Public bodies can deviate from procurement process under reforms outlined by Cabinet Office

Out-Law News | 24 Sep 2014 | 10:55 am | 4 min. read

Public bodies in England, Wales and Northern Ireland will be able deviate from a procurement process they have outlined when buying certain services under new plans unveiled by the Cabinet Office.

New draft regulations on public procurement, which will implement new EU rules finalised earlier this year, would see a new 'light touch' regulatory regime apply to some public procurements, including contract awards for health and social services and educational and cultural services, among others.

Under the Cabinet Office proposals, public bodies would have freedom to determine the procedures that will be applied to those procurements but generally require those authorities to "conduct the procurement, and award any resulting contract" in conformity with the stated procedures.

However, the proposals would, if introduced as currently worded, allow the authorities to award contracts in accordance with a different process from the one it has previously communicated in its tender notice so long as certain conditions are satisfied, including that "the failure to conform does not, in the particular circumstances, amount to a breach of the principles of transparency and equal treatment of economic operators".

Public procurement expert Jennifer Robinson of Pinsent Masons, the law firm behind, said: "The rules will be welcomed by public bodies as giving them some flexibility in the way they procure services that are subject to the light touch regime. However, even though the authorities would be required, under the plans, to explain the reasons for deviating from the stated process, the matter of whether doing so breaches the principles of equal treatment and transparency would remain a subjective issue."

"The flexibility allowed for in the proposals will no doubt open up a further area for scrutiny of contracting authorities' decisions," she said.

The draft Public Contracts Regulations 2015 (93-page / 702KB PDF) would apply to public contracts for supplies, services and works that are of a value above certain financial thresholds set at EU level. Contracts worth less than the threshold figures would not, generally, be subject to the new public procurement rules, although a number of Lord Young's recommendations on opening up public sector procurement opportunities and removing barriers to SME participation are set to be implemented in the new legislation and would apply to 'below threshold' contracts that are above certain minimum levels – £10,000 for central government contracts and £25,000 for any other public sector contract.

The Cabinet Office, which has launched a consultation on its plans for the new Public Contracts Regulations 2015 (38-page / 521KB PDF), has not outlined a specific date on which it intends the new rules to come into force. Robinson said that she expects that most of the provisions will be implemented in spring next year.

However, the Cabinet Office made clear that some of the provisions should be delayed. In particular it said that tender processes for the procurement of health care services for the purposes of the NHS should not have to adhere to the new light touch regime until 18 April 2016, the date following the deadline for national implementation of the new EU public procurement rules.

This delay is to allow health care commissioners time to adapt their practices to this new regime, according to the Cabinet Office. This will also provide time for the development of useful guidance on how the light touch regime is intended to sit alongside specific NHS regulation in this area, currently set out in the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013).

According to the draft legislation, the Cabinet Office has also decided to take up the EU on the longer implementation period for certain mandatory electronic procurement (e-procurement) rules, as provided for under the EU's new Public Sector Procurement Directive.

"Such mandatory provisions include an obligation to use e-communications only during all tender processes and to use the EU’s new Single Procurement Document, a form of pre-qualification document, in procurements," Robinson said. "These provisions will only kick in on 18 October 2018, under the plans."

Plans to abolish pre-qualification questionnaires (PQQs) for all public contracts worth below the EU threshold values are also outlined. A pre-qualification process will still apply to major public contract awards although provisions are aimed at making this less bureaucratic.

Public bodies would have to "have regard" to guidance the Cabinet Office issues to help achieve this aim, which Robinson said could have the effect of extending the application of Cabinet Office guidance beyond its current scope of application – generally central government departments, executive agencies and non-departmental public bodies –  to other public sector bodies too.

The Public Sector Procurement Directive allows EU countries to choose whether to require public contracting authorities in their jurisdiction to break up contracts into lots and procure supplies, services and works on that basis.

The Cabinet Office has decided against imposing this requirement but has instead worded the draft regulations in a way which would give flexibility to public sector bodies in England, Wales and Northern Ireland to decide to divide contracts into lots if they wish.

Robinson said that these plans would be welcomed by public bodies given the retention of the flexibility currently available under the existing UK procurement regulations. She said this recognises that one size does not fit all. Lots are already being adopted increasingly in practice, for example in the context of current IT outsourcing trends. Robinson said many IT buyers have decided to follow a 'tower' model for the supply of IT services. In practice this means that different components of a rounded IT service are procured for separately, meaning that there is flexibility for the buyers to renegotiate or terminate contracts with suppliers of one of the components without the rest of the supplier arrangements being affected.

The Cabinet Office's consultation on its proposals closes on 17 October. Further consultations are expected at a later date on its plans to implement the new EU Utilities Directive and new EU Concessions Directive. Those directives were introduced as part of a package of procurement reforms delivered earlier this year that included the Public Sector Procurement Directive.

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