How will legislation

shape procurement in

the futurePfH Live

24 June 2014

Andrew Millross, Partner

CoverageLegislation – past, present and future

Recognition of Group Structures

The rise and fall of Development Agreements

Increased coverage

Death of the negotiated procedure

Major move to electronic tendering

Framework Agreements come of age

Attempts to simplify processes

Value for money and social and environmental issues

Control over Variations

Previous legislationPublic Works Contracts Regulations 1991

Supplies 1993, Services 1995

Consolidated Directive 2004 Public Contracts Regulations 2006

Forms Regulation 1564/2005 separate Utilities regime

Remedies Directive – 2007/66/EC

Public Contracts Regulations – further amendments 2007, 2009 & 2011

2014 Directives

3 new Directives: Public procurement – “Classical

Directive” Utilities Concessions – new Directive

Came into force on 17th April 2014

Implementation period 2 years for most of the Directive 54 months for compulsory e-tendering

Cabinet Office “early implementation” PPN5/13

“The basic principles of

the EU Treaty have not

changed so contracts still

have to be competed and

awarded transparently and without

discrimination”

Cabinet Office PPN 5/13

Why?

Deliver “Europe 2020” strategy

better efficiency and value for money

simplification flexibilisation

Easier support of common societal goals

environmental climate change innovation

Part of the process of moving to:

“competitive and dynamic knowledge-

based economy in the world, capable of

sustainable economic growth

with more and better jobs and greater social cohesion”

Lisbon Strategy 2000

Future legislationForms for new procedures

PIN, OJEU and contract award notice for “light touch regime” contracts notice of contract variation minor changes to other forms

Electronic invoicing Directive 2014/55 will enable all suppliers to submit electronic invoices in a prescribed

format contracting authorities must accept invoices submitted in that form implementation deadline November 2018

World Trade Organisation Government Procurement Agreement mirrors EU procurement rules covers a wider range of countries including USA, Japan and potentially

China

European Single Procurement Documentation standard form

Recognition of Group structures (Art 12)“Reverse” and “multiple Teckal” now covered by rules

Codification may lead to greater focus turnover must be derived from activities

“for the parent” change of terminology from “with” so check group structures now

Beware “20% test” for DLO greater freedom to work for third parties

if DLO is part of the provider

Public sector co-operation – (Dublin ambulances & Hamburg waste cases) but limited to “statutory functions” (not cleaning – Piepenbrock case)

“Teckal” testcodified

“Control test”

parent controls strategic objectives and significant decisions of subsidiary

“Activities Test”

80% of activities for parent authority

“Capital Test”

no private capital in subsidiary

Rise and fall of Development Agreements (Arts 2 & 10)

“Pure land transactions” exempt

Issues since Roanne about construction obligations in Development Agreements

Helmut Muller and subsequent cases reduced concerns

Definition of a “public works contract” still unclear in Directive

What is a “decisive influence” does it include a “right of veto” over

changes to specification? or does it apply only if the authority can

insist on the developer making changes?

 

Works contract includes a contract for :

“the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work”

(Art 2(6))

Increased coverage & Part B abolition (Art 74) Part B regime abolished and replaced by light touch regime for

health and social services legal services educational services (but not training)

Threshold EUR 750 000 (approx £630K)

Must publish OJEU contract notice and CAN comply with Treaty obligations

(transparency, equal treatment etc)

“Other services” residual category eg grounds maintenance will be fully regulated

Contracts now subject to

“full” tendering

regime

•Grounds maintenance

•Agency staff (other than in care or health sectors)

•Rail transport

Death of the negotiated procedure (Arts 26 & 29)Commission concern over “abuses”

during preferred bidder stage

Competitive dialogue (CD) introduced in 2004

Negotiated procedure replaced with “competitive procedure with negotiation” (CPN)

“negotiation stage” equivalent to “dialogue stage” under CD

“minimum requirements” and award criteria not “subject to negotiation”

final tender stage – equivalent to BAFO – bidders can rely on previous “offers”

CPN & CD both available where

•“requirements cannot be met without the adaption of readily available solutions

•contract “includes design or innovative solutions”; or

•contract cannot be awarded without negotiations eg on “legal or financial makeup

Framework Agreements come of age (Arts 33 & 37)EU Commission concerns over UK use of frameworks Regulated in 2004 Directive

No major changes in 2014 Directive (Art 33) minor changes (to “fix problems”) confirm that

• contracting authorities “identified in the OJEU notice” (rather than “parties to the framework agreement”) can use it

• with direct award the choice of provider must be based on objective criteria

• both direct award and mini-competition can be used under the same framework agreement (but only with “objective” criteria to determine which applies when)

Buying clubs (Art 37) contract with buying club not subject to OJEU all buying club purchasing must be electronic (from

implementation) contracting authorities no longer liable for buying club

breaches

Major move to electronic tendering (Arts 22 & 53) Compulsory e-tendering & communications

extended implementation period (54 months) – but consultation whether to implement sooner

must document verbal communications impacting on tender submission or evaluation

data integrity requirements (eg no access to tenders until after deadline)

On line availability of “procurement documents”

from publication of OJEU notice - meaning? procurement documents =

• Specification• Contract conditions• Payment mechanism/cost model • ITT and supporting documents• OJEU notice & PQQ

“Contracting authorities shall by electronic means offer unrestricted and full direct access to the procurement documents from the date of publication of the OJEU notice” -

Art 53(1)

Electronic purchasing (Arts 34 & 36)

Dynamic purchasing system (DPS) (Art 34)

notice to suppliers on the DPS replaces need for OJEU notice on each purchase

minimum tender period of 10 days

Electronic catalogues (Art 36)

Must be “adequate” notice to suppliers to “update catalogue” before each call-off

interface with DPS – 10 day ITT operates as notice that information is to be collected from the (updated) catalogue

DPS

•Procured using restricted procedure

•30 days from OJEU notice to respond

•No limit on number of suppliers

•New suppliers can join at any time

•10 working days to assess new suppliers

•Suppliers cannot be charged for participating

Attempts to simplify procedures (Arts 46 & 48)

Single aggregated PIN covering several procurements over 12 months

at start of each procurement bidders that “express an interest” are sent a “notice to confirm interest”

Lots will be able to limit the number of Lots a tenderer

• can bid for, and/or • can win

must divide procurement into Lots or explain why not in the procurement documents

Simplification of prequalification & selection (Arts 24, 41 & 56 - 65)

Terminology changes Art 58 “selection criteria” – to

prequalify “suitable” bidders Art 65 can limit the number of

bidders “meeting the selection criteria” that are invited to tender

Self – declaration

Checked before contract award

Codification of exclusion grounds from case law

“Self-cleansing” provisions

Exclusion grounds

•evidence of collusion

•conflict of interest/prior involvement that “cannot effectively be remedied by less intrusive measures”

•“significant or persistent deficiencies in the performance of a prior public contract … resulting in early termination, damages or comparable sanctions”

•violations of environmental or employment legislation

Simplification of “selection” criteria (Arts 56, 58, 60 & Annex XII)

Economic and financial standing information limited to

• bank reference & insurance details• published accounts• turnover statement

cannot use credit reference agencies

Technical and professional ability references

• can use only to establish a “sufficient level of experience”,

• can consider at either “selection” or award but not both

limit on information that can be required to “prove selection criteria” are met – (Art 60)

Financial

Annual turnover no more than 2 times contract value unless “special risks”

Minimum turnover in “area” (of work) covered by the contract

Financial ratios

Minimum insurances

Simplification of “selection” (Art 65)Must state in OJEU notice

minimum and (“where appropriate”) maximum number of tenderers; and

“objective and non-discriminatory criteria or rules” to be applied to select tenderers

Not limited to financial strength or technical ability

Link to “subject matter of the contract” might be implied by future case law

So don’t throw out the PQQs yet – but they may need to be renamed

Value for money (Arts 40, 67, 68 & 71)Soft market testing specifically permitted (Art

40) but must ensure it does not distort competition (Art

41)

Award criteria (Arts 67 & 68) MEAT can now specifically include cost to the

authority/lifecycle costs Government consulting on banning “lowest price” can consider “organisation, qualification and

experience of staff assigned to the contract”

Direct payment of subcontractors (subject to national law) (Art 71)

Sustainability (Arts 42, 43 67 & 70)Technical specifications (Art 42)

can now include “method of production” if proportionate to contract value and objectives

must include accessibility criteria for people with disabilities

Labels (Art 43) can specify environmental, social eg “fair trade” labels, if

“label” is• “objectively and independently verified” • “international” • “linked to subject matter of contract” and • “equivalent labels” are accepted

Award Criteria (Art 67) can include “qualitative, environmental and/or social aspects”

provided “linked to the subject matter of the contract”

Contract performance conditions (Art 70) can include “environmental, social or employment-related

considerations” if “linked to the subject matter of the contract”

Regulation of Variations (Art 72) Permitted where variation:

is provided for in contract • “in clear precise and unequivocal

review clauses… • stating the scope and nature of possible

modifications or options • and the conditions under which they

may be used”• may not “alter the overall nature of the

contract” is a new contractor “following corporate

restructuring including takeover, merger, acquisition or insolvency” including “step-in” to subcontracts

has a value below both• applicable EU tendering threshold; and• 10% of initial contract value for

services/supplies or 15% of original contract value for works (plus inflation, if contract includes an inflation clauses) – value assessed cumulatively

is not “substantial” within Pressetext (see box)

“Substantial” changes – Pressetext

Changed contract would have attracted other tenderers or changed the tender result

Variation “changes the economic balance of the contract in favour of the contractor in a way not provided for”

“Considerable” extension to scope

New contractor (other than as left)

Questions

Free e-briefings:

www.anthonycollings.com/news-and-events/briefings.aspx

Advice:andrew.millross@anthonycollins.com 0121 212 7473