Procurement Update - March 2011

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 pastthree months.

31/03/2011

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:

Cabinet Office Procurement Policy Notes

Use of the Accelerated Restricted Procedure in 2011 (Information Note 01/11)
Advises that the Commission’s relaxation of the circumstances where the accelerated restricted procedure may be used has been extended to the end of 2011. (4 January 2011)

Published guidance on implementing requirements for greater transparency in central Government procurement and contracting (Information Note 02/11) 
The Cabinet Office Efficiency and Reform Group (ERG) has issued guidance on publishing all new central government contracts (including ICT) in full from January 2011. It sets out common principles which departments should follow to help ensure consistency of approach across central government in meeting these requirements. These requirements apply to all central government departments including their agencies, all non-departmental public bodies, NHS bodies and trading funds. (18 January 2011)

Further measures to promote small business procurement (Information Note 05/11)
This note provides information to contracting authorities on new government measures to help ensure that SMEs can compete on an equal footing for public sector contracts. The measures include: 

  • launch of Contracts Finder, which will be used to publish procurement and contracting information in one place, including procurement opportunities, tender documents and contracts; 
  • launch of SME product surgeries that will give SMEs the opportunity to pitch innovative products and services direct to a panel of senior procurement and operational professionals from central government and the wider public sector; 
  • a completely new approach to assessing companies and organisations who want to do business with Government, so that SMEs are not disadvantaged including:
    • seeking to eliminate PQQs for all central government procurements under £100,000, so that procurers will be free to choose the best route to market for their individual circumstances; and  
    • allowing firms to submit their prequalification data once for all procurements in common commodities; 
  • from March 2011, all departments are required to publish a set of specific, targeted actions to increase their business with SMEs; 
  • the Government will also seek to break requirements up into “micro lots” where practical.

Baroness Eaton, Chair of the Local Government Group, has also announced her support for the new measures and the intention that local government will also make their opportunities available on Contracts Finder and use a simplified PQQ. (11 February 2011)

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Policy and Guidance

European Commission: Green Paper on the modernisation of EU public procurement policy - Towards a more efficient European procurement market (COM(2011) 15)
Seeks views on how the EU procurement legislation could be updated to help public procurers cope with new challenges, such as the need for a more efficient use of public funds as well as taking into account social and environmental concerns. The consultation focuses on the modernisation of the rules, tools and methods for public procurement. Key themes include exploring ways to reduce the current complexities of the procurement rules, increasing cross border trade, achieving environmental and social policy objectives through procurement and improving access for SMEs to public contracts.
The Green Paper is wide ranging, raising 114 questions of varying relevance to UK public bodies. The breadth of coverage, complexity and length of the Green Paper is a potential disincentive for those wishing to respond.
The Commission is also currently undertaking a comprehensive ex-post evaluation to take stock of the efficiency and cost-effectiveness of the current European public procurement rules. The results of this evaluation and of the Green Paper consultation will be discussed at a high level conference on public procurement reform, planned for 30 June 2011 in Brussels. All work streams will then feed into any appropriate legislative proposals. The consultation closes on 18 April 2011. (27 January 2011)

The Cabinet Office issued Action Note 21/10 asking for feedback on the European Commission’s evaluation of the Procurement Directives and any subsequent proposals to change them. It has since  issued Procurement Policy Note 4/11 asking for further comments.

LG Group response to government on the modernisation of EU procurement rules
The LGA has submitted a paper on the modernisation of EU Public Procurement Directives, in response to the Cabinet Office’s request for feedback. This paper outlines aspects of Directive 2004/18 which are particularly difficult or costly for councils to implement, while also making recommendations for change in the future. (8 February 2011)

NHS European Office of the NHS Confederation: How to buy, what to buy - Revising the EU public procurement rules
Provides a summary of the Green Paper and invites views from NHS procurement managers and commissioners on those aspects of the paper which most closely relate to their work, together with more general comments. (28 February 2011)
We have issued an Alert on this consultation.

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DCLG: Code of recommended practice for local authorities on data transparency
Seeks views on a draft Code, issued under s.2 of the Local Government, Planning and Land Act 1980, that lays down the core principles of data transparency which all local authorities should embrace as part of the new era of accountability.  The draft Code includes the minimum data sets that should be released by local authorities: 

  • expenditure over £500, (including costs, supplier and transaction information); 
  • grants and payments under contract to the voluntary community and social enterprise sector; 
  • names, budgets and responsibilities of staff paid over £58,200 (equivalent to the lowest Senior Civil Service pay band); 
  • an organisational chart; 
  • councillor allowances and expenses; 
  • copies of contracts and tenders to businesses and to the voluntary community and social enterprise sector; 
  • policies, performance, audits and key indicators on the authorities' fiscal and financial position; and 
  • data of democratic running of the local authority including the constitution, election results, committee minutes, decision-making processes and records of decisions.

The consultation closed on 14 March 2011. (7 February 2011)

Also, the Decentralisation Minister Greg Clark has written to all council leaders about supporting the voluntary sector and small firms. He states that the Government expects them to publish all grants and payments, as well as copies of contracts and tenders, they make to the voluntary, community and social enterprise sector. (4 February 2011)

DCLG: Proposals to introduce a Community Right to Challenge
Seeks views on the provisions in the Localism Bill to introduce a Community Right to Challenge that would give community or voluntary sector groups, as well as parish councils and council employees, new powers to challenge and take over a local service, subject to obligations to comply with relevant procurement requirements. Under the proposed new law, councils would have to respond to this challenge and consider the positive impact the proposal could have on the community. If the proposal was turned down the council must publish the reasons for this. The paper discusses the detail of how the Right will work in practice, which will be set out in regulations, and also what type of support and guidance should be provided. The consultation closes on 3 May 2011. (4 February 2011)

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Cases - UK

Mears Ltd v Leeds City Council [2011] EWHC 40 (QB) (QBD)
This case concerned the Council's ALMO's procurement of capital improvement and refurbishment works for social housing in the Leeds area. M was informed that it was unsuccessful; during the course of the feedback and the surrounding communications, it emerged that the local authority had drawn up model answers to be used by its officers in the tendering process. M claimed that the Council had breached the Public Contracts Regulations, and sought an interim order suspending the procurement and an order that the local authority re-run the procurement either in full or in part.
The court held, ordering limited disclosure, that to the extent that the model answers did not contain any new criteria or weightings but performed the task of seeking to ensure fair and consistent assessment of the tenders within stated criteria and weightings, the Council was entitled to keep the model answers confidential from the tenderers, but the mere fact that they were confidential did not prevent them from being disclosed.  The model answers were evidently part of the guidance given by the local authority to evaluating the tenders; however, any confidentiality should be preserved at the instant stage and as such it was only appropriate that the answers be provided to M's legal representatives for inspection and then if appropriate to an individual of M who had not been involved in the procurement. (19 January 2011)

Brent LBC and Harrow LBC v Risk Management Partners Ltd [2011] UKSC 7 (Sup Ct)
The issue in this appeal was whether the Public Contracts Regulations 2006 applied to contracts of insurance that had been awarded to a mutual insurance company, LAML, which had been set up by a number of London Boroughs. The Boroughs contended that they did not have to comply with the 2006 Regulations as the contract was awarded to a company which fell within the so-called “Teckal exemption”. The Court of Appeal held that although arrangements between participating authorities could in principle come within the "Teckal exemption", here LAML could not be regarded as a department of each of the participating local authorities - it could not operate effectively unless its Board had considerable freedom to manage its insurance business.  The nature of its business, and the possibly differing interests of different authorities and affiliates, were antithetic to the necessary local authority control.
The Supreme Court held, allowing H LBC's appeal, that the 2006 Regulations did not apply where a local authority intended to enter into a contract of insurance such as that with LAML. An insurance contract was just as eligible for the exemption as any other contract such as one for waste services. What mattered was whether the arrangement satisfied the control test laid down in Teckal. ECJ case law on the control test, particularly Coditel Brabant SA v Commune d'Uccle (Case C-324/07), stated that the test would be satisfied where control was exercised by the authorities collectively – it was not essential that it be exercised by each authority individually. Here, although it was true that, when it came to claims, the nature of the relationship between each participating member as insured and LAML was essentially one between independent third parties, collective control over strategic objectives and significant decisions was with the participating members at all times and so the Teckal control test was satisfied. On the facts, the function test was also satisfied and none of the issues or the answers gave rise to any questions requiring guidance from the ECJ. (9 February 2011)

Bevan Brittan has issued an Alert on this case, in which we look at the implications of the decision for local authorities that are contemplating setting up new entities to share the delivery of services: Mutual joy - Supreme Court clarifies procurement rules for local authority companies.

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SITA UK Ltd v Greater Manchester Waste Disposal Authority [2011] EWCA Civ 156 (CA)
S appealed against the High Court's ruling that its procurement challenge was brought out of time.
S was an unsuccessful bidder in GMWDA’s tendering process for a PFI project to provide waste disposal facilities for Greater Manchester that used the negotiated procedure. In January 2007, GMWDA announced that V was its preferred bidder and that S would be its reserve bidder. The contract was not actually awarded until 8 April 2009. S claimed that after GMWDA had identified the preferred bidder and entered into negotiations, V's bid changed to such an extent that, in the absence of an opportunity being given for S to re-tender, it could not be said that V's bid was the most economically advantageous. S also claimed that G had failed to afford both tenderers equal treatment and to act with appropriate transparency. S contended that GMWDA had breached the Public Contracts Regulations and, after much correspondence had passed between S and GMWDA, S issued its claim in August 2009. The High Court ruled that S’s claim should be struck out on the basis that it had been brought outside the three month time limit, applying the decision of the ECJ in Uniplex (UK) Ltd v NHS Business Services Authority (C-406/08). The court found that S knew in April 2009 that the contract had been awarded in breach of the Regulations and the infringements it had identified in April 2009 allowed it to make the complaint it ultimately made. The fact that S later acquired knowledge of details of earlier infringements added nothing material.
The Court of Appeal held, dismissing S's appeal, that S’s claim was time-barred. The judge had applied the correct test in line with Uniplex and UK case law. S's letters showed that it was aware that GMWDA was in breach of its procurement obligations and that it had a potential claim. Nor could S rely on further breaches which later came to light - time did not start afresh where what was being relied upon to start time running again was a further breach of the same duty, whether it in fact occurred before or after the breaches already known. (24 February 2011)

Countryliner Ltd v Surrey CC (Unreported, CA)
C, a bus operator, appealed against the striking out of its claim against the Council regarding a public tender for the provision of bus services. As part of the tender process, the Council required tenderers to supply evidence of their respective capabilities to implement the services, including relevant planning permissions. C submitted a tender naming one of its sites as the relevant bus depot but it did not have planning permission to operate a bus depot from that site and so could not provide evidence of relevant permission. The Council rejected C's tender. C claimed that the Council was in breach of the Public Contracts Regulations 2006 as it had not made the significance of the requirement for evidence of planning permission clear in its invitation material. The judge determined that C's claim disclosed no reasonable grounds for bringing the claim. C appealed, contending that it was not right to use the existence of a planning dispute concerning the relevant bus depot site as a reason for refusing its tender in light of the fact that it had been using that site as a bus depot for a number of years.
The Court of Appeal held, dismissing the appeal, that there was little point in letting the case proceed where the judge had decided that there was, on the evidence, no reason to let it go to trial. The local authority's invitation documents were clear on their terms: there had to be documentary evidence demonstrating the relevant permission. It was not enough to say that because C had operated a bus depot for a number of years that there was a "planning dispute" - it could not provide the relevant evidence. (8 March 2011)

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Cases – Europe

European Commission v Republic of Cyprus (C-251/09) (ECJ)
This case concerned the award of a contract under the Utilities Directive 93/38. The Court of Justice of the European Union considered and rejected claims by the European Commission (EC) that a utility operating in the electricity sector had (1) failed to comply with requirements of the Utilities Directive and the general requirement of transparency in relation to the use of an allegedly undisclosed evaluation criterion to reject a tenderer; and (2) had failed adequately to notify the unsuccessful tenderer of the reasons for rejection of its tender thus depriving it of an effective review. 
The Cyprus Electricity Authority, Archi Ilektrisimou Kyprou (AIK) ran a tender for the design, delivery and construction of plant at Vassilikos power station. Two groups of companies submitted offers but the tender submitted by one of the bidders was rejected at the second stage evaluation. The  EC claimed that one of the award criteria was not sufficiently clearly disclosed in advance and that AIK had violated the principles of equal treatment and transparency by modifying the award criteria after the award procedure.  In addition the EC alleged that AIK had violated the principle of equal treatment by introducing new issues during negotiations. The EC also claimed that AIK appointed a tenderer that did not satisfy the condition for participation in the tender process relating to construction experience and that it had failed to properly communicate the reasons for the rejection of the tender.
The court confirmed that the award criteria must be set out  in the contract documents or tender notice  in a manner which permits all reasonably well informed and diligent tenderers to understand them in the same way and that when the tenders are evaluation these criteria must be applied in an objective and uniform manner. The court found in this case that the alleged lack of clarity did not amount to a violation of Treaty principles. The court also concluded that the EC had failed to demonstrate that the clarifications provided by the successful tender were not in line with methodology provided for in the call for offers documents and that the successful tenderer did not meet the required conditions relating to experience of construction. It was of the view  that the reasons for rejection of the tender were properly communicated. (17 February 2011)

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News

LGA: The impact of EU procurement legislation on councils
The LGA has published the results of an online survey of procurement officers which gathered information on councils' experiences of and opinions on EU procurement legislation. The survey was carried out in order to inform the LGA's view ahead of European Commission proposals to modernise EU procurement legislation on 2011. The overarching aim was to ensure that LGA work on this issue helps to create more favourable EU procurement rules for councils in the future. The survey found that: 

  • just over a third of respondents felt that the Procurement Directive 2004/18 had led to more efficient and effective procurement practice; but 
  • 2/3rds of respondents stated that procurement costs and administrative burdens had worsened as a result of the Directive; and 
  • the Remedies Directive was a key issue - although only 17% of respondents had been legally challenged under the Remedies Directive in the last 12 months, 69% identified dealing with challenges from unsuccessful bidders as an issue which presents a difficulty to their council’s procurement activities.

(6 January 2011)

OFT: Commissioning and competition in the public sector
The OFT has published a study that forms part of the OFT's wider work in public markets. Drawing on case study research and engagement with a range of public and private sector parties involved in public services delivery, it identifies four competition themes and works up more detailed, constructive guidance so that commissioners and procurers are better equipped to leverage competition to create open and contestable public services markets that incentivise suppliers to increase efficiency, improve quality of service provision and innovate. The report argues that having an open, transparent and competitive tender process is not enough on its own to ensure that public services markets are open and contestable, both over the short-term and long-term. Achieving effective competition in public services must also involve: reducing barriers to entry and exit, encouraging a diverse supplier base and ensuring suppliers have the right incentives to make efficiency savings, raise quality and innovate. (15 March 2011)

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