State Aid? State What?!

Do you need to think
about State Aid risk on
your procurement project?

Make sure you know what
to look out for with our
handy new guide
from our state aid experts.

Looking to challenge a procurement decision?

Suppliers wishing to challenge have only a short time frame in which to act. Click here for our useful guide.

Which Regulations do you need?

To get up to speed with the various new procurement law regulations, please click below;

> Concession Contracts Regulations 2016 

> Utilities Contracts Regulations 2016

> Public Contracts Regulations 2015 

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

Procurement news blog


March 13, 2019 11:00 AM | Posted by Beresford-Jones, Jenny | Permalink

After a turbulent day in Parliament yesterday, there is still little clarity on what will happen on 29 March or whether that timetable will be extended.

It seems that the government is preparing equally for both the “no deal” and “deal” scenarios: on Thursday last week, the Cabinet Office published a Procurement Policy Note (PPN) giving guidance on what happens in either situation (although with the caveat that the guidance is only draft guidance given the uncertainty about how events will unfold).

If there is a deal...

If there is a deal, then there will no change to the procurement law regime until December 2020 (the end of the transition period). Further guidance will be issued as we approach that point.

If there is no deal...

Even if there is no deal, there will be no major changes to the procurement law regime, because the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016 and the Concession Contracts Regulations 2016 are all part of UK law and this will not change merely because we exit the EU.

However there will be some changes, the most important of which will be the fact that the OJEU will no longer be used for advertising, award and other notices. Instead a new UK e-notification will be used (note, this is distinct from Contracts Finder, and the obligations related to the latter, which will continue unchanged).

The PPN suggests that contracting authorities might wish to contact to contact the e-sender service they use to see how the service intends to tie in with the new UK e-notification service (if at all). If you wish to publish directly to the UK e-notification service, you will need to register with Contracts Finder as a Buyer at www.supplierregistration.cabinetoffice.gov.uk. The guidance notes that the following e-senders have told Cabinet Office that they intend to integrate their services with the new UK e-notification service in advance of site launch:

  • Adam (useadam.co.uk)
  • ADB (UK) Limited
  • Atamis Limited
  • BiP Solutions
  • European Dynamics
  • EU Supply
  • Jaggaer
  • Millstream Associates (part of Proactis)
  • Proactis
  • Sourcedogg

Likewise, suppliers currently registered to receive information about opportunities in the OJEU will need to register with the new UK e-notification service to receive these.

The new regime will apply to all procurements in train on, and new procurements commenced on or after, exit day. This means that if a procurement was started before exit day it will have been advertised in the OJEU, but where award is after exit day, the award notice will instead be published to the UK e-notification service.

The guidance appends some useful Q and As dealing with the no deal scenario, which are worth a read. These say that a beta version of the UK e-notification service is available to test, by contacting the Crown Commercial Service on info@crowncommercial.gov.uk.

Posted by Jenny Beresford-Jones

December 17, 2018 9:56 AM | Posted by Beresford-Jones, Jenny | Permalink

The Crown Commercial Service has published a note alerting us to the fact that its "Mystery Shopper" service has undergone a re-launch and is now known as the Public Procurement Review Service.

The Mystery Shopper service was launched in 2011 as a tool for the encouragement of good practice and moved on to a statutory footing once the Small Business Enterprise and Employment Act 2015 came into force and provided statutory authority for the work of the service. The recent re-name and re-launch was seen as necessary in order to reflect the true scope of its remit and authority.

The note reminds us that, while the Review Service can encourage good practice and “name and shame” recalcitrant or uncooperative contracting authorities, it nonetheless does not have the power to order a contracting authority to do (or stop doing) something. In the UK (unlike in other jurisdictions, many of which have public procurement tribunals) only the High Court has that authority, and the cost of issuing a claim there can often prove prohibitive for suppliers.

However, the service is able to make recommendations to contracting authorities if it considers there to have been a breach of the procurement regulations or of good practice guidance. If you are a supplier and you think you have been unfairly treated, it is always worth contacting the service to see what help might be available, especially as it might solve the problem at an early stage and avoid the need for more formal proceedings.

Posted by Jenny Beresford-Jones

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

Highlights

Contact Us

The Procurement Portal aims to provide a "one stop shop" for procurement law queries and advice.

Click here to email our team with your query.

Managing and mitigating procurement risk course

This updated course is great for anyone who wants to make informed judgments around procurement risk and be able to handle potentially contentious issues with confidence.

You can access our updated course here.

Subscribe by email

> Subscribe to our blog updates by email

The "FeedBurner" subscription service is provided by a third party and Mills & Reeve LLP therefore accepts no responsibility or liability for this service. Please also refer to our full terms and conditions.

Procurement FAQs

We have over 100 questions and answers on a host of topics, from advertisement to managing a procurement challenge.

> Click here to find out more