Are you ready for the new procurement rules?

The late Maya Angelou once said:

I've learned that you can tell a lot about a person by the way she/he handles these three things: a rainy day, lost luggage, and tangled Christmas tree lights

As intensely erudite and talented as she was (50-odd honorary degrees don't award themselves you know), I think that she could have easily added one further critical activity to this list: 'dealing with the EU procurement rules'.

OK, admittedly, it's not the most snappy of additions but many a lawyer has struggled to make sense of the rules. Even those who are strong of heart and keen of mind have often ended up weeping quietly as they try to make sense of the reams of statutory instruments, case-law and guidance in this area.

And now the rules are going to change (to the end, check our recent post: Contracting with public authorities? Here’s what may change soon).

In theory, the new regulations are designed to simplify things and provide for greater flexibility.

We recently spoke to Ruth Smith, national head of procurement law at Mills & Reeve, about this new regime. Below, she comments on this and the background to the government consultation on it (which closed on 17 October 2014). Here's what she had to say:

What is the background to this consultation?

The last major reform of the EU procurement rules was ten years ago in 2004 and, recognising the need to update and modernise them, proposals were tabled by the European Commission back in 2011. These developed through negotiations between member states and resulted in the three new EU Procurement Directives which were adopted at a European level on 17 April 2014:

The UK has a maximum of three years to implement the new Directives through our own UK Regulations and the Cabinet Office consultation concerns the implementation of the first of the three Directives (relating to public contracts) which the UK intends to implement before the other two (on utility and concession contracts). The draft Public Contracts Regulations 2015 will replace the existing Public Contracts Regulations 2006, SI 2006/5.

The Commission’s stated aims in modernising the Procurement Directives were that the new rules should be more flexible and less complex and so increase the efficiency of public spending. Other aims were that the rules should allow greater access to the internal market for SMEs, and that they be a better vehicle to support common goals of society (eg social and environmental objectives). In addition, to provide greater certainty by codifying issues which had, to date, only been covered by case-law.

There are lots of changes and some helpful codification of existing case-law principles. Key changes include:

  • removing the current distinction between Part A and Part B services and the introduction of a new ‘light touch’ regime to cover some services (including health, social, educational, cultural, welfare, and some other services)
  • more flexibility in the choice of procurement procedure (particularly the competitive negotiated procedure) and the introduction of a new ‘Innovation Partnership’
  • shorter timescales
  • new e-procurement requirements—it will be a requirement at day one that Official Journal of the European Union (OJEU) notices are submitted electronically and that the procurement (ie tender) documents are freely available online as from the date of the OJEU notice (the latter is a key point as it will require more up-front preparation in advance of the procurement starting)
  • measures which should make it easier for SMEs to compete
  • more scope to exclude bidders
  • greater scope to incorporate sustainability measures

Do these draft implementing regulations implement the new EU Directives effectively?

The Cabinet Office has adopted a ‘copy out’ approach to transposition. The majority of the provisions in the new Directives are mandatory and must be implemented as they stand. The government's ‘copy out’ policy is therefore to essentially copy those provisions directly into our Regulations with little (if any) alteration. The Cabinet Office says its own policies on ‘copy out’ and avoiding gold plating further limit the scope for them to deviate from the Directives’ wording.

There are some policy choices which have been left to member states, and the general theme of the choices made by the UK (as reflected in the draft Regulations) has been to adopt the most flexible route and to take a minimalistic approach to transposition.

The one big surprise, which is not a feature of the Directive but nevertheless included in the draft Regulations (and seems somewhat at odds with the ‘no gold plating’/over-regulating/minimalistic approach), is regulation on sub-threshold contracts.

There is also some additional regulation of contracts which are above the threshold and additional regulation regarding payment of invoices within 30 days.

There is also a slightly odd provision in the new ‘light touch’ regime (reg 76). The starting point is that when conducting a light touch procurement, a contracting authority must do this in conformity with the information which it set out in the notice (OJEU/PIN) which advertised the procurement. There’s nothing odd about that as it’s consistent with transparency and essentially goes without saying. However, the odd bit is that the Regulation then introduces the ability to conduct the procurement other than as indicated in the notice (OJEU/Prior Information Notice (PIN))—provided this doesn't amount to a breach of transparency or equal treatment and provided the authority has thought about this and has concluded that it would not breach transparency/equal treatment (and then documented its conclusions). While I am sure the intention here is to provide flexibility, in practice this could just create another area which is ripe for litigation as, no doubt, authorities will try to rely on it. Bidders will then dispute whether in fact the conduct was in breach of transparency/equal treatment and will also make freedom of information requests to see whether the authority had thought about, justified, and documented that it was resorting to this approach.

Will the Cabinet Office’s copy out and minimalistic approach result in effective implementation in practice?

It’s too early to say. One disadvantage of a copy out approach is that if the Directive is unclear on a point then our own Regulations will similarly be unclear. While it means the government can’t be criticised for not transposing the Directive correctly, it still leaves those who have to work with the rules having to deal with the ambiguity or uncertainty in practice. However, there is at least some comfort in the fact that the Cabinet Office has said that in a number of areas, where it has taken the minimalistic approach to transposition, it will issue guidance to assist. We will just have to wait and see how good the guidance is.

Could there be any problems if the draft implementing regulations are brought into force in their current form?

The regulation around below threshold contracts may be a welcome surprise for SMEs, but may not be as welcome in other quarters.

There are one or two other practical difficulties arising from the fact that the UK is proposing to implement well ahead of the two-year deadline for transposition. The problems relate to the standard forms which are created by the Commission and must be used to submit information about contract opportunities, awards etc (ie the OJEU notice form and various others). The difficulty arises because the information required by the new Directive, in some cases, differs from that currently required in the existing forms, and in other cases we don’t have a form to use.

Historically, the Commission usually produce the new forms shortly before the deadline for transposition which may leave the UK without the necessary forms to use for a while (although the Cabinet Office says it is pressing the Commission to produce the forms earlier). If the new forms are not available when our Regulations come into force then the Cabinet Office’s consultation suggests measures the UK can take and how we can best work with what’s available. It also says it will produce guidance to assist.

There will inevitably be cost implications associated with the changes, but again these aren’t due to the way the Regulations have been drafted but are due to the changes introduced by the new Directives. There will need to be a change in working practices, procedures, policies and documentation to accommodate the changes and a need for training for those who will be both using them and bidding under them.

What does all this mean for lawyers and their clients?

It means a lot of change—getting up to speed with the new Regulations and how they will apply in practice. Contracting authority clients will have to adapt their existing policies, procedures and documents to accommodate the changes and will be looking to their lawyers to guide them through the transition. It’s also worth noting the impact of the transitional provisions. The new Regulations will only apply to procurements commenced after the Regulations come in to force—any procurements which are on-going when the new Regulations are introduced will continue to follow the existing rules. While that makes sense, and is what we expected, it does mean that for a while we will be running with two different sets of Regulations.

It also means new traps for the unwary and new areas for potential dispute and litigation in an arena which is already highly litigious. It has always been important to maintain a robust audit trail of steps and decisions taken in relation to a procurement (and the justification for these) but some of the new obligations now make this mandatory. These will all be disclosable documents, either under the Freedom of Information Act 2000 or in disclosure in any litigation—so clients will really need to get their house in order (if not in order already) to ensure their record keeping is extremely robust and supports the decisions which have been made.

For clients who are bidders, they too will need to get up to speed with the Regulations to ensure they both understand the new rules of the game (and how to make the most of contract opportunities) and also how to spot new areas of potential breach to ensure they can take actions to ensure their rights are properly protected.

How does all this fit in with other developments in this area?

The new Directive echoes some of the UK government’s existing agenda—simplifying processes, supporting growth and SMEs, the mutuals’ agenda, clamping down on tax breaches and poor past performance etc—so it does sit reasonably comfortably with these.

However, it doesn’t fit particularly well with the UK’s new, controversial regime in the health sector (the NHS (Procurement, Patient Choice and Competition) (No 2) Regulations 2013, SI 2013/500) which relate to the commissioning/procurement of NHS health services and applies to NHS England and clinical commissioning groups. NHS commissioners are still finding their feet with this regime which is the reason why the government has decided to delay bringing the light touch regime in to force for contracts covered by the NHS regime until April 2016 (ie the deadline for transposition). This will give commissioners more time to get used to the NHS regime and also, I suspect, time for the government/Cabinet Office to work out how the NHS regime can work in harmony (and not at odds) with the light touch procurement regime.

So what do you think? Are these new rules more bureaucratic or less bureaucratic? Will they help to encourage more SMEs bid for tenders? Do let us have your thoughts below.

Interviewed by Nicola Laver. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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