Procurement Update 2019 19 November 2019 Leeds Newcastle | Leeds | - - PowerPoint PPT Presentation

Newcastle | Leeds | Manchester

Leeds 19 November 2019

Procurement Update 2019

Newcastle | Leeds | Manchester

SSID - WH Visitor | Password - W@rdh4d@w4y30

Housekeeping

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• Brexit implications
• What the politicians are saying
• Frameworks

Break

• Abandonment, suspension, pausing
• Faraday case
• Case law update

Outline

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Tim Care 19 November 2019

Brexit

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Deal or no deal!

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• The Public Procurement (Amendment, etc) (EU Exit) Regulations 2019
• The Public Procurement (Amendment, etc) (EU Exit) (No 2) Regulations 2019

No deal

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• Minimises impact of Brexit on the procurement regime following exit day
• Replaces references to OJEU to the new e-notification service called “Find a Tender”
• Transfers functions from the EU Commission to the Cabinet Office e.g. setting thresholds
• 18 months after exit day further provisions would amend the regulations further e.g. :
• conditions relating to GPA
• duties owed to economic operators from other states

Effect

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• WTO confirmed if we leave with no deal, we will join GPA
• Substantially replicates EU’s position in relation to other GPA members
• How does the GPA work?

Government Procurement Agreement

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• ECJ will no longer have jurisdiction
• Withdrawal Act – “have regard to” EU decisions
• EU’s purposive approach v UK courts’ strict interpretation

What about EU case law?

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• PCRs are preserved by the Withdrawal Act for the transition period
• Procurements launched before the end of the transition period continue under existing

rules

• Frameworks and DPS set up before the end of the transition period continue under

existing rules

• What happens at the end of the transition period – what does the Political Declaration

say?

If there is a deal?

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• Think about wording in procurement documents in case Brexit occurs
• Force majeure clause
• Restrict price changes
• Adverse law changes

How to prepare

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Melanie Pears, Partner, Head of Public Sector November 2019

Procurement Policies – Political Context

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• Procurement is key
• Previously reported on various views from think tanks and associations
• Lack of specific information whilst we wait for manifestos to be published
• Touch on what we know so far:
• Conservatives
• Labour
• Liberal Democrats

Introduction

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• 2017 – Soft Brexit
• 2019 – No Brexit procurement regime remains as is
• General policy – central government to facilitate local communities

Liberal Democrats

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• Change of leadership
• Johnson’s leadership campaign – July 2019:
• Changes to favour UK companies / favoured for Government work
• Avoid “great inherited conglomerate of EU regulation and legislation we cannot

change”

• “Treat procurement differently so as to increase our investment” in nationally important

industries like shipbuilding

Conservatives (1)

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• “We tend to apply them [procurement rules] in a particularly onerous way and it might be

possible to treat public procurement differently so as to increase our investment in ship building”

Conservatives (1)

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• Protectionist approach
• International trade deals generally need GPA membership to ensure access to other

markets (USA/EU)

• GPA members would need to agree a proficient approach or UK would have to leave GPA
• Would reducing competition nationally / locally be best in long term?

Conservatives (2)

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• Trade Bill 2017 – 2019
• 3 elements
• Implementation of international trade agreements
• Trade Remedies Authority
• Collection and disclosure of trade information
• “Continued access through GPA”

Conservatives (3)

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• “Continued access to £1.3 trillion opportunities pa”
• “Continued access to procurement opportunities in 47 countries”

Conservatives (3)

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• GPA membership
• Protectionist approach below threshold
• Local jobs
• Local or regional supplies
• Local economies
• Protectionism controversial in international trade negotiations

Labour (1)

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• Different approach and emphasis
• 2017 – requirements for bidders for government contracts:
• Full trade union recognition
• Compliance collective bargaining agreements
• More towards 20-1 ratio lowest and highest paid
• Pay suppliers in full within 30 days
• High environmental standards

Labour (2)

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• Apprenticeship and training opportunities proportionate to firm size
• Full tax compliance
• Best practice equal opportunities

Labour (2)

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• 2019 (so far);
• Redrawing of priorities for contract bidders’
• People and planet before profit
• Possible ban on outsourcing
• PFI contracts ‘in-house’
• Nationalisaton

Labour (3)

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• No change
• Protectionism
• International trade

Conclusion

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David Taylor 19 November 2019

Frameworks

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• Brief re-cap on structure of frameworks
• Advantages and disadvantages
• Case law update
• Case study – background and lessons learnt

Framework Agreements

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• Regulation 33 (2), PCRs 2015:
• “an agreement between one or more contracting authorities and one or more

economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged.”

• Provides a mechanism for one party to place order with another on standards terms
• Two types of framework:
• simple
• complex

What is a framework?

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• Framework Agreement:
• includes provisions for forming future contracts (“call-off contracts”)
• sets out the terms for future contracts
• includes management provisions for operating the framework

Basic structure

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• Different options available:
• CAs can buy “products” (i.e. goods, services, works) from a pre-established

framework

• CAs can set up their own framework agreement
• Cabinet Office advice encourages CAs to make use of frameworks created by central

purchasing bodies where possible

• Using multi-purchaser frameworks to share services and increase efficiencies

Types of framework

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• No specific procurement procedure set out in

Reg 33 – but must be procured in accordance with one of the competitive procedures in the PCRs:

• Cabinet Office recommends using open

procedure

• Contract Notices and Contract Award

Notices

• Frameworks can be set up by one

Contracting Authority and used by

• thers:
• must be clearly identified in the call for

competition

• Limited to 4 years:
• call-offs can extend beyond the expiry
• call-off contracts:
• do not require a standstill period
• do not require a Contract Award Notice
• do have to publish award notice on

Contracts Finder

Setting up a Framework

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• Direct award if:
• the Framework Agreement sets out all the terms
• there are objective conditions for choosing a supplier
• If not – further competition:
• Framework Agreement should set out the process

Calling-Off

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• Can be used when:
• the nature of the products to be

procured can be established

• a pricing mechanism can be

established

• Advantages:
• creates a streamlined and flexible

process for procuring products

• can be used when the requirements are

not known at the outset

• creates a facility for procurement
• no obligation to purchase

exclusively from a single supplier

• no obligation to purchase a

minimum quantity of products

• no requirement to establish the precise

scope of products, or to set a fixed price (just requires a pricing mechanism)

Why use a framework? (1)

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• Disadvantages:
• can create complex contractual arrangements
• for simple procurements, FAs can cause avoidable complications – and create

avoidable risks:

• call-off contract may be inconsistent / incompatible / contradictory to provisions in

the FA

• may not benefit from economies of scale if awarding individual packages to different

providers under a framework

Why use a framework? (2)

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• Background
• Framework agreement for environmental services
• Contracting Authority – Regional Health and Social Care Authority of Lake Garda
• Economic operator – ATI Markas
• Framework agreement included an extension clause:
• permitted one or more of identified Contracting Authorities to use the framework
• “subject to conditions identical to those of the relevant framework agreement”

Case Law Update (1)

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• Additional Contracting Authority wanted to

use the framework – ASST of Valmonica

• Objected to by:
• incumbent provider of environmental

services (Coopservice)

• the Italian Competition and Markets

Authority

• Referred to CJEU for preliminary ruling:
• (1) Does a contracting have the power

to act on its own behalf and on behalf of

• ther Contracting Authorities,

specifically indicated, which are not, however, direct parties to the framework agreement?

• (2) Is it possible for Contracting

Authorities that are not signatories to a framework agreement to refrain from determining the quantity of services that may be required when they conclude subsequent contracts or to determine that quantity by reference to their usual requirements?

Case Law Update (2)

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• (1) Does a Contracting Authority have the power to act on its own behalf of other Contracting

Authorities, specifically indicated, which are not, however, direct parties to the framework agreement?

• not essential for a Contracting Authority to be an original party to the framework

agreement

• in line with Reg 33 PCRs 2015
• “it is sufficient that such a Contracting Authority appear as a potential beneficiary of that

framework agreement from the date on which it is concluded by being clearly identified in the tender documents with an explicit reference that makes both the ‘secondary’ Contracting Authority itself and any interested operator aware of that possibility”

Case Law Update (3)

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• (2) Can Contracting Authorities that are not

signatories to the original framework agreement refrain from setting out the quantity of services which may be required in subsequent contracts?

• In other words – how do you establish the value
• f the framework agreement?
• Consider the principles of equal treatment,

non-discrimination and transparency

• Public Contracts Directive – “a framework

agreement must, at the outset, determine the maximum volume of supplies or services that may form the subject of subsequent contracts.”

• CJEU – “where a framework agreement is

concluded with a single operator, contracts based on that agreement must be awarded within the limits of the terms laid down in the

• agreement. It follows that the Contracting

Authority that is an original party to the framework agreement can make commitments on its own behalf or on behalf

• f the potential Contracting Authorities that

are specifically indicated in that agreement

• nly up to a certain quantity and once that

limit has been reached the agreement will no longer have any effect.”

Case Law Update (4)

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• Key points:
• Framework Agreements provide scope for flexibility
• be clear and transparent in procurement documentation
• ensure that the Contract Notice is accurate e.g. estimated value
• Framework Agreements can be complex – remember to consider whether they are the

best option

Case Law Update (5)

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• NHS foundation trust
• Capital programme for construction works:
• new build
• rectification works
• ProCure22
• NHSFT re process

Case Study – setting up a construction framework (1)

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• Reasons for setting up own framework:
• estates strategy included a number of schemes
• specific provisions relating to financial stability – including selection criteria and

suspension from framework

• preparatory work had been done for a number of projects so requirements were

known

Case Study – setting up a construction framework (2)

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• Key considerations:
• ensuring contract documents (including call-off contract) were finalised to greatest

extent possible before tender

• accurately estimated the value of the works
• selection criteria had to provide sufficient comfort on financial standing without

breaching PCRs and ensuring SMEs had opportunity to join

• consistency throughout all documentation
• following call-off procedure set out in framework agreement

Case Study – setting up a construction framework (3)

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• Advantages and disadvantages of frameworks
• Important to assets in advance whether it is appropriate to use a framework
• Be clear and transparent in procurement documents
• If using a framework, consider whether to use pre-existing framework or to set up own

framework

Conclusion

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Tim Care 19 November 2019

Abandonment, Suspension, Pausing

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• Comes from two sources
• accepted discretion of contracting authority
• terms of an ITT
• Why would you abandon, suspend or pause?

The right to abandon, suspend or pause

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• Fundamental principles
• Equal treatment
• Non-discrimination
• Transparency
• Proportionality

Contracting Authority’s Obligations

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• Claim by Amey against WSCC
• Amey claimed £28m loss of profit
• WSCC failed in an attempt to have the claim struck out
• WSCC considered abandoning or re-winding the procurement
• Decided to abandon and re-procure
• What were WSCC’s reasons?

Amey Case (1)

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• Did WSCC act manifestly erroneously by taking the abandonment decision?
• Was its decision manifestly erroneous because it was a deliberate attempt to deprive

Amey of its claim?

• Did WSCC breach its obligation of equal treatment?
• Did WSCC breach its obligation of transparency?
• What was the effect of the abandonment on the first claim?

Amey Case (2)

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• Court confirmed that a contracting authority has a broad discretion when deciding not to

award a contract

• But that decision is subject to the fundamental principles
• Courts must be able to determine the lawfulness of the decision

Amey Case (3)

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• No manifest error
• All bidders were treated equally
• There was no lack of transparency
• The abandonment did not extinguish the first claim

The Decision

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Tim Care 19 November 2019

Faraday Case

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• Regulation 10(i)(a) – acquisition of land
• Definition of “public contracts” and “public

works contracts”

• Courts take a broad purposive approach
• Roanne (2007)
• Helmut Muller (2011)
• requirement specified by the

contracting authority

• requirement for an economic benefit
• Midlands Co-op (2012)
• requirement for legally enforceable
• bligation to undertake work

When is a Development Agreement a Public Works / Services Contract?

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• Regeneration of London Road Industrial

Estate, Newbury

• Most land owned by WBDC
• Faraday held a few plots under leases

from WBDC

• WBDC decided to hold a tender
• WBDC chose St Modwen (SMDL)
• Entered into a Development Agreement
• Facilitate comprehensive

redevelopment

• Unconditional obligation on SMDL e.g.

planning

• Conditional obligation on SMDL e.g.

draw down of land

• Joint steering group
• Held – no enforceable obligation to carry
• ut the redevelopment
• Not a public works contract

Facts of the Faraday case

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• Four grounds
• was the Development Agreement a “public works contract”
• was it unlawful for WBDC to commit itself to enter into a Development Agreement

without a public procurement

• was the public procurement regime deliberately and unlawfully avoided
• was it a “public services contract”

The Appeal (Court of Appeal)

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• Examined effect of SMDL serving a notice

to acquire

• SMDL, as developer, obliged to carry out

the development

• Payment of “pecuniary interest” to SMDL

agreed

• “We must keep in mind the underlying

principles in the public procurement legislation…. and apply them with reason and common sense”

• Look at substance over form – the true

nature of the Development Agreement

• Not a public works contract on day one
• Became a public works contract at

SMDL’s option – without a lawful procurement process

• So WBDC acted unlawfully
• No bad faith – not a sham

The Decision

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• Regulation 99
• A justification of the decision of the Contracting Authority
• Prevents a claim of ‘ineffectiveness’
• This notice was not sufficient
• The justification should provide enough by way of relevant detail about the contract to

enable a third party to decide, in a short period, whether to launch proceedings

Voluntary Transparency Notice

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Melanie Pears 19 November 2019

Case Law

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To be inserted

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Speakers

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Tim Care

Partner | Public Sector

T: 0330 137 3458 E: tim.care@wardhadaway.com

David Taylor

Associate | Public Sector

T: 0330 137 3462 E: david.taylor@wardhadaway.com

Melanie Pears

Partner | Public Sector

T: 0330 137 3451 E: melanie.pears@wardhadaway.com

wardhadaway.com @WardHadaway Ward Hadaway Newcastle | Leeds | Manchester