2.5.4 What are the procedures for contracts

above EU Thresholds?

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Open Procedure - This is a one-stage procedure whereby all interested parties can tender for a contract. In this procedure, the contracting authority takes no steps to limit the number of tenders received or to consider the suitability of suppliers prior to the submission of tenders. The procurement of routine commodities is normally carried out through an open competition as they are simple to specify and therefore to price.  Examples would include office stationary, computer consumable through to the purchase of energy such as liquid fuel, gas electricity etc. This procedure also covers service contracts such as consultancy, ICT and financial services. It is also appropriate for small construction projects such as the construction of a changing/shower facility at a seaside location or the supply and installation of wind turbines.

If there are minimum requirements for the contracting authority then it is important that they be made clear in the contract notice to avoid unqualified bidders incurring the expense of preparing and submitting tenders.

Restricted Procedure - This is a two-stage process where only those parties who meet minimum requirements in regard to professional or technical capability, experience and expertise and financial capacity to carry out a project are invited to tender. 

As a first step, the requirements of the contracting authority are set out through a contract notice in the OJEU and expressions of interest are invited from potential bidders. The contract notice may indicate the relevant historical information to be submitted or the information may be sought via a detailed questionnaire (a Pre Qualification Questionnaire, PQQ) to interested parties. 

Prequalification of Bidders. The purpose of the pre-qualification is to assess historical financial, economic and technical capacity and capability of prospective bidders. This is possible where high costs of preparing detailed bids could discourage competition, - such as custom-designed equipment, industrial plant, some complex information and technology contracts or large or complex works.

It is important to note that, as a basis for pre - qualifying candidates, only the criteria relating to personal situation, financial capacity, technical capacity, relevant experience, expertise and competency of candidates set out in the European Directive (Articles 45 to 48 of 2004/18/EC) and also in the National Law (Articles 51 to 54 of Law 12(I)/2006) are permissible.

The prequalification should be based entirely upon the capability and resources of prospective bidders to perform the particular contract satisfactorily, taking into account their

experience and past performance on similar contracts,
capabilities with respect to personnel, equipment, and construction or manufacturing facilities, and
Financial position.

The scope of the contract and a clear statement of the requirements for qualification needs to be sent (via post or electronically from the contracting authoritys head quarters) to those who respond to the contract notice. All such applicants that meet the qualitative selection criteria should then be allowed to bid. The output from this stage is a restricted list of pre-qualified economic operators.

The second step involves the issue of Invitation to Tender (ITT) documents to all those on the restricted list. The ITT includes the complete specifications, the evaluation criteria, terms and conditions of contract, pricing schedule etc.

The Directives require that a number sufficient to ensure adequate competition is invited to submit bids and indicate a minimum of five (provided there is at least this number who meet the qualification criteria) and up to a total of 20 (is considered best practice). In the restricted procedure the contracting authorities have the right to limit the maximum number of candidates (economic operators) they intend to invite. In order to exercise this right they should clearly state it in the Contract Notice and also to determine this maximum number. According to the National Law 12(1)2006 this number cannot be less than 5 and is recommended not to exceed 20.

Contracting authorities may opt to shortlist qualified candidates. Short listing of candidates who meet the minimum qualification criteria must be carried out by non - discriminatory and transparent rules and criteria agreed in advance of issue and clarified to potential competitors.

The restricted procedure is most commonly used :

when a contracting authority needs to ensure that potential bidders have the capacity and capability to undertake the project, or
where there are higher levels of risk, (in high risk projects, such as large construction projects, the restricted procedure enables contracting authorities to eliminate those without the necessary capacity and capability at the first stage), or
the cost of tendering is high, (The first stage of the restricted procedure tends to be short and succinct requiring no detailed costings or methodology from potential bidders. This encourages more SMEs and SEs to bid for the first stage and receive an outcome before undertaking a detailed bidding process), or
Where there are a large number of potential suppliers. 

From a contracting authoritys perspective, the restricted procedure may appear to require more input than the open procedure, due to a two-staged evaluation process. However, in the long term it is less intensive as there tend to be fewer bids to evaluate at the detailed technical evaluation process, i.e. stage two.

An example of applying the restricted procedure would relate to the provision of fleet maintenance when the contracting authority wishes to outsource this service.  It will be important that potential suppliers meet all the economic, financial and technical requirements for this work, as the contracting authority fleet is an expensive asset that cannot afford excessive downtime or poor or dangerous standards of practice.  Therefore, if a supplier has had any legal actions in the past due to professional negligence or legal offences the contracting authority would need to take this into consideration at Pre-Qualification Stage. If this is the case then the bidder would not be allowed to proceed to the second stage of tendering. However, in the open procedure this initial evaluation is not undertaken as a separate first stage and therefore the potential suppliers who dont meet the minimum qualification criteria have submitted a detailed technical bid that eventually wont be evaluated.

Competitive Dialogue Procedure - This is a procedure, introduced under Article 29 of the public sector Directive 2004/18/EC and Article 31 of the National Law 12(I)/2006 , designed to provide more flexibility in the tendering process for more complex contracts, for example public private partnerships (PPPs). Contracting authorities must advertise their requirements and enter into dialogue with interested parties, (pre qualified on the same basis as for restricted procedure described above). Through the process of dialogue with a range of candidates, a contracting authority may identify arrangements or solutions which meet its requirements. Provided its intention is indicated in the contract notice or in descriptive documents supplied to candidates, a contracting authority may provide for the procedure to take place in successive stages in order to reduce the number of solutions or proposals being discussed. The reduction must be achieved by reference to the award criteria for the contract.

In conducting the dialogue, contracting authorities must ensure equality of treatment and respect for the intellectual property rights of all candidates. When satisfied about the best means of meeting its requirements, the contracting authority must specify them and invite at least three candidates to submit tenders. The most economically advantageous tender (MEAT) will then be selected. Aspects of tenders may be clarified or fine tuned provided that there is no distortion of competition or discrimination against any bidder.

The opportunity to use competitive dialogue has been introduced into the EU Directives and thus in the National Law. This could be used, for example, if a contracting authority wished to outsource a major core activity then it would wish to enter into dialogue with a number of suppliers. One possible example would be the requirement for systems support to a core finance system. The contracting authority would be advised to enter into structure engagements with a number of potential suppliers with the purpose of clarifying and developing a detailed requirement that would allow the market place to compete and provide a quality service.

Negotiated Procedure- There is two types of negotiated procedure:

(a) Contracting authorities advertise and negotiate the terms of the contract. This process should normally involve the submission of formal tenders by at least three suppliers (pre-qualified on the same basis as for the restricted procedure described above, provided there are at least this number who meet the minimum qualification criteria) with negotiation on final terms in a competitive process. This procedure may be used mainly:

where the nature of the requirement does not permit overall pricing;
where it is not possible to specify requirements for a service or goods with sufficient precision to enable bidders to respond with priced tenders;
Where an open, restricted or competitive dialogue procedure was unsuccessful.

The negotiated process is normally used for major or complex ICT outsourced contracts.  This reflects the dynamic nature of the market place and the range of potential solutions that suppliers can offer. For example, the procurement of a new digital mapping system.  Following market research it would seem that there are a number of innovative and suitable products on the market.  The contracting authority therefore develops a high level output specification for future requirements.  In addition detailed evaluation criteria would be developed to allow for a wide range of potential solutions to be considered. Following a Prequalification a restricted list has been produced and an Invitation to Negotiate (ITN) issued.  This ITN contains draft requirements, terms and conditions etc along with details of the evaluation criteria to be applied. It is essential that throughout this process suppliers can refine their offers in a structured manner to the point were the contracting authorities believe there is little further room for negotiations or refinement. At this point they would request a Best and Final Offer thus ensuring the maximum opportunity to meet their business needs and deliver VFM.

It is noted that the contracting authority may carry out the negotiated procedure in successive phases, in order to reduce the number of tenders to be negotiated by applying the award criteria referred to in the contract notice or the tender documents. Use of this possibility should be recorded in the contact notice or in the tender documents.  

(b) Contracting authorities negotiate, without advertising, the terms of the contract directly with one or more parties, (see Chapter 5). This is a departure from the core principles of openness, transparency and competition and is a very exceptional procedure. The main instances where this procedure may be used are:

in cases of extreme urgency;
when, for technical or artistic reasons or due to the existence of special or exclusive rights, there is only one possible supplier or service provider;
when an open or restricted procedure has not attracted any or no appropriate tenders;
extension of existing contracts and repeat contracts subject to certain conditions;
For the purchase of supplies on particularly advantageous terms, for example, when a supplier/receiver/liquidator of a bankruptcy is definitively winding up a business. 

Contracting authorities should ensure and document, that the precise circumstances justifying negotiation, as set out in the EU Directive and Law N12 Chapter V sections 30 to 33, exist before deciding on the use of this procedure.

The most common use of this process is when there has been a call for competition and no (or no appropriate) offer is received.  It is important before moving into negotiations to find out why the market has not fully responded.  For example, a contract for the hire of agricultural tractors during the peak farming season might result in only one supplier responding.  Before negotiating with the supplier it is essential to ensure that a benchmarking exercise is undertaken to ensure the contracting authority are not paying over the normal competitive rates.

The following flowchart outlines the steps contracting authorities should take when procuring contracts above EU thresholds.


Figure 2-2: Steps to be followed when procuring contracts above EU thresholds


According to the legislation in force, contracting authorities shall apply the open procedure and the restricted procedure when awarding public contracts. Only under specific circumstances, defined by the law, the negotiated procedure can be used. For low-value procurement and specific procurement simplified procedures are available2 [ Analytical (step-by-step) presentation of each procurement procedure, as well as of the requirements of each step, is given in Chapter 3. ].


© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
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