Out-Law Guide | 10 Jul 2006 | 11:23 am | 4 min. read
This guide has been superseded. Instead, please see our guide on Public procurement law: the basics.
The guide below is out of date and is no longer updated.
The rules affecting procurement of contracts for works, services and supplies were brought together in one piece of consolidated legislation for England, Wales and Northern Ireland, the Public Contracts Regulations 2006 (which came into force on 31st January 2006) and one piece of consolidated legislation for Scotland, the Public Contracts (Scotland) Regulations 2006 (which also came into force on 31st January 2006). These Regulations implement the European Commission's Consolidated Directive, adopted in March 2004, into UK law.
One of the aims of the European Commission's Consolidated Directive was to bring together the three old Directives covering works, supplies and services into a new single consolidated text. This change should make it easier for contracting authorities to follow the public procurement rules as they can now all be found in one place, within the Regulations.
It had also become clear over the years that important aspects of the rules set out in the various directives were unclear and, as a result, had to be clarified by the European Court of Justice in a number of cases. The new Consolidated Directive, and therefore the Regulations, both provide a clearer statement of the law, bringing it into line with the ECJ's judgments. The Commission has also simplified the financial thresholds under the public procurement rules. This should make it easier for contracting authorities to understand when the rules apply to them.
The combination of consolidation and clarification means that the Regulations are a clearer, more user-friendly statement of the law. It stands to reason that if contracting authorities are better aware of their obligations contractors should benefit from this.
Contractors are also given a key window to challenge wrongful award decisions in the Regulations.
In 1998, the European Court of Justice issued a landmark ruling, known as the Alcatel case. It said that national courts in EU Member States must, in all cases, be able to review and set aside award decisions on procurement contracts subject to EU procurement Directives.
Following that decision, contracting authorities are now obliged to allow a standstill period of at least 10 calendar days between the date of notifying tenderers of their contract award decision (which must be in writing) and the date they propose to enter into the contract (in the case of contracts subject to the full regime). If a tenderer makes a request for a debriefing by the end of the second working day of the 10 day period, authorities must debrief the tenderer during the standstill period. In any event, there must be three working days between the debriefing and the end of the standstill period. The purpose of this change is to allow aggrieved bidders a reasonable chance to consider their situation, and to bring an action before the contract is concluded if they think they have a case (see below).
A commonly used procurement tool is the multi-supplier framework agreement. Under the Regulations, strict rules now apply to frameworks. For example, they must not generally exceed a term of four years and the terms of any framework must be determined at the outset. The Regulations also provide for a "mini-competition" to be used as an alternative way of making call-offs under the framework contract (the other being by applying the prescribed terms of the framework contract itself).
The Regulations also introduce a new procedure known as the "competitive dialogue", alongside the existing open, restricted and negotiated procedures (with/without advertisement). Although it is only available in limited circumstances for the procurement of "particularly complex" contracts, this procedure has the advantage of allowing the input of those participating in the tender process.
During the "dialogue", bidders are able to discuss all the aspects of the contract individually with the contracting authority. Once the dialogue has generated solutions to the agreed requirements, tenders are invited based on each tenderer's individual solution. The best tender can then be selected.
The chief advantage of the competitive dialogue procedure from the contractor's point of view is that it should be lawful in more situations than the negotiated procedure without advertisement. Hence there is less risk of a contract awarded under the competitive dialogue procedure having to be set aside, a scenario that every contractor would want to avoid.
Apart from clarifying and simplifying the rules on public procurement, the Regulations also aim to modernise procurement practices by placing more emphasis on the use of e-procurement. For example, shorter minimum time-scales can apply when contract notices are sent electronically. Authorities may also detail their own procurement activities on a website known as a "buyer profile". The publication of scheduled purchases and PINs (Prior Information Notices) on a buyer profile should give potential tenderers plenty of time to prepare in advance of contracts being formally publicised.
The Regulations also introduce two new electronic purchasing tools: dynamic purchasing systems (DPS) and electronic auctions. DPS allow an electronic mechanism for multiple purchases under successive contracts to be set up from a list of pre-qualified tenderers. As the name suggests, the "dynamic" nature of the DPS means that there will be continual competition between tenderers, who are able to update their indicative tenders throughout the life of the DPS. However there are disadvantages to the DPS from the contracting authority's point of view, not least the need to place an OJEU advertisement prior to every contract awarded under it. So it remains to be seen how popular it will be in practice. Detailed rules have also been introduced on the use of electronic auctions.
Contracting authorities are under a duty to comply with the public procurement rules (where applicable). If they do not comply, contractors have two avenues of redress. Firstly, aggrieved contractors may bring actions in the UK courts for damages and/or for the award decision to be set aside (subject to strict time limits).
Alternatively, a contractor may bring the breach to the attention of the European Commission by lodging a complaint with it. If the Commission were to launch an investigation, this could ultimately lead to the UK facing formal legal proceedings in the European Court of Justice (as the Member State where the alleged breach took place). Although damages could not be awarded to the aggrieved contractor, the Commission could insist that the UK take action against the authority in order to ensure that it complies with any judgment. This could mean that a concluded contract awarded in breach of the Regulations might have to be set aside. The contracting authority might then re-tender its requirements lawfully under the Regulations.