The Complaints Board for Public Procurement has considered a case where Aalborg University (AAU) had established a dynamic purchasing system for the purchase of furniture for the university. AAU held a mini tender for furniture and chose to award the contract to Paustian2gether ApS (P2G) based on the best price-quality ratio.
Holmris B8 A/S (Holmris) filed a complaint claiming that several products in P2G's offer did not meet the minimum requirements. AAU acknowledged that certain minimum requirements were not met, but they also found that Holmris' own offer was not compliant.
The Complaints Board found that AAU had already acknowledged the breach of the minimum requirements and therefore annulled the award of the contract. However, as this was a dynamic purchasing system and no voluntary standstill period had been held, the contract could not be declared ineffective. Instead, a financial penalty of DKK 190,000 was imposed.
CLEMENS notes:
This ruling is interesting as it is one of the few rulings on dynamic purchasing systems and the first to address the ineffectiveness sanction in this context. It emphasizes the importance of paying attention to the standstill period and proper enforcement of minimum requirements in dynamic purchasing systems. Furthermore, it points out that even small violations of minimum requirements can have a significant impact and warns against setting only mandatory minimum requirements. Finally, it mentions that the financial penalty was set at 4% of the contract value, reflecting the limited value of the contract and the execution of the tender.
Learn more about dynamic purchasing systems and minimum requirements management.
Dynamic purchasing systems can be an effective way to manage public procurement, but it's important to know the minimum requirements to avoid complaints and sanctions. A recent complaint case at the Complaints Board for Public Procurement highlights this issue. In this article, we will review what dynamic purchasing systems are, what minimum requirements entail and discuss the specific case of non-compliance with these requirements.
What are dynamic purchasing systems?
Dynamic purchasing systems are a type of electronic tendering that allows new suppliers to be added to the system as they become suitable. The system is generally available and open to all interested applicants. Minimum requirements must be met by all potential suppliers, and any requirements should be carefully worded and include only mandatory requirements to avoid complaints due to changes to basic elements.
Definition and purpose
A dynamic purchasing system is an electronic procurement platform that enables public companies to purchase goods and services from multiple suppliers over an extended period of time. Dynamic purchasing systems are used to increase competition and efficiency in public procurement processes.
Generally available dynamic purchasing systems can be an attractive choice for public companies as they provide access to a larger number of suppliers while the process is often more flexible than traditional tendering procedures. In order to use a dynamic purchasing system, the public company must meet certain requirements: they must be considered suitable as a contract partner, have documented procedures in place regarding compliance with minimum requirements and have clear criteria for awarding the contracts.
Here are some requirements for using dynamic purchasing arrangements:
- An exact description of the goods or services
- Compliance with minimum requirements
- Clear criteria for evaluation and selection
- Update on changes in prices or services from suppliers
Pros and cons
The benefits of using dynamic purchasing systems are that they allow for a more flexible and fast-paced approach to procurement. This makes it easier for both businesses and public institutions to find suitable products and services. The generally accessible system also increases competition among suppliers, which can lead to better prices.
Disadvantages of using dynamic purchasing systems include the risk of minimum requirement violations, as demonstrated in the AAU case (see below). If the minimum requirements are not clearly formulated or adhered to, complaints or changes to fundamental elements of the contract may occur. In addition, dynamic purchasing systems often require more time and resources in the initial application process compared to traditional procurement processes. The difference in handling minimum requirements between traditional tendering and dynamic purchasing systems must be carefully considered before implementing these systems.
What are minimum requirements?
When using dynamic purchasing systems, it is important to pay attention to the minimum requirements. These requirements must be carefully formulated and only contain mandatory requirements. Failure to meet the minimum requirements can constitute changes to fundamental elements of the contract. It is also important to keep in mind that awarding a contract to an unqualified bidder will typically lead to ineffectiveness of the contract when using dynamic purchasing systems.
Definition and purpose
Dynamic purchasing systems are a type of electronic platform that allows public authorities to make repetitive purchases of standard products and services from pre-approved suppliers. The purpose of using dynamic purchasing systems in the procurement process is to achieve greater flexibility and faster access to the market, while ensuring compliance with applicable public procurement rules. The use of dynamic purchasing systems can have both advantages and disadvantages, so it is important to carefully consider their use.
Some benefits of using dynamic purchasing systems include:
- Faster access to the market
- More efficient use of resources
- Greater competition between suppliers
Some disadvantages of using these systems include:
- Lack of flexibility in the formulation process
- Challenges in managing and fulfilling the minimum requirements
It's important to keep these aspects in mind when deciding whether or not to use dynamic purchasing systems.
How should minimum requirements be formulated?
The minimum requirements should be formulated clearly and precisely so that there is no doubt as to which requirements applicants must meet. In addition, it is important to ensure that the minimum requirements only include mandatory requirements.
Here are some examples of the different types of minimum requirements:
Requirements for the applicant's economic and financial capacity:
- Shareholders' equity
- Turnover
- Rating or credit rating
Requirements for the applicant's technical capacity and professional competencies:
- Experience with specific types of projects or tasks
- Education or certifications in relevant field
- Availability of necessary resources (e.g. staff)
Requirements for the applicant's experience from similar tasks or projects:
- References from previous work/projects
- Documentation of successful completion of previous projects/assignments
Once you have determined these requirement elements, you can create a checklist of the minimum requirements in the tender. The checklist will help keep track of all requirement units when evaluating bids received in dynamic purchasing systems.
Complaint about non-compliance with minimum requirements
In the case of non-compliance with minimum requirements when using dynamic purchasing systems, financial penalties can be imposed. This was confirmed in a recent complaint case handled by the Public Procurement Complaints Board, where a contract was canceled due to the nature of the system. It is important to formulate the minimum requirements carefully and only include mandatory requirements to avoid possible complaints or changes to the tender.
Concrete example with Aalborg University
AAU established a dynamic purchasing system for furniture procurement with the award criterion "best price-quality ratio". Holmris B8 A/S (Holmris) and Paustian2gether ApS (P2G) both submitted tenders, but P2G was awarded the contract despite not meeting the minimum requirements. The Complaints Board for Public Procurement annulled the award of the contract due to the breach of the minimum requirements and imposed a financial penalty of DKK 190,000 as it was a dynamic purchasing system with no standstill period at the time of award.
This shows the importance of formulating minimum requirements carefully so that only mandatory requirements are included. Violation can lead to complaints or modification of basic elements, as well as penalties determined by the value of the contract and the procurement area surrounding the case, as in AAU's example.
Failure to meet minimum requirements can result in financial sanctions, such as the one imposed in Aalborg University's case. There are different types of sanctions, including cancellation of the contract or a payment sanction as in the case of AAU.
To avoid breaching the minimum requirements, procurement officers should ensure that tenderers' documentation is thoroughly examined and verified. If a complaint is suspected, respond quickly and cooperatively with the Public Procurement Complaints Board to handle the situation in the best possible way.
Where can I find more information about dynamic purchasing systems and minimum requirements management?
More information on dynamic purchasing systems and minimum requirements management can be found on the website of the Danish Competition and Consumer Authority, where there are guides and information on rules and practices in this area. In addition, you can also contact your own company's legal department or an external Attorney with expertise in procurement law for further advice and guidance. It is important to be thoroughly informed and have a good understanding of the rules and practices when participating in tenders, including dynamic purchasing systems.
Who oversees procurement rules?
If you wish to complain that a contracting authority has not complied with the procurement rules, you must submit your complaint to the Danish Complaints Board for Public Procurement. You can find more information about the Complaints Board for Public Procurement on their website.
In addition, the Danish Competition and Consumer Authority is responsible for carrying out preparatory work for legislation and acting as a supervisory authority. You can read more about the Danish Competition and Consumer Authority on their website.
How can I find the rules?
The legislation regulating procurement is primarily based on two EU directives:
- The classic procurement directive
- The sector-specific Utilities Directive.
There are also several other directives that regulate public procurement by the state and other public authorities. In addition, the rules are supplemented by national laws and executive orders in Denmark.
In Denmark, the Classic Procurement Directive is implemented through the Public Procurement Act. The Act largely implements the directive directly, but there are also some national additions. For example, the law requires that all parts of the evaluation model are published in the tender documents.
You can read the procurement law for more detailed information.
The Utilities Procurement Directive applies to public authorities in the water and energy supply, transportation and postal services sectors. The Utilities Directive is directly applicable in Denmark with certain exceptions, which are described in the Danish implementation order.
You can read more in the Utilities Directive and the Implementing Regulation for more information.
