Public contracts are financed with tax money. Consequently, they are subject to a particularly stringent regulatory framework.
A public contract is a contract concluded between a government department or an organisation in the social-profit sector and one or more market parties to provide goods or services for compensation. This is done according to well-defined rules and principles, including for the description, publication and award of the contract.
If your company wants to enter this attractive market it is essential that you familiarise yourself with the – often complex – rules. The main points are listed below:
What types of public contracts are there?
Public contracts roughly break down into three categories, which the contracting authority may combine under certain conditions:
Supply of goods
This category includes all movables that a contracting authority needs for its operations, from post-its to combat helicopters. They can acquire this through purchase, rent, hire-purchase or leasing. The placement or installation of the supplied goods also fall under the contract.
This type of contract includes both tangible (e.g. maintenance, cleaning, catering, and transport) and intangible services (such as financial services, consulting, legal advice, technical support or training).
This is often combined with the supply of goods, especially if the cost of the services is higher than that of the goods. Consider, for example, an ICT company that supplies software but also provides training and support for hundreds of users.
This includes designing and executing structural and civil engineering works for a public principal. This may vary from site preparation to large-scale infrastructure projects such as highways, bridges or locks complexes. Good to know: only approved contractors are eligible for such contracts.
What rules and basic principles must public authorities respect?
Contracting authorities finance their operations with tax money, which they have to manage and spend as efficiently as possible. Public contracts are therefore subject to strict rules as set out in a number of Acts and Royal Decrees.
Level playing field
In brief, this legislation obliges the contracting authorities to meet their needs as economically as possible. They have at their disposal a wide range of procedures aimed at keeping costs low by allowing the free market to operate optimally. Of course, real competition is only possible if all candidates are able to compete on an equal footing. Therefore, any contracting authority must follow three basic principles when putting a contract to tender:
- the contract should be accessible to everyone (although certain procedures may deviate from this principle)
- all candidates must receive the same information and be treated in the same way
- the procedures, selection criteria and deadlines should be fully transparent
For the same reason, the contracting authority should take into consideration any tender that meets the financial, economic and technical criteria set out in the specifications and respects the procedural requirements.
What does this mean in practice?
To satisfy these basic principles, the contracting authority must:
Clearly define its needs
In this preliminary stage, the contracting authority clearly and comprehensively describes the need for which it is inviting tenders. This allows it to estimate the total value of the contract correctly and select the most suitable procedure.
Specifically, it prepares detailed specifications that accurately describe the expected performance. In this stage it also decides whether:
- it is tendering the contract alone or in collaboration with other public authorities
- it will allow variants or options, within which candidates may deviate from the specifications within certain limits
- it will divide the contract into 'lots'. This practice is common for large or complex files and allows candidates to tender for part of the contract
Comply with the disclosure rules
Once the specifications have been drawn up, the contracting authority must communicate the contract through the appropriate channels:
- if the total amount of the contract exceeds 85,000 euros (excluding VAT), it should be published in the Belgian Bulletin of Public Tenders if the total value of the contract (excluding VAT) exceeds the following thresholds, it must also be published in the Official Journal of the European Union:
- 5,186,000 euros for public works
- 207,000 euro for goods and services.
The threshold for public services and defence is 414,000 euros, and for central federal governments it is 134,000 euros.
- there is no disclosure obligation for smaller amounts. The contracting authority usually also publishes such contracts on its website or in the trade press or submits them to a selection of potential suppliers.
Besides a detailed description of the contract, this publication must also specify the deadline for submission of tenders and the selection and tender criteria.
Select the best tender
After receiving the tenders the contracting authority analyses and compares them thoroughly. The tendering authority is then legally obliged to select the 'most economically advantageous tender'. A key consideration in this choice is the best price or price-value ratio, but other factors also play a role.
For instance, your tender must clearly show that your company is in a sufficiently strong financial, organisational and logistical position to execute the contract successfully. Naturally, the contracting authority will also test the tender against the tender criteria defined for the contract, e.g. reduced CO2 emissions, fastest completion, lowest cost of ownership, etc.
This weighting is based on a points score or a value scale, which allows the contracting authority to select the best candidate in an objective manner.
Avoid conflicts of interest
A public contract must be awarded in a completely impartial manner. At the slightest suspicion of a possible conflict of interest – such as family members who work for one of the candidates or have a financial or other relationship with a potential supplier – the person responsible for the contract must challenge this.
Who issues tenders for public contracts?
From public broadcasting stations to post-sorting centres and training organisations – contracting authorities in Belgium are as numerous as they are diverse.
The entities that are subject to Belgian legislation on public contracts – jointly called the 'contracting authorities', are highly diverse. Given the complex structure of our state, with several administrative layers, this is not surprising.
Furthermore, their number is growing. Following the legislative amendment of 1 July 2013, educational institutions, hospitals and organisations in the social sector must apply the procedures for public tendering. This means an added potential market for your company.
Who are the contracting authorities?
- The Belgian federal structure
- The federal government: the different federal authorities, the Ministry of Defence, institutions for public utilities and social services and public enterprises like Bpost or Belgacom
- The three regions: the respective policy bodies of the Flemish, Walloon and Brussels Capital regions, but also housing corporations and transport companies
- The three communities: the administrative bodies of the Flemish, French, and German-speaking communities, media, cultural institutions, regional airports, etc.
- Local authorities
- The 10 provinces: administrative entities and policy initiatives at the provincial level, but also provincial development companies and schools.
- The 589 municipalities: town councils, inter-municipal companies, emergency service areas, police areas, etc.
- Social profit institutions
These are legal entities of a non-commercial or non-industrial nature that have been incorporated to meet general public needs. To come within the scope of application of the law, these institutions must be funded for at least 50% with public resources or be under the control or supervision of the government. In practice it mainly concerns:
- schools, colleges and universities from all education networks (official, subsidised official, and free)
- hospitals and other organisations in the social sector, such as care facilities or non-profit organisations that offer training courses.
How does a public authority award a contract?
The procedures for awarding public contracts are divided into two main categories:
- an open procedure starts with the publication of the contract through the appropriate channels, after which any interested company may submit a tender. This is followed by a single assessment round in which the tenders are analysed and the contract is awarded.
- a limited procedure takes place in two stages: first the contracting authority publishes a general call to companies to put themselves forward as candidates. From the interested parties the contracting authority selects a number of companies – usually at least five – which, in its analysis, have shown to be best suited to execute the contract. In the second stage the contracting authority asks these candidates to submit a tender, followed by the usual assessment and allocation round.
Which tenders are selected?
In principle, the contracting authority must consider each submitted tender, provided this was submitted by a company that:
- meets all the financial, economic and minimum technical requirements specified in the call;
- is not in a state of exclusion (e.g., bankruptcy, tax or social security debts, etc.); and
- has submitted a 'correct' tender: in other words, it must respect all the procedural requirements, meet the need described in the contract and not contain any reservations.
The candidate selected to execute the contract depends on the selection method used, also known as 'method of award':
- In case of tendering the award is based purely on price: the candidate that has submitted the cheapest tender is awarded the contract.
- There are several selection criteria for a call for tenders, each with their own weighting, which are described in the contract specifications in addition to the price (e.g. environmental impact, speed of completion, choice of materials, etc.). The contract is awarded to thetender that, after weighting of these criteria, achieves the highest score.
- The negotiating procedure is mainly used for urgent contracts or contracts that are difficult to budget for. It is only applicable in specific cases provided for in the legislation on public tendering.
The procedure is similar to a public tender, with one major difference: after receiving the tenders the contracting authority invites a number of candidates (at least three) to negotiate their proposal. Only after they have been able to refine and modify their tenders is the contract awarded.
A variant is the 'negotiation procedure without publication'. In this case the negotiations start immediately without prior selection.
- In case of sizeable or complex contracts – often private-public partnerships – a competitive dialogue is appropriate. In this case the contracting authority negotiates with the potential candidates while it is still preparing the specifications.
In the first stage it selects a number of potential suppliers and invites these to participate in the dialogue. The solution that best meets the needs of the authority is decided on jointly in this dialogue.
Once agreement is reached the candidates are given the opportunity to submit a tender. The final award takes place on the basis of the tender criteria that were jointly determined.
- By means of a concession for public works, a contracting authority may grant a party the contract to execute works at its own expense in exchange for the operating rights of the work executed, possibly supplemented with a form of compensation (e.g. construction and operation of an underground car park or toll tunnel).
- As of 1 July 2013, a contracting authority that puts out a tender for goods or services for daily use can also organise an electronic auction (E-auction). This is an additional step in the award process, after the tenders have been received.
In effect, this is a 'reverse auction' whose purpose is to keep the price as low as possible. During one or more rounds candidates can each make a lower bid for all or part of their tender, after which the party with the lowest price is awarded the contract.
A contracting authority that has initiated a procedure is not required to actually award the contract. If, for example, it appears that there is no candidate that meets the requirements or if all tenders exceed the available budget, it may decide not to award the contract or to start a new, possibly different, procedure. It must, however, provide reasons for this decision.
If the contract is divided into lots, the contracting authority can – again on condition of stating reasons – decide to award only part of the contract. The remaining lots may expire or become the subject of a new procedure.
If the specifications expressly state this, the contract may be renewed one or more times – in other words, the same supplier continues to offer the same services. Normally the entire duration of the contract may not exceed four years.
How do you put together a good tender?
The answer to that question is less obvious than it may seem at first glance. A tender for a public contract is much more than a simple quotation. Of course, the strength of your offer plays a crucial role, but it is equally important that you comply with all the rules and procedures. How should you approach this?
1. Check whether your company can execute the contract
Analyse the contract and the specifications and determine which criteria are decisive for the contracting authority to award the contract. Does your company score sufficiently on these points to make a difference? And especially: is it financially, organisationally and logistically strong enough to successfully complete the contract?
If you are not confident of your chances it might be better not to invest time and energy in further elaboration of the tender.
If you do decide to go for it, do not forget to provide proof in your tender that your company has the necessary capacity (financial, technical, geographic, etc.) to execute the contract. Typically, the contracting authority will explicitly ask for a bank statement or references, for example.
2. Consider the practical side: procedure, procedural requirements and deadlines
With public tenders it is important to follow the procedure down to the minutest details. This is certainly no exaggeration: the slightest omission may mean that you will not be awarded the contract. It is therefore essential to carefully check all the steps you must take and provide all the information and documents required by the contracting authority.
The desired structure and content of your answers is largely fixed. These procedural requirements are extremely rigorous, even if contracts are increasingly tendered through 'flexible' electronic platforms such as e-Procurement. Electronic signatures, correct terminology, number of copies, etc. – success is in the details.
Another essential point is to respect the deadline for submission of the tender. This depends on the procedure and the value of the contract and may vary from one to several weeks. For procedures with European publication requirements you often have more time than for procedures subject to Belgian disclosure obligations. These deadlines are very strict: even if you have submitted the best tender, if you are too late it will not be taken into consideration.
3. Quote a realistic price
Try to provide as accurate, transparent and realistic a price as possible for your solution. Avoid exceptionally high or low prices, as these will only arouse suspicion or immediately be rejected. Does the contract have optional or mandatory variants? If so, indicate clearly why a variant is or is not cheaper than the basic solution.
4. Be concise yet complete
Like you, public procurement officials are busy people who prefer not to browse through large tomes or endless product catalogues. Try to find the right balance in your tender between your sales pitch and the required information. It is a good idea to include a convincing management summary in the tender.
In an ideal tender you show that you know and understand the needs of the contracting authority and can offer the most suitable and economical solution. All this should be in concise, clear and comprehensible wording that respects all the procedural and form requirements. Although it is not the easiest task, it is very rewarding if accomplished successfully.
Some common reasons why contracting authorities reject a tender:
- you have not submitted your tender within the submission deadline
- you did not use the correct channel to submit your tender (e.g. by post instead of e-Procurement)
- you have not observed all the procedural requirements
- your tender does not contain all the requested information, documents or (if applicable) proofs
- your tender and/or the attached documents have not been signed or have not been signed by authorised persons
- your tender contains conditions, clauses or provisions which are not allowed according to the specifications or legislation on public tendering
- you have submitted several tenders even though the procedure does not allow this
Five practical tips to increase your chances of winning a public contract
How do you prepare your company to derive maximum benefit from the market for public contracts?
Define a clear strategy
Obviously the offer and activities provided by your company determine the type of contracts for which you are eligible. But how far are you willing and able to go? It is therefore good to reflect on the following questions:
From which amount or which contract size is it profitable for your company to submit a tender? Remember that preparations can take a lot of time and resources, not to mention the procedure itself.
Do you want to tender for specific contracts or do you want to draw up a type of standard bid to tender for as many contracts as possible?
Which market do you want to target? Do you want to limit your ambitions to local authorities and files, or do you have the resources to serve the biggest contracting authorities, including across national borders?
Reserve the necessary resources
Be prepared for the organisational and logistical impact of a public contract:
Do your people have the necessary information and know-how (practical, legal, technical, etc.) to put together a tender that meets all the requirements for a public contract? Will it be necessary to provide additional training or call in external experts?
Will you put together a team of employees to deal exclusively with the public contract or will it be an additional task?
Can your company execute the contract alone or would it be better – provided the specifications allow for this – to work with co-contractors or subcontractors? Do you already have a network of partners who can assist you in this?
Public authorities have relatively long payment terms, which may affect your working capital needs. It is therefore advisable to analyse and optimise your working capital needs.
Start preparing your tender as soon as possible
Gather all the documents the contracting authority may require in advance: financial information about your company, qualifications, licenses and certificates, certificate of approved contractor, certificate of insurance against professional risks, any references and testimonials, etc.
Also, by preparing a number of standard tenders and price lists in advance you will save a lot of time when it comes to the actual tendering procedures, which often have tight deadlines.
Get to know your prospects and competitors
In many cases, contracting authorities have to publicise a contract and may therefore not contact you directly. Nevertheless, it is definitely worthwhile presenting your company in a proactive way. For example through a prospecting visit, but also a trade fair or an advertisement in the press. Indicate clearly what your expertise is and the range of products or services you offer. It can never hurt to add a few laudatory references, of course ...
It is also useful to keep an eye on what the competition is doing, even before you actively enter the market for public contracts. It may be interesting to follow a number of awarded contracts and study how selected candidates perform, and to see where you might score even better.
Try to find out more about the operating procedures of the contracting authorities
You may already be able to glean a lot from the area of activity and operating funds of the contracting authority, but it is just as important to be familiar with its decision-making process. Who has a say, who decides and on what basis? Who is responsible for the technical and financial aspects? Do you have to convince the procurement department or the users? And, not forgetting: how long does the entire process take?