New OJEU thresholds for 2012 and 2013
The European Commission has updated its works, supplies and services financial thresholds for the application of the EU Public Procurement Directives from 1 January 2012 to December 2013. The main new values in Euro and sterling are set out below:
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Important changes from 2011 (1): reduced time limits for challenges – 30 days from date of knowledge
The most important change in 2011 came from the Public Procurement (Miscellaneous Amendments) Regulations 2011 (SI No. 2053), and entered into force on 1 October 2011.
This introduced a 30 day time limit for interested parties to issue formal challenges in procurement disputes, running from the “date of knowledge” of the alleged breach. This is capable of being extended in the Court’s discretion up to three months (but no longer).
The changes to the time limits came about as a result of the judgment of the Court of Justice of the EU (“the ECJ”) in Case C-406/08 Uniplex, which condemned the previous UK rule on time limits requiring proceedings to be started ‘promptly and in any event within 3 months beginning with the date when grounds for starting the proceedings first arose’, subject to an open-ended discretion for the Court to extend time.
The ECJ held that two features were incompatible with EU law: the ‘promptly’ requirement, and the requirement for the 3 months to be calculated from, in effect, the time when the relevant breach of the procurement rules occurred (rather than from the date on which the claimant knew, or ought to have known, that the breach had occurred ‘the date of knowledge’).
Following various government consultations it was decided that a time limit running from the date of knowledge of the alleged breach and fixed at a period 30 days would be the most desirable clarification, striking the best balance between the legitimate interests of challengers and legal certainty for contracting authorities needing to be able to get on with procurements with some security. It was accepted that in a minority of cases, 30 days would not be enough, hence the Court retaining discretion to extend this limit, but only up to a maximum of 3 months.
Clearly with the shortening of time limits within which to act, bidders will need to be very clear on when is the “date of knowledge”, and take no chance with this (NB. the new rules apply to any situation from which the date of knowledge is on or after 1 October 2011). Recent cases like Mears v Leeds city Council and SITA v Gr. Manchester Waste Disposal Auth. have shown that bidders may not wait until every last piece of whatever jigsaw they are trying to put together falls into place.
Once they may be reasonably clear that a breach has taken place the time starts to run, and may not be suspended with endless requests for further information. From the contracting authorities’ perspective, there is an added incentive to provide bidders with full information on evaluation processes, with a view to effectively setting the new shorter time limits running.
The ultimate effect of the shortened deadlines is difficult to predict. It is possible that the new 30 day limit may deter challenges by leaving potential claimants with insufficient time to instruct lawyers and assemble their evidence and arguments. On the other hand, it might actually increase the number of challenges, with aggrieved bidders feeling the pressure to issue claims in time to meet deadlines without taking more considered views of the contracting authority’s decision and reasons.
Important changes from 2011 (2): time limit linked to issue of proceedings rather than their being served
Under the new rules, what the claimant needs to do within the time limit is simply to issue the proceedings rather than to serve them (after issue) on the defendant. The requirement on contracting authorities to refrain from entering into a contract the award of which is challenged by proceedings under the Regulations has also been modified. This requirement will now arise when the authority has become aware that a claim form has been issued rather than when the claim form is deemed to have been served under the Court rules. This change is coupled with a new requirement for the claimant to serve the claim form within 7 days of issuing it, bringing the proceedings back into line with those relating to judicial review.
Important changes from 2011 (3): Bribery Act 2010 brought within mandatory exclusions
The mandatory grounds through which an economic operator must be rejected under Regulation 23 of the PCR have been altered. The list of criminal offences has been updated to include relevant offences created or consolidated since the original PCR in 2006. The principal money laundering offences will now refer to convictions pursued under the Criminal Justice Act 1988, the Proceeds of Crime (Northern Ireland) Order 1996 and drug trafficking under the Drug Trafficking Act 1994.
The offence of corruption has been limited to active corruption in order to bring the provisions more closely into line with the Directives, which distinguish between active (giving a bribe) and passive (receiving a bribe) corruption. The Directives only require mandatory exclusion in the event of active corruption.
It is worth noting that only offences under sections 1 and 6 of the Bribery Act 2010 have been included as mandatory exclusion grounds; no reference has been included here to the section 7 offence (corporate offence of failing to prevent bribery). As regards the discretionary exclusions (PCR 23(4)) references are now made to take account of Debt Relief Orders and Debt Relief Restrictions Orders.
In addition, discretionary exclusion on the grounds of misrepresentation have been clarified to enable a contracting authority to exclude an economic operator which is guilty of serious misrepresentation in providing any information related to the selection process or where it fails to provide such information when requested to do so.
Christmas package on reform of the EU procurement rules
On 20 December 2011, the European Commission published its proposals to modernise and replace the current public procurement rules (Directives 2004/17/EC and 2004/18/EC for the public sector and utilities respectively) as well as proposing a new Directive on concession contracts. All three Commission proposals will now go to the European Parliament and Council of Ministers for adoption under the co-decision legislative procedure. If agreement can be reached at first reading, the package could in theory be adopted by the end of 2012 with implementation expected by 2014.
The following is a brief overview of the proposed changes:
Use of negotiated procedure and innovation partnerships The use of the negotiated procedure with advertisement will be made more available. This option will sit alongside the competitive dialogue procedure and increase the choice of procurement methods open to contracting authorities. Time limits for participation and offers will be shortened. A new special procedure for the development and subsequent purchase of new, innovative products, works and services has also been devised. Known as “innovation partnership”, this new procedure allows contracting authorities to structure a partnership in successive stages following an R&D process with targets and payments in appropriate installments and allowing tendering to be introduced at intervals assuming IP rights have been acquired. Contracting authorities are expected to welcome these developments as a slight loosening of their procedural obligations generally.
Part A and B services distinction to be abolished
The traditional distinction between so-called priority and non-priority services (‘A’ and ‘B’ services) will be abolished. However, the regular procurement regime will not be applied to social health or educational services, so called “services to the person”, as these vary widely between Member States and continue by their very nature to have a limited cross border dimension.
For these services, a specific regime will apply with a higher threshold of EUR 500,000 and require EU wide advertisement but discretion to organise the choice of providers in the most appropriate fashion. If this change is carried through it could make a very big difference indeed to many service providers used to effectively circumventing OJEU procedures by reference to Part B classification.
Selection and award criteria
The grounds for exclusion of candidates and tenderers have been reviewed and clarified. Contracting authorities will be entitled to exclude economic operators which have shown significant or persistent deficiencies in performing prior contracts. The proposal provides also for the possibility of ‘self-cleaning’: contracting authorities may accept candidates or tenderers in spite of the existence of an exclusion ground if they have taken appropriate measures to remedy the consequences of any illicit behaviour and effectively prevent further occurrences of the misbehaviour. The distinction between selection and award criteria would be more flexible, removing the current requirements for these to be applied in a particular sequence.
Contract modifications
A common issue for practitioners is what happens if there is a modification of contracts during their term. Provisions have been included to deal with unforeseen circumstances requiring contract modification where the overall nature of the contract does not change and the price increase is not greater than 50% of the original value. Substantial modification would require a new award (unless explicitly set out as review clauses/options initially) while modifications whose (cumulative) value is less than 5% of the price of the initial contract would be allowed.
Limit on turnover requirements
Turnover requirements which are frequently a real obstacle to access by SMEs are explicitly limited to three times the estimated contract value (except in duly justified cases). In addition, Member States will have the option to implement provisions whereby subcontractors can request for direct payment by the contracting authority for supplies, works and services provided to the main contractor in the context of the contract performance. This is intended to be an efficient way of ensuring that subcontractors are paid.
New regime for regional and local contracting authorities
There will be simplified procedures for regional and local contracting authorities, who may be able to replace the publication of individual contract notices by the publication of a general notice for their planned procurement for the next year.
Reduction of necessary documentation and EU procurement passport
The Commission intends to alleviate excessive documentation requirements via compulsory acceptance of self-declarations, whereby a bidder declares on oath that he fulfils the criteria which are a pre-condition for tendering (e.g. no conviction for corruption etc). Only the winning bidder would then be obliged to supply the documentary evidence to prove the facts declared in the self-declaration. Provision has been made for EU procurement passports to be issued by national authorities on the basis of a standard form (and in an electronic format within two years of implementation).
E-procurement
Ambitious measures on electronic procurement aiming at full electronic communication in public procurement within a period of two years after implementation of the new directive are envisaged.
National authorities for monitoring implementation and control of public procurement
Member States will be required to designate a single national authority in charge of monitoring, implementation and control of public procurement. This is new departure as until now, the procurement rules only govern up to the award of the contract. Such bodies already exist in some Member States but this will be a new departure for the UK.
Conflicts of interest/unfair advantage
The proposals also contains specific provisions on conflicts of interest and unfair advantage, the latter aimed at safeguards against undue preference for participants who have advised the contracting authority or been involved in the preparation of the tender.
New proposal to govern concession contracts
Concessions are partnerships between the public sector and mostly private companies, where the latter tend to operate, maintain and carry out the development of infrastructure (eg. ports, water distribution, parking garages, toll roads) or provide services (e.g. energy, water and waste disposal). Concessions are the most common form of public private partnership and their essence is that the private party – the concessionaire – derives a significant part of its expected revenue at its own risk. In other words, its ability to get paid and be profitable (or not) depends largely and often wholly on its performance.
Standard public contracts and works concession contracts are covered by the existing OJEU rules, but services concessions are specifically excluded. This loophole is claimed to give rise to potentially serious distortions of the Internal Market such as direct awards of contracts without any competition (with associated risks of national favouritism, fraud and corruption).
The Commission considers that to eliminate discrepancies among national regimes and ensure homogenous understanding of the Treaty principles across Member States, a European framework is necessary.
The new concessions Directive is not intended to have retroactive effect and concession contracts in place at its entry into force would not be affected for their entire duration. However, an extension to the duration of a concession contract may qualify as a new concession and therefore be subject to the rules of the new Directive, once the latter comes into force.
The new proposal for a Directive on concessions leaves public authorities entirely free to carry out public tasks assigned to them by using their own means or resources, but if they wish to outsource via concession the provisions of the new directive would have to be complied with.
These rules would include:
- compulsory OJEU publication of concessions whose value is equal to or greater than €5,000,000/ £4,348,350;
- minimum time limits of 52 days for the submission of applications for the concession;
- solutions for dealing with changes to concessions contracts during their term notably when justified by unforeseen circumstances;
- unlike the rules that apply to public contracts, Member States will be able to define the applicable procedures for the award of concessions so long as certain general rules concerning selection and award criteria and procedural guarantees are met. These rules aim at ensuring that such criteria are published in advance, are objective and not discriminatory. In general, they are less rigid than similar provisions currently applicable to public contracts.
- the Remedies Directives (Directives 89/665/EEC and 92/13/EC, as amended by Directive 2007/66/EC) would be applicable to all concessions above the threshold.
Conclusions
Firstly, the 2011 changes, of which the 30 days from date of knowledge rule is by far the most significant, have already made a big difference to everyday procurement practice, and we expect this to continue to be reinforced as time goes on.
Bidders must react quickly, and smart authorities will be more careful to ensure time periods run as quickly as possible. Whether one thinks 30 days is too long or too short this gives more legal certainty, and knowing where you stand is normally considered a good thing by all parties to these matters.
On the other hand, the reform package proposed creates all sorts of speculation as to what might happen to procurement practice in future years.
A number of very significant changes are anticipated and while these will not become law any day soon, under any scenario, the possibility that they are probably coming down the line within at least this decade is significant.
