Competitive Dialogue and Competitive Procedure with Negotiation: the official guidance, explained

The key facts

• Competitive Dialogue (CD) and Competitive Procedure with Negotiation (CPN) are the two procurement routes under the Public Contracts Regulations 2015 that allow dialogue or negotiation with bidders, and the recommended routes for complex outsourcing projects.
• The regulations permit them where needs cannot be met without adapting available solutions, where design or innovation is involved, where prior negotiation is needed because of the nature, complexity or risk of the requirement, where technical specifications cannot be set precisely, or where only unacceptable or irregular tenders were received.
• Almost all attributes of CPN are available under CD, which offers marginally greater flexibility; CPN allows award on initial tenders where that right was reserved in the contract notice.
• Both procedures follow five stages: planning and pre-market engagement, advertise and selection, dialogue or negotiation, final tenders, and award, with a review at the end of each stage.
• As a guide, a successful CD or CPN takes approximately nine months, and sometimes longer depending on market structure and complexity.
• A minimum of three bidders meeting the selection criteria must be invited to participate, and shortlisting uses the Standard Selection Questionnaire.
• The Should Cost Model informs the department's negotiating position and the robustness of bids, and is not normally shared with bidders.
• The project business case should always justify the chosen procurement procedure.

What this guidance note is and who it applies to

This May 2021 guidance note provides high-level guidance on the Competitive Dialogue and Competitive Procedure with Negotiation procurement procedures, building on chapter 6 of the Sourcing Playbook. It is a collection of best practice for commercial practitioners, aimed at running planned, structured processes that maximise value for money and minimise risk, and it assumes suitably qualified and experienced practitioners are in place, since both are complex procedures.

CD and CPN are the two legislative procurement routes that allow departments to hold dialogue or negotiations with bidders. For complex outsourcing projects they are the recommended routes, because there is a high probability that departments and bidders will need to talk through significant risks on both sides. In the note's usage, dialogue is discussion of any aspect of the procurement under CD, and negotiation is discussion aimed at improving the content of tenders under CPN, though each concept is wide enough to accommodate the other provided the principles of transparency, equal treatment and non-discrimination are respected.

When CD or CPN is the right route

The regulations set out when the procedures may be used: where needs cannot be met without adaptation of readily available solutions, where the works, services or supplies include design or innovative solutions, where the contract cannot be awarded without prior negotiation because of its nature, the complexity of its legal and financial make-up or its risks, where technical specifications cannot be established with sufficient precision, or where only unacceptable or irregular tenders were received in an open or restricted procedure.

The note adds practical indicators: no off-the-shelf solution, solutions needing adaptation, complex legal or financial frameworks, multiple stakeholders, interoperability risk across multiple technical solutions, solutions needing stress testing for long term viability, complex milestones and KPIs, critical risk allocation, high levels of employee transfer, high business continuity risk, costly data inaccuracy, high due diligence needs, unpredictability in policy or demand, and opportunities to drive out cost without harming quality. The business case should always justify the procedure chosen, and SROs should seek assurance that the recommended route provides scope for any necessary dialogue or negotiation.

Choosing between the two, almost all attributes of CPN are available under CD, which expressly allows all aspects of the procurement to be discussed, final tenders to be clarified, specified and optimised, and negotiation with the winning bidder to confirm financial commitments or other terms. CPN's distinctive features, awarding on initial tenders where reserved in the contract notice and greater flexibility on time limits, are hard to envisage applying to complex outsourcing, which is why CD is often the more attractive option, though departments must always assess which procedure suits the specific commercial outcome.

The five stages from planning to award

Both procedures run through five key stages: planning and pre-market engagement, advertise and selection, dialogue or negotiation, final tenders, and award. At the end of each stage the department should review whether the procurement remains on track and the business case assumptions remain valid. As a guide, a successful process takes approximately nine months, with no set timeframe beyond the minimum periods for participation requests, initial tenders and standstill.

Stage one carries the heaviest lifting: early market engagement to warm up the market, confirm one exists, take soundings on scope, risk and cost, and test the contractual model; resourcing with an SRO appointed before planning starts, a core team spanning policy, commercial, financial and legal roles, and a Senior Responsible Industry Executive identified by each shortlisted bidder as a senior channel for issue resolution; a realistic timetable reviewed weekly by the programme management office; delegated decision-making with pre-agreed tolerances; robust record keeping, usually a Virtual Data Room for structured data sharing; and mechanisms to protect bidders' intellectual property and commercially sensitive information.

At stage two, the competition is advertised by Contract Notice, with CD requiring an indicative timeframe and CPN requiring any reservation of the right to award on initial tenders to be stated up front. Shortlisting applies the Standard Selection Questionnaire, and a minimum of three bidders meeting the selection criteria must be invited to participate. Stages four and five mirror conventional procurement: final tenders evaluated against the published criteria, standstill letters, and contract finalisation during standstill, with CD allowing limited post-tender negotiation with the winner provided essential aspects are not materially modified.

Running the dialogue well

The heart of the process is stage three. A robust dialogue or negotiation strategy sets objectives and parameters topic by topic, is approved through governance before deployment, and starts from a narrow point of definition, expanding only where there is clear benefit. The objectives the note lists are instructive: testing deliverability with technical and financial experts, exploring innovation with agreed mechanisms for funding and intellectual property, removing bidder assumptions or assigning clear ownership of their consequences, allocating risk appropriately across pricing mechanisms, performance regimes and contract terms, driving greater value for money without increasing delivery risk, testing working relationships, and agreeing how change will be managed over the contract life.

The Model Services Contract lets departments hold most contract terms as non-negotiable, keeping discussion focused. The Should Cost Model is used to ensure suppliers provide transparency on all key cost drivers, informing the department's negotiating position without normally being shared. Bidders should be told early where proposals fall short, though dialogue must never be used to signal how bidders will score. Dialogue closes only when the department is satisfied it will receive at least one tender capable of meeting its needs, and closure is communicated formally to all bidders.

The note ends with pitfalls drawn from experience, including insufficient or poor early market engagement, which can take months but underpins confidence in the entire process, limited competition that weakens buying power, and poor risk identification and allocation.

How eSourcing Data helps

CD and CPN place extreme demands on process discipline: parallel sessions with multiple bidders, equal treatment across every exchange, high volumes of clarifications, and an audit trail that must survive into the procurement report. eSourcing Data provides the structured environment this requires, with procurement records, communications and documents held centrally and timestamped, so consistency between bidders can be demonstrated rather than asserted.

Clarification management is a particular pressure point the guidance highlights, with responses shared with all bidders unless genuinely commercially sensitive. Running clarifications through the platform keeps a single written channel per procurement, supports quality assurance before release, and leaves the evidence of equal treatment in place automatically.

From advertisement through evaluation to award, notices, published criteria and evaluation records sit in one system, which shortens the path from closed dialogue to a defensible award decision and gives programme boards live visibility of a process that typically runs for nine months or more.

What to do about it

1. 1Justify the choice of CD or CPN in the business case against the regulatory grounds and the note's complexity indicators.
2. 2Invest properly in pre-market engagement before advertising: confirm market appetite, test the contractual model and sound out scope, risks and costs.
3. 3Appoint the SRO before planning starts, build a full core team, and ask each shortlisted bidder to name a Senior Responsible Industry Executive.
4. 4Publish a realistic end-to-end timetable, review it weekly, and communicate any change to all bidders at the earliest opportunity.
5. 5Agree delegated authority, risk and cost tolerances before dialogue opens so the negotiating team can decide within a known envelope.
6. 6Define a narrow list of topics for dialogue or negotiation, hold Model Services Contract terms non-negotiable where possible, and expand only where there is clear benefit.
7. 7Stand up a Virtual Data Room and a clarification process that evidences equal treatment from day one.