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 email@example.com and our procurement team will endeavour to answer as many as we can in our Procurement Bill Bytes Q&A Webinar next month.
Under the Bill frameworks and dynamic purchasing systems are replaced with three commercial purchasing tools: frameworks, open frameworks and dynamic markets. This article examines how each of those tools work and explores the differences (and similarities) with the existing regime.
“A framework is a contract between the contracting authority and one or more suppliers that provides for the future award of contracts by a contracting authority to the supplier or suppliers”. (Section 44(2))
An above threshold framework is itself a public contract under the Bill and will therefore need to be awarded and managed in accordance with the Act. This means that the procurement objectives set out in Section 11 will apply and that the award must either be made in accordance with the competitive award procedures in Section 18 or must be awarded directly (see our Procurement Bill Bytes on these processes, Byte 2 and Byte 4)).
The requirements for establishing a framework under the Bill set out in Section 44(5) are broadly familiar. The following information must be set out in the framework, which is designed to promote transparency and compliance:
- a description of goods, services or works to be provided under contracts awarded in accordance with the framework (i.e. for call off contracts);
- the price payable, or the mechanism for determining the price payable, under such contracts;
- the estimated value of the framework (which is to be the estimated value of all of the contracts to be awarded under the framework);
- the selection process for awarding call off contracts in accordance with the framework;
- the term of the framework;
- which contracting authorities are entitled to award call off contracts under the framework; and
- whether the framework is awarded pursuant to clause 47 (open frameworks – see below).
The Bill also permits authorities to charge suppliers a fee where they are awarded contracts under a framework (based on a fixed percentage of the value of the contract) (Section 44(7)).
As is the case under the existing regime, a framework term may not exceed 4 years (with a longer term for defence and security frameworks and utilities frameworks of 8 years) (Section 45).
However, if the contracting authority considers the nature of the goods, services or works to be supplied under call off contracts means a longer term is required they can exceed that maximum term. If this is the case, the authority must set out the reasons for exceeding the standard term in the Tender Notice or Transparency Notice (the notice notifying the market of the intention to run a competitive award procedure or make a direct award respectively).
There is no reference in the Bill or explanatory notes to the circumstances which might warrant a lengthening of the term and it is notable that the requirement under the PCR that the 4 year term only be exceeded in exceptional circumstances has not been carried forward into the Bill. This is perhaps an area which will be addressed further in guidance.
On establishing the framework, an authority will be checking whether suppliers are excludable suppliers or excluded suppliers as defined by Section 54 (i.e. whether the discretionary or mandatory exclusion grounds apply and whether the circumstances giving rise to those grounds are likely to occur again or whether the supplier is on the debarment list). It must exclude an excluded supplier (mandatory grounds apply) and may exclude an excludable one (discretionary grounds).
This is similar to the existing approach. However, the Bill also sets out that a framework cannot permit the award of a call off contract to an excluded supplier and further that it will be an implied term of every framework that the authority may exclude suppliers from call off competitions under that framework where they have become excluded or excludable suppliers since the framework was established (or the authority has subsequently discovered that to be the case) (see Section 46).
Awarding contracts under frameworks
The Bill preserves the existing routes for awarding call off contracts (with or without further competition). It sets out that competition is the default and that a call off contract can only be awarded without competition in two circumstances: (1) where only one supplier is party to the framework; or (2) where the framework sets out both (i) the core terms of the public contract; and (ii) the objective mechanism for supplier selection.
The obligation for an objective means of determining how contracts are awarded where there is no competition replicates the position under the PCR (although “objective mechanism” possibly provides a clearer steer towards a pre-defined system than the PCR requirement of “objective conditions”). However, the position on the terms is different. The PCR requires that awards without competition can only be made where the framework sets out “all the terms governing the provision of the works, services and supplies concerned” [emphasis added]. Core terms under the new proposals is not a defined term but is intended to cover key terms such as deliverables, standards, pricing, and basic boilerplate clauses such as warranties, indemnities, termination provisions, confidentiality, disputes, variations etc. There may be little difference in practice but the clarity is helpful.
“An “open framework” is a scheme of frameworks that provides for the award of successive frameworks on substantially the same terms”. (Section 47(1))
Section 47 of the Bill contains the new open framework which is described as scheme of frameworks awarded in succession but functions like a longer framework which can be re-opened to the market and tweaked around the edges at defined intervals. The benefit is the framework panel can be refreshed allowing new entrants to the market to join.
Operating open frameworks
The key operating principles are set out below.
- The successive frameworks must be awarded on substantially the same terms meaning the award is capable of being made by reference to the same tender notice without substantial modification (as described in S31(3)).
- The open framework must make provision for further frameworks to be awarded (this could for example be annually or biannually but must be (a) at least once in the period of 3 years following the award of the first framework; and (b) at least once in each five year period following the award of the second framework).
- The frameworks succeed one another so that each framework expires on the award of the next.
- The total term is eight years from the award of the first framework.
- There must be at least two suppliers for the open framework to work. If only one supplier is admitted to the framework it must expire after 4 years.
- The open framework must be competed and can never be directly awarded.
How existing suppliers are readmitted to the open framework depends on the number of suppliers that can be a party to the framework.
- Number of suppliers is limited: If there is a limit on the number of suppliers that can be party to the framework then an existing supplier can be readmitted on the basis of either:
- a tender relating to an earlier award under the scheme (either a tender under a previous mini-competition or even potentially (although this is not expressly stated) its tender for the first framework); or
- a new tender relating to the current award.
- No limit on number of suppliers: If there is no limit then the authority is also able to readmit a supplier based on the fact that the supplier has been awarded a framework already under the scheme (so there is no need for the authority to reconsider an earlier or a new tender).
Whilst this process has the potential to increase efficiency, the current drafting in the Bill does not resolve some of the practical issues we highlighted in our earlier article on this topic around comparing existing and new tenders in the successive frameworks – see here. It seems likely that there will be further guidance on this topic in the lead up to the provisions coming into force which may resolve some of these practical questions.
Example open framework
The Dynamic Purchasing Systems (DPS) which exist under the current regime are fully electronic systems which can be used for commonly used, commodity type purchases. The defining features are that they are open to new suppliers throughout their lifespan and all suppliers on the DPS (or at least in the relevant category) must be invited to tender for opportunities.
Under the Bill, DPSs have been expanded into “Dynamic Markets” which can be used for all procurements. They function as a qualification tool creating a ready pool of bidders who meet the authority’s conditions of participation. The authority is then able to award public contracts by reference to suppliers’ membership of the market (i.e. to run a competitive tendering procedure under Section 18 which excludes suppliers who are not members of the dynamic market).
Establishing dynamic markets
Dynamic markets can be established by any contracting authority including those that are centralised procurement authorities and special utilities dynamic markets are permitted for the award by utilities of public contracts that are utilities contracts.
Before establishing a dynamic market the authority must publish a Dynamic Market Notice setting out its intention to do so. This notice must then be updated to notify the market as soon as reasonably practicable after the dynamic market is established.
As the conditions for membership cannot be modified during the term of the market, the authority will need to be clear about these at the outset. The authority must be satisfied that any conditions are a proportionate means of ensuring members have the legal and financial capacity and the technical ability to perform the contracts to be awarded by reference to membership of the market.
Unlike under the existing regime there is scope for charging fees to suppliers but, again, this must be clear at the outset. The documents which establish the dynamic market can provide for fees to be charged when suppliers are awarded a contract by reference to their market membership (in which case they must be a fixed percentage of the estimated contract value). For utilities dynamic markets the position is slightly different as fees can be charged in connection with obtaining membership of the market
Operating dynamic markets
Membership: The authority must:
- Accept applications for membership of the dynamic market (or part of it) at any time in the life of the market and must consider those applications within a reasonable period. It cannot limit the number of members.
- Admit all suppliers satisfying the conditions for membership to the market as soon as reasonably practicable. This is subject to them not being excluded suppliers (or excludable suppliers which the authority has decided to exclude).
- Inform suppliers of the outcome of their application (together with the reasons for the decision) as soon as reasonably practicable.
- Remove a supplier from the market if the supplier is entered onto the debarment list for a mandatory exclusion ground (and inform the supplier of its decision to do so).
The authority may remove a supplier if:
- it is an excluded supplier because a mandatory ground exists (but the supplier is not on the debarment list);
- if the supplier has become an excludable supplier since it joined the market (or the authority has since discovered that to be the case); or
- the supplier no longer satisfies the conditions of membership.
(provided it informs the supplier of its decision to remove them and provides reasons)
Competitions: Competitions for contracts under a Dynamic Market are run in accordance with Section 18 with requests to participate or tenders invited by way of a Tender Notice (for above threshold contracts) and with suppliers who are not members of the dynamic market being excluded. For detail on the procedures detailed in Section 18 and the time limits which will apply to such procedures see Procurement Bill Byte 4.
Note, however, that before excluding tenders from suppliers who are not already members of the market, the authority must consider any applications for membership made by such suppliers (unless due to exceptional circumstances arising from the complexity of the procurement it is not possible to do so before the relevant deadline).
Notices and timeframe: There is no time limit on the operation of a dynamic market. However, the Dynamic Market Notice must be updated as soon as reasonably practicable where the market is modified or where it ceases to operate.
 Section 79 which relates to regulated below-threshold contracts notices indicates that the requirement to publish a below-threshold tender notice does not apply where the contracting authority advertises only for the purpose of inviting tenders from particular or pre-selected suppliers (S79(2)). This might include those who are part of a framework or dynamic market.