Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
Given this, “contracting authorities” (for example local authorities, housing associations, ALMOs) should be aware that new Cabinet Office guidance suggests that competitive dialogue procedure should not be used as often as it has been in the past. Government was concerned that the procedure has too often been used as an alternative to proper market testing before starting the procurement.
Although the guidance is binding only on Central Government, other contracting authorities should bear it in mind when considering whether to use the competitive dialogue procedure.
Competitive dialogue and when it can be used
Competitive dialogue is a procedure which allows clients to discuss aspects of the contract with the contracting authority with the selected tenderers after prequalification but before asking for final tenders. During this stage, an individual “solution” is worked out with each tenderer. Once the dialogue has generated potential “solutions”, final tenders are invited, with each tenderer pricing their own “solution” to the contracting authority’s requirements.
Technically the competitive dialogue procedure can be used only to procure “particularly complex contracts” (ie contracts where the client cannot objectively define at the outset either the technical means of carrying out the project or its legal and/or financial make-up).
The government proposes that competitive dialogue should not be used for projects where “market testing” is an acceptable alternative or where the procurement can be completed within four months.
The new guidance suggests that the competitive dialogue procedure should now only be used for projects such as:
- construction or economic infrastructure projects involving design and/or the need for planning permission (ie new build);
- projects involving complicated commercial arrangements, a public private partnership or a private finance element (ie joint ventures).
Clients proposing to use competitive dialogue should ensure they have a good reason to do so and that their contract is genuinely within the definition of “particularly complex”.
For more information
For advice on EU procurement procedures contact Andrew Millross on email@example.com or 0121 212 7473.
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