The Public Contracts Regulations 2015 (PCR 2015) (available here) were laid before Parliament on Thursday last week, with the majority of the provisions coming into force onThursday 26 February 2015.
So has the final version of the PCR 2015 changed significantly since the previous draft was issued in Autumn last year? The short answer, as might have been anticipated, is there has been little substantial change and what change there has been is often to make the drafting clearer rather than to amend the substance of the provision. This will be a great relief to all procurement practitioners, who are already hard pressed enough to get ready for the new regime at short order.
So, what has changed in the final version? Here is a short summary of the more material points:
Lord Young Reforms - The most significant changes made in the final version of the PCR 2015 are to Part 4 (Regulations 105 to 114). These are the controversial provisions which go beyond the requirements of the EU Directive and implement our current Government’s policy agenda (including the Lord Young reforms) on supporting growth, transparency and maximising opportunities for SMEs.
- Requirements relating to above threshold procurements (Regulations 105 to 108) - If getting to grips with the new Directive’s requirements wasn’t enough, for the first time, it will also be a statutory requirement (a) to use Contracts Finder and (b) to ensure that selection criteria are pared back to the minimum in the hope of attracting greater SME participation (see Regulation 107).
- Publication of notices on Contracts Finder (Regulations 106 and 108) - These provisions (other than for a contracting authority that is a maintained school or academy) require contracting authorities to also publish on Contracts Finder any Contract Notice or Contract Award Notice which it publishes in the Official Journal of the European Union (note there is an exemption if publication impedes law enforcement, is not in the public interest, or would prejudice commercial interests or competition). This puts onto a statutory footing the obligation to publish on Contracts Finder, which has previously been addressed only via Procurement Policy Notes and guidance.
There is also a statutory obligation to have regard to Cabinet Office guidance about how and when the information needs to be published. There is a suggestion (see Regulations 106(4) and (5) and 108(7) and (8)) that the Cabinet Office is considering a system where information is automatically extracted from the OJEU and copied across to Contracts Finder without further action being required by contracting authorities. This has perhaps been introduced as a result of concerns expressed in the consultation, and in an effort to reduce the additional burden on contracting authorities in complying with these additional provisions. Regulations 106 and 108 only come into force on 26 February 2015 for contracting authorities which “perform their functions on behalf of the Crown”. There is a short one month reprieve, until 1 April 2015, for all other contracting authorities. This is perhaps to allow the Cabinet Office time to issue further guidance on these Regulations.
Note also that contracts for health services covered by the NHS (Procurement, Patient Choice and Competition)(no.2) Regulations 2013 (the “NHS Regulations”) are saved from these additional provisions.
- Requirements relating to sub-threshold contracts - The previous draft of the PCR 2015 introduced a new regime for sub-threshold contracts. These provisions are now shifted back in the final version to Regulations 109 to 112. They apply to:
- Central government contracts valued at over £10,000; and
- Sub-central government (including NHS Trusts) contracts valued at over £25,000.
They do not apply to health service contracts covered by the NHS Regulations.
For those contracts which are caught by the new provisions, if they are to be advertised at all this must include an advertisement on Contracts Finder. Information on contracts awarded must also be published on Contracts Finder; there is a ban on using a separate PQQ stage; and there is an obligation to have regard to any guidance issued by the Cabinet Office.
The final version of the PCR 2015 clarifies that advertisement of any “contract opportunity” (and not merely “any contract”) will be within the scope of these provisions. This is regardless of how “specific” the opportunity is. So advertisement of forward-looking requirements that have not yet crystallised, such as through a PIN, pipe line notice or similar, will trigger the obligation to also advertise on Contracts Finder. Finally, an exemption to the requirement to publish details of contracts within the scope of these regulations has been added; there will be no requirement to publish if publication impedes law enforcement, is not in the public interest, or would prejudice commercial interests or competition.
Other more minor changes in the final version of the PCR 2015 include:
Batching Contract Award Notices - Regulation 50 has been amended, to make it clear that the right to send notices “batched quarterly” applies only to dynamic purchasing systems and not generally (as was implicit in the first draft). Note: ‘batching’ is still an option for contracts awarded under the "light touch" regime.
Mandatory Grounds for Exclusion - Regulation 57 includes certain additional offences to those triggering mandatory exclusion (offences under the Counter Terrorism Act 2008 and the Serious Crime Act 2007).
Light touch regime - Concerns had been raised during the consultation process about the flexibility given at Regulation 76(4) to contracting authorities running a procurement under the “light touch” regime for health and social services. This provision allows the contracting authority to alter the stated process while underway (subject to certain conditions including that this does not amount to a breach of equal treatment and transparency). The final version now includes a new obligation to inform bidders still participating of any such changes.
Schedule 1 List of central government contracting authorities - The updated list of central government contracting authorities is now included at Schedule 1.
Preparing for the "big change"
The start of the new regime is looming large on the horizon - 26 February is less than 3 weeks’ away! All procurements commenced (i.e., advertised) on or after that date will fall under the new regime. The following are our selected “top ten tips and highlights” for contracting authorities which we hope will help you to prepare:
Start now or wait?
If you’re about to commence a procurement, is it worth waiting, or possible to wait, until after 26 February to take advantage of some of the additional flexibilities (eg, the use of the competitive procedure with negotiation) or the reduced timescales which are built into the PCR 2015? Or conversely, are there compelling reasons in favour of pressing ahead quickly (which might be the case if you are procuring Part B services for the purposes of the current PCR 2006; see next bullet!)
Light touch or full regime? From 26 February, the old distinction between “Part A” and “Part B” services disappears and is replaced by the new ‘light touch’ regime. Under the light touch, all health, social and some other services contracts within the CPV codes set out at Schedule 3 must be advertised in the OJEU in accordance with Regulation 74, if valued at over EUR 750,000. Note, however, that this “light touch” regime does not (yet) apply if the contract is for health services within the scope of the NHS Regulations. While the majority of former “Part B” services fall within “light touch”, don’t assume this as there are some notable exceptions (including no catch all “other services” category). Those services which are not expressly identified in Schedule 3 will now be subject to the full regime.
Front load your preparations
Under the new regime, all “procurement documents” (and this is widely defined) must be ready and made available electronically (via the internet) from the date of the OJEU advertisement (or invitation to confirm interest where a PIN has been used as a call for competition). This may well be a significant change to your current processes and preparations which may, to date, have taken a more linear, staged approach to the drafting and availability of your procurement documentation.
Know your timescales
In most cases timescales for the different stages of the procurement procedures are shorter. If you’re a sub-central contracting authority, you also have the flexibility (for restricted and competitive negotiated procedures) to agree the time period for submitting tenders with bidders. If you intend to do that, make sure that all bidders agree.
Update your precedent documents
- Make sure, for example, that the revised and expanded grounds for exclusion (both mandatory and discretionary) replace the existing grounds.
- Check any selection criteria are still compliant (e.g., turnover requirements not exceeding twice contract value).
- Remember, when drafting your contract award criteria, that MEAT (most economically advantageous tender) has a slightly different meaning to its meaning under the PCR 2006; and that the new term “best price-quality ratio” has been introduced. Also, if you are proposing to use "life cycle-costing" as an award criterion, check you’ve included all information on this as Regulation 68 requires you to do.
- Amend timescales, terminology and references to the “Regulations”.
- Check content – have you included all information in your procurement documents as the new regime requires you to include? Note, you will need to check against the EU Directive for this as, in many cases, the PCR 2015 simply cross refer to the Directive rather than repeating its provisions. Why not prepare some simple checklists to make sure that everything is covered?
- Don’t forget your record keeping and reporting obligations including the need for the “Regulation 84 report” to document, for each procurement, key decisions and steps taken along the way. Again, a simple check-list would be a useful aide memoire for this.
Accommodating change and termination provisions
Regulation 72 on modification of contracts sets out clear parameters on those changes to an existing contract which can be accommodated without triggering the need for a new procurement process. When drafting your contract terms (including change control provisions) to issue with your procurement documents, and when identifying the scope of the contract in your OJEU, check the Regulation 72 ‘safe harbours’ and maximise your opportunities to use them in the way you approach your drafting.
And while you’re drafting or updating your contract terms, include provisions to allow for contract termination in the circumstances covered by Regulation 73. It’s better to have dealt with this up-front and included your own provisions on giving notice, consequences of termination etc. than to remain silent and have these dealt with through the Regulations’ deeming provisions.
Be ready for the “Lord Young reform” provisions
There’s a lot of new obligations to get to grips with; and watch out for Cabinet Office guidance on these and the new statutory obligations to “have regard to” the guidance or report as a “reportable deviation” departures from it.
Know your numbering
Remember, even provisions which are little changed from the PCR 2006 will likely have a new Regulation number. For example, the familiar Regulation 32 standstill notices and the Regulation 32A standstill period now become Regulations 86 and 87 respectively.
Which is which?
Don’t throw your copy of the PCR 2006 away! Remember the PCR 2006 will still apply to any procurements already started prior to 26 February 2016 (and in a few cases, such as health service contracts under the NHS Regulations even longer). So for a while you’ll be working with two sets of Regulations, so make sure you know which of your procurements is following which.
Update your internal procedures and policies
Ensure your staff know about them and are trained - see below as we’ve got some practical seminars on the way to help you with this.