Procurement procedures practiced hitherto in awarding public contracts in India, as well as in most developing countries, have generally refrained from allowing simultaneous negotiations between procuring entities and participating bidders at the pre-contract stage, the default practice being the selection of the lowest-priced supplier out of technically acceptable bids received. A number of CVC instructions already recognise negotiations as possible sources of serious integrity problems, allowing them to be conducted only under certain limited circumstances. The recently notified Draft PPP Policy and the Draft Public Procurement Bill have changed this regulatory landscape by introducing “Competitive Dialogue” and “Competitive Negotiations” to government contracts in India, and it may therefore be worthwhile for practitioners to be briefed on the nuances of these newly proposed procurement methods.
Competitive Negotiations are practiced extensively in the United States covering almost 80-90% of its Federal procurement dollars, and provide for simultaneous one-to-one discussions between contracting officers—COs—and individual bidders/ offerors. Bidders are allowed to make repeatedly improved offers, both technical and commercial, in as many rounds of negotiations as may be determined by the CO to be appropriate. These discussions eventually culminate in inviting Best and Final Offers (BAFOs) from all offerors in the last round, and the CO evaluates all BAFOs on a 2-axis matrix of price and quality, making subjective assessments such as “unacceptable quality”, “satisfactory price”, “excellent quality”, “poor on price”, etc. A contract is awarded to a party whose offer is determined by the CO as representing Best Value for Money for the US Government; and this again is a subjective decision, without the CO being required to compute an objectively-weighted comparison based on price and quality assessments of competing offers.
In addition, the US Federal Acquisition Regulation allows a CO to accept the initial responsive offers for the purposes of bid comparison, without holding any negotiations at all: an option many COs exercise so as to avoid the practical risk of inadvertently holding unequal discussions with competing offerors—a situation that can seriously jeopardise the successful award of a procurement contract should a dissatisfied bidder challenge contract-award on grounds of unequal discussions.
These new, private sector-like methods of public procurement were introduced in the US in the 1990s under the leadership of academician-administrators Steve Kelman and Steven Schooner. The system places a great degree of trust on COs who are barred from revealing details of one bidder’s technical or commercial offers to its competitors during various rounds of discussions; and this trust is effectively supplemented by strong law enforcement with respect to maintaining integrity of the procurement process.
On the other hand, Competitive Dialogue is a method of procurement practiced in the EU in the award of complex contracts, typically in cases where the Government lacks the capabilities to arrive at all technical and commercial/ legal details of procurement on its own at the start of the procurement process. Extensive techno-commercial discussions are conducted with short-listed potential bidders, who are then all called upon to make responses to a RFP that evolves during these discussions. In effect, it resembles a simplified version of Competitive Negotiations, and appears to be driven by EU’s core vision of an integrated European market, constrained as it is by the high degree of possible subjectivity in a fully-blown competitive negotiations method that could be abused by procuring entities to cherry-pick their own domestic bidders, leaving bidders from other EU member-states as hapless spectators in the procurement process.
Also Read
The prime advantage in using these modern methods of procurement is their utility in achieving Best Value for Money for the Government through simultaneous negotiations, but use of these procedures requires that risks of unequal discussions and unauthorised transmission of bid information by COs are effectively contained through strong enforcement and contractual oversight. Of course, it also helps that in both the EU and the US, a CO is typically a one-stop shop, being the singular point of accountability in the public procurement process, with virtually no room for horizontal or vertical approvals/ information flows, both within or outside the Government.
Concerns with the use of both these processes have been adequately documented in a number of studies by academicians and legal practitioners alike, with almost two decades of voluminous case law particularly in the US jurisdiction. Given that the Draft PPP Policy and the Draft Public Procurement Bill in India presently contain only a skeletal framework for contracting using these new methods, minus the details that will be available in rules to be subsequently promulgated, the new public procurement systems will certainly pose interesting challenges for government COs, for participating bidders, and for legal practitioners alike. It seems fair to surmise that both procuring entities and competing bidders may need to exercise a great degree of vigilance over inadvertent or deliberate miscarriage of bid information or unequal discussions under the new procurement procedures, and the detailed procurement regulations to be issued later by the Government will therefore certainly be worth watching out for.
The author holds an LLM with Highest Honours, having specialised in Government Procurement Law. In 2009, he established www.BuyLawsIndia.com —a website dedicated to fostering state-of-the-art research in this area. Views expressed are personal.
