Recognising the latest regulations

We take a look at the changes effecting commercial, contractual and public procurement law matters in the latest Public Contracts Regulations.

The Public Contracts Regulations came into force on 26 February 2015, transposing EU Directive 2014/24 into UK law and will now need to be complied with by all Contracting Authorities (CAs). These arrived ahead of schedule, as the government wanted to introduce what they see as substantial benefits in the new 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.

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

There are several major changes to be aware of. Firstly, 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 European threshold, it also applies to notices published in OJEU – so CAs will now have to advertise on both systems. Just to add to the complexity and to make sure the process isn’t a simple one – CAs are not allowed to advertise on Contracts Finder until it has been published in OJEU. Secondly, 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 service descriptions, pre-qualification documents, invitations to tender, the terms and conditions of contract and all the supporting documents.

This new requirement could trigger material change issues if the CA has to put out draft contract terms from the outset of all tender processes. This would leave the CA published to challenge from unsuccessful bidders. However, changes to the contract terms will be allowed in certain circumstances and so this process needs to be managed carefully. This will be a significant change to CAs current processes and preparations which will previously have been more of a staged approach. Changes to the contract terms can take place where the changes (no matter what the monetary value) have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses. These must state the scope and nature of possible modifications or options as well as the conditions under which they may be used, and do not provide for modifications or options that would alter the overall nature of the contract or the framework agreement.

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. 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 per cent price increase from the original arrangements.

Additional clauses

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. Instead of Part B services, a ‘light touch regime’ will be established for certain services (to include health, education and social services) where the contract value is over £750,000.

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.

This ‘light touch regime’ does not yet apply if the contract is for services within the scope of the NHS Regulations.

CAs should be thinking about designing a skeleton process and procedure for procurements falling within the ‘light touch regime’ – to ensure that it does not become a burden on both administration time and costs.

The regulations have confirmed, codified and expanded on the so-called ‘Teckal’ and ‘Hamburg’ exemptions allowing in‑house awards and inter-authority co‑operation in certain circumstances. Greater flexibility has been added to existing procurement procedures that you will already be familiar with and new procedures have been introduced. There will also be accelerated forms of published, restricted and competitive procedure with negotiation available where there is evidence of urgency.

Innovative partnerships

Further, in most cases, timescales for the stages of the procurement procedures are shorter. Sub-central CAs also have the flexibility (in certain circumstances) to agree the time period for submitting tenders with bidders. If a CA intends to do that, make sure that all bidders agree. In particular, the ‘Innovative 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. We know that CAs are looking to work with the private sector to commercialise new products and services and this is potentially a great opportunity for CAs and suppliers to explore. There is a ‘mutuals’ carve out. This means that there is a right for CAs to hold competitions limited to mutual type organisations in certain circumstances and where certain criteria is met.

Pre Qualification Questionnaire

There have been many important changes to the Pre Qualification Questionnaire (PQQ) stage. There is now a much simpler process of assessing the credentials of suppliers.

There should be greater use of supplier self‑declarations and only the winning bidder will then have to submit various certificates and documents 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.

A turnover cap has been introduced to assist with SME participation. Unless there is specific justification, CAs should not set company turnover requirements at more than two times the contract value. There are new discretionary and mandatory exclusions. These include poor performance under previous contracts and offences under the terrorism and serious crimes acts. CAs will still find it difficult, in my opinion, to exclude bidders on the basis of previous poor performance.

Invitation To Tender

There has also been substantial changes to the Invitation To Tender stage.

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.

This means that CAs need to think about long term quality and link these to social, environmental and sustainability issues. The social and environmental aspects that can be taken into account in tenders are much clearer. The main change is that in addition to environmental – social aspects can now be taken into account in certain circumstances. CAs will also have the power to ask for evidence of social/environmental characteristics and will also be able to refer to factors linked to the production process used. However, these must be reasonable for all potential bidders. This also links in to the Public Services 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 is relevant.

Top Tips

CAs are likely to have procurements running that are governed by the different regimes. Make sure you manage these carefully. Update your precedent documents and numbering. This includes checking selection and award criteria and ensuring that all are still compliant; Make sure that the revised and expanded grounds for exclusion replace the existing grounds; Remember that ‘Most Economically Advantageous Tender’ (MEAT) has a slightly different meaning to its meaning under the 2006 Regulations and that the new term ‘best price-quality ratio’ has been introduced.

If you are proposing to use life cycle costs – check you’ve included all the information required; Amend timescales, terminology, numbering of Regulations and references; Check the content – have you included all the procurement documents that you need to and the relevant content? CAs should prepare a checklist to follow. Remember the new record keeping and reporting obligations. Be ready for further guidance – look out for Cabinet Office guidance (there is now some published) – as CAs now have a statutory obligation to ‘have regard to’ guidance – so make sure you are updated at all times. Update your internal procedures and policies.

This content is correct at time of publication