European Union Legislation and Procurement Reform (Scotland) Act 2014: reference pack

12. Award Stage

General Principles when Awarding Contracts

Regulation 57 of the Public Contracts (Scotland) Regulations 2015 applies general principles to public procurements, so that suppliers adhere to the relevant laws and minimum standards.

Public bodies may decide not to award a contract to the supplier submitting the most economically advantageous tender, where, the way the supplier proposes to deliver the contract would not comply with the environmental, social and labour law established by European Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X of the 2014 Public Contracts Directive.

Public bodies may ask suppliers to “submit, supplement, clarify or complete the relevant information or documentation” where “information or documentation” submitted by them “is or appears to be incomplete, erroneous or where specific documents are missing”, provided that such requests are made in full compliance with the principles of equal treatment and transparency.

Contract Award Criteria

Contract award criteria options under Public Contracts (Scotland) Regulations 2012:

MOST ECONOMICALLY ADVANTAGEOUS TENDER OR LOWEST PRICE

Contract award criteria option under Public Contracts (Scotland) Regulations 2015:

MOST ECONOMICALLY ADVANTAGEOUS TENDER (Best Price / Quality Ratio)

Public bodies must base the award of public contracts on the basis of the most economically advantageous tender which must be identified on the basis of both price or cost AND other criteria which may include qualitative, environmental and/or social aspects linked to the subject matter of the public contract in question.

This is represented by the new term “best price-quality ratio”. This is the only way that procurements within the scope of the Public Contracts (Scotland) Regulations 2015 may be carried out.

Importantly there will no longer be any option for public bodies to use price only or cost only as the sole award criterion for contracts awarded under the Public Contracts (Scotland) Regulations 2015. It should be noted that this differs from the UK Public Contracts Regulations 2015, which still permit price or cost only as the sole award criterion.

Award criteria shall be considered to be linked to the subject matter of the public contract where they relate to the works, supplies or services to be provided under that contract in any respect and at any stage of their life cycle - including factors (even where such factors do not form part of their material substance) involved in:

• the specific process of production, provision or trading of those works,
  supplies or services; or
• a specific process for another stage of their life cycle.

The regulations provide us with the following updated list of exemplar criteria:

( NB: those in bold are new)

• quality, including technical merit, aesthetic and functional characteristics, accessibility ^[18] , design for all users, social, environmental and innovative characteristics and trading and its conditions;
• organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract; or
• after-sales service and technical assistance, delivery conditions such as delivery date, delivery process and delivery period or period of completion.

The Regulations clarify that public bodies are able to use criteria such as the “organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract.” This might be the case, for example, in contracts for intellectual services such as consultancy or architectural services. Public bodies which make use of this possibility should ensure, by appropriate contractual means, that the staff assigned to contract performance effectively fulfil the specified quality standards and that such staff can only be replaced with the consent of the public body which verifies that the replacement staff affords an equivalent level of quality.

Scottish Ministers have published statutory guidance on the selection of tenderers and the award of contracts.

Concessions Award Criteria

Concessions contracts must be awarded on the basis of objective criteria which comply with the principles of equal treatment, non-discrimination and transparency and which ensure that tenders are assessed in a way which ensures effective competition.

The public body shall list the criteria in descending order of importance. Where the public body receives a tender which proposes an innovative solution with an exceptional level of functional performance which could not have been foreseen by a diligent public body, the public body may, exceptionally, modify the ranking order of the award criteria to take into account that innovative solution.

The modification of the ranking order must not result in discrimination.

Life Cycle Costing

In awarding public contracts on the basis of the most economically advantageous tender, public bodies must determine the balance between:

PRICE OR COST + BEST PRICE QUALITY RATIO

In determining price or cost, a cost-effectiveness approach can be used. A cost -effectiveness approach may include life cycle costing. “Life cycle” means all consecutive or interlinked stages, including research and development to be carried out, production, trading and its conditions, transport, use and maintenance, throughout the existence of the product or the works or the provision of the service, from raw material acquisition or generation of resources to disposal, clearance and end of service or utilisation.

Life cycle costing encourages closer integration of social and environmental considerations, the key concepts of which are set out in the Guidelines for Social Life Cycle Assessment of Products.

If used as an award criterion:

“Life cycle costing must, to the extent relevant cover parts or all of the following costs over the life cycle of a product, service or works -

• costs, borne by the contracting authority or other users, such as -

a) costs relating to acquisition;

b) costs of use, such as consumption of energy and other resources;

c) maintenance costs;

d) end of life costs, such as collection and recycling costs; and

• costs imputed to environmental externalities linked to the product, service or works during its life cycle, provided their monetary value can be determined and verified.

Such costs may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation costs.”

When public bodies assess costs using a life-cycle costing approach they must indicate in the procurement documents the information that they require from suppliers, and how they will evaluate these costs.

The method used for this assessment must be based on objective and non-discriminatory criteria, be accessible to all interested parties and the data required can be provided with reasonable effort by suppliers.

The Directive requires that wherever a common method for the calculation of life-cycle costs has been made mandatory then this common method shall be applied such as the Clean Vehicles Directive in Annex XIII. The clean vehicles Directive requires that energy and environmental impacts linked to the operation of vehicles over their whole lifetime are taken into account in all purchases of road transport vehicles, as covered by the

public procurement Directives and “The Cleaner Road Transport Vehicles (Scotland) Regulations 2010”.

Abnormally low tenders

Public bodies shall require bidders to explain the price or costs proposed in the tender where they appear to be abnormally low, as opposed to the previous position which only required a check of abnormally low bids where a public body intended to reject them:

• Although not defined, where all bids except one (or more) are similar on price/cost, and where those bid(s) are well below that quoted by all other bidders, that may indicate the bid is abnormally low. Where a tenderer submits an unusually low priced bid, it could be due to legitimate factors such as a competitive advantage it enjoys based on its greater efficiency, cheaper inputs, or even the ability to take a loss on the contract. It may however be due to illegitimate factors, such as underpayment of staff or subcontractors, or a failure to comply with relevant legislation.

This means that public bodies must now check all abnormally low bids, as opposed to the previous position where it was possible to accept an abnormally low bid without investigating why it was abnormally low.

A supplier’s explanation of their potentially abnormally low bid may now also relate to subcontracting obligations.

Public bodies must reject a tender where it has been established that the tender is abnormally low because a supplier has not complied with the environmental, social and labour law listed in Annex X of the 2014 Public Contracts Directive.

QUIZ

Question 21

Contracts within the scope of the Public Contracts (Scotland) Regulations 2015 can be awarded on the basis of lowest price or lowest costs only:

a) True

b) False.

Question 22

Which of the following may be included as life cycle costs under relevant public contracts? (select all answers that apply):

a) Energy consumed by equipment procured or in service delivery

b) Carbon and other greenhouse gas emissions

c) Maintenance costs

d) Waste management costs

e) Purchase costs.