the european space agency's procurement regulatory...

ESA UNCLASSIFIED – Releasable to the Public

THE EUROPEAN SPACE AGENCY's PROCUREMENT REGULATORY REFORM

P.M.Reynaud Head of Procurement Regulations, Quality & Launcher Procurement Division ESTEC 07/02/2011

P.M.Reynaud Head of Procurement Regulations, Quality & Launcher Procurement Division | ESTEC | 07/02/2011 | RES/PG | Slide 2


Two Main Pillars of the Reform

To comply with the needs of today (Fairness, better Cost

Control..)

- Four Step Procurement approach

- Product policy/ Catalogue

- C1 - C4

- SME policy

To set up a modern Procurement Agency

- Procurement Regulations

- Implementing Instructions

- GCC revision incl. risk management & variable profit scheme

- IPC Rules of Procedure

POLICY REGULATIONS



THE PROCUREMENT REGULATIONS

BACKGROUND

– ESA Contracts Regulations were adopted in 1982 and where considered of an acceptable standard w.r.t basic international public procurement principles.

However

– Many regulatory evolutions had taken place both in and outside ESA which were not reflected.

– Many new procurement techniques have been implemented in ESA on an ad hoc basis and needed to be incorporated to provide legal certainty and trust among the various stakeholders of the procurement process (Delegations, Industry, the EU and the Executive) .



External Regulatory Evolutions

• The 1990s saw a surge in the codification of International Public Procurement Rules to achieve an international level playing field .

• This was achieved trough the adoption of 3 major regulatory texts elaborated in the frame of the :

World Trade Organisation (WTO) Agreement on Government Procurement - GPA ,

European Union (EU), Public Sector Directive 2004/18/EC

United Nations Commission on International Trade Law (UNCITRAL). Model Law on Procurement of Goods, Construction and Services

• National authorities, International Organisations (such as the various Development Banks) and the EU when procuring for its own purposes have since transposed/adapted them in their respective regulatory frameworks.

• In October 2008 the OECD Council in its recommendation on “Enhancing Integrity in Public Procurement“ recognised the a.m efforts and called for their implementation within its Member States.



Ad hoc Measures and Practices 1/2

– Since 1982 in the execution of its procurements ESA resorted to a certain number of procurement techniques and practices driven by:

a. the need to adapt to the specifics of certain programmes/ activities through frame contracts, two stage procurements, calls for opportunities…

b. the evolution of the industrial landscape through best practices, co funding...

c. the evolution of information technologies through EMITS, EFIS……and d. the increase collaboration with European Institutions, Grants, Galileo, GMES….

– While such techniques and practices are:

Not uncommon, and

Internationally recognised.



Ad hoc Measures and Practices 2/2

• Owing mainly to the fact that to date they were not regulated within ESA they have usually

been taken on ad hoc basis; and

applied differently according to circumstances.

• Thus in some instances creating among the stakeholders of the process undue feelings of:

Lack of competition;

Lack of transparency;

Unfair and inequitable treatment; and

Lack of confidence in the process.



From Contracts Regulations to Procurement Regulations

– Taking due account of the situation prevailing both internally and externally e.g (UNCITRAL, WTO GPA,OECD Council’s recommendation of October 2008) the Procurement Regulations were elaborated with the objective of:

modernising the ESA’s procurement process;

promoting further confidence in the said process; and

allowing for the necessary developments enabling the future evolution between ESA and external partners such as the EU.

– While preserving the specific needs necessary for the Agency to carry out the objectives set under its Convention and Annexes especially in the field of Industrial Policy.



Structure

The “PROCUREMENT REGULATIONS OF THE EUROPEAN SPACE AGENCY“ adopted by Council in December 2008 (ESA/REG/001), and which are publicly available are divided in seven Parts .

PART I: GENERAL PROVISIONS AND PRINCIPLESPART II: METHODS OF PROCUREMENTPART III: INITIATION OF TENDERPART IV: TENDERING PROCEEDINGSPART V: AWARD OF CONTRACTS PART VI: REVIEW PART VII: AMENDEMENTS

and 6 Annexes who cover/shall cover the internal instructions necessary for their implementation.



PART I: General Provisions and Principles 1/2

Article 1- Organs

Important in that it calls on the Director General to ensure the independence of the staff of the Procurement Department.

Article 2 - Definitions

New definitions have been introduced to take account of the new concepts introduced in the text and in some cases to align on accepted definitions found in other instruments such as the EU regulations.

Article 3 - Applicability

Acknowledges that overall these regulations are applicable which is not the case in the current Regulations.

Indicates in which cases these or part of these regulations will or will not be applicable in the frame of international agreements.

Article 4 - Public Access to Procurement Regulations

Central to the reform it implements transparency and in the context of a review (Part VI), allows economic operators to access the rules so they can oppose them to the Agency. This is major substantial change in the approach to procurement.



PART I: General Provisions and Principles 2/2

Article 5 - Use of Electronic Tools

Provision which officialises the use of e- procurement systems in the Agency. The current regulations only referring to paper and manual distribution.

Requirements derive from the functional requirements for e-procurement tools published by the EU.

The advantage of using these requirements for ESA is that they are in line with those to be followed by public authorities in the development of e-procurement tools and familiar to economic operators and call for flexibility in order to respond to changes in the legislations.

Article 6 - Recording of the Process

Major enhancement of the system in order to foster transparency and increase auditing & reporting ability .

Article 10 - Principles

Current Regulations Article 4 extended to encompass a certain number of principles recognised by the international community UNCITRAL,WTO GAP and EU

Article 11 - Granting of Special Rights to Contractors

Legal basis for BEST PRACTICES which is not present in the current regulations (to be modified)



Part II: Methods of Procurement

Article 13 -Competitive Tendering

Encompasses a certain number of principles recognised by the international community UNCITRAL,WTO GAP and EU.

Article 14 -Non-Competitive Tendering

Takes care of the evolutions in procurement methods.

Article 15 - Framework Agreements

New provision to include this method of procurement which has been applied in the Agency but without any clear systematic rules.

Article 16 -Two Stage Tendering

New provision to include this method of procurement which has been applied in the Agency but without any clear systematic rules. Such provisions can be found in EU and UNCITRAL but are accommodated to the specificities of the procurements of the Agency .

Article 17 -Best Practices

Best practices are recognised as a method of procurement of the Agency.



Part III: Initiation of Tender 1/2

Article 18 -Qualification and Registration of Economic Operators

Incorporates a certain number of requirements which are standard in the legislation of ESA Member States party to the EU. Provides ESA Director General with administrative powers (new Article 19).

Article 19 -Administrative sanctions

Logical consequence of the previous Article 18 allows to suspend economic operators from procurements.

Article 20 -Advanced Notice

Introduces the notion of expression of interest and recognises the use of EMITS.

Open to all competitive procurements and no longer limited to ones above 100 000 Euros.

Article 22 -Conflict of Interest

Becomes an important part of the evaluation process’s transparency and fairness.

Article 23 -Tender Evaluation Board and Panels

Defines the Tender Evaluation Board’s central role in procurement.



Part IV: Tendering Proceedings 1/4

Article 25- Evaluation Criteria and Weighting Factors.

Establishes clear guidelines in the establishment of evaluation criteria and weighting factor in order to enhance fairness and transparency. Weighting Factors shall be published.

Article 29- Time Limits for Tendering period

Establishes clear guidelines in the establishment of time limits for tendering in order to enhance fairness and transparency. (proposed modifications to bring them lower)

Article 30- Clarifications and Amendments of the Invitation To Tender

Sets more precisely the conditions under which an ITT can be clarified and/or amended in order to enhance fairness and transparency.

Article 31 -Suspension of the Procurement Process.

Allows the Director General to suspend the process and the accompanying measures. This text should be considered in the context of a review process (Part VI) when indications of malpractices are brought to the attention of the Agency and need to be investigated before a decision is taken.




Article 32- Cancellation of the Invitation to Tender.

Allows the Director General to cancel an ITT and the accompanying measures. This text should be considered both in the context of a review process and also in consideration of programmatic decisions which may arise from time to time.

Article 34 -Opening of Tenders.

Sets the conditions under which tenders are admitted for evaluation and what are the rights of tenderers whose tenders are rejected this in order to enhance fairness and transparency.

Article 35- Re-issue of Invitation To Tender.

Introduces conditions which can call for a re-issuing.

Article 36- Confidentiality of Tenders.

Sets the rules as to the way tenders must be treated while in the custody of the Agency.




Article 37- Period of Validity of Tenders

Establishes clear guidelines for the establishment of the period of validity of tenders it also has the objective of taking care of keeping the offers valid in very specific circumstances in order to avoid changes to basic conditions set in the tenders.

Article 38- Confirmation of Qualification

The objective of which is to avoid industry having each time it submits a tender to introduce the information which is or should already be with the Agency in application of the proposed Article 18.1 and 18.5.

Article 39-Evaluation of Tenders

Sets the main principles and conditions to be followed by a TEB in the evaluation.

Article 40- Consultation with Tenderers During the Evaluation Period

This new Article establishes clear guidelines as to what constitutes consultations and the conditions surrounding them.




Article 41- Negotiations with Tenderers During the Evaluation Period

This is a new Article the objective of which is to establish clear guidelines as to what constitutes negotiations w.r.t consultations and the conditions surrounding them. These guidelines are important in the sense that they must ensure impartiality at all stages in order to enhance fairness and transparency.

Article 42- Results of Evaluation and Recommendation

This new Article provides the necessary guidelines to the Tender Evaluation Board for a recommendation to the persons foreseen under Para. 4 who will ultimately take the decision.



Part V: Award of Contracts

Article 43- Submission of Contract Proposal to the IPC

Introduces a clear distinction between cases prior to the award of a contract, during the execution of a contract and the case for Best practices

Para.1.b Introduces the systematic submissions for contracts exceeding 20 MEuros

Para.3 Introduces the systematic submission to IPC of the results of the competition resulting from Best Practices when the latter reach a significant level.

Article 44- Signature and Entry into Force of Contract

Sets clearly and unambiguously the entry into force of the contract.

Article 45- Notification to tenderers

This new Article sets the rules under which tenderers shall be notified of the results of their respective tenders.

Article 46- Debriefing to Unsuccessful Tenderers

This new Article sets the rules under which tenderers shall be debriefed on their respective tenders.



The ESA Review Procedure 1/3

• The principle of a review procedure in the frame of the Agency’s procurement process recalls a universally recognised practice of Public Procurement both at national and international level otherwise known as “Right to Review”, “Challenge Procedure”, “Remedies” or “Protest Procedures”

• This type of procedure further implements an important principle of Public procurement which is that of “Transparency” the objective of which is to build confidence in the fairness of the procurement system of the organisation with respect to the actors of the procurement process that are the tenderers and Member States.

• The Agency’s various procurement regulations only partially provided aggrieved tenderers with means of redress.

• The introduction of a “Review procedure” based on the principles found in the text of the WTO GPA and UNCITRAL Model Law was proposed the objective being to provide tenderers with an adequate opportunity and effective procedure for review.

• This procedure had to be adopted by Council upon recommendation of IPC and AFC since Member States had to be aware of the consequences of the introduction of such “review” both financially and programmatically.




While preserving the rights of tenderers and the integrity of the procurement process such a review system needed to integrate some restrictions in order :

I. Not to introduce uncertainties in procurements by creating potential financial and programmatic consequences which could not be affordable by the Agency and its Member States; (see Art. 49.3 & 57 Proc. Reg.)

II. To avoid undermining the recognised technical authority of the Agency by limiting the review to procedural aspects only; (see Art. 48 Proc. Reg.)

III. to limit the disruption of the procurement process by setting clear time limits (see Art.50 Proc.Reg.) and defining “legitimate interests” at different stages of the procedure (see Art. 49.1 Proc. Reg.);

IV. not to impinge on the rights of ESA as established by its Convention especially in the domains of the selection of the method of procurement, the choice of the selection procedure and decisions based on industrial policy considerations. (see Art. 49.2 Proc.Reg.)




The Review Procedure foresees 3 incremental steps:1. Review by the Head of the Procurement Department (see Art. 51 Proc. Reg.)

– Where the claimant disagrees with the decision of the Head of the Procurement Department he can then require an

2. Independent review by the Industrial Ombudsman for ESA (see Art. 53 Proc. Reg.)

– Where the IOE’s recommendation is not accepted by the Head of the Procurement Department the claimant can bring the matter to an

3. Independent Procurement Review Board (see Art. 55 Proc. Reg.)

– The decision of the Board shall be final and binding on the parties.– 6 members (proposed by Industry, Member States via IPC Chairman and ESA Director

General) nominated by ESA Council.

The Procedure is established by IPC through1. The Implementing instruction concerning the establishment and proceedings of the European Space

Agency’s Procurement Review Board Annex V to ESA/REG/001

2. The Implementing Instruction concerning the European Space Agency’s Procurement Review Procedure Annex VI to ESA/REG/001.



PART VI: Review 1/2

Article 47- Objectives

Sets the objectives of providing a review mechanism while taking due account of the Agency’s status and its programmatic constraints.

Article 48- Right to Review

Sets the conditions for under which a review can take place (direct interest and potential lost and emphasises the fact that this review is based on a procedural breach only.

Article 49- Restrictions

Para.1 Restricts the review to primes only. Para.2 a) Excludes review based on the method of procurement (UNCITRAL)

Para.2 b) Excludes review based on administrative sanctions, suspension of the process cancellation of the ITT, re-issuing of ITT and decision of a TEB thus for the latter preserving the Agency’s technical authority.

Para.2 c) Excludes review based on the nationality of an economic operator. Para.2 d) Excludes the award decisions Para.3 Confirms the fact that the review should not suspend the placing of the contract .

Article 50-Time Limits and Submissions

Sets the time limits in order to avoid the disruption of the process but also allows for early claims before the placing of a contract.



PART VI: Review 2/2

Article 51- Review by the Procurement Department Describes the obligations and mechanism to be followed by the procurement Department

Article 52- The Agency’s Industrial Ombudsman Instates the Ombudsman in the Agency’s procurement process.

Article 53- Review by the Agency’s Industrial Ombudsman

Second or first level of review which describes the obligations and mechanism to be followed by the Ombudsman and the Procurement Department

Article 54- The Procurement Review Board Instates the a Procurement Review Board in the Agency’s procurement process

Article 55- Review by the Procurement Review Board

Describes the obligations and mechanism to be followed by the Procurement Review Board who’s decision is final and binding on the parties

Article 56- Interim Measures

Enable the rights of the claimant to be preserved while preserving the need for the Agency to conclude a contract without undue disruption and delay of the procurement process. The conditions are the one foreseen in the UNCITRAL model Law.

Article 57- Compensation Considering that the Agency is limited in its financial possibilities compensation is limited to 100 000 Euros.



Entry Into Force and Publication 1/2

– The Procurement Regulations entered into force on 01 June 2010 and replace the “Contracts Regulations” with the exception of Article 1,3,9 and 18 which entered into force in December 2008.

– As presented to Council, their implementation and that of the associated implementing instructions is incremental and all Agency’s procurements are planned to be covered by the Procurement Regulations and pertaining implementing instructions by the first quarter of 2011.

– The implementing Instructions being:

Revised Best Practices (under preparation under discussion with industry) IPC

Ombudsman (finalised and approved by IPC)

Establishment and Proceedings of the Procurement Review Board (Annex V to ESA/REG/001)IPC

ESA’s Procurement Review Procedure (Annex VI to ESA/REG/001)IPC

ESA Industrial Cost Audits (Annex I to ESA/REG/001)IPC

ESA Nationality of Companies Audit (Annex II to ESA/REG/001)IPC

Frame contracts competition (approved merged in TEB Manual Annex III to ESA/REG/001)

Two-stage tendering (under preparation to be merged in TEB Manual Annex III to ESA/REG/001)

Tender Evaluation Manual (approved, form Annex III to ESA/REG/001to be published February )

General conditions of tender (under preparation will form Annex IV to ESA/REG/001)



Entry Into Force and Publication 2/2

Article 60 of the said Regulations provide that these Regulations shall not apply to tendering procedures initiated by the Agency prior to the entry into force, hence the following remain regulated by the “Contract Regulations” and the current Tender Evaluation Manual.

procurement proposals and activities for which the approval cycle was initiated or concluded prior to 01/06/2010,

activities which form part of a procurement plan adopted prior to 01/06/2010,

activities for which a TEB has been nominated prior to 1st June 2010 and,

activities under already existing Frame Contracts,

For procurement actions which do not fall under the categories described above and until such time the new Tender Evaluation Manual is approved an interim TEB manual has been drafted.

The Procurement Regulations and its Annexes are published on EMITS under “Administrative Documents” together with the Interim Tender Evaluation Manual. http://emits.esa.int/emits/owa/emits.main



Future

1. This reform as allowed ESA to re align itself on current trends in international public procurement hence reaching its objectives.

2. These documents will be adapted/updated as necessary on a regular basis to take care of the necessary evolution and lessons learned. (current revision is underway)