Procurement law update 15 th November 2018 Newcastle | Leeds | - - PowerPoint PPT Presentation

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Procurement law update

15th November 2018

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Speakers

Tim Care Partner | Public Sector

E: tim.care@wardhadaway.com T: 0191 204 4224

Lucy Probert Solicitor | Public Sector

E: lucy.probert@wardhadaway.com T: 0191 204 4286

Melanie Pears Partner | Head of Public Sector

E: melanie.pears@wardhadaway.com T: 0191 204 4464

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Brexit – an update

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News and contingency plans » No news on an EU deal – no update on procurement » Withdrawal bill – PCRs remain UK legislation but no role for the ECJ » Treaty Principles to be given direct effect » HoC briefing paper and CCS paper - Accessing public sector contracts if there’s no Brexit deal » Government taking steps to maintain WTO Agreement on Government Procurement » All procurements started pre- March 2019 will have to comply with current arrangements » Replacement for OJEU - “a replacement UK-specific e-notification service will be made available”

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Innovation in Procurement

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Innovation in Procurement » What is “Innovation Procurement”? » What is “Pre-Commercial Procurement” (PCP)? » What is “procurement of innovation” (PPI)? » Innovation Partnerships

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Innovation Procurement » One or both of: » buying the process of innovation (R&D) » buying the outcomes of innovation » What do we mean by “innovation” » Role of state aid » Use of a competitive tender procedure » PCP

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Pre-Commercial Procurement » Best known form of procurement of R&D » A family of processes » Procurement of research by a Contracting Authority with the object of stimulating innovation that the Contracting Authority wants to benefit from at a later stage » Once the product and service does exist, procurement of innovation (PPI) is taking place – separate

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Public Contracts Regulations 2015 » Regulation 14 – research and development services » PCRs apply if: » Benefits accrue exclusively to the Contracting Authority for its use; and » The service is wholly remunerated by the Contracting Authority » So, PCP is excluded from the PCRs » Costs and intellectual property are shared » But, state aid rules apply » So there must be a competitive process – basic principles

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Innovation Partnership » PCRs Regulation 31 » Combination of a purchase of R&D and the subsequent purchase of the resulting goods/services in one procedure » Can be set up with one or several suppliers » Structured in successive phases » Can make a decision after each phase to terminate or reduce the number

• f partners (provided set out in the procurement documents)

» State aid free if leads to the purchase of unique or specialised products or services

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Delivering Social Value

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Delivering Social Value » 2012 Act » Lord Young review » PCRs 2015 » Case study » Latest developments

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Public Services (Social Value) Act 2012 » "An Act to require public authorities to have regard to economic, social and environmental well-being in connection with public services contracts" » "Social Value seeks to maximise the additional benefits that can be created by providing benefits above and beyond the core services themselves"

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How Does It Apply? » Services only » Above threshold » Must consider how the procurement might improve the economic, social and environmental well-being of the area

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Lord Young Review » Lack of awareness » Inconsistent approach » Difficulties with measurement » "Where it has been taken up, it has had a positive effect, encouraging a more holistic approach to commissioning which seeks to achieve an

• ptimal combination of quality and best value"

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What Can It Achieve? » Adds value at no extra cost » 20% average » Cost savings » Better commissioning

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PCRs 2015 » Regulation 67(3) » Award criteria can include social and environmental matters » Must be linked to the subject matter of the contract

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Case Study » Local Authority procurement to install and operate smart parking sensors and improve internet skills » Contract value - £1million » Evaluation: » 70% quality » 15 % price » 15% social value » Target – social value of 5% (£50,000)

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Measuring Social Value » Took Council-adopted outcomes » Supported by KPIs » Financial value attributed to each KPI

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Example (1) » Outcome – more local people in work » KPI – number of job opportunities for NEETs » Value - £15,000 per opportunity

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Example (2) » Outcome – education opportunity for STEM subject » KPI – number of hours training / education » Value – £20 per hour

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Bids » Apprenticeships » Project for science students at local college » Re-training parking enforcement officers

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Latest Developments » Cabinet Office announcement » Civil Society Strategy, August 2018 (DCMS) » Civil Society refers to individuals and organisations when they act with the primary purpose of creating social value, independent of state control. Social value means enriched lives and a fairer society for all » Aim is to ensure public spending is used to generate social value » Want to improve the use of the Act » Central government expected to apply Act to goods and works » Expected to ‘account’ for social value in procurement, rather than ‘consider’ » Look at its use in grants » Look at applying it in planning and community asset transfer

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Dynamic Purchasing Systems

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Dynamic Purchasing System – an introduction » For purchases commonly available on the market » Similar to an electronic framework » Key differences: » Suppliers meet selection requirements » All suppliers meeting the selection criteria to be admitted » Suppliers can be admitted at any time, with no limits to number of suppliers » Contracts awarded during a second, competition stage

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Why might you use a DPS? » Streamline procurement – single process for demonstrating suitability and capability rather than each time compete for a contract » Quicker process? » SME access – less onerous? Open to changing market throughout term? » Flexible as suppliers can join at any time – not locked out » If don’t meet requirements at first, can reapply » No maximum duration – although set out in contract notice and comply with Treaty Principles » Supplier can be deselected if no longer meet criteria – check periodically throughout DPS and certainly prior to award

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Establishing the DPS » Regulation 34 » Follow restricted procedure » Call for competition and minimum 30 days to respond » Contract notice – specify nature of requirements and approximate quantities or values » Division into “categories” » Wholly electronic procedure » Stage 1 – only exclusion and selection criteria to gain admittance » Self certification of compliance with selection requirements and no exclusion grounds apply » No need for award notice at Stage 1

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Awarding contracts » Invite all suppliers admitted to category to bid » Similar rules to frameworks on award criteria i.e. award on basis of criteria set out in the original contract notice or “more precisely formulated” » Minimum timescale of 10 days for return of tenders » No obligation to have a standstill – best practice » Contract award notice to be published within 30 days or can group them on for submission on a quarterly basis » No specific rules on terms and conditions of contracts – can have different

• nes for different DPS categories however comply with Treaty Principles

and have objective reasons for differences. Suitable for commonly used purchases

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Reasons not to use a DPS » Bespoke, high value supply required » Ongoing management required by the Authority » Requirement to complete evaluation of new applicants within 10 days of receipt or 15 days if justified – need resources to do so » No mechanism for direct award » No limit on suppliers – can you manage large multi supplier competitions » Do you have the correct infrastructure to manage a wholly electronic procedure?

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Conflicts of interest

An update

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Regulation 24 – What is covered? » Contracting authorities shall take appropriate measures to prevent, identify and remedy » conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment[…] » Concept […] shall at least cover any situation where relevant members of staff have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure. » Staff of the CA involved in the procurement procedure » Pre market engagement » Related companies

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Conflicts in practice – a recent case Siauliu regiono atlieku tvarkymo centras (C-531/16)

» Case of related tenderers » No stand alone duty on tenders to disclose links to CA » Presented with evidence, CA obliged to verify and examine all relevant circumstances » Cannot exclude automatically » Management by specific provisions of a contractual nature to guarantee independence and confidentiality of tenders » SQ on significant control and conflicts of interest but CHECK the drafting is sufficient

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Evaluation Matters

Lessons from recent case law

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EnergySolutions EU Limited v Nuclear Decommissioning Authority (2016)

» A recap: » Procurement for decommissioning of 14 nuclear sites » Competitive dialogue under 2006 Regs » Challenge of award » Hugely complex procurement dealing with substantial public funds » Over 70 issues in challenge » Came down to matters of evaluation and manifest error by the Authority » Winning tenderer should have been excluded » Claimant should have been given a higher score – manifest error

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Judgement » Court found Contract was wrongly awarded to CFP due to manifest error during evaluation and RSS had submitted MEAT » CFP should have been disqualified having failed at least one threshold requirement » RSS should have scored 91.48% and (ignoring the disqualification) CFP should have scored 85.56% » Fraser J found that the NDA had "fudged" the evaluation to avoid disqualifying CFP

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The rules of manifest error » Criteria to be transparent, objective and related to contract » Objective standard of RWIND » Court will only interfere where there is manifest error » No margin of appreciation for compliance with Treaty obligations » Evaluative judgements “capable of constituting a manifest error." » “No prohibition, but there is a margin of appreciation." » i.e. the Court will not interfere just because it could have reached a different conclusion about the score » Only where it was clear that the score was erroneous beyond the margin of appreciation » Reasons behind the score » Application of the criteria » The score itself » Manifest error can be present in any one, or more than one, of the steps

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Record keeping » Approach "designed to minimise the degree of scrutiny" » No records at all of dialogue phase – no way to ensure consistency in treatment of bidders during initial tenders and feedback » Proposed destruction of contemporaneous notes during evaluation » Evaluators instructed not to enter their own notes into procurement system, to prevent "confusion" » Only consensus comments entered – and scores changed later » Actions not consistent with obligation to act transparently » No fear of disclosure if compliant and would demonstrate the validity of its decision making

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Example of moderated / consensus scoring

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Question Evaluator A Evaluator B Evaluator C Moderated Score and Comments 4.2 The bidder has given a comprehensive answer, dealing with most of the issues that we wanted. Their explanation demonstrated substantial experience of dealing successfully with similar projects with examples There was no mention of how they would deal with the HR issues and no plan for handling the transition from the existing supplier. They seem not to have any knowledge of TUPE and their mobilisation plan lacks sufficient detail. Not as good as response by Tenderer B. Good understanding of the HR issues. No real idea of how to handle the mobilisation phase. Vague discussion about working with the existing supply chain, but no local knowledge exhibited. CVs of key personnel good. The winning bidder gave a much more detailed transition and mobilisation plan which gave us total confidence in their solution Score (out of 5) 5 2 4 4 Score Criteria 5 Excellent response, exceeding our requirements, including well-evidenced and relevant examples 4 Above average response 3 Satisfactory response, demonstrating their ability to perform the contract 2 Part or limited response provided with shortcomings in evidence /information provided. Does not satisfy fully the requirement and some reservations about the bidder’s relevant ability to perform the contract 1 Insufficient information provided to demonstrate that the Potential Provider has the ability to perform the contract Failed to submit an adequate answer or address the question. Does not meet the requirement. Does not comply

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Key Points » Link between scoring and criteria? » Reasoning of moderation exercise is not recorded » List of positive and negative points made by evaluators is recorded. » No accurate record of how consensus scores were reached – list of points made by evaluators, some conflicting, no indication of how influential these were and no record as to how these were reconciled » Comments inserted which indicate scoring was done on comparative basis » Contemporaneous notes – deleting / overwriting / editing » Mixing up feedback exercise with moderation exercise?

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How do the principles translate? » Be clear about scoring and moderation processes and criteria » Tender documents to » Set out process to be followed » include how marking and moderation will be done » in terms that can be objectively assessed and understood by the RWIND tenderer » Follow it! » Keep full, clear and contemporaneous records » Reasons against criteria and sub criteria » In moderation exercise, full notes of what was said by whom and how any consensus score was reached (not a list of points made) » Document control – no editing or overwriting » Agreement of notes by evaluation panel? » Standstill discussions to be recorded and kept separately

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Abnormally Low Tenders

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Abnormally Low » What does it mean? » significant variations between bids » below what was expected » assumption of greater roles than anticipated » Regulation 69 – the Contracting Authority shall require economic operators to explain price or cost where their tender appears to be abnormally low » The Contracting Authority shall assess the response » It may reject the tender » It shall reject the tender if it is abnormally low because the tenderer does not comply with environmental, social or labour laws

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SRCL v NHS England » Facts » NHSE contention was they only had a duty to investigate where the price appeared abnormally low and it was actually considering rejecting the bid for that reason » Court said it would only interfere in the decision if there was a manifest error » Held, Regulation 69 does not require a Contracting Authority to investigate any alleged abnormally low tender

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Time Limits for Claims

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Regulation 92 » 30 days from when the claimant first knew or ought to have known that the grounds had arisen » Court can extend where it considers there is a good reason for doing so » But in any event, no later than 3 months from the first date » How does that fit with the 10 day standstill?

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When does time start to run? » Where the issues / grounds are evident from the ITT » Clarifications » Standstill letter

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SRCL v NHS England » Facts » Court was asked to extend the 30 day limit » There was no “good reason”: » good reason could include illness or something our of the claimants control » no exhaustive list » Court should take a broad approach » lack of prejudice to the Contracting Authority is not a determining factor

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Case Law Update

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Fosen – Linjen AS v AtB AS » EFTA decision (not ECJ) » Small ferry operator » Tender to provide ferry services in Norway » Second of three » Award criteria » price (50%) » environment (25%) » quality (25%) » Scale 1-10 then weighted » FL successful in halting award of contract » Procurement procedure then cancelled as a result of errors » Subsequent claims for loss of profit and cost of bidding

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Fosen – Linjen AS v AtB AS » Successful in first instance, appealed, a number of queries referred to EFTA court » Held » a simple breach can trigger liability for damages (provided other conditions met e.g. causal link) (otherwise the process would allow breach which could prevent free movement of goods and services) » rules on standard of proof for Member States to provide » Member States could allow Contracting Authorities to be exempt from liability for loss of profits where cancelled as a result of error » award criteria are a matter for each Contracting Authority, but must be clear, easy to interpret and in the same way by each candidate » Contrast with EnergySolutions v NDA [2017] » Damages only available where breach ‘sufficiently serious’

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R (On the application of Hersi & Co Solicitors) v The Lord Chancellor (as Successor to the Legal Services Commission)

» Tender for publicly funded immigration, asylum and mental health legal services in London area » 218 bidders » 128 successful » Hersi & Co not successful » 7 ‘selection criteria’ » Hersi & Co answered first 3 only » Scored zero on remaining 4 » Hersi & Co argued: » Clarifications should have been sought » Answers clear from previous answers; and » Inequality

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R (On the application of Hersi & Co Solicitors) v The Lord Chancellor (as Successor to the Legal Services Commission)

»7 years to be heard »A robust, accurate and proper indicative comparators must be used to demonstrate unfair treatment »Regard to previous decisions (6 recent cases failed on similar grounds) »Claimants conduct slowed down the litigation – not well received by Court

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MLS (Overseas) Limited v The Secretary of State for Defence » Tender for logistical support services to MOD » MLS incumbent » MLS tender “commercially compliant, offered lowest price and highest technical score” » MLS failed to supply a response on evidence of safety culture throughout its supply chain » Challenged outcome » ITT did not make it clear consequence of a fail for an individual question – manifest error » Contracting authority – should have clarified the position

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MLS (Overseas) Limited v The Secretary of State for Defence » Held (1)

• A reasonable tenderer would not understand a ‘fail’ score in respect to

question 6.3 would or could result in rejection of a tender

• Breach of obligation of transparency

(2)

• MLS had two opportunities to clarify where information was in tender
• Additional evidence could have created a fresh tender, which could

lead to unfair advantage

• No manifest error

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Subsequent Judgment » What relief was available to MLS? » Damages or set aside contract? » Court has discretion – confirmed MLS should be awarded the contract » Reasoning:

• “strong public interest” in allowing contract to be awarded without delay
• MOD happy to enter into a contract with MLS
• ‘serious and obvious’ result of breach
• damages difficult to assess
• ‘Interested Party’ (SC Shipping Consultants Associated Limited’)

not prejudiced by award of contract to MLS

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Impresa Di Construnzioni Ing.E. Mantovani SpA, Guerrato SpA v Provincia Autonoma Di Bolzano

» Tender for a prison in Bolzano » Mantovani stated that a former Board Member had ceased to exercise functions of the company in March 2013 and so far as aware, never convicted of a criminal charge » Bid allowed, but status checks undertaken » Board Member sentenced to 1 year 10 months in prison » Sentence handed down after tender submitted » Number of measures to disassociate » Excluded on advice Italian Authority Against Corruption » Decision challenged

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Impresa Di Construnzioni Ing.E. Mantovani SpA, Guerrato SpA v Provincia Autonoma Di Bolzano

» Held » National legislation can allow exclusion for failing to declare criminal conviction relating to professional conduct in year prior to tender notice » Failure to declare a conviction not yet final was sufficient ground to exclude

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DHL Supply Chain Ltd v Secretary of State for Health and Social Care » Logistics contract » ‘Future operating model’ to enable better value from the NHS Supply Chain » DHL claimed that the Secretary of State failed to apply the correct scoring criteria to one of the selection questions for winning bidder » DHL issued an application for summary judgement Held » Trial was appropriate » There was a prospect of the Secretary of State defending the claim » The trial progress should not be replaced with a mini trial in an attempt to resolve questions of fact

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VAR S-L v Iveco Orecchia SpA » Tender for spare and replacement parts for buses and trolley buses in Milan » Manufacturer’s ‘original’ or ‘equivalent’ parts guaranteed to be of the same quality » Proof of ‘equivalent quality’ on delivery » VAR successful » Iveco challenged – no proof of ‘equivalent quality’ with tender Referral to ECJ » Proof at tender stage? » If not, how to ensure ‘equal treatment, open competition and sound administration’?

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VAR S-L v Iveco Orecchia SpA Held » No specific time limits » However, when demonstrating achievement of technical specification, this must be at tender stage

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