Transforming public procurement – so long red tape, hello golden thread?

Published 16 diciembre 2020

Introduction

On 15 December 2020, the Government published the eagerly anticipated Green Paper in relation to transforming Public Procurement. Anyone interested in Public Procurement is encouraged to respond to the various questions under the Green Paper by 10 March 2021 to procurement.reform@cabinetoffice.gov.uk.

This briefing summarises the key themes and proposals set out in the 78 page Green Paper and should be useful to both buyers and bidders.

Whilst the Government is proposing to “slash” the 350+ regulations governing public procurement, this does not mean that the UK is no longer to have a regulated Public Procurement regime – far from it. The Government is proposing to streamline the current regulations (the Public Contracts Regulations 2015 (“PCR”), the Utilities Contracts Regulations 2016, the Concessions Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011) into one single regulatory framework with sector specific parts. It also proposes to strengthen its ability to drive policy through Public Procurement.

It is interesting that the Green Paper has excluded the procurement of healthcare services from its scope given that the Department of Health and Social Care is continuing to consider next steps in relation to proposals from NHS England on procurement in the Long Term Plan. We will therefore have to wait and see what the NHS Bill sets out in terms of the procurement/commissioning of health care services in the future.

Key themes

The key themes underlying the proposals in the Green Paper are transparency, publishing and using data more effectively, streamlining the legislation, simplifying procurement processes, promoting innovation, enabling social value to be effectively evaluated and getting value for money for the public purse.

The Government proposes to set up a new National Procurement Policy Statement that contracting authorities will be required to “have regard to”. This, it is hoped, will enable the Government to drive its policies through Public Procurement.

Principles

Currently, contracting authorities are required to comply with the principles of transparency, equal treatment, non-discrimination and proportionality when awarding public contracts. As the UK is now a member of the WTO Agreement on Government Procurement (GPA) in its own right, the new regulatory framework is to be founded on the rules and principles set out in the GPA as well as ensuring consistency with HM Treasury’s Managing Public Money and the seven principles of public life as set out by the Committee on Standards in Public Life.

The Government proposes that the following interdependent principles should be included in the new procurement legislation:

• Public good - procurement should support the delivery of strategic national priorities including economic, social, ethical, environmental and public safety;

• Value for money - procurement should enable the optimal whole-life blend of economy, efficiency and effectiveness that achieves the intended outcome of the business case. The Green Paper sets out that it is critical to maintain the “golden thread” from Government priorities via the business cases through to procurement specifications and the assessment of price and quality when awarding contracts;

• Transparency - openness that underpins accountability for public money, anticorruption, and the effectiveness of procurements (more on this below);

• Integrity - good management, prevention of misconduct, and control in order to prevent fraud and corruption;

• Fair treatment of suppliers - decision-making by contracting authorities should be impartial and without conflict of interest;

• Non-discrimination - decision-making by contracting authorities should not be discriminatory. The Green Paper makes it clear that under the new legislation, contracting authorities will not be able to show favouritism among domestic suppliers which will extend to suppliers who have rights under international trade agreements.

The above principles should already underpin procurement processes, there will, however, be a change in semantics – the requirement to ensure value for money, for example, is not currently a legislative requirement but rather a policy one.

Transparency and the use of data

The transparency principle will be promoted considerably by the use of data under the proposed new regime. The Government proposes to establish a central platform accessible by buyers and suppliers (but in different formats) that will include:

• A supplier registration system for a simplified selection stage where suppliers just submit their information once to save duplication in processes (similar to the function of the European Single Procurement Document). Contracting authorities could apply criteria to this information to determine whether suppliers would be eligible to tender (such selection criteria is to comply with the GPA);

• A debarment register for suppliers (which may include, where relevant, related entities) who have relevant convictions to make it easier for contracting authorities to identify organisations that should be excluded from public procurement processes;

• The publication of annual pipelines for planned procurements and commercial activity, looking forward at least 18 months but ideally 3-5 years;

• A register of framework agreements and dynamic purchasing systems available to contracting authorities – this will enable commercial teams in contracting authorities to identify opportunities and would no doubt be very useful;

• How suppliers have performed against set KPIs in public contracts;

• The publication of procurement and contracting data on the part of contracting authorities through the commercial lifecycle (either via links to their own systems or directly);

• A register of complaints about public procurement practices of contracting authorities and entities including the record of the formal process of complaint management through to resolution;

• A register of legal challenges relating to alleged breaches – it is proposed that the status of challenges should be updated and published by the contracting authority in accordance with statutory guidance on transparency. This is likely to impact on litigation strategies by both claimants and defendants.

Two other significant proposals relating to transparency are:

• The requirement for contracting authorities to implement the Open Contracting Data Standard so that data across the public sector can be shared and analysed;

• The requirement to publish contract amendment notices so that amendments are transparent and give commercial teams greater certainty over the risk of legal challenge (currently, regulation 72 PCR only requires the publication of a modification notices for certain limbs of it. This will therefore be quite a shift from current practice).

Proposals relating to the procedures

The Government propose to develop three procurement procedures under the new legislation with the aim of promoting flexibility and simplification. These will apply to all types of contract including those currently covered by the so-called “Light Touch Regime” (which the Government proposes to scrap so that all services are covered by the below):

(1) A new flexible procedure that gives buyers freedom to negotiate and innovate to get the best from the private, charity and social enterprise sectors (this means buyers would not have to justify the use of negotiation as they currently do);

(2) An open procedure that buyers can use for simple, “off the shelf” competitions;

(3) A limited tendering procedure to be used in certain circumstances including as a crisis or extreme urgency (it is proposed that it will be mandatory to publish a notice when a decision is made to use this procedure and to allow a standstill period of 10 days before entering into the relevant contract unless the “crisis” or “extreme urgency” circumstance is met).

Both buyers and bidders will no doubt be pleased with the proposal for a flexible procedure allowing for negotiation.

The limited tendering procedure will mirror much of regulation 32 PCR and will include a new circumstance specifically relating to crisis which is to cover:

• an event which clearly exceeds the dimensions of harmful events in everyday life and which substantially endangers or restricts the life or health of people;
• where measures are required to protect public morals, order or safety; or
• where measures are required to protect human, animal or plant life or health.

The aim of the crisis circumstance is to provide greater certainty to contracting authorities should there be a national or local emergency. It is proposed that the Minister for the Cabinet Office is given new powers to declare a crisis for the purposes of this circumstance under the reformed rules. Contracting authorities would need to submit to the Minister of Cabinet Office if they believe a crisis should be declared for the decision to be made. This circumstance would only apply to contracts awarded to deal with the immediate requirement posed by the crisis.

Framework Agreements and DPS+

The Government propose to legislate for new options in framework agreements including an option for an ‘open framework’ with multiple joining points and a maximum term of 8 years. The Green Paper does make it clear that direct awards under Framework Agreements would have to be made on the basis of objective criteria (which is no different to the current position on direct awards under framework agreements).

The Government also proposes to create a new Dynamic Purchasing System (DPS+) that may be used for all types of procurement (not just commonly used goods and services), the process to establish it will be simpler than the current regime for DPS.

Evaluation

Some of the proposals relate to how bids will be evaluated both at selection and award stage.

Currently, we know a number of contracting authorities have been frustrated when attempting to apply the discretionary ground for exclusion under regulation 57(8)(g) PCR allowing for a bidder to be excluded where it has shown “significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract…which led to early termination of that prior contract, damages or other comparable sanctions.” It is often difficult to meet all of this exclusion. The Green Paper proposes to remove the underlined wording from this ground which would make it easier to exclude a bidder who has poorly performed a previous contract.

The Government proposes retaining the basic requirement that award criteria must be linked to the subject matter of the contract but amending it to allow specific exceptions set out in statutory guidance. Allowing certain, specific exceptions would permit contracting authorities to assess how suppliers are operating across the whole of their business, not just in the narrow delivery of the contract, taking account of certain behaviour such as a supplier’s record on prompt payment of its subcontractors across its business and a supplier’s plans for achieving environmental targets across its operations. The Green Paper sets out that in providing this flexibility, the future regulatory regime would be able to influence, to a far greater extent, how suppliers act on such national priorities across their business and it is no coincidence that this Green Paper has been published only weeks after the Procurement Policy Note on Social Value.

The Green Paper sets out that the current procurement regulations are too prescriptive as to what can be evaluated under a “Most Economically Advantageous Tender” (“MEAT”). The Government proposes requiring the evaluation of bids to be based on “Most Advantageous Tender” (“MAT”) in line with the requirement of the GPA. It is suggested that adopting MAT (together with accompanying guidance) should provide greater reassurance to contracting authorities that they can take a broader view of what can be included in the evaluation of tenders in assessing value for money including social value as part of the quality assessment.

Challenges and available remedies

Significant changes are proposed in relation to procurement challenges and remedies including:

• A reform of the Count processes and introduction of a fast track process to speed up the review and make it more accessible;

• Written pleadings – certain types of claims would be reviewed on the basis of written pleadings which should save costs;

• Disclosure – the increased transparency obligation will require the disclosure of information relating to each procedure once the contract award decision has been made. It is proposed that this will give bidders immediate and more comprehensive access to much of the information that might be sought under a traditional disclosure process. There is a suggestion that standstill letters setting out the characteristics and relative advantages of the successful tender will no longer be required but that bidders can still access information that has to be published – this could be a game changer;

• Contracting authorities will be encouraged to set up their own time limited, formal internal reviews of complaints before they are lodged with the Court by staff not directly involved in the procurement that is the subject of the complaint. The intention is to set up a pilot programme for this;

• A tribunal system for procurement challenges to be heard cheaper and faster is proposed – the Government aim to investigate this with HM Courts and Tribunals’ Service. It may involve low value claims or challenges to an ongoing procurement process;

• A shift away from remedies such as damages towards measures which allow for elements of a procurement to be re-run, decisions to be set aside or documents to be amended where a breach has been identified;

• Amending the test to be applied by the Courts when determining whether to lift the automatic suspension so that it is more procurement specific that would balance public interest, urgency, the upholding of the regulations and the impact on the winning bidder against the right for the claimant to be able to participate in the contract and the alternative available remedies;

• Capping the level of damages that can be awarded to legal fees plus 1.5x bid costs (with some exemptions such as in the event of illegal direct awards).

Conclusion

The Government has certainly set out proposals that could significantly overhaul the current Public Procurement regime. Although the procurement processes may well be simplified in the future, the obligation to act transparently in an evaluation for example is based on a raft of case law (some European and some from the English Court) which can still make the adherence to the regulations quite complex.

In our view, much of what is being proposed should be attractive to buyers in terms of processes being streamlined, framework agreements being for longer and the suggestion that individual standstill letters setting out the characteristics and relative advantages of the successful tender will no longer be required. There will be quite an administrative burden on buyers in terms of the suggested data publication requirements. Bidders may welcome the ability to negotiate more freely and they should certainly benefit from more data being publicly available. Bidders are also likely to benefit from quicker and cheaper routes to challenge although some are unlikely to be keen on proposals around the limits to damages in certain circumstances.

If you would like to contribute to the consultation, do email the Government using the email address at the top of this briefing.

For further information on public procurement, please contact the authors of this briefing.