Procurement Update – February 2014

This Update contains brief details of recent key developments relevant to those involved in procurement work that have been published in the past three months.

13/02/2014

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

Cabinet Office: Procurement Policy Note 10/13 – New threshold levels for 2014
This PPN sets out the finalised threshold values to apply from 1 January 2014 to 31 December 2015. It also provides a summary of all the changes to threshold levels for public contracts, utilities contracts and defence and security contracts from January 2014. The levels are slightly lower than the 2012 figures, because of fluctuations in exchange rates - the threshold for local authority supplies and services contracts from 1 January 2014 is £172,514, and the works contracts threshold is £4,322,012. (16 December 2013)
See Bevan Brittan's alert: New procurement thresholds from 1 January 2014.

Cabinet Office: Procurement Policy Note PPN 01/14 – Information sharing in Government procurement exercises
Sets out the actions that should be taken to make sure that information can be shared within government and to protect government’s rights in the event of a dispute settlement agreement. (3 February 2014)

Cabinet Office: Procurement Policy Note PPN 02/14 – Extension of the Mystery Shopper service
This PPN announces the decision to extend the Cabinet Office’s Mystery Shopper service to carry out spot checks on procurement processes as well as continuing to deal with referrals raised by SMEs and other concerned suppliers. Spot checks will be undertaken by examining procurement documents, usually online, on procurement portals and checking for compliance with the relevant PPNs. (7 February 2014)
See also the Cabinet Office's Scope and remit of the Mystery Shopper scheme with updated guidance on the Mystery Shopper scheme. (23 January 2014)

Cabinet Office: Procurement Policy Note PPN 03/14 – Measures to promote tax compliance
Sets out the scope and background of the new policy requiring all suppliers bidding for central government contracts >£5m from April 2013 to self-certify their tax compliance. (7 February 2014)

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National Audit Office: The role of major contractors in the delivery of public services
In this memorandum, the NAO challenges Government and its private sector suppliers to work together more effectively in the taxpayers’ interest and to address the issues behind the current lack of confidence in Government’s use of contractors. It focuses on the role of four individual contractors in the delivery of public services (Atos, Capita, G4S and Serco) and asks three questions that it believes deserve greater public scrutiny, namely: whether there is sufficient competition in contracted-out public services; whether contractors’ profits reflect a fair return; and how to know whether contractors are delivering. The report finds that contracting with third parties is an important element of public service delivery, but there is currently a lack of transparency over the role that contractors play, the business that they do, the rewards that they make and the way that they perform. (12 November 2013)

DBIS: State aid – The basics
This guide is intended to help public bodies understand what state aid is, and whether it might affect their policies. It aims to help answer policymakers' three basic questions: Is it state aid? What do I do if it might be state aid and how can state aid be granted legally? (27 November 2013)

Transparency International UK: Corruption in local government – The mounting risks
This report warns that an unintended consequence of changes such as the Localism Act 2011 and those proposed in the Local Audit and Accountability Bill may be to create an enabling environment for corruption.  However, the authors believe that it is not too late to address this. The report identifies 16 recent legislative changes which increase the risk of corruption, as well as other trends such as the decline in scrutiny by local press and the move to more private sector outsourcing. It includes 22 recommendations, including that the Government should conduct a corruption risk assessment and strengthen whistle-blowing procedures. (9 October 2013)

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London Councils: Myth busting for boroughs – Asking suppliers to create skills and employment opportunities in their contracts
This "myth busting" guidance aims to raise awareness of the employment and skills opportunities through procurement by highlighting key success stories, and dispel some preconceived ideas on how to generate jobs and skills through procurement. It focuses on how many boroughs have used the Public Services (Social Value) Act 2012 to build on existing work to generate additional jobs and training opportunities for residents.
There is a complementary Myth busting for suppliers guide that aims to dispel a number of concerns that suppliers might have when boroughs ask them to generate additional jobs and training in their contracts. (13 January 2014)

Cabinet Office: Public Services (Social Value) Act 2012 – One year on
This paper reviews the implementation of the 2012 Act that requires commissioners to think about how they can secure wider social, economic and environmental benefits when procuring services. It outlines how commissioners have responded to the Act during its first year, and looks at the Government’s plans to advance social value in the future. (31 January 2014)

Cabinet Office: New models of construction procurement
The Government has published draft guidance on new models of construction procurement, based on best practice in public sector construction. These will enable both central and local government bodies to work with industry in a consistent and collaborative way, building long term stable partnerships between client and suppliers. The models provide modern, innovative methods and tools, allowing clients to lead change and drive positive results. The guidance consists of: 

The guidance documents have been issued as draft so that they can be road-tested before a formal launch in summer 2014. (29 January 2014)

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Legislation - EU

New Procurement Directives
The European Parliament has voted to adopt three new Directives that replace the existing Public Sector and Utilities Directives and introducing a new Directive covering the procurement of works concessions and service concessions. It is likely that the Directives will come into effect in March 2014, following formal signature and publication requirements. Member States will have 24 months to implement the Directives but it is likely that implementation will happen sooner in the UK. (15 January 2014)
The adopted texts of the three Directives are available on the European Parliament website.
Bevan Brittan has produced a summary of the Procurement Directives as adopted following the vote: please click here if you would like a copy.

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Cases – UK

Pearson Driving Assessments Ltd v Minister for the Cabinet [2013] EWHC 2082 (TCC) (8 July 2013)
In a case concerning a challenge to the legality of a public procurement process, the court held that it was not necessary for the defendant Minister to give specific disclosure of documents before the Minister's application to lift the statutory automatic suspension was heard.
The court held, in refusing the application for specific disclosure, that consideration must be given to what is fair and just. Despite the claimant's arguments that sight of the documents was necessary to defend the application for the stay to be lifted, the court held that it would not be appropriate to order specific disclosure. The court was concerned that it should be able to make a decision on whether to lift the suspension before all the requisite steps in the proceedings have been carried out. If it becomes clear (during the course of hearing the arguments relating to the automatic suspension) that justice cannot be done without further disclosure, the application to lift the suspension would have to be adjourned.

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Cases – EU

Commission v Netherlands (C-576/10) (CJEU) (11 July 2013)
Which Procurement Directive applies?
In this case the European Commission, bringing a case against the Netherlands, claimed that there was a breach of Public Sector Directive 2004/18 arising from the award of a public works concession contract without a call for competition. The main issue for the CJEU was whether Directive 2004/18 (the 2004 Directive) applied or whether it was the previous directive, Directive 93/37 on public works (the 1993 Directive), that applied.
The decision by the contracting authority in the Netherlands not to go out to tender for the award of the project for a range of community facilities was made in 2002, on the basis that this was a land transaction. In 2002 the authority invited developers to make proposals and at that time the 1993 works Directive was in force.  It was only in 2007 that the authority finally concluded the co-operation agreement on the development and the related land sale.
The Commission alleged that there was a breach of the 2004 Directive. It argued that after the deadline for implementation by member states of the 2004 Directive in 2006, the nature of the proposed contract had been amended in a material way as a result of negotiations between the parties. It was of the view that  the changes were such that the contract awarded became a new contract, triggering a requirement for a new award procedure under the Iressetext principles. That new award procedure should have commenced after the date for implementing the 2004 Directive, and therefore the final award should be subject to that Directive.
The CJEU rejected the Commission’s argument. It confirmed that the applicable directive is the one which was in force at the date that the contracting authority chose the type of procedure and decided that a prior call for competition was not necessary. The relevant decision was made in 2002, the old 1993 Directive applied and so there was no breach of the 2004 Directive The CJE also found that the Commission had failed to demonstrate that the changes negotiated by the parties were material.

Ministeriet for Forskning, Innovation og Videregaende Uddannelser v Manova A/S (C-336/12) (ECJ) (10 October 2013)
Failure to submit full documentation and correction of errors or admissions at the selection stage
This case concerned a competitive procurement procedure run by the Danish Ministry of Science, Innovation and Higher Education for contracts for the operation of seven occupational guidance and advice centres. These are “Part B” (non-priority) services under Directive 2004/18. 
Potential tenderers were required to submit a copy of their most recent balance sheet as part of the application (selection) process. Two potential tenderers did not submit their balance sheets with their applications and so the Ministry asked the two organisations for the missing document and both submitted it. They were then invited to tender to deliver some of the services and both were awarded contracts. One of the other tenderers challenged the decision before the Danish review body which held that the Ministry had violated the equal treatment principle by not rejecting the incomplete applications.
On appeal, the court referred the issue of equal treatment to the CJEU. The CJEU concluded that it does not violate equal treatment to request clarification or further explanatory information at this stage of the process where the information requested can be objectively shown to pre-date the deadline for submitting the application.

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Swm Costruzioni 2 SpA, Manocchi Luigino DI v Provincia di Fermo (C-94/12) (ECJ) (10 October 2013)
Ability to rely on the capacities of more than one third party in demonstrating economic and financial standing
This case was a request for a preliminary ruling made by an Italian review body on the issue of the compatibility of Italian legislation with the provisions of Directive 2004/18. Under the relevant Italian legislation, relating to certain types of works contracts, economic operators were permitted to rely on the resources of only one other entity when demonstrating their economic and financial standing.
The CJEU ruled that this provision is not compatible with the provisions Directive 2004/18 which  require economic operators to be allowed to rely on the resources of other entities to demonstrate their economic and financial standing. The CJEU ruled that the same rule applies to proof of technical/professional capability. The CJEU did, however, indicate that a restriction on the number of entities that may be relied on may be possible, but only where the restriction is imposed on a case by case. 

Belgacom NV v Interkommunale voor Teledistributie van het Gewest Antwerpen (Integan) (C-221/12)  (14 November 2013)
Award of a contract without competition as part of a dispute settlement process – obligation of transparency
This case concerned an agreement between four inter-municipal associations and Telenet under which the municipal associations transferred television broadcasting rights and other services to Telenet without any advertisement or competition.
The facts are quite complex and, in summary, relate to the grant by the inter-municipal associations to Telenet of long term exclusive and non exclusive rights to use their cable networks, a subsequent dispute between the parties and the way in which that dispute was settled. The parties concluded an agreement to settle the dispute in a way that was mutually satisfactory. As part of that agreement Telenet was granted a 38 year lease of the inter-municipal associations’ cable networks, in return for the payment of fees for the maintaining, expanding and upgrading of the network. Telenet was also granted an exclusive right to use the networks for telephony, internet access and to provide the inter-municipal authorities’ subscription television services. The value of the final agreed fees payable by Telenet was €425m.
Belgacom challenged the dispute settlement agreement. It claimed that the award of rights to use the network to Telenet as part of that agreement violated the transparency obligation implied from the free movement rules.  The Belgian court referred several questions to the CJEU. The CJEU confirmed that an allegation of breach of transparency principles could be made under general Treaty principles in this case.  Of particular interest is the CJEU's ruling that failure to advertise under the transparency obligation derived from the free movement rules cannot be justified by the kind of considerations arising in these particular circumstances; such as the wish to settle the dispute and to ensure commercially attractive services for the inter-municipal associations' subscribers.

Comune di Ancona v Regione Marche (C-388/12) (ECJ) (14 November 2013)
Concept of cross-border interest
This case relates to a project for harbour improvements, financed by the European Regional Development Fund, which is one of the structural funds set up by the EU to reduce regional disparities within the EU. The main issues related to the interpretation of the ERDF funding and financial rules and whether or not these had been breached. An additional issue which arose related to allegations that the authority had, as part of the project, awarded a concession contract for the management of a slipway without advertising or following any competitive procedure and so  in breach of Treaty requirements. The CJEU considered whether in this case there was the necessary cross border interest to trigger the Telaustria principles. It concluded that where the concession is "incapable of generating either substantial revenue or an undue advantage for that third party or for the public contracting authority” this does not automatically result in there being no cross border interest.

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News

Crown Commercial Service
A new Crown Commercial Service has been created that brings together the Government Procurement Service, the commercial function of the Cabinet Office, and common goods and services procurement and commercial management currently undertaken by separate government departments, into one organisation. The Crown Commercial Service is now operating as one organisation with a new management structure in place, led by Bill Crothers, the Government’s Chief Procurement Officer and comprising of senior staff from GPS, Cabinet Office and new appointments of commercial specialists from the private and public sector.

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Bevan Brittan’s Procurement Telephone Advice Service

Our Procurement Telephone Advice Service allows local authority and public sector clients telephone access to specialist legal support on all procurement related issues. This service was initially made available to some of the firm’s existing clients and is now being more widely launched to all public bodies.
Our Procurement Telephone Advice Service aims to provide you with an easy and accessible single point of contact for practical and essential procurement advice. You may make use of this service between 9am – 6pm Monday to Friday (excluding bank holidays) in a way which best suit your needs as and when you require our support, whether it is to address a procurement query or to clarify a point of law.
We have two service packages: 

  • Option 1 Pay as You Go: designed to offer you essential procurement advice as and when you need it whilst giving you full control over your legal spend.
  • Option 2 Annual retainer: provides your business with the procurement advice and support you require at a fixed annual cost over a 12 month period.

For more information, or to sign up to one of our service packages please do not hesitate to email Nina Beasley.

 

The Crown Commercial 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 Lot 7: General Litigation and Legal Support Services and Lot 8: Major or Complex Projects.

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