What, more procurement regulations?! The SBEE Act Regulations 2015

Our Countdown to Law-nch series has so far focussed on the draft Public Contracts Regulations 2015.  Although the Government’s response to the consultation on the draft Regulations was published on 30th January, as yet we still have no definite date for their coming into force.  The consultation response just refers to "early 2015" (but we have heard on the grapevine the Cabinet Office may be working to the end of February 2015 as a timetable). Look out for further blog posts as soon as more concrete information is available.

We are therefore turning our attention this week to the “other” procurement regulations and, following the announcement by the Cabinet Office of its policy statement, how the government intends to use its new powers under sections 39 and 40 of the Small Business, Enterprise & Employment Bill (this link is to the latest draft as brought forward last week from Committee stage in the House of Lords). The SBEE Bill is currently making its way through the legislative process and is expected to become law in the not too distant future.

Section 39 will allow the government to make a second raft of regulations governing public procurement, aimed at implementing Lord Young’s policy drive to encourage small and medium sized players in the market.

Section 39 is very broad and essentially gives the government the power to make whatever regulations it sees fit about the way contracting authorities exercise their procurement functions (including the management of contracts once they have been entered into). It contains an illustrative list of the sorts of duties the regulations might cover, for example:

  • an obligation to procure in a timely and efficient way;
  • duties around the procurement process, such as timescales and pre-market engagement;
  • duties to make information and procurement documentation available free of charge;
  • a duty to accept invoices by electronic means; and
  • a duty to monitor and report on compliance.

There has been a consultation, on the back of which the government has published a couple of illustrative regulations that give us a taster of the likely direction of travel. These regulations will apply to above-threshold procurements (except the procurement of health services covered by the NHS (Procurement, Patient Choice and Competition) (no 2) Regulations 2013 (the ‘NHS Regulations’)) and will bind all contracting authorities covered by the Public Contracts Regulations 2015, except for maintained schools/Academies.

The government’s general approach to the Public Contracts Regulations 2015 (and in implementing EU law generally) is to implement the parent EU directive as minimally as possible and to take a “copy out” approach to avoid the risk of “goldplating” (i.e. exceeding the regulatory requirements of the directive itself).

It is a mark of the importance the government places on the SME agenda and the Lord Young reforms that, in this area, it is prepared to go rather further than the directive itself required. This is demonstrated, for example, by the inclusion of draft Regulations 105 to 109 in the Public Contracts Regulations 2015, which for the first time will regulate under-threshold contracts, and also by these illustrative SBEE Act regulations which go a good deal beyond the minimum requirements of the parent directive.

The first illustrative regulation will not impose an absolute requirement to use pre-market engagement, but it will require any contracting authority choosing this route to do so in a manner that “increases awareness of and interest in bidding” by smaller companies and social value enterprises, “and other economic operators” (which on our reading must refer to all potential suppliers in the market). This is taking regulation a good deal further than is required by draft Regulation 40 of the Public Contracts Regulations 2015, which already covers premarket engagement. Given that there will be an obligation to report on how the SBEE Act regulations have been complied with, contracting authorities will need to work out how to demonstrate that their pre-market engagement has been properly set up and directed at the right sections of the market.

The second illustrative regulation will require contracting authorities to run procurements in a way which has regard to “lean sourcing principles”. These principles are set out in the illustrative regulation and are aimed at maximising efficiency through appropriate planning and effective engagement with suppliers and stakeholders.

We can expect to see further illustrative regulations in due course; the Cabinet Office has said in its policy statement that it is looking at potentially using the SBEE Act regulations to require contracting authorities to:

  • accept electronic invoicing;
  • ensure bidders have free access to information and documentation about procurement opportunities; and
  • run a debrief process for unsuccessful bidders even where the procurement value is under the relevant threshold.

Section 40 of the SBEE Bill gives the government the power to investigate how public bodies have exercised their procurement functions (excepting Academies and maintained schools, together with the procurement of health services covered by the NHS Regulations 2013),which are all exempt from the threat of investigation).

Comment

It is clear that the Public Contracts Regulations 2015 will not represent the whole story when it comes to the regulation of public procurement in the UK. We already have difficult issues around how the “light touch” regime for health and social services in the PCR 2015 will mesh together with the rules on the procurement of health services under the NHS Regulations 2013 (to add to the uncertainty here, the Labour Party has recently said that, if it wins the General Election on 7 May, it will immediately be looking to roll back the NHS Regulations 2013 and reduce the trend towards tendering out of health services).  The waters will only be made more murky as we consider how the SBEE Act regulations will fit into the legislative matrix.

The Cabinet Office appears to be proposing to use SBEE Act regulations to make statutory the types of guidance which would previously have been the subject of a Procurement Policy Note.  However, in the absence of specific powers to enforce these, they appear to have struggled to encourage Government and the wider public sector to comply – but these new provisions will clearly carry more “clout”.   That said, it is not completely clear what the consequences for breach of the SBEE Act regulations will be, nor where the route to challenge will lie for a bidder who believes a contracting authority has failed to comply with its duties. Of course the government could export across the remedies provisions of the Public Contracts Regulations 2015, but these require bidders to start proceedings in the High Court, which may well lie beyond the reach of the very SME bidders that the SBEE Act regulations aim to encourage.