Public procurement: common queries

As a starting point, you are correct to consider regulation 6 of the Public Contracts Regulations 2015 (the “PCRs”). Regulation 6 essentially explains how to calculate the estimated value of a contract, for the purposes of determining whether it will be caught by the PCRs. Therefore, a calculation, in accordance with Regulation 6 of the PCRs, needs to be carried out at the outset to confirm that the contract value indeed falls beneath the relevant threshold for the PCRs to apply. As of the date of this webinar, the relevant thresholds are: £122,976 (central government) or £189,330 (other contracting authorities) for supplies and services; and £4,733,252 for works contracts.

Where an authority is undertaking this analysis, it must calculate the estimated value of the contract based on the total amount payable, net of VAT, including any form of option and any potential renewals (see Regulation 6(1) of the PCRs). Therefore, an authority should consider, at the outset, whether it is likely that the contract will be renewed for successive periods and if so, it should consider the value of such renewals as part of determining the contract value. It is also worth noting that authorities cannot simply avoid the application of the PCRs by essentially ‘splitting’ the contract into a series of 12-monthly ‘rolling’ contracts, particularly if the authority is aware that the contract may be renewed after the end of each 12 month period (see Regulations 6(5) and (6) of the PCRs).

Where a contract value is determined to fall below the relevant PCR threshold, it is then necessary to consider Chapter 8 of the PCRs. In the scenario you describe, we have assumed that the local authority essentially ‘extended’ the original contract, which remains the same in terms of scope, albeit the value of the contract has increased by £1,000. If this was the case, then there would be no requirement to publish any form of notice on Contracts Finder. Indeed, Regulations 110(1) and (2) of the PCRs clarify that even where the value of a below-PCR threshold contract is estimated to exceed £25,000, a contracting authority is only obliged to advertise the opportunity on Contracts Finder if the authority advertises the opportunity elsewhere. 

We would, however, recommend that the authority considers whether there are likely to be further renewals of the contract in the future and if so, whether the total value of those renewals is likely to exceed the PCR threshold. The authority should also consider whether such renewals will be permissible (i.e. consider whether any of the grounds in Regulation 72 of the PCRs apply), and if not, the contracts in question should be subject to a fresh procurement procedure.

Where an authority is undertaking an analysis as to whether a particular modification would have (i) allowed for the admission of other candidates; (ii) led to the acceptance of another tender; or (iii) attracted additional participants, ideally the analysis would be carried out by considering the proposed modification in question against the original procurement exercise. For example, was the drafting of the original contract wide enough to encompass the change under contemplation? Was there a pass/fail criterion which a bidder failed, however may now have passed as a result of the intended modification? Did a bidder withdraw from the process on a point which the authority is now considering conceding? All of these factors would need to be considered in order to assess, with any form of precision, that a change is likely/unlikely to be ‘substantial’ as defined within Regulation 72 of the PCRs.

If an authority simply does not have such information, e.g. if the original procurement took place many years ago and the documents may now be lost, the analysis could only therefore be confined to the information which the authority does have in its possession. The authority should bear in mind, however, that if its decision to modify the contract was later challenged, the claimant may request the disclosure of specific documents or disclosure may be ordered by the Courts (which, generally speaking, requires that a “reasonable and proportionate search” is conducted, with sanctions potentially being imposed if the disclosure exercise is not conducted properly). Therefore, it would be advisable to ensure that a thorough check for the original procurement documents is undertaken before performing any analysis against Regulation 72, as those documents may be found later in the course of complying with a disclosure exercise and could potentially undermine an authority’s initial view that the change is not ‘substantial’.

It is interesting that the wording asks whether a modification “would have” allowed for admission of other candidates and so on, rather than whether it “could have” done so. This does suggest that this regulation is looking not at a hypothetical case where there “may” have been other candidates, but rather whether there did in fact exist other candidates who would have taken part. Indeed, Mrs Justice Andrews considered this point in the 2015 case of Edenred (UK Group) Limited v HMT, HMRC and NS&I [2015] EWHC 90 (22 January 2015) – see paragraph 128 in particular.

This would depend on whether the other criteria in Regulation 72(1)(b) of the PCRs were met, i.e. is it arguable that: (i) the additional services, supplies or works are necessary?; (ii) a change of contractor cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, services or installations procured under the initial procurement; and (iii) it would cause significant inconvenience or substantial duplication of costs for the contracting authority to undertake a fresh procurement exercise; and (iv) the value of the modification amounts to 50% or less than the advertised contract value? If the answer to all of these questions is ‘yes’, then the authority should be able to rely on Regulation 72(1)(b) of the PCRs.

In respect of the second part of the question, the 50% cap applies each time that the authority modifies the contract in accordance with Regulation 72(1)(b) (see Regulation 72(2) of the PCRs). In respect of the final part of the question, Regulation 72 applies equally to contracts which fall within the light touch regime.

If an authority is modifying an existing call-off contract, our view is that the modification would first need to be considered against Regulation 72 of the PCRs. If the authority intends to justify the modification by applying either Regulation 72(1)(b) (additional goods/services/works) or Regulation 72(1)(c) (unforeseen circumstances apply), then this would require the authority to publish a modification notice on the Find a Tender service. There is no ‘threshold’ stipulated within either of these provisions, other than a reference to the 50% ‘cap’ which applies in respect of the maximum permitted value of each modification. Therefore if either Regulation 72(1)(b) or (c) is utilised by the authority to justify the modification, a modification notice is required notwithstanding the value of the modification in question, or whether the ‘contract’ is a call-off from a framework.

Our view is that this may not be entirely necessary/justified if the value of the contract in question remains below the relevant PCR threshold after the modification, albeit it may be prudent to conduct this analysis to safeguard against any potential complaints/claims later down the line. However, if the value of the intended modification increases the total contract value such that it will now exceed the PCR threshold, we would certainly recommend that any such modification is considered against the grounds listed in Regulation 72.

This is addressed in Regulation 72(2) of the PCR, i.e. the 50% ‘cap’ applies to each modification, i.e. it is not to be construed as an aggregate cap on all modifications conducted under Regulation 72(1)(b) or (c) of the PCRs. 

Please see our response to Question 5 above which we trust answers your query here.

This is correct, however only where you are using ‘Ground 6’ of the Regulation 72 modification grounds (otherwise known as the ‘safe harbour’), ie:

• That the value of the modification falls below: (i) the relevant threshold for the PCR to apply; and (ii) 10% of the initial contract value for service/supply contracts or 15% for works contracts; and
• The modification is not altering the overall nature of the contract

Regulation 72(2) of the PCRs clarifies that the position is different if an authority is intending to rely on Regulation 72(1)(b) (i.e. “Ground 2”) or (c) (i.e. “Ground 3”) of the PCRs. In this scenario, any increase in price may not exceed 50% of the value of the original contract. This ‘cap’ applies to each modification, i.e. it is not to be construed as an aggregate cap on all modifications conducted under Regulation 72(1)(b) or (c) of the PCRs.

There is no aggregate cap which applies when an authority is making successive modifications to a contract in reliance on Regulation 71(1)(b) or (c). Regulation 72(2) of the PCR clarifies that the 50% ‘cap’ applies to each modification made. In terms of the initial contract value, yes this would constitute the contract value which was originally advertised (which should include the scope for any options/renewals). 

The most common form of challenger is a bidder which was ultimately unsuccessful in securing the contract, therefore most likely a competitor of the successful bidder. However, challenges can be also be initiated by successful bidders (e.g. where bidders have successfully secured a place in one Lot on a framework, however not others etc.). 

Potentially, this would however require an analysis of Regulation 72 to determine whether any of the modification grounds could be used to justify this. However, ideally the full scope of entities who may potentially purchase from the framework agreement should be identified in the original contract notice either by name or by reference to a defined class (see Crown Commercial Service “Guidance on Framework Agreements” (updated October 2016)) and therefore general descriptions such as “all UK Contracting authorities” should be avoided. In light of this, it may be prudent to consider whether the inclusion of additional purchasers later down the line should be disclosed via the Find a Tender service to ensure full transparency (e.g. a modification notice if applying Regulation 71(1)(b) or (c) of the PCRs and/or a VEAT notice if applying one of the other modification grounds).

In principle, Regulation 72(1)(b) could be used to justify an extension of an existing contract, provided the other criteria are met (note we have listed the other criteria in our response to Question 3 above).

We have assumed that this question relates to a scenario where a bidder has noticed a typographical error in their submission after their tender has been submitted and the deadline has passed.

In the first instance, we would perhaps query whether it is a material typographical error. If it is a minor/obvious typographical error, such that the evaluators will be able to understand the response provided and allocate a score, then we would query whether any action would be needed on the part of the authority here at all.

If, however, the typographical error is significant, such that this could cause ambiguity/confusion on the part of evaluators, then the authority’s next steps will likely be dependent on the facts and legal advice may be required. For example, if it is clear that the ‘corrected’ version of the tender will remove the ambiguity and it does not change the underlying content/essence of the response, it might be possible to permit this either a supplementation to the tender submission or as a clarification, subject to any restrictions which may be set out in the ITT.

As a general principle, it is more problematic to allow revisions (particularly material revisions) to a tender once the bid deadline has passed. 

This depends on what changes are under contemplation and which of the grounds under Regulation 72 will be used to justify those changes. On the assumption your query relates to applying Regulation 72(1)(c) (the modification is required due to unforeseen circumstances), clearly the more time which passes between the start of the pandemic and the date upon which the authority wishes to vary an existing agreement due to the pandemic, the less likely it is that an authority can now argue that the circumstances in question are ‘unforeseen’. However, this may not always be the case as each set of circumstances will be different depending on the changes to be made and whether there has been a change in the status of the pandemic (e.g. the introduction of a new variant which increases risk to public health etc.).

Changes can be made to call-off contracts under a framework agreement, provided one of the Grounds under Regulation 72 can be satisfied. This is perhaps a separate consideration to whether a framework agreement has in place a ‘direct award’ mechanism, which would enable a contracting authority to directly award contracts to suppliers on the framework.