Following the first reading of the Procurement Bill in the House of Lords, Shoosmiths considers how this will change public procurement as we know it.
The Government has recently taken the next step in its plan to transform public procurement, by publishing the Procurement Bill (‘the Bill’). The first reading in the House of Lords took place on 11 May 2022 and we can now start to consider the changes this Bill will bring.
The overarching aims of the Government’s overhaul were to ‘speed up and simplify our procurement processes, place value for money at their heart, generate social value and unleash opportunities for small businesses, charities and social enterprises to innovate in public service delivery’. Certainly we can see examples of these aims starting to be delivered in the Bill with the use of a simple one-stage tender procedure which should simply the processes for both contracting authorities and suppliers. The Bill does not move away dramatically from the proposals in the Green Paper or the Government’s response to the consultation on the Green Paper. Although as ever the devil is in the detail, in respect of a number of areas with regulations yet to be published as well as guidance from the Cabinet Office.
Appetite for change
The post-Brexit landscape presented a unique opportunity to move away the EU public procurement regime. There was a clear appetite to implement a framework and set of rules which addressed some much needed changes. That said, the UK remains bound by what was agreed with the EU in the Trade and Cooperation Agreement. For example, in making any changes it would not be possible to refuse to consider bids from EU member states in favour of prioritising UK entities.
Scope of the Bill
The Bill in its current form, covers 13 Parts supported by a further 11 Schedules. The 13 key Parts are as follows:
- Key Definitions
- Principles and Objectives
- Award of Public Contracts and Procedures
- Management of Public Contracts
- Conflicts of Interest
- Below-threshold Contracts
- Implementation of International Obligations
- Information and Notices: General Provisions
- Remedies for Breach of Statutory Duty
- Procurement Oversight
- Appropriate Authorities and Cross-Border Procurement
- Amendment and Repeals
Part 1 outlines several key definitions. The definition of ‘contracting authority’ makes it clear that devolved Scottish authorities are excluded authorities, as Scotland will continue to operate under its own procurement rules. In addition, in a bid to simplify and harmonise existing legislation, the Bill incorporates definitions concerning utilities contracts, defence and security contracts and concession contracts. There are still some areas requiring clarification such as light touch contracts, as the type of services to be included will be contained in the regulations which are yet to be published.
Principles and objectives
The core objectives which a contracting authority must have regard to when carrying out procurement are provided at Regulation 11.1, these are as follows:
- ‘delivering value for money;
- maximising public benefit;
- sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions; and
- acting, and being seen to act, with integrity’.
Award of public contracts and procedures
There are a substantial number of changes detailed in several Chapters of this Part of the Bill. We have focused on what we consider to be the key developments.
It seems that Regulation 15 widens and provides a more detailed scope for preliminary market engagement. Although the same considerations remain to ensure this does not distort competition.
Perhaps the most notable change is the new criteria under Regulation 18 which permits a contracting authority to award contracts to the ‘most advantageous tender’ as opposed to the ‘most economically advantageous tender’. This implies there will be more flexibility for contracting authorities to consider factors beyond price. There are also clear accompanying obligations for contracting authorities to disregard tenders including where there is a material breach of a procedural requirement. Regulation 30 creates a new procedure for contracting authorities to exclude suppliers for improper behaviour, where this behaviour has put the supplier at an unfair advantage.
It will be interesting to see how various provisions are developed and ultimately interpreted. For example direct awards seem to allow the contracting authority a fairly wide scope to exclude a supplier, if there is an overriding public interest in doing do (Regulation 40(5)). In addition Regulation 41 appears to provide a fairly broad justification to make a direct award to protect life. The detail will be in regulations that are yet to be made.
This Part also deals with Frameworks, and provides an increased discretion to exceed the usual 4 year maximum term of a framework, if the nature of what is to be supplied means a longer term is required, rather than the ‘exceptional circumstances duly justified’ that appears in the Public Contracts Regulations 2015. There is no express requirement on the contracting authority to act reasonably, although reasons do have to be given in the tender or transparency notice.
Changes have also been made to assessment summaries and standstill periods. Under Regulation 48, the information which has to be provided under the assessment summaries following a contract award, seems to be much more limited in terms of what information has to be provided, when compared to the ‘characteristics and relative advantages of the tender selected’ in Regulation 55 of current regulations. In addition the mandatory standstill period is now 8 working days, with no standstill for direct awards (Regulation 49).
Finally, chapter 6 provides updated guidance on general provisions about award and procedures. Within this, there is a new provision to publish procurement termination notices, if a contracting authority decides not to award a contract though there is no obligation to give reasons in the notice (Regulation 53). In addition under Regulations 54, 55 and 56, excluded suppliers have scope to avoid being an excluded or excludable supplier where the circumstances that gave rise to the application of the exclusion ground are unlikely to occur again (unless they are on the debarment list). There is a long list of factors the contacting authority will have regard to in considering this and so there is plenty of scope for the supplier to prove it should not be an excluded or excludable supplier. It is a generous provision as it also affords the supplier an opportunity to make representations.
Management of public contracts
The general theme of the changes to this Part, are to reflect the requirement for greater transparency in public procurement. The regulations set out requirements to publish various notices throughout the process, some of which are new to the procurement process, and should be considered in detail by contracting authorities and private sector suppliers on a case-by case basis. Regulation 64 is worth a special mention, as it requires the contracting authority to publish a payments compliance notice containing ‘specified information’ about the contracting authority’s compliance with a 30 day term of payment. The ‘specified information’ is to be set out in regulations that are yet to be published.
In addition Regulations 69 – 71 set out the scope, process, notice requirements and voluntary standstill period on the modification of contracts. These detailed provisions require close reading should the need for modifications arise.
Conflicts of interest
The conflicts of interest provisions are relatively concise and can be summarised as imposing a duty on contracting authorities to take all reasonable steps to identify and keep under review, actual or potential conflicts of interest (Regulation 74). There is also a conflicts assessment process to be followed throughout the procurement procedure and a duty to take all reasonable steps to ensure that a conflict of interest does not put a supplier at an unfair advantage or disadvantage.
Regulations 77 – 80 set out the procedure, notice requirements and implied payment terms which apply specifically in relation to below-threshold contracts. A notifiable below-threshold contract is defined as a contract awarded by a central government body with an estimated value of at least £12,000 or otherwise not less than £30,000.
Implementation of international obligations
Schedule 9 lists 24 defined treaty state suppliers (specified international agreements) with the UK. As you would expect, there is a clear requirement for contracting authorities not to discriminate against treaty state suppliers by treating them less favourably than it would treat the UK.
Information and notices: General provisions
Regulations are yet to be published concerning the form and contents of notices required and whether they require publication on a specified online system (Regulation 86). This area will no doubt develop as the Bill progresses to provide the required clarification and transparency.
Remedies for Breach of Statutory Duty
Where disputes arise, Part 9 outlines the remedies for breach of statutory duty. The Court has a wide range of interim remedies it can order including lifting an automatic suspension to enter a contract. There is an overriding public interest test when assessing remedies, which seeks to uphold the procurement rules, avoid delays, consider the interests of suppliers and any other matter that the court considers appropriate (Regulation 91). This new simplified test replaces the American Cyanamid test. Of interest, Regulation 90 states that where a Contracting Authority is notified of the commencement of Court proceedings after the expiration of the Standstill period then their right to enter into a contract is not automatically suspended. The overriding public interest test also applies in considering whether to set-aside a contract or modification (Regulation 93).
There has been some change to the time limits for bringing claims, although our view is that this could have been taken further to allow parties proper time to evaluate their claims. Under the new Regulation 95, suppliers must commence proceedings before the earlier of (a) the end of the period of 30 days beginning with the day on which the supplier first knew or ought to have known there were grounds for a claim or (b) the end of the period of 6 months from the date of contract or modification.
There is also a new provision for an appropriate authority to carry out procurement investigations (Regulation 96). It remains to be seen how this will interplay with the dispute resolution options and whether it will provide assistance to suppliers in resolving concerns about individual procurements.
The Bill is due to have its second reading in the House of Lords on 25 May 2022. There is a long process ahead before it comes into force and it is likely to undergo a number of further changes and clarifications. The end goal remains to bring into force a simplified public procurement process which allows contracting authorities to have greater flexibility. It is estimated the Bill will come into force in 2023 and there will be a 6 month notice period before the Bill is implemented. Until this point, it is business as usual under the Public Contracts Regulations 2015 and relevant Utilities, Concessions and Defence procurement regulations. We will be keeping a close eye on the Bill in the meantime.