Important reforms to the EU rules on public procurement have been implemented into UK law by the Public Contracts Regulations 2015, which enter into force today.  The new Regulations make various changes and clarifications to the rules governing the award of contracts by public bodies in England, Wales and Northern Ireland.  Overall, they introduce greater flexibility and clarity for public sector purchasers and their suppliers.

The new Regulations will apply to any public procurement procedure which commences on or after today.  Some of the most significant changes are highlighted below.

  1. Two new award procedures
  2. Expanded rules on the exclusion of bidders
  3. New rules on changes to existing contracts
  4. Other significant changes
  5. New regulations for utilities and concessions to follow later this year 

1. Two new award procedures 

One notable reform is the introduction of two new contract award procedures: the "competitive procedure with negotiation" and the "innovation partnership".  These increase the range of options available to public authorities when they seek partners for complex or innovative projects. 

The competitive procedure with negotiation will be available on the same grounds as the existing competitive dialogue procedure (which is retained), such as where negotiations are necessary due to the nature, complexity or risk-profile of the contract.  It replaces the old "negotiated procedure" which was available only on narrower grounds.  The new procedure gives public authorities the freedom to negotiate with bidders at all stages of the process, except after the submission of final tenders.  It remains to be seen whether public authorities will start using this procedure instead of competitive dialogue for major procurements.

The innovation partnership can be used whenever a public authority is seeking a partner to develop an innovative product, service or work, which the authority will subsequently purchase from that partner.

2. Expanded rules on the exclusion of bidders

There are significant changes to the rules which allow contracting authorities to exclude or disqualify parties from participating in a procurement procedure. The grounds for discretionary exclusion have been expanded to include:

violations of environmental, social or labour laws entry into agreements aimed at distorting competition conflicts of interest poor performance of previous public contracts

The final new ground will permit contracting authorities to exclude companies which have been guilty of "significant or persistent deficiencies" in their previous performance of public contracts, leading to their early termination, damages or other sanctions.

The new Regulations also provide that the period of exclusion will last for five years following the date of a relevant conviction under the grounds for mandatory exclusion, or three years from the relevant event justifying discretionary exclusion.  Previously, no maximum period was specified, leaving uncertainty as to when past misdemeanours could be regarded as "spent".

A further new provision requires public authorities to admit firms which fall within one of the exclusion grounds but which have taken sufficient corrective "self-cleaning" measures to ensure that the relevant offence or misconduct will not be repeated.

3. New rules on changes to existing contracts

The European Court ruling in Pressetext established that significant changes to an existing public contract may be regarded as the award of a new contract which has to be put out to tender under the procurement rules.  The new Regulations include detailed provisions clarifying which types of changes will or will not be sufficient to trigger this requirement. 

The new rules specify, for example, that a re-tender is not required where the monetary value of a change falls below the threshold for application of the Directive and represents less than 10% of the initial contract value (or 15% in the case of works contracts).  Moreover, a new tender is not required if the change had been provided for in the initial contract through "clear, precise and unequivocal review clauses".

The risk that variations to an existing agreement will fall foul of the procurement rules was illustrated by the recent High Court ruling inGottlieb v Winchester.  In that case, the Court halted a major regeneration project in Winchester by ruling that substantial variations to a development agreement were unlawful under the procurement regime.  [click here to view previous e-bulletin]

4. Other significant changes

Other changes introduced by the new Regulations include the following:

The previous distinction between "Part A" and "Part B" services has been abolished.  Almost all types of service are now caught, although a lighter-touch regime is foreseen for legal, social and educational services, which will have to be advertised in the EU Official Journal if their value exceeds Euro 750,000. New provisions spell out the scope of the derogations for "in-house" and "public cooperation" contracts that are awarded between public bodies.   Preliminary market consultations, prior to launching a procurement procedure, are expressly permitted. In order to facilitate SME participation, authorities may not set a minimum turnover requirement at more than double the contract value. The minimum time-limits which authorities must allow for bidders to respond to notices or submit tenders have been shortened, so as to speed up award procedures. When comparing tenders for services contracts, contracting authorities are permitted to take into account the qualifications and experience of the individual staff assigned to performing the contract.  Case law had suggested that these factors could not be considered at the award stage.

5. New regulations for utilities and concessions to follow later this year

Finally, it should be noted that separate new procurement regulations will be adopted later this year, governing

  • procurement by utilities in the water, energy and transport sectors, replacing the current Utilities Contracts Regulations 2006; and
  • the award of public concessions for works or services, which are only partially regulated at present.