Further debate on the living wage this month, as the Scottish Government issues guidance on evaluating fair working conditions that relate to the subject matter of a procurement. Useful direction from the courts on how to determine the extent to which "loss of reputation" should be taken into account when deciding whether or not to lift an automatic suspension - and food for thought on proportionate procedures when running below threshold or "light touch" procurements. One new PPN this month - guidance from CCS on achieving a level playing field in capital projects requiring significant steel supplies.
Encouraging commitment to payment of a living wage: In last month's Pulse, we looked at the AG opinion in the RegioPost case - advising the court that bidders who refuse to commit to payment of a minimum wage should be excluded from a procurement process. The Scottish Government has gone one step further - providing guidance on how to procure commitment from bidders that they will pay a living wage. The guidance is issued pursuant to sections 9 and 29 of the Procurement Reform (Scotland) Act, 2014 (equivalent provisions to the pre-contract obligation in the Public Services (Social Value) Act 2012, to "consider" how a proposed contract "might improve the economic, social and environmental well-being" of a contracting authority's area). Section 15 of the Scotland Act also requires contracting authorities to prepare a procurement strategy - which must include a statement of its policy on payment of a living wage. Whilst acknowledging the Ruffert and Bundesdruckerei cases, the statutory guidance argues that human rights standards recognise the right to fair working conditions, which would include fair and equal pay. Fair working conditions (of which payment of a living wage is a strong, but not conclusive, indicator) can therefore be included as the basis for selection and award criteria, provided that they relate to the subject matter of the contract. This is where the argument for inclusion often falls down - fair pay may enhance the quality and continuity of any workforce, but it does not necessarily make a contractor's employees drive buses better, operate computers more efficiently or reach particular standards when building infrastructure projects - for example. The guidance includes a form of wording for an ITT/ITN to explain fair working conditions, and define an associated award criteria. The RegioPost judgement is scheduled for 15 November 2015 - the tide is turning on commitment to the minimum and the living wage - the European court will determine how far.
Proportionality in structuring below threshold or "light touch" procurement procedures: Icogen challenged the award to Edilux of a below threshold contract for the restoration of Greek temples in Sicily. The contracting authority accepted the challenge, and annulled the award to Edilux on the basis that it had failed to lodge with its tender a declaration that it would report irregularities in the tender process, instances of bribery or corruption, the basis on which it would appoint sub-contractors, and generally comply with principles of fairness, transparency, confidentiality and integrity. The form also required bidders to declare no controlling interest in, or sub-contracting arrangement with, other bidders. As the procurement had clearly generated cross-border interest, the Italian referring court asked whether excluding a bidder for failure to submit such a form, constituted breach of the TFEU principles of transparency, equal treatment and non- discrimination. The European Court was happy that for the most part the form - generally scoped to combat organised crime in Southern Italy - had the effect of preventing criminal activity and distortions of competition and, as such, strengthened equal treatment and transparency in procurement procedures. However the contents of such a form must be proportionate - they must not go beyond what is necessary to achieve equal treatment and transparency. In the context of exclusion, a bidder's declaration that it is not in a relationship of control or association with other bidders assumes interference in some way with other tenders. As drafted, it precluded the opportunity for bidders to show that their bids were independent, and was therefore contrary to the EU interest in ensuring the widest possible participation by tenders. Cases such as this one will be of interest to those designing below threshold, or procurement processes based on the new "light touch" regime (regulation 74-76 Public Contracts Regulations, 2015), which are not required to follow specific grounds for excluding bidders and awarding contracts, but must comply with the general principles of transparency and equal treatment.
Guidance on when "loss of reputation" impacts the decision whether or not to lift an automatic suspension: OpenView challenged Merton's decision to award a CCTV and number plate recognition contract to Tyco, resulting in automatic suspension of the contracting process. In Merton's application to lift the suspension, Mr Justice Stuart-Smith held that damages would be an alternative and adequate remedy for OpenView, rather than maintaining the suspension whilst a full trial of the underlying issues took place. In his view the court would not find it difficult to calculate damages on the basis of loss of chance - a hypothetical re-run of the procurement process, using criteria allegedly applied to the Tyco, but not to the OpenView, bid would be possible. OpenView argued that even if that were the case, the damage to its reputation as a result of not having been awarded the contract, still had the effect of making an award of damages inadequate. The court was not convinced - "neither the size nor the nature of the contract suggest that the reputational advantage of being known to be the successful contractor will be substantial or give risk to a reasonable expectation of future additional profitability ". The judge outlined the following, as the criteria which should be followed when considering "loss of reputation":
- It is unlikely to be taken into account, unless a court is confident that failure to leave the suspension in place, would lead to significant and irrecoverable financial loss.
- The burden of proof is on the bidder to prove that there is a "real prospect of loss that would retrospectively be identifiable as being attributable to the loss of the contract at issue, but not recoverable as damages."
- "the relevant person who must generally be shown to be affected by the loss of reputation is the future provider of profitable work".
Infrastructure projects with a capital value in excess of £10 million, and a significant steel requirement : The steel industry in the UK is suffering at the hands of cheaper imported products. This procurement policy note provides guidance as to how new flexibilities in the Public Contracts Regulations 2015, such as procuring on a whole life cost basis, and taking account of appropriate social and environmental impacts at award stage (where they are linked to the subject of the contract), can help UK steel companies compete on a level playing field when applying for public procurement opportunities.