The negotiated procedure – a tendering format that calls for dialogue
The negotiated procedure under the Finnish Public Procurement Act (section 34) differs significantly from the open and restricted procedures, because it allows interaction and the amendment of bids during the tendering process. As the procedure is administratively heavy and demands considerable resources from both parties, it is not used for routine procurements; the Act sets separate conditions for its use.
For a bidder, the negotiated procedure offers an exceptional opportunity to present the strengths of its solution and to have a genuine dialogue with the buyer before the final price and solution are locked in.
1. When is the negotiated procedure used?
A contracting authority cannot choose the negotiated procedure freely. It can be used mainly when the subject of the procurement is complex and requires tailoring.
Typical uses are:
- Large and complex IT and software procurements where no ready-made "off-the-shelf" product is directly available.
- Procurements that involve design work or innovative solutions.
- Situations where the technical specifications cannot be defined precisely enough in advance.
2. The stages of the negotiated procedure
The process combines the shortlisting stage of the restricted procedure with a negotiation stage as a new element. In broad terms it proceeds in four steps:
- Request to participate and shortlisting: The contracting authority publishes a contract notice. Companies submit a request to participate in which they demonstrate their financial and technical suitability (references, for example). The authority then selects the candidates who proceed (typically at least three).
- Initial bid: The selected candidates receive the tender documents and submit a first, initial bid on that basis. This serves as the starting point for the negotiations.
- Negotiation stage: The contracting authority negotiates with the bidders in order to adapt the bids to the buyer's needs. Several rounds of negotiations are possible, and they may cover technical solutions, ways of delivering the work or contract terms, for example.
- Final bid and selection: Once the negotiations have been concluded, the contracting authority asks the remaining bidders for final bids. These are no longer negotiated. The winner is chosen according to the award criteria announced in advance.
3. Key points for the bidder
Although the negotiated procedure is flexible, it is not a completely free negotiation. A bidder should keep the following rules in mind:
- Minimum requirements are not negotiable: The contracting authority sets certain minimum requirements and award criteria in the tender documents. There is no flexibility on these during the negotiations. The solution must always meet these basic conditions.
- Equal treatment and trade secrets: The contracting authority must treat all bidders equally in the negotiations. The law protects a bidder's trade secrets: the authority may not disclose a technical solution or innovation proposed by one bidder to the others without explicit consent.
- The weight of the initial bid: Even though it is an initial bid, it must be of sufficient quality. The contracting authority may reserve the right to make the procurement decision directly on the basis of the initial bids without negotiations, if this was stated in the contract notice.
- Reserving resources: Negotiated procedures are often long and require considerably more expert resources from the bidding company (workshops and meetings, for example) than single-stage tenders. This is worth taking into account when planning the time of sales staff and specialists.
Frequently asked questions
When can the negotiated procedure be used?
When the subject of the procurement is complex, requires tailoring, or the technical specifications cannot be defined precisely enough in advance (section 34) — typically in large IT and software procurements and in projects involving design work.
What cannot be flexed in the negotiations?
The minimum requirements and the award criteria are not negotiated. The solution offered must always meet the basic conditions of the tender documents.
How does the negotiated procedure proceed?
In four stages: the request to participate and shortlisting (typically at least three candidates), an initial bid, rounds of negotiations, and final bids that are no longer negotiated.