16/04/2010
This update contains brief details of recent news, legislation, cases and other developments relevant to those involved in procurement work.
If you have been forwarded this update by a colleague and would like to receive it direct please email Claire Booth.
All links are correct at the date of publication.
In this update:
Policy and guidance
IDEA: Regional Improvement and Efficiency Partnerships Efficiency Casebook
Outlines the RIEPs’ efficiency and procurement support and details a wide range of practical advice, guidance and best practice on efficiency. It includes sections on procurement, promoting shared services, making better use of assets, transforming services, and benchmarking efficiency. (8 February 2010)
OGC: Procurement Policy Note - Time limits for challenges under the Public Procurement Regulations (Action Note 03/10)
Discusses the implications of the ECJ's decision in the Uniplex case for the time limits that apply to challenges brought under Part 9 of the Public Contract Regulations. In Uniplex v NHS Business Services Authority (C406/08), the court held that national requirements for a challenge to be brought promptly are contrary to EU law because they prevent claimants from knowing the exact time limit that will apply. The ECJ further held that time should begin to run from the date the claimant knew or ought to have known of the breach, rather than the date of breach itself. (22 February 2010)
DCLG: Putting the frontline first - meeting the local government challenge
This Task Force report challenges local authorities to take a strategic approach to managing their budgets and to take urgent and radical action to transform services. The first part of the report sets out strategic questions which council leaders need to be asking themselves about their council. Council leaders should use this to challenge their senior officers to ensure that the necessary action is being taken. The second part sets out ten decisive steps that all councils should act on to protect vital frontline services in an era of tighter public finances, with a framework of actions, tools and resources. (1 March 2010)
OGC: Mandatory exclusion of economic operators
Advice on the steps that contracting authorities can take to ensure compliance with the mandatory requirement in the Public Contracts Regulations that suppliers, contractors and services providers who have been convicted of certain offences, including participation in criminal organisations, corruption, money laundering and fraud, be excluded from public contracts. (15 March 2010)
Commission on 2020 Public Services: Beyond Beveridge - principles for 2020 public services
This interim report from the UK think tank sets out the urgency for change, the limits of our current public services settlement, and the need for a systematic and long-term approach to reform. The report says that the UK needs to overturn the existing Beveridge model of public services in order to cope with an ageing population, rising expectations and higher labour costs. It argues that power should be taken away from central government and given to local people, who would be encouraged to take greater responsibility for themselves. Recommendations included introducing ‘participatory budgeting’ between citizens and local services, setting up ‘outcome agreements’ and allowing people to get involved in commissioning services. The report also calls for an expansion of schemes where public sector professionals set up co-operatives to run services. (16 March 2010)
2020 Public Services Trust: Financing the UK's welfare states
This paper by Prof. Howard Glennerster, published alongside the Commission on 2020 Public Services' report, reveals the extent of the hole in public finances and advocates partnership approaches between the state and citizens to fund public services. (16 March 2010)
Wales Audit Office: A picture of public services - financial challenges facing public services
Highlights the key issues facing public services in Wales and sheds light on the lessons learned in the five years since the Wales Audit Office was created. It predicts that, over the three years from April 2011, there could be a total cut in funding for Welsh public services of around £1.5bn. It warns against a narrow approach to efficiency based on doing more, or the same, with less money, fewer staff and less time, as this can ultimately result in a squeeze somewhere else, such as poorer quality services. It identifies key areas for public services to focus on, including strategy and planning, financial management, collaborative working, using performance data more effectively, staff management, and making better use of assets. To help support public services cope during the harsh economic times, the WAO has also launched a set of materials to help public bodies to achieve efficiency through innovation. (16 March 2010)
OFT: Choice and competition in public services - A guide for policy makers
This guidance for policy makers considering using choice and competition in the delivery of public services provides a framework for assessing where and how the use of choice and competition can be most effective. It draws on evidence from a range of different public services including health, schools, further education, social care and employment services in order to support future policy making. It argues that, in order for choice and competition to work effectively, policy makers need to be particularly aware of three key lessons:
- consumer behaviour needs to be understood;
- implementing good exit mechanisms is vital; and
- both user choice and competition between providers need to function effectively in order to secure overall benefits for users.
(19 March 2010)
Institute of Directors: Towards Tesco - improving public sector procurement
This report argues that at least £25bn of annual efficiencies can be made in the public sector within three years through a radical restructuring of public sector procurement and greater use of shared services and outsourcing. It proposes that there should be mandatory use of structures such as centralised buying organisations and regional procurement hubs. (19 March 2010)
Audit Commission: Surviving the crunch - Local finances in the recession and beyond
This report traces the effects of the economic downturn on council services. It says that most councils have been cushioned from the worst of the recession because the Government stuck to its three-year funding settlement; but this ends in 2011. Even though the timing and extent of cuts in government support are unclear, councils must prepare now for leaner times. The best-prepared councils are taking action now to preserve services in the years ahead, but others have yet to make any financial plans beyond 2011. The report recommends that councils tell the public and their staff about how they are planning to cope with the full effects of the recession. It includes a number of case studies. (23 March 2010)
HM Treasury: Budget 2010 - Chapter 6: Protecting public services
Sets out details of the Government’s plans to protect key public service priorities whilst meeting its commitment to halve public sector net borrowing over the next four years. It re-affirms the Government's commitment to making £11bn of savings a year by 2012/13 from efficiency and streamlining Government; with local government being expected to deliver £2.1bn savings towards that total from areas including greater collaborative procurement, increased back office efficiency and greater use of shared services, and up to £100m through reducing energy usage in local authorities. (24 March 2010)
HM Treasury: Smarter government - update of progress
Sets out how the Government has delivered on each of the commitments in the December 2009 report Smarter Government - Putting the Frontline First. (24 March 2010)
OGC: The ten key procurement for growth principles
emphasise the need for effective engagement with industry pre-procurement, to enable consideration of supply chain opportunities and take account of industry feedback before requirements are set. (24 March 2010)
OGC: Implementing e-tendering
Sets out some of the benefits which can be achieved for both contracting authorities and suppliers from the effective use of electronic tendering in public procurement. It also offers guidance on implementing e-tendering solutions. (24 March 2010)
OGC: PPM, assurance and procurement landscape map
Flow chart bringing together the different stages of a programme or project to portray the interdependencies between PPM and the procurement lifecycle, assurance activity (such as OGC Gateway reviews) along with risk management. The tool also highlights the need to consider Early Market Engagement activity as part of the strategic process from high level policy to a delivery programme. (24 March 2010)
OGC: Procurement Policy Note – Requirement to include 30-day payment clause in new contracts (Action Note 07/10)
From 25 March 2010, it will be mandatory for all Government departments, agencies, NDPBs and the bodies over which they have direct control to include a contract condition requiring their contractors to pay their sub-contractors within 30 days. This action note provides guidance and an appropriate model clause to help the Government implement the new requirement. It covers new contracts for goods and services only. (24 March 2010)
HM Treasury: Total Place - A whole area approach to public services
Sets out proposals for sweeping changes to the way that public services will be delivered following wide-ranging testing of the Total Place approach in 13 pilot areas. The report presents a series of commitments that will give greater freedoms and flexibilities to support a new relationship between Government and places. The new ways of working pioneered by the pilots will be replicated in all areas across England; the best performing authorities will be supported to go further and faster with new far reaching freedoms through a 'single offer', and a much wider group of local authorities and their partners will be encouraged to pioneer new working in policy areas where they are strongest via 'devolved responsibility'. (25 March 2010)
Bevan Brittan LLP has issued an Alert Total Place - the legal implications that considers what this report means in practice for local authorities and their wider public sector partners.
DH: Principles and rules of cooperation and competition
This document sets out revised PRCC in commissioning and provision of NHS services. The PRCC were first issued under the 2007/08 Operating Framework and are intended to support cooperation and competition in the interests of patients and taxpayers in relation to: commissioning and procurement; cooperation and collusion; conduct of individual organisations; and mergers and vertical integration. These new PRCC will supersede the original PRCC of December 2007 from October 2010 onwards. (25 March 2010)
DH: Primary Care Trust procurement guide for health services
Sets out expectations of PCT Boards on the use of procurement to improve services for patients. The guidance is consistent with law, including the application of the UK Public Contracts Regulations to commissioning of health services and reflects overarching principles of transparency, proportionality, non-discrimination and equality of treatment. The guide is referenced in the NHS Operating Framework for 2010/11. It should be read in that context and in conjunction with the Principles and Rules for Cooperation and Competition and the national standard contracts guidance. (25 March 2010)
Cases - UK
B2net Ltd v HM Treasury (sued as Buying Solutions) [2010] EWHC 51 (QBD)
B2net, an information technology storage company, applied for an interim order preventing BS from continuing with its competitive public procurement to establish a framework agreement for the provision of IT goods and services to government. B2net submitted its completed PQQ but failed to be shortlisted by a small margin as it had failed to score maximum points in respect of a question about breadth of experience. B2net contended that the selection process was unfair. The court held, refusing to grant an injunction, that damages would provide B2net with an adequate remedy, and they would be more readily capable of calculation than many claims for damages for loss of business. If an injunction was granted but B2net failed to establish its case at trial, the disruption caused to the extensive range of public purchasers that were expected to use the framework, and to the other bidders, would inevitably be damaging, whereas the remedy under a cross-undertaking in damages would not prevent injustice to those parties. (20 January 2010)
BSkyB UK Ltd v HP Enterprise Services UK Ltd and Electronic Data Services LLC [2010] EWHC 86 (TCC)
Following a tender process in 2000, BSkyB selected EDS to design, build, manage, implement and integrate the process and technology for a customer relationship management (“CRM”) System at Sky's existing contact centres located at Dunfermline and Livingston. BSkyB alleged that EDS made fraudulent misrepresentations which led to EDS being selected for a Letter of Intent and for a Prime Contract.
The court held that EDS was liable in deceit where it had falsely represented that it had carried out a proper analysis of the amount of time needed to complete the initial delivery of the CRM and that it was of the opinion, and had reasonable grounds for holding the opinion, that it would deliver the project in the timescales put forward. There was no proper analysis carried out and no reasonable grounds for making those statements. Those misrepresentations were deceitfully made by an EDS
employee who dishonestly made the misrepresentations knowing them not to be true with the intention that BSkyB would rely on them. EDS was therefore liable in deceit for those misrepresentations. (26 January 2010)
SITA UK Ltd v Greater Manchester Waste Disposal Authority [2010] EWHC 680 (Ch) (Ch D)
S was an unsuccessful bidder in GMWDA’s tendering process for a PFI project to provide waste disposal facilities for Greater Manchester that used the negotiated procedure. A number of bidders were invited to tender. In January 2007, GMWDA announced that V was its preferred bidder and that S would be its reserve bidder. The contract was not actually awarded until 8 April 2009. The press release confirmed that the project would trigger a £640m construction programme and that the contract would be worth £3.8bn to V, compared with earlier figures of around £3bn; this was significantly more expensive than S’s original bid. S claimed that after GMWDA had identified the preferred bidder and entered into negotiations, V's bid changed to such an extent that, in the absence of an opportunity being given for S to re-tender, it could not be said that V's bid was the most economically advantageous. S also claimed that G had failed to afford both tenderers equal treatment and to act with appropriate transparency. S contended that GMWDA had breached the Public Contracts Regulations and, after much correspondence had passed between S and GMWDA, S issued its claim in August 2009. GMWDA applied for S’s claim to be struck out on the basis that it had been brought outside the three month time limit.
The court held, granting GMWDA’s application, that S’s claim was time-barred. The limitation period could only start from the date on which the complainant knew or ought to have known that there had been a breach of the rules (applying the decision of the ECJ in Uniplex (UK) Limited v NHS Business Services Authority (C-406/08)). For a service provider to have knowledge of "grounds" within reg.32(4)(b) it was not necessary for it to have knowledge of some form of damage or loss; all that was required to be known, or constructively known, to the complainant was the infringement, without the additional element of knowledge of damage. On the evidence, S knew in April 2009 that the contract had been awarded in breach of the Regulations and the infringements it had identified in April 2009 allowed it to make the complaint it ultimately made. The fact that S later acquired knowledge of details of earlier infringements added nothing material. The three-month period started to run in April 2009 so the proceedings were therefore out of time, unless there were reasons for extending that time. (29 March 2010)
Bevan Brittan LLP has issued an Alert Procurement challenges - when does the clock start to tick? that advises bidders on the implications of this decision and the key matters that they should bear in mind when considering challenging a procurement award.
Cases - EU
Helmut Muller v Bundesanstalt für Immobilienaufgaben (C-451/08)
This case concerned the application of the EU procurement rules to development / construction agreements and the BfI's sale of land on which the purchaser was subsequently to carry out works corresponding to the urban planning objectives of a local authority (the municipality of Wildeshausen). The ECJ has ruled that:
- the concept of ‘public works contracts’ within the meaning of Art.1(2)(b) of the Public Procurement Directive 2004/18 does not require that the works which are the subject of the contract be materially or physically carried out for the contracting authority, provided that they are carried out for that authority’s immediate economic benefit. The latter condition is not satisfied by the exercise by that contracting authority of regulatory urban-planning powers;
- the concept of ‘public works contracts’ requires that the contractor assume a direct or indirect obligation to carry out the works which are the subject of the contract and that that obligation be legally enforceable in accordance with the procedural rules laid down by national law;
- the ‘requirements specified by the contracting authority’, within the meaning of the third variant set out in Art.1(2)(b) of Directive 2004/18, cannot consist in the mere fact that a public authority examines certain building plans submitted to it or takes a decision in the exercise of its regulatory urban-planning powers;
- in circumstances such as those of the case in the main proceedings, there is no public works concession within the meaning of Art.1(3) of Directive 2004/18; and
- in circumstances such as those of the case in the main proceedings, the provisions of Directive 2004/18 do not apply to a situation in which one public authority sells land to an undertaking, even though another public authority intends to award a works contract in respect of that land but has not yet formally decided to award that contract.
(25 March 2010)
Wall v Stadt Frankfurt am Main, Frankfurter Entsorgungs- und Service (FES) GmbH (C-91/08)
This case concerned the City of Frankfurt’s tender for a service concession contract relating to the operation, maintenance, servicing and cleaning of 11 municipal public lavatories (including two that were to be newly built) for a period of 16 years. W’s tender was rejected and the contract was awarded to FES, a waste management company in which the City of Frankfurt owned 51% of the shares. FES initially subcontracted the advertising services under the contract to W but then asked the City of Frankfurt for consent to a change of subcontractor. It also named W as the supplier of the new lavatories but then advised W that it had got a more competitive offer from another supplier. W brought an action, seeking that FES refrain from performing the contract relating to the advertising services and from concluding and/or performing any contract with a third party for the construction of the two public lavatories which were to be newly built. W also sought that the City of Frankfurt to be ordered to refrain from consenting to the conclusion of a contract between FES and anyone other than W for the construction of those two public lavatories. The ECJ ruled that:
- where amendments to the provisions of a service concession contract are materially different in character from those on the basis of which the original concession contract was awarded, and are therefore such as to demonstrate the intention of the parties to renegotiate the essential terms of the contract, all necessary measures must be taken to restore the transparency of the procedure. If need be, a new award procedure should be organised in a manner appropriate to the specific features of the service concession involved;
- where an undertaking which is the holder of a concession concludes a contract for services within the scope of a concession it has been awarded by a regional or local authority, the obligation of transparency does not apply if that undertaking:
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- was set up by the regional or local authority for the purpose of waste disposal and street cleaning but also operates in the market;
- belongs to that regional or local authority to the extent of a 51% holding, but decisions of shareholders can be taken only by a three-quarters majority of votes at a general meeting of the company;
- has only a quarter of the members of its supervisory board, including the chairman, appointed by the regional or local authority; and
- obtains more than half its turnover from bilateral contracts for waste disposal and street cleaning in the territory of that regional or local authority, which reimburses itself by means of municipal taxes on its residents.
- The principles of equal treatment and non-discrimination on grounds of nationality and the consequent obligation of transparency do not require the national authorities to terminate a contract or the national courts to make a restraining order in every case of an alleged breach of that obligation in connection with the award of service concessions. It was for the domestic legal system to regulate the legal procedures for safeguarding the rights which individuals derive from that obligation in such a way that those procedures are no less favourable that similar domestic procedures and do not make the exercise of those rights practically impossible or excessively difficult. The obligation of transparency flows directly from Arts.43 EC and 49 EC, which have direct effect in the domestic legal systems of the Member States and take precedence over any contrary provision of national law.
(13 April 2010)
Competition decisions
OFT: RBS agrees to pay £28.5 million penalty for disclosing pricing information to competitor
The Royal Bank of Scotland has agreed to pay a fine of £28.59m after admitting breaches of competition law between October 2007 and March 2008. The fine was reduced from £33.6m to reflect RBS's admission and agreement to co-operate. The agreement follows an OFT investigation which found that individuals in RBS's Professional Practices Coverage Team had unilaterally disclosed generic as well as specific confidential future pricing information to their counterparts at Barclays Bank. The OFT also found evidence that the information was taken into account by Barclays in determining its own pricing. (30 March 2010)
OFT imposes £225m fine against certain tobacco manufacturers and retailers over retail pricing practices
OFT has fined two tobacco manufacturers and ten retailers that it found had engaged in unlawful practices in relation to retail prices for tobacco products in the UK. The £225m fine is the largest total fine imposed by the OFT to date in a case under the Competition Act 1998. The OFT concluded that each manufacturer had a series of individual arrangements with each retailer whereby the retail price of a tobacco brand was linked to that of a competing manufacturer's brand. These arrangements restricted the ability of these retailers to determine their selling prices independently and breached the Competition Act 1998. (16 April 2010)
News
OGC announces e-auction strategy to save £270m
The OGC Centre for e-Auctions has published its Forward Plan for e-Auctions, which aims to save the public sector up to £270m by the end of 2011/12. It sets out a rolling schedule of e-auctions for the next 24 months, which will influence over £900m of public sector spend. In addition, the OGC has established an online facility dedicated to e-auctions, which will include on-line forums and access to best practice guidance. The site will be continually developed and enhanced based on user feedback and requirement, and will include regular updates on upcoming e-auctions.
The Buying Solutions legal services framework agreement allows customers throughout the public sector to place orders with Bevan Brittan LLP under standard terms and conditions of the agreement. We are appointed to the Full Commercial Panel and can therefore provide advice on a wide range of legal services covered by the framework, including:
- IT
- Property and Estates
- Employment and Pensions
- Intellectual Property
- PPP/PFI projects
- Competition law
- Telecommunications & ecommerce
- Construction
- Corporate & Finance
- Public Procurement
- Outsourcing
- Regulatory law
