EU procurement – changes are afoot

The EU has been working on three new procurement Directives (for utilities, public sector procurement, and concessions).  This has been a lengthy process but at long last these new Directives are almost in their final form. The new Directives are likely to be passed by the European Parliament by the end of 2013 (or early in 2014 if the timetable slips again).

The UK will then have up to 2 years to implement the new Directives through UK Regulations (replacing the Public Contracts Regulations 2006 and their utilities equivalent). However, due to political pressure, the Cabinet Office is looking to “fast track” the process. While the exact timetable is not yet known, our best guess is that Cabinet Office will look to implement the new Regulations by the end of 2014.

As the text of the new rules (and a clear timetable for implementation) crystallises, we will be issuing further e-briefings setting out thoughts on the key changes for contracting authorities, focussing on concrete reality rather than speculation. 

Cabinet Office consultations

Meanwhile, the Cabinet Office has issued a number of consultation papers on “optional” provisions within the Directives. So far these have covered:

• the new “light touch regime” for health and social services, legal services and limited other services;
• termination of contracts;
• SME access to public contracts;  and
• procurement procedures.

We have been responding to these consultation papers and would be delighted to send you copies of our responses to any (or all) of them if you are interested. 

The new “light touch” regime – tendering procedure for high value contracts

One of the key changes made in the new Directive is the change to the Part A/Part B services regime. The replacement for the current “Part B” will be a “light touch” regime for a smaller range of services. These will include health and social services, some administrative services, security and prison services, hotel and restaurant services, and legal services (other than court representation, which will be exempt altogether). 

For contracts and frameworks with values above €750,000 (around £635,000) for these services, the new light touch regime will require you to:

• publish an OJEU contract notice or prior information notice;
• publish a contact award notice; and
• follow a procurement process that complies with the key EU Treaty principles – including transparency and equal treatment.

The Cabinet Office consultation concerned the form of the tender process that would be required, since the Directive leaves this for the national rules to determine. Our response recommends that these are kept as flexible as possible, with an express Regulation saying that the procuring authority can follow any process that they wish, as long as it complies with the Treaty requirements.

The new “light touch” regime – transitional arrangements and what to do now

 If you have existing contracts, frameworks or even informal arrangements with values above the tendering threshold for these services, you may be tempted to reprocure these contracts now before the new Regulations come in.  Whilst this should be considered on a case by case basis, our general recommendation would be not to do this.

Based on the last change in procurement regime, transitional arrangements are likely to apply to contracts that were validly procured under the current rules. Whilst the detail of what “validly procured” will cover will not be known until we have the draft UK Regulations, it is likely to cover any formal tender process. Potentially it could even include contracts let without any tender process at all. In any case, the tendering regime for these contracts is not expected to be particularly onerous. If you tender these contracts now and your tender process is not, in fact, covered by the transitional arrangements, you may have to run another procurement process in the very near future.

For services like grounds maintenance and leisure services, which are Part B services now, but will subject to the full OJEU processes under the new Directive, you should be watching out for the draft Regulations.  Once these are available and the transitional arrangements are known for these services, you can consider whether there is anything you can do to prevent your existing contracts for these services from having to be retendered.

Termination of contracts

This consultation concerned a technical point relating to contract terminations. Under the new Directive there needs to be a means of terminating contracts:

• following their substantial modification (which should have led to a reprocurement);
• where the contractor should have been excluded for ineligibility; or
• following their being declared unlawful by the European Court.  

The Cabinet Office is consulting on how to achieve this.

We have suggested a mechanism similar to that in the “Construction Act” (the Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009). That Act provides that if a construction contract does not include specific provisions, for example in relation to payment or adjudication, then a statutory form of those provisions is written into the contract.

A similar approach here would both give procuring authorities the flexibility to deal with this as they wish, but would also comply with the requirements of the Directive.

SME access

This concerned two specific questions concerning lots. We recommended that procuring authorities should not be required to break down their contracts into smaller lots in order to allow access to those contracts by smaller and medium enterprises (“SMEs”).  We considered there were good reasons why an authority may not want to break down contracts into smaller lots (which could include simplicity of contract administration and standardisation for leaseholders).  In any case, the new Directive will require authorities that do not split up their contracts into lots to explain the reason why not.

The second question was whether authorities letting separate lots should be able to evaluate tenders for combined lots together alongside individual lot tenders. We thought they should, and that they would need to identify the “most economically advantageous overall combination of tenders” (“MEAOCOT”) in order to do this.

For more information or a discussion on any aspect of the existing or proposed procurement regimes, please get in touch with one of the following members of our procurement team:

Gayle Monk on gayle.monk@anthonycollins.com, Andrew Millross on andrew.millross@anthonycollins.com or Mark Cook on mark.cook@anthonycollins.com.

Please contact Gayle if you would like a copy of our responses to any of the consultation documents.

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