In June last year we wrote an article for this newsletter considering the new European procurement law directive. That directive has since been implemented into UK law on 26 February 2015 by the Public Contracts Regulations 2015 (the “Regulations”). Eight months into the new regime, we have set out below some of the key changes and their impact to date.
The Light Touch Regime
The old distinction between Part A and Part B services was abolished. The Light Touch Regime (“LTR”) has been introduced for certain types of services: health and social care, catering, education and legal services. The remaining categories of former Part B services are now caught by the full services regime.
Under the LTR, if the value of the services exceeds 750,000 Euros (currently £625,050), the commissioner is required to advertise the opportunity, run a fair and transparent tender process treating all bidders equally, and publish a contract award notice.
In practice, this is very similar to the position adopted by most commissioners for former Part B services. Therefore, the key change has been the introduction of greater clarity as to when these types of services need to be advertised, i.e. there is now a financial threshold to determine whether an opportunity needs to be advertised, rather than applying the realistic prospect of a cross border interest test.
It is the case that a commissioner may still be able to justify not advertising under the new regime, for example, where there is only one possible supplier. This will be a case by case decision for the commissioner.
The Light Touch Regime does not currently apply to healthcare services that fall under the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013. This position will change in April 2016, although how the two sets of legislation will work together is yet to be decided. Guidance is expected to be published to assist CCGs and NHS England.
Going forward, the Light Touch Regime is likely to result in an increased number of tenders, so charities and social enterprises need to be aware of this and be prepared to spot the opportunities as they come up.
Material variation
Regulation 72 of the Regulations provides greater clarity as to what will be considered to be a material variation to a contract. It is the case that if a contract is varied to a material extent, this gives rise to a new contract opportunity and a commissioner will therefore need to consider its procurement law duties and may need to re-tender the materially varied contract. Regulation 72 provides much needed clarity, and should be a starting point for all concerned as to when a variation will be permitted without a fresh procedure. However, it is still the case that disputes will arise as to what is considered material. If you are considering putting in a challenge in a situation where you consider a new process should have been run (but hasn’t) this may well be of assistance in making your case.
In-house/shared services
Regulation 12 has provided clarity on the tests that will apply to in-house awards (clarifying the Teckal tests) and what constitutes a shared service arrangement.
These are both situations where a contract can be awarded without a competitive process.
New procedures
The Regulations have introduced the Innovation Partnership procedure and the Competitive Procedure with Negotiation. We are currently advising on one of the first Innovation Partnership procedures in Europe. Commissioners have tended, however, to utilise the more familiar procedures (open and restricted) for their processes. Bidders will therefore still need to respond to open and restricted processes in the majority of cases but it’s worth being aware of the new processes so as to be prepared in case such bidding opportunities do arise.
Evaluation/Short listing
The Regulations require commissioners to evaluate based on the most economically advantageous tender (“MEAT”) approach, albeit the Regulations have been drafted to allow a commissioner to establish the MEAT bid on the basis of price alone. Our experience is that MEAT is often used in any event.
Commissioners need to take care when utilising PQQs that their requirements are proportionate. For example, turnover requirements should not exceed twice the contract value (unless this can be justified). Disproportionate turnover requirements have been seen as a barrier to bidding by smaller charities and social enterprises so this change should help.
Timescales
The minimum timescales for procurement processes have been reduced, meaning that processes can be conducted more quickly. However, commissioners should now be publishing all of their procurement documents at the time of the advert, meaning that commissioners need to undertake more work at the beginning of the process and giving bidders more information at the outset meaning it should be easier to sift such opportunities at an earlier stage before too much time has been invested in a bid.
Challenging procurement decisions
The law in this area has not changed, but a key change has been the increase in court fees for bringing a procurement challenge. It is too early to know the impact that these increases will have, but they do increase the potential costs risk for challenging a procurement decision via the courts.
If you would like to discuss these implications further, please contact one of our dedicated procurement team.
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