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Procurement methods

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This page outlines the different approaches that commissioners can take to procuring services for their populations. This area of work is very tightly regulated by European regulations, in particular the Public Contract Regulations 2015.

Our legal partner Browne Jacobson has provided information for this knowledge bank page.

When must a contract go out to open competition?

For most types of contracts let by non-central governmental bodies, there is no requirement under the 2015 regulations to use an open competitive process, if the contract has a value of less than £164,176 (the figure is £106,047 for central government bodies). For providers, this means that we can expect processes to be a bit more flexible when smaller amounts of funding are involved... However, many local authorities and other public bodies have internal rules requiring lower thresholds for putting contracts out to open tender.

For certain types of ‘health, social and educational’ contracts (see Schedule 3 of the Regulations) a higher threshold of £589,148 applies. For those types of contracts with a value above that threshold, a ‘light touch regime’ applies. The regulations say that as long as a process is advertised in the Official Journal of the European Union (OJEU), remains transparent and fair, and complies with the rules set out in the initial advertisement, then commissioners can more-or-less design a process that suits them.

Who procures?

Most public-sector organisations have specialist teams that advise on and carry out the procurement on behalf of commissioners. In the healthcare sector, procurement is often carried out by commissioning support units (CSUs) that work across a wide geographical area.

Procurement routes

There are several different processes that public sector bodies can use to procure services.

Open

Open procedure is a one stage procedure where the contracting authority advertises the opportunity (in most cases) by way of a contract notice in the OJEU and provides the tender documentation to all interested bidders.

  • A return date is set out in the contract notice and all tenders must be returned by that date.
  • The contracting authority must evaluate all tenders returned in accordance with the selection and evaluation criteria set by it at the start, and the contract is awarded to the highest scoring tenderer.

Restricted

Restricted procedure is a two-stage procedure.

  • The contracting authority advertises the opportunity (in most cases) by way of a contract notice in the OJEU and provides the tender documentation to all interested bidders.
  • Those wishing to participate in the competition must first complete a selection questionnaire, to be returned by a date set by the contracting authority.
  • The contracting authority evaluates all completed selection questionnaires it receives and draws up a shortlist based on its selection criteria.
  • That shortlisted tenderers are invited to tender for the opportunity and must submit their tender by a given date.
  • All tenders received must be evaluated in accordance with the evaluation criteria set by the contracting authority at the start, and the contract is awarded to the highest scoring tenderer.

Competitive procedure with negotiation

The competitive procedure with negotiation is similar to the restricted procedure, however, provided the contracting authority has reserved the right to do so, it may (at the stage when tenders have been submitted) enter into a round, or rounds, of negotiation with those who have submitted tenders.  

  • Following completion of the negotiation, final tenders are submitted.
  • The contracting authority must then evaluate all tenders returned in accordance with the evaluation criteria set by it at the start and the contract is awarded to the highest scoring tenderer.

Competitive dialogue

Competitive dialogue is a tender process that was created in the European Union to allow more flexibility when dealing with complex or unusual procurements. It is different from other tender processes because it allows commissioners to thoroughly discuss each aspect of the procurement with suppliers before specifying the requirements, and before inviting the suppliers to submit their full and final tenders or proposals.

This makes competitive dialogue very useful for procurements where the commissioner knows what their needs are, but not how those needs can be met. It can also do away with protracted contract negotiations, build working relationships and iron out potential problems before the contract is awarded.

The disadvantage of this process for providers is that a lot of time and resource goes into the dialogue process, which is lost if the provider does not win the contract.

A competitive dialogue process can be broadly divided into four stages:

  1. Selection stage – an assessment of bidders to ensure there is sufficient capacity and capability to deliver the service. Output – list of qualified providers to go to the next stage
  2. Invitation to participate in dialogue – first round of ‘dialogue’ meetings (focus on outline solutions) with qualified providers with the use of award criteria to progressively reduce the number of bidders. Outline tenders are submitted and evaluated. Output – shortlist of bidders with one or more suitable alternative solutions capable of meeting the buying organisation’s requirements
  3. Invitation to continue dialogue – further dialogue with shortlisted bidders with focus on detailed solutions
  4. Final tender submissions evaluated using award criteria. Output – selection of preferred bidder for contract award. Followed by a standstill period, clarifications (not re-negotiation) and signature of contract

Negotiated procedure without prior publication

This is an award procedure whereby the contracting authority enters into direct negotiation with a provider without advertising the opportunity. This procedure can only be used in very limited circumstances set out in regulation 32 of the public contracts regulations. These include failure of a properly conducted procurement procedure, extreme urgency (provided that the reason for the emergency is not caused by the default of the contracting authority) and for technical or exclusive right protection reasons.

Innovation partnership

This new procedure is intended to allow scope for more innovative ideas. Commissioners can publish a notice outlining a need to be met by an innovative product or service not currently available on the market, stating minimum qualitative requirements. One or more respondents is then selected to become the commissioner's innovation partner(s).  As such, they engage with the commissioner to develop the service that best meets the commissioner's requirements (with cost negotiations continuing through the project's various phases).

This specific procedure should allow contracting authorities to establish a long-term innovation partnership for the development and subsequent purchase of a new, innovative product, service or works provided that such innovative product or service or innovative works can be delivered to agreed performance levels and costs, without the need for a separate procurement procedure for the purchase.

See The Public Contracts Regulations 2015 Paragraph 49.

Definition of innovation

'Innovation' means the implementation of a new or significantly improved product, service or process, including but not limited to production, building or construction processes, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations, including with the purpose of helping to solve societal challenges or to support the Europe 2012 strategy for smart, sustainable and inclusive growth.

- Directive 2014/24/EU – Article 2(1)(22)

How the voluntary sector can benefit from this procedure

Where a commissioner wishes to set up a new and novel service, or a new and novel model of service delivery, there may be opportunities to partner with a provider organisation without an open tender. Where you have a unique and innovative offer it might be worth taking legal advice as to how best to engage with a commissioner to see if there is an opportunity to enter into a relationship outside of the procurement regime.

This could also be an opportunity for a commissioner to work with a voluntary-sector consortium to design and develop a new service.

How will public procurement be affected by the UK’s withdrawal from the European Union (Brexit)?

The government has indicated that it intends to retain the procurement regulations in UK law as they are currently drafted (subject to minor amendments to make them work when we are no longer part of the EU).

In the longer-term, legislators and policy makers may reform the legislation, although any departure from existing principles will depend on the deal struck with the EU. If the UK agrees a transition period for its withdrawal from the EU, the legal framework described above will most likely continue.

Page last edited Nov 08, 2017

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