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Encouraging SME’s participation in Public Procurement

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Background

The Department of Public Expenditure, NDP Delivery and Reform (the “Department”) has issued “Circular 05/2023: Initiatives to assist SME’s in Public Procurement.  The circular replaces the previous initiatives contained in circular 10/14.  The aim circular of 05/2023 is to ensure that Small Medium Enterprises (“SME’s”) can remain competitive when tendering for public sector contracts.

The primary changes introduced in circular 05/2023 include the following (all figures listed below are exclusive of VAT).

Updated Advertising and Award Thresholds for all contracts for Supplies or General Services:

  • Contracting Authorities (“CAs”) are not required to advertise supplies or services contracts below an estimated value of €50,000, as opposed to the previous threshold of €25,000.
  • Before awarding supplies or services contracts with an estimated value between €5,000 and €50,000 CAs must seek:

-Three written quotations in response to a written specification; or

-Three quotations in response to an electronic request for quotes issued via eTenders.

  • Contracts with an estimated value below €5,000 can be awarded on the basis of verbal or written quotes from one or more competitive suppliers.
  • CAs may still opt to carry out a formal tendering process on eTenders even if the estimated value is below €50,000.

 

Advertising and Award Thresholds for Works Contracts

  • CAs are not required to advertise works contracts below an estimated value of €200,000, as opposed to the previous threshold of €50,000.
  • Before awarding works contracts with an estimated value below €200,000 CAs must seek:

-A minimum of five written quotes from interested and competent contractors.

  • CAs may still opt to carry out a formal tendering process on eTenders even if the estimated value is below €200,000.

 

Advertising and Award Thresholds for works-related services

  • CAs are not required to advertise works-relates services contracts below an estimated value of €50,000, this threshold has not changed.
  • Before awarding works-related services contract with an estimated value below €2,000 CAs must seek:

-A minimum of five written quotes from interested and competent consultants.

  • CAs may still opt to carry out a formal tendering process on eTenders even if the estimated value is below €50,000.

 

The following table summarises the current national advertising and awarding requirements for public contracts.

 

Contract Type Value of Contract Advertising Requirements Awarding Requirements
Supplies or General Services Less than €5,000 No advertising required No formal tendering process required.  May be awarded on the basis of verbal or written quotes from one or more suppliers.
€5,000 – €50,000 No advertising required No formal tendering process required.  At least three written quotes required.  May be awarded on the basis of responses to written specifications or via the electronic request for quotes facility on eTenders.
€50,000 – EU Threshold Must be advertised on eTenders Formal tendering process required.
Greater than or equal to €140,000 (EU Threshold for Government Departments and Offices) Must be advertised on eTenders and in the Official Journal of the EU Formal tendering process required.
Greater than or equal to €215,000 (EU Threshold for Local and Regional Authorities and public bodies in the Utilities Sector) Must be advertised in on eTenders and the Official Journal of the EU Formal tendering process required.
Works Less than €200,000 No advertising required If not advertised on eTenders five written quotes should be sought by the Contracting Authority.
€200,000 – €5,382,000 Must be advertised on eTenders Formal tendering process required.
Greater than or equal to €5,382,000 Must also be advertised in the Official Journal of the EU Formal tendering process required.
Works-related services Less than €50,000 No advertising required If not advertised on eTenders five written quotes should be sought by the Contracting Authority.
€50,000 – EU threshold Must be advertised on eTenders Formal tendering process required.
Greater than or equal to €140,000 (EU Threshold for Government Departments and Offices) Must be advertised in the Official Journal of the EU Formal tendering process required.
Greater than or equal to €215,000 (EU Threshold for Local and Regional Authorities and public bodies in the Utilities Sector) Must be advertised in the Official Journal of the EU Formal tendering process required.

 

Good practices to promote SME participation

In addition, to amending the above-mentioned thresholds the Department has also highlighted a number of good practices to encourage SME participation:

  • Preliminary Market Consultations: CAs may undertake preliminary market consultations to better understand the capabilities of SMEs, such as their range of goods and services and their potential for innovation.
  • Greater use of lotting: CAs can encourage SMEs to bid for contracts by ensuring contracts are in line with their capacity, specialism and location by subdividing contracts and framework agreements into lots.
  • Consortium bids: SMEs can choose to form a consortium where they would not be of sufficient scale to partake in a tender in their own right. CAs are encouraged to consider the use of a Prior Information Notice (“PIN”) to provide SME’s optimum time to consider and arrange consortium bids.
  • Greater use of Open Tendering: CAs should utilise the open procedure more frequently to make the tendering process less burdensome and restrictive for SMEs.
  • Technical ability and Economic and Financial Requirements: Selection criteria for tenderers should be relevant and proportionate to contracts, while ensuring that they do not unfairly exclude SMEs.
  • Turnover Requirements: CAs should consider if high turnover levels may provide a barrier to SMEs participation, and whether the required turnover levels are proportionate to the level of risk involved.
  • Innovation: CAs are encouraged to take an output orientated approach which facilitates tenderers to take more innovative approaches.
  • Feedback: CAs should provide thorough feedback to unsuccessful tenderers. This will highlight to tenderers what aspects of their bids need to be improved.
  • Life Cycle Costing: CAs are encouraged to use this approach due to its social value. However, CAs in utilising this should not seek overly burdensome information that would create a disproportionate cost for SME’s.
  • Insurance Requirements: Insurance requirements should be proportionate and reasonable to the risks and value of the contract. CAs should be mindful not to let insurance requirements act as a barrier to SME participation where possible.
  • In addition, Tenderers should only be asked to declare that they can obtain a level of insurance cover but should not be required to have it in place at the time of tendering.
  • Dynamic Purchasing Systems (“DPS”): The use of the DPS as opposed to a Framework Agreement is becoming more prevalent on the market.  A Framework Agreement allows for a specified number of operators to provide the works, goods or services to a given CA for a maximum period of 4 years.  If for instance an SME fails to obtain a place or does not have the requisite experience in time it is likely blocked from providing the relevant works, goods or service to that CA for 4 years.  However, if the CA opts to set up a DPS instead, an SME, can apply or reapply to join at any time.
  • No charging for tender opportunities: CAs must ensure that tenderers do not have to pay to access public tender competitions. This charging may act as a barrier for SME participation.

 

Quigg Golden are leading experts in public procurement law.  Should you require any advice on procurement regulations or guidelines please do not hesitate to contact us.

Encouraging SME’s participation in Public Procurement. The background, pointers for advertising and good practices.
Claire Graydon, Senior Associate
Encouraging SME’s participation in Public Procurement. The background, pointers for advertising and good practices.
Ben Browne, Junior Associate

Follow Quigg Golden on LinkedIn here.

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