Procurement Update - December 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 months.

15/12/2010

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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:

OGC publications

Procurement Policy Note 16/10 Need to ensure that bodies permitted to use frameworks are adequately identified and clarification is issued if necessary
Outlines the need to ensure that bodies permitted to use framework agreements are adequately identified and that clarification is issued to relevant suppliers and framework users if required. (8 September 2010)

Procurement Policy Note 17/10 New guidance on implementing requirements for greater transparency in central Government procurement and contracting
Sets out the Government's commitments on implementing requirements for greater transparency in central government procurement and contracting. These requirements apply to all central government departments including their agencies, all non-departmental public bodies, NHS bodies and trading funds. Separate requirements are in place for the wider public sector such as local authorities. See also the Cabinet Office guidance, below. (10 September 2010)

Procurement Policy Note 19/10 Package of announcements to support small businesses
Provides information to contracting authorities on government measures announced on 1 November to open up government procurement as part of an initiative to help SMEs grow and boost enterprise across Britain. The new measures are designed to address head-on the areas that SMEs have consistently highlighted as the biggest barriers to doing business with the public sector.  Key measures include plans to:

  • cut away unnecessary bureaucracy and waste by streamlining the procurement process; 
  • improve the transparency of public procurement opportunities; and 
  • require major suppliers to guarantee that subcontractors working on Government contracts are paid within 30 days and encouraging them to pass these payment terms down supply chains.

(11 November 2010) 

Procurement Policy Action Note 20/10 Mandated use of core pre-qualification questions in Central Government
As part of a new programme of work announced by the Minister for the Cabinet Office to make it easier for SMEs to do business with government, the Cabinet Office has produced a simplified set of pre-qualification core questions for use in both above and below OJEU threshold procurements. The core questions cover legal status, economic and financial standing and elements of technical and professional ability. This set of core PQQ questions must be used in all new procurements from 1 December 2010. (1 December 2010)

Procurement Policy Note 21/10 Feedback request - European Union (EU) Evaluation of the Public Procurement Directives
The European Commission is undertaking a comprehensive evaluation of the EU public procurement legislation, which will examine the effectiveness of the public procurement rules in open, contestable and sound procurement. The Commission aims to make proposals to simplify and update the rules in 2012 at the latest. This paper seeks views on the effectiveness of the public procurement rules. The feedback will be used to influence the European Commission’s evaluation of the Procurement Directives and any subsequent proposals to change the Directives. Comments are required by 4 February 2011. (6 December 2010)

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Policy and guidance

Cabinet Office: Achieving greater transparency of public sector procurement and contracting
The Cabinet Office Efficiency and Reform Group has produced practical guidance to assist departments in meeting the new requirements to publish central government contracts and tender documents online. The guidance provides a set of common principles to help departments take a consistent approach to meeting the requirements set out by the Prime Minister. It also includes guidance to departments on the publication process. There is separate guidance on publishing ICT contracts, tender documents and all contracts in full. See also the OGC’s PPN 17/10, above.  (10 September 2010)

MoJ: Guidance about commercial organisations preventing bribery (section 9 of the Bribery Act 2010)
Section 7 of the Bribery Act 2010, which will come into force in April 2011, creates a new offence for commercial organisations of failure to prevent persons associated with them from committing bribery on their behalf. It is a defence for an organisation to prove that it had adequate procedures in place to prevent persons associated with it from committing bribery offences. Section 9 of the Act requires the Secretary of State to publish guidance about procedures which commercial organisations can put in place to prevent persons associated with them from bribing. This consultation seeks views on draft guidance to help commercial organisations of all sizes and sectors understand what sorts of procedures they can put in place to prevent bribery from occurring within them. The consultation closes on 8 November 2010. (14 September 2010)

Cabinet Office: Efficiency review by Sir Philip Green - key findings and recommendations
Sir Philip Green was asked by the Government to carry out an efficiency review of Government spending, focusing on commodity procurement, property and major contracts. This paper sets out the findings and recommendations of his review. His key finding is that the Government has consistently failed to make the most of its scale, buying power and credit rating. His investigation has revealed the poor quality of much of the data relating to where and how Government spends its money.  In addition, a lack of a centralised approach to buying goods and services has allowed departments to pay hugely different prices for the same items (11 October 2010)

Cabinet Office: Building a stronger civil society -  a strategy for voluntary and community groups, charities and social enterprises
Sets out the Government's strategy for voluntary, community and other third sector bodies (referred to as "civil society organisations") as the first step towards helping them grasp new opportunities arising from the devolution of power to local communities and reform of public services that underpins the Big Society. Plans in the strategy include modernising public service commissioning so the most efficient and effective charities can get a fair chance to bid for public contracts. The consultation closes on 6 January 2011. (18 October 2010)

OFT: Land agreements guidance consultation
Seeks views on draft guidance for businesses about the types of land agreements that might fall foul of competition law. Until now, land agreements between businesses benefited from special treatment under the Competition Act 1998. However, from 6 April 2011 land agreements that prevent, restrict or distort competition will be void and unenforceable. Companies involved in such agreements can also face fines of up to 10 per cent of their annual worldwide turnover. The guidance provides a practical framework and hypothetical examples of how typical agreements may be assessed. It makes clear that: 

  • there is no presumption that a restriction in a land agreement constitutes an infringement of competition law, and the OFT expects that only a minority of restrictions will be anti-competitive; 
  • the types of restriction most likely to impact competition are those which keep other companies out of a market, or which aim to make it more difficult for other businesses to compete; and 
  • the law will only apply to land agreements between businesses, not individuals.

The consultation closes on 14 January 2011. (15 October 2010)

Cabinet Office: Consultation on taking account of the 'Uniplex' case (C-406/08, judgment on 28 January 2010) regarding the time limits for the bringing of proceedings alleging a breach of the procurement rules
Seeks views on proposed amendments to the UK procurement rules to achieve compliance with EU law as a result of the ECJ’s judgment in Uniplex v NHS Business Services Authority (C-406/08). That case concerned the compatibility with EU law of certain features of the time limits for starting challenges laid down in the Public Contracts Regulations 2006 and Utilities Contracts Regulations 2006. Two essential changes must be made: 

  • the time limit must run from when the applicant knew or ought to have known of the infringement; and 
  • the requirement to act “promptly” must be removed as the ECJ ruled that it is not precise and so makes the rules uncertain.

The consultation closes on 19 January 2011. (24 November 2010)

HM Treasury: Review of competitive dialogue
The Cabinet Office’s Efficiency and Reform Group are currently undertaking a Lean Procurement Review to uncover the causes of delay in the procurement process and to suggest actions to rectify them. This report  considers the impact of the Competitive Dialogue process on public sector procurements in the UK, and contains a number of  recommendations to improve the procurement process, achieve better value for money and shorten delivery times. It has been submitted by HMT as evidence to the ERG Review for their consideration. (30 November 2010)

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Legislation

Public Bodies Bill
This Bill has been introduced into the House of Lords. It enables the announced reforms to quangos to be implemented where legislation is needed. The Bill is an enabling bill, i.e. it will not itself make any changes to public bodies; instead, it: 

  • creates a legal framework that will enable Government departments to implement the majority of public bodies reforms that require legislation and that are not already covered in other departmental bills; 
  • creates legislative powers which give ministers the ability to abolish or merge bodies, modify a body's constitutional or funding arrangements, or transfer its functions elsewhere; and 
  • gives Secretaries of State the necessary powers to take forward changes to their bodies in secondary legislation when they are ready to do so.

The schedules include a list of a number of public bodies which were part of the review process and which would need legislation to make any reforms to them in the future, including bodies for which there are no plans to reform. This is to ensure that, if the Government wishes to make changes to these bodies in the future following further review processes, the necessary legal framework will already be in place.  It received its 2nd Reading on 9 November 2010 and is currently in Committee. (28 October 2010)

Localism Bill
This Bill has been introduced into the House of Commons and received its 1st Reading. The Bill contains a package of reforms that aim to devolve greater power and freedoms to councils and neighbourhoods, establish powerful new rights for communities, revolutionise the planning system, and give communities control over housing decisions. It includes a new Community Right to Challenge under which voluntary and community groups, social enterprises, parish councils and groups of local authority employees will be able to express an interest in running any service for which the authority is responsible, and the authority will then have to consider whether they can provide it better. However, the authority cannot simply award the contract or franchise to the challenging organisation, but would have to hold a procurement exercise in which the organisation would bid for that service alongside others.
We have issued an Authority Alert: The advent of localism in which we give our initial comments on the key measures contained in the Bill’s 207 clauses and 24 schedules.
The LGA has issued an On the Day Briefing that summarises and comments on the Bill's main provisions.
DCLG: Decentralisation and the Localism Bill - an essential guide describes the six essential actions that central government will need to take to do things differently, in behaviour, expectation, and culture, which go alongside the changes in law proposed in the Bill. (13 December 2010)

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Cases – UK

Veolia ES Nottinghamshire Ltd v Nottinghamshire CC; (1) Dowen (2) Audit Commission (Interested Parties) [2010] EWCA Civ 1214 (CA)
This case concerned the disclosure of commercial confidential information under s.15(1) of the Audit Commission Act 1998.
D, a local elector, applied to the Council to exercise his right to inspect under s.15(1)and take copies of all books, deeds, contracts, bills, vouchers and receipts relating to waste management in the Council’s area, including the schedules to the contract made between V and the Council and V’s monthly invoices for work done under the contract. V applied for an injunction to prevent the council disclosing the documents, claiming that they did not fall within s.15(1), and also that they had been supplied to the council on a confidential basis. The High Court judge held that D was entitled to inspect and make copies of the contract documents as they were related to the council’s accounts to be audited, and that that right overrode any express confidentiality obligations in the contract. V appealed, arguing additionally that s.15(1) had to be read down so as to exclude confidential information protected by the ECHR 1950 and/or the Public Procurement Directive 2004/18, and that the public inspection provisions of the 1998 Act only permitted use of the disclosed information for the purposes of an audit under the Act.
The Court of Appeal held, allowing the appeal in part, that the disputed documents were "relating to" the Council's "accounts to be audited" and so D was entitled to inspect them and make copies under s.15(1). Regarding the issue of confidentiality, ECHR Protocol 1 art.1, and possibly also art.8, provided sufficient reason to read down s.15(1) so as to make an exception for confidential information, subject to the public interest justification test. Any protection provided by the Public Procurement Directive 2004/18 would involve a similar balancing exercise. As to whether D could put the disputed documents to a use outside the purposes of the audit, he could not - access did not mean use for any purpose. However, the court would not spell out any implied statutory restriction on the use of information obtained under s.15(1) as there were many ways in which an interested person might seek to deploy such information and the lawfulness of such conduct should be decided on the facts of each case in private law where a claimant sought to restrain the use of the information, rather than in the abstract by reference to a general implied formula. (29 October 2010)

Indigo v Colchester Institute Corporation (Unreported, 1 December 2010) (QBD)
This case is the first application by a contracting authority under Reg.47H of the Public Contracts Regulations to lift an automatic suspension of entry into a contract pursuant to Regulation 47G. Indigo tendered unsuccessfully for a proposed contract for the provision of cleaning services at the College’s two sites and its score was significantly below that of the winner, E. Indigo challenged the award, and thus triggered the automatic extension under Reg.47G of the prohibition on the College entering into the contract. The existing contract expired on 31 December 2010 so the College sought an order lifting the suspension.
The court held, allowing the College’s application, that under the new remedies provisions, implemented with effect from 20 December 2009, where court proceedings relating to the award of a contract are started and the contract has not been entered into then the contracting authority must “refrain from entering into the contract”.  The court applied the legal tests which would usually be applied in an application for an interim injunction and based on the balance of convenience test, decided to lift the suspension.

Lancashire CC v Environmental Waste Controls Ltd [2010] EWCA Civ 1381 (CA)
The local authority appealed against a decision that it had failed to properly assess a tender submitted by EWC, a waste management and disposal company. The assessing officer had raised concerns over EWC's financial strength and possible under-pricing of its bid, but had been told to ignore those concerns when evaluating the competing tenders. The contract was not awarded to EWC even though it met the criteria and its tender was the lowest. EWC claimed that the local authority had wrongly taken into account the concerns about its financial standing. The judge held that the officer had done his honest best to carry out the assessment independently of his concerns about EWC's financial standing, but that it would not have been possible for him to put those concerns out of his mind completely or avoid being influenced by them. The local authority argued that the judge had not been entitled to hold that its officer was influenced, albeit subconsciously, by the irrelevant consideration.
The court held, allowing the appeal, that in an appropriate case a judge could be entitled to find that the decision maker was influenced by an irrelevant consideration, even though honestly not aware of being influenced, but it was vital that the suggestion was put to him in cross-examination in the plainest terms. The officer had given evidence that he followed the advice to ignore the issue, and he had been found by the judge to be an honest witness. Moreover, it had not been put to the officer in cross-examination that he had been influenced by his concerns. In the circumstances, the judge had not been entitled to conclude that the procedure was infected by reliance on an irrelevant consideration. (7 December 2010)

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Cases – Europe

Commission v Ireland (C-226/09)  – Translation services
In this case the Court of Justice of the European Union set out a number of important principles concerning the use and disclosure of award criteria and weightings in relation to contracts for Part B services. The Irish contracting authority had opted to use publicise a contract for translation services using an OJEU contract notice in which it set out the award criteria to be used with no indication of weightings or order of priority. The court confirmed that, in the context of Part B services, there is no obligation to set weightings in advance or communicate those to the tenderers. It also confirmed that in setting out a list of the award criteria for Part B services without any indication of their order of importance does not imply that they are listed in order of importance. The court did, however, declare that there was a violation of the principles of equal treatment and transparency resulting from the contracting authority’s decision to change the weightings after the evaluation of tenders had begun. (18 November 2010)

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News

DCLG: Local government expenditure over £500
This web page provides links to details of expenditure over £500 that has been uploaded by some local authorities following DCLG's call for councils to provide financial transparency by publishing spending information over £500 online by January 2011. The page also links to information on arm's length bodies' spending data 2009-10 and DCLG's transparency in government.

Cabinet Office: A new approach to supplier relations in Government
As part of the Government's commitment to make it easier to do business with the state, a new online feedback facility is being launched today to enable SMEs to share their experiences of public procurement. The website asks suppliers, in plain and simple terms, how to rip up the red tape and bring more common sense into securing government contracts. (1 December 2010)

OFT: Commissioning and competition in the public sector
The OFT has announced that it is conducting a study into commissioning and competition in the provision of public services, designed to help government buyers promote competition in markets in order to realise better value for money. The study's objective is to provide constructive and practical guidance to policymakers and commissioners of public services in local, central and devolved government on how to take due account of competition issues in the procurement of public services.  It is expected to report in March 2011. (10 December 2010)

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