The implications of Dutch procurement law for public private partnerships

David Marks, EC Partner at CMS Cameron McKenna, looks at the implications of Dutch procurement law for public private partnerships.

Background

The importance of PPPs for achieving the implementation of Trans European Networks (TENs) had already been recognised for some time at EC level. Likewise, the Dutch government has been studying the UK experience to determine the optimal governmental structures to facilitate successful projects, the most suitable pilot projects and the appetite for them in businesses and financial circles.

In February this year the Dutch government launched a major PPP for the high speed rail link from the Belgian border to Amsterdam. Of this the Dutch Prime Minister observed:

“We are committed to developing this vital new rail link, which will ensure that the Netherlands is fully part of the European high speed rail network as it progresses in the next decade. We welcome the involvement of the private sector in this project and look to it to provide an innovative approach to the provision of the new line.”

Other projects, big and small, are sure to follow. Those who become involved with them will soon enough have to get to grips with Dutch procurement law and the particularity of the Dutch approach to the competitive negotiation of works under the UAR-EG 1991 (Uniform Aanbestedings-Reglement). It is also an environment in which bid protests have become increasingly common.

Procurement Law

Different EU Member States have different approaches to implementing EC legislation. The UK tends to explain EC directives, filling in gaps and uncertainties. Many Member States go for “copy out” and simply adopt directives wholesale into the national legal order. The Netherlands usually takes the latter approach.

The procurement route followed can be vital for a project’s success. For PPPs considerable flexibility is needed: it is down to bidders to devise solutions within the framework of the procuring entity’s output specification and it will not always be possible to determine the risk allocation between the public and private sectors in advance.

Because of the need for flexibility in PPPs, procurement by competitive negotiation is usually more than just desirable, instead it is a necessity. Under EC procurement law outside the utilities sectors, competitive negotiated procurement by public bodies utilities is the exception, not the rule.

Procurement by Competitive Negotiation

Directive 93/37/EEC on public works limits competitive negotiated procurement to a few narrow situations, including the following, which is the most commonly invoked in relation to PPPs:

“in exceptional cases, when the nature of the works or the risks attaching thereto do not permit prior overall pricing”.

In the UK implementation (Public Works Contracts Regulations 1991) this is rendered as:

“exceptionally, when the nature of the work or works to be carried out under the contract is such, or the risks attaching thereto are such, as not to permit prior overall pricing”.

The gloss in the UK rules makes it clearer that the negotiated procedure can be used where either the nature of the works or the nature of the risks under the contract does not permit prior overall pricing. The Dutch rules in the UAR-EG 1991 do not contain this gloss. The general interpretation favoured in the Netherlands is that only the uncertain nature of the works or the risks associated with the works (rather than the uncertainty of risk allocation under the contract) justify a competitive negotiated procedure. With such an approach it can be difficult to justify a competitive negotiation for a PPP involving a highly standardised work project even if novel proposals for risk allocation are invited.

To date competitive negotiations under the UAR-EG 1991 have been rare.

A Particular Approach to Competitive Negotiation

Once into a competitive negotiated procurement, there is a particular procedure to follow under the UAR-EG 1991. The overall tender process following prequalification is broken down into three phases: the consultation phase (“overlegfase”), the tender phase and the negotiation phase.

The consultation phase will be novel for many. Under this process bidders are provided with tender documents and are invited to engage in dialogue with the contracting authority. The basic purpose of the consultation is to remove the uncertainties which previously justified the use of the competitive negotiated procedure such that tenders could be priced in the next phase, the tendering phase. Costs can be discussed in the consultation phase but not price. The consultation may lead to modifications in the tender documentation.

At the tender phase offers are sought on the revised tender documents. Once bidders are in negotiation can start with selected bidder. However, the negotiations cannot involve what is called “hawking” (more dryly translated as a Dutch auction) ie. the contracting authority cannot say to bidder A knowing that B has offered X, “give me X-5%” and so on with B.

Conclusion

It has to be accepted that the EC procurement rules were not necessarily drafted with PPPs in mind. The Commission’s proposals to revisit the rules and appears to be sympathetic to a wider use of competitive negotiations with appropriate safeguards to ensure non-discrimination. Changes or no changes, bidders on Dutch PPPs will need to familiarise themselves with the particularity of Dutch law’s present approach to competitive negotiation.