Practical Law

The Public Contracts Regulations 2015 (SI 2015/102) (PCR 2015) will come into force on 26 February 2015 (see Legal update, Public Contracts Regulations 2015 published) and any contract advertised on or after that date will be subject to the new rules.

Local authorities will therefore be working hard on their standing orders or contract procedure rules (Standing Orders) to ensure they reflect the requirements of the PCR 2015.

So what should revised Standing Orders include?

Firstly, the requirements on advertising, notices and the types of procedure available have all been subject to some change.

One important change is that the distinction between Part A and Part B services has gone. Instead, services listed in Schedule 3, which include many Part B services, must also be advertised on OJEU when they are valued at EUR 750,000 (£625,050, sterling figure subject to confirmation) or more. However, the contracting authority is not obliged to follow one of the procurement processes contained in the PCR 2015. Instead, under regulation 76, the contracting authority has a discretion on the process it wants to adopt, as long as:

• The process is at least sufficient to ensure compliance with the principles of transparency and equal treatment of suppliers.
• It conducts the procurement, and awards any resulting contract, in accordance with the contract notice or prior information notice (which may be used as a call for competition) in respect of the conditions for participation, time limits for contacting the contracting authority, and the award procedure to be applied. (However, the authority can make changes to the process during the course of the procurement as long as those changes don’t breach the principles of transparency and equal treatment.)

In other words, aside from the requirement to advertise on OJEU, the new law reflects the existing Treaty principles applicable to the award of Part B services contracts which were (or may have been) of cross border interest. (See Practice note, Part B, below threshold and other procurements outside the regulations.)

One of the most significant changes in the PCR 2015 didn’t come from the new Directive (2014/24/EU) at all, but from Lord Young’s reforms designed to facilitate access by SMEs to public contracts. Under regulation 105 of the PCR 2015, where local authorities advertise a contract valued at £25,000 or more (net of VAT),  they are also obliged to advertise it on the Contracts Finder website.

The new advertising and process requirements at a glance

Contract value	Advertising requirements	Type of process	Contract award notice
£0-24,999	No advertising requirements	N/A	N/A
£25,000* to EU threshold	Advertise on Contracts Finder	At authority’s discretion (however, the usual Treaty principles would in theory still apply to the extent that such a contract were of cross border interest)	On Contracts Finder
Above threshold:Goods and services: £172,514Works: £4,322,012	Advertise on OJEU and on Contracts Finder	One of the mandated procedures in PCR 2015: open, restricted, competitive dialogue, competitive procedure with negotiation, or innovation partnership	On OJEU and on Contracts Finder
Above threshold:Schedule 3 Services: £625,050		Process which complies with obligations of transparency and equal treatment

* Note that Procurement Policy Note 03/15, states “where existing standing orders in local government are in place that have a higher value for advertising opportunities, the higher value applies rather than £25,000”. The obligation to advertise on Contracts Finder only arises where the authority puts the contract award opportunity in the public domain.

Issues to decide before revising Standing Orders

Before Standing Orders can be revised, local authorities will need to consider the following issues:

• Will the authority set any expectations around market consultation and other pre-procurement activities, as expressly permitted by regulation 40?

• Will the authority use a prior information notice (PIN) as a call for competition? If so, in what circumstances?

• Regulation 53 requires contracting authorities to make their tender documents available electronically. Local authorities should ensure Standing Orders reflect this.

• Some changes have been made to excluded services, for example, most legal services are now subject to the regime if they exceed the threshold of £625,050 applicable to Schedule 3 contracts. Should these be listed in Standing Orders to ensure officers are clear on the appropriate regime to apply?

• Case law on public to public arrangements has been codified and expanded. Should Standing Orders explain which arrangements between the authority and other public bodies are excluded? (See Practice note, Public to public collaboration and the procurement rules.)

• How will the authority comply with its obligation under regulation 22 to prevent, identify and remedy conflicts of interest? How will it reflect its obligations under regulation 41 to take measures to ensure competition is not distorted by the prior involvement of candidates or tenderers in the preparation of the procurement?

• How will the choice of procurement route be made? The PCR 2015 permits the use of the competitive dialogue and competitive procedure with negotiation in much broader circumstances than the Public Contracts Regulations 2006 (regulation 26(4)). And the new innovation partnership is also available. Will the authority’s rules provide any guidance on when these procedures could be used? (See Checklist, Public procurement procedures: minimum time limits.)

• Pre-qualification stages are not permitted for contracts valued at less than £172,514 (so no restricted-type procedure can be used). How will the authority assess the tenderers’ suitability? Contracting authorities are also obliged to have regard to central government guidance on PQQs for above threshold contracts.

• Standing Orders should set out how sub-contracting arrangements be evaluated and reflected in the contract terms. The PCR 2015 enables:
  • authorities to require tenderers to indicate their proposed sub-contracting arrangements;
  • tenderers to rely on the capacity of other entities, for example, partners or sub-contractors; and
  • authorities to require tenderers to replace sub-contractors to whom mandatory exclusion grounds apply.

• Standing Orders should also provide guidance on changes made to the selection phase, including the new mandatory exclusion grounds, for example for child labour and terrorism offences. In addition, there is the new requirement to accept the European Single Procurement Document (ESPD), a self-declaration that the supplier meets the selection criteria, and the requirement to use the eCertis database to check suppliers’ credentials (this will be mandatory from 18 October 2018).

• Regulation 57 permits contracting authorities to take a bidder’s past performance into account when assessing suitability. What approach will the authority take in assessing past performance? (See Practice note, Selection criteria and pre-qualification questionnaires (PQQs).) Officers will also need guidance on the self-cleaning provisions whereby tenderers to whom an exclusion ground applies must not be excluded if they can prove their reliability.

• Will the authority take a standard approach to dividing contracts into lots, and permitting bids for multiple lots? Regulation 46 requires contracting authorities to indicate their reasons for not subdividing a contract into lots in the procurement documents or report. Will Standing Orders provide guidance on when the authority will deem it appropriate to divide a contract into lots?

• The PCR 2015 allows local authorities to agree deadlines for receipt of tenders with selected candidates under the restricted, competitive procedure with negotiation, and dynamic purchasing system procedures. There is also guidance on extending deadlines (regulation 47(3)). Standing Orders should include guidance on this and the authority’s general principles for setting time limits. (See Checklist, Public procurement procedures: minimum time limits.)

• Regulation 69 requires authorities to investigate tenders that appear abnormally low. Standing Orders should provide guidance on abnormally low tenders and to whom officers should refer their concerns.

• Regulation 77 permits authorities to reserve participation in certain procurement exercises to social enterprises and employee-owned organisations. Standing Orders should explain when the authority may use this option.

• Standing Orders should provide guidance on when a contract can be varied and on whose authority. Regulation 72 sets out a number of grounds on which contracts can be varied without triggering a new procurement process. (See Practice note, Varying public contracts.)

• Standing Orders should set out the new contractual provisions mandated by the PCR 2015. For example, regulation 73 requires the authority to reserve a right to terminate where the:
  • contract has been varied in breach of regulation 72;
  • contractor should have been excluded from bidding for the contract under regulation 57 (1) to (3); or
  • contract should not have been awarded due to a specified breach of community law.

(Even where the contract is silent, regulation 73(3) implies the power to terminate on those grounds.)

• Regulation 112 also requires authorities to ensure their contracts require them to pay contractors within 30 days of an undisputed invoice, and for contractors to carry this obligation down the supply chain.

• Standing Orders should reflect the record keeping obligations in regulations 55 and 84. In particular, note the requirement in regulation 55(2)(d) to disclose information on “the conduct and progress of negotiations and dialogue with tenderers” as part of the debrief obligations.

Finally, local authorities should also consider revising Standing Orders applicable to schools. The PCR 2015 makes some exceptions for maintained schools and academies. The following provisions do not apply:

• The obligation to advertise contracts of £25,000 or more, and to publish contract award notices on Contracts Finder (regulations 106, 108, 110 and 112).

• The requirement for contracts to include provisions requiring the contracting authority to settle undisputed invoices within 30 days (regulation 113).