Bonaire in Business: Transparent procurement and tendering

Blog

15 November 2015

Tendering. It’s common practice in the European Netherlands. If the value of a contract for the delivery of products, the procurement of services or the execution of (construction) work exceeds a certain threshold, government bodies and public enterprises are under the obligation to launch a call for tenders for that contract. Other companies are not obligated to call for tenders, but often use the same procurement procedures to achieve the best procurement result and to be able to account for the spending of their resources.

In Bonaire the legal framework is different, but there is a growing interest in applying tendering and procurement procedures. These are often inspired by the European tendering procedures. As an entrepreneur, what do you need to think about and how can you benefit from it?

Procurement law in Bonaire

A Bonaire entrepreneur will search in vain for the BES Procurement Act and the European procurement directives don’t apply to Bonaire either. Dutch Ministries that commission work in Bonaire (such as the fire station) usually apply the Dutch procurement rules in one form or another, though.

If the procurement rules don’t apply to Bonaire, does that mean that government bodies or public enterprises in Bonaire can design their procurement procedures entirely at their own discretion? That is a complicated legal question that has not yet been answered in Bonaire. There’s a lot to be said for government bodies and public enterprises having to respect at least the general principles of procurement law. This would mean that they would have to set up each procurement procedure under application of the principle of equal treatment, the principle of transparency and the principle of due care. In short, it means that all entrepreneurs must be given the opportunity to express their interest in contracts and that selection must take place in an open and honest manner.

Apart from these legal preconditions, government bodies, public enterprises but also private companies can (voluntarily) choose to design their procurement policy based on these general principles or even according to (Dutch) procurement rules.

Why tendering?

Of course it’s easy to award a contract to a close acquaintance or a company with which you are doing business on a regular basis. Being accountable for that decision is a bit more difficult. If you don’t allow potential contractors or suppliers to compete for a contract, it’s very difficult to say with certainty that you have bargained the lowest price with the best quality. By organizing a tendering procedure you give the market the opportunity to do its job. If the procedure is properly designed, this will result in the best offer for the lowest price.

Some public enterprises, such as WEB, have therefore formulated a procurement policy in which they indicate which principles they use and how they design their procurement procedures. This policy specifies which procurement procedure applies to which type of contracts and how the procedures generally work. As a result, entrepreneurs who want to be considered for contracts know immediately what to expect.

Procurement procedures

The most transparent, but also the most labor-intensive procedure is that of the public tender. In the case of a public tender, the contract is published in local newspapers and on local websites. Everyone can participate in the tender process. In a tender document (also known as the tender instructions) it is described exactly which conditions and criteria are used and what the schedule is. After the submission of the ‘tender’ (the offer) all tenders are assessed and the contract is ‘awarded’.

If a contracting authority expects that too many parties would like to participate, following the publication it will first make a selection of parties with sufficient qualifications to participate in the remainder of the procedure. This should be done according to predetermined, objective and transparent criteria (such as references or certain certificates). The procedure will then be carried out according to the public procedure, but only with the selected parties. This type of procedure is called a restricted procedure or procedure with prior selection.

In addition to a number of procedures for large and complex projects, which I will not describe in further detail here, the so-called ‘direct agreement procedure’ or ‘negotiated procedure’ is often applied in practice. In this procedure, the awarding authority invites a number of entrepreneurs to submit a tender and to exchange ideas about the content of the contract in advance or thereafter. Since not everyone is given the opportunity to participate, this procedure may only be used in exceptional cases under the European Dutch rules. In the procurement policy of government bodies or public enterprises, this procedure is therefore often only used for contracts with a small financial scale.

Criteria

It’s easiest for a contracting authority to assess the tenders on the basis of the criterion of the lowest price. Often quality is also important, though, resulting in the tenders being judged on the basis of the so-called criterion of the most economically advantageous tender. In that case, points are commonly awarded for such aspects as the design, guarantees or a contribution to the local economy (social return), for instance. Those points are then translated into a fictitious discount on the tender amount, which means that a tender with a higher price can still be awarded the contract because its quality exceeds that of its competitors. It’s not easy to come up with a good and appropriate system for this, but if the contracting authority succeeds in doing so it will get good value for money.

Opportunities for entrepreneurs

As an entrepreneur it’s important to keep a close eye on local newspapers and websites, so that you are aware in time of any tender procedures. Perhaps the Public Body of Bonaire could even be persuaded to facilitate a platform for publishing calls for tenders. In the Netherlands this has been done successfully already with ‘Tenderned’.

As an entrepreneur, if you participate in a tender it’s always possible to ask questions about the tender procedure and the criteria to be used. Smart entrepreneurs seize this opportunity to convince the contracting authority to use other or revised criteria, which may increase their chances of success.

As a local entrepreneur in Bonaire there’s nothing wrong with asking the contracting authority to think about criteria of social return. Such criteria can reward a tenderer who stimulates the local economy with a higher score for his or her contribution. From a European perspective such criteria are viewed with mixed feelings, but there is much to be said for applying them in our economy.

Conclusion

Tendering is a nice and transparent method for responsible procurement. For each tender process, an appropriate procedure can be found or designed that does justice to the local conditions and offers entrepreneurs chances to compete for contracts. To entrepreneurs this offers opportunities to set themselves apart and to increase their chances of being awarded contracts.

Tom Peeters is an experienced and specialized real estate lawyer and head of our Bonaire office. He regularly publishes about project development, sustainable energy projects, cooperative structures and (public) procurement. Via this blog he shares his knowledge about these and other legal topics that concern entrepreneurs in Bonaire.