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Chapter 6 Public Procurement

Chapter 6 Public Procurement. Program. The nature of public procurement Public procurement law European Public Procurement Directives Notices and public procurement procedures Procurement process Implications for public procurement. Nature of public procurement.

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Chapter 6 Public Procurement

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  1. Chapter 6Public Procurement

  2. Program The nature of public procurement Public procurement law European Public Procurement Directives Notices and public procurement procedures Procurement process Implications for public procurement

  3. Nature of public procurement Governmental institutions play crucial role in internal markets In 2002 public procurement accounted for 16,3% of the GDP in the EU EU strives towards a free market without any impediments

  4. Nature of public procurement • Public accountability: • Legitimacy of procurement process is important • Public institutions are subject to European Procurement Laws • Process is procedure driven instead of result or performance driven • This often has a negative effect on the efficiency • Not subject to free markets: • Public institutions are funded by money from taxes • Not always a drive to create best value for tax payers • Sometimes focus on other than commercial goals: • Support local economy • Sustainable investments

  5. Nature of public procurement • Sometimes budgets are granted per year: • If the budget is not completely used in one year, this often means that the budget will be lowered for the next year • Results in an increased spend at the end of the year • Often only purchase price of products and services are considered (rather than total costs of ownership) • Professionalization of public procurement is a rather slow process

  6. Public procurement law Public procurement law prescribes in a formal way how to go about government contracts. • Major constituents of public procurement law are European Public Procurement Directives • 2004/17 for public utilities sector • 2004/18 for classical government

  7. Scope of the European Directives • Scope: • All governmental institutions (State, regional or local authorities and bodies governed by public law) • Public procurement directives: • Supplies, works and service contracts • Framework agreements: • Agreement between one or more contracting entities and one or more suppliers • To establish the terms governing contracts to be awarded during a given period

  8. Scope of the European Directives • In a limited number of cases governmental institutions do not have to European Public Procurement… special arrangements exist for: • Contracts for Ministry of Defense • Secret assignments or assignments aimed at protecting state security • Contracts placed based upon international treaties • Intra-public assignments

  9. European threshold values

  10. Public procurement procedures • Formal notice,an advertisement through which the contracting authority invites interested parties to submit a proposal • Formal notice sent to Tender Electronic Daily (TED) • Three different notices: • Prior information notice • Contract notice • Contract award notice

  11. European procurement procedures Open procedure: Every market party can apply Restricted procedure: Focused on pre-selection Competitive dialogue: Used in complex projects, investigates which solution best fits the functional specification Negotiated procedure with/without contract notice: Announcement on forehand: negotiations about execution and costs possible, with or without a pre-selection Design contest: A jury grants the project to one party, the procedure has to be clear and genuine

  12. Procurement process (1) • Defining specifications • Proportionality: inline with the nature of the assignment • Nondiscriminatory: specifications can not form a trade limitation • Equality: fair competition allowing a ‘one level playing field’ among suppliers • Supplier selection • Separation between selection and award criteria • First evaluate suppliers on exclusion criteria • Then on suitability criteria • Inform suppliers when they are not selected for short list

  13. Procurement process (2) • Solliciting bids and awarding contracts • Initial award of the bid • Based upon lowest price • Based upon economic offer • Informing non-selected parties about refusal • Awarding the contract to the selected supplier

  14. Implications for public procurement The purchasing function in public procurement should be improved drastically Resistance against procedures from governmental purchasers Successful implementation of European legislation calls for clearly structured purchasing processes and a professional organization Management culture in governmental institutions are causing problems Examination on correct application of these procedures is needed European Procurement Procedures have been developed without looking at current position and competences of purchasing function…

  15. Compliance rates For all governmental sectors in the Netherlands Ibid Significant, 2004

  16. Conclusions Procurement within the government concerns a lot of money. The EU Treaty has significant implications for public procurement. Public procurement primarily serves political objectives and plans. Contracting authorities need to respect European financial thresholds.

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