Ruth Connorton and Tim Dennis

29 April 2015

CIPS North East branch

Public Procurement Law Update

- New rules, same problems?

Legal background EU directives

Concession Directive 2014/23/EC

Public directive 2014/24/EC

Utilities Directive 2014/25/EC

English law covers Wales and NI (separate Scottish Regs)

Public Contracts Regulations 2015 (PCR)

Public Contracts Regulations 2006 (as amended) still valid for

health service purchasing under NHS (Procurement, Patient

Choice and Competition) (No 2) Regulations 2013 – health

service purchasing by NHS England and CCGs and

concessions

Case law

Guidance and PPNs

Concessions Directive Works/ services concessions over threshold (£4,322,012)

Must include transfer of operating risk covering demand/ supply or

both

All public, some utility provisions and defence

For social/ other services – contract notice and award notice only

Time limited - recoup investment and a return on capital

General process subject to Treaty principles

Minimum period for tenders 17 days

Award criteria in descending order of importance and potential to re-

order where an unforeseen innovative solution with exceptional

functional performance arises

PCR 2015 In force 26 February 2015

Procurements with contract notice on/after that date

Works, supplies, non “light touch” services

Existing thresholds apply

Light touch regime for social and other services - replaces

Part B

“Social and other services” Replaces Part B

Schedule 3 exclusive list of services by CPV code

£625,050 threshold

OJEU advertising: contract notice or PIN published “continuously”

Treaty principles apply - equal treatment and transparency

Significant flexibility in process, time limits to be reasonable, no

standstill required (?)

Contract award notice (can be published quarterly)

New obligations – SME friendly? Contracts Finder notices (above and below threshold)

All procurement documents must be available via the internet from

date of OJEU publication

Standard CCS PQQ mandated - England

No PQQ below goods & services threshold

Contracts Finder award notice (above and below threshold)

Contracts Finder notices for framework call-offs (any value)

Justification for not subdividing into lots

30 day payment terms throughout supply chain and annual

reporting on compliance

Available procedures Procedure When?

Open

Restricted

Freely available

Innovation partnerships Where innovative need not freely available on

the market

Competitive dialogue

Competitive procedure with

negotiation

Where needs:

- adaptation of readily available solutions

- design or innovative solutions

- prior negotiation of contract needed

- technical specification cannot be established

Negotiated procedure

without prior publication

Very limited grounds

Utilities free choice except negotiated without publication

Tendering processes Open Restricted Negotiated Comp

dialogue

Innovation

partnership

Pre market

engagement

Contract notice

PQQ x

ITT

Negotiation X X

Tender

Post selection

negotiation

X X X

Award

Further growth X X X X

Comp negotiation vs Comp dialogue Competitive negotiation

Know needs and characteristics

Negotiate with all on basis of initial and subsequent tenders,

but not final tenders (runs like restricted)

Competitive dialogue

Know needs and requirements

Dialogue with all to identify solutions and means best suited to

satisfying needs, final tenders

Clarify, specify and optimise all tenders

Final negotiations to confirm commitments/ terms but not on

essential elements or to distort competition

Innovation Partnerships Must be able to identify a need for an innovative product, service or

works that cannot be met by the current market

“Innovation” …new or significantly improved… including…

production, building or construction processes, a new marketing

method, or a new organisational method in business practices,

workplace organisation or external relations including…helping to

solve societal challenges or support the Europe 2012 [2020]

strategy for smart, sustainable and inclusive growth

One partner or several partners each conducting separate R&D

Negotiation permitted and must structure in successive phases: eg

R&D, prototype, manufacture, delivery

Must establish IP rights base to go to market

Value of delivery not disproportionate to value of investment for

development

Pre Market Engagement Expressly permitted (and encouraged by Cabinet Office)

To prepare the procurement and inform the market of procurement

plans and requirements

Authority must take appropriate measures to ensure that

competition is not distorted

Can only exclude where there are no other means to ensure non-

distortion of competition

Must provide the tenderer with an opportunity to prove distortion of

competition will not result

CCS Standard PQQ Must use for all procurements (including light touch) if over

threshold

Core questions and additional modules

Must add your own evaluation methodology

“Reportable Deviations” cannot deviate from questions or question

wording unless justified and then must report to CCS within 30

days of making PQQ available to candidates – from 1 September

2015

Cannot use PQQ stage below goods & services threshold

Will be replaced by ESPD - European Single Procurement

Document

PQQ grounds Mandatory exclusion criteria (5 years)

Discretionary exclusion criteria (3 years)

Significant or persistent deficiencies under a prior public

contract which led to early termination, damages or comparable

sanctions

Economic and financial standing

Minimum turnover (max 2x contract value unless exceptional)

Information on accounts (must state how scored)

Any minimum hurdles must be in contract notice or ITCI

Self cleansing/ declaration permissible

Continuing obligation throughout process

Contract award criteria Must award to “most economically advantageous tender”

On basis of price or cost – so can be price only

Or can include the best price/quality ratio

Price can include life cycle costing looking at acquisition,

maintenance, end of life costs, usage eg energy consumption

Quality criteria can take into account e.g.

Technical merit, social, environmental and innovative

characteristics

Qualifications and experience where significant impact on

contract performance

After sales service

Frameworks Methods of call off:

Single supplier framework – direct call off

Multi supplier framework – direct call off or mini-competition OR

mini-comp only

Must set out in framework agreement:

Objective criteria for deciding between direct call-off or mini

competition

How decision will be made if direct call off; and

Mini-competition award criteria

Must publish contract award information on Contracts Finder for

each call off contract

Things not coming to market? Continued in house provision

“Social and other services” no cross border interest (but still

should be some competition for value/ governance reasons)

Not considered/ illegal process

Direct award to a mutual

Direct award to an in house service

Awards to mutual or social entities Contracts for limited range of social/ other specific services

including surgical and medical hospital services, education

Can restrict award to types of organisation where

its objective is a public service mission

profits are reinvested or distributed to participants

management/ ownership is based on employee ownership/

participatory principles

haven’t awarded a contract for those services by that authority

in past 3 years

Limit of 3 years’ duration on the awarded contract

Competition amongst reserved bodies

“In house” awards

Structural (Teckal)- award to a legal person governed by private or public law

Control test - decisive influence over strategic objectives and

significant decisions (can be jointly exercised)

Activity test - 80% of the activities must be carried out for the

controlling authority

Capital – no direct private capital participation except required

non-controlling, non-blocking without decisive influence

Public to public co-operation (Hamburg)

Co-operate to deliver public services driven by goal of achieving common objectives

Governed solely by public interest considerations

Perform on the open market less than 20% of activities

Modification of contracts - allowed Modification can occur without a new procurement arising where:

Contract clearly and unequivocally provides for the change and

it doesn’t affect overall nature

Additional provision not envisaged but a change of contractor

can’t be made due to interchangeability or interoperability

issues or significant inconvenience/ substantial cost duplication

and not >50% of contract value

Couldn’t be foreseen, doesn’t affect overall nature and not

>50% of contract value

Change of contractor due to merger, insolvency, acquisition etc

Change value doesn’t exceed the relevant threshold AND is

less than 10% of the original contract value (services) or 15%

of the contract value (works) – net cumulative value of changes

Not “substantial”

What is “substantial” modification Changes are substantial, and therefore give rise to a new

procurement, where it:

Renders the contract materially different in character to that

originally concluded

Introduces conditions which if included originally would have

brought other bidders/ different winner

Changes the economic balance of the contract in favour of the

contractor in a manner not provided for initially

Extends the scope of the contract considerably or

A new contractor replaces the original contractor (except

insolvency, acquisition, re-organisation)

Reporting Information on every contract/ framework agreement/ DPS

Authority details, the subject matter and value of the contract

Details of any shortlisting or de-selection and reasons;

Reasons for rejection of any abnormally low tenders

Winning bidder identity and reasons and if known any sub-

contracting levels and main sub-contractor identities

Justification for the choice of procedure – negotiated/ dialogue

Reasons for any decision not to make an award

Reasons why any non-electronic communication has been

used for tender submission

Any conflicts of interest detected and subsequent measures

taken

Send to Commission or Cabinet Office on request

Documentation retention Keep documentation for at least 3 years to "justify decisions taken

in all stages of the procurement procedure" such as on

Communications with bidders and potential bidders and internal

deliberations

Preparation of procurement documents

Any dialogue or negotiation

Selection and award of the contract

Claims/ remedies

Pre contract award Post contract award

Breach of duty Automatic suspension

Damages

Damages

Ineffectiveness

- illegal direct award

- breach duty &

standstill

- incorrect over

threshold framework

call off

Automatic Suspension

Voiding of contract

Damages

Civil financial penalties

Contract cancellation

Voiding of contract

Damages

Civil financial penalties

Contract cancellation

Issues relevant to litigation

Reporting requirements and record keeping

Document Retention

Discretionary exclusion criteria – persistent deficiencies under a

prior public contract – may result in more disputes between parties

during contracts

Revised definition of “Economic Operator” – wider group of

potential claimants under PCR 2015?

What we tell bidders Go fishing

Time is of the essence - act quickly

Use your contacts - “off the record” isn’t

Press the procuring body - debriefs

No stigma to challenging

Reasons/ issues can leak out more as you push to keep going

Get legal advice ASAP – don’t prejudice claim

Current trends Increasingly litigious area

Public Sector challenging Public Sector

Increasing claims in SOS services areas – stopping awards

Economics often driving challenges

Phone a friend

Ruth Connorton

Partner, Head of Procurement

T: 0191 404 4130

M: 07711 969 790

E: rconnorton@dacbeachcroft.com

Tim Dennis

Senior Solicitor

T: 0191 404 4003

M: 07725 642701

E: tdennis@dacbeachcroft.com