I am teaching an undergraduate module on EU Public Procurement Law as an option for the LLB students at Leicester. One of the activites I have designed consists in asking students to submit short (500-word) 'reflection papers' assessing streamlined cases. The objective of this activity is to make sure that they have a strong hold of the mechanics of the system and the basic elements that contracting authorities need to take into account when making procurement decisions.
The first exercise asked them to “Highlight the advantages and the legal risks of resorting to a competitive procedure with negotiation instead of an open procedure for the supply of medical supplies such as vaccines.” They submitted some interesting reflections and, on that basis and with my own views, I have prepared the following model answer to give them feedback. I thought it could be of interest, despite its simplicity, so I am posting it here for your consideration. Comments welcome!
Medical supplies are highly commoditised goods[1] and relatively easy to subject to strict technical specifications (art 42(3)(b) dir2014/24), particularly when EU standards exist and may limit the ability of the contracting authority to reject standardised and CE-marked products (Medipac-Kazantzidis, C-6/05, EU:C:2007:337). This is particularly clear in the case of vaccines, given the very stringent processes that regulate their commercialisation.[2] Their supply can consequently be procured through open procedures (art 27 dir2014/24) and, possibly, even focus on cost-efficiency only (art 67(2) dir2014/24).
However, such a procurement strategy is likely to trigger a significant number of offers, which can result in significant evaluation and administrative costs for the contracting authority (CA). Hence, resorting to other procedures (or framework agreements) could be in the CA’s interest if it can limit the costs linked to the administration of the procedure without sacrificing technical or commercial advantages derived from significant competition.
A competitive procedure with negotiation (art 29 dir2014/24) would be available in this case if the CA can justify that it meets one of the grounds for its use (art 26(4) dir2014/24), and probably if it can justify the need for negotiations prior to award (art 26(4)(iii)). However, resorting to this procedure can be risky if avoidance of other options (mainly, a restricted procedure, art 28 dir2014/24) is seen as a circumvention of the applicable rules. The use of negotiated procedures has been limited in the case law (Commission v Italy, 199/85, EU:C:1987:115) and the changes introduced by Directive 2014/24 create uncertainty regarding CA’s actual freedom to negotiate.[3] However, this risk can be minimised by shortlisting in a transparent manner (art 65 dir2014/24).
The second main risk derives from the negotiation capacity of the CA. If the CA is inexperienced in negotiations, it can incur in both commercial risks derived from its inability to obtain the best possible economic conditions, and legal risks derived from an improper or discriminatory development of the negotiations (art 29(5) dir2014/24). It could also create risks if it does not have solid management procedures for confidential information and business secrets (idem).
Hence, in order to reap the benefits derived from the lower cost of the competitive procedure with negotiations, the CA needs to have strong legal and commercial expertise. If it does, this is a procedure from which it can benefit. Otherwise, the CA will be better off with the open procedure.
[1] EY, Pulse of the industry: Differentiating differently, Medical technology report 2014, 5. http://www.ey.com/Publication/vwLUAssets/ey-pulse-of-the-industry-report/$FILE/ey-pulse-of-the-industry-report.pdf (Accessed: 21.11.2014).
[2]
For background information, see http://www.vaccineseurope.eu/about-vaccines/eu-regulatory-framework-for-vaccines/
(Accessed: 21.11.2014).
[3]
For discussion, see P Telles and L Butler, ‘Public Procurement Award Procedures
in Directive 2014/24/EU’, in F Lichère, R Caranta and S Treumer (eds), Novelties in the 2014 Directive on Public
Procurement, vol. 6 European Procurement Law Series, (Copenhagen, DJØF
Publishing, 2014). http://ssrn.com/abstract=2443438
(Accessed: 21.11.2014).