Time for a dialogue

The UK leads the way when it comes to using competitive dialogue in procurement. At the Global Revolution procurement conference in Copenhagen earlier this month, Rob Hann gave his views on the experience gained and the lessons learned so far.

I knew I needed to get out more but although my job as a local government lawyer and procurement specialist for Local Partnerships has had its interesting moments (honest!), it doesn’t usually encompass the opportunity for foreign travel, let alone the ability to take part in a Global Revolution!

So when the invitation arrived from Nottingham University’s world-renowned procurement expert – Professor Sue Arrowsmith – exploring whether I would like to speak at the Global Revolution Procurement Conference in Denmark, the opportunity was just too tempting to resist. Consequently, I recently travelled to the beautiful City of Copenhagen to network with more than 400 expert speakers and delegates from all over the world on a wide variety of procurement-related topics.

The Plenary sessions heard from representatives from leading agencies and organisations such as the World Trade Organisation, UNCITRAL, OECD, SIGMA, the World Bank, the Asian Development Bank and the EU. The remaining workshops over the two days were split into a myriad of topical issues facing practitioners in this ever-changing world.

My own humble contribution revolved around a series of workshops and discussions on procuring particularly complex projects. Imagine my surprise to discover that in at least one area – competitive dialogue and its use as a procurement process for particularly complex projects – the UK is actually leading the Global Revolution! Local Partnerships, the organisation I work for, helps local public bodies to procure and operate major, complex projects across all sectors, including local government.

The conference heard the results of research carried out by Nottingham University’s PhD students Richard Craven and Sylvia De Mars that out of 27 Member States only eight had actually ever used the competitive dialogue (CD) process since it first made its appearance in an EU Directive in 2004.

Moreover, of those eight Member States three (Portugal, Spain and Belgium) had used the process only 30 times in total (with Portugal only having dipped its toes into CD twice). Three Member States had what was described as “regular use” of CD (Ireland, Netherlands and Germany) but the heaviest users of CD by far and away were France and – Yes, you’ve guessed it – the UK.

The UK of course has only been following orders laid down by the European Commission when competitive dialogue was introduced as a new procurement process for the procurement of particularly complex projects. The comparatively high usage by the UK is explained in part by the significant central government-sponsored infrastructure progammes initiated under the Labour administration throughout the nineties and noughties, some of which were flagged as either PFI or Building Schools for the Future projects. There is a significant tranche of ‘other’ schemes included in the CD figures such as ICT, defence and energy projects.

My own address to the conference focussed on the experience to date of CD in local government in the UK, how the process was envisaged to work when first introduced and how that experience has panned out following the close of the projects which were first in the queue to use the process. Points made included the following:

• There is some good news – many local authorities have managed CD well
• Projects have closed despite delays caused by “funder churn” in the financial markets (Wigan JSC, NEFRA, Manchester Waste)
• The amount of time and cost spent at the preferred bidder (PB) stage compared to previous (negotiated procedure) has reduced with less instances of bidders trying to “change the deal” when at PB stage (although the lending crisis has obscured this a bit)
• On the debit side, the recession, the costs of working up fully compliant commercial bids whilst in competition, the increasing challenge culture, confusion over ECJ case law and process issues are taking their toll on local authorities and bidders alike
• Many public bodies appear pre-occupied with avoiding challenge rather than focusing on securing best VFM or MEAT bidder
• Bidders complain about high costs of bidding bearing in mind there can only be one winner and the impossible requirements (as they see it) imposed from public bodies on one side and banks on the other in the run up to PB selection and financial close
• The legislation in some instances is unclear. For example, what precisely does “clarifying, specifying and fine tuning” mean post preferred bidder – what is permitted given the risk of challenge?
• Procuring multiple sites/facilities can be problematic under CD
• There has been an impact following the economic downturn as bidders become more selective when pitching for work and staying the CD course
• CD was designed for a different market, where liquidity and competition allowed to have negotiations substantially completed at final offer – the current context, where banks are unable/unwilling to provide committed offers do not allow this.

Overall, my conclusion was that CD has good and bad features with bidders and local public bodies alike appreciating the ability to engage with each other during the competitive process to explore ‘solutions’. Better quality information is now developed by public bodies before the procurement process begins.

All these are undoubted positives. However, key questions remain about the process as implemented in the UK which Local Partnerships, amongst others are exploring. What can be done to improve CD and bring down or mitigate bid costs for all participants? For example, to reduce to two bidders more swiftly?

How can legitimate post-PB issues – such as detailed planning, detailed surveys, funder issues etc. – be sensibly handled without fear of challenge for breach of the rules?

With care and attention and some understanding of the practical problems faced by well intentioned contracting authorities seeking to deliver projects in this environment, much can be done to improve CD to the benefit of all concerned.

It was certainly a concern to learn that the UK has committed to CD as the main process for particularly complex projects when the vast majority of other member states clearly have not. The procurement ‘playing field’ across the EU for the procurement of particularly complex projects is not yet harmonised despite the EU legislation that has been introduced to effect this.

Unless consideration is given to ironing out the teething problems for the Member States that are using the CD process, there is a danger that those Member States will begin to be regarded as expensive places to do business as compared to elsewhere in Europe with a corresponding impact on competitiveness for the Member States concerned.

There is perhaps a rare opportunity to make representations to the European institutions about improving the process for all concerned. The EU is currently undertaking an internal evaluation of its public procurement directives with an eye to perhaps revising the directives in future years. Views from stakeholders, especially business, on the EU procurement directives will be very valuable in this respect.

Representatives from several European Member States attending the conference made it clear they were extremely interested in the UK’s experience of CD and that they wanted to better understand how the process worked and to learn from the experience of the UK to date.

Consequently, the really good news I took away from my two days in Copenhagen was that whilst the UK economy might be riding out a sticky patch, there is still plenty of opportunities for those who know their way around the CD process in the wider European environment and I for one am keeping my passport and tooth brush handy.

Viva la revolution!

Rob Hann is director of legal services at Local Partnerships.