Procedures

New guidance has been published by the Equality and Human Rights Commission to help commissioners and procurers in considering how to ensure compliance with their public sector equality duty (PESD) obligations at different stages of the procurement lifecycle.

The PESD, which is a continuing duty deriving from the Equality Act 2010, requires public authorities and any organisation carrying out a public function (including the private and voluntary sector) to have "due regard to" (i.e. consciously consider, including in their decisions) the need to eliminate unlawful discrimination, advance equality of opportunity and foster good relations.

The guide, and other resources on the EHRC website, identify and recommend that the PESD be factored in to procurement policies and procedures, business case planning and each subsequent stage of the procurement process. Whilst relevance and proportionality are the key guiding principles in deciding if, when and how equality should be taken account, it is extremely important that the duty is considered.

The recent case of R (on the application of RB) v Devon County Council and Devon Primary Care Trust [2012] EWHC 3597 (Admin) highlights the important interaction between the PESD and procurement and the risks for commissioners and procurers who fail to take account of it in their procurement and decision making processes. The claimant, the mother of two children, brought judicial review proceedings alleging the Council and PCT had failed to properly consider the PESD when deciding to appoint Virgin Care as preferred bidder to provide integrated childrens health and care services. The Court agreed that the authorities had failed to discharge their PESD when deciding to appoint Virgin as preferred bidder. Luckily for the authorities (and Virgin) the Court did not quash the decisions and the contract with Virgin has now been put in place. The case nevertheless provides a salutary lesson for commissioners and procurers who, in similar circumstances, may not be as lucky next time.

The last couple of weeks has seen controversy in the healthcare sector, following publication of the National Health Service (Procurement, Patient Choice and Competition) Regulations 2013 (the “Regulations”) which are due to come into force on 1 April 2013. Following an outcry from many practitioners and commentators, the government has now withdrawn the Regulations in their current form, and taken them back to the draughtsman for a second attempt. More on this shortly, but, before that, let’s remind ourselves of what the Regulations actually do.

They were made under the Health and Social Care Act 2012, which introduces a new commissioning structure within the NHS. Primary Care Trusts are being abolished and their commissioning function is being transferred to new G-P led Clinical Commissioning Groups (CCGs). The Act also imposes requirements on a new National Health Service Commissioning Board and the CCGs under it, to ensure good practice in the procurement of health care services for the purposes of the NHS and to prevent anti-competitive behaviour by commissioners with regard to such services. The Regulations:

• set out the objectives of such procurement (securing the needs of people who use the services, and improving quality and efficiency);
• include general requirements in relation to transparency, proportionality and non-discrimination;
• set out requirements relating to matters such as advertisements and qualification criteria; and
• set out Monitor's powers to investigate and take enforcement action in relation to breaches.

These Regulations effectively, therefore, introduce a further layer of procurement obligations on NHS commissioners as the Public Contracts Regulations 2006 (insofar as they apply to Part B services), and EU treaty principles (where there is a cross border interest) still continue to apply.

For commissioners of healthcare, these Regulations must be complied with when procuring clinical services and the regulator, Monitor, has extensive powers if they are breached. For providers of healthcare, these Regulations provide the framework within which tenders will be issued and the basis for addressing any concerns. Commissioners and providers of healthcare should, therefore, ensure that they fully understand the Regulations. In particular, from April, commissioners of healthcare must comply with them when making commissioning decisions. In advance of this they should ensure that they review and amend their Standing Orders, Standing Financial Instructions, and procurement policies to ensure that they properly reflect the requirements of the new Regulations.

The latest version of the Regulations has been withdrawn following concerns about implications of the drafting. The particular issue has been around Regulation 5 of the withdrawn draft, which stated that a new health services contract could be awarded to a single provider without competition only in three circumstances: (a) where the commissioning body is satisfied that only one provider could provide the service, or (b) for technical reasons (including intellectual property rights) only that provider is capable of being awarded the contract, or (c) for reasons of extreme urgency, it is not possible to award the contract to any other provider within the necessary timeframe.

The backlash in the sector has centred on the fears that these exemptions are narrow in scope and will in effect require commissioners to tender almost all services, leading to “privatisation by the back door". Announcing the withdrawal of this draft, Health Minister Andrew Lamb MP stated that ‘Concerns have been raised that commissioners would need to tender all services. This is not our intention and we will amend the regulations to remove any doubt that this is the case and clarify that the position remains the same as at present.’ We expect that a new draft will be issued soon and we will update you accordingly.

A new policy that will allow government departments to exclude companies and individuals which take part in tax avoidance from being awarded Government contracts has been unveiled.  (See Cabinet Office Information Note 03/13)

However, the proposed rules contained in the consultation draft, may not be as wide-ranging as the headlines suggest and are apparently intended to be as “light touch as possible”. The rules are unlikely to exclude companies (some of which have attracted much press comment recently) who simply arrange their global tax affairs in a way which minimises their UK corporation tax liability.

Under the new policy, potential suppliers to government will have to self-certify, as part of the selection stage of above-threshold procurements, their recent tax compliance history. Companies will have a so-called “occasion of non-compliance”, which could result in their exclusion from the bidding process if:

• any tax return is found to be incorrect as a consequence of HMRC successfully taking action:
  • under the General Anti-Abuse Rule (GAAR) to be enacted in Finance Bill 2013; or
  • under any targeted anti-avoidance rule (TAAR); or 
  • under the "Halifax abuse" principle (concerning VAT avoidance); or 
• any tax return is found to be incorrect because a scheme which the supplier was involved in, and which was, or should have been, notified under the Disclosure of Tax Avoidance Scheme (DOTAS) rules, has proved to have failed; or
• the supplier's tax affairs have given rise to a conviction for tax related offences or to a penalty for civil fraud or evasion.

If a tax return is amended either following litigation or simply by agreement with HMRC, by reason of GAAR, TAAR etc. this will also be treated as an “occasion of non-compliance”.
Suppliers who self-certify that they have had an “occasion of non-compliance” may avoid exclusion if they can provide an explanatory statement evidencing the steps taken to prevent a recurrence. However, this is at the government department’s discretion according to the seriousness of the non-compliance and the steps taken to prevent recurrence.

In addition to the possibility of excluding suppliers at the selection stage, government departments must ensure their contracts contain standard clauses enabling them to terminate if a supplier has had an occasion of non-compliance after the contract has been entered into, and an obligation to notify changes in relation to tax compliance. Failure to do this will also trigger remedies including, potentially, termination of the contract.

To ensure that UK suppliers are not unfairly disadvantaged, foreign suppliers will be required to certify that there has not been an 'occasion of non compliance' in relation to the equivalent foreign tax rules.

Effective from 1 April 2013, this new policy will apply to all central government above-threshold contracts advertised in OJEU and to which the EU procurement rules apply. It is intended to apply to all central Government departments, their executive agencies and Non-Departmental Public Bodies.

As a matter of procurement law, the relevant rules regarding the discretionary exclusion of suppliers in this context are either that: 

• the supplier has not fulfilled its obligations relating to the payment of taxes under UK law or the law of the relevant member state where the supplier is established; or 
• the supplier has committed an act of grave misconduct in the course of his business or profession.

Although the draft proposals refer to suppliers “recent” tax compliance history, the time frame suggested for self-certification is the preceding 10 years. This has the potential to go beyond the limits of procurement law if it captures a supposed “occasion of non compliance” which, at the relevant time, was not unlawful. Government departments will therefore need to take care to avoid the over zealous exclusion of suppliers under the new policy or they could be at risk of challenge for breach of procurement law.

This new initiative continues a recurring theme by the UK Government of seeking to deliver its policies through procurement. Another example is the Government’s push to open up the market to SMEs.

Had the Government pressed ahead with its reforms, we would have seen a new franchising system, whereby a single exam board had the monopoly to run the new English Baccalaureate Certificates (EBC) for a particular subject area for a period of 5 years.

So does such an approach in principle raise EU procurement concerns? There is discussion in the House of Commons Education Committee’s report of the distinction between a “contract” and a franchise “relationship”; the point being made by the Committee that if classified as the former (which the committee suspected) then EU procurement law would come in to play.

But we understand the Government had always intended to advertise and hold an open competition for each franchise; which Ofqual would then award according to objective and transparent criteria. So classification as a public services contract (which being education would be for Part B services) or even a public services concession ought not to have been such a major concern. Such a process, if followed correctly and carefully, would be consistent with any EU procurement or EU Treaty obligations applicable to Part B contracts or concessions.

We suspect the risks posed by the pace and radical nature of the reform and its impact on the existing market were the real reason for the u-turn. Creating a monopoly in a market which has previously been highly competitive inevitably heightens the risk of legal challenge (as winners have a lot to gain but equally losers a lot to lose). Irrespective of its merits, a legal challenge to a Government process or decision (whether on EU procurement grounds, judicial review or otherwise) will at best cause disruption and delay and at worst the cancellation of the process altogether. With recent judicial review challenges such as the West Coast mainline still reverberating, and lessons to be learned about how mistakes can be made when seeking to introduce major change in over ambitious timescales, it is perhaps not surprising that the Government made the decision it did.

European Dynamics have continued to keep the European Courts busy. In a recent skirmish (Case T-447/10 European Dynamics v Court of Justice of the European Union, judgment of 17 October 2012), the General Court had to consider the often debated point of whether it was lawful to evaluate the CVs of the proposed team at award stage. Although the case was brought under the Financial Regulations which govern public contracts financed from the EU budget, these rules are very similar to those under the Public Procurement Directives and so it still provides a useful precedent.

The case concerned a procurement by the Court of Justice of the European Union (CJEU) for maintenance, support and development of IT applications. European Dynamics was unsuccessful in its bid for 2 lots and brought an action for annulment of the decision to reject its tenders. One ground for challenge was that the CJEU had confused the selection and award criteria and had not restricted the use of team CVs to the selection stage.

At the selection stage, the CJEU had required submission of 34 CVs relating to the proposed team. These were assessed to determine whether the tenderer could provide the number of personnel specified and that each person met the minimum requirements for technical expertise.

At the award stage, the CJEU again assessed CVs, but this time in the context of the “skill, experience, organisation and training of the proposed team”.

The General Court noted the distinction between selection and award criteria recounting that, at the award stage, criteria such as the tenderer’s experience or its capacity to make a team available should not be used (since these relate to the tenderer’s capability to perform the contract and not to establishing the most economically advantageous tender).

However, the Court went on to say that a criterion which assessed the proposed team’s technical skills and professional experience may, in certain situations, constitute a valid award criterion where the services are of a highly technical nature and the precise subject matter of the services must be determined progressively as the contract proceeds. In those circumstances, the technical skills and professional experience may have an impact on the quality of services and so determine the technical value of a bidder’s tender and consequently its economic value.

In the present case, the Court found that the CJEU had not confused the selection and award stage. Although CVs had been considered at both stages, different issues had been assessed. The examination at selection stage was limited to whether the tenderer had sufficient personnel who met the minimum technical requirements (i.e. the tenderer’s technical capability). In contrast, the examination at award stage related to the technical “value” of the proposed team.

The Court also found that the CJEU was entitled to examine team CVs at award stage as this case was one of those situations where, as previously recounted, the technical skills and professional experience of the team was liable to impact on the quality and effectiveness of the services performed and as such had an economic value.

This case is a victory for common sense and represents an important watershed as the European Courts and the Commission have previously taken a very strict line against using experience (in any context – CVs or otherwise) as an award criterion. Whether the same decision would have been reached had the defendant been a non-EU institution is another question! Or, perhaps the Court’s relaxation in approach was simply in acknowledgment of the proposals in the latest draft of the new Procurement Directive. The current draft specifically allows a proposed team’s experience to be considered at award stage provided this impacts on the quality of contract performance.

BUT, A WORD OF CAUTION, although the case provides a useful precedent, great care should still be taken if team CVs are to be considered at award stage. In particular you should ensure that:

• any issues considered at selection stage are not re-visited;
• the facts and circumstances in your case are analogous to those which applied here; and
• those issues considered at award stage will genuinely have an impact on the quality and effectiveness of the performance of the contract and do not relate to a tenderer’s capability to perform the contract.

This Act will apply to all procurements run under The Public Contracts Regulations 2006 (the “Regulations”) which are still in the pre-procurement planning stage (i.e. an advertisement has not yet been issued/expressions of interest have not yet been sought) as at 31 January 2013.

It places a requirement on all public bodies who are contracting authorities for the purposes of the Regulations to consider the economic, environmental and social benefits of their approaches to procurement before the process starts. The Cabinet Office has published this procurement policy note by way of guidance; annexed to the note are some useful case studies on how social value might be considered.

Under the Act, contracting authorities will also have to consider whether they should consult on these issues. The Act does not stipulate when or how this should be done, but the Cabinet Office note suggests this will be “particularly relevant when considering procurements for services which are delivered directly to citizens. The voluntary and community sector, along with other providers and interested groups, should be engaged from the earliest stage to help shape policies, programmes and services”. Consultation may be less relevant where the service is being provided directly to the contracting authority (e.g. back office functions).

 The Act only applies to services contracts and does not apply to call-off contracts under framework agreements. The Act also provides that the requirements to consult and to consider the impact on social, environmental and economic well being can be disregarded if the urgency of the requirement means it is impractical to consider them (note that the urgency must not be caused by undue delay by the contracting authority).

Contracting authorities should consider referencing these requirements in their standard contracting procedure rules, in employee training programmes and in any stakeholder or service user engagement protocols. The Cabinet Office guidance also recommends keeping a formal record of steps that have been taken to comply with the Act. While the duty imposed by the Act is only a “duty to consider” rather than a “duty to act”, contracting authorities should bear in mind the risk of judicial review claims where it can be objectively demonstrated that insufficient consideration was given.

Stephen Allott, the Crown Representative for SMEs, is holding a “live web chat” on Wednesday 19 December between 3 and 4pm on public procurement, and wants to hear experiences – good and bad – of SMEs bidding for public sector work. You can join the debate at http://www.cabinetoffice.gov.uk/content/mystery-shopper-live-chat or via Twitter using hashtag #MysteryShopper.

This is part of the “Mystery Shopper” service run by the Cabinet Office, which allows suppliers to give feedback to the public sector on procurements. The service claims to have achieved a successful outcome in 77% of cases reported to it, with changes made to major procurements by organisations such as the Government Procurement Service and Department for Transport.

Suppliers can email or use this online form. Full details of the service are set out in the Cabinet Office's Scope and Remit document.

The Cabinet Office has recently published a Procurement Policy Note (PPN) on taking bidders’ past performance into account when assessing bids.

When does the PPN apply?
The PPN applies to:
• contracts and framework agreements entered into from 8 November 2012;
• by government departments, executive agencies and non-department public bodies;
• where these are anticipated to be worth over £20 million; and
• where the subject matter of the contract is IT services, facilities management, or business processing outsourcing.

What does the PPN require?
• Tender documents must contain the standard wording set out at annex 1 of the PPN, explaining this policy;
• The OJEU notice must set out the minimum standards required, together with the information the contracting authority will need to make the assessment as to whether those standards are reached. Bidders must provide certification that they have met the standards. Annex 2 to the PPN contains sample wording for the OJEU notice;
• Departmental bodies should provide certificates to past suppliers who have requested them as part of the implementation of this policy; copies must be sent to the Cabinet Office. A template certificate is provided at Annex 3. Where poor performance has meant a public body is not prepared to provide a certificate, reasons must be given;
• Contracting authorities must verify the information obtained, being careful to treat all bidders equally and not discriminate, and to act transparently. A panel should be appointed to adjudicate on whether the minimum standards are met in any particular case.

Comment
This new policy is the government’s attempt to ensure there is no repeat of previous high-cost and high profile public procurements where suppliers failed to deliver, particularly in the IT sector. It remains to be seen how the policy will operate on the ground. However, one can foresee certain pitfalls from a procurement law perspective, which contracting authorities will need to negotiate sensitively. For example:

• The danger that past performance will creep into the evaluation stage. This is a developing area of case law, but at present the status quo is represented by the Lianakis case; this firmly prohibited the assessment of past performance in the award criteria;
• The risk that, in exercising its discretion to verify certificates and references received (see paragraph 31 of the PPN) and to ultimately come to its own conclusions, a contracting authority will offend against the basic EC Treaty principles of non-discrimination, equality of treatment and transparency, giving rise to a ground for challenge by bidders;
• In their capacity as previous customers, will contracting authorities be prepared to refuse to provide certificates and thereby to admit that past procurements have “gone wrong”?
• Will the certification regime set out in the PPN only operate, in practice, in respect of previous public contracts, whereas suppliers may well have performed poorly in other, private commercial, contracts in the past?

Readers should also note that the proposals for a new directive on public procurement include at Article 55 (of the October 2012 draft) a provision allowing member states to provide that contracting authorities must, or alternatively, may, exclude bidders who have “shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract or a prior contract with a contracting entity which led to early termination of that prior contract, damages or other comparable sanctions”.

On 31 October, the First Tier Tribunal gave judgment which provides some guidance on how far 'confidential information' received during a competitive bidding process can be withheld under the Freedom of Information Act ("FOIA").

In 2010, the London Borough of Newham began a competitive bid process under the structure of the Gambling Act 2005 for the operation of a casino at Westfield, close to the Olympic Park. For the purposes of this blog it is important to note that:

• the procedure required a written agreement ("the Schedule 9 Agreement") between any proposer and the Council setting out the benefits offered and the compensation proposed in the event that, having been awarded the casino licence, the development was delayed or the benefits failed to materialise; and
• in its paperwork for the tender process the Council made it clear that "All information submitted to [the Council] at any time during Stage 2, including the form itself and associated documents, will be treated as confidential...."

Following the bidding process an unsuccessful bidder challenged the decision as unlawful and made an application, amounting to a request under FOIA, for further information about the contents of the bids and how they were considered. Among the information requested was the Schedule 9 Agreement. This was provided but had been substantially redacted so that, for example, information about the specific obligations which the guarantor would guarantee was deleted as was the whole of a Schedule which summarised the benefits proposed by the successful bidder. The justification for withholding the information was under section 43(2) of FOIA-prejudice to commercial interests.

In short, having reviewed the documents in question, the Tribunal agreed that the threshold for engaging section 43(2) had been passed in relation to all the categories of information. Accordingly, the main question for the tribunal was the public interest balance between that confidentiality and appropriate disclosure.

The arguments urged on the Tribunal by the Council were that the avoidance of harm gave rise to a greater public interest than disclosure and that general disclosure of information would discourage bidders who would be concerned that confidential financial and commercial information would be placed in the public domain. It was noted that in this case it was a competitor who was seeking the information, not a member of the public, and that while the information may be specific to this particular project it would be possible to build up a body of information from it and other information which would disclose sensitive commercial information. For the Information Commissioner it was argued that there was already such a large amount of information in the public domain that the withheld information added very little but facilitated a better informed public debate on what was a controversial plan.

The Tribunal looked at each category of document confidentially. Importantly it held that in relation to the Schedule 9 Agreement the public interest was best served by full disclosure of the identity and creditworthiness of whoever stood behind the obligations. Moreover, the Tribunal considered that a copy of the Schedule 9 Agreement with that information restored would also demonstrate the expected public benefits which the guarantor was not prepared to stand behind and the Council's acceptance of that limitation on the security obtained for the package of benefits offered. The Tribunal found that the public interest in bidders being able to prevent competitors from finding out about this part of the proposals was relatively slight and did not equal, let alone outweigh, the public interest in disclosure.

In other words, information which a commercial bidder may regard as commercially sensitive might nevertheless be ordered to be disclosed under FOIA. The Tribunal did consider whether in the case of some of the information its disclosure might lead to an actionable breach of confidence leading to an exemption under section 41 of FOIA. The Tribunal did find that some of the withheld information was obtained in circumstances in which the confider might reasonably have assumed that it would be held in confidence. It said that there should be no time limit over which the obligation of confidence lasts but it was not correct that such an obligation should last forever. It found that the reasonable expectation of the confider would be that confidentiality would be maintained for a reasonable period of time after the date when the licence was awarded.

This is significant for other public sector tendering exercises, for both contracting authorities and bidders, because it demonstrates that even if information disclosed in the tender can be considered confidential (which is quite a high hurdle to cross) it will only be protected from disclosure by FOIA for a limited time.

It is worthwhile reading the whole decision which can be found here.

If not Murder on the Orient Express, then certainly Red Faces at the Department for Transport!

Procurement law is headline news today, following a dramatic midnight announcement by the government that it is dropping the controversial award of the West Coast Mainline franchise to FirstGroup. The announcement came only hours before the complaints about the procurement process raised by the current operator, Virgin Trains, were due to be scrutinized by the High Court.

The transport secretary, Patrick McLoughlin, admitted that the procurement process was flawed and that this was entirely the fault of civil servants within his department. Three people involved in the process have been suspended from their duties and a review is underway. The details are a little hazy, but the flaws in the procurement seem to have been around the way the department calculated and scored the risks attached to each of the four bids, and, in particular, the level of security payments offered as a guarantee by FirstGroup, in the event it ran into problems with the operation of the contract.

Various press articles have commented that around £40 million will be paid to the four bidders by way of compensation for wasted costs. This is interesting, as, of course, the usual scenario is for the contracting authority, in the contract documents, to reserve the right to abandon the process at any point and state that bidders will have no claim for wasted bid costs.

Further details will undoubtedly emerge and we will update you when they do.

In December of last year, the European Commission published its proposals for a new Directive on public procurement (see our previous post here). Since then, the Commission has been consulting stakeholders on what a new Directive should properly include.  

 

Last week, the Cabinet Office published a procurement policy note summarizing the latest state of the negotiations and the UK government’s current position on some key outstanding issues.

 

The Commission’s proposals for a new Directive

 

The proposals are lengthy but all have the general aim of simplifying public procurement and making it more flexible, together with dealing with some of the grey areas created by, or left unaddressed by, the current Directive. The new Directive is expected to be adopted at some point in 2013 – member states will then have an 18 month period in which to implement it.

 

Key features of the proposals include:

 

• Clearer definitions of “public works contract” and “public services contract”
• The so-called “Teckal exemption” for in-house contracts will be put into statute for the first time
• The Directive will clarify that a public contract will not be created in a situation where two contracting authorities genuinely co-operate in the performance of their public functions
• Two new procedures will be created, both recognizing the need for negotiation in some complex contracts while at the same time aiming to ensure a level playing field for bidders. These are:
  • The competitive procedure with negotiation
  • The innovation partnership
• Shortening of time limits for participation and submission of offers
• Statutory clarification on when a variation or extension of a public contract amounts to a new award requiring a new procurement process to be run
• Use of life-cycle costing as a basis for making an award
• Removing the distinction between Part A & Part B services
  • so-called “Social Services”, to include social, health and education services, will be given their own separate, slimmed down regime with high thresholds and only minimal advertising requirements
  • however, other services which are currently Part B services, such as legal services, will become subject to the full application of the procurement regime
• Encouraging access by small- and medium sized entities
  • including by dividing contracts into lots

 

The Cabinet Office’s work

 

The Cabinet Office is engaged in negotiations to influence the ultimate shape of the new Directive and has recently issued a procurement policy note detailing progress so far and key interventions:

 

o        There had been plans for each member state to be required to appoint a national body to oversee procurement activity in that state; this was successfully resisted by the UK

o        There had been a proposal for a “European Procurement Passport”, which bidders would be able to present to contracting authorities to demonstrate compliance with selection criteria. However, the UK has successfully argued for a new “self-certification” approach, whereby only the winning bidder is required to physically supply documentary evidence that it meets the selection criteria, during the award phase. Prior to this point, bidders will merely "self-certify" that they meet the criteria without the actual production of documentary evidence. This new approach makes the European Procurement Passport redundant and it has been dropped

o        The UK has successfully relaxed proposals for mandatory division of contracts into lots for SMEs, such that this is now at the discretion of the contracting authority (provided that it can give reasons why such a division is not appropriate in a particular case)

o        The UK has campaigned for greater built-in flexibility in procurement procedures – the current proposals will permit negotiation in all contracts which go beyond mere “off the shelf” procurements; the government is satisfied with this outcome

o        The government is campaigning to retain the current distinction between Part A and Part B services, but acknowledges that this is unlikely to be successful. However, the UK will continue, if the distinction is indeed abolished, to push for a lighter touch regime for those Part B services (such as legal services) which will not become “Social Services” under the new regime

o        The government supports the new proposal that a bidder’s poor performance under previous contracts be made more explicitly a ground for de-selection

o        The proposals currently require the transition to 100% e-procurement to be made within two years of transposition deadline.  While it wishes to encourage e-procurement, the government will resist this requirement being made absolute as it believes it is unrealistic

o        The UK is seeking an temporary exclusion from the full rigours of the procurement regime for innovative public service delivery bodies, such as employee-owned mutuals, in order to give such organizations time to become established before they are subject to full competition

 

We will continue to monitor and report on the progress of negotiations and the likely timetable for implementation of the new rules.

The Organisation for Economic Co-operation and Development (“OECD”) has recently published guidelines to assist contracting authorities in the detection and prevention of bid-rigging and other anti-competitive behaviour by bidders. This paper follows on from previous guidelines issued in 2009.

 

The key recommendations in the recent guidance are that:

 

• officials running procurement processes have an understanding of the relevant market and training in how to spot anti-competitive behaviour by bidders and “suspicious” bids;
• the procurement process be designed to minimize the opportunities for intra-bidder communications;
• the number of bidders is maximised, including small- and medium-sized bidders where possible, on the basis that the larger the field of bidders, the harder it will be for bid rigging to take place;
• selection and award criteria are carefully chosen with a view to maximising competition rather than encouraging collusion;
• e-procurement be used as much as possible, as this creates a “bidder trail” which can be evaluated for suspicious bid patterns much more easily than paper bids;
• all bidders are required to sign a “Certificate of Independent Bid Determination”, confirming that no collusion has taken place; and
• the tender documentation includes warnings prohibiting bid rigging and gives deterrent details of the sanctions that will be imposed on bidders if bid rigging is discovered.

 

We have contacted the Cabinet Office to see if it intends to publish a Procurement Policy Note or other guidance for contracting authorities in response to the new OECD publication; we will post again if so.

 

 

In March, the Public Services (Social Value) Act 2012 received Royal Assent and its substantive provisions will come into force on a date which has yet to be set by the Government, but is expected to be within the next couple of months. The new Act requires that, before starting any procurement process under the procurement Regulations for a services contract (including a services contract incorporating purchase of goods), the contracting authority must consider:

• how the services being procured might improve the economic, social and environmental well-being of the area in which the contracting authority primarily exercises its functions, and
• how, in conducting the procurement process, the contracting authority might act with a view to securing that improvement.

There is also a requirement on the contracting authority to consider whether to undertake any consultation about matters that fall within either of the points above.

All of the requirements above may be disregarded to the extent that an urgent need to arrange the procurement makes it impractical to comply with them, but note that this urgency exemption does not apply where the time available for the procurement has been reduced by the delay of the contracting authority.

Chris White MP, who put forward the initial Bill to Parliament, tells us that:

“The aim of the Act was to support community groups, voluntary organisations and social enterprises to win more public sector contracts and to change commissioning structures so that a wider definition of value rather than just financial cost was considered.”

But will the Act deliver on these aims? After all, the new Act does not require contracting authorities to ensure that the goods or services being procured result in a demonstrable improvement to the economic, social and environmental well-being of the local area.

Furthermore, the procurement Regulations will continue to apply in their current form and so:

• the procurement must not discriminate against economic operators based outside the UK and/or the contracting authority’s local area; and
• the contracting authority must award the contract to the bidder making the most economically advantageous offer or offering the lowest price.

Clearly, there is nothing to stop a supplier from outside the local area delivering a contract in a manner which improves the social and environmental well-being of the public body’s catchment area. For example, any supplier may choose to use local sub-contractors for elements of the relevant contract.

When the new Act comes into force, public bodies will need to consider whether they should include reference to social values in each services specification and whether evaluation criteria referencing the impact on the economic, social and environmental well-being of the local area should be included in the procurement process. Care will need to be taken to ensure that any new criteria are appropriately linked to the subject matter of the contract, and therefore also remain appropriate to determine the most economically advantageous offer.

However, there will need to be a balancing exercise. Public bodies will need to ensure that any criteria looking at the local impact of the proposed contract are not framed in such a way that they might discriminate against suppliers who are not based locally.

It is anticipated that many public bodies will put in place a policy on procurement which includes a statement of their approach to addressing the issues set out in the Act. Public bodies may also elect to carry out consultations locally to discuss their approach, which are envisaged by the legislation. Procurements will then need to be carried out in accordance with any such policy.

Social enterprise campaigners hope that the Act will transform public sector purchasing by looking at the collective benefit to the local community of public spending. The impact of the Act remains to be seen, but what is clear is that it is a rare example of a private member’s bill actually becoming law.

The Commission published in late December its draft legislative proposals on a replacement EU procurement directive (as well as a draft replacement utilities directive and a proposed new directive on concession contracts).

The revised draft rules are intended to provide clarity in a number of areas which have been the subject of case law under the current regime, to improve and streamline procurement procedures, and to facilitate cross-border competition and opportunities for SMEs. The many changes include the concept of "innovation partnerships" as a new procurement route, and the negotiated procedure becomes a "competitive procedure with negotiation". The draft regulations also contain new provisions on joint procurement by contracting authorities, market testing, tenders presented as an "electronic catalogue", and the concept of a "European procurement passport" which has previously been promoted as a means of reducing administration for SMEs.

The Cabinet Office has issued a Procurement Policy Note asking for feedback on some of the proposals contained within the draft. It expresses concern that the Commission has chosen not to exempt mutuals from the draft regulations, and at the level of governance requirements.

Negotiations on the draft directives are ongoing, and as a result these proposals may change significantly before any new regulations are adopted into EU law (expected to be in 2013), and then transposed into UK legislation.

The Commission and Cabinet Office have confirmed that the relaxation of the rules permitting the use of the accelerated restricted procedure will cease to apply from 1 January 2012.

The Commission had previously authorised use of accelerated restricted where the acceleration would benefit the economy (which was generally taken to apply to most substantial contracts). The Commission's decision therefore appears to reflect an EU view that the economic situation has now improved, which may be a surprise to those watching growth figures for EU member states!

The change will mean that only the more limited justification for accelerating the restricted procedure around urgency preventing the use of the standard time frames (as set out in Regulation 16) will apply for procurements commenced in the new year.

The Cabinet Office has confirmed this in a Procurement Policy Note, which also confirms the new procurement thresholds which will apply from 1 January.

How time flies…the European Commission has recently published the new public procurement financial thresholds which will apply from 1 January 2012.  The new thresholds will apply for award procedures under the Public Contracts Regulations 2006, the Utilities Contracts Regulations 2006 and the Defence and Security Public Contracts Regulations 2011.

In short, the new UK thresholds under the Public Contracts Regulations are:

• Supply/Service contracts awarded by central government- £113,057
• Supply/Service contracts awarded by other contracting authorities - £173,934
• Works contracts - £4,348,350

The new € EUR thresholds can be found here and the equivalent £ GBP thresholds can be found here.

The EU has issued some helpful (if lengthy) guidance called "Buying Green" - a handbook explaining how to introduce environmental factors into the procurement process.

The new handbook deals with the issue which has been the subject of some debate among procurement professionals - is it appropriate to consider green credentials at PQQ stage? The procurement regulations are quite clear on what can be taken into account at PQQ stage (see Regulations 23, 24 and 25). There is a brief reference to "environmental management measures" at Regulation 25(2)(h) but consideration of this is limited to "where it is necessary for the performance of the contract".

There is no clear basis in the Regulations on which you could ask, for example, "do you have an environmental impact policy in place?" and score that as part of the PQQ. However, the Buying Green paper points out, at pages 34 and 35, a number of areas where green credentials could be legitimately built in to standard PQQ questions, for example by asking about past experience of contracts with similar environmental requirements.

Those attending the annual White Paper Conference on procurement law last week were treated to an insight from leading commentators into the likely future direction of procurement law.

Predictions of future developments included:
- an increased focus on value for money and less of a technical and mechanistic approach to interpreting the rules;
- an attempt to breath new life into the competitive dialogue procedure, with reduced (if any) restrictions on its use, and scope for post-tender negotiation;
- the (welcome?) return of the negotiated procedure to mainstream use;
- further increases in the use of electronic procurement, including availability of all tender and contract documentation online earlier in the procurement process; and
- improved training and guidance for those involved in procurement.

Speakers also highlighted the need for clarity about how the government's extensive plans for mutuals would be impacted by the procurement regime. Watch this space!

The White Paper speakers also had some interesting things to say about developments on procurement challenges. Among the views expressed:
- the American Cyanamid test which has been adopted by the courts for dealing with automatic suspension cases is natural to English courts but imposes a real barrier to claimants;
- there may be insufficient weight given to the public interest in getting procurements right as opposed to procuring the service;
- ineffectiveness as a remedy was counter-intuitive to English courts and unlikely to be very…well…effective; and
- there was little prospect of the EU legislation on remedies being amended in the near future given how recently the Remedies Directive has been introduced.

The Cabinet Office has issued new guidance, effective immediately, on the transparency obligations relating to the publication of contracts and tender documentation. The guidance applies to central government departments, agents and agencies and non-departmental public bodies as well as NHS bodies and trading funds.

There are a number of amendments to the guidance, including updates to address dynamic purchasing systems, and new guidance on the "consultancy value statement" which must be completed relating to all consultancy purchases of over £20K.

The guidance is available to download in two parts - Publication of New Central Government Contracts, and Publication of Tender Documentation.

The EU has recently been considering the problems faced by small and medium-sized enterprises (SMEs) in competing for public contracts under the current EU procurement regime. SMEs win only 31-38% of public procurement contracts by value which is substantially less than their overall share in the economy (52% of combined turnover) suggests they should. Ironically therefore measures designed to increase competition and to free the market for all potential bidders is actually having the opposite effect by making it too costly for most SMEs to participate in tenders for public contracts.

The Committee for the Internal Market and Consumer Protection has recently considered this point and unanimously approved measures to remove the administrative barriers for SMEs to allow them to participate more effectively in competitive tenders. Those measures include a proposal for an EU-wide "electronic procurement passport" which would prove that the holder complies with EU rules on public procurement without the need to go through a substantial paper exercise for each new bid. MEPs also backed a proposal to divide public contracts into lots to give SMEs a better chance of bidding.

Although we are still a long way from any firm proposals, let alone the introduction of further legislation, the mood in Europe is clearly to lighten the load for SMEs, not-for-profit and social economy operators when it comes to the current requirements for bidding for public contracts. The Commission has been seeking views since January 2011 on this and is currently preparing a series of legislative proposals which will be tabled later this autumn.

Further up-dates on this will be available via our blog in due course.

On 27 August, European Commission Implementing Regulation 842/2011 was passed, introducing new proformas for various OJEU notices (for example, prior information notices, advertisements, award notices and voluntary ex ante transparency notices). The regulation will come into force on 16 September, meaning the new proformas must be used from that date.

The regulation is available here; the new proformas themselves are contained in the annexes to it.

On Tuesday, judgment was handed down in the interesting case of Mears Limited v Leeds City Council, which concerned a procurement for the maintenance of public housing stock. The case illustrates some of the rocks on which an evaluation process might founder and provides a helpful practical application of the recent line of cases around disclosure of award criteria. It also provides useful guidance on how contracting authorities might best structure evaluation schemes so as to avoid potential breaches of the procurement regulations.

Leeds ran a competitive dialogue process for tenders to maintain its public housing stock. The process contained several stages. The claimant, Mears, was successful in getting through the initial selection phase, but was unsuccessful in reaching the final bid phase. The assessment of the bids involved three elements which would later prove to be contentious:

• an Evaluation Table, divided into several sections, with each section containing several questions. Each overall section was given a weighting, but within each section, no weightings were given to individual questions. Before the bid deadline, a bidder asked for clarification as to how each question would be weighted and was simply referred back to the Evaluation Table itself (in which each section of questions had an overall weighting). The claimant argued that the questions amounted to separate sub-criteria that should have been weighted, and that this was a breach by Leeds.

• internal Scoring Guidance, which suggested that, this being a competitive dialogue process, full marks on certain elements could be reserved for those bids which showed innovation or exceeded the specification in some way. The claimant argued, following the findings in Letting International v London Borough of Newham, that the failure to tell bidders that full marks could only be obtained by exceeding the stated requirements was non-transparent and was therefore a breach of the regulations.

• internal Model Answers, which gave guidance to evaluators as to what might be expected in answers to the questions in the Evaluation Table. The claimant argued that the content of these Model Answers amounted to separate criteria which should have been disclosed.

An interesting precursor to this hearing is that there was a previous trial in January of this year to decide whether the internal Model Answers should be disclosed to the claimant. Mears became aware of the existence of these Model Answers during the feedback stage, when Leeds explained that marks had been lost because “answers do not hit Model Answers”. Leeds then refused to disclose the Model Answers during the feedback stage on the grounds that to do so would defeat the purpose of the procurement and result in identical, “tick box” answers from all the bidders, between which it would then be impossible to distinguish. The court recognised this as a legitimate concern, but also held that it was essential to Mears’ case that Mears had sight of the Model Answers, and ordered disclosure within a “confidentiality ring”, to Mears’ named representative and solicitors only. This illustrates the dangers of unwittingly providing “ammunition” to bidders during the feedback stage (although of course it can always be argued that bidders will have a right to a wide range of information via a Freedom of Information Act request in any case).

Turning back to the recent hearing, the judge first looked back at the leading recent cases around evaluation and summarised the current state of the law. Criteria, sub-criteria and weightings need to be disclosed to bidders upfront in order that bidders can prepare the bid with an understanding as to how it will be assessed and what the contracting authority’s requirements are. There are however a couple of situations where a contracting authority is justified in not disclosing a criterion; first, because it does not, on a reasonable view, introduce different or new criteria, sub-criteria or weightings; or secondly, because it could not have affected the tenders in any event.

In the light of this, the judge decided that:

• the unweighted questions in the Evaluation Table did amount to sub-criteria and should have been weighted. Bidders may well have bidded differently had they understood the relative importance of each question. This was therefore a breach by Leeds.

• on the evidence, the Scoring Guidance was guidance only and although it suggested that innovative bids might score top marks, it was not impossible to score full marks without innovation. As such this was not a matter that needed to have been disclosed to bidders. The judge seems to have been influenced by the fact that this was a competitive dialogue process where bidders should expect that a contracting authority is looking for offers of individual and potentially innovative solutions. Perhaps his view would have been different had this been a more simple process under the open or restricted procedures.

• a couple of the Model Answers did amount to undisclosed award criteria and therefore this was a breach by Leeds. But, those two answers excepted, there was no requirement to disclose the Model Answers as the majority of them were not award criteria or sub-criteria and were merely guidance. The judge seems to have accepted that there should not be a general rule to disclose Model Answers as this would create “identikit” bids which it would become impossible to evaluate. However he warned that Model Answers must be scrutinised to ensure that they do not contain award criteria or sub-criteria which have not otherwise been disclosed.

Having established that there had indeed been some breaches by Leeds, the judge went on to consider whether the claimant had actually suffered any loss which needed to be remedied. Leeds argued that Mears would still not have obtained a high enough score to advance further in the process even if the breaches had not taken place. But the judge decided Mears only needed to demonstrate more than a “fanciful chance” of being successful had it had access to the information that Leeds had not disclosed, and decided this test was met.

The judge finally looked at what remedy ought to be given to Mears – the choice being to award damages, or to order the re-running of the procurement, or indeed both – the court having a discretion to decide on a remedy under the procurement regulations. He decided that there was a strong public interest issue, in that Leeds would be left without contracts to maintain its social housing, and on that basis that only damages should be awarded and that the procurement should be allowed to stand.

The case is reassuring to contracting authorities that in general model answers are not disclosable in advance provided they do not introduce new criteria; this has been a troubling question in the light of the recent trend in case law to insist on disclosure of award criteria, sub-criteria and in some cases sub-sub-criteria. Contracting authorities would be well advised to ensure that evaluation aids such as model answers and scoring guides, if they are not to be disclosed, do not contain new criteria and are expressly stated to be for guidance only and not prescriptive. Of more concern to contracting authorities is the fact that the case also demonstrates that, where breaches are established, the claimant does not need to show that it would have definitely won the contract had the breaches not taken place; the "more than a fanciful chance" test is not a great hurdle for a claimant to surmount once a technical breach has been established by the court.

At the end of last month it was announced that the Bribery Act 2010 will come into force in July of this year. As readers may be aware, the Act essentially codifies what was previously rather a hotch potch and outdated collection of statutory and common law offences relating to bribery and corruption. It also introduces a new offence known as the "section 7" offence, whereby a company which fails to have adequate procedures in place to prevent bribery can itself be convicted of the criminal offence of failure to prevent bribery.

One of the interesting questions from a public procurement perspective has been the issue of how the Bribery Act 2010 will be cross-referenced into regulation 23(1) of The Public Contracts Regulations 2006 (the Regulations), which deals with mandatory exclusion criteria. Regulation 23(1) in its current form requires a contracting authority automatically to exclude any bidder which has a conviction for the offence of bribery or for corruption under the Public Bodies Corrupt Practices Act 1889 or the Prevention of Corruption Act 1906; these two statutes will be repealed in full when the Bribery Act 2010 comes into force.

We can therefore expect to see updated drafting of regulation 23 to reflect the Bribery Act 2010; a consultation is expected to be held shortly on how this should be achieved.

Given that conviction for the offence of bribery is a case for mandatory exclusion at present, we presume that the two new basic offences under sections 1 and 2 of the Bribery Act 2010 (broadly speaking, offences relating to bribing or accepting a bribe) will remain in the mandatory exclusion category, although this has not been formally confirmed.

The interesting angle is that Kenneth Clarke MP has confirmed that a conviction for the new "section 7" corporate offence of failure to prevent bribery will not require mandatory exclusion by contracting authorities - rather, they will be permitted to exercise their discretion as to whether to accept the bid or not, under regulation 23(4). It is expected that guidance will be published on how contracting authorities might approach the exercising of this discretion.

We will post further updates once the consultation is published.

In a recent post below we discussed the coalition government's transparency drive and the new requirements on central government, NPDBs and NHS Bodies to publish tender documents and contracts where these are valued at over £10,000.

This information is to be published on a new portal called Contracts Finder, which has just been launched. You may like to bookmark the address if you haven't already - www.contractsfinder.businesslink.gov.uk.

Readers may recall that in 2009/2010, OGC guidance contemplated a potential relaxation in the conditions required to be met for use of the accelerated restricted procedure, as provided for following EU guidance on the impact of the changes in the global financial markets. Recent OGC guidance has confirmed that this relaxation has now been extended until the end of 2011. Contracting authorities are required to keep statistics of how and when the relaxation is used, in order that the OGC can report to the EU. This will include information on contract values, the type of contract (supplies/works/services), business sector and types of purchased good/services etc.

As readers may be aware, several pieces of guidance in relation to procurement come into force with the coming of the new year. We thought it would be helpful to post a summary of these.

Coming in, from January 2011

New transparency obligations

Central government departments, NPDBs and NHS Bodies are required to publish contracts worth over £10,000 from January 1st 2011. According the the guidance, contracting authorities must include the specification, the terms & conditions, and the overall pricing scheme (although not necessarily a breakdown of pricing structure). Publications should be to a new portal called "Contracts Finder"; more information is provided at Annex B of the guidance. The guidance states that publication should take place within 20 days of the end of the standstill period. Redactions of information that would be exempt from disclosure under the Freedom of Information Act are permitted; the guidance contemplates a two-way dialogue between public bodies and suppliers about which information can be disclosed. The contracting authority must also complete and publish the proforma at Annex A of the guidance, which gives details of how actual procurement timescales compared against estimates.

Readers will probably also be aware that from September 2010, Central government departments, NPDBs and NHS Bodies have been required to publish tender documents in relation to contracts valued at over £10,000.

Contracts with small- and medium-sized entities (SMEs)

From January 1st 2011, Central government departments, NPDBs and NHS Bodies, when publishing contracts on the "Contracts Finder", are required to note where contracts have been awarded to SMEs.

Mandatory PQQ

The OGC has launched new PQQ guidance, including a number of core PQQ questions which are mandatory for central government purchasers for procurements advertised from 1 December 2010, and which apply to all central government procurements where a PQQ would normally be used.

Departments have up to 1 January 2011 to fully integrate the core questions into their systems. For more details, see the OGC guidance, and the core PQQ questions.

Continuation of relaxation on conditions for use of accelerated restricted procedure no longer available to public bodies

Readers may recall that in 2009/2010 OGC guidance contemplated potential relaxation in the conditions required to be met for use of the accelerated restricted procedure, as provided for following EU guidance on the impact of the changes in the global financial markets. Recent OGC guidance has confirmed that this relaxation has been extended until the end of 2011. Contracting authorities are required to keep statistics of how and when the relaxation is used, in order that the OGC can report to the EU. This will include information on contract values, the type of contract (supplies/works/services), business sector and types of purchased good/services etc.

The OGC has published the long awaited detailed guidance on the operation of the new transparency obligations relating to contract publication announced by the government in May. The obligations come into force for the majority of contracts with central government and NHS organisations from 1 January 2011.

The guidance clarifies what needs to be published, and what exemptions and redactions will be permitted. It also advises Departments to publicise the transparency obligations and include reference to them in contracts, so that suppliers are fully aware that their contracts will be published. The new guidance supersedes previous OGC guidance relating to the publication of IT contracts.

The guidance refers to a new portal, named “Contracts Finder” which is to be operational by the end of the year. An interim portal is available in the meantime.

More information on the current position on the new transparency obligations is available on the OGC transparency page. 

Meanwhile, for local government, the Local Government group has updated its guidance on the new transparency obligations as they apply to local authorities.

The OGC has launched new PQQ guidance, including a number of core PQQ questions which are mandatory for central government purchasers for procurements advertised from 1 December 2010, and which apply to all central government procurements where a PQQ would normally be used.

Departments have up to 1 January 2011 to fully integrate the core questions into their systems. NDPBs and central government agencies must have integrated the questions from 1 March 2011.

Other public bodies are also permitted to use the standard form of core PQQ questions.

The OGC’s stated objective is to streamline and simplify procurements by using a standardised approach across government. However, the guidance recognises that PQQs will need to be tailored for specific requirements.

Given that Departments will also be obliged to publish PQQs (see the separate post on transparency), it should be relatively easy for the Cabinet Office to monitor compliance with this new requirement.

For more details, see the OGC guidance, and the core PQQ questions.

The ERG (OGC) has recently published a policy note on framework agreements, reminding contracting authorities of the importance of checking that they fall within the class of public bodies who are entitled to use that framework.

This issue has been made more important since the Remedies Directive came into force at the end of the 2009, bringing with it a new remedy of “ineffectiveness” for contracts entered into directly without competition, when competition was required. If a declaration of ineffectiveness is made, the contract comes to an end prospectively from the date of the declaration.

The ERG (OGC) points out that a contracting authority who uses a framework without being entitled to do so is, in effect, awarding a contract directly and without the proper element of competition and thus is laying itself open to a claim by a challenger for a declaration of ineffectiveness.

Contracting authorities must therefore check the scope of any proposed framework arrangement very carefully. The policy note states that specifying "any contracting authority" as being entitled to use a framework in the OJEU notice is unacceptably wide. It is acceptable for the framework to mention "classes" of public bodies, provided this class description is sufficient to immediately identify whether a public body is a member of that class. If this is not possible, the members of the class must be fully listed out.

Frameworks are only open to the contracting authorities that were originally party to the agreement. However, the policy note contemplates that changes to the list of members of the "class" may be legal, provided that the scale and scope of the framework is not materially altered.

The policy note suggests that operators of current frameworks where terminology is too generic should consider issuing clarifications containing more detailed descriptions of which bodies are entitled to use the framework. Obviously, in issuing these clarifications, it is important to take a conservative approach and not to extend the original scope of the framework, whether in terms of value or classes of public bodies permitted to use it.

Readers of this blog may be aware that the distinction between selection criteria and award criteria has been a hot topic in procurement law recently (together with issues around adequate disclosure of award criteria). The European Lianakis case in 2008 emphasised the importance of ensuring that only criteria aimed at assessing suitability of bidders in general should be used at selection stage, while award criteria ought to evaluate the merits of particular bids in response to a particular requirement.

A couple of recent European decisions against the IT services supplier European Dynamics (“ED”) are therefore interesting given that they cover this distinction between selection and award criteria. The cases are helpful to contracting authorities as they appear to suggest that, while the selection and award stages are distinct and require separate treatment, it is possible to use the same information at both stages, provided it is used in a way appropriate to that particular stage.

The first case concerned a procurement of IT services run by the European Monitoring Centre for Drugs and Drug Addiction ("EMCDDA"). ED claimed that EMCDDA had made a manifest error in confusing its use of selection and award criteria and that it was not entitled to evaluate qualifications and experience at award stage. The judgment is helpful in that it appears to acknowledge that experience and qualifications may be used as award criteria, provided this is done comparatively and in relation to the particular contract being let.

One of the stated award criteria was "technical merit of human resources for the execution of the tasks, 30%". The evaluation committee in this case gave reasons to ED as to why it was unsuccessful – one of these was that, while the system architects ED proposed using had rich academic qualifications, they had limited experience. The court took the view that, given the stated award criterion of "technical merit", EMCDDA was entitled to comparatively evaluate qualifications and experience at award stage; the court certainly did not criticise it for taking this approach. Indeed, the court commented that "the evaluation report does not call into question [ED’s] knowledge or the experience which it has established. During the award stage, those qualities are assessed in the light of the specific proposals made by the applicant regarding the implementation of the defined services".

This is helpful to public bodies as it appears to suggest that a contracting authority may use responses to the same set of criteria (in this case, education and experience) in two ways; (1) at selection stage, to de-select all those not meeting an absolute minimum standard, and (2) at award stage, to look comparatively at how the responses to those criteria score under a particular stated award criterion. The Court held that in applying the criterion relating to technical merit of the human resources, the evaluation committee could clearly take into account the qualifications for and relevant professional experience relating to the required tasks. These did not constitute criteria in their own right but were an inherent part of the stated criteria (and, therefore, it did not matter that qualifications/experience had not been expressly stated as an award criteria in themselves).

The second case concerned a procurement of computer services run by the Publications Office of the EU. ED was unsuccessful and brought a claim against the Commission, claiming that it was criticised for having exceeded the maximum number of pages permitted for best practice documents and that the Publications Office thereby confused award and selection criteria. ED argued that the documents concerned had already been evaluated in the selection procedure and that criteria designed to assess a bidder’s general suitability to perform the contract in question could not be regarded as award criteria.

The Court noted that there must be a distinction between selection criteria and award criteria, which are governed by different rules. However, and interestingly, it found that the assessment of the sub-criterion relating to best practice was different at the two different stages. At the selection stage, the review involved assessment of the technical and professional capacity of the various tenders. However, at the award stage, the review covered compliance with the criterion of the number of pages to be included in the tender. Therefore, if the tender had satisfied the selection criterion as to the content of the best practice documents, there was nothing to prevent the Publications Office from taking into account in its award criteria the fact that the volume of best practice documents exceeded the maximum number of pages requested. This decision again is very helpful as it suggests that the same information can be used in different ways at each of selection and award stage.

It is of course true that all cases turn on their own facts to some extent; the court in these cases may well have been influenced by the fact that the claimant was European Dynamics, which has brought a string of claims in relation to procurements where it has been unsuccessul in the last year or so. Nonetheless, these cases do seem to show the court's willingness to take a common sense approach to selection and award criteria.

Readers with an interest in the application of the procurement rules to development agreements might find this article useful, written by Nathan Holden, a partner in Mills & Reeve’s Local Authorities practice. Nathan analyses the recent Muller case and summarises the latest position in relation to development agreements.

The Bribery Act received Royal Assent on 8 April 2010 and will come into force when the relevant Secretary of State issues a commencement order, likely to be in October of this year. The Act simplifies the existing law on bribery and enables courts to deal with it more effectively. It also creates offences of, among others, accepting, or conniving in the acceptance of, a bribe which will be particularly relevant to public bodies. You can read our full article on the Bribery Act on the Mills & Reeve website.

Readers may be aware that a major policy objective at both European and UK level is to increase the opportunities for small and medium sized suppliers (SMEs) to tender for public contracts. SMEs are seen as being a potential source of innovative and cost-effective providers for some types of public contract.

In November 2008, the Glover Report was published which contained several recommendations, including that by the end of 2010 all public sector contract opportunities should be included on one single, free, online portal. In summer 2009 the government removed subscription fees to Supply2.gov.uk for SMEs in an aim to make the site more accessible. It has also released a free online procurement training course aimed at SMEs, called "Winning the Contract".

Last week, the OGC built on these initiatives by publishing guidance for authorities on how and when to flag contract opportunities to SMEs. The guidance includes a list of characteristics of contracts that may well be appropriate for SME involvement. These include when the contract is low value, requires local delivery is for a tailored or innovative product or service.

The guidance also includes suggested wording for inclusion in OJEU notices and other advertisements to make it clear that the contract could be delivered by SMEs. It is however also important to make it clear that the mere fact that a bidder is an SME will not confer an automatic advantage in the evaluation (since this would be discriminatory and contrary to the spirit of the procurement regime). The suggested wording is:

"The Contracting Authority considers that this contract may be suitable for economic operators that are small or medium enterprises. For the avoidance of doubt the contracting authority points out that no weight will be attached to whether an economic operator is an SME in selecting economic operators to [submit tenders/participate in dialogue/negotiate] or in assessing the most economically advantageous tender".

The Bribery Bill has recently had its second reading in the House of Lords and will be of interest to both contracting authorities and private sector suppliers alike. The Bill will shortly enter into the Report stage where it receives detailed parliamentary scrutiny. It is therefore possible that it may come into force in April 2010, though watch this space for further updates once the Report stage is completed.

There was seen to be a need for this reform of the law because the UK has never as yet successfully prosecuted a company for bribery, even though it signed up to the OECD’s bribery convention back in 1989.

What is the new law?

If enacted in its current form, the Bribery Bill will simplify the existing law on bribery and enable courts to deal with it more effectively. The Bill creates offences of, amongst others, bribing another person/company/public body or accepting a bribe in return for giving an advantage to the briber.

Of particular interest to contracting authorities is the offence under section 2 in which a person “requests, agrees to receive or accepts” an advantage of some kind in return for improperly performing, or allowing the improper performance of, a “function or activity” where that function/activity is either of a public nature or done in the course of a business.

The Bill makes it clear that if the bribery offence is committed with the consent/connivance of a senior officer of the company or public body, then that person is also guilty of an offence. This will potentially catch all those working at manager level and upwards.

Although it does not affect contracting authorities directly, the Bill also creates a new offence where a commercial organisation (i.e. not a public body) negligently fails to prevent bribery.

Penalties under the Bill include fines and/or imprisonment for up to ten years (for the more serious offences).

What are the implications for contracting authorities?

Contracting authorities could therefore be guilty of bribery if, for example, they agree to “fix” a procurement evaluation process in the briber’s favour in return for some advantage. It seems it would also be possible for a contracting authority to be guilty of bribing a supplier if it offers some sort of advantage to a supplier in return for the supplier agreeing to improperly perform an activity connected with the running of its business (e.g. bribing the supplier to submit a lower-priced bid than it would otherwise have done).

The OGC will no doubt be publishing updated boilerplate standard clauses on the prevention of corruption, which take into account the Bill’s provisions and which contracting authorities will need to ensure are included in public contracts. Contracting authorities may also like to address in public contracts the consequences of a supplier being found guilty of a Bribery Bill offence. For example, the prosecution of a major supplier for negligent failure to prevent bribery is likely to be embarrassing for a contracting authority, which may wish to have the option of immediately terminating the contract in these circumstances.

The Public Contracts Regulations 2006 only apply to procurements where the value of the proposed public contract falls over a specified threshold (although the general requirements of non-discrimination, equality of treatment and transparency must still be respected for under-threshold contracts). There are different thresholds depending on whether it is a public works, public supply or public services contract. These thresholds will be as follows from 1 January 2010:

PUBLIC SUPPLY CONTRACTS
Contracting Authorities specified in Schedule 1 – £101,323 (€125,000)
Other Contracting Authorities – £156,442 (€193,000)
Indicative notices – £607,935 (€750,000)
Small Lots – £64,846 (€80,000)

PUBLIC WORKS CONTRACTS
Contracting Authorities specified in Schedule 1 – £3,927,260 (€4,845,000)
Other Contracting Authorities – £3,927,260 (€4,845,000)
Indicative notices – £3,927,260 (€4,845,000)
Small Lots – £810,580 (€1,000,000)

PUBLIC SERVICES CONTRACTS
Contracting Authorities specified in Schedule 1 – £101,323 (€125,000)
Other Contracting Authorities – £156,442 (€193,000)
Part B Services – £156,442 (€193,000)
Indicative notices – £607,935 (€750,000)
Small Lots – £64,846 (€80,000)

The new Remedies Directive coming into force on 20 December 2009 contains a remedy of ineffectiveness – a challenger may in certain circumstances apply to court to have a public contract declared ineffective. One of these circumstances is where the contract was awarded without any advertisement or competition, in contravention of the The Public Contracts Regulations 2006.

However, a safe harbour is available. Contracting authorities who believe they are justified in awarding a contract without competition can protect themselves against a claim for a declaration of ineffectiveness by publishing a voluntary transparency notice in the OJEU, and by observing a voluntary standstill period of ten days from the day after the date of the notice.

The standard form for these voluntary transparency notices has now been published and is available for download from the EU Commission.