SCARBOROUGH BOROUGH COUNCIL CABINET 4 APRIL 2006 A ITEM AGENDA ITEM NO A8 JOINT REPORT OF THE HEAD OF LEGAL SERVICES HLS/06/17 AND THE STRATEGIC DIRECTOR OF OPERATIONS SDO/06/16 on THE COUNCIL S PROCUREMENT STRATEGY AND CHANGES TO CONTRACT PROCEDURE RULES ARISING FROM CHANGES TO EUROPEAN LAW PURPOSE OF REPORT To seek authority to: (a) amend the Council s Contract Rules to reflect changes to European Law and (b) to note and approve the Council s buyer profile (c) to extend the operation of the current Approved Lists pending introduction of the Electronic Contract Management System in June 2006 1. INTRODUCTION 1.1 This report is to update members on progress with the Council s Procurement Strategy, seek agreement with the proposed Council buyer profile, consult members of the Committee upon the proposed changes to the Constitution to reflect changes in European Law and seek the agreement of members to extend the current Approved Lists pending commencement of the new Contract Management System in June 2006. 2. CORPORATE OBJECTIVES 2.1 The Council s Procurement Strategy supports the achievement of all the Council s corporate objectives. 3. ISSUES AND ASSESSMENT 3.1 Changes to the European Directives: In 1996 the European Community issued a green paper which recognised that of some 110,000 entities and contracting authorities to which the EU Directives apply, about 85%, especially local authorities, do not comply with their advertising and transparency requirements. This provided a catalyst for a review of the directives and the identification of improvements to them to both clarify and improve the rules.
3.2 The green paper produced in 1996 was subsequently adopted by the European Commission in March 2004 and was required to be implemented within the UK by January 2006. The new rules recognise changes that have occurred to procurement practice and the opportunities arising from the development of the Internet, for electronic and accelerated procurement activities. 3.3 The major changes are: (a) Electronic Communications Contracting Authorities may adopt a buyer profile and thereby provide procurement information to suppliers through a website. Annual notice of future procurement activities (Prior Information Notices) may be advertised in this manner, provided that the European Commission is notified. Where contract notices are compiled and submitted electronically the EU time limits can be reduced by 7 days, and a further 5 days where unrestricted electronic access to all contract documentation is provided. Given that the Council is now in a position to meet these requirements, and the new Contract Management System will improve this arrangement still further, it is intended to publish and maintain a buyer profile detailing intended procurement activity over the next year. The initial buyer profile is attached to this report as Appendix 1. The profile is in the course of revision and will continue to be updated throughout the year. (b) Sustainability and Social issues Under the new rules contribution to the environment and the promotion of sustainable development may be included in technical specifications, selection of tenders and award criteria. This offers the opportunity for the Council to adopt a policy which addresses local environment and sustainability needs within the borough of Scarborough. (c) Central Purchasing Bodies and Framework Agreements Central Purchasing Bodies such as the Yorkshire Purchasing Organisation are specifically referred to in the directives for the first time. Likewise framework contracts are specifically referred to. Both these procurement arrangements were referred to in changes to the constitution adopted by Council in September 2004. Central Purchasing bodies let framework type contracts on behalf of a group of public bodies in compliance with EU Procurement rules. Contracting bodies can them simply procure goods and services through contracts that have already been let by the Central Purchasing body avoiding the necessity to go through the full rigours of the EU Procurement process.
In a similar manner, when letting a framework contract, a public body may let that contract on the basis that it will permit other public bodies to become party to the contract. This is an arrangement that is being used within the Yorkshire region to enable joint procurement by local authorities and has been adopted by the Council in relation to the framework contracts that it is currently in the process of letting. (d) New Procurement Options, namely (i) Competitive Dialogue For complex contracts this permits a contracting body to advertise its needs, requirements and award criteria rather than a specific contract, to provide a starting point for a dialogue with contractors to identify the best way of meeting its needs. (ii) Dynamic Purchasing Systems This facilitates the introduction of electronic market places (see below) (iii) Electronic Auctions This enables use of electronic auctions for procurement by contracting bodies. 3.5 These changes are set out in amendments to the Contract Rules attached as Appendix 2 to this document. 3.6 Electronic Procurement Strategy The Council has a two pronged approach to the introduction of E procurement which was set out within the E Procurement Strategy adopted by Council in January 2006: (i) E Procurement (b) Contract Management System (i) Scarborough has joined the initial tranche of Authorities introducing the system within the region (ii) The system will enable suppliers to apply electronically to be included on Council Approved Lists, manage the maintenance of the lists electronically, manage the process of letting Council contracts electronically, and enable contracts once let, to be managed electronically (iii) The system will maintain an audit trail of procurement activity and Council contracts, and it is intended to enforce compliance with Contract and Financial Rules through the system. (iv) The Corporate Procurement Officer has represented Scarborough Borough Council in agreeing the content of procedures for inclusion on the system (v) Meetings are taking place throughout January to May 2006 to standardise regional procurement processes and train officers for introducing the new arrangements.
(vi) It is intended that all procurement activity will take place through the Contract Management System in future, and that only those officers who are trained to use the system will be able to use it. (vii) The system will go live in June (viii) In the meantime the Council has commenced the process of letting framework contracts outwith the system (ix) The intention therefore is that from June 2006 the Council s Approved Lists and contracts be managed electronically through the new system. (x) As the new system will replace current arrangements for Approved List management an extension of the current Approved Lists until October is sought to enable time for introduction of the new arrangements. (b) Marketplace System (i) (ii) (iii) The Council entered into contract with @uk PLC to provide an E marketplace in January 2006 As framework contracts are let they will be placed on the new system to facilitate the call off of orders electronically Agreement has now been reached by all the District Councils in North Yorkshire, North Yorkshire County Council and the City of York Council to join the same marketplace. This will have the effect of creating a single marketplace for the North Yorkshire region. 4. IMPLICATIONS (a) Policy 4.1 The proposed actions fall within the Council s budget and policy framework. (b) Financial 4.2 The cost of procuring the Contract Management System has been met through the Centre of Excellence. The cost of procuring the @uk marketplace has been met through monies provided by Central Government (IEG). Further grant assistance provided by the Officer of the Deputy Prime Minister is being used to cover introductory costs that are specific to this Council. The revenue cost of maintaining the systems is not anticipated to exceed 5000 per annum which is intended to be met from savings arising from using the system.
4.3 (c) Risk Issue Quantum Risk Implication Mitigation Extension of Approved list not permitted Cost of advertising all Delay in contracts for prequalification of programme suppliers Not amending Unquantifiable the Contract rules Incorrect information within the constitution Additional costs and delay to current contracts Possible errors by officers who are unaware of changes Extension of approved list Amend the rules (d) Legal 4.4 The decisions requested within this report will ensure compliance with legal requirements. Approved lists cannot be used for contracts that are let in Europe. Extension of the operation of the current approved lists pending introduction of the new Contract Management System will limit tenders where there are approved lists to the current approved lists. 5. TIMETABLE 5.1 Jan/March 2006 Standardisation of Regional documentation for procurement practice March 2006 Promotion of new approach to Business community April/May 2006 Training of trainers to introduce new system in initial tranche of Authorities (including Scarborough 3 officers attending) May/June 2006 Trainers provide training in new system to procurement officers authorised to use the system in Scarborough June 2006 Procurement controlled through the new system and restricted to trained officers June August 2006 Approved List revised through new applications April- September 2006 Framework contracts let in accord with the Buyer s Profile April - September 2006 Training to officers in @uk marketplace for call off goods mirroring introduction of framework contracts October 2006 The majority of Framework Contracts established on @uk marketplace
RECOMMENDATIONS That Cabinet: (a) recommend to Council approval of the Council s Contract Rules to reflect changes to European Law and (b) note and approve the Council s buyer profile (c) extend the operation of the current Approved Lists pending introduction of the Electronic Contract Management System in June 2006 Strategic Director of Operations Head of Legal Services Background Papers: None
ADVERT DESPATCHED TO OJEC (IF OVER 140,000) OJEC REFERENCE NUMBER CLOSING DATE FOR NOTES OF INTEREST (IF EC RESTRICTED TENDER) TENDER DESPATCH DATE CLOSING DATE FOR RECEIPT OF TENDERS @ 12 Noon TENDER REFERENCE DESCRIPTION OF TENDER NATURE OF CONTRACT FORM OF CONTRACT Whitby Coastal Protection Scheme Services (Part A) Consultants 10/06/2005 2005-021895 Coastal Protection Consultants Framework Services (Part A) Framework 05/07/2005 2005-02755 Alcohol and Beverages Goods Framework 03/11/2005 2005-053116 06/03/2006 03-Apr-06 Frozen Food and Groceries Goods Framework 03/11/2005 2005-053131 06/03/2006 03-Apr-06 Fresh Meat Goods Framework n/a 08/03/2006 03-Apr-06 Fresh Fruit and Vegetables Goods Framework n/a 08/03/2006 03-Apr-06 Dairy Products Goods Framework n/a 08/03/2006 03-Apr-06 Ice Cream Goods Framework n/a 08/03/2006 03-Apr-06 Hot and Cold Beverage - Vending Goods Framework n/a 08/03/2006 03-Apr-06 Vehicle Spares Goods Framework 09/12/2005 2005-060952 Corporate and Workwear Clothing Goods Framework 13/01/2006 2006-003495 General Building Supplies Goods Framework 10/02/2006 2006-002708 Plant and Machinery Hire Goods Framework 04/03/2006 2006-006445 Vehicle Hire Goods Framework n/a Highways Markings Works Framework n/a Highway Repairs and Maintenance Works Framework n/a Administrative Building Cleaning Services (Part B) Framework 15/12/2005 2005-062305 Building Repairs and Maintenance Works Framework n/a Scaffolding Works Framework n/a Roofing Works Framework n/a Security Services (Part B) Framework Print Contract Goods Framework 2006-007445 Wave Rider Buoy Services (Part A) Term Cleaning Products Goods Framework Spa Technical Portable Equipment Goods Goods 12/12/2005 2005-061284 Spa Technical Installation Fixed Equipment Services (Part B) Term 12/12/2005 2005-061294 DATE AWARDED CONTRACT AWARDED TO OJEC AWARD NOTICE REFERENCE NUMBER
DATE OJEC AWARD NOTICE
Appendix 2 CONTRACTS TO WHICH EC PROCUREMENT RULES APPLY 11. Thresholds 11.1 Advice should be sought from the Head of Legal Services in respect of any procurement with an estimated value greater than EC Procurement thresholds upon whether EC Procurement Rules apply. The threshold values are reviewed on a regular basis, normally every two years. Table 1 identifies when EC Procurement Rules are likely to apply: Table 1: EC Procurement Thresholds - Valid from January 2006 All s Prior-information Notice Supplies 144.371 513,166 Services 144.371 513,166 Works 3,611,319 3,611,319 11.2 Procurement exercises with an estimated contract value within 10% of Threshold levels where EC Procurement Rules apply should also be advertised in the OJEC to avoid OJEC advertising requirements being unintentionally breached. 11.3 Standards If the European Committee for Standardisation (CEN) has issued a relevant standard, all the goods and materials used or supplied, and all the work done under the contract, must be in line with that standard. 11.4. The Euro A provision should be included in any contractual documentation requiring the contractor to convert prices from sterling to Euro and to submit invoices for payment accordingly once we give the contractor notice to do this. 11.5 Number of tenderers If the contract is expected to exceed EC limits, a minimum of five contractors or suppliers must be invited to tender. (In cases where fewer than five contractors or suppliers apply and are shortlisted, all contractors or suppliers must be invited to tender.) 11.6 If during the course of a competitive tendering exercise, an officer becomes aware that the value of bids received exceeds the EC Thresholds, but bid invitations have not been extended through the OJEC notice procedure - as it was anticipated that the threshold would not exceeded advice must be sought from the Head of Legal Services upon how to proceed. 11.7 Where the Council has an aggregated requirement for specified goods or services with an estimated annual value at or greater than the figures provided in Table 1, a Prior Indicative Notice (PIN) must be placed in the Supplement to the Official Journal of the European Community (OJEC) once annually.
Appendix 2 11.8 Buyer s Profile The Corporate Procurement Officer shall publish and maintain a buyer s profile via the internet incorporating the following information: (a) a brief description of future and current tenders within the year 1 April to 31 March (b) the date the advert was dispatched to OJEC (c) the OJEC reference number (d) the closing date for notification of interest in relation to expressions of interest (e) the tender dispatch date (f) the closing date for tenders (g) the award date (h) the identity of the successful tenderer (i) the award notice reference number (j) the date of the award notice 11.9 EC s: All contracts with a value in excess of EC limits shall be let in accordance with a procurement method which is acceptable within EC law. The acceptable methods are: (a) the Restricted, (rule 10.3 above) ; (b) the Open, (rule 10.4 above); (c) the Negotiated, under which purchasing bodies may negotiate the terms of a contract with one or more suppliers of their choice. The Negotiated must never be used without specific written advice from the Head of Legal Services confirming that he considers that the procedure applies. Advice upon the potential application of the Negotiated must be sought where: (i) the open or restricted procedure has produced no tenders (ii) the contract follows a design contest and the rules require it to be awarded to the successful contestant (iii) there is extreme urgency and: (a) the events that have led to extreme urgency were not foreseeable and were not attributable to the contracting authority, (b) the time limits required for open and restricted procedures cannot be met, and (c) the scope of proposed contract is necessary to respond to the immediate emergency. (iv) an open or restricted procedure was discontinued because of irregular tenders. (d) Competitive Dialogue: subject to the agreement of the Head of Legal Services the authority may use the Competitive Dialogue procedure to advertise its needs, requirements and Award Criteria rather than a specific contract, to enable the development of solutions for a final contract through dialogue:
Appendix 2 The pre-tender stage: (i) determination of the form of contract to be tendered is not required prior to the final tender stage (ii) a candidate submitting a bid within the competition must be treated equally with, and be provided with the same information as, any other candidate; (iii) information provided by candidates within the competition is treated as confidential and must not be disclosed to third parties, save with the agreement of the candidate concerned; (iv) the evaluation team may enter into dialogue with a number of candidates in order to: a. develop solutions upon which to invite tenders and b determine the Award Criteria to be applied The preliminary tender stage: (v) (vi) (vii) a minimum of three candidates must be selected to participate in the preliminary tender stage unless less than three candidates meet the Award Criteria, in which case all qualifying candidates must be invited to participate; the evaluation team may enter into dialogue with those invited to submit a preliminary tender to: a. clarify their preliminary tenders b. ensure they meet the authority s requirements and c. establish the principal terms for the proposed contract the evaluation team must evaluate the preliminary tenders against the predetermined Award Criteria to determine which preliminary tender is the most economically advantageous, The final tender stage: (viii) (ix) at the final tender stage best and final offers on the proposed contract must be invited from those tenderers who have submitted a preliminary tender and have not formally withdrawn from the process subsequent dialogue with the winning bidder will only be permissible if it does not impose any substantial new requirement, or have the effect of modifying substantial aspects of the tender, 11.4 Where the Restricted, Open or Competitive dialogue are used the Council is required to place a Contract Notice in the Official Journal of the European Community and the timescale for expressions of interest in response to such notices is prescribed. Advertisement is subject to the following constraints: (a) Legal advice must be sought upon the applicable timescales (b) the accelerated procedure may only be used with the consent of the Head of Legal Services Table 2 sets out the ordinary timescales. The applicable timescales may be reduced further as indicated in Tables 3 and 4 where electronic systems are used to publish the contract notices and provided unrestricted electronic access to documentation:
Appendix 2 Table 2: Advertisement in OJEC without use of electronic media Minimum no. of calendar days after sending the Contract Notice to OJEC (i) to the closing date for receipt of registrations of interest from contract notice (ii) to the closing date for receipt of tenders as (ii) above, but where a PIN is published between 52 and 365 days prior to the Contract Notice Minimum no. of days to allow following decision on contract award before formalising contract Max. no. of days after contract award in which to send Contract Award Notice EC Open EC Restricted EC Accelerated - 37 days 15 days EC Negotiated 37 days (if poss.) 52 days 40 days 10 days 21 days* 36 days 26 days N/A Table 3: Notice of contract compiled and submitted electronically: 21 days*(i.e., same as above) 10 days 10 days 10 days 10 days 48 days 48 days 48 days 48 days Minimum no. of calendar days after sending the Contract Notice to OJEC (i) to the closing date for receipt of registrations of interest from electronic contract notice (ii) to the closing date for receipt of tenders as (ii) above, but where a PIN is published between 52 and 365 days prior to the Contract Notice Minimum no. of days to allow following decision on contract award before formalising contract EC Open EC Restricted EC Accelerated - 30 days 10 days EC Negotiated 30 days (if poss.) 45 days 35 days 10 days 14 days* 29 days 19 days N/A 14 days*(i.e., same as above) 10 days 10 days 10 days 10 days
Appendix 2 Max. no. of days after contract award in which to send Contract Award Notice 48 days 48 days 48 days 48 days Table 4: Notice of contract compiled and submitted electronically and unrestricted electronic access to all contract documentation provided at tender receipt stage Minimum no. of calendar days after sending the Contract Notice to OJEC (i) to the closing date for receipt of registrations of interest from electronic contract notice (ii) to the closing date for receipt of tenders as (ii) above, but where a PIN is published between 52 and 365 days prior to the Contract Notice Minimum no. of days to allow following decision on contract award before formalising contract Max. no. of days after contract award in which to send Contract Award Notice EC Open EC Restricted EC Accelerated EC Negotiated - 30 days 10 days 30 days 40 days 14 days 10 days 21 days* 29 days 5days N/A 21 days*(i.e., same as above) 10 days 10 days 10 days 10 days 48 days 48 days 48 days 48 days