Earlier this month, the Cabinet Office published its plans for transforming public procurement rules post-Brexit. The plans involve introducing legislation next year to be adopted and implemented though further secondary legislation together with ‘a detailed package of published resources (statutory and non-statutory guidance on the key elements of the regulatory framework, templates, model procedures and case studies)’.
These reforms were consulted on over a year ago. Some of the more controversial proposals (such as capping damages in procurement challenges) have now been dropped. The reforms nevertheless present a comprehensive overhauling of the current set of EU-based regulations. Using the main themes of the proposed reforms, we set out here some of the highlights that will be of particular interest for contracting authorities, utilities and suppliers / contractors.
The Government intends to provide six months’ notice of “go-live”, once the legislation has been adopted, in order to support effective implementation. In any event, given the timescales around the legislative process, the new regime is unlikely to come into force until 2023 at the earliest. It is however likely that the detail of the new regime will take shape over the course of next year.
Procurement that better meets the UK’s needs
- The proposed reforms are focussed on England only; Wales, Scotland and Northern Ireland all having degrees of devolved powers to make their own rules.
- They aim to make public procurement more of a strategic policy tool, for example enshrining in law the principles of ‘the public good’ and ‘value for money’ and ‘integrity’ alongside the competition-based principles of transparency, equal / fair treatment of suppliers and non-discrimination.
- It is unclear at this stage whether what is better for England is also better for the rest of the UK.
- Requirements are to be introduced at each stage of the procurement process setting out explicit publication (transparency) obligations as to what information authorities need to publish, and to set minimum standards in terms of its quality and accessibility.
- An additional statutory objective of promoting the importance of open and fair competition is to be provided for, encouraging competitive procurement.
- The concept of ‘public good’ will be framed as an objective of maximising the ‘public benefit’ to support wider consideration of social value benefits, and address concerns about any potential conflict with local priorities.
- A new Procurement Review Unit (“PRU”) will be set up to investigate complaints from suppliers, make informal and formal recommendations and to publish statutory guidance for contracting authorities.
A simpler regulatory framework
- The proposed reforms will, ‘to the greatest extent possible’, combine the current four sets of regulations (public contracts, concessions contracts, utilities and defence procurement) into a ‘single, uniform framework’.
- The new regime will apply to the utilities sector where the following three conditions are satisfied:
- the entity awarding the contract is a ‘utility’;
- the contract is for works, services or supplies associated with a prescribed relevant utility activity that will generally match the UCRs (except for now excluding postal services sector); and
- the estimated value of the contract exceeds the relevant financial thresholds (currently £378,660 for goods and services and £4,733,252 for works).
- While the proposed reforms seek to maintain the flexibility in the current rules for utilities, there does not appear to be any intention to relax the rules, and utilities (and also concession and defence procurement) seem to be set to be covered by the same ‘core regime’ that will apply to public sector contracts for work, goods and services.
Using the right procurement procedures
- The proposed reforms will introduce a new ‘flexible competitive procedure’, an ‘open procedure’ and a ‘limited tendering procedure’ (with elements of the Light Touch Regime being kept for certain services). This means that the commonly used ‘restricted procedure’ will be dropped, the implication being that the new competitive flexible procedure is intended to be the default two-stage tendering procedure. It is likely the Cabinet Office will publish specific guidance in the form of template options and case studies to help authorities understand when best to use each procedure.
Awarding the right contract to the right supplier
- A specific feature of the reforms will be a new framework for bidder exclusion grounds, described as being ‘simpler, clearer and better suited to the UK’s commercial and legal landscape’. For mandatory exclusion grounds, convictions or formal decisions will be required. For example, to exclude a bidder under the new mandatory ground of ‘serious breaches of competition law’, there must be a decision by the Competition and Markets Authority (CMA) or another regulator relating to the most serious breaches of competition law (such as bid-rigging cartels). The three-year time limit for both mandatory and discretionary exclusion grounds is expected to increase to five-years.
- The proposals include the introduction of a centrally managed public debarment list of suppliers for both mandatory and discretionary exclusion grounds. New discretionary grounds will be added such as where suppliers may pose a risk to national security and allowing for easier exclusion where there has been previous poor performance by a supplier (including the introduction of a Contract Performance Register holding information such as a supplier’s performance against contractual KPIs). There will also be new mandatory grounds, such as for a refusal to disclose a supplier’s beneficial owners, which will sit alongside new guidance on ‘self-cleaning’ and definitions of who is an ‘associated person’ to a supplier.
Using the best commercial purchasing tools
- The new regime will allow for both open and closed framework agreements, whilst allowing utilities previously covered by the current UCRs to award longer term closed frameworks. A central register of framework agreements will be introduced alongside a new dynamic purchasing system that can now be used for all types of procurement, and now to be called ‘Dynamic Markets’ rather than ‘DPS+’.
Ensuring open and transparent contracting
- New transparency requirements had been a key feature of the proposals consulted on last year. The reforms introduce a series of new notices to published by authorities, covering the full ‘procurement lifecycle’, from planning and market engagement through to contract award, implementation, material changes and termination. To address concerns raised about the burdens on contracting authorities in preparing and publishing these notices, the full set of transparency requirements will only now apply above a threshold contract value of £2 million.
- At award stage, the reforms will require the sharing with all bidders of certain redacted evaluation documents (on the winning bid only) and sending the unsuccessful bidders their own documents privately. This is intended to strike a balance between preserving commercial confidentiality and competition for the market (and future competitions) and providing appropriate transparency as to why the winner was selected. Rather than authorities having to prepare debrief letters giving the ‘characteristics and relative advantages’ of the winning bid, this is intended to allow losing bidders themselves to compare the relative advantages of the winning bid against their own, and to provide sufficient information to permit challenges to the decision. The proposal to require disclosure of the tenders submitted in a procurement has been dropped due to concerns over confidentiality.
Fair and fast challenges to procurement decisions
- Although it had been consulted on, the reforms will not include any independent review mechanism by authorities, nor the introduction of a specialist tribunal for lower value claims and issues relating to ongoing competitions. The intention instead is to continue to make improvements to the current High Court (TCC) arrangements. Possible reforms include early and enhanced disclosure and a dedicated procurement judge.
- The reforms will include a new ‘simple, single limb’ test for the automatic suspension to be lifted. The detail of this is still to be developed, but would include allowing for lifting where there are ‘overriding consequences for various interests concerned’.
- The controversial cap on damages has been dropped, recognising that capping damages could have other detrimental effects on the ability of unsuccessful bidders to challenge procurements.
- The reforms will include the removal of debrief letters, replacing these with the new transparency requirements (outlined above). It has been emphasised, that the intention to remove debrief letters is not to provide less information to bidders at the end of the process but to encourage contracting authorities to share further documentation and review their procedures carefully when challenged by suppliers. In summary, the new debriefing process is described as:
- the Award Notice confirming the authority’s intention to award a contract and notifying the market of the outcome (including anticipated contract value/description and identity of all bidders and also detail the standstill period);
- when the authority releases the Award Notice signalling its intention to award a contract, they will additionally provide participants with certain evaluation documents for the winning bidder (redacted for commercial sensitivity);
- all bidders will be provided with their own, unredacted, evaluation document(s) to enable them to compare the relative advantages of the winning bid against their own;
- authorities may, if they choose, provide inpidual covering debrief letters to bidders (which may include feedback on improving performance) but this may not be appropriate or possible in all circumstances.
Effective contract management
- The reforms propose widening the grounds for contract amendments, recognising the difficulties faced by authorities as circumstances evolve throughout the lifetime of a contract. The mandatory publication of contract amendment notices is intended to provide third party suppliers with sufficient knowledge to bring a challenge. The notices are also intended to give greater legal certainty to authorities, as the amendment will not subsequently be allowed to be challenged after the expiry of the standstill period of the ‘Contract Change Notice’.