EU Funded Projects

Common errors in Public Procurement

Public procurement is a key aspect of public investment: it stimulates economic development in Europe and represents an important element of boosting the Single Market. Public procurement matters – it represents around 19% of the EU’s GDP and is part of our everyday life. Public procurement offers opportunities to enterprises, thereby fostering private investment and contributing growth and jobs on the ground. Finally, public procurement plays an important role in channelling European Structural and Investment Funds.

For the 2007-2013 programming period, 349 billion euro was allocated in the area of cohesion policy. It is estimated that around 48% of the European Structural and Investment Funds was spent through public procurement. Failure to comply with public procurement rules has been a significant source of error. Serious areas resulted in a lack, or complete absence of fair competition and/or in the award of contracts to those who were not the best bidders. The next section will focus on the procurement process and includes examples of common errors and ways how to mitigate them. The content was taken from guidance published by the European Commission as part of its priority action to help Member States strengthen their administrative capacity in managing EU funds.

Procurement Process

From a practical perspective, the procurement process is broken down into six stages as highlighted in the below diagram

1. Preparation and Planning

Planning is crucial. If the Contracting Authority gets this part of the process wrong, then mistakes and problems will inevitably follow. Many errors can be traced back to inadequate planning.

Common mistakes leading to a financial correction at planning stage Ways to avoid such errors
Direct award of a contract with inadequate justification for non-publication of a contract notice. Carrying out adequate market testing and calculating the contract value based on a genuine estimate to determine which procurement procedure to adopt.
  1. Setting discriminatory selection criteria such as requiring registration of experts with a national body without recognising equivalent qualifications; and
  2. Setting criteria that are disproportionate to the subject matter such as setting financial criteria at too high a level creating unjustified barriers for prospective bidders.
It is vital that prior to the publication of the contract notice, the criteria are adequately screened in line with regulations to ensure that they are proportionate and non-discrimantory.

2. Publication

A fundamental tenet of EU public procurement law is that all contracts above a certain threshold value should be published in a standard format at the EU level in the Official Journal, so that all economic operators in Member States have equal possibility to tender for contracts for which they consider they can meet the requirements.

Common mistakes leading to a financial correction at planning stage Ways to avoid such errors
Insufficient definition of the subject matter of the contract leading to subsequent irregular modifications of the contract.
  1. taff drafting the tender specifications should be adequately skilled and proficient in the subject matter; and
  2. The requirements must be explained clearly without referring to branding.
Non-compliance with minimum time limits for receipt of tenders and requests to participate The CA must take note of the time limits stipulated in the Directive prior to issuing contract notice and set realistic timetables at this stage.
Failure to state selection and award criteria (and weighting) in the contract notice/tender. Use of checklists and/or pro forma contract notices and tender documents.

3. Submission and selection of bids

This phase is to ensure that compliant bids are received and selected according to the rules and criteria established in the tender dossier. Communication with the tenderer before submission of the offer must only be in writing, with the same information sent to all tenderers. The answers to any questions asked by the tenderer must be anonymised and circulated to all tenderers with clear cut-off dates. Communication with the tenderers after the deadline of submission of offers is limited to clarification of the offer only in Open and Restricted procedures. Any dialogue relating to the substance of an offer is not acceptable.

Common mistakes leading to a financial correction at planning stage Ways to avoid such errors
Elimination of candidates/tenderers using unlawful selection/award criteria. Issue clear guidelines to the evaluation committee to ensure that such instances do not occur.
Modification of selection criteria after opening of tenders, resulting in incorrect rejection of tenderer.
Unclear objective selection criteria used in reducing the number of applicants. The CA must design transparent and objective selection criteria to avoid room for different interpretations.

4. Evaluation of bids

The purpose of this stage is to determine the winning bidder by strictly applying the published award criteria. During evaluation, never amend the award or evaluation methodology midway through the procurement process.

Common mistakes leading to a financial correction at planning stage Ways to avoid such errors
Modification of award criteria after the opening of tenders resulting in the incorrect acceptance of tenders.
  1. If the award criteria need to be modified after publication, the Contracting Authority is to either cancel the tender and reissue or issue an erratum and possibly extend deadline for submission of tenders; and
  2. Evaluation Committee are to be clearly instructed through guidelines that amending award criteria after tenders submission is a violation of the Directive and strictly prohibited.
Lack of transparency/equal treatment during evaluation such as unclear or unjustified scoring given to each tenderer. The Chairperson of the evaluation committee is to ensure that there is written justifications for each decision taken which need to be included in the evaluation report.
Undisclosed conflict of interest by members of the evaluation committee. A conflict of interest declaration is to be signed by all members of the evaluation committee and other experts prior to their participation in the evaluation process.

5. Award

When the contracting authority has decided to whom the contract should be awarded, all bidders must be informed of the result. After the standstill period, the contract can be signed. Within 48 days after the contract signature, the Contracting Authority has to send a Contract Award Notice to the Official Journal for publication. Failure to publish the Contract Award Notice is a relatively common error that can be eliminated through the use of checklists and key stage controls. As soon as it is noticed that a Contract Award Notice has not been published, even after the 48 day period, Contracting Authorities should nonetheless take immediate action to ensure that it is published. This will be taken into account in deciding on any financial correction.

Common mistakes leading to a financial correction at planning stage Ways to avoid such errors
Negotiating with the successful tenderer on the scope agreeing to extend or reduce scope and price. If the Contracting Authority notes prior to the signing of the contract that the scope needs amending, the tender procedure has to be cancelled and tender re-issued.

6. Contract Implementation

The purpose of this stage of the process is to ensure that the contract is satisfactorily implemented in accordance with the outcome of the tender process. For a balanced relationship, the staff administering the contract on behalf of the Contracting Authority should be as experienced and competent as those of the Contractor. Modifications of contracts and award of additional works to an existing contractor is one of the most common and serious errors as noted below.

Common mistakes leading to a financial correction at planning stage Ways to avoid such errors
Award of additional contracts without competition in the absence of justified urgency brought about by unforeseeable events. If additional works/services are essential then a new contract should be tendered other than in very specific circumstances and with strict limits on the additional value.
Reduction in the scope of the contract during contract implementation resulting in reduction in contract price.
  1. This could be avoided by involving all stakeholders at planning stage; and
  2. If the reduction in scope is material, the contract has to be rescoped and the Contracting Authority must cancel the contract and retender.

Conclusion

According to the European Commission and European Court of Auditors reports, during the 2007-2013 programming period, errors mentioned-above contributed significantly to the overall estimated error rate in the Cohesion policy area, primarily to the error rates for the ERDF and the CF. Serious errors led to a lack, or complete absence, of fair competition and/or to the award of contracts to those who were not the best bidders. Public procurement is still a significant source of errors and there is a long way to go in terms of analysing the problem and implementing actions. Moreover, for the 2014-2020 programming period, the rules have been changed where Member States could face net corrections if expenditure which has been declared as legal and regular by the managing, certifying and audit authorities, is subsequently found to be effected by error.

5.00 avg. rating (93% score) - 1 vote