Procurement law reform – where are we now?

EU flag iStock 000009228887XSmall 146x219Richard Auton, Anna Sweeney and Andrew Uprichard look at the progress of the EU's planned procurement reforms.

Readers may recall that the EU is proposing to modernise European procurement rules. In December 2011 the European Commission issued three draft directives: one to replace the Public Sector Directive 2004/18; one to replace the Utilities Directive 2004/17; and a new directive covering concession contracts.

Public sector directive

Here is a reminder of the main changes proposed in the new public sector directive, as updated during negotiations in 2012.

Part A / Part B services

The distinction between Part A services (those subject to the full procurement regime) and Part B services (those deemed less likely to affect trade between member states and therefore subject to less regulation) is to be abolished. This potentially brings Part B services within the full rules. However, there will be a 'light touch' regime for 'health and social services'. The definition of what these are has been expanded during negotiations to include legal services, as well as things like provision of services to the community: administrative, social, educational, healthcare and cultural services. Thus many services that are currently classed as Part B services will fall within this 'light touch' regime.

Local authorities

'Sub-central' government authorities will have slightly less onerous advertising and minimum tender return deadlines, allowing greater reliance on Prior Information Notices without the need to issue a separate Contract Notice.

New procedures

The new proposed directive will abolish the negotiated procedure and instead introduce two new procedures, the Competitive Procedure with Negotiation and the Innovation Partnership. The requirement to justify using the competitive dialogue procedure will be removed. This is to allow authorities more flexibility and encourage more innovative solutions from suppliers.

Clarification of case law

The directive codifies case law such as Teckal and clarifies the circumstances in which the award of a contract to an entity wholly controlled by one or more contracting authorities will fall outside the procurement rules. It also introduces a new statutory exemption for the use of 'public-public co-operation' and codifies the Pressetext case on when a modification to an existing contract will trigger a new procurement.

Dividing contracts into lots

Contracts for goods and/or services over 500,000 Euros or for works over 5 million Euros must be divided into lots, or the authority must provide justification of why they have not done so. This is to encourage more SMEs to bid for public contracts. National rules may make division into lots compulsory.

E-tendering

Once the Directive has been enacted into national law, contracting authorities will have 30 months to move to 100% electronic tendering. The UK Government is arguing that this may not be achievable but it is worth starting to prepare for the move now.

Pre-qualification

There will be a definitive list of pre-qualification conditions that contracting authorities can impose:

  • suitability to pursue the professional activity;
  • economic and financial standing;
  • technical and professional ability.

Contracting authorities shall limit any requirements to those that are appropriate to ensure that a candidate or tenderer has the legal and financial capacities and the technical and professional abilities to perform the contract. All requirements shall be related and proportionate to the subject-matter of the contract.

Bidders can self-declare that they meet the selection criteria but must provide the supporting documentation when requested.

These changes are designed to make it easier for SMEs and start-ups to bid for public contracts.

Award criteria

The criteria for the award of contracts remain the most economically advantageous tender or the lowest cost. Costs may be assessed, on the choice of the contracting authority, on the basis of the price only or using a cost-effectiveness approach, such as a life-cycle costing approach. This seems to fit more with the requirement of the Public Services (Social Value) Act 2012 to consider the 'social value' when procuring.

Utilities directive and concessions directive

The Council of the European Union issued compromise texts of these Directives in September 2012. We will report on these in a future update, once the texts are more settled.

Implementation timetable

The draft Directives were originally due to be agreed by the end of 2012. As at the time of writing, they are still being debated by the Council of the European Union and various Committees of the EU Parliament and it appears that they are still some way off agreement. Once the text of the Directives are adopted by the European Parliament, each EU member state will have 18 months to transpose them into national law. We are probably looking at the end of 2014 at the earliest before they become law in the UK, but both contracting authorities and potential bidders should be aware of the likely changes now, so they can start preparing.

Richard Auton is a director, Anna Sweeney is a professional support lawyer and Andrew Uprichard is a partner at Walker Morris. They regularly contribute articles and updates to reach... ®, the free Walker Morris knowledge database and alerter service