Comment

Rail companies need to start planning for implementation of new EU directives

Suzanne O’Keane, Achilles’ community manager of RISQS – the Railway Industry Supplier Qualification Scheme – explains upcoming changes to EU rules and what they mean for businesses supplying the rail industry.

Rail companies need to get on board with new EU directives if they want to win a share of the billions being pumped into improving infrastructure.

The rail industry is about to experience an almost unprecedented influx of work, with more than £95bn in infrastructure work up for grabs in the coming years, including works in Control Period 5 and the HS2 and Crossrail projects.

But the investment comes at the same time as a raft of EU procurement directives – heralded as the biggest overhaul in more than a decade. It makes it more important than ever for buyers and suppliers in the rail industry to understand how to incorporate the changes and how their businesses will be affected.

A ‘double-edged sword’

The changes are designed to bring more simplicity, clarity and flexibility to the rules governing above-threshold contracts, create a level playing field for SMEs and fill in ‘gaps’ in legislation where, historically, experts have had to find a solution using only examples of case law or by applying the five treaty principles.

But they are also something of a ‘double-edged sword,’ offering greater opportunities to main contractors and SMEs, while potentially exposing buying organisations to a far greater number of challenges.

Costs of failure to comply with EU procurement regulations are well-documented. Reports suggest that irregularities with the West Coast Main Line franchise tender alone are expected to cost the UK government £40m.

As well as providing services to the Railway Industry Supplier Qualification Scheme (RISQS), Achilles also has an EU consultancy that offers advice on procurement regulations to more than 200 public sector organisations. RISQS, which incorporates services provided by Achilles, brings together more than 100 rail and transport buyers and more than 3,000 suppliers. There is a single questionnaire and an audit process, incorporating all industry standards, to ensure buyers can find companies which would meet their supply needs and comply with relevant standards and regulations.

With such large changes coming to the EU regulations, it is prudent for all companies to understand the changes to ensure they are not caught in an administrative bungle.

Understanding the main changes

1. The first big change is the removal of the distinction between ‘Part A’ and ‘Part B’ services

‘Part A’ services are those opportunities clearly covered by EU legislation, which were likely to attract interest from providers beyond the awarding member state, such as the high-profile contract to build trains for the Thameslink project, awarded to Siemens.

‘Part B’ services – which include rail transport – were not subject to the same comprehensive process. Reports suggest that historically, some awarding organisations were assigning opportunities incorrectly as a Part B service to shortcut the more lengthy process – but that would now incur a challenge.

In future, the full force of the regulations will apply to the majority of services, which means more opportunities must also be published on OJEU. The minority of services which are excluded will be identified by specific Common Procurement Vocabulary (CPV) codes.

2. Exemptions for ‘sub-central’ bodies

Non-central government bodies, such as local authorities, will now be able to use a process similar to that already used in the utilities sector, which is EU-regulated. Procurement managers will be able to use a prior information notice (PIN) as a call for competition in the restricted or competitive procedure with negotiation, without the need to publish a notice in the OJEU afterwards.

3. Shortlisting of suppliers for contracts

Buyers will now only be able to specify that a potential rail supplier’s financial turnover is up to two times greater than the value of any contract. In addition, rail buyers will also have to explain, in either tender documents or award decisions, why they decided not to divide a contract into lots; potentially creating a new avenue of challenge for disgruntled losers.

4. Excluding suppliers from contracts

Rail buyers can shut suppliers out of a process where they have shown “significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract…which led to early termination, damages or other comparable sanctions”.

5. Greater opportunities to negotiate

There is a new ‘competitive procedure with negotiation’ aimed at allowing more discussion with suppliers. The principle is welcome but it comes with a warning for buyers – minimum requirements and award criteria are non-negotiable, and there are stringent requirements to be followed.

6. Speeding up the tender process

Mandatory time limits for rail tenders to be submitted have been reduced from 52 days to 35 in the open procedure (or 30 if the process is electronic). In the restricted process, it’s dropped from 40 to 30 (or 25 when electronic). For competitive dialogue, the minimum requirement for receipt of requests to participate is 30 days.

7. Management of contracts

The new directives define more closely what constitutes a ‘substantial’ or ‘material’ change to a contract to protect suppliers from being unnecessarily precluded from bidding for contracts.

If an agreement changes unacceptably, then potentially, buyers can be challenged. To protect themselves, buyers must post a notice in the OJEU explaining proposed changes.

It is essential all rail industry companies start taking steps now to get ahead of the new EU regulations. With such an abundance of work around, those who do not update their processes in line with regulations may find themselves overlooked.

Full details on RISQS was published in the June/July 2014 edition of RTM.

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