To negotiate or not – that is the question.

The conundrum

Previously the most commonly used procedure when procuring “straightforward” construction works and services (if there is such a thing!) was the “restricted procedure”.  This procedure however has its limitations when the bidder is unhappy with the proposed terms of contract, but doesn’t wish to make a fuss prior to contract award stage for fear of “blotting its copy book”.  Technically speaking if the bids are evaluated properly and in accordance with the scoring methodology in the ITT then this shouldn’t be an issue but in truth, bidders do worry.  Another problem with the “restricted” procedure is that bidders should submit tenders based on the contracting authority’s prescribed contract terms and specification.  There shouldn’t be any negotiation of those terms.  In practice however this is often not the way that things transpire.

Competitive with negotiation - a solution?

The new regulations may offer a solution to this conundrum - the competitive with negotiation procedure.

The legal bit

Regulation 26(4)(a) sets out the when the new procedure can be used. It includes the following circumstances:

o          the requirement involves design or innovative solutions; or

o          the contract cannot be awarded without negotiation due to the nature, complexity, legal or financial make up or risks attached; or

o          the specification can’t be established with sufficient precision.

After a quick mental run-through of most projects I am working on I think at least one (if not all) of the above boxes can be ticked to justify its use.

It is also important to note that the competitive procedure with negotiation does not permit any negotiation following receipt of final bids (unlike in the new competitive dialogue procedure).

So what next?

Use of this process would allow the Employer to invite bidders to raise comments on the contract prior to the final tender deadline.  The Employer could then review and consider all comments and if desired amend the proposed contract in line with the comments received, before reissuing to bidders prior to them submitting their final bid.  The negotiation process could potentially go through a number of iterations like this, particularly if the works are risky or complex and there is not much market appetite for the contract terms initially published.

This gives the Employer the opportunity to listen to any bidder concerns on the contract terms, to revise them if the Employer considers that those concerns are justified, and invite final tenders on a more mutually acceptable set of terms.  It’s open, it’s transparent and it’s fair.

And the downside?

There are some reservations that readers should be made aware of (aren’t there always?):

o          It’s new and it’s scary.  It hasn’t been tried and tested yet.  Do you want to be the first???

o          Compared with the restricted procedure, the Employer needs to be able to justify use of the competitive with negotiation process and show that it comes within the required justifications (see “the legal bit” above).

o          The justifications for using it must be published in the Employer’s Regulation 84* report which opens the door to a challenge on the grounds that the Employer wasn’t entitled to use the procedure.

o          Negotiation with the winning bidder is not allowed (did I mention already that negotiation with the winning bidder is not allowed?).

In principle I’m a fan of this new procurement procedure because it reflects construction procurement practices in the real world and gives the Employer and bidders the chance to legitimately discuss and resolve any concerns over the contract terms before the award is concluded.

(* “what’s a Regulation 84 report” I hear you say – pop on down to one of our procurement seminars to find out – or give me a call)

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Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

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