Procurement and contract issues regarding Covid-19

18th March 2020

Covid-19, and the measures to combat it, are having a major effect on ongoing public procurements and the implementation of major IT and infrastructure projects.

Here are some common issues that have cropped up in recent days:

Direct awards justified by urgency

Under the current circumstances, it is necessary for public authorities to purchase medical equipment, drugs and other essential supplies on an urgent basis. Regulation 32(2)(c) of the Public Contracts Regulations 2015 allows authorities to negotiate contracts directly with suppliers:–

  • insofar as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with.”.

It is important to note that this applies only where “strictly necessary”, but this will almost automatically be the case with regard to all urgent medical and other essential supplies and services which are necessary to deal with the Covid-19 pandemic. It will not be the case with other routine supplies (such as non-related drugs or equipment), unless e.g. the supply chains for those items have been disrupted by Covid-19 and the authority urgently needs to purchase them from another source, to prevent potential harm to people for whom the authority is responsible.

For less urgent purchases, where there is still time to conduct some form of tender, the “accelerated” timescales are available in respect of open and restricted procedure. These can limit the tender period to as little as 15 days.

Competitive dialogue and negotiated procedure with competition – can we go virtual?

These procedures typically apply to major strategic projects and require intensive, face to face meetings involving the authority, bidders, experts, etc., with an obvious risk of transmission of Covid-19. Must these be put on hold, or can meetings be conducted virtually by videolink or telephone?

It is absolutely acceptable under the procurement rules to hold meetings virtually rather than face to face. There is no prescribed method for holding dialogue or negotiation meetings and it is up to the authority how it wishes to do so.

Care must be taken to ensure that the key principles of transparency and equal treatment are complied with. In particular, all bidders must be given sufficient notice to prepare, IT and communications must be tested to make sure they work and all bidders can access them, and bidders must all be given the same opportunity in terms of time, access to authority personnel to ask questions/clarifications, and information.

Can my organisation / our supplier claim relief for Force Majeure?

Some organisations, particularly in the NHS, are having to re-deploy staff to urgent work and therefore may not be able to provide the necessary resource to support implementation of key contracts. On the supplier side, supply chains may be disrupted, staff may have to work from home, etc. Is either party liable for breach of contract or losses resulting from non-performance, and what are their options?

This very much depends on the precise drafting of the contract in question. Some standard public-sector contracts (particularly PFI/PPP) are very prescriptive about what constitutes Force Majeure. Others are drafted more widely, including any circumstances beyond the control of the parties.

Typically, a Force Majeure clause requires the party whose performance is or is likely to be affected, to notify the other party as soon as possible. The party affected is then (as long as the definition of Force Majeure in the contract covers the relevant circumstances) relieved from any contractual sanctions or penalties, including termination. There is then usually an obligation on the parties to discuss in good faith to agree measures to mitigate the impact on the services, supplies or works so far as possible. “No-fault” or voluntary termination may become an option if the Force Majeure persists for a certain period of time.

Force Majeure clauses vary widely and so detailed, specific advice should always be taken.

For further advice, please contact Simon McCann on [email protected].

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