Public procurement procedures

Public procurement award  procedures come in many kinds, though for the pharmaceutical industry, three procedures are most commonly used (1). The standard procedures to use are either the open or the restricted procedure. In the former, a company may immediately submit an offer, whereas the latter procedure envelops two phases, where, in a first phase, a company can submit a request to participate. In this first phase, the hospital will verify whether the selection (eg financial and technical capacity) are fulfilled and whether no (mandatory) exclusion (eg bankruptcy) are present. After this verification, a bid may be submitted. When a company faces these procedures, the deadline should be checked in the contractual documents, as a deadlines for submission can differ (2).

A third commonly used procedure is the negotiated procedure with prior publication, which also runs in two phases, but is different from the restricted procedure in that companies may negotiate with the hospital after their initial bid about some of the terms of the contract. Here too, the deadlines for submission must be checked (3), but more importantly, it should be pointed out that this procedure can only be used when the (estimated) amount of the tender is below 221.000 EUR (VAT excl.).
 

Standard Operating Procedures

It pays to set up standard operating procedures to deal with bids, as this streamlines the bidding process and allows you to check for common errors in bidding, which might be costly and lead to exclusion or irregularity of the bids. We discuss a couple of "do's and don’t's" in the bid preparation and some recurrent issues regarding pricing and rebates, paying heed to the impact of the Law on Medicinal Products. 

1. Do's and dont's

• Be careful when contacting the hospital (before tendering)
  Though practical questions may be asked and irregularities in contractual documents may be notified, the contact cannot be used to "shape the tender" to your company's advantage, as this could engender an exclusion of the bid.
• Check the formal requirements of the tender
  For tenderers above the "European threshold amounts", an ESPD (4) must be provided, though for tenderers below these thresholds, an "implicit declaration on honour" can suffice. Nonetheless, do not forget to submit additional documents that a contracting authority may request (eg fiscal or social security attestations, a non-bankruptcy certificate, …)
• Only the statutorily competent person may sign the proposal and the inventory
  Check which person has the legal power to bind your company, and should this person enjoy a power of attorney, the mandate must be attached to adequately attest to that.
• Beware when and what you bid: a bid must holds unconditionally
  A bid binds. It cannot be modified after submission and qualified as a legal offer. For that reason to, there can be no conditions imposed or other reservations (never attach your general terms and conditions - they will not only not apply, but can make your bid unlawful). 
• Always insert a confidentiality clause
  At the very least, it should be mentioned that the price (structures, and concomitant rebates or discounts) should be thus treated by the hospital. This reduces the risk of your pricing being disclosed to competitors, which sometimes intentionally lodge claims before the Council of State in the hope of such disclosure, since a hospital will be required to submit the bid to the judge, who cannot treat it confidentially unless a confidentiality clause has been enshrined in the tender.

2. Pricing and rebates

You should avoid "abnormally low" tenders, which may be excluded from the procedures. At least you should have a convincing explanation for your price.

In terms of that explanation, pay attention to some legal pointers. Bundling discounts (discounts for participation in several lots) are only allowed, if tender documents do not preclude them (5). Flat rebates (eg 5% on the ex factory price), on the other hand, are allowed, but should be integrated into the price, to maximize comparability of prices by the hospital. Staggered rebates, applicable to framework contract (where presumable quantities are in play, and the price drops with increased demand) are allowed in this context, unless they amount to so-called stretch rebates, where a discount applies only on certain conditions, eg the hospital buying 20% more each year (6). 

Furthermore, a rebate must relate to a concerned tender (you can't offer, eg, free products), and it should be transparent and clearly indicated how the rebates work. From the point of view of Article 10 of the Law on Medicinal Products, some further restrictions apply. This articles prohibits, in the framework of supply, prescription, delivery or administering of medicinal products to directly or indirectly offer or give benefits or advantages in kind or in cash to wholesalers, brokers, persons entitled to prescribe, deliver or administer such products or to institutions where these activities take place. This well-known restriction has sparked discussion about how it is to tie in with public procurement law, and a the majority of lawyers now claim that economic margins and discounts which are part of the usual purchases and sales of medicinal products are not per se contrary to Article 10 of the Law. In order to minimize risk, we would advise that a commercial agreement clearly make reference to the tender, that compromising wording (such as bonus, or monetary benefit) are avoided, and that transactions should be monitored to be with the contracting authority (hospital, and not with a third party, linked with eg a specialist).

The result: what is a public contract?

The tender contract consist of essentially three documents, ie the technical specifications ("bestek" / "cahier special des charges"), of your bid, and of the general tender conditions, enshrined in a 2013 Royal Decree. 

Only these written documents constitute the contract, and these must be available in writing. Orally agreed contracts are usually considered null and void (7). Aside, a hospital must provide (sufficient) reasons for its decision to select a competitor and award the contract, even if confidential information is involved (8).

More generally, if a hospital fails to organize a call for tenders, it violates the law. Some courts have decided to deem ensuing contract (likewise) absolutely null and void (9). Should you encounter such a practice, you should inform the hospital in writing that public tender rules are applicable here. Although it might not protect your company against absolute nullity, it may break ground to file for damages.

Further

Should you have any questions or if you like to check whether your SoPs still comply with the latest developments in public procurement law, or more generally, in terms of regulatory compliance, please do not hesitate to contact Christel Brion (christel.brion@nautadutilh.com) or Jens Mosselmans (jens.mosselmans@nautadutilh.com).

On 21 March 2019, we were very pleased to welcome Mieke Goossens amongst us at our first Healthcare Compliance Workshop. Mieke, member of the Management Committee of betransparent.be, had a discussion with Christel Brion on the transparency obligations in the pharma and medtech sector.

1) Aside from the so-called negotiated procedure without (prior) publication, which can be used, for instance, when a hospital is faced with a monopoly in the market.
2) Normally, it is 35 days for an open procedure, but 30 days for a restricted procedure. In cases of urgency, this timeframe might be shorter (15 days).
3) The standard timeframe is 22 days.
4) European Single Procurement Document.
5) Art. 50 of the 18 April 2017 Royal Decree on public procurement procedures.
6) In this case, the price will not be deemed sufficiently transparent, so that the tender will be excluded.
7) Article 1 (5) of Public Procurement Directive 2014/24/EU states that public contracts are these "concluded in writing between one or more economic operators and one or more contracting authorities".
8) Eg Council of State, Nos 218.184 (23 Feb 2012) and 211.549 (25 Feb 2011).
9) Eg The Brussels Court of Appeals has rendered decisions holding this implication in 2011 and 2013.