Lots in public tenders: which lots should you bid for?

What are lots in a public tender?

A lot (perceel in Dutch) is a separate part of a contract that is awarded on its own. The buyer runs one tender, but each lot can have a different winner. A municipality outsourcing the maintenance of its buildings could, for example, create one lot for electrical work, one for building services and one for roofing. That is a fictional example.

To decide whether the contract must be tendered at European level, the value of all lots is added up (articles 2.18 and 2.19 of the Aanbestedingswet 2012, the Dutch Public Procurement Act).

There is one exception, the lots exemption (percelenregeling). A buyer may keep one or more small lots outside the European procedure. The EU directive allows this for a lot with an estimated value below € 1,000,000 for works and below € 80,000 for supplies and services, excluding VAT. Together these lots may not exceed 20% of the total value of all lots (article 5(10) of Directive 2014/24/EU). In the Netherlands the rule is in articles 2.18 and 2.19 of the Dutch Act; PIANOo, the Dutch public procurement expertise centre, and the Dutch Proportionality Guide explain it.

Why does a public buyer divide a contract into lots?

Because the law says so. Article 1.5 of the Dutch Public Procurement Act says three things. A buyer does not combine contracts unnecessarily. If it does combine them, it gives reasons in the tender documents. And it divides a contract into lots, unless it considers that inappropriate, in which case it also gives reasons. When combining, it weighs the market and access for small and medium-sized businesses, the organisational consequences and risks, and how closely the contracts are related.

According to the Gids Proportionaliteit (the Dutch Proportionality Guide), the starting point of the law is that combined contracts are in principle divided into lots. The guide gives three reasons to do so.

• ExpertiseKnowledge rarely found in one companyThe contract requires different types of expertise that one company often does not have.
• SMEsA chance for smaller businessesThe buyer wants smaller businesses to be able to win part of the contract.
• RiskNo dependence on one supplierThe buyer does not want to depend on a single supplier in a market segment.

The guide sees risk on both sides. A very large contract without lots, or with very large lots, shuts out a large part of the market. As an example of a disproportionate contract, the guide mentions one in which a single supplier must deliver security, cleaning, catering, window cleaning and grounds maintenance together, while companies in that market rarely offer more than one or two of those services.

Lots are the rule. No lots is the exception, and the buyer must explain it.

What if the contract is not divided into lots?

First look for the reasons in the tender documents. Article 1.5 requires the buyer to explain why it does not divide the contract into lots, and the European directive speaks of the main reasons (article 46(1) of Directive 2014/24/EU). If the reasons are missing, or unconvincing because the contract bundles services the market offers separately, ask about it in the clarification round, called the nota van inlichtingen in Dutch tenders. Ask for lots, for example by region or by service, or for the reasons.

Do not wait. Challenge the design of a tender before you bid, not after. How to build such a challenge, and the complaints route that follows, is covered in the Proportionality Guide. If the contract stays in one piece, working with a partner is sometimes the way to take part anyway.

Can you bid for several lots?

Usually yes, but the contract notice decides. The buyer must state in the notice whether you can bid for one or more lots (article 2.10(1) of the Dutch Act). The European directive is more precise: for one, for several or for all of the lots (article 46(2)). A limit on the number of lots you may bid for is called an inschrijvingsbeperking in Dutch practice.

Separately, the buyer can limit how many lots one bidder may win. In Dutch practice this is a gunningsbeperking, an award limit. You may then bid for more lots, but you will win no more than the maximum. For both, fixed rules say what the buyer must announce in advance.

How does an award limit work?

An award limit works in two steps. First the buyer assesses the bids for each lot against the award criteria. If you would then win more lots than the maximum, the allocation rules in the tender documents decide which ones you get.

According to the Proportionality Guide, such a limit can be proportionate, for example to give SMEs a chance or to reduce the buyer’s risk. But the buyer must use it deliberately, with an eye on the market, geographical spread and disciplines, and give reasons for its choice. The guide gives two examples that show the difference.

• Can be proportionateSecurity by regionA buyer with sites in three regions divides security services into three regional lots. A bidder can win only one region. That gives SMEs more opportunities and makes the buyer less dependent on one supplier.
• Not proportionateGrounds and pavingA grounds contract is divided into a lot for grounds maintenance and a lot for paving. Some companies do both. Deciding in advance that a party can win only one of the two lots is, according to the guide, not proportionate.

Read the allocation rules before you decide which lots to bid for. They determine which lot you lose if you win too many. If the documents ask for an order of preference, put the lot you want most at the top, not the lot with the highest revenue. If the rules are unclear, ask in the clarification round how they work in a tie or for a lot nobody else wins.

An award limit does not say how many lots you bid for. It says how many you can win.

What is a bid for a combination of lots?

An offer for a group of lots together, alongside or instead of your offers per lot. This is allowed only if the contract notice reserves the option and states which lots or groups of lots can be combined (article 2.10(2)). If the notice does not, the buyer cannot award a combination of lots. According to the Dutch law firm VH Advocaat, where a combination is allowed the buyer first assesses each lot and then compares whether the combination as a whole scores better on the award criteria.

Watch out for a double meaning. In Dutch tenders, a bid by two or more companies working together is also called a combinatie. That is something else. More on that form of cooperation in consortia and subcontracting.

Which selection criteria apply per lot?

That differs per tender, so read it lot by lot. Lots often have their own size, and with it their own references, turnover requirements or certificates. Also check whether a requirement adds up if you bid for several lots. A turnover or capacity requirement you meet for one lot can be too high for three lots together. If the documents do not say how this works, ask.

Hold the requirements for each lot against the limits in Dutch law and the guide. According to the guide, for example, a reference need not be larger than 60% of the estimated value. Which requirements are too heavy and what to do about them is covered in selection criteria and knock-outs.

Which lots should you bid for?

Ask yourself these four questions for each lot.

1. 1Does the lot fit your company?Look at region, services and references. A lot in your own region, for work you do every day, is easier to win than a lot that needs new staff or a new location. Focus wins more often than spread. Weigh each lot separately in your bid/no-bid decision.
2. 2Can you deliver everything you win?Without an award limit, you can win every lot you bid for. Your bid is binding. So check whether your staff, equipment and planning can cope if you win them all. If not, bid for fewer lots or find a partner.
3. 3Price each lotEach lot has its own competitors, travel times and costs. The same rates for all lots can be too high in one and loss-making in another. Build your price per lot, as described in pricing a proposal. Only bundle a benefit in a bid for a combination of lots if the contract notice allows it.
4. 4Alone or together?If you want more lots than you can handle alone, or you lack a reference for one lot, you can work with others as a consortium or with a subcontractor. Bidding together with a competitor is not automatically allowed; the conditions are in the article on consortia and subcontracting.

A fictional example. A cleaning company from one province sees a tender with four regional lots and an award limit of two lots per bidder. It bids for the two lots in its own region, with a sharp price and a method statement that shows its local team and short travel times. It does not bid for the two distant lots.

Bidding for every lot feels like more chances. Often it is more work for less profit.