This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
Implementation Standards for Framework Agreements
Well-documented concerns over the non-transparent use of supplier rosters, along with repeated failures in effectively consolidating government purchasing, have led to a widespread series of public sector reforms aimed at creating clearer rules around the creation and administration of Framework Agreements. By way of example, these reforms have included a series of international arrangements directed at reducing the barriers to competition created by local supplier lists:
The World Trade Organization’s Government Procurement Agreement (GPA) is an international trade treaty that includes the United Kingdom,United States, Canada, and many European countries. Article 8 – Qualification of Suppliers contains provisions which are relevant to the creation of supplier rosters for the purposes of creating master contract arrangements. These rules prohibit discrimination based on place of origin, require transparency in selection criteria, contemplate the acceptance of suppliers prequalified by the other parties, and prohibit the use of permanent prequalification lists that block supplier access to competition.
In December 2011, the United Nations ratified the 2011 edition of the United Nations Commission on International Trade Law Model Law on Public Procurement (the UN Model Procurement Law). The updated UN Model Procurement Law replaced the 1994 version and contained some notable updates, including the recognition of the use of master standing agreements that are referred to as Framework Agreements and detailed protocols for the creation and use of master agreements with multiple assignments. The UN Model Procurement Law recognizes both closed Framework Agreements (using a limited number of prequalifiedsuppliers for a finite number of years), as well as open Framework Agreements (which are indefinite in duration and therefore require more robust refresh protocols to allow new suppliers into the arrangement).
The European Union’s 2014 Procurement Directive, and the UK’s Public Contracts Regulations 2015 (which are based on the EU Procurement Directive),contain updated rules for the use of framework agreements. These rules require second-stage competitions where more than one supplier is selected under a framework arrangement and require that contract awards under frameworks must be made according to clear procedures and criteria. These rules align with the closed Framework Agreement rules under the UN Model Procurement Law. These statutes also contain Dynamic Purchasing System rules that align with the open Framework Agreement protocols under the UN Model Procurement Law.
The 2017 Canadian Free Trade Agreement (CFTA) and Canada-Europe Comprehensive Economic and Trade Agreement (CETA) both contain protocols governing the use of Framework Agreements. Article 508 of the CFTA regulates the prequalification of suppliers and now requires an annual re-posting where supplier prequalification lists will be used for more than three years. It also prescribes general disclosure requirements surrounding the evaluation and use of supplier lists and standing arrangements, including the call-up processes for awarding specific work under those frameworks. The CETA provisions regarding the use of prequalification processes and supplier lists are similar to the CFTA rules, but the CETA rules create stricter standards regarding the ongoing obligation to allow new suppliers onto suppliers lists while those lists remain in use. Those stricter standards align with the UN Model Procurement Law open Framework Agreement protocols and the Dynamic Purchasing System rules recognized under the EU Directive and UK Regulations. The CETA rules restrict the ability to extend the duration of closed Framework Agreements beyond the restrictions contained in the CFTA. If the total expenditure under a framework meets or exceeds the CETA thresholds, the stricter CETA rules would apply.
The former North American Free Trade Agreement (NAFTA) between Canada, the US, and Mexico contained similar provisions to those contained in the GPA. Specifically, Article 1009: Qualification of Suppliers in the NAFTA set out rules for the prequalification of suppliers which prohibited the discrimination based on place of origin, required transparency in selection criteria, contemplated the acceptance of suppliers prequalified by the other parties, and prohibited the use of permanent prequalification lists that indefinitely block supplier access to competition. Article 13.8 of the 2018 United States-Mexico-Canada Agreement contains the same restrictions against created “closed-shop” supplier lists.
As these examples illustrate, the trade treaty currents are clearly directing the use of prequalification lists and supplier rosters towards the use of open Framework Agreements and away from arrangements that would allow public institutions to create barriers to open competition.