Getting to grips with the new public procurement rules - Issue two

14 minute read
06 March 2015

26 February 2015 passed without the merest suggestion that it was the day upon which the biggest revolution of public procurement law came into force. Now that the new procurement rules are in place, it has never been more 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 second alert of our "Getting to Grips" (with the public procurement rules) series, we examine the effect of the new "light touch" regime, the new rules on electronic access to procurement documents, the tricky issue of selection and getting the award criteria right.

Big area 1: the light touch regime (Regulations 74-77)

Under the new regulations, the previous distinction between "Part A" and "Part B" services has been removed. The replacement is the new "light touch" regime for the procurement of contracts for social or other specific services ("Schedule 3 services") with a value at or over €750,000 or approximately £625,000 (precise sterling value to be confirmed).

Instead of classifying services into Parts A and B, the Public Contracts Regulations (PCR) 2015 sets out an exhaustive list by common procurement vocabulary (CPV) code, in Schedule 3, of those services falling within the ambit of the light touch regime. The majority of former Part B services now fall into the light touch regime. From now on it will be necessary to analyse the relevant CPV codes in order to work out whether or not the procurement is picked up by the light touch regime.

What types of contracts does the light touch regime apply to?

The services which are covered under the light touch regime include (among others):

  • Health, social and related services
  • Administrative, social, educational, healthcare and cultural services
  • Compulsory social security services
  • Benefit services.

It is important to note that any services not expressly stated within Schedule 3 will be subject to the fully regulated regime.

What does the light touch regime require contracting authorities to do?

Advertisement: Schedule 3 services contracts valued over approximately £625,000 must be advertised by using a Prior Information Notice or Contract Notice in the Official Journal of the European Union (OJEU). Additionally, Regulation 106 requires authorities to advertise any contract opportunities published in the OJEU on the Government's 'Contracts Finder' website.

Award: The award of an above threshold Schedule 3 contract must be advertised through a contract award notice published on the OJEU. Authorities benefit from the option to publish such notices in batches, which can be sent on a quarterly basis within 30 days of quarter-end. The requirement to publish notices on Contracts Finder also applies to contract award notices which must be published within a "reasonable time" following sending the award notice for publication on the OJEU.

Procedures: Authorities have the discretion to choose the appropriate procurement procedure for Schedule 3 contracts. However, such procedures must comply with the core EU Treaty principles of equal treatment and transparency. The light touch regime allows for authorities to change the procedure and award criteria mid-process, which would not be permitted in the fully regulated regime. Such changes are permitted where they do not infringe upon the principles of equal treatment and transparency.

In order to validly make such a change, the authority must have given proper regard to the matter and concluded there would be no breach of Treaty principles. There is also a requirement for participants to have been sufficiently well informed of the nature of the change proposed.

When does the light touch regime come into force?

The regime applies to Schedule 3 services contracts advertised on or after 26 February 2015.

However, the requirements to advertise contract notices and contract award notices will come into force on 1 April 2015 for sub-Central Government contracting authorities.

Does the light touch regime apply to contracts covered under the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013?

These 2013 Regulations govern the procurement of contracts for health care services by NHS England and Clinical Commissioning Groups. Such contracts will not be subject to the light touch regime until 18 April 2016. In the meantime, the previous 'Part B' regime will continue to apply to them.

Big area 2: electronic availability (Regulation 53)

Under the PCR 2006, authorities were given the option of publishing notices electronically or by "other means". However, this option has now been removed by Regulation 53. Authorities are now required to publish all notices electronically.

Additionally, authorities must offer unrestricted and full direct electronic access, free of charge, to the procurement documents.

What documents are included under the term "procurement documents"?

"Procurement document" is very widely defined in Regulation 2, and includes any document produced or referred to by the authority to describe or determine elements of the procurement or the procedure. This will therefore include (among others) the contract notice, the technical specifications, descriptive document and proposed conditions of contract.

When do the procurement documents need to be published online?

The documents need to be published from the date of publication of the contract notice (or the date on which an invitation to confirm interest is sent, if a Prior Information Notice (PIN) is issued beforehand).

Are there any exceptions to this requirement?

Yes. Regulation 53 does allow for some exceptions to the mandatory use of electronic communications.

These exceptions can be summarised as applying only to:

  • substantiated cases of urgency (accelerated procedures)
  • where practical limitations arise from specific file formats, tools, equipment or the need for physical/scale models, or
  • where the authority needs to place limits on the confidential information involved.

For many authorities, the requirement to have all of this documentation ready prior to hitting 'send' on the OJEU notice will come as a marked step-change.

Big area 3: selection stage (Regulations 57-58)

As under the previous regime, the new rules under Regulation 57(1) contain a comprehensive list of the grounds which, when they arise, require authorities to exclude candidates from further participation in the procurement process. New mandatory exclusion grounds include offences under the Serious Crime Act 2007, the Counter Terrorism Act 2008 and instances where a supplier has been subject to convictions or judgments relating to the payment of taxes or social security contributions.

A further list of discretionary grounds for exclusion is also contained within the new rules, as was the case in the old. These include a supplier's insolvency, and instances where an authority can demonstrate that a supplier is guilty of grave professional misconduct. New discretionary grounds for exclusion include violations of labour law, irremediable conflicts of interest, and "significant or persistent deficiencies" in past contract performance leading to early termination of the prior contract in question, or to damages or other comparable sanctions.

Additionally, a new provision has been introduced to provide for instances where after pre-qualification, at a later stage of the procurement process a supplier's breach of a mandatory ground comes to light. In such circumstances, the authorities must exclude a supplier infringing upon the ground. If a discretionary ground comes to light in the same way, then authorities are at liberty to exclude suppliers from further participation in that event (though they need not do so).

Is there a limit on the period by which authorities can be excluded for past breaches of the mandatory and discretionary exclusion grounds?

Yes. The thinking is that it would be disproportionate for suppliers to be excluded on an unlimited basis. For a mandatory exclusion offence, a bidder must be excluded for a period of five years. In relation to the discretionary grounds, the relevant exclusion period is three years.

What if the supplier can demonstrate that it has cleaned up its act?

Authorities must not exclude on a mandatory or discretionary basis if the candidate in question has provided sufficient evidence which demonstrates "self-cleaning", as set out in Regulation 57(13). Self-cleaning effectively consists of a supplier undertaking to pay compensation or take strategic steps to demonstrate that corrective measures are in place. An authority must then evaluate the supplier's measures to determine whether they are sufficient.

To determine economic and financial standing, can authorities still apply minimum turnover requirements during the selection stage?

Authorities do still have this ability. However, regulation 58 sets out a new cap that limits minimum turnover requirements to a maximum of twice the contract value. An authority may be able to circumvent this restriction if it can justify the imposition of a higher cap due to the particular nature of the contact in question.

Big area 4: award (Regulations 67 and 68)

Under the PCR 2006 regime, there were two bases on which an authority could decide to appoint a particular supplier in a public procurement. These were "lowest price" and "the most economically advantageous tender" (MEAT). Of these, the latter made provision for a mix of price and non-price factors.

Under the new rules, the sole basis for an authority's award decision is the MEAT. However, this does not mean that the "lowest price" basis has been removed altogether. The expression "the most economically advantageous tender" has simply been re-calibrated, and now includes - as, in effect, one of its subsets - a lowest price approach. It also includes a "best price-quality ratio" method, and it is this which broadly equates to what was meant by MEAT under the old regime.

In addition, a new feature of the MEAT criterion is the accommodation of further criteria to form the basis of an award decision. "Cost" is distinguished from "price", and is specifically mentioned as a permissible award criterion. Cost can include a "cost-effectiveness" approach, and an assessment based on life-cycle costing is permitted. In fact, Regulation 68 deals specifically with life-cycle costing, defining what the expression means and requiring any evaluation which is based on life-cycle costing to adhere to certain specific rules.

All award criteria must be linked to the subject matter of the contract in question, and must not have the effect of conferring an unrestricted freedom of choice on the authority. They must ensure the possibility of effective competition, which would seem entirely right: it is long established that award criteria cannot be used to favour a particular candidate, or have the effect of breaching Treaty principles or of distorting competition.

Is there still a restriction on the evaluation of past experience at award stage?

Yes and no. The Lianakis judgment established that authorities must not evaluate matters at award stage which should be considered at selection stage. However this principle has been slowly eroded in subsequent case law and the PCR 2015 reflects this shift in position.

Regulation 67(3)(b) allows authorities to include the assessment of the "organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract" in the award criteria. However, as noted above, such criteria must be linked to the subject-matter of the contract and will be more relevant to procurements where the proficiency of the proposed personnel is a fundamental factor.

What guidance is provided to authorities in relation to ensuring the award criteria are linked to the subject matter of the contract?

Regulation 67(5) sets out some additional guidance on this issue, stating that such award criteria must "relate to the works, supplies or services to be provided under that contract in any respect and at any stage of their life-cycle, including factors involved in:

  • the specific process of production, provision or trading of those works, supplies or services, or
  • a specific process for another stage of their life cycle

even when those factors do not form part of their material substance.

This indicates that a potentially broad interpretation to this requirement could be applied by authorities, and this guidance corresponds with the move to accommodate life-cycle award considerations as set out in Regulation 68.

In the next alert:

We'll say more about the new rules on pre-procurement consultation, and on the requirement now imposed on authorities to flush out conflicts of interest (actual or perceived). Meanwhile, if you have any queries, please don't hesitate to get in touch with one of the experts from our procurement team:

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