Transforming Public Procurement – the Final Frontier?

“For too long, modern and innovative approaches to public procurement have been bogged down in bureaucratic, process-driven procedures. We need to abandon these complicated and stifling rules and unleash the potential of public procurement so that commercial teams can tailor their procedure to meet the needs of the market. The UK is ready.” - Lord Agnew, Minister of State for the Cabinet Office (December 2020)

Sounding like a title sequence from Star Trek, the Cabinet Office has this week announced its plans to boldly go where no (or at least very few) procuring authorities seem to have managed to travel before – to a world of fast, fair and effective procurement delivering value for money: Green Paper on ‘Transforming public procurement’

The Green Paper sets out the UK Government’s future plans to amend the current public procurement regime. It proposes far-reaching reforms to the current rules, including integrating the current EU-derived suite of regulations into a single, uniform framework of simplified rules.

The proposed reforms are ambitious and far-reaching. Reponses on the proposals are sought by 10 March 2021, providing stakeholders with an excellent opportunity to further inform and shape how we amend our current public procurement rules post-Brexit.

Set out below are our Top 20 highlights, which we think should be of particular interest for procuring public authorities, utilities and suppliers:

1. A single set of rules: Merging the current set of UK regulations into a single regulatory framework, aligning the current PCR more closely with the UCR and CCR rules. It is recognised that this will be “a major and complex exercise”. There is no reference to any review of scope of application in terms of what constitutes a “contracting authority” and a “utility” under this single set of rules.
2. A new set of procurement principles: Providing for a modified set of procurement principles, more closely aligned with achieving value for money and GPA rules and listed as: (1) “the public good”, (2) “transparency”, (3) “integrity”, (4) “efficiency”, (5) “fair treatment” and (6) “non-discrimination” – it is unclear how closely these are still intended to align with the principles as they appear in the current rules (for example there is no reference to “equal treatment”, which is replaced by “fair and reasonable treatment”; and “non-discrimination” is said to mean that “authorities cannot show favouritism among domestic suppliers”.
3. Three simpler award procedures: Replacing the existing seven procedures with “three simple, modern procedures”, aligning more closely with the GPA rules:
   1. A new competitive, flexible procedure that will be similar to the existing “Light Touch Regime” and designed to give authorities “maximum flexibility to design a procurement process that meets their needs and the needs of the market”, this new procedure replacing the current restricted, competitive dialogue, competitive procedure with negotiation, innovation partnerships and design contests procedures;
   2. Retaining the open procedure which buyers can use for simpler, ‘off the shelf’ competitions; and
   3. Retaining the negotiated procedure without prior publication but renaming it as the “limited tendering” procedure, and modifying it to include a ground for procuring in a “crisis” and including option to publish a voluntary transparency notice and apply a 10 day standstill period before entering into the contract (except in cases of extreme urgency / crisis).
4. New award criteria (MEAT ≠ MAT)?: It is proposed that authorities be given greater freedom to procure the “most advantageous tender” (“MAT”); “adopting MAT (together with accompanying guidance) should provide greater reassurance to contracting authorities that they can take a broader view of what can be included in the evaluation of tenders in assessing value for money including social value as part of the quality assessment”. It is added that, “[t]his approach is already provided for in the current regulations under MEAT, so this change would be about reinforcing and adding clarity rather than changing scope”.
5. “Linked to the subject matter of the contract”?: While it is proposed to retain the basic requirement that award criteria must be linked to the subject matter of the contract, it is proposed to allow for specific exceptions in statutory guidance to be issued by the Cabinet Office (for example to allow award criteria that take account of the Government’s strategic policy priorities and drive up supplier behaviour in terms of a supplier’s “record payment on prompt payment of its subcontractors” or its “plans for achieving environmental targets across its operations”.
6. New and revised mandatory and discretionary exclusion grounds: It is proposed to include new mandatory exclusion grounds covering all criminal convictions related to fraud and non-disclosure of beneficial ownership. It is also proposed to consider how tax evasion could be included as a discretionary exclusion, and to includ an explicit discretionary exclusion ground covering deferred prosecution.
7. A new central “debarment list” (“blacklisting”): It is proposed to investigate developing a centrally managed debarment list of suppliers who have relevant convictions to make it easier for authorities to identify organisations that should be excluded from public procurement (with thought to be given as to how this would apply to foreign-based suppliers).
8. Stricter rules on exclusion for “poor past performance”: Currently, a supplier can only be excluded if its past poor performance has led to termination, damages or other comparable sanctions. It is proposed that a supplier could be excluded for “significant or persistent deficiencies in the performance of a substantive requirement” even if it had not led to termination, damages or comparable sanctions.
9. A new “supplier registration system”: It is proposed to simplify the selection stage through the use of basic supplier information that would be submitted through a new supplier registration system, which authorities could use to apply financial standing selection criteria (similar to a form of qualification system as currently permitted under the UCR).
10. DPS+ and framework agreements: Adopting a new Dynamic Purchasing System (DPS+) to operate as an open digital tendering platform and more flexible rules on framework agreements, including a distinction between a four-year “closed” framework agreement and an eight-year “open” framework agreement.
11. Embedding transparency – requirements on authorities to disclose information: It is proposed to require disclose of “procurement and contract data as soon as practically possible and significantly increase transparency in the public procurement regime”. “Authorities would be required to declare in their tender documents when information would be disclosed and justify what, if any, information is to be treated as commercially sensitive”. Moreover, authorities would be required to “publish basic disclosure information, covering the information currently required by Regulation 84 of the PCR with the contract award notice, including call offs under framework agreements and DPS+ before they could initiate contract award and commence standstill” (emphasis added). This is very different to how the current regime works.
12. Adopting the Open Contracting Data Standard (“OCDS”): OCDS is a free, non-proprietary, open data standard for public contracting implemented by over 30 governments globally. It is described as “the only international open standard for the publication of information related to the planning, procurement, and implementation of public contracts”. It is proposed to “legislate to require all authorities to publish procurement and contracting data throughout the commercial lifecycle to the central platform” in a format compliant with the OCDS. This means data for buyers, suppliers, contracts, spend and performance would be held and published in OCDS-compatible, open, non-proprietary reusable formats. Contract award data, including call-offs under framework agreements and DPS+ would include details of the buyer, supplier, bidders and a unique contract identifier. All e-procurement and related systems across the public sector would be required to become OCDS compliant and interoperable with other public procurement systems – ensuring all of this information could be held on a single central procurement platform.
13. Creation of a new data-driven digital Central Procurement Platform: It is proposed to develop a digital strategy and roadmap for public procurement, including a new central procurement platform that all authorities would have to use to publish procurement and contracting data. The central platform would provide: “public access to all published data online and via APIs”; notices from the “Find a Tender” service and Contracts Finder; links to e-procurement systems for tendering; “access to commercial data analysis tools”; and “price and commercial performance comparison by supplier and between supplier”. Ultimately, it is suggested that the central platform would be able to host additional functionality including but not limited to: a new register of suppliers; a register of commercial tools; contract performance including spend data and KPIs; a new central debarment list; (annual) procurement pipelines; a central register of complaints; and a similar register of legal challenges.
14. “Fundamental changes to the way procurement challenges are heard and managed”: It is proposed to develop a new set of procurement-specific Civil Procedure Rules and Practice Directions, involving a tailored fast track system for procurement challenges. The emphasis would be on written pleadings, with disclosure relying on new wider but more general standard disclosure rules and supported by a clearer set of rules for disclosure on different types of challenges that would help to establish what additional information should be disclosed as a matter of course in a particular challenge and how to quickly set up confidentiality rings. The objectives of these changes would be to make a future review system “quicker, cheaper and therefore more accessible to suppliers, with decreased impact on delivery of public services”. While recognising interest in a more specific tribunal system, the proposals prefer this modified adoption of the current High Court (TCC) system to a separate tribunal system. It is however proposed to consider the potential to transfer a subset of procurement challenges to a tribunal-based system, for example for lower-value claims.
15. Recognising a preference for “pre-contractual remedies” rather than damages: While recognising this, it is proposed to amend the test to be applied for the lifting of the automatic suspension. It would no longer be based on the test applied when granting an injunction, but be “a more appropriate, procurement-specific test”. The aim would be “to balance public interest, urgency, the upholding of the regulations and the impact on the winning bidder against the right for the claimant to be able to participate in the contract and the alternative available remedies”. It is hoped that the introduction of a fast track procedure should reduce the need to rely on this test, as the reduction in Court timescales will allow more contracts to remain suspended while the case is heard. It is however proposed that any contracts let under the new crisis and extreme urgency provisions would be excluded from the risk of automatic suspension preventing contract award.
16. Removing the requirement to issue debrief letters: While recognising the importance of pre-contractual remedies and suppliers having “full and timely access to the information they need to determine whether a procurement process is being or was run properly”, it is proposed to remove the requirement for debrief letters and to rely instead on the general information authorities will be required to publish ahead of contract award (as outlined above). This proposal appears to be driven by the current “complicated and time-consuming” requirement to provide unsuccessful suppliers with the “characteristics and relative advantages” of the winning tender and the need to consider disclosure of potentially commercially sensitive information.
17. Limiting damages to recovery to legal fees plus 1.5x bid costs: With the emphasis being the availability of fast-track pre-contractual remedies, it is proposed to limit the ability to seek damages: “the potential for large payouts can encourage speculative claims from bidders, especially from incumbent suppliers who can also secure valuable extensions to existing contracts while the challenge is being considered, often over a significant period of time”.
18. Prompt payment of subcontractors: It is proposed to provide greater visibility on payment throughout the supply chain by ensuring all suppliers in a public contract supply chain are paid within 30 days. This is to be achieved by legislating to: provide clear access for any subcontractor to take up payment delays directly with the authority; provide a specific right to the authority to investigate the payment performance of a supplier; and aligning public and private sector reporting requirements and publishing payment performance all in one place to allow greater scrutiny.
19. Contract amendments (Regulation 72): It is proposed to permit amendments to be made in cases of crisis or extreme urgency and to reorder Regulation 72 of the PCRs so that it is clearer and easier to understand. The main provisions would be retained and applied across all sectors, meaning that the rules for utilities may be stricter than currently provided for under the UCRs. With the exception of amendments where there is a crisis or extreme urgency, a mandatory standstill period of ten days will apply to all contract amendments which require the publication of a contract amendment notice. This means that authorities would need to wait ten days after publishing the contract amendment notice before entering into the amendment. The usual limitation period would start from the date of the publication of a contract amendment notice. This means that, even if the amendment is unlawful, the contract amendment would not usually be at risk of challenge (under the regulations) after 30 days, provided that a contract amendment notice is published, the notice provides sufficient information and nothing changes in the period after publication of the notice. It is suggested that this would therefore avoid the need for the publishing a VEAT notice to mitigate the risk of challenge.
20. Price / profit capping on any contract extension required as a result of a procurement challenge: To remove “any perverse incentive, perceived or otherwise, for incumbents to challenge contract awards where they have been unsuccessful”, it is proposed to limit the amount that is payable under any emergency extension of the exiting contract. Adopting an approach that is currently used in the defence sector under the Defence Reform Act 2014 and the Single Source Contract Regulations 2014, it is proposed that an appropriate rate of profit would be determined based on a government standard rate and the profit payable during the contract extension would be calculated using that rate for the duration of the extension.

Comments

These are ambitious and far-reaching proposals. To use a well-worn phrase, there will be devil in the detail of these proposed reforms, but the objectives and overall aims should be welcomed by both contracting authorities and by suppliers (though it is worth noting the increased amount of reporting and disclosure that will be required from the public sector).

It is also worth pointing out that the reforms appear to be aimed mainly at central UK Government and England, the Green Paper making the point that the UK Government “anticipates that the new rules proposed in this Green Paper would apply in respect of contracting authorities undertaking wholly or mainly reserved functions” and that it will “continue to engage with the Welsh Government, Northern Ireland Executive and Scottish Government about the application of these proposed reforms”.

It is clear that public procurement will increasingly be leant on by Government – in all its forms – as a policy tool for driving economic growth and jobs. These reforms effectively signal the start of this space race to pursue those goals in the post Brexit-universe. This brings into play one of the particular features of that universe, which is divergence, and the prospect of both the UK and possibly its constituent parts launching off in different directions.