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Dynamic Purchasing Systems - planning

Procurement iStock 000002542569XSmall 146x219A significant number of Dynamic Purchasing Systems are either up and running or in the planning phase in the UK and this is raising practical issues, writes Susie Smith in the first in a series of articles.

A Dynamic Purchasing System (DPS) is an electronic system through which contracting authorities can source requirements by inviting tenders from economic operators admitted to the DPS. Unlike framework agreements, economic operators can apply to join the DPS at any time in the life of the DPS and they are not required to submit tenders in order to join the DPS. All economic operators who meet the selection criteria have to be admitted to the DPS, and a DPS permits contracting authorities to move straight to the tender phase when a contract opportunity arises.

Until February 2015 the public procurement rules on setting up and operating a DPS created an unwieldy and un-dynamic tool for procurement and was not often used. The updated DPS provisions in the 2015 Public Contracts Regulations (PCRs) create a much more dynamic tool for procurement.

It is worth noting that a DPS, like a framework agreement, is not a procurement procedure but a technique or tool for procurement. In order to purchase under a DPS a contracting authority must use the restricted procedure adapted in line with the specific provisions in Regulation 34 (and elsewhere). The provisions of the PCRs will also generally apply where they are relevant to the setting up and operation of a DPS.

Planning for a DPS

As with all more complex procurements, a thorough market analysis, assessment of user needs and process planning is essential to establish:

  • Whether a DPS is the appropriate procurement tool; and
  • How the DPS will operate effectively.

Early issues to consider include:

Subject matter of the DPS

DPSs are intended for "commonly used purchases the characteristics of which, as generally available on the market, meet their requirements." They are not intended for use for works, supplies or services that require adaptation to meet a contracting authority's needs. This is confirmed by the explanation in the 2014 Directive which says that the subject matter of a DPS must be "off-the-shelf products, works or services" (Recital 63). This is reflected in the operation of a DPS which is electronic and uses an adapted version of the restricted procedure which does not permit negotiation.

Categories

Under the DPS rules, contracting authorities are not able to limit the number of economic operators admitted to a DPS. All suitably qualified economic operators must be admitted to the DPS.

The general rule is that a contracting authority must invite all economic operators admitted to the DPS to tender for a contract opportunity. A large market of economic operators for the opportunities covered by a DPS could result in a heavy burden on the contracting authority in terms of the number of requests to participate it receives. It may also be the case that a broadly scoped DPS may be unappealing to SMEs or specialist providers and so result in a dominance of larger organisations as participants.

Contracting authorities are permitted to divide a DPS into "categories". There is no limit on the number of categories into which a DPS may be divided. Contracting authorities must include information on the categories in the procurement documents and specify the selection criteria for each of the categories. Invitations to tender can then be issued only to those economic operators who fall within the category relevant to the contract in question. This helps to manage the administrative burden and narrows the competition. Division into categories may also encourage SME or specialist provider participation.

It is therefore important to consider carefully, in advance of advertising a DPS, whether the DPS will be divided into categories and what each category will cover.

Categories must be "objectively defined on the basis of the characteristics of the procurement to be undertaken under the category concerned". This includes the possibility of categories being defined by reference to the maximum allowable size of contracts to be awarded or to a specific geographical area. Categories must not be structured in such a way as to be discriminatory under Treaty principles.

Practical examples of DPS categories are:

  • Car parking services divided into three categories by geographical area.
  • Supply of office furniture divided into four categories for: chairs, desks, meeting tables and other furniture.
  • Building installation work divided into three categories for electrical, fire alarm and lift installation.

Does Regulation 46 on “Lots” apply to “Categories” under a DPS?

"Divide or explain" principle: Regulation 46 requires a contracting authority to consider whether or not to divide a public contract into lots and document reasons for a decision not to divide a public contract into lots.

In our view Regulation 46 on lots does not apply to "categories" under a DPS. This is because when a contracting authority sets up a DPS and admits economic operators to a DPS it is not awarding a public contract. The award of a public contract under a DPS occurs at a later stage, following a separate, contract specific, tender process. The DPS rules do not use the term "lots".

A contracting authority is not, therefore, obliged to consider whether to divide the DPS into lots.

A contracting authority is required to consider whether a public contract over the EU financial threshold which is to be awarded using a DPS should be divided into lots. It must document the reasons if it decides not to do so.

Management of categories: A trickier question is whether management of DPS categories is permitted along the lines set out in Article 46 on lots. In particular, Article 46 permits contracting authorities to limit the number of lots which an economic operator can apply for.

There are no specific provisions governing the management of DPS categories in this way. On balance, our view is that it would not be permitted to limit the number of categories to which a suitably qualified economic operator may be admitted. Limiting participation in this way seems to run counter to the spirit of a DPS the aim of which is to create as much competition as possible and whose overall membership cannot be limited.

The Crown Commercial Service confirms this view. In the FAQ section of its guidance on Dynamic Purchasing Systems there is the following Q & A:

"Q: Can we limit the number of suppliers on the DPS or in any categories under the DPS?

No: any and all suppliers who pass the exclusion criteria and meet the selection criteria must be admitted to the DPS [category]."

Duration of the DPS

There is no statutory limit on the duration of a DPS but there are practical issues to consider.

Contracting authorities need to decide on the length of the DPS in advance because this information must be included in the notice published in the Official Journal of the European Union (OJEU) advertising the setting up of the DPS. The notice will continue to be live in the OJEU for the life of the DPS. This is to ensure that it is a genuine ongoing opportunity for economic operators to find out about the DPS and apply to be admitted if they are interested in participating.

In some cases it may be appropriate to set up a long-term DPS; for example, to encourage a developing market, indicate a long term presence on the market or ensure continuity in service delivery.

In other cases a short-term arrangement may be more appropriate; for example, where there are likely to be changes in the contracting authority's service delivery requirements in the short term or goods to be supplied are subject to rapid technological change and these changes go beyond what may be permissible modifications in the DPS (see later for further discussion on modifications to a DPS).

If the contracting authority decides to change the duration of the DPS or terminate the DPS then it must publish a notice in the OJEU using one of the standard form notices.

Keeping documents “live” for the duration of the DPS

Contracting authorities need to ensure that the electronic portal or other system used is set up to ensure that the procurement documents remain "live" and available for the duration of the DPS. We understand that with some portals this is still a problem in practice.

DPS and light regime services

DPSs are already being used for a range of light regime services. A review of OJEU contract notices reveals a fair number of DPSs for school and social care related transport services. This reflects the common pre-existing use of active frameworks, or sometimes a DPS, for these services. There are also a number of DPSs for occupational therapy equipment supplies and for wide ranging social care service, often divided into categories.

Which provisions of the PCRs apply? There is some uncertainty about which provisions of the PCRs apply to light regime services in general and so there is also a lack of clarity around the PCRs applying to light regime DPSs.

The Crown Commercial Service (CCS) states that "….most of the mandatory and permissive provisions in the main rules do not have any binding effect on LTR contracts (except for those exceptions that are explained in this guidance)…" and goes on to comment that "some provisions are obviously necessary".

The CCS explains that, in addition to the specific light regime provisions in Regulations 74 to 77, the PCR provisions which do apply to LTR contracts are those relating to; in-house award, aggregation, electronic availability of procurement documents, advertising in Contracts Finder, Lord Young provisions on use of selection stage and standard form PQQ, records and reporting requirements.

An alternative view is that the additional PCRs which apply are the "scope and general" provisions in Regulations 1 to 24 and the "records and reports" requirement in Regulations 83 and 84.

What is clear is that the detailed procedural requirements do not apply, so no specific form of procedure is specified and the provisions on establishing a DPS and the restricted procedure rules do not need to be followed to the letter. This provides considerable flexibility where a contracting authority is setting up a light regime DPS. A contracting authority must always bear in mind the need to comply with general principles of transparency, equal treatment and proportionality in particular.

Categories: An example of a potential flexibility is that categories can be managed – potentially limiting the categories for which an economic operator can apply to be admitted or limiting the number of categories to which an economic operator can be appointed. The principle of transparency requires a contracting authority planning to do this to make this clear at the outset of the procurement process.

Susie Smith is a consultant at Bevan Brittan. She can be contacted on 0370 194 1604 or This email address is being protected from spambots. You need JavaScript enabled to view it.. In the next article the firm will look at the process for setting up a DPS.