Reserved Contracts

A reserved contract allows for a public body to ‘reserve’ a contract, or elements thereof, to certain types of suppliers. The contract must still be open to competition in accordance with national procurement guidelines but entry to participation is limited to certain suppliers. The decision to reserve a contract, and the basis on which it is being reserved, must be called out in the invitation to tender.

Under the 2016 Regulations, contracting authorities may decide to reserve the right to tender for any contract, or elements thereof, in the following two instances:

• To sheltered workshops and economic operators whose main aim is the social and professional integration of disabled or disadvantaged persons. To participate in reserved procurement procedures, 30% of the company’s employees must be disadvantaged (Regulation 20); and

• For certain contracts for health, social and cultural services (these contracts are specifically listed by CPV code in Regulation 77 of the 2016 Regulations) to organisations such as not-for-profit organisations which meet certain conditions, namely the pursuit of a public service mission linked to the delivery of the relevant services and reinvestment of profits in the organisation. The management and ownership structure of the organisation performing the contract should be based on employee ownership or participatory principles or have active participation from employees or stake holders. The organisation should not have been awarded a contract for the services concerned in the preceding three years. (Regulation 77).

What is a sheltered workshop?

A sheltered workshop is defined as an organisation in which at least 30% of the employees are either disabled or disadvantaged.

What is meant by the term Disadvantaged?

The term ‘disadvantaged’ is not defined in the 2016 Regulations. However, Recital 36 of Directive 2014/24/EU indicates that the term includes the unemployed, members of disadvantaged minorities or otherwise socially marginalised groups.

Under normal conditions of competition, ‘sheltered workshops’ or social enterprises whose main aim is to integrate disadvantaged people in the workplace might not be able to obtain contracts. Under the EU Procurement Directives, contracting authorities are able to restrict some tendering procedures to ‘sheltered workshops’ and social enterprises. To participate in reserved procurement procedures, 30% of the company’s employees must be disadvantaged.

The call for competition shall make reference to Article 20 of the Public Authorities Contracts Directive.

Contracting authorities may reserve certain types of contracts for certain types of organisations. In other words, it is legally possible to close, for a defined period of time, some markets to suppliers of a specific nature, referred to in Regulation 77 as “qualifying organisations”. These contracts have to exclusively target one or more of the following services in the categories listed in Regulation 77(2) using the relevant CPV (Common Procurement Vocabulary) codes14 which include:

In the cases where reserving contracts under Regulation 77 is possible, the contracting authority will need to make sure that the type of organisation awarded the contract is a ‘qualifying organisation’. For the purposes of the Regulation, a qualifying organisation needs to comply with following cumulative list of requirements:

• It needs to pursue a public service mission linked with any of the contracts mentioned above.

• Their profits are reinvested into the organisation with a view to achieving the organisation’s objective. Where profits are distributed or redistributed, this should be based on participatory considerations (for example, profits should be reinvested within the organisation with the purpose of achieving its social goal). In relation to the latter, certain profit-based models (for example, companies that ensure they employ 30% or more disabled or disadvantaged persons but who are commercial in nature) are also allowed to compete.

• The management and ownership structures need to be based on employee ownership or participatory principles, or require the active participation of employees, users or stakeholders.

• The final requirement is that the organisation cannot be awarded the same contract (with the same CPV code) by the same contracting authority again within a three year period. They can win contracts with other CPV codes awarded by the same contracting authority or win contracts with the same code but awarded by other contracting authorities.

Considerations

• A contracting authority should pursue this option on the basis of their user requirement and specification, after establishing that supported employment organisations can meet this specific requirement and provide value for money before conducting the procurement exercise.

• It is important to note that the role of social enterprises and their contribution to the delivery of public services through grant-funded schemes will not be affected by this aspect of the Directives.

• It is also important to note that the duration of the contract shall not be longer than 3 years.

• The call for competition shall make reference to Regulation 77 of the European Union (Award of Public Authority Contracts) Regulations 2016 (S.I. No. 284/2016).

The 2016 Regulations explicitly allow a contracting authority to conduct market consultations with suppliers and expert bodies before the start of a procurement process which may facilitate improved specifications, better outcomes and shorter procurement times.

Preliminary market consultation can provide insights about the capacity of the market to deliver on the requirements of the contracting authority and the risks involved. If a contracting authority determines that the market lacks the capacity to deliver a reserved contract, it may consider encouraging the formation of consortia or dividing larger contracts into lots which can be reserved.

It is essential, however, that any pre market engagement does not create advantages for certain market players or result in specifications and tender documents being drafted in their favour. Market consultation should be sufficiently broad to provide the contracting authority with meaningful feedback on the relevant market. Requests for information can be issued via eTenders to a wide number of suppliers according to their Common Procurement Vocabulary (CPV) codes.

If the market consultation is followed by a tender competition, it is important that there is no basis for any assertion of bias, unfairness, discrimination or lack of transparency. Therefore, the process adopted and information received during market consultation should be clearly recorded in writing. Contracting authorities should take appropriate measures to ensure that participation by potential tenderers in pre-market consultations does not distort competition, that any relevant information exchanged in the context of, or resulting from, the involvement of a tenderer in the pre-market consultation is made available to all other participating tenderers, and the adequate time limits for receipt of tenders are fixed to ensure each tenderer has the opportunity to submit a tender.

Compliance with the obligation of transparency requires that the process of obtaining market intelligence is kept separate from the tendering and award phase of the competition.

Any public sector body interested in learning more about reserved contracts can contact the OGP via support@ogp.gov.ie.

Resources/Tools

Information Note on Incorporating Social Considerations Into Public Procurement

Procurement Guidelines

Buying Social 2nd Edition

Making socially responsible public procurement work - 71 good practice cases