2015 Procurement Regulations

The Public Contracts Regulations 2015 (the “Regulations”) came into force on 26 February 2015 and will now need to be complied with by all Contracting Authorities (“CAs”) when procuring contracts for works, services and goods. These arrived ahead of schedule, as the Government wanted to introduce what they see as substantial benefits in the new procurement regime.

The new Regulations apply only to procurements commenced on or after 26 February 2015. They do not apply retrospectively and so procurements commenced prior to this date will continue to be subject to the Public Contacts Regulations 2006 (the “2006 Regulations”). This means that most CAs will be running procurements under two sets of procurement rules at the moment. Some reforms included in the new Regulations, such as those that support the move to electronic procurement procedures, will not come into force until 2018.

Broadly, a procurement will have “commenced” when:

• an advertisement, contract notice or equivalent has been made (whether OJEU or otherwise);
• expressions of interest from a supplier are sought; or
• a CA responds to an unsolicited expression of interest or offer.

Major changes you need to be aware of:

• The use of a PQQ stage for contracts below certain thresholds is now prohibited in certain circumstances – this should make it easier for SMEs to bid for these contracts.
• All contracts with a value estimated to be greater than £25,000 (£10,000 for central government) have to be advertised on Contracts Finder (which was also re-launched on 26 February 2015). This requirement doesn’t just apply to contracts between £25,000 and the applicable European threshold, it also applies to notices published in OJEU – so CAs will now have to advertise on both systems when applicable.
• Instead of ‘Part B’ services, a ‘light touch regime’ will be established for certain services (to include health, education and social services) where the services contract value is over €750,000 (£625,050). The implementation of the new light touch regime for certain health services has been delayed until April 2016 for CCGs and NHS England and in the meantime they will need to comply with the existing Part B rules alongside the separate NHS Regulations (s75) for NHS commissioners – however, commissioners can potentially still take advantage of some of the more helpful and flexible aspects of the new regime. When procuring supplies, works and non-healthcare services – CCGs and NHS England will now need to comply with the new Regulations. The new Regulations are in force now for NHS Trusts. If the value of the applicable services exceeds the €750,000 (£625,050) threshold, any procurement by those bodies should comply with the ‘light touch regime’ obligations of the new Regulations. When purchasing supplies, works and non-healthcare services – NHS Trusts will also now need to comply with their obligations under the new Regulations. Under the ‘light touch regime’, CAs will be able to determine the procedures that will be applied to those procurements – but must ensure transparency and equal treatment of bidders through a call for competition, award procedure and reasonable and proportionate time-limits. Any relevant Cabinet Office guidance also now needs to be complied with.
• The new Regulations encourage contracts to be split into ‘lots’ where possible to encourage SME participation. CAs will be required to give reasons if they choose not to split a contract into ‘lots’. CAs will be challenged by the need to come up with a transparent evaluation process that includes allowing for bidders to bid for more than one ‘lot’ and to limit the number of ‘lots’ that any one bidder can win. Within construction projects, CAs might tender for an entire project under a single contract notice but then break that down in to ‘lots’ such as remediation, demolition, construction or specialist works packages. This might also be the approach now used to procure consultancy contracts – the CA might advertise for a professional team under one contract notice and then have different ‘lots’ for the different roles such as architect, surveyor, engineers and the project manager. This should encourage SME participation.
• All procurement documents will now need to be available online at the same time that the contract notice (or advertisement) is published. The term ‘procurement documents’ is defined very broadly and includes the initial call for competition, full technical specifications and descriptions, pre-qualification documents, invitations to tender, the terms and conditions of contract and all the supporting documents. This new requirement could obviously trigger material change issues if the CA has to put out draft contract terms from the outset of all tender processes. However, changes to the contract terms will be allowed in certain circumstances and so this process needs to be managed carefully (see next bullet point).
• Changes to the contract terms can take place where the changes have been provided for correctly in the initial procurement documents in clear, precise and unequivocal review clauses. These must state when they can be used and the scope and nature of the changes. Other contract changes are also allowed under the new Regulations – such as “necessary” additional “works, services or supplies by the original contractor” if a change in supplier is not possible for “economic or technical reasons” or would “cause significant inconvenience or substantial duplication of costs” to the CA – if mitigated correctly. Changes can also be made if they are “not substantial”, if such changes could not be “foreseen” by “a diligent contracting authority”, if the changes do not effect “the overall nature of the contract” and if it does not result in a 50% price increase from the original arrangements. Clauses will also now need to be included so that CAs can terminate substantially amended contracts that should have led to a new procurement procedure.
• The Regulations have confirmed the so-called ‘Teckal’ and ‘Hamburg’ exemptions allowing in-house awards and inter-authority co-operation in certain circumstances. The new Regulations arguably allow for some forms of contractual relationships between NHS bodies to be exempted from the Regulations in the right circumstances.
• Greater flexibility has been added to existing procurement procedures that you will already be familiar with and new procedures have been introduced. There are other large and small changes (such as publisheding of tenders under the published procedure) and there will also be accelerated forms of some procedures available where there is evidence of urgency. Further, in most cases, timescales for the stages of the procurement procedures are shorter. Some CAs may even have the flexibility to agree the time period for submitting tenders with bidders in certain circumstances. The ‘Innovation partnerships’ procedure offers a real alternative procedure for CAs to follow. The aim is to enable both the development and purchase of an ‘innovative’ work, service or product from the same supplier. Proposals would be submitted during the competitive process and then the ‘innovative’ solution would be developed after the award of the contract. This gives much more flexibility than the competitive dialogue procedure where discussions have to continue with the bidders until the CA decides on the final solution.
• There is now a much simpler process of assessing suppliers. There should be greater use of supplier self-declarations and only the winning bidder will then have to submit the paperwork to prove their status. It is thought that the UK will implement the use of the European Single Procurement Document (which will cover most of the standard PQQ questions) in most circumstances and hopefully suppliers will then be able to re-use the same form – saving time and money. Within construction projects, the Cabinet Office has already pushed very hard previously to make sure that central government departments use the standardised pre-qualification questionnaire (PAS 91) when procuring public works contracts – however, failure to use PAS 91 carried little consequence. The Regulations now require CAs to have regard to any Cabinet Office guidance (or face the consequences) and it is expected that this will lead to the need for PAS 91 to be followed.
• A turnover cap has been introduced to assist with SME participation. CAs should not set company turnover requirements at more than two times the contract value. It is intended that this will make access to certain contracts easier for SMEs.
• There are new discretionary and mandatory exclusions. A CA needs to ensure both they and the documentation are up to date.
• CAs can now take in to account full life-cycle costs when awarding contracts. The hope is that this will encourage better value and more effective procurements. CAs need to think about long term quality and link these to social, environmental and sustainability issues.
• The social and environmental issues that can be taken into account in tenders are much clearer. The main change is that in addition to environmental – social issues can now be taken into account in certain circumstances. CAs will have the power to ask for evidence of social/environmental characteristics and can link such factors to the production process used. However, these must be reasonable for all potential bidders. This also links in to the Public Services (Social Value) Act 2012 where certain CAs must consider the social good offered by bidders – in addition to price and quality.
• CAs can now take into account, at the award stage, the relevant skills and experience of individual staff members – where it has a significant impact on level of performance. As an example, this may be helpful when looking to procure contractors or consultants dealing with areas such as listed buildings.

This content is correct at time of publication