Procurement Update – August 2014

This Update contains brief details of recent key developments relevant to those involved in procurement work that have been published in the pastsix months.

27/08/2014

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Emily Heard

Partner

This Update contains brief details of recent key 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

Procurement Policy Note 04/14 – Contracting for Value - Model Services Contract
The Crown Commercial Service and the Government Legal Service have developed a revised set of model terms and conditions for major services contracts with a value over £10m; it replaces the out-of-date OGC Model ICT Contract version 2.3 and reflects current Government priorities and recommended ways of doing business. The model is suitable for use with the range of business services that Government purchases and in particular contains applicable provisions for contracts for Business Process Outsourcing and/or IT delivery services.
The new Model Services Contract is now live on the Crown Commercial Service web page. (4 March 2014)

Procurement Policy Note 05/14 – Fair Deal for staff pensions: staff transfers from Central Government
The Fair Deal policy allows newly transferring staff continued access to a public service pension scheme. It replaces the previous policy which required employers to provide transferring staff access to a broadly comparable pension scheme and the option of a transfer of their accrued pension rights. This PPN explains how the policy affects pensions when staff transfer from Central Government to independent contractors delivering public services. It is directly applicable to Central Government Departments, Executive Agencies, the NHS, maintained schools (including academies but excluding those covered by other arrangements for local government) and any other parts of the public sector under the control of Government ministers where staff are eligible to be members of a public service pension scheme. (11 March 2014)

Procurement Policy Note 06/14 – Short Form Terms and Conditions for Goods and Services
The Crown Commercial Service and the Government Legal Service have developed a set of short form terms and conditions of contract for use by government departments and many other public sector organisations. These organisations may use the short form terms and conditions the procurement of goods and services where the contract value is likely to be below the relevant EU procurement thresholds. The Short Form terms and conditions are available on the Crown Commercial Service web page. (8 April 2014)

Procurement Policy Note 07/14 – Implementing Article 6 of the Energy Efficiency Directive
This note explains how the Government is implementing the requirements of Art.6 of the Directive, which requires “central government departments” in EU member states to purchase highly energy efficient products, services and buildings, as set out in Annex III. This is a qualified duty and authorities do not have to buy the default product, service or building where this is not cost effective or does not allow effective competition. The PPN sets out how organisations must comply with the requirements of the Article for purchases made on or after 5 June 2014. (3 June 2014)

Procurement Policy Note 08/14 – Use of Pre-Qualification Questionnaires
This note sets out revised standard PQQ core questions for use by central government departments, executive agencies and non departmental public bodies. The revisions have been made to reflect policy changes, e.g. in the areas of tax compliance and supplier past performance. Interestingly this PPN refers to a new approach to asking questions of suppliers which is being planned to tie in with the implementation of the new procurement Directive, with reference to Lord Young’s proposals. This PPN supersedes PPN 01/12. (11 July 2014)

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HC  Communities and Local Government Committee: Local government procurement
This report critically examines how local authorities are working to improve their procurement operations in order to cut council costs and reduce the burdens on those doing business with them, strengthen links with delivery of  community objectives, improve risk management and reduce fraud. It finds that opportunities to collaborate are not being fully taken and additional savings of around £1.8bn could be achieved if all councils were to use collaboration as a default option. The Committee concludes that achieving change requires procurement to be seen not as a niche activity for specialists, but rather as the essential activity under-pinning service delivery. To ensure that all council procurement is raised to the level of the best, there needs to be sector-led work to improve collaboration, spread best practice, develop streamlined processes, and to reduce fraud and poor risk management. This must be spearheaded by council cabinet members and frontline councillors, with close involvement of senior officers. Even at a time of financial constraint, investment in procurement skills is essential to enable effective management of the multi-billion procurement spend, and should be seen as a wise investment now to save costs in future. (13 March 2014)
See also the Government response to House of Commons Communities and Local Government Committee’s Sixth Report of Session 2013-14  in which it acknowledges that there is still considerable scope for improvement in local government procurement. It supports the Committee’s view that the drive to make these improvements should be sector led. It sets out a number of steps that local authorities can take to make significant savings, and comments on each of the Committee's recommendations. (25 June 2014)

DCLG: Fire and rescue procurement aggregation and collaboration
This joint report analyses and evaluates existing procurement for a sample group of fire and rescue authorities in England. It identifies obstacles to collaborative procurement and sets out a high level plan of where the fire sector could make future savings and efficiencies. (13 March 2014)

Cabinet Office: Open Public Services 2014
Update on how public service reform has progressed since the 2013 report, and the Government's priorities for the next stage of its transformational vision of Open Public Services for all. The Open Public Services White Paper, published in 2011, set out the Government’s approach to reforming public services, based on the principles of choice, diversity, accountability, decentralisation and fair access. This progress report shows how far Government has come in reforming public services in line with these principles. (14 March 2014)

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Welsh Government: Report of the Welsh Co-operative and Mutuals Commission
This  report sets out 25 recommendations on creating a culture and environment in which cooperative ways of doing business are the norm, not the exception. It states that Wales needs to embrace the cooperative and mutual business model to achieve a real improvement in social and economic wellbeing. The report’s recommendations cover:

  • how to integrate co-operatives and mutuals into education;
  • government business advice and support;
  • investment finance;
  • planning; and
  • public procurement.

It also makes a number of recommendations on how the Welsh Government can encourage innovation amongst cooperative enterprises and how the cooperative and mutual movement can increase its voice, influence and capacity. (21 February 2014)

Cabinet Office: New models of construction procurement
Guidance on new models of construction procurement, based on best practice in public sector construction that will help both central and local government bodies to work with industry in a consistent and collaborative way, building long term stable partnerships between client and suppliers. The models provide modern, innovative methods and tools, allowing clients to lead change and drive positive results. (11 July 2014) 

DEFRA: A Plan for Public Procurement – Enabling a healthy future for our people, farmers and food producers
The Government has announced that from 2017, all of central government will commit to buying fresh, locally sourced, seasonal food, so that all food that can be bought locally will be bought locally. This plan sets out what standards the public sector and suppliers are encouraged to follow when buying food and catering services. DEFRA has also published the balanced scorecard that sets out what criteria the public sector is encouraged to consider when buying food and catering services. To support small businesses further, the Government will also put in place a new buying process from September, centred around an online portal. Companies which register on this portal and meet the requirements of the plan’s scorecard will automatically be alerted when any eligible contracts come up for tender. (21 July 2014)

DH: NHS Procurement Atlas of Variation
This online tool shows differences in the amount hospitals pay for everyday items including catheters, gloves and needles. Its aim is to help hospitals to compare prices and identify where they need to drive down costs. (22 July 2014) 

Cabinet Office: Mystery Shopper Progress Report – Trends from the first three years
The Mystery Shopper service helps anyone (but especially suppliers) who come across poor procurement practice in the public sector. This trends report provides an overview of the progress of the service in its first three years. It shows that 79% of all closed cases have resulted in a positive outcome. (1 July 2014)

NAO: Procuring new trains
This report scrutinises the DfT's decision to lead two large procurements of rolling stock (for Thameslink and Intercity Express) itself, despite not having led a major rolling stock procurement before, because of long-standing issues in the rail industry and the scale of the procurements. It highlights that the DfT was departing from its stated policy of leaving train procurements to the industry, which has created confusion in parts of the industry about the DfT’s role. The report points out that both procurements achieved levels of competition equivalent to or better than other rolling stock procurements since 2000. The DfT awarded both contracts more than two and a half years later than intended, largely because of pauses to the procurements and the challenge of securing finance for these projects during the financial crises. (9 July 2014)

Cabinet Office: Social Value Act – Information and resources
Online guide to the Public Services (Social Value) Act 2012 that includes sources of help and support for people who commission and provide public services and case studies that show best practice on implementing the Act. (19 August 2014)

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Legislation – UK

Small Business, Enterprise and Employment Bill, Articles 33 & 34
This Bill has been introduced into Parliament and received its 2nd Reading. It introduces potentially wide-ranging powers for the Minister of the Cabinet Office or Secretary of State to impose on a contracting authority “duties in respect of the exercise of its functions relating to procurement”. This includes the exercise of functions in preparation for entering into contracts and in the management of contracts. The provisions list the types of duties that the Regulations may impose. If enacted, the Bill would also put the Government’s Mystery Shopper scheme on a statutory footing. Public sector contracting authorities would have a new duty statutory duty to co-operate with investigations and to respond within 30 days to an order requesting information or documents to enable investigations to proceed efficiently. (16 July 2014)
For more information, see the Government's Public Sector Procurement fact sheet.

Procurement Reform (Scotland) Act 2014
This Act has received Royal Assent and comes into force on such days as the Scottish Ministers may by order appoint. The Act acts as a complement to the existing procurement rules. It introduces a degree of regulation for procurements of contracts above certain financial thresholds specified in the Act and below the EU financial thresholds. It also makes provision in relation to a wider range of procurements, most notably creating obligations concerning advertising, community benefits and procurement strategies. The Act establishes a national legislative framework for sustainable public procurement. It places a number of general duties on contracting authorities regarding their procurement activities and some specific measures aimed at promoting good, transparent and consistent practice in procurement. The Act also places some administrative requirements on larger spending contracting authorities to publish procurement strategies and annual reports, which will aid visibility of the purchasing activities of these bodies and how they will meet their procurement obligations. (17 June 2014)

Local Government (Transparency) (Descriptions of Information) (England) Order 2014 (SI 2014/2060)
This Order adds to the descriptions of information covered by the Local Government Transparency Code 2014, about which the Secretary of State may require local authorities to publish information more than once a year. The two additional descriptions are: 

  • information about any expenditure incurred by authorities; and 
  • information about any legally enforceable agreement entered into by authorities and any invitations to tender for such agreements. 

(24 June 2014)

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Legislation – EU

New EU Procurement Directives
The three new procurement Directives were published in the Official Journal of the European Union on 28 March 2014:

The new Public Sector and Utilities Directives replace the existing Public Sector and Utilities Directives (2004/18/EC and 2004/17/EC). They are intended to update and simplify the current rules and introduce greater flexibilities. They are also aimed at encouraging SME participation and supporting the use of environmental and social considerations in procurement.
The Concessions Directive will cover the procurement of both works concessions and service concessions. Service concessions were previously not regulated by the procurement Directives.
All three Directives came into effect on 17 April 2014 and Member States have 24 months to implement the new Directives into national legislation.

Bevan Brittan byte size procurement updates
We have published a series of 10 "byte size" legal updates, in which we look at the new Public Sector Directive  and deconstruct it into a topic based approach. For each topic we provide a brief explanation of the most relevant new and updated provisions in the new Directive. We also highlight some of the practical implications of those provisions. They cover:

  1. Pre-procurement issues 
  2. Statutory time limits under the Public Sector Directive 2014/24/EU  - Open and Restricted Procedures
  3. Statutory time limits under the Public Sector Directive 2014/24/EU Part 2 - Competitive Dialogue Procedure and Competitive Procedure with Negotiation
  4. Competitive procedures where negotiation is permitted
  5. Innovation partnership – a new EU concept and a new procedure
  6. Selection stage - Grounds for exclusion, selection criteria and the ESPD
  7. Framework agreements, Dynamic Purchasing Systems and e-catalogues
  8. Award criteria and life-cycle costing
  9. Permitted Changes to existing contracts and framework agreements
  10. Public-public cooperation or “in-house” exceptions.

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Cases - UK

Patersons of Greenoakhill v South Lanarkshire [2014] CSOH 21
Lifting of an automatic suspension
This case concerned a tendering procedure by South Lanarkshire Council for a waste contract divided into two lots, under the Public Contracts (Scotland) Regulations 2012. These regulations are very similar (and are identical in many respects) to the Public Contracts Regulations 2006.  Patersons - the incumbent tenderer and an unsuccessful tenderer in the procedure - challenged the award decision on a number of grounds. Under the Scottish regulations (reg.47(9)) the challenge led to an automatic prohibition on concluding the contract. The contracting authority applied to have the prohibition lifted.
The court decided that the prohibition should indeed be lifted. Key considerations in exercising the discretion to lift the suspension were, first, the case for breach of the regulations was weak; secondly, the importance of the public interest in obtaining the services without uncertainty and risk, including in light of the difficulties involved in concluding an interim arrangement; and, thirdly, the fact that damages were an adequate remedy for Patersons. (7 February 2014)

British Telecommunications plc v Common Services Agency [2014] CSOH 44
Disclosure of the methodology for evaluating bids
This case concerned a competitive dialogue procedure under the Public Contracts (Scotland) Regulations 2006, conducted by the Common Services Agency (CSA), for a telecommunications service for use by any public service organisation in Scotland (the Scottish Wide Area Network or “SWAN”). The Common Services Agency had decided to appoint Capita plc as the preferred bidder. This decision was challenged by one of the tenderers, BT (which was the service provider for the current network), and this gave rise to an automatic suspension (which the CSA did not seek to lift since the final hearing was expedited).
 At a first hearing, the court first considered several issues:
The main basis of challenge was that the approach adopted to scoring bids had not been disclosed in accordance with the requirements of the transparency principle. The court concluded that on the facts the authority had indeed failed to disclose this approach and that this violated the transparency principle. The court rejected, however, a challenge to the actual scores given and certain matters of judgment, considering that there were within the area of discretion of the purchaser.
The court rejected briefly (on the basis of well-established principles) arguments by the CSA that the proceedings were outside the time limit (in para.17) and that the communication with the authority prior to litigation failed to meet the requirements of reg.47(6) requiring advance notification of the intention to bring proceedings (a requirement that no longer applies in England, Wales and Northern Ireland under the Public Contracts Regulations 2006).
Having reached its conclusions on the matters above the court then, in a second hearing, considered the issue of remedies. In this respect, BT sought an order to set aside the decision appointing Capita, and to require the procurement process to be re-run (at least from the invitation to tender stage). On this, the court concluded that it would exercise its discretion to decline to set aside the decision, and that BT was therefore limited to a remedy in damages. The court emphasised, in particular, the absence of a clear impact of the specific breach on the award decisions and the possibility of a damages remedy, as well as the specific consequences to the public interest of any delay and the difficulty of conducting a re-run fairly given the information already disclosed. (7 February 2014)

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Mansfield DC v Secretary of State for Communities and Local Government [2014] EWHC 2167 (Admin) (Admin Ct)
Compliance with EU grant funding conditions
The Council received grant funding from the European Reconstruction and Development Fund (ERDF) in respect of two contracts awarded by the Council relating to its town centre improvement plan. The overall value of the two contracts was a little over £900,000 so they fell well below the threshold of the Public Contracts Regulations 2006. The ERDF funding conditions meant that they were subject to EU procurement requirements as well as local and national guidance and rules and that there was an entitlement to claw back funding in the event of non-compliance. The grant funding was administered by the local Regional Development Agency which provided guidance, including guidance on sub-threshold procurements.
The Council did not advertise the contracts on its website or in the press; instead, it selected a pool of contractors from the Government's Constructionline website. The Secretary of State decided to claw back 25% of the grant payments. The SoS contended that the Council had breached EU law in the award of the two contracts by failing to advertise publicly the proposed contracts and so had breached the terms of the grant. He also argued that the amount of the claw back (25% of the total grant) was proportionate.
The Council applied to quash the SoS's decision. The judge dismissed the Council's application. The judge found that there was a breach of funding conditions as there was no open advertising of the proposed contracts in the way contemplated by the local guidance. That breach triggered the clawback provisions. The judge commented that in the light of those findings it was probably immaterial whether there had also been a breach of EU law. He did, however, go on to consider the arguments on this issue. He noted that it would not be possible to "waive" a requirement imposed by EU law. He was of the view that the failure to consider whether there was any realistic prospect of cross-border interest (with the need for appropriate advertising if it existed) represented a breach of the EU procurement requirements and an ex post facto justification was not sufficient to remedy that omission. The judge also confirmed that the amount of the clawback was appropriate and there was little scope for departing from the guidance which imposed this level of penalty.
The judge noted that it was unfortunate that the claw back should have become necessary since the Council had never had any intention to evade its responsibilities under the procurement processes. There was a good and open working relationship between the Council's team and the team from the RDA. However, the EU requirements were demanding and the onus was on the grant recipient to get its own processes right. The ultimate responsibility for complying with the procurement obligations lay on the grant recipient. (2 July 2014)

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DWF LLP v Secretary of State for Business Innovation & Skills (Acting on behalf of The Insolvency Service) [2014] EWCA Civ 900 (CA)
Amendments to Particulars of Claim
This case demonstrates the benefits of ensuring a Claim Form is widely pleaded when bringing a challenge. It is also relevant to how to managing a claim to include details which emerge through disclosure over time.  In this case the court considered whether the level of detail in the Claim Form was sufficiently widely drafted to cover subsequent amendments to Particulars of Claim, or whether the amended Particulars amounted to a new cause of action (which would have been time-barred once the application to amend came to be heard).  
DWF, a firm of solicitors, had tendered for a significant contract to provide legal services in Scotland, England and Wales. DWF were unsuccessful overall but for the England and Wales contracts were placed just 1% behind the next placed firm, Shepherd and Wedderburn, to whom a contract was intended to be awarded.  DWF learned that despite having directly knowledge of working in England, but not in Scotland, DWF had scored better for Scotland than for England and Wales.  So far as DWF was aware Shepherd and Wedderburn had limited experience in England and Wales. DWF called the scoring result the "Scottish anomaly". 
DWF issued proceedings and in the Claim Form referred to breach of reg.4(3) of the Public Contracts Regulations 2006 and/or general principles of EU law and went on to refer to manifest errors and a failure to treat the claimant equally.  Particulars of Claim were served pleading breach of, among other things, the EU principle of transparency. Subsequently, the Insolvency Service provided disclosure relating to the fact that DWF was marked down following a presentation. DWF applied to amend its Particulars to plead, among other things, a failure to follow objectively and transparently published criteria.  At first instance HHJ Raynor QC refused permission to amend the Particulars, finding that the proposed amendments amounted to a new claim (which would be time-barred).  The judge held that whilst the Claim Form referred generally to reg.4(3), it did not allege a breach of the obligation to act in a transparent way.  A breach of the obligation to treat operators equally was alleged but was held to be a distinct obligation to the obligation to act transparently.  The Court of Appeal disagreed, and held that the direct reference to reg.4(3) covered both transparency and non-discrimination, and that the principles of transparency and equal treatment "necessarily overlap and are intertwined".  The amendments the claimant sought were not a new cause of action, but instead just moved from a case based on inference from the Scottish anomaly to one based on explanation for it. The appeal in respect of the amendment was therefore allowed.
The Court of Appeal went on to deal with the issue of whether the automatic suspension ought to be maintained in favour of DWF.  Whilst many cases recently have resulted in the suspension being lifted, here the Court of Appeal declined to do so, holding that damages would not be an adequate remedy:  the court would be involved in a "host of speculative questions" and it would be impossible fairly to quantify the loss to the firm of general damage to the insolvency department and loss of reputation. (8 July 2014)

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Wealden Leisure Ltd v Mid Sussex DC (HC14F01304) (16 July 2014) (Unreported, Ch D)
Early specific disclosure

This case cautions against too intransigent an approach when dealing with requests for specific disclosure in a procurement challenge.  The High Court has granted WL's application for early specific disclosure arising from its on-going EU procurement claim against the Council, in which it was alleged that the Council's recent £120m leisure services concession procurement breached EU procurement law. WL sought early specific disclosure of the final tenders received by the Council, in order to allow it to properly plead its case that the preferred bid was abnormally low. WL had been informed that the preferred bid was approximately 20% cheaper than its own bid.  WL had also learned that the Council had allowed the preferred bidder to amend its price after final tender.  The Council refused to provide the documents, even though WL had proposed that disclosure would be restricted to a confidentiality ring limited to lawyers and an independent expert.
Applying the well-known principles regarding early specific disclosure in EU procurement litigation established in cases such as Alstom [2010] EWHC B32 and Roche [2013] EWHC 933, the High Court ordered that the Council must disclose the entirety of the final tenders received. The court invited the Council also to disclose the evaluation documents evidencing what, if any, investigation it had conducted regarding the sustainability of the preferred bid. Following a short adjournment, the Council acceded to this invitation. (16 July 2014) (based on summary published by 11KBW)

Draper v Lincolnshire CC [2014] EWHC 2388 (Admin) (Admin Ct)
Community Expression of Interest
D applied for judicial review of the Council's decision to reduce the provision of statutory library services. The Council decided that it had to reduce the cost of its library service by £2m, and it proposed to do this by reducing the number of its static libraries from 44 to 15. It issued a consultation on its proposals to implement a new model of statutory library provision in the county and to offer certain communities a range of community library provision. The consultation stated that the decision to reduce the statutory service to 15 libraries was not alterable, but only the criteria for designating libraries could be. It also indicated that it was open to suggestions including alternative ways of achieving the savings. G, a charitable organisation that ran libraries in London, submitted an Expression of Interest in which it proposed to take over the provision of the whole of the county's library services, and it stated that it could do so while retaining what existed and achieving a saving of £1.8m.
The Council rejected G's proposals on the basis that it provided limited detail on how this would work in practice and that pursuit of this option would require a Europe-wide procurement process to be undertaken which would take at least six months to implement with no guarantee that the savings sought would be achieved and a comprehensive and efficient library service delivered. D contended that the proposals which the Council adopted did not meet the statutory requirements set out in s.7 of the Public Libraries and Museums Act 1964, that the consultation was flawed and there were failures to comply with the Public Sector Equality Duty and to consider in a lawful manner G's proposal to take over the provision of library services and avoid the cuts.
The court held, granting D's application, that the consultation exercise was flawed, as a central element in relation to the statutory service, namely to reduce it to 15 libraries, could not be changed. The Council could not defend the consultation exercise on the basis that the reduction of the statutory service was not fixed at only 15 static libraries to be provided but general proposals could be entertained and at the same time reject the expression of interest from G on the grounds that it did not fall within the scope of the consultation. G's proposals were plainly an Expression of Interest within s.81 of the Localism Act 2011, which the Council had a duty to consider; if accepted, then the Public Contracts Regulations 2006 applied. G's proposals constituted Part B services which had a less demanding procurement exercise than Part A services. It was ironic that the Council had rejected G's plans as it considered that procurement would lead to unacceptable delay, while this claim had produced a delay of over six months and in any event the new arrangements were not likely to be in place until 2015. The Council had complied with its Public Sector Equality Duty. The manner in which G's proposals were dealt with coupled with the view that they did not fall within the consultation exercise meant that the decision must be quashed and the Council had to reconsider it. (17 July 2014)

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Healthcare at Home Ltd v Common Services Agency [2014] UKSC 49 (Sup Ct)
The Supreme Court held that when the court referred to what a "reasonably well-informed and normally diligent" (RWIND) tenderer would understand from the criteria in an invitation to tender, it was applying a hypothetical construct. Evidence from tenderers themselves as to their understanding of the invitation to tender was irrelevant in establishing what the RWIND tenderer would have thought. (30 July 2014)

Liconic AG v UK Biocentre Ltd (Unreported, TCC)
Criteria for being a contracting authority

The defendant, B, was a wholly owned subsidiary of UK Biobank, a major charitable research project aimed at improving the prevention, diagnosis and treatment of serious and life-threatening illnesses, which was a contracting authority under the Public Contracts Regulations 2006. B was established to use Biobank's skills and knowledge in sample storage and management. The claimant, L, had unsuccessfully tendered to carry out work for B. L issued a claim for relief under the public procurement regime, contending that there had been serious irregularities in the tender process and that B had breached the EU procurement principles. B applied for the striking out of, or summary judgment on, L's claim on the basis that it was not a contracting authority. The issues were whether B met the criteria in Regulation 3(1)(w) of (i) being established for the purpose of meeting the need in the general interest; (ii) not having an industrial or commercial character. 
The court held, refusing the application, that there was a low threshold when considering whether a company had been established for the purpose of meeting the need in the general interest. There was witness evidence that B did not have an arm's length commercial relationship with Biobank; its business plan provided for any surplus profit to be gift-aided to Biobank; there had been a policy change to stop undertaking commercial work.  The pleadings disclosed an arguable case that B met the criteria for being a contracting authority. There were issues of fact and European jurisprudence which meant that the case should proceed to trial and was not suitable for summary disposal.  (8 August 2014)

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Cases – EU

Technische Universität Hamburg-Harburg, Hochschul-Informations-System GmbH v Datenlotsen Informationssysteme GmbH [2014] EUECJ C-15/13 (ECJ)
Availability of the Teckal (in-house) exemption to “horizontal” transactions
In this case the CJEU considered whether the Teckal (in-house) exemption applied to the award of a contract between bodies which were ultimately controlled by the same public body. The University of Hamburg awarded a contract for the supply of an information management system to HIS, a not-for-profit company. The award was made direct to HIS without following an EU compliant competitive process. The University was an education establishment of the Federal State and the City of Hamburg. HIS was owned by the Federal State and a number of local authorities, including the City of Hamburg. HIS was established to assist educational institutions by the provision of information management systems.
It was accepted that the University did not control HIS but it was argued that the Teckal exemption applied because both the University and HIS were ultimately controlled by the same authority, the City of Hamburg. On the facts the CJEU found that the City of Hamburg did not have sufficient control over the University, the latter having considerable autonomy over the conduct of its affairs, and so it did not go on to consider the specific question of the permissibility of “horizontal” Teckal arrangements. However, the CJEU did comment that the Teckal exemption must be interpreted strictly. It also referred to the basic principles underlying the exemption being to permit a contracting authority to perform its public interest tasks using it own administrative, technical and other resources  which may include a body which is subject to control which is similar to that exercised over its own departments. (8 May 2014)
Note: there are provisions in the new Directive which codify the Teckal exemption. These provisions permit, in certain circumstances, the award of contracts between two bodies controlled by the same contracting authority.

Idrodinamica Spurgo Velox [2014] EUECJ C-161/13
Trigger for time limit for making a legal challenge
This case is relevant to the discussion which sometimes arises in the context of major projects as to when the contract award decision is taken and so when the standstill letter should be sent. Is the appropriate date for the standstill letter when the preferred bidder is appointed or is it when the final award decision is made, just before final signature of the contract? In practice, a significant period of time may elapse between the two decisions. Does a standstill letter sent at preferred bidder stage provide protection from further claims arising after the standstill period has expired?
In this case the CJEU considered the question of when the time limit for making a legal challenge is triggered. Under Italian law challengers have 30 days from the date of receipt of the communication of the award decision to make a claim. Acquedotto Pugliese (AP), the water and sewerage company in the Puglia region of Italy, launched an open tendering procedure for the award of a four year contract for the cleaning and disinfection of the sewerage system as well as construction and maintenance work on the sewerage and water infrastructure. In July 2011 it appointed consortium G as the preferred tenderer and it communicated its award decision to the participating tenderers. There was a considerable delay before the contract between AP and consortium G was entered into and it was finally concluded in April 2012. In the meantime one of the members of consortium G had withdrawn from the consortium. AP accepted this change in March 2012 and the contract was entered into with consortium G in its new, reduced, composition.
Idrodinamica was the third placed bidder. It commenced legal proceedings seeking annulment of the decision by AP to authorise the change in consortium and of the decisions to conclude and award the contract with consortium G. Idrodinamica argued (1) that the acceptance of the reconstituted consortium G was unlawful; and (2) that the second placed bidder consortium should have been excluded at the start of the process on the grounds that one of its member had made a false declaration concerning a criminal offence. It was argued that Idrodinamica's claim was out of time as it had not been brought within 30 days following the communication of the contract award decision.
The CJEU held that the 30 day period for bringing an action against an award decision laid down by national legislation must start to run again when new grounds for an action have arisen after communication of the original award decision. In this case the change in composition of the consortium which occurred after the communication of the original award decision triggered a new 30 day period for bringing an action.  The CJEU held, however, that the complaint about the second placed bidder was made too late as that information was available at a much earlier stage in the tender process. (8 May 2014)

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Impresa Pizzarotti v Comune di Bari [2014] EUECJ C-213/13
Is a contract for a lease a works contract?
This decision is of interest to authorities considering whether development arrangements are to be classified as public works contracts.
The case arose in the context of the award of a contract for a project for the development of a new judicial complex to house all of the courts in the Municipality of Bari. The award was made without conducting an EU compliant procurement process. The contract awarded was for facilities which were not yet built. The contracting authorities classified the arrangements as a lease, which they argued was not subject to the EU procurement rules as it fell within the exception applying to land related transactions. The CJEU rejected this argument. It confirmed that the deciding factor is the substance of the transaction not the name which it is given by the contracting authorities. In this case the arrangements satisfied the conditions set out by the CJEU in its earlier decision in Müller (C-451/10). The authorities had clearly specified their requirements and had a decisive influence over the works. The fact that the payments did not guarantee to cover the full costs of the construction were also not relevant. (10 July 2014)

Consorzio Stabile Libor Lavori Pubblici [2014] EUECJ C-358/12
Exclusion on the ground of failure to make social security contributions
In this case the CJEU considered Italian legislation concerning non-payment of social security contributions. The relevant Italian legislation specifies what constitutes a "serious infringement" leading to exclusion. The serious infringement is defined by reference to the percentage of contributions unpaid. This case concerned a contract under the relevant EU threshold and so the CJEU considered Treaty principles and general principles including the principle of proportionality. The CJEU held that the Italian legislation was not in breach of the Treaty rules and general principles. (10 July 2014)

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News

Cabinet Office: New Crown Representatives to help government get value for money
The Government has appointed six experienced business leaders to join the existing group of 15 Crown Representatives to look at wasteful contracts and make sure that the Government is getting the best possible value for taxpayers. Crown Representatives sit within the new Crown Commercial Service. They help the Government to act as a ‘single customer’. They co-ordinate across departments to ensure a single and strategic view of the Government’s needs is communicated to the market, identify areas for cost savings, and act as a point of focus for cross-cutting supplier-related issues. Additionally they enable ideas or suggestions raised by the market or individual suppliers to be shared amongst Government’s commercial community.
Crown Representatives work with departments’ existing commercial teams. Often they will step in to resolve disputes or lead on negotiations where a government-wide deal is being sought. They manage either a small pool of government’s key strategic suppliers, or represent a particular sector of the market. There are around 30 suppliers who hold a wide portfolio of significant contracts across a number of departments managed in this way, drawn predominantly from the ICT, business process outsourcing, banking services, and facilities management sectors. (4 March 2014)

Home Office: Better Police procurement
The National Audit Office, the Public Accounts Committee, and the Home Affairs Select Committee have all strongly recommended that the Home Office work more closely with the police to achieve value for money and transparency of procurement spend. A recent independent review of the National Police Procurement Hub (NPPH) sponsored by the Home Office also recommended bringing together separate strands of work on police procurement into a comprehensive programme of value for money initiatives to drive procurement savings and efficiencies. A programme has been established to: 

  • improve the evidence for collaborative procurement 
  • improve management information for PCCs and police on procurement spend 
  • support the implementation of the NPPH - an electronic marketplace, similar in style to Amazon, which will enable police forces to purchase a wide range of goods and services 
  • extend procurement collaboration to the wider law enforcement community where there are common requirements and potential benefits of scale. UK Border Force and Immigration Enforcement will be included and the National Crime Agency, Police Scotland and Police Service of Northern Ireland have also been invited to participate. 

The programme is supported by a wide range of partners in policing who are involved in taking it forward. (26 June 2014)

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Welsh Government: New guidance will ensure more community benefits from construction contracts
The Welsh Government has published updated guidance on the Community Benefits policy, which builds social clauses into construction contracts to ensure Welsh businesses, individuals and communities benefit from public sector contracts. The new guidance reflects emerging practice, current policy objectives and provides more detailed advice to support implementation. (23 July 2014)

Cabinet Office: Review of Tax and Procurement Policy: announces that HMRC and the Cabinet Office have now undertaken their review of the Tax and Procurement Policy that came into effect from 1 April 2013. Under the policy, businesses seeking a government contract of £5m or more must self-certify that they have not submitted an incorrect tax return owing to engaging in tax evasion or tax avoidance. The review explored whether the policy is having the intended effect of encouraging tax compliance from government suppliers. Of the 65 bids applying for central government contracts of £5m or more, one potential bidder failed the overriding mandatory procurement test. This failure, however, was due to the bidder being unable to provide and deliver services that would fulfil the procurement department’s contract, rather than an issue of whether or not they were tax compliant. The remaining 64 potential bidders declared that they had been tax compliant. The review found that early indications are that those wishing to bid for relevant contracts are very mindful of the need to be tax compliant. (26 August 2014)

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Bevan Brittan’s Procurement Telephone Advice Service

Our Procurement Telephone Advice Service allows local authority and public sector clients telephone access to specialist legal support on all procurement related issues. This service was initially made available to some of the firm’s existing clients and is now being more widely launched to all public bodies.
Our Procurement Telephone Advice Service aims to provide you with an easy and accessible single point of contact for practical and essential procurement advice. You may make use of this service between 9am – 6pm Monday to Friday (excluding bank holidays) in a way which best suit your needs as and when you require our support, whether it is to address a procurement query or to clarify a point of law.
We have two service packages:

  • Option 1 Pay as You Go: designed to offer you essential procurement advice as and when you need it whilst giving you full control over your legal spend.
  • Option 2 Annual retainer: provides your business with the procurement advice and support you require at a fixed annual cost over a 12 month period.

For more information, or to sign up to one of our service packages please do not hesitate to email Nina Beasley.

The Crown Commercial Services 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 Lot 7: General Litigation and Legal Support Services and Lot 8: Major or Complex Projects.

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