We pleased to feature another guest article from Julien Moiroux, a procurement law specialist based in the Paris office of Simmons & Simmons. He works at the “cutting edge” of developments in France, acting for both awarding authorities and government contractors. He is also the co-author with Prof. Lucien Rapp of “Contrats publics et finance d’entreprise: indemnités contractuelles, financement externe, risque contentieux”.
Peter Smith has published some interesting posts on the EU’s drive to impose the division of procurement contracts into lots setting out the pros and cons of lotting following the adoption of the 2014 EU Directives on procurement contracts. In this article, we explore some of the issues that have been seen in France in particular.
1 – The New Directives and Lotting
Behind this newly reformed legal framework, one of the main goals is to provide support for small businesses. In this respect, the access by SMEs to procurement contracts is supposed to be fostered by specific measures, such as the division of procurement contracts into lots and the possibility to indicate in the contract notice whether tenders may be submitted for one, for several or for all of the lots with a limit to the number of lots that may be awarded to only one candidate.
One of the statements made in the aforementioned post, which sums up the paradox of both the need and the requirement to divide procurement contracts into lots, is that lotting can reduce competition just as it can improve it: “In a market dominated by large suppliers, splitting a requirement into small lots might make it unattractive to all or many of the players who might bid. Whilst the converse argument probably applies more often”.
This is particularly illustrated by one feature of the EU reform that recently led to uncertainty in the French implementation of the Directives.
To go back to the basics, the EU procurement Directives actually provide that “the objective of facilitating greater access to public procurement by SMEs might be hampered if contracting authorities would be obliged to award the contract lot by lot even where this would entail having to accept substantially less advantageous solutions compared to an award grouping several or all of the lots”.
Therefore, “it should be possible for contracting authorities to conduct a comparative assessment by first discerning which tenders best fulfil the award criteria laid down for each individual lot and comparing it with the tender submitted by a particular tenderer for a specific combination of lots taken as a whole” (Recital 79 Directive 2014/24/EU, Recital 88 Directive 2014/25/EU).
So it was left to national legislators to decide if and how to implement this flexible option.
2 – The Approach in France
In France, since 2006, the French Public Procurement Code (art. 10) required organisations to divide their requirements into lots, and the 2015 legislation* implementing the 2014 EU Directives has extended this obligation to all contracting authorities and entities except when the contract subject-matter does not allow for the distinction between separate components or services. Most importantly, by way of derogation (from the lot-by-lot review), the contracting authority can authorise (and where this is the case, expressly mention it in the tender documents) candidates to submit variable offers according to the number of lots most likely to be awarded to them**.
This idea is simple and practical: one candidate’s offers on three, four different lots may vary (most likely in its price) if more than one lot is awarded to that candidate. Pros and cons concerning this flexibility were largely debated in France:
- It is an intelligent procurement process tool ensuring best value for money and encouraging SMEs to better think about their different proposals (for one lot or a combination of lots). In a nutshell, the use of variable offers in a procurement contract divided into several lots could serve the need of contracting authorities to implement the most economically advantageous tender criterion.
- On the technical side, awarding several lots to the same company may allow for an improvement of the execution schedule, because of the continuity (or even simultaneity) in the performance of different services included in separate lots.
- This option conflicts with the initial idea behind dividing contracts into lots; it may, in fact, jeopardize SME access to public procurements: When the buyer allows the submission of variable offers, SMEs will probably be more reluctant to compete because of the greater leeway available to larger companies regarding their costs, human resources, etc.
- Legal uncertainty could jeopardise this process tool’s advantages, especially with respect to the need to assess different combinations of lots in a manner ensuring the principle of equal treatment between candidates. Indeed, the French 2015 procurement legislation does not provide for any clear rule and the Legal Directorate of the French Ministry of Economy and Finances had to publish guidelines, which are “soft” law indications of how the authorities will interpret the regulations.
- These uncertainties could make contracting authorities reluctant to use this possibility of variable offers.
3 – And finally …
Sapin II Law, enacted on 9 December 2016, solved this problem by simply deleting this possibility from the French 2015/2016 procurement legislation.
One could argue that the mechanism remains in the EU Procurement Directives and that French legislation therefore no longer complies with one of their requirements. However, with respect to minimum requirements (as opposed to a full harmonisation), Member States may always adopt stricter measures***, which seems to be the French approach to package bids.
But in this particular case, does “stricter” mean “better”?