ComparativeProcurementProcurement regulation and practice in Germany,Sweden and the UK

An independent report prepared for the RIBA by Burges Salmon LLP

Contents

1 Executive summary and recommendations 12 An overview of EU public procurement law 23 How does it apply: UK 34 How does it apply: Germany 65 How does it apply: Sweden 76 A comparative assessment 8

Appendix Comparison table 9References 15

Royal Institute of British Architects66 Portland PlaceLondon W1B 1AD020 7580 5533www.architecture.com

This is an independent report, commissioned bythe RIBA from Burges Salmon, which examinesthe comparative implementation of the EUPublic Procurement Directive, as it relates to theappointment of architects and the procurementof buildings in Germany, Sweden and the UK,and in the context of some of the RIBA’s keyprocurement reform recommendations.

Burges Salmon is a leading UK law firm workingacross the full breadth of major practice areasand is noted for its procurement practice.

Our national and international client base rangesfrom global organisations, government and non-profit businesses, to smaller entrepreneurs andprivate individuals. Burges Salmon regularlyadvises the RIBA on public procurement issuesin relation to RIBA competitions and bestpractice guidance to architects.

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1.1 The EU Commission Evaluation report into EU publicprocurement legislation substantiates RIBA’s concerns thatconstruction procurement in the UK can be expensive andtime consuming, and recognises that the legislation oftenmakes it difficult for SMEs to compete, particularly incomparison with other EU member states.

1.2 However, there is widespread belief that one of thereasons for this is that in implementing the Public ContractsDirective (2004/18/EC) (the ‘Directive’) the UK has ‘goldplated’ the requirements of the Directive, in the sense that it has imposed additional requirements upon contractingauthorities. Whilst it is true that the UK has implemented all of the non-mandatory provisions of the Directive to givecontracting authorities flexibility as to whether they wish touse the provisions on framework agreements, competitivedialogue or e-auctions, the basic process for conducting a tender process in accordance with the mandatoryframework is the same in the UK, Germany and Sweden.

1.3 What is interesting is how the public procurementlegislation is used on the ground.

Use of procedures(a) In Germany and Sweden, the application of the public

procurement rules is much wider and contractingauthorities are required to conduct tendering proceduresfor contracts below the thresholds, albeit in a simplifiedform to the regulated procurement routes. Whilst therehas been an increase in transparency of contractsawarded under the thresholds in the UK, there are nostandardised formal rules or guidance that apply.

(b) The UK is the greatest user of the competitive dialogueprocedure. This is perhaps not surprising given that it wasthe UK government who sought to introduce it as areplacement to the negotiated procedure.

(c) In Germany, there is greater use of the design contestprocedure for the selection of architects. This procedurerequires submissions to be judged anonymously ( theselection of a design rather than of an architect). Thisleaves contracting authorities unable to have regard tocapability and financial standing including professionalindemnity insurance. In Germany this issue has beenpartially overcome because the system of procuringconstruction transfers the responsibility for obtainingappropriate insurance to the main contractor. It is wronghowever to see this as always being necessarilysupportive of the SME practice, as there is indirectevidence of smaller practices later being sidelined on capacity issues.

Selection and award(a) In the UK, contracting authorities still have the choice

as to whether they apply the lowest price test or the most economically advantageous tender offer test for theaward of the contract. Even though there is guidance inplace which directs central government to apply the mosteconomically advantageous tender test for complexprojects there are no strict enforcement measures in placefor policing this and the guidance is not binding on localauthorities. In contrast, the German government has beenmore prescriptive in its legislation about use of the testsand making sure that concept of quality is clearly defined.It is more unusual however for a design service to beprocured on the basis of lowest price.

Enforcement(a) National supervisory bodies for public procurement exist

in all three jurisdictions but the roles and powers differ. Asfar as we are aware, the Swedish Competition Authority isthe only national supervisory body with real enforcementpowers.

1.4 The comparative analysis of the public procurementsystems in the UK, Germany and Sweden suggest that thereare a number of lessons that can be learned.

(a) Whilst helpful, guidance may be of limited impact if thereis no mechanism in place for ensuring that the guidanceis being properly applied or observed. It may need to besupported by additional training. Or the role of nationalsupervisory procurement bodies may need to bestrengthened to give them greater enforcement powers.The option of appointing National Oversight Authorities isone of the options currently being considered by the EUCommission (the ‘Commission’) in its proposals for anew EU procurement directive issued in December 2011(the ‘Proposed Directive’).

(b) Sweden and Germany appear to have a greater trackrecord of success for encouraging SMEs. The network of Chamber of Industry and Commerce in Germany alsoprovides training and support to SMEs on how to tenderso the perceived barrier to entry is not as great, and thework of the Chamber seems to help to uphold theproportionality principle.

1.5 EU procurement reforms on their own are unlikely to bethe complete answer. One of the advantages of the Germansystem is that the implementation of the public procurementrules appears to be tailored to fit with the current contractualand legal system. Consequently to achieve the same effectin the UK, further consideration may need to be given asreforming the way construction procurement is carried out in the UK.

1 Executive summaryand recommendations

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2.1 The root of public procurement law is in the EU’s goal tocreate a ‘common market’ by removing all national barriersto trade set up by its Member States. The EU recognisedthat government spend represented a significant portion ofthe Member States’ combined GDP and that the commonmarket would be significantly more effective if governmentsabandoned their historic approach of purchasingpredominantly from domestic suppliers, sometimes at theexpense of value for money or quality.

2.2 The EU public procurement rules establish a frameworkfor advertising and tendering certain contracts for works,services and supplies above defined thresholds across theEU and awarding those contracts on the basis of value formoney.

2.3 There is a strict hierarchy of rules. The Treaty on theFunctioning of the European Union (the ‘TFEU’) sits at thetop of the hierarchy and contains two provisions, which,amongst others, help to promote open procurement:

(a) an overarching prohibition on discrimination on the basisof nationality;1 and

(b) the establishment of ‘four freedoms’: freedom of a citizenof one Member State to work or establish a business inany other Member State and the freedom to move theirgoods and capital between and through Member States.2

2.4 Below the TFEU sits the Public Contracts Directive(2004/18/EC, the ‘Directive’). The Directive sets out thebody of the rules, which Member States are required toimplement into their own legislation. The Directive givesMember States the freedom to implement the provisions in a manner which they think fit and which best reflects theirindividual legal systems. The current Directive also includessome optional provisions, such as the right to use e-auctionsor framework agreements. In the event of any conflictbetween the Directive and national implementing legislation,the Directive will prevail.

2.5 Finally, the decisions of the European Court of Justice(‘ECJ’) provide a body of law on the application andinterpretation of the TFEU principles and the Directive. Theseare binding as to the interpretation of the TFEU principlesand the Directive. The judgments have also developed theprinciples of fairness, transparency and non-discrimination,which underpin all public procurement in the EU, whether theDirective applies or not.

2.6 This should mean that the public procurement principlesare applied uniformly across the Member States, allowing forsome variations to reflect the different legal systems in forceand procedural rules.

2.7 The EU public procurement rules are enforced by theCommission and at a local level through civil procedures inMember States.

2 An overview of EU public procurement law

EC treaty

Directive2004/18

Public ContractsRegulations 2006

(as amended)

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AN

SPA

RE

NC

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FAIR

CO

MP

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ITIO

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Figure 1 Hierarchy of rules

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Construction procurement approaches3.1 Any comparison between the UK and other EU MemberStates of how the implementation of procurement law affectsthe selection of design team members does need to haveregards to the different approaches to the selection ofprofessional and contracting members of the constructionteam. Within this report we will have regard to some of thekey differences.

(a) Typical design team selection processIn the UK the emphasis for the majority of projects is forcontracting authorities to select an architect with whom theycan work effectively. A competition that centres on theselection of a design first, whether or not as a formal designcontest is used relatively infrequently.

(b) Authorities are looking to allocate riskConstruction is a complex process and carries significantrisk during both design and construction phases. Clientsregard the procurement process as relatively expensive andoffering no saving in professional fees. Clients includingcontracting authorities tend to select practices with a trackrecord and financial standing that at least seemingly createsthe comfort that the practice (and its professional indemnitycover) will be there if ever called upon in the future. Thecriteria that can be used at the selection stage in a regulatedprocurement encourage this ‘filter’ and can be used tooinflexibly in a way that discourages SME involvement.

(c) Use of design and build with novation of design teammilitates against SMEsConstruction and design risk are interrelated. One of theadvantages to a contracting authority of single pointresponsibility available with a design and build procurementroute is avoiding having to separate out construction anddesign issues in the event of a later problem. Contractorswho accept this risk, do so on the basis that they take anovation of the architects appointment and require typicallyhigher professional indemnity levels.

(d) Liability and insurance context – drives contractingauthorities towards larger businessesThere is a perception, not limited to the public sector, thatlarger practices are more stable (although the recent financialclimate has challenged this), and certainly more likely tocarry larger levels of professional indemnity cover on an‘each and every claim’ basis. Whilst this is to some degreerational unless the basis of insurance changes, there is adanger that over prescriptive use of the selection stageevaluation criteria, compounds the impact of this approachon SME architects.

Legislation3.2 The Public Contracts Regulations 2006 (as amended)(the ‘Regulations’) implement the Directive into English andWelsh law.3

3.3 The UK government adopted a comprehensiveimplementation package, including all of the optionalprovisions in the Directive (for example, on centralpurchasing bodies, e-auctions and framework agreements).This approach gives contracting authorities maximumpermitted freedom regarding how to conduct a competitionand the choice of procedure.

3.4 The Regulations require contracting authorities to useone of five competitive procedures when procuring contractsfor certain works, services and supplies, if the individualelements or aggregate value of the procurement in questionexceed designated thresholds.

Open procedure3.5 This is a one stage process. This procedure involves: (i) a call for competition; (ii) bidders respond with a tender;and (iii) evaluation of bids on pre-disclosed selection/awardcriteria. There is no negotiation. This process is better suitedto commoditised services or goods and is not commonlyused for the selection of architectural services.4

3.6 Whilst the speed of this procedure means it is attractiveto contracting authorities, it has the following drawbacks ifused for the selection of architects. There is no limit to thenumber of bidders who can submit a tender. Whilstcontracting authorities can impose minimum standards as afilter, care has to be taken to avoid using the filters as anindirect method of shortlisting bidders. This means that is notpossible to assess both design submissions and conduct aface-to-face interview with bidders. Consequently, minimumstandards as to financial thresholds or professionalindemnity insurance may be set unreasonably high toprovide contracting authorities with reassurance that anarchitect will be able to perform the contract.

3 How does it apply: UK

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Restricted procedure3.7 The restricted procedure permits contracting authoritiesto use selection criteria set out in pre-qualificationquestionnaires (‘PQQ’) to thin down the number of bidderswho will subsequently be invited to submit a full tender.

3.8 However, contracting authorities may only thin downbidders on the basis of their economic or financial standingand their technical or professional ability, as defined inRegulation 24 and 25 of the Regulations, whereas a procurerof architectural services does sometimes wish to firstexclude bidders on the basis of initial designs and then basethe final award on face-to-face interviews (as discussedabove). As contracting authorities strictly cannot thin downon the basis of design, the benefit of a two-stage procedureis limited to the situation where the contracting authoritywishes to select an architect rather than a design.

Competitive Dialogue (CD) procedure3.9 The CD procedure is used by a contracting authoritywho knows the outcome it desires but is unable to define thelegal or financial structure at the outset of the tenderprocess. Its use is restricted by Regulation 18 of theRegulations to ‘particularly complex contracts’, which isdefined by reference to the technical, legal and financialcomplexity of the project. The CD process may be usedwhere the design is carried out by a main contractor as partof a wider project for the design, build and delivery of aconstruction project.

3.10 Under the CD procedure, bidders who havesuccessfully passed the PQQ stage are invited to participatein structured dialogue with the contracting authority toidentify and discuss the best technical and contractualsolutions to meet the contracting authority’s requirements.Once dialogue has closed, bidders are asked to submit theirfinal solutions, without scope for further negotiation.

3.11 CD procedures have been criticised for being very timeand resource intensive. However it is the only procedurewhich can provide flexibility as to solutions. If properlymanaged and resourced it can be delivered in a streamlinedway, but problems have arisen in practice, perhaps partly asresult of lack of guidance in the rules.

The negotiated procedure3.12 The negotiated procedure had been used extensively inthe UK up to the point that the Regulations came into force.The negotiated procedure was the preferred procurementroute used for the majority of complex projects. Under thepresent procurement regime the negotiated procedureshould only be used in exceptional circumstances. Itappears to be used more commonly in some other EUcountries for the procurement of design services, but thismay be a matter of lack of enforcement of the rules ratherthan what is strictly permitted. Very few public authorities inthe UK are using the negotiated procedure, save in very clearjustified circumstances.

Design contests3.13 Design contests have significant potential for theprocurement of architectural services and better qualityconstruction as the Regulations allow contracting authoritiesto create a unique procedure and set of selection/awardcriteria for each contest. This has significant benefits ascontracting authorities are able to place design at theforefront of their assessment and a winner is chosen by ajury selected by the contracting authority on the basis of theirexpertise in a given area.

3.14 However, whilst design is given increasing importance,the Regulations require submissions to be madeanonymously so a contracting authority is unable to assessits ability to work with a bidder to fulfil a project. In addition,the Regulations do not address the ownership of intellectualproperty rights in the design, which can lead to disputesbetween the contracting authority and the winner. Designcontest rules can be the subject of some tension with thecommercial protections that contracting authorities arelooking for from a bidder.

3 How does it apply: UK

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Selection and award3.15 The distinction between selection criteria and awardcriteria is emphasised throughout the Directive, Regulationsand case law. However, this distinction can cause difficultiesfor contracting authorities when evaluating tenders.

3.16 The selection stage of procurement allows contractingauthorities to shortlist bidders on the basis of the ability of abidder to perform a contract based on their financial andeconomic standing and technical experience gained fromcarrying out similar contracts. Any minimum standards mustbe proportionate and relevant to the specific contract. Thereis no legal definition of what is proportionate as this willdepend upon the individual circumstances of each case.Proportionality is an issue for the national courts to decideupon. Bidders must be excluded if either the company orany directors or senior management have been convicted ofcertain offences relating to, amongst others, dishonesty andmoney laundering and may be excluded for other breachesof regulatory rules or insolvency.

3.17 The award criteria should identify the bidder best ableto perform the relevant contract in question. Contractingauthorities may decide to award the contract on the basis of:

(a) The lowest price; or

(b) The most economically advantageous tender.

3.18 Where the most economically advantageous tendercriteria is used, contracting authorities must disclose the keycriteria to be used in identifying the most economicallyadvantageous offer and state the weighting to be given toeach criteria.5 One of RIBA’s concerns is that in the UK,qualitative assessments may often be subordinated to otherweightings, such as price.

3.19 The difference between selection and award criteria hasbeen widely considered at both European and Member Statelevel. The legal reasoning is based on the ECJ’s decision inthe Lianakis6 case, which clearly states that contractingauthorities are unable to include further selection style criteriaat the award stage. However, this fails to take account of thefact that selection criteria at PQQ stage typically assess abidder’s past experience of similar projects. This preventscontracting authorities from considering the ability of thebidder and the proposed team to deliver on the specificproposal, which is likely to be a key consideration for theprovision of architectural services.

Enforcement3.20 The body responsible for implementing procurementpolicy in the UK is the Cabinet Office, which has recentlytaken over the role of the now defunct OGC. Its focus is onmaking procurement processes more efficient, particularly ata central government level. It provides guidance to centraland local government on procurement issues however it haslimited enforcement powers. It can mandate the applicationof guidance to central government departments, theirexecutive agencies and non departmental governmentbodies but can only recommend their application as bestpractice to local authorities.

3.21 Private law enforcement is available through the UKnational courts for breaches of the Regulations.

3 How does it apply: UK

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Legislation 4.1 The Directive has been implemented into German law bya suite of legislation:

(a) the German Act against Restraints of Competition;

(b) the German Ordinance on the Award of Public Contracts;and

(c) the Procurement Regulations. There are different versionsof the Procurement Regulations for works, supplies andservices. In relation to the provision of architecturalservices, the Procurement Regulations for the award ofIndependent Contractor Services are the mostappropriate. For construction projects, the ProcurementRegulations for Public Works apply and set out standardterms and conditions of contract.

4.2 Germany has chosen not to implement the optionalprovisions of the Directive relating to central purchasingbodies.

4.3 At the federal and local government level, a simplifiedtendering regime applies for contracts which are below thethresholds set out in the Directive.

Choice of procedures4.4 The same range of procedures is available in Germanyas apply in the UK. However in practice the CD procedurehas not widely replaced the negotiated procedure. Incontrast to the UK, much greater use is made of designcontests. Whereas in the UK, design contests are notpopular because of the requirement to assess designproposals anonymously this does not seem to raise suchconcerns in Germany. One reason for this may be as a resultof the different approaches to construction procurement. InGermany the responsibility for obtaining insurance cover fora project lies with the main contractor or occasionally theclient, rather than with individual members of the designteam. This allows contracting authorities to focus on thedesigns proposed rather than the identity of the architecturalpractice.

4.5 For contracts under the thresholds, simplified versions ofthe open, restricted and negotiated routes are available. Thecontracting authority must comply with the general EUprinciples of fairness, transparency and non-discrimination.

4.6 Germany procurement legislation is more prescriptive inrelation to changes that can be made during and after thetender process. It is notable that Germany is one of theMember States with the shortest tendering times. In part,

this may be explained by the reluctance to use the CDprocess which statistically tends to distort the average in theUK even though it is not used extensively for selection of adesign team. However the greatest reasons for delay andincreased costs in a construction project are changes to thespecification during the tender process and/or extensivenegotiations after the appointment of the preferred bidder.The fact that German legislation sets out detailedrequirements for contract specifications and prohibits abidder from changing its offer after it has been submitted tothe contracting authority is likely to focus the minds of bothbidders and contracting authorities much earlier on andavoid changes and subsequent delays during the tenderprocess.

Selection and award4.7 The ground for exclusion of bidders and selection are thesame as apply in the UK, in accordance with the Directive.

4.8 At the award stage, contracting authorities have theoption of awarding the contract on the basis of the mosteconomically advantageous tender (MEAT) or the lowestprice. Interestingly, where quality criteria are used todetermine the most economically advantageous offer,Germany judicial rulings call for greater disclosure of thecriteria and sub-criteria on which quality will be assessed. Itis not clear whether this results in greater weightings beingattributed to design.

Enforcement4.9 The Federal Ministry of Economy and Technology isresponsible for implementing procurement legislation andproviding guidance on its application.

4.10 Specialist procurement review bodies or ‘awardchambers’ are responsible for enforcing procurement lawbetween contracting authorities and aggrievedcomplainants. The process for seeking a review of an awarddecision is much quicker than in the UK national courts. Byway of illustration, the award chambers must carry out areview of the decision within 5 months of receiving the formalcomplaint. This compares with between 6 months to 2 yearsin the UK courts. Moreover the concept of automaticsuspension of the award decision which was introduced bythe Remedies Directive7 has been in force for much longer inGermany. Whilst it could be said that there is a greaterculture of litigating procurement disputes in Germany, theremedies regime appears to be cheaper, faster and moreeffective in practice.

4 How does it apply: Germany

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Legislation5.1 The Law on Public Procurement (2007:1091) applies toprocurements both above and below the thresholds set outin the Directive.

5.2 Sweden has decided not to implement most of theoptional provisions of the Directive. It is one of only fourMember States not to implement the competitive dialogueprocedure. Interestingly the one exception is in relation toframework agreements, where its usage is quite high, withcontracting authorities routinely conduction mini-competitions from widely based frameworks

Choice of procedures5.3 The same range of procedures is available in Sweden asapply in the UK contracts above the thresholds, with theexception of the competitive dialogue process.

5.4 For contracts below the thresholds, there are threeprocedures. The simplified and selective tenderingprocedures are similar to the open and restricted proceduresbut permit negotiation with one or more bidders at the awardstage. The direct tendering procedure is only permitted if thevalue of works or services is less than 15% of the current EUthresholds.

Selection and award5.5 The ground for exclusion of bidders and selection are thesame as apply in the UK, in accordance with the Directive.

5.6 Contracting authorities may award a contract basedupon the lowest price or alternatively the most economicadvantageous offer, provided that the basis of evaluation isset out clearly in advance.

Contract forms5.7 There are no specific standard forms of contract forconstruction projects or the appointment of architects.

Enforcement5.8 The Competition Authority in Sweden also hasresponsibility for enforcement of procurement legislation inSweden. Unlike the national supervisory bodies in the UKand Germany, the Swedish Competition Authority has thepower to fine contracting authorities for non-implementation.

5.9 Private law enforcement is available through the Swedishnational courts.

5 How does it apply: Sweden

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6.1 Whilst the application of the EU public procurement rulesin the UK, Germany and Sweden follow similar routes ofprocurement, selection and award criteria as dictated by theDirective, in practice there are some interesting divergencesin the way that contracting authorities choose to carry outtender processes.

6.2 Taking some of the key RIBA procurement reformrecommendations in turn, we have set out in Appendix 1examples of good and bad procurement practice in the UKand other Member States to identify how the UK couldimplement some of the recommendations being put forward.

6 A comparative assessment

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Appendix Comparison table

RIBA RecommendationsClarify and simplify process and language

An example of the over-complicated language used in theDirective is the definition of bodiesgoverned by public law in Article 1(5) of the Directive.

RIBA is also concerned that anunfair burden is placed uponcharities and other voluntaryorganisations who are required tocarry out a regulated procurementprocess in respect of subsidisedworks and service contracts andthese should be amended.

UK Germany, Sweden andother member statesThere is evidence that organisationswhich are caught in the UK asbodies governed by public law arenot subject to the rules in otherMember States. For example,‘Registered Social Landlords’ falloutside the procurement rules in theNetherlands. In Germany, certainhospitals and providers of medicalservices which are funded bysubscriptions rather than thegovernment also fall outside thedefinition. This could placeorganisations in the UK at acompetitive disadvantage. However,we are unable to comment onwhether the different outcomes areas a result of divergent interpretationby different Member State of therules, or as a result of differentstructures of the organisations,without further investigation.

EU

The purpose of the proposedDirective is to simplify theprocurement process and toconsolidate the caselaw of the ECJinto the revised Directive.

However critics will argue that theintroduction of two new proceduresand additional reforms are likely toadd more complication and issuesfor interpretation.

RIBA Recommendation 1

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RIBA RecommendationsReduce the time and costs of the tendering process

UK

The EU evaluation report and Lean reportidentify the UK as having some of thelongest tender times and highest costs oftendering, both for the contractingauthority and bidders. In part this may beexplained by the higher use in the UK ofthe CD procedure. In part also it may as aresult of failure of contracting authoritiesto properly define their requirements earlyon in tender process, which can lead tochanges in specification at a later stage.In our experience this is one of the mainreasons for delay.

The Lean report has identified a numberof causes of delay resulting from:

• Lack of capability and resources• Failure to properly engage with

suppliers at the pre-tendering stage• Lack of proper governance and

procurement processes• Issuing contract notices too early • Adverse attitude to risk

The focus of the report is on improvingthe pre-tendering phase for contractingauthorities so that they have a clear ideaof their requirements and are betterprepared for the tender phase. Guidanceand training on intelligent commissioningand scoping are practical ways to addresssome of these issues.

Attempts have been made in the UK tostandardise PQQs to save time. Forexample, central governments bodies arerequired to use the standard form of PQQissued by the OGC the previousgovernment body responsible forimplementing the public procurementlaws in the UK. The risk with a genericPQQ which is based on ‘one size fits all’ isthat it may be difficult to select candidatesto be invited to tender, without setting toohigh minimum standards which maydiscriminate against SMEs and microbusinesses. Often contracting authoritieswill fail to adapt a standard document tothe specific contract or type of bidder thatthey wish to attract. To address some ofthese issues, the Cabinet Office has justissued a Procurement Policy Note on theuse of the standard PQQs

www.cabinetoffice.gov.uk/sites/default/files/resources/PPN-01-12-Use-of-PQQ.pdf

The UK has a greater track record for e-tendering.

Germany, Sweden andother member statesIn Germany, there are moredetailed rules on requirements forspecifications and prohibitions onchanges which may explain inpart why Germany has one of thequickest tender times on average,102 days compared with 161days in the UK.

EU

The focus of the EU proposals toreduce timescales is on greateruse of e-tendering.

EU proposals for self-accreditation and passports willremove some of the costs of theselection phase, although thebenefit may be greater forGermany and Sweden who donot use e-tendering so much.

Appendix Comparison table

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RIBARecommendationsRemove any ‘gold plating’

UK

There is a perception in the UK thatin implementing the Directive, theUK has introduced additionaltendering requirements in theRegulations beyond thosecontemplated by the Directive.Whilst it is true that the UKgovernment has given contractingauthorities the option of using all ofthe non-mandatory featuresprovided for in the Directive, forexample, framework agreementsand the competitive dialogueprocedure, the Regulations do notimpose greater requirements onbidders. This would be contrary toEU law.

Experience however suggests thatat the day to day level, procurementofficers may adopt a very rigidinterpretation of the Regulations.

Germany, Sweden andother member statesIn contrast to the UK, Germany andSweden have decided not toimplement some of the non-mandatory features of the Directive,notably the CD procedure is notavailable in Sweden.

EU

Appendix Comparison table

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Award of a construction contractshould always be to the mosteconomically advantageoustender

OGC Guidance to centralgovernment requires contractingauthorities to take into account‘whole life costing’ to ensure Valuefor Money (‘VfM’), especially inrelation to complex contracts.8

However at the local authority level,this may be more difficult to enforce.

There is also a concern that in theUK, weightings given to qualitativeassessments are frequentlysubordinated to all otherconsiderations such as price.

The Commission has recognisedthe need for further guidance in thisarea. In its Green paper on themodernisation of EU publicProcurement policy, it mooted theidea of eliminating tenders basedupon lowest price although this ideahas not been included as part of therevised package of proposals.

Appendix Comparison table

RIBA Recommendation 2

RIBARecommendationsFocus on processes andincentives that drive quality andoutcomes

UK

Contracting authorities must retainthe freedom to evaluate based upontheir individual requirements.However, guidance on theimportance of quality of design andits benefits in terms of ‘whole life’costings may address this concern.

Germany, Sweden andother member statesWhere quality is used as a criterionfor assessing the most economicallyadvantageous tender, Germanlegislation requires greatertransparency on how quality isassessed.

EU

Embed assumptions in favour ofsustainability at all stages ofprocurement

There is a misconception with somecontracting authorities thatsustainable criteria cannot be usedat contract award stage. It ispossible for sustainability criteria tobe used in evaluating tender bidsprovided that they are linked to thesubject matter of the contract, areproportionate and can bedemonstrated to have an economicbenefit. This issue can beaddressed through training andguidance.

Prioritise defining the principlesof ‘whole life costing’

OGC Guidance to centralgovernment requires contractingauthorities to take into account‘whole life costing’ to ensure Valuefor Money (‘VfM’), especially inrelation to complex contracts.9

However at the local authority level,this may be more difficult to enforce.Training an encouragement may bebeneficial.

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RIBA Recommendation 3

Appendix Comparison table

RIBARecommendationsEnable access for microbusinesses and SMEs

UK

Whilst the EU Evaluation reportshows that SME’s participation incontracts above the thresholds inthe UK has been decreasing, theevidence of the reasons for thisappears to be inconsistent. The UK has a high use of frameworkcontracts which may be one reasonfor the decrease.

But the same report notes thataccess for SMEs below thethresholds has improved. It alsoshows that the UK has good recordof division into lots which tends tobe a factor which facilitates SMEaccess, with approximately 18% of contracts being advertised in lots. It would be helpful to provideevidence from the construction and architectural services sectorspecifically to determine rates ofaccess in the sector which wouldsupport RIBA’s proposals in relationto this issue.

The fact that Germany and Swedenboth have tendering regimes inplace for under the thresholdscontracts, and have increased SMEparticipation in contracts in recentyears, may suggest that greaterguidance on use of tendering topromote competition would bebeneficial in the UK.

Germany, Sweden andother member statesGermany and Sweden both havesimplified tendering regimes forworks and services below thethresholds.

Evidentially access for SME’s inGermany and Sweden has beengreater in the last two years than the UK.

In Germany 19% of contracts areadvertised in lots and there is arelatively low take up of frameworkcontracts.

Germany also provides consultingcentres for public procurementthrough its network of Chamber ofIndustry and Commerce to providesupport and assistance tocontractors on tendering.

EU

One of the issues for architects inthe UK is the high cost and basis ofprofessional indemnity cover, whichmay restrict access to contracts forarchitectural services for SMEs andmicro-businesses. In the UKprofessional indemnity cover istaken out on an annually renewable‘claims made’ basis. Clientstypically require architects tomaintain a prescribed level of coverfor 12 years. The cost of committingto this can be a disincentive for an SME.

In Germany, the allocation of riskbetween the design team is sharedacross the project, for examplethrough Single Project Insurance.This means that the cost of takingout professional indemnity cover isnot solely the responsibility of thearchitect. This promotes wideraccess for architects. As a result,more design competitions are alsoheld.

Sweden has a high proportion offrameworks. This may explain whySMEs share of contracts above thethreshold has been decreasing over time.

From a legal perspective, theproposal to discriminate in favour ofSMEs and micro businesses raisesdifficult issues since the rationale forthe public procurement rules is toopen up the public sector marketsto competition. Moreover, anysubordinate legislation issued underthe Treaty on the Functioning of theEuropean Union must comply withthe general principles of fairness,transparency and non-discrimination.

Other indirect ways, such asharmonising the requirements forprofessional indemnity cover orpromoting the adoption ofindependent/ single projectinsurance across Member States,may be easier to implement.

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RIBA RecommendationsCommit to reviewing OJEUthreshold values

UK

The UK Government response tothe European Commission Greenpaper indicated that it was in favourof this idea in principal.

Germany, Sweden andother member states

EU

Appendix Comparison table

Ensure financial standing criteriaare proportionate to the projectand the contract

The OGC has issued a practice noteto contracting authorities on how toset minimum turnover requirementsin order to ensure the financialstability of bidders.10 One of thedifficulties in this area is thatfinancial stability is not necessarilylinked to the ability of architects todesign quality buildings. This isanother example whereprocurement officials may ‘goldplate’ the legislation by interpretingthe guidance too literally and notapplying the rules to the particularsector.

Set objectives for the proportionof contracts awarded to microbusinesses and SMEs

From a legal perspective, theproposal to discriminate in favour ofSMEs and micro businesses raisesdifficult issues since the rationale forthe public procurement rules is toopen up the public sector marketsto competition. Moreover, anysubordinate legislation issued underthe TFEU must comply with thegeneral principles of fairness,transparency and non-discrimination.

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References

Sources of reference EU Commission Working Document: Summary of EvaluationReport into EU Public Procurement Legislation, June 2011http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/executive-summary_en.pdf

Green paper on the modernisation of EU public Procurementpolicy (COM (2011) 15 final)http://ec.europa.eu/internal_market/consultations/docs/2011/public_procurement/synthesis_document_en.pdf

UK response to the EU Commission Green paper on themodernisation of EU public procurement policywww.cabinetoffice.gov.uk/sites/default/files/resources/0707UKGPpbResponsefinal%20(2).pdf

Global Legal Group International Comparative Legal Guideto Public Procurement: 2011www.iclg.co.uk/khadmin/Publications/pdf/4198.pdf

Cabinet Office ‘Accelerating Government Procurement’report into Lean review, February 2011www.cabinetoffice.gov.uk/sites/default/files/resources/lean-study-accelerating-government-procurement.pdf

Competition PLC: Guides to procuring construction andprojects in Germany and Sweden

References 1 Article 18 TFEU

2 Articles 21, 26 and 28 TFEU

3 Different sets of Regulations apply in Scotland andNorthern Ireland although the procedures discussed in thisdocument and the surrounding considerations are broadlysimilar to the English and Welsh legislation.

4 The Open procedure should be distinguished from the‘open competition’ – a phrase unconnected with regulatedprocurement to describe a restricted procedure process toselect an architect where the ability to express interest is‘open’ to all and is in contrast to a ‘limited’ or ‘invited’competition. An ‘open competition’ would most usually beundertaken in accordance with the restricted procedure.

5 Regulation 30

6 Case C-532/06 – Emm.G. Lianakis AE and others v DimosAlexandroupolis and others

7 2007/66/EC

8 www.forthconstruction.co.uk/downloads/achieving-excellence-guide-7.pdf

9 www.forthconstruction.co.uk/downloads/achieving-excellence-guide-7.pdf

10 www.sopo.org/PDFs/ogcfinanapp.pdf andwww.sopo.org/PDFs/ogcannexes.pdf

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