Public procurement reforms come into force across most of the UK

Out-Law News | 26 Feb 2015 | 9:37 am | 3 min. read

New rules requiring public bodies in England, Wales and Northern Ireland to change the way they procure goods and services have come into force today.

The Public Contracts Regulations 2015 implement the EU's Public Sector Procurement Directive which was finalised last year. Most of the provisions in the new Regulations have effect from 26 February and apply to all new tender processes started on or after that date. Some reforms included in the new Regulations, such as those that support the move to electronic procurement procedures, will not come into force until 2018.

The EU reforms are being implemented separately in Scotland.

Public procurement law expert Jennifer Robinson of Pinsent Masons, the law firm behind Out-Law.com, said the reforms offer the government and other public bodies new opportunities to promote innovation through the procurement process.

'Innovative partnerships' offer an alternative procedure for public authorities to follow to the procurement frameworks they may already be familiar with, such as the open procedure, restricted procedure, competitive dialogue, and competitive procedure with negotiation, Robinson said.

"Innovation partnerships are geared at enabling both the development and subsequent purchase from the same supplier or suppliers of an 'innovative' work, service or product," Robinson said. "The idea is that project proposals are submitted during the competitive tender process and the solutions developed post-award of the contract. This is in contrast to the competitive dialogue where discussion with prospective suppliers is required to continue until the authority identifies the solution that best meets its needs."

"There is scope to appoint more than one innovation partner but also for partners' contracts to be terminated as the development progresses post-appointment. The procedure, however, raises so-far unanswered questions and there are a number of restrictions that apply, including to the innovation partnership contract, which might put some authorities off. That said, it is potentially a great door-opening opportunity for suppliers and a new avenue for authorities to explore who are interested in working with the private sector to commercialise new products and services. Innovation partnerships look set to be a cross-roads for procurement, state aid and competition issues," she said.

Robinson said that the reforms require public bodies to publish their contract notices on the UK government's 'Contracts Finder' portal as well as in the Official Journal of the EU. She said the requirement represents the "gold-plating" of the EU rules on publicity of public contracts and is designed to make those contracts more accessible to SMEs.

The way that 'procurement document' has been defined under the new Regulations could force public contracting authorities to publish the terms of their contracts earlier in the procurement process than they may be used to doing, Robinson said. She said contract terms might need to be outlined at the qualitative selection stage of procurement and before suppliers are formally invited to submit bids for work.

"This new requirement could potentially trigger new material change considerations for an authority if it has to make draft contract terms available from the outset of all tender processes, even two-stage ones, leaving it open to challenge from unsuccessful bidders for the work," Robinson said.

Robinson said, though, that the new Regulations do provide public bodies with some rights to modify contracts during the term of those agreements without having to launch a new procurement procedure.

According to the rules, modification can take places where the changes, regardless of their monetary value, "have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses" and so long as those clause "state the scope and nature of possible modifications or options as well as the conditions under which they may be used, and do not provide for modifications or options that would alter the overall nature of the contract or the framework agreement".

Modifications to contracts to facilitate "necessary" additional "works, services or supplies by the original contractor" can also be made if a change in supplier is not possible for "economic or technical reasons", or would "cause significant inconvenience or substantial duplication of costs" to the public purse.

Contract changes can also be made if the changes are "not substantial", or if necessary amendments could not have been "foreseen" by "a diligent contracting authority", if the alternations do not change "the overall nature of the contract" and if the changes do not represent more than a 50% price increase on the original arrangements.

Public contracts put in place under the new regime will also have to include clauses that allow public bodies to terminate substantially modified contracts that should have been opened up to a new procurement procedure, under the new rules. Where such clauses are not stated on the face of a public contract, they will still be deemed part of that contract.

A new 'light touch' regime will also apply to contracts worth more than €750,000 in the health and social care sector. This was one of the "significant" changes to the rules identified by public procurement law expert Stuart Cairns of Pinsent Masons when the new Regulations were finalised earlier this month.

Under the 'light touch' regime, public bodies will have freedom to determine the procedures that will be applied to those procurements but to generally "conduct the procurement, and award any resulting contract" in conformity with those stated procedures. However, authorities will be able 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".