Scottish public bodies will not face outright ban on contracting with companies that fail to meet tax obligations

Out-Law News | 18 Feb 2015 | 10:32 am | 3 min. read

Public bodies in Scotland will be encouraged to exclude businesses that fail to pay their taxes from bidding for and winning public contracts under plans outlined by the Scottish Government.

The proposals seek to implement changes to EU public procurement rules finalised last year and are likely to come into force towards the end of this year, the Scottish Government said. Separate new rules implementing some of the EU reforms are set to come into force later this month in England, Wales and Northern Ireland.

The Scottish Government said, though, that it would not place an outright prohibition on Scottish public bodies from enabling a company that has "breached its obligations relating to the payment of tax or social security contributions" from bidding for or winning public contracts under the new rules.

Instead, new statutory guidance "will set a clear presumption" that such businesses should be excluded "unless it would be clearly disproportionate" to do so or those businesses have "taken appropriate remedial measures", it said.

A 'presumption' of exclusion from public contracts will also apply to businesses that have "exploited assets in illegal settlements" or "behaved dishonestly in an attempt to distort competition or to gain an unfair advantage", under the plans.

Businesses that have breached employment laws or "engaged in blacklisting of workers" will also generally find it harder to win public contracts under the reforms.

The Scottish Government also outlined plans to allow public health and social care providers in Scotland to choose their own "procedures, tools and techniques" when procuring services in certain circumstances in future.

The EU public procurement reforms introduced a new 'light touch' regime which allows for procurements for certain services to conform to less prescriptive rules than in other cases. The light touch regime applies to health, social and cultural service contracts worth more than €750,000. The EU rules, however, give individual EU countries an element of freedom over precisely what procurement rules to set for the tendering and award of such contracts.

In its consultation paper, the Scottish Government outlined plans to create a flexible 'light touch' framework (108-page / 736KB PDF). It suggested it would not explicitly force public bodies to award contracts for health, social and cultural services on the basis of "the best price-quality ratio".

"We expect that only limited regulation will apply to contracts for these services," the Scottish Government said. "This is similar to the approach taken by the UK government. That is, the

Scottish rules will require compliance with the basic [EU] Treaty principles (transparency, equal treatment, non-discrimination) together with the publication requirements for contract opportunity and award notices."

"We envisage that public bodies will be able to decide to use the procedures, tools and techniques of their own choosing, whether similar to those in the main rules or not. We believe that these combined requirements are sufficient, should not make things too complicated and should also ensure that public bodies – and contractors – focus on the quality of services. This approach should also preserve as much of the existing flexibility as possible. That is, public bodies will largely be free to judge how the procurement rules might best be applied on an individual case-by-case basis for social and other specific services contracts," it said.

The Scottish Government has also decided to adopt the same broad approach as the UK government on mandating the use of electronic communications during public procurements. It has elected to delay the application of the e-procurement obligations until October 2018 so as to give Scottish public bodies more time to ensure their "systems are able to cope with this change".

However, the Scottish Government said public bodies in Scotland would be required to "communicate electronically" in some cases as soon as the new public procurement rules in Scotland take effect later this year. This requirement will apply when the public bodies are "organising a dynamic purchasing system; carrying out an electronic auction; dealing with electronic catalogues; sending notices; [or] making procurement documents electronically available".

Keith Brown, the Scottish government's cabinet secretary for infrastructure, investment and cities, said: "If we are to deliver sustainable economic growth, it is essential that we continue to use the power of public spending to deliver greater public value and drive efficiencies. The procurement reform agenda, the implementation of the Procurement Reform (Scotland) Act 2014 and the new EU procurement rules, collectively, will help us further to deliver these aims."