The Procurement Bill was introduced on 11 May 2022 and is currently going through the parliamentary process. In this series of Procurement Bill Bytes we take a detailed look at some of the issues and draw out some of the key changes that contracting authorities and suppliers need to get to grips with.
It should be noted that any of the provisions of the Procurement Bill might change as a result of the process of parliamentary approval. If changes occur to the provisions described in this article, we will update it on our website at the appropriate time.
We are really interested in your thoughts on how these reforms will affect you and are particularly keen to hear any questions you may have on the topics covered in our Procurement Bill Bytes. Please send any questions to firstname.lastname@example.org and our procurement team will endeavour to answer as many as we can in our Procurement Bill Bytes Q&A Webinar next month.
In this article we consider how the Bill indicates that the new public procurement regime will incorporate authority discretion in contrast with the position under the current Public Contracts Regulations 2015 (“PCR”). We identify some parallels and points of reference in existing duties that contracting authorities are subject to, both as public law bodies and under the PCR. We conclude by suggesting steps that contracting authorities and suppliers may wish to take to prepare for the upcoming changes.
How much discretion do contracting authorities currently have?
Under the current legal regime, governed by the PCR, there are multiple areas within a procurement cycle where there is significant scope for the exercise of discretion by expert decision-makers embedded within procuring authorities.
- At the very outset there is significant discretion over whether to procure at all. Nothing in the PCR obliges a contracting authority to outsource and where capability exists in-house there’s no requirement to go out to procurement.
- Once an authority has decided to procure a contract valued above the applicable threshold, however, the obligations in the current regime bite and the contracting authority must ensure equal treatment, non-discrimination and transparency, and act in a proportionate manner. Compliance with those principles is mandatory but, as the Courts have recognised multiple times, there is still room for the exercise of discretion. In the context of tender evaluation, provided the scoring scale adopted allows for evaluator discretion, the Court recognises that it should be slow to set aside the score arrived at by a panel of expert evaluators. See, for example, the comments of Fraser J in Bechtel Limited v HS2 Limited  EWHC 458 (TCC), paragraph 19:
“The court will only interfere in an evaluation if there has been “manifest error”, and when assessing that, evaluators are entitled to act within what is called a “margin of discretion”. The court does not routinely substitute its own view in terms of score for an item, against that of the evaluator who awarded the score to that item, to compare if the two scores align. That would not be the correct legal approach.”
- Many other decisions made in a procurement cycle afford discretion to the decision-maker(s). The Most Economically Advantageous Tenderer is to be assessed “from the point of view of the contracting authority” (PCR 67(1)) giving significant discretion over how award criteria are formulated and weighted. Contracting authorities can decide whether or not to permit variant tenders and whether and if so how to split contracts into lots (PCR 45 & 46) and even after having commenced a procurement contracting authorities enjoy a wide margin of discretion in respect of any decision not to conclude that procurement.
However, there are also significant areas in which no discretion is left to the procuring authority. Often that is where policy reasons require that a consistent approach is adopted. Again these “musts” are evident throughout the procurement cycle so, for example, if a contract meeting the relevant definitions falls above the threshold and is not exempt it must be procured using one of the processes listed in the PCR. Advertised opportunities must be open for specified minimum time periods and bidders falling within certain exclusion grounds must be excluded from competitions. These are just a handful of the multiple ways in which a contracting authority’s discretion is limited under the existing regime.
More limitations come in the context of compliance with the general principles themselves. In the context of the obligation to treat suppliers equally there is scope for a margin of discretion in determining whether or not suppliers’ situations are different but there is no margin for differential treatment where the situations are the same so, for example, evaluators must afford equal credit for equal commitments in different suppliers’ tenders. In the well-known case of Woods Building Services Limited v Milton Keynes Borough Council  EWHC 2011 (TCC) the Court found that evaluators had breached the equal treatment principle by penalising one tenderer for not expressly stating that their project manager would be dedicated to the contract in question but not penalising the other even though they likewise had not made any such statement. In addition, the transparency obligation founds numerous hard-edged obligations under the current system: there is no discretion over whether or not to provide the characteristics and relative advantages of the winning tender to the other compliant unsuccessful tenderers following a competition, for example. In addition, suppliers seeking to challenge procurement processes can point to the general duty of transparency to justify requests for information and disclosure.
How are things going to change?
The first and most obvious change is in the language used. The PCR reflect the language of the EU Directives they were drawn from. Some changes are simple – the PCR use the word “shall” 456 times, the Bill not once. The Bill instead uses “must” (a mere 171 times) or “may not” to set out hard-edged obligations. Both use “may” frequently (225 times in the Bill though on several occasions this is as part of “may not”; 285 times in the PCR). Often this is to signpost a contracting authority to an available option. For example under Section 15 of the Bill a contracting authority “may” engage in preliminary market engagement or publish a planned procurement notice. That permissive language and discretion exists under the current regime, however the Bill introduces more fundamental changes to authority discretion in other areas.
- A core restriction within the current regime is that set processes must be followed to carry out a lawful regulated procurement. However, the intention behind the Bill is to allow far more discretion in the design of procurements. Section 19(2) sets out the processes that are proposed to be available as (i) an open process; or (ii) any other process that “the contracting authority considers appropriate”. This clearly leaves a very significant margin for discretion and scope for contracting authorities to consider how their procurement structure can best serve their needs. Contracting authorities will wish to document the basis on which they consider the process they design to be “appropriate” and there are certain further controls in the Bill but, in principle, that decision rests firmly within the margin of the contracting authority’s discretion and the Court should be slow to intervene. The change here goes well beyond language and serves to devolve and localise decision-making so contracting authorities can adopt procurement processes that suit their needs rather than fit into a pre-defined structure.
- A further change draws from and uses similar language to the “Lord Young reforms” currently found in Part 4 of the PCR. Those provisions were national rules which supplemented the EU Directive and applied, largely, to below threshold contracts not regulated by the main body of the PCR. That part of the PCR required, amongst other things, contracting authorities to “have regard to” guidance issued by the Cabinet Office (see, for example, Regulation 106(3)). The concept of needing to “have regard to” guidance or similar was not used elsewhere in the PCR. By contrast the Bill is underpinned by Section 11 which requires a contracting authority, in carrying out a procurement, to have regard to the procurement objectives, which are to deliver value for money, maximising public benefit, sharing information and acting with integrity. Section 12 likewise requires contracting authorities to have regard to the National Procurement Policy Statement. Duties to “have regard to” are a staple feature of public law and something contracting authorities will be generally familiar with. An example is the public sector equality duty contained in s.149 of the Equality Act 2010 which imposes an obligation on public authorities to have due regard to the need to eliminate discrimination, advance equality of opportunity and foster good relations. Whilst this may be a familiar concept, contracting authorities will likely wish to build in processes to ensure that their procurement practitioners give (and document) appropriate thought to the objectives and anything else they must have regard to throughout the procurement cycle. The concept may be less familiar to some suppliers bidding for public opportunities given the relatively limited scope of the Lord Young reforms in the current regime.
- Finally the Bill represents a shift away from some of the overarching principles that underpin strict obligations in the current regime. Most notably there is no general transparency principle referenced in the Bill. There are specific points within the procurement cycle where transparency will be required, for example, under Section 20 of the Bill a contracting authority must publish a tender notice and any associated tender documents for the purpose of inviting suppliers to submit tenders in an open procedure. Further details as to transparency requirements will follow in secondary legislation but the intention appears to be that there is no general duty of that nature in the new regime.
What can you do now to prepare?
The exact scope and nature of the reforms still remains to be finalised and the Bill is progressing through the committee stage before becoming law but the shift in language does appear to reflect an underlying desire to build discretion in and ensure that the Court allows for such a margin in disputes that come before it. In order to put themselves in a strong position to benefit from the new regime, contracting authorities should consider how to embed and document thought about the procurement objectives in a process and the ways in which flexibility and discretion can be promoted rather than restricted throughout the procurement cycle.