Beware of Light Touch – it may trap the unwary!

Posted by Cathrine Bryant on
The new Directive on Public Procurement (articles 74-77) left considerable flexibility for the EU Member states to implement “national rules” around the procurement of what the Directive refers to as “social and other specific services”. These include health, social care, education and other services set out in Annex XIV to the Directive.  The new provisions will apply to all contracts with a value of E750,000 or more (sterling equivalents will be set once the Regulations are made). Articles 74-77 are the replacement for the almost departed Part B Services. “Almost”, because in relation to clinical commissioning, the existing Part B provisions remain in place until at least 18 April 2016. This is the intended transition period to enable commissioners in England to transition to the new procurement environment.

The Government has recently published for consultation its draft Public Contracts Regulations 2015. Regulations 74 to 77 provide for considerable flexibility in the new light touch regime. True to the Government’s promise not to “gold plate” the Regulations, Regulations 74 and 75 have been copied across directly from the Directive and the flexibility is to be found in Regulation 76.

Regulation 75 imposes a new requirement which did not apply to former Part B services – contracting authorities must advertise these services in the OJEU using either a contract notice or a prior information notice. Contract award notices must also be published when contracts are awarded, although these can be grouped and published quarterly. The aim of this is to bring greater transparency to health and social care contracting (and other specific service types).

Of interest to Contracting Authorities will be Regulation 76(1) which allows for taking into account the specificities of the services when setting up the procurement and choosing the procedure. In other words, authorities are not bound to use any particular form of tendering and can adopt their own procedure, as long as it complies with the basic requirements of transparency and equal treatment of bidders. This has long been advocated for by the health services in particular, however, they will have to wait their turn to use this provision as clinical commissioning is excluded for the time being.

There is even flexibility to change the procedure, since Contracting Authorities can, although they may have previously advertised the requirements or information about the procurement, conduct the procurement in a way which does not conform with such previous notification. However, they must be able to show:

  • That not conforming with the previously advertised requirements does not breach the basic principles of transparency and equal treatment of bidders; and
  • That the Contracting Authority has applied its mind, that it considers there to be no discrimination against bidders on the basis of the basic principles and that it has recorded its reasons and conclusions.

Be aware here!  The requirement that Contracting Authorities “must have applied their minds” opens them up to actions for judicial review. Also, the wide application of the principles of transparency and equal treatment mean that the much vaunted flexibility of this section is limited in ways which will be very familiar to seasoned procurers. For instance, a change in procedure which makes it unclear what criteria were relied on to award the contract, or which does not allow bidders a fair opportunity to adjust their tenders, would be likely to breach such principles. Nonetheless, where a change is objectively justified (for example not enough compliant tenders are received or the nature of the authority’s requirements change), sufficient notice and clarity is given to bidders, and an audit trail is kept of the factors and reasons for the decision, this flexibility could be valuable. 

Regulation 77 gives effect to the long awaited right to reserve certain contracts for employee owned mutuals on a time limited basis. This does not mean that such contracts may be directly awarded to such organisations, but that participation in the tender process can be limited to such organisations, thus giving them a significant advantage since they are not exposed to competition from outside the sector. Done properly, Contracting Authorities can therefore give spin-out entities (where they fulfil the required public service mission and ownership criteria) a safe launch for the first 3 years without having to face competition from larger and potentially better-funded private sector organisations.  This Regulation however does not apply to the procurement of health care services by the NHS where these services fall within the meaning and scope of the Procurement, Patient Choice and Competition Regulations. 

Conclusions

In the final analysis, the light touch regime does bring flexibility in some respects (freedom to adopt whatever tender methods suit the authority best, ability to change procedures, and ability to limit participation to the employee-owned mutuals) but to the unwary and unwise, they could mean challenge and delay. 

Follow this link to find the draft Regulations and consultation document.

About the Author

Cathy is a legal director in the firm's corporate team. As a dual qualified lawyer Cathy brings a depth of experience to her role as an adviser on tax matters in corporate transactions.

Cathrine Bryant
Email Cathrine
029 2068 6198

View Profile