HEFCE Request 00/19

Public supply, works and services contracts awarded in 1999

Respond by 16 June 2000

April 2000

Executive summary

Purpose

1. This document asks all institutions to show that they have complied with the European Community’s Directives on Public Procurement, for contracts awarded in the calendar year 1999.

   Key points

2. The EC directives are put into effect by the UK Regulations on Public Supply, Works and Services Contracts.
3. The information required is set out in the attached survey forms. We collect this information on behalf of the Department for Education and Employment (DfEE).
4. Institutions should not include contracts that have been placed through one of the five universities purchasing consortia. Each consortium should make its own return.

   Action required

5. Completed survey forms should be returned to the HEFCE by 16 June 2000. Where a nil return applies, institutions should still complete and return the forms.

   Background

6. The UK Regulations on Public Supply, Works and Services Contracts put into effect the EC’s Directives on Public Procurement. The DfEE is responsible for gathering statistical returns from the higher education institutions covered by the regulations. These returns are submitted to the Treasury and then to the European Commission.
7. Under the regulations, institutions must ensure that contracts in excess of the relevant financial thresholds are advertised throughout the European Community, in the Official Journal of the European Communities (OJEC). They must also provide information about expenditure on procurement.
8. The DfEE has asked us to provide information for HEFCE-funded higher education institutions for the calendar year 1999. The information required is set out in the attached survey forms.

   Guidance

9. Any queries about the UK Regulations on Public Supply, Works and Services Contracts, or the EC Directives on Public Procurement, should be referred to one of the following:
   Tom Chadwick, National Director of Procurement Development based in the University of Glasgow on 0141 330 6799;
   Greg Wade, SCOP Administration Officer in London on 020 7419 5550;
   Ian Wragg or Remi Ikomi at the DfEE in Sheffield on 0114 259 3166 or 0114 259 4707 respectively.
10. Note that the existence of devolved budgetary authority within an institution does not absolve that institution from ensuring that it complies with the EC directives. Responsibility for compliance rests with the institution; failure to do so is a breach of the regulations and leaves it open to legal challenge.
11. Institutions should be aware that the use of the negotiated procedure without a call for competition is only acceptable in certain closely defined circumstances, which they may be asked to justify. Guidance on the applicability of the most commonly invoked reasons for using the negotiated procedure is set out in Annex A.

    Returns

12. Annex B lists the Nomenclature for Industrial Products (NIPRO) codes, for completing Form B1. Annex C lists the General Industrial Classification of Economic Activities within the European Community (NACE) codes, for completing Form B2. Annex D lists the Central Products Classification (CPC) codes, for completing Form B3. Annex E lists the codes to be used when a negotiated procedure is adopted.
13. Institutions should not include contracts which have been placed through one of the five universities purchasing consortia. Each consortium should make its own return.
14. When naming the nationality of the person to whom the contract was awarded, the nationality of the contractor who actually fulfilled the contract should be recorded. For example, if a contract was with a German company via a UK subsidiary or agent, the nationality should be recorded as UK.
15. In Forms B1, B2 and B3 the total contract value should be recorded, not the annual cost. For example, if a three-year contract was awarded at £60,000 per annum, then £180,000 should be recorded.
16. If there is insufficient space to include all details on the survey forms, please photocopy them or attach a separate sheet. The completed survey forms should be returned by 16 June 2000 to:

    Keith Harris
    Analytical Services Group
    HEFCE
    Northavon House
    Coldharbour Lane
    Bristol BS16 1QD

17. Where a nil return applies, institutions must still complete and return the forms with the relevant sections ticked.

Annex A

Use of the negotiated procedure without a call for competition

1. The EC directives make it clear that using the negotiated procedure, without any call for competition, is only allowed in exceptional circumstances. The notes below discuss the use of the exceptions which HEIs have most commonly invoked in previous returns.

   Research and development

2. The exclusion relating to research and development is very restrictive. The actual Directive uses the wording ‘… where the products involved are manufactured solely for the purpose of research, experiment, study or development. This provision does not extend to quantity production to establish commercial viability or to recover research and development costs’.
3. EU guidance states that the provision does not cover capital goods simply because they are purchased for research or experimental laboratories, or because they are paid for out of research and development funds. In other words, it is only intended to apply when the process of manufacture itself is the subject of research, experiment, study or development. An item of laboratory equipment whose manufacture involved incorporating a new technique or process might qualify, but the provision does not apply to buying a piece of equipment just because it has to be built to order rather than taken from stock.

   Sole supplier

4. Institutions must be careful to not rely on arguments that suggest there is only one possible supplier. For example, the recent NAO report ‘Procurement of Equipment from Research Grants’ (HC 494 Session 1998-99, 23 June 1999) examined 68 cases in a sample of HEIs. It identified 48 cases where there was scope for competitive tendering but a competitive procurement process was not followed. In only three of those cases could it confirm that only one supplier existed.
5. Furthermore, the wording of the EU Directive states that ‘for technical or artistic reasons, or reasons connected with the protection of exclusive rights, the goods supplied can be manufactured or delivered only by a particular supplier’.
6. Thus, there are two conditions to be satisfied: the goods must have special technical or artistic features or must be protected by exclusive rights, and there must be only one potential supplier.

   Extreme urgency

7. It will be very rare for an HEI to be able to invoke ‘extreme urgency’ as a reason for not following a competitive procurement process. The wording of the EU Directive states that contracting authorities may only award a contract by negotiated procedure without prior publication of a contract notice ‘… in so far as is strictly necessary when, for reasons of extreme urgency brought about by events unforeseeable by the contracting authorities in question, the time limit for the open, restricted or negotiated procedures cannot be kept. The circumstances invoked to justify extreme urgency must not in any event be attributable to the contracting authorities.’
8. The limitations of ‘extreme urgency’ and ‘events unforeseeable’ represent stringent tests. EU guidance makes it clear that ‘the concept of unforeseeable events is taken to mean occurrences that overwhelmingly transcend the normal bounds of economic and social life (for example, an earthquake or flood in the wake of which essential supplies are needed as a matter of the utmost urgency in order to provide relief and shelter for the victims)’. The limitations would not be met just because an HEI had fallen behind its original programme, or would be inconvenienced or disadvantaged by a delay because it had not initiated the correct procedures early enough.

Annex B

NIPRO codes for supplies contracts

Annex C

NACE codes for works contracts

Class 50: Building and civil engineering

Annex D

CPC codes for priority services contracts

Annex E

Codes to be used for negotiated procedures

Supplies contracts

1. Irregular tenders
2. Absence of tenders
3. Research and development
4. Particular suppliers
5. Extreme urgency
6. Additional deliveries

Works contracts

1. Irregular tenders
2. Research and development
3. No prior overall pricing
4. Absence of tenders
5. Particular contractors
6. Extreme urgency
7. Additional works (unforeseen contracts)
8. Repetition of works under original contract

Services contracts

1. Irregular tenders
2. Prior overall pricing
3. Specification not able to be established in advance
4. Absence of tenders
5. Particular service providers
6. Following a design contest
7. Extreme urgency
8. Additional services (unforeseen circumstances)
9. Repetition of works under original contract