Public Procurement Law Update - New rules, same problems? Ruth - - PowerPoint PPT Presentation

Ruth Connorton and Tim Dennis 29 April 2015

CIPS North East branch

Public Procurement Law Update

• New rules, same problems?

Legal background

• EU directives
• Concession Directive 2014/23/EC
• Public directive 2014/24/EC
• Utilities Directive 2014/25/EC
• English law covers Wales and NI (separate Scottish Regs)
• Public Contracts Regulations 2015 (PCR)
• Public Contracts Regulations 2006 (as amended) still valid for

health service purchasing under NHS (Procurement, Patient Choice and Competition) (No 2) Regulations 2013 – health service purchasing by NHS England and CCGs and concessions

• Case law
• Guidance and PPNs

Concessions Directive

• Works/ services concessions over threshold (£4,322,012)
• Must include transfer of operating risk covering demand/ supply or

both

• All public, some utility provisions and defence
• For social/ other services – contract notice and award notice only
• Time limited - recoup investment and a return on capital
• General process subject to Treaty principles
• Minimum period for tenders 17 days
• Award criteria in descending order of importance and potential to re-
• rder where an unforeseen innovative solution with exceptional

functional performance arises

PCR 2015

• In force 26 February 2015
• Procurements with contract notice on/after that date
• Works, supplies, non “light touch” services
• Existing thresholds apply
• Light touch regime for social and other services - replaces

Part B

“Social and other services”

• Replaces Part B
• Schedule 3 exclusive list of services by CPV code
• £625,050 threshold
• OJEU advertising: contract notice or PIN published “continuously”
• Treaty principles apply - equal treatment and transparency
• Significant flexibility in process, time limits to be reasonable, no

standstill required (?)

• Contract award notice (can be published quarterly)

New obligations – SME friendly?

• Contracts Finder notices (above and below threshold)
• All procurement documents must be available via the internet from

date of OJEU publication

• Standard CCS PQQ mandated - England
• No PQQ below goods & services threshold
• Contracts Finder award notice (above and below threshold)
• Contracts Finder notices for framework call-offs (any value)
• Justification for not subdividing into lots
• 30 day payment terms throughout supply chain and annual

reporting on compliance

Available procedures

Procedure When? Open Restricted Freely available Innovation partnerships Where innovative need not freely available on the market Competitive dialogue Competitive procedure with negotiation Where needs:

• adaptation of readily available solutions
• design or innovative solutions
• prior negotiation of contract needed
• technical specification cannot be established

Negotiated procedure without prior publication Very limited grounds

Utilities free choice except negotiated without publication

Tendering processes

Open Restricted Negotiated Comp dialogue Innovation partnership Pre market engagement      Contract notice      PQQ x     ITT      Negotiation X X    Tender      Post selection negotiation X X X   Award      Further growth X X X X 

Comp negotiation vs Comp dialogue

• Competitive negotiation
• Know needs and characteristics
• Negotiate with all on basis of initial and subsequent tenders,

but not final tenders (runs like restricted)

• Competitive dialogue
• Know needs and requirements
• Dialogue with all to identify solutions and means best suited to

satisfying needs, final tenders

• Clarify, specify and optimise all tenders
• Final negotiations to confirm commitments/ terms but not on

essential elements or to distort competition

Innovation Partnerships

• Must be able to identify a need for an innovative product, service or

works that cannot be met by the current market

• “Innovation” …new or significantly improved… including…

production, building or construction processes, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations including…helping to solve societal challenges or support the Europe 2012 [2020] strategy for smart, sustainable and inclusive growth

• One partner or several partners each conducting separate R&D
• Negotiation permitted and must structure in successive phases: eg

R&D, prototype, manufacture, delivery

• Must establish IP rights base to go to market
• Value of delivery not disproportionate to value of investment for

development

Pre Market Engagement

• Expressly permitted (and encouraged by Cabinet Office)
• To prepare the procurement and inform the market of procurement

plans and requirements

• Authority must take appropriate measures to ensure that

competition is not distorted

• Can only exclude where there are no other means to ensure non-

distortion of competition

• Must provide the tenderer with an opportunity to prove distortion of

competition will not result

CCS Standard PQQ

• Must use for all procurements (including light touch) if over

threshold

• Core questions and additional modules
• Must add your own evaluation methodology
• “Reportable Deviations” cannot deviate from questions or question

wording unless justified and then must report to CCS within 30 days of making PQQ available to candidates – from 1 September 2015

• Cannot use PQQ stage below goods & services threshold
• Will be replaced by ESPD - European Single Procurement

Document

PQQ grounds

• Mandatory exclusion criteria (5 years)
• Discretionary exclusion criteria (3 years)
• Significant or persistent deficiencies under a prior public

contract which led to early termination, damages or comparable sanctions

• Economic and financial standing
• Minimum turnover (max 2x contract value unless exceptional)
• Information on accounts (must state how scored)
• Any minimum hurdles must be in contract notice or ITCI
• Self cleansing/ declaration permissible
• Continuing obligation throughout process

Contract award criteria

• Must award to “most economically advantageous tender”
• On basis of price or cost – so can be price only
• Or can include the best price/quality ratio
• Price can include life cycle costing looking at acquisition,

maintenance, end of life costs, usage eg energy consumption

• Quality criteria can take into account e.g.
• Technical merit, social, environmental and innovative

characteristics

• Qualifications and experience where significant impact on

contract performance

• After sales service

Frameworks

• Methods of call off:
• Single supplier framework – direct call off
• Multi supplier framework – direct call off or mini-competition OR

mini-comp only

• Must set out in framework agreement:
• Objective criteria for deciding between direct call-off or mini

competition

• How decision will be made if direct call off; and
• Mini-competition award criteria
• Must publish contract award information on Contracts Finder for

each call off contract

Things not coming to market?

• Continued in house provision
• “Social and other services” no cross border interest (but still

should be some competition for value/ governance reasons)

• Not considered/ illegal process
• Direct award to a mutual
• Direct award to an in house service

Awards to mutual or social entities

• Contracts for limited range of social/ other specific services

including surgical and medical hospital services, education

• Can restrict award to types of organisation where
• its objective is a public service mission
• profits are reinvested or distributed to participants
• management/ ownership is based on employee ownership/

participatory principles

• haven’t awarded a contract for those services by that authority

in past 3 years

• Limit of 3 years’ duration on the awarded contract
• Competition amongst reserved bodies

“In house” awards

• Structural (Teckal)- award to a legal person governed by private or

public law

• Control test - decisive influence over strategic objectives and

significant decisions (can be jointly exercised)

• Activity test - 80% of the activities must be carried out for the

controlling authority

• Capital – no direct private capital participation except required

non-controlling, non-blocking without decisive influence

• Public to public co-operation (Hamburg)
• Co-operate to deliver public services driven by goal of

achieving common objectives

• Governed solely by public interest considerations
• Perform on the open market less than 20% of activities

Modification of contracts - allowed

• Modification can occur without a new procurement arising where:
• Contract clearly and unequivocally provides for the change and

it doesn’t affect overall nature

• Additional provision not envisaged but a change of contractor

can’t be made due to interchangeability or interoperability issues or significant inconvenience/ substantial cost duplication and not >50% of contract value

• Couldn’t be foreseen, doesn’t affect overall nature and not

>50% of contract value

• Change of contractor due to merger, insolvency, acquisition etc
• Change value doesn’t exceed the relevant threshold AND is

less than 10% of the original contract value (services) or 15%

• f the contract value (works) – net cumulative value of changes
• Not “substantial”

What is “substantial” modification

• Changes are substantial, and therefore give rise to a new

procurement, where it:

• Renders the contract materially different in character to that
• riginally concluded
• Introduces conditions which if included originally would have

brought other bidders/ different winner

• Changes the economic balance of the contract in favour of the

contractor in a manner not provided for initially

• Extends the scope of the contract considerably or
• A new contractor replaces the original contractor (except

insolvency, acquisition, re-organisation)

Reporting

• Information on every contract/ framework agreement/ DPS
• Authority details, the subject matter and value of the contract
• Details of any shortlisting or de-selection and reasons;
• Reasons for rejection of any abnormally low tenders
• Winning bidder identity and reasons and if known any sub-

contracting levels and main sub-contractor identities

• Justification for the choice of procedure – negotiated/ dialogue
• Reasons for any decision not to make an award
• Reasons why any non-electronic communication has been

used for tender submission

• Any conflicts of interest detected and subsequent measures

taken

• Send to Commission or Cabinet Office on request

Documentation retention

• Keep documentation for at least 3 years to "justify decisions taken

in all stages of the procurement procedure" such as on

• Communications with bidders and potential bidders and internal

deliberations

• Preparation of procurement documents
• Any dialogue or negotiation
• Selection and award of the contract

Claims/ remedies

Pre contract award Post contract award Breach of duty Automatic suspension Damages Damages Ineffectiveness

• illegal direct award
• breach duty &

standstill

• incorrect over

threshold framework call off Automatic Suspension Voiding of contract Damages Civil financial penalties Contract cancellation Voiding of contract Damages Civil financial penalties Contract cancellation

Issues relevant to litigation

• Reporting requirements and record keeping
• Document Retention
• Discretionary exclusion criteria – persistent deficiencies under a

prior public contract – may result in more disputes between parties during contracts

• Revised definition of “Economic Operator” – wider group of

potential claimants under PCR 2015?

What we tell bidders

• Go fishing
• Time is of the essence - act quickly
• Use your contacts - “off the record” isn’t
• Press the procuring body - debriefs
• No stigma to challenging
• Reasons/ issues can leak out more as you push to keep going
• Get legal advice ASAP – don’t prejudice claim

Current trends

• Increasingly litigious area
• Public Sector challenging Public Sector
• Increasing claims in SOS services areas – stopping awards
• Economics often driving challenges

Phone a friend

Ruth Connorton Partner, Head of Procurement

T: 0191 404 4130 M: 07711 969 790 E: rconnorton@dacbeachcroft.com

Tim Dennis Senior Solicitor

T: 0191 404 4003 M: 07725 642701 E: tdennis@dacbeachcroft.com