Different Stages in The Procurement Process

Information: Coutesy of the EU Commission
Notification: The contracting authority planning the public procurement prepares the call for tender and sends the invitation (through appropriate publication services) to candidates to recognise relevant documentation and to issue their tender. In short, it provides notification of tenders to the suppliers. The tendering of bidding phase: Covers the preparing of an offer by a tenderer and its submission to the contracting authority. In short, the response to the contract notification. This will normally only take place after strategic thinking and planning, it is the result of a marketing approach to the public sector.
Awarding phase: This phase begins with the opening of the tenders. After checking the contents of tenders, the winning tender is selected. Execution phase. After the contract is awarded, the contract shall be executed by both parties the contracting body and the successful bidder. Which procedure has to be followed by the contracting authorities to award contracts? The contracting authorities must choose between three different procedures for the awarding of contracts.
Open procedure: All interested suppliers, contractors or service providers may tender. Anyone interested in tendering who submits a compliant tender to the contracting authority within the appropriate time limit, in response to its call for competition, must be considered for the contract. Advantages: Unlimited amount of offers, therefore unlimited competition. Relatively quick. Disadvantages: Risk of huge pile of paper, all to be examine by the contracting authority.
Restricted procedure: Only those suppliers, contractors or service providers invited to participate by the contracting authority may submit a tender. The tender process has two distinct stages. After a call for competition has been made in the Official Journal, applicants must submit their requests to tender within a specified period. The contracting authorities than considers these expression of interest and excludes non-compliant tenders, tenderers who are unable to fulfil the technical specifications or who fail to meet the eligible criteria. The shortlisted candidates must then submit their tenders before a second deadline.
Advantages: Preliminary selection of candidates based on qualitative criteria. By reducing number of candidates less paperwork to examine. Disadvantages: Longer and sometimes more complicated procedure. Higher risk of complaints and court action.
Negotiated procedure: Direct discussions and negotiations take place between the contracting authority and one or more suppliers, contractors or service providers of its choice. The negotiated procedure mostly applies for the utility sector Advantages: Hardly any procedural rules. Possibility to choose candidates without pre-selection procedure.
Disadvantages: Can only be used in exceptional circumstances. As there is no objective pre-selection, there is a higher integrity-risk. The contracting authorities can choose which procedure they will use. All the Directives encourage the use of the open or restricted procedure, specifying situations where the negotiated procedure is permitted.

Where and what kind of information is available about Public tenders? One of the key elements of the public procurement regime is that all contracts caught must be advertised in the Official Journal. All public contracts are published in the "Supplement to the Official Journal" (S series) and available on the internet: http://ted.eur-op.eu.int.
The four most important notices are described below: Periodic indicative notice (PIN): most contracting authorities are required to publish a PIN setting out details on future contracts. In the public sector a PIN is simply a method of providing advance warning to tenderers of future contracts.

Notice on the existence of a qualification list: this notice only applies to contracts regulated under the Utilities Directive. Utilities using a pre-qualification system must publicise the system annually where the system is to run for more than three years, or once if it is for a shorter period

Tender Notice: this is the most important of the procurement notices, advertising individual contracts to be awarded by contracting authorities. A pre-information notice is an early indication of a tender to be published at a later date. Contract award notices: once a contract has been awarded the contracting authority must publish the result in the Official journal. The notice must contains details of how and to whom the contract was awarded including the date of the award, the award criteria applied, the number of tenders and the final contract price.

Others: Request for proposals: Outlines a general framework and invites you to make proposals for the type of product or service which you could offer. It is typically used to encourage project participation within the framework of a specific EU-Programme. Usually the co-financing is to a maximum of 50%, and the product or service developed remains the property of the company to whom the contract is awarded.

Calls for expressions of interest: Ask you to express your interest in supplying a certain type of product or service. For specific contracts the EU will then contact all companies which have previously expressed their interest.

Invitations to tender: Ask you to submit a bid for a specific product or service. They are typically used for concrete products and services sought, e.g. printing, cleaning, studies, computer supplies. The product or service is paid for 100% and becomes the property of the European Union. Your EIC can provide tailor-made information on public procurement.

Twice a week you'll receive an e-mail with a selection of tender notices according to the activity of your business. If you want further information please contact us. How can enterprises be sure not to be discriminated during the procurement process: the selection and qualification criteria? To prevent the contracting authorities eliminating suppliers, contractors or service providers on grounds that are discriminatory the Directives list two major categories of qualification requirements: legal; economic and technical.

Contracting authorities must follow objectively determined and homogeneously specified selection criteria for enterprises participating in award procedures of public procurement contracts. Failure to satisfy the conditions can result in the contracting authority excluding from consideration the tenders of those who fail.

Legal requirements: The definition of a contractor wishing to submit a tender for the award of a public contract comprises any legal or natural person involved in supplies, construction and services activities. It also includes private consortia, as well as private consortia, as well as joint ventures or groupings. Contracting authorities may impose a requirement as to the form and the legal status of the contractor that wins the award.

Eligibility requirements: In principle there are automatic grounds for exclusion when a contractor, supplier or service provider
  1. is bankrupt
  2. is subject of proceedings for a declaration of bankruptcy
  3. has been convicted for an offence concerning his professional conduct
  4. has been guilty of grave professional misconduct
  5. has not fulfilled obligations relating to social security contributions
  6. has not fulfilled obligations relating to the payment of taxes
Financial and economic standing: Evidence of financial and economic standing may be provided by means of: (1) appropriate statements from bankers (2) the presentation of the enterprises balance sheets, or extracts from the balance sheets (3) a statement of the enterprises annual turnover

Technical capacity: The technical knowledge and ability of a contractor: In construction projects, the references which the contractor may be required to produce must be specified in the notice or invitation to tender. They include for example:

  1. the contractor's educational and professional qualifications, or those of the staff
  2. a list of the works carried out over the past 5 years, accompanied by certificates of satisfactory execution
  3. a statement of the tools, plant and technical equipment
  4. the average annual manpower
The technical capacity of the a supplier: In supplies contracts, the references which may be requested must be mentioned in the invitation to tender, and are the following:
  • a list of principal deliveries effected in the past three years, with the sums, dates and recipients,

  • Public or private, involved:
    1. a description of the undertaking's technical facilities
    2. samples, descriptions or photographs of the products to be supplied
    3. certificates drawn up by official quality-control institutes or agencies
    4. others
    Facilitating SME's access to Public Procurement: Small and medium-sized enterprises are a unique source of innovation and competition in the internal market and account for 99.8% of the total number of EU enterprises. The European Commission has always paid particular attention to them. By facilitating their access to procurement opportunities, EU procurement policy allows those firms to strengthen their competitiveness and enables them to contribute more towards growth, employment and competitiveness in the European economy. Commission action has mainly been focused on creating a level playing field where bids from firms, whatever their size or origin, have similar chances of success. Since the early 1990s, measures have been focused specifically on SME's' needs in terms of simplification, information, services support, and promoting cooperation between SME's on public contracts.

    Improvement of the SME access with the New Legislative Package Although there is some evidence that the current directives have a positive impact on public procurement markets and on SME participation, there are still some concerns that those markets are not yet sufficiently open and competitive. In order to respond to those challenges, the European Commission put forward proposals in May 2000 for a new legislative package that aimed to make the existing texts clearer and simpler and to adapt them to modern administrative needs and to the new economy. This package was approved in early 2004. It is meant to further increase procurement opportunities and transparency, reduce red tape, bring transaction costs down, reduce entry barriers to the market and finally to ensure that contracting authorities and bidders can save time and money by using new technology to manage the tendering process.

    Barriers to SME's and the reasons for not participating to tender procedures. Recent studies have shown major obstacles for SME's on the public procurement market. In the Sixth Report (2000) of the European Observatory for SME's, a chapter was included on this subject. SME's are subject to a number of constraints on their competitiveness in public procurement markets. Many of the constraints result from the relative effects of fixed costs on SME's to conduct public procurement relative to the effects of fixed costs on large businesses.

    There are two types of cost that SME's, and firms in general, incur. Variable costs are costs that change with production of a good or service. For example, most firms hire labour to deliver specific outputs. Labour is in this context a variable cost. A fixed cost, on the other hand, is one that a firm must incur in order to maintain its existence. Fixed costs must be paid in order for the firm to stay in operation, even if the firm produces nothing. Fixed costs and variable costs comprise the total costs of the firm. These are standard definitions in the industrial organization literature. The effect of fixed costs on SME's may be a relatively greater burden on SME's than on large firms. Fixed costs may comprise a larger proportion of the total costs incurred by SME's. The fixed costs of large firms, on the other hand, tend to be relatively lower and less of a burden on the large firm. In sum, the costs of just "getting in the game" tend to be much greater, in relative terms, for SME's than for large firms

    The significant constraints are the following: Lack of information allowing suppliers to bid for contracts. Good and easily available information is vital in exploiting procurement opportunities. Today, over 135.000 procurement notices are published each year in the OJEC and it is no easy task for suppliers to identify out of this mass, the specific calls for tender in which they have an interest. Information is costly. In addition, SME's face considerable barriers to entry because of the costs of obtaining information on goods, works and services being sought by governments. Information costs may be sufficiently onerous so as to preclude SME involvement in public procurement.

    The difficulty of acquiring information is more significant in the international context. Large firms, especially multinationals, have easier access to information about invitations to tender in foreign countries than do SME's. Potentially, the lack of information is damaging particularly to firms in developing and transitioning economies. Lowering the costs of information will remove or lessen a significant impediment to SME participation in public procurement. Most of the Euro Info Centres in your region can deliver you a tailor-made tender alert service in order to provide you the specific calls for tender in which you have an interest.

    The Size of Public Sector Contracts
  • The large size of public contracts for SME's / Subcontracting possibilities. Many of the public contracts are let to large companies. However, small companies can still play a part in these contracts, perhaps as subcontractors or by forming consortia.

  • Subcontracting plays a major role in the opening up of public markets, as it is the most effective way for SME's to participate in public procurement. All the directives encourage the use of subcontracting in the award of public contracts.

  • Particularly in public supplies contracts, the contracting entity in the invitation to tender may question tenderers on their intentions to subcontract part of the contract to third parties. In the public works contracts, contracting authorities awarding the principal contract to a concessionaire may require the concessionaire to subcontract to third parties at least 30% of the total work to provided for by the principal contract.

  • There is no single way of finding out about subcontracting opportunities. Public-sector organisations may give you information about their main contractors or you might identify and contact a supplier who has won a major contract, for example through the OJEU. Take contact with the Euro Info Centre in your region if you want to obtain this information.

  • Government procedures and practices that favour large businesses Governments may bundle quantities sought in procurements so that they may lower transaction costs associated with procurement by dealing with fewer contracts and contractors and take advantage of quantity-discounting strategies. Bundling often makes it difficult for SME's to compete for contract awards. There may be substantial costs for SME's in registering and qualifying as a government supplier. Some registration and qualification conditions may be onerous and lead to exclusion of SME's from various lists maintained by procuring entities.

    The regulatory burden associated with the public procurement process and with contract performance may be formidable for SME's. Some regulatory aspects of procurement, much of which is not related directly to selection of the contractor or contract performance, may constitute a significant barrier to entry for SME's. Fees associated with procurement documentation may be onerous for SME's. The costs of inspections and contract administration may be relatively more burdensome for SME's. It is often very difficult for SME's to seek legal recourse against the government, and dispute resolution or litigation may entail transaction costs that are unduly burdensome to SME's that lack in-house counsel who are paid fixed salaries.

    Competition law and sometimes the law on small business programmes themselves may make twinning or joint venturing costly or risky. In some cases, governments may take action to alleviate regulatory burdens on SME's. The point here is that, in the absence of government intervention targeted specifically to deregulate the procurement process so as to reduce costs and barriers to entry in public procurement, procurement procedures and practices may deter SME's from participating in public procurement.

    Cost of Public Sector Procurement.
    1. Costs of handling public procurement. SME's face high transaction costs in handling public procurement. These are largely fixed costs that do not change much with the value of the contracts. For example, the cost of pre-qualification, qualification and the costs associated with registering as a government supplier do pose greater burdens on SME's than on large firms
    2. Finance restrictions, which are the result of restricted availability of capital through formal financial channels. To these are the added extra costs of financing the goods and services supplied until the government pays its dues (governments in general are extremely slow payers).
    3. Costs associated with bid preparation and proposal costs. These costs are a result of shortage of skilled labor that has the experience dealing with bid preparation.
    4. It is also because public procurement often involves greater bid and proposal costs than those found in commercial contracting.
    5. Too high administrative burdens and unclear jargon used.
    The tender documentation provided by the contracting authorities tenders can be either so detailed it provides little opportunity for creative solutions or it can provide too little detail for firms to respond adequately, especially in terms of fixed-price offers. The documentation is also sometimes based on defining a solution where a description of the outcome required would allow some flexibility in the solutions offered. Enterprises express their concerns about the difficulty of identifying the nature and scope of a project through the specification document. If a specification document is unclear, it can be difficult to ascertain the size and, therefore, to approximate budget for a project.

    This makes quoting an appropriate pricing schedule difficult. The format for responses is not consistent. Companies have to provide the same information in different formats each time they tender. Information that is frequently duplicated includes: financials, insurance requirements, company profile and methodology. Much of this information has been provided earlier.

    Thresholds The EC Directives apply to public sector procurements above certain monetary thresholds (for central government, these thresholds are approximately 100,000 for goods and services and 4,000,000 for works). Further details can be found under the Legal and Policy Framework section on the OGC Website.

    Open Procedure The Open Procedure is a one-stage procedure where the public sector advertises its requirement asking for tenders to be returned by a given date. This procedure is used a great deal by local authorities.

    Restricted Procedure The Restricted Procedure is a two stage procedure which involves separate selection and award stages. For further details please see the step by step guide entitled Restricted Procedure.

    Negotiated Procedure The Negotiated Procedure is only available in very limited circumstances and like the Restricted Procedure it has two stages. However the second stage allows departments to enter into substantive negotiation with tenders. Information courtesy of EU Matching - For more information visit: