On the 15 December 2020, the Cabinet Office published its long-awaited Green Paper setting out its proposed radical reforms to be made to the public procurement regime, which currently applies in England, Wales, Scotland and Northern Ireland post Brexit.
Up to 23:00 on 31 December 2020, the UK’s public procurement regime had to be based squarely upon EU directives. Following the expiry of the transitional period under the withdrawal agreement, the government has signalled its desire to move away from what it sees as an ‘…outdated public procurement regime…’, notwithstanding the fact that the EU model constantly evolved and is sought to be replicated in numerous states around the world.
The new approach sought to be followed by the government, aims to meet the less prescriptive rules set out in the international Agreement on Government Procurement (GPA), which forms part of the UK’s membership of the World Trade Organization (WTO) which commenced, independently of the EU, on 1 January 2021.
The Green Paper sets out numerous proposals and invites consultation with interested parties by 10 March 2021 to be sent to [email protected].
A significant point to bear in mind from the outset, is that the Green Paper is not seeking to alter or affect the procurement of healthcare services which, the Cabinet Office acknowledges, is already being reviewed and consulted upon by the Department for Health and Social Care as a result of the NHS Long Term Plan and its subsequent discussion papers Busting bureaucracy and Integrating care.
A summary of some of the key proposed changes is set out below:
Consolidation of the existing suite of regulations – creating a simpler regulatory framework
The most familiar set of procurement regulations will undoubtedly be the Public Contracts Regulations 2015, but there are also the Concession Contracts Regulations 2016 (applying specifically to the award of concession contracts), the Utilities Contracts Regulations 2016 (applying only to bodies defined as ‘utilities’ for these purposes) and, finally, the Defence and Security Public Contracts Regulations 2011 (applying to defence/security related contract awards).
The first proposal is to consolidate all of these regulations into a single set of rules for all contact awards. They will then be supplemented with sector-specific elements where different rules are required to protect national interest or for effective operation.
It is acknowledged that this is likely to be a complicated and lengthy exercise, but it is believed that it will, once implemented alongside the other proposed reforms, deliver a simpler and more agile procurement framework.
Reducing the number of procurement procedures
Currently, there are seven procedures available to buyers across the range of regulations:
- Open procedure
- Restricted procedure
- Competitive procedure without publication
- Competitive dialogue
- Competitive procedure with negotiation
- Innovation partnership
- Design competitions
The proposal is to reduce this to just three procedures:
- The new competitive flexible procedure: This would be consistent with the general principles of procurement, minimal detailed rules, advertised at the start and at award (consistent with the more comprehensive transparency proposals), permitting buying teams greater flexibility to design an appropriate process including opportunities to negotiate and innovate.
- The open procedure: Retaining the existing process for more routine, ‘off the shelf’ purchases.
- The limited tendering procedure: Akin to the competitive procedure without publication, gateway criteria to its use to be retained (urgency etc.) but to introduce a new ‘crisis’ criteria (see below); introducing mandatory contract award notice (consistent with greater transparency requirements).
Crisis gateway criteria
It is proposed that a new gateway criteria justifying the use of the limited tendering procedure be introduced (beyond those already set out in regulation 32) – the concept of permitting its use in the case of a ‘crisis’ is under consideration. The thinking behind this proposal is to permit contracting authorities to act quickly and effectively in circumstances which do not necessarily amount to extreme urgency due to unforeseeable events (as currently provided). The parameters of what a ‘crisis’ might amount to for these purposes is subject to the consultation, but the idea would be that the Minister for the Cabinet Office would have new powers to be able to declare a ‘crisis’. Interestingly, an associated proposal is that if a contract is legitimately awarded under these provisions on the basis of crisis or extreme urgency, they would be immune to an automatic injunction.
This proposal is, however, not to be seen as a ticket to make direct awards with impunity as it would involve a requirement for there to be a proper consideration of whether the market was such that accelerated procedures could be used in order to involve some competition and a record of their logic to be prepared and retained.
Removing the Light Touch Regime
Working on the assumption that the competitive flexible procedure should offer sufficient flexibility in a buyer designing their own procedure, it is proposed to remove the Schedule 3 services distinction, and treat all services alike thereby removing the need for the distinct Light Touch Regime process rules (and the associated higher threshold).
Enshrining key principles of procurement into law
Whereas, under the current procurement regime the fall back obligations, if not explicit in the relevant regulations, EU treaty obligations and principles are meant to be followed at all times. With the UK’s withdrawal from the EU, these general principles need to be replaced directly into domestic law, which explains why they will appear, at first glance, familiar.
The government has taken the opportunity to propose reviewing and revising these key principles, which are to be followed through every procurement moving forward as follows:
- Public good: Supporting the delivery of strategic national priorities including economic, social, ethical, environmental interests and public safety.
- Value for money: Enabling whole life blend of costs to be factored into the evaluation process.
- Transparency: Accountability for spending public money, anti-corruption and effectiveness.
- Integrity: Promoting good management, prevention of misconduct, fraud and corruption.
- Fair treatment of suppliers: Ensuring impartial decision making without conflicts of interest.
- Non-discrimination: Protecting suppliers from discriminatory behaviour by buyers.
In line with the ‘public good’ principle, there is a keenness to allow procurement priorities to adapt and evolve in line with national policy requirements as these change over time. There is a desire to allow buyers to have regard to national priorities of strategic importance which, we understand, would be published in national procurement policy statements from time-to-time.
Evaluation - MEAT becomes MAT
In order to widen buyers’ scope in evaluating tenders, it is proposed to change evaluation being based on most economically advantageous tender (MEAT) to simply most advantageous tender (MAT), which complies with the requirements of the GPA. The belief is that this will encourage buyers to place emphasis on non-economic factors, such as social value as part of the quality assessment.
Evaluation – Going beyond the subject matter of a contract
It is proposed to permit buyers to consider factors that are not directly linked to the subject matter of the contract under consideration in very limited circumstances (eg taking into account national strategic policy priorities and to drive up the standards of supplier behaviour). This could, for instance, include taking into account suppliers’ records on prompt payment of subcontractors and/or their plans for achieving environmental targets more generally than related specifically to this contract.
The new approach being proposed is novel in that it starts with an assumption that information is published through a notice or on a centrally managed data registry, unless there is a specific exemption, as a means to ensure quicker procedures. But also, to attempt to reduce the amount of delay involved to contract commencements where challenges are launched.
Proposals in this regard include:
- Establishing a single data platform for suppliers to register key data (akin to the ESPD currently) to streamline qualification procedures for suppliers.
- Widening the grounds to exclude suppliers to include poor past performance of public contracts and the addition of a new mandatory exclusion ground relating to the non-disclosure of beneficial ownership.
- Exploring the possibility of setting up of a centrally-managed list of debarred suppliers as a central resource which would be accessible to determine whether relevant convictions have been made against suppliers.
- Requiring contracting authorities to implement the Open Contracting Data Standard as a means to upload and maintain data which would be accessible by all public bodies for analysis at contract and category level.
- Wider assumption of the publishing of contract notices and contract award notices, but also upon variations being made to pre-existing contracts.
There are two proposals regarding the use of multi-supplier channels:
- Introducing a new Dynamic Purchasing System (DPS+), which could be utilised for a broader spectrum of goods and services, but which would involve any contract award under such a DPS+ needing to be undertaken using the new competitive flexible procedure.
- Acknowledging the utility of framework agreements but at the same time recognising that their use could feasibly be extended beyond the existing period of four years. Proposing a staggered approach whereby frameworks would be allowed to be established for a four-year term, which would be allowed to be closed for that term, but also allowing up to an eight-year term, where it would remain closed for up to three years, whereupon it would be reopened to competition in the market (like with a DPS).
One of the most vexing issues that has faced procurement professionals for many years is the way in which challenges have been able to be used as a tactical means to delay or frustrate the outcome of a procurement. While the Remedies Directive of 2007 was very much seen as being a key plank of providing the stick with which to beat contracting authorities into improving their compliance with procurement practice, the associated redress options have often been seen to be open to abuse (or probably more accurately been seen to be used tactically) – both as a tactical battering ram by suppliers with deep pockets, but also as a disincentive, in terms of cost, to genuine challenges being raised.
The options raised in the Green Paper regarding the enforcement regime are as follows:
- Exploring the possibility of introducing a specialised tribunal instead of the High Court to consider procurement challenges, and/or introducing a tailored expedited process within the High Court structure to review challenges once raised as a means to speed up the system, and in doing so, make the review process more accessible to suppliers.
- Considering whether there would be an opportunity to find a quicker way to apply to seek to lift (or, where appropriate, to retain) automatic suspensions.
- Excluding the application of an automatic suspension on the award of a contract let competitively in situations specifically of crisis or extreme urgency.
- Removing the requirement to send mandated debrief letters in as much detail as is currently required to bidders, while retaining the obligation on the buyer to publish some level of ‘basic disclosure information’ in a contract notice, before initiating contract award and continuing to respect a standstill period.
- Capping damages on challenges to their legal fees plus 1.5 x their bid costs and excluding damages for loss of chance, as a means to act as a disincentive for suppliers making speculative challenges. This is proposed not to apply in cases where a supplier may not have had the opportunity to challenge a procurement before award, in, for example, circumstances where there has been an illegal direct award, crisis procurements where the buyer has failed to publish a prior required notice and where malfeasance has been demonstrated on the part of the buyer.
Clearly a great deal of thought has gone into appropriate ways in which the UK’s procurement regime can be streamlined in terms of removing administrative burdens, while at the same time trying to achieve its end goals of removing corruption and encouraging speed and simplicity. This Green Paper presents a key opportunity to have in influence over how public procurement regulation affects you as both a supplier and/or buyer of goods, services and works in the public sector.
To have your say in responding to the questions posed throughout the Green Paper, you are invited to respond by 10 March 2021.
The Cabinet Office will then take some months to consider all responses and to then reflect upon then before consolidating them all into workable legislation, which is expected to become law in late 2021 or at some point in 2022.