Key Contact: Kerri Crossen – Partner Patrick Kane- Senior Associate

On 28 March 2023, the Department of Public Expenditure, NDP Delivery and Reform published Circular 05/23 (the “2023 Circular”), a document including best practice and obligations on contracting authorities engaging in below (and above) EU threshold tendering.

The 2023 Circular takes a carrot and stick approach for contracting authorities – it increases the threshold for advertising works and services contracts and brings some additional flexibility for contracting authorities. However, it also requires contracting authorities to publish more notices and share more data (including the publication of contracts awarded under framework agreements).The 2023 Circular also helpfully signposts a number of lesser spotted aspects of the European Union (Award of Public Authority Contracts) Regulations 2016 (the “2016 Regulations”) to assist contracting authorities with tenders that exceed the EU thresholds. (For more information on these thresholds, please see our previous article.)

We have set out our initial thoughts on the 2023 Circular below, with a focus on the changes made to the existing guidance provided by the Office of Government Procurement (the “OGP”).

Increasing the thresholds

Among the reforms provided by the 2023 Circular is a substantial increase in the threshold at which goods, services and works must be advertised on eTenders. If a tender falls between €5,000 and the relevant threshold specified in the table below, contracting authorities are only required to request three quotes (for services, supplies and goods) or five quotes (for works and works-related services). The thresholds for notification under Circular 40/02 and works-related services remain the same, as do the EU thresholds (which will change in 1 January 2024).

 

We note the 2023 Circular states that contracts worth less than €5,000 (ex VAT) can be “awarded on the basis of verbal or written quotes from one or more competitive supplier” (emphasis added) – a change from the existing guidance that multiple quotes are required for contracts of this value, which remains best practice.

Finally, we note that the 2023 Circular continues to be ambiguous regarding whether three quotes (or five quotes) must be received by a contracting authority for contracts between €5,000 and €50,000, or whether they should simply be requested.

Greater transparency in public procurement

Despite the changes to the thresholds stated in the table above, contracting authorities are required to publish contract award notices for any contract award above €25,000 ex VAT. This appears to include works and works-related services in addition to goods and services. Importantly, the 2023 Circular reiterates the requirement that a contract award notice must be published for “any contract awarded under a Framework Agreement” – regardless of the value of that call-off contract.

This is strictly speaking not a new requirement – it was previously referred to within the OGP Guidelines and Circular 10/14 – but given the OGP’s focus on obtaining additional data on the impact of the changes, contracting authorities may be criticised in audits for any systematic failure to publish these notices.

 The 2023 Circular strongly encourages the publication of additional information by contracting authorities, including the future pipeline of work that may be tendered by the public body (in a manner similar to the UK’s Commercial Pipeline) and the use of prior information notices.

This focus on transparency reflects the moves at national and European level to do more with data obtained from tender procedures for policy-making reasons and to ensure compliance with measures such as the Clean Vehicles Directive and the use of green public procurement criteria (GPP).

Greater flexibility in below threshold procurement

 The 2023 Circular replaces Circular 10/14, but a comparison of the two documents demonstrates that a substantial portion of the previous Circular and OGP Guidance remains. In a number of instances where changes have been made, contracting authorities have been provided with greater flexibility:

  • The 2023 Circular no longer requires the use of open tendering for below threshold procurements. This recommendation is now qualified by references to reasonableness and “without compromising efficiency and value for money” – and the 2023 Circular indicates that alternative procedures may be more appropriate in certain circumstances (particularly where contracting authorities are procuring innovative products or solutions); and
  • Whilst the 2023 Circular recommends the use of preliminary market consultations, contracting authorities are not expected to conduct market analysis and the 2023 Circular refers to this occurring on a case-by-case basis.

Guidance on above threshold tendering

The 2023 Circular focuses on below EU threshold tendering, but it also helpfully identifies a number of useful aspects of the 2016 Regulations that can be used by contracting authorities to assist SMEs and deliver better outcomes, including:

  • The use of financial ratios (such as asset-to-liability ratios) as a means of assessing a supplier’s financial capacity rather than simply relying upon annual turnover;
  • Alternative procurement routes available to contracting authorities that can facilitate greater innovation from tenderers, such as competitive dialogue, innovation partnerships and competitive procedure with negotiation;
  • The availability of life-cycle costing as a means of evaluating tenders (rather than focusing on acquisition costs) where appropriate; and
  • The use of dynamic purchasing systems (or DPS) for commonly used goods, works and/or services.

The references to these aspects of the 2016 Regulations is greatly welcomed and will hopefully encourage more contracting authorities to consider these options as part of their procurement strategy. It is logical that contracting authorities can and should use more flexible procurement procedures for lower value procurement to meet the specific needs of individual contracts.

Analysis

Save for the increase in thresholds above, the 2023 Circular does not constitute a sea change in public procurement requirements. The renewed focus on the publication of contract award notices for all procurements over €25,000 (ex VAT) and for call-offs from framework agreements may reduce the efficiencies gained from the threshold increases, and many contracting authorities may continue to advertise on eTenders for below threshold procurements to demonstrate compliance with the principles of transparency, equal treatment and proportionality. However these changes – coupled with the proposed changes to the Capital Works Management Framework – may reduce the administrative burden on SMEs and allow for greater competition.

Circular 40/02 requires contracting authorities to notify the Comptroller & Auditor General on an annual basis of contracts awarded without competition.