COMPETITIVE DIALOGUE AND THE NEGOTIATED PROCEDURES - Essay Example

? COMPETITIVE DIALOGUE AND THE NEGOTIATED PROCEDURES COMPETITIVE DIALOGUE AND THE NEGOTIATED PROCEDURES The manufactured goods such as furniture, stationery and other industrial products are usually produced at standard characteristics in matters of quality as well as pricing, however, other products and services are produced in customized aspects to fit the need of the buyer (procurer). Such goods may include some IT application gadgets as well as some security and military equipments. In the latter category, the procurer customizes and specifies the characteristics required and the manufacturer produces the goods in the customized traits. This provision entitles the procurer to identifying probable suppliers, who with the specifications of the procurer, manufactures and supplies the required products. This has led to devising of the tendering mechanisms such as the competitive tendering and the negotiated procedures of procurement by both the private as well as the public domain besides the open and the closed tendering procedures. The competitive dialogue involves customized discussions that involves many bidders and, applied in complex procurement procedures. The competitive dialogue method is characterized of two basic stages where the contracting authority starts by advertising the opportunities. Interested participants apply and gives the information through which the contracting authority to determine the competitiveness of the applicants for the contracts and thus few of the qualified applicants are shortlisted for the second phase which is the actual competitive dialogue. The dialogue entails thorough discussions with the shortlisted participants and the contracting authority stops to engage when it is assured of proposals that will meet her requirements. After the dialogue, the authority then invites tenders for the contract and the evaluation of the tenders stick to the formula of most economically advantageous. On the other hand, negotiated procedures involve the negotiation of procurement by procurer (contracting authority) and the potential bidders where the most cost effective bidders get the contract award1. The competitive dialogue pass through the two stages as with the prior procedure with the difference notable in that within the negotiated procedures the contracting authority requires proposals from the shortlisted participants before engaging in negotiations. In the analysis of procurement through competitive dialogue as well as the negotiation procedures, the most outstanding thing is that both the procurer and the supplier has information that the other has not and is important for the tendering process to be efficient as well as successful. The success of the negotiated as well as the competitive dialogue procurement procedures rest on the ability for the parties involved to use the information at hand convincingly to win the contract award. The two procedures therefore run hand in hand and are thus reviewed together. In the event that competitive dialogue becomes strenuous, then procurer would source for a probable supplier within the market and thus negotiate the procurement procedures. Competitive Dialogue According to the directive 2004-18-ec, the member states have the provision of choosing what kind of contracting that the authorities would be permitted to use either through central purchasing bodies, auctions by electronic means, dynamic purchasing systems as well as through competitive dialogue procedure2. Competitive dialogue is a mechanism or a procedure through which institutions achieve bidding mechanisms for the purpose of procurement by discussions. It is a provision through which all economic operators are allowed to request to participate in the competitive dialogue leading to assignment of a contract. A newly devised procedure, Competitive dialogue is most applied in public procurement and bidding practices. It was designed to be used in contract procedures, which the open or closed procurement procedures do not provide for3. It has brought great evolution in terms of procurement and bidding in the UK in maintaining competency as well as speed of procurement process within the public and the private domains. The processes of verifying the suitability of the candidate tenderers to participate and the selection is required to be in the very transparent manner possible.. The contracting authorities are also obligated to specify the adopted non-discriminatory procedures that would be adopted within the procedure and of importance is the means through which other entities such as economic operators may verify the transparency as well as non-discriminatory level of the procedures. Moreover, the contracting authority is required to specify the level of competency and means to ascertain it, required, for economic agents to be incorporated in order to fit incorporation within the procedure4. In the procedure, an organization advertises tenders for potential bidders to apply and after the applications; the organization evaluates and picks on favorable bidders through the prequalification information as well as information to be used in selection stage. The procedure follows deliberate direct dialogue procedures to establish the most appropriate solutions from the range selected earlier. The dialogue often takes different stages through which best bidders are selected with the aim of reducing the long list of bidders. The competitive dialogue procedure is most applicable within quite complex tendering and procurement undertakings. For instance, the procurement procedures for IT equipment may have many unprecedented technicalities in cost implications and legal implications, which only suffice in the event of discussions with the potential bidders. Moreover, procurement procedures for sophisticated goods, which require technical expertise, may necessitate the procurer to adopt the competitive dialogue procedure for awarding the contracts. Through application of a predefined award criterion, the solutions are evaluated in the order of efficiency as well as application. The competitive dialogue procedure happens to be one critical procedure in procurement because unlike other procedures, it requires through planning, resources, consumes lots of time and involves competitive tendering. The UK government has acknowledged the procedure and through the office of government devised a manual for the public competitive dialogue procedure which is available in soft copy through link: http://www.ogc.gov.uk/documents/OGC_HMT_2008_Guidance_on_Competitive_Dialogue.pdf The procedure has defined timescales through which the operations take place, the expression of interest runs through thirty-seven days and the stand still period of ten days through which the tenders are notified of the tender award. However, the timescales vary from a procedure to another for the reason of the phases to be engaged in discussions as well as the resource constraint as the competitive dialogue procedures are time and resource consuming. Very complex procurement procedures may take time over the dialogues as the parties engage in more informed discussions through which the bidding would be based on. However, small contracts necessitate little time compared to the time used in the otherwise complex procurements. Among other notable strengths of the competitive dialogue procedure is that disciplined competition is involved and encouraged, public and private working relations are boosted and the overall delivery of solutions is effective and in a controlled financial implication. However, in the event of poor planning and execution of the competitive dialogue procedures, the cost implication for both the public as well as the private sector rises beyond manageable limits. Criticisms on the effectiveness of the procedure arise from the criteria of defining complex procedures as required, the frequency of the discussion procedures as well as cost implications especially with poor or improper preparation and the lack of necessary skills required for the procedures. While preparing for a competitive dialogue within the UK dialogue procedure for procurement, it is important for one to consider the external factors that influence the success of the dialogue procedure. The nature of the procurement contract to be delivered as well as the parties to be involved plays a major role in the success of the competitive dialogue procurement5. The external environmental factors such as the competitive bidders available and the government influence in the procedure are important to consider while planning for a competitive dialogue. In such a case as this that involves procuring contracts for corporate purposes of supplying IT material for instance, the procedure will involve evaluation of the range of costs to be incurred and with proper pre-planning, then public bidding is done through advertisement. In the planning stage, the dialogue requires that the procurement team have a thorough knowledge of exactly what is required before engaging the bidders. The appropriate approach to the dialogue ensures that the procurement procedure remains objective and that the minimal cost is incurred in order to realize high procurement returns. The availability of many competing suppliers enhances the efficiency of the supply, as the procurer would have many bidders to evaluate on while at the same time having a shortcoming to the procedure in that much time would be required to engage all the chosen bidders. Past studies on the effectiveness of the competitive dialogue procurement procedures reveal that the dialogue phase is very necessary for the success the whole process of competitive dialogue process of contract awarding. While choosing a particular procurement route such as the adopting of this competitive dialogue, thorough research in the prevailing market challenges is necessary in order to make informed decisions. This enables the organization’s procurement department as well as the responsible authorities make decisions on what the requirements and the targets are before posting the invitation to tender. For the sake of ensuring that the dialogue remains object give and the discussion as based on the basic issues of matter, the competitive dialogue is supposed to be focused on seeking solutions to the matters at hand. Strong leadership team from the contracting authority is required, through which the technical and legal expertise required for the successful procurement in Competitive dialogue is to be spearheaded. The leadership is also required to exhibit competence in commercial and financial matters during the process. Regulation 456 permits the process of down selecting of the bidders to be smooth in order to work progressively over the dialogue phases with the requirement that the number of the remaining bidders will effect genuine competition. Moreover, the reduction can be done progressively as the dialogue progresses through the stages, through with a mandatory obligation of being objective as stipulated in the contract notice7.Too many bidders slow the process of procurement while very few bidders may result to unsuccessful bidding and genuine competitions is a requirement regulation 45 may be compromised. Reducing on the participants is beneficial as it ensures the proportionality of the costs as incurred through the bidding process8. Nevertheless, despite the great success that the adoption of the competitive dialogue procedure has brought on board to the procurement discipline, small and even some large organizations are still hesitant of adopting the procedure due to mainly the resource constraints as the procedure devotes large sums of financial resources. Moreover, the lack of technical experience and expertise hinders many firms from adopting the competitive dialogue procedure as procurement mechanism. The review on ‘HM Treasury’s Verdict on Competitive Dialogue’ recommends some practical ways of ensuring the success of the competitive dialogue procurement procedure. These ways include that contracting authorities should not practice the procurement procedure as a default procedure. A justification document as to why the contracting authority chooses to use the competitive dialogue should be produced. Unnecessary questions or information should be avoided in the discussion phases in order to save on time and that the evaluation criteria adopted by the contracting authority should form the basis of the discussions to avoid diversion of interest9. The use of competitive dialogue procedure in public procurement arises from the need to devise flexible mechanism of undertaking public procurements. 2004/18/EC, the public sector directive introduced the competitive dialogue as a procedure to award complex procurement tenders at the place of formerly public negotiated procedures of awarding contracts. Time constraints and resource misuse usually characterize the public procurement domain within the other procedures and hence the need to devise such a method that would be instrumental in overcoming such vices previously associated with public procurement. The development of competitive dialogue procurement procedure ascertains transparency within bidding procedures and aids to reduce discrimination within the public and private procurement practices. It follows a predefined procedural approach starting from the preparation stage, pre-qualification and selection stage, Competitive Dialogue stage, Final Tenders stage and finally the Contract Award stage10. Through these steps, the competitive dialogue is very instrumental in ensuring competitiveness in the whole process in matters of confidentiality of bidders’ information, proper evaluation of provisions of the bidders and the efficiency in tendering process is realized. Furthermore, the contracting authorities provide the framework through which the dialogue process take place due to the competitiveness of the exercise as well as the constraint as seen above. The gradual process of discussion through the stages ascertains fair competition as is required through the 2004 directive of public procurement process11. Benefits Competitive dialogue Promotes competition among potential suppliers through which the procurer is in a position to choose the lowest bidder in terms of cost implications. The procedure also offers transparency through which corruption, favoritism as well as other unfavorable practices is mitigated and in the process, accountability in resource utilization is achieved. Basic problem that has in the past compromised the tendering processes have been corruption practices as well as favoritism through which the procurer fails to appreciate the best performance for the least effective because of favoritism and corruption. This implies that the procedures maintain high levels of discipline in competition as is required. Competitive dialogue procurement procedures offer a solution to the rather complex procurement procedures that the negotiated procedure would fail to offer solution to. In our case, the procurement of IT equipment and installations requires high levels of competency in technological aspects, which makes the process quite complex, in attending to such a procurement then the competitive dialogue forms the best solution. Limitations A lot of time is usually used in the entire processes since preparation stage to the final awarding of the contract award. Some competitive dialogue procedures take years before they are complete and hence, much time is consumed. Manipulation in the process of dialogue would result to unprecedented outcomes with the procurer or the bidders suffering great losses. The process is therefore not fully proof of human manipulation through the processes of corruption and other malpractices like favoritism. It is customized and cannot fit all types of contracting. Furthermore, the long durations that the dialogue phases take have a cost implication to the entire procedure and hence the need to minimize or adopt other favorable procedures with minimized cost implications. Negotiated Procedures Negotiation procurement procedures arise from ‘negotiations’ implying the procedural and deliberate discussion process between two or more people geared to arriving at an understanding for the realization of an individual or corporate gain. Interested participants apply after the contracting authority advertises available opportunities and gives the prequalification information through which the contracting authority to determine their competitiveness for the contracts and shortlists only the selected. The selected economic agents are there-after invited to tender and engages the shortlisted tenderers in negotiations only based on their proposals as submitted12. The basis of a negotiation procedure lies with the individual drive to gain benefits at the end of the process from the bargaining procedure; in this case economic. Such goods as industrial goods that are not technical such as furniture and stationary would be best suited for this mode of procurement. Negotiated procedure is often applied in the instances of failure by other procurement procedures or when the tendering does not involve complex processes. Negotiations represent the simplest forms of dialogue and are most appropriate in the event that competition is not desirable in the procurement process. Other instances of application of the negotiated procurement procedures are failure of other procedures in tendering to produce results, when intensive research and development work is needed and in the event that prior pricing is not possible. Experience, tact and common sense of judgment form the basis of the negotiations because of the interrelationship exhibited by these attributes. Effectiveness in negotiation results from preparedness of the negotiators where each negotiator should have good understanding of his/her position about the strengths as well as weaknesses of one’s points. Corporate procurement negotiation procedures start from the point of preparation of RFP (request for proposal) which while well prepared strengthens a negotiator’s position in the negotiation against his/her opponent. The preparations are paramount in that they provide negotiators with the capacity to reason when and how to present the arguments. The general procedure through which the negotiated procedure procurement is carried on follows the contracting person or organization putting on public notices the contract to which willing bidders request to participate in. Upon the reception of the requests, the contracting person negotiates the conditions of the contract to supply with the chosen contractor. Regulation 4513 permits the process of down selecting of the participants to be smooth in order to work progressively over the negotiation stages with the requirement that the number of the remaining bidders will effect genuine competition. Through publication of a prior notice, the contracting authority is permitted to reduce on the participants of a tendering negotiated procedure. Moreover, the reduction can be done progressively as the dialogue progresses through the stages, through with a mandatory obligation of being objective as stipulated in the contract notice14. The negotiated tendering process may be necessary in the event that the supplies received during open tendering processes, the competitive dialogue or even through the restricted procedure does not match the requirement of the procurement process. Only the candidates who meet the minimum requirements for the procurement and who applies for the contract are to be engaged in the negotiations, usually with a restricted number of bidders to participate. The processes of verifying the suitability of the candidates to participate in the negotiated procedure and the selection is required to be very transparent. The contracting authorities are also obligated to specify the adopted non-discriminatory procedures that would be within the procedure and of importance is the means through which other entities such as economic operators may verify the transparency as well as non-discriminatory level of the procedures. Moreover, the contracting authority is required to specify the level of competency and means to ascertain it, required, for economic agents to be incorporated in order to fit incorporation within the negotiated procedure15. Negotiations take place in a very fair basis where the all contenders are treated in like manner in order to confirm the most appropriate contractor. Moreover, the negotiations are meant to ensure that the contractors meet the requirements to the bid and hence realize the favorable supply. The procurer assumes the responsibility of communicating to the winner of the award tender as well as to all other participants through writing and gives the reasoning behind the decision. Procurement negotiations undertake the following major steps: preparation, actual negotiation and action point in post negotiation. Negotiated procedures are time consuming and require proper planning to avoid hasty decision, which are resultant of insufficient time. The procedure entails adequate procedural analysis of the proposals, which enables the procurement team weigh on the prices, terms as well as conditions. Moreover, the preparation stage gives the procurer ample time to plan on technical as well as legal implications necessary for the negotiations. The preparation stage is also necessary to establish any omissions during the RFP preparation. Such errors may be from the market survey, which is very necessary for the success of negotiated procurement procedures. Facilities and other necessary conditions for the negotiated procedure are planned for during this stage. The procurement team is entitled to adopt the most appropriate negotiation procedure as deemed efficient for them to conduct the negotiated procedures. The contracting authority should provide the framework through which the negotiation process takes place due to the competitiveness of the exercise. Negotiated procedure takes place in subsequent stages in the event of a number of bidders are deemed fit to participate in the procedures. The gradual process of discussion through the stages ascertains fair competition as is required through the 2004 directive of public procurement process16. The negotiations entail full explanations to the vendor by the procurer on one’s side and getting the vendors opinion on the other. It is equally mandatory that the negotiator listen from the vendor’s perspective through which the vendor would identify weakness, which would form basis for the deliberation. In the procedure, the negotiator brings about the information gained from the market, being cautious of disclosing what other vendors offer and through a cost analysis, by which consensus in the discussions are reached, right from the most important to the least ones. The negotiator must also be willing and tactical to explore available alternatives in the event of disagreements. The basic negotiation basics revolve around the prices, technical characteristics of the products as well as the deadlines to be realized. Sealing the negotiations requires that the procurer evaluate the advantages of the offers against the shortcomings of the bidders and chooses amongst the available bidders based on equality of treatment to the bidders17. The post negotiation phase entails signing onto the agreements after ensuring full understanding by all and the negotiating parties have reached consensus. In order to tighten and clarify the existing rules governing contracts and public procurement procedures, UK government has amended her public procurement provisions with effect from 2011. The main amendments revolve around how and when challenges can be brought on board within a negotiated contract and the applicable rules to address the issues as they arise. The rules are instrumental in increasing compliance burden of the bidding parties as well as increasing certainty and clarity within public procurement arena. Public satisfaction in matters of public procurement matters a lot through proper use of public resources by sound procurement procedures. The procurement team on behalf of the public is required to exhibit competence in handling and issuing of the contract in order to build on the confidence and satisfaction of the public. The procedure of tendering is therefore made very public to avoid possible manipulation, which would compromise the entire process. Among the amended procurement laws, the following stand out: the period for general limitation changed from the previous three months to thirty days. This imply that the legal challenge as necessitated by the bleach of contract between the bidder and the procuring team commences within the thirty days of notification unlike was the case prior to this amendment. The court’s discretion in extending limitation period has also been constricted to three-month backstop. Automatic suspension of awarded contract was revised and the suspension can now only be effected with proper awareness of the parties to the agreement. Information on the successful tender awards only necessary to all bidders who compete to the level of awarding the tender unlike was the case that all bidders who participated in the procurement bid had to be notified18. Advantages The negotiated procedures are less time consuming compared to the competitive dialogue. The negotiated procedure entails the deliberations on less technical products that does not involve complex technical negotiations. Moreover, the negotiated does not involve multiple phases of negotiations like is the case with competitive dialogue through which much time is wasted. The procedure involved is not cumbersome as only market research on the products required is necessary. Longer preparation periods as is the case with other procedures involve the same higher wastage of resources that would otherwise be used in other ways. The procedure can be applied to tender processes where other procedures such as the open tendering fail to realize desired results. Furthermore, the procedure is most suitable in the event that the process does not involve high competition. Intensive market research required by the negotiated procedure ascertains informed negotiations which results to assigning the contract to the most appropriate supplier. Limitations The procedure is not suitable for complex tendering processes such as the ones involving technical goods. Moreover, the process of negotiations is bound to be faced with malpractices such as corruption and favoritism as the procedure involves minimal people. Physical barriers such as distance as well as language barriers would constrain the procedure and would require intermediaries and interpreters. Intensive research required in preparation for negotiated procedures may have adverse cost implications and consume much time and this would eventually delay the procedure. Differences There are notable differences between the competitive dialogue and the negotiated procedures of contract awarding as seen in the time taken to complete the contracting process and the number of suppliers contracted to participate. The competitive dialogue takes a longer time to complete as compared to the negotiated procedure. Moreover, the competitive dialogue involves many contenders through which much time is consumed unlike with the case of negotiated procedure, which restricts the number of contenders. Finally, the competitive dialogues applied in the context of complex tendering contracts whereas the negotiated framework works for the uncomplicated tendering. The complicated dialogue is most suitable for the technological devises and specialized contracting which needs technical expertise unlike the case with negotiated tendering which does not hold to these specifications. In conclusion, Article 1 of the directive 2004-18-EC defines ‘public supply contract(s)’ as being any public contract which has the sole purpose to rent, purchase or even lease products with or without defined intention to buy, and moreover, any contract that is subject for installation operations and covers incidental matters is a public contract19. Moreover, the directive specifies that in use of competitive as well as negotiated dialogue procedures of contract awarding the contracting authorities must abide to the national procedures as discussed within the directive. The contracting authorities are allowed to award public contracts through the open or even the closed contracts unless in specific circumstances that necessitates the use of competitive dialogue and negotiated procedures. Article 29 provides that in the event that the contract to be awarded is of complex status, then at the competitive dialogue procedure would be used; the public contracts are only advanced based on most economic advantage as evaluated20. References Steven T and Patrick B, Incentives and Award Procedures: Competitive Tendering vs. Negotiations in Procurement. January, 2006 OJ L 16, 30.4.2004, p. 1 Office of the government, Competitive dialogue procedure: OGC guidance on the Competitive dialogue procedure in the new procurement regulations. January 2006. 3 OJ L 39, 30.4.2004, p. 6 HM treasury, HM Treasury Review of Competitive Dialogue, November 2010. 9 OJ L 40, 30.4.2004, p. 6 OJ L 40, 30.4.2004, p. 6 Nabarro, Competitive Dialogue – Good News for 2011. Projects briefing, January 2011. 2 Devonshires solicitors, HM Treasury’s Verdict on Competitive Dialogue.Bulletin. 1-3 The UK Office of Government Commerce, An Introduction to Public Procurement, OGC, 13 OJ L 41, 30.4.2004, p. 7 The European Parliament And Of The Council Directive 2004/18/EC of 31 March 2004on the coordination of procedures for the award of public works contracts, public supplycontracts and public service contracts [2004] L 134/114 OJ L 40, 30.4.2004, p. 6 OJ L 40, 30.4.2004, p. 6 OJ L 39, 30.4.2004, p. 6 OJ L 41, 30.4.2004, p. 7 The European Parliament And Of The Council Directive 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [2004] L 134/134 Morrison and Foerster, UK Public Procurement Law Digest Volume 2 (2010-2011) September 2011. 61-62 The European Parliament And Of The Council Directive 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [2004] L 134/135 The European Parliament And Of The Council Directive 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [2004] L 134/136 Read More