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Results of NCC Members Question: Sidestepping the OJEU tender process

Results of NCC Member's Question: Issued 28 March 2012

NCC Members can ask relevant questions of the wider NCC membership, moderated by NCC. We collate the responses, where appropriate anonymise them, then publish the results on the website for the benefit of the wider Membership. Can you help with this question from a local government organisation? 

" We are using and have been using a major software package for 30 years and are very happy with it. We pay £125,000 a year in maintenance/upgrades. But we have discovered that we don’t have a contract for this and need to be compliant and sign a contract with the vendor company. The contract we want to sign takes us over the set spending limit and we would need to go to an OJEU tender process. This is impractical as we use the software, we don’t want to rip it out and start again, we don’t have the money to buy a new system in any case, and we don’t want to waste the time and money going through a pointless procurement exercise. Has anybody else been in the same position, where they needed to sign a contract with an incumbent supplier, but not an official existing supplier as they don’t have a contract? As a local government organisation we need to be compliant and need to do the right thing.”

Number of responses: 4

Please note that these are responses from NCC Member organisations. NCC is not responsible for views expressed and does not recommend any particular supplier. NCC can provide respondent contact details should you wish to discuss further.

From an emergency services body:

"I believe that the organisation can procure direct from their supplier without going to OJEU as there is provision within the Public Contract Regulations 2006 for you to procure. Namely, use of the negotiated procedure without prior publication of a contract notice and specifically regulation 14b(ii). This indicates that you can procure if it is a partial replacement of, or an addition to, existing equipment (see below):

The regulation states:

14(1) – A contracting authority may use the negotiated procedure without prior publication of a contact notice in accordance with regulation 17(3) in the following circumstances – (b) subject to paragraph (3), when the goods to be purchased or hired under the contract are required by the contracting authority as a partial replacement for, or in addition to, existing goods or an installation and when to obtain the goods from a supplier other than the supplier which supplied the existing goods or the installation would oblige the contracting authority to acquire goods having different technical characteristics which would result in:

(aa) incompatibility between the existing goods or the installation and the goods to be purchased or hired under the contract; or

(bb) disproportionate technical difficulties in the operation and maintenance of the existing goods or the installation.

Paragraph (3) referred to above is below, but basically indicates that providing the contract is no longer than three years, you can use the provision:

Paragraph (3) – A contracting authority shall not use the negotiated procedure in accordance with paragraph (1)(b)(ii) if the term of the proposed contract, or the term of that contract and of any other contract entered into for the same purpose, is more than three years, unless there are reasons why it is unavoidable that this period should be exceeded.

Therefore I would suggest they can procure direct, as there is provision within the regulations to be able to do this so but they would need their own legal staff to confirm that view."

From a public sector research organisation:

"From the brief description given it is clear that they need to follow a recognised procurement route, given the value, but that doesn’t have to be the full OJEU tender process, which can take months and is very onerous. It sounds like making use of an existing framework agreement is unlikely in this case (though would be simplest/quickest), otherwise they should use Buying Solutions ( who put the requirement out to a range of pre-approved companies for a response. A suitably worded specification would need to be drawn up, but there is no need for them to change the product just because of procurement reasons.

Their existing supplier could partner with one of the published Buying Solutions companies to submit a bid in a competitive tender against other suppliers."

From a local council:

"We were in precisely the same position previously, and modified the council's standing orders to ensure that the renewal of contracts and licences in this sort of situation was not contrary to the council's standing orders. The level of spend annually is not above the OJEU figures (unless there has been a change) and the only reason for OJEU would be the extension of the contract on a multi-year basis, although there may be different legal views on this.

Equally, I would presume there is no need to establish something different from the existing maintenance and upgrades arrangement, and what is it that the LGO wishes to be compliant with? I know of no regulation that says you have to have a legal contract; there would clearly already be an implied contract.

To use a daft example, you may be obliged to tender for electrical energy supply, but you are not required to tender to renew your building or its wiring unless you decide you need to change it. We believe you can argue that the software is part of your operational system unless you decide it is no longer fit for purpose, and therefore there is no need to change unless you need to (unless, and I am preuming here, there are multiple suppliers of EXACTLY the same thing – eg, Microsoft Office, rather than a dedicated revs and bens package)."

From an emergency services body:

"Just a suggestion – can Procurement Standing Orders be suspended if there is a good enough reason? Sole supplier, for example?

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