TOOLS-Chapter 5 With Annexes_EN

PUBLIC PROCUREMENT BEST PRACTICE GUIDE of 37

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Public Procurement Directorate

CHAPTER 5: NEGOTIATED PROCEDURES 1-01-2008

TABLE OF CONTENTS

TABLE OF CONTENTS..................................................................................................1

CHAPTER 5: NEGOTIATED PROCEDURES ..........................................................2

INTRODUCTION............................................................................................................2

5.1 WHAT IS THE NEGOTIATED PROCEDURE? ..............................................................3

5.2 CASES JUSTIFYING USE OF THE NEGOTIATED PROCEDURE .....................................5

5.2.1 Negotiated procedure with publication of a contract notice .......................... 5

5.2.2 Negotiated procedure without publication of a contract notice ..................... 9

5.3 HOW IS THE NEGOTIATED PROCEDURE CARRIED OUT? .........................................15

5.3.1 Stages of the procedure ............................................................................ 15

5.3.2 Tender documents .................................................................................... 21

5.3.3 Negotiation techniques .............................................................................. 23

5.4 APPLICATION OF THE NEGOTIATED PROCEDURE...................................................25

5.4.1 Negotiated procedure with one (1) economic operator .............................. 25

5.4.2 Two cases of a negotiated procedure........................................................ 25

5.4.3 Negotiated procedures with reduction of the number of

economic operators................................................................................... 28

5.5 GENERAL REFERENCE TO THE NEGOTIATED PROCEDURE FOR PUBLIC

CONTRACTS IN THE WATER, ENERGY, TRANSPORT AND POSTAL

SERVICES SECTORS (DIRECTIVE 2004/17/EC & LAW 11(Ι)2006).........................31


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CHAPTER 5: NEGOTIATED PROCEDURES

INTRODUCTION

This Chapter describes the use of negotiated procedures (with and without publication of a

contract notice) in public procurement.

Moreover, Appendix 5-1 presents the procedure of the competitive dialogue, a new form

of procurement procedure introduced by the new institutional framework.

These two procedures, together with the "conventional procedures", i.e. the open procedure

and the restricted procedure, make up the entire set of procedures provided for under the

Community legislation on the award of public supply contracts, public service contracts and

public works contracts. These procedures have been transposed into the national law and

are applied accordingly.

Finally, Appendix 5-2 examines two special cases of public contracts:

• concessions, and

• public-private partnerships, also known as PPPs.

Reference to these two types of contracts is made because in these cases the

Contracting Authorities usually follow procedures that involve consultations and

negotiations with the economic operators.

It should be noted that the discussion of the competitive dialogue and of concessions

and PPPs is included in this Guide with the aim of providing information to

Contracting Authorities about the new possibilities offered to them, together with

general guidelines and instructions on their application.

Contracting Authorities should bear in mind that the procedures involving

consultations, negotiations and dialogue with the economic operators are particularly

demanding, in terms of care and skills, on the Contracting Authority officials who conduct

them. These officials should be familiar with both the national and the Community legislation,

so as to be able to apply the principles and provisions of the institutional framework and thus

minimise the likelihood of appeals and objections. In such cases, Contracting Authorities

should seek the assistance of specialised legal, financial and technical consultants.

The negotiated procedures may also be applied in cases of complex contracts, when these

are subject to restrictions of the Law, and may also be applied by analogy in cases of

ordinary low-value contracts which are subject to the same restrictions of the Law.

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More particularly, in this Chapter the Guide provides Contracting Authorities with practical

instructions and guidelines on how to use the negotiated procedure in a way which will

ensure full compliance with the requirements of the institutional framework and will be

suitably adapted to the specific characteristics of the contract to be awarded. In order to

make effective use of the procedure, Contracting Authorities should:

� Understand the key characteristics of the procedure (types, options, flexibility limits).

� Be aware of the cases justifying use of the negotiated procedure with or without

publication of a contract notice.

� Be able to prepare, organise and conduct successfully a negotiation process.

More specifically, they should be able to:

•••• Determine the different stages of the negotiated procedure.

•••• Prepare the tender documents in support of the procedure.

•••• Make use of effective negotiation techniques.

•••• Be aware of the options available under the negotiated procedure for reducing the

number of tenders to be negotiated.

5.1 WHAT IS THE NEGOTIATED PROCEDURE?

According to the Community and national legislation, "negotiated procedure means the

procedure whereby the Contracting Authorities consult the economic operators of their

choice and negotiate the terms of the contract with one or more of these."1

In the negotiated procedure, "Contracting Authorities shall negotiate with tenderers the

tenders submitted by them in order to adapt them to the requirements which they have set

out in the contract notice, the tender documents and the additional documents, if any, and to

seek out the best tender."

In this procedure, the Contracting Authority should determine in the tender documents the

individual negotiation steps and the terms to be the subject of negotiations.

The negotiated procedure is an exceptional procedure and may be applied only to

cases limited to those specified by the Law.

From its definition, it follows that the key characteristic of the negotiated procedure is that the

Contracting Authorities negotiate the terms of the contract with the tenderers.

This means that, when using the negotiated procedure, Contracting Authorities may:

• Invite candidates with the purpose of awarding a public works contract, a public supply

contract or a public service contract, while at the same time they may also

1 Directives 2004/18/EC and 2004/17/EC of the European Parliament and of the Council, and Laws

12(I)/2006 and 11(I)/2006 of the Republic of Cyprus.


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• Discuss and negotiate with the candidates who have responded to the invitation, the

terms of the contract as specified in the relevant invitation.

Types, characteristics and options of the negotiated procedure

There are two types of negotiated procedure:

• The negotiated procedure with publication of a contract notice in the Official Journal of

the European Union (OJEU) and in the Official Gazette of the Republic of Cyprus

(OGRC) or, if the estimated value of the contract is below the thresholds of article 19 of

Law 12(Ι)/2006, only in the OGRC.

• The negotiated procedure without publication of a contract notice.

The negotiated procedure (the same applies to the competitive dialogue) may lead

either to the appointment of an "Interim Contractor", with whom final negotiations will

take place and the contractual documents will be finalised, or, in cases where all contract-

related issues have been clarified during the preceding procedure, directly to the

appointment of the Final Contractor for the project. The above option or choice made must

be determined in advance and must be stated in the tender documents.

In case of failure of the negotiations with the Interim Contractor, the Contracting Authority

may proceed to negotiations with the second candidate on the list, and so on. The

Contracting Authority is obliged to state these provisions in the tender documents.

The procedure for appointment of an "Interim Contractor" is not possible in the open and

restricted procedures, where the tendering procedure leads directly to the appointment of the

"final Contractor for the project" without any possibility of consultations or negotiations.

During the negotiated procedure (the same applies to the competitive dialogue), the

Contracting Authority has the option to proceed to consultations as well as to negotiations

with the candidates regarding the tender documents and their tenders. It is stressed that this

option is not allowed in the case of the open procedure nor in that of the restricted procedure.

The limits of the Contracting Authority’s flexibility during the negotiated procedure

During the negotiated procedure, the Contracting Authority may act with a certain degree of

flexibility not only in terms of the award of the contract but also during the procedure followed

in connection with a relevant invitation or with a relevant a tender procedure.

When using the negotiated procedure for public procurement, however, this flexibility is

limited to specific cases and is subject to specific rules.

During the negotiated procedure, the Contracting Authority must adhere to the

provisions of the applicable legislation and act as a public authority by applying these

provisions, together with the principles governing public procurement (e.g. transparency,

equality of treatment) and the principles of proper and ethical governance (e.g. codes of

ethics), especially when:

• Specifying the contractual terms of the tender documents (technical specifications,

prices, schedules, material or non-material terms of the contract etc.).

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• Evaluating the tenders and their comparative advantages, and negotiating these

tenders (Directives 2004/18/EC and 2004/17; Law 12(Ι)/2006, Chapter IV, Article 32,

par. 2, p. 41; Law 11(Ι)/2006, Chapter V, Article 38, paragraphs 2 & 3, p. 286).

During the negotiated procedure, the Contracting Authority must apply the principles of

equality of treatment and of transparency in its negotiations with economic operators.

Restrictions in the use of the negotiated procedure

Although pursuant to the national and Community legislation Contracting Authorities

are free to choose the open or restricted procedure whenever they see fit, they should

opt for the negotiated procedure only in the cases listed exhaustively in the relevant

Community Directives and in the transposition law. These cases must be interpreted strictly,

and the burden of proving their existence lies on the Contracting Authority invoking them.

For these reasons, Contracting Authorities may use the negotiated procedure only in the

specific cases listed exhaustively in the Directives and in the national legislation. The

following paragraphs provide a detailed description of these cases.

5.2 CASES JUSTIFYING USE OF THE NEGOTIATED PROCEDURE

5.2.1 Negotiated procedure with publication of a contract notice

Pursuant to the Community Directives and the national legislation, use of the negotiated

procedure with publication of a contract notice is justified in four cases.

These cases are summarised in the table below:

FIELD OF APPLICATION No. CASES JUSTIFYING USE OF THE NEGOTIATED

PROCEDURE WITH PUBLICATION OF A CONTRACT NOTICE SUPPLIES SERVICES WORKS

1 The case of irregular tenders or unacceptable tenders being submitted in response to an open or restricted procedure or a competitive dialogue

��

2 The case where prior overall pricing is not possible ��

3 The case where the contract specifications cannot be established with sufficient precision

��

4 The case of works performed solely for purposes of research, testing or development ��

The case of irregular or unacceptable tenders

This case refers to the submission of irregular or unacceptable tenders in response to

an open or restricted tender procedure or to a competitive dialogue, and is applied

only insofar as the original terms of the contract are not substantially altered.

The table below lists examples of irregular tenders:

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EXAMPLES OF IRREGULAR TENDERS

Tenders that do not comply with the terms of the tender documents. For example, tenders whose technical envelopes contain variants, when this is not authorised in the tender documents, or tenders that fail to supply (either intentionally or not) key information required in the tender documents and thus cannot be evaluated by the Contracting Authority.

Tenders made with reservations or tenders containing intentional or systematic errors. For example, if the financial offer of a tenderer contains reservations, such as conditions regarding currency exchange rates, inflation etc., when these are explicitly forbidden by the tender documents.

Tenders whose prices are demonstrably the product of collusion between the tenderers and are sheltered from competitive forces, or if more generally there are serious indications of collusion between the tenderers with the purpose of circumventing genuine competition or if, in the opinion of the Contracting Authority, there was not sufficient competition during the tendering procedure.

The table below lists examples of unacceptable tenders:

EXAMPLES OF UNACCEPTABLE TENDERS

Tenders not submitted within the specified time limit.

Tenders that do not meet the qualitative selection criteria (e.g. failure to submit a certificate or document regarding the tenderer’s personal situation, thus making it impossible to obtain additional information or clarifications) or the requirements of the award criteria.

Financial offers that exceed the estimated budget of the Contracting Authority (when this budget is set as the ceiling in the tender documents, i.e. when negative reductions are not acceptable).

Abnormally low tenders that cannot be justified in writing by the tenderers following a request by the Contracting Authority.

In both cases the Contracting Authority may cancel the tender procedure and repeat it using

the negotiated procedure with publication of a relevant contract notice, provided that the

original terms of the contract are not substantially altered, as already mentioned.

In the same cases, the Contracting Authority may not publish a contract notice if it includes in

the negotiations all economic operators who meet the qualitative selection criteria and who,

during the previous open or restricted procedure or competitive dialogue, have submitted

tenders complying with the formal requirements (submission of tender guarantee, submission

of tenders within the specified time limit, completeness of the tender envelope etc.) of the

contract award procedure.

An essential condition for using the negotiated procedure, in the case of irregular or

unacceptable tenders (and in the case of lack of tenders, which is examined further below),

is that the original terms of the contract must not be substantially altered.

The term "original terms" of the contract includes all technical, administrative, financial and

other terms contained in the tender documents (European Commission, Guide to the

Community Rules on Public Works Contracts, Office for Official Publications of the EU, 1997,

p. 30).

The above terms of the original tender procedure must not be "substantially altered" during

the negotiated procedure, to prove that this second tender procedure is essentially a

continuation of the previous open or restricted procedure and not a new tender procedure.

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The term "substantial alteration" is an abstract legal term widely used by the Community law

on public contracts. A substantial alteration is a change that may violate a specific principle

of community law, especially the principles of free and undistorted competition, of equality of

treatment of the tenderers, and above all the principle of ensuring the effectiveness of the

Community Directives.

For example, changes to the technical specifications, the financing of the contract or the

payment of the contractor, the execution deadlines, the conditions for acceptance of the

deliverables or the construction techniques, are to be regarded as “substantial alterations” to

those terms (European Commission, Guide to the Community Rules on Public Works

Contracts, Office for Official Publications of the EU, 1997, p. 30).

The Court of Justice of the European Communities has had the opportunity to point out that

price is also included in the original terms of a contract that cannot be substantially altered in

case the negotiated procedure is used. An increase of the pre-estimated value of the original

contract, even if such increase does not exceed 10%, is considered a substantial alteration,

in the view of the Court, that does not justify the use of the negotiated procedure (Judgment

of 13.01.05 in Case C-84/03 Commission v Spain, not yet published, point 47 and ff.).

The Court's arguments are clear. The negotiated procedure is exceptional in nature

and, therefore, must be applied only in the cases listed exhaustively by the Directives.

Precisely because of this exceptional nature, the relevant provisions of the Community

Directives must be interpreted strictly, while the burden of proving the actual existence of

exceptional circumstances justifying the derogation lies always on the party invoking the

existence of these circumstances, i.e. on the Contracting Authority (Judgments in Cases C-

385/02 Commission v Italy, not yet published, point 19; C-126/03 Commission v Germany,

not yet published, point 23; and C-394/02 Commission v Greece, not yet published, point 33,

where reference is made to previous judgements).

Therefore, the term "non-substantial alteration" must also "be interpreted strictly" (Judgement

in Case C-84/03 Commission v Spain, not yet published, point 48) to prevent the Directives

being deprived of their effectiveness. A substantial alteration is therefore considered to be

every alteration of a term of the original tender procedure "which is capable of undermining

both the scope and the exceptional character” of articles 30 and 31 of Directive 2004/18/EC

(Judgement of 13.01.05 in Case C-84/03 Commission v Spain, not yet published, point 49).

The case where prior overall pricing is not possible

This option refers to exceptional cases, when the nature of the works, supplies or

services whose nature or other imponderable factors do not allow prior overall

pricing, which would enable the Contracting Authority to determine in the tender documents

the budget for the work, service or supply. In such a case, tenderers cannot estimate

beforehand the total value of the project in their tenders and thus offer a pre-determined

price, but they are obliged to include in their tenders conditions that reflect the risks resulting

from the nature of the project or from various imponderable factors which the Contracting

Authority does not assume.

This option also refers to exceptional circumstances, for example in cases of projects whose

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overall pricing of the project, or in cases of an element of archaeology whose extent and

severity cannot be assessed in advance.

The negotiated procedure can be used on the above basis in exceptional cases, such as in

"Public-Private Partnerships (PPP)" & "Public Finance Initiative (PFI)" contracts, and has

been widely used in the United Kingdom, where these types of contracts were first developed

and applied. However, the negotiated procedure can also be used for awarding other types

of contracts for which similar reasons apply, such as in the case of public "concession

contracts".

For example, there are cases where the long-term financing of a work, supply or

service by the contractor or the long-term operation and maintenance of a work or

supply by the contractor do not allow prior overall pricing, as information which relates to

financial and legal planning and to the allocation of risks regarding funding and operation and

which is crucial for determining the final cost, can only be determined through negotiations

with the candidate contractors.

There are also cases where various elements, such as the party (the State or the

Private Sector entity) to assume the risk of force majeure, or the interest rate and

inflation risks which affect the operational cost of a work or supply, cannot be determined

beforehand and without prior negotiations with the candidate contractors

There are also other issues which the Contracting Authority is not in a position to determine

in advance in the tender documents, such as:

• The exact operating specifications of a project and the method to be used for monitoring

their application.

• The possibility (or lack thereof) of potential claims of the Contracting Authority resulting

from breaches of contract regarding the operation of the project, being offset against

Contractor claims regarding the construction or supply.

• The possibility (or lack thereof) of the Contracting Authority taking on direct contractual

commitments towards the contractor's funding agencies etc.

All of the above are factors that determine the cost of a project, while the option of

negotiation allows the specification of the most effective cost-to-benefit ratio for every risk

that the Contracting Authority assumes or transfers to the Contractor.

There are certain risks, such as adjustments of collective labour agreements at the

national and sectoral level, which, if assumed by the Contracting Authority, may result

in uncertainty as to the total price of the project even at the contract signature stage. This will

occur, for example, if the contractor's payment for maintenance and operation of a building is

agreed using a price-index adjustment based on the collective labour agreements.

From the above, it follows that prior overall pricing by the Contracting Authority is not

possible for some project contracts and, therefore, the use of the negotiated procedure is

justified.

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The case where the contract specifications cannot be established with sufficient

precision

This option refers to cases of service contracts whose nature, especially if it

involves intellectual services (compilation of special reports, opinions, project designs

etc.) or financial services (insurance, banking and investment services), is such that the

contract specifications cannot be established with sufficient precision to permit the award of

the contract by selecting the best tender according to the rules governing the open or

restricted procedure.

A typical example here are the loan agreements which Municipal Authorities intend to

conclude with banks for financing the implementation of works or the purchase of equipment.

In these cases, Municipalities may take advantage of the provisions of the law and address

the banking market in order to negotiate the terms of such loans.

The case of works performed solely for purposes of research, testing or development

This case refers to public works contracts for works which are performed solely for

purposes of research, testing or development of a project and not with the aim of

ensuring the project’s operation and maintenance or recovering research and development

costs.

An example here is the construction or extension of a research centre, where the

project’s construction and operation specifications are directly related to, affect or are

affected by, confidential information about the research conducted or to be conducted in that

centre. In such a case, even the contractor’s nationality may be a factor restricting selection.

To assist Contracting Authorities in documenting the fulfilment of the terms and

conditions justifying use of the negotiated procedure with publication of a contract

notice, a relevant Checklist is given in Annex 5-3.

5.2.2 Negotiated procedure without publication of a contract notice

Pursuant to the Community Directives and the national legislation, use of the negotiated

procedure without publication of a contract notice is justified in ten cases.

These cases are summarised in the table below:

FIELD OF APPLICATION No.

CASES JUSTIFYING USE OF THE NEGOTIATED PROCEDURE WITHOUT PUBLICATION OF A CONTRACT

NOTICE SUPPLIES SERVICES WORKS

1 The case of “lack” of tenders ��

2 The case where the contract may be awarded only to a particular economic operator ��

3 The case of “extreme urgency” ��

4 The case where the products involved are manufactured purely for the purpose of research, experiment, study or development

��

5 The case of additional deliveries by the original supplier ��

6 The case of supplies quoted and purchased on a commodity market ��

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FIELD OF APPLICATION No.

CASES JUSTIFYING USE OF THE NEGOTIATED PROCEDURE WITHOUT PUBLICATION OF A CONTRACT

NOTICE SUPPLIES SERVICES WORKS

7 The case of supplies being purchased on particularly advantageous terms ��

8 The case of contracts that follow a design contest ��

9 The case of additional works or services not included in the original contract

��

10 The case of new works and services consisting in the repetition of similar works or services of the original contract ��

The case of “lack” of tenders

This case refers to tender procedures for the award of public works contracts, public

supply contracts and public service contracts conducted using the open or restricted

procedure, in response to which no tenders or no suitable tenders or no applications have

been submitted. All these three sub-cases are considered as cases of “lack” of tenders.

In this case, the Contracting Authority may cancel the tender procedure with a relevant

advertisement in the OJEU and in the OGRC and, if it so wishes, repeat it using the

negotiated procedure without publication of a contract notice, insofar as the original terms

of the contract are not substantially altered (in what regards the definition of substantial

alteration, the discussion presented above in the case of irregular or unacceptable tenders

applies).

Tenders are considered unsuitable when their contents are not in agreement with the

terms and scope of the tender documents and thus do not meet the requirements of

the Contracting Authority as laid down in these documents. For this reason, submission of

such tenders is considered as lack of tenders. The table below lists some examples of

unsuitable tenders.

EXAMPLES OF UNSUITABLE TENDERS


Tenders made with reservations or tenders containing intentional or systematic errors.

Tenders made conditionally or containing conditions for counter-offers.

Tenders whose prices are demonstrably the product of collusion between the tenderers and are sheltered from competitive forces, or if more generally there are serious indications of collusion between the tenderers with the purpose of circumventing genuine competition or if, in the opinion of the Contracting Authority, there was not sufficient competition during the tendering procedure.

Financial offers that exceed the estimated budget of the Contracting Authority (when this budget is set as the ceiling in the tender documents, i.e. when negative reductions are not acceptable).

Abnormally low tenders that cannot be justified in writing by the tenderers following a request by the Contracting Authority.

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The case where the contract may be awarded only to a particular economic operator

This case refers to public works contracts, public supply contracts and public service

contracts which, for technical or artistic reasons, or for reasons connected with the protection

of exclusive rights, may be awarded only to a particular economic operator.

This particular case is extremely restrictive and is applied only in cases where

Contracting Authorities are able to demonstrate that the specific work, supply or

service may be implemented only by a particular economic operator.

The cases where this exception may be applied most safely are those where an

economic operator has the exclusive right to execute, supply or provide a particular

work, product or service.

Nevertheless, this exception does not apply in cases where the particular exclusive right has

also been granted to other economic operators, or may reasonably be obtained by other

economic operators through licensing

For example, a sculptor may have the exclusive right to repair or reconstruct a work of

art of his own, but he may not have the exclusive right to take pictures of it and

reproduce these pictures, if he has already granted this right also to other entities or persons.

A characteristic example is the case of a complaint filed with the European Court of

Justice for violation of the Community Directives in connection with the supply of

pharmaceutical products and specialities. The defendant (in this case, Spain) invoked the

exclusive right conferred to it under the national law regarding the purchase of

pharmaceutical products and specialities by the public hospitals within the social security

system, to justify the direct award of a contract for the supply of such products to

Farmaindustria, the national association of pharmaceutical companies. The Court pointed out

that the justification that the said products may be covered by exclusive rights is not

adequate, on the grounds that it is not sufficient for the pharmaceutical products and

specialities in question to be protected by exclusive rights, but they must also be capable of

being manufactured or delivered only by a particular supplier. Since this requirement is

satisfied only with respect to those products and specialities for which there is no competition

in the market, the grounds invoked cannot in any way justify general and indiscriminate

recourse to a single-tender procedure for all supplies of pharmaceutical products and

specialities (Judgement of 3 May 1994 in Case C-328/92 Commission v Spain [1994] ECR I-

1569, point 17).

The case of “extreme urgency”

This case refers to tender procedures for the award of public works contracts, public

supply contracts and public service contracts where, for reasons of extreme

urgency brought about by events unforeseeable by the Contracting Authority, the time

limits laid down by the other procedures cannot be complied with.

The circumstances invoked by the Contracting Authority to justify the occurrence of

extreme urgency must not in any event be attributable to the Contracting Authority.

Unforeseeable events are considered to be events transcending the normal bounds

of economic and social life (for example, earthquakes or flooding) and requiring

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immediate action for relief and assistance to those affected.

It should be noted that this case may only be invoked to justify putting out to tender the

works, supplies and services which are necessary for meeting and alleviating the immediate

needs which have resulted from the unforeseeable events, and not as a pretext to fulfil

additional needs.

As the practice of invoking occurrence of unforeseeable events is common among

Contracting Authorities, who use “single-tender procedures” to meet their needs and thus

circumvent the conventional procedures provided for by the Community Directives (open and

restricted procedure etc.), which impose specific selection and award constraints and specific

time limits, the Community law is particularly strict regarding the application and

interpretation of the corresponding provisions of the Directives.

The Contracting Authorities should bear in mind that the minimum time limits laid

down by both the Community Directives and the national transposition law for urgent

circumstances “due to unforeseeable events” may meet their requirements without the need

for recourse to the case of “extreme urgency” discussed here.

Furthermore, it should be taken into account that recourse to “extreme urgency” is

justified for actions which the Contracting Authority may carry out during a limited

period of time (shorter than the minimum time limits for urgent cases under the conventional

procedures).

For works, services and supplies required beyond this period of time, Contracting Authorities

have sufficient time in which to publish a contract notice and award the contract using the

conventional procedures (open or restricted etc.) (Case C-24/91 Commission v Spain, [1992]

ECR I-1989, where the European Court of Justice held the extreme urgency relied on by the

Spanish Government to be incompatible, because the time limits specified exceeded those

laid down by the Community Directives for cases of extreme urgency).

However, in the health sector for example, the Court judged that extreme urgency was

correctly invoked by hospitals to justify use of the negotiated procedure without publication of

a contract notice for the supply of pharmaceutical products, as an urgent need for a particular

pharmaceutical speciality may well arise in a hospital, and taking also into account the

freedom of doctors in these hospitals to prescribe the pharmaceutical products they consider

necessary. The Court however noted that this cannot justify the a priori systematic recourse

to private contracting for all supplies of pharmaceutical products and specialities to hospitals.

The case where the products involved are manufactured purely for the purpose of

research, experiment, study or development

This case refers only to tender procedures for the award of public supply contracts

where the involved products are manufactured purely for the purpose of research,

experimentation, study or development. This provision does not extend to quantity production

to establish commercial viability or to recover research and development costs.

Furthermore, this case does not cover the purchase of research or laboratory equipment (the

purchase of microscopes, personal computers etc.).


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The case of additional deliveries by the original supplier

This case too refers only to tender procedures for the award of public supply contracts

and concerns additional deliveries by the original supplier which are intended either

as a partial replacement of normal supplies or installations in use or as the extension of

existing supplies or installations where a change of supplier would oblige the Contracting

Authority to acquire material having different technical characteristics which would result in

incompatibility or disproportionate technical difficulties in operation and maintenance.

The length of such contracts as well as that of recurrent contracts may not, as a general rule,

exceed three years.

The case of supplies quoted and purchased on a commodity market


and concerns supplies quoted and purchased on a commodity market such as crude

oil, cotton, cereals etc.

The case of supplies purchased on particularly advantageous terms


and concerns the purchase of products on particularly advantageous terms, from

either a supplier who is definitively winding up its business activities, or from the receivers or

liquidators of a bankruptcy, a court settlement, or a similar procedure under national laws or

regulations.

The case where a contract follows a design contest

This case refers only to tender procedures for the award of public service contracts,

when the contract concerned follows a design contest and must, under the applicable

rules, be awarded to the successful candidate or to one of the successful candidates. In the

latter case, all successful candidates must be invited to participate in the negotiations. This

provision should be included in the original tender documents.

The case of additional works or services not included in the original contract

This case refers to tender procedures for the award of public works contracts and

public service contracts, and concerns additional works or services not included in the

approved design (in case of technical works) or in the original contract but which have,

through unforeseen circumstances, become necessary for the performance of the works or

services described in the original contract, on condition that the award is made to the

economic operator performing such works or services:

• When such additional works or services cannot be technically or economically separated

from the original contract without major inconvenience to the Contracting Authorities, or

• When such works or services, although separable from the performance of the original

contract, are strictly necessary for its completion.

The aggregate value of contracts awarded for additional works or services may not

exceed 50% of the amount of the original contract.


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It should be noted that in this case “additional works or services” due to

“unforeseen events” can be works and services that become necessary through

events or circumstances which did not exist prior to the original contract or which could

not be identified and included in the scope of the work/service of the original contract,

although applicable provisions were adhered to (e.g. in the development of the relevant

designs or in the conduct of the necessary investigations in the case of technical works), and

due care and diligence was applied in accordance with the rules of “workmanship and

science". These rules are related to the official (approved) regulations and specifications

currently applicable in the Republic of Cyprus as well as to the respective internationally

applicable regulations which form the scientific and technical foundations and practices

regarding the scope of the work or service.

If, for example, the quantity of earthworks (excavations or embankments) in a road

works project increases compared to that foreseen by the approved design as a result

of geotechnical problems during the construction stage, the Contracting Authority must prove

that, although the specifications for the geotechnical investigations were adhered to, the new

situation was unforeseeable. If, for example, the specifications required exploratory

boreholes to be drilled every 100m, but according to the design these were required every

200m, then the additional earthworks for the project cannot be justified as a result of

unforeseeable circumstances. If however the above specifications were adhered to and an

unforeseen soil subsidence takes place, then the additional earthworks are justified as

additional works.

It is pointed out that works or services concerning the extension of the physical scope

of the original contract or the improvement of its quality (e.g. by using materials of

better quality or methods that are not specified in the original tender documents) cannot in

any way be considered as additional works/services.

The designation of the above additional works or services as works/services made

necessary by unforeseeable circumstances must be justified by actual and detailed

information by the Contracting Authority. Insufficient justifications or vague statements

invoking the need for completion of the scope as defined in the original contracts are contrary

to the rules of Community law, which apply as national law in the Republic of Cyprus, and

may cause problems in the smooth progress of the works/services and particularly in their

financing by the Community Funds.

The case of new works or services consisting in the repetition of similar works or

services included in the original contract

This case too refers only to tender procedures for the award of public works contracts

and public service contracts, and concerns new works or services consisting in the

repetition of similar works or services entrusted to the economic operator to whom the same

Contracting Authorities awarded an original contract, provided that such works or services

are in conformity with a basic design for which the original contract was awarded according

to the open or restricted procedure.

As soon as the first project is put up for tender, the possible use of this procedure shall be

disclosed and the total estimated cost of subsequent works or services shall be taken into

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consideration by the Contracting Authorities when they apply the thresholds for public

contracts. This procedure may be used only during the three years following the conclusion

of the original contract.

In the case of public works contracts, for example, this procedure applies when a contract for

a series of recurrent works is put up for tender but only a part of these works are awarded

through the original contract (completed section), while the extension or completion of the

works (recurrent works) are awarded to the original contractor through a new contract on the

same or improved terms after negotiations.

Respectively, in the case of service contracts, this procedure applies when for example a

contract for Programme Management services for a particular Community Programme is put

up for tender but only a part of the contract is awarded, while the new contract refers to

similar services within this Programme which are performed on a recurring basis for the

Programme’s finalisation or completion.

To assist Contracting Authorities in documenting the fulfilment of the terms and

conditions justifying use of the negotiated procedure without publication of a contract

notice, a relevant Checklist is given in Annex 5-3.

5.3 HOW IS THE NEGOTIATED PROCEDURE CARRIED OUT?

5.3.1 Stages of the procedure

The main purpose of negotiations between the Contracting Authority and the economic

operators participating in the tender procedure is to negotiate the tenders – within a single

award procedure– with the aim to eventually permit the award of a contract.

As already mentioned in the beginning of this chapter, the Contracting Authorities negotiate

with the economic operators the tenders submitted by them, in order to adapt them to the

requirements and terms specified in the tender documents (Directive 2004/18/EC, article 30

and Law 12(Ι)/2006, Chapter IV, article 32, and Directive 2004/17/EC and Law 11(Ι)/2006,

respectively).

In practice this procedure involves a number of risks regarding the violation of the

principles and rules of national and Community laws on public contracts by the

Contracting Authority and its officials as well as by the economic operators, through their

actions.

The negotiated procedure includes several stages and individual steps, during which the

Contracting Authority invites, negotiates with, evaluates and selects the economic operator

whose tender meets its requirements.

The stages and steps of a typical negotiated procedure with publication of a contract notice

are presented in the next paragraphs, followed by a discussion of the differences in the case

of the negotiated procedure without publication of a contract notice.

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Possible stages and steps of the negotiated procedure with publication of a contract

notice

Although the responsibility to determine the stages of the procedure on a case by case basis

belongs to the Contracting Authority, the negotiated procedure is usually conducted in two

stages (as is also the case with the restricted procedure):

• The first stage refers to the invitation of requests to participate.

• The second stage refers to the invitation to negotiate.

First stage: Invitation of requests to participate

As is also the case in the restricted procedure, the negotiated procedure starts with the

publication of the contract notice, using the relevant standardised forms, in the Official

Journal of the European Union (OJEU) and the Official Gazette of the Republic of Cyprus

(OGRC) or, if the estimated value of the contract is below the thresholds of article 19 of Law

12(Ι)/2006, only in the OGRC.

After the contract notice has been published, the Contracting Authority releases to the

interested economic operators the “Request to Participate” documents, using which these

will submit their requests to participate in the negotiated procedure.

The Contracting Authority then selects the candidates to participate in the negotiations, using

the selection criteria which have been determined in advance.

The prequalification of economic operators is conducted exactly as in the respective

stage of the restricted procedure, the only difference being that the minimum number

of prequalified economic operators must be three (3), instead of five (5) in the restricted

procedure. In all cases, however, the number of candidates to be invited to negotiate must

be sufficient to ensure genuine competition.

This means that in the negotiated procedure (and in the competitive dialogue, which is

presented in Annex 5-1) the tender documents cannot provide that only two (2) candidates or

only one (1) candidate will be invited to negotiate.

The prequalification of the candidates to be invited to negotiate concludes the first stage of

the procedure.

Second stage: Invitation to negotiate

The second stage commences with the invitation which the Contracting Authority sends to

the prequalified economic operators, inviting them to submit proposals for negotiation. The

Contracting Authority must make sure that the terms which it intends to negotiate have been

included in the tender documents (negotiation documents).

In the negotiated procedure with publication of a contract notice (as is also the case in

the competitive dialogue), the Contracting Authorities invite a number of candidates

which is at least equal to the minimum number of candidates specified in advance. In the

event that the number of candidates meeting the selection criteria and the minimum levels is

less than the minimum number (e.g. less than 3 or only 1), the Contracting Authority may

proceed with the procedure by inviting the candidate(s) meeting the required capacity levels.

The Contracting Authority cannot include in the negotiation procedure other economic


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operators who have not submitted a request to participate or candidates who do not meet the

selection criteria.

The prequalified candidates submit to the Contracting Authority their proposals for

negotiation and the Contracting Authority, after examining them, invites the economic

operators to negotiate by means of a written invitation.

The negotiation starts with the submission of clarification questions about the contents of the

tender documents, and of comments on the draft contract. The Contracting Authority then

negotiates with the economic operators their proposals. During the negotiation, the

Contracting Authority shall ensure the equality of treatment of all participating economic

operators, and shall not provide information in a discriminatory manner which may give some

economic operators an advantage over others.

Once the negotiation has been concluded, the Contracting Authority examines and assesses

the comments submitted by the economic operators, and evaluates their proposals on the

basis of the results of the negotiation. At this point, the Contracting Authority may, at its

absolute discretion, modify the tender documents.

Depending on the extent of the modifications to be required, the Contracting Authority may

publish a “Modifications Document” for the tender documents, in order to ensure full

coverage of its requirements.

The Contracting Authority sends the Modifications Document to the prequalified economic

operators and invites them to submit their binding tenders.

If the Contracting Authority considers that further modifications to the tender documents are

required, it may issue a new "Modifications Document”. In this case, the Contracting

Authority may allow the submission by the economic operators of new comments on the

terms of the draft contract as this may have been modified, and so on.

Until the date of publication of the last "Modifications Document", the Contracting Authority

reserves the right to modify unilaterally the tender documents at its discretion and regardless

of the comments made by the economic operators.

It is very important to point out that the tender documents cannot be substantially

altered and, therefore, a "Modifications Document" cannot be published in the case of

negotiated procedures following the cancellation of an open or restricted procedure or of a

competitive dialogue in which either no tenders were submitted or the tenders submitted

were irregular or unacceptable, as their repetition using the negotiated procedure

presupposes that the original terms of the contact are not substantially altered (see above

§5.2.1, 1st case, and §5.2.2, 1st case).

Once the above procedure has been completed, it is followed by the steps below:

• Submission of binding tenders by the participants in the negotiation, on the basis of

the final tender documents.

• Evaluation of these tenders, and

• Award of the contract to the best tender, in accordance with the tender documents.

The above stages are identical to the respective stages of the restricted procedure.

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The award of the contract in the negotiated procedure takes place using as an award

criterion:

• The most economically advantageous tender, or

• Exclusively the lowest price.

This procedure leads to the appointment of the "Interim Contractor" (as opposed to the final

Contractor in the restricted procedure), with whom the Contracting Authority negotiates the

final terms of the contract, which cannot be substantially altered in relation with the original

terms specified in the tender documents. The finalisation of these documents involves the

provision of additions or clarifications in connection with submitted documents, updating the

formal supporting documents, providing guarantees, insurances etc.

A similar procedure is applied in cases where Contracting Authority opts to conduct the

negotiated procedure in successive stages, in order to reduce the number of economic

operators to participate in the negotiation. The negotiated procedure in successive stages

with a reduction of the number of participants is carried out by applying the award criteria

specified in the tender documents. Recourse to this option, together with the award criteria

which govern it, must be stated in the contract notice and in the tender documents. A

detailed description of this case is presented in paragraph 5.4.2.

The Figure below presents in detail the individual steps of the negotiated procedure

with publication of a contract notice: Icon1398.ico


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Figure 5-1: Individual steps of the negotiated procedure with publication of a contract notice

Stages and steps of the negotiated procedure without publication of a contract notice

The key differences in the stages and individual steps of this procedure, compared to

the negotiated procedure with publication of a contract notice, are the following:

• The invitation to the economic operators is not published but is sent to specific

economic operators who, in the opinion of the Contracting Authority, are in a position

to execute the work, offer the supply or provide the service.

• The first stage (“Invitation of Requests to Participate”) is usually omitted, and the

Contracting Authority invites the candidates which it has selected at its discretion, to

directly submit their proposals for negotiation. The first stage is omitted on the

grounds that the economic operators have been selected by the Contracting Authority

itself and, therefore, are presumed to meet the qualitative selection criteria.

Nevertheless, if the Contracting Authority has not sufficient knowledge of the situation

of the economic operators which it invites, then it should verify the fulfilment of the

qualitative selection criteria. The second stage ("Invitation to Negotiate") is organised

Negotiated procedure with publication of a contract notice

Publication of Contract Notice in the OJEU (if required) & in the Official Gazette of the Republic of Cyprus

Prequalification of Candidates to be invited to negotiate

Definition of procedures & Invitation to Negotiate

Tenders Negotiation Phase

Submission of Tenders by Prequalified Candidates

Selection of Interim Contractor

Finalisation of Interim Contractor’s Tender

Contract Signature


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in exactly the same steps as those of the negotiated procedure with publication of the

contract notice, the only difference being that if the first stage has been omitted, then

before the contract is signed the Contracting Authority verifies that the Interim

Contractor meets the qualitative selection criteria specified in the tender documents,

by requesting the Interim Contractor to provide additional information or clarifications

on the certificates and documents required by the invitation.

The Figure below presents in detail the individual steps of the negotiated procedure

without publication of a contract notice:

Figure 5-2: Individual steps of the negotiated procedure without publication of a contract

notice

Negotiated procedure without publication of a contract notice

Written invitation of the economic operators to negotiate

Submission of Tenders by the Economic Operators

Tenders Negotiation Phase

Selection of Interim Contractor

Finalisation of Interim Contractor’s Tender

Review of Formal Supporting Documents

Contract Signature

Option for prequalification of

the economic operators to be

invited to negotiate using selection

criteria

Determination of the number and capabilities of the Economic Operators to be invited to negotiate

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5.3.2 Tender documents

The tender documents for the negotiated procedure share the same structure and

organisation with those used in the restricted procedure. Thus, the model draft tender

documents given in Chapter 3 for the restricted procedure can be easily adapted to take

account of the particularities of the negotiated procedure.

The following paragraphs provide guidelines and instructions on how to make the appropriate

adaptations to the tender documents for each one of the two stages of the negotiated

procedure.

Stage of invitation of requests to participate

The Figure below presents the tender documents for the first stage of the negotiated

procedure.

TENDER DOCUMENTS

INVITATION OF REQUESTS TO PARTICIPATE (NEGOTIATED PROCEDURE)

Annex Ι

Invitation of requests to participate Request to Participate Template

SUBMISSION OF REQUESTS TO PARTICIPATE

BY CANDIDATE ECONOMIC OPERATORS

Request to participate

TENDER DOCUMENTS


Annex Ι


TENDER DOCUMENTS


Annex Ι








Figure 5-3: Tender documents for the first stage of the negotiated procedure

The tender documents for the first stage do not differ substantially from the respective

documents of the restricted procedure, as in both cases the purpose of the stage is to select

suitable economic operators who will be invited to submit their proposals for negotiation or

their tenders for evaluation, respectively.

The invitation of requests to participate contains, inter alia, the requirements for participation

in the negotiation, the minimum number of candidates to be invited to negotiate, the selection

criteria and a summary description of the contract scope.

Stage of invitation to negotiate

The Figure below presents the tender documents for the second stage of the

negotiated procedure.

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Instructions to Economic Operators

Part Α

Draft agreement and Special Conditions of Contract

Part Β

General Conditions of Contract

Annex Ι

Terms of Reference – Technical

Specifications

Annex ΙΙ

Templates for Forms

Appendix

TENDER DOCUMENTS

INVITATION TO NEGOTIATE

Modifications Document of the tender documents

MODIFICATIONS TO THE TENDER DOCUMENTS – INVITATION TO NEGOTIATE STAGE

(if required)

PROPOSALS OF PREQUALIFIED CANDIDATES

Invitation to negotiate


Part Α


Part Β


Annex Ι


Specifications

Annex ΙΙ

Templates for Forms

Appendix

TENDER DOCUMENTS



Part Α


Part Β


Annex Ι


Specifications

Annex ΙΙ

Templates for Forms

Appendix

TENDER DOCUMENTS




(if required)



(if required)





TENDERS OF PREQUALIFIED CANDIDATES

Technical Offer Financial Offer

CONTRACT

Agreement and Special Conditions of Contract


Annex Ι

Terms of Reference – Technical Specifications

Annex ΙΙ

Contractor’s Technical Offer

Contractor’s Financial Offer


Annex ΙΙI





CONTRACT



Annex Ι


Annex ΙΙ




Annex ΙΙI

CONTRACT



Annex Ι


Annex ΙΙ




Annex ΙΙI

Figure 5-4: Tender documents for the second stage of the negotiated procedure

The tender documents for the second stage of the negotiated procedure should

provide the following information, in addition to the information contained in the

respective documents for the restricted procedure:

• The terms of the tender documents which are, and those which are not, the subject of

the negotiation.

• The steps, method and schedule of the negotiation.


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5.3.3 Negotiation techniques

Contracting Authorities enjoy great flexibility in terms of the negotiation methods and

techniques which they wish to use during the negotiation. They must however ensure

that their every action or technique adheres to the principles of the EU Treaty and complies

with the provisions under the Community and the national law regarding this procedure.

The above-mentioned principles are discussed in detail in the “Code of Ethics in Public

Procurement” which accompanies this Guide. In what in particular regards the negotiated

procedure, the Code points out that "in case that the negotiated procedure is followed, the

negotiations should be conducted in a fair, structured, ethical and equitable manner” (Code,

par. 2.3, item 8, p. 15).

The table below provides guidelines to assist Contracting Authorities in their task during

the negotiation:

GUIDELINES FOR CONDUCTING THE NEGOTIATION

The various types of documents sent by the Contracting Authority to the economic operators participating in the negotiation must be dispatched in a way which will be clearly indicate:

• The sender’s data,

• The date of dispatch, and

• The subject of the document together with its attachments (written invitation to negotiate with proof of mailing etc.).

The Contracting Authority should determine the negotiation framework by specifying the subject, the issues related with it, and the agenda of the negotiations.

The Contracting Authority should determine an indicative schedule of the negotiation stages, which shall include the dates of the meetings to be held, the issues to be discussed, and the interim deliverables, if any, of the economic operators in the form of reports or proposals or comments on the tender documents. The same schedule should also include the dates on which the Contracting Authority shall provide its answers on the above, together with any other commitments of the Contracting Authority during the procedure, as well as the expiry date of the negotiation, which is a crucial element of the procedure. Although this schedule is indicative, the Contracting Authority must make every effort to adhere to it, as this reflects its ability to manage effectively the framework which it has laid down itself and, consequently, the tender procedure in its entirety.

The negotiation meetings should be minuted in detail and the minutes should be signed by all participants.

The results of the negotiations should be communicated in writing to all participants with proof of receipt.

In cases where the Contracting Authority negotiates with each economic operator separately, the other economic operators should be aware of this and should be notified of the results of every such negotiation held. The order of negotiations must be strictly observed in every negotiation cycle, and may be based on the order in which the requests to participate (if a contract notice was published) or the invitations to negotiate (if a contract notice was not published) were entered in the records of the Contracting Authority. In all cases, the economic operators must be aware of this order. During this negotiation, the Contracting Authority should not disclose to other economic operators data or information designated as confidential by a particular economic operator, especially when such data or information concerns technical or trade secrets or confidential aspects of that operator’s proposals.

In cases where the Contracting Authority negotiates simultaneously with more than one economic operators (concurrent negotiation), the economic operators should be notified beforehand of the

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GUIDELINES FOR CONDUCTING THE NEGOTIATION

negotiation framework, while the agenda of the discussions must be strictly observed. Upon completion of the procedure, all participants must be informed of the final decisions of the Contracting Authority.

The table below presents some basic negotiation techniques regarding the tender

documents, as an indicative example of a method which can be used in the

negotiations between the Contracting Authority and the economic operators, and which

conforms to the principles and provisions of the Community and the national law.

BASIC NEGOTIATION TECHNIQUES REGARDING THE TENDER DOCUMENTS

The Contracting Authority should include in the tender documents the terms which are, and those which are not, the subject of the negotiation.

The economic operators may submit questions in writing and may request clarifications.

The questions submitted by economic operators and the answers/clarifications of the Contracting Authority shall be communicated to all economic operators, without disclosing the data of the economic operator that submitted the question.

If an economic operator considers that a question submitted by it is confidential, it must indicate this by marking the question as “confidential” and must also justify the question’s confidential nature.

If the Contracting Authority considers, at its absolute discretion, that the question regards all economic operators, it shall communicate its view to the economic operator who submitted the question, and the latter shall have the option to withdraw it in writing.

If the economic operator does not withdraw the question, then this question and the respective answer of the Contracting Authority shall be communicated to all participants.

If however the Contracting Authority considers, at its absolute discretion, that the question is confidential, the answer shall be communicated only to the economic operator who submitted the question.

The economic operators may also submit comments on the terms of the draft contract.

The comments to be submitted shall be ordered and shall indicate clearly the article to which they refer. More in particular, any modifications proposed by each economic operator should be accompanied by the respective complete wording which is proposed. In all cases, the proposed modifications should be accompanied by a brief justification.

The application of the above techniques in a negotiation procedure, together with any other

techniques which the Contracting Authorities may adopt, requires the establishment of an

experienced negotiation mechanism. This mechanism forms part of the Contracting

Authority's Procurement Team, which has been presented in Chapter 2 of this Guide.

The negotiation commences with the submission of clarification questions about the content

of the tender documents and of comments on the draft contract.

The negotiation team may include:

• Administrative officials with experience in public procurement procedures and in

market research (in the case of public supply contracts).

• Legal experts with experience in the Community law on public procurement.

• Technicians with experience in self-financing projects (in the case of public works

contracts or public services contracts).

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• Economists with experience in structured funding.

• Depending on the size and complexity of the project, specialised external financial-

legal and technical consultants.

The above experts must have received training on the conduct of negotiations.

5.4 APPLICATION OF THE NEGOTIATED PROCEDURE

5.4.1 Negotiated procedure with one (1) economic operator

In many cases, such as for example in negotiated procedures without publication of a

contract notice, Contracting Authorities have to negotiate with only one economic operator of

their choice.

This may happen either because the particular case concerns only one economic operator

(for example, the 2nd case of the negotiated procedure without publication of a contract

notice, which concerns the award of the contract only to one economic operator; or the 5th,

9th and 10th cases of the same procedure, which concern the award of additional supplies

and of additional or new works or services under an original contract) or because only one

economic operator submitted a request to participate in response to a relevant invitation.

In these cases, the negotiation is conducted directly with the selected economic operator,

and concerns the operator’s technical offer as well as and his financial offer.

To this end, the Contracting Authority issues tender documents on the basis of which the

economic operator is invited to submit a tender. The provisions of the tender documents

depend on the complexity of the contract.

The Contracting Authority evaluates the tender submitted by the tenderer (technical offer and

financial offer) and, if it considers it to be disadvantageous, invites the tenderer to negotiate.

During this procedure, the Contracting Authority initially negotiates with the tenderer the

technical part of his tender and, if an agreement is reached, invites the tenderer to submit an

improved financial offer.

The Contracting Authority reserves the right to accept or reject this offer.

It is not appropriate for the Contracting Authority to negotiate the tenderer’s financial offer

with a view to forcing the tenderer to accept an additional reduction, as the latter will be

aware that if this does not happen, then he shall not be awarded the contract.

5.4.2 Two cases of a negotiated procedure

In this section, two cases of negotiated procedure are presented:

• The first case refers to the submission of irregular or unacceptable tenders in response to

an open or restricted procedure or a competitive dialogue (this is one of the cases of

paragraph 5.2.2). The Contracting Authority intends to repeat the tender procedure using

the negotiated procedure with publication of a contract notice, invoking the provisions of

the aforementioned paragraph, and


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• The second case is a case where the Contracting Authority cannot establish beforehand

the specifications of a public service contract with sufficient precision (this is also one of

the cases of paragraph 5.2.2).

Negotiated procedure with publication of a contract notice following the submission of

irregular or unacceptable tenders

This case refers to the submission of irregular or unacceptable tenders in response to

an open or restricted procedure or a competitive dialogue.

In tender procedures for the award of public works contracts, public supply contracts and

public service contracts, there may be cases of irregular or unacceptable tenders being

submitted by economic operators. In such cases, Contracting Authorities may cancel the

previous tender procedure and repeat it using the negotiated procedure with publication of a

contract notice. This option is only possible insofar as the original terms of the contract are

not substantially altered.

The new procedure is usually a two-stage procedure (consisting of the stage of invitation of

requests to participate, and of the stage of submission of tenders which also includes the

invitation to negotiate).

The Contracting Authority publishes an invitation of requests to participate, inviting interested

economic operators to participate in the negotiation. It then proceeds to select the economic

operators with whom it shall negotiate their tenders. This selection (prequalification) is based

on the selection criteria described in the invitation of requests to participate.

In the invitation to negotiate, the Contracting Authority sets the negotiation framework and

specifies the elements of the economic operators’ tenders which may be the subject of

negotiations.

The tenders are prepared on the basis of the tender documents for the negotiated procedure,

whose terms cannot be substantially different from those of the respective tender documents

for the previous tender procedure.

In these cases, the financial offers of the participants in the negotiation are not subject to

negotiations, but are usually prepared and submitted separately, in a sealed envelope,

during the stage of submission of binding tenders which follows after conclusion of the

negotiation.

During the negotiation, the Contracting Authority and the economic operators negotiate the

contents of the technical offers in order to adapt them to the specifications and terms of the

tender documents and to the terms of the contract, if there are deviations from them.

Once the negotiation is concluded, the Contracting Authority invites the economic operators

who participated to submit their binding tenders (technical offers and financial offers), which

must be adapted to the requirements of the tender documents as these have been modified

as a result of the negotiation procedure.

The Contracting Authority then evaluates these tenders on the basis of the award criteria as

predetermined in the tender documents, and appoints the Interim Contractor. The

Contracting Authority negotiates with the latter the final terms of the contract, which cannot

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be substantially different from those provided for in the tender documents, and the procedure

is concluded with the signature of the relevant contract.

In the present case, which refers to the first condition under paragraph 5.2.1, the Contracting

Authority (as also mentioned in the respective paragraph) may not publish a contract notice if

it includes in the negotiations all economic operators who meet the qualitative selection

criteria and who, during the previous open or restricted procedure or competitive dialogue,

have submitted tenders complying with the formal requirements (submission of tender

guarantee, submission of tenders within the specified time limit, completeness of the tender

envelope etc.) of the contract award procedure.

Negotiated procedure with publication of a contract notice where prior establishment

of the specifications of a public service contract is not possible

This case refers mainly to the services in category 6 Annex ΙΙΑ of Community Directive

2004/18 and of Law 12(Ι)/2006 of the Republic of Cyprus (financial services including

insurance services, banking and investment services etc.), but also to other intellectual

services generally.

In the case of these services, when the Contracting Authority cannot establish with sufficient

precision its specifications and requirements in order to award a service contract using the

open or restricted procedure, then it may use the negotiated procedure to select the best

tender.

The negotiated procedure in this case may be carried out as follows.

The Contracting Authority publishes an invitation of requests to participate, in which it defines

the objectives it wishes to accomplish, its key requirements and needs, the selection criteria

and the basic criteria for the award of the contract.

Within this framework, the Contracting Authority has two options:

• To provide, in the invitation to participate, for the submission only of the documents

regarding the personal situation of the candidates and of the information about their

technical and financial capacity. The selection criteria must be appropriate and must

be related to the scope of the particular contract.

• To provide, in the invitation to participate, for the submission, in addition to the above

documents and information, of a “draft solution”, i.e. a preliminary description of the

solution which the candidate intends to propose in response to the Contracting

Authority's requirements and criteria. The economic operators may also be invited to

supply an estimate of the cost for the implementation of their proposed draft solution.

After the requests for participation are received, the Contracting Authority proceeds in both

cases to the selection of the economic operators to participate in the negotiation.

The selection (prequalification) is made on the basis of the predetermined selection criteria

(technical and financial capacity), and is preceded by the usual verification of the information

concerning the personal situation of the candidates. Pursuant to the Community Directives

and the national law, the minimum number of candidates to qualify for participation in the

negotiation cannot be less than three (3) (provided that the number of candidates is

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sufficient). In all cases, the number of candidates to be invited must be sufficient to ensure

genuine competition.

It is also possible to provide for a subsequent optional stage, in which the Contracting

Authority, after the prequalification of candidates on the basis of the selection criteria

specified in the invitation, may request prequalified candidates to submit a “draft solution”

which can serve as the basis for the negotiation to follow.

In all cases, the Contracting Authority shall then enter into negotiations with the prequalified

economic operators, for the purpose of examining the best way in which its needs may be

covered.

Once the negotiation is concluded, the Contracting Authority, taking into consideration the

proposed solutions and the results of the negotiation with the participants, prepares the

tender documents for the invitation to tender.

The Contracting Authority invites the participants to submit their tenders on the basis of the

above tender documents.

The tenders are evaluated on the basis of the award criteria, and the contract is awarded,

without any possibility of further negotiation, either to the most economically advantageous

tender or to the tender with the lowest price.

This procedure is a typical and simple negotiated procedure that follows the stages and

individual steps presented in paragraph 5.3.1.

It should be pointed out that the above refer mainly to the negotiated procedure with

publication of a contract notice. However, they can also be applied to the negotiated

procedure without publication of a contract notice. In the latter case, the Contracting

Authorities are more flexible in their negotiations with the economic operators: for example,

they may examine the candidate contractor's suitability (personal situation and technical and

financial capacity, which are the qualitative selection criteria), before the signature of the

relevant contract.

5.4.3 Negotiated procedures with reduction of the number of economic

operators

Pursuant to the Community law and the national transposition law, the Contracting

Authority may gradually reduce the number of economic operators which shall be

invited to submit their final tenders [Directive 2004/18, recital 41, and Law 12(Ι)/2006,

Chapter IV, paragraph 31(4) & paragraph 32(4)].

The gradual reduction of the number of economic operators to be invited to submit

their final tenders is usually applied:

• When “prior overall pricing” is not possible (paragraph 5.2.1) in a negotiated procedure

with publication of a contract notice,

• In extremely complex contracts in a competitive dialogue, examined in Annex 5-1, and

• In Concessions and Public-Private Partnerships, examined Annex 5-2.


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In these cases, the Contracting Authority may gradually reduce the number of candidates in

successive stages of the procedure, if it estimates that the number of the interested parties

will be extremely high, a situation which would lead to a complex, time-consuming and costly

negotiation procedure with an increased likelihood of appeals.

The Contracting Authority must however always bear in mind that, pursuant to the

Community Directives and the national transposition law, the minimum number of candidates

to be invited to negotiate cannot be less than three (3).

The Contracting Authority shall indicate in the tender documents the minimum number

of candidates participating in the procedure, taking into account the principles of

equality of treatment and of transparency throughout the negotiated procedure and until the

award of the contract.

The procedure may be carried out in four successive stages:

First stage: Invitation of requests to participate

Second stage: Initial or preliminary invitation to negotiate

Third stage: Final invitation to negotiate

Fourth stage: Submission of binding tenders

First phase: Invitation of requests to participate

In this stage, the Contracting Authority publishes a contract notice for a negotiated procedure

and decides, for example, to select 5 to 7 candidates with whom to enter into an initial

negotiation.

This selection (prequalification) is carried out, as above, on the basis of the predetermined

objective selection criteria (technical and financial capacity) and after the usual verification of

the information concerning the personal situation of the candidates. In these criteria the

Contracting Authority may also include criteria relating to the evaluation of "draft solutions",

should the submission of draft solutions be requested at this stage.

The objective criteria mentioned above do not necessarily imply the application of weightings

(Directive 2004/18/EC, recital 40). Therefore, they do not preclude them. Consequently, the

Contracting Authority may include in the “Contract Notice” and in the “Invitation of Requests

to Participate” weighted prequalification criteria, and associate these directly to the technical

and financial capacity of the participants and to the "draft solution" whose submission may be

requested at this stage.

Second stage: Initial or preliminary invitation to negotiate

In the next stage, the Contracting Authority, taking also in consideration the proposed

solutions, and based on the “draft solution”, prepares an “Initial or Preliminary Invitation to

Negotiate”.

This invitation includes the draft terms for the submission of tenders and the draft terms of

the contract.


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The Contracting Authority shall hold a consultation on this invitation with the prequalified

economic operators, who may submit questions or comments.

The “Initial or Preliminary Invitation to Negotiate” is an invitation which may serve as

intermediate stage between the 1st and 2nd stage of the negotiated procedure described in

the paragraph 5.3.1 above.

Through the “Initial or Preliminary Invitation to Negotiate”, the Contracting Authority aims to:

• Specify in the tender documents the way in which its needs and requirements could be

met, as well as the scope of the project, from the early stages of the negotiation with the

economic operators, and at the same time

• Reduce the number of economic operators who will continue to participate in the

negotiation, as this is procedure is a complex and costly one, especially for the

participating economic operators.

Based on the results of the negotiation, the Contracting Authority prepares the documents for

the submission of tenders, and invites the prequalified economic operators to submit their

tenders.

During the procedure for submission of tenders by the economic operators, the Contracting

Authority may include again a new stage in order to reduce the number of participants from

5-7 to three (3).

This reduction should be made using the award criteria, which must be described in

the tender documents for the submission of tenders. These award criteria may be

weighted. If weighting is not possible for demonstrable reasons, the Contracting Authority

shall indicate in the relevant contract notice the criteria in descending order of importance

(Directive 2004/18/EC, Article 53, §2, and Law 12(Ι)2006, Article 50, §4, page 71).

For example, this stage may only involve the submission of technical offers at a specific level

of detail (e.g. preliminary project designs, specific commitments regarding financing of the

project, and acceptance by the economic operators of the basic terms of the contract).

Third stage: Final invitation to negotiate

Based on the negotiation completed up to this point, the Contracting Authority may prepare

the modified tender documents, which should under no circumstances alter the non-

negotiable terms of the tender procedure as determined in the tender documents, and may

use these to proceed to the “Final Invitation to Negotiate”, whereby the three (3) participants

shall be invited to submit their tenders.

During the procedure for submission of these tenders, the Contracting Authority may include

another stage in order to reduce the number of participants from three (3) to two (2).

This reduction stage too must be described in the tender documents as above, in such a way

as to ensure adherence to the principles of equality of treatment and of transparency during

the procedure.

For example, this stage may involve only the submission of technical offers at a more

detailed level (e.g. final project designs, more strict commitments regarding financing of the

project, acceptance of the terms of the contract).


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The Contracting Authority then negotiates with the remaining economic operators their

tenders, in order to clarify any ambiguities or gaps in their technical offers and commit the

participants to the terms of the contract, while ensuring that these clarifications or additions

do not in any way violate the terms of the tender documents based on which these economic

operators participate in the procedure This negotiation procedure is concluded with the

selection of two economic operators on the basis of the predetermined award criteria.

Fourth stage: Submission of binding tenders

The two economic operators that participate in the procedure shall then submit their binding

tenders. These tenders are evaluated by the Contracting Authority and, based on this

evaluation, the "Interim Contractor" is appointed, using as award criterion the most

economically advantageous tender or exclusively the lowest price.

The Contracting Authority negotiates and finalises the contract with the Interim Contractor

without substantially altering or modifying the contract and, thus, violating the terms of the

tender documents.

The need to gradually reduce the number of participating economic operators which is

imposed by the above procedure is dictated by the complexity of the respective cases, the

high participation costs for the economic operators, and the market’s behaviour, response

and commitment regarding such contracts (negative behaviour of financial institutions and

banks regarding specific commitments contained in the contracts etc.). The gradual reduction

of participants aims to resolve these problems and enhance the reliability of the Contracting

Authority in terms of its capability to achieve its objective, which is to award the contract

successfully.

The negotiation steps described above offer several alternatives, ranging from

the simple to the complex, which Contracting Authorities may adopt. Before

determining the stages of the procedure, due consideration must be given to a

number of parameters, such as the complexity of a contract.

It should be noted that, according to the case-law of the European Court of Justice,

such dialogues, consultations and negotiations are not permitted under the existing

open and restricted procedures.

5.5 GENERAL REFERENCE TO THE NEGOTIATED PROCEDURE FOR PUBLIC

CONTRACTS IN THE WATER, ENERGY, TRANSPORT AND POSTAL SERVICES

SECTORS (DIRECTIVE 2004/17/EC & LAW 11(Ι)2006)

In the following paragraphs, a general reference is made (in the form of tables) to the

negotiated procedure for public contracts awarded in the Water, Energy, Transport and

Postal Services Sectors, pursuant to the provisions of Directive 2004/17/EC and Law

11(Ι)2006.

In the Water, Energy, Transport and Postal Services Sectors, Contracting Entities may award

contracts:

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• Using the negotiated procedure with publication of a contract notice, at their

absolute discretion,

• Using the procedure without publication of a contract notice restrictively and in

specific cases, according to their reasoned opinion.

"Negotiated procedure is the procedure whereby Contracting Entities consult the economic

operators of their choice and negotiate the terms of the contract with one or more of

these" (Community Directive 2004/17/EC and Law 11(Ι)/2006 of the Republic of Cyprus).

During the negotiated procedure the Contracting Entities negotiate with the tenderers the

tenders submitted by them, in order to adapt them to the requirements which have been set

out in the tender documents and to seek out the best tender, in exactly the same way as the

one described in the previous Sections of this Chapter for the respective negotiated

procedure under Law 12 (Ι) 2006.

Pursuant to the national legislation, there are eleven cases justifying the use of a procedure

without publication of a contract notice.

These cases are summarised in the following table:

FIELD OF APPLICATION

No.

CASES JUSTIFYING USE OF A PROCEDURE WITHOUT PUBLICATION OF A CONTRACT NOTICE IN THE WATER, ENERGY, TRANSPORT AND POSTAL SERVICES SECTORS

(DIRECTIVE 2004/17/EC & LAW 11(Ι)/2006, article 38, paragraph 3a) SUPPLIES SERVICES WORKS

a

When no tenders or suitable tenders or no applications have been submitted in response to a procedure with a prior tender procedure, provided that the initial terms of the contract are not substantially altered

��

b.

Where a contract is purely for the purpose of research, experiment, study or development, and not for the purpose of securing a profit or of recovering research and development costs, and insofar as the award of such contract does not prejudice the competitive award of subsequent contracts with do seek, in particular, those ends

��

c

When, for technical or artistic reasons, or for reasons connected with the protection of exclusive rights, the contract may be awarded only to a particular economic operator

��

d In the case of "extreme urgency" brought by "unforeseeable events"

��

e In the case of additional deliveries by the original supplier ��

f In the case of additional works or services not included in the original contract

��

g In the case of new works consisting in the repetition of similar works or services of the original contract

��

h In the case of supplies quoted and purchased on a commodity market

��

i In the case of contracts awarded on the basis of a framework agreement

��

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FIELD OF APPLICATION

No.

CASES JUSTIFYING USE OF A PROCEDURE WITHOUT PUBLICATION OF A CONTRACT NOTICE IN THE WATER, ENERGY, TRANSPORT AND POSTAL SERVICES SECTORS

(DIRECTIVE 2004/17/EC & LAW 11(Ι)/2006, article 38, paragraph 3a) SUPPLIES SERVICES WORKS

j

In the case of “bargain purchases”, where it is possible to procure supplies by taking advantage of a particularly advantageous opportunity available for a very short time at a price considerably lower than normal market prices

��

k In the case of contracts that follow a design contest ��

The above cases are codified in the following tables:

Law 11(Ι)/2006, Chapter V, Article 38, §3, (a)

When no tenders or suitable tenders or no applications have been submitted in

response to a procedure with a prior tender procedure, provided that the initial terms

of the contract are not substantially altered

Tenders are considered unsuitable when their contents are not in agreement with the

contract scope as this is described in the tender documents, and thus do not meet the

requirements of the Contracting Entity as laid down in these documents.

EXAMPLES OF UNSUITABLE TENDERS


Tenders made with reservations or tenders containing intentional or systematic errors.

Tenders made conditionally or containing conditions for counter-offers.

Tenders whose prices are demonstrably the product of collusion between the tenderers and are sheltered from competitive forces, or if more generally there are serious indications of collusion between the tenderers with the purpose of circumventing genuine competition or if, in the opinion of the Contracting Entity, there was not sufficient competition during the tendering procedure.

Financial offers that exceed the estimated budget of the Contracting Entity (when this budget is set as the ceiling in the tender documents, i.e. when negative reductions are not acceptable).

Abnormally low tenders that cannot be justified in writing by the tenderers following a request by the Contracting Entity.

EXAMPLES OF LACK OF TENDERS

When no tender is submitted.

Tenders not submitted within the specified time limit.

Tenders which are irrelevant to the terms of the tender documents.

EXAMPLES OF LACK OF TENDERS

When the requests for participation or negotiation of all interested parties are found, during their evaluation, not to meet the requirements of the qualitative criteria (e.g. failure to submit a certificate or document regarding the tenderer’s personal situation, thus making it impossible to obtain additional


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information or clarifications).

SUBSTANTIAL ALTERATION OF THE ORIGINAL TERMS OF THE CONTRACT

Every change that may violate a specific principle of community law, especially the principles of free and undistorted competition, of equality of treatment of the tenderers, and above all the principle of ensuring the effectiveness of the Community Directives.

Changes in the technical specifications.

Changes in the contract financing method or to the payment of the contractor.

Changes in the contract schedule.

Changes in the conditions for the acceptance of the deliverables under the contract.

Changes in the construction techniques of a project.

Changes in the price. For example, an increase of the pre-estimated value of the original contract, even if such increase does not exceed 10% (Judgment of 13.01.05 in Case C-84/03 Commission v Spain, not yet published, point 47 and ff.).

Law 11(Ι)/2006, Chapter V, Article 38, §3, (b)

Where a contract is purely for the purpose of research, experiment, study or

development

CASES WHERE A CONTRACT IS AWARDED PURELY FOR THE PURPOSE OF RESEARCH - EXPERIMENT - STUDY or DEVELOPMENT or FOR RECOVERING

RESEARCH and DEVELOPMENT COSTS

When a work, service or supply is performed for the first time purely for the purpose of research, experiment, study or development (R&D).

When a work, service or supply as above is performed for the purpose of securing a profit (e.g. a product manufactured solely for the purpose of research).

When a work, service or supply as above is not performed for the purpose of securing a profit or of recovering research and development costs, and insofar as the award of such contract does not prejudice the competitive award of subsequent contracts with do seek, in particular, those ends (e.g. manufacture of a product in quantities that do not secure its commercial viability or for the purpose of selling it in order to recover research and development costs or for meet the costs of purchasing capital equipment for experimental or research laboratories).

Law 11(Ι)/2006, Chapter V, Article 38, §3, (c)

The case when, for technical or artistic reasons, or for reasons connected with the

protection of exclusive rights, the contract may be awarded only to a particular

economic operator

Law 11(Ι)/2006, Chapter V, Article 38, §3, (d)

The case of “extreme urgency” brought about by “unforeseeable events”

CASES OF EXTREME URGENCY DUE TO UNFORESEEABLE EVENTS


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When for reasons of extreme urgency brought about by events unforeseeable by the Contracting Entity, the time limits laid down for the open, restricted and negotiated procedures cannot be adhered to.

Unforeseeable events are considered to be events transcending the normal bounds of economic and social life (for example, earthquakes or flooding) and requiring immediate action for relief and

assistance to those affected.

This case refers only to works, supplies or services which are necessary for meeting and alleviating the immediate needs which have resulted from the unforeseeable events.

Law 11(Ι)/2006, Chapter V, Article 38, §3, (e)

The case of additional deliveries by the original supplier

THE CASE OF ADDITIONAL DELIVERIES BY THE ORIGINAL SUPPLIER

This case refers to additional deliveries by the original supplier which are intended:

− either as a partial replacement of normal supplies,

− or installations in use,

− or as the extension of existing supplies or installations,

where a change of supplier would oblige the Contracting Entity to acquire material having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance.

Law 11(Ι)/2006, Chapter V, Article 38, §3, (f)

The case of additional works or services not included in the original contract

CASES OF ADDITIONAL WORKS or SERVICES NOT INCLUDED IN THE ORIGINAL CONTRACT WHICH CAN NOT BE FORESEEN

Additional works or services that cannot be technically or economically separated from the original contract without great inconvenience to the Contracting Entity.

Additional works or services which, although separable from the performance of the original contract, are strictly necessary for its completion.

“Unforeseen circumstances” are considered to be those due to events or circumstances which could not be identified and included in the scope of the original contract, although the necessary investigations were conducted and the necessary designs were developed, and due care and diligence was applied in accordance with the rules of “workmanship and science", which include the official (approved) regulations and specifications for works and services in the Republic of Cyprus or in the European Union.

The Contracting Entity must provide actual and detailed justification of the above.

Law 11(Ι)/2006, Chapter V, Article 38, §3, (g)

The case of new works consisting in the repetition of similar works of the original

contract


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CASES OF NEW WORKS CONSISTING IN THE REPETITION OF SIMILAR WORKS OF THE ORIGINAL CONTRACT

This case refers to works or services consisting in the repetition of similar works or services awarded to the contractor to whom the same Contracting Entities awarded an earlier contract through a tender procedure, provided that:

− such works are in conformity with the design for the original contract,

− the tender documents for the original contract provide that the award of such works may be made to the original contractor on terms which are the same with those of the original contract,

− and that the total budget of the works has been taken into consideration in putting out to tender the original contract in accordance with the provisions of the law (thresholds).

Law 11(Ι)/2006, Chapter V, Article 38, §3, (g)

The case of supplies quoted and purchased on a commodity market

THE CASE OF SUPPLIES QUOTED AND PURCHASED ON A COMMODITY MARKET

This case refers to supplies quoted and purchased on a commodity market (crude oil, coal etc.)

Law 11(Ι)/2006, Chapter V, Article 38, §3, (h)

Contracts awarded on the basis of a framework agreement

THE CASE OF CONTRACTS AWARDED ON THE BASIS OF A FRAMEWORK AGREEMENT

When Contracting Entities have already awarded a framework agreement, they may award further contracts on the basis of that framework agreement.

A "framework agreement" is an agreement between one or more Contracting Entities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantities envisaged.

Law 11(Ι)/2006, Chapter V, Article 38, §3, (k)

The case of “bargain purchases”

THE CASE OF “BARGAIN PURCHASES”

This case refers to “bargain purchases”, where it is possible to procure supplies by taking advantage of a particularly advantageous opportunity available for a very short time at a price considerably lower than normal market prices.

It concerns supplies purchased on particularly advantageous terms:

− either from a supplier who is definitively winding up its business activities,

− or from the receivers or liquidators of a bankruptcy, a court settlement, or a similar procedure under national laws or regulations.


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Law 11(Ι)/2006, Chapter V, Article 38, §3, (l)

The case of a design contest

THE CASE OF CONTRACTS FOLLOWING A DESIGN CONTEST

This case refers to designs (services), when the contract concerned is part of the follow-up to a design contest organised in accordance with the provisions of the Law and must, in accordance with the applicable rules, be awarded to the winner or to one of the winners of that contest.

In the latter case, all the winners should be invited to participate in the negotiations. This provision should be included in the documents of the original design contest.

For all the above cases, the steps of the procedure for the award of the respective contracts

are identical to the steps of the negotiated procedures with one or more economic operators,

as described in the previous paragraphs.

During the procedure for the prequalification of economic operators, the Contracting Entities

must apply, inter alia, the principles of the European Union Treaty.

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