Procurement Update - July 2012

This update contains brief details of key developments in the past three monthsrelevant to those involved in procurement work.

31/07/2012

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Emily Heard

Partner

This update contains brief details of recent key 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: 

Policy and guidance

Procurement Policy Note 03/12 - European Legislative Proposal on Third Country Access to the EU Public Procurement Market
Announces that the European Commission has published a legislative proposal for a new EU Regulation, which would enable the EU to close its markets to those countries whose markets are not reciprocally opened. The aim of the instrument is to give the Commission extra leverage in international trade negotiations. (13 April 2012)

Procurement Policy Note 04/12 - Procurement Supporting Growth: Supporting Material for Departments
On 26 April 2012 the Minister for the Cabinet Office, Francis Maude, announced the next steps in implementing the Government’s programme to ensure that the huge purchasing power of the public sector is used to support growth [see News, below]. This programme of reform is designed to support growth and UK businesses, including SMEs. This PPN provides departments, their agencies and NDPBs with a range of supporting material to assist in implementing these commitments, including a checklist that they must follow in order to operate the presumption against competitive dialogue, further supporting material to assist with conducting early supplier engagement, and the LEAN Sourcing Principles. (9 May 2012)

DH: NHS procurement - Raising our game
The DH has published guidance aimed at improving procurement across the healthcare system, in advance of a wide procurement strategy planned for later in 2012. The guidance sets out proposed actions for NHS trusts and the Department. It focuses on taking immediate action to start tackling six key areas for improvements: levers for change, transparency and data management, NHS standards of procurement, leadership, clinical engagement and reducing variation, collaboration and use of procurement partners and  suppliers, innovation and growth. It includes requirements for the NHS to publish all tender and contract information for contracts over £10,000 in Contracts Finder and to stop using PQQs for low value contracts under £100,000. The wider procurement strategy is the subject of public consultation which has just closed. Bevan Brittan participated in that consultation. (28 May 2012)

WLGA: Legal guidance for collaboration
The Local Government (Wales) Measure 2009 requires local authorities to make arrangements to secure continuous improvement in the exercise of their functions, and gives them powers to collaborate with others (including other local authorities) to discharge those duties. Local authorities must also consider whether using their collaboration powers will help deliver continuous improvement. In addition, the Local Government (Wales) Measure 2011 empowers Welsh Ministers to amalgamate two or three local government areas if they are satisfied that it is necessary to achieve effective local government and that effective local government is not likely to be achieved by the relevant local authorities exercising their powers to collaborate under  the 2009 Measure. This guidance explains the legal implications of collaborative working between Welsh local authorities. (26 April 2012)

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OFT: Street furniture advertising - Recommendations to local authorities
Between February 2011 and April 2012 the OFT investigated the compatibility of current street furniture advertising contracts in the UK with competition law. As a result of the assurances it has received from Clear Channel UK and JCDecaux, the OFT has now closed its investigation. This note provides information for local authorities following the closure of the investigation, with a brief background on the investigation and the voluntary assurances. It also makes recommendations for ways in which local authorities might procure street furniture advertising in future in order to encourage greater competition. These recommendations are not legally binding on local authorities. (17 May 2012)

DCLG: Community Right to Challenge - Statutory guidance
The Community Right to Challenge allows voluntary and community groups, parish councils and local authority staff, from 27 June 2012, to express an interest in taking over the running of local authority services. Relevant authorities must consider expressions of interest and, where they accept it, carry out a procurement exercise for the service. This statutory guidance gives further information on how the legislative framework under Part 5 Chapter 2 of the Localism Act 2011 is expected to operate. See also the regulations (below). (27 June 2012)
NB: Bevan Brittan is of the view that some of the statements in the guidance relating to the non-applicability of the EU procurement rules to Part B services are incorrect so these should be treated with caution.

DWP: Fraud guide
This guide is used by DWP staff who investigate allegations of benefit fraud but may also be of interest to local authority officers. The guide has 46 parts and is reviewed twice a year. (31 May 2012)

DBIS: State aid - Frequently asked questions
Updated guidance that answers common questions about state aid. (May 2012)

Cabinet Office: Public service mutuals - the next steps
This report from the Mutuals Taskforce examines the barriers facing public servants who form mutual businesses and take control of their services. It recommends a number of actions to make this burgeoning movement a mainstream option for public service delivery, including:  a temporary exemption from EU competition rules to enable mutuals to be established before being subject to full and open competition, and to encourage more public sector workers to set up their own spin-off organisations. This exemption would need to be negotiated at EU level.
The Cabinet Office has also published a Pipeline of Public Sector Mutuals which shows that the number of public service mutuals has risen to 58, from nine in 2010. (22 June 2012)

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Legislation – EU

Draft new Public Procurement Directives
Negotiations continue at EU level on the final draft of the new Public Sector, Utilities and Concessions Directives. If the process follows the current proposed timetable then final drafts should be published in the autumn, with the Directives being adopted by early 2013 for implementation in Member States, including the UK, within 18 months of that date.

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Legislation – UK

Community Right to Challenge (Expressions of Interest and Excluded Services) (England) Regulations 2012 (SI 2012/1313)
These regulations, which come into force on 27 June 2012, specify the requirements for expressions of interest submitted by relevant bodies using the Community Right to Challenge provisions in Part 5, Chapter 2 of the Localism Act 2011. They also specify those services that are excluded from the Community Right to Challenge. (21 May 2012). See the note above on the Statutory Guidance issues on the Community Right to Challenge.

Community Right to Challenge (Fire and Rescue Authorities and Rejection of Expressions of Interest) (England) Regulations 2012 (SI 2012/1647)
These regulations, which come into force on 27 June 2012, set out the grounds on which an expression of interest made under the Community Right to Challenge may be rejected by a relevant authority. They also add certain fire and rescue authorities in England whose services may be the subject of an expression of interest. (26 June 2012)

Local Government Best Value (Exclusion of Non-commercial Considerations) Order (Northern Ireland) 2012 (SR 2012/271)
This NI SR, which comes into force on 4 July 2012, specifies that two of the matters listed in Art.19(4) of the Local Government (Miscellaneous Provisions) (Northern Ireland) Order 1992 , relating to the terms and conditions of employment of a contractor’s workforce and the conduct of contractors or their workers in industrial disputes, shall cease to be non-commercial matters so far as is necessary or expedient to permit or facilitate compliance with the best value requirements of the Local Government (Best Value) Act (Northern Ireland) 2002, or where there is a transfer of staff to which the TUPE Regulations 2006 or the Service Provision Change (Protection of Employment) Regulations (Northern Ireland) 2006 may apply. (4 July 2012)

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Cases – EU

Commission v Netherlands (C-368/10) Fair trade labels and environmental criteria
These proceedings related to a tender procedure under Directive 2004/18 conducted by the province of North Holland for the supply and management of automatic tea and coffee machines. The tender documents included a requirement for the tea and coffee supplied to have specified eco and fair trade labels, and that the supplier should comply with “criteria of sustainability of purchases and socially responsible business”, including by contributing to improving the sustainability of the coffee market and environmentally, socially and economically responsible coffee production, and should state how they meet those criteria.
The court ruled that fair trade considerations, as well as environmental issues,  can be used as evaluation criteria in certain situations. However, in other respects the Netherlands had failed to comply with the Public Procurement Directive 2004/18. (10 May 2012)
Bevan Brittan has published an article on this case: Need a cup of coffee? Social and environmental criteria in procurement.

Insinööritoimisto InsTimi Oy v Suomen Puolustusvoimien Teknillinen Tutkimuslaitos (C-615/10) Exemption for military equipment
In this case, which is primarily of interest to those involved in defence procurement, the court considered the circumstances when the defence exemption under the Public Sector Directive is available and so the procurement is not subject to the EU procurement rules. It looked at the situation where the item purchased has both civilian and military applications and gave guidance on when the exemption is available. This was a decision relating to a procurement undertaken prior to the new Defence and Security Directive 2009/81. (7 June 2012)

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Cases – UK

Newcastle upon Tyne Hospital NHS Foundation Trust v Newcastle PCT [2012] EWHC 2093 (QB) (QBD)
This claim related to a Part B procurement for diabetic retinopathy screening services in Newcastle. The court overturned the automatic suspension. The judge did not focus too much on the first Cyanamid principle (whether there was a serious question to be tried) on the basis that the threshold in determining this was low (although he seemed to indicate that he thought the defendants' arguments to be stronger).  On whether damages were an adequate remedy, the court found that they would be for the claimant, but that they would not be for the defendants because of the prejudice to the exercise of their functions and the TUPE issues involved in transferring staff to an interim arrangement and then to the successful bidder later.  On the balance of convenience, the court found in favour of the defendants and lifted the suspension.  On this point, the court was not prepared to uphold the claimant's arguments that it should be awarded the contract in the interim period. The judge commented that because the case seemed to involve novel issues of law it would be unlikely to be dealt with before the end of the year. There was also some discussion about limitation and whether the claimant knew about the alleged breach when they first studied the ITT documents and raised a point of clarification to the defendants, but the judge did not explore this further other than to say that he though the defendants' arguments on this point to be better. (24 July 2012)

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News

Cabinet Office: £70 billion of potential government business published to boost UK growth
The Cabinet Office Minister has set out the next steps in delivering the Government’s programme of reform by: 

  • publishing pipelines of future procurement opportunities across a range of sectors, as well as an updated construction pipeline; 
  • publishing an analysis of the capabilities needed to deliver its future tunnelling requirements using the infrastructure pipeline published in November; it will publish similar analyses for other pipeline sectors in the coming months; 
  • launching the ‘Procurement Pledge’ setting out an agreed understanding with potential providers and their representative bodies that formalises this new approach and provides a mechanism from which Government can be held to account. 

(26 April 2012)

Cabinet Office: Independent review into the barriers of public service choice
The Government has appointed David Boyle to lead an independent choice review that will look into what people currently do with the choices that they have, whether barriers exist that are currently preventing individuals from exercising choice and the factors necessary to ensure choice is available to everyone. The review will focus on identifying the practical barriers to people exercising choice in specific areas where choice is already available to users, including: community services; adult social care; schools; Further Education; and early years. It will assess how the current system operates against these principles and make practical recommendations which take account of value for money and the limitations of capacity and public resources. The final report will be published in early 2013. (22 June 2012)

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Publicly funded HEIs and procurement
BIS have commented in their Response to consultation on Students at the Heart of the System on the regulatory impact of EU procurement rules on Higher Education Institutions (HEIs) that are wholly or mainly publicly funded. BIS states that “it is for institutions to take their own legal advice on whether or not they are contracting authorities for the purpose of [the Public Contracts Regulations]. But BIS’s view is that a student loan is a contractual agreement between the student and the Government, with any public subsidy benefiting the student not the institution. The agreement between the student and the institution to pay a fee in return for teaching is not public financing. On that basis, we think the shift in funding from grant to loans may mean that more HEIs will fall below the 50% threshold for public funding in future and so be exempt from these regulations.”
Note that this is a complex area and the subject of some considerable ongoing debate. There is disagreement with BIS’s view, with some procurement lawyers arguing that as the Student Loans Company is classified as a Non-Departmental Public Body, student loans would still be held to be public funding for the purposes of the Public Contracts Regulations, and so would not reduce the percentage of public funding received by universities.

Procurement alert: What can you do when a contractor is unable to deliver?
Recent reports suggest that G4S, the private security firm tasked with keeping the London 2012 Olympics safe and secure, may be unable to supply all the guards it was contracted to deliver for the games. This situation highlights a problem that any contracting authority can face - what to do if a contractor cannot deliver. As the Government will be well aware, a perceived failure on the part of a contractor can lead to a hefty share of the blame falling on the shoulders of the contracting authority. Service users inevitably turn to the authority in charge for answers about what is being done to put this right. As the example of the Olympic Games clearly illustrates, the show must go on. We have published an article that looks at the practical steps that a public body can take when a contractor is unable to deliver. (13 July 2012)

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Procurement law survey

Against a backdrop of stringent European rules and decisions, the Government's austerity programme and pressure to support small and social enterprise, local authorities are finding the procurement landscape more challenging than ever. In an effort to make some sense of it all, Bevan Brittan LLP has teamed up with Local Government Lawyer to undertake a comprehensive survey of procurement lawyers and professionals.
The survey should take no more than 10 minutes to complete and covers the following topics:

  • engagement with suppliers pre-procurement 
  • social factors
  • social enterprises
  • new models for delivering services
  • challenges to procurement exercises
  • standstill letters
  • SMEs.

Click here to take the survey. The survey results and analysis will be published in the Autumn, but those that take part will receive an advance copy of the results.

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The Government Procurement Services 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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