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Scottish government outlines planned changes to public procurement rules

New public procurement rules in Scotland are set to come into force in April next year.

The Scottish Government has published its response to a consultation exercise it held earlier this year on updating public procurement regulations in Scotland so as to implement the EU's Public Sector Procurement Directive. The Directive, which was finalised last year, has already been implemented in the rest of the UK.

The Scottish Government said it intends to put new draft regulations before the Scottish Parliament "shortly" and that it intends for the reforms to come into force on 18 April 2016.

According to the Scottish Government's consultation response paper (46-page / 386KB PDF), Scotland's new public procurement law framework will differ in part from the rules in place in England, Wales and Northern Ireland.

Public procurement law expert Christopher Murray of Pinsent Masons, the law firm behind Out-Law.com, said: "It was expected that the Scottish Government might take a slightly different approach to the rest of the UK when implementing certain parts of the new EU rules on procurement. Scotland has for some time now been in the process of reviewing procurement law more generally to focus greater attention on the social and economic benefits that can be delivered using public sector procurement. The new regulations are a further step towards achieving this overall goal."

"However, given that the new rules have been implemented in the rest of the UK since 26 February 2015, it may take some time for bidders operating on a UK-wide basis to understand the nuances between the two systems. In the interim, these subtle but important differences may lead to some confusion," he said.

In its paper the Scottish Government said that when deciding which prospective supplier to award contracts to, public bodies in Scotland will need to take account of both the price and quality of the bids before it and never solely award those contracts on the basis of the lowest price bid.

This approach, if confirmed in the draft legislation to be published, would differ from the current legal position in Scotland and the post EU-reform position adopted in the rest of the UK where certain public contracts can be awarded purely on the basis of the lowest price bid. The Scottish Government said its proposals had "across the board" support from respondents to its consultation.

"We will therefore introduce Regulations which will require contract award decisions to be made on the basis of an assessment of both price and quality," it said.

Other differences include in relation to how the Scottish Government intends to approach the issue of reserved contracts. In the rest of the UK reserved contracts, where only certain types of organisations can bid for certain contracts, can be drawn up. However, the Scottish Government has decided not to include this clause in the new Scottish public procurement regulations.

In its paper the Scottish Government also addressed the issue of mandatory and discretionary exclusions that will apply to public sector contracting.

Under the new regime public bodies will not be forced to "exclude businesses [from the procurement process] for non-payment of taxes, where this has not resulted in a court ruling", it said. Instead, it will be left to public bodies to decide whether to contract with companies that fail to meet tax obligations.

It said it had adopted the non-mandatory approach "because of the difficulties inherent in demonstrating" companies' non-compliance with tax rules in the absence of a court ruling and because of "the risk of challenge" a mandatory exclusion rule could place on public bodies.

Where a court has confirmed a company's failure to meet tax obligations, public bodies in Scotland may still have grounds for holding contracts with such companies, the Scottish Government said.

"We have decided that when a business has been found to have breached obligations, public bodies should be allowed not to exclude it where this would clearly be disproportionate," it said. "This is because circumstances may arise where the amount unpaid is very minor in relation to the contract in question."

The Scottish Government had consulted on setting up a new procurement tribunal in Scotland. In its new paper, it confirmed the idea had received "mixed views" from consultation respondents and decided against pursuing the idea further.

"The mixed views received about this issue are not conclusive enough to justify establishing a new body at this time," it said.

The Scottish Government also confirmed that Scottish Ministers, acting through Single Point of Enquiry (SPoE) service, will be empowered to request information from public bodies in respect of procurement rules not being followed or breached, for the purposes of providing information to the European Commission. A report for the Commission has to be provided every three years under the terms of the EU Directive. In England and Wales it is the Cabinet Office that performs this monitoring and enforcement role.

In October the Scottish Government published new procurement guidance that requires public sector organisations in Scotland to consider "whether it is relevant and proportionate to include a question on fair work practices" before inviting companies to bid for contracts. Only if public bodies have "good reason for doing so" should they ignore the guidance, it said.

The guidance means that businesses that pay the 'Living Wage' should be considered more favourably than rival companies that do not when bidding for public sector contracts in Scotland, the Scottish Government said at the time.

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