Practical Law

Framework agreements are a hugely popular mechanism for sourcing goods, services and works in the public sector. The ability to access frameworks set up by other contracting authorities takes a lot of the leg work out of a procurement process and lets contracting authorities easily see what is on offer in the market.

But contracting authorities regularly come up against the same questions:

• Can we lawfully use this framework agreement?
• Do we have to use the same award criteria that was used in the establishment of the framework when we run a mini competition?
• Can we charge other authorities for setting up frameworks that they use?
• Who is liable if the framework agreement breaches the procurement rules?
• How do we stop the same supplier winning all the lots?

The provisions on framework agreements in the Public Contracts Regulations 2015 (PCR 2015) don’t radically depart from the regime under the Public Contracts Regulations 2006 (PCR 2006). But they do provide some clarity on these tricky areas.

If your name’s not down…

There’s not much change here. The Preamble to Directive 2014/24/EU doesn’t depart from existing orthodoxy when it says:

“…the contracting authorities that are parties to a specific framework agreement from the outset should be clearly indicated, either by name or by other means, such as a reference to a given category of contracting authorities within a clearly delimited geographical area, so that the contracting authorities concerned can be easily and unequivocally identified.”

What about new public bodies are formed after the framework agreement is advertised? Initial comment from the government on Directive 2014/24/EU stated:

“If the permissible users went through some bona fide restructuring without extending scope that would probably be OK. So if an academy school took over from a similar non academy school, that would probably be OK; but if it was a new school in an area which didn’t have a school previously; probably not.”

So bad news for completely new bodies, but it’s helpful to have this steer.

What’s a framework?

Regulation 33 helpfully sets out the four types of framework agreement. There’s not much change from the European Commission’s Explanatory Note on Framework Agreements (issued under the previous procurement directive 2004/18/EC). But one clarification is that contracting authorities can use a hybrid approach to awarding contracts under a multi-supplier framework agreement, that is, they can allow for direct call offs and also mini competitions. Although this has been common practice, it’s comforting to see it reflected in legislation.

The four types of framework agreement are:

• Single supplier framework agreement. The contracting authority enters into contracts with the supplier in accordance with the terms of the framework, but can also ask the supplier to supplement its tender to reflect more refined requirements.

• Multi-supplier arrangements which set out all the terms under which contracts may be called off without further agreement. It must be clear from the procurement documents which supplier will perform the contract. Typically this will be the supplier who achieved the highest score following evaluation to get onto the framework agreement or, if not available, and the documents permit it, the next highest-scorer.

• Multi-supplier arrangements which do not set out all the terms of the arrangement and under which contracts will be awarded following mini competitions, the procedure for which must comply with regulation 33(11).

• Multi-supplier arrangements which allow both for contracts to be called off without opening competition, and for mini competitions. The decision as to which approach to use must be made on objective criteria set out in the initial procurement documents.

Multi-purchaser agreements: who’s responsible?

While the central purchasing body setting up a framework agreement is responsible for how it is procured, regulation 37 of the PCR 2015 makes it clear that individual contracting authorities accessing these agreements are responsible for compliance with the PCR 2015 in respect of any parts of the procedure they conduct themselves, such as:

• Awarding a contract under a dynamic purchasing system.

• Conducting a mini competition.

• Determining which of the framework providers it should place an order or enter into a contract with.

It is therefore important that they are supplied with and fully understand the mechanism for the award of work.

Another important clarification is that contracting authorities can award a contract to a central purchasing body to enter into contracts and set up framework agreements that it can access without going through a procurement exercise for that contract (regulation 37(8), PCR 2015).

Mini competitions: same award criteria?

Mini competitions must be based on the same terms as applied for the award of the framework agreement and:

• Where necessary, include more precisely formulated terms.

• Where appropriate, include other terms referred to in the procurement documents.

Contracting authorities must award each contract to the tenderer that has submitted the best tender on the basis of the award criteria set out in the procurement documents for the framework agreement.

This last requirement, which reflects similar wording in the PCR 2006, has caused concern in terms of how far a contracting authority can use different weightings, or even different criteria from those set out in the procurement documents for the framework agreement, in its mini competitions. Unfortunately, the PCR 2015 do not clarify this issue.

The European Commission’s Explanatory Note on Framework Agreements, referring to the former procurement Directive 2004/18/EC, provided some clarity stating:

“The award criteria do not have to be the same as those used for the conclusion of the framework agreement itself. Thus, it would be entirely possible to conclude a framework agreement exclusively on the basis of “qualitative” criteria, in terms of the most economically advantageous tender, and to base the award of specific contracts solely on the lowest price, naturally on condition that this criterion was set out in the specifications of the framework agreement.”

Whether the award criteria or weightings are likely to change, the best approach is undoubtedly for the contracting authority to inform bidders of its intentions in the initial procurement documents.

Division into lots

One of the drivers of the procurement reforms, both in the EU and the UK, was the desire to facilitate access to public contracts by SMEs. One of the ways of achieving this was to encourage contracting authorities to subdivide contracts into lots.

In implementing the Directive, the UK government declined to make subdivision into lots for certain contracts mandatory. Regulation 46 of the PCR 2015 confers a specific power on contracting authorities to award a contract in the form of separate lots. The authority may determine the size and subject-matter of the lots.

If the authority has divided the contract into lots, it:

• Must indicate whether tenders may be submitted for one, for several or for all lots.

• May limit the number of lots that may be awarded to one tenderer.

• May award contracts containing more than one lot.

However, it must provide for these arrangements in the contract notice or the invitation to confirm interest.

Contracting authorities may well want to limit the number of lots a single supplier can win, particularly in markets where diversity of supply is paramount and the authority is a key buyer. As a general rule, it would seem counter-productive to limit the number of lots a tenderer can bid for, as this could encourage many bids for the most attractive lots and none for the least attractive.

In these circumstances, it is likely that, following an evaluation, the authority will find that one or more bidders is the top scorer for more than the maximum number of lots it is permitted to deliver. How will the authority decide who gets which lot? Should it allow the bidders to choose? Or should it allocate the lots according to some objective criteria, for example, alphabetically? This is a potential minefield for the authority. However it chooses how to allocate contracts, it must set out its “objective and non-discriminatory criteria” in the procurement documents.

Publication of award notices

As was previously the case, contracting authorities must publish contract award notices when they conclude a framework agreement. However, there are some subtle changes from the PCR 2006:

• The increased threshold for services such as health and social care (formerly Part B, not Schedule 3) means that the award of fewer framework agreements for these services will need to be notified on OJEU.

• In contrast, the new provisions requiring contracting authorities to post contract award notices on Contracts Finder include both award notices for framework agreements and contracts under framework agreements (regulation 108). Presumably, this rule applies only to contracts awarded under framework agreements which were themselves advertised on OJEU. (However, regulation 112 requires notification of the award of below threshold contracts to be posted on Contracts Finder.)

It is also worth remembering that framework agreements advertised on OJEU must also be advertised on Contracts Finder.

For more information, see Practice note, Framework agreements let under the public procurement regime.