7. Financial Thresholds and Procedures

CSO 7.1

1

The table at CSO 7.4 sets out a number of thresholds and the purchasing procedures to be used at each of the threshold levels specified.  The Council needs to ensure there is appropriate competition for its purchasing, both to comply with statutory requirements, but also in order to demonstrate that it is achieving best value.  The table identifies different thresholds because it is also important to ensure that the process undertaken is proportionate to the purchase.  Thus, for example, it may be inappropriate to run a more complex tender process of the type provided for by the EU Rules for a small scale, low value purchase.

2

As is noted in CSO 7.2, there is a general presumption in favour of competition and so wherever possible, contract opportunities should be advertised by way of some form of public notice.  It should be noted that EC Treaty Principles mean that even if a contract is relatively small, if it is of potential interest to contractors from other member states (and this is possible in most situations), then the Council must consider advertising in a manner which ensures that potential contractors from other member states are aware of the opportunity and have a chance to apply to deliver these services.  This requirement may be satisfied, for example, by advertising on a website, (either the Council’s own website or, for example, the south east business portal) which ensures that contractors from other member states have a chance to search for and so be aware of contract opportunities offered by the Council.

3

The EU Threshold levels set out in 7.4 are fixed for 2 year periods.  The levels of £173,934 for supplies and services contracts and £4,348,350 for works contracts apply from 1 January 2012 until 31 December 2013.  The EU Thresholds will then be recalculated by reference to exchange rates at that date and new EU Threshold levels will apply with effect from 1 January 2014 for the following 2 years (and so on).

CSO 7.2

4

Whilst there is a general presumption in favour of competition, there will be some circumstances where a competition will not be undertaken for a new contract.  These are outlined in CSO 13.  All of those involved in the purchasing process must bear in mind that these are genuinely exceptional circumstances and so where a competitive process is not used, then this needs to be clearly evidenced and appropriate approvals obtained in advance.

CSO 7.3

5

Public notices for quotes or tenders can take a number of different formats, but the general principle is that they should be easily accessible and easily understood.  Whilst paper format, for example an advert in the press or trade journals, may be appropriate, increasingly it is important to ensure that opportunities are made available electronically on an easily accessible website, or other electronic media.

6

If an advertisement is to be placed in the Official Journal of the European Union (OJ), then that requires a standard format to be adopted and submitted electronically.  If an OJ advertisement is being used, then an advertisement may not be placed for the same contract in any other media until the advertisement has been dispatched to the OJ.

CSO 7.4

7

As explained above, the procedures to be used tie in with the estimated value of the contract.  For contracts under £10,000 it is normally appropriate to award a contract following receipt of just a written quote.  For purchasing at this level, it is quite likely that one of the Purchasing Schemes referred to in CSO 15 may be more appropriate and deliver better overall value to the Council.  The Council’s basic requirements and principles as outlined in CSO 1 must be complied with, so that even when only a single quote is sought, resources are used efficiently and principles of sustainability, efficiency, whole life costings and costs savings are incorporated, where appropriate, into the process.

8

For contracts up to £75,000, it is acceptable to undertake a process involving obtaining quotes, rather than formal written tenders, but serious consideration should be given to the requirement for a public advertisement (see commentary on CSO 7.1).

9

For a contract in excess of £75,000, you are required to ensure that written tenders are provided in advance, following an advertisement by way of public notice.  Written tenders will usually be submitted by contractors in response to an invitation to tender, issued by the Council.  Written invitations to tender will generally include relevant specifications and briefs of the technical requirements, the contract terms to be used and instructions on the conduct of the procurement process itself, including timescales for responses.

10

For contracts of a type and value caught by the EU Rules, much more detailed provisions apply.  The EU Threshold for supplies and services contracts and for works contracts differ significantly.  The supplies and services threshold is much lower than the threshold for works contracts.

11

Under the EU Rules there are two types of service contracts.  Part A contracts are listed in Schedule 3, Part A of the Regulations.  For these type of contracts, all of the EU Rules will apply if the contract value is over the threshold.  This includes the obligation to advertise in the OJ, follow the detailed EU Rules relating to selection and evaluation processes including the requirement to publish the award criteria and weightings in advance, as well as the requirement to comply with statutory timescales.

12

Part B services are listed in Schedule 3, Part B of the Regulations.  For these types of contracts, there is no obligation to advertise in the OJ or to follow most of the detailed EU Rules, but there is a presumption in favour of advertising and a competitive process.  There are also obligations under the EU Rules to ensure that specifications and technical requirements are defined in a non discriminatory way and to publish an advertisement in the OJ, once the contract has been awarded.  Please seek advice from Legal Services when dealing with any contract which may, or does, fall within the EU Rules including service contracts for Part B services.

13

Contracts often involve a mix of works, supplies and services i.e. hybrid contracts.  Where the contract is a mixed contract and is of a value which means that it may fall within the EU Rules, then great care needs to be taken in calculating the potential value of the contract to establish whether or not the EU Rules apply.  (See notes on calculating the contract value at CSO 9).  If you are in any doubt as to whether or not the EU Rules apply, then seek advice from Legal Services.

CSO 7.5

14

There are four main types of competitive procedures available for contracts which are caught by the EU Rules.  These all involve advertising in the OJ.  The open and restricted procedures are the procedures which the Council will generally use for all purchasing which is caught by the EU Rules.

15 Open Procedure:

This involves accepting applications and tenders from all interested parties.  Full contract and specification documents are issued to all applicants and there is no opportunity to negotiate.

16 Restricted Procedure:

This procedure allows the Council to restrict the number of applicants (tenderers) to whom it issues an invitation to tender.  The Council is permitted to shortlist applicants responding to the OJ advertisement using specified short-listing criteria.  The Council can then issue an invitation to tender to the shortlisted tenderers.  The invitation to tender will include the full contract specification and technical requirements, as well as the contract terms.  The Council is not permitted to negotiate with the tenderers.

17 Competitive Dialogue and Competitive Negotiated Procedures:

In exceptional circumstances, the Council may use the competitive dialogue, or competitive negotiated procedures.  These procedures are only appropriate in the context of complex projects*.  In practice, the competitive negotiated procedure will rarely be available for the Council to use.  A decision to use a competitive dialogue or competitive negotiated procedure can only be taken after consultation with Legal Services and following approval from the relevant Senior Manager.

*The Regulations do not state whether the competitive dialogue procedure or the competitive negotiated procedure should be used of preference.  However, the competitive dialogue procedure has been introduced to provide a clearly structured process for use in the context of complex projects.  One of the main reasons for its introduction was to address major concerns at a European level relating to the over use of the competitive negotiated procedure – which was only intended for use in genuinely exceptional circumstances. 

There was a particular reservation about the extent to which authorities were negotiating with a single bidder towards the end of the procurement process.  This was regarded as potentially anti competitive.  These concerns led to the introduction of the competitive dialogue, which provides for structured negotiations with bidders but little room for further discussion once final tenders are submitted.

Both the European Commission and the UK's Government Procurement Service have made it clear in their notes/guidance on use of the competitive dialogue that it should be used in preference to the competitive negotiated procedure.  The GPS has indicated that the competitive negotiated procedure may only be used in truly exceptional circumstances and has provided the development of the London Underground as an example.  Competitive dialogue is now being used as the standard procedure in most PFI, PPP and complex outsourcing projects".

The circumstances where a contracting authority can use the competitive negotiated procedure without prior publication of a contract notice was clarified in January 2008.  The Regulations now allow use of this procedure, where a competitive dialogue has been discontinued, because none of the bids received is compliant or satisfactory following evaluation.

18 PIN:

The Council has the option to file a PIN (Prior Information Notice) and if it does so then in certain circumstances it may reduce some of the statutory timescales under the Rules. In respect of supplies and services contracts, a PIN should be published as soon as possible after the commencement of each financial year.  The PIN should contain details of supply and services contracts for which the Council expects to seek tenders during the forthcoming 12 months.

For works contracts, a PIN should be issued as soon as possible after the decision approving the planning of a work or works which exceeds the relevant threshold. 

If the Council does decide to publish a PIN then the standard PIN form should be used.  Standard forms are accessible through the European Commission's website: http://www.bipsolutions.com/html/ecdirectives.htm

Next page: Financial Thresholds and Processes Applying to Approval and Execution of Contracts

Previous page: Scheme of Delegation

• Introduction – Purpose of the Contract Standing Orders (CSOs)

• General Principles – Application and Compliance with Contract Standing Orders

• General Principles Applying to All Contracts

• Regulatory context

• Responsibilities of Directors, Service Managers and Responsible Officers

• Scheme of Delegation

• Financial Thresholds and Procedures

• Financial Thresholds and Processes Applying to Approval and Execution of Contracts

• Calculating the contract Value

• Principles Underlying Tendering Processes and Tender Evaluation

• Submission and Opening of tenders

• Evaluation of Quotes and Tenders

• Waivers

• Extensions to Existing Contracts

• Purchasing Schemes

• Review and Changes to these Contract Standing Orders

• Standard Clauses

• Appendix 1 - Risk Matrix

• Attachment 1 - Risk Assessment

Procurement

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