Public Sector Procurement Procedures

Introduction

Most healthcare procurement is undertaken by public-sector organisations. The EU stipulates a number of standard procurement procedures that healthcare buyers may utilise when awarding contracts. Although the procedures only apply to member states, they address the core principles of public-sector procurement (openness, transparency, competition, equal opportunities, consistency, value for money) and are therefore useful benchmarks for all healthcare buyers.

For above-threshold procurements, public-sector buyers may freely choose the open or restricted tendering procedures. Competitive dialogue, competitive procedure with negotiation, and negotiated procedure without notice, on the other hand, may only be used in specific circumstances. It is essential that the use of these procedures is fully justified and documented for auditing purposes. The procedures are shown in the diagram below and an outline of each one follows.

Open Procedure

Anyone may submit a tender. The advantage of the open procedure is that it invites an unlimited amount of offers and, therefore, unlimited competition. Its main disadvantage to the buyer is the potential administrative burden of having to examine a large number of tender documents. This method is best suited to non-complex procurement activity where the size of the market is relatively small.

Restricted Procedure

Suppliers who respond to advertisements by expressing an interest in tendering are required to complete a pre-qualification questionnaire to show that they meet the buyer’s requirements regarding financial and commercial probity and have sufficient experience and resources to meet the needs of the procurement opportunity. Only suppliers who are subsequently short-listed are then invited to submit a tender. This approach is best suited to non-complex procurement activity with larger markets.

This procedure tends to be used where there is a need to pre-qualify suppliers because the number of potential suppliers is very large or where a contracting authority wants to limit the number of people who will have access to certain confidential and/or sensitive information. The procedure can be used to reduce the number of tenders to be assessed by the buyer. The disadvantage of the procedure is that it takes longer and is sometimes more complicated to run.

Open and restricted procedures are used in circumstances where the requirement can be clearly specified, the supply market is competitive, and the procurement is straightforward. Examples: generic medicines, laboratory and biomedical equipment, medical consumables, and indirects such as stationery, travel, catering, IT hardware and contingent labour.

Competitive Dialogue Procedure (CD) And Competitive Procedure With Negotiation (CPN)

These may only be used for procurements where one or more of the following circumstances apply:

• The needs of the contracting authority cannot be met without adaptation of available solutions;
• The contract includes design or innovative solutions;
• The technical specifications cannot be established with sufficient precision;
• A contract cannot be awarded without prior negotiation because of specific circumstances related to the nature, the complexity or the legal and financial make-up, or because of risks attached to the procurement;
• In response to an open or restricted procedure where only irregular or unacceptable tenders were submitted.

These procedures tend to be used in the case of complex, high-value projects where the above conditions are met. They are not intended to be used for off-the-shelf goods and services which are available from many different suppliers on the market.

CD was introduced to limit the use of non-competitive negotiations with suppliers. Short-listed suppliers are invited to submit an initial offer and on the back of this a number will be invited to participate in a competitive dialogue process with the buyer. The dialogue is flexible and may include written or verbal submissions and interviews to arrive at a solution that meets the buyer’s needs. The dialogue will normally take place in successive stages and the number of potential suppliers can be reduced at each stage.  At the conclusion of the dialogue process the buyer will ask the remaining potential suppliers to submit their best-and-final-offer tender.

CD expressly allows for all aspects of the procurement to be discussed, as well as limited discussions of final tenders and negotiation on the winning tender to confirm financial commitments or other terms. These aspects may make it a more attractive procedure to use. However, CD can be very expensive to run in both financial and resource terms. CPN offers the ability to accept initial tenders, shorten timescales, and decide not to negotiate if the requirement is met immediately, but it is hard to envisage these aspects applying to the complex procurements for which it is intended.

In all cases, bidders should be provided with clarity about what is expected of them throughout the process and have confidence that the procurement process will proceed to completion in all but exceptional circumstances.

The competitive dialogue and competitive procedure with negotiation are used in circumstances where the requirement is complex and cannot be easily defined, but sufficient suppliers are available to provide competition. Examples: major infrastructure projects, large IT networks, complex outsourcing projects, mental health and community services.

Negotiated Procedure Without Notice

This applies to a situation where the buyer undertakes a direct negotiation with a supplier without advertising the requirement openly and without running a competitive tender. It can only be used in very limited and narrowly defined circumstances: (i) where it is not possible to run a competitive process due to lack of interest, (ii) where the contract can only be carried out by a particular supplier due to technical reasons or the protection of exclusive rights (e.g. patents/IPR); or (iii) where it is necessary for reasons of extreme urgency. The burden of proof is on the buyer to justify using this procedure and should only be used when no other procedure is possible.

Decision Making Process

The decision-making process for determining which procedure to use is shown below.[2]

[1] https://www.nao.org.uk/report/government-procurement-during-the-covid-19-pandemic/

[2] Adapted from: www.procurementportal.com