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Sunday 20 October 2019

Public procurement rules govern tendering process


Design: An artist’s impression of the atrium in the new National Children’s Hospital to be built in Dublin
Design: An artist’s impression of the atrium in the new National Children’s Hospital to be built in Dublin
John Mulligan

John Mulligan

The €450m cost overrun for the National Children's Hospital has been blamed on everything from new rules that resulted from the tragic Grenfell Tower fire in London in 2017, to the types of fixtures and fittings required for each of the hospital's 6,000 rooms.

The procurement process for the hospital had been intended to avoid cost spikes. It failed miserably.

The National Paediatric Hospital Development Board, which is responsible for the project, said that it tendered for the hospital in 2016 using a two-stage procurement process. It explained that this allowed tendering to happen prior to completion of full detailed drawings for phase B of the hospital - the actual above ground construction.

That, said the board, meant construction could start two years earlier than under a traditional procurement process, and was designed to secure most of the project's costs at 2016 levels. The cost subsequently spiralled as the design was completed.

So how does a typical procurement process work?

Are there rules about how projects are put out for tender?

The EU has a minimum set of harmonised public procurement rules that must be adhered to in member States. These govern the way in which public authorities, government departments and some utilities purchase goods, works and services worth more than €5.5m. There are also national guidelines.

What are the rules?

The EU rules are partly about ensuring a level playing field for companies across the EU to participate in tenders for projects in any member State.

They also specify - at length - how tender processes should be undertaken, covering everything from the division of contracts into lots, and costing. One directive notes: "Contracting authorities shall require economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low."

Are there government rules?

In 2004, a reform of public sector construction procurement was launched. It was designed to introduce cost certainty at the tendering stage, and to give better value for money.

An update to the guidelines published last year noted: "Best value for money for a project should be considered not only in the context of the capital cost, but in the whole life cost of the facility delivering the public service which a sponsoring agency can afford."

How do large-scale projects proceed?

For large-scale public projects worth more than €100m that require contractor input at an early stage, the Public Works Contract for Early Collaboration can be used, but requires prior approval from the Government Construction Contracts Committee.

So, how does a tender process begin?

There can be a number of different steps. A contracting authority can appoint a team that designs a project and then tenders the construction work to a main contractor.

Alternatively, under a design and build scheme, a contracting authority usually appoints a design team to secure planning and other consents required, and then tenders out the project to a main contractor.

Irish Independent

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