Covid-19 – the impact on procurement over the next coming months

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COVID-19: The impact on procurement over the next coming months

Published 19 March 2020

As we are in the midst of what has been described as the worst public health crisis for this generation, NHS Procurement teams and suppliers of products and services are under immense pressure. Some suppliers are now citing force majeure as they face situations where they are unable to supply. Many buyers will be looking at making urgent direct awards and extending existing contracts. This article addresses these points and then focusses on the impact on current and future procurement processes.

Firstly, a Procurement Policy Note has been published by Crown Commercial Service which sets out provisions under the Public Contracts Regulations 2015 ("PCR") available to organisations that need to make urgent arrangements for supplies, services and/or works during the Covid-19 pandemic.

These include:

• direct award due to extreme urgency;
• direct award due to absence of competition or protection of exclusive rights;
• call off from an existing framework agreement or dynamic purchasing system;
• call for competition using a standard procedure with accelerated timescales;
• extending or modifying a contract during its term.

Depending on the specific nature of the requirement there may be further options under the PCR, such as the additional delivery of supplies from an existing supplier (regulation 32(5)), additional similar works or services from an existing supplier (regulation 32(9)), or using the services of a subsidiary of another contracting authority (regulation 12).

The PPN sets out that contracting authorities should keep proper records of decisions and actions on individual contracts, as this could mitigate against the risk of a successful legal challenge. The PPN also sets out that where a direct award is made, contracting authorities should publish a contract award notice (regulation 50) within 30 days of awarding the contract.

A reminder of the wording on urgency

For new awards, as covered in the PPN, regulation 32 of the PCR allows purchasers to use the negotiated procedure without advert insofar as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify the extreme urgency must not in any event be attributable to the contracting authority.

For contract variations or extensions, regulation 72 of the PCR provides that an existing public contract may be modified where all of the following conditions are met:

(1) the need for the modification has been brought about by circumstances which a diligent contracting authority could not have foreseen;
(2) the modification does not alter the overall nature of the contract;
(3) any increase in price does not exceed 50% of the value of the original contract.

NHS commissioners and providers will no doubt be relying on the above exemptions for many extremely urgent purchases to enable them to provide care.

In our view, maintaining the status quo by extending contracts to allow procurement teams to deal with more urgent supply procurements is likely to be less controversial than amending a contract to include a completely different service/ supply so buyers should think about the reason behind the change and be transparent as to what they are doing and why.

Where a purchase is not extremely urgent, but is still classed as urgent (meaning the usual timescales in the procedures in the PCR cannot be adhered to) then the PCR do contain provisions that enable contracting authorities to run procurements in much shorter timescales (such as 15 days for the receipt of bids in an open procedure), however in our experience to date since the Government announced the UK is in the “delay” phase of managing the Covid-19 outbreak, bidders in the health sector are unlikely to be able to respond with bids quickly.

Current/future procurement processes

But what about procurement processes that are currently underway or that are about to start? How will Covid-19, the daily updates from Government that may bring about changes and the constant unknowns for organisations and their staff impact these?

For commissioners and providers wanting to start a new procurement process, it's now highly unlikely that any in person face to face market engagement can go ahead - this will impact pre market engagement activity or indeed planned dialogue meetings. Organisations will have to switch to telephone conferences or skype meetings where they have the technology in place to do so. With people now being asked to work from home, peoples' ability to respond/participate in meetings may be affected.

Consideration will need to be given to the timetables for procurement processes - a number of healthcare suppliers are working around the clock to maintain supply of key products. Healthcare providers are focussing their efforts and resources on managing the situation. Will these organisations be in a position to be able to tender for contracts during the next few months? Will they be able to respond quickly to clarification questions? Will they be able to mobilise in the required timescales? Will evaluators be available for the contracting authority to evaluate bids or participate in moderation meetings? If the relevant procurement involves clinical evaluators, it’s likely their time will now be redeployed.

Timetables may have to be extended for each stage of the procurement process. For procurements that are not urgent or where a delay could be absorbed, then consideration should be giving to making changes to the process. If organisations are wanting to start procurement processes or are currently in the middle of one, it's now time to plan for the unexpected which is clearly easier said than done but careful thought at this stage may pay dividends later. Our advice to commissioners or providers running procurement processes is to communicate with your bidders, be open and transparent about the pressures and any changes that may have to be made. Our advice to bidders is to share any issues being faced.

Risk of challenge

The procurement rules still apply, and any application of the provisions above will need to be justifiable, on the specific facts of your procurement need. Bidders will still be able to use the courts if required to test that commissioners have done so. As ever, it is not possible to say with certainty whether / when a bidder might do so. On the one hand, at the time of writing, we would query whether any supplier would want to bring a procurement challenge against an NHS organisation during the current crisis and indeed whether they would have the time and resource to do so. However, as time moves on and if businesses are seriously impacted to the extent that it comes down to financial survival, then it may well be the case that some suppliers are faced with no option but to challenge in order to protect their business and employees.

If you'd like any support with any procurement issues, please contact one of our procurement experts

Authors

Alistair Robertson

Alistair Robertson

London - Walbrook

+44 (0)20 7894 6020

Mary Mundy

Mary Mundy

Leeds

+44 (0)113 251 4727

Hannah Chapelhow

Hannah Chapelhow

Newcastle

+44 (0)191 404 4121

Victoria Fletcher

Victoria Fletcher

London - Walbrook

+44 (0)20 7894 6658

Tim Dennis

Tim Dennis

Newcastle

+44 (0)191 404 4003

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