On 26 February 2015, the Public Contracts Regulations (“PCRs”) 2015 will come into force. These regulations implement the provisions of the new Public Sector Directive No. 2014/14 into English law. Separate regulations will be introduced for Scotland. We reported this time last year how the EU had adopted new Directives on public procurement. The PCRs replace the Public Contract Regulations 2006 as amended and will govern all public sector procurements commenced after the commencement date.
These represent a significant modernisation of the UK public procurement regime and will affect all public bodies and those who supply the public sector. This article sets out some key tips contracting parties should be thinking of in advance of the new rules coming into force. Some of the key changes are as follows:
- Services contracts: The Part A and Part B Services distinction is abolished. All services are now covered above the relevant services threshold of €111,000 for Central Government and €141,000 for non central Government.
- New light touch regime: There is an exception for most but not all former Part B services defined in Schedule 3. This include health and social services. They will be subject to a new light touch regime which must be advertised in the OJEU notice if the contract value exceeds € 750,000. Concern has been expressed at the new wide power contracting authorities have under Regulation 76(4) of the Regulations to alter how the procurement is conducted and awarded notwithstanding that it is at variance with how the procurement was initially advertised to be run.
- Greater SME participation: Often referred to as the Young Reforms, they were a late addition to the PCRs. It is not often you see the UK Government gold plating the implementation of EU Directives but this appears to be an exception. They are designed to grant more access to public procurement contracts for SMEs. They require contracting authorities to also publish on Contracts Finder, the Governments new contract opportunity website, any contract notice or contract award notice which it publishes in the Official Journal of the European Union. It also requires that sub-threshold procurements (over £10,000 for central government or over £25,000 for sub central Government including NHS Trusts) are also placed on Contract Finder. The reforms ban all relevant sub threshold procurements from using a PQQ stage. All contracts must be subject to minimum selection criteria to further enhance the likelihood of the contracts being won by SME bidders. In addition there is an obligation that these procurements must follow any guidance issued by the Cabinet office. It remains to be seen whether these requirements will have a lasting effect on the way the public sector procures or whether the force of the courts will be required to challenge larger contracts to be broken up.
- Shorter timescales for procurements: There are to be shorter timescales for most types of procurement and other efficiency gains.
- Mandatory grounds for exclusion: Regulation 57 includes certain additional offences to those which mandate contracting authorities to exclude bidders from the procurement process (offences under the Counter Terrorism Act 2008 and the Serious Crime Act 2007).
So what is it particularly important for contracting parties to address in advance of the new Regulations?
1. Updating precedent documents: As a contracting authority you may wish to consider updating precedent documents in light of the New Regulations. Here are some of the possible changes you need to consider:
- Revised and expanded grounds for exclusion both mandatory and discretionary.
- Carefully examine your selection criteria. There are now limits you can place on turnover requirements. Also the definition of MEAT (most economically advantageous tender) has changed and a new term has been introduced referred to as best price quality ratio.
- If you are using life cycle costing you need to make sure you outline all the required information in Regulation 68.
- Check you have included all information in your procurement documents which the new regulations require.
2. Future contract amendments and extensions: This is equally applicable to contracting authorities and public sector suppliers. Regulation 72 codifies recent European Court case law under Pressetext and other cases into the Regulations. There are now clear parameters on those changes to an existing contract which can be made without requiring a new procurement. When considering the scope and value of the procurement make sure you accurately estimate the scope and value to future proof the procurement allowing you to accommodate the need for variations and extensions during the procurements duration. In addition you may also want to add contractual terms to deal with change of control situations and provide for the assignment and novation of the contract to third parties.
3. Termination provisions: You should allow provisions relating to contract termination in the circumstances covered by Regulation 73. This regulation implies certain terms into the contract if they have not been included and therefore it is advisable to include your own provisions rather than to leave yourself at the mercy of the Court’s discretion in implying such terms.
4. Be ready for the Lord Young reforms: These reforms, whilst noble in aim, are sailing into unchartered territory. It is unclear how these reforms are going to work in practice but it is advisable to start planning and familiarising yourself with the new procedures.