procurement state aid final presentation slides

Procurement, State Aid and Social
Value Update
The new Public Contracts
Regulations –what to expect and how
to be prepared
13 January 2015
9:45am – Introduction (Stephen Pearson)
9:50am – 10:30am – The New Public Procurement
Directive (Annie Moy)
10:30am – 11:15am – State Aid Update (Stephen
11:15am – 11:30am – Coffee
11:30am – 12:30am - Exercises
The New Public
Procurement Directives
An overview of the changes
Annie Moy – Sharpe Pritchard
Aims of the reforms:
Simpler, more flexible procurement
Better access to EU market for SMEs
Consolidating case-law
Improved governance and more professionalism
in procurement
Key changes
Removal of Part A and B distinction
New procedures
Shortlisting and award criteria
Electronic procurement
Procurement between public authorities
Contract changes
Removal of Part A and Part B
Default position: all service contracts have to be
advertised and procured in accordance with the
requirements of the Directive
• Many of the current B Services will benefit from lightertouch regime and a higher threshold
• (Specific Exclusions set out at Articles 7 – 12 e.g legal,
health and social)
• BUT: OJEU Notice requirement if above threshold
• Threshold = currently €750,000
Choice of procedure (1)
The existing four procedures with reduced
Open Procedure: 35 days (old regime = 52 days)
Restricted Procedure: 30 days (old regime = 40 days)
Plus PIN reduction
Plus electronic reduction
Plus two new procedures:
• Competitive procedure with negotiation (Article 29)
• The innovation partnership procedure (Article 31)
Choice of procedure (2)
Competitive Negotiation (Art 29) or Competitive
Dialogue (Art 30) can only be used where:
• Needs cannot be met without adaptation of readily
available solutions
• Include design or innovation solutions
• Nature, complexity or legal and financial make-up or risk
• Cannot establish specifications with sufficient precision
• Or – only irregular or unacceptable tenders received
following open or restricted procedure.
Choice of procedure (3)
Competitive Procedure with Negotiation (Art 29):
• Purpose of negotiation: to improve the content of the offers
in order to better correspond to the award criteria and
minimum requirements
• Authority will need to:
– Know exactly what it wants, and
– Be able to specify its requirements,
• Authority is allowed to negotiated to ensure that the bid is
an improvement in terms of meeting requirements.
Choice of procedure (4)
Innovation Partnership Procedure (Article 31):
• Purpose: to establish a structured partnership for the
development of an innovative product, service or works not
already available in the market.
• Procedure is the same as the Competitive Procedure with
Negotiation BUT Council only able to use this if there is not
already a solution on the market.
• Select partly on innovation
• Negotiate apart from final tender
• Final contract will have intermediate stages (with targets).
Shortlisting and award criteria (1)
Shortlisting (Article 58.1):
• suitability to pursue the professional activity
• economic and financial standing
• technical and professional ability
Factors must be proportionate and relate to the
subject matter of the contract
Financial turnover threshold limited to 2x contract
value (or each individual lot).
Shortlisting and award criteria (2)
Award based on Most Economically Advantageous
Tender (MEAT) only:
• MEAT may be based on price or cost using costeffectiveness approach e.g. life-cycle costing
• May be the best price-quality ratio mix of qualitative,
environmental and/or social aspects linked to the subject
matter of the contract
• Cost element may be fixed price/cost on the basis of which
economic operators will compete on qualitative criteria
• No unrestricted freedom to choose
• Must specify relative weighting given to criteria
Procurement between public
authorities (1)
Teckal Companies (in house companies): Case C-107/98
(Article 12 (1))
A Contract will fall outside the scope of the Directive if:
• Contracting authority exercises control which is similar to
that which it exercises over its own departments
• More than 80% of the activities of the controlled company
are carried out in the performance of tasks entrusted to it
by the contracting authority
• No direct private capital participation
Procurement between public
authorities (2)
Pooled Funding: Hamburg, Case C-480/06 (Article 12(4))
A Contract will fall outside the scope of the Directive if:
• Establishes or implements a co-operation between
• The implementation of that cooperation is governed solely
by considerations relating to the public interest
• The participating authorities perform on the open market
less than 20% of the activities concerned by the
Procurement between public
authorities (3)
Mutuals (Art 77): Reserved contracts for certain CPV codes
in health, social and cultural
Maximum duration is 3 years
Call for competition to cite this article
Cumulative conditions for “mutual”:
• Public service mission
• Re-investment of profits
• Employee ownership/participation
• No award to organisation by the authority under this article
in last three years
Contract changes (1)
Existing contracts may be varied if:
a)Variation was already provided for in the procurement;
b)Additional works, services or supplies where no change of
contractor is realistic – 50% rule (modification not to exceed
50% of the value of the original contract);
c)Modification is not foreseeable, no fundamental change and
50% rule;
d)Change of contractor – partial succession; or
e)Where not substantial, a de-minimis change both below
10% contract value (15% works) and also below threshold;
f)for the Pressetext reasons (see next slide)
Contract changes (2)
Where the modifications, irrespective of their value, are not
substantial (Article 72.1(e) – the “Pressetext” criteria).
A modification will be deemed substantial if:
• It would have allowed for the admission of other
candidates/acceptance of another tender/attracted additional
• It changes the economic balance of the contract in favour of
the contractor in a manner not provided for in the initial
• It extends the scope of the contract considerably; or
• It results in a change of contractor other than the case
provided for at (d) on previous slide.
Preparing for implementation
Ensure ICT systems can handle electronic procurement
Monitor changes to existing contracts carefully
Consider how Part B services will be advertised in future
Consider how to encourage greater involvement of SMEs
Review procurement processes with a view to simplifying /
making use of new procedures
Thank you – any questions?
[email protected]
State Aid
What fresh hell is this?
Refresher & Update
Stephen Pearson (Partner)
Freeths LLP
Why is State Aid Important?
• Free Trade – part of the founding principles of the
• Article 107 TFEU “Any aid granted … through
state resources … which distorts … competition
by favouring undertakings … shall … be
incompatible with the internal market”
• Increased intervention by DCLG in ERDF Projects
• Awareness of public and private sectors / funders
What is State Aid?
• Key cases and principles
–2014/3292 – Block Exemption
What is State Aid Cont’d?
• Advantage
– granted by State
– to an undertaking providing goods / services
– distorts competition
Key Cases – New and Old
• Altmark Trans [2003] ECR 1-7747, Case C280/00
• Leipzig – Halle [2012] Case C-288/11P
• R (SkyBlue) v Coventry City Council (2014)
EWHC 1747
• Konsum Nord v Commission (2011) Case T244/08
• The “German Incubator” Case
GBER 2014/3292
• Adopted 21 May 2014
• Simplifying “aid compatible with internal market”
• Examples:
– Research and development support –
fundamental, industrial and experimental
– Innovation aid for SMEs
– Training aid
– Culture and heritage conservation
• New requirement for Member States to disclose
all exempt State Aid:
– Legal basis
– Budget
– Type of support
Key Advice
• Consider loans > 1.99%
• Review payments carefully
• Keep DCLG “on side”
• Increased fear of State Aid
• Interventional approach by HMG
• More awareness required !

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