Part 4 Chapter 3 of the Localism Bill sets out the framework for a new Community Right to Challenge that will give communities the right to bid to take over local state-run services currently delivered by or on behalf of local authorities.
This article considers a number of procurement issues that are raised by the Right to Challenge provisions.
The Right to Challenge is linked in with the Community Right to Buy which aims to assist “community” organisations to purchase assets of community value, and the Right to Provide under which public sector workers will be given the right to form employee owned cooperatives and bid to take over services they currently deliver.
Localism Bill framework
The Right to Challenge is available only to a “relevant body”: this includes voluntary and community bodies, charities, parish councils and two or more staff of a relevant authority. It relates only to a “relevant service” defined as “a service provided by, or on behalf of, a relevant authority in the exercise of its functions”.
The provisions give a relevant body the right to submit an Expression of Interest (EoI) in providing a service currently provided by a “relevant authority” (a county council, district council or London borough, or other authority specified in regulations). The EoI is submitted to the relevant authority providing that service and that authority is then obliged to consider the EoI. The authority is required as part of its assessment to consider how the EoI and procurement exercise might promote or improve the social, economic or environmental well being of the authority’s area. The authority must also have regard to any guidance issued on the Right to Challenge by the Secretary of State.
The authority must then either accept, or accept with modification (subject to the agreement of the submitting body) or decline the EoI. Where the local authority declines the EoI it must give written reasons for its decision. Where the local authority accepts the EoI it must then carry out a procurement exercise relating to the provision of the service, in line with relevant legal requirements.
The consultation paper
In February 2011 DCLG issued a consultation paper on the detailed workings of the Right to Challenge which will be set out in regulations, to come into effect in 2012.
Key features are:
- the Right to Challenge will apply only to services which are provided by, or on behalf of relevant authorities and not to the functions of the relevant authorities. Where a service is jointly commissioned then the question of whether or not the Right to Challenge is available will depend on whether the service relates to the function of a relevant authority. So, for example, if a service is jointly commissioned by a London borough (which is a relevant authority) and an NHS Trust (which is not a relevant authority) and the service relates to a function of the NHS Trust then the Right to Challenge will not be available. There will also be statutory and other exemptions;
- to limit the burden on relevant authorities, they can specify
periods during which EoIs may be submitted so that they fall within
the authority’s commissioning cycle. If relevant authorities opt to
specify periods then they may refuse to consider EoIs submitted
outside the specified periods for the relevant services. If periods
are not specified then an EoI can be submitted at any time.
The Secretary of State may specify minimum periods which relevant authorities must comply with when setting periods during which EoIs may be submitted. Where no periods are specified by a relevant authority then the consultation paper states that “it will be for the authority to decide how it will manage this in a fair and transparent way”;
- the relevant body must show that it is capable of providing or being involved in providing the relevant service. Alternatively, bodies can demonstrate that they are taking steps to ensure that they will be in such a position ahead of the procurement exercise. This is intended to assist small or newly formed voluntary and community organisations and local authority employees who may need to take further steps in order to participate in a tender process;
- the regulations will specify minimum and maximum periods that must elapse between the date of a decision to accept an EoI and the date on which a procurement exercise commences. The consultation paper acknowledges that where common periods are set then it is important to allow for a range of circumstances and that longer periods may be appropriate in certain cases;
- the paper confirms that the option to accept an EoI with agreed modifications is not intended to permit wholesale changes. The consultation paper proposes an exhaustive list of grounds for rejecting an EoI;
- the Secretary of State will have power to specify in regulations the minimum and maximum periods which must elapse between acceptance of an EoI and starting the procurement process. The consultation paper explains that the start of the procurement process should be understood as meaning when the tender is publicised. The consultation paper refers specifically to the need to accommodate organisations which may need time to prepare to tender, supporting an argument in favour of a minimum time period. It also acknowledges the need to ensure that the procurement process is not delayed for an unnecessarily long time, supporting an argument in favour of specifying a maximum time period. The consultation paper highlights the need to comply with the Public Contracts Regulations 2006 (the “Procurement Regulations”) where they apply;
- DCLG is aware that relevant bodies, particularly small and new voluntary and community sector organisations, may benefit from support to improve their skills and expertise to prepare effective EoIs and compete successfully in a procurement exercise. DCLG is considering what more general support measures could be made available to assist understanding of the Right to Challenge and the other new rights being introduced under the wider localism agenda. Relevant authorities must have regard to guidance issued by the Secretary of State on the Right to Challenge.
The consultation paper points out that the Right to Challenge is not a right to deliver the service and that one outcome of a procurement exercise may be that the relevant body which originally exercised its Right to Challenge may not end up as the provider of the service. It is also careful to highlight the need for relevant authorities to comply with the Procurement Regulations where they apply and to use appropriate competitive processes where they do not.
The explanation of when the Procurement Regulations apply is rather over simplified and does not, for example, refer to requirements to advertise and comply with other positive Treaty obligations flowing from the EU cases. Future guidance would do well to provide information on these issues.
The provisions on acceptance of an EoI require the relevant authority to take account of the economic, social and environmental benefits of accepting an expression of interest. It also requires a relevant authority, in carrying out the procurement exercise, to “consider how it might promote or improve the social, economic and environmental well-being of the authority’s area by means of that exercise”. This raises the spectre of significant discussion around the issue of the extent to which social and environmental issues can legitimately be taken into account in a tender process. It also raises linked concerns about how far these provisions will be interpreted by the relevant authorities as legitimising the selection of tenderers and the acceptance of a tender using criteria linked to the location and local nature of a tendering organisation thus, potentially, resulting in discriminatory behaviour.
A further area for concern is the extent to which transparency, non-discrimination and equal treatment can be maintained where a procurement process has been prompted by an EoI received from one of the tendering organisations. Relevant authorities will need to act with care to ensure that there is no actual or perceived bias resulting from pre-procurement links with the body, or bodies, submitting an EoI.
Careful records will need to be kept so that relevant authorities are able to demonstrate that pre-tender discussions have not tainted the process. Checks will need to be made to ensure that the tendered specification is not inappropriately influenced by the proposals in the original EoI and that the procurement process is not skewed in favour of a particular provider. The dangers are even greater where the relevant authority accepts an EoI with modifications as in order to comply with the primary legislation the modifications will need to be agreed, and therefore presumably discussed, with the relevant body submitting the expression of interest.This article also appears in our local authority newsletter Authority View Spring 11.