Goodbye PQQ, hello SQ!

For anyone hoping that Brexit will give us greater control over our own public procurement destiny, the recent publication of a Procurement Policy Note (PPN) reminds us of exactly how quickly our very own Crown Commercial Services (CCS) can change the status quo without consultation or prior warning.

The PPN (which can be found here) replaces the CCS’s standard pre-qualification questionnaire (PQQ), used when selecting contractors or suppliers to invite to tender, with a new standard Selection Questionnaire (SQ). Accompanying the SQ is guidance mandating its use for all contracting authorities for “above threshold” procurements under Part 2 of the Public Contracts Regulations 2015 (PCR 2015). This is statutory guidance that contracting authorities must “have regard to” or else be in breach of Regulation 107. Case law says that statutory guidance must not be deviated from without “good reason”. If it is, the guidance says that any deviation and the reasons for it must be reported to CCS.

Here are our initial thoughts on the good, the bad, and the ugly in the new SQ and guidance.

The Good

• Supply chain management:  Part 3 of the SQ asks bidders who intend to subcontract delivery of the contract to say how they maintain healthy supply chains, including providing evidence of their supplier performance management systems and explaining how they ensure suppliers are paid promptly.
• Modern Slavery Act 2015: The SQ asks suppliers to confirm whether they are subject to the reporting requirements of the Modern Slavery Act 2015 and, if so, whether they have complied with them. Offences under that Act are now listed as mandatory exclusion grounds, in line with the 2016 amendments to PCR 2015. Bidders can self-certify that they have not committed any of these offences or can give details of the “self-cleaning” measures they have taken if they have been convicted.
•  Skills and Apprenticeships: Suppliers are asked to confirm whether they will be supporting apprenticeships and training through the contract being tendered. Technically, this is not a legitimate selection question, as it “looks forward” to performance of the specific contract, rather than “back” at the supplier. However, asking for evidence of how the supplier supports apprenticeships and training (and how they require their supply chain to do so) is helpful.  These new questions are only for contracts valued at £10 million or more and lasting 12 months or longer. The guidance also suggests this question should be used “primarily” in central government tenders, without expanding on what this means. The guidance also “encourages other contracting authorities to consider skills and apprenticeships” without offering any alternative questions to these. If these questions are legitimate (and we would say that they are), they must also be legitimate “project-specific questions” where suppliers will be required to provide these kinds of community benefits.
•  Project specific questions: These can still be asked (thankfully!).

The Bad

• Past performance: Unhelpfully, the SQ suggests that only central government departments and agencies can ask questions about suppliers’ past performance. This is bizarre! Does the CCS really think that local authorities, housing providers and schools do not have a legitimate interest in the reliability of their suppliers? When reliability questions were mandated for central government departments and agencies (in PPN 04/15), these were categorised by the CCS as “project-specific questions”. On this basis, we would suggest that past performance should be a legitimate area for “project specific” questions for any contracting authority. Contracting authorities asking this will need to decide, though, whether to report this to CCS as a “reportable deviation” from the SQ;
• Economic and financial standing: As with the previous PQQ, the financial information that can be asked for is still very limited. A supplier can still be asked to self-certify that they meet a “minimum level of economic and financial standing and/or a minimum financial threshold”. Under the previous PQQ, this was generally understood as meaning that a supplier could self-certify that they met specific financial ratios in their accounts (and any minimum turnover threshold). Tantalisingly, the new SQ suggests that credit checks can play a role in selecting bidders (albeit not a definitive one). Previous concerns over the use of credit checks centred on the fact that they were not “transparent”. It is frustrating that the guidance hints at the possibility of using them, without explicitly endorsing them. This leaves authorities in a difficult position of having to decide whether or not to take the risk of using credit checks, alongside other financial evaluation methods.

The Ugly

• With immediate (or retrospective?) effect: The PPN requires an immediate switch from the PQQ to the new SQ. This is a hard call for contracting authorities who are just about to go out to tender. It’s impossible for those who went out to tender after the PPN’s “issue date” (9 September 2016) but before CCS published it (26 September 2016). As with the previous guidance issuing the CCS standard PQQ, the CCS has placed contracting authorities in the impossible position of being subject to a statutory obligation to comply with guidance that it hadn’t even issued!
• Mandatory use of PAS91 for works contracts: The guidance mandates the use of PAS91, published by the British Standards Institute, instead of the SQ for all works contracts and contracts for “goods and services needed in relation to the works”, which we assume will include professional consultants’ appointments. The mandatory use of PAS91 is particularly surprising because the latest (2013) edition in circulation is very out of date. A new edition has been due for publication “later this month” since June this year. Use of the existing version in the meantime will be cumbersome, requiring contracting authorities to omit the PCR 2006 and CDM 2007 provisions and use the supplementary questions in PAS91 to cover Public Contracts Regulations (PCR) 2015 and Construction (design and management) regulations (CDM) 2015.

The bottom line is that the SQ (for goods and services contracts) and PAS91 (for works and related contracts) must be used for all new procurements under Part 2 PCR 2015 and it must be complied with strictly, as was the case for the old PQQ.

What remains the same is the importance that carefully-considered, project-specific questions play so as to ensure that only the most appropriate suppliers are invited to tender.  The PPN reminds contracting authorities that these project-specific questions should relate to the “list of possible topics”. This is a reference to Regulations 58(15)-(18) PCR 2015 (covering skills, efficiency, experience and reliability) and Regulation 60(9) PCR 2015 (setting out the “means of proof” by reference to previous contracts, resources, people and procedures).

For more information

If you would like advice on the use of selection questionnaires when procuring public contracts or any aspect of the new statutory guidance, please contact Beulah Allaway.