Procurement Update – March 2016

This Update contains brief details of recent key developments relevant to those involved in procurement work.

07/03/2016

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:

Crown Commercial Service Procurement Policy Notes (PPNs)

CCS: Procurement Policy Note 16/15 – Procuring steel in major projects
Explains how Government buyers should source steel for major projects in a more strategic and transparent way. It applies to all central government departments, including their executive agencies and non-departmental public bodies. All other contracting authorities in the wider public sector are strongly encouraged to adopt this approach. It applies to infrastructure, construction or other major procurement projects with a significant steel component, where the overall project requirement has a capital value of >£10m.
There is also Steel procurement in major projects: guidance on the application of social issues. (14 December 2015)
 
CCS: Procurement Policy Note 17/15 – Standard EU forms and notices for public procurement
Announces that the new standard forms and notices for procurements under the Public Contracts Regulations 2015 have been published in the Official Journal of the EU. Contracting authorities should use the new standard forms and notices for procurements under the Public Contracts Regulations 2015. They should stop using the current forms and notices as soon as the new ones become available on Tenders Electronic Daily (TED) eNotices or via TED e-Senders system. Note that the commencement date of 3 December in the PPN is incorrect - the Commission Implementing Regulation 2015/1986 actually came into force on 2 December 2015. (2 December 2015)

CCS Procurement Policy Note 18/15 – New threshold levels 2016
Sets out the new threshold levels to apply for the purposes of the Public Contracts Regulations. They come into force from 1 January 2016. (9 December 2015)
See also our Revised EU public procurement thresholds summary that sets out the key thresholds for public sector purchasers.

CCS Procurement Policy Note 01/16: Ensuring compliance with wider international obligations when letting public contracts
This note reminds contracting authorities of their international obligations when letting public contracts. It makes clear that procurement boycotts by public authorities are inappropriate, outside where formal legal sanctions, embargoes and restrictions have been put in place by the Government. (17 February 2016)

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Policy and guidance

CCS: Public Contracts Regulations – Guidance on new subcontracting provisions in the Public Contracts Regulations 2015
The Public Contracts Regulations 2015 provide some additional obligations and flexibilities to enable further transparency and oversight of the working practices of the subcontracting chain, which implement the subcontracting provisions in the new Procurement Directive. There are also new obligations to meet the Government’s policy on prompt payment of invoices. This guidance explains the new rules on implementing the subcontracting provisions. (9 December 2015)

Home Office: Transparency in supply chains – A practical guide – Modern Slavery Act 2015
Section 54 of the Modern Slavery Act 2015 requires certain organisations to develop a slavery and human trafficking statement each year. The slavery and human trafficking statement should set out what steps organisations have taken to ensure modern slavery is not taking place in their business or supply chains. This document provides guidance on who is required to publish a statement, how to write a slavery and human trafficking statement and how to approve and publish the statement. (29 October 2015)

House of Commons Library: Local authority boycotts
This research briefing discusses government proposals in PPN01/16 to introduce new rules and guidance to limit the extent to which local authorities in England and Wales can use boycotts in their procurement and pensions investment policies. (19 February 2016)

DfE: Procurement training for schools
These training modules are designed to help school staff understand public procurement legislation and get together to share effective practice and improve their procurement skills. (20 January 2016)

Bevan Brittan Commissioning Bytes
The new Public Contracts Regulations 2015 replace the old Part B services approach to health and social care contracts with a more formal set of obligations called the 'Light Regime'. We have produced a series of Commissioning Bytes that highlight some practical steps towards being light regime ready. The first five cover:

  • Commissioning Bytes (Introduction): The new public contract regulations are coming to the health sector - How to design a compliant light regime process
  • Commissioning Byte 1: What steps can you take now with your existing contracts to renew or extend them before the April deadline? 
  • Commissioning Byte 2: How do you comply simultaneously with the Public Contracts Regulations 2015 and the regime enforced by Monitor under the NHS (Procurement, Patient Choice and Competition) Regulations 2013 (No.2)? 
  • Commissioning Byte 3: How flexible can your procedure be? How do you give best emphasis to your desired patient outcomes? 
  • Commissioning Byte 4: How do you challenge-proof your procurement?

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Legislation

Utilities Regulations 2016 and Concessions Regulations 2016
See below under Consultations for information on the progress of the draft Utilities Regulations 2016 and Concessions Regulations 2016 that transpose the Utilities Directive 2014/17 and the Concessions Directive 2014/32 respectively.

Public Contracts (Scotland) Regulations 2015 (SI 2015/446)
These regulations implement the Public Procurement Directive 2014/24 in Scotland. They revoke and replace the Public Contracts (Scotland) Regulations 2012. The regulations come into force in Scotland on 18 April 2016. (December 2015)

Commission Implementing Regulation (EU) 2016/7 establishing the standard form for the European Single Procurement Document [2016] OJEU L3/16
The European Single Procurement Document (ESPD") has been published and is in force in England, Wales and Northern Ireland from 26 January 2016. The aim of the ESPD is to reduce the administrative burden on economic operators by providing an EU-wide standard self-declaration document covering grounds for exclusion, selection criteria and shortlisting rules and criteria. The ESPD will be re-useable by economic operators for different procurements, with minimal updating. (5 January 2016)
See our Procurement Alert: European Single Procurement Document published.

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Consultations

Cabinet Office / CCS: Government Response to the Consultations on UK Transposition of new EU Procurement Directives – Utilities Regulations 2016 and Concessions Regulations 2016
Sets out the Government's response to the August 2015 consultation on the draft Utilities Regulations and Concessions Regulations 2016. The consultation responses have confirmed that the draft implementing regulations implement the Directives effectively and do so in the best way. The Government now intends to implement the new Utilities Contracts Regulations and Concession Contracts Regulations by 18 April 2016 for England, Wales and Northern Ireland. (3 February 2016)

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Cases – UK

Counted4 Community Interest Co v Sunderland City Council [2015] EWHC 3898 (TCC)
Lifting of automatic suspension
C4 was the incumbent provider of the clinical aspect of substance misuse services to the Council under an existing contract. It participated in  the Council's re-procurement of substance misuse treatment and harm reduction services, but was unsuccessful. The contract was awarded to the previous contract holder, an NHS trust. C4 brought proceedings challenging the award; it contended that the procurement process was unlawful, in breach of EU regulations and that there was an implied tender contract. In addition to allegations relating to the scoring of bids, C4 alleged that the Council had failed to take measures to prevent, identify, and remedy a conflict of interest of a member of the evaluation panel. The issue of proceedings triggered the automatic suspension on contract-making under Regulation 95 of the Public Contracts Regulations 2015. On the Council's application to lift the automatic suspension the court held that,  the test was whether there was a serious issue to be tried, whether damages would be an adequate remedy, and whether the balance of convenience favours maintaining the suspension pending trial (the American Cyanamid principles). In refusing the application to lift the suspension the Court was satisfied that there was a serious issue to be tried in relation to both the conflict of interest claim and the scoring allegations, which the Court found were not  hopeless, frivolous or vexatious. While C4's claim to damages was readily calculable, if the suspension were to be lifted the workforce would be lost and it would take years to develop skills that were not available in the wider market. The Court considered the balance of convenience test in the context of the public interest. The Court held that there was a public interest in the local authority complying with EU legislation. The current service did not create such a risk to the users of the service that the public interest outweighed the prejudice to C4 if the suspension were lifted. From a public interest viewpoint, a further delay of two to three months in the lead up to trial could not sensibly be said to be critical and the risk of staff leaving was not great. Considering all of the factors together, on the balance of convenience, the automatic suspension should not be lifted, but it should rather continue until trial.
In applications to lift the automatic suspension, the giving of a cross-undertaking by the Claimant is common, albeit not standard. In this case C4 offered a cross-undertaking limited to reasonable additional management costs of the Council from the expiry of its current contract to the date of trial. In light of the Court's finding that the Council would not suffer any loss if the suspension was not lifted, it was happy to accept that limited cross-undertaking. (18 December 2015)

Salt International Ltd (Formerly Nationwide Gritting Services Ltd) v The Scottish Ministers [2015] ScotCS CSIH 85
Breach in circumstances of "extreme urgency"
Salt International (S) appealed against a finding that the Scottish Ministers' (M) purchase of salt without publishing a contract notice had been justified by the extreme urgency brought about by the weather conditions over two consecutive winters, albeit that the urgency in the second winter had been caused by M's failure to act sooner in relation to its salt supply arrangements. M cross-appealed against that latter finding.
S did not consider that the Public Contracts (Scotland) Regulations 2006 applied to salt purchasers so they did not consider whether they were justified in using the negotiated procedure on the basis of extreme urgency (Regulation 14(1)(a)(iv)). On a breach being alleged by S it was for M to prove that circumstances of extreme urgency existed at the time of the impugned purchase, and the courts must examine the evidence of such circumstances "with a critical, although not a sceptical, eye". Those circumstances had been proved and the appeal court refused to interfere with the lower court's findings or conclusions.
A breach of one of the duties owed to economic operators under the Regulations is actionable only if loss is shown, and it is for the economic operator to show loss. In this case the lower court had found the evidence of S's commercial director incredible and unreliable, and found that S would not have tendered in any event in relation to either winter, and even if it had its bid would have been unsuccessful because of its limited track record and the fact that it only had one year's accounts. Accordingly S had not suffered any loss. The appeal court found those conclusions had been adequately explained and justified and refused to interfere with the lower court's findings.
(1 December 2015)

Lightways (Contractors) Ltd v Inverclyde Council [2015] ScotCS CSOH 169
Declaration of ineffectiveness re call-off contract for street lighting services
This decision is notable as it represents the first declaration of ineffectiveness in the UK courts.  Unfortunately, it comes without an indication from the court as to the level of the "effective, proportionate and dissuasive" civil financial penalty that is required to be imposed on the contracting authority when a declaration of ineffectiveness is granted, as this decision was deferred to a later date.
The Claimant, who was a provider of street lighting services, issued an application for summary judgment in its claim against Inverclyde Council issued under the Public Contracts (Scotland) Regulations 2012.  The claim asserted breach of Regulation 19(3) (which is reflected in Regulation 33(4), (7) and (8) of the Public Contracts Regulations 2015 in England and Wales), which provides:

"Where a contracting authority awards a specific contract based on a framework agreement, it must:
(a) Comply with the procedures set out in this regulation; and
(b) Apply those procedures only to the economic operators which are party to the framework agreement."

The basis of the claim was that the Council had awarded a contract to Amey Public Services LLP ("Amey LLP") as a purported call-off from a framework agreement.  However, Amey LLP was not listed as a recognised firm on the framework agreement.  Its sister company Amey OW Limited ("Amey OW") was.  The Court found at summary judgment that this amounted to an illegal direct award of a public contract and declared the contract ineffective. (15 December 2015)

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EnergySolutions EU Ltd v Nuclear Decommissioning Authority [2015] EWCA Civ 1262 (CA)
Energy Solutions (ES) issued a claim for damages  arising from its unsuccessful tender to decommission nuclear installations for the respondent public authority. ES did not issue its claim during the standstill period. Had it done so the automatic suspension on contract-making (Regulation 47G) would have been triggered. Had NDA then applied to lift the automatic suspension, ES may have been required to give a cross-undertaking in damages. NDA argued that ES's failure to issue proceedings during the standstill period meant that any losses it suffered were attributable to that failure, rather than to any breaches by NDA of the Regulations (effectively arguing that issuing within the standstill period was a pre-condition to a damages claim). At first instance the Court held that that could not be decided as a preliminary issue but required evidence as to what ES and NDA would have done had the proceedings been issued in the standstill period. NDA also argued that where a breach of the Regulations is established, an award of damages is discretionary and that a claimant must establish that the breach is "sufficiently serious" in order for damages for be awarded.
The Court of Appeal held that a failure to issue a claim within the standstill period does not break the chain of causation between a contracting authority's breaches and the claimant's losses, effectively meaning that issuing within the standstill period is not a pre-condition for a damages claim.  Further, the Court of Appeal held that the English courts have no discretion about whether to award damages to unsuccessful tenderers who were shown to have suffered loss as a result of public authorities' breaches of duty under those regulations. Damages were to be assessed on established English law principles and there were no grounds for importing a requirement that a breach be "sufficiently serious" in order for damages to be awarded. (15 December 2015)

R (QSRC Limited) v National Health Service Commissioning Board (NHS England) [2015] EWHC 3752 (Admin) (Admin Ct)
The claimant, a healthcare services provider, applied for judicial review of a decision by the defendant commissioning board, NHS England (NHSE), to refuse to enter into an interim contract with it for specialist services pending a national procurement exercise on the basis that it was not an "existing provider" of healthcare services. The court held that the decision was not unlawful. Although the claimant was an existing provider under Monitor's Guidance, NHSE had provided objective justification for its decision and had complied with reg.3(2) of the National Health Service (Procurement, Patient Choice and Competition) Regulations 2013 (No 2) (SI 2013/500). (21 December 2015)
See our analysis of this case on our website.

Central Tenders Board v White (t/a White Construction Services) (Montserrat) [2015] UKPC 39
The Privy Council held that the Central Tenders Board of the Government of Montserrat had not acted ultra vires in accepting a tender for a public works contract despite the tender's non-compliance with certain of the procedural conditions set out in the procurement process, specifically the requirement that tenders should specify the time for completion of the works. The instruction to tenderers stated that a failure to comply strictly with instructions was "liable to cause the tender to be rejected." Conversely the instructions stated, for example, that any attempt to bribe a decision-maker "will result in instant rejection of the tender." In relation to failures to comply, therefore, the Board had a discretion to accept non-compliant tenders. Had it had no such discretion, and had the acceptance caused another tenderer to lose a chance of winning the contract, then the Board would have been in breach of its implied contractual duty to treat all tenderers fairly and equally. (6 October 2015)

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Cases – EU

RegioPost GmbH & Co KG v Stadt Landau in der Pfalz (C-115/14)
The court held that it was permissible to include in a public contract a special contract condition requiring the successful contractor to pay the minimum wage set by regional law, and that a contractor could be excluded under Art.26 of Directive 2004/18 for refusal to agree to such a condition. (17 November 2015)

Consorci Sanitari del Maresme v Corporació de Salut del Maresme i la Selva (C-203/14)
The case concerned a contract for MRI services in health centres awarded under Directive 2004/18. Spanish law required tenderers to provide a classification certificate in order to participate in the tender process. Maresme was a public sector entity that tendered for the contract. It was unable to provide a classification certificate as it was a type of body which was not permitted to register on the classification system which issued those certificates. The contracting authority purchaser excluded Maresme from the award procedure. Maresme challenged the exclusion decision. 
The ECJ first of all considered the question of whether the tribunal considering the case was a type of body (a “court or tribunal”) which had standing to seek a preliminary ruling from the ECJ. The ECJ concluded that it was. The ECJ then went on to consider an argument by Spain that the ECJ had no jurisdiction because the case concerned a purely “internal” situation because registration was only required for Spanish undertakings The ECJ rejected this argument, confirming the established principle that the procurement directives are not limited to internal situations only. The ECJ also confirmed its previous case law, finding that a public authority has a right to participate as a tenderer in award procedures covered by the procurement directives.
(6 October 2015)

Orizonte Salute – Studio Infermeristico Associato v Azienda Publicca di Servizi alla persona “San Valentino” (C-61/14)
This case arose from proceedings in an Italian concerning contracts for nursing services. During the proceedings questions arose concerning the compatibility with the Remedies Directive of court for bringing proceedings in public procurement.
The decided that imposition of court fees constitute “procedural rules”. Procedural rules are subject to the general EU law principle that they must not render “practically impossible or excessively difficult” the exercise of rights. In addition, procedural rules must not “compromise the effectiveness” of the Remedies Directive.
The ECJ decided ruled that fees of the kind imposed in this case did not violate EU law. The fees did not exceed 2% of the relevant contract value. (6 October 2015)

Impresa Edilux v Assessorato Beni Culturali e Identità Siciliana (C-425/14)
This case concerned  a public works for the restoration of Greek temples in Sicily. The contract was below the threshold of the Directive 2004/18 so the ECJ considered the applicability of Treaty principles. The contracting authority required tenderers to sign a declaration as a condition of participation in the tender process. The declaration included and undertaking by tenderers relating to rules of behaviour in the tender process aimed at preventing the infiltration of organised criminal activity into public procurement and to protect transparency and competition.
The ECJ ruled that it is in principle acceptable to exclude tenderers that fail to undertake commitments of this kind provided that the principle of proportionality is respected. The ECJ then applied the principle of proportionality to the commitments require in the declaration. It concluded that most of the commitments were lawful but that some of the commitments breached the proportionality principle. They went beyond what was necessary to achieve their objectives. . 
Applying the proportionality test, the ECJ, first, rejected an argument that a declaration was not lawful because it was an ineffective means to address the objective of preventing infiltration of organised crime.
The ECJ then concluded that most of the commitments required by the Declaration were lawful, as they did not go beyond what was necessary to achieve their objectives. (22 October 2015)

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Ostas celtnieks SIA v Talsu novada pašvaldība (C-234/14)
Reliance on third party resources to perform a contract
This case concerned the provisions in Articles 47 and 48 of Directive 2004/18/EC which permit an economic operator to rely on the capacities of third parties to demonstrate (1) economic and financial standing; and (2) technical and professional ability to deliver elements of a contract. Where an economic operator wishes to rely on the capacities of third parties then it must prove to the contracting authority that it will have at its disposal the necessary resources. It can do this, for example, by providing a written undertaking from the third party confirming that the resources will be made available.
Similar provisions can now be found in the Public Contracts Regulations 2015 at Regulation 63(1). The provisions specifically provide that an economic operator can rely on the capacity of a third party “regardless of the legal nature of the links” between them.
In this case a local authority in Latvia published a call for tenders for road improvement works. The tender documents included conditions applying in the event that the tender was awarded to an economic operator that relied on the capacities of other contractors for performance of the contract. In that case the economic operator was required to enter into a co-operation agreement or a partnership agreement with the third party contractors before the contract could be awarded. It was also a requirement that the terms of the co-operation agreement or partnership agreement must include a joint and several liability provision.
The ECJ held that this requirement was too restrictive. It confirmed an economic operator tendering for a contract and relying on the capacities of third parties should be free to choose the legal nature of the links it intends to establish with those third parties. (14 January 2016)

News

Bevan Brittan's procurement seminars

  • Commissioners' Light Touch Regime: London (1 March 2016), Leeds (15 March 2016), Bristol (18 April 2016)
    This interactive seminar aims to help commissioners of healthcare services get to grips with the new rules which are coming into force within April. Attending will help you understand the way the new regime applies and how to navigate the new rules. There will be a focus on practical advice and the management of the risks for NHS procurement of health care.
  • Procurement Update: Bristol (1 April 2016), London (19 April 2016, a.m. and p.m. sessions), Leeds (20 April 2016), Birmingham (21 April 2016)
    Our Procurement team will cover legislative and policy developments as well as looking at recent EU and UK court cases and how these affect procurement in practice.
  • Effective Local Government Contract Management and Renegotiation: Birmingham (12 April 2016)
    This seminar explains in simple terms how Councils can manage every step of the process from procurement and service delivery to ending a contract and building a reprocurement strategy.

See the Events page on our website for more details and to book a place.

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

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