Pegasus Helicopters and the Temptation of Non-Public Deals

In recent weeks, the press has reported that the DGT’s Pegasus helicopters will be grounded for an indefinite period because the Ministry of the Interior’s most recent public tender for their maintenance was declared void.

No company submitted a bid for a contract valued at €40 million over four years, which will now force the Ministry to **restart the procurement process at a higher price than originally.

Although not yet confirmed, it is likely that the DGT will resort to a “negotiated procedure without prior publication” to procure more flexibly what is needed for the Pegasus helicopters to return to operational service.

The negotiated procedure without prior publication is a process provided for under public procurement law for exceptional circumstances, which allows the Administration to negotiate directly with bidders the terms of the future contract (price, deadlines, conditions) rather than setting them unilaterally in advance in a tender specification, as occurs in an open procedure. In addition, it allows the Administration to invite a limited number of companies to participate in the negotiation, rather than opening the opportunity to submit an offer to any bidder meeting the required financial and technical capacity specified in the tender, as is also the case in an open procedure.

Among the exceptional circumstances that allow the use of the negotiated procedure without prior publication, the law provides for cases where a previous open procedure tender has been declared void, as in the Pegasus case, or for the procurement of services that, for technical reasons, can only be performed by a limited number of companies or even a single company.

This is an exceptional procedure that requires the Administration to justify its decision to use it for procurement and, precisely because of its subsidiary nature, the interpretation of the rules governing the negotiated procedure without prior publication must always be strict, in order to avoid unjustifiably restricting free competition among potential bidders.

Although the law is clear in this regard, after several years working in Public Procurement one identifies certain questionable practices, and one of them is clearly the casual use of the negotiated procedure without prior publication. According to OIReScon figures, in 2020, 2021, and 2023, the use of this procedure accounted for 40%, 12%, and 16%, respectively, of all tenders processed.

When the Administration sets a price in an open procedure below market conditions, and does so negligently or fraudulently, it is effectively predetermining that the open procedure will be declared void and subsequently processed through a negotiated procedure without prior publication, in which a price up to 10% higher will be agreed upon, negotiated with a single bidder (or at most two), according to OIReScon data on the average number of bidders invited to participate in negotiated procedures without prior publication processed in 2024.

The Pegasus case is by no means an isolated incident. At the national, regional, and local levels, there are tenders for the acquisition of aerial firefighting vehicles, radar systems for traffic control, and for the procurement of works and services of strategic importance.

The risks of such practices are evident: greater scope for corruption, increased dependence on a few suppliers, and the exclusion of small and medium-sized bidders from the market. In short, it entails the removal of safeguards designed to ensure that the Administration procures under the best possible conditions, in accordance with the principle of efficiency and in protection of taxpayers’ funds.

The solution to the problem undoubtedly lies in strengthening controls over how tender specifications are priced before launching an open procedure, aiming for a standard of diligence and ethics in procurement processes that truly ensures that the negotiated procedure without prior publication is only used when no other alternative remains.

Article published in El Confidencial