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Public procurement: looking back to 2014 and forward to 2015

In this post, we consider the most significant events of 2014 for procurement law practitioners, and scan the horizon for what’s in store for 2015.

New Public Contracts Regulations 2015 will come into force

In September 2014, the government consulted on the draft Public Contracts Regulations 2015, implementing Directive 2014/24/EU, see Legal update, Cabinet Office consults on transposition of new EU procurement directives.

The consultation posed questions on how the government had implemented the Directive and, in particular in relation to its approach to areas which were left to each member state’s discretion. The government adopted a copy-out approach to the Directive and adopted the options offering maximum flexibility for contracting authorities in its areas of discretion, for example by refraining from imposing any additional detailed obligations on the procurement of above threshold contracts falling within Schedule 3 of the draft regulations.

The draft regulations bring several benefits to contracting authorities. In our view, the most important being:

  • Timescales reduced by about a third.
  • Sensible clarity around the ability to look at a tenderer’s technical expertise at award stage, but only “where the quality of staff can have a significant impact on the level of performance of the contract.”
  • Detailed provisions around the ability to vary a public contract without triggering the requirement to carry out a new procurement process.
  • New competitive negotiated procedure which we think will bring some much needed flexibility to public procurement.

However, there are still many areas of ambiguity and the government recognises the need to produce guidance. It is hoped that this guidance will include information on the enforcement of the obligations arising from Lord Young’s recommendations codified in Parts 4 and 5 of the draft regulations which impose an obligation on all contracting authorities to advertise all contracts valued at £10,000 or more (or £25,000 for bodies such as local authorities and CCGs) (see Practice note, Part B, below threshold and other procurements outside the regulations; Lord Young’s reforms).

Draft regulations for concessions contracts and utilities procurement

At the same time as Directive 2014/24/EU, the following Directives also came into force in March 2014:

  • Directives 2014/23/EU on the procurement of concessions contracts.
  • Directive 2014/25/EU on procurement by utilities.

The government intends to publish draft regulations implementing these directives in 2015. It will also carry out a consultation and training events on the new regulations. For more information, see Practice note, Reform of the EU public procurement regime.

Facilitating participation of SMEs in public contracts

The government has introduced a number of measures aimed at changing procurement practices to enable more participation from SMEs, the most significant of these is the codification of the Lord Young recommendations in Parts 4 and 5 of the draft Public Contracts Regulations 2015 which will require contracts of £10,000 or more (£25,000 for local government and other sub-central authorities) to be advertised on the Contracts Finder website, and will abolish the use of PQQs for below threshold contracts (see Practice note, Part B, below threshold and other procurements outside the regulations; Lord Young’s reforms).

Separately, the Small Business, Enterprise and Employment Bill, includes measures to improve public procurement procedures (see Legal update, Small Business, Enterprise and Employment Bill published: competition and regulatory issues). In particular, it provides for the Minister for the Cabinet Office or the Secretary of State to make regulations to impose on a contracting authority duties in respect of the exercise of its functions relating to procurement and for the Minister to investigate the exercise of those functions.

In October 2014, the Cabinet Office issued a consultation on how this power could, in particular, be used to require procuring authorities to run an efficient and timely procurement process; make available information, documents or processes free of charge to any potential supplier; and accept electronic invoices (see Legal update, Cabinet Office consults on reform to public procurement in Small Business, Enterprise and Employment Bill).

Practice direction for procurement disputes

The Civil Procedure Rule Committee (CPRC) meeting minutes for 7 November 2014 suggest that Coulson J is considering a framework for handling public procurement disputes in the TCC, including prioritisation, listing and the timing of cases. He has indicated that he will consider the approach and return to the CPRC in 2015 with a paper. This is due to the significant increase in procurement disputes in the TCC. For more information on the cases to date, see Practice note, Public procurement case tracker.

Launch of Crown Commercial Service

The Crown Commercial Service (CCS) was officially launched in March 2014, its name recognising its shift away from the process of procurement to a more commercial focus on pre-procurement activities and contract management. The CCS launched a model services contract, short form terms and conditions, and various procurement policy notes. It also began the process of centralising certain central government buying activities.

The CCS is likely to be at the forefront of support for contracting authorities implementing the new Public Contracts Regulations 2015.

Most significant decisions in procurement case law

  • Suspension maintained. 2014 saw a rare example of a court maintaining the automatic suspension of the award of a contract, see Legal update, High Court prevents Gatwick Airport from awarding new contract for air traffic control services. The High Court held that there were serious issues to be tried and damages would not be an adequate remedy. Those issues will be determined in an expedited trial, including whether the Utilities Contracts Regulations 2006 apply to Gatwick Airport at all and, if they do not, whether by advertising its contract on OJEU it had created an implied tender contract that it would conduct the process in accordance with the regulations. Although it is likely that more claimants will succeed in persuading the courts to maintain a suspension until the proceedings have concluded, such cases will be the exception as the balance of convenience will usually favour the award of a contract to deliver public services over an aggrieved bidder’s loss of opportunity where damages are likely to be an adequate remedy.

For analysis of the case law on the early stages of procurement actions and applications to lift automatic suspensions in procurement cases, see Articles, Pre-action and early disclosure in procurement cases and Dispensing with American Cyanamid: a fresh approach to interim relief in procurement challenges?

  • The limitations of VEAT notices. In September 2014, the ECJ delivered its judgment in Italian Interior Ministry v Fastweb SpA (Case C-19/13). Though more opaque than the Advocate General’s earlier opinion, the judgment effectively requires national courts to examine whether a contracting authority’s decision to rely on the negotiated procedure without prior publication of a contract notice was based on a genuine belief that the conditions for using that procurement route in Directive 2004/18/EC were met. If those conditions were not met, the national court must declare the contract ineffective. The case confirms that using a VEAT notice as an attempt to avoid a declaration of ineffectiveness will not work if the contracting authority knew its decision not to advertise the contract was unlawful under the Directive. For more information, see Legal update, ECJ ruling on application of exceptions to ineffectiveness remedy.
  • Reasonably well-informed and normally diligent tenderer test. In July 2014, the Supreme Court handed down a ruling which examined the nature of the “reasonably well-informed and normally diligent” tenderer test that has been developed in order to establish the standard of clarity required to satisfy the principle of transparency in procurement procedures. The Supreme Court confirmed that this is an objective legal standard, applied by reference to a hypothetical tenderer. The relevant question is not whether it had been proved that all actual or potential tenderers had in fact interpreted the criteria in the same way, but whether the court considered that the criteria were sufficiently clear to permit uniform interpretation by all reasonably well-informed and normally diligent tenderers (see Legal update, Supreme Court ruling on application of “reasonably well-informed and normally diligent” tenderer standard).

For a full round up of the year’s procurement cases, see our monthly procurement case digest.

What’s in store for 2015?

Practical Law Public Sector also has the following predictions for the year ahead:

  • More procurement challenges in the field of health services. This area is becoming more active as the market becomes more diverse.
  • Enthusiastic use of the new competitive procedure with negotiation once the draft Public Contracts Regulations 2015 become law. We anticipate the new procedure being used for many contracts which might not be complex or high value enough to warrant a competitive dialogue procedure, but where there are elements that would benefit from negotiation.
  • More confident market engagement. While this is already common, it is hoped that the explicit sanctioning of market consultation will strengthen the pre-procurement phase.
  • In spite of the codification of the existing case law on public to public arrangements in draft regulation 12, the issue of when two contracting authorities can rely on the collaboration exemption is still opaque. We predict further case law in this area.
  • Finally an end to all those tedious cases about whether a contracting authority has confused selection and award criteria!
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