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Public Procurement Law Update

Updates covering the latest public procurement issues on legislation, policy and cases in this fast moving area of law.

Latest Issue

In the latest edition of our Public Procurement Law Update, we cover some significant policy changes, which include saying goodbye to the "PQQ" and hello to the "SQ". We also report on a number of recent cases, including one on the application of procurement law to development agreements, an area in which there have been some recent, for want of a better word, "developments" and also another case, which sheds some useful judicial insight on how not to run a procurement process. Finally, we are also pleased to welcome Associate, Victoria Trigwell, who has recently joined us.   

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New Guidance on Social, Ethical and Environmental Considerations in Public Procurement

Tuesday 13th December 2016

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Public Procurement Law Update

Newly published Crown Commercial Service (CSS) guidance encourages contracting authorities to incorporate social, ethical and environmental considerations into various stages of their procurement processes, as permitted by provisions already in place in the Public Contracts Regulations 2015 (PCR2015).

1.   Social Tenderers

The new guidance highlights that tender competitions can be reserved for certain suppliers who assist the social inclusion of disabled or disadvantaged persons. To qualify for participation in such procurements, the supplier’s workforce has to be made up of a minimum of 30% disadvantaged or disabled workers. The figure was previously higher (at 50%), so a larger pool of suppliers will now be eligible to participate.

 2.   Automatic Exclusions

The guidance clarifies that tenderers must be excluded from the procurement if they have been convicted of terrorist, child labour and/or human trafficking offences. Contracting authorities can use their discretion to exclude those tenderers which the contracting authority can demonstrate have violated social, labour or environmental conventions.

3.   Specification and Labels

The PCR2015 provides for specifications, which lay down the characteristics required of the works, services or supplies being procured. Where contracting authorities intend to purchase works, supplies or services with specific characteristics, they can also require a specific label as proof of compatibility with those characteristics. The new guidance clarifies that labels may include environmental requirements, provided the label is available in all Member States and does not unfairly discriminate against a tenderer from a particular jurisdiction.

4.   Award Criteria

The award criteria set out in the PCR2015 are a series of principles upon which detailed criteria may be built. The guidance reminds contracting authorities that contracts can be awarded on criteria other than cost price and quality. For example, whole life cost can be assessed, including production and end of life disposal, in the price award criteria. A contracting authority can also evaluate the best price-quantity ratio of tenders, which can include considerations such as the social, economic and environmental aspects (and impact) of the tender proposals, so long as such criteria relates to the subject matter of the tender.

While the ability to test such issues is welcome, it should be noted that contracting authorities must still evaluate such aspects in an objective, non-discriminatory and quantifiable way. The nature of some of these requirements can lead to difficulties in comparing tenders and devising an evaluation that does not lead to subjective marking and an inevitable challenge.

An easier way to include such requirements, which the guidance also highlights, is to include them as contractual obligations rather than pre-contract criteria. So long as they relate to the subject matter of the contract and do not make the procurement discriminatory; the inclusion of such requirements with the contract ensures the contracting authority’s needs are met whilst avoiding the difficult test of fairly and rigorously evaluating such matters.

Conclusion

It is in the interest of some contracting authorities to protect and encourage local business growth through the use of the procurement process. Of course, protecting or favouring one tenderer because of its local links fundamentally undermines the purpose of procurement law, which is about opening up competition. Although the new CCS guidance does not explicitly allow local tenderers to take precedence, it does allow contracting authorities to indirectly control certain characteristics of the successful tenderer. For example, if a contracting authority was to specify in its award criteria that the environmental efficiency of the manufacture and delivery of a product was of particular importance, then local tenderers would implicitly be placed at an advantage over their international counterparts due to the inevitable carbon output associated with long-distance transportation.

However, it is important to note the difficulty of ensuring tangible social, economic and environmental considerations are fairly, objectively and transparently assessed in the procurement process. Where a local benefit is required by a contracting authority (e.g. providing apprenticeships), it may be easier to simply ensure that such a requirement is included as a condition of the contract when preparing the invitation to tender. So long as such measures relate to the subject matter of the tender, they are likely to comply with the law. 

You can read more about our public procurement services by visiting our public procurement page.
 
If you have any queries regarding the new guidance, or public procurement law in general, please do not hesitate to contact Richard.
 
Partner, Commercial team
Tel: 0151 600 3302 / 0161 836 8800
 


Richard Hough is a  member of the Procurement Lawyers' Association

 


Case Law Developments

Tuesday 13th December 2016

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Public Procurement Law Update

  • Development agreement guidance

 Faraday v West Berkshire Council [2016] EWHC 2166 (Admin)

This case provides useful guidance as to when development agreements may fall outside the parameters of the PCR 2015. Faraday opposed the award of a development agreement to the successful bidder and applied for judicial review on the basis that the Council had failed to comply with the PCR 2015. Faraday’s challenge was dismissed.

This case emphasises the importance of adherence by contracting authorities to the PCR 2015 when entering into and drafting public contracts. Failure to comply could open the door to costly legal challenges and potential liability. The case also demonstrates that by careful design, development agreements may not be deemed public works contracts and therefore fall outside the scope of the PCR 2015.

Read more about this case here.

  • The importance of a robust and fair evaluation process

Energysolutions EU Limited v the Nuclear Decommissioning Authority [2016] EWHC 1988 

This case is a textbook example of how not to undertake a selection process. The contracting authority in this instance shredded notes, discouraged recorded discussion regarding the evaluation, and encouraged the inconsistent application of scoring across the range of bids received. The decision emphasises the importance of maintaining high standards throughout the evaluation stage and the need for a contracting authority to adhere to its own rules, as set out in its own procurement documents, in order to avoid a legal challenge.

Read more about this case here.

  • European Dynamics unsuccessful again

European Dynamics Luxembourg SA (European Dynamics), Evropaiki Dynamiki Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v European Institute of Innovation and Technology (EIIT) T-481/14

The European Court of Justice (ECJ) was faced with a challenge by serial claimants European Dynamics regarding the procurement by EIIT of software development and services.

The ECJ dismissed the various applications by European Dynamics. The ECJ’s decision reiterates the point emphasised in Energysolutions (see above) that the implementation of fair, well-balanced and well-evidenced evaluation processes are imperative for contracting authorities in avoiding litigation. A stringent and documented selection process can go a long way towards proving adherence to the principles of procurement law.

  • Settlement agreements can constitute a regulated modification of contract

Finn Frogne A/S v Rigspolitet ved Center for Beredskabskommunikation C‑549/14

The contracting authority in this case had awarded a contract to a company, the fulfilment of which was subsequently under threat. Negotiations led to a settlement agreement, which implemented material variations to the original contract, (including reductions in the value of the services to be provided and the conversion of a lease of property to an outright sale) in order to settle the dispute.

It was held by the court that, in line with PCR 2015, material amendments to public contracts shall not be made without a new tendering procedure, even where the amendment is designed to settle a dispute. This restriction may not, however, apply in cases where the original contract contains detailed provisions permitting the adjustment of certain conditions after the award of the contract.

Settlement agreements which materially vary the conditions of a public contract will therefore be subject to the same modification tests are detailed under Reg. 72 of the PCR 2015 unless robust and compliant change mechanisms exist in the contract.

  • Exclusion of ‘Abnormally Low Tenders’ (ALT): A heavy burden on contracting authorities to justify their decisions

FP McCann Ltd v Department for Regional Development [2016] NICh12

A tender for a public contract was rejected as an ALT following multiple clarification requests to the tenderer by the contracting authority. The contracting authority found that the tender was significantly lower than the internal benchmark and the tenders of other competitors for the contract, in part because of failings by the tenderer to incorporate bitumen market rates and the cost of required plant (amongst other elements) into their bid.

The court held that the contracting authority may have been correct to reject the bid as an ALT. However, it was found that the contracting authority should have sought further clarification regarding its fears in relation to certain aspects the bid, and had therefore not followed the required process sufficiently to reject the bid for being an ALT. The unsuccessful consortium bidder was awarded damages.

The case reinforces the burden on contracting authorities to engage in a genuine and thorough process of discussion with bidders before disregarding them as an ALT. The importance of this point is highlighted by the fact that damages were awarded to the tenderer despite the probability that their bid would likely have been rejected as an ALT even if they had been subjected to a more thorough evaluation. 

Need advice or wish to talk to us?
 
If you have any queries about the current public procurement regime in force in the UK, please do not hesitate to contact us.
 
Partner, Commercial team
Tel: 0151 600 3302 / 0161 836 8800
 

 
Associate, Commercial team
Tel: 0151 600 3085
 
 
Associate, Commercial team
Tel: 0151 600 3249
 
 

Richard Hough, Michael Winder and Victoria Trigwell are members of the Procurement Lawyers' Association

New mandatory Pre-Qualification Questionnaire (PQQ) published

Wednesday 5th October 2016

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Public Procurement Law Update

In its latest Procurement Policy Note (PPN 08/16), The Crown Commercial Service (CCS) has issued a new Standard Selection Questionnaire (SQ), which replaces the previous mandatory Pre-Qualification Questionnaire (PQQ) with immediate effect.

A supplier selection process is sometimes adopted under certain public procurement procedures. It allows the gathering of information in relation to and assessment of a prospective bidder’s credentials, before considering the merits of their tender for a public contract. The information gathered includes bidders' historical records, financial credentials, details regarding past corruption, and whether they meet other certain mandatory criteria.

The SQ closely resembles the outgoing model PQQ, but introduces some new features. It has been created to seamlessly work in conjunction with the European Single Procurement Documents (ESPD). The ESPD allows suppliers to state, using self-assessment, that no mandatory or discretionary exclusion grounds apply and that they meet the minimum standards for the required selection conditions. The ESPD is designed to reduce the administrative burden on suppliers, because the same exclusion grounds will be used in ESPDs across the EU, allowing them to re-use forms previously submitted for another procurement, provided the information is still accurate.

All contracting authorities undertaking procurements above the minimum OJEU thresholds must stop using the PQQ for new procurements, and instead begin to use the new SQ and adhere to the requirements as set out in the PPN 08/16, which provides CCS guidance on the selection process.

You can read more about our public procurement services by visiting our public procurement page.

For further information regarding the new standard selection questionnaire, or public procurement law in general, please do not hesitate to contact Michael.


Michael Winder

Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com

 

Michael Winder is a  member of the Procurement Lawyers' Association


Further guidance on development agreements

Wednesday 5th October 2016

Public Procurement Law Update

As a general rule, while the simple sale and purchase of land are exempt from the application of public procurement law, most development agreements between contracting authorities and the private sector are classified as ‘public works contracts’ and are accordingly governed by the Public Contracts Regulations 2015 (PCR 2015). The recent case of Faraday v West Berkshire Council provided further guidance as to when development agreements are not public contracts, and thus fall outside the parameters of the PCR 2015.

In Faraday, the council directly entered into a development agreement which required the production of a development plan for the regeneration of an industrial estate. It chose not to comply with the requirements of PCR 2015 because it decided that the contract was not a public contract. Faraday opposed the award of the development agreement to the successful bidder and applied for judicial review, stating that the council had failed to comply with the PCR 2015.

Faraday argued that the main object of the contract was the design and execution of works, in turn rendering the development agreement a public works contract. The court considered the test for defining a public contract. A development agreement will be defined as a public contract if its ‘main object’ corresponds with the definition of a public works, services, or goods contract. It must also include an obligation on the developer to carry out that main object. Faraday’s argument was ultimately rejected because there was no legal obligation requiring the successful bidder to execute any works or to redevelop the land.

Faraday also claimed that the council exercised ‘decisive influence’ over the type or design of the work, which case law has previously established as being an influential factor in determining whether an agreement constitutes a public works contract. This argument was rejected on the basis that the development agreement did not require the works to adhere to requirements set out by the council.

It was therefore held by the court that the development agreement did not constitute a public contract and was therefore not caught by the PCR 2015. Faraday’s challenge was dismissed.

This case is important because it highlights the importance of a contracting authority’s duty to ensure that close attention is paid to the PCR 2015 when entering into and drafting public contracts. Failure to comply with public procurement legislation could open the door to costly legal challenges and potential liability. By careful design, however, development agreements can avoid being defined as public contracts and thus fall outside the scope of the PCR 2015.

You can read more about our public procurement services by visiting our public procurement page.

If you have any queries regarding development agreements, or public procurement law in general, please do not hesitate to contact Michael.


Michael Winder

Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com

 

Michael Winder is a  member of the Procurement Lawyers' Association


Case Law Developments

Thursday 22nd September 2016

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Public Procurement Law Update

  • Clarity as to whether damages are an adequate remedy for a not for profit company

Kent Community Health NHS Foundation Trust v NHS Swale Clinical Commissioning Group (CCG) and NHS Dartford, Gravesham and Swanley [2016] EWHC 1393 (TCC)

The CCG called for tenders for adult community services. The claimant was unsuccessful and began proceedings alleging breach of the procurement rules. The court imposed an automatic suspension on the right to enter the contract with the successful bidder. The CCG subsequently applied to lift the suspension. One issue considered in order to lift the suspension was whether damages would be an adequate remedy for any breach.

Previously, it has been decided in the Bristol Missing Link case to keep the suspension in place due to the catastrophic effect that lifting the suspension would have on a not-for-profit company.

In this case, however, the court rejected the argument that the interests of a not-for-profit company could not be served adequately by an award of damages. The difference here being, the claimant (as an NHS trust) would not suffer such catastrophic consequences as the claimant would have done in the Bristol Missing Link case. The public services motivation of a not-for-profit company does not automatically make damages an inadequate remedy.

This case shows that, just because a claimant is a not-for-profit company, it does not mean that the automatic suspension that applies immediately on issuing a claim will be kept in place by a court. It is not sufficient to rely on public service to demonstrate this. That said, there may be circumstances in which a not-for-profit company could successfully argue that damages are not an adequate remedy, and the suspension should remain, for example if the not-for-profit company depended on the tendered contract in order to continue to exist.   

  • Scottish court refuses application to lift automatic suspension

Scott & Co (Scotland) LLP v Aberdeenshire Council [2016] SCS CSOH 64

In counterpoint to the above case, a court in Scotland refused an application to lift the automatic suspension, thus adding to the body of cases where the court has sided with the claimant when a defendant contracting authority seeks to lift the automatic suspension.

Refusing the Council’s application, the court considered that the claimant had an arguable case in raising the challenge on the basis of manifest error in the evaluation by the Council of the claimant’s tender submission. The court further found that the balance of convenience favoured the suspension remaining, particularly as the date for full hearing was not far away and would therefore facilitate an effective and rapid review of the award decision.

This case demonstrates that a swift hearing to settle the substantive matter can be a deciding factor in whether to keep an automatic suspension. Previous cases we have reported on appear to agree that a suspension is often kept alongside the court ordering a swift hearing, or (as in this case) with a hearing which is due to occur shortly anyway.

  • ERDF funding can be clawed back or withheld if a contracting authority fails to comply with domestic procurement law.

Judetul Neamt (C-260/14), Judetul Bacau (C-261/14) V Ministerul Dezvoltarii Regionale si Administratiei Publice

The ECJ ruled in this case that a failure by contracting authority to comply with national procurement law provisions in connection with a below-OJEU threshold public contract may constitute an ‘irregularity’ under procurement law for the purposes of reducing or clawing back funds by ERDF.

This case provides a timely reminder that, if a contracting authority receives ERDF funds for a particular project and fails to comply with national law dealing with sub-OJEU threshold procurement, for example the advertising on Contracts Finder, this could lead to claw back of the funding by the ERDF.

  • The principle of equal treatment does not prevent a consortium member replacing the consortium during a procurement procedure.

C-396-14 NT Hojgaard A/S, Zublin A/S v Banedanmark

The railway infrastructure operator in Denmark (Banedanmark) started a procurement under the negotiated procedure for construction of a new railway line. Two different consortia were successful at the pre-qualification stage. One consortium comprised two entities, one of which was declared insolvent just after the consortium had qualified for the tender stage. Banedanmark decided to allow the surviving consortium member to continue to participate alone and subsequently awarded the contract to it. This was then challenged by the competing consortium which claims that this constitutes a breach of the procurement principles of equal treatment and transparency. The ECJ ruled that, so long as that economic operator itself met the bidding requirements and its participation did not place the other tenderers at a disadvantage, the principles of equal treatment and transparency did not prevent one consorting member from replacing the whole consortium following the consortium’s dissolution and continuing to tender alone.

You can read more about our public procurement services and how we can help you by visiting our public procurement page, or contact us directly.

Seminar: Richard and Michael are hosting at our firm’s Liverpool office an update on public procurement law and an introduction to state aid law in conjunction with Kelly Stricklin-Coutinho of 39 Essex Chambers on 5th October 2016.

If you wish to reserve a place on this workshop, please click this link.

Need advice or wish to talk to us?

If you have any queries about the current EU public procurement regime in force in the UK, please do not hesitate to contact us.


Richard Hough

Partner, Commercial team
Tel: 0151 600 3302
Email: richard.hough@brabners.com




Michael Winder

Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com

 

Richard Hough and Michael Winder are members of the Procurement Lawyers' Association


Legislation and Policy Update – Legal requirements to publish on Contracts Finder

Tuesday 13th September 2016

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Public Procurement Law Update

On 18th July 2016, Procurement Policy Note 07/16 was issued by the UK Government.

The purpose of the PPN was to remind public bodies of the requirements of Part 4 of the PCR 2015, namely that they must ensure that any procurement opportunities and awards of contracts above certain thresholds are published on the government’s Contracts Finder portal.

Along with other requirements, non-central government public bodies which procure a contract for works, services or supplies in excess of £25,000 must advertise the opportunity and the award of the contract on the Contracts Finder portal. This applies even if the procurement is above the OJEU threshold and the OJEU publication requirements have been met.

The PPN appears to be intended to remind contracting authorities that this is an obligation. It is unclear, however, whether contracting authorities are ignoring this requirement, or the government is simply keen to publicise it once again.

Interestingly, Contracts Finder is still in a beta testing phase and, despite intentions in the lead up to the adaption of the PCR 2015, the Contracts Finder system still does not currently have an automatic link to the EU Tenders Electronic Daily (TED) system. Until this automatic link is working, any notice published on TED for OJEU notice purposes must also then be manually inputted into Contracts Finder within 24 hours. 

You can read more about our public procurement services and how we can help you by visiting our public procurement page.

Need advice or wish to talk to us?

If you have any queries about the current EU public procurement regime in force in the UK, please do not hesitate to contact us.


Richard Hough

Partner, Commercial team
Tel: 0151 600 3302
Email: richard.hough@brabners.com




Michael Winder

Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com

 

Richard Hough and Michael Winder are members of the Procurement Lawyers' Association


The effect of Brexit on Procurement Law?

Wednesday 7th September 2016

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Public Procurement Law Update

The government now have a mandate to leave the European Union. While political commentators are unclear as to when the government will trigger the Article 50 process, extensive consideration has been given to the impact on domestic law of the UK’s decision to leave the European Union.

Ahead of the referendum, we published an article on how we thought a Brexit vote might impact on public procurement law.

Since the referendum, some of the issues surrounding Brexit have become clearer, while others remain currently unfathomable.  

First of all, while the purpose of public procurement law was to preserve open trade between EU member states and to prevent ‘buy national’ preferences by entities spending public money, this may no longer apply once the UK has left the EU.

Amongst contracting authorities and bidders, there is significant dislike of the myriad of red tape and procedural rules which arise within the Public Contracts Regulations 2015 (PCR 2015) and the surrounding practises and procurement policy notes. It is noted that when bidders succeed in challenging decisions of authorities, quite often it is based on a failure to follow a procedural rule rather than a fundamental lack of equal treatment or discrimination by the contracting authority.

As noted previously, there remains a demand to ensure that public bodies treat bidders fairly and transparently and provide a recourse of legal rights and remedies if those standards are not met. At the highest political levels, this view prevails. While the government could repeal or amend the procurement laws post-Brexit, it should be noted that in England, Wales and Scotland, the legislation enacted by national and devolved governments is more stringent and more extensive than is required under the EU directives. For example, Part 4 of the PCR 2015, which relates to sub-threshold procurements, arose from Lord Young’s report regarding SME’s, as opposed to anything that the EU Commission have imposed on member states.

For the foreseeable future, the UK government is likely to remain in favour of public procurement laws.

We previously noted that, should the UK decide to follow established models of trade with the EU, it would be required to keep EU procurement law within its national law. For example, Norway, by being a member of the European Economic Area, is bound by the EU Public Procurement directives. In contrast, the Swiss model of bilateral agreements with the EU does not impose any procurement obligations in Switzerland but this an exception rather than the rule. Finally, the government procurement agreement (GPA), set up by the World Trade Organisation (WTO), is based on identical principles i.e. non-discrimination, transparency and procedural fairness to those which are applied under EU public procurement law.  

Unless the UK fails to reach any agreement with the EU and decides not to rely on the GPA, it is likely the UK will continue to adopt national procurement legislation which is very similar in substance to that which we currently have, regardless of whether this is in the current legislation or replacement legislation. This much is clear.

What has become unclear, however, is how case law and cross border trade will be applied.

Currently, the UK remains a member of the EU. This situation will continue unless and until the UK government enacts Article 50 of the Treaty on the Functioning of the EU. Even then, there is a two year process during which the UK will disengage from the EU. During this time the UK courts and public procurement practitioners must abide by the decisions reached in the European Court of Justice (ECJ) in relation to the application of procurement law.

It is unclear to what extent, if any, the UK courts or public procurement law practitioners would be required to abide by decisions reached by the ECJ or the EU first tier courts once the UK is outside of the EU. While the decisions of the ECJ can be very helpful in interpreting the directives and therefore our own domestic legislation on public procurement law, the big issue for the leave campaign was to ‘take back control’ and ensure the supremacy UK Parliament and UK courts. While this would be helpful to some extent for legal practitioners, as we would not have to read as many case reports, the volume of EU-wide public procurement law cases does help to interpret and to clarify grey areas in the law. It would be dangerous to rely on the judgement of the ECJ, however, if such cases had no relevance in UK law. That said, given the above regarding the use of public procurement law under the Norwegian model, we may not only be required to adhere to these cases if we want to access the EEA but it would make sense generally for UK public procurement law not to drift too far from EU public procurement law, given that they are established from the same principles.

Furthermore, where cross border endeavours are conducted, it would be undesirable to have public procurement law systems and principles which share the same foundations, but have diverged to the point of being incompatible with each other.

Therefore, whilst it is increasingly clear that public procurement law, will remain largely unchanged post-Brexit, a number of questions remain unanswered as to how it will develop in a post-EU future. 

You can read more about our public procurement services and how we can help you by visiting our public procurement page.

Need advice or wish to talk to us?

If you have any queries about the current EU public procurement regime in force in the UK, please do not hesitate to contact us.


Richard Hough

Partner, Commercial team
Tel: 0151 600 3302
Email: richard.hough@brabners.com




Michael Winder

Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com

 

Richard Hough and Michael Winder are members of the Procurement Lawyers' Association

 

Brexit – Wither Procurement Law?

Thursday 12th May 2016

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Public Procurement Law Update

On 23 June 2016 the people of the United Kingdom will go to the polls to decide whether they wish to remain within the European Union or wish to leave the European Union, which we all know as ‘Brexit’.

Some of the views in the legal sector have been coloured by the thought of what will happen to our laws in the event of a Brexit. While the percentage of laws that arise directly from, or are influenced in some way by, Brussels is debated, it is common knowledge that many of our laws emanate from the European Union and are implemented directly or through local legislation in the UK. Whereas much of the body of EU law that Brexit campaigners suggest could be repealed, it is likely to be replaced by regulation and red tape covering much of the same matter, particularly to avoid hindering UK customers and businesses from being able to buy and sell into the EU or out of the EU. It is harder to see whether such arguments apply in the case of procurement law.

Procurement law originated from the EU. From mid-April 2016, the latest set of EU public procurement law directives will be fully implemented in the UK. In the event of a Brexit could the UK simply scrap the current system and do without it?

In short, this is unlikely. We consider that should a Brexit occur, and even if we scrapped the current set of regulations based on the EU directives, replacement legislation would need to be adopted on a national level, for the following reasons:

  1. Demand - Pre-1973 when the UK entered the European Economic Community (as the EU was then known), public law in the UK was in its infancy and it simply was not the done thing to challenge a procurement. With the advent of PFI, public-private partnerships and increased outsourcing by public bodies, coupled with a better remedies regime under public procurement law from 2009 onwards, tenderers for contracts with the public sector or utilities now have a reasonable expectation that they will be treated fairly and transparently and to have recourse to legal rights and remedies if contracting authorities fall short of the required standards. The willingness of tenderers to challenge procurement decisions has increased. This has been particularly so since the recession of 2008 where it was all the more important to win contracts. This genie cannot be put back in the bottle and it is unlikely that demand for the ability to challenge public procurement decisions will fall away just because of a Brexit. 
     
  2. Common Law - In deciding cases, the courts in this country build up a body of case law, which legislation is silent on a point in dispute. While the availability of regulations governing contracting authorities has provided a framework in which to avoid challenges going to court, there are other jurisdictions which do not have such regulations. It has been seen in those jurisdictions, some of which have a common law background like the UK, that cases will go to court and a decision will be made. Examples of such cases show that there would be recourse to tenderers through contract law claims and judicial review claims to review the decisions made by public bodies. This, coupled with the demand by tenderers to challenge any suspect decisions, would mean that in the long run there would likely be a development of a body of law guiding how public procurement should be run. One has to question whether such a system would actually be less user friendly than a single comprehensive set of regulations like those which are currently in place.
     
  3. Outsourcing - Unless there is a major reversal in funding and approach at local authorities, it is unlikely that outsourcing would cease in the event of a Brexit. Left wing Brexiteers point to EU generated procurement law on being a barrier to things such as the re-nationalisation of the railways. Whether re-nationalisation and in-sourcing would occur in a post-Brexit world are very much matters for the crystal ball. It is likely therefore that there will need to be some method of ensuring the public sector can safely outsource contracts without finding themselves routinely dealing with legal challenges arising as a combination of points 1 and 2 above.
     
  4. The Wider World - Many Brexiteers rely on the attractiveness of bi-lateral or free trade agreements with countries outside of the EU as the basis of their rationale for Brexit. It is likely therefore that the UK in a post-Brexit world would seek to enter its own versions of the Transatlantic Trade and Investment Partnership (TTIP) agreement that has been negotiated between the USA and EU and the Comprehensive Economic and Trade Agreement (CETA) agreement which has recently been entered into by Canada. It is also likely that the UK would continue to engage with the World Trade Organisation (WTO).

    If the UK were to trade within the European Economic Area (EEA) (in what capacity we currently do not know), such arrangements would require the current regulations to remain in force. In addition, the EU Commission has a long held ambition to close the EU’s public procurement markets to entities from states which do not offer reciprocal and enforceable access to their own public procurement markets. This has historically been blocked by a number of member states, most notably the UK.

    Without the UK, this long held ambition may be eventually realised. Therefore to remove enforceable public procurement market access in the UK could hurt UK suppliers bidding for contracts in Europe. The WTO would require the UK to enter into the Government Procurement Agreement (GPA) a multi-state/entity agreement within the WTO framework, the terms of which are in fact a rather simplified version of the current EU public procurement regime. Therefore, to be part of the WTO, we would need regulations that are very similar to those we currently have.

    Agreements with the US and/or Canada do, or are likely to, incorporate chapters on public procurement and therefore there would need to be a domestic public procurement regulatory regime in place in the UK. The standards will likely be similar to the existing EU law and the overall effect will be maintained with the current regime, even if some of the peripheral detail is amended.

In conclusion

In conclusion, whilst Brexit would give us the opportunity to implement our own UK focussed public procurement regime, we cannot simply dispense with it. Given the context of the outside world, there is very little scope to radically depart from the current laws we already have and therefore public procurement lawyers would likely see very little change to their area of law in a post-Brexit world.

It would be interesting, however to see how the UK government dealt with some of those bodies that are currently included on the periphery of public procurement law. Would entities such as registered providers of social housing, who are only included in public procurement regime due to EU decisions, fall inside or outside of a UK focussed public procurement regime?  Only time, and the ballot box, will tell.

You can read more about our public procurement services and how we can help you by visiting our website page here.

Need advice or wish to talk to us?

If you have any queries about the current EU public procurement regime in force in the UK, please do not hesitate to contact us.


Richard Hough

Partner, Commercial team
Tel: 0151 600 3302
Email: richard.hough@brabners.com




Michael Winder

Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com

 

Richard Hough and Michael Winder are members of the Procurement Lawyers' Association

 


Legislation update: Key changes in the Utilities Contracts Regulations 2016

Thursday 12th May 2016

Public Procurement Law Update

The EU Utilities Contracts Directive, which regulates the procurement of goods, services and works by entities operating in the utilities sector, is now implemented in English law by the Utilities Contracts Regulations 2016 (UCR) which came into force on 18 April 2016.

The UCR contain a number of changes to the existing legal framework governing procurement by utilities. These key changes are outlined below.

Are you a Utility?

A handy list of utilities is currently set out in the existing regulations (the Utilities Contracts Regulations 2006). This list will disappear under the UCR. Instead, the UCR provides for a general definition of what will be considered a utility.

Save for some limited exceptions, entities who operate on the basis of special or exclusive rights to supply gas, heat, electricity or water, provide transport services, postal services, operate ports or airports, or extraction of oil and gas, are likely to be considered a utility within the meaning of UCR.

The term ‘Special or exclusive rights’ is defined in the UCR as rights granted by a ‘competent authority’ by way of any legislative, regulatory or administrative provision, which has the effect of limiting the exercise of a specific utility activity to one or more entities, and which substantially affects the ability of other entities to carry out such an activity.

Limits on Turnover

Utilities are able to specify that bidders have a minimum turnover threshold in order to be considered for the award of a utilities contract.

Under the UCR, turnover thresholds can no longer be any higher than twice the total value of the contract. This ‘cap’ is intended to encourage small and medium sized businesses to participate in the tender process and therefore boost overall competition.

Award Criteria

Under the UCR, utilities are now expressly allowed to take into account the experience of bidders’ staff members who will be involved in providing the works or service, or delivery of goods where this impacts the standard of service etc. received by the utility. Previously, utilities were only permitted to take the experience of staff into account at the selection stage and not as part of its evaluation.

Light Touch Regime

Under the UCR, the familiar division of service contracts into Part A and Part B services, of which only Part A was subject to the full public procurement law regime, will be scrapped. A new light touch regime for certain health and social services will, however, exist and it operates on the same basis as the one present in the Public Contracts Regulations 2015 (PCR), which you can read more about here.

There is a higher minimum financial threshold of £785,530 before contracts are caught by this regime.

Competitive Dialogue

The UCR will introduce ‘competitive dialogue’, a procedure which has existed in the public sector for some time. Competitive dialogue allows bidders and purchasers to engage in clear dialogue sessions for requirements that are not “off the shelf” and increase the likelihood of bidders understanding and providing for specific purchasers’ needs.

Timescales

Notably, timescales throughout the procurement process are also likely to be significantly reduced under the UCR. The minimum timescales have been reduced but with the proviso that you must use no less than the appropriate amount of time for the needs of the particular procurement.

Material Changes to Contracts

Previously, the general principle has been that a contract must undergo a retender if it is “materially changed” following award. This is logical, given that a material change to the contract may alter it so much that it is effectively a different contract to that which was originally awarded.

The UCR clearly sets out the extent to which modifications may be made to awarded contracts. Notably, if the original contract contains provisions relating to contract modification, a re-tender may not be required if the contract is amended in accordance with those provisions.

The provisions of the UCR reflect existing case law.

Need advice or wish to talk to us?

If you have any queries about the operation of the Utilities Contract Regulations 2016, please do not hesitate to contact us.


Richard Hough

Partner, Commercial team
Tel: 0151 600 3302
Email: richard.hough@brabners.com

 


Michael Winder
Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com




Richard Hough and Michael Winder are members of the Procurement Lawyers' Association


Policy update: A look at the new European Single Procurement Document and the latest Procurement Policy Notes

Thursday 12th May 2016

Public Procurement Law Update

European Single Procurement Document

The Public Contracts Regulations 2015 contain provisions relating to the adoption by suppliers of a European Single Procurement Document (ESPD) which, it was hoped, would assist businesses in showing that they have met the mandatory pass/fail criteria and other selection criteria set by contracting authority. The idea of an ESPD meets the objectives of the 2014 EU Directives, which were designed with the objective of lessening the administrative burden on both contracting authorities and tenderers in the procurement process.

This was particularly so for small and medium sized businesses that are less well equipped to meet the extensive administrative burdens imposed on them when responding to a procurement exercise. The intention of the ESPD is that it replaces the need for numerous certificates and documents with one standard form. The idea is that the same form can be used for every contracting authority within every member state rather than having to deal with differing requirements across Europe. 

In January 2016, the EU Commission Implementing Regulation 2016/7 established the standard form of the ESPD. Prior to this, no set format had been provided.

Procurement Policy Note - on wider international obligations

A new procurement policy note (PPN) has been issued, which sets out contracting authorities’ international obligations when letting public contracts. The PPN makes it clear that public procurement should not be used as a tool to boycott tenders from suppliers based in other countries except where the UK government has implemented formal legal sanctions, embargos or restrictions. 

The note goes on to explain that the consequences of such local level boycotts can be both national and international, causing damage to integration and community cohesion within the UK and also hindering export trade and foreign relations. The PPN notes as well that such local boycotts could be unlawful and can lead to severe penalties arising under international agreements, which can be applied against both a contracting authority and the UK government.

Procurement Policy Note - on publication of payment performance statistics

A new PPN was issued in which re-emphasises the requests of Part 4 of the Public Contracts Regulations 2015, that at the end of each financial year each contracting authority must publish data that demonstrates its compliance with the obligation within Part 4 to pay head-supplier invoices within 30 days. The data must show the extent of its compliance over the previous 12 months.

Need advice or wish to talk to us?

If you would like to discuss any matters about these regulations, please do not hesitate to contact us.

Richard Hough
Partner, Commercial team
Tel: 0151 600 3302
Email: richard.hough@brabners.com


 

Michael Winder
Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com

 



Richard Hough and Michael Winder are members of the Procurement Lawyers' Association


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