Procurement

Posted by Simon McCann on
The new EU directive on public procurement was adopted on 18 April 2014 and transposed into domestic law in England, Wales and Northern Ireland with effect from 26 February 2015 as the Public Contracts Regulations 2015 (Regulations). It must be transposed by all member states by 18 April 2016 (the transposition deadline). Early transposition in England and Wales has afforded greater flexibility to contracting authorities, facilitated access to contracts by small and medium-sized enterprises, and put environmental and social policy goals at the heart of public procurement. 

However, procurements for contracts for health care services let by NHS England and clinical commissioning groups to which the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 (NHS Procurement Regulations) apply were granted a temporary exception from the new Regulations until the transposition deadline. This temporary exception was ostensibly granted to allow commissioners time to adapt to the new regime and means that, until April, commissioners remain subject to the rules on Part B services. 

The new Regulations have abolished the former distinction between Part A and Part B service contracts. Under the previous directive and Public Contracts Regulations 2006, procurements of Part B services were largely excluded from the public procurement regime. Part B services, set out in Schedule 3 to the 2006 Regulations, included health and social services. In place of this distinction between Part A and Part B services, the new Regulations introduce light touch rules for certain health, social and other services (Schedule 3 services). Fewer services fall within the light touch regime than Part B, meaning that some Part B contracts are now subject to the "full" rules. This light touch regime has applied to Schedule 3 services contracts tendered by other contracting authorities, such as NHS Trusts and Local Health Boards, since 26 February 2015 and is set out in regulations 74 to 77.

However, from April, the mandatory requirements of the light touch regime will apply to all procurements for health and social services above the threshold (€750,000 or £589,148).  These requirements include:

  • the publication of a contract notice or prior information notice to advertise the contract opportunity and contract award notice following the procurement in the Official Journal of the European Union;
  • carrying out the procurement in compliance with the over-arching EU Treaty principles of transparency and equal treatment, and the processes set out in the OJEU advert; and
  • ensuring that any time limits imposed are reasonable and proportionate.

Despite this limited number of prescriptive requirements, significant flexibilities remain for commissioners to use any process or procedure (not just the standard EU procedures contained in the Regulations) to run their procurements provided these requirements are met.

With April looming, there remain a number of uncertainties surrounding how the NHS Procurement Regulations will fit with the new procurement rules.

Many of the new mandatory requirements will be familiar to those operating under the NHS Procurement Regulations and Part B services regime. For example, regulation 3(2) of the NHS Procurement Regulations requires commissioners to act transparently, proportionately and without discrimination and sets out rules relating to advertisement. However, it is only where commissioners have decided to advertise a contract that they must publish a contract notice on the NHS procurement portal, Supply2Health. From April, they will not only have to publish the notice on OJEU but their freedom to choose whether or not to go out to tender will be curtailed.

It is therefore important for commissioners to understand how the new light touch regime fits in with the NHS Procurement Regulations.

While the Government has published practical guidance setting out the requirements of the light touch regime, a number of key questions have still not been answered.  For example, the NHS Regulations provide a basis for a "no tender" decision based on an assessment of various duties (known as the "most capable provider" approach). This is not permitted in the light touch regime – all contracts above the threshold must be advertised. 

As it stands, the adoption of the light touch regime in April is completely incompatible with the commissioners' discretion whether to tender or not. Due to the sovereignty of EU law, if there is an inconsistency between the EU procurement regime as set out in the 2015 Regulations and the NHS Regulations, the courts would resolve it in favour of the EU rules and require commissioners to carry out a tender exercise in all cases where the value exceeds the threshold.    Time is quickly running out to tackle this issue.

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Simon specialises in public and utilities procurement and major projects including construction, development, IT, energy saving partnerships, joint ventures and other vehicles.

Simon McCann
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