Reservation of public contracts

Shared services iStock 000007489708XSmallWhat is the interrelationship between regulations 20 and 77 of the Public Contract Regulations 2015? The LexisPSL Public Law team analyse the reservation of public contracts.

Regulations 20 and 77 of the Public Contract Regulations 2015, SI 2015/102 (PCR 2015), concern the reservation of contracts. These provisions allow authorities to reserve contract opportunities for certain types of supplier in order to allow the contracting authority to further their objectives in social, health and other policies.

PCR 2015, reg 20 states:

'(1) Contracting authorities may

(a) reserve the right to participate in public procurement procedures to sheltered workshops and economic operators whose main aim is the social and professional integration of disabled or disadvantaged persons, or

(b) provide for such contracts to be performed in the context of sheltered employment programmes,

provided that at least 30% of the employees of those workshops, economic operators or programmes are disabled or disadvantaged workers'

Reg 20 focuses on opportunities for the social and professional integration of disadvantaged or disabled workers and allows the contracting authority to restrict the process to bids from organisations meeting the relevant criteria.

Reg 20 reflects an extension of the provisions for reserved contracts under the Public Contracts Regulations 2006, SI 2006/5 (which were replaced by PCR 2015, based on Directive 2014/24/EU, the Public Contracts Directive). It falls within PCR 2015 Pt 2, ch 2 and allows contracting authorities to limit the right to participate in certain public procurement procedures, as above. The call for competition should make specific reference to Directive 2014/24/EU, art 20 (from which reg 20 derives) and the procurement procedures under PCR 2015 should be followed as applicable.

PCR 2015, reg 77 falls within PCR 2015 Pt 2 ch 3 and allows contracting authorities to reserve the right to participate in procedures for the award of particular reservable public contracts to certain qualifying organisations. An organisation will qualify if it meets strict conditions:

'(a) its objective is the pursuit of a public service mission linked to the delivery of services referred to in paragraph (2);

(b) profits are reinvested with a view to achieving the organisation's objective, and any distribution of profits is based on participatory considerations;

(c) the structures of management or ownership of the organisation are (or will be, if and when it performs the contract)—

(i) based on employee ownership or participatory principles, or

(ii) require the active participation of employees, users or stakeholders; and

(d) the organisation has not been awarded, pursuant to this regulation, a contract for the services concerned by the contracting authority concerned within the past 3 years.'

Reg 77 was added to PCR 2015 as a part of the ‘light touch regime’ (see below) which allows contracting authorities to reserve contracts for a range of social, health and educational services for mutual and social enterprises meeting the relevant criteria. The call for competition should make specific reference to Directive 2014/24/EU art 77 (from which reg 77 derives) and the procurement procedures for the light touch regime under PCR 2015 should be followed as applicable.

PCR 2015 reg 77 potentially has a broader scope than PCR 2015 reg 20, but the provisions regarding what constitutes a qualifying organisation are prescriptive, as is the list of reservable public contracts under reg 77(2), which refers to particular CPV codes for certain social and specific services listed in PCR 2015, Sch 3. Although PCR 2015 does not specifically define the sheltered workshops and employment programmes referred to in reg 20, most government guidance referring to reserved contracts distinguishes between the reservations under regs 20 and 77. See for example: A brief guide to the EU Public Contracts Directive (2014).

Light touch regime

PCR 2015 included a special ‘light touch regime’ (LTR) for certain types of services. The services that fall under the LTR are not subject to the full regime under PCR 2015, Pt 2. LTR services generally include social, health and education services (see PCR 2015, regs 74-77).

Government guidance on the LTR indicates that reg 77 is intended to apply to a different subset of suppliers to reg 20. See Part 2 of: Public Contracts Regulations 2015: guidance on the new light touch regime for health, social education and certain other service contracts. Which regime applies will depend on the precise nature and purpose of the particular enterprise in question and whether it meets the relevant criteria for the application of the LTR.

For further information on which regimes apply in certain circumstances, see Practice Note: Considerations when authorities procure contracts that are not subject to the full procurement regime. As noted above, public contracts for certain LTR services can be reserved for public sector mutuals/social enterprises. EU-wide advertising is still required but only qualifying enterprises can compete. See Practice Note: Public service mutuals for more on this.

This Q&A was originally published in LexisPSL Public Law. If you would like to read more quality content like this, then register for a free 1 week trial of LexisPSL.

This is the latest in a series of articles by LexisPSL. See also: Introduction to concession contracts procurement