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

11 minute read
24 February 2015

The new public sector procurement directive becomes law in the UK (except Scotland) on 26 February 2015. It brings about the biggest shake-up in public procurement law for almost a quarter of a century.

The new public sector procurement directive becomes law in the UK (except Scotland) on 26 February 2015. It brings about the biggest shake-up in public procurement law for almost a quarter of a century.

Within the new legislation are changes that will have practical implications for customers - i.e. contracting authorities - as well as suppliers interested in winning public contracts. Some of the changes will mean things need to be done differently, or thought about differently, in order to meet requirements seen here for the first time.

In this new four-part series of weekly alerts about the changes, we look at those areas where we expect the biggest practical implications to be felt. Our experts will give an overview of the requirements and set out the firm's views on what may well turn out to be some frequently asked questions.

Here we start with the new, home-grown rules implementing Lord Young's reforms, which are intended to offer a fair slice of the public procurement cake to small and medium-sized enterprises (SMEs). There are four major areas to consider:

1) Small procurements (Regulations 109-112)

The part of the new rules which may well have the greatest practical impact is that which introduces a new statutory regime for small procurements. Introduced as part of the reform package aimed at facilitating access to public procurement for SMEs - and not technically a transposition of the EU directive - this new statutory regime requires authorities which advertise small contracts with a value at or above particular thresholds (£10,000 for central government and £25,000 for other authorities, including NHS Trusts) to publicise the opportunity, in addition, on the Government's "Contracts Finder" website. Following a procurement, Contracts Finder must also be used in order to publicise the award.

Will this apply from 26 February 2015?

Generally, no. The requirement to advertise in Contracts Finder will only have a 26 February start date for contracting authorities exercising functions on behalf of the Crown. Other authorities will have a 'stay of execution', so to speak, until 1 April 2015.

Will the new regime for small procurements apply to absolutely every contracting authority?

No. The requirement to use Contracts Finder will not apply to maintained schools or academies; none of the regime will apply to certain authorities carrying out devolved functions in Wales and Northern Ireland. Nor will any of this regime apply to procurements of health services by NHS commissioners, which are subject to the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 (NHS PPCCR). As is the case with the Public Contracts Regulations 2015 generally, this requirement will not apply in Scotland.

Will this requirement mean that an advertisement in Contracts Finder is obligatory, whether or not an authority advertises elsewhere, or will it apply only when an authority actually decides to advertise in another medium? 

The draft text of these Regulations inferred that advertisement in Contracts Finder would apply whenever an authority wished to let a contract falling above the applicable small threshold. However, in Regulation 110 as made, the text has subtly changed: it now indicates that publication of a below-EU-threshold opportunity on Contracts Finder is required only where an authority actually advertises elsewhere - which, subject to certain constraints, it can decide whether or not to do - rather than this being an automatic requirement whenever the £10,000 or £25,000 threshold is tripped.  

Many contracting authorities have constitutional rules which require advertisement of contracts of a certain value - which might not be aligned to the thresholds in Regulation 110. What then?

On 18 February 2015, the Cabinet published Procurement Policy Note 03/15, which states that where existing local government standing orders have a higher value for advertising opportunities, then it is the higher value, rather than £25,000, which applies. This should come as welcome news for local authorities, who might otherwise have had to make changes to their Standing Orders with little warning. However, the £10,000 threshold for central government authorities is not subject to similar relaxation.

How does this requirement affect "approved supplier lists"?

The new rules do not specifically mention so-called "approved supplier lists"; depending on the precise nature of the list, the requirements of Regulation 110 could possibly apply at the stage when an authority sets up a list, in circumstances where it advertises in order to do so.

2) Contracts Finder advert in addition to Official Journal of the European Union notice (but not to precede it!) for contracts above EU thresholds

Additionally, there will be a new requirement (again, in force from 1 April 2015 for most authorities) for separate advertisements to be posted on Contracts Finder wherever Contract Notices are placed in the Official Journal of the European Union (OJEU). We do not yet know whether (and if so, for how long) this will need to be a manual exercise, or whether existing software will allow information in OJEU notices to be extracted automatically so as to appear in Contracts Finder.  We'll let you know if the Government issues guidance to clarify this between now and 1 April.

Which needs to appear first?

The Contract Notice in the OJEU. Authorities are required to publish on Contracts Finder within 24 hours of the time when they become entitled to publish at national level (which will generally be when a Contract Notice is actually published).

Will this requirement apply to procurements under the so-called "light touch" regime?

Yes. The requirement to publish a parallel advertisement in Contracts Finder will apply in the case of any procurement where a Contract Notice in the OJEU is required.

From 26 February, the light touch regime will replace that applying to the former "Part B" services and will abolish the Part A/Part B distinction between categories of services for all procurements, except those to which the NHS PPCCR apply. Under this regime, Contract Notices must be published in the OJEU wherever the contract value equals or exceeds EUR 750,000 (£625,050). We'll say more about the new light touch regime in our next alert.

Will the requirement to use Contracts Finder in addition to a notice in the OJEU apply to absolutely every contracting authority?

No. It will not apply to maintained schools or academies, nor to certain authorities carrying out devolved functions in Wales and Northern Ireland. Other areas unaffected are procurements of health services by NHS commissioners, which are subject to the NHS PPCCR, and Scotland in general.

3) Ban on the use of pre-qualification questionnaires (PQQs) (Regulation 111)

Authorities will be prohibited from including a pre-qualification stage in any procurement where the value of the procurement is below the EU threshold for goods and services. Until the end of 2015, that threshold is £111,676 for central government (and including NHS Trusts) and £172,514 for other contracting authorities. This effectively precludes the use of PQQs and prohibits "restricted"-type procedures.

However, this does not mean contracting authorities cannot ask questions of potential suppliers which are aimed at assessing their suitability. That said, any suitability-related questions must be both relevant to the subject matter of the procurement, and proportionate.

Does this ban come into force on 1 April too?

No - this part of the new rules comes into force on 26 February 2015.

Any other big themes in the rules/guidance?

Where the contract value is above the relevant EU threshold, contracting authorities will be required to have regard to any guidance issued by the Cabinet Office in relation to the qualitative selection of economic operators. This may have an impact on the nature of questions which they will be able to ask of suppliers in future PQQs (even where the use of PQQs is not prohibited). The change comes in addition to the revised rules on selection generally (found in Regulations 57 and 58), which we will cover in one of our forthcoming alerts.

4) Prompt payment requirements (Regulations 113 and 122)

One of the aims of the new rules is to create an easier ride for smaller businesses. With this in mind, there is a requirement for authorities to ensure that all public contracts contain clauses to the effect that valid and undisputed invoices will be paid by the contracting authority within 30 days.

The change will also be welcomed as good news for subcontractors, as there will need to be similar flow-down clauses requiring contractors to do the same, right down the supply chain. In addition, contracting authorities will be subject to certain reporting and public disclosure obligations. These are intended to provide statistical verification of the proportion of invoices paid in accordance with the new requirements.

Are all contracting authorities and all types of procurement subject to this requirement?

No. Maintained schools and academies are, again, exempt from it. Neither will the requirement apply to procurement falling within the NHS PPCCR.

When does this requirement come into force?

It comes into force on 26 February 2015, in the same way as the ban on PQQs in sub-EU-threshold procurement.

For more on the implications of the new rules, look out for our second alert in this four-part series. Next time we will say more about the new "light touch" regime, and the new rules around electronic access to procurement documents (Regulation 53); selection (Regulations 57 and 58); and getting the award criteria right (Regulations 67 and 68). Meanwhile, if you have any queries, please don't hesitate to get in touch with one of our procurement experts listed below.

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