Out-Law / Your Daily Need-To-Know

What has changed for contracting authorities in the 2015 Public Contracts Regulations?

Out-Law Guide | 13 Mar 2015 | 2:30 pm | 7 min. read

The 2015 Public Contracts Regulations implement the EU's 2014 Public Sector Procurement Directive in England, Wales and Northern Ireland.  The 2015 Regulations replace the previous UK public sector procurement regime which was set out in the 2006 Public Contracts Regulations.

This guide was last updated in March 2015

For a brief overview of the circumstances in which the new regulations apply, as well as some exceptions, please see our separate Out-Law guide. This guide will set out some of the main changes to the previous regime introduced by the new regulations.

What changes can you expect to EU notices?

The standard form EU notices for publication in the Official Journal of the European Union, including contract notices and prior information notices, are in the process of being updated, as member states have until 18 April 2016 to implement the changes.

The UK's Cabinet Office has indicated that it is working with the EU's e-Senders branch to ensure that the new notices are available to member states that are implementing early as soon as possible. The Cabinet Office has also published guidance on how to adapt the existing notices to comply with the new 2015 Regulations in the mean time (26-page / 496KB PDF). Authorities should continue to adhere to this guidance until the new notices become available and are available via e-sender systems, at which point the Cabinet Office will issue further guidance. 

Authorities can also expect a series of new EU notices produced to reflect new provisions in the directive; for example, a notice of modification of a contract during its term and a contract notice relating to the new 'light touch' regime contracts. These are also awaited alongside the updated standard form notices mentioned above.

What changes do you need to make to your tender documents?

Pre-qualification stage

Although this is not an immediate change, contracting authorities should be aware that the 'core PQQ' adopted at central government level and used by others will ultimately be replaced by the European Single Procurement Document - essentially a bidder's 'passport' to getting shortlisted for public contracts in the EU. This document will demonstrate a bidder's financial and economic standing, technical capacity and ability, and previous experience. A draft of this new document is under discussion by the member states and no final draft has yet been agreed. Authorities should be aware that their pre-qualification processes will need to be adapted in due course.

In the meantime, authorities should ensure any prequalification documents issued in relation to tender processes started on or after 26 February 2015 reflect:

  • the updated list of mandatory and discretionary exclusion grounds relating to child trafficking offences and non-payment of taxes, amongst other things (mandatory exclusion); and conflicts of interest (discretionary exclusion);
  • the new 'self-cleaning' mechanism under which bidders may demonstrate why, despite falling within an exclusion ground, they ought not to be prevented from bidding for a contract;
  • the new condition that the minimum annual turnover requirement for bidders may not in general exceed two times the estimated contract value;
  • the new parameters on use of ratios to assess a bidder's financial strength.

Tender stage

All tender documents must refer to contracts being awarded on the basis of the "most economically advantageous tender" (MEAT). Lowest price can no longer be a headline award criterion. However, the wording of the regulations seems to permit an authority to determine the MEAT on the basis of cost alone; i.e. without conducting any qualitative tender evaluation of factors such as the quality of the bid or its technical merit. As such, it still appears possible to award contracts on the basis of lowest price alone, albeit an authority will have to express its approach to evaluation slightly differently.

An authority's choice of award criteria may include staff "qualification" and "experience" where the staff assigned to deliver the contract may have a significant impact on level of performance. This effectively implements previous EU case law in this area. Cost may be assessed on the basis of life-cycle cost, taking into account factors such as the energy or maintenance costs related to a tendered product. If this approach is taken, authorities must ensure they comply with the parameters on life-cycle costing set out in the regulations.

Contract operation

The regulations confirm the circumstances in which contracts may be varied without requiring a new procurement process. These circumstances include:

  • low value/below threshold changes;
  • changes, regardless of their monetary value, that have already been provided for in the initial procurement documents in "clear, precise and unequivocal" review clauses; provided that the clauses state the scope/nature of the possible changes and the conditions under which they may be used, and the changes do not alter the overall nature of the contract;
  • changes that are not "substantial", defined with reference to the familiar 'materiality' tests established by the EU courts.

The most noteworthy development in the area is the ability to allow a new supplier to step into the shoes of the originally appointed supplier, in whole or in part, following corporate restructuring such as a takeover or insolvency, provided certain conditions are satisfied.

Tied to the above development, the regulations introduce the right for an authority to terminate the contract in three scenarios; one of which includes "substantial" modifications as set out above. Importantly, even if these cancellation rights are not included in the contract terms they will be deemed to apply by virtue of this new regulation, subject to reasonable notice being given. It is also open to authorities to define relevant terms and conditions to aid in the operation of these new termination rights.

The Cabinet Office has indicated that it will provide model contract clauses and guidance to assist authorities with these new termination rights. Authorities would be well-advised to clarify for suppliers how these new termination rights may operate – for example, where the right to terminate in the event of a "substantial" modification will be time-limited.

New reporting and retention requirements

Reporting and recording obligations are more extensive for authorities under the 2015 regulations than under the previous regime. Contracting authorities should ensure their internal systems are updated to reflect these new requirements, which include:

  • a requirement to retain all concluded contracts where the contract value exceeds €1 million for supplies or services, or €10 million for works, at least for the duration of the contract; and to grant access to these contracts if requested subject to EU or national rules on access to documents and data protection. Although many authorities in the UK will be familiar with the need to publish contracts in line with the government's Transparency Agenda and to make contracts available under the Freedom of Information Act, this creates a new basis for suppliers to request sight of contract documents;
  • a requirement to collate a report on every contract, framework agreement or dynamic purchasing system to which the 2015 regulations apply in their entirety. This report should be held on file, but may be requested in whole or in part by the European Commission and/or the Cabinet Office. The regulations list the information that must be contained in the report such as the contract value, the names of bidders rejected at the prequalification stage and the reasons for their rejection, and any conflicts of interest identified and how they were addressed. It would be prudent for authorities to prepare a template report that they can use for all fully-regulated contracts and framework agreements. The Cabinet Office has reserved itself an additional right to request information beyond the scope of that listed in the regulations in order to enable it to respond to Commission requests.

Additional UK-specific reporting and publication requirements arise under the Lord Young reforms, which are summarised below.

What are the Lord Young reforms?

Some provisions in the 2015 regulations go further than in the EU directive, implementing specific SME-friendly recommendations from Lord Young, the Enterprise Adviser to the Prime Minister. These provisions introduce rules that must be followed by authorities when awarding 'below threshold' contracts that are still above minimum thresholds of £10,000 (central government) or £25,000 (sub-central government authorities or NHS Trusts). These reforms do not apply to contracts also subject to the 2013 NHS Regulations.

The main requirements for above-threshold contracts are:

  • to publish any contract notice sent to the EU's Publications Office for publication within 24 hours of when the authority is entitled to publish the notice at a national level;
  • to comply with Cabinet Office guidance on qualitative selection at the pre-qualification stage of the tender process, including avoiding burdensome and disproportionate questions;
  • to publish certain contract award information on Contracts Finder within a reasonable time. Note that this obligation extends to the award of call-off contracts under framework agreements.

The main requirements for below-threshold contracts are:

  • to publish information on the contract opportunity on Contracts Finder within 24 hours of the time it first advertises the opportunity in any other way;
  • not to include a pre-qualification stage if procuring a central government contract below €134,000, or a sub-central government contract below €207,000;
  • to publish information on contract award within a reasonable time on Contracts Finder;
  • to include in every public contract, regardless of whether the contract is subject to the 2015 regulations, provisions stipulating that the authority will pay the contractor no later than 30 days from the date of invoice if "valid and undisputed" – a concept to be elaborated on by the Cabinet Office in guidance in due course;
  • to "have regard" to any guidance published by the Cabinet Office in relation to these new requirements.

These provisions will not apply in Northern Ireland, as it was felt that many of the principles were already addressed through Northern Ireland's procurement policy. For example, for a number of years public bodies in Northern Ireland have committed to pay invoices within just 10 days. Similarly, these provisions will not extend to most Welsh public sector bodies.

The Cabinet Office has published guidance in support of these reforms:

New requirements relating to Pre-Qualification Questionnaires to help businesses access public sector contracts (22-page / 517KB PDF)

Guidance on the new transparency requirements for publishing on Contracts Finder (3-page / 405KB PDF)

Statutory guidance for Contracting Authorities and Suppliers on paying undisputed invoices in 30 days down the supply chain (4-page / 418KB PDF)

Other changes contained in the 2015 regulations

This short guide highlights the main changes that contracting authorities must be aware of as of 26 February 2015 when approaching the market with public contracts. There are a whole host of other changes that authorities may be interested in, many of which might appear to be smaller changes but which could have potentially bigger repercussions. These include rules in relation to the opening of tenders under the open procedure, confirmation of the ability for authorities to operate two alternative methods of contract award under multi-supplier framework agreements within certain parameters, and a specific prohibition on designing a procurement with the intention of excluding or narrowing competition.

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