Two weeks on from the new public procurement directive coming into force, the new rules should be beginning to establish themselves in our collective consciousness. Now, more than ever, it is crucial for both contracting authorities and suppliers to ensure they are familiar with the changes brought about by the Public Contracts Regulations 2015.
In this third alert in our four-part series, "Getting to Grips" (with the public procurement rules), we look at three important areas: first, the new provisions which allow prior market engagement with interested parties, including potential bidders; second, the latest law dealing with the division of contracts into separate, bite-sized packages, or "lots"; and third, the rules introduced into procurement law for the first time around conflicts of interest, and how to avoid them.
1) Prior market engagement
The new procurement regime is keen to introduce greater efficiency into the procurement process, and it is recognised that preliminary market consultations are an excellent way of achieving such efficiency. For this reason, the ability to conduct these kinds of consultations is, for the first time, expressly provided for.
Was it previously illegal to engage with the market pre-procurement?
No. It has never actually been unlawful to engage the market in this way; it is simply that, until now, such an exercise has been under-utilised. This is probably down to confusion over how it might be conducted in a way which does not give rise to discrimination, or breaches of equal treatment, or transparency principles - or pose a risk of these.
In fact, it is perfectly possible; and this is acknowledged by Regulation 40 of the 2015 Regulations, which expressly provides that authorities may conduct market consultations with a view to "preparing the procurement" and "informing economic operators of their procurement plans and requirements".
What other guidance (and indeed assurance) does Regulation 40 give us?
First, authorities are allowed to obtain advice from independent experts or authorities, or from "market participants". Does this mean suppliers who might be interested in bidding? We suspect that it does, but that the meaning may be intended to cover more than just this particular group.
It is clear that authorities are able to structure such a consultation as they wish: there is scope for them to be flexible in how they go about it. What is important, quite simply, is that they do not distort competition or breach applicable EU Treaty principles in the process.
What about engaging with potential bidders? Surely the rules must be stricter there!
Whereas Regulation 40 is concerned with the involvement in a consultation of a wider pool of interested parties, Regulation 41 imposes specific requirements around the prior involvement of potential bidders, ahead of a procurement procedure. It covers any situation in which a "candidate or tenderer" has advised an authority, whether in the context of a consultation covered by Regulation 40 or not.
Regulation 41 essentially requires authorities to take "appropriate measures" to ensure that competition is not distorted by reason of that earlier participation. The list of measures which could be taken in that regard is not exhaustive. Those cited comprise communication of information "exchanged in the context of, or resulting from, the involvement" of the supplier, and the fixing of adequate time limits for the receipt of tenders.
These steps are clearly aimed at levelling the playing field when it comes to the tender itself, and are in line with case law in the EU and domestic courts which confirms a basic obligation on authorities to do exactly that.
2) Lots of lots?
Under the new directive, authorities are encouraged to divide large contracts into separate lots where possible, in order to open up procurement to participation by small and medium-sized enterprises.
Is there any obligation to divide contracts into lots?
Regulation 46 allows authorities to award contracts in the form of separate lots, and enables them to decide the size and subject matter of those lots. So, there is no actual requirement for authorities to package contracts in lots; they may do so if they wish.
So where's the catch?
The "catch" (if it can be called that) is that authorities must provide an indication of the main reasons for any decision not to subdivide into lots. A record of those reasons is required to be transmitted to the European Commission as part of authorities' reporting requirements; alternatively, it may be communicated in the "procurement documents" (most likely, the contract notice (OJEU notice)).
Authorities may decide to limit the number of lots to be awarded to a particular tenderer, but are required to state the maximum number of lots per tenderer in the contract notice or invitation to confirm interest. Authorities have the ability to combine into a single contract separate lots which are awarded to a single tenderer.
Will this lead to more scrutiny?
The reporting requirement means that authorities may, in due course, be questioned if it appears they are failing to divide into lots contracts which might lend themselves to being so divided. We predict that Brussels will be keen to assess the extent to which the new rules are actually opening up the public procurement market to SMEs, and so will be monitoring these decisions closely.
3) Conflicts of interest
For the first time, the public procurement regime contains an express rule aimed at preventing the harm caused by conflicts of interest. Authorities are now required to "take appropriate measures" to effectively "prevent, identify and remedy" conflicts of interest arising in the conduct of procurement procedures. This is to avoid any distortion of competition and to ensure equal treatment of all economic operators.
What is actually meant by a "conflict of interest"?
Regulation 24 goes on to provide what is, in effect, a non-exhaustive list of situations where a conflict of interest would arise. These are chiefly concerned with personal interests held by staff members of the authority. It appears that authorities are required to not only deal with situations of actual conflict, but also those where a potential conflict, or even the perception of a conflict, exists. The personal interests described in the non-exhaustive list include those which might be perceived to "compromise the impartiality and independence" of the staff in question in the context of the procurement procedure.
Staff members include, for these purposes, those engaged by professionals advising the authority in the conduct of the procurement procedure.
Can authorities really prevent conflicts of interest arising?
It is important to bear in mind that there may be a number of situations where conflicts could become apparent - if, for example, staff members of bidders were to disclose, during the procurement process, that they had a particular family connection to a member of staff at the authority. So, there is a big emphasis now on making sure any actual or potential conflict is rooted out right at the start, and on steering well clear of creating situations where even a perception of it might arise. It has to be done; we may soon see clarification emerging as to what "appropriate measures" actually are.
In next week's issue, the last in this series, we'll be looking at the two new procurement procedures introduced as part of the changes: the Competitive Procedure with Negotiation, and the Innovation Partnership Procedure. Meanwhile, our experts are on hand if you would like to discuss these or any other aspects of the new public procurement regime: