Increasingly, health and social care is provided by organisations who have bid for contracts from the NHS or local councils under the EU procurement regime. These organisations should be aware of significant changes to the procurement framework which are on the horizon.
The European Commission first announced its ambitious plans to modernise the existing EU procurement rules in December 2011. Reform has now come one step closer with the formal adoption of two new EU Directives, which came into force on 17 April 2014. New regulations, implementing the Directives are expected for England, Wales and Northern Ireland in October 2014
Given the ambitious implementation plans, those who bid for contracts should be aware of some of the new provisions now and ensure they are ready in good time for the changes coming into effect.
Some of the Key Changes
There are a number of changes being introduced by the new rules, the key ones include:
- Categories of Services – This is likely to be a significant change for those operating in the health and social care sector. The new rules replace the distinction between priority 'Part A' services (fully regulated) and non-priority 'Part B' services (currently subject to limited regulation) with a new, less onerous advertising and award regime for a specific sub-set of social and other specific services with a contract value over €750,000 (public sector) and €1,000,000 (utilities). This is one of the areas that the Cabinet Office has been consulting on for the new regulations as it is up to Member States to best decide how to ensure that the “light touch” regime that is put in place complies with general Treaty Principles of transparency, equal treatment and non-discrimination. The details will be set out in draft regulations which are eagerly awaited.
- Award criteria - all award decisions are to be on the basis of the most economically advantageous tender, which can be identified on the basis of things such as price-quality ratio and/or by the use of lifecycle–costing as a means of assessing cost-effectiveness. Specific provisions have been included on what is expected to be covered by the term “lifecycle-costing”. Awards on the basis of “lowest price” are no longer permitted.
- Reducing documentation – the introduction of the concept of a “European Single Procurement Document”, namely a document which bidders can continually update and use to “self-declare” as part of their responses that they satisfy relevant selection criteria with the aim of simplifying procedures for bidders. This should be of assistance to bidders in reducing the burden of completing similar, but not identical, tender requirements each time they bid for a public sector contract.
- Revisions to exclusions - additions to the grounds for exclusion at selection stage (including poor performance on previous contracts) and provisions allowing for “self-cleaning” to permit economic operators to potentially continue to be involved in procurements even where exclusion grounds technically apply. Bidders will need to be aware of the exclusion for poor performance on previous contracts and we expect that Cabinet Office may well issue guidance to contracting authorities on this aspect.
- Assessment of financial capacity – as one of the measures to encourage SME participation, the introduction of a limit on the minimum yearly turnover that bidders are required to have will be twice the contract value (except in duly justified circumstances where a higher level may be permitted based on the nature of specific works, services or supplies).
- Use of lots – provisions have been included requiring contracting authorities to explain why they may have decided not to sub-divide a contract in lots. The new rules also expressly provide for the assessment of offers across multiple lots when determining the most economically advantageous tender. The failure of some authorities to break up larger contracts into lots has been the subject of criticism by SMEs over the last few years.
- Reflecting market practice - specific provisions dealing with potential conflicts of interest, prior involvement in a procurement process and anticipating the potential for preliminary market engagement, all of which are situations which often come up in practice.
- Simplified procedures - the ability for certain contracting authorities (including local authorities) to use a prior information notice as a means for calling for competition and potentially reducing timescales, as well a general reduction in other mandatory timescales (such as those for submitting expressions of interest and tender responses).
- E-procurement – plans included to work towards the mandatory use of e-procurement, although this is working to a separate and extended deadline for full implementation.
- Additions and clarifications - other clarificatory and procedural provisions relating to issues such as the following:
- the scope of awarding reserved contracts to certain organisations (for example, public service mutuals and social enterprises in the UK)
- compliance with EU environmental, social and labour obligations and
- procedures relating to sub-contracting.
It is recommended that your procurement personnel are aware of the proposed changes and keep up to speed on the timetable for national implementation; this could include planned training (possibly aligned with the publication of the draft regulations) or more general awareness raising. Until the new rules come into force, the existing Regulations will continue to apply and there is likely to be a transitional phase during which an authority could have procurements running under both regimes.