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.
At its worst, competitive dialogue can be slow, time-consuming, and painfully expensive for all involved.
The EU procurement rules limit the use of competitive dialogue to “particularly complex” contracts. It is difficult to argue that the likes of "standard" responsive or planned maintenance contracts, using a standard form contract and an established payment mechanism (such as a schedule of rates) is "particularly complex". However, the restricted procedure restricts post-tender negotiations to “clarification, specification and fine tuning” of tenders. Competitive dialogue is available where the specification, payment method or contract terms cannot be finalised through the (more usual) restricted procedure.
Competitive dialogue should not be used as an alternative to proper pre-procurement scoping, engagement and consultation. Too many organisations rush into competitive dialogue to help them decide what they want to purchase. These dialogue processes can easily become unfocused, as the organisation is led into a never-ending debate with bidders to identify what the organisation really wants and can afford. Cabinet Office Procurement Policy Note 04/12, issued last year, highlights this risk. It limits the use of competitive dialogue for government contracts to situations where:
- there has been extensive pre-market engagement with current and potential suppliers; and
- those discussions identify that competitive dialogue is still the only realistic procurement procedure.
Even when run well, competitive dialogue is more time consuming and expensive than the restricted procedure. The dialogue stage is resource-intensive for both the housing provider and bidders, with correspondingly higher procurement and tendering costs. For lower value contracts, it may be better to try to simplify the contract, rather than incurring the cost of a competitive dialogue procedure.
For those keen to use the procedure, it is worth knowing how to run a successful competitive dialogue procurement. Two of our recent projects help illustrate this.
For a contract for materials supply to a registered provider’s DLO, we used competitive dialogue to:
- establish whether or not to continue the in-house stores operation;
- decide how to price materials for both internal and third party work; and
- agree some bespoke additions to the standard form contract we used for the contract conditions.
Here the process involved a single meeting with each bidder and a couple of exchanges of marked-up documents.
A very different project involved procuring a private sector partner to deliver education and related support services for Staffordshire County Council through a joint venture organisation. Here, planning and effective project management were key. This involved:
- extensive pre-procurement discussions to establish both what was desirable and what was really feasible;
- joint planning of the procurement by the in-house team and external advisers, with a clear project plan, sufficient evaluation time in the dialogue stage and fixed dialogue meeting dates which were “blocked out” in people’s diaries;
- identifying and anticipating any future legal concerns throughout the process;
- clear management support with effective project sponsor and project managers;
- early preparation of the service specifications, contract documents and supporting (e.g. property) documentation and their development as necessary through the dialogue; and
- using the dialogue stage to “stretch” bidders’ offers.
Under the proposed EU procurement Directive, competitive dialogue will be more widely available. Before taking advantage of this flexibility, housing providers will need to consider carefully whether competitive dialogue is appropriate for their contract. If so, they should structure the dialogue process effectively.
Andrew Millross is a partner and Gayle Monk a solicitor at Anthony Collins Solicitors.
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