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> Concession Contracts Regulations 2016 

> Utilities Contracts Regulations 2016

> Public Contracts Regulations 2015 

If you're not sure which regulations apply, click here.

Procedures


November 18, 2018 8:36 PM | Posted by Beresford-Jones, Jenny | Permalink

The Court of Appeal has just handed down its judgment in the case of Faraday Development Ltd v West Berkshire Council. This judgment is one of the most important developments in procurement law this year. As it concerned a development agreement, it is especially interesting to those working in the Projects and Construction sectors. However, it also involved a Declaration of Ineffectiveness and the drafting of a VEAT notice, meaning that its relevance extends to all sectors.

The case concerned a development agreement to develop land in Newbury, Berkshire. The contracting authority, West Berkshire Council, entered into a contract with developer St Modwen. The land was parcelled into leases, with the agreement giving St Modwen the option to activate or “draw down” a lease at a future point. Crucially, there was no obligation on St Modwen to take a lease or to start the development works. However, should St Modwen decide to take a lease, an obligation to develop would crystallise at that point and become binding. The arrangement was structured in this way to allow St Modwen the flexibility to decide whether to develop the land in the context of the well-known financial and commercial challenges within the sector.

The Council believed, given that (at the point the agreement was signed) there was no obligation on St Modwen to develop the land or even to take the lease, this contract could not amount to a public works contract as defined in the procurement regulations. Believing itself to be justified in this assessment it published a voluntary ex ante transparency (better known as VEAT) notice in August 2015, explaining that it was entering into the contract, that no OJEU process was required as this was a wholly exempt land transaction with no obligation to develop. The contract was entered into in September 2015, and the claimant Faraday brought a claim, arguing that this was an illegal direct award that ought to have been the subject of a full procurement process under the regulations.

The High Court heard the case at first instance, and, applying the decisions in Helmut Mueller and Midlands Cooperative, decided in the Council’s favour. As there was no obligation on St Modwen to develop, said the High Court, this could not be a contract for public works and therefore there could be no obligation to run a formal procurement process. However, the High Court did give permission for Faraday to appeal, noting that this area of procurement law was one where there was an interest in testing the principles established so far in case law around when a development agreement will (and will not) be caught by the procurement rules.

The Court of Appeal last week overturned that High Court judgment and found in favour of Faraday. It decided that, while it was true that, at the point the development agreement was entered into, there was no obligation on St Modwen to start work, nonetheless, should St Modwen take the option of a lease, the obligation to develop would be triggered. This option was entirely out of the Council’s control, meaning that at some point “down the line” there could potentially be a situation where a developer was developing land for the Council. In other words, the development agreement as signed could lead to a scenario where a public works contract came into being which had not been formally procured in accordance with the regulations.

The Council argued that even if this were the case, it had published a VEAT notice in good faith. This meant, said the Council, that the necessary transparency concerning the arrangement had been achieved as the market had been put on notice of it. The Court however (having looked at the transparency standards set out in the Fastweb case) decided that the VEAT notice was drafted in a way which did not give sufficient detail about the arrangement as a whole in order that other developers could, on reading it, understand the full scope of the transaction. The VEAT notice described the deal as an exempt land transaction without obligations and did not go into detail about the obligation to develop should the lease be drawn down. In reality, the deal was more complex than merely a simple land transaction; the Court held that the VEAT notice fell short of the necessary “clear and unequivocal disclosure”.

Having concluded that the development agreement was, when looked at in the round, a public works contract and that it had been awarded illegally without the necessary procurement process, the court was obliged to grant a Declaration of Ineffectiveness, overturning the contract from the date of the declaration. It was also required to impose a fine on the Council and the penalty was fixed at a nominal amount of £1. This has caused raised eyebrows amongst procurement lawyers, given the requirement in the regulations that these fines be proportionate and “dissuasive”!

However, as leading counsel for the Council explained at the White Paper Procurement Conference in London on Friday, this decision is not in any way a carte blanche to assume that all such civil penalties will be nominal. The circumstances in this case were unusual. The contracting authority had a genuine good faith belief that the procurement regime did not apply to this contract and there was no evidence that the transaction had been structured in this way to deliberately avoid running a procurement. The design of the option structure reflected not a hope to circumvent the rules but rather the commercial reality that developers face in the current climate.

Lessons to take away

Specifically in relation to development agreements, it is no longer safe to assume that where there is no obligation on the developer to develop, the procurement rules will not apply. Post-Faraday (assuming this judgment survives as good law; it is not yet clear whether the Council can or will pursue an appeal to the Supreme Court) it will be necessary to look at the deal in the round, particularly where obligations to develop may crystallise at a later stage in a contingent way.

There are salutary lessons too for those drafting VEAT notices – if you need to do so, you must have regard to the standards laid down in the Fastweb case and ensure that the notice truly reflects the nature of the contract being proposed.

The judgment means that we now have not one but two Declarations of Ineffectiveness in the UK. While on first reading it looks like the civil penalty imposed was anything but “dissuasive” authorities must remember that this case turned on very particular facts and should continue to assume that ineffectiveness fines could well be hefty.

Posted by Jenny Beresford-Jones

November 5, 2018 10:37 AM | Posted by Beresford-Jones, Jenny | Permalink

The lodestar of EU public procurement law is the application of the EC Treaty principles of transparency, non-discrimination, and equal treatment. Much of our work as procurement lawyers involves helping clients to apply these concepts in a practical way to real life situations, where the colour tones tend to be grey rather than black and white!

One of the questions we are regularly asked is about the operation of the equal treatment principle in a situation where an incumbent provider is taking part in the re-procurement of a contract. How far must you go to “level the playing field?” Surely the incumbent has an in-built potential advantage; how do we neutralise that?

A recent European case is helpful and suggests that we don’t need to tie ourselves in too many knots about this.

The claimant was a IT company called Proof. It took part in a competition to provide website and intranet services to the contracting authority, the European Institute for Gender Equality (“EIGE”). This was a re-procurement of a service that was originally set up in 2014. The incumbent provider also took part in the new competition, and emerged as the successful bidder.

Proof brought a claim alleging that the award criteria were vague and that EIGE had deployed excessive discretion in giving a higher score to the incumbent, because of the knowledge the latter had obtained through operating the contract since 2014. Proof cited in particular the following extract from the evaluation report of the winning bid which it said showed favouritism to the incumbent on the basis that it had had the opportunity to understand the contract in greater depth:

‘the tenderer presents a deep understanding of the objectives of the framework contract that is at the same time holistic and highly specific.’

The Court was not persuaded by this argument. It held that, even if the incumbent did enjoy an advantage, this advantage was not as a result of any conduct on the part of EIGE (such as unfair marking or other bias). The Court went on to say that it is “inevitable” that an incumbent will enjoy an “inherent de facto advantage” in any situation where a contract is to be re-procured and the incumbent decides to bid. The authority could only nullify that advantage by excluding the incumbent; this drastic action could not be expected as it would amount to discrimination against the incumbent and would itself be a breach of the EC Treaty principles.

The case illustrates that the equal treatment principle is not a mandate for dealing with all bidders in an identical manner. It shows too that, sometimes, to take this approach might in itself be a breach. Instead, you need to treat bidders who are in the same situation in the same way, and bidders who are in different situations, differently. The reality is that an incumbent and a new potential supplier are in two slightly different positions in relation to the procurement and in terms of their relationship with the contracting authority. While authorities must always guard against any overt actions or decisions that favour the incumbent, it is unlikely that the equal treatment principle will be breached merely for crediting the incumbent with "knowing what it knows" as a result of its prior contractual relationship with the authority.

Case T 10/17 Proof IT SIA v EIGE (16 October 2018)

Posted by Jenny Beresford-Jones

October 1, 2018 8:38 AM | Posted by Prandy, Helen | Permalink

July 2018 will live long in the memory: long hot summer days, a World Cup semi-final and a Welshman winning the Tour de France. With all the excitement it is perhaps not surprising that the latest determination by a judge of what Regulation 69 requires a Contracting Authority to do (or not do) passed by without comment from this blog. However, with the arrival of Autumn it is time to look back at some of the summer’s most interesting procurement decisions.

One of those decisions was Fraser J’s latest analysis of Regulation 69 and whether Contracting Authorities have a positive obligation to investigate if a bid is abnormally low.

In a trial that included evidence that the Claimant might deliberately have over-bid in order to “hurt” the Defendant and in order to effectively create a scenario in which it could bring a challenge based on ‘abnormally low bids’ the judge was critical not just of the behaviour of the Claimant but, more pertinently, of the way it had attempted to demonstrate that the winning bid was ‘abnormally low’.

The judge described the approach to establishing “abnormally low” as “entirely ignoring commercial factors”. The Claimant chose to challenge the bid based on a comparison of rates for some items along with a consideration of its own profit margins. However, the judge was very clear that a simple comparison of numbers is not enough. In every case commercial judgement has to be allowed for including the experience and business skill of the tenderer.

The judge reiterated that the law on abnormally low bids remains that set out in NATS (Services) Ltd v Gatwick Airport Ltd despite the fact that this decision related to the 2006 Regulations and earlier Directive. In particular he emphasised the finding of the court in that case that the purpose of the Regulations is to encourage competition and that:

“A key aspect of this is price and tenderers who are keen to secure a project will want to pitch their prices at a level which will be the lowest. They might be keen to break into a market or establish their market share. There is nothing wrong with that for them or for the utilities or contracting authorities, who are (almost) always keen to place contracts at the lowest price and, preferably, at lower than they have budgeted. One needs to consider how, commercially, a tenderer, which is not the incumbent provider or not the market leader, will ever get a contract unless it puts in attractively low prices”.

Mr Justice Fraser approved the NATS judgment and concluded that the court should be “very slow to interpret the Regulations…as imposing some wide ranging obligation….to determine whether there is or might be an abnormally low tender”. As for whether failing to consider if a bid was abnormally low might amount to some kind of “manifest error” on the part of the Authority this risked “placing an impossible burden on contracting authorities, and stifling true commercial competition.”

The judge concluded that there was no obligation under Regulation 69 to investigate any allegedly abnormally low tender. Regulation 69 simply requires that if a bid is to be rejected as abnormally low then it must be investigated before that is done. There is no corresponding duty to investigate it if the bid is accepted albeit that many contracting authorities, including here, may carry out some form of independent verification of bids as part of their own due diligence process.

For anyone interested in the behaviour of bidders, and perhaps particularly incumbents, the case generally makes interesting reading not just because the judge found that the Claimant “took a conscious decision not to bid on a commercial basis….to try to engineer a situation where the other bids were far lower than its own, in order to justify an attack on the outcome…”. There was also some interesting evidence on the behaviour of (some) incumbents when providing TUPE information and the disclosure of some damning evidence on the decision making process which the judge refused to keep confidential. This included the presentation slide about seeking “to hurt” the Defendant.

It is possible that this case sounds the death knell of challenges on abnormally low bids. They are difficult anyway but the emphasis on commercial factors, nous and experience are all intangible factors which might be impossible to gainsay. That is not to say that we will see an end to Authorities rejecting abnormally low bids but it must be right that the factors the judge relied on here to dismiss the claim must also have to be factored into an Authority’s thinking when considering a bid under Regulation 69 and whether or not it can properly be rejected as ‘abnormally low’.

SRCL Limited v The National Health Service Commissioning Board (also known as NHS England)

Posted by Helen Prandy

September 13, 2018 3:49 PM | Posted by Beresford-Jones, Jenny | Permalink

The government has just published a tranche of papers outlining the potential impact of a “no deal” Brexit. One of the topic areas covers access to public contracts in the event that no deal is reached in time for 29 March 2019 (when Britain leaves the EU).

The paper is light on detail but there are a few points to note:

  • if there is no deal, contracts will no longer be advertised in the OJEU but instead a replacement UK-specific e-notification service will be made available free of charge to all users;
  • current procurement legislation (in particular, the Public Contracts Regulations 2015) will be amended accordingly;
  • the requirements to advertise on Contracts Finder will continue; and
  • further guidance will be issued as Brexit day draws closer.

Posted by Jenny Beresford-Jones

August 29, 2018 2:16 PM | Posted by Helen Prandy | Permalink

This firm recently successfully defended the Secretary of State for Health and Social Care against a claim by DHL Supply Chain Limited for summary judgment in connection with the procurement of a new logistics contract. The procurement is part of an overhaul by the Department of Health and Social Care of the NHS Supply Chain and disaggregating it from a single supplier, DHL, in order to drive efficiencies, leverage NHS purchasing power and generate savings which can be applied to front line services.

In an application before the Technology & Construction Court in early August DHL sought summary judgment on “a simple point of construction” relating to one of the requirements in the Selection Questionnaire. At the same time, the Court also heard our application to lift the automatic suspension imposed by Regulation 95 of the Public Contracts Regulations 2015 and allow the Department to enter into a contract with the winning bidder.

The case was unusual as it looked at summary judgment in the context of a procurement claim where no limitation argument was considered.

In order to defeat a claim for summary judgment a Defendant is required to show that it has a defence with “a realistic prospect of success”. The Court accepted that the construction of the Selection Questionnaire put forward by the Department was supported by other tender documents and in any event the wording should be construed against a factual basis on which the Court needed to hear evidence.

The application to lift the automatic suspension came down to a consideration of where the balance of convenience lay which is always fact specific. In this case, the judge held that the balance of convenience lay in favour of the Department allowing the automatic suspension to be lifted.

DHL were subsequently denied permission to appeal these decisions by the Court of Appeal although a claim for damages continues.

DHL Supply Chain Limited v Secretary of State for Health and Social Care [2018] EWHC 2213 (TCC)

Posted by Helen Prandy

June 14, 2018 11:45 AM | Posted by Prandy, Helen | Permalink

Readers of this blog may recall that last year the Supreme Court dealt something of a blow to bidders by limiting the circumstances in which damages for a procurement breach might be awarded (click here to read our blog post on this).

Now, almost exactly a year later, the High Court has further clarified the position on the court’s powers to order that a contract should be awarded to a bidder where a finding has been made that the Contracting Authority breached the Regulations.

This is an order commonly sought by bidders whose key interest is usually to secure a valuable commercial contract particularly where a court has already concluded that but for the Authority’s breach of the Public Contracts Regulations it would have been the winning bid. With some justification most bidders might consider that in those circumstances it is ‘only fair’ that the contract should be awarded to them.

The Public Contracts Regulations prescribe 3 potential remedies for bidders but these do not include a power to order an Authority to enter into a contract with a bidder who has been successful in proceedings. However, the Regulations do not fetter “other powers of the Court” and so in principle it is possible to ask the court to order that the Authority must enter into a contract with a bidder following the outcome of legal proceedings.

However, the High Court has reiterated that such a remedy will be granted only in “exceptional circumstances”.

As is often the case with such pronouncements there is no clarity around what might amount to an “exceptional circumstance” but the way English law stands at the moment it is in fact difficult to identify any circumstance where such an order might be made.

Why so pessimistic?

Well, English courts have had a long-standing aversion to forcing the provision of services. For example, an employee cannot be ordered to work and an employer cannot be ordered to employ someone. Even more importantly though, in most procurements, ordering an Authority to appoint a particular bidder actually places that bidder in a better position than it was in the tender process itself. Usually the tender documents will reserve a right not to award a contract so all bidders go into the process knowing that a contract may not be concluded.

English courts particularly dislike the principle of putting a litigant in a better position than it would have been in the ordinary course of events so as long as procurement documents retain the right not to award I cannot see any circumstance in which a court will take it upon itself to award the contract and oblige the Authority to appoint a previously unsuccessful bidder.

It is fair to say that the English legal system is not a particularly welcoming place for disappointed bidders: ineffectiveness is virtually unheard of, even now an automatic suspension can be relatively easy to lift , the path to a damages claim is not straight-forward and costs can be prohibitive. However, given the knots the UK Government already finds itself in over the terms of Brexit it is difficult to see this at the top of anyone’s list of legislative priorities any time soon.

MLS (Overseas) Limited v The Secretary of State for Defence and SCA Shipping Consultants Associated Limited (as Interested Party)

Posted by Helen Prandy

April 26, 2018 12:22 PM | Posted by Smith, Ruth | Permalink

The Government has confirmed that the Competition and Markets Authority (CMA) will be the regulator for any State aid regime which is adopted for the UK post-Brexit.

Responding to the House of Lords EU Sub-Committee’s report, following the Committee’s inquiry and call for evidence on the impact of Brexit on UK competition policy, the Government acknowledges the need for a UK-wide State aid regime following exit from the EU (the existing EU State aid rules will continue to apply during the transitional period with the European Commission continuing its responsibility for approving and monitoring aid).  Whilst the Government’s longer term decisions on State aid control will be influenced by the outcome of the EU / UK future trade negotiations, without prejudice to these, the Government is of the view that the UK should be prepared to establish a full, UK-wide subsidy control (State aid) framework, with a single UK body for enforcement and supervision, at the point this is required.  A functioning State aid regulatory regime is seen to be a key part of ensuring fair competition both internationally and within the UK’s internal market; and subsidy controls ensure government interventions are smart, targeted and have incentive effects. 

To ensure any future UK State aid regime is operable, the Government believes the CMA will be best placed to take on the role of independent State aid regulator. This role reflects the CMA’s experience and understanding of markets as the UK’s competition regulator and the independence of its decision-making from Government.  Establishing a clear regulatory function should, according to the Response, ensure the State aid rules will be operated fairly throughout the UK internal market.

Coinciding with the Government’s Response, the CMA has now announced two new appointments through its twitter feed:  Sheldon Mills takes on the role of interim Senior Director for State aid and Juliette Enser as interim Project Director for State aid.

The full text of the Government’s Response (covering both State aid and wider competition policy) is available here.

Have you seen our new Procurement Portal page on State Aid? Click here to read our helpful guide to when State Aid issues may arise and how you might structure your procurement project so as to avoid the application of the State Aid rules.

Posted by Ruth Smith
Mills & Reeve LLP

April 10, 2018 2:28 PM | Posted by Smith, Ruth | Permalink

A new Procurement Policy Note (PPN) from the Crown Commercial Service requires in-scope organisations to take action to update their terms and conditions to include new obligations on suppliers relating to supply chain visibility. Check below to see if this applies to you and, if so, what you need to do.

In scope organisations

The PPN applies to all Central Government Departments, Executive Agencies and Non-Departmental Public Bodies (NDPBs).

What’s required?

For all new procurements commencing from 1st May 2018 which are covered by the Public Contracts Regulations 2015 and which are valued at over £5 million per annum, in-scope organisations must update their contract terms and conditions to include clauses which place new obligations on successful prime supplier(s) to:

  • advertise on Contracts Finder, sub-contract opportunities arising from that contract with a value above £25,000; and
  • report on how much they spend on sub-contracting and, separately, how much they spend directly with SMEs and VCSEs in delivering the contract.

The standard clauses for inclusion in the contract with the prime supplier are provided in the Annexes to the PPN.

Prime supplier to advertise sub-contracting opportunities

The obligation on a prime supplier to advertise sub-contracting opportunities does not apply to sub-contracts arranged or existing prior to the award of the contract (e.g. as part of the tender process).

The inclusion of this new contract condition, requiring the prime to advertise sub-contracts over the specified threshold, must still be relevant and proportionate to the subject matter of the contract. The PPN acknowledges that there may therefore be some exceptions when inclusion of this condition will not be required, or where the threshold for advertising should be increased. For example, if national security interests mean sub-contracts cannot be openly advertised; or if the £25,000 threshold for advertising would be unduly burdensome in the specific circumstances. The test of what is relevant and proportional must be considered on a case by case basis and according to the specific circumstances of the contract.

Beyond advertising, the standard clause does not specify how the prime should conduct the procurement of the sub-contract but there is an expectation that a reasonable time period is given for potential sub-contractors to respond.

The prime should also update the Contracts Finder notice within 90 days of the award to include the appointed sub-contractor(s) details.

Providing data on supply chain spend with SMEs

This further new contract condition requires successful suppliers to provide in scope organisations with data on their direct spend with SME/VCSEs in the supply chain relating to that contract. The data provided, at frequencies to be specified by the in scope organisation, must include:

  • the value of contract revenue sub-contracted; and
  • the value of contract revenue subcontracted to SMEs or VCSEs.

Again, inclusion of this requirement is still subject to the test that the obligation is both relevant and proportionate in the circumstances.

For further details, the PPN (including the suggested standard clauses for inclusion in contracts) is available here.

Posted by Ruth Smith.

February 22, 2018 1:33 PM | Posted by Smith, Ruth | Permalink

Anyone involved in a project which benefits from European Structural and Investment Funds ought to be aware of the risks of failing to fully comply with European procurement rules when purchasing works, goods or services for the project. These projects are frequently subject to rigorous audit and, where evidence of procurement non-compliance is identified, the European Commission takes a very strict approach. Aside from any potential risk of challenge from suppliers, the Commission can also require a financial correction (i.e. repayment) of up to 100% of the EU funds originally granted (together with interest on this amount). This is the case whether or not the funds have already been spent. Where the original EU grant is significant (often £millions) facing a 100% financial correction will not be good news!

In the light of these risks, based on its experience of past audits, the European Commission has identified some of the most common ‘school boy’ procurement errors that have been made and which have resulted in a financial correction. These are included in its recently produced guidance for practitioners. The guidance has been developed to help practitioners steer a safe and lawful path through the public procurement maze.

Working through the main stages in any procurement life cycle, the guidance uses traffic light symbols to highlight ‘risk of errors’ (red) and ‘guidance on steps to help achieve compliance / good practice’ (green).

It also includes some helpful checklists which can be used as a procurement progresses to check compliance at each stage.

Whilst designed specifically with EU funded projects in mind, the guidance is equally relevant to any procurement which is subject to the EU procurement rules (in the UK the Public Contracts Regulations 2015) and is well worth a look.

Details of the guidance are available here.

Posted by Ruth Smith, Mills & Reeve LLP

January 22, 2018 12:05 PM | Posted by Beresford-Jones, Jenny | Permalink

The collapse of Carillion brings uncertainty for its employees, suppliers, sub-contractors, creditors and customers. The company’s liquidation raises a wide ranging set of questions, many of which cannot yet be answered. Of particular interest to public sector customers of Carillion will be the procurement law implications, including those of novating/retendering contracts (discussed further below).

It remains to be seen how Carillion will be wound up but the liquidators state that all the options are being explored, including a potential sale of the businesses and assets in whole or part.

A look at the raw statistics shows the scale and potential complexity of the construction giant’s liquidation. Carillion employs around 20,000 people in the UK directly, while many more workers will be affected by virtue of their being employed by major suppliers to or sub-contractors of Carillion, particularly if they are small or medium-sized entities.

Carillion’s customers will also need to consider their position, with the company being party to around 450 contracts (around one-third of its business) with public bodies (e.g. central and local government, NHS Bodies, schools, prisons and transport).

The firm PWC has been appointed to assist in the liquidation by the Official Receiver and has set up a webpage here, with advice to the various different categories of person/organisation affected.

The official line, at least for the present, appears to be that Carillion is continuing to trade for now, that employees should continue to turn up for work, and suppliers to supply goods and services, as normal.

Customers under current contracts are told that for now Carillion will continue to perform those contracts. How long this will continue is not made clear. Customers will be contacted on a contract by contract basis to discuss ongoing arrangements.

Creditors are advised to register with the liquidator.

Implications from a procurement law perspective

The immediately obvious question will be around whether contracts will have to be retendered competitively or whether the provisions of the Public Contracts Regulations 2015 can be relied on to avoid the need to do this.

Joint venture arrangements may contain step-in rights for one of the other partners to take over Carillion’s role in the delivery of the project. Assuming that these step in rights were included in the original deal then it is reasonable to hope that the exercising of the step in right will qualify as a “clear, precise and unequivocal” review clause and, as such, that the change in supplier will be permitted under Regulation 72. Legal advice would obviously need to be sought to confirm this on a case by case basis.

If parts of the Carillion business are sold then it is possible that contracts within that business will “novate” to the new provider as part of an asset sale. Regulation 72(1)(d)(ii) is helpful here as it provides that no retendering is needed where a new contractor replaces the old upon its succession into the position of the initial contractor following insolvency. A key difficulty here, however, is that the successor contractor must meet the selection criteria used when the contract was originally let. This could be difficult to satisfy if the original competition “set the bar high” in terms of the financial and economic standing required of contractors in order for them to qualify.
Where Regulation 72 cannot confidently be relied on, then contracting authorities are likely to have to run a new procurement for the services/supplies/works concerned.

If a Carillion contract were to be terminated abruptly as part of the liquidation, it is potentially possible (but by no means certain) that this could be done without running a competition. This would be in reliance on Regulation 32 (negotiated procedure without notice) on the grounds that the “extreme urgency” test, due to the novel and unforeseen situation, was met. However this exemption is very narrowly construed by the Courts and should only be relied on after legal advice has been taken and the risks considered.

In the longer term there are also likely to be procurement policy implications of the fallout from the Carillion collapse. Noises are already being made in the press about the systemic failures of procurement processes to identify financially sound tenderers (including those who might previously have issued profit warnings), and about the over-reliance in the construction and other sectors on a few dominant PLCs, at the expense of smaller suppliers.

If you have queries around how to protect your position or manage stop-gap arrangements in the interim period, do contact our free to access to set up an initial chat.

By Jenny Beresford-Jones

January 5, 2018 12:22 PM | Posted by Beresford-Jones, Jenny | Permalink

Just before Christmas we had sight of the judgment in the recent case of MLS (Overseas) Limited v The Secretary of State for Defence. The case highlights how an apparently simple error in drafting an evaluation methodology can lead to significant consequences for the progress of the procurement. It also shows how wide the gap can be between what the contracting authority thinks it has communicated in the methodology and what a bidder's actual understanding of that methodology may be on reading it.

The Contract

The Ministry of Defence (“MoD”) ran a procurement for a contract valued at around £350 million for global port, maritime and other logistical support services for the Royal Navy. Given the sector, the procurement was regulated by the Defence and Security Public Contracts Regulations 2011, as amended. However, the principles on which the case turned apply equally to procurements regulated by the Public Contracts Regulations 2015.

In particular, in running the procurement, the MoD was under a duty to conduct the competition in a manner which respected the EC Treaty principles of transparency, non-discrimination and equal treatment.

The claimant, who was also the incumbent provider, emerged from the evaluation as the most economically advantageous tender, according to the stated award criteria. However, on one particular question (“question 6.3”) relating to ensuring safe working cultures not only within the tenderer's own organisation but also down the supply chain, the claimant’s response was judged to be inadequate as it did not fully address how the tenderer would pass on health and safety obligations to its own contractors. Question 6.3 was a “pass/fail” question; both evaluators and a further moderator marked the response as a “fail”.

On this basis, following requests by MoD for the claimant to clarify its response and a further moderation meeting, MoD marked the claimant's tender as uncompliant and excluded it.

The Claim

The claimant commenced the claim prior to the award of the contract to the second-placed bidder, which suspended the award process pending legal proceedings.

The claimant argued (amongst other things) that the ITT did not state, or at least was ambiguous as to, the consequence of a "fail" score in respect of Question 6.3. This meant, argued the claimant, that the MoD was not entitled automatically to reject its tender for a single fail score. In rejecting its tender, the MoD acted unlawfully in breach of its obligations of transparency and equal treatment.

The MoD argued, in return, that the evaluators and moderator were entitled to conclude that the claimant’s tender failed to meet the minimum requirements specified in the evaluation criteria for achieving a "pass" score for Question 6.3.

The MoD accepted that, due to an administrative error, the MoD had omitted to include an express statement in the ITT that the consequence of a "fail" score would be rejection of the tender, However, said the MoD, it would have been apparent to a reasonably well-informed and normally diligent tenderer from the ITT that a "fail" score for Question 6.3 would lead to automatic or discretionary rejection of the tender.

The ITT

The section of the ITT on technical requirements contained an example technical evaluation table, which showed the weighting and scores available, up to a possible score of 100%, for the following questions:

• Question 1 – Capability;
• Question 2 – Customer Relationship;
• Question 3 – Supply Chain Management;
• Question 4 – Value for Money; and
• Question 5 – Insurance

It was clearly stated that failure to meet a minimum standard of “good confidence" for any of these five questions would result in rejection of the tender.

Significantly though, the technical evaluation for Question 6, Safety and Quality Management (of which question 6.3 was obviously a part), was not included here. The methodology for this question was clearly stated to be a simple “pass/fail” judgment, but it was not made clear that a “fail” result here would amount to a judgment that the response fell below “good confidence” level and would consequently be non-compliant, leading to the rejection of the tender.

The Law

The question before the court was whether the failure to expressly state that a “fail” result on question 6.3 would result in exclusion was a transparency breach by the MoD (as the claimant argued)?

Or, on the other hand, as MoD argued, was it a reasonable expectation that tenderers looking at the ITT should have “put two and two together” and realised that exclusion would be logical consequence of a failure on question 6.3?

The judge considered some of the leading cases in this area, in particular the SIAC and Healthcare at Home cases. These established the principle that the award criteria must be formulated in such a way as to allow all reasonably well informed and normally diligent tenderers (“RWIND tenderers”) to interpret them in the same way.

The judge noted that this was an objective test: the question was not whether it had been proved that all actual or potential tenderers had in fact interpreted the criteria in the same way, but whether the court considered that the criteria were sufficiently clear to permit uniform interpretation by all RWIND tenderers.

The judge also looked at the more recent Nuclear Decommissioning Authority case, where the transparency obligation was considered in the context of the contracting authority’s obligation to adhere to a procurement process/rules that it has previously stated. In that case, the judge said this:

The principles of equal treatment, non-discrimination and transparency require a contracting authority that has adopted a decision-making procedure for assessing bids to comply with it once it has begun to do so. A different way of expressing the same principle is to state that a contracting authority that has set rules for that procedure must follow them, applying those rules in the same way to the different bidders. Changing the decision-making procedure during the process of assessment risks arbitrariness and favouritism, a risk that it is the purpose of such requirements to avoid”.

Judgment

The judge concluded that the MoD had indeed breached the obligation to act transparently.

The ITT did not indicate that a "pass" score for each part of Question 6 was a minimum standard that had to be met to make the tender technically compliant.

The judge disagreed with the MoD’s argument that a RWIND tenderer should have understood, that a "fail" score for Question 6.3 would be treated as an assessment of lower than "good confidence" and lead to automatic rejection of the bid. The judge said, conversely, that the RWIND tenderer would assume that there would be a difference in treatment between Questions 1 to 5 and Question 6 because the ITT identified different categories of assessment for such responses. The ITT could have stipulated that a "pass" would equate to "good confidence" but did not do so.

Conclusion

The case highlights to contracting authorities the risks of ambiguity in the evaluation methodology and need for the evaluation criteria to make it absolutely and explicitly clear where a “fail” result will lead to rejection of the bid.

Note that this is the case not only in relation to the ITT stage (as in this case) but also during the selection phase. Indeed, Cabinet Office guidance explicitly states that SQ evaluation methodologies must make candidates expressly aware of any SQ questions where a “fail” result will lead to disqualification on that ground alone.

You can read the full judgment in the case here.

Posted by Jenny Beresford-Jones

December 20, 2017 2:07 PM | Posted by Beresford-Jones, Jenny | Permalink

The European Commission has just published new thresholds for the application of the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016 and the Concession Contracts Regulations 2016. These come into force on 1 January 2018. Overall the thresholds are slightly, but not significantly, higher than at present.

Thresholds for contracts regulated by the Public Contracts Regulations 2015

 Type of contract

Threshold from 1 Jan 2018 

 Supply and services contracts (central government)

 £118,133

 Supply and services contracts (non-central government)

 £181,302

 Works and subsidised works contracts

£4,551,413

 Social and other services contracts falling within the "Light Touch Regime"

 £615,278

Thresholds for contracts regulated by the Utilities Contracts Regulations 2016

 Type of contract

Threshold from 1 Jan 2018

 Supply and services contracts and design contracts

 £363,424

 Works contracts

£4,551,413

 Social and other services contracts falling within the "Light Touch Regime"

 £820,370

Thresholds for contracts regulated by the Concession Contracts Regulations 2016

 Type of contract    

Threshold from 1 Jan 2018

Concession contract                                                                    

 £4,551,413

 

Posted by Jenny Beresford-Jones

December 20, 2017 11:23 AM | Posted by Burton-Jones, Sophie | Permalink

Organisations that outsource their data processing operations need to ensure that the contractors they use are reliable, and take appropriate steps to keep the information secure. Cybersecurity failures can lead to serious reputational damage, being held to ransom by criminal hackers and sanctions by regulators, particularly where that information includes personal data.

Outsourced processing is normally governed by detailed contractual arrangements dealing with how the data will be stored and used. And, from May 2018, the General Data Protection Regulation, or GDPR, will require tougher and more detailed obligations in contracts.

New requirements for outsourced processing

The new requirements include compulsory details about:

  • the subject matter and duration of processing;
  • the nature and purposed of processing;
  • the types of personal data and categories of data subject; and
  • the obligations and rights of the controller.

The contract must also include terms requiring the data processor to:

  • act only on the written instructions of the controller (unless required by law to act without such instructions);
  • ensure that people processing the data are subject to a duty of confidence;
  • take appropriate measures to ensure the security of processing;
  • only engage a sub-processor with the prior consent of the data controller and a written contract;
  • assist the data controller in providing subject access and allowing data subjects to exercise their rights under the GDPR;
  • assist the data controller in meeting its GDPR obligations in relation to the security of processing, the notification of personal data breaches and data protection impact assessments;
  • delete or return all personal data to the controller as requested at the end of the contract; and
  • submit to audits and inspections, provide the controller with whatever information it needs to ensure that they are both meeting their obligations, and tell the controller immediately if it is asked to do something infringing data protection law.

Impact on public sector contracts

The requirements of the GDPR affect almost all organisations that process personal data in the EEA or about European citizens, with the public sector in the frame alongside businesses. So most public sector outsourcing will have to meet the new requirements.

The UK Crown Commercial Service has issued a Procurement Policy Note PPN 03/17 that explains the new rules and sets out the contractual changes that will be needed for processing personal data in the future. The new requirements will apply to all processing relationships from May 2018, and so as well as affecting new arrangements, existing relationships may need to be updated.

Businesses that are currently supplying data processing services to Central Government and other public sector bodies should expect to be contacted with a view to bringing existing agreements up to date, and ensuring that technical and organisational capabilities will measure up. Equally, those planning to bid for new contracts should expect to see the new obligations in future contracts.

The GDPR also imposes new obligations on processors. These include obligations to keep records of processing and in many cases employ a data protection officer. The PPN notes that public bodies should not accept liability for fines directly imposed on their processors under the GDPR.

Posted by Sophie Burton-Jones

July 21, 2017 2:56 PM | Posted by Beresford-Jones, Jenny | Permalink

After several months of waiting, the new Technology and Construction Court (TCC) guidance note on procedures for public procurement cases has been formally launched. The Guidance forms a new "appendix H" to the general TCC Guide.

We first wrote about the new Guide in our article here back in September - there have been no material changes to the format since then, so do have a look at that article if you need to get up to speed with the changes the Guide brings and its likely impact.

If you're looking to challenge a procurement decision, do see our content hereHelen Prandy is a procurement litigation specialist, if you wish to have a preliminary discussion about your options.

You can read a copy of the new guidance on procedures for public procurement claims here.

Posted by Jenny Beresford-Jones

July 19, 2017 12:29 PM | Posted by Smith, Ruth | Permalink

The new ‘Screening for Cartels’ tool has been developed by the CMA in conjunction with Spend Network and includes a series of tests designed to help procurers identify suspicious bidder behaviour which may be indicative of an illegal cartel.

A cartel will exist where bidders act together to fix their approach to bidding for contracts by, for example, fixing the prices each will bid, sharing information, agreeing not to bid or by making a poor quality or overpriced bid.

Using a series of algorithms and the data from a tender, the tool tests for suspicious signs in three main areas, any or all of which may be suggestive of bid rigging:

  • number and pattern of bidders;
  • pricing; and
  • document origin (including text and ‘typo’ similarities) and low endeavour submissions.

Whilst the tool does not prove the existence of a cartel, where it does identify suspicious signs procurers can consider what further steps they may need to take and/or the questions and clarifications they may need to make with bidders before proceeding to a contract award. 

The tool is being made available by the CMA free of charge.   For further details and instructions on how to request and download the tool go to:  https://www.gov.uk/government/publications/screening-for-cartels-tool-for-procurers/about-the-cartel-screening-tool#sharing-suspicious-results-with-the-cma

Posted by Ruth Smith - read more about Ruth here.

May 19, 2017 11:41 AM | Posted by Beresford-Jones, Jenny | Permalink

Think of public procurement litigation … what images come to mind for you?

Perhaps you see scenes straight out of Bleak House – gothic court rooms, scribes scurrying in the gathering gloom, dusty papers and piles of impenetrable legal tomes?

Not a bit of it. The Technology and Construction Court, which hears almost all public procurement claims, is actually housed within the Rolls Building, a temple of glass and steel in the heart of the City. And, since 25 April 2017, there should be no piles of court papers either, as courts have moved across to a compulsory, paperless system of “electronic working”. This uses an electronic filing system which allows claimants to issue claims and file documents electronically as well as pay court fees and obtain publically available documents.

At the time the commitment was made to transform to a wholly electronic system, some commentators expressed concern about what could happen should systems fail or be attacked. Of course the events of this week, which saw NHS IT systems incapacitated by the ransomware “WannaCry”, show that those fears were not without foundation.

However, the overall effect of the change should be to improve procedural efficiency for those bringing or defending public procurement claims.

if you would like a preliminary discussion about potential procurement litigation, do contact  who leads our procurement disputes practice.

Posted by Jenny Beresford-Jones

March 8, 2017 11:19 AM | Posted by Beresford-Jones, Jenny | Permalink

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 | Permalink

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 | Permalink

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 | Permalink

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 [2016] 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 | Permalink

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.

September 27, 2016 2:17 PM | Posted by Beresford-Jones, Jenny | Permalink

The Crown Commercial Service (CCS) has just published a procurement policy note containing statutory guidance on the selection stage and an updated version of its standard pre-qualification questionnaire. This is mandated for use in over-threshold procurements by virtue of Regulation 107.

Why was a new PQQ document needed?

The old PQQ needed updating in order to fit together with the requirements of the European Single Procurement Document (“ESPD”). There has been an obligation on contracting authorities to accept ESPDs since January of this year and of course a mismatch has arisen between the standard form ESPD and the CCS’s PQQ. The ESPD allows suppliers to simply self-certify that they meet the requirements, with the contracting authority seeking evidence of this only from the winning bidder at the end of the process. The new document is aligned with the ESPD.

Key points to note

  • The “Pre-Qualification Questionnaire” (PQQ) is now known as a “Selection Questionnaire” (“SQ”).

 

  • Authorities should stop using the old PQQ and start using the SQ with immediate effect. The guidance is silent on the question but we assume this instruction is in relation to new SQs being issued and there is no requirement to recall PQQs that are already being used in a current procurement. 

 

  • The SQ is structured in three parts, not dissimilar to the old PQQ. Part 1 of the standard SQ covers the basic information about the supplier. Part 2 covers a self-declaration regarding whether or not any of the exclusion grounds apply. Part 3 covers a self-declaration regarding whether or not the company meets the economic, financial, technical and professional selection criteria. There then follow some "additional" questions at the end of the document.

 

  • The exclusion grounds in the SQ now correlate to those in the latest version of the Public Contracts Regulations 2015 and in the ESPD (e.g. including, where applicable, exclusions around the Modern Slavery Act 2015).

 

  • Contracting authorities will need to brief potential candidates on how they can access the SQ and submit their responses. The guidance envisages three options (1) include all three parts of the SQ with the procurement documents; (2) direct suppliers to the Commission's EU-ESPD service for parts 1 and 2, and include standard selection questions separately within the procurement documents; or (3) provide access details to an e-procurement system that asks the same questions as listed in the standard SQ plus any procurement-specific questions.

 

  • Self-certification declarations are required as part of the selection stage not only from suppliers but also from any other supplier being relied on to meet the selection criteria. The guidance reminds contracting authorities of the "self-cleaning" procedure which allows suppliers who have breached the criteria to demonstrate that they have "righted their wrongs".

 

  • Contracting authorities must accept self-certifications via the EU-ESPD template, even if this is in the format adopted by another member state.

 

  • Evidence of compliance need not be requested until award stage (although the winning bidder's evidence must be checked prior to award). That said, evidence may be requested at an earlier stage if the contracting authority decides this is necessary.

 

  • Deviations are not permitted from Parts 1 and 2. You can deviate from Part 3 provide you report. The guidance says you must report:
    • changes to the wording of the standard questions and instructions; and
    • additional questions that are included which are not specific to the individual procurement.
    • Helpfully, the guidance confirms that additional questions which are specific to the procurement do not need to be reported, nor does the decision to leave out a question or tweak wording to make it compatible with e-procurement systems. You only need to report once (which is helpful for those authorities wishing to report an on-going deviation in their standard form SQ).

 

  • The prohibition on holding a separate selection stage for under-threshold procurements remains.

 

  • The guidance notes that, while completing parts 1 and 2 is not mandatory for over-threshold 'light touch regime' procurements for health, social and other services, nonetheless it would be good practice to exclude a supplier against those criteria in any event, and recommends that parts 1 and 2 are used even where the procurement is light touch, together with part 3 around economic and financial standing and technical and professional capacity.

 

  • Interestingly, the SQ no longer contains the "additional PQQ modules" on, for example, Health and Safety, Environmental Management or Compliance with Equality Legislation that used to feature at the end of the old PQQ. Instead, additional modules on e.g. Steel, skills and apprenticeships are set out, to be included depending on whether the relevant policy in those areas applies to the contracting authority in question. Presumably, however, the old additional modules could still be included in the additional modules section if desired.
June 28, 2016 12:11 PM | Posted by Beresford-Jones, Jenny | Permalink

Following the result of the EU Referendum on Friday, here in the Mills and Reeve procurement team, our thoughts have quickly turned to the likely implications for public procurement.

Given that our public procurement rules implement European Directives on public procurement, utilities and concessions contracts, there is the potential that the decision to Leave could eventually bring far-reaching changes in our field. As a starter for ten, out of many possible examples:

• the obligation since April 2016 to run an OJEU competition for clinical health services over a certain threshold is a product of an EU directive. It would, in theory, be open to a government to amend our regulations and remove this obligation, reversing the trend towards increased private sector delivery of healthcare services;

• the official procurement processes come down to us via the EU Directives. In principle, a government could legislate to remove the obligation to follow one of these in favour of a more flexible regime;

• the government could alter the respective thresholds at which the obligation to advertise a contract and run a competition bites; or

• in theory, at least, it could even abandon the regulation of public procurement altogether!

That said, we think we are likely to see Business as Usual rather than any immediate change, at least in the short to medium term. And, although the Law Society of Ireland says it has received a surge in applications from UK lawyers to work in its jurisdiction due to fears about Brexit, here at Mills and Reeve we are not yet consulting the ‘situations vacant’ pages. Here is why.

Even the most cursory look at the fast developing news stories of recent days illustrates the fact that the process of withdrawing from the EU will be complex and will not happen overnight. Indeed, some more sceptical commentators are questioning whether Brexit will ever come to pass at all. There is a two year period following triggering under "Article 50" of the exit process for the UK to reach its “divorce settlement” with the EU, around how to untangle the status quo.

Separately from that, it may take us a much longer period to agree a framework upon which our future relationship with the EU will be based. It will take time for us to negotiate new trade deals, with and outside of the EU (particularly if our potential trading partners want to see the terms of the “divorce settlement” with the EU before reaching any agreement with us on future trade deals).

Even once we have withdrawn, our Public Contracts Regulations 2015, Utilities Contracts Regulations 2016 and Concessions Contracts Regulations 2016 (and their Scots equivalents) are pieces of UK legislation that, unless and until amended or repealed, will stand perfectly well on their own account as our public procurement regime. Not forgetting, too, that the UK has had its own home-grown procurement law regime dating back to long before the European regime was adopted.

Of course, once we have left the EU, our legislature may amend or repeal our procurement regulations. That said, given that the priorities of the post-Brexit parliament (and the newly established "Brexit Unit" headed up by Oliver Letwin) are very likely to be elsewhere, unravelling the tangle web of our relationship with Europe, we think we are unlikely to see major legislative change to procurement law in the short to medium term, especially as we have already been through a major legislative change in 2015 and 2016.

Also, our current membership of the Agreement on Government Procurement (“GPA”) is by virtue of the our being part of the EU but, even once we Leave (and our membership of the GPA ends), we anticipate that in forging any trade details the UK would likely look to becoming a member of the GPA in its own right. The significance of this for procurement is that the GPA imposes similar obligations to the EU Directives; another reason not to throw away your copy of the procurement rules just yet. Of course if the country does a "Norway-style" deal, we will need to continue to abide by the EU procurement law regime.

Our final reason for our view there is no need for procurement teams to expect major change is that the UK government has historically had a healthy appetite for legislating in our field, sometimes going beyond, or “gold plating”, the requirements of the EU Directives. See, for example, Part 4 of the Public Contracts Regulations 2015 and its obligations around use of Contracts Finder and the regulation of the PQQ stage. These measures stem from the so-called “Lord Young” reforms and are designed, in particular, to increase opportunities for small and medium sized entities, a major policy objective of this government and one that seems unlikely to change. Another example of this is the fact that, while one of the core EC Treaty principles is “transparency”, the government has domestically been pursuing a parallel transparency agenda for a considerable time now. Even as an ex-Member State, it is almost certain that principles of transparency/equal treatment/value for money are still likely to remain high up in the UK’s priorities in any new framework for public sector contracting.

Having said all that, there is no doubt that we are in a period of dramatic change in the country’s political and economic direction and it is clear there is considerable uncertainty around its effects in the medium and longer term, both in our field and more widely.

The detailed implications of Brexit will vary depending on whether you are a contracting authority or supplier, and, for suppliers, depending on the size of the business whether your usual market is within the UK or within the EU, but as yet it is too early to say what these are in any detail. We can expect an onslaught of policy development and/or consultation from the government in due course, and we’ll be scrutinizing this and blogging on any developments relevant to our field.

June 20, 2016 11:02 AM | Posted by Ruth Smith and Jenny Beresford-Jones | Permalink

“What is adequacy? Adequacy is no standard at all!” So said Winston Churchill in 1938 in the House of Commons, as part of his criticism of the politics of appeasement and the then government’s statement that it had an “adequate” rearmament programme.

So in the context of adequacy, how does a Court assess adequacy of damages in a procurement case, when hearing an application to lift an automatic suspension involving two not-for-profit NHS organisations? That was the difficult decision before the Court in the recent case of Kent Community Health NHS Foundation Trust v NHS Swale CCG and NHS Dartford, Gravesham and Swanley CCG [2016] EWHC 1393 (TCC)

The facts of the case

Kent Community Health NHS Foundation Trust (the “Trust”) was the incumbent provider of adult community services in north Kent, under a contract which expired on 1 April 2016. In planning for this expiry date, the commissioning CCGs (NHS Swale and NHS Dartford, Gravesham and Swanley) decided that they would put the service out to competitive tender. As health services, the services were “Part B” services falling under the Public Contracts Regulations 2006. The Trust submitted a tender but following the tender evaluation, the CCGs announced their intention to award the contract to one of the other bidders, Virgin Care. The Trust then issued proceedings in the High Court and so triggered the automatic suspension of the contract award.

When hearing the CCGs application to lift the suspension, the Court applied the usual American Cyanamid test.

The test asks three questions:

• can the claimant bidder show that there is serious issue to be tried? Unless the bidder has no real prospect of succeeding at trial, this part of the test will usually be satisfied;

• assuming there is a serious issues to be tried, would financial damages be an “adequate remedy” for the successful party? If, in the case of a challenging bidder, the answer is “yes” then the Court will usually agree to lift the suspension and allow the contract to be entered into; and

• if damages are not adequate as a remedy, then does the “balance of convenience” favour one side or the other? In public procurement cases, this is usually shorthand for saying “does the public interest lie in allowing the contract to be awarded prior to a full trial on merits, or not?”

In this case, both parties to the application were public sector, NHS bodies with similar public sector duties to the people of Kent in respect of the provision (or commissioning the provision) of adult community healthcare services. However, they each held diametrically opposed views on how that duty should best be fulfilled and the services provided.

The application of the American Cyanamid test

The parties accepted there was potentially a serious issue to be tried and so that was quickly dealt with by the Court.

It then went on to consider, in detail, whether damages would be an adequate remedy for each party.

The Trust argued that, as it was a not-for-profit entity which exists to service the public good, damages would not be an adequate remedy and instead it needed the suspension to be maintained pending full trial of the issues. Procurement for NHS services, said the Trust, could not be treated as an ordinary commercial exercise. If Virgin Care were awarded the contract, this would undermine the Trust’s public service mission to provide integrated health care to people in Kent, in a way that could not be compensated in financial terms. In any event, said the Trust, it stood to lose 10% of revenue and would suffer from reduced economies of scale, which would impact on patient care as it would have to make savings elsewhere.

Unsurprisingly, the CCGs argued that the suspension should be lifted and the award of the contract allowed to proceed. They argued damages would be an adequate remedy for the Trust were it to win at full trial. The financial loss to the Trust could easily be calculated and the financial and reputational impact of losing the contract would not be so catastrophic as to cause the Trust’s total disintegration as an entity/service provider (in the few cases where the courts have held that damages were inadequate as a remedy, it has usually been for reasons along these lines).

In contrast, the CCGs argued damages would not be adequate remedy for them. The Court acknowledged that if the suspension remained in place, the CCGs losses were more difficult to quantify. The CCGs had some on-going concerns about the quality of the Trust’s services but, in assessing damages, this had to be balanced against possible similar or different difficulties in the bedding in of a new service in the early days the proposed contract with Virgin Care. The CCGs were concerned that any delay in finalising the new contracting arrangements, even with an expedited trial, would still present a real risk of their not having adequate arrangements in place by winter of 2016/2017 (when demand for the services would be at its heaviest).

Judgment

The court accepted that in some cases damages might not be an adequate remedy on grounds other than it not being possible to calculate the financial loss incurred. For example, where the relief sought is the protection of protection of privacy, financial compensation might well be inadequate. The question of the adequacy of damages should be answered by reference to the interests of the person seeking the injunction. In principle there was no reason why damages should be regarded as inadequate simply because the Trust, as a not for profit organisation, would not suffer a substantial financial loss. The Court accepted that, in some cases, the immediate financial loss may be modest, but the knock on effects (which would not be compensated) could be catastrophic. This then might create a real interest that could not be compensated in damages to meet the substantial justice of the case.

That said, the court was not persuaded by the Trust’s arguments on adequacy of damages, and said:

• The Trust having a public service mission to provide health care services in Kent did not give it a monopoly on doing so. The chosen procurement regime set out to treat the Trust and other bidders equally, and on a level playing field of providers. There could be no justification for approaching the question of adequacy of damages differently had Virgin Care been the loser and the claimant in this case. In short, the Trust’s status as an NHS Body did not secure it any special treatment in the decision about adequacy of damages, and in financial terms its losses could be easily calculated.

• The award of the contract to Virgin Care would not cause a significant reputational loss to the Trust or have a catastrophic effect on the its ability to continue providing services.

• The Trust’s core argument was that the award of the contract to Virgin Care would undermine its public mission to deliver integrated care across Kent and the new arrangements with Virgin Care would not serve the interests of patients as well as would be the case if the contract remained with the Trust. It was a category error, said the Trust, to expect financial damages to compensate for this. Indeed, the Trust’s purpose in engaging in the procurement was not to generate money but rather to best serve the interests of patients; and its interest in pursuing the litigation was in the protection of the public good. Therefore, it would not be doing substantial justice to the Trust if the Court held that all it could recover was money.

In response to this, the Court said its role was to resolve the dispute before it, it could not and would not express a view about the comparative merits of the services depending on whether these were provided by the Trust, as part of integrated provision of a wider service, or by Virgin care as a separate provider. All it would rule on was on whether the procurement process was flawed and, if so, the consequences.

On that basis, the Court ruled that damages would be an adequate remedy for the Trust, should it win on the substantive points at full trial. In contrast, the Court said that there was a significant risk that, if the suspension remained in place, an award of damages would not be an adequate remedy for the CCGs.

Given that damages would be adequate, on a strict application of American Cyanamid, the judge noted, it was not usually necessary to look further at the balance of convenience but in this case he did.

He noted that the public interest brought a couple of issues into play: (1) the procurement exercise should be conducted fairly and (2) the CCGs should be able to put arrangements they consider in the public interest into effect promptly. The Court found that overall the balance of convenience did not weigh heavily in favour of either party.

The Court concluded the prudent course, in the interests of justice in the run up to full trial, would be to maintain the “status quo”. But what was the “status quo?. The CCGs argued, since the contract with the Trust had already expired on 1 April 2016, the status quo was that it should be free to contract with Virgin Care. The Trust argued that maintaining the status quo required its contract to be extended in the interim period. The Court favoured the CCGs reasoning, concluding the suspension should be lifted and the CCGs allowed enter into the contract with Virgin Care. In short, faced with the question of whether it was just in all the circumstances that the Trust should be limited to a remedy in damages the Court’s answer to this was “it is”.

You can read the full judgment here.

Comment

The case provides useful insight on how the Court will consider adequacy of damages in an automatic suspension case where both parties are not for profit organisations.

Interestingly, no reference is made in the judgment to the NHS (Procurement, Patient Choice and Competition) (No 2) Regulations 2013 and the CCGs duty, under those Regulations, to procure the provider (or providers) who are most capable. Indeed, the Court was quite clear in this case that its role was not to assess the respective merits of each bidder’s services but simply whether or not the procurement process was flawed.

May 27, 2016 4:27 PM | Posted by Smith, Ruth | Permalink

Yesterday’s Press Release from the Commission (see below) relating to its infringement package for May 2016 goes like this – not 1, not 2 but yes you’ve guessed it TWENTY ONE member states told to get their act together and transpose the 3 new EU procurement directives!  So it appears - as if we didn't know already - our fellow member states have a slightly more relaxed approach to EU regulation than us Brits do.  

The European Commission has requested 21 Member States to transpose in full one or more of the three directives on public procurement and concessions (Directives 2014/23/EC, 2014/24/EC, 2014/25/EC) into national law. All Member States were obliged to notify the transposition of the new public procurement rules by 18 April 2016.  The Commission's request takes the form of a letter of formal notice and it has been sent to Austria, Belgium, Bulgaria, Croatia, the Czech Republic, Cyprus, Estonia, Ireland, Greece, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovenia, Finland, Spain and Sweden.

March 31, 2016 5:24 PM | Posted by Smith, Ruth | Permalink

If you’re a contracting authority, have you remembered that with effect from 1st April 2016, you must publish on the internet statistics showing, for the preceding financial year (i.e starting with 2015/16), the extent to which you have met your obligation to make payments to suppliers within 30 days?

Well in case you had forgotten, the Crown Commercial Service has issued a new PPN to remind you. The PPN is available here. The obligation stems from Regulation 113 of the Public Contracts Regulations 2015 which requires contracting authorities to include in their contracts provisions for payment of suppliers within 30 days of the date of a valid, undisputed invoice. The publication requirements, as highlighted in the PPN, are dealt with in Regulation 113(7).

Some contracts are exempt from the requirement including: contracts for NHS health care services falling within the scope of the NHS (Procurement, Patient Choice and Competition) (No 2) Regulations 2013 and contracts awarded by maintained schools and Academies.

The PPN reminds authorities, whose contracts are in scope, that the details to be published are:

- After March 2016, for the financial year 2015/16: (i) the percentage of invoices paid within 30 days and (ii) the amount of interest paid to suppliers due to late payment.

- After March 2017, (i.e. for the 2016/17 financial year and later years): in addition to (i) and (ii) above, (iii) the amount of interest the authority was liable to pay (whether or not paid and whether under any statutory or other requirement) due to a breach of Regulation 113.

Regulation 113(9) also requires authorities to have regard to guidance issued by the Cabinet Office. This guidance, which includes a model template for publishing payment performance statistics, is highlighted in the PPN and available here.

And finally … the CCS Mystery Shopper service will be conducting spot checks. So publish your statistics or be shopped … you have been warned ….!


March 24, 2016 11:52 AM | Posted by Beresford-Jones, Jenny | Permalink

Not buses of course, but procurement regulations. Last week saw the publication of the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and the unwieldy sounding Public Procurement (Amendments, Repeals and Revocations) Regulations 2016.

All of these come into force on 18 April 2016, in relation to procurements commenced on or after that date. See the Portal’s Useful Links page for a copy of each.

Utilities Contracts Regulations 2016

These will replace the Utilities Contracts Regulations 2006 and implement the 2014 Utilities Directive. We are creating new content for the Portal on these regulations and will post details when this is available. We have done a comparison of the final version against the last draft and there do not appear to have been material changes made in the interim, which is reassuring for those who read the last draft.

Concession Contracts Regulations 2016

These are new regulations to implement the 2014 Concessions Directive and will regulate public works and public services concession contracts valued at over the threshold of £4,104,394.

The regulations carefully define the characteristics and features of a concession contract. In-scope concessions will need to be advertised in the OJEU and follow a procurement procedure that meets certain minimum standards around transparency, equality of treatment and non-discrimination. Duration of concession contracts must be limited to 5 years (unless it can be demonstrated that a longer term is needed for the concessionaire to recoup its investment).

We have done a comparison of the final version against the last draft available and there are no significant changes, apart from in the section dealing with Remedies. This has been brought into line with the wording in the Utilities Contracts Regulations 2016, and will allow a tenderer to claim its costs of preparing the tender and participating in the process if it can show that it would have had a real chance of winning the concession contract but for a substantiated breach by a Utility (note, not by a Contracting Authority.)

We are creating new content for the Portal on these regulations and will post details when this is available.

The Public Procurement (Amendments, Repeals and Revocations) Regulations 2016

These regulations make amendments to several pieces of legislation but particularly to the Public Contracts Regulations 2015 (PCR 2015). From 18 April 2016, you will need to refer to an updated copy of the PCR 2015 that reflects the changes made.

The following are some of the more interesting amendments made to the PCR 2015:

  • Regulation 57 (Exclusion Criteria) is amended so that an offence under section 2 or 4 of the Modern Slavery Act 2015 (i.e. human trafficking) becomes a mandatory exclusion offence. We understand from the Crown Commercial Service that it intends release a new standard form PQQ plus guidance that will include this new ground (and that it will also include amendments to reflect the fact that the European Single Procurement Document is now in force; see our article here for more on this);
  • Duration of Exclusions for tax offences - Regulation 57(11) used to impose a 5-year exclusion period where there was a mandatory exclusion for an offence of non-payment of taxes and a 3 year period of exclusion where discretion to exclude was exercised in relation to a lower level breach. Although there remains an obligation to exclude where this kind of offence has been committed and discretion to exclude for lower level breaches, the “5 year/3 year” period appears to have been removed for these particular exclusion grounds;
  • Permitted modifications - Regulation 72(1)(b) is amended so that, to fall within this safe harbour, you need to demonstrate that additional works/services/supplies are required, the that the value change is less than 50%, and that the contractor cannot be changed because (1) there are economic and technical reasons (e.g. interoperability with existing equipment/services) AND (2) changing the contractor would cause significant inconvenience or substantial duplication of costs. The “and” underlined here reads “or” in the current version of the PCR 2015 – so this safe harbour has narrowed significantly in scope from what is currently stated on the face of the regulations. However, the change has been made to reflect the fact that the parent Directive also uses “and” rather than “or”; our advice has been and continues to be that contracting authorities should assume that “and” is correct; and
  • Permitted modifications (2) – we already have had the Edenred case and guidance from the CCS which tells us that we must apply Regulation 72 to modifications proposed after 26 February 2015, even where the original contract is governed by the 2006 Regulations, and that the Regulation 73(3) termination rights are to be implied in this situation as well. Regulation 118(5) of the PCR 2015 will now states this expressly, which provides some useful clarity on the position.

An area of interest to Commissioners and Providers in the health sector is around the coming into force on 18 April 2016 of the PCR 2015’s Light Touch Regime for the procurement of health services by CCGs and NHS England.

This area is already regulated by the NHS Procurement, Patient Choice and Competition)(No.2) Regulations 2013 (the 'NHS Regs 2013') and there is a certain dissonance between the two regimes. We did wonder whether these amendment regulations might amend either the PCR 2015 or the NHS Regs 2013 to give us a clearer steer on how the two are intended to gel together. However, no such amendments feature and it may be that the government intends to leave it to practitioners to work out how to apply the law. You can read more about the two regimes, and our advice as to how to interpret the law post 18 April 2016, in my colleague Christopher Brennan’s article here.

February 24, 2016 9:47 AM | Posted by Ruth Smith and Tom Benjamin | Permalink
Renegotiated deal in hand, David Cameron has returned from Brussels to a mixed reception. The growing clamour for so-called ‘Brexit’ from senior Conservative cabinet ministers, and Boris Johnson, has added an urgent reality to the possibility of the UK severing its ties with the European Union.

Between now and 23 June, the country will be turning its mind to the effect that Brexit would have on lives, livelihoods and business. Some may think it could be a time to rejoice at the prospect of bidding farewell to a procurement regime often dubbed as “inflexible, complex and onerous”, whilst public sector procurement teams and lawyers may be wondering about the future security of their jobs. But it's neither time to rejoice or worry: whatever the decision on Brexit, it looks as though the current landscape of public procurement regulation, at least in the short to medium term, is here to stay.

Here are five reasons why public procurement cynics should hold off on the champagne orders and why public procurement teams and lawyers ought not to be losing sleep.

1. The EU regime is, for the most part, transposed directly into UK law

Whilst the EU Treaty and EU Procurement Directives would no longer apply in the UK, an ‘out’ decision would have no impact on the validity of the UK legislation put in place to transpose those directives (i.e. the Public Contracts Regulations 2015 and the soon to come into force Utilities Contracts Regulations 2016 and Concession Contracts Regulations 2016). Instead, there is likely to be a drawn-out process of repeal and reform in sectors in which the UK has traditionally been dissatisfied with the EU position. Wholesale reform of the public procurement regime is unlikely to be top of the government’s list.

2. The UK had a procurement regime before joining the EU

There was no single regulatory framework prior to the European system, but other regimes existed (including compulsory competitive tendering for local authorities) together with public bodies’ own internal rules and policies for regulating their procurement processes. These rules existed to achieve best value for money in the use of public funds, and to ensure accountability, probity and decisions free from bias. With the potential for judicial review where a public authority’s decision making was flawed or biased, the old pre-EU practices had all the carrots and sticks of an effective regulatory regime. The only issue was a lack of consistency, which has since been corrected by legislation. So even if existing UK procurement legislation were to be repealed it is highly likely that another, similar regime might take its place.

3. The public sector is a slow mover

Although the global market has advanced significantly since the UK’s pre-EU regime, the underlying principles of achieving value for money and accountability in public authority decision-making remain the same. These principles are now entrenched in a public sector which has, over time, become hardened to the arguably burdensome EU procurement regime. It is unlikely that authorities would quickly embrace an unregulated, or indeed an under-regulated, regime.

4. The UK’s appetite for procurement regulation

Despite being against ‘gold plating’, the UK’s approach to implementing EU law (and particularly EU procurement law) has gone beyond the minimum requirements imposed by the parent directives. Examples of this include:

• in the NHS – the NHS (Procurement, Patient Choice and Competition ) (No 2) Regulations 2013 which add further regulation to the procurement of NHS healthcare services by NHS England and Clinical Commissioning Groups;
• the Public Contracts Regulations 2015 and the additional rules in Part 4 concerning, amongst other things, advertising on Contracts Finder; use of the Cabinet Office standard PQQ and rules relating to sub-threshold contracts; and
• the Small Business, Enterprise and Employment Act 2015, which gives ministers the power to impose duties on authorities relating to their procurement processes and to investigate the processes of authorities.

So there is strong evidence the UK has a healthy appetite to regulate in this field, most recently illustrated by the Procurement Policy Note issued by the Crown Commercial Service last week. The PPN (an extract of which appears below) reminds authorities of their international obligations when tendering public contracts and expects public procurers to apply the same standards to suppliers both within and wholly outside the EU:

Public procurement should never be used as a tool to boycott tenders from suppliers based in other countries, except where formal legal sanctions, embargoes and restrictions have been put in place by the UK Government. There are wider national and international consequences from imposing such local level boycotts. They can damage integration and community cohesion within the United Kingdom, hinder Britain’s export trade, and harm foreign relations to the detriment of Britain’s economic and international security.”

5. The regime still applies to EEA members

If the UK were to adopt the Norwegian model following an ‘out’ vote, it would become a member of EFTA and the EEA. The UK’s obligations as members of the EEA would include the adoption of the EU procurement rules. The difference, and big disadvantage with this model, would be UK’s loss of its place at the negotiating table when it came to future revisions of the EU procurement rules.

The future

No one really knows the consequences of an ‘out’ decision on 23 June. What we do know is that the referendum would only be the start and nothing would change overnight. The UK would have its work cut out in re-negotiating its trading relationship with Europe and other trading partners. The process of reform would be a gradual one, and it could be quite some time before the regulation of public procurement found itself on the parliamentary agenda.
January 20, 2016 4:17 PM | Posted by Smith, Ruth | Permalink

Regulation 59 of the Public Contracts Regulations 2015 (“PCR 2015”) requires contracting authorities to accept a European Single Procurement Document (“ESPD”) from bidders as part of the selection process.

This implements a similar provision in the new Public Contracts Directive 2014/24, the aim of which is to reduce the administrative burden on bidders and contracting authorities by simplifying the manner in which information and evidence is provided at selection stage. It is effectively a form a self-certification of good standing that the bidder does not fall within any of the exclusionary grounds and has the necessary economic/financial standing and technical and professional ability. It is intended to reduce the amount of documentation required from bidders at an early stage by avoiding the need for bidders to submit additional evidence and documentation in support of the statements made in the ESPD. This evidence and supporting documentation can then be requested by the contracting authority at any point “where it is necessary to ensure the proper conduct of the procedure”.

An example of when this may be the case is given at Recital 84 of the Directive which suggests that, in the case of two-stage procedures (e.g. restricted, competitive dialogue etc.) when making a short-listing decision, the submission of supporting information from the short-listed bidders may be justified to avoid selecting candidates which later prove ineligible. The contracting authority must also request the up to date supporting evidence and documentation from the bidder to be awarded the contract.

The European Commission has recently published an Implementing Regulation, which for the first time sets out a standard form for the ESPD, which (as we understand it) each member state will adopt. It brings into force, from January 26 2016 in England and Wales, the obligation on contracting authorities to accept the ESPD from bidders as preliminary evidence instead of certificates issued by public bodies or third parties (e.g. banks) to confirm that the bidder:

  • is not in breach of one of the mandatory or discretionary exclusion criteria;
  • meets the selection criteria set out at Regulation 58 (suitability to perform the contract, economic and financial standing and technical and professional ability); and
  • where applicable, meets the objective and non-discriminatory criteria that the authority is going to apply to reduce the numbers who are invited to bid.

Ultimately, the ESPD will be available in an online format only but the PCR 2015 state that the “online only” requirement is to be delayed until April 2017; until then, paper/Word copies may be used.

How will the ESPD work in practice?

At the time of writing we have not yet had the benefit of any guidance from the UK government so to some extent the answer to this question is that we don’t yet know. However, there are a few pointers we can give at this stage:

  • The Regulation 59 obligation on contracting authorities is simply to accept ESPDs sent to them by bidders;
  • The obligation applies to contracting authorities from 26 January 2016 (though it is as yet unclear whether it applies to procurements already under way at that date or only to those advertised on or after that date). Note that the obligation will not apply to Utilities running a procurement until the Utilities Contracts Regulations 2016 come into force (on 18 April 2016);
  • The Implementing Regulation states that the contracting authority OJEU/call for competition must reference what information the ESPD will require, and that the intention is for ESPDs to be submitted with the tender in an Open procedures and with the Request to Participate in others; and
  • Member states can require use of (or can leave it to contracting authorities to decide whether to use) an ESPD in a below-threshold or Light Touch procurement. Given the relatively “hands-off” approach the government took to implementing the Public Contracts Regulations 2015 in general, it seems likely that here the government may opt to leave this decision to contracting authorities on a case by case basis.

Obviously, some key questions remain unanswered, particularly the issue of how in practice the use of the ESPD is meant to fit together with the Crown Commercial Service’s (CCS) standard Pre-Qualification Questionnaire (PQQ). Both cover much of the same ground, and it would seem to defeat the object of the ESPD and create more room for error or ambiguity if bidders are now required to complete two documents where previously only one was needed. We have today had a steer from the CCS to the effect that it is “currently discussing the most suitable option for ensuring that government's guidance and standard documents on selection are aligned with the ESPD. A PPN and accompanying guidance will be published shortly. In the interim the advice in PPN03/15, the supplier selection guidance and the standard PQQ template should continue to be used until the policy and guidance on the aligned ESPD/PQQ are published.”

What should contracting authorities do now?

Obviously, do keep an eye out for the CCS guidance and PPN which will hopefully resolve some of the questions around how the ESPD will work in practice here.

Otherwise, given that the Regulation 59 obligation is to accept ESPDs from January 2016, a failure to do so would amount to a technical breach of the Regulations. Therefore it is worth briefing procurement staff internally about the standard format of the ESPD, its purpose and the possibility that ESPDs will be received, and should be accepted. Having said that, it is perhaps unlikely that bidders will be ready to submit ESPDs in the near future, particularly if, following the CCS steer around continuing to use the standard PQQ for now, contracting authorities do not prompt this by referencing the use of ESPDs in the OJEU or call for competition.

However, contracting authorities should take care to avoid any wording in their procurement documents which either expressly or by inference actively prohibits a bidder from submitting an ESPD on or after 26 January 2016, since the obligation to accept these will be “live” from that point. For example, if the conditions accompanying a PQQ or ITT state that a PQQ or Tender response may be rejected if it is not in the format specified, and the specified format does not take account of the possibility of some of the information being contained within an ESPD then the drafting should be amended to take account of this.

Once the CCS guidance is available, it is likely that a review of standard procurement documents will be needed, to ensure these work together with the ESPD process. There are likely be consequential amendments to the standard form PQQ document. Also, standard form ITTs may need revision (as discussed above and, for example, to reflect the obligation at Regulation 54(4) to ensure that ITTs reference the evidence and supporting documents that will have to be submitted in due course to verify the preliminary statements made in the ESPD).

We will post here again with further analysis and practical tips around use of the ESPD, once the CCS guidance is available.

December 22, 2015 12:01 PM | Posted by Beresford-Jones, Jenny | Permalink

This week, we’ve been looking through a log of all queries received by our Procurement Portal helpline over 2015, looking for any discernible “themes”. Surprisingly, “themes” were conspicuously absent, with the exception of a spike of questions in the spring on the impact of the new Public Contracts Regulations 2015 (which came into force in February). Those aside, it turns out we have answered questions on just about every topic in procurement law and practice this year.

One of the most surprising questions came in only last week, from an incumbent supplier of goods who for very many years now has traditionally been awarded contracts directly, free from any competition.

S. Claus, an entity based at the North Pole, called our helpline to query whether its contracts in fact ought to have been advertised and competed and whether there was any risk of a claim for a “declaration of ineffectiveness”? The client was most anxious to avoid this eventuality, given the catastrophic consequences should it ever come to pass (disappointed children with empty stockings, elves and reindeer sitting idle, etcetera).

Happily, we were able to advise that the direct award of these contracts is probably legal.

Our advice was based firstly on Regulation 32(2)(b)(ii), which allows a contracting authority to award a contract without publication of a notice where the services/goods can only be provided by one supplier, due “technical reasons” making competition absent. The client explained to us that no other provider had the technical capability to provide the service with the flexibility and in the volume and timeframe offered by S. Claus. In our view, while in general the scope of this exemption is narrow, nonetheless we were satisfied in this case that the requirements of this Regulation were met; i.e. that "no reasonable alternative or substitute" was available and that the absence of competition was not due to an "artificial narrowing down of the parameters of the procurement".

As a second line of argument, we also considered whether these contracts were “public contracts” at all, given the requirement in the Regulations for public contracts to be “in writing” and “for pecuniary interest”, and that they be procured by a "contracting authority".

We concluded that this was a grey area in respect of the first two definitions. First, while no contract is signed as such, it is possible that S. Claus’ customary acceptance of handwritten requests may well amount to a contract “in writing”. Further, while S. Clause receives no monetary consideration, nonetheless the traditional payment of a glass of sherry and a mince pie is still likely to constitute “pecuniary interest”.

However, we advised that it was highly unlikely that children worldwide could amount to a "contracting authority" for these purposes, providing much needed reassurance to the client and saving the disappointment of children everywhere. 

A very Merry Christmas to all our readers from the Procurement Portal team!

December 21, 2015 10:52 AM | Posted by Smith, Ruth | Permalink

We have recently had judgment in a Scottish case where an ineffectiveness declaration has been made which, to our knowledge, is the first of its kind: Lightways (Contractors) Ltd v Inverclyde Council [2015] CSOH 169 (click here to see the judgment).

Readers will probably remember that a court may award a "declaration of ineffectiveness" and bring a contract to an end, in three specific circumstances. These are (broadly speaking) (1) where the contract has been awarded directly when an OJEU advertisement and competition was in fact required; (2) where there has been a breach of the requirement to hold a lawful standstill period and this has deprived a bidder of the opportunity to seek redress for another substantive breach; or (3) the rules on mini-competitions have not been followed, in the context of a contract called off from a framework.

Brief facts

In 2015, the Council ran a mini-competition and made a call off under Lot 9 of a CCS Framework agreement for Street Lighting Services. The contract award was made to a company named “Amey Public Services LLP” (LLP) and the contract entered into. It was relevant that in 2013 the Council had previously made an award under the Framework to the same LLP.

The Claimant (Lightways (Contractors) Ltd) was not on the Framework for Lot 9 but nevertheless challenged the award on grounds that the LLP were not appointed under the Framework and so the contract award had been made contrary to Regulation 19(3) of the Public Contracts (Scotland) Regulations 2012 (which mirrors Regulation 19(3) of Public Contracts Regulations 2006). This regulation states that call offs can only be made to entities which have been appointed to the Framework. In fact, it was a different Amey company, “Amey OW Limited” (OW), which was the supplier listed on the Framework.

Notwithstanding that both the LLP and OW had links to Amey, they were very different companies. The LLP was a JV between a company in the Amey Group (not OW) and Lanarkshire Council whose principal activity was stated to be a contract with Lanarkshire Council for highways maintenance. In contrast, OW’s principal activity was stated to be civil engineering consultancy. Each company had their own assets, employees and were very separate businesses. Unlike LLP, OW had no presence at all in Scotland.

Decision

The Court accepted the Claimant’s arguments and was satisfied that Lightways had standing (in layman's terms, this means the "right to sue") to challenge even though it was not itself a party to the Framework.

It did not accept that the principle of proportionality applied here to allow the court to simply correct the Council’s mistake and substitute OW in the LLP’s place. It was clear that this was not a simple mistake which could easily be corrected, as the Council had never had the intention to award the contract to OW (the party listed on the Framework). This was evident from the fact that the intention was to award to the same company as had had the contract (albeit through the same error) since 2013. 

Therefore, the Court concluded the Council had no defence to the challenge (under Regulation 19(3)) and therefore made an order of ineffectiveness.

Comment

The case is interesting, not only because it is the first case on ineffectiveness but also in relation to "standing". Even though the claimant was not entitled to be appointed under the Framework, it was still found to have standing to challenge the award.

There is no mention in the judgment of the Council carrying out a standstill prior to entering into the contract with LLP; it would have been interesting to know if running a standstill would have "saved" the Council from an ineffectiveness declaration, as, by appointing to an entity which was not on the Framework, the Council had in effect made an illegal direct award. If the Court felt Lightways had standing to challenge, this suggests it may also have concluded that a standstill may not have saved the position as Lightways (who was also not a party to the Framework) would not have received a standstill notice in any event.

The case is also a good reminder of the importance of ensuring (a) that the same entity that tenders is awarded the contract and (b) in the case of Frameworks checking that tenderers invited to mini competitions and those awarded call offs are parties which are actually appointed to the Framework.

December 4, 2015 11:51 AM | Posted by Beresford-Jones, Jenny | Permalink

Yesterday, the European Commission’s new forms for use under the Public Contracts Regulations 2015 “went live” on the SIMAP website. The Crown Commercial Service has also published a policy note on the topic.

Contracting authorities should now use these new forms for procurements regulated by the Public Contracts Regulations 2015, rather than relying on the transitional “workaround” that has previously been in place.

That said, the CCS guidance does state that “due to the requirement to adapt systems to accept the new standard forms and notices, and the time needed to re-qualify, some e-Senders may not have the new standard forms and notices available in December. The transitional arrangements may continue whilst the TED re-qualification phase is taking place.”

Of particular interest are the “new” forms, for example, those for use in relation to substantial modifications under Regulations 72(1)(b) and (c) and the new contract notice and award notice forms for procurements falling under the Light Touch Regime.

Also available on the SIMAP site are new forms that will be required under the new Utilities directive and the new Concessions directive (which will be implemented here in April 2016 by the Utilities Contracts Regulations 2016 and the Concession Contracts Regulations 2016 respectively).

November 27, 2015 11:28 AM | Posted by Souter, Katherine | Permalink

These new thresholds for the application of the various public procurement regimes come into force on 1 January 2016.

 Supply and services contracts (central government)  €135,000/£106,047
 Supply and services contracts
(sub-central government)
 €209,000/£164,176
 Works contracts (central and sub-central)
 €5,225,000/£4,104,394


The threshold for public concession contracts under the new Concessions Directive is now €5,225,000/£4,104,394. Note however that this Directive has not yet been implemented in the UK (although the draft Concession Contracts Regulations 2016 have been published and are due to come into force on 18 April 2016).

The “light touch” threshold for public service contracts for social and other specific services has not been amended in Euros but the Commission’s conversion into other currencies means that the value in £GBP drops (the threshold €750,000/£589,148, under the Public Contracts Regulations 2015).

November 16, 2015 10:41 AM | Posted by Calder, Kevin | Permalink
Sitting in a room full of the UK's leading public procurement lawyers on Friday at the annual November procurement conference it almost felt like White Paper have a monopoly on procurement seminars. Talking of which, fans of Monopoly may have spotted that delegates could 'own' their spot on Park Lane for the day for £350!

Speakers included Sarah Hannaford QC, who looked at building houses in the Gottlieb case, and how the parties may fare in their forthcoming appeal. There was also discussion as to whether the UK draftsman had taken a Chance in going for "or" rather than following the Directive with an "and" in Reg 72(1)(b). Sarah reminded delegates of the importance of getting the scope of the OJEU notice right before the procurement passes 'go'.

Once again Claudio Romanini provided input from his Community chest of thoughts on the issues.

Thanks from the M&R delegates to all the contributors, White Paper and "Boris" for another excellent event. See you next year!
November 4, 2015 3:08 PM | Posted by Smith, Ruth | Permalink

Specifying location requirements can be a tricky business when running an EU procurement exercise.  Get this wrong and you risk a challenge on grounds of lack of equal treatment and/or for creating an unjustified obstacle to open competition.   A Spanish contracting authority recently learned this the hard way when specifying its location requirements for a health service contract with the result that the matter was referred to the ECJ. 

The facts were that in an attempt to reduce the pressure on public hospitals in the Basque region of Spain their Department of Health decided to outsource various public health care surgical services to private hospitals.  The surgical procedures were still to be performed by surgeons of the public health service but they would travel to the hospital facilities of the selected private hospitals to carry them out.

The Department of Health advertised two separate contracts for these services under the open procedure.  The procurement directive in force at the time was Directive 2004/18 and, as these were above threshold Part B services, the rules in the Directive on technical specifications applied.  A minimum requirement of the Department’s technical specifications was that the private hospitals offered had to be located in Bilbao.  The precise wording of the requirement was as follows:

Having regard to the need for services to be provided with sufficient proximity patients and their families, the availability of public transport and travelling time, and the need to minimise the necessary travel by medical staff of the …. hospitals, the health care centres proposed must be situated in the municipality of Bilbao.”

A private hospital located in a municipality adjacent to Bilbao challenged the procurements on the grounds that the Bilbao location requirement was unjustified and contrary to the principles of equal treatment and freedom of access to public procurement procedures.

It was relevant that the services covered by the contract(s) were not exclusively for patients who resided in Bilbao and covered patients living in other nearby localities.  Further, that the hospital facilities offered by the challenger, although not located in Bilbao, satisfied all other conditions of the procurements including being sufficiently close and accessible for patients, their families and the public health surgeons who were required to travel there.

The Court agreed with the challenger and concluded that the location requirement in the specification (i.e. for the hospitals to be located in Bilbao), which resulted in the automatic exclusion of the challenger, was contrary to the Directive’s rules on technical specifications, as applicable to Part B contracts (in particular, Article 23(2)), as it did not allow equal access for tenderers and was an unjustified obstacle to competition.

Comment

Although the decision is not surprising it serves as a good reminder of the need for care when drafting specifications.  This is not only with regard to location but also generally to ensure your requirements are justified and do not pose an unnecessary obstacle to competition.  It is worth noting that in this case the court did not criticise the more general proximity requirement in the specification (as that was clearly justifiable) but the requirement to be in Bilbao, which was the only point which the challenger could not meet and led to its automatic exclusion, was unnecessary, unjustified and a step too far.


 
October 14, 2015 10:11 AM | Posted by Beresford-Jones, Jenny | Permalink
Do we really need to have all the procurement documents ready “up front”?

This is one of the most common questions we have been asked since the publication of the Public Contracts Regulations 2015 (“PCR 2015”).

We have previously blogged about Regulation 53(1) of the PCR 2015, which requires contracting authorities to offer unrestricted and full direct access free of charge to the “procurement documents” from the date that a notice is published in the OJEU commencing a procurement. The problem is the very wide definition of “procurement documents”, which is as follows:

“procurement document” means any document produced or referred to by the contracting authority to describe or determine elements of the procurement or the procedure, including the contract notice, the prior information notice where it is used as a means of calling for competition, the technical specifications, the descriptive document, proposed conditions of contract, formats for the presentation of documents by candidates and tenderers, information on generally applicable obligations and any additional documents.

The breadth of the definition at first glance suggests that a contracting authority needs to have the PQQ, ITT, terms and conditions of contract, specification and so on ready for publication electronically on day one. Obviously this is a step change in what has been common practice previously (i.e. to prepare the procurement documents on a linear, “stage by stage”, basis) and has caused considerable concern amongst contracting authorities. Could a bidder make a procurement challenge merely on the basis that one of the procurement documents was not published electronically on day one? How is it possible to publish documents in respect of a negotiated or competitive dialogue process where, by definition, the specification and terms and conditions will not even be known on day one? Clients have also flagged very legitimate concerns about confidentiality and security issues if full documentation such as specifications have to be published online with the OJEU.

The Crown Commercial Service has now issued some guidance which is helpful to contracting authorities. It suggests that you can take a “purposive” view of the definition of “procurement documents” and that “where individual regulations refer to “procurement documents”, what is meant by that wording changes based on the different stages of the process that has been reached.”

The guidance goes on to suggest that, at the very early stages of the procurement, “few if any” of the procurement documents will be included in the definition, and, as the procurement becomes more crystallised, further documents will be generated and supplied. If this view is correct, it suggests that contracting authorities can prepare and publish some of the key procurement documents following the OJEU notice, provided that the description of the procurement given in the OJEU notice and accompanying documents which are published with the OJEU (such as any descriptive document or memorandum of information) is sufficiently detailed to allow bidders to form a proper view of the nature, scope and scale of the procurement so as to enable them to decide whether or not they wish to take part in the competition.

The CCS notes that the PCR 2015 do not specifically address the situation where elements of the final documents may necessarily depend on the outcomes of negotiations or dialogues (i.e. where the procurement is following the competitive with negotiation, competitive dialogue or innovation partnership procedure). It notes that the core information requirements are set out in Regulations 29-31 (for each procedure respectively) and that information needs to be “sufficiently precise to enable suppliers to identify the nature and scope of the requirement and decide whether to request to participate”.

The guidance gives the example of a construction contract being let by a two-stage process, and suggests that procurement documents at the outset would need to explain the final output (in terms of building size, limitations, use and so on) so that bidders could decide whether or not to express interest, but that the contracting authority would not be expected to produce a full specification at the outset in the context of a negotiated process.

Finally, the guidance addresses the question of whether a PIN notice “counts” for the purposes of Regulation 53(1). The issue here is that Regulation 53(1) simply refers to a ‘notice’ rather than a ‘contract notice’, and therefore on the face of it looks like the electronic publication requirement could apply even where only a PIN is being published. Taking a purposive view again, the CCS guidance suggests that procurement documents will be at an embryonic or non-existent stage if the PIN is being used merely as market pre-engagement tool, and therefore that the obligation to publish more detail will only bite at the later point when a full contract notice is issued. If, on the other hand, the PIN itself is being used as the call for competition (i.e. as an equivalent to the OJEU notice) then the guidance suggests that the same approach needs to be taken as if it were a standard contract notice (as discussed above).

Contracting authorities need to keep in mind that this is an area of the law which is as yet untested by the courts and that the guidance offered by the CCS is an interpretation only of the EU rules as implemented in the UK – there is of course no guarantee that the courts would reach the same conclusion. On a literal reading of Regulation 53(1) it clearly states that you need to publish all the procurement documents (as defined) on day one.

That said, the possibility of a bidder mounting a successful challenge on the basis of a breach of Regulation 53(1) is perhaps remote; a supplier would have to demonstrate somehow that the incomplete publication of the procurement documents on day one meant that it either expressed or failed to express an interest in competing and thereby suffered some quantifiable loss. A more likely scenario might be where a bidder brings some wider claim about the loss of an opportunity to bid in a fair and transparent process and uses a perceived failure to comply strictly with Regulation 53(1) as evidence of the lack of transparency. It might also be used tactically during the procurement process to put pressure on a contracting authority. For example, if a new document arrives later on in the process that contains something not previously disclosed, then a bidder may use Regulation 53(1) to lean on the contracting authority, perhaps as a way to seek more time or even to try to force the contracting authority to drop an aspect of their requirement on the basis that it should have been published earlier with the OJEU notice.

It is also worth noting that it is good practice in any event to prepare a number of the key procurement documents before starting a supplier selection procedure; our experience is that clients who have got the key documents ready pre-OJEU are much less likely to face issues with their procurement process down the line. So, there remain good reasons to look at preparing a number of the key procurement documents, in particular the ITT or equivalent, prior to issuing the OJEU notice, and, if a document is finalised and ready, to consider publishing it. However, contracting authorities should note that there is limited flexibility to add to or amend the procurement documents once published to bidders. In particular, any changes must not be sufficiently material so as to change the nature of the procurement or the specification and, in accordance with Regulation 47, you must always consider whether an extension of time limits is appropriate when procurement documents are amended.

Overall then, the CCS guidance is helpful to contracting authorities and reflects what a number of commentators in the field have been suggesting on this point. It gives some reassurance that it should not be necessary to produce an entire suite of procurement documents on day one, provided that sufficient information about the requirement is provided at the time of OJEU so that bidders can make an informed decision whether to compete for the opportunity or not.

We conclude this article with a few “best practice” reminders around the drafting and publication of the OJEU notice and other key procurement documents:

• In an ever more litigious sector, it is becoming increasingly important to get the OJEU notice right, in terms of including the correct CPV codes and description of the requirements, and so on. We are regularly asked to “sense check” OJEU notices by clients: do contact our team if this would be of interest;

• Make sure there is consistency in approach across all the documents – errors may be highlighted in sharper relief where all documents are published at the same time;

• The greater the amount of information published upfront, the more important it is that the contracting authority reserves itself the right to amend the documents or to issue additional documents and require bidders to take these into account when preparing any responses (as mentioned above, the contracting authority will still have to consider whether any proposed amendments could have a material impact on the process);

• Before the OJEU notice is issued the contracting authority should ideally prepare a schedule of core procurement documents so that the project/procurement team can consider what is going to be produced and the most appropriate time to publish the information;

• Maintaining an audit trail is key: if a decision is made not disclose a document at the time the OJEU notice is issued, it is sensible to document this, as it may prove useful to rely on later;

• If the PQQ and ITT documents are published at the same time then the contracting authority either needs to ensure it has resources available to answer clarification questions early on about both the PQQ and ITT stages or (at least) it will need to be clear about when it will respond to questions on the documents relevant to each stage; and

• There may be some technological hurdles to overcome if a wide suite of procurement documents is published at the outset; for example, on most e-tendering systems, bidders can only access ITTs when they have passed the PQQ stage (meaning that contracting authorities may need to discuss with their current e-tendering suppliers how ‘read only’ versions of documents can be accessed).
August 24, 2015 12:15 PM | Posted by Beresford-Jones, Jenny | Permalink

It's now six months or so since the Public Contracts Regulations 2015 came into force, implementing the new EU Public Contracts Directive. The government is now turning its attention to implementing the other two new EU Directives, on Utilities procurement and Concession contracts. This must be done by April 2016, to comply with the EU deadline.

To that end it has just published the draft Utilities Contracts Regulations 2016 ("UCR 2016") and the draft Concession Contracts Regulations 2016 ("CCR 2016"). It is consulting on both drafts - the deadline for responses is 18 September 2016.

The consultation papers (available here and here) are worth a read even if you don't intend to respond, because they offer an overview of the changes the UCR 2016 and CCR 2016 will bring once they come into force next year.

We are currently reviewing the draft regulations and consultation documents and will post again with further details of these soon.

July 1, 2015 4:18 PM | Posted by Beresford-Jones, Jenny | Permalink
From the academic year 2015/16, the cap on student numbers will be removed. The Guardian newspaper has conducted a survey which suggests that around half of Russell Group universities plan to expand recruitment while the other half have no plans to take on more students.

Where more students are recruited, this will probably increase the proportion of funds a university receives via tuition fees. This effect may well be amplified by the fact that the government funding allocation to English universities for teaching for the years 2014/15 and 2015/16 is falling, with the Higher Education Funding Council for England (HECFE) commenting that the reductions extend more widely than merely those accounted for by the switch to funding via tuition fees.

Why is this relevant from a procurement perspective? Because universities will only be covered by the public procurement regime if they meet the definition of “contracting authorities”. The Public Contracts Regulations 2015 came into force in February this year, but introduced no material changes to the definition. A university will still be a “contracting authority” if more than 50% of its funding is classed as public money. If it is not a “contracting authority” a university is free of the requirements of the regime, which some would see as an advantage in a sector hard pressed by funding cuts.

The ever-increasing shift to funding via student tuition fees, reignites the debate around whether these tuition fees, where they are funded via loans from the publicly-owned Student Loans Company (SLC), should be categorised as “public” or “private” money when assessing whether a university is funded mainly from the public sector or not. At the time tuition fees were introduced, the Department of Business, Innovation and Skills (“BIS”) stated that such tuition fees might well be “private sector funding” and, as such, universities might be more likely to find themselves outside the scope of the public procurement rules as a result of the new funding structure. However, it left the risk of making this judgment up to individual universities to decide on a case by case basis.

At the time, we wrote in this blog that we disagreed with the BIS view, having sought the legal opinion of one of the leading QCs in this area. With the question now coming once more into sharp focus we have seen nothing which changes our view on the point.

The SLC is itself a contracting authority, and receives its money from the government, out of which it makes tuition fee loans to students, with the fees in question being paid direct to the relevant university. Indirectly, therefore, the university receives public money from the state. The loan between the student and SLC is made on non-commercial terms and indeed may be written off in the future, in what could be regarded as a form of public subsidy. If the issue came before the court, we think it is likely that the court would take a purposive approach and “look through” the supposedly “private” contract between student and university to find the (public) source of the funding underlying the arrangement.

Were the SLC ever to reach a point where its funds to make loans were derived from the private sector predominantly, then of course that could well change the analysis. For now though, in our view, the increasing sum being paid through tuition fees funded via the SLC is unlikely to assist universities to wriggle free of the public procurement regime.
July 1, 2015 12:00 PM | Posted by Beresford-Jones, Jenny | Permalink

Those who have been swotting up on the Public Contracts Regulations 2015 ("PCR 2015") will know that they do not apply to any public contract whose procurement process was "commenced" before 26 February 2015.

Those who really know their stuff will also be aware that Regulation 72 of the PCR 2015 now sets out when amendments to existing public contracts may be made, without needing a completely new procurement process. This regulation codified and clarified the previous position, which until then had only been set out in case law (i.e. the Pressetext case). While Regulation 72 does not change the existing law, it does clarify it and provide greater certainty as to whether a modification is likely to be "substantial".

However, there has been something of a conundrum here. If the original contract was regulated by the old 2006 regulations, but the amendment was being made after 26th February 2015, which set of regulations applied to the new amendment?

Would Regulation 72 of the PCR 2015 be in force in relation to the amendment, seeing as it was being made after 26th February 2015? Or, in the alternative analysis, would it not apply, given that the transitional provisions at Regulation 118 of the PCR 2015 say that (to paraphrase) "Nothing in these Regulations affects any procurement commenced before 26th February 2015"?

When the Crown Commercial Service ("CCS") put out its guidance on Regulation 72, it stated very clearly that, if the amendment was being made on or after 26 February 2015, then new Regulation 72 of the PCR 2015 would apply to the question of whether that amendment was a "substantial modification" or not.

The CCS view has recently been lent authority by the Supreme Court, which today handed down its judgment in the Edenred case. This case turned on whether a proposed amendment to a pre-existing contract without a new procurement procedure was lawful or not. As part of the analysis, the Court needed to establish what law would apply to the proposed amendment, and decided that, since the amendment would fall on or after 26 February 2015, Regulation 72 of the PCR 2015 would apply (even though the PCR 2015 do not apply in general to the original contract concerned).

The decision is welcome as it clears up the uncertainty and as it allows contracting authorities to take advantage of the clearer and more detailed tests set out in Regulation 72, when deciding whether an amendment to a contract is lawful or not.

June 26, 2015 9:55 AM | Posted by Beresford-Jones, Jenny | Permalink

It is not only schoolteachers who are busy writing pages of reports at this time of year; contracting authorities need to do so too, thanks to Action Note 10/15, which has recently been issued by the Crown Commercial Service.

This Action Note applies to all contracting authorities, and requires them to submit online, by 10 July 2015, the requested details of all public contracts and frameworks entered into in 2013 and 2014. Note that it does not extend to contracts called off from a framework.

The request is made under Regulation 40 of the Public Contracts Regulations 2006 and as such, as the CCS points out, compliance is mandatory rather than discretionary.

The Action Note states that this is the last time the CCS expects to call for these reports; under Regulation 84 of the new Public Contracts Regulations 2015, while there is an obligation to keep reports, there is no obligation to send them to the CCS unless actually requested to do so. The Action Note suggests that this is therefore the last set of annual reports contracting authorities will be required to make en masse, given the introduction of Regulation 84.

Details of the mechanism for making reports online and the level of detail required can be found in the Action Note.

May 13, 2015 4:17 PM | Posted by Beresford-Jones, Jenny | Permalink

Afraid so. Generally speaking, it is an absolute requirement of Regulation 53 of the Public Contracts Regulations 2015 ("PCR 2015") to provide electronic access from the date of the OJEU notice. The feedback we are getting is that this represents a step change in previous practice, which has often been to take a more sequential approach to the drafting of procurement documents.

Aren't there exemptions from the requirement?

We note that, while Regulations 53(3) and (4) do provide limited exemptions from the requirement to make the procurement documents electronically available, even if these do apply, the procurement documents still need to be made available from the date of the OJEU notice via some alternative means.

What does "unrestricted and full direct access free of charge" mean?

We have also been asked on several occasions to advise on what “unrestricted and full direct access free of charge” means (this is the phrase used in Regulation 53). There is no new guidance on this as yet but we note that the phrase exactly mirrors wording in the old directive, for which there is some (admittedly now rather old) guidance. We advise following this old guidance (see in particular paragraph 3.2.1) until anything new is published. The old guidance suggests that, although there may not be any “intermediary stage”, a simple registration requirement is acceptable prior to downloading documents (although ideally it should be possible for bidders to merely view documents without any registration).

Can you amend the procurement documents if they have already been published?

Another question we are asked a lot is how much scope there is to change the procurement documents once they have been published, particularly if this had to be done at speed in order to publish the OJEU notice in compliance with Regulation 53. Obviously the ideal would be for the procurement documents to be as complete as possible on day one (obviously taking a common sense approach; in a negotiated process, for example, it will not be possible to disclose final and complete terms and conditions at the beginning of the procurement).

That said, Recital 81 of the new Directive and Regulation 47(3) of the PCR 2015 do contemplate the possibility of ‘significant changes to the procurement documents’ provided the timetable is extended appropriately, so clearly some degree of change is acceptable. However, changes to the award criteria or to core requirements would almost certainly require a new advertisement. The key test is whether the procurement is so changed by the supplementary information that it has moved outside of the scope of the original advertisement and suite of documents, such that, had they known what the procurement would eventually have looked like, suppliers other than those who bid could potentially have been interested.

April 20, 2015 11:01 AM | Posted by Beresford-Jones, Jenny | Permalink

This Act received Royal Assent at the end of March. In this post, we look at its relevance for procurement practitioners and suppliers alike.

Why is it relevant?

The Act is wide-ranging in scope, but two particular sections are important from a public procurement perspective.

Section 39 of the Act, which came into force on 26 March 2015, gives the Secretary of State the power to introduce regulations to impose duties on contracting authorities around streamlining and efficiency in public procurement and creating a level playing field for SMEs. A contracting authority will not be within the scope of the Act if its main functions are devolved functions in Scotland, Wales or Northern Ireland. The types of duties imposed may include:

  • duties to exercise functions relating to procurement in an efficient and timely manner;
  • duties relating to the process by which contracts are entered into (including timescales and the extent and manner of engagement with potential parties to a contract);
  • duties to make available without charge:
    • information or documents;
    • any process required to be completed in order to bid for a contract;
  • duties relating to the acceptance of invoices by electronic means (including a prohibition on the charging of fees for processing such invoices, the publication of reports relating to the number of such invoices received or the electronic systems that must be used by a contracting authority); and
  • duties to publish reports about compliance with the regulations.

The government has been consulting on draft regulations; as yet there is no definite timetable available for when these will be finalised. When they are in force, however, the Public Contracts Regulations 2015 will no longer represent the complete picture when it comes to the regulation of public procurement, particularly given the new investigatory powers we discuss in the next paragraph.

Section 40 of the Act, which comes into force on 26 May 2015, will give statutory footing to the Mystery Shopper scheme, granting the Secretary of State the power to investigate the way a contracting authority conducts its procurement functions. This is a wide remit; it covers the design and planning of the procurement process, the process itself and the management of the contract ultimately awarded.

There are exemptions from the threat of investigation for maintained schools/Academies/the procurement of clinical health services and central government departments. The section also gives the government the right to publish the outcome of the investigation, potentially a fertile source of reputational risk for contracting authorities.

Further information about sections 39 and 40 of the Act is available in BIS's factsheet here. Once the s.39 regulations are available, we will blog again.

 

Section 39

March 23, 2015 11:55 AM | Posted by Beresford-Jones, Jenny | Permalink

Recently we have had several queries from clients and users of our procurement portal around the requirement at regulation 112 to publish contract award notices on Contracts Finder even where the contract is below the threshold.

This will be an additional layer of administrative burden for contracting authorities and understandably our readers are wondering whether it is really strictly necessary. (Of course the obligation to publish contract award notices on Contracts Finder also applies where the contract is over the threshold, thanks to regulation 106, but given that this information must be published in the OJEU anyway, this is perhaps less of a burden.)

When is the obligation to post contract award information for below-threshold contracts onto Contracts Finder actually triggered? It will apply, from 1 April 2015, if the contract is below the relevant EU threshold for that contract type but above the de minimis lower threshold. This lower threshold is £10k for central government bodies and £25k for sub-central government bodies and NHS Trusts.  Note that Academies and maintained schools (as defined) are exempt, as is the procurement of “health services” for the purposes of the NHS (Procurement, Patient Choice and Competition)(No.2) Regulations 2013.

There is no absolute requirement to advertise one of these contracts on Contracts Finder; regulation 110 merely states that, if you choose to advertise, then you must advertise/also advertise on Contracts Finder. However, regulation 112 requires contract award information to be posted on Contracts Finder, regardless of whether the below-threshold contract was initially advertised there or not.

It also sets out the minimum information requirements that must be included, which, in addition to information about the contractor and the contract value, must also contain a note on whether the winning bidder is an SME or a value-driven non-governmental not-for-profit organisation. Further details are available in the Crown Commercial Service’s recent guidance. Also worth a look, for more guidance on some of the technicalities of using Contracts Finder, are the CCS’s Q and As on the topic.

What happens if we don’t?!

It is not entirely clear what the consequences of a failure to publish a contract award notice for a below-threshold contract might be. Regulation 91 states that a bidder can bring an action in the High Court for a breach of the duty set out at regulations 89 or 90. When you look at regulations 89 and 90, they state that the scope of that duty is limited to the provisions of Part 2 and any other EU obligation in relation to an over-threshold contract covered by Part 2. On that basis, our view is that the “applications to court” regime at regulations 88-104 does not apply to the Part 4 requirement at regulation 112 to post contract award details to Contracts Finder for below-threshold contracts (although of course this has not yet been tested in the courts!)

We suspect that litigation over this is very unlikely because a bidder would have to show that it had somehow suffered a loss as a result of the contracting authority’s failure to publish contract award details on Contracts Finder; a scenario that is difficult to immediately envisage. Also, theoretically at least, new court fees have come into effect which have increased the fee for issuing proceedings to 5% of the damages claimed up to a ceiling of £10K so, if that legislation stands, then it would simply be uneconomic to bring this kind of claim. Note too the statement at regulation 114 that a material failure to comply with Part 4 will not of itself affect the validity of a contract once it has been entered into. However this provision of course stops short of preventing, for example, a claim by a bidder for damages.

Notwithstanding this, there could be a reputational risk of failing to comply with regulation 112; allegations of a lack of transparency and a place in the “bad books” of the Crown Commercial Service (including perhaps a mention in its quarterly “Mystery Shopper” reports). As such, least risky approach is of course to try to meet the below-threshold Contracts Finder requirements rather than to fail to do so.

 

March 6, 2015 10:55 AM | Posted by Beresford-Jones, Jenny | Permalink

A week or so into life under the Public Contracts Regulations 2015 and we have already several pieces of guidance on the new regime from the Cabinet Office, as follows:

In addition, the Contracts Finder website was re-launched on 26 February to coincide with the new regulations coming into force. You can find it here https://www.gov.uk/contracts-finder and you may need to update internet links in your internal documents/website.

February 26, 2015 9:46 AM | Posted by Beresford-Jones, Jenny | Permalink

The Public Contracts Regulations 2015 are now in force for all procurements commenced on or after today. Procurements commenced before today will continue to be regulated by the Public Contracts Regulations 2006. Broadly speaking, a procurement will be “commenced” for these purposes on the date that the advertisement is sent to the OJEU.

We have been busy updating the Procurement Portal in the last couple of weeks and today we're able to share some helpful new content:

You could also call or email our Procurement Portal helpline with any queries you may have around the new regulations and how they apply to your organisation.

We are in the process of fully updating our Procurement Portal with new content on the 2015 regulations, so do check back from time to time to see what we have added. You might also like to sign up to receive timely updates from our procurement blog. Alternatively, you can sign up to receive newsletter updates covering all the latest developments in the field.  

February 9, 2015 3:16 PM | Posted by Smith, Ruth | Permalink

The Public Contracts Regulations 2015 (PCR 2015) (available here) were laid before Parliament on Thursday last week, with the majority of the provisions coming into force on Thursday 26 February 2015.

So has the final version of the PCR 2015 changed significantly since the previous draft was issued in Autumn last year? The short answer, as might have been anticipated, is there has been little substantial change and what change there has been is often to make the drafting clearer rather than to amend the substance of the provision. This will be a great relief to all procurement practitioners, who are already hard pressed enough to get ready for the new regime at short order.

So, what has changed in the final version? Here is a short summary of the more material points:

Lord Young Reforms - The most significant changes made in the final version of the PCR 2015 are to Part 4 (Regulations 105 to 114). These are the controversial provisions which go beyond the requirements of the EU Directive and implement our current Government’s policy agenda (including the Lord Young reforms) on supporting growth, transparency and maximising opportunities for SMEs.

- Requirements relating to above threshold procurements (Regulations 105 to 108) - If getting to grips with the new Directive’s requirements wasn’t enough, for the first time, it will also be a statutory requirement (a) to use Contracts Finder and (b) to ensure that selection criteria are pared back to the minimum in the hope of attracting greater SME participation (see Regulation 107).

- Publication of notices on Contracts Finder (Regulations 106 and 108) - These provisions (other than for a contracting authority that is a maintained school or academy) require contracting authorities to also publish on Contracts Finder any Contract Notice or Contract Award Notice which it publishes in the Official Journal of the European Union (note there is an exemption if publication impedes law enforcement, is not in the public interest, or would prejudice commercial interests or competition). This puts onto a statutory footing the obligation to publish on Contracts Finder, which has previously been addressed only via Procurement Policy Notes and guidance.

There is also a statutory obligation to have regard to Cabinet Office guidance about how and when the information needs to be published. There is a suggestion (see Regulations 106(4) and (5) and 108(7) and (8)) that the Cabinet Office is considering a system where information is automatically extracted from the OJEU and copied across to Contracts Finder without further action being required by contracting authorities. This has perhaps been introduced as a result of concerns expressed in the consultation, and in an effort to reduce the additional burden on contracting authorities in complying with these additional provisions. Regulations 106 and 108 only come into force on 26 February 2015 for contracting authorities which “perform their functions on behalf of the Crown”. There is a short one month reprieve, until 1 April 2015, for all other contracting authorities. This is perhaps to allow the Cabinet Office time to issue further guidance on these Regulations.

Note also that contracts for health services covered by the NHS (Procurement, Patient Choice and Competition)(no.2) Regulations 2013 (the “NHS Regulations”) are saved from these additional provisions.

-Requirements relating to sub-threshold contracts - The previous draft of the PCR 2015 introduced a new regime for sub-threshold contracts. These provisions are now shifted back in the final version to Regulations 109 to 112. They apply to:

- Central government contracts valued at over £10,000; and
- Sub-central government (including NHS Trusts) contracts valued at over £25,000.

They do not apply to health service contracts covered by the NHS Regulations.

For those contracts which are caught by the new provisions, if they are to be advertised at all this must include an advertisement on Contracts Finder. Information on contracts awarded must also be published on Contracts Finder; there is a ban on using a separate PQQ stage; and there is an obligation to have regard to any guidance issued by the Cabinet Office.

The final version of the PCR 2015 clarifies that advertisement of any “contract opportunity” (and not merely “any contract”) will be within the scope of these provisions. This is regardless of how “specific” the opportunity is. So advertisement of forward-looking requirements that have not yet crystallised, such as through a PIN, pipe line notice or similar, will trigger the obligation to also advertise on Contracts Finder. Finally, an exemption to the requirement to publish details of contracts within the scope of these regulations has been added; there will be no requirement to publish if publication impedes law enforcement, is not in the public interest, or would prejudice commercial interests or competition.

Other more minor changes in the final version of the PCR 2015 include:

Batching Contract Award Notices - Regulation 50 has been amended, to make it clear that the right to send notices “batched quarterly” applies only to dynamic purchasing systems and not generally (as was implicit in the first draft). Note: ‘batching’ is still an option for contracts awarded under the "light touch" regime.

Mandatory Grounds for Exclusion - Regulation 57 includes certain additional offences to those triggering mandatory exclusion (offences under the Counter Terrorism Act 2008 and the Serious Crime Act 2007).

Light touch regime - Concerns had been raised during the consultation process about the flexibility given at Regulation 76(4) to contracting authorities running a procurement under the “light touch” regime for health and social services. This provision allows the contracting authority to alter the stated process while underway (subject to certain conditions including that this does not amount to a breach of equal treatment and transparency). The final version now includes a new obligation to inform bidders still participating of any such changes.

Schedule 1 List of central government contracting authorities - The updated list of central government contracting authorities is now included at Schedule 1.

Preparing for the "big change"

The start of the new regime is looming large on the horizon - 26 February is less than 3 weeks’ away! All procurements commenced (i.e., advertised) on or after that date will fall under the new regime. The following are our selected “top ten tips and highlights” for contracting authorities which we hope will help you to prepare:

Start now or wait?

If you’re about to commence a procurement, is it worth waiting, or possible to wait, until after 26 February to take advantage of some of the additional flexibilities (eg, the use of the competitive procedure with negotiation) or the reduced timescales which are built into the PCR 2015? Or conversely, are there compelling reasons in favour of pressing ahead quickly (which might be the case if you are procuring Part B services for the purposes of the current PCR 2006; see next bullet!)

Services contracts

Light touch or full regime? From 26 February, the old distinction between “Part A” and “Part B” services disappears and is replaced by the new ‘light touch’ regime. Under the light touch, all health, social and some other services contracts within the CPV codes set out at Schedule 3 must be advertised in the OJEU in accordance with Regulation 74, if valued at over EUR 750,000. Note, however, that this “light touch” regime does not (yet) apply if the contract is for health services within the scope of the NHS Regulations. While the majority of former “Part B” services fall within “light touch”, don’t assume this as there are some notable exceptions (including no catch all “other services” category). Those services which are not expressly identified in Schedule 3 will now be subject to the full regime.

Front load your preparations

Under the new regime, all “procurement documents” (and this is widely defined) must be ready and made available electronically (via the internet) from the date of the OJEU advertisement (or invitation to confirm interest where a PIN has been used as a call for competition). This may well be a significant change to your current processes and preparations which may, to date, have taken a more linear, staged approach to the drafting and availability of your procurement documentation.

Know your timescales

In most cases timescales for the different stages of the procurement procedures are shorter. If you’re a sub-central contracting authority, you also have the flexibility (for restricted and competitive negotiated procedures) to agree the time period for submitting tenders with bidders. If you intend to do that, make sure that all bidders agree.

Update your precedent documents

- Make sure, for example, that the revised and expanded grounds for exclusion (both mandatory and discretionary) replace the existing grounds.

- Check any selection criteria are still compliant (e.g., turnover requirements not exceeding twice contract value).

- Remember, when drafting your contract award criteria, that MEAT (most economically advantageous tender) has a slightly different meaning to its meaning under the PCR 2006; and that the new term “best price-quality ratio” has been introduced. Also, if you are proposing to use "life cycle-costing" as an award criterion, check you’ve included all information on this as Regulation 68 requires you to do.

- Amend timescales, terminology and references to the “Regulations”.

- Check content – have you included all information in your procurement documents as the new regime requires you to include? Note, you will need to check against the EU Directive for this as, in many cases, the PCR 2015 simply cross refer to the Directive rather than repeating its provisions. Why not prepare some simple checklists to make sure that everything is covered?

- Don’t forget your record keeping and reporting obligations including the need for the “Regulation 84 report” to document, for each procurement, key decisions and steps taken along the way. Again, a simple check-list would be a useful aide memoire for this.

Accommodating change and termination provisions

Regulation 72 on modification of contracts sets out clear parameters on those changes to an existing contract which can be accommodated without triggering the need for a new procurement process. When drafting your contract terms (including change control provisions) to issue with your procurement documents, and when identifying the scope of the contract in your OJEU, check the Regulation 72 ‘safe harbours’ and maximise your opportunities to use them in the way you approach your drafting.

And while you’re drafting or updating your contract terms, include provisions to allow for contract termination in the circumstances covered by Regulation 73. It’s better to have dealt with this up-front and included your own provisions on giving notice, consequences of termination etc. than to remain silent and have these dealt with through the Regulations’ deeming provisions.

Be ready for the “Lord Young reform” provisions

There’s a lot of new obligations to get to grips with; and watch out for Cabinet Office guidance on these and the new statutory obligations to “have regard to” the guidance or report as a “reportable deviation” departures from it.

Know your numbering

Remember, even provisions which are little changed from the PCR 2006 will likely have a new Regulation number. For example, the familiar Regulation 32 standstill notices and the Regulation 32A standstill period now become Regulations 86 and 87 respectively.

Which is which?

Don’t throw your copy of the PCR 2006 away! Remember the PCR 2006 will still apply to any procurements already started prior to 26 February 2015 (and in a few cases, such as health service contracts under the NHS Regulations even longer). So for a while you’ll be working with two sets of Regulations, so make sure you know which of your procurements is following which.

Update your internal procedures and policies

Ensure your staff know about them and are trained - see below as we’ve got some practical seminars on the way to help you with this.

Help is at hand ...

There is a huge amount to get to grips with, not only to prepare for the "big change" but also to ensure you are following the new regime correctly once it is in force. To help you, the procurement team here at Mills & Reeve is running a series of free half-day, practical seminars in April, in each of our Cambridge, London, Birmingham, Norwich and Manchester offices. If you haven't contacted us already and would like an invite, please email , or you can register to receive procurement updates and seminar invitations at www.mills-reeve.com/signup

February 6, 2015 10:43 AM | Posted by Beresford-Jones, Jenny | Permalink

The wait is over: the final version of the Public Contracts Regulations 2015 has just been published; these will come into force on 26 February 2015. You can access a copy of the new regulations here.

We are in the process of analysing the final draft, and will be blogging again very shortly on the changes that have been made, so do look out for that.

We are also finalising details for our series of free half-day seminars on the Public Contracts Regulations 2015, which we expect to hold in our Cambridge, London, Birmingham, Norwich and Manchester offices soon. Please email me at if you would like to receive an invitation for these.

February 4, 2015 10:23 AM | Posted by Beresford-Jones, Jenny | Permalink

What, more procurement regulations?! The SBEE Act Regulations 2015

Our Countdown to Law-nch series has so far focussed on the draft Public Contracts Regulations 2015.  Although the Government’s response to the consultation on the draft Regulations was published on 30th January, as yet we still have no definite date for their coming into force.  The consultation response just refers to "early 2015" (but we have heard on the grapevine the Cabinet Office may be working to the end of February 2015 as a timetable). Look out for further blog posts as soon as more concrete information is available.

We are therefore turning our attention this week to the “other” procurement regulations and, following the announcement by the Cabinet Office of its policy statement, how the government intends to use its new powers under sections 39 and 40 of the Small Business, Enterprise & Employment Bill (this link is to the latest draft as brought forward last week from Committee stage in the House of Lords). The SBEE Bill is currently making its way through the legislative process and is expected to become law in the not too distant future.

Section 39 will allow the government to make a second raft of regulations governing public procurement, aimed at implementing Lord Young’s policy drive to encourage small and medium sized players in the market.

Section 39 is very broad and essentially gives the government the power to make whatever regulations it sees fit about the way contracting authorities exercise their procurement functions (including the management of contracts once they have been entered into). It contains an illustrative list of the sorts of duties the regulations might cover, for example:

- an obligation to procure in a timely and efficient way;

- duties around the procurement process, such as timescales and pre-market engagement;

- duties to make information and procurement documentation available free of charge;

- a duty to accept invoices by electronic means; and

- a duty to monitor and report on compliance.

There has been a consultation, on the back of which the government has published a couple of illustrative regulations that give us a taster of the likely direction of travel. These regulations will apply to above-threshold procurements (except the procurement of health services covered by the NHS (Procurement, Patient Choice and Competition) (no 2) Regulations 2013 (the ‘NHS Regulations’)) and will bind all contracting authorities covered by the Public Contracts Regulations 2015, except for maintained schools/Academies.

The government’s general approach to the Public Contracts Regulations 2015 (and in implementing EU law generally) is to implement the parent EU directive as minimally as possible and to take a “copy out” approach to avoid the risk of “goldplating” (i.e. exceeding the regulatory requirements of the directive itself).

It is a mark of the importance the government places on the SME agenda and the Lord Young reforms that, in this area, it is prepared to go rather further than the directive itself required. This is demonstrated, for example, by the inclusion of draft Regulations 105 to 109 in the Public Contracts Regulations 2015, which for the first time will regulate under-threshold contracts, and also by these illustrative SBEE Act regulations which go a good deal beyond the minimum requirements of the parent directive.

The first illustrative regulation will not impose an absolute requirement to use pre-market engagement, but it will require any contracting authority choosing this route to do so in a manner that “increases awareness of and interest in bidding” by smaller companies and social value enterprises, “and other economic operators” (which on our reading must refer to all potential suppliers in the market). This is taking regulation a good deal further than is required by draft Regulation 40 of the Public Contracts Regulations 2015, which already covers premarket engagement. Given that there will be an obligation to report on how the SBEE Act regulations have been complied with, contracting authorities will need to work out how to demonstrate that their pre-market engagement has been properly set up and directed at the right sections of the market.

The second illustrative regulation will require contracting authorities to run procurements in a way which has regard to “lean sourcing principles”. These principles are set out in the illustrative regulation and are aimed at maximising efficiency through appropriate planning and effective engagement with suppliers and stakeholders.

We can expect to see further illustrative regulations in due course; the Cabinet Office has said in its policy statement that it is looking at potentially using the SBEE Act regulations to require contracting authorities to:

- accept electronic invoicing;

- ensure bidders have free access to information and documentation about procurement opportunities; and

- run a debrief process for unsuccessful bidders even where the procurement value is under the relevant threshold.

Section 40 of the SBEE Bill gives the government the power to investigate how public bodies have exercised their procurement functions (excepting Academies and maintained schools, together with the procurement of health services covered by the NHS Regulations 2013),which are all exempt from the threat of investigation).

Comment

It is clear that the Public Contracts Regulations 2015 will not represent the whole story when it comes to the regulation of public procurement in the UK. We already have difficult issues around how the “light touch” regime for health and social services in the PCR 2015 will mesh together with the rules on the procurement of health services under the NHS Regulations 2013 (to add to the uncertainty here, the Labour Party has recently said that, if it wins the General Election on 7 May, it will immediately be looking to roll back the NHS Regulations 2013 and reduce the trend towards tendering out of health services).  The waters will only be made more murky as we consider how the SBEE Act regulations will fit into the legislative matrix.

The Cabinet Office appears to be proposing to use SBEE Act regulations to make statutory the types of guidance which would previously have been the subject of a Procurement Policy Note.  However, in the absence of specific powers to enforce these, they appear to have struggled to encourage Government and the wider public sector to comply – but these new provisions will clearly carry more “clout”.   That said, it is not completely clear what the consequences for breach of the SBEE Act regulations will be, nor where the route to challenge will lie for a bidder who believes a contracting authority has failed to comply with its duties. Of course the government could export across the remedies provisions of the Public Contracts Regulations 2015, but these require bidders to start proceedings in the High Court, which may well lie beyond the reach of the very SME bidders that the SBEE Act regulations aim to encourage.

Next time in our Countdown to Law-nch series we will be looking at the recent Government response to the consultation on the draft Public Contracts Regulations 2015; should we expect many changes when we at last get sight of the final version of the regulations? Perhaps not ...

January 19, 2015 10:21 AM | Posted by Souter, Katherine | Permalink
We are generally told that gigantic organizations are inescapably necessary; but when we look closely we can notice that as soon as great size has been created there is often a strenuous attempt to attain smallness within bigness…” (E.F.Schumacher in ‘Small is Beautiful’)

In this week of our “Countdown to Law-nch” series, we’re looking at the government’s attempts to use the draft Public Contracts Regulations 2015 (the “Draft Regulations”) to attain “smallness within bigness”; or to put it another way, the employment of policy and legislation as a vehicle for the encouragement of smaller players in the procurement markets.

We’ve been assessing the impact of the Draft Regulations on small- and medium-sized entities (SMEs), and in this blog post, we focus in particular on how those operating in the construction sector may be affected. That said, the new measures, which aim to remove potential barriers to SME participation, are certainly not specific to the construction industry and will apply across the board. They will therefore be of more general interest too, both to SME bidders who may find that they present new opportunities, and to contracting authorities, who will need to familiarise themselves with the new measures and ensure procurement processes are compliant.

Keep calm and pre-qualify. On the whole, straightforward public works contracts are procured using the restricted procedure, which has two stages; pre-qualification and tender. The purpose of pre-qualification is to see that potential bidders are capable of delivering the works in terms of their experience, capability, financial strength and that they have the resources to complete the job. The pre-qualification stage has to date been cited as a barrier to entry for SMEs who often find it too time consuming and costly to respond with the rafts of documentation and information requested or simply cannot satisfy turnover requirements. The Draft Regulations make a new distinction between contracts which are under the relevant value threshold and those which exceed it. Where the contract value is under that threshold, the Draft Regulations will prohibit the use of a separate pre-qualification stage (effectively a ban on the use of pre-qualification questionnaires or use of a restricted procedure). It is intended that this will make access to below threshold contracts easier for SMEs. For above threshold procurements there will be a cap on turnover requirements of twice the contract value.

Cabinet Office Guidance and PAS 91. Our construction industry readers will be aware that the Cabinet Office has already mandated that central government departments use the standardised pre-qualification questionnaire (PAS 91) when procuring public works contracts, but failure to use PAS 91 when seeking a shortlist of bidders for public works contracts used to carry little or no consequence under the current Regulations. However, the Draft Regulations will now require contracting authorities to have regard to any guidance issued by the Cabinet Office on the selection of bidders. Contracting authorities must also report to the Cabinet Office any conduct which amounts to a “reportable deviation” from the guidance (and we assume that bidders may have no hesitation in doing that too if they have concerns). This is almost certain to cement the status of PAS 91 and its use. Outside of the construction sector, the Cabinet Office has already mandated a set of core PQQ questions for central government bodies (with other contracting authorities also advised to consider using it). We presume these will also be further updated to ensure that they reflect the Draft Regulations and, no doubt, Cabinet Office guidance to cement their use.

To Lot or not to Lot? The division of contracts into lots is also seen as a method of increasing SME participation. In the brave new world of public procurement, contracting authorities will be encouraged to split public contracts into lots where possible, but the Draft Regulations do not make it mandatory. It remains a choice for contracting authorities to make on a case by case basis. But what is new is that contracting authorities will be required to give reasons if they choose not to split a contract into lots. Bids for combined lots will be allowed and so too the ability to limit the number of lots that any one bidder can win; this will leave contracting authorities with something of a challenge around how, as required by the Draft Regulations, they explain with the necessary degree of transparency, the mechanism to be used in their evaluation if a decision is made to adopt either option.

Focussing on the construction industry in particular, lots could potentially be used where a contracting authority wants to tender for an entire project under a single contract notice but then break that down in to separate lots for perhaps site remediation, demolition, construction, or perhaps where specialist works packages are required and the contracting authority wants to contract directly to retain control. Similarly with consultancy contracts the contracting authority may wish to procure all of its professional team under one contract notice and then split each discipline into lots for the architect, surveyor, engineers, project manager etc. At this early stage, it seems unlikely that the Draft Regulations on the use of lotting will encourage an employer to alter the way it procures construction projects.

A byrd in hand - is worth ten flye at large. Payment in the construction industry is always the subject of a new policy initiative and it is a key concern for smaller suppliers across all sectors. The Draft Regulations intend to make 30 day payment terms a legal requirement (across all sectors) in a bid to encourage SMEs. It is a positive step, but in order to benefit from it, SMEs first have to navigate and conquer the pre-qualification and tender process. If more SMEs are awarded public contracts then speeding up payment to them and increasing cash flow will help to maintain their business and make life easier for them to deliver successful projects (thereby growing their experience, turnover and, hopefully, balance sheet).

Next time in our Countdown to Law-nch series, our procurement litigators will be blogging about the potential effect (or otherwise) of the Draft Regulations on remedies available to bidders who feel that a procurement has not been conducted properly, as well as making a forward survey of the potential impact of the Public Contracts Regulations 2015 on procurement litigation more generally.
December 22, 2014 11:07 AM | Posted by Calder, Kevin | Permalink
At this time of year, a key procurement question is: how is the transport of goods by sleigh properly classified for the purposes of the procurement Regulations? As an entity wholly funded by public goodwill, it seems likely that purchases by Santa if based in the EU will fall within the Public Contracts Regulations. However, some of the CPV codes for transportation fall within Part A, whilst others are in Part B. Sleigh transport is not specifically addressed by the CPV codes, but as the delivery of presents will include both transport by air and by land, our view is that it will fall under Part A and therefore procurement of sleigh transportation will need to be subject to a full OJEU process.

Season’s greetings from all at procurementportal.com, and best wishes for an exciting 2015, the year of the new Regulations!

December 15, 2014 11:11 AM | Posted by Prandy, Helen | Permalink
For Santa, deciding which reindeer should pull the sleigh was a simple matter of identifying the reddest nose but in the absence of distinguishing features how do you decide between two bids of equal merit? Research on this immediately led me to PLC a respectable source of sound legal advice which delivered the verdict that it was best to avoid the situation altogether by providing for a tie breaker in the tender documentation. All very well but what if there is no tie breaker? Well it’s amazing these days what a couple of minutes browsing the results of a popular search engine can unearth. In this case, an article on a case in Canada where the award of a federal government contract was decided on a coin toss. Not just one coin toss but a best of three. The coin toss took several months of careful preparation to set up and required an agreement on who the person tossing the coin should be, where the coin should be tossed and even what denomination of coin it was (a quarter since you ask).

Apparently some small print in a government manual does indeed provide for a coin toss in the case of a tie and it was in fact quite regularly used at State and City level!

Notwithstanding that a coin toss does seem almost the ultimate in objective judgement it’s probably better practice to follow the steady advice of PLC and try to avoid the situation in the first place.

December 8, 2014 5:13 PM | Posted by Beresford-Jones, Jenny | Permalink

Under the threshold, but not under the radar - the new regime for sub-threshold contracts

Last time in our "Countdown to Law-nch" series we were looking at e-procurement and the steps that contracting authorities will need to take to prepare for the commencement of the Public Contracts Regulations 2015 (the "Regulations").

This week we are looking at sub-threshold contracts, those contracts whose value is lower than the threshold above which the Regulations apply in full. At present, these are not covered by the Public Contracts Regulations 2006 (although the general EC Treaty principles around transparency, non-discrimination and equality of treatment must still be respected).

When we first set eyes on the draft Regulations and looked at draft Regulations 105 to 109 we got a surprise; these regulations introduce a new regime in respect of under threshold contracts that actually goes further than was was required by the parent Directive.

This is in contrast to the general approach taken overall, which is to implement the minimum required, to retain discretion and flexibility and to avoid "goldplating" the Directive. The fact that the Government departed from this general approach in respect of sub-threshold contracts is testament to the importance attached to the encouragement of small and medium sized entities (SMEs) which the sub-threshold regime is designed to cover.

If implemented in their current form, the below-threshold Regulations (which will apply to contracts over £10,000 for Central Government and £25,000 for other contracting authorities) will impose two key requirements:

  • if the opportunity is to be advertised at all, this must include an advertisement on Contracts Finder; and
  • a ban on the use of a PQQ or a separate pre-qualification stage (note too that even where contracts are above-threshold, the new Regulations will require contracting authorities to have regard to any Cabinet Office guidance on the use of PQQs (including avoiding burdensome, excessive or disproportionate questions) and their assessment).

Contracting authorities will therefore need to update their procurement teams and policies, to ensure that these new requirements are being met; they will apply from the date that the Regulations come into force (likely to be in the first part of 2015).

Next time in our Countdown to Law-nch series we will be focussing on what the 2015 Regulations have in store for the Construction sector specifically.

December 1, 2014 10:39 AM | Posted by Calder, Kevin | Permalink

Never put off till tomorrow that which could be done the day after tomorrow ... (Mark Twain) - the 2015 Regulations and e-procurement

Last time in our "Countdown to Law-nch" series, we looked at the interplay between the 2015 Regulations and the NHS (Procurement, Patient Choice and Competition)(No.2) Regulations 2013. This week we are looking at e-procurement, an area that could cause headaches for practitioners on the ground. Given the amount of preparation needed for contracting authorities to get themselves into position to run a procurement fully by electronic means as contemplated by the new Dirctive, we have been eagerly awaiting news on the likely timetable for the introduction of the new requirements. The news is mixed: certain requirements have been delayed for as long as possible, while other requirements will be introduced in advance of the deadline imposed by the Directive.

The main focus for contracting authorities at present needs to be on meeting the requirements around providing electronic availability of procurement documents. Regulation 53 (which will come into force as soon as the 2015 Regulations “go live”, probably in the first half of 2015) requires that contracting authorities shall provide unrestricted, full, direct access (via the internet) free of charge to the “procurement documents”, from either the date of the publication of the OJEU (which must be despatched electronically) or the invitation to confirm interest. “Procurement documents” is widely defined to capture the PIN, OJEU, specification, contract, ITT etc. This is a mandatory requirement which, for many, will require a step change in current working practices and a good deal more up front preparation to have all the procurement documents prepared and ready by the date of issuing the OJEU.

The Directive also introduces a couple of new e-procurement requirements intended to lessen the burden on bidders to provide information to contracting authorities. For example, the Directive will make it obligatory for contracting authorities to use e-Certis (an online certificates database) when running the selection process, and also to accept the new European Single Procurement Document, effectively a "supplier passport" which will prove there are no grounds for excluding that supplier. However, practitioners may be relieved at the news that mandatory use of these tools will be delayed until the latest time possible under the Directive (which is April 2017 for central purchasing bodies and October 2018 for all other contracting authorities).

The UK had certain policy choices around some of the electronic procurement provisions and, consistent with the general approach taken in drafting the 2015 Regulations, the government has opted to take a flexible rather than prescriptive approach wherever possible. The Government will not, for example, centrally set the levels of security or mandate the circumstances in which electronic signatures or electronic catalogues should be used. These matters will be left to each contracting authority, with the government intending to provide an umbrella set of guidance to contracting authorities in due course.

Next time in our Procurement Regulations 2015 - Ready For Law-nch? series, we'll be looking at the changes the 2015 Regulations will bring for under-threshold contracts, where the Regulations actually go further than what was required by the directive itself.



November 12, 2014 11:42 AM | Posted by Beresford-Jones, Jenny | Permalink

"The odd couple – can they ever live happily after?" - the uncomfortable relationship between the draft Public Contracts Regulations 2015 and the NHS (Procurement, Patient Choice and Competition) (no.2) Regulations 2013

 Here at Mills & Reeve, the procurement team kicked off its series of blog posts on the proposed draft Public Contracts Regulations 2015 by looking at some of quirky features of the UK’s proposed “light touch” regime - which will apply to the procurement of health, social and some other services and which, once in force, will replace the current Part B services regime (see our last blog for further details). Continuing the light touch theme, this week, we’re focussing on the light touch regime specifically in the context of commissioning health services; in particular the less than happy relationship between the “odd couple” aka the draft 2015 Regulations and our existing, and snappily titled, NHS (Procurement, Patient Choice and Competition)(no.2) Regulations 2013 (let's call them the 'NHS Regulations' for short!).

For those who need a reminder, the NHS Regulations set out the following principles-based requirements for Commissioners of NHS-funded services:
  • When commissioning services, Commissioners must act with a view to securing the needs of patients and improving the quality and efficiency of services (the “Objective”);
  • Services must be commissioned from the provider most capable of delivering the Objective and who provide best value for money;
  • Commissioners must act in a proportionate, transparent and non-discriminatory way;
  • Commissioners must ensure providers have a means through which to they can express an interest in providing NHS services; and
  • Commissioners should consider using competition, patient choice and integration as a way to improve the quality and efficiency of services provided.

These principles stop short of a requirement that all services must be procured competitively. Monitor’s guidance is very clear on this point and states that the NHS Regulations do not establish a tender process as the default mechanism which Commissioners should use. Whether to advertise and compete a contract requires Commissioners to make a balanced judgment based on local circumstances, which has regard to and is consistent with the principles in the NHS Regulations. That said, Commissioners’ interpretation of the specific words and language used in the NHS Regulations, together with the increased incidence of challenge (and Commissioners fear of this), may often steer them towards advertising and competing a contract in any event.

But, once the light touch regime is in place, there will be no question about the circumstances when Commissioners must advertise. Subject to some very tightly defined exceptions, health service contracts over the relevant threshold (750,000 euros) will have to be advertised in the OJEU, albeit there will be more flexibility as to timings and process following this. But the big question is how Commissioners, who are still getting comfortable with the 2013 Regulations, then comply with those and also the light touch regime. There will inevitably be numerous cases where, under the NHS Regulations, awarding a contract without advertising or running a competition would be permissible but where, under the light touch regime, it would not. But that situation is not exclusively confined to the introduction of the light touch regime and may arise even now. This would be where the contract in question is of cross border interest; as then EU Treaty principles (including transparency) are engaged, meaning that a sufficient degree of advertising of the contract is required.

As EU law will always “trump” UK legislation, the EU Treaty and the requirements of the light touch regime will always prevail. So what’s the UK’s answer? Well it seems, at least as far as the light touch regime goes, procrastination is the order of the day! In the face of this apparent conflict and inconsistency, the Cabinet Office has decided to play for time, and delay the implementation of the light touch regime for health services to the last possible date (i.e. April 2016). This, we assume, is in the hope that a satisfactory and workable solution can be found in the meantime. Commissioners can only wait - and hope - that by the time April 2016 dawns, the Cabinet Office will have pulled a rabbit out of its hat which will not leave Commissioners facing even more uncertainty and confusion but instead enable them to make robust and legally compliant commissioning decisions.

Next week in our Procurement Regulations 2015 - Ready For Law-nch? series, we'll be looking at e-Procurement, including the somewhat daunting new requirement to have all the procurement documentation ready and available electronically by the date the OJEU notice is published. Will your organisation be ready?

October 20, 2014 5:00 PM | Posted by Smith, Ruth | Permalink
Here at Mills & Reeve, the procurement team is gearing up for the biggest shake up of procurement law in a decade, the introduction of the Public Contracts Regulations 2015 next year. As part of our preparations, we'll blog each week on a different aspect of the draft Regulations, highlighting as we go those interesting or quirky aspects which we think need extra thought or which might prove to be a future bone of contention.

This week we've been looking at the "light touch" regime, which is destined to completely replace the current Part B Services regime, for some service contracts that are valued at over 750,000 Euros. As anticipated, the draft Regulations published on 19 September take a very minimalist approach, and the light touch regime is actually featherlight. Although there's a new requirement for either an OJEU notice or PIN, the contracting authority is then free to design whatever procurement process it chooses, provided this doesn’t offend against principles of transparency and equal treatment.

So far so good, now here's the twist. Draft Regulation 76(4) allows a contracting authority to depart from what it stated it would do in the contract notice and decide to run the procurement differently. This is provided that it considers it is still acting transparently, that its actions will not result in unequal treatment, and that it has made a written record of how and why these conclusions have been reached.

The aim here was almost certainly simply to achieve the greatest possible flexibility, but we can see legal fog on the horizon for both the contracting authority and bidders. For the contracting authority, it may be left wondering when and how this flexibility can be used in practice, whether it has properly addressed issues of transparency and equal treatment, and whether its actions and justifications will stand up to scrutiny. For bidders, if the contracting authority hasn't got it right, they'll no doubt be confused about the procurement process which is actually being followed. Combine all of this with the ability of bidders to use Freedom of Information Act requests to establish whether the contracting authority did indeed properly consider (and document) transparency and equal treatment issues before departing from the advertised process, and you have a fertile source of potential procurement dispute and challenge.

Of course the regulations are not yet in final form, so it is a game of 'wait and see' as to whether draft Regulation 76(4) makes the final cut.

Next week in our Procurement Regulations 2015 - Ready For Law-nch? series, we'll be looking at the uncomfortable relationship between the Public Contracts Regulations 2015 and the NHS (Procurement, Patient Choice and Competition) Regulations 2013 and asking whether the two can ever work together in harmony.
October 8, 2014 5:49 PM | Posted by Burton-Jones, Sophie | Permalink
From 1 October 2014, many businesses that supply services to public bodies will be caught by the government’s Cyber Security rules. The change is mandatory for central government bodies and NDPB's, with other public bodies potentially applying the new rules too.

Announcing the change, Cabinet Office Minister Francis Maude, said:

It’s vital that we take steps to reduce the levels of cyber security risk in our supply chain. Cyber Essentials provides a cost-effective foundation of basic measures that can defend against the increasing threat of cyber attack. Businesses can demonstrate that they take this issue seriously and that they have met government requirements to respond to the threat.
Cyber Essentials is a single, government and industry endorsed cyber security certification. It is accessible for businesses of all sizes and sectors to adopt, and I encourage them to do so
.’

The Cabinet Office press release cites BAE Systems, Barclays, Hewlett-Packard, Vodafone and the Confederation of British Industry, as well as small businesses like Nexor, Tier 3 and Skyscape, as early adopters. And in August, Vodafone UK announced that it was the first telecommunications provider and the first multi-national organisation to have been awarded the Cyber Essentials Plus accreditation. Howard Pinto, Head of Technology Security at Vodafone UK said that the achievement highlighted Vodafone’s “ongoing commitment to ensuring the security and protection of our IT and customer systems and online assets'.

Two levels of certification are available, renewable each year. For a Cyber Essentials certification, the business undertakes its own assessment, which is verified externally. This is meant to be the basic, low-cost option, predicted to cost £200 to £400. Cyber Essentials Plus is the gold-plated version, involving both remote and on site vulnerability testing to check whether basic hacking and phishing can be fought off.

Details of the scheme can be found here. Broadly speaking, the five areas it covers are:

• Boundary firewalls and internet gateways
• Secure configuration
• Access control
• Malware protection
• Patch management

In its 26 September Procurement Policy Note the Cabinet Office explains that contracts involving the following features will have to comply with the scheme:

i) Where personal information of citizens, such as home addresses, bank details, or payment information is handled by a supplier.
ii) Where personal information of Government employees, Ministers and Special Advisors such as payroll, travel booking or expenses information is handled by a supplier.
iii) Where ICT systems and services are supplied which are designed to store, or process, data at the OFFICIAL level of the Government Protective Marking scheme.


Services already covered by other government schemes that include comprehensive cyber security obligations are exempt. These include cloud services procured through G-Cloud, Digital Services Framework, Public Sector Network and ID Assurance Framework.

Although currently only mandatory for a sub-set of public sector contracts, the government is encouraging wider use of the Cyber Security certification in both the public and private sectors. Francis Maude emphasised that ‘Gaining this kind of accreditation will also demonstrate to non-government customers a business’s clear stance on cyber security.’ We can expect to see it asked for more often, although some have asked whether the level of assurance offered by the basic level certification is enough.
September 22, 2014 11:49 AM | Posted by Smith, Ruth | Permalink

Those of you who know your nursery rhymes will know that if you go down to the woods today you'll be sure of a big surprise. Well the same might be said of anyone taking a peek at the UK's draft regulations for implementing the new EU Public Procurement Directive; which were revealed and issued for consultation by the Cabinet Office on Friday 19 September (and which can be found on the gov.uk website and also via this link: Draft new UK Public Procurement Regulations

But the big surprise is by no means a teddy bear's picnic. Instead, as well as new regulations to implement the new EU Public Procurement Directive, we also have new regulations governing the procurement of below threshold contracts. We are told these follow Lord Young's recommendations, and the subsequent consultation, on making public sector procurement more accessible to SMEs. If implemented in their current form, the below threshold regulations (which will apply to contracts over £10,000 for Central Government and £25,000 for other contracting authorities) will impose two key requirements:

  • if the opportunity is to be advertised at all - this must include an advertisement on Contracts Finder; and
  • a ban on the use of a PQQ or a separate pre-qualification stage.

And the Government's known dislike of pre-qualification doesn't stop there. Even when procuring above threshold contracts, contracting authorities will be required to have regard to any Cabinet Office guidance on qualitative selection; which may include guidance on the use of PQQs (including avoiding burdensome, excessive or disproportionate questions) and their assessment.

Other headline points on the new draft regulations are:

  • if the title of the draft regulations is anything to go by (i.e. "Public Contracts Regulations 2015") they will not be brought in to force in this calendar year;
  • the new light touch regime is, as anticipated, very light touch;
  • there's some additional breathing space for NHS commissioners in the form of a delayed effective date. The new regulations will not apply to the procurement of contracts within the scope of the NHS (Procurement, Patient Choice and Competition) (No 2) Regulations 2013 until the later date of 18 April 2016; and
  • consultation on and implementation of the other two new Directives (relating to utilities and concessions) will also come later; once the implementation of the public contracts regime is out of the way.

Anyone wishing to respond to the Cabinet Office consultation has a relatively short period in which to do so as the consultation ends on 17 October 2014.

Watch this space for further bulletins, updates and events as we digest the details of the draft regulations and the consultation and proposals for implementation progress.

August 12, 2014 7:34 AM | Posted by Smith, Ruth | Permalink

The biggest reform of procurement law in a decade is underway, with the new EU directives on public procurement, utilities procurement and concession contracts expected to be implemented in the UK later this year. The Mills & Reeve procurement team has recently teamed up with Built Intelligence to develop a webinar which offers a cost-effective and time-efficient way to get your team up to speed with the key changes in the landscape once the new directives are in force in the UK.

Developed from our recent series of seminars, the webinar is priced very competitively at £49 + VAT for one user, with per user discounts for multiple users/courses*.  To take up our launch offer of a 15% discount during August, use discount code 'mrlaunch'.

Through watching the webinar, you will learn about:

  • The background to the new EU procurement directives.
  • The likely timetable for implementation and transitional measures.
  • The main changes to our existing rules, using a useful case study to illustrate the new landscape in practice.

For more information about the webinar, please click here.

* Mills & Reeve LLP receives a share of the course fees from BuiltIntelligence to reflect our contribution to the course content.

June 2, 2014 1:42 PM | Posted by Beresford-Jones, Jenny | Permalink
The European Court of Justice has recently been asked to consider whether the Teckal exemption for in-house contracts should also exempt so called ‘horizontal in-house transactions’. That’s where, although there is no control as between the contracting authority awarding the contract and its appointed contractor; the two parties are each controlled by the same public body.

To date, the Teckal (or in-house) exemption has been strictly applied and the Courts have only endorsed direct awards as being outside the scope of the EU procurement rules where (1) the contracting authority exercises over the contractor a control similar to that exercised over its own departments, and (2) where the contractor carries out the essential part of its activities with the controlling authority. Case law has also confirmed that the test can be met where the contracting authority exercises the necessary control over the contractor jointly together with other contracting authorities.

In the current case, the Court had to consider whether to stretch this concept. The facts were that the University of Hamburg needed to procure an information management system. One of the potential suppliers it investigated was Hochschul-Informations-System GmbH (“HIS”); HIS was a not-for-profit company, whose objectives were to assist educational institutions in their work via the provision of information management systems. One-third of HIS was owned by the German federal state, with the other two-thirds being owned by a group of local authorities (the city of Hamburg being one of these, owning 4.16% of HIS’s capital). The second potential supplier was a private company, Datenlotsen Informationssysteme GmbH, the claimant in this case.

The University decided to directly award the contract to HIS without following any procurement process. Datenlotsen challenged the award, arguing the University had acted unlawfully as the requirements of the Teckal exemption had not been met.

Although it was common ground that the University did not control HIS, in its defence the University argued its contract with HIS should be regarded as a “horizontal in-house transaction”. Its position was that this should still fall within the Teckal exemption on the grounds that both parties (i.e. the University and HIS) were ultimately controlled by the same public body i.e. the City of Hamburg.

The Court made short shrift of this, holding that the exemption did not apply. It went back to first principles and looked at the purpose behind the Teckal exemption, which was to recognise that it would be undesirable for the procurement law regime to positively force public bodies to employ outside entities, in circumstances where they wished to carry out their public functions through use of their own internal resources. However, that was not the case here. There was no internal link between the University and HIS; it owned no share capital in HIS and had no say in its management. It would undermine the principles on which the Teckal exemption was based, to extend its limited application (which had been clearly defined by case law) to the current situation.

In any event, the Court concluded the City of Hamburg did not have ‘similar control’ over the University as its control was limited to procurement matters whereas the University had autonomy as regards its main activities of education and research. So it could not be said that the City of Hamburg ‘controlled’ the University. The Court therefore did not have to consider whether the Teckal exemption could be extended to cover a new category of “horizontal in-house transactions” i.e. where, although no control existed as between the contracting authority and contractor, both the contractor and contracting authority were nevertheless controlled by the same public body.

The Court also concluded that the alternative exemption relating to ‘inter-municipal co-operation’ did not apply here as in the current context neither the University or HIS were public bodies co-operating in the performance of a public task they had to perform.

Comment:

The Court left open the question of whether the Teckal exemption should be extended to ‘horizontal in-house transactions’. However, the uncertainty around this is set to be short lived now that the situation has been specifically addressed in the new public procurement Directive (which came in to force on 17 April).

The new Directive codifies the Teckal test in legislation for the first time and will be implemented in our own UK Regulations in due course (current predictions are by the end of the year). Article 12(1) states that a contract awarded will not be caught by the Directive if (to paraphrase):

• the contracting authority exercises over the contractor concerned a control which is similar to that which it exercises over its own departments (“similar control” in this context means the contracting authority exercising “a decisive influence over both strategic objectives and significant decisions” of the contractor. It includes where this control is exercised by another body, provided that other body is itself controlled by the contracting authority); and

• more than 80 % of the activities of the contractor are carried out in the performance of tasks entrusted to it by the controlling contracting authority or by other bodies that are themselves controlled by that contracting authority; and

• there is no private sector ownership of the contractor, with certain exceptions.

Article 12(2) appears to specifically permit an extension to the principles in Teckal in the form of “horizontal in-house transactions”, provided that the conditions or Article 12(1) as listed above have been met. Article 12(2) states the exemption to the Directive will apply where (to paraphrase):

A controlled legal person, also being a contracting authority awards a contract to its controlling contracting authority, or to another entity that is also controlled by that controlling contracting authority. In the Datenlotsen case, of course, the City of Hamburg had insufficient control over the University and HIS to fall within the conditions of Article 12(2) and at the time of the transaction the new Directive did not, in any event, apply.

But, once the Directive has been implemented in the UK, it is reasonably clear that, provided the necessary conditions are met (including, in particular, sufficient control) horizontal in-house transactions will be a new breed of Teckal which fall outside the scope of the public procurement regime. Whilst the new Directive has no direct effect in UK until implemented through our own Regulations, even before then it is easy to see that a UK Court could have regard to its provisions were a case, which met the conditions for a horizontal in-house transaction, to come before it.

Contracting authorities seeking to take advantage of this position should nevertheless be mindful that to do so, in advance of the new Directive’s implementation, is not without risk – particularly in the light of the European Court’s decision as discussed above. In addition, any exemption to the EU procurement regime, even once provided for in our own UK Regulations, will still be strictly interpreted, emphasising the importance of ensuring that all the necessary conditions are fully met.

You can read the judgement in the case here .
May 12, 2014 12:32 PM | Posted by Beresford-Jones, Jenny | Permalink

The Crown Commercial Service and the Government Legal Service have recently published a set of standard "short form" terms and conditions.

These are intended for use by Central Government departments, including Executive Agencies and NDPBs, when procuring goods and services where the likely contract value is under the relevant thresholds. Use of the new short form terms is advisory rather than mandatory.

The terms have been drafted to comply with current government guidance and policy, and also to be "light touch", to avoid complex terms which would increase costs unnecessarily and discourage the participation of small- and medium-sized entities.

The accompanying procurement policy note points out that the new short form terms are not suitable for construction work (which should use the industry-standard terms) or for IT contracts (which should usually use an appropriate framework arrangement). NHS bodies will of course need to use the standard NHS Terms and Conditions rather than these short form terms. Users are advised to make an assessment on a case by case basis as to whether the new short form is in fact suitable.

March 28, 2014 9:36 AM | Posted by Smith, Ruth | Permalink

The three new EU Directives on public procurement, utilities procurement and concession contracts were published in the Official Journal of the European Union today and will come into force on 17 April 2014.  The notice and the published versions of the new Directives are available here.

The UK now has until 17 April 2016 to implement the Directives into our own Regulations.  But this is a long stop date and the Cabinet Office’s stated intention is to work to an expedited timetable for implementation, so we could see the new UK Regulations coming into force by the end of this year.

The wide-ranging reforms in the new legislation, including a brand new regime for the procurement of concession contracts, brings with it the need for both buyers and suppliers alike to quickly adapt their policies, procedures and documentation to align with the new legislation, its concepts and provisions.

The Mills & Reeve Procurement Team will be closely tracking developments as we progress to UK implementation.  Counting down the months and days, watch this space and our Procurement Portal for regular updates, practical tips and tools, and, once the draft Regulations are available and in near final form, client training to help you plan, prepare and be ready for the new rules.   

For further information, or to sign up for our Procurement Newsbites bulletin and client training mailing list please email .  You can also subscribe to our Procurement Portal blog here (email) or here (RSS feeds).

March 26, 2014 3:46 PM | Posted by Prandy, Helen | Permalink

Here in Cambridge there are many memorials to Thomas Hobson, the city innkeeper who used to tell customers that they could have any horse as long as it was the one closest to the stable door, an option which became known as Hobson's choice. Exhausted passengers arriving at Luton airport might have felt the same about their bus service to London had the basis on which the contracts were awarded not been successfully challenged recently in an interesting way from a public procurement perspective.

Although the principles behind the Public Contracts Regulations and Utilities Contracts Regulations (both) 2006 are to facilitate competition throughout the European Union, public procurement and general competition law are usually regarded as two quite separate regimes which, historically, have rarely had an impact on each other. In particular, competition law only applies to 'undertakings', that is, bodies engaged in economic activity generally involving competition on a market, and will look at how undertakings operate in the market including whether those that enjoy a dominant position, abuse that position to influence the market. In contrast, procurement law applies to public bodies or utilities who, depending on their activity, may or may not be treated as an undertaking for competition law purposes.

Increasingly, however, bodies subject to procurement law may also be undertakings (and this is especially the case in the utility sector) and a High Court judgment at the end of January 2014 shows how a competition law claim in the context of a procurement exercise might arise.

In Arriva the Shires Ltd v London Luton Airport ("Arriva") the company which operates Luton airport (a utility for the purpose of the Utilities Contracts Regulations) was looking to award a concession to operate the coach service between the airport and London. The concession was extremely lucrative and the Claimant was the incumbent provider. The concession included a 7 year exclusivity on the route plus a right of first refusal over new routes. Unfortunately for the Claimant it lost out on the award of the contract by a process which, to public procurement lawyers at least, looks very far from ideal.

For the purpose of the trial the Defendant accepted the assumption that it had a dominant position in the relevant market for the supply of facilities at the airport. The claim was brought on under two main grounds: (1) Abusive conduct relating to the tender process and (2) Abusive conduct arising from the terms of the concession.

As far as the tender process was concerned, it was also recognised that this was a concession and therefore outside the scope of the Regulations so although there were many aspects of the tender process which would have been considered unfair in the context of a traditional public procurement the judge found no fundamental issue describing it simply as "perhaps less than fair". The judge's conclusion on this point appears to have been heavily influenced by the Claimant's bid being so far behind the winning bid that the defects in the tender process could not have changed the outcome, and thus that the Claimant had suffered no loss.

However, in relation to the terms of the concession, and in particular the 7 year period of exclusivity, the judge made a clear finding that this amounted to an abuse of dominant position, that there was a clear distortive effect on the market, that the process had inappropriately emphasised the return to the Defendant rather than the benefit to consumers and that there was no objective justification for the grant of exclusivity over a period of seven years. It is worth noting that under the new Concessions Directive which has been approved by the EU and is awaiting implementation in the UK that the benchmark for the length of a concession contract is 5 years unless a longer period would reasonably be required by the concessionaire to recoup its investment. 7 years therefore looks out of line with what the EU considers to be 'best practice' on concession contracts.

The case is a timely reminder of the need to consider whether competition law issues may be relevant when organising a tender process. This will particularly be the case for utilities, public bodies who are competing in the market and when considering the award of a concession. It raises three key points:

Firstly, because one of the bases of complaint in Arriva was the fairness of the tender process, the case indicates that the conduct of tenders may be scrutinised under the prohibition on abuse of dominant position.

Secondly, at least for now while we wait for the new Concessions Directive to come into force, the tendering of concessions may be more prone to competition law principles than a 'standard' procurement.

Thirdly, the judge in this case appeared to be strongly influenced by the evidence (relevant to competition claims) of the benefit to consumers and whether this was secured by the granting of an exclusive concession for such a long period. He considered that in this case, bids should have been evaluated on the basis of consumer benefit rather than the financial return to the Defendant. This may mean that, where competition law does bite on the award of a concession, the evaluation of tenders and the terms of the concession should address the benefit to consumers.

So competition law is yet another factor which may need to be kept in mind both if you are an undertaking/contracting authority planning a procurement or a bidder who feels it has been unfairly excluded from a market.

January 15, 2014 3:30 PM | Posted by Beresford-Jones, Jenny | Permalink

Readers of our blog will be aware of the large scale reform of procurement law that has been in the pipeline for some time now, with an EU proposal for three new directives on public procurement, utilities procurement and concessions contracts.

Today, the final step in the legislative process was completed when the European Parliament adopted the three new Directives, the final form texts of which will be available shortly.

The UK will have a period of 24 months in which to translate the new Directives into national law, but in practice the Cabinet Office is working to an expedited timetable, aiming to introduce regulations to replace The Public Contracts Regulations 2006 towards the end of 2014. In the meantime it is issuing discussion papers by way of informal consultation on those new measures where the UK has some flexibility or choice in how it implements the new rules.

The press release from the European Parliament is available here; it includes a useful high level summary of the major changes we can expect to see this year. Also useful is this memo of FAQs on the reforms.

Once the final form texts are available we will blog on the details and, in particular, on whether there have been any significant changes since the penultimate drafts of July 2013.

December 17, 2013 8:33 AM | Posted by Smith, Ruth | Permalink

 

As an early Christmas present the European Commission has announced the new procurement thresholds to take effect from 1st January 2014.  When converted to sterling these are marginally lower than we have currently.

 

Public Contracts Regulations 2006

 

Revised EU threshold

Revised UK threshold

Supplies and Services

Schedule 1 bodies (Central Government and other bodies listed in Schedule 1 of the Regulations

 

EUR 134,000

 

£111,676

Supplies and Services

Other contracting authorities

Also applies to Part B services and Research & Development services (all bodies)

 

EUR 207,000

 

£172,514

 

Works

 

EUR 5,186,000

 

£4,322,012

 

 

Utilities Contracts Regulations 2006

 

Revised EU threshold

Revised UK threshold

 

Supplies and Services

 

 

EUR 414,000

 

£345,028

 

Works

 

EUR 5,186,000

 

£4,322,012

 

 

Defence and Security Public Contracts Regulations 2011

 

Revised EU threshold

Revised UK threshold

 

Supplies and Services

 

 

EUR 414,000

 

£345,028

 

Works

 

EUR 5,186,000

 

£4,322,012

 

 

Small Lots (all Regulations):

 

  • Supplies and services                        EUR 80,000 or £66,672
  • Works                                                 EUR 1,000,000 or £833,400
December 11, 2013 4:35 PM | Posted by Prandy, Helen | Permalink
Hard on the heels of the Danish case referred to in our last blog post comes the unfortunate tale of Mr Nadarajah, a sole legal practitioner who operated under the title All About Rights Law Practice.

This case had come before the courts before in April 2011 when Mr Nadarajah had brought a claim for judicial review against the Legal Services Commission (“LSC”) following its rejection of his tender to provide publicly funded legal services. Mr Nadarajah was a shoo-in for the tender as his was the only firm in the relevant geographical area which specialised in mental health. "Get the tender in: Get the contract" or so at least Mr Nadarajah must have thought.

However, on 10 June 2010, the LSC had written to him informing him that the tender had been rejected because a mandatory form had been submitted blank.

When Mr Nadarajah challenged this decision, the High Court held that the LSC had acted lawfully and in the legitimate exercise of its discretion by rejecting the tender. The submission of the mandatory form was a key feature of the process and fairness to all tenderers as well as equal treatment required the insistence that the form be completed.

However, some time later, pursuant to a request under FOIA, it became clear that some aspects of the LSC’s evidence in the original judicial review had been wrong and following an appeal the matter was remitted to the High Court to consider again. In particular it focused on:

• Whether the decision to reject the tender was proportionate; and
• Whether there had been any inequality of treatment.

In deciding that the decision to reject the tender was reasonable and proportionate the court considered the following:

• That completion of the form was mandatory. Indeed it was the only mandatory document in the tender submission.
• It had been made clear in the tender documentation that no alteration could take place after the closing deadline.
• Allowing the completed form to be submitted would be tantamount to allowing a new bid.
• The fact that Mr Nadarajah had been ‘guaranteed’ to win did not render the rejection disproportionate. There was always competition which might be affected by allowing the bid.

In relation to equality of treatment the court found that the appropriate comparators were those firms who had also submitted a blank form. All of those bidders had had their bids rejected. Accordingly, the court found that there had been no inequality of treatment.

It is clear from this case that the court is prepared to support a contracting authority which rejects a non-compliant bid. So how do we reconcile this decision with the decision of the ECJ in our previous blog?
There are perhaps 3 points of critical difference:

• Firstly, the Danish case was at PQQ not ITT stage.
• Secondly, in the Danish case the missing balance sheets were part of the background but were not new information. By contrast the information required in Mr Nadarajah’s blank form was absolutely critical to the assessment of the bid and was information created specifically for the purpose of the bid.
• Finally, the LSC tender documents expressly stated that no alteration or amendment to bids would be allowed once the deadline had expired. The Danish documents contained no such requirement.

As we said in our last blog, where the contract documents contain a mandatory requirement the bidder must be extra careful to submit a compliant bid as the contracting authority will have little or no flexibility to request clarification.

All About Rights Law Practice, R (on the application of) v The Lord Chancellor [2013] EWHC 3461 (Admin), judgment of 15 November 2013
November 6, 2013 5:19 PM | Posted by Beresford-Jones, Jenny | Permalink

In this case, the Danish education ministry ran a procurement for services to guidance centres for people hoping to go on to higher education. It was to be a part B services contract.

There was a selection stage. As part of the assessment of economic and financial standing, hopeful tenderers were asked to submit balance sheets together with their application to be considered for tendering. The day after the deadline for that had passed, two providers had not sent in their balance sheets. The Ministry emailed them and asked them to forward them on (which they promptly did within a day or two).

These two providers, plus the claimant in this case, were chosen to be invited to tender. After evaluation, those two providers won and the Ministry signed contracts with them. The claimant was unsuccessful and brought the claim, alleging that the Ministry should not have given them a further opportunity to send in their balance sheets when they had missed the deadline. The Danish court stayed the action and made a reference to the European Court, asking whether the principle of equal treatment meant that the Ministry was prohibited from asking for the balance sheets.

The court first noted that, although this was a part B services contract, because there was a cross border interest, the general principles of the EC Treaty would apply and therefore that the Ministry had been under a duty to act transparently and ensure non-discrimination and equality of treatment. The court looked at the SAG case, which concerned clarification or amplification of a tender received after the bid deadline. The judgment in the SAG case stated that it would not be possible to allow a bidder to amend a bid after the bid deadline, but that, however, clarification or correction of material error could be permitted provided certain guidelines were followed, the EU principles were respected, and the clarification/correction did not amount to the making of a new bid.

The court decided that the same principles should apply in this case, even though here it was dealing with applications filed for the purposes of the selection stage rather than actual bids submitted. On that basis, the court was prepared to allow the Ministry to ask for the balance sheets after the deadline, provided that it could be shown that the balance sheets pre-dated the deadline; in short, provided that no advantage was gained by the two bidders concerned. The court also commented that, had the procurement documentation expressly stated that failure to provide information would lead to the exclusion of that bidder, it would not have permitted the Ministry to request the information after the bid deadline, as this would amount to a breach of the principle of transparency as the Ministry would be acting in a manner contradictory to its own stated process.

The case is not new law but it does provide an interesting rehearsal of the approach the court is likely to take in these situations and it confirms that the court will treat clarifications at selection stage and award stage in the same way. In order to preserve as much flexibility to clarify as possible, contracting authorities may wish to consider making sure that no absolute statements are made in the contract documents about automatic exclusion of incomplete applications for selection/bids. Where the contract documents do contain this kind of statement, suppliers should be extra careful to submit compliant bids, as the contracting authority will have little or no flexibility to request clarifications.

The judgment is available here Case C‑336/12 - Ministeriet for Forskning, Innovation og Videregående Uddannelser v Manova A/S, judgment of 10 October 2013.

October 23, 2013 2:20 PM | Posted by Smith, Ruth | Permalink

Last week, at an event organised by the Procurement Lawyers' Association in London, the European Parliament, European Commission and Cabinet Office revealed the latest plans for EU adoption and UK implementation of the new EU Procurement Directives.

Here are the headlines:

-      formal adoption of the new Directives by the European Parliament and the European Council is now likely to be in December 2013 (but it may slip to January 2014);

-    the UK's approach will be to implement the Directives here as soon as possible (no specific date was given); and work towards this has already started. The Cabinet Office has already issued a number of discussion papers to relevant stakeholders (with more papers to follow) on issues where the UK has some choice around the approach to implementation. The papers issued so far concern: termination of contracts; the new "light touch" regime for health, social and other services; and measures designed to provide better access to opportunities for SMEs.

-    the UK will not be amending our existing Regulations but will be starting again from scratch with a new set of Regulations, adopting the "copy out" method for implementation as much as possible (i.e. copying the text directly from the Directive). The driver for this is to avoid 'gold plating' and to minimise the risk of failing to implement the Directive correctly. If the Directive is ambiguous there will be no attempt to clarify this in the new Regulations;

-    the structure of the new Regulations will be very different from the current Public Contracts and Utilities Contracts Regulations 2006. They will be more aligned to the structure and sequence of the new Directives, and so there should (for the most part) be consistency in numbering between the Articles of the Directives and the new Regulations; and

-    there will be little change to the existing provisions in the Regulations on Remedies but there may need to be some structural changes to these to accommodate the Regulations' new format.

The Mills & Reeve procurement team is busily preparing for the new Directives and has a series of client seminars scheduled for early 2014, in our London, Cambridge, Birmingham, Norwich and Manchester offices. These practical, interactive, seminars will be of value to professionals in the public, private and third sectors. Focussing on the key changes, we'll help you prepare for the new regime and take advantage of its opportunities. If you interested in attending you can register your interest here

October 3, 2013 7:00 PM | Posted by Smith, Ruth | Permalink

Whether Universities are in or out of the public procurement regime is a continuing source of debate ... if the views of today's delegates at an education sector conference are anything to go by.  So what's the fuss all about? 

In 2011, we asked whether the increase in the proportion of university funding coming from the Student Loans Company would mean universities were no longer subject to the public procurement regime under the Public Contracts Regulations (here's our blog link)

At the time (and with a loud sigh of disappointment from many university procurement officers!), the answer was that the Regulations would continue to apply as before. The Student Loans Company is a public body, and so the change was essentially swapping one public body funder (HEFCE) for another (the SLC).  The change from grant to loan simply means its indirect public financing (rather than direct) but its public financing all the same.

However, we included one important caveat (with our future gazing hats on): "...in the event that the Student Loans Company is privatised...this may have an impact on the above analysis".

Then in June this year, in a speech about the Government's infrastructure plan, Danny Alexander confirmed the intention to sell off at least part of the student loan book with the promise of more to follow.  So it seems that privatisation may well come to pass.

Details remain sketchy at the moment, but depending on how it is structured, privatisation of SLC (or sale of the student loan book, particularly relating to tuition fees) could mean that universities step out of the public procurement regime. But don't rip up those OJEU notices just yet. Watch this space...
"


 

September 2, 2013 11:42 AM | Posted by Smith, Ruth | Permalink

The Department of Health has just published the new versions of the standard NHS terms and conditions for the supply of goods and for the provision of services.

The terms and conditions were developed by the Department in partnership with Mills & Reeve and are now the main contracting documents for NHS bodies to use when buying goods and services. They have received positive feedback from both the Association of British Healthcare Industries (a key trade body for NHS suppliers) and the Health Care Supply Association (the representative and network organisation for all staff involved in NHS procurement). The significance of this work is evidenced by the fact that the NHS spends over £20 billion a year on goods and services, which typically counts for around thirty percent of the operating costs of each hospital trust and these new terms and conditions have been described by the Department as “the first step in the NHS acting as a single customer”.

May 23, 2013 12:49 PM | Posted by Smith, Ruth | Permalink
New Cabinet Office guidance identifies their top five tips for promoting economic growth through procurement; and highlights the five big mistakes that procurers should avoid.

So what are the “top tips” for growth? Here are the Cabinet Office’s suggestions:

• Be clear about what you want, define success in outcome terms and consider the impact of policy requirements on business.

• Signal demand early by publishing requirements pipelines on Contracts Finder and using a project specific PIN to alert the marketplace to opportunities.

• Talk to the market early, well before formal procurement starts, and respond to industry’s ideas and reactions; make sure you have a meaningful dialogue with a diverse range of suppliers.

• Be open to new ideas and make sure that small firms get a fair hearing throughout the process.

• Use the Lean sourcing process to reduce time and cost.

And what are the “big mistakes” to avoid?

Focussing on how to avoid discriminating against small firms, the guidance suggests procurers should:

• Avoid using extensive selection criteria through a PQQ: as this tends to prevent small firms from having their bids seen and their ideas evaluated.

• Not assume that larger firms are better: take care not to discriminate unfairly against small businesses by setting selection criteria which only larger firms can satisfy.

• Avoid large scale requirements and long contract durations: which favour only big multinational businesses and make it harder to take advantage of SME offerings. These also tend to carry high risk for both parties and have a poor track record of success.

• Not rely solely on financial assessment criteria at the selection stage; use financial evaluation proportionately taking care not to discriminate against SMEs, mutuals and JVs.

• Not insist on onerous or disproportionate insurance requirements.

The “Procurement for Growth” guidance can be accessed through the link. It forms part of a range of Government measures designed to stimulate economic growth and UK businesses and to support SMEs.

May 22, 2013 1:29 PM | Posted by Calder, Kevin | Permalink

A surprisingly high proportion of the standstill letters we see do not comply fully with the requirements of the Public Contracts Regulations 2006 (as amended). In this post - using a highly unscientific sampling method to generate the list(!) - we flag the top five reasons why.

  1. Mistake 1: wrong standstill expiry date. The standstill letter should set out when the standstill period ends. Many letters fail to do this at all, but of those that do, quite a few give the wrong date. Try this test: You send all the letters electronically on 14th August 2013 - is the last day of standstill (a) 24 August, (b) 25 August, (c) 26 August, or (d) 27 August? The answer is below, but while you ponder that, let's move on to...
  2. Mistake 2: not setting out the award criteria. Yes, we know you put the criteria in the ITT, but the Regulations require you to list them again. And do check the criteria you list accurately match the criteria given earlier in the procurement process...
  3. Mistake 3: not naming all the winning bidders. The Regulations require contracting authorities to give the full names of each winner. This is particularly an issue for frameworks, where all those appointed to the framework should be named in the award letter.
  4. Mistake 4: only giving overall scores. In most cases, contracting authorities should provide a score breakdown to allow bidders to understand where they have not done so well. Care does need to be taken not to inadvertently disclose confidential information in a standstill letter - do check that the scores and criteria do not allow the recipient to "reverse engineer" the evaluation and discover confidential pricing detail.
  5. Mistake 5: not providing bespoke reasons. Unsuccessful bidders should be told the reasons for the decision including the characteristics and relative advantages of the winning bidder. The use of "relative" means that this requires a comparison exercise between the winning and unsuccessful bids - it is not sufficient simply to state: "the winning bid scored well on xx". Contracting authorities should also explain why the unsuccessful bidder did not score so well eg "the winning bidder provided a more detailed explanation of their business continuity strategy and offered examples which were not provided in your bid".

That's enough mistakes for now! So, back to our quiz question.

The answer is (d). Remember, the standstill period is not always 10 days - the last day of standstill must be a working day - not a weekend or bank holiday. And don't forget that if you don't send the standstill letter electronically or by fax, the length of the standstill period increases by up to a further 5 days. If in doubt, try our handy standstill calculator.

April 15, 2013 12:18 PM | Posted by Smith, Ruth | Permalink
New guidance has been published by the Equality and Human Rights Commission to help commissioners and procurers in considering how to ensure compliance with their public sector equality duty (PESD) obligations at different stages of the procurement lifecycle.

The PESD, which is a continuing duty deriving from the Equality Act 2010, requires public authorities and any organisation carrying out a public function (including the private and voluntary sector) to have "due regard to" (i.e. consciously consider, including in their decisions) the need to eliminate unlawful discrimination, advance equality of opportunity and foster good relations.

The guide, and other resources on the EHRC website, identify and recommend that the PESD be factored in to procurement policies and procedures, business case planning and each subsequent stage of the procurement process. Whilst relevance and proportionality are the key guiding principles in deciding if, when and how equality should be taken account, it is extremely important that the duty is considered.

The recent case of R (on the application of RB) v Devon County Council and Devon Primary Care Trust [2012] EWHC 3597 (Admin) highlights the important interaction between the PESD and procurement and the risks for commissioners and procurers who fail to take account of it in their procurement and decision making processes. The claimant, the mother of two children, brought judicial review proceedings alleging the Council and PCT had failed to properly consider the PESD when deciding to appoint Virgin Care as preferred bidder to provide integrated childrens health and care services. The Court agreed that the authorities had failed to discharge their PESD when deciding to appoint Virgin as preferred bidder. Luckily for the authorities (and Virgin) the Court did not quash the decisions and the contract with Virgin has now been put in place. The case nevertheless provides a salutary lesson for commissioners and procurers who, in similar circumstances, may not be as lucky next time.
March 6, 2013 6:50 PM | Posted by Beresford-Jones, Jenny | Permalink

The last couple of weeks has seen controversy in the healthcare sector, following publication of the National Health Service (Procurement, Patient Choice and Competition) Regulations 2013 (the “Regulations”) which are due to come into force on 1 April 2013. Following an outcry from many practitioners and commentators, the government has now withdrawn the Regulations in their current form, and taken them back to the draughtsman for a second attempt. More on this shortly, but, before that, let’s remind ourselves of what the Regulations actually do.

They were made under the Health and Social Care Act 2012, which introduces a new commissioning structure within the NHS. Primary Care Trusts are being abolished and their commissioning function is being transferred to new G-P led Clinical Commissioning Groups (CCGs). The Act also imposes requirements on a new National Health Service Commissioning Board and the CCGs under it, to ensure good practice in the procurement of health care services for the purposes of the NHS and to prevent anti-competitive behaviour by commissioners with regard to such services. The Regulations:

  • set out the objectives of such procurement (securing the needs of people who use the services, and improving quality and efficiency);
  • include general requirements in relation to transparency, proportionality and non-discrimination;
  • set out requirements relating to matters such as advertisements and qualification criteria; and
  • set out Monitor's powers to investigate and take enforcement action in relation to breaches.

These Regulations effectively, therefore, introduce a further layer of procurement obligations on NHS commissioners as the Public Contracts Regulations 2006 (insofar as they apply to Part B services), and EU treaty principles (where there is a cross border interest) still continue to apply.

For commissioners of healthcare, these Regulations must be complied with when procuring clinical services and the regulator, Monitor, has extensive powers if they are breached. For providers of healthcare, these Regulations provide the framework within which tenders will be issued and the basis for addressing any concerns. Commissioners and providers of healthcare should, therefore, ensure that they fully understand the Regulations. In particular, from April, commissioners of healthcare must comply with them when making commissioning decisions. In advance of this they should ensure that they review and amend their Standing Orders, Standing Financial Instructions, and procurement policies to ensure that they properly reflect the requirements of the new Regulations.

The latest version of the Regulations has been withdrawn following concerns about implications of the drafting. The particular issue has been around Regulation 5 of the withdrawn draft, which stated that a new health services contract could be awarded to a single provider without competition only in three circumstances: (a) where the commissioning body is satisfied that only one provider could provide the service, or (b) for technical reasons (including intellectual property rights) only that provider is capable of being awarded the contract, or (c) for reasons of extreme urgency, it is not possible to award the contract to any other provider within the necessary timeframe.

The backlash in the sector has centred on the fears that these exemptions are narrow in scope and will in effect require commissioners to tender almost all services, leading to “privatisation by the back door". Announcing the withdrawal of this draft, Health Minister Andrew Lamb MP stated that ‘Concerns have been raised that commissioners would need to tender all services. This is not our intention and we will amend the regulations to remove any doubt that this is the case and clarify that the position remains the same as at present.’ We expect that a new draft will be issued soon and we will update you accordingly.

February 22, 2013 6:29 PM | Posted by Smith, Ruth | Permalink

A new policy that will allow government departments to exclude companies and individuals which take part in tax avoidance from being awarded Government contracts has been unveiled.  (See Cabinet Office Information Note 03/13)

However, the proposed rules contained in the consultation draft, may not be as wide-ranging as the headlines suggest and are apparently intended to be as “light touch as possible”. The rules are unlikely to exclude companies (some of which have attracted much press comment recently) who simply arrange their global tax affairs in a way which minimises their UK corporation tax liability.

Under the new policy, potential suppliers to government will have to self-certify, as part of the selection stage of above-threshold procurements, their recent tax compliance history. Companies will have a so-called “occasion of non-compliance”, which could result in their exclusion from the bidding process if:

  • any tax return is found to be incorrect as a consequence of HMRC successfully taking action:
    • under the General Anti-Abuse Rule (GAAR) to be enacted in Finance Bill 2013; or
    • under any targeted anti-avoidance rule (TAAR); or 
    • under the "Halifax abuse" principle (concerning VAT avoidance); or 
  • any tax return is found to be incorrect because a scheme which the supplier was involved in, and which was, or should have been, notified under the Disclosure of Tax Avoidance Scheme (DOTAS) rules, has proved to have failed; or
  • the supplier's tax affairs have given rise to a conviction for tax related offences or to a penalty for civil fraud or evasion.

If a tax return is amended either following litigation or simply by agreement with HMRC, by reason of GAAR, TAAR etc. this will also be treated as an “occasion of non-compliance”.
Suppliers who self-certify that they have had an “occasion of non-compliance” may avoid exclusion if they can provide an explanatory statement evidencing the steps taken to prevent a recurrence. However, this is at the government department’s discretion according to the seriousness of the non-compliance and the steps taken to prevent recurrence.

In addition to the possibility of excluding suppliers at the selection stage, government departments must ensure their contracts contain standard clauses enabling them to terminate if a supplier has had an occasion of non-compliance after the contract has been entered into, and an obligation to notify changes in relation to tax compliance. Failure to do this will also trigger remedies including, potentially, termination of the contract.

To ensure that UK suppliers are not unfairly disadvantaged, foreign suppliers will be required to certify that there has not been an 'occasion of non compliance' in relation to the equivalent foreign tax rules.

Effective from 1 April 2013, this new policy will apply to all central government above-threshold contracts advertised in OJEU and to which the EU procurement rules apply. It is intended to apply to all central Government departments, their executive agencies and Non-Departmental Public Bodies.

As a matter of procurement law, the relevant rules regarding the discretionary exclusion of suppliers in this context are either that: 

  • the supplier has not fulfilled its obligations relating to the payment of taxes under UK law or the law of the relevant member state where the supplier is established; or 
  • the supplier has committed an act of grave misconduct in the course of his business or profession.

Although the draft proposals refer to suppliers “recent” tax compliance history, the time frame suggested for self-certification is the preceding 10 years. This has the potential to go beyond the limits of procurement law if it captures a supposed “occasion of non compliance” which, at the relevant time, was not unlawful. Government departments will therefore need to take care to avoid the over zealous exclusion of suppliers under the new policy or they could be at risk of challenge for breach of procurement law.

This new initiative continues a recurring theme by the UK Government of seeking to deliver its policies through procurement. Another example is the Government’s push to open up the market to SMEs.

February 8, 2013 8:59 AM | Posted by Smith, Ruth | Permalink
Had the Government pressed ahead with its reforms, we would have seen a new franchising system, whereby a single exam board had the monopoly to run the new English Baccalaureate Certificates (EBC) for a particular subject area for a period of 5 years.

So does such an approach in principle raise EU procurement concerns? There is discussion in the House of Commons Education Committee’s report of the distinction between a “contract” and a franchise “relationship”; the point being made by the Committee that if classified as the former (which the committee suspected) then EU procurement law would come in to play.

But we understand the Government had always intended to advertise and hold an open competition for each franchise; which Ofqual would then award according to objective and transparent criteria. So classification as a public services contract (which being education would be for Part B services) or even a public services concession ought not to have been such a major concern. Such a process, if followed correctly and carefully, would be consistent with any EU procurement or EU Treaty obligations applicable to Part B contracts or concessions.

We suspect the risks posed by the pace and radical nature of the reform and its impact on the existing market were the real reason for the u-turn. Creating a monopoly in a market which has previously been highly competitive inevitably heightens the risk of legal challenge (as winners have a lot to gain but equally losers a lot to lose). Irrespective of its merits, a legal challenge to a Government process or decision (whether on EU procurement grounds, judicial review or otherwise) will at best cause disruption and delay and at worst the cancellation of the process altogether. With recent judicial review challenges such as the West Coast mainline still reverberating, and lessons to be learned about how mistakes can be made when seeking to introduce major change in over ambitious timescales, it is perhaps not surprising that the Government made the decision it did.
January 28, 2013 1:54 PM | Posted by Smith, Ruth | Permalink
European Dynamics have continued to keep the European Courts busy. In a recent skirmish (Case T-447/10 European Dynamics v Court of Justice of the European Union, judgment of 17 October 2012), the General Court had to consider the often debated point of whether it was lawful to evaluate the CVs of the proposed team at award stage. Although the case was brought under the Financial Regulations which govern public contracts financed from the EU budget, these rules are very similar to those under the Public Procurement Directives and so it still provides a useful precedent.

The case concerned a procurement by the Court of Justice of the European Union (CJEU) for maintenance, support and development of IT applications. European Dynamics was unsuccessful in its bid for 2 lots and brought an action for annulment of the decision to reject its tenders. One ground for challenge was that the CJEU had confused the selection and award criteria and had not restricted the use of team CVs to the selection stage.

At the selection stage, the CJEU had required submission of 34 CVs relating to the proposed team. These were assessed to determine whether the tenderer could provide the number of personnel specified and that each person met the minimum requirements for technical expertise.

At the award stage, the CJEU again assessed CVs, but this time in the context of the “skill, experience, organisation and training of the proposed team”.

The General Court noted the distinction between selection and award criteria recounting that, at the award stage, criteria such as the tenderer’s experience or its capacity to make a team available should not be used (since these relate to the tenderer’s capability to perform the contract and not to establishing the most economically advantageous tender).

However, the Court went on to say that a criterion which assessed the proposed team’s technical skills and professional experience may, in certain situations, constitute a valid award criterion where the services are of a highly technical nature and the precise subject matter of the services must be determined progressively as the contract proceeds. In those circumstances, the technical skills and professional experience may have an impact on the quality of services and so determine the technical value of a bidder’s tender and consequently its economic value.

In the present case, the Court found that the CJEU had not confused the selection and award stage. Although CVs had been considered at both stages, different issues had been assessed. The examination at selection stage was limited to whether the tenderer had sufficient personnel who met the minimum technical requirements (i.e. the tenderer’s technical capability). In contrast, the examination at award stage related to the technical “value” of the proposed team.

The Court also found that the CJEU was entitled to examine team CVs at award stage as this case was one of those situations where, as previously recounted, the technical skills and professional experience of the team was liable to impact on the quality and effectiveness of the services performed and as such had an economic value.

This case is a victory for common sense and represents an important watershed as the European Courts and the Commission have previously taken a very strict line against using experience (in any context – CVs or otherwise) as an award criterion. Whether the same decision would have been reached had the defendant been a non-EU institution is another question! Or, perhaps the Court’s relaxation in approach was simply in acknowledgment of the proposals in the latest draft of the new Procurement Directive. The current draft specifically allows a proposed team’s experience to be considered at award stage provided this impacts on the quality of contract performance.

BUT, A WORD OF CAUTION, although the case provides a useful precedent, great care should still be taken if team CVs are to be considered at award stage. In particular you should ensure that:

• any issues considered at selection stage are not re-visited;
• the facts and circumstances in your case are analogous to those which applied here; and
• those issues considered at award stage will genuinely have an impact on the quality and effectiveness of the performance of the contract and do not relate to a tenderer’s capability to perform the contract.
January 23, 2013 3:25 PM | Posted by Beresford-Jones, Jenny | Permalink

This Act will apply to all procurements run under The Public Contracts Regulations 2006 (the “Regulations”) which are still in the pre-procurement planning stage (i.e. an advertisement has not yet been issued/expressions of interest have not yet been sought) as at 31 January 2013.

It places a requirement on all public bodies who are contracting authorities for the purposes of the Regulations to consider the economic, environmental and social benefits of their approaches to procurement before the process starts. The Cabinet Office has published this procurement policy note by way of guidance; annexed to the note are some useful case studies on how social value might be considered.

Under the Act, contracting authorities will also have to consider whether they should consult on these issues. The Act does not stipulate when or how this should be done, but the Cabinet Office note suggests this will be “particularly relevant when considering procurements for services which are delivered directly to citizens. The voluntary and community sector, along with other providers and interested groups, should be engaged from the earliest stage to help shape policies, programmes and services”. Consultation may be less relevant where the service is being provided directly to the contracting authority (e.g. back office functions).

 The Act only applies to services contracts and does not apply to call-off contracts under framework agreements. The Act also provides that the requirements to consult and to consider the impact on social, environmental and economic well being can be disregarded if the urgency of the requirement means it is impractical to consider them (note that the urgency must not be caused by undue delay by the contracting authority).

Contracting authorities should consider referencing these requirements in their standard contracting procedure rules, in employee training programmes and in any stakeholder or service user engagement protocols. The Cabinet Office guidance also recommends keeping a formal record of steps that have been taken to comply with the Act. While the duty imposed by the Act is only a “duty to consider” rather than a “duty to act”, contracting authorities should bear in mind the risk of judicial review claims where it can be objectively demonstrated that insufficient consideration was given.

December 17, 2012 6:30 PM | Posted by Calder, Kevin | Permalink
Stephen Allott, the Crown Representative for SMEs, is holding a “live web chat” on Wednesday 19 December between 3 and 4pm on public procurement, and wants to hear experiences – good and bad – of SMEs bidding for public sector work. You can join the debate at http://www.cabinetoffice.gov.uk/content/mystery-shopper-live-chat or via Twitter using hashtag #MysteryShopper.

This is part of the “Mystery Shopper” service run by the Cabinet Office, which allows suppliers to give feedback to the public sector on procurements. The service claims to have achieved a successful outcome in 77% of cases reported to it, with changes made to major procurements by organisations such as the Government Procurement Service and Department for Transport.

Suppliers can email or use this online form. Full details of the service are set out in the Cabinet Office's Scope and Remit document.
November 21, 2012 3:58 PM | Posted by Beresford-Jones, Jenny | Permalink
The Cabinet Office has recently published a Procurement Policy Note (PPN) on taking bidders’ past performance into account when assessing bids.

When does the PPN apply?
The PPN applies to:
• contracts and framework agreements entered into from 8 November 2012;
• by government departments, executive agencies and non-department public bodies;
• where these are anticipated to be worth over £20 million; and
• where the subject matter of the contract is IT services, facilities management, or business processing outsourcing.

What does the PPN require?
• Tender documents must contain the standard wording set out at annex 1 of the PPN, explaining this policy;
• The OJEU notice must set out the minimum standards required, together with the information the contracting authority will need to make the assessment as to whether those standards are reached. Bidders must provide certification that they have met the standards. Annex 2 to the PPN contains sample wording for the OJEU notice;
• Departmental bodies should provide certificates to past suppliers who have requested them as part of the implementation of this policy; copies must be sent to the Cabinet Office. A template certificate is provided at Annex 3. Where poor performance has meant a public body is not prepared to provide a certificate, reasons must be given;
• Contracting authorities must verify the information obtained, being careful to treat all bidders equally and not discriminate, and to act transparently. A panel should be appointed to adjudicate on whether the minimum standards are met in any particular case.

Comment
This new policy is the government’s attempt to ensure there is no repeat of previous high-cost and high profile public procurements where suppliers failed to deliver, particularly in the IT sector. It remains to be seen how the policy will operate on the ground. However, one can foresee certain pitfalls from a procurement law perspective, which contracting authorities will need to negotiate sensitively. For example:

• The danger that past performance will creep into the evaluation stage. This is a developing area of case law, but at present the status quo is represented by the Lianakis case; this firmly prohibited the assessment of past performance in the award criteria;
• The risk that, in exercising its discretion to verify certificates and references received (see paragraph 31 of the PPN) and to ultimately come to its own conclusions, a contracting authority will offend against the basic EC Treaty principles of non-discrimination, equality of treatment and transparency, giving rise to a ground for challenge by bidders;
• In their capacity as previous customers, will contracting authorities be prepared to refuse to provide certificates and thereby to admit that past procurements have “gone wrong”?
• Will the certification regime set out in the PPN only operate, in practice, in respect of previous public contracts, whereas suppliers may well have performed poorly in other, private commercial, contracts in the past?

Readers should also note that the proposals for a new directive on public procurement include at Article 55 (of the October 2012 draft) a provision allowing member states to provide that contracting authorities must, or alternatively, may, exclude bidders who have “shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract or a prior contract with a contracting entity which led to early termination of that prior contract, damages or other comparable sanctions”.
November 12, 2012 12:06 PM | Posted by Prandy, Helen | Permalink

On 31 October, the First Tier Tribunal gave judgment which provides some guidance on how far 'confidential information' received during a competitive bidding process can be withheld under the Freedom of Information Act ("FOIA").

In 2010, the London Borough of Newham began a competitive bid process under the structure of the Gambling Act 2005 for the operation of a casino at Westfield, close to the Olympic Park. For the purposes of this blog it is important to note that:

  • the procedure required a written agreement ("the Schedule 9 Agreement") between any proposer and the Council setting out the benefits offered and the compensation proposed in the event that, having been awarded the casino licence, the development was delayed or the benefits failed to materialise; and
  • in its paperwork for the tender process the Council made it clear that "All information submitted to [the Council] at any time during Stage 2, including the form itself and associated documents, will be treated as confidential...."

Following the bidding process an unsuccessful bidder challenged the decision as unlawful and made an application, amounting to a request under FOIA, for further information about the contents of the bids and how they were considered. Among the information requested was the Schedule 9 Agreement. This was provided but had been substantially redacted so that, for example, information about the specific obligations which the guarantor would guarantee was deleted as was the whole of a Schedule which summarised the benefits proposed by the successful bidder. The justification for withholding the information was under section 43(2) of FOIA-prejudice to commercial interests.

In short, having reviewed the documents in question, the Tribunal agreed that the threshold for engaging section 43(2) had been passed in relation to all the categories of information. Accordingly, the main question for the tribunal was the public interest balance between that confidentiality and appropriate disclosure.

The arguments urged on the Tribunal by the Council were that the avoidance of harm gave rise to a greater public interest than disclosure and that general disclosure of information would discourage bidders who would be concerned that confidential financial and commercial information would be placed in the public domain. It was noted that in this case it was a competitor who was seeking the information, not a member of the public, and that while the information may be specific to this particular project it would be possible to build up a body of information from it and other information which would disclose sensitive commercial information. For the Information Commissioner it was argued that there was already such a large amount of information in the public domain that the withheld information added very little but facilitated a better informed public debate on what was a controversial plan.

The Tribunal looked at each category of document confidentially. Importantly it held that in relation to the Schedule 9 Agreement the public interest was best served by full disclosure of the identity and creditworthiness of whoever stood behind the obligations. Moreover, the Tribunal considered that a copy of the Schedule 9 Agreement with that information restored would also demonstrate the expected public benefits which the guarantor was not prepared to stand behind and the Council's acceptance of that limitation on the security obtained for the package of benefits offered. The Tribunal found that the public interest in bidders being able to prevent competitors from finding out about this part of the proposals was relatively slight and did not equal, let alone outweigh, the public interest in disclosure.

In other words, information which a commercial bidder may regard as commercially sensitive might nevertheless be ordered to be disclosed under FOIA. The Tribunal did consider whether in the case of some of the information its disclosure might lead to an actionable breach of confidence leading to an exemption under section 41 of FOIA. The Tribunal did find that some of the withheld information was obtained in circumstances in which the confider might reasonably have assumed that it would be held in confidence. It said that there should be no time limit over which the obligation of confidence lasts but it was not correct that such an obligation should last forever. It found that the reasonable expectation of the confider would be that confidentiality would be maintained for a reasonable period of time after the date when the licence was awarded.

This is significant for other public sector tendering exercises, for both contracting authorities and bidders, because it demonstrates that even if information disclosed in the tender can be considered confidential (which is quite a high hurdle to cross) it will only be protected from disclosure by FOIA for a limited time.

It is worthwhile reading the whole decision which can be found here.

October 3, 2012 3:48 PM | Posted by Beresford-Jones, Jenny | Permalink
If not Murder on the Orient Express, then certainly Red Faces at the Department for Transport!

Procurement law is headline news today, following a dramatic midnight announcement by the government that it is dropping the controversial award of the West Coast Mainline franchise to FirstGroup. The announcement came only hours before the complaints about the procurement process raised by the current operator, Virgin Trains, were due to be scrutinized by the High Court.

The transport secretary, Patrick McLoughlin, admitted that the procurement process was flawed and that this was entirely the fault of civil servants within his department. Three people involved in the process have been suspended from their duties and a review is underway. The details are a little hazy, but the flaws in the procurement seem to have been around the way the department calculated and scored the risks attached to each of the four bids, and, in particular, the level of security payments offered as a guarantee by FirstGroup, in the event it ran into problems with the operation of the contract.

Various press articles have commented that around £40 million will be paid to the four bidders by way of compensation for wasted costs. This is interesting, as, of course, the usual scenario is for the contracting authority, in the contract documents, to reserve the right to abandon the process at any point and state that bidders will have no claim for wasted bid costs.

Further details will undoubtedly emerge and we will update you when they do.
September 3, 2012 3:48 PM | Posted by Beresford-Jones, Jenny | Permalink

In December of last year, the European Commission published its proposals for a new Directive on public procurement (see our previous post here). Since then, the Commission has been consulting stakeholders on what a new Directive should properly include.  

 

Last week, the Cabinet Office published a procurement policy note summarizing the latest state of the negotiations and the UK government’s current position on some key outstanding issues.

 

The Commission’s proposals for a new Directive

 

The proposals are lengthy but all have the general aim of simplifying public procurement and making it more flexible, together with dealing with some of the grey areas created by, or left unaddressed by, the current Directive. The new Directive is expected to be adopted at some point in 2013 – member states will then have an 18 month period in which to implement it.

 

Key features of the proposals include:

 

  • Clearer definitions of “public works contract” and “public services contract”
  • The so-called “Teckal exemption” for in-house contracts will be put into statute for the first time
  • The Directive will clarify that a public contract will not be created in a situation where two contracting authorities genuinely co-operate in the performance of their public functions
  • Two new procedures will be created, both recognizing the need for negotiation in some complex contracts while at the same time aiming to ensure a level playing field for bidders. These are:
    • The competitive procedure with negotiation
    • The innovation partnership
  • Shortening of time limits for participation and submission of offers
  • Statutory clarification on when a variation or extension of a public contract amounts to a new award requiring a new procurement process to be run
  • Use of life-cycle costing as a basis for making an award
  • Removing the distinction between Part A & Part B services
    • so-called “Social Services”, to include social, health and education services, will be given their own separate, slimmed down regime with high thresholds and only minimal advertising requirements
    • however, other services which are currently Part B services, such as legal services, will become subject to the full application of the procurement regime
  • Encouraging access by small- and medium sized entities
    • including by dividing contracts into lots

 

The Cabinet Office’s work

 

The Cabinet Office is engaged in negotiations to influence the ultimate shape of the new Directive and has recently issued a procurement policy note detailing progress so far and key interventions:

 

o        There had been plans for each member state to be required to appoint a national body to oversee procurement activity in that state; this was successfully resisted by the UK

o        There had been a proposal for a “European Procurement Passport”, which bidders would be able to present to contracting authorities to demonstrate compliance with selection criteria. However, the UK has successfully argued for a new “self-certification” approach, whereby only the winning bidder is required to physically supply documentary evidence that it meets the selection criteria, during the award phase. Prior to this point, bidders will merely "self-certify" that they meet the criteria without the actual production of documentary evidence. This new approach makes the European Procurement Passport redundant and it has been dropped

o        The UK has successfully relaxed proposals for mandatory division of contracts into lots for SMEs, such that this is now at the discretion of the contracting authority (provided that it can give reasons why such a division is not appropriate in a particular case)

o        The UK has campaigned for greater built-in flexibility in procurement procedures – the current proposals will permit negotiation in all contracts which go beyond mere “off the shelf” procurements; the government is satisfied with this outcome

o        The government is campaigning to retain the current distinction between Part A and Part B services, but acknowledges that this is unlikely to be successful. However, the UK will continue, if the distinction is indeed abolished, to push for a lighter touch regime for those Part B services (such as legal services) which will not become “Social Services” under the new regime

o        The government supports the new proposal that a bidder’s poor performance under previous contracts be made more explicitly a ground for de-selection

o        The proposals currently require the transition to 100% e-procurement to be made within two years of transposition deadline.  While it wishes to encourage e-procurement, the government will resist this requirement being made absolute as it believes it is unrealistic

o        The UK is seeking an temporary exclusion from the full rigours of the procurement regime for innovative public service delivery bodies, such as employee-owned mutuals, in order to give such organizations time to become established before they are subject to full competition

 

We will continue to monitor and report on the progress of negotiations and the likely timetable for implementation of the new rules.

August 8, 2012 4:23 PM | Posted by Beresford-Jones, Jenny | Permalink

The Organisation for Economic Co-operation and Development (“OECD”) has recently published guidelines to assist contracting authorities in the detection and prevention of bid-rigging and other anti-competitive behaviour by bidders. This paper follows on from previous guidelines issued in 2009.

 

The key recommendations in the recent guidance are that:

 

  • officials running procurement processes have an understanding of the relevant market and training in how to spot anti-competitive behaviour by bidders and “suspicious” bids;
  • the procurement process be designed to minimize the opportunities for intra-bidder communications;
  • the number of bidders is maximised, including small- and medium-sized bidders where possible, on the basis that the larger the field of bidders, the harder it will be for bid rigging to take place;
  • selection and award criteria are carefully chosen with a view to maximising competition rather than encouraging collusion;
  • e-procurement be used as much as possible, as this creates a “bidder trail” which can be evaluated for suspicious bid patterns much more easily than paper bids;
  • all bidders are required to sign a “Certificate of Independent Bid Determination”, confirming that no collusion has taken place; and
  • the tender documentation includes warnings prohibiting bid rigging and gives deterrent details of the sanctions that will be imposed on bidders if bid rigging is discovered.

 

We have contacted the Cabinet Office to see if it intends to publish a Procurement Policy Note or other guidance for contracting authorities in response to the new OECD publication; we will post again if so.

 

 

April 11, 2012 8:48 AM | Posted by Knight, Paul | Permalink

In March, the Public Services (Social Value) Act 2012 received Royal Assent and its substantive provisions will come into force on a date which has yet to be set by the Government, but is expected to be within the next couple of months. The new Act requires that, before starting any procurement process under the procurement Regulations for a services contract (including a services contract incorporating purchase of goods), the contracting authority must consider:

  • how the services being procured might improve the economic, social and environmental well-being of the area in which the contracting authority primarily exercises its functions, and
  • how, in conducting the procurement process, the contracting authority might act with a view to securing that improvement.

There is also a requirement on the contracting authority to consider whether to undertake any consultation about matters that fall within either of the points above.

All of the requirements above may be disregarded to the extent that an urgent need to arrange the procurement makes it impractical to comply with them, but note that this urgency exemption does not apply where the time available for the procurement has been reduced by the delay of the contracting authority.

Chris White MP, who put forward the initial Bill to Parliament, tells us that:

The aim of the Act was to support community groups, voluntary organisations and social enterprises to win more public sector contracts and to change commissioning structures so that a wider definition of value rather than just financial cost was considered.”

But will the Act deliver on these aims? After all, the new Act does not require contracting authorities to ensure that the goods or services being procured result in a demonstrable improvement to the economic, social and environmental well-being of the local area.

Furthermore, the procurement Regulations will continue to apply in their current form and so:

  • the procurement must not discriminate against economic operators based outside the UK and/or the contracting authority’s local area; and
  • the contracting authority must award the contract to the bidder making the most economically advantageous offer or offering the lowest price.

Clearly, there is nothing to stop a supplier from outside the local area delivering a contract in a manner which improves the social and environmental well-being of the public body’s catchment area. For example, any supplier may choose to use local sub-contractors for elements of the relevant contract.

When the new Act comes into force, public bodies will need to consider whether they should include reference to social values in each services specification and whether evaluation criteria referencing the impact on the economic, social and environmental well-being of the local area should be included in the procurement process. Care will need to be taken to ensure that any new criteria are appropriately linked to the subject matter of the contract, and therefore also remain appropriate to determine the most economically advantageous offer.

However, there will need to be a balancing exercise. Public bodies will need to ensure that any criteria looking at the local impact of the proposed contract are not framed in such a way that they might discriminate against suppliers who are not based locally.

It is anticipated that many public bodies will put in place a policy on procurement which includes a statement of their approach to addressing the issues set out in the Act. Public bodies may also elect to carry out consultations locally to discuss their approach, which are envisaged by the legislation. Procurements will then need to be carried out in accordance with any such policy.

Social enterprise campaigners hope that the Act will transform public sector purchasing by looking at the collective benefit to the local community of public spending. The impact of the Act remains to be seen, but what is clear is that it is a rare example of a private member’s bill actually becoming law.

January 3, 2012 3:07 PM | Posted by Calder, Kevin | Permalink

The Commission published in late December its draft legislative proposals on a replacement EU procurement directive (as well as a draft replacement utilities directive and a proposed new directive on concession contracts).

The revised draft rules are intended to provide clarity in a number of areas which have been the subject of case law under the current regime, to improve and streamline procurement procedures, and to facilitate cross-border competition and opportunities for SMEs. The many changes include the concept of "innovation partnerships" as a new procurement route, and the negotiated procedure becomes a "competitive procedure with negotiation". The draft regulations also contain new provisions on joint procurement by contracting authorities, market testing, tenders presented as an "electronic catalogue", and the concept of a "European procurement passport" which has previously been promoted as a means of reducing administration for SMEs.

The Cabinet Office has issued a Procurement Policy Note asking for feedback on some of the proposals contained within the draft. It expresses concern that the Commission has chosen not to exempt mutuals from the draft regulations, and at the level of governance requirements.

Negotiations on the draft directives are ongoing, and as a result these proposals may change significantly before any new regulations are adopted into EU law (expected to be in 2013), and then transposed into UK legislation.

December 22, 2011 12:47 PM | Posted by Calder, Kevin | Permalink

The Commission and Cabinet Office have confirmed that the relaxation of the rules permitting the use of the accelerated restricted procedure will cease to apply from 1 January 2012.

The Commission had previously authorised use of accelerated restricted where the acceleration would benefit the economy (which was generally taken to apply to most substantial contracts). The Commission's decision therefore appears to reflect an EU view that the economic situation has now improved, which may be a surprise to those watching growth figures for EU member states!

The change will mean that only the more limited justification for accelerating the restricted procedure around urgency preventing the use of the standard time frames (as set out in Regulation 16) will apply for procurements commenced in the new year.

The Cabinet Office has confirmed this in a Procurement Policy Note, which also confirms the new procurement thresholds which will apply from 1 January.

December 14, 2011 2:45 PM | Posted by Souter, Katherine | Permalink

How time flies…the European Commission has recently published the new public procurement financial thresholds which will apply from 1 January 2012.  The new thresholds will apply for award procedures under the Public Contracts Regulations 2006, the Utilities Contracts Regulations 2006 and the Defence and Security Public Contracts Regulations 2011.

In short, the new UK thresholds under the Public Contracts Regulations are:

  • Supply/Service contracts awarded by central government- £113,057
  • Supply/Service contracts awarded by other contracting authorities - £173,934
  • Works contracts - £4,348,350

The new € EUR thresholds can be found here and the equivalent £ GBP thresholds can be found here.

November 30, 2011 9:52 AM | Posted by Calder, Kevin | Permalink
The EU has issued some helpful (if lengthy) guidance called "Buying Green" - a handbook explaining how to introduce environmental factors into the procurement process.

The new handbook deals with the issue which has been the subject of some debate among procurement professionals - is it appropriate to consider green credentials at PQQ stage? The procurement regulations are quite clear on what can be taken into account at PQQ stage (see Regulations 23, 24 and 25). There is a brief reference to "environmental management measures" at Regulation 25(2)(h) but consideration of this is limited to "where it is necessary for the performance of the contract".

There is no clear basis in the Regulations on which you could ask, for example, "do you have an environmental impact policy in place?" and score that as part of the PQQ. However, the Buying Green paper points out, at pages 34 and 35, a number of areas where green credentials could be legitimately built in to standard PQQ questions, for example by asking about past experience of contracts with similar environmental requirements.
November 14, 2011 6:41 PM | Posted by Calder, Kevin | Permalink

Those attending the annual White Paper Conference on procurement law last week were treated to an insight from leading commentators into the likely future direction of procurement law.

Predictions of future developments included:
- an increased focus on value for money and less of a technical and mechanistic approach to interpreting the rules;
- an attempt to breath new life into the competitive dialogue procedure, with reduced (if any) restrictions on its use, and scope for post-tender negotiation;
- the (welcome?) return of the negotiated procedure to mainstream use;
- further increases in the use of electronic procurement, including availability of all tender and contract documentation online earlier in the procurement process; and
- improved training and guidance for those involved in procurement.

Speakers also highlighted the need for clarity about how the government's extensive plans for mutuals would be impacted by the procurement regime. Watch this space!

The White Paper speakers also had some interesting things to say about developments on procurement challenges. Among the views expressed:
- the American Cyanamid test which has been adopted by the courts for dealing with automatic suspension cases is natural to English courts but imposes a real barrier to claimants;
- there may be insufficient weight given to the public interest in getting procurements right as opposed to procuring the service;
- ineffectiveness as a remedy was counter-intuitive to English courts and unlikely to be very…well…effective; and
- there was little prospect of the EU legislation on remedies being amended in the near future given how recently the Remedies Directive has been introduced.

October 10, 2011 5:15 PM | Posted by Calder, Kevin | Permalink

The Cabinet Office has issued new guidance, effective immediately, on the transparency obligations relating to the publication of contracts and tender documentation. The guidance applies to central government departments, agents and agencies and non-departmental public bodies as well as NHS bodies and trading funds.

There are a number of amendments to the guidance, including updates to address dynamic purchasing systems, and new guidance on the "consultancy value statement" which must be completed relating to all consultancy purchases of over £20K.

The guidance is available to download in two parts - Publication of New Central Government Contracts, and Publication of Tender Documentation.

October 5, 2011 6:42 PM | Posted by Prandy, Helen | Permalink
The EU has recently been considering the problems faced by small and medium-sized enterprises (SMEs) in competing for public contracts under the current EU procurement regime. SMEs win only 31-38% of public procurement contracts by value which is substantially less than their overall share in the economy (52% of combined turnover) suggests they should. Ironically therefore measures designed to increase competition and to free the market for all potential bidders is actually having the opposite effect by making it too costly for most SMEs to participate in tenders for public contracts.

The Committee for the Internal Market and Consumer Protection has recently considered this point and unanimously approved measures to remove the administrative barriers for SMEs to allow them to participate more effectively in competitive tenders. Those measures include a proposal for an EU-wide "electronic procurement passport" which would prove that the holder complies with EU rules on public procurement without the need to go through a substantial paper exercise for each new bid. MEPs also backed a proposal to divide public contracts into lots to give SMEs a better chance of bidding.

Although we are still a long way from any firm proposals, let alone the introduction of further legislation, the mood in Europe is clearly to lighten the load for SMEs, not-for-profit and social economy operators when it comes to the current requirements for bidding for public contracts. The Commission has been seeking views since January 2011 on this and is currently preparing a series of legislative proposals which will be tabled later this autumn.

Further up-dates on this will be available via our blog in due course.
September 8, 2011 4:05 PM | Posted by Beresford-Jones, Jenny | Permalink

On 27 August, European Commission Implementing Regulation 842/2011 was passed, introducing new proformas for various OJEU notices (for example, prior information notices, advertisements, award notices and voluntary ex ante transparency notices). The regulation will come into force on 16 September, meaning the new proformas must be used from that date.

The regulation is available here; the new proformas themselves are contained in the annexes to it.

April 21, 2011 4:20 PM | Posted by Beresford-Jones, Jenny | Permalink
On Tuesday, judgment was handed down in the interesting case of Mears Limited v Leeds City Council, which concerned a procurement for the maintenance of public housing stock. The case illustrates some of the rocks on which an evaluation process might founder and provides a helpful practical application of the recent line of cases around disclosure of award criteria. It also provides useful guidance on how contracting authorities might best structure evaluation schemes so as to avoid potential breaches of the procurement regulations.

Leeds ran a competitive dialogue process for tenders to maintain its public housing stock. The process contained several stages. The claimant, Mears, was successful in getting through the initial selection phase, but was unsuccessful in reaching the final bid phase. The assessment of the bids involved three elements which would later prove to be contentious:

• an Evaluation Table, divided into several sections, with each section containing several questions. Each overall section was given a weighting, but within each section, no weightings were given to individual questions. Before the bid deadline, a bidder asked for clarification as to how each question would be weighted and was simply referred back to the Evaluation Table itself (in which each section of questions had an overall weighting). The claimant argued that the questions amounted to separate sub-criteria that should have been weighted, and that this was a breach by Leeds.

• internal Scoring Guidance, which suggested that, this being a competitive dialogue process, full marks on certain elements could be reserved for those bids which showed innovation or exceeded the specification in some way. The claimant argued, following the findings in Letting International v London Borough of Newham, that the failure to tell bidders that full marks could only be obtained by exceeding the stated requirements was non-transparent and was therefore a breach of the regulations.

• internal Model Answers, which gave guidance to evaluators as to what might be expected in answers to the questions in the Evaluation Table. The claimant argued that the content of these Model Answers amounted to separate criteria which should have been disclosed.

An interesting precursor to this hearing is that there was a previous trial in January of this year to decide whether the internal Model Answers should be disclosed to the claimant. Mears became aware of the existence of these Model Answers during the feedback stage, when Leeds explained that marks had been lost because “answers do not hit Model Answers”. Leeds then refused to disclose the Model Answers during the feedback stage on the grounds that to do so would defeat the purpose of the procurement and result in identical, “tick box” answers from all the bidders, between which it would then be impossible to distinguish. The court recognised this as a legitimate concern, but also held that it was essential to Mears’ case that Mears had sight of the Model Answers, and ordered disclosure within a “confidentiality ring”, to Mears’ named representative and solicitors only. This illustrates the dangers of unwittingly providing “ammunition” to bidders during the feedback stage (although of course it can always be argued that bidders will have a right to a wide range of information via a Freedom of Information Act request in any case).

Turning back to the recent hearing, the judge first looked back at the leading recent cases around evaluation and summarised the current state of the law. Criteria, sub-criteria and weightings need to be disclosed to bidders upfront in order that bidders can prepare the bid with an understanding as to how it will be assessed and what the contracting authority’s requirements are. There are however a couple of situations where a contracting authority is justified in not disclosing a criterion; first, because it does not, on a reasonable view, introduce different or new criteria, sub-criteria or weightings; or secondly, because it could not have affected the tenders in any event.

In the light of this, the judge decided that:

• the unweighted questions in the Evaluation Table did amount to sub-criteria and should have been weighted. Bidders may well have bidded differently had they understood the relative importance of each question. This was therefore a breach by Leeds.

• on the evidence, the Scoring Guidance was guidance only and although it suggested that innovative bids might score top marks, it was not impossible to score full marks without innovation. As such this was not a matter that needed to have been disclosed to bidders. The judge seems to have been influenced by the fact that this was a competitive dialogue process where bidders should expect that a contracting authority is looking for offers of individual and potentially innovative solutions. Perhaps his view would have been different had this been a more simple process under the open or restricted procedures.

• a couple of the Model Answers did amount to undisclosed award criteria and therefore this was a breach by Leeds. But, those two answers excepted, there was no requirement to disclose the Model Answers as the majority of them were not award criteria or sub-criteria and were merely guidance. The judge seems to have accepted that there should not be a general rule to disclose Model Answers as this would create “identikit” bids which it would become impossible to evaluate. However he warned that Model Answers must be scrutinised to ensure that they do not contain award criteria or sub-criteria which have not otherwise been disclosed.

Having established that there had indeed been some breaches by Leeds, the judge went on to consider whether the claimant had actually suffered any loss which needed to be remedied. Leeds argued that Mears would still not have obtained a high enough score to advance further in the process even if the breaches had not taken place. But the judge decided Mears only needed to demonstrate more than a “fanciful chance” of being successful had it had access to the information that Leeds had not disclosed, and decided this test was met.

The judge finally looked at what remedy ought to be given to Mears – the choice being to award damages, or to order the re-running of the procurement, or indeed both – the court having a discretion to decide on a remedy under the procurement regulations. He decided that there was a strong public interest issue, in that Leeds would be left without contracts to maintain its social housing, and on that basis that only damages should be awarded and that the procurement should be allowed to stand.

The case is reassuring to contracting authorities that in general model answers are not disclosable in advance provided they do not introduce new criteria; this has been a troubling question in the light of the recent trend in case law to insist on disclosure of award criteria, sub-criteria and in some cases sub-sub-criteria. Contracting authorities would be well advised to ensure that evaluation aids such as model answers and scoring guides, if they are not to be disclosed, do not contain new criteria and are expressly stated to be for guidance only and not prescriptive. Of more concern to contracting authorities is the fact that the case also demonstrates that, where breaches are established, the claimant does not need to show that it would have definitely won the contract had the breaches not taken place; the "more than a fanciful chance" test is not a great hurdle for a claimant to surmount once a technical breach has been established by the court.
April 13, 2011 3:34 PM | Posted by Beresford-Jones, Jenny | Permalink

At the end of last month it was announced that the Bribery Act 2010 will come into force in July of this year. As readers may be aware, the Act essentially codifies what was previously rather a hotch potch and outdated collection of statutory and common law offences relating to bribery and corruption. It also introduces a new offence known as the "section 7" offence, whereby a company which fails to have adequate procedures in place to prevent bribery can itself be convicted of the criminal offence of failure to prevent bribery.

One of the interesting questions from a public procurement perspective has been the issue of how the Bribery Act 2010 will be cross-referenced into regulation 23(1) of The Public Contracts Regulations 2006 (the Regulations), which deals with mandatory exclusion criteria. Regulation 23(1) in its current form requires a contracting authority automatically to exclude any bidder which has a conviction for the offence of bribery or for corruption under the Public Bodies Corrupt Practices Act 1889 or the Prevention of Corruption Act 1906; these two statutes will be repealed in full when the Bribery Act 2010 comes into force.

We can therefore expect to see updated drafting of regulation 23 to reflect the Bribery Act 2010; a consultation is expected to be held shortly on how this should be achieved.

Given that conviction for the offence of bribery is a case for mandatory exclusion at present, we presume that the two new basic offences under sections 1 and 2 of the Bribery Act 2010 (broadly speaking, offences relating to bribing or accepting a bribe) will remain in the mandatory exclusion category, although this has not been formally confirmed.

The interesting angle is that Kenneth Clarke MP has confirmed that a conviction for the new "section 7" corporate offence of failure to prevent bribery will not require mandatory exclusion by contracting authorities - rather, they will be permitted to exercise their discretion as to whether to accept the bid or not, under regulation 23(4). It is expected that guidance will be published on how contracting authorities might approach the exercising of this discretion.

We will post further updates once the consultation is published.

January 12, 2011 10:08 AM | Posted by Beresford-Jones, Jenny | Permalink

In a recent post below we discussed the coalition government's transparency drive and the new requirements on central government, NPDBs and NHS Bodies to publish tender documents and contracts where these are valued at over £10,000.

This information is to be published on a new portal called Contracts Finder, which has just been launched. You may like to bookmark the address if you haven't already - www.contractsfinder.businesslink.gov.uk.

January 10, 2011 11:24 AM | Posted by Beresford-Jones, Jenny | Permalink

Readers may recall that in 2009/2010, OGC guidance contemplated a potential relaxation in the conditions required to be met for use of the accelerated restricted procedure, as provided for following EU guidance on the impact of the changes in the global financial markets. Recent OGC guidance has confirmed that this relaxation has now been extended until the end of 2011. Contracting authorities are required to keep statistics of how and when the relaxation is used, in order that the OGC can report to the EU. This will include information on contract values, the type of contract (supplies/works/services), business sector and types of purchased good/services etc.

January 6, 2011 3:20 PM | Posted by Beresford-Jones, Jenny | Permalink

As readers may be aware, several pieces of guidance in relation to procurement come into force with the coming of the new year. We thought it would be helpful to post a summary of these.

Coming in, from January 2011

New transparency obligations

Central government departments, NPDBs and NHS Bodies are required to publish contracts worth over £10,000 from January 1st 2011. According the the guidance, contracting authorities must include the specification, the terms & conditions, and the overall pricing scheme (although not necessarily a breakdown of pricing structure). Publications should be to a new portal called "Contracts Finder"; more information is provided at Annex B of the guidance. The guidance states that publication should take place within 20 days of the end of the standstill period. Redactions of information that would be exempt from disclosure under the Freedom of Information Act are permitted; the guidance contemplates a two-way dialogue between public bodies and suppliers about which information can be disclosed. The contracting authority must also complete and publish the proforma at Annex A of the guidance, which gives details of how actual procurement timescales compared against estimates.

Readers will probably also be aware that from September 2010, Central government departments, NPDBs and NHS Bodies have been required to publish tender documents in relation to contracts valued at over £10,000.

Contracts with small- and medium-sized entities (SMEs)

From January 1st 2011, Central government departments, NPDBs and NHS Bodies, when publishing contracts on the "Contracts Finder", are required to note where contracts have been awarded to SMEs.

Mandatory PQQ

The OGC has launched new PQQ guidance, including a number of core PQQ questions which are mandatory for central government purchasers for procurements advertised from 1 December 2010, and which apply to all central government procurements where a PQQ would normally be used.

Departments have up to 1 January 2011 to fully integrate the core questions into their systems. For more details, see the OGC guidance, and the core PQQ questions.

Continuation of relaxation on conditions for use of accelerated restricted procedure no longer available to public bodies

Readers may recall that in 2009/2010 OGC guidance contemplated potential relaxation in the conditions required to be met for use of the accelerated restricted procedure, as provided for following EU guidance on the impact of the changes in the global financial markets. Recent OGC guidance has confirmed that this relaxation has been extended until the end of 2011. Contracting authorities are required to keep statistics of how and when the relaxation is used, in order that the OGC can report to the EU. This will include information on contract values, the type of contract (supplies/works/services), business sector and types of purchased good/services etc.

December 16, 2010 8:53 AM | Posted by Calder, Kevin | Permalink

The OGC has published the long awaited detailed guidance on the operation of the new transparency obligations relating to contract publication announced by the government in May. The obligations come into force for the majority of contracts with central government and NHS organisations from 1 January 2011.

The guidance clarifies what needs to be published, and what exemptions and redactions will be permitted. It also advises Departments to publicise the transparency obligations and include reference to them in contracts, so that suppliers are fully aware that their contracts will be published. The new guidance supersedes previous OGC guidance relating to the publication of IT contracts.

The guidance refers to a new portal, named “Contracts Finder” which is to be operational by the end of the year. An interim portal is available in the meantime.

More information on the current position on the new transparency obligations is available on the OGC transparency page

Meanwhile, for local government, the Local Government group has updated its guidance on the new transparency obligations as they apply to local authorities.

December 16, 2010 8:46 AM | Posted by Calder, Kevin | Permalink
The OGC has launched new PQQ guidance, including a number of core PQQ questions which are mandatory for central government purchasers for procurements advertised from 1 December 2010, and which apply to all central government procurements where a PQQ would normally be used.

Departments have up to 1 January 2011 to fully integrate the core questions into their systems. NDPBs and central government agencies must have integrated the questions from 1 March 2011.

Other public bodies are also permitted to use the standard form of core PQQ questions.

The OGC’s stated objective is to streamline and simplify procurements by using a standardised approach across government. However, the guidance recognises that PQQs will need to be tailored for specific requirements.

Given that Departments will also be obliged to publish PQQs (see the separate post on transparency), it should be relatively easy for the Cabinet Office to monitor compliance with this new requirement.

For more details, see the OGC guidance, and the core PQQ questions.
November 17, 2010 4:13 PM | Posted by Beresford-Jones, Jenny | Permalink
The ERG (OGC) has recently published a policy note on framework agreements, reminding contracting authorities of the importance of checking that they fall within the class of public bodies who are entitled to use that framework.

This issue has been made more important since the Remedies Directive came into force at the end of the 2009, bringing with it a new remedy of “ineffectiveness” for contracts entered into directly without competition, when competition was required. If a declaration of ineffectiveness is made, the contract comes to an end prospectively from the date of the declaration.

The ERG (OGC) points out that a contracting authority who uses a framework without being entitled to do so is, in effect, awarding a contract directly and without the proper element of competition and thus is laying itself open to a claim by a challenger for a declaration of ineffectiveness.

Contracting authorities must therefore check the scope of any proposed framework arrangement very carefully. The policy note states that specifying "any contracting authority" as being entitled to use a framework in the OJEU notice is unacceptably wide. It is acceptable for the framework to mention "classes" of public bodies, provided this class description is sufficient to immediately identify whether a public body is a member of that class. If this is not possible, the members of the class must be fully listed out.

Frameworks are only open to the contracting authorities that were originally party to the agreement. However, the policy note contemplates that changes to the list of members of the "class" may be legal, provided that the scale and scope of the framework is not materially altered.

The policy note suggests that operators of current frameworks where terminology is too generic should consider issuing clarifications containing more detailed descriptions of which bodies are entitled to use the framework. Obviously, in issuing these clarifications, it is important to take a conservative approach and not to extend the original scope of the framework, whether in terms of value or classes of public bodies permitted to use it.
October 4, 2010 3:23 PM | Posted by Beresford-Jones, Jenny | Permalink

Readers of this blog may be aware that the distinction between selection criteria and award criteria has been a hot topic in procurement law recently (together with issues around adequate disclosure of award criteria). The European Lianakis case in 2008 emphasised the importance of ensuring that only criteria aimed at assessing suitability of bidders in general should be used at selection stage, while award criteria ought to evaluate the merits of particular bids in response to a particular requirement.

A couple of recent European decisions against the IT services supplier European Dynamics (“ED”) are therefore interesting given that they cover this distinction between selection and award criteria. The cases are helpful to contracting authorities as they appear to suggest that, while the selection and award stages are distinct and require separate treatment, it is possible to use the same information at both stages, provided it is used in a way appropriate to that particular stage.

The first case concerned a procurement of IT services run by the European Monitoring Centre for Drugs and Drug Addiction ("EMCDDA"). ED claimed that EMCDDA had made a manifest error in confusing its use of selection and award criteria and that it was not entitled to evaluate qualifications and experience at award stage. The judgment is helpful in that it appears to acknowledge that experience and qualifications may be used as award criteria, provided this is done comparatively and in relation to the particular contract being let.

One of the stated award criteria was "technical merit of human resources for the execution of the tasks, 30%". The evaluation committee in this case gave reasons to ED as to why it was unsuccessful – one of these was that, while the system architects ED proposed using had rich academic qualifications, they had limited experience. The court took the view that, given the stated award criterion of "technical merit", EMCDDA was entitled to comparatively evaluate qualifications and experience at award stage; the court certainly did not criticise it for taking this approach. Indeed, the court commented that "the evaluation report does not call into question [ED’s] knowledge or the experience which it has established. During the award stage, those qualities are assessed in the light of the specific proposals made by the applicant regarding the implementation of the defined services".

This is helpful to public bodies as it appears to suggest that a contracting authority may use responses to the same set of criteria (in this case, education and experience) in two ways; (1) at selection stage, to de-select all those not meeting an absolute minimum standard, and (2) at award stage, to look comparatively at how the responses to those criteria score under a particular stated award criterion. The Court held that in applying the criterion relating to technical merit of the human resources, the evaluation committee could clearly take into account the qualifications for and relevant professional experience relating to the required tasks. These did not constitute criteria in their own right but were an inherent part of the stated criteria (and, therefore, it did not matter that qualifications/experience had not been expressly stated as an award criteria in themselves).

The second case concerned a procurement of computer services run by the Publications Office of the EU. ED was unsuccessful and brought a claim against the Commission, claiming that it was criticised for having exceeded the maximum number of pages permitted for best practice documents and that the Publications Office thereby confused award and selection criteria. ED argued that the documents concerned had already been evaluated in the selection procedure and that criteria designed to assess a bidder’s general suitability to perform the contract in question could not be regarded as award criteria.

The Court noted that there must be a distinction between selection criteria and award criteria, which are governed by different rules. However, and interestingly, it found that the assessment of the sub-criterion relating to best practice was different at the two different stages. At the selection stage, the review involved assessment of the technical and professional capacity of the various tenders. However, at the award stage, the review covered compliance with the criterion of the number of pages to be included in the tender. Therefore, if the tender had satisfied the selection criterion as to the content of the best practice documents, there was nothing to prevent the Publications Office from taking into account in its award criteria the fact that the volume of best practice documents exceeded the maximum number of pages requested. This decision again is very helpful as it suggests that the same information can be used in different ways at each of selection and award stage.

It is of course true that all cases turn on their own facts to some extent; the court in these cases may well have been influenced by the fact that the claimant was European Dynamics, which has brought a string of claims in relation to procurements where it has been unsuccessul in the last year or so. Nonetheless, these cases do seem to show the court's willingness to take a common sense approach to selection and award criteria.

May 13, 2010 4:13 PM | Posted by Beresford-Jones, Jenny | Permalink
Readers with an interest in the application of the procurement rules to development agreements might find this article useful, written by Nathan Holden, a partner in Mills & Reeve’s Local Authorities practice. Nathan analyses the recent Muller case and summarises the latest position in relation to development agreements.
April 23, 2010 12:09 PM | Posted by Beresford-Jones, Jenny | Permalink
The Bribery Act received Royal Assent on 8 April 2010 and will come into force when the relevant Secretary of State issues a commencement order, likely to be in October of this year. The Act simplifies the existing law on bribery and enables courts to deal with it more effectively. It also creates offences of, among others, accepting, or conniving in the acceptance of, a bribe which will be particularly relevant to public bodies. You can read our full article on the Bribery Act on the Mills & Reeve website.
February 11, 2010 2:26 PM | Posted by Beresford-Jones, Jenny | Permalink
Readers may be aware that a major policy objective at both European and UK level is to increase the opportunities for small and medium sized suppliers (SMEs) to tender for public contracts. SMEs are seen as being a potential source of innovative and cost-effective providers for some types of public contract.

In November 2008, the Glover Report was published which contained several recommendations, including that by the end of 2010 all public sector contract opportunities should be included on one single, free, online portal. In summer 2009 the government removed subscription fees to Supply2.gov.uk for SMEs in an aim to make the site more accessible. It has also released a free online procurement training course aimed at SMEs, called "Winning the Contract".

Last week, the OGC built on these initiatives by publishing guidance for authorities on how and when to flag contract opportunities to SMEs. The guidance includes a list of characteristics of contracts that may well be appropriate for SME involvement. These include when the contract is low value, requires local delivery is for a tailored or innovative product or service.

The guidance also includes suggested wording for inclusion in OJEU notices and other advertisements to make it clear that the contract could be delivered by SMEs. It is however also important to make it clear that the mere fact that a bidder is an SME will not confer an automatic advantage in the evaluation (since this would be discriminatory and contrary to the spirit of the procurement regime). The suggested wording is:

"The Contracting Authority considers that this contract may be suitable for economic operators that are small or medium enterprises. For the avoidance of doubt the contracting authority points out that no weight will be attached to whether an economic operator is an SME in selecting economic operators to [submit tenders/participate in dialogue/negotiate] or in assessing the most economically advantageous tender".

January 19, 2010 12:54 PM | Posted by Beresford-Jones, Jenny | Permalink

The Bribery Bill has recently had its second reading in the House of Lords and will be of interest to both contracting authorities and private sector suppliers alike. The Bill will shortly enter into the Report stage where it receives detailed parliamentary scrutiny. It is therefore possible that it may come into force in April 2010, though watch this space for further updates once the Report stage is completed.

There was seen to be a need for this reform of the law because the UK has never as yet successfully prosecuted a company for bribery, even though it signed up to the OECD’s bribery convention back in 1989.

What is the new law?

If enacted in its current form, the Bribery Bill will simplify the existing law on bribery and enable courts to deal with it more effectively. The Bill creates offences of, amongst others, bribing another person/company/public body or accepting a bribe in return for giving an advantage to the briber.

Of particular interest to contracting authorities is the offence under section 2 in which a person “requests, agrees to receive or accepts” an advantage of some kind in return for improperly performing, or allowing the improper performance of, a “function or activity” where that function/activity is either of a public nature or done in the course of a business.

The Bill makes it clear that if the bribery offence is committed with the consent/connivance of a senior officer of the company or public body, then that person is also guilty of an offence. This will potentially catch all those working at manager level and upwards.

Although it does not affect contracting authorities directly, the Bill also creates a new offence where a commercial organisation (i.e. not a public body) negligently fails to prevent bribery.

Penalties under the Bill include fines and/or imprisonment for up to ten years (for the more serious offences).

What are the implications for contracting authorities?

Contracting authorities could therefore be guilty of bribery if, for example, they agree to “fix” a procurement evaluation process in the briber’s favour in return for some advantage. It seems it would also be possible for a contracting authority to be guilty of bribing a supplier if it offers some sort of advantage to a supplier in return for the supplier agreeing to improperly perform an activity connected with the running of its business (e.g. bribing the supplier to submit a lower-priced bid than it would otherwise have done).

The OGC will no doubt be publishing updated boilerplate standard clauses on the prevention of corruption, which take into account the Bill’s provisions and which contracting authorities will need to ensure are included in public contracts. Contracting authorities may also like to address in public contracts the consequences of a supplier being found guilty of a Bribery Bill offence. For example, the prosecution of a major supplier for negligent failure to prevent bribery is likely to be embarrassing for a contracting authority, which may wish to have the option of immediately terminating the contract in these circumstances.


December 11, 2009 3:57 PM | Posted by Beresford-Jones, Jenny | Permalink
The Public Contracts Regulations 2006 only apply to procurements where the value of the proposed public contract falls over a specified threshold (although the general requirements of non-discrimination, equality of treatment and transparency must still be respected for under-threshold contracts). There are different thresholds depending on whether it is a public works, public supply or public services contract. These thresholds will be as follows from 1 January 2010:

PUBLIC SUPPLY CONTRACTS
Contracting Authorities specified in Schedule 1 – £101,323 (€125,000)
Other Contracting Authorities – £156,442 (€193,000)
Indicative notices – £607,935 (€750,000)
Small Lots – £64,846 (€80,000)

PUBLIC WORKS CONTRACTS
Contracting Authorities specified in Schedule 1 – £3,927,260 (€4,845,000)
Other Contracting Authorities – £3,927,260 (€4,845,000)
Indicative notices – £3,927,260 (€4,845,000)
Small Lots – £810,580 (€1,000,000)

PUBLIC SERVICES CONTRACTS
Contracting Authorities specified in Schedule 1 – £101,323 (€125,000)
Other Contracting Authorities – £156,442 (€193,000)
Part B Services – £156,442 (€193,000)
Indicative notices – £607,935 (€750,000)
Small Lots – £64,846 (€80,000)
December 9, 2009 4:13 PM | Posted by Beresford-Jones, Jenny | Permalink
The new Remedies Directive coming into force on 20 December 2009 contains a remedy of ineffectiveness – a challenger may in certain circumstances apply to court to have a public contract declared ineffective. One of these circumstances is where the contract was awarded without any advertisement or competition, in contravention of the The Public Contracts Regulations 2006.

However, a safe harbour is available. Contracting authorities who believe they are justified in awarding a contract without competition can protect themselves against a claim for a declaration of ineffectiveness by publishing a voluntary transparency notice in the OJEU, and by observing a voluntary standstill period of ten days from the day after the date of the notice.

The standard form for these voluntary transparency notices has now been published and is available for download from the EU Commission.
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