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Writer's pictureRicardo Cuesta
Mar 7, 20234 min read

Construction in Common and Civil Law: understanding each other (3)


Public Procurement and Selection of a Contractor


In Europe the process for selecting a contractor for a public contract is standardized due to the existence of Directives approved by the European Parliament that must be enacted into every Member State’s legislation. Therefore, the basic features of the process for selecting a contractor is very similar in all EU States.


The former ‘Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts’ was aimed to ensure an open market for public procurement as well as the fair application of the rules for the award of public works, supplies and services contracts.


The currently applicable ‘Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC’[1] is part of the Europe 2020 Strategy developed by the EU ‘to develop as a smarter, knowledge-based, greener economy, growing fast and sustainably, creating high levels of employment and social progress’[2].


Public Procurement plays an important role in The Europe 2020 Strategy since it is conceived as one of the instruments based on the internal market that must de used to achieve intelligent, sustainable and inclusive growth, while guaranteeing a more economically rational use of public funds.


As a consequence, the public procurement process is very similar in every EU member State and when using public procurement to invite tenders to provide works, supplies or services, every State they must treat all applicants equally and not discriminate between them. They must also be transparent in their dealings and processes.


Even in a common law State as the United Kingdom, the procurement process is still based on the 2014 Directive as The Public Contracts Regulations 2015, based on the EU Directive, are still in force. A new Procurement Bill has been recently introduced intended to repeal the current EU-based regulations and consolidating the current four sets of regulations, which transpose EU Directives into UK law, into a single regime[3].


In the US -another common law regime- the procurement process is subject to numerous statutes depending on the level of the public entity. At Federal level the Federal Acquisition Regulation (FAR) governs bids for contracts funded with federal money. And at the State and local level there are a number of statutes and regulations organizing the procurement process at those levels.


I would like to focus the attention now in the pre-selection of the companies that will be allowed to bid for a contract. This is usually called the prequalification process.


As the purpose of these series of articles is to explain common law lawyers what is the experience and practice that Spanish engineers have when they start working in a different country, prequalification is perhaps one of the most different processes.


Prequalification is an early stage of the procurement process directed to select the companies that will be allowed to later participate in the bidding process.


At this stage the relevant public entity tries to impartially evaluate prospective bidders to determine their business practices, work experience, equipment and financial capability to perform a particular contract.


Typically during the prequalification process the contractor is requested to provide information regarding:


  • Organizational structure

  • Licenses

  • Experience in similar projects

  • Financial capability

  • Bonding and insurance capacity

  • Safety and OHSA records


This process is useful to identify bidders that will meet the specific requirements of a project and gives assurance that unqualified bidders will not participate in the procurement process saving time to the owner.


Classification


In the general procurement process in Spain the Public Sector Contracts Act 2017, contains a complete regulation on the evidence a bidder must submit in order to prove its qualification for a project in a similar manner as described above. This is a consequence of the principle of freedom of access to public contracts for any EU based company.


There is not usually a prequalification process and the bidders have to provide all this information with their bid documents.


But this process can be simplified if the prospective contractor is classified. Classification provides a very useful mechanism for assuring that only qualified bidders will bid for a public contract.


Classification is, therefore, a system to evidence the technical and financial solvency of the contractor that prevents the contractor from having to substantiate it each time it bids for a project and the public entity does not need to evaluate it in each procurement process. The solvency assessment is made only once and the contractor is classified as suitable to carry out certain works, according to a pre-established work classification.


Being classified is a mandatory requirement for projects with a value in excess of 500,000 €.


At the national level the Public Procurement Advisory Board (Junta Consultiva de Contratación Pública del Estado) is in charge of making this assessment and the Regional Boards are also entitled to do the same.


Classification of companies determines the contracts that contractors can bid according to their scope and value, and this is done taking into account the technical capacity, experience and financial capacity of the contractor.


Classification is implemented by assessing the capacity of a contractor to perform certain types of works within certain values and, in evaluating their experience, the projects performed by their foreign affiliates are taking into account.


After the assessment is done a contractor is classified to perform certain types of projects. This classification is registered in the special Registry of Classified Contractors and the bidder only has to provide a certification of the Registry to prove it is qualified to bid for a certain project.


The financial capability of classified contractors is revised every year and the technical capacity is revised every three years.


Through this Classification system, a prequalification process is not necessary in Spain to have guarantee that only suitable contractors will bid for a project.



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