Project managment

Tendering requirements and EC rules

Civil engineering construction works and many other similar types of purchase form a large part of the annual expenditure of local and national government authorities and of the public services such as water, drainage, gas and electricity, etc. Consequently such authorities have long-standing rules concerning the procurement of tenders, designed to ensure tenders are obtained openly in a manner which gives best value for taxpayer’s money. The rules may stipulate the number of contractors to be pre-qualified under selective tendering according to the size of contract to be let, and penalties to be imposed if bribery or collusion by tenderers is discovered. In the UK the government introduced ‘compulsory competitive tendering’ (CCT) into local government, national health and other public services, under which the employing authority’s own direct labour force was required to bid in competition with outside contractors’ offers in order to gain work. Initially the competition was on tendered price, but later was modified to be on ‘Best Value’, that is, on the quality of materials, workmanship, design, etc. of tender offers (see Section 1.15). The UK Local Government Task Force later published a guide for local authorities containing some 120 recommendations for procedures advisable when commissioning a construction project.1 Under some European Community (EC) Directives rules have been set for tendering procedures for construction work, and also for the supply of goods and services, which members of the Community are obliged to follow. An appendix to this chapter lists the UK Regulations implementing the EC Directives.
The EC has also been considering how bids for contracts can be submitted
by electronic communication means, that is, ‘E-procurement’. An EC study
group (IST 1999/ 20570) of contractors was set up to advise and report by 2002 on the framework needed for specifying the legal conditions for use of electronic
communication.
The rules vary according to the expected value of the contract and the type of service required. Most supply contracts for public works come under EC rules if they exceed a threshold value of 400 000 ECU (£250 000 approximately); while construction contracts for the utilities (e.g. gas, water, drainage, electricity, etc.) come under control for contract values exceeding 5 million ECU (£3.2 million approximately). Limitations are applied to prevent splitting down work to avoid such rules. Some general features of the EC rules are as follows:
• Procedure. Open, restricted (i.e. selective), or negotiated tenders may be sought. Open tendering requires public advertisement inviting tenders
for a contract. Restricted or selective tendering, requires public advertisement inviting tenderers to pre-qualify for some specified type of work, then inviting bids for work of that type from some or all of pre-qualified tenderers. For a negotiated tender at least three tenderers from those prequalified must be invited to bid – except in certain circumstances, such as for emergency work, for research or development, or for technical or artistic works available from only one source, or as an unforeseen addition to a current contract or a repetition of some current contract work.
• Advertising. Work coming under the rules must be advertised annually, or
for each contract individually, to permit tenderers to register their interest.

1 Rethinking construction: an implementation guide for local authorities; implementation toolkit, published by Local Government Task Force, 108–110 Judd Street, London WC1 – undated but issued mid 2001.

If pre-qualification is not used, a contract notice advertisement must be
issued. Minimum times are set for lists to remain open. After the award of a contract, an award notice must be issued.
• Contract award criteria. The criteria which are to be applied in awarding a contract must be set out. The choice may be the lowest tender, or that which is economically the most advantageous. In the latter case the factors which will be taken into account when judging tenders must be stated and
adhered to.
• Publicity. All required notices must be published in the Official Journal of the EC, using standard formats.
• Standards. Standards must not be set in specifications in a manner which
restricts trade between Community members. European standards, or
National standards which implement such standards, take preference over
any others.
The EC is not the only body setting rules for tendering. The major international lending authorities such as the World Bank, Asian Development Fund,
UNO, WHO, etc. also have rules to ensure that tenders are open to international contractors, or to contractors from countries funding a project, or to conform to some specific requirement. Individual countries often require that tendering procedures shall be so designed that either certain goods and services come only from inside the country, or maximum possible use is made of these. Limits may be set on the use of imported goods or services. On construction contracts tenderers may be required to work in conjunction with local contractors and the number of expatriates the contractor employs in the country may be restricted.

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