2016-04-28
Swiss public procurement law. Are negotiations between public authorities and bidders allowed?

Today I would like to share with you the article written by Bruno Schoch from Eversheds Switzerland about negotiations in Swiss public procurement. This is a good opportunity to present the Swiss public procurement legislation which is highly fragmented. Apart from the WTO Government Procurement Agreement that applies to bids from GPA Member States and the bilateral agreement on public procurement with EU, domestically Switzerland has three different levels of procurement regulations: federal, cantonal and municipal. To make the picture even more complicated there is also an intercantonal agreement on public procurement. 

By Bruno Schoch

The possibility to negotiate or the prohibition thereof give a different dynamic to the procurement process. In Switzerland, the different levels of government deal differently with the issue of negotiation in public procurement proceedings. When entering a bid in a Swiss procurement proceeding, the supplier should hence be mindful of the level of government the procuring entity represents and adapt their bidding strategy accordingly. The success of the bid and the subsequent transaction between bidder and authority may depend on it.

Introduction

Public procurement rules aim to provide a level playing field for suppliers of goods and services to public authorities. The rules guarantee that the procurement process is transparent, predictable and fair. As a consequence of these basic principles, once a bid is made, it can only be changed in accordance with the strict rules on public procurement.

The basic goal of any public authority launching a public procurement process is entering into a contract with a supplier. This underlying contract reflects the fundamental financial interests between the parties and governs the different aspects of the transaction, such as project milestones, the terms of fulfilment, conditions of payment, etc. However, in many cases, it also rules Intellectual Property Rights, subsequent service agreements, supply of essential spare parts and so on. The contract, therefore, is at the very heart of the authority/supplier relationship, which potentially lasts for a very long time. Hence, getting it right is essential.

Given the basic principles of public procurement, the tender documents issued by the procuring authority when initiating the procurement process need to anticipate the rules of the contract to a large extent. This is highly challenging especially for complex and tailor-made goods, which incorporate current scientific and technological developments. Also, from a supplier’s perspective, it demands high precision when entering a bid. Therefore, often, there is a practical need for subsequent negotiation between authority and bidder in order to consolidate needs and expectations.

In Switzerland, in accordance with a long-standing of federalism, the different levels of government have dealt differently with the issue of negotiation in public procurement proceedings. This article aims to highlight the main differences in this regard by first introducing the main rules applicable to public procurement in Switzerland and then focusing on the rules on negotiation on a federal and on a state level.

Fragmentation of Swiss procurement legislation  

Swiss procurement legislation is highly fragmented. Internationally, the WTO Government Procurement Agreement (“GPA”) applies to bids from GPA Member States, which include the EU Members, Armenia, Aruba, Canada, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Norway, Singapore, South Korea, Chinese Taipei and the United States. If a supplier comes from an EU Member State, then the bilateral agreement on public procurement applies as well. Lastly, the EFTA-Convention also offers relevant provisions on procurement.

In accordance with the Swiss political structure, domestically, you encounter three different levels of rule-making: federal, state (called “Cantons”) and municipal.

If the procuring authority is federal, federal procurement rules apply. These rules can be found in the Federal Act on Public Procurement (“FAPP”, SR 172.056.1) and the corresponding Ordinance on Public Procurement (“OPP”, SR 172.056.11).

However, if you are dealing with a university of a canton or a building project of a local government, then the rules of that canton or the canton the local government is located in apply. Swiss federalism of course does not stop there. If you are dealing with a local authority, then local procurement rules may apply in addition to the cantonal rules.

The GPA perspective: the possibility to negotiate 

Art. XIV GPA gives the legislator the option of allowing the authority to conduct negotiations during the procurement process. However, this is limited to circumstances in which the authority has indicated their intent to do so in the notices or if – based on the evaluation – it is unclear which tender best fulfils the specific evaluation criteria. Such negotiations should be used to identify strengths and weaknesses in tenders. As a general rule, they are confidential in particular with regard to information intended to assist particular participants to bring their tenders up to the level of other participants.

The federal and the cantonal legislators have implemented this rule in different ways: While the federal legislator has taken advantage of the option of allowing such negotiations, the cantonal legislators have made a joint decision not to do so. Both implementations are in accordance with the GPA provision.

Federal rules on negotiation 

On a federal level, negotiations are a common instrument used in procurement proceedings. According to Art. 20 FAPP, negotiations can be conducted if the invitation to tender states that negotiations will be conducted or if none of the bids appear to be the most economical with respect to the award criteria. If – and only if – such lawful negotiations take place, the bidders are allowed make subsequent amendments to their offers. Otherwise, the bids cannot be amended.

Negotiations on a federal level may deal with the specifications of goods or services offered, however, it may also focus exclusively on price and price reduction.

Based on an evaluation of the award criteria, the authority can choose which bidders they would like to enter into negotiations with. The authority must document oral negotiations taking note of the persons present at the negotiation as well as the results thereof.

These formal requirements must be strictly adhered to, especially when dealing with procurement of highly technical and complex goods and services. Failure to do so can be subject to an administrative appeal, during which the Court will examine this ex officio.

Cantonal rules: prohibition of negotiation 

Switzerland is made up of individual states called “Cantons”. Due to a strong tradition of federalism, Cantons have the power to legislate in many areas of law, including procurement. Therefore, each Canton has an individual procurement regime. However, to make things a little simpler, Cantons have harmonised their legislation to a certain degree through an intercantonal agreement on procurement.

This intercantonal agreement provides that the cantonal authorities must evaluate the individual bids with respect to the award criteria and in accordance with the basic principles of transparency and non-discrimination. Negotiations aimed at changing the price/performance ratio are forbidden, banning negotiations on price or content and scope of the bid between the authority and the bidder.

The authority can ask for oral feedback or explanations during the evaluation process or invite the bidder to give a presentation on their bid. This, however, can only be used to clarify the bid and not to amend it. Furthermore, the authority must be cautious to offer equal treatment to all bidders and – in the interest of transparency – it must document such interactions between the authority and individual bidders in writing.

In complex procurement proceedings, drawing the line between negotiation (which are forbidden) and clarification of the bid (which is allowed) is a difficult distinction to make. In the interest of legal certainty and in order to avoid drawn out legal proceedings, it is best to plot a course in accordance with the current jurisprudence and custom of the individual canton in which the procurement is taking place. 

 

 

By Tomasz Zalewski




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We discuss judgments from the European Court of Justice and their influence on the interpretation of public procurement law in Poland. We follow and comment on legislation in the European Union. We address current issues in Polish case law.

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