Published June 2014
Having been in development since 2011, the new European Procurement Law Directive (the “Directive”) was approved by the European Parliament in January 2014. The Directive came into force on 17 April 2014. The UK Government will now have to implement the provisions of the Directive into domestic Regulations. The Cabinet Office has already indicated that it would do so as soon as possible, and therefore new UK procurement Regulations can be expected sometime later this year.
The Directive is a significant change in procurement law and requires all those involved in procurement to consider the Directive/Regulations carefully as the current UK Regulations will be completely rewritten. The Cabinet Office is using the read across method to implement the Directive domestically and is therefore as far as possible copying the wording of the Directive into the UK Regulations. Consequently, all references in the current Regulations etc will change. The intention is, however, to simplify the rules and provide more flexibility.
Part A/Part B services
Specifically for charities and social enterprises, one of the key changes is the abolition of the distinction between Part A and Part B services. Any service over the minimum financial threshold, which currently stands at £111,676, will need to be procured under the procurement rules (unless there is a justification for not doing so). However, the Directive introduces a new regime for specific areas currently covered by the Part B services regime. These are health and social services, legal, education and catering services. This is a significant narrowing down of what is covered currently by Part B.
For these four specific areas, a new Light Touch Regime will be introduced. The Light Touch Regime (“LTR”) is an area over which the UK Government will have discretion as to how to implement the Directive’s requirements. This area has been consulted upon by the Cabinet Office, and we will have to wait and see as to what rules apply. What is clear is that the LTR will apply to contracts over €750,000 and is likely to mean that more opportunities covered by the LTR will need to be tendered than would currently be the case as the test will now be a financial one, rather than a subjective test (as to whether or not there is a realistic prospect of a cross border interest). It is likely that if there is only one possible supplier, then there will be no need to advertise over this value, although we will have to wait and see.
The recitals to the Directive (which are not binding, but do provide a rationale and some narrative as to the intention behind the provisions of the Directive) suggest that some health and social care services could be reserved for organisations based on employee ownership or active participation in delivering these services to end users. Such reserved services will be caught by the LTR and therefore the new regime will be of critical importance to charities and social enterprises.
Codification of Case Law
The Directive also codifies a number of leading procurement cases into statute. This should make it easier to determine whether or not, for example, a proposed solution is “in-house” or whether a change in an existing contract is considered to be a material variation. Specific regulations will deal with these areas and, for example, will (amongst other tests) specify that an in-house provider can spend no more than 20% of their activity working for the organisation that does not control them. This should provide some certainty, and will be more convenient for charities and social enterprises to establish the position (subject to case law on the Directive).
New/amended procedures
New procedures are introduced and the existing procedures remain, albeit in a slightly refined form. The use of the negotiated procedure without notice has been tweaked to narrow down when this can be applied and therefore care needs to be taken to ensure that decisions still properly fall within this procedure.
Better for SMEs?
The Directive also requires contracting authorities to consider whether or not larger contracts should be split into lots so as to promote access for SMEs etc. Whilst there is not an absolute requirement for larger contracts to be split into lots, the relevant provisions may result in more contracts being offered in lots. If a larger contract is not split into lots, then the rationale should be set out in the procurement documents. Commissioners will also be more limited when setting a minimum requirement for turnover at PQQ stage.
Evaluation
The new Directive also requires contracting authorities to base the award of public contracts on “the most economically advantageous tender”. There are also new provisions on life cycling costing.
There are clearly a number of issues that are going to change as a result of the Directive and they will each impact on all parties involved in procurement processes. In particular, the terms of the LTR will be awaited with significant interest.
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