Reference requirements in public procurement – demonstrating a bidder's technical and professional capacity
In public procurement the contracting authority must satisfy itself that the winner of the tender genuinely has what it takes to meet the obligations of the contract. This is assessed by setting suitability requirements for bidders, the most typical of which are reference requirements measuring previous experience.
For a bidding company, reference requirements are often the decisive question of whether to take part at all. The Public Procurement Act (1397/2016) nevertheless sets clear limits on what a buyer may require and how a bidder can meet those requirements.
This article goes through the key principles of the rules on reference requirements from a bidder's perspective.
1. Proportionality of the requirements and the time limits (section 86)
The Procurement Act requires that all suitability requirements, references included, relate to the subject of the procurement and be proportionate to its scale and nature. A contracting authority may not set unjustifiably strict requirements that restrict competition unnecessarily or exclude SMEs from the market without justification.
The law also sets time limits on how old the references a contracting authority may require can be:
- In procurements of goods and services: As a rule, references may be required for the last three (3) years at most.
- In works contracts: The corresponding limit is typically five (5) years.
A contracting authority may depart from these limits and accept older references where necessary to ensure sufficient competition, but a bidder cannot be required, as an absolute condition, to provide evidence going back ten years in an ordinary procurement.
2. Relying on the capacities of other entities (section 78)
One of the Procurement Act's most significant flexibilities for a bidder is the right to rely on the capacities of other entities. If a company does not itself have the number of references required in the tender documents, it can borrow them from another company.
This is done by naming in the bid a capacity-providing subcontractor. A capacity-providing subcontractor can be a parent company, a subsidiary or an entirely external subcontracting partner.
The condition is that the bidder can objectively demonstrate to the contracting authority — through a letter of intent or a subcontracting agreement, for example — that the company's resources and expertise will genuinely be at the bidder's disposal when performing the contract. Note also that the capacity-providing subcontractor must attach its own ESPD form to the bid, confirming that no ground for exclusion applies to it.
3. Bidding as a consortium (section 61)
Another lawful route to meeting heavy reference requirements is to form a consortium. The law allows two or more companies to submit a joint bid.
When bidding as a consortium, the members' references are as a rule added together when assessing whether the suitability requirements are met. This is an excellent strategy where a procurement has been divided into large lots and the combined references of two specialised expert companies meet the buyer's high overall requirement.
4. Start-ups and the absence of references
For a newly founded company, strict company-level reference requirements can be a barrier to market entry. Contracting authorities are entitled to require experience, and the expertise of the staff alone does not always substitute for a company-level reference requirement unless the tender documents specifically allow the use of key persons' previous work experience (personal references).
If the tender documents absolutely require company references that a company does not yet have, the only routes under the Procurement Act are the capacity-providing subcontractor described above, or a joint bid with a more experienced partner. Taking part in market dialogues before the procurement is published is also critical, so that the contracting authority can be encouraged, with good reason, to set the reference requirements at a level that also allows new, innovative players to take part.
Frequently asked questions
How old may the references a contracting authority requires be?
For goods and services, as a rule from the last three years at most; for works contracts, five years (section 86). Older references may be accepted where necessary to ensure sufficient competition.
What if your own references are not enough?
A company can rely on the capacities of other entities (section 78) by naming a capacity-providing subcontractor — a group company or a partner, for example — and demonstrating objectively that the resources really are available (through a letter of intent, for instance).
May a reference requirement restrict competition?
The requirements must relate to the subject of the procurement and be proportionate to its scale. Unjustifiably strict requirements that unnecessarily exclude SMEs are contrary to the Procurement Act.