Source: https://iclg.com/practice-areas/public-procurement-laws-and-regulations/england-and-wales
Timestamp: 2019-04-20 08:55:13+00:00

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On 26 February 2015, the majority of the provisions of the Public Contracts Regulations 2015 (SI 2015/102) (“PCR 2015”) entered into force. The PCR 2015 implements Directive 2014/24 in England, Wales and Northern Ireland.
On 18 April 2016, the Utilities Contracts Regulations 2016 (SI 2016/274) (“UCR 2016”) and the Concession Contracts Regulations 2016 (SI 2016/273) entered into force. The UCR 2016 implements Directive 2014/25 in England, Wales and Northern Ireland, while the CCR 2016 implements Directive 2014/23.
The PCR 2015 implements the EU rules relating to the procurement of services, supply or works contracts by public bodies, other than by utilities in relation to a utility activity. The UCR 2016 implements the EU rules relating to the procurement of service, supply or works contracts by utilities that relate to a utility activity. The CCR 2016 implements the EU rules relating to the procurement of services concessions and works concessions by public bodies.
The PCR 2015, the UCR 2016 and the CCR 2016 are collectively referred to hereafter as “the Regulations”.
The basic principles underlying the regime (and which are key to its interpretation) are those underlying the EU public procurement directives, which arise out of the Treaty on the Functioning of the European Union (“TFEU”), and which apply throughout the EU (“EU General Principles”). These principles include, in particular, the free movement of goods, the right of establishment, the freedom to provide services, non-discrimination, equal treatment, transparency, proportionality and mutual recognition. These underlying principles form the basis of the interpretation of the UK legislation and apply in all situations in which an authority procures works, services or supplies from a third party, including where the contract falls outside the scope of the directives or the Regulations.
The UK Ministry of Defence (“MoD”), the UK government body which procures military equipment, is subject to the Regulations in the same way as any other public body. However, Article 346 of the TFEU provides an overriding exemption in relation to defence and classified procurements (the “national security exemption”), which has been included in the Regulations as an express exclusion. There is also an express exclusion in the Regulations for secret contracts.
The Defence and Security Public Contracts Regulations 2011, which implement the EU Defence Directive 2009/81, came into force on 21 August 2011. The Defence Regulations set out specific rules for the procurement of arms, munitions and war material (plus related works and services) for defence purposes, as well as for the procurement of sensitive supplies, works and services for non-military security purposes.
Under section 75 of the Health and Social Care Act 2012, the Secretary of State for Health was given the power to make regulations to impose requirements on the National Health Service Commissioning Board (the “Board”) and clinical commissioning groups (“CCGs”) for the purpose of securing that, in commissioning health care services for the purposes of the NHS, they adhere to good practice in relation to procurement, as well as certain other objectives. Accordingly, the National Health Service (Procurement, Patient Choice and Competition) (No.2) Regulations 2013 were enacted and came into force on 1 April 2013. The NHS Regulations provide that when procuring health care services, other than pharmaceutical services, for the purposes of the NHS, the Board or the CCG must act with a view to: securing the needs of the people who use the services; improving the quality of the services; and improving efficiency in the provision of the services. The NHS Regulations also provide that a relevant body may, at its discretion, award contracts directly without advertisement in cases of extreme urgency or where only one provider would be capable of performing the contract.
In addition, the Regulations do not apply to the award of public service contracts for public passenger transport services by rail or metro, which are subject to the award requirements under Regulation (EC) 1370/2007 on public passenger services by rail and road.
The Freedom of Information Act 2000 (“FOIA”) is relevant in the context of public procurement. The FOIA offers a general right of access to information held by public authorities about public contracts and procurement activities, subject to certain conditions and exemptions (the principal exemptions being trade secrets and commercially sensitive information). The FOIA can, for example, allow an unsuccessful tenderer to obtain information about the conduct of a procurement process, in addition to the information which the authority is required to provide to tenderers pursuant to the Regulations.
In 2011, the UK Government implemented specific measures to ensure greater transparency across all government operations. For instance, central government tender documents for contracts over £10,000 must be published in full on a single website and made available to the public free of charge. A website named “Contracts Finder” (see www.gov.uk/contracts-finder) was launched in January 2011 as the Government’s single platform for providing access to the above public sector procurement-related information.
In addition, the Protection of Freedoms Act 2012 (Commencement No. 8) Order 2013 (SI 2013/1906) brought into force, from 1 September 2013, several provisions of the Protection of Freedoms Act 2012 (“POFA”), which require public bodies to provide datasets in response to FOIA requests in a re-usable form as far as reasonably practicable, licensed for re-use (if the public body owns the copyright).
The Public Services (“Social Value”) Act 2012 introduced a statutory requirement for public authorities to have regard to economic, social and environmental well-being in connection with public services contracts. The Act applies only to public services contracts, and not to works or supplies contracts. Section 1(3) states that the authority must consider how that which is proposed to be procured might improve the economic, social and environmental well-being of the relevant area and how, in the process of the procurement, it might act with a view to securing that improvement.
However, contracting authorities remain fully subject to the EU rules, in particular, the principles of equal treatment and non-discrimination between tenderers.
In October 2012, new legislation (the Infrastructure (Financial Assistance) Act 2012) was adopted to enable the Government to provide financial assistance of up to £50 billion in support of infrastructure investment, thereby supporting major infrastructure projects that have struggled to access private finance because of adverse credit conditions.
As noted in the response to question 1.1, the UK rules implement the EU public procurement directives. In addition, the UK procurement market is open to operators from the operators countries that are parties to the WTO Government Procurement Agreement (“GPA”), as well as operators from Norway, Iceland and Liechtenstein by virtue of the European Economic Area (“EEA”) Agreement (see further Chapter 1 on EU public procurement rules). The Regulations implement the UK’s obligations under the GPA and the EEA Agreement.
The PCR 2015 applies to public sector “contracting authorities”, i.e. state, regional and local authorities; bodies governed by public law; and associations formed by one or several of such authorities or bodies. Schedule 1 of the PCR 2015 contains an express list of public bodies either by category or name.
In addition to entities expressly referred to in the PCR 2015, there is a broad category of other “bodies governed by public law”, which can be described as bodies set up for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, and which are either: (i) financed wholly or mainly by another contracting authority; (ii) subject to management supervision or control by another contracting authority; or (iii) where more than half of the board of directors or members, or, in the case of a group of individuals, more than half of those individuals, are appointed by another contracting authority. Associations involving one or more of the above entities are also subject to the PCR 2015.
In practice, certain essentially private entities can be subject to the Regulations if they are funded for the most part or controlled by a contracting authority and fulfil a non-commercial purpose. There are other limited circumstances in which a private entity can be subject to the Regulations, such as where a public authority awarding a subsidy (or “State aid”) is obliged to require the subsidised body to comply with the PCR 2015 as if it were a public authority.
■ certain private entities performing a “utility activity” “on the basis of special and exclusive rights granted by a competent UK authority”.
A “utility activity” comprises procurements related to certain specified activities in the water, energy, transport and postal sectors.
Contracts must be classified as either a works contract, a supplies contract or a services contract. These categories are mutually exclusive, i.e. a procurement can only be for one type of contract. This classification will determine which set of rules will apply and the applicable financial thresholds. “Works contracts” are contracts carried out in connection with the execution or realisation of a work or works for a contracting authority, for example, general building and civil engineering works (including demolition, installation and building completion work). “Supply contracts” are contracts for the purchase, lease, rental or hire of goods. “Service contracts” are contracts engaging an entity to provide a service. In circumstances in which a procurement is for both goods and services, it will qualify as a services procurement, rather than a supplies procurement, if the value attributed to the services exceeds that of the goods. If a procurement is for both works and services, it will qualify as a services procurement, provided that the works are only incidental to the provision of services.
A procurement will only fall within the Regulations if its value exceeds a specific financial threshold, which differs according to the classification of the procurement. The value of a procurement for the purposes of the threshold rules is its estimated value net of value-added-tax. The reasoning behind the use of financial thresholds is that procurements above a certain threshold are considered capable of having an impact on competition and of affecting trade between EU Member States, as they are more likely to attract bidders from other Member States.
The EU’s policy is to keep the financial thresholds in line with those set in the WTO GPA. The Commission revises the EU thresholds accordingly from time to time. In addition, non-Eurozone EU Member States, such as the UK, receive a revision of the financial thresholds every two years converted into their national currencies, based on the exchange rate published in the OJEU. The following thresholds have been applicable since 1 January 2018.
* The Regulations identify a number of categories of services, collectively referred to as “social and other specific services”, which are subject to a light touch procurement regime. Contracting authorities have greater flexibility when awarding contracts for social and other specific services.
The Regulations contain an express “splitting” prohibition, which requires the aggregation of the values of similar contracts in certain circumstances. The aim is to prevent the artificial splitting-up of contracts into lower-value contracts, which would fall below the relevant thresholds and, thus, outside the scope of the Regulations. In practice, this means that, in circumstances in which a contracting authority/utility intends to award more than one contract for a single overall requirement (for example, in phased construction projects), the value of these contracts must be added together. The aggregate figure will determine whether or not the relevant threshold has been met.
The CCR 2016 introduced a distinct regime for the award of concession contracts. Under the CCR 2016, the main feature of a “concession” is the transfer to the concessionaire of an economic risk involving the possibility that it will not recoup all the investments it has made and the costs it has incurred in operating the works and services covered by the award.
A contract for a toll road or a bridge, under which the contractor builds (wholly or partly at its own cost) the asset but is entitled to recoup its investment by levying tolls for its use, is an example of a “works” concession. The operation of a local bus service, pursuant to which the “operator” will charge the public fares, is an example of a “service” concession. Concessions that contain elements of both works and services are classified according to whichever element forms the greater part of the contract (although in such an event, it may be advisable to split the contract into a separate public works concession and a service concession).
■ limits on the scope of acceptable modifications to concession contracts during their term.
■ require bidders to specify the amount of works that will be carried out by independent sub-contractors, and the proportion of the work as a whole that this constitutes.
The Regulations include express rules on the award and use of framework agreements. The procuring authority does not need to establish the precise scope of the products or set a fixed price when it awards a framework agreement. The purpose of the framework mechanism is to be able to establish the scope and prices of products with sufficient precision at the time that the products/services are required.
The Regulations impose certain restrictions on the use of frameworks. In particular, framework agreements may not be used with a view to preventing, restricting or distorting competition. This means that, in practice, limits on the scope of the products or services covered by the framework need to be established.
Framework agreements may be either single or multi-supplier. Multi-supplier agreements are often favoured where the authority wants to retain a competitive element throughout the term of the framework. However, the Regulations provide that multi-supplier agreements must include at least three suppliers, provided that there are sufficient suppliers that satisfy the selection criteria and who have submitted admissible tenders. In addition, when awarding specific contracts under a multi-supplier framework, the authority is often under an obligation to hold a mini-competition between the suppliers that are party to the framework and capable of performing the contract.
Framework agreements may be either single or multi-purchaser (i.e. they can be created for the benefit of one or more contracting authorities). Multi-purchaser frameworks may involve either a single contracting authority acting as a central purchasing body for a number of contracting authorities, or all of the relevant contracting authorities entering into an agreement with one or more suppliers. Under multi-purchaser arrangements, only those contracting authorities that have been identified in the contract notice, either specifically or as part of a group or class of contracting authorities, will be entitled to make use of the framework.
In principle, each of the award procedures under the Regulations may be used to award a framework agreement. However, as framework agreements are most commonly used for more straightforward purchases, grounds for using the competitive procedure with negotiation, the competitive dialogue procedure or the innovation partnership procedure, are unlikely to apply. See further the response to question 3.1 on the types of award procedures that are available.
■ the proposed number of suppliers to whom a framework agreement will be awarded.
There is no obligation to award specific contracts under a framework agreement in accordance with the Regulations. However, the award of specific contracts must comply with the terms of the framework agreement, and the terms of the framework agreement should not be varied, particularly those terms relating to the price to be paid.
The Regulations also require mini-competitions to be conducted, in circumstances in which there is a multi-supplier agreement which has not established all of the terms of the proposed contract in advance. However, mini-competitions should only be used where the framework does not anticipate or is unable to make advance provision for a term. The Regulations impose specific obligations on the contracting authority in respect of the mini-competition. In particular, it should be based on the same terms as those which applied for the award of the framework agreement and satisfy certain requirements with respect to the evaluation of tenders.
The term of a framework agreement should not exceed four years; however, a longer term may be granted in exceptional circumstances. The Regulations do not stipulate the duration of a specific contract awarded under a framework agreement. Contracting authorities are entitled to place orders for specific contracts at any point up to the end of the four-year period, which means that a specific contract can extend beyond the lifespan of the framework arrangement.
The Regulations provide that contracting authorities may divide the scope of contracts into different lots based on, for example, value or geographical area.
Contracting authorities are being encouraged to divide contracts into lots whenever possible in order to facilitate the access of small and medium-sized enterprises (“SMEs”) to public sector contracts. In addition, when a contract is divided into lots, it leaves the contracting authority with a contingency option, in case one of the suppliers fails to perform its contract.
If a contracting authority decides not to subdivide a particular contract into lots, it must set out the main reasons for its decision in the procurement documents or in its procurement report.
■ the maximum number of lots each tenderer can win, if any limits apply.
If a contracting authority wishes to limit the number of lots a single tenderer can win, it must clearly set out how lots will be allocated, in the event that a tenderer is the highest scorer for more lots than it is permitted to win. These rules must be objective and non-discriminatory.
Contracting authorities in the UK are required to provide access to public contract opportunities to suppliers which are established in an EU Member State; or a country which is a signatory to (a) the Government Procurement Agreement (“GPA”) (see Chapter 1), or (b) another relevant international agreement by which the EU is bound.
Suppliers from countries not falling within any of the categories mentioned above are not, as a matter of law, prevented from bidding for and performing public contracts in the UK. However, contracting authorities may not owe the same duties to bidders from non-GPA countries, and may choose to treat bidders established in non-GPA countries less favourably than bidders established in the EU (or another GPA signatory country), at least at the outset of a tender process.
Once non-GPA bidders have been admitted to the process, it is probable that the EU General Principles, including equal treatment, apply thereafter.
In addition, where the procurement in question falls under the UCR 2016, a supplier from a non-GPA country risks being treated less favourably where it sources more than 50% of the products to be supplied under the contract from non-GPA countries.
■ The open procedure, under which the procurement is advertised and all interested providers tender a single fully-priced offer. This procedure is generally used only for simple procurements, as it does not permit any negotiation with interested providers.
■ The restricted procedure, under which the contract is advertised and bidders are invited first to pre-qualify. Only those tenderers who pre-qualify are invited to submit a fully-priced tender. The procedure offers no scope for substantive negotiation or dialogue between the contracting authority (or utility) and the tenderers.
■ The competitive dialogue procedure, under which interested bidders must first pre-qualify before being invited to enter into a dialogue with the contracting authority in order to identify and develop a solution. This procedure is very flexible and the dialogue may be conducted in successive stages, with the aim of reducing the number of solutions/bidders. This procedure is designated for use in the award of complex contracts.
■ The competitive procedure with negotiation is a new procedure which replaces the negotiated procedure. The initial stages of the procedure mirror the restricted procedure; however, further tender stages are permitted to negotiate with interested parties to improve the content of their bids. The revised procedure provides a number of additional safeguards to protect against unequal treatment and discrimination.
■ The innovation partnership, which is an entirely new procedure to be used where a contracting authority requires a partner to develop an innovative product, service, or works. Under this procedure, the contract is awarded in accordance with similar rules to the competitive procedure with negotiation. However, the procedure also sets out certain provisions governing the structure and operation of the partnership with the contractor in the contract execution phase. The procedure is only available in limited circumstances and, in particular, where a solution is not readily available in the market.
The UCR 2016 also makes available to contracting entities the open procedure, the restricted procedure, the competitive dialogue procedure and the innovation partnership. The key difference is that the UCR 2016 retains the negotiated procedure, under which interested bidders must first pre-qualify before the contracting authority enters into negotiations with a group of pre-qualified tenderers by way of an invitation to negotiate (“ITN”).
The Regulations set out minimum timescales for each procedure. The applicable minimum timescales in both Regulations are broadly the same; however, there are variations in the form of possible shorter timescales under the UCR 2016, due to the fact that the utilities regime as a whole is more flexible and less stringent.
■ the innovation partnership: 30 days between the dispatch of the contract notice and the receipt of response; unspecified but sufficient time between the issue of the ITN and the receipt of responses; and a 10-day standstill period before the award of the contract. The procedure allows research and development (“R&D”) phases to take place following contract award.
In the case of the open and restricted procedures and the competitive procedure with negotiation, the above timescales between the publication of a contract notice and the receipt of tenders/selection questionnaire (“SQ”) responses can be reduced by publishing a Prior Information Notice, between 35 days and 12 months before the date of publication of the contract notice, which gives the market advance notice of an intended procurement. The form of a PIN is standardised, and includes outline information about the nature and scope of the works/supplies or services that the authority intends to procure, as well as the scheduled date for the start of the award procedure.
In cases of urgency, an accelerated timetable is available under each of the open procedure, the restricted procedure and the competitive procedure with negotiation. In circumstances in which the accelerated procedures are used, the minimum time for receipt of responses is reduced to 15 days from the publication of the contract notice.
In open procedures, bids are directly submitted after publication of the contract notice, without any short-listing stage. The contracting authority has no opportunity to limit participation to pre-qualified providers and can, therefore, only assess issues such as the economic and financial standing of a bidder once bids have been submitted. In contrast, the restricted procedure, the competitive procedure with negotiation, the competitive dialogue procedure and the innovation partnership procedure allow the contracting authority to select which bidders may participate in the tender process during a pre-qualification stage which takes place before any bids are submitted. The pre-qualification stage consists of the assessment of SQ forms completed by prospective bidders. SQ forms are issued to all prospective bidders who respond to a contract notice.
The purpose of the SQ is, firstly, to enable the contracting authority to identify any material legal reasons as to why it may be required to exclude a bidder. The SQ will cover the criteria set out in the Regulations for the mandatory exclusion of a bidder, which apply where a contracting authority has actual knowledge that the bidder has been convicted of offences such as conspiracy to participate in a criminal organisation, corruption, bribery, fraud or money laundering. The SQ will also cover the criteria set out in the Regulations for the discretionary exclusion of a bidder. These criteria cover factors such as: lack of financial standing or technical capacity/ability; conviction of a criminal offence relating to the conduct of a business or profession, or of an act of grave misconduct in the course of a business or profession; failure to fulfil obligations relating to the payment of taxes; or serious misrepresentation in providing any information required under the Regulations.
In addition, contracting authorities may exclude a bidder where it can demonstrate by any appropriate means that the bidder is in breach of its obligations relating to the payment of taxes or social security contributions.
Bidders are subject to an ongoing obligation to satisfy the conditions for participation during the award procedure. This means that contracting authorities are required to exclude bidders if they become aware during the procedure that the bidder satisfies one of the mandatory exclusion grounds. Similarly, contracting authorities may exclude a bidder where they become aware of it satisfying one of the discretionary exclusion grounds.
Notwithstanding the foregoing, the Regulations provide “self-cleaning” rules which provide bidders with an opportunity to provide evidence to the effect that they have taken measures to demonstrate their reliability to perform a contract, despite the existence of the relevant grounds for exclusion. The contracting authority must evaluate the measures taken by the bidder to rectify the breach, taking into account the seriousness of the criminal offence or misconduct. Once a decision to exclude a bidder has been taken, the period of exclusion can be up to five years from the date of conviction for the mandatory grounds for exclusion and up to three years from the relevant event in the case of the discretionary grounds for exclusion.
The SQ may also set out minimum standards required from bidders in respect of (i) economic and financial standing, (ii) technical or professional ability, and (iii) suitability to pursue a professional activity. This may consist of questions regarding: background corporate information; turnover, financial history and current financial position; contractual performance history; statements of compliance; customer details for reference purposes; and any particular questions relating to the specific product/service required.
In addition, the SQ may contain a list of documents and supporting material to be submitted with the SQ response, such as quality certification(s), annual accounts and health and safety and environmental policies.
The SQ responses will be evaluated on the basis of a scoring weighting which the contracting authority is required to disclose in advance to the prospective bidders. The contract notice will have indicated the estimated numbers of bidders to be invited to tender, and bidders will be ranked and selected to meet that estimate.
After the deadline for the receipt of bids, the contracting authority will proceed to evaluate the bids against pre-disclosed award criteria. The basic principle is that the contracting authority must select the “most economically advantageous tender” (“MEAT”). The contracting authority is required to identify the MEAT on the basis of the price or cost of the tender. In addition, the MEAT may be identified based on the best price-quality ratio, assessed on the basis of criteria linked to the subject matter of the contract. Such criteria are typically required to be qualitative in nature, or relate to environmental or social policy considerations.
The contract notice and related tender documentation must specify the basis on which the contract will be awarded. Where cost or the price-quality ratio is relevant, the authority must disclose the scoring and the relative weighting given to each award criterion and sub-criterion. Where this is not feasible, the award criteria must be stated in descending order of importance.
The Regulations introduced the right to use life-cycle costing in the evaluation of the MEAT. The purpose of this right is to enable greater use of public procurement to further social and environmental objectives. Therefore, life-cycle costing may include costs of use, such as consumption of energy and other resources; maintenance costs; end of life costs, such as collection and recycling costs. Where the authority intends to factor in costs imputed to environmental externalities, those costs must be linked to the subject matter of the contract, and be capable of determination and verification. Where the authority intends to use a life-cycle costing approach, the intention to do so, and the methodology to be applied must be communicated to bidders in the procurement documents.
The Regulations oblige contracting authorities to require tenderers to explain the price or costs proposed in a tender where the tender appears to be abnormally low. The explanations given may relate to: the economics of the manufacturing process, the services provided or the construction method; the technical solutions chosen; any exceptionally favourable conditions available to the tenderer for the supply of products or services or for the execution of the work; compliance with applicable environmental, social and labour law obligations; and the possibility of the tenderer obtaining State aid. The right to reject arises when the evidence supplied does not satisfactorily explain the low price or costs.
Whenever a contracting authority makes a decision to award a contract which is covered by the Regulations, it must publish a contract award notice detailing the contract award. The notice must be published in the OJEU within 30 days of the date of the contract award decision.
■ a precise statement of when the mandatory standstill period will end.
In essence, the contracting authority must provide the information necessary for an unsuccessful bidder to determine whether or not the decision is well founded. The debrief will, therefore, be case specific and also be specific to each unsuccessful bidder.
Joint procurements (for the purchase of “shared services”) will usually be undertaken in the UK through either an administrative model (two public bodies collaborate to provide services to each other without any structural change), a corporate model (an entity with a separate legal personality is used as the medium to supply services to various purchasers), or a contractual model (services are procured on the basis of a detailed written contract).
If the arrangement is between a purchaser and an “in-house entity” (see further the response to question 4.2 below), then the public procurement rules will not apply.
There are specific requirements which must be followed if a variant bid (i.e. a bid which provides a different solution to a requirement than that set by the purchaser) is to be accepted. The purchaser must indicate in the contract notice (commencing the award procedure) whether or not it will accept variants. Variants must be linked to the subject matter of the contract. The purchaser must also provide details of the minimum requirements to be met by a variant and the specific requirements for the presentation of a variant. Only variants meeting those minimum requirements may be taken into consideration.
In practice, purchasers commonly face the issue of whether they can “cherry-pick” and change their requirements based on the tenders received. The position is complex, but it is arguable that it is permissible to allow this if all tenders are permitted to re-tender on the same basis. However, even in such a situation, issues may arise in relation to, in particular, the confidentiality of tenderers’ solutions.
The Regulations include an express rule which requires contracting authorities to take appropriate measures to prevent, identify and remedy actual or potential conflicts of interest arising in the conduct of procurement procedures, in order to avoid any distortion of competition and to ensure equal treatment of all operators. The Regulations provide examples of the circumstances in which a conflict of interest may arise. These circumstances relate primarily to situations where staff members’ personal interests might compromise the independence of the award procedure.
The Regulations contemplate contracting authorities conducting market consultations for the purposes of preparing procurements. Contracting authorities may also seek advice from third parties when planning a procurement, provided that the involvement of those third parties does not have the effect of distorting competition.
Where a bidder (or an entity related to a bidder) has been involved in some way in the preparation of the procurement procedure, the contracting authority is required to take appropriate measures to ensure that competition for the contract would not be distorted as a result of that bidder’s prior involvement in any preparatory activities. Such measures include communication to the other bidders of relevant information exchanged in the context of or resulting from the involvement of the bidder in the preparation of the procurement procedure.
The bidder should only be excluded as a result of its involvement in the preparation of the procurement where there are no other means of ensuring that all bidders are treated equally. However, prior to any decision to exclude a bidder on this basis, the relevant bidder must be given the opportunity to prove that its involvement in preparing the procurement would not be capable of distorting competition.
■ public passenger transport services by rail or metro, which are subject to the award requirements under Regulation (EC) 1370/2007 on public passenger services by rail and road.
■ a procurement by a utility for the purchase of water, energy or fuel for the production of energy.
The Regulations do not apply to certain “in-house” arrangements and certain arrangements between public bodies.
■ “horizontal” arrangements, involving a number of contracting authorities co-operating to meet public service obligations.
■ there is no direct private capital participation in the controlled legal person.
The PCR 2015 and the UCR 2016 also provide that the vertical exception applies where the controlled legal person awards a contract to the contracting authority it is controlled by, or where it awards a contract to another legal person controlled by the same contracting authority.
■ the participating contracting authorities perform on the open market less than 20% of the activities concerned by the co-operation.
Breaches of the Regulations are actionable by a third party which “in consequence, suffers, or risks suffering, loss or damage” (i.e. it would or could lose out as a result of the breach), both pre-contract award and post-contract award.
An injunction preventing the contracting entity from signing the contract will automatically be granted to the claimant where the challenge is against the contract award decision. However, the contracting authority may apply to have the automatic suspension set aside on the basis that the test for injunctive relief is not met (based upon the American Cyanamid principles).
There have now been several recent reported cases where the High Court has refused to grant an application to lift the automatic suspension, including R (Edenred (UK Group) Limited) v. HM Treasury and others (2014) and NATS (Services) Ltd. v. Gatwick Airport Ltd. (2014). Although in the majority of cases the Court will grant an application to lift the automatic suspension, the Court appears to have become more open to maintaining the automatic suspension pending an expedited trial.
Actions by public bodies in pursuit of public functions and subject to public law duties are, generally, subject to judicial review. A public duty will arise if there is a statutory obligation as to how something is to be done. A claimant must show that it has “sufficient interest”, which is construed widely, in order to apply for a public law remedy. The most significant principles applied in judicial review are: fairness; the requirement not to act arbitrarily or unreasonably; the obligation to take into account only relevant considerations; and legitimate expectations. Recent case law suggests that judicial review is also available for a breach of the Regulations, on the basis that the statutory obligations in the Regulations constitute public law obligations. However, it is generally accepted that an economic operator should use the statutory cause of action if it is available.
The High Court has jurisdiction to hear claims under the Regulations. Public procurement cases are typically heard by the Technology and Construction Court, which is a specialist court within the High Court.
The Administrative Court reviews the lawfulness of a decision or action taken by a public body under the judicial review procedure.
Appeals are heard by the Court of Appeal, and then by the Supreme Court.
There is no specific administrative tribunal for public procurement claims.
Proceedings under the Regulations generally need to be brought within 30 days, beginning with the date when the tenderer first knew or ought to have known that grounds for starting the proceedings had arisen. The Court has a discretion to extend the time limit to up to three months if there is good reason to do so. In Turning Point Limited (2012), the High Court indicated that a good reason will usually be something which was beyond the control of the claimant, for example, significant illness or detention of relevant members of the tendering team.
There are specific limitation rules for the remedy of ineffectiveness. An application for a declaration of ineffectiveness must be brought either: (i) within six months of the date of contract signature; (ii) within 30 days of the receipt of information from the contracting authority to the effect that the contract has been concluded and a summary of the relevant reasons for award; or (iii) in the case of a contract awarded without publication of a prior contract notice, within 10 days of the publication of a Voluntary Ex Ante Transparency Notice (“VEAT Notice”) or 30 days of the publication of a Contract Award Notice (“CAN”) in the OJEU. There is no linkage to knowledge of contract execution; therefore, the date of contract signature constitutes a hard line in the sand for ineffectiveness proceedings.
As noted above, the ordinary 30-day limitation period is triggered from the date of knowledge. This period cannot be shortened. However, tactically, authorities may seek to put tenderers on notice of facts relating to potential breaches before they take an award decision with a view to triggering the date of knowledge. The authority would then be in a position to raise a limitation defence if a tenderer subsequently sought to challenge that potential breach after it has discovered that its tender was unsuccessful.
There are specific measures that can be taken to shorten the limitation period for the remedy of ineffectiveness in circumstances in which a contract has been awarded without first advertising the opportunity in a contract notice published in the OJEU (see further question 5.6 below). Each of these measures involves publishing a specific type of notice in the OJEU.
The first type of notice is the VEAT Notice. The VEAT Notice must explain why the contracting authority considered that the contract opportunity did not need to be advertised in a contract notice. Provided the contracting authority does not enter into the contract within ten days of publishing the VEAT notice, the remedy of ineffectiveness will not be available.
The second type of notice is the CAN. The CAN must, like the VEAT Notice, explain why the contracting authority considered that the contract opportunity did not need to be advertised in a contract notice. In addition, the contract must not be entered into for 30 days from the date of publication of the CAN.
After contract signature, disappointed bidders that have suffered loss as a result of a breach of the Regulations by the contracting authority may claim damages for the loss of opportunity or for wasted tendering costs.
In addition, the remedy of ineffectiveness (contract nullity) may be available if one of the three grounds is satisfied. Firstly, where a contract is concluded without prior publication of a contract notice. Secondly, where a contract is concluded during the standstill period or during the automatic suspension of the contract award procedure. It is necessary, in this case, to show an additional breach of the public procurement rules which prevented pre-contractual remedies from being sought. Finally, where a drawdown contract based upon a framework agreement is not awarded in compliance with an applicable mini-competitive procedure.
In making a declaration of ineffectiveness, the Court must also impose financial penalties on the contracting authority. In addition, the Court may make orders dealing with issues of restitution and compensation between the contracting parties. In England and Wales, there has been one reported case to date concerning an application for such the ineffectiveness remedy, which was struck out by the Court (Alstom Transport and Eurostar International Limited (2011)).
Alternative penalties (contract shortening, fines, or both) are also available instead of ineffectiveness, in situations where ineffectiveness is inappropriate.
The likely timescale is case-specific and depends upon the particular issues in dispute, the speed with which the Court can hear the case, and the remedy being sought. It is possible to obtain practical protection for the interests of an aggrieved tenderer very quickly. However, cases typically come to trial on the substance within a six to 12-month timeframe; this can extend to two to five years.
There have been several recent cases where claimants have successfully obtained an order from the courts setting aside the contract award decision. In Woods Building Services v. Milton Keynes, the High Court set aside the contracting authority’s original decision and declared that the claimant’s tender was the most economically advantageous tender. The Court did not consider it appropriate to make a mandatory injunction in relation to the award of the contract, although it did not rule out the possibility of such an injunction being made in appropriate circumstances. The High Court ruled that the claimant was entitled to damages, but the amount of those damages will be assessed after the re-run procurement as the outcome of the re-run procurement could affect the quantum of any claim for loss of profit.
In Lancashire Care NHS Foundation Trust and another v. Lancashire County Council (2018), following an expedite trial, the Court set aside the decision to award a contract under the light touch regime for social and other specific services on the basis that the reasons given by Lancashire County Council for the scores it had awarded in respect of the quality evaluation questions were insufficient, which meant that the Court could not determine the issue of manifest error in the evaluation of tenders received without conducting a full re-evaluation.
In MLS (Overseas) Ltd. v. The Secretary of State for Defence (2018), the Court set aside the Ministry of Defence’s (“MOD”) award decision after it had unlawfully rejected the claimant’s tender. However, the Court declined to order the MOD to enter into the contract with the claimant.
The level of damages recoverable depends on whether the evidence indicates that the claimant would have been awarded the contract in the absence of the breach or merely whether he has lost the opportunity to bid in a fair and transparent tender procedure. Lancashire County Council v. Environmental Waste Controls Limited (2010) confirms that in the latter case the most the claimant can hope to recover is a proportion of the lost profit.
In Mears Limited v. Leeds City Council (2011), the Court found that Leeds City Council had failed to disclose the weightings applied to certain award criteria and that this could have affected the preparation of the claimant’s tender. The Court concluded that, if this breach had not been made, it is likely that the claimant would have been selected to participate in the next stage of the tender procedure. However, it was decided that damages, rather than set aside of the Council’s decision, was the appropriate remedy as the balance of convenience weighed heavily against restarting the procurement.
In August 2012, Virgin Trains initiated Court proceedings against the Department for Transport (“DfT”) in relation to the award of the West Coast train franchise to another operator, which resulted in the DfT deciding to cancel the award and to reimburse the four tenderers’ bidding costs (estimated to amount to a total of £40 million) well before any Court judgment was reached.
In April 2017, the Supreme Court handed down a ruling in Nuclear Decommissioning Authority v. Energy Solutions EU Ltd. (2017)concerning the circumstances in which damages may be recoverable for failure to comply with the Directives as given effect in the Regulations. The Court confirmed that the detailed procedural rules governing actions for safeguarding an individual’s rights under EU law must be no less favourable than those governing similar domestic actions. Therefore, liability is to be assessed by reference to the Francovich conditions, namely: the rule of law must be intended to confer rights on individuals, the breach must be sufficiently serious, and there must be a direct causal link between the breach of obligations and the damages sustained by the injured party. Moreover, based on the UK’s approach to the transposition of the EU’s remedies directives (see General Chapter on the EU Public Procurement Rules), the Regulations should be read as providing damages only upon the satisfaction of the Francovich conditions.
On 14 November 2018, the Court of Appeal made the first declaration of effectiveness by an English court in the case of Faraday Development Ltd v. West Berkshire Council and another (2018). West Berkshire Council had entered into a development agreement with a developer (“SMDL”) without first carrying out a regulated procurement. The council had issued a VEAT notice stating that it believed that the agreement did not need to be procured in compliance with a regulated procurement. The Court of Appeal held, however, that although the development agreement was not a “public works contract” at the time it was entered into, its provisions meant that the council had effectively agreed to act unlawfully in the future. In particular, under the agreement, the council committed itself to acting in breach of the legislative procurement regime as a “public works contract” would come into existence when SMDL proceeded to draw down the land. The Court concluded that the remedy of ineffectiveness was not time-barred on the basis that a valid VEAT notice had not been published. The parties agreed, following judgment, that the Public Contract Regulations 2006 made it mandatory for the Court to grant a declaration of ineffectiveness, and to order the payment of a civil financial penalty by the council. The amount of that penalty was fixed at £1.
The types of mitigation measures available depend upon the type of risk.
As noted above VEAT notices and CANs, if used correctly, may reduce the time limit within which ineffectiveness proceedings can be brought. Each notice can be used, for instance, prior to contract signature where a contract has been modified and there is a risk of challenge on the basis that the modification results in the award of a “new” contract which has not been properly advertised in a contract notice.
Where possible, the contracting parties could sign a contract but suspend or limit the implementation and expenditure for the first six months, in order to limit the commercial exposure, should a claim be brought seeking a declaration of ineffectiveness. This approach can be combined with contractually agreed provisions on compensation in the event of ineffectiveness.
The Regulations do not expressly deal with the issue of change during an award procedure. The extent to which changes to specifications or conditions are permitted depends upon a range of factors, the justification of the change and the effect on the economic balance of the contract, and should be assessed on a case-by-case basis against the background of the EU General Principles.
Before selecting the winning tender, changes that are not material are generally permitted. However, the contracting authority should, in general, ensure that any changes could not have had an impact on the identity of the participating tenderers and that there is no breach of the equal treatment principle.
In practice, the appropriate approach should be to consider whether any actual or potential tenderer could be prejudiced by any change and, if so, to go back to the stage in the procedure at which this impact would have first occurred.
The Regulations do not provide any express provisions on changes to the membership of bidding consortia. However, contracting authorities may provide restrictions on changes to consortia arrangements in the tender documents. In general, these restrictions require tenderers to demonstrate that the reconstituted consortium continues to meet the pre-qualification criteria and that the changes do not result in breaches of the EU General Principles.
There are many legitimate reasons for permitting changes to final tenders, e.g. correcting errors, supplementing omissions, and providing further details. However, there is a risk that the contracting authority may be in a position of favouring a certain tenderer by giving it an opportunity to improve its tender. The extent to which changes to final tenders may be permitted depends upon the applicable award procedure.
In the context of the open and restricted procedures, the Regulations do not specify whether changes to final tenders are permissible. It is generally accepted that variations for the purposes of clarifying or supplementing the content of tenders, pre-contract award, are permissible. This is subject to the contracting authority giving the same opportunity to all tenderers, and to tenderers not being allowed to improve their final tender. Changes post-contract award could be permitted, provided that the result is an improvement of the terms of the tender for the benefit of the contracting authority. However, changes that benefit the tenderer are unlikely to be permissible.
In the context of the competitive procedure with negotiation/negotiated procedure, the Regulations again do not specify whether changes to final tenders are permissible. The PCR 2015 and the UCR 2016 clarify, however, that fine-tuning is possible under the competitive dialogue procedure following the submission of tenders. However, the basic features of the final tender cannot be amended. Post-contract award, the Regulations specify that the contracting authority may require the preferred bidder to clarify aspects of its tender or confirm commitments, provided that there is no change to the substantial aspects of the tender.
Changes to final tenders post-contract award are therefore generally permissible, subject to certain constraints, namely that the changes must not be capable of affecting the outcome of the competition such that the preferred bidder remains the best bidder. Moreover, the reasons for the changes are relevant. For instance, changes are more likely to be permissible if they result from external reasons, such as changes in risk or technology.
The Regulations introduce express provisions, based on the principles developed in the CJEU’s case law, which set out the circumstances in which changes may be made to public contracts without triggering a requirement to run a new procurement process.
■ the change does not alter the overall nature of the contract.
The Regulations permit changes of contractor in accordance with an unequivocal review clause, or universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another contractor that fulfils the criteria for qualitative selection initially established, provided that this does not entail other substantial changes to the contract.
The Regulations do not contain specific rules in relation to privatisations. It is necessary to consider the whole arrangement, in order to determine whether the Regulations apply.
There are arguments available as to why the privatisation of a business (even with the benefit of contracts for the supply of goods, works or services back to the privatising entity) should not amount to a procurement. In particular, it is generally assumed that it will not breach the Regulations to award a contract at privatisation which only covers pre-existing areas of work for which the purchaser has a clear requirement at the time the contract is made, which reflects insofar as possible the provisions of the previous arrangement, and which includes terms that are normal for a contract of the type in question. In addition, the duration of the contract should be as short as possible. This is sometimes called the “privatisation principle”.
The Regulations do not contain special rules in relation to PPP (or PFI) arrangements. Where a PPP/PFI arrangement gives rise to a procurement of goods, works and services and is above the relevant threshold value, it is, in principle, within the scope of the Regulations in the same way as any other contract. The principal issues that arise in relation to PPP/PFI arrangements stem from the fact that these are typically long-term contracts that are exposed to changes in government policies (for example, the scaling-back of the schools’ building programme) and/or market requirements. This means that there are often difficult issues as to whether these contracts can be adapted to changes in circumstances without fundamentally altering the nature and extent of the original OJEU advertised contract, with the result that quite a new contract is created (one that is subject to a new application of the public procurement rules, including a new OJEU notice). Issues of scope and contract flexibility need to be carefully considered at the outset of a procurement.
There are no proposals to change the law at this time. In particular, immediately after Brexit, the Regulations will continue to apply. However, following Brexit, the UK Government will have more freedom to set/change its own procurement rules. Therefore, there is a prospect that proposals to change the law could be put forward following Brexit.
The key regulatory development in the UK has been the referendum on EU membership, which resulted in the UK electorate voting to leave the EU. The way in which the UK continues to apply the public procurement rules will likely depend on the way in which the UK wishes to continue engaging with the EU’s single market. The impact of Brexit is considered in the general chapter “The Implications of Brexit for Public Procurement”.

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