A new technology, a new procurement act and dramatic changes in the market terms will set new agenda in relation to tender procedures concerning street lighting in the years to come. Consequently, ÅF Lighting and Horten have developed a second version of the tender material used most frequently in the market until now. The new material takes into consideration the new possibilities and the experience obtained after more than 20 tender procedures in recent years, among others on behalf of Hovedstadens Belysningssamarbejde.

This must be seen in the light of the fact that, in close cooperation with Horten, ÅF Lighting has experienced a surge of tender procedures concerning municipal street lighting in recent years. The tender procedures are a consequence of a number of repurchases of lighting installations from local power companies. To obtain the savings from the new LED technology and advanced control solutions and the advantages of the dramatically changed competition, a number of municipalities, for instance Gribskov, Greve, Herlev, Brøndby, Lejre and Dragør, have invited to tenders for the municipal operation and maintenance and the energy renovation of old street lighting installations. It was therefore necessary to repurchase the lighting installations.
The above municipalities all saved several millions by putting up the operation, maintenance and energy renovation up for tender through an aggregate tender procedure based on models with incorporated dynamic prices on fittings and guarantees for energy savings. During the next tender surge, the possibilities of the new procurement act will be incorporated as well as the experiences gained. This will for instance include light control strategies, energy renovation, contract term, guarantees and transient protection.

Advanced tender

The change to LED technology and advanced control solutions make it possible to achieve major energy savings, even though these savings mat vary a lot depending on the fitting and the solution. This makes requirements for advanced procurement procedures taking the above development into account and which may optimise price, design, quality and energy efficiency.
The development of the LED technology also makes new requirements for guarantees and service life, resulting in the tender making similar requirements ensuring that the assumptions concerning energy savings and repayment terms may be complied with in practice.
In line with the LED and control technology developing, the requirements and solutions also change and consequently, the procurement procedures must be adapted on a current basis in order for the municipalities to obtain the most optimal solutions living up to their individual needs from time to time.

Major savings

Today, many municipalities worry about the total transaction costs when planning and putting purchases up for tender. But it always turns out that these costs are recouped very quickly by inviting tenders for street lighting. When assessing calls for tenders for operation and maintenance of street lighting in recent years, the market has changed significantly. The municipalities that have carried out tender procedures have reduced the costs for operation and maintenance by more than 70% provided that the task has not been put out for tender previously, and that is without impairing the service level.
The most recent example is the Municipality of Brøndby, which saved DKK 420 per fitting on all 11,000 fittings by putting out the operation and maintenance for tender. This was an annual saving of more than DKK 4 million without any impairment in the service level, according to the municipality. Previously, the power company fixed the price - but the market does.
We actually see that the market for operation and maintenance of street lighting expands at the moment. Partly because there are a number of suppliers who have specialised in this kind of maintenance task, and partly because new suppliers/contractors emerge all the time, who are experienced within similar tasks. The market is therefore still interesting for new companies despite heavily decreasing prices.
The same development is seen in Sweden and Norway where the markets are also changing heavily due to new technology, requirements for competition and a great need for energy renovation.

Pitfalls and experiences

Our experience with tender procedures concerning street lighting shows that, despite the complex content, the tender procedures may be carried out relatively easily, but also that there are great savings to obtain in the way the tender procedures are carried out. In general, it is important that the task is clearly defined and described in detail.
It is decisive to have an overview of the existing installations. Often, information on the installations is available in a data base or a GIS system, but if this information is incorrect or not updated, the tenderers run a greater risk resulting in increased prices. A correct and updated overview of the installations will, on the other hand, give the tenderers exact information on the installations, making it possible to offer the best solution and to identify potential savings either by replacing fittings or by investing in control and dimmers.
To obtain the best savings, our models are based on finding one supplier for both the operation, maintenance and energy renovation. This model will provide advantages instead of dividing the task into several minor deliveries consisting of fittings, poles, operation and maintenance.
One of the most important advantages of one supplier is that the interfaces are more simple as only one supplier is responsible for fittings, control, poles, installation and operation and maintenance.
This also means that one supplier is responsible for the planning and implementation. Finally, only one supplier is to order and coordinate deliveries and ensure that the material is ready for installation.
Tasks that would rest heavily on the municipality if it was divided between several suppliers.
It will also be more simple to handle the guarantee obligations as only the supplier will be responsible for the installation. In case of one supplier, this will typically be a major player purchasing a lot of fittings, poles and equipment therefore being in a far better position in case of problems with the products than compared to the municipality. To this must be added the price. The total price will be significantly lower when the operation, maintenance and energy renovation are provided in one aggregate delivery. Finally, a larger contract sum and the possibility of coordinating the operation and maintenance with the replacement of the installations is a far more attractive task for the supplier.

New procurement act and new possibilities

The new procurement act, which came into force on 1 January 2016, has increased the possibility of applying the more flexible negotiated tender procedures.  This is especially a positive development in connection with more complex contracts because the possibilities of providing and receiving better tenders are optimised.
Negotiated tender procedures are conditional on the contract's content necessitating a more flexible procedure.
This could for instance be complex contracts where the solution is innovative or related to special risks or where it has simply not been possible to describe the task sufficiently in connection with the contract notice.
It is characteristic that negotiated tender procedures may now be applied even if a solution is already available in the market if only a certain adaptation is required in connection with the purchase. As previously, it is still not possible to offer a standard service in connection with negotiated tender procedures. Tender procedures concerning street lighting are undoubtedly complex justifying application of negotiated tender procedures.

What can be negotiated?

The purpose of the negotiations is that the contracting entity can receive tenders during several stages and in each stage is able to influence and optimise the quality and content of the tender bids.
A major and absolutely very important new creation in relation to the new act is the very wide limits as to what can be discussed during a negotiation meeting. In principle, all matters may be discussed if feedback is provided in accordance with the principle on equal treatment, meaning that no tenderer can obtain a competitive advantage based on a knowledge head start. On the contrary, there are important restrictions as to which discussions and complaints about the tender documents the contracting entity may meet legally. Basic elements in the tender documents must never be changed as such change may distort competition between the potential suppliers. For example, this applies to the award criteria and the minimum requirements - the contracting entity must therefore clarify its needs and the approximate requirements.

What are the advantages of negotiated tender procedures in connection with street lighting?

One major practical problem in connection with tender procedures concerning street lighting is that it is generally prohibited to state product references in the technical specifications. This is especially problematic in connection with modernisation and energy renovation because there will often be a wish to purchase fittings similar to the ones that the contracting entity has already. References to specific products or manufacturers may be legal if it is otherwise impossible to describe the object accurately and clearly.  It will always be for the contracting entity to prove that it was necessary to refer to a reference product, and this may be difficult to prove because it will almost always be possible to describe the service to some extent. In practice, reference products are quite often used in connection with tender procedures concerning street lighting to ensure that the tenderers get an idea of what expression the contracting entity wants.
In connection with negotiated tender procedures, the parties can discuss the pros and cons of the preliminary tender bid and therefore also products and materials provided, however, that the listed minimum requirements as to functionality have been met. This provides significant flexibility, especially in relation to contracts emphasising on operation and maintenance of street lighting, but emphasising less on modernisation. The contracting entity will be provided more flexibility to adapt the tender bids to its wishes.
As described above, there are wide limits for negotiation and, generally, the contracting entity will have significantly more flexibility and thereby be better able to reach the best solution for the contracting entity by way of a negotiated tender procedure.

Hovedstadens Belysningssamarbejde

For the purpose of collecting experience and knowledge on street lighting, 15 municipalities in the capital established Hovedstadens Belysningssamarbejde in 2014 with the aim of preparing joint standard tender procedure documents concerning street lighting.
ÅF Lighting and Horten won the tender and prepared standard documents containing the most recent technical and legal knowledge. These standard documents have now been tested in many municipalities.

contacts

Andreas Christensen

Partner