­The Road To Reform Section 3

Introduction

On 6 December 2021 the government published its response to the Green Paper on proposed reform to public procurement. A link to the response can be found here.

This is the third in a series of articles which the procurement law team at Bevan Brittan LLP are producing on what the proposed reforms will mean for the public sector and suppliers. Each article will give practical commentary on the different themes within the proposed reforms.

Here is a menu of what we will be covering, with links to each Part which will become live once each Part is published:

• Section 1 - An overview
• Section 2 - Principles and objectives, the National Procurement Policy Statement and the PRU
• Section 3 - Single set of Regulations with exemptions, interface with health procurement, light touch regime and concessions
• Section 4 - New procedures, including for urgent procurements, emphasis on pre-market engagement and planning
• Section 5 - Evaluation (MAT not MEAT), links to NPPS and other legislation
• Section 6 - Exclusion: grounds for exclusion, debarment register, past performance and supplier registration system
• Section 7 - Purchasing tools – new DPS+, new rules for open and closed frameworks
• Section 8 - Transparency – notices, debriefing, what has to be published and Open Contracting Data Standard
• Section 9 - Remedies: reforms to Court process, no independent review up front by the authority, disclosure, new test for automatic suspension, no cap on damages, no tribunal and alternative route via PRU
• Section 10 - Contract Management: prompt payment, amendments to contracts after signature

In the third of our Road to Reform series of articles covering the Government’s response to consultation on the proposed reforms to the public procurement regime we look at (1) the government’s proposal to create a single uniform set of regulations and the exemptions which will apply (2) how the procurement reforms will interface with health procurement (3) the light touch regime and (4) concessions.

A single, uniform framework (with exemptions)

At present, there are four sets of regulations that govern procurements in the UK. Under the new regime, the government intends to combine these four sets of regulations into a simpler legislative framework consisting of just one consolidated set of rules.

The Government’s desire to simplify and streamline procurement regulation, arguably in order to give the impression of less regulation overall, has been a key theme of the proposed reforms from the outset. There is of course much to be lauded in simplification, but there is also much in the current regulations that reflects the specific complexities of different sectors that will need to be carried over into the new regime. For example, defence procurement has to be conducted factoring in issues of national security and confidentiality far more often than other sectors, and utilities benefit from a number of exemptions and a specific process to streamline the qualification of bidders.

The Government has confirmed following consultation that some of the specific flexibilities in the UCR and DSPCR should be maintained and therefore that a number of exceptions to the uniform framework and specific features for these sectors will remain, which we set out below. We will therefore have one single regulatory regime, but a number of sector-specific exemptions and particular features that will add to the complexity of the legislation overall.

If none of the exemptions apply, the new regime will apply in full to utilities procuring works, services or supplies associated with a prescribed relevant utility activity where the contract is above the relevant threshold, and to any contracting authority purchasing military equipment and works for military purposes above the relevant threshold.

Utilities exemptions and specific features

Exemptions

• Contracts procured by utilities for the prescribed relevant activities that are directly exposed to competition will still be exempt from procurement legislation. The power to determine that an activity is directly exposed to competition will be moved to the Minister of the Cabinet Office (where previously this power sat with the European Commission.
• There will be exemptions for the following contracts on the basis that competition in those markets effectively provides a safeguard for consumers:
  • contracts awarded for the purpose of resale or lease to third parties;
  • contracts and design contests awarded or organised for purposes other than the pursuit of a covered activity or for the pursuit of such an activity outside the UK;
  • contracts awarded by certain utilities for the purchase of water and for the supply of energy or of fuels for the production of energy;
  • contracts awarded to an affiliated undertaking; and
  • contracts awarded to a joint venture or to a utility forming part of a joint venture.

Specific features

• The new procurement legislation will maintain the effect of qualification systems as a separate tool for utilities under similar terms to the UCRs, which enable participation in procurements to be limited to candidates that are registered on a qualification system that has previously been advertised.
• The government proposes to allow utilities to retain the ability to make contract modifications for additional goods, works or services by the original contractor, without any financial cap, if the utility cannot change the supplier under the same conditions as Regulation 88(1)(b) in the UCRs.
• There will be scope for closed framework agreements to be longer than the maximum 4-year term to allow utilities to cater for their business planning periods that include requirements from their regulators.
• The PRU (see Article 2) will not oversee procurements run by utilities that are acting under special or exclusive rights, who will continue to be overseen by existing regulatory bodies.

Defence exemptions and specific features

Exemptions

• The new regime will maintain the full suite of national security exemptions for sensitive defence, security, and civil procurement.
• Contracting authorities will be able to exempt procurements from the requirements of the regime on national security grounds.

Specific features

• The Government is currently considering defence and security sector specific features in the new regime to give greater flexibility around contract amendments and limited tendering. These include options in the event of a single supplier remaining in a competition, addressing gaps in capability, addressing issues around urgency and operational demands, and enabling better exploitation of new and emerging technologies during the life of a contract.

Concessions

Under the current regime, concessions contracts benefit from lighter touch regulation. A concession is a contract where some or all of the income comes from third party sources – such as payments by members of the public using a café, sports centre, public toilets or toll bridge – and the provider takes on the risk associated with the operation of the concession.

Concession contracts will be brought within the scope of the new consolidated regime, and therefore subject to the full extent of the regulations where they are above threshold, but particular features specific to concession contracts will remain.

• The Government intends to include specific provisions covering:
  • the definition of a concession,
  • how a concession contract is to be valued; and
  • the duration of a concession contract.
• The Government also proposes retaining the higher financial threshold for concession contracts, the greater discretion with regard to the method of calculating the estimated value of a concession contract, and the express exemption for lottery operating services.
• The consultation response also states that the Government proposes to retain some “other specific exemptions which exist under the current regime”. It is not yet clear which other exemptions will be retained.

Procurement of healthcare services

One of the biggest changes arising out of forthcoming reform to health legislation is that the procurement of healthcare services will be carved out of the new procurement regime. The Government sees the current requirement to advertise all contracts for healthcare services above the Light Regime threshold as adding unnecessary bureaucracy and hindering integration of care services and the development of stable collaborations between local authorities and the NHS (both in terms of joint commissioning and integrated provision across health, public health and social care). Therefore, the procurement of healthcare services (and “other goods and services that are procured with those healthcare services”) are to be carved out of the PCR 2015 and will instead be regulated by the new Provider Selection Regime pursuant to the new Health and Care Act (currently passing through Parliament). The government have not provided a specific date for when the Provider Selection Regime will come into force but it is expected to be after the introduction of the new Health and Care Act (anticipated in July 2022) and before the introduction of the new procurement regime.

More information on the anticipated changes being implemented through the Provider Selection Regime (PSR) can be found in our articles here and here. There is much still to be developed about how the PSR will work, and we will be interested to see whether it achieves the objective of reducing the burden of procurement given the requirements imposed to encourage robust and lawful decision-making and the scrutiny likely to be applied by providers to those decisions.

Light Touch Regime

Despite the fact that healthcare services are being removed from procurement regulation, the Light Touch Regime will remain. Respondents to the consultation commented on the need for special consideration for procurements where there is an element of service user choice (for example under the Care Act 2014) and expressed concerns about the increased administrative burden of bringing a range of existing Light Touch contracts within the fully regulated regime, in particular given the important participation of SMEs and VCSEs in these contracts. These comments appear to have been taken on board with the Government confirming that certain services will be permitted to be treated differently, in a manner similar to the former Light Touch Regime. The scope of the changes remains to be seen, but a summary of the current position is set out below.

There is a lot of grey space in what the replacement for the Light Touch Regime will look like and what services will be covered. We will need to watch this space to see how commissioners of and bidders for non-healthcare light regime services will be affected.

 

If you would like to discuss this topic in more detail, please contact Fran Mussellwhite, Partner, or Victoria Croshaw, Solicitor.