A dynamic company needs to be constantly attentive to new market opportunities, especially overseas. In this sense, public procurement or international calls for tender represent potential too often untapped by Belgian companies. To this end, the Trade4U app can prove very useful!
Make the most of untapped opportunities
A huge number of public authorities, both in Belgium and overseas, call on companies for the provision of services, the supply of products, etc. In 2016 alone, the UN (with one of the largest public procurement programmes) launched calls for tender for over 17,000 million dollars (split approximately between the provision of services and the supply of products). A volume which is steadily growing - although Belgium is one of the top suppliers as regards UN contracts (mainly with UNICEF, thanks to the pharmaceutical sector which accounts for over 85%), Belgian companies, in particular SMEs, are still not making the most of this financial godsend.
The importance of being successful first time round
For a company, whatever its size, these public procurement contracts, in particular international contracts, can offer several advantages. Logically, this means new contracts and therefore obtaining revenues. But being successful first time round overseas also constitutes a unique opportunity to "make a mark" in a specific geographic region. This access is crucial in order to guarantee new openings in the long term...
Let's take an example: a Belgian start-up which is successful in a call for tender to provide its innovative technology to an important work site in Dubai is undeniably opening new doors for itself in the Middle East. A virtual circle which can also be applied within the company, because by making this leap, the SME is developing in-house skills in order to respond to specifications. Expertise which will turn into a comparative advantage.
Limited access and administrative workload
And this is often where the problem actually lies: the complexity of public procurement. Particularly when it involves responding to a call for tenders in Brazil or China. If SMEs are still not taking much interest in these market opportunities, it is because there are objective reasons. The significant administrative workload involved in putting a tender together, the lack of human and financial resources internally, contracts with scopes which are too large for the size of the company, not to mention the obstacles associated with the international dimension (language barrier, lack of knowledge of the local reality), but also the lack of visibility of these proposals and so on. In fact, information is key!
Efforts and solutions: Trade4U
Public authorities, particularly in Belgium but also internationally through regional development banks, are endeavouring to make these public calls (for bidders) more accessible to SMEs. Simplification of procedures, shortening of deadlines, division of contracts into smaller lots, etc. In Belgium, both regional export agencies* as well as the Belgian Foreign Trade Agency are working on raising the awareness of Belgian companies and providing them with information. And with this objective in mind, the Trade4U platform was created.
Soon to celebrate its second anniversary, this mobile app (available on smartphone and tablet) centralises business opportunities - several hundreds of websites are sifted through -, international projects and calls for tender all over the world. The functionalities offered to its subscribers (subscription costs EUR 150 per year) include the option of carrying out targeted searches (by country, sector, product, service, etc.), expressing interest in a contract, setting up a consortium (to respond to large-scale contracts), receiving alerts and reminders of deadlines for filing applications, assessing the success of calls for tender (number of clicks) and receiving "public procurement" procedure guides along with foreign trade news and statistics.
* The three regional actors in the foreign trade sector are:
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 is a public contract put out to tender?
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.
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 find public tenders?
Every day dozens of new contracts are published, some of which are undoubtedly of interest to your company. But how and where do you find them?
It is best to start looking through the official channels, where contracting authorities must publish contracts from a certain threshold amount:
- the Belgian Bulletin of Public Tenders if the total amount of the contract exceeds 85,000 euros (excluding VAT)
- the Official Journal of the European Union if the total value of the contract (excluding VAT) exceeds the following threshold amounts:
- 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.
Contracts with a lower value are usually published on the website of the contracting authority or in the trade press.
Publication of tenders at the Flemish and Federal level takes place electronically through e-Procurement, while Wallonia and Brussels have their own platform. If you register on these platforms, you can create a search profile. This way you are automatically notified if a contract is published that meets your selection criteria (e.g. sector, region, amount, etc.).
There are also several specialised providers in our country that offer a similar, paid service.
Prospecting and networks
As an entrepreneur you know only too well how important prospecting and networking are in forging business relationships with individuals or companies. It is no different for the public and social-profit sector. Cold-calling, visiting a contracting authority, participating in trade fairs, word-of-mouth advertising – these are all proven methods to discover interesting opportunities.
Moreover, the budgets of most contracting authorities are public information. By studying their budget carefully, you can infer a lot about their future needs and capacity to tender contracts.
Let your reputation work in your favour
Just as decisive a factor is the reputation you build up by executing public contracts. If public authorities are familiar with the quality of your products or services they will be more inclined to do business with you again. This is especially an asset in procedures with no disclosure, where the contracting authority selects a number of potential suppliers.