Procurement

UK

Update on UK implementation of new EU Procurement Directives

The Government intends to launch a formal consultation on the new EU Procurement Directives this summer, paving the way for their implementation in the UK either at the end of 2014 or, more likely, early next year.

The Cabinet Office aims to adopt a “copy out” approach to implementing the new Directives, which means the UK implementing regulations will mirror the new Directives far more closely than the current regulations do their predecessors.

Nonetheless, there will be a need for legislative clarification in a number of areas where the wording of the new Directives could be improved upon. The Cabinet Office consultation presents an opportunity to help mould the UK implementing legislation.

Government mandates use of new Pre-Qualification Questionnaire On 11 July 2014, the Crown Commercial Service published a new Procurement Policy Note on the use of pre-qualification questionnaires (PQQs) when the Government is purchasing goods and/or services. This introduces new PQQ core questions to replace the former standard core questions.

Taking effect immediately, all Central Government Departments, Executive Agencies and Non Departmental Public Bodies must use the revised PQQ questions (except  in defence and security procurements).

In particular, the new core questions are designed to ensure that a bidder’s past performance is taken into account in future procurements (as well as introducing new questions on tax compliance) in accordance with new Government policy in these areas.

The new provisions on past performance apply to Government purchases of goods and/or services valued at £20m or above (excluding VAT) in the fields of ICT,  facilities management and business process outsourcing. They require purchasers to include minimum standards for reliability based on past performance and to ask for specified information (including certificates of performance) concerning a bidder’s past performance in the last three years.

Other contracting authorities such as local authorities and the wider public sector are strongly recommended to apply the revised PQQ questions in equivalent goods and/or services procurements.

However, construction (or works) procurements must continue to use PAS 91, rather than the revised PQQ.

Once the EU Procurement Directives are implemented in the UK, the Government plans to adopt a new approach to asking questions relating to a supplier’s suitability (implementing Lord Young’s May 2013 recommendations to open up public sector procurement and remove barriers for SMEs).

State aid

Europe

More aid permitted under new EU General Block Exemption

On 1 July 2014, the Commission’s new EU General Block Exemption Regulation (GBER) entered into force. State aid to businesses must normally be notified to the Commission for prior approval (unless the amounts involved are de minimis). The GBER exempts such state aid measures from having to be notified, if certain conditions are met.

The GBER will permit national EU governments to grant more state aid measures and higher amounts of aid than under its predecessor, without having to notify. The Commission estimates the GBER will exempt around 75% of all aid measures and approximately 67% of the aid amounts granted each year in the EU (compared to around 60% and just over 30% under the previous GBER). It adds that even more state aid measures could be exempted if EU Member States carefully design their aid schemes to satisfy the GBER’s conditions.

The principal provisions of the GBER are explained in ‘General Block Exemption Guidance’, issued by the UK Department for Business Innovation & Skills (BIS) in July 2014. In addition to providing clarity on the most commonly used sections of the GBER and on its significant changes, this guidance covers Regional Aid and aid for Research, Development and Innovation (RD&I). BIS states that further guidance on the GBER and on other new state aid rules will follow.

The GBER covers a number of new categories of aid:

  • Aid to innovation clusters
  • Aid schemes to make good the damage caused by natural disasters
  • Social aid for transport residents of remote regions
  • Aid for broadband infrastructure
  • Aid for culture and heritage conservation, including aid schemes for audio-visual works
  • Aid for sport and multifunctional recreational infrastructures
  • Investment aid for local infrastructure

In addition, the GBER broadens categories of aid that were already exempt under its predecessor:

  • There is wider scope for risk finance aid;
  • Investment aid for research infrastructure is exempted
  • There is a new simplified provision on start-up aid
  • New environmental aid categories are introduced (aid for the remediation of contaminated sites, district heating and cooling, waste management, operating aid for electricity from renewable sources and energy infrastructure)
  • There is a wider definition of the notion of disadvantaged workers for employment aid to the youngest
  • Aid may now be provided for compensating the costs of assistance provided to disadvantaged workers
  • Regional operating aid for outermost regions and sparsely populated areas and for urban development schemes is also exempted

The GBER also establishes higher notification thresholds and aid intensities, eg:

  • R&D projects notification thresholds are doubled
  • For risk finance, the previous annual tranches of €1.5m are replaced by a total limit that an eligible business can receive of €15m
  • The threshold for investment aid for sports and multifunctional infrastructures is now €15m or the total costs exceeding €50m per project
  • The threshold for investment aid for culture and heritage conservation is now €100m per project

However, while aid covered by the GBER need not be notified to the Commission, EU Member States will still have to publish lists  of aid recipients. In addition, the Commission will improve its monitoring of aid granted under the GBER and will require EU Member States to carry out an evaluation on the effects of, and submit an evaluation plan for, every  aid scheme with an annual budget of €150m or above, within 20 days of the implementation of the scheme.

These transparency provisions tie in with the Commission’s newly adopted transparency requirements. Under the new transparency Communication, EU Member States will be required to publish every state aid award above €500,000 on a dedicated website (which they have two years to set up), including the identity of the recipient, the amount and objective of the aid and the legal basis for it.

The Commission will continue to assess state aid measures that are not covered by the GBER under the relevant state aid guidelines and frameworks. Here, for example, the Commission has also recently adopted a new Framework on aid for RD&I activities, which entered into force on 1 July 2014.