Procurement news blog
April 7, 2017 11:10 AM | Posted by
Prandy, Helen |
Even as a procurement specialist I am forced to admit that public procurement is not the most exciting or glamorous subject. There are not many scripts kicking around in Hollywood which feature a procurement lawyer as the main protagonist but just as no one notices the referee until he makes a bad decision when public procurement goes wrong it can go really wrong and the consequences for nearly all involved can be disastrous.
In August 2016 we blogged about the case of Energy Solutions Ltd v The Nuclear Decommissioning Authority in which a judge had characterised an evaluation by the NDA as “fudged” and verging on the “incredible”. With further aspects of the case before the courts and a pending appeal to the Supreme Court the NDA recently acknowledged that the procurement process had been fundamentally flawed.
In doing so, it was forced to terminate a £6.1 billion contract 9 years early and pay a total of £97.5m in compensation, effectively out of the pockets of us, the taxpayers. On top of that the government has ordered an enquiry into the conduct of the procurement, jobs are likely to be lost and the lead contractor for the “winning bidder” had 3% knocked off its share price on the news.
Clearly not all public procurement is so high profile and mistakes will not have such wide-ranging consequences but the reasons for the failure of this procurement are an object lesson to all contracting authorities to ensure that evaluation is carried out fairly and transparently and that clear records are kept of all evaluation decisions and an appropriate audit trail established.
By Helen Prandy - read more about Helen here
March 24, 2017 2:54 PM | Posted by
Beresford-Jones, Jenny |
Where an over threshold public contract is concerned, The Public Contracts Regulations 2015 (and their 2006 predecessors) set out a prescribed statutory framework for bidders and other “economic operators” in the market to challenge a breach of the procurement rules. This involves the sending of Award Decision Notices by the authority, the holding of a standstill period prior to entering into the contract, and the ability of the claimant to apply to suspend the contract award process by making a claim in the High Court during the standstill period (or indeed to claim after the expiry of the standstill period, usually seeking an award of damages or a declaration of ineffectiveness).
What happens, though, where a claimant finds itself sitting outside of this statutory framework and wishes to challenge a procurement decision in court? Perhaps the claimant is not itself a tenderer in the procurement or does not fall within the definition of “economic operator” and there it has no right to use the statutory framework to bring a claim?
In this situation a claimant may fall back on a judicial review, or “JR”, claim. As the name suggests, this a claim to have the decision of a public body reviewed by the Courts. It is often used in the procurement context where the claimant is not a tenderer nor a supplier more generally and therefore is unable to use the statutory route to a public procurement claim. An example could be the end-users of a particular health service claiming that the reorganisation of health services in a particular area has not been done lawfully by the authority concerned. However, bringing a JR claim is not always possible, due to the requirement for the claimant to demonstrate to the satisfaction of the Court that it has “sufficient standing” to claim.
In the recent case of Wylde and others v Waverley Borough Council  EWHC 466 (Admin) the court was asked to consider whether the Council's decision to enter into a development agreement to develop a town centre was judicially reviewable or not. The judgment provides an interesting reminder of the issues a court will look at to establish whether the claimant has “sufficient standing” and as such will be of particular interest if bringing (or defending) a procurement challenge outside of the usual mechanism provided in the procurement regulations.
The Council had run a competitive process to appoint a development partner and entered into a contract in 2003 for the work. This was a conditional contract, with the “viability condition” being (put simply) that the scheme to be implemented had to be guaranteed a minimum level of profit. It proved difficult for the parties to meet this viability condition and, in May 2016, the parties agreed to vary the condition and make it less onerous, so that the contract could become unconditional. In November 2016, following the start of this claim for judicial review, the Council published a voluntary ex ante transparency notice (VEAT notice) to give notice of the variation; no responses to the notice were received from any supplier in the market.
This claim was actually brought by five claimants, none of whom was a developer who had, for example, lost out in the procurement process. Rather, the claimants were all local tax payers and some were members of local civic societies aimed at preserving the town, who objected to the development scheme. The claimants claimed that the variation to the development agreement in May 2016 was in fact an illegal variation which amounted to a wholly new contract, requiring a wholly new competition to be run.
The immediate issue for the court, therefore, was whether this group was able to demonstrate “sufficient interest” in the development to warrant it having the necessary standing to bring a claim.
The claimants argued, following the Gottlieb case, that as tax payers to the Council, this indeed gave them “sufficient interest” in the scheme in order for them to claim. The Council and the Developer counter-argued, following the Chandler case, that, even had a new competition been run as the claimants argued it should have been, this would not have affected the claimants since they were not tenderers and because the development, which the claimants opposed, would still have gone ahead (just maybe with a different Developer).
The Court agreed with the Council and the Developer and found that the claimants had insufficient interest in the development agreement to have the necessary standing to bring the JR claim. First of all they could not show that a new process would have produced a different outcome (and indeed the lack of interest in the VEAT notice tended to show that the outcome of a new process would have been unchanged). But further, even if a new process were run and the outcome different, since the Claimants were not themselves tenderers nor connected to one, their interests were not affected.
The case shows some of the hurdles non-tenderer claimants attempting to use the JR route have to get over to succeed. Had the claimants here been, for example, the end users of a health service that was being tendered, it is possible that they may have found it easier to demonstrate that their interests would have been affected by the running of a new procurement and the appointment of a different service provider, and thereby they might have been able to establish standing to bring the claim.
Posted by Jenny Beresford-Jones
March 8, 2017 11:19 AM | Posted by
Beresford-Jones, Jenny |
Transparency is one of a triumvirate of principles underpinning procurement law (the others being non-discrimination and equality of treatment). It is also a cornerstone of UK government procurement policy, with transparency clauses having been included in government model contracts since at least 2011.
The concept of “Transparency” can crop up in many different contexts, from the transparency of contract opportunities available, or the transparency of a procurement process and the ability of the objective bidder to understand what is required of it, through to the transparency of information about the identity of successful bidders in the market.
However, in its latest PPN update to the Transparency Principles first published in the summer of 2015, the focus of the Crown Commercial Service (CCS) is on how a contracting authority can decide whether requested information is disclosable, or not.
In the previous iteration of the principles, the CCS advised applying the disclosure exemptions in the Freedom of Information Act 2000 (FOIA) to determine whether information was or was not disclosable. In the updated principles, however, there seems to be an even stronger emphasis on disclosure, suggesting that there may be a feeling amongst policy makers that contracting authorities may be tending to rely more heavily than they need to on the FOIA exemptions.
While the PPN acknowledges that sometimes the FOIA exemptions will indeed apply, the note now states that there is a presumption of disclosure for the vast majority of commercial information about government contracts, with the FOIA “commercial confidentiality” exemption being relied on only rarely.
The scope of guidance has also been widened and now includes suppliers, whether private, public or third sector. The onus is on suppliers to work together with government to deliver transparency. With private sector suppliers now being brought within the definition of potential in scope organisations, there is a warning to them that companies delivering public services must be mindful of their existing contractual obligations around disclosure. That is, when complying with these principles, the onus is on the provider to ensure nothing disclosed breaches some other contractual obligation (e.g. perhaps with a sub-contractor or other supplier, or indeed with a contracting authority, where, for example, a supplier has acquired sensitive information as part of its provision of the service).
The PNN advises contracting authorities to discuss transparency and disclosure with bidders at an early stage of a procurement process and include wording about these requirements in the procurement documents.
Helpfully, the PPN gives a flavour of the sorts of information that remains likely to attract the FOIA “commercial confidentiality” exemption. For example:
- the method by which a supplier has arrived at the price charged (note this is distinct to the contract value, which would normally be disclosable);
- IP rights – proprietary details of the product or service may be confidential (although information around performance would normally be disclosable);
- Business plans – the guidance notes that the detail of how a supplier expects to generate a return from the contract is likely to be confidential.
The PPN also sets out the following useful guidelines in terms of publishing information:
- where information is redacted, explain why;
- update the information published during the lifecycle of the contract, particularly if there have been significant changes (for example, detailing plans for performance improvement);
- there is also a reminder of the Contracts Finder obligations at Part 4 of the Public Contracts Regulations 2015.
Posted by Jenny Beresford-Jones
December 23, 2016 2:50 PM | Posted by
Beresford-Jones, Jenny |
At this time of year here in the Mills and Reeve procurement team we reflect on the year gone by and on all the queries we have answered via our procurement portal helpline. In no particular order of importance the top five issues this year seem to have been:
(1) Do I really have to advertise on Contracts Finder? How does that fit with our standing orders?
(2) Can I extend or change the contract without having to run a new process?
(3) Do I really need to have all the documents ready to publish when the advert is published?
(4) I think my bid was evaluated incorrectly. Can I challenge?
(5) And finally, will Brexit affect public procurement?
If you too are wondering about any of these questions, please get in touch!
Roundabout now we also usually succumb to a little festivity and this year is no exception……
<<fades to black and white scene by the fire, as the music begins …>>
I’m dreaming of a perfect procurement
That's advertised transparently
With a reminder
On Contracts Finder
Of every 'opportunity'...
I'm dreaming of a perfect procurement
That treats all bidders equally
With criteria apparent
In docs transparent
And published electronically...
I'm dreaming of a perfect procurement
With ev’ry OJEU form I see
May you always get value for money
And may all your procurements be challenge-free!
Merry Christmas and a Happy New Year from the Mills & Reeve procurement team!
November 16, 2016 2:38 PM | Posted by
Beresford-Jones, Jenny |
The Department of Health has published a guidance note, The Public Contracts Regulations 2015 and NHS Commissioners, summarising the main requirements of the Light Touch Regime (LTR) of the Public Contracts Regulations 2015 (PCR 2015) and highlights the changes to commissioners and those supporting them (Commissioning Support Units, NHS Trusts and NHS Foundation Trusts) with their procurement of healthcare services. The guidance should be read in conjunction with regulations 74-77 of the PCR 2015 and the Crown Commercial Service’s guidance on the LTR for health, social, education and certain other services.
Five areas for commissioners to be alert to
- The new provisions of the PCR 2015 relating to the award of clinical services came into force for clinically commissioned work within the NHS on 18 April 2016. Any new healthcare services contract procurement procedure that commences on or after that date will need to comply with the requirements of the PCR 2015.
- Under the PCR 2015 health, social and other specific services are subject to the LTR where the value of the contract is in excess of 750,000 Euros (£589,148 at current exchange rates).
- Under the LTR the PCR 2015 includes some additional requirements including the requirement to advertise in the OJEU either by a contract notice or a prior information notice the intention to award a public contract with a lifetime value of 750,000 Euros (£589,148) or more, except where there is a reason for using the negotiated procedure without prior publication; and that any variation to the procurement process must comply with the principles set out in Regulation 76(4) of the PCR 2015.
- Under the LTR commissioners have the freedom to determine the procurement procedure to use when awarding a contract provided that they satisfy the principle of transparency and equal treatment of providers.
- The guidance note provides that the “PCR 2015 regime is not a barrier to the integration of care services where this make sense for the local community.” - this being a key priority in the NHS Five Year Forward View. Indeed, points out the guidance, the 'light touch regime' specifically states that commissioners may use certain award criteria that are highly relevant to patient care when designing and running their procurement processes, including the needs of vulnerable users, and ensuring the quality, comprehensiveness and continuity of patient services.
What to take away
The introductory section of the guidance states that “The PCR 2015 … contain a number of flexibilities that, where justified, can be used by commissioners to dispense with the need for open competition.” It is important not to read this as suggesting that it is possible to dispense with the need to advertise in the OJEU if the value of the contract is over the threshold. It is true that an over-threshold LTR procurement need not follow one of the formal procurement processes provided that the principles set out in Regulation 76 are followed, but the requirement to advertise cannot be avoided if the contract is over the threshold.
That said, as touched on above, this advertisement need not be made via OJEU Contract Notice; it is instead possible to use a Prior Information Notice (PIN) as a call for competition, provided that the PIN meets the requirements in Regulation 75(1)(b). We have recently seen NHS England use PINs to call for competition for around £15 billion of specialised services contracts and has stated in the PINs its intention to award the contracts for 2017-19 to the incumbent providers, unless expressions of interest are received from alternative operators, triggering a competitive process. The latest guidance draws out the point that commissioners could use the negotiated with notice procedure set out at Regulation 32, provided that the grounds for its use are met. One of these grounds is the situation where in an open/restricted process (for which there has been a call for competition) has yielded no suitable tenders or requests to participate.
For more information on the LTR and how it operates in practice please see our in depth articles here and here.
November 11, 2016 10:18 AM | Posted by
Prandy, Helen |
Fat-finger syndrome, so the ever-reliable internet tells us, is the “occasional tendency of stressed traders working in fast-moving electronic financial markets to press the wrong button on their keyboard and, in the process, lose their employer a mint…”
Sadly any of us using a keyboard connected to the outside world is at risk of accidentally pressing the wrong button and bidders faced with an imminent deadline for submission of their tender via an electronic portal are no exception. If cases before the courts are any reflection then there are a significant number of tenders submitted accidentally either with the wrong information, out of date information or, worst of all, completely blank…it does happen just ask the Legal Aid Agency.
When this does occur the contracting authority has two choices: it can either reject the clearly defective tender out of hand or it can bring the obvious error to the attention of a bidder and ask for it to be remedied. Which approach is correct? While transparency and equal treatment are non-negotiable in bid evaluation contracting authorities do retain a margin of appreciation in matters of judgement provided the exercise of discretion is not manifestly wrong.
That means that both approaches could be correct depending on the circumstances.
A Scottish court has recently considered the correct approach when dealing with the extent to which a contracting authority should allow a bidder to correct an obvious error. In this case a bidder for demolition work had its bid rejected because in relation to Lots 1 and 2 it had omitted mandatory financial information and for Lot 3 had submitted a blank template. The contracting authority disqualified the bid but the bidder argued that as the omissions were obvious and easily corrected it should have been allowed to correct the mistakes so that the bid could be fully considered. It argued that the Authority was bound to seek clarification.
The Authority argued that the requirement of strict compliance was plainly set out in the tender documents given to all bidders. The bidder was not asking to be allowed to correct a formality as it had submitted no figures whatsoever and it was not obvious what it had intended to submit.
The court found for the Authority. It said that there was no duty on the Authority to give a bidder the chance to correct its bid. The reservation of a right in the bid documents to clarify allowed the Authority to resolve ambiguities but not to seek late submission of information which should have been supplied but was not. Had the Authority done so here it was likely that it would breach the principle of equal treatment.
It is not always easy to draw the distinction between an ambiguity which might be clarified and the kind of correction which effectively gives the erring bidder a second chance. In this case although the mistake was obvious allowing it to be corrected meant giving the bidder the chance to submit information it had been required to provide but had not something which is plainly unfair to bidders who had submitted their correct bid by the deadline.
Harsh though this might appear to the (perhaps junior) member of a bid team whose job it is to submit all of the tender on time it is an important reminder that it is never a good idea to leave bid submission to the last minute and to make absolutely sure that the bid is exactly what you need and want to submit.
As for what happens when you try to submit a bid and the computer says no well, that’s another story…
Case referred to: Dem-Master Demolition Limited v Renfrewshire Council  CSOH 150 CA78/16 by Helen Prandy
(click here to see Helen's profile)
November 1, 2016 4:54 PM | Posted by
Beresford-Jones, Jenny |
This article was first published in LexisPSL on 19/10/2016.
The Crown Commercial Service (CCS) has issued new guidance on the social and environmental aspects of the Public Contracts Regulations 2015, SI 2015/102 (PCR 2015). The guidance outlines how contracting authorities may incorporate criteria for compliance with social, environmental and labour law in the public procurement process and when assessing the performance of public contracts.
1. What prompted the guidance? What is the policy background?
The new EU Directive 24/14 on public procurement was implemented in England and Wales by the Public Contracts Regulations 2015 (“PCR 2015”) in February last year. This was the biggest shake up of the public procurement regime in a decade. The PCR 2015 contain greater flexibilities around using public procurement to promote supplier (and supply chain) compliance with social, environmental and labour laws as well as wider scope for evaluating social, environmental and labour law issues as part of the award criteria. That said, the government’s interest in using public procurement as a vehicle for the promotion of these (and other) policy considerations long predates the PCR 2015 – see for example the introduction of the Public Services (Social Value) Act 2012 which requires contracting authorities to have regard to economic, social and environmental well-being when commissioning public services contracts.
At around the same time that this guidance was issued, the Crown Commercial Service also released an updated Selection Questionnaire to replace the old Pre-Qualification Questionnaire. The SQ is mandated for use in over-threshold procurements and contains the “exclusion” criteria required by the Directive, including those around social, environmental and labour law compliance, and as such there is a relationship between these two documents which have both been published recently.
2. What are the key issues addressed by the guidance?
There are two core issues: (1) how can contracting authorities ensure their supply chain is compliant with social, environmental and labour law and (2) how can these factors be lawfully evaluated in the context of a public procurement exercise?
3. What should contracting authorities do in order to ensure compliance with relevant social, environmental and labour laws in delivering public contracts? Is the guidance helpful in clarifying the law in this area?
- The guidance puts the onus onto contracting authorities to decide how they ensure suppliers are compliant and that the approach adopted may vary on a case by case basis. However it makes the following suggestions:
- Do ensure enough information is obtained from the successful bidder to check it satisfied the exclusion criteria (which amongst other things assess compliance with social, environmental and labour laws); and
- Consider the risks of breaches as present within the particular supply chain and carry out checks to an appropriate level of sub-contracting (this will vary depending on the contract value and type).
Also, the guidance requires contracting authorities to use the standard wording provided at Annex B, giving the contracting authority a right to terminate a contract if breaches of social, environmental or labour law come to light.
4. What practical guidance is provided in relation to exclusion, specification, award, and contract lifecycle?
In relation to exclusion, the guidance helpfully sets out how exclusion grounds may be used to further social policy goals. Where a supplier is convicted of terrorist, child labour or human trafficking offences they must be excluded. Where the offence is a violation of social, labour or environmental conventions then the contractor may be excluded. The guidance helpfully also references the new Regulation 71 obligation to ensure that sub-contractors who breach these exclusion criteria are indeed replaced and contains an FAQ around how far down the supply chain the contracting authority is expected to probe. Interestingly the guidance does not mention the new “self-cleaning” mechanism set out at Regulation 57(13) onwards. This mechanism allows a supplier who has breached one of these criteria to provide evidence of measures it has taken to address the issue. The contracting authority can then decide whether it views these measures as adequate and whether to exclude the supplier.
Around specification, the guidance highlights how labelling requirements could be used to allow a contracting authority to further environmental goals (for example, labels to certify energy efficiency standards). There is a reminder of the conditions the label concerned must meet in order to be acceptable under the PCR 2015 (particularly, the requirements for use of the label must be based on objective and non-discriminatory criteria and be established by an authority not linked to the contracting authority, “equivalent” labels must also be accepted and there must be a clear with the subject matter of the contract in question.). The guidance also notes the requirement at Regulation 42(8) to actively include accessibility criteria where the end result of the procurement is product or service destined for use by individuals.
In terms of award criteria, attention is drawn to the fact that Regulation 67(2) now expressly states that award criteria may include environmental or social aspects as long as a clear link with the subject matter of the contract can be demonstrated. So, where products are being acquired, the criteria could take into account not only price and operating cost but also social/environmental issues such as recyclability and the involvement of disadvantaged persons in the manufacturing process. Other examples might include fair trade requirements, such as the requirement to pay a fair price to producers. The new provisions at Regulation 68 on life cycle costing allow the assessment of the cost over the whole lifecycle of a product and allow scope to consider environmental factors such as disposal costs.
The guidance reminds readers that the Directive does not permit contracting authorities to require suppliers to have corporate social responsibility or environmental responsibility policies in place in a generic sense. This is because award criteria (including social or economic award criteria) need to be linked to the specific contract being procured.
Finally, there is a new provision expressly requiring contracting authorities to reject tenders that are abnormally low where the reasons for the low tender is because the supplier is not compliant with national or international labour, social or environmental law.
Once the contract has been signed, social and environmental factors can still play a role. For example Regulation 70 allows special conditions to be included in the contract around its performance, provided this has been highlighted in the procurement documents and the condition can properly be linked to the contract. An example might be conditions around recycling of waste or packaging, or in relation to fair trade requirements.
5. What are the key overarching policy and statutory requirements that contracting authorities should take account of in delivering public contracts in addition to the environmental and societal impact? Is this expected to change in light of Brexit?
While the general approach of the government is to favour light touch regulation, nonetheless it has not shied away from the opportunity to use public procurement regulation as a tool through which to further policy goals. As well as social and environmental goals we have seen other policy objectives. For example:
- Improving access to public contracts for small and medium sized entities (SMEs). This policy goal has led to extra regulation (at Part 4 of the Public Contracts Regulations 2015) around advertising on Contracts Finder and rules around the use of the selection stage to ensure that SMEs are not prejudiced unduly); and
- Increased transparency about opportunities available and contracts awarded. Again, the aim of the Contracts Finder site has been to improve the position here, although perhaps recent Crown Commercial Service reminders about these obligations suggest that not all contracting authorities are compliant.
Although it looks like we will end up with a “hard Brexit” and a very British solution to our relationship with Europe nonetheless we are unlikely to see much change in the public procurement regime at least in the shorter to medium term (although longer term it is possible that the regime will be tweaked or recast). Public procurement is unlikely to be high up the agenda of the post-Brexit legislators. In any event, as the above shows, the government has always had a healthy appetite for regulation in this area, often going beyond the core requirements imposed by the EU Directives.
6. What are the key takeaways for public sector lawyers? Are there any grey areas?
Public procurement is notorious for its “grey areas” and the issues practitioners grapple with are rarely straightforward. Instead we are usually required to apply core principles to a particular circumstance in order to arrive at a view and make a judgment as to how best to proceed. The question of how to introduce social and environmental factors into a public procurement is no exception. The new regime does introduce greater flexibility to evaluate these issues but do bear in mind that:
- Any criteria must be properly linked to the subject matter of the contract and not merely generic; generalised statements about compliance will be insufficient and could open the procurement;
- A contracting authority must not impose requirements that are discriminatory, for example requiring an environmental label that is only available in one member state; and
- Transparency is key, so for example any contract conditions must be set out in the procurement documents, any life cycle costing formula needs to be objectively based and set out upfront in the procurement documents.
7. When is the new guidance effective from? Is further guidance expected?
The new guidance is effective now. Given the CCS’ workload it is perhaps unlikely that further guidance in this area will be issued for a while now, unless responses to this document indicate a need for this.
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