Before the introduction of the current Public Contracts Regulations 2015, contracting authorities were undoubtedly more nervous about conducting pre-market engagement in case they gave an unfair advantage to one contractor over another. The current position seems to be that contracting authorities are carrying out a wide variety of different types of pre-market engagement, ranging from simple desk-based analysis to one to one meetings with selected bidders. Pre-market engagement is now specifically permitted by the PCR 2015, and indeed there is a lot of published guidance (see footnote) explaining that it is:
- Essential best practice
- Ensures value for money
- Reduces risk by early scoping of tender requirements.
That said, there are still some pitfalls to navigate. Pre-market engagement must not distort competition, nor result in a violation of the principles of non-discrimination and transparency. In this article we look at how pre-market engagement or the prior involvement of tenderers may cause problems for authorities, and how to avoid similar problems arising in practice.
The starting position
The starting position is that under Regulation 40 of the PCR 2015:
- In order to:
- Prepare the procurement
- Inform operators of procurement plans and requirements
- Authorities may conduct market consultations
- Authorities may seek or accept advice (for example) from:
- Independent experts
- Other authorities
- Market participants
- Such advice may be used in the planning and conduct of the procurement procedure providing:
- It does not have the effect of distorting competition; and
- Does not result in a violation of the principles of non-discrimination and transparency.
So in order to be able to use the valuable product of pre-market engagement, authorities will need to plan pre-market engagement so that it does not have these distortive effects or results. Similarly, those operators who have been involved in pre-market engagement should not find their ability to participate in a subsequent tender jeopardised. This is because Regulation 41 then protects those operators (or indeed entities related to them) from automatic exclusion. Regulation 41 provides that:
- The contracting authority shall take appropriate measures to ensure that competition is not distorted by the participation of that tenderer (those measures have to be documented in a Regulation 84 report).
- Those appropriate measures must at least include the communication of information to other tenderers and fixing of adequate time limits to allow other bidders to catch up.
- The contracting authority may only exclude a tenderer who has had prior involvement where there is no other means to ensure equal treatment and the tenderer has had a chance to prove the competition is not distorted.
Is it possible to meet with selected operators or does that afford an unfair advantage to those operators?
Whilst that precious "face time" between supplier and purchaser is undoubtedly of value, it may still be proportionate for the authority to select individual operators to meet with. For example, the authority may not have time to meet with all potential providers, yet meeting with them all at a general bidder event day may not provide the insight into the market the authority needs. PPN 04/12 published on 9 May 2012 (even before the current Regulations) envisaged it would be permissible to meet with a "proportionate number of suppliers in relation to market size", and Regulation 41 protects suppliers who have been involved from exclusion, so seems designed in recognition that certain operators may have been involved whereas others will not have been involved. It is important to put in place "appropriate measures" at this point and ensure that they are documented in the Regulation 84 report. Those measures might include:
- Issuing a Prior Information Notice to invite expressions of interest and inform the market of the intention to carry out pre-market engagement
- Using an independent consultant or some other non-discriminatory way to select an impartial cross-section of operators to meet with
- Consider whether it is appropriate to separate those conducting the pre-market engagement from those who will be evaluating the tenders, thereby minimising the risk of prejudice in favour of those companies involved.
- Sticking to a pre-determined set of questions when meeting with operators, so each one is given the same information and same opportunity to respond, and then considering whether it is appropriate to share that information to the wider market (being mindful of any confidentiality obligations).
- Ensuring that the rest of the market has time to catch up in terms of adequate time for clarifications and tender responses.
How can you use the product of pre-market engagement when designing your tender specification? What if you particularly like a solution you find out about?
The general principles of non-discrimination, transparency, equal treatment and proportionality contained in Regulation 18 have a relevant cousin in this situation. Regulation 18(3) goes on to say that the contracting authority must not design the procurement in a way which unduly favours or disadvantages certain operators.
The detailed rules of technical specifications contained in Regulation 42 provide that contracting authorities must ensure that the technical specification:
- Affords equal access
- Does not create unjustified obstacles
- Avoids unjustified reference to particular makes
- Uses "or equivalent" if referring to standards or to a particular make or source.
Does case law provide any guidance?
Image source: Licensed under CC-BY-SA 3.0 Tomas Castelazo
Image source: Licensed by CC BY-SA 4.0 Cornallanense
Image source: https://hasse77.1g.fi/kuvat
Image source: https://www.varian.com
A useful question to ask when designing the tender requirements is therefore whether it is really essential to include a requirement that may restrict competition, or whether it is possible to stipulate outcomes instead. For example, rather than specifying a particular configuration or solution, can requirements reference the particular objectives desired instead?
When does prior involvement in helping develop a specification mean a tenderer should be excluded?
With proper planning, prior involvement should not result in a distortion of competition, and exclusion of a tenderer should be a last resort, and only after consultation with that operator in any event (Regulation 41). Contracting authorities do however need to be alive to the risk of an unfair advantage, investigate it where appropriate, and also consider the overlap between the provisions against conflicts of interest under Regulation 24. Regulation 24 contains comparable language to that contained within Regulation 41, referring to "appropriate measures" to effectively prevent, identify and remedy conflicts of interest so as to avoid any "distortion of competition" and to ensure "equal treatment".
What is clear is that an apparent conflict of interest must be investigated before exclusion.
Turning to what might be appropriate measures by way of prevention and remedy, a case against the European Union Intellectual Property Office demonstrates when prior involvement can be managed (and investigated properly).
In conclusion, significant benefits can be obtained by the contracting authority who plans and conducts pre-market engagement carefully. The guiding principles should be to ensure sufficient time between the pre-market engagement phase and the procurement phase so information can be shared as appropriate and then also in the tender phase so that clarifications can be asked. The audit trail is essential in terms of ensuring a hygienic process but also in the event of any challenge. There is a mandatory requirement to document appropriate measures in a Regulation 84 report. There are a great number of cases on conflicts of interest and this area generally, and these are listed below for further reading.