Procurement routes

Under the regulations councils can continue to use the familiar open procedure or restricted procedure for ‘off the shelf' requirements.


What is this about?

Under the regulations councils can continue to use the familiar open procedure or restricted procedure for ‘off the shelf' requirements.

However, there is now much greater flexibility to use negotiation for complex or innovative requirements.  There are three different procurement routes to choose from:

  •  competitive procedure with negotiation (CPN)
  •  competitive dialogue (CD)
  •  innovation partnership (IP).

Important changes have been made to CD and CPN and the IP is an entirely new route.

Additionally, it remains possible in limited circumstances to award a contract by negotiation without prior advertising.

The section outlines the changes to procurement routes and the circumstances in which each might be used. Procurement of services under the Light Touch Regime (LTR) is addressed in another section.

Note that new obligations relating to notices, time limits, procurement documents and electronic procurement apply to all the procurement routes.

What is new?

Open procedure
The open procedure is the fastest and simplest route to award a contract but it allows no opportunity for negotiation.

The UK Government regards the open procedure as the ‘default' procedure for government procurement.

On the whole, the new regulations have not changed the open procedure (other than the time limits etc.) but there is one important difference. Councils can now evaluate tenders before assessing whether exclusion grounds and selection criteria have been met (see selection).

Effectively, this means that the information only needs to be checked for the winning tenderer.

Restricted procedure
The restricted procedure is most useful where there are potentially a very large number of bidders in the market (this will be confirmed through market engagement) or there is otherwise a genuine need to pre-qualify suppliers.

The procedure is largely unchanged by the new regulations.

Competitive procedure with negotiation
Under the new regulations CPN and CD can both be used in the same set of circumstances:

  • The needs of the council cannot be met without adaptation of readily available solutions
  • The goods, works or services include design or innovation solutions
  • The contract cannot be awarded without prior negotiation because of specific circumstances related to the nature, the complexity or the legal and financial make-up or because of risks attaching to them.

In addition, either procedure can be used when only irregular or unacceptable tenders are returned in an open procedure or restricted procedure.

This adds considerably to the circumstances in which CPN can be used (i.e. use of the old version of this procedure was more limited). The CPN route is not suitable for ‘off the shelf' requirements where the open procedure or restricted procedure is a better choice.

The CPN procedure is more structured than the old version (which gave councils a lot of discretion). Key changes (safeguards) in the new version are:

  •  Setting minimum requirements at the beginning and not changing them during the negotiations.
  •  Having stable award criteria and weighting throughout the process.
  •  Informing tenderers in writing of any changes to the specifications.
  •  Not revealing confidential information from a candidate or tenderer to other participants without specific consent.
  •  Documenting all stages of the process
  •  Submission in writing of all tenders.

The negotiations can take place in stages by using contract award criteria to eliminate tenderers.

All tenders apart from final tenders can be negotiated. But the council can reserve the right not to negotiate, i.e. it can accept an initial tender if it is suitable.

Negotiations can take place on all aspects of the tenders, other than the minimum requirements, such as quality, quantities, commercial clauses, social, environmental and innovative aspects.  

Competitive dialogue
The key changes in the new version of CD are:

  • There is no longer a requirement to specify the council's minimum requirements at the outset.
  • The council must set out an indicative time frame for the dialogue.
  • There is more flexibility following submission of final tenders (they may be ‘clarified, specified and optimised').
  • There is also more flexibility to negotiate with the preferred tenderer to confirm financial commitments or other terms contained in the tender by finalising the terms of the contract.
  • Contract awards must be based on the ‘best price-quality ratio'.

The improved version of CD remains the best route for PF2 and similar PPP contracts because of these additional flexibilities. For example, there may be a need to address issues raised by third party funders or planning issues before the ‘legal close'.

CD should be considered for all highly complex outcome-based contracts.

Innovation partnership
The IP enables the council to develop innovative products, works or services where no suitable solution exists in the market (sharing the risk with suppliers) and then to purchase the resulting products, services etc.

In return for sharing the risk in the development phase the council might want to share in the profits from wider sale of the products, services etc. that are developed (licensing).
The procurement procedure for an innovation partnership is a version of the CPN.

Following the negotiations, contracts can be awarded to one or more partners. In an IP the contract award must be based on the ‘best price-quality ratio'. This is not a requirement in CPN generally.

Arrangements regarding intellectual property rights need to be agreed.  

The development phase of the partnership should:

  • Be structured in successive phases following the sequence of steps in the R&D process.
  • Set intermediate targets and provide for payment in appropriate instalments.
  • Include an option to terminate after each phase (based on achievement of the targets) or, where there are several partners, allow for competitive development with a reduction in the number of solutions.

The resulting products, services or works can be purchased from the partner(s) provided that they meet agreed performance levels and maximum costs agreed between the council and the participants.

Negotiated procedure without prior advertising
There continue to be circumstances in which a negotiated procedure without prior advertising can be used. The burden of proof is on the council to justify its use of this procedure under the regulations.

The circumstances are broadly unchanged from the old rules. However, the acquisition of additional services, works or goods not included in the original procurement is now covered by the rules on changes to contracts and requires a special type of notice to be published.

In general councils using this procurement route would be advised to publish a so-called voluntary ex-ante transparency notice (VEAT notice) to guard against the most severe remedies for illegal direct award of a contract.

Note that there are no longer any requirements in the regulations concerning how this procedure should be carried out.

The diagram below shows a procurement route ‘decision tree'. Use of this tool is mandatory in UK Government (where the open procedure is the default procedure). It is recommended to councils and the wider public sector.

PCR Crown Commercial Service