Procurement Update - August 2010

This update contains brief details of recent news, legislation, cases and other developments relevant to those involved in procurement work that have been issued in the past four moonths.

20/08/2010

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Emily Heard

Partner

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:

Bevan Brittan news

Procurement update seminar - Birmingham 
We will running a Procurement Update session in our Birmingham office on Tuesday 28 September from 1.30 - 4 pm. If you are interested in attending this, please contact our Events team.

Public Procurement Research Group appointment 
Bevan Brittan consultant Susie Smith has been appointed a Special Professor in the School of Law at the University of Nottingham. This appointment is in recognition of her contribution to the field of public procurement law.

Bevan Brittan LLP has produced an Authority Alert: Capital investment cuts – the legal options that considers the legal issues that may arise from wider cuts to capital schemes, the impact of requirements or decisions to suspend, re-scope or terminate any such projects and actions that authorities should consider taking.

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OGC publications

A guide to buying through framework agreements
This guide provides an overview of the considerations for using framework agreements and how to buy from them. It focuses primarily on the process of calling off from an already established multi-user framework agreement, but many of the principles apply equally to single-user framework agreements. The guide has been written with the assumption that, unless otherwise stated, the full scope of the EU Procurement Rules apply. (30 July 2010)

PPN 12/10 Development agreements and Section 106 planning agreements
Updates the 2009 guidance note on the applicability of the public procurement rules to “development agreements” between local authorities or other public bodies and developers. It sets out some of the circumstances which may reduce or increase the likelihood that a development agreement will be subject to the public procurement rules. (30 June 2010)

PPN 13/10 New requirements for greater transparency in public procurement
This action note advises on implementing the Prime Minister's letter of 29 May 2010, which set out specific commitments on transparency in procurement and contracting: 

  • All new central government ICT contracts to be published online from July 2010. 
  • All new central government tender documents for contracts over £10,000 to be published on a single website from September 2010, with this information to be made available to the public free of charge.
  • All new central government contracts to be published in full from January 2011.

(30 June 2010)

PPN 14/10 How to indicate the use of eAuctions on contract notices
Provides clarification for contracting authorities on the appropriate wording to be used in contract notices to indicate that an electronic auction (eAuction) may be used. (12 July 2010)

PPN 15/10 Use of framework agreements set up by non-contracting authorities
Some organisations that are not contracting authorities have either established or are attempting to establish arrangements described as framework agreements for use by contracting authorities across the public sector. This action note outlines the issues and risks for contracting authorities considering the use of such agreements. The OGC states that these agreements should not be used by contracting authorities. (12 July 2010)

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Policy and guidance

IDeA: Tackling worklessness - Targeting jobs and training through the procurement process
Guidance on how to use procurement to generate jobs and training opportunities, while handling potentially conflicting objectives such as cost reductions, quality and timely delivery. (16 April 2010)

Welsh Assembly Government: Community benefits - Delivering maximum value for the Welsh pound
Guidance on the different approaches that procurers can take to deliver added value by the inclusion of community benefits in their procurement activities. It shows how community benefits can be legitimately promoted within the policy and legal framework governing public procurement, with case studies and examples. There is also a flow chart. (26 April 2010)

National Audit Office / Audit Commission: A review of collaborative procurement across the public sector
This review draws on Audit Commission research that was carried out during Autumn 2009. It finds that although collaborative procurement has the potential to improve value for money, the public sector procurement landscape is fragmented, with no overall governance. Consequently, public bodies are incurring unnecessary administration costs by duplicating procurement activity, and they are paying a wide range of prices for the same commodities, even within existing collaborative arrangements. It recommends that, given the size of public sector procurement spend and the potential to significantly improve value for money, public bodies should work together much more effectively than they currently do; there should also be a clear framework to coordinate public sector procurement activity. (21 May 2010)

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DH: Equity and excellence - liberating the NHS: Health White Paper
A number of consultation papers have been issued that seek views on the reorganisation proposals in the White Paper. All the consultations close on 11 October 2010:

  • Commissioning for patients: gives more detail on proposed arrangements and seeks views on a number of areas including: 
    • how the NHS Commissioning Board and GP consortia can best work together to make effective and efficient commissioning decisions; and
    • how the NHS Commissioning Board can best support consortia and ensure they achieve improvements in outcomes within NHS resources.  
  • Regulating healthcare providers: seeks views on proposals to free up FTs to innovate for improved outcomes and services, and to give Monitor new powers to defend the interests of patients and the public, through regulating prices and protecting choice and competition. Monitor will become the economic regulator for the NHS, sitting alongside the Care Quality Commission which will continue to regulate quality.

The DH's draft Structural Reform Plan sets out the timetable for the reforms over the next four years. Sir David Nicholson has written to the CEOs of all stakeholder bodies (including local authorities) setting out his plans to lead the implementation of the Health White Paper. His letter provides a framework within which SHAs can lead this process regionally, and sets out some initial actions that commissioners and providers need to take as part of their state of readiness for 2012. (12 July 2010) 

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LG Group: Leading the way by working together
This annual report from the nine RIEPs shows that local government is ready to take more responsibility for its own improvement by working together at local, regional and national levels. It celebrates the achievements of the sector with a selection of recent case studies. (20 July 2010)

National Audit Office: Reducing the cost of procuring Fire and Recue service vehicles and specialist equipment
This report critically examines Firebuy, a specialist body established by DCLG to support procurement of kit by Fire and Rescue Services at national level. The report finds that Firebuy has cost nearly twice as much to set up and run as the total savings it claims to have delivered. It recommends that DCLG quickly assess whether to continue with a nationally directed central procurement body and, if so, to change the way Firebuy operates, or to transfer its operations to another professional buying body or a Fire and Rescue Service. (23 July 2010)

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Principles and Rules for Cooperation and Competition
This document sets out revised Principles and Rules for Cooperation and Competition (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. The PRCC have been reviewed to ensure they are consistent with the Health White Paper: Equity and Excellence: Liberating the NHS which set out the Government’s strategy for the NHS including the commitment that, wherever relevant, patients should have a choice of any willing provider that meets NHS standards, within NHS prices. It should be read in that context and also in conjunction with the Procurement Guide for Commissioners of NHS-Funded Services (see below) and the National Standard Contracts guidance. The original PRCC of December 2007 will continue to remain in force until October 2010. The new PRCC, except Principle 7, will supersede them and come into force from October 2010 onwards. (30 July 2010)
Monitor is now carrying out a consultation on the adoption of the new version of the PRCC for NHS foundation trusts. The consultation will close on 27 August 2010.

Procurement guide for commissioners of NHS-funded services
This Guide supersedes the PCT Procurement Guide published in March 2010 and the elements of Commercial Skills of the NHS concerned with the procurement of clinical services. The Guide has been reviewed to ensure it is consistent with the Health White Paper: Equity and Excellence: Liberating the NHS which set out the Government's strategy for the NHS including the commitment that, wherever relevant, patients should have a choice of any willing provider that meets NHS standards, within NHS prices. The guidance sets out expectations of commissioners on the use of procurement to improve services for patients and 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. It should be read in that context and in conjunction with the Principles and Rules for Cooperation and Competition (see above) and the National Standard Contracts guidance. (30 July 2010)

European Commission: Consultation on an EU initiative on concessions
Seeks views on how the present rules on concessions work and suggestions for improvements.  The responses will inform the EC’s initiative on improving the current legal framework on concessions. The consultation closes on 30 September 2010. (5 August 2010)

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Legislation

Bribery Act 2010
This Act has received Royal Assent and comes into force on a day (or days) to be appointed. The Act provides a modern and comprehensive scheme of bribery offences. It: 

  • replaces old and fragmented legislation with a modern and consolidated bribery law, based on the recommendations of the Law Commission; 
  • creates offences of offering, promising or giving of a bribe and requesting, agreeing to receive or accepting of a bribe either in the UK or abroad, in the public or private sectors; 
  • creates a discrete offence of bribery of a foreign public official in order to obtain or retain business; and  
  • creates a new offence in relation to commercial organisations which fail to prevent a bribe being paid by those who perform services for or on behalf of the organisation. It will, however, be a defence if an organisation has adequate procedures in place to prevent bribery.

It repeals the whole of the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906 and the Prevention of Corruption Act 1916. (8 April 2010)

Equality Act 2010
This Act has received Royal Assent and comes into force on a day (or days) to be appointed. It makes the law easier to understand and implement by simplifying 116 pieces of equality legislation into a single Act for individuals, public authorities and private organisations. The measures include giving people the right not to be treated less favourably by public authorities because of their age, religion or belief, sexual orientation, or transgender status, as well as their disability, gender, or race which were already covered. It also extends anti-age discrimination rules to include goods, facilities and services. (8 April 2010)

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Cases - UK

Croft House Care Ltd v Durham CC [2010] EWHC 909 (TCC) (QBD TCC)
This case concerned the disclosure and inspection of documents in proceedings which arose out of the council's procurement process for the award of domestic care services contracts. CHC alleged that the local authority had breached the Public Contracts Regulations 2006 and EU law principles and/or that there had been a breach of an implied or tender contract. They sought to set aside the award and to re-run the tender procedure. The council sought directions concerning the disclosure and inspection of documents; in particular, it claimed that two categories of document were confidential: commercially sensitive material provided by tenderers concerning the method statement and statement of technical capacity; and documents which contained information which would prejudice its ability to re-run the procurement were that to be necessary. CHC submitted that the council had an obligation under the CPR r.31.6 to disclose such documents and the protection of business secrets had to be balanced against the right to a fair trial; and that the difficulties in re-running the procurement were not a valid reason for failure to disclose relevant documents and there was no justification in law or practice for refusing disclosure on that basis.
The court held that the fact that documents might contain confidential information was not, in itself, a reason for not providing such documents on disclosure and inspection. The court had to balance the right to confidentiality with the need for the claims to be disposed of fairly. The ultimate test was whether disclosure and inspection was necessary for disposing fairly of the proceedings. The council's interests in having an effective competition for the provision of services had to be balanced with the need for there to be fair competition and the need for CHC to be able to pursue a remedy. While the council had identified potential problems in re-running the procurement process, it had not shown that the disclosure of material to CHC would give rise to such insurmountable difficulties that there would be no practical way of carrying out a fair procurement process in the future. A confidentiality ring would not be appropriate as CHC were small family-run businesses; in such circumstances, the directors and personnel could not be excluded from seeing the documents and yet provide proper instructions on the allegations. (27 April 2010)

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Apcoa Parking (UK) Ltd v Westminster City Council [2010] EWHC 943 (QB) (QBD)
AP applied for an interim injunction to restrain W council from awarding any contract in respect of parking enforcement or street management services to any of the bidders in its public procurement process. W had abandoned a procurement of on-street parking services after AP alleged that W had behaved unlawfully in the course of the procurement process. W then subsequently started a new procurement process but AP alleged that it was effectively precluded from competing in that second procurement. AP brought proceedings to set aside W's decision to abandon the first process and to amend some decisions made in that first process. W submitted that there was no relevant issue to be tried and that AP had failed to demonstrate why damages would not be an effective remedy.
The court held, dismissing AP's application, that there was no legal basis to overturn or quash W's decision to terminate the first procurement process and so there was no prospect of obtaining the injunctive relief sought. There was therefore no need to maintain the status quo and so the claim for interim relief fell. The balance of convenience lay clearly in favour of not imposing further delays on W or further obstruction to its procurement process in relation to those important services. (29 April 2010)

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J Varney & Sons Waste Management Ltd v Hertfordshire CC [2010] EWHC 1404 (QB) (QBD)
V was one of the unsuccessful tenderers for the contracts for the operation of the local authority's 18 Household Waste Recycling Centres for the five year period from 2008 to 2013. V was the incumbent operator at three sites for 2003 - 2008; it tendered for the contracts to operate 17 of the sites, but was awarded none. The invitations to tender consisted of instructions for tendering, drafts of relevant documentation and the conditions of contract, the return schedules and various appendices to the new contract. The return schedules set out the standard of service expected and were used by the local authority to assess the bids as regards customer satisfaction. V claimed damages against the local authority for breach of its obligations under the Public Contracts Regulations 2006. It claimed that the local authority: 

  • was in breach of its statutory obligations of transparency, equal treatment and non-discrimination in that each of the return schedules was a separate award criterion and that neither the fact that they were award criteria nor the weightings attached to each had been disclosed; 
  • had erroneously accepted tenders as "most economically advantageous" when they included prices which were abnormally low and unsustainable over the life of the contracts; 
  • had unilaterally amended the contracts after they had been in operation for some time, thereby creating new contracts for which it had no opportunity to tender; and 
  • was in breach of the terms of an implied contract that it would give fair, reasonable and objective consideration to the tender.

The court held, dismissing V's claim, that the local authority was not in breach of its obligations of transparency in respect of the return schedules. The schedules were not award criteria but rather, they contained sub-criteria of the stated award criterion of customer satisfaction. Local authorities did not owe a general duty to investigate "suspect" tenders that appeared abnormally low. There was nothing in V's suggestion that the local authority should have appreciated that some of the tenders were abnormally low, and the suggestion that it was in manifest error in failing to investigate them was wholly without merit. There was no unilateral amendment of the contracts by the local authority, but even if there had been, and that that was a breach of public procurement law, it did not follow that there would have to be a competition for the new award. There was no implied contract between V and the local authority:  the Regulations created their own regime imposing duties on the local authority in relation to any tender submitted, and it was therefore unnecessary to imply a contract. Obiter, in the context of procuring public contracts the local authority had no discretion or "margin of appreciation" in relation to its compliance with its obligations of equal treatment and transparency, though it did have such a margin in relation to matters of judgment or assessment. (16 June 2010)

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Montpellier Estates Ltd v Leeds City Council [2010] EWHC 1543 (QB) (QBD)
M's claim concerned the local authority's procurement of a development agreement for a concert arena and related facilities. M owned one of four sites identified by the local authority as potentially suitable. It submitted a bid and also expressed its concerns to the local authority that the local authority itself would bid; the local authority assured M that the competition would be fair and open and that it had no intention to bid. A few months later, the local authority told M that it had decided to terminate the competition, and on the same day it announced that it was going to develop a site that it and a university owned. M contended that for at least a year the local authority had been secretly planning a public development option, and that it was in breach of statutory duty and the implied contract between them. M also sought an injunction preventing the local authority from entering into any contract for the development of the arena. The authority argued that the parts of the particulars of claim complaining about the introduction of the public sector comparator and the way the process was terminated should be struck out as they fell into the trap of failing to distinguish the duties that existed in respect of the disclosure and application of award criteria from the less onerous duty that arose in relation to terminating a procurement procedure.
The court held, refusing the authority's application for summary judgment, that there was force in the authority's argument that a public authority had a wide discretion to terminate a procurement process; however, on the facts it would not be right to strike out, or grant summary relief in respect of, parts of M's particulars of claim. M's case was not directed solely to the circumstances of termination but to the parallel process leading to the formulation of the local authority's alternative plan, which had been continuing, albeit undisclosed, during the procurement process itself. An implied contract could arise in a procurement context even where the Public Contract Regulations 2006 applied. (24 June 2010)

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Cases - EU

Commission v Germany (C-160/08)  – German ambulances
Tthe ECJ held that the failure to publish OJEU contract award notices for ambulance services contracts which were awarded by local authorities to the German Red Cross without an EU competition was in breach of the EU procurement rules. The ECJ rejected arguments made by the Federal Republic of Germany that these contracts fell within exceptions to Treaty principles and thus the EU procurement directives on the grounds that they related to the exercise of official authority or that they related to the provision of services of general economic interest. (29 April 2010)

Commission v Germany (C-271/08) – German local authority pensions
The ECJ held that the direct award of contracts to pension providers designated in a collective agreement was in breach of the requirements of the procurement Directives. The ECJ rejected arguments made by the Federal Republic of Germany that the fundamental right of collective bargaining should not be limited by the procurement rules. In this case, the collective bargaining resulted in specific providers of pension services being agreed between the parties and nominated in a collective agreement. The ECH declared that the Federal Republic of Germany had failed to fulfil its obligations under the procurement directives in awarding pensions related service contracts to organisations specified in the collective agreement without an EU call for tender. (15 July 2010)

Commission v Spain (C-423/07) – Spanish motorway works concession
The ECJ held that the Kingdom of Spain was in breach of the Procurement Directives when it awarded a motorway works concession contract the scope of which exceeded the description in the original OJEU advertisement. The Kingdom of Spain put forward a number of arguments to defend its action including arguing that the award of the additional works was legitimate as it resulted from the exercise of initiative by tenderers in submitting alternative proposals.  The ECJ rejected this argument on the facts but did comment that it is acceptable “…to leave some latitude to tenderers’ initiative in the formulation of their tenders.” (22 April 2010)

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News

DCLG: New era of transparency will bring about a revolution in town hall openness and accountability
The Communities Secretary Eric Pickles has written to all councils urging them to publish details of all spending over £500 in full and online as part of wider action to bring about a revolution in town hall openness and accountability. He has said that transparency and openness must be the default setting for the way councils do their business and he will call on local government to move at speed to adopt this new approach. By September 2010, councils will be expected to make details of spending on all goods and services that fall above the £500 threshold available for the public to see and scrutinise. All councils should be doing this as a matter of course by the start of next year, as well as publishing invitations to tender and final contracts on projects over £500. There will be inital guidelines on how to publish this information. In September draft Codes of Practice on payments over £500 and contracts/invitations to tender over £500 will be published for formal consultation; the final Codes of Practice will be published in November, so all authorities are able to publish in January 2011. (4 June 2010)
The Government has set up a Local Spending website that enables people to look at spending in any area of England by clicking on and scrolling over maps, showing how taxpayers' money was spent locally and by which public bodies.

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Cabinet Office: Whitehall shake-up in drive for efficiency
The Cabinet Office has set up an Efficiency and Reform Group that will have a strong mandate at the centre of government to ensure departments work together to quickly tackle waste and improve accountability. Responsibility for the Office of Government Commerce (OGC) and Buying Solutions will move to the Cabinet Office where they will form part of the new group, thus bringing together in one place all the cross-government operational functions, including procurement, project management, IT and Civil Service workforce and reform. (15 June 2010)

DCLG: Councils pledge to raise bar on procurement
The Secretary of State has co-chaired a meeting with LGA Chairman Dame Margaret Eaton to discuss how to help councils improve value for money and protect frontline services. This marks the start of a major programme to be lead by the LGA that will help identify ways councils can deliver better value for money for taxpayers, e.g. by addressing the fragmentation of local government spending to secure further savings and encouraging more collaborative working. (25 June 2010)

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Cabinet Office: Francis Maude launches pathfinder mutuals
The Cabinet Office has announced the first wave of pathfinder mutuals, to be run by entrepreneurial public sector staff, who want to take control of their services. Twelve fledgling public service spin-offs have been chosen to be trailblazers for the rest of the public sector, helping Government establish what type of support and structures will best enable the development of employee-led mutuals on an ongoing basis. The pathfinders will be supported by expert mentors from some of the country's most successful businesses and leaders in employee ownership models. All the mentors have offered their support for free and will work with staff in the pathfinder projects to help them develop a range of sustainable, efficient and pioneering employee-led services.  (13 August 2010)

DCLG: Eric Pickles to disband Audit Commission in new era of town hall transparency
The Communities Secretary has announced plans to disband the Audit Commission and refocus audit on helping local people hold councils and local public bodies to account for local spending decisions.  The Audit Commission's in-house audit practice, which is the fifth largest audit practice in the country, will be transferred out of public ownership. A range of options will be developed for converting the audit practice into a business independent of Government which could be sold or otherwise transferred into the private sector. The aim is for such a system to be in place from the 2012/13 financial year, with the necessary legislation being introduced in this Parliamentary session. (13 August 2010)

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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

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