Buying in a crisis – UK and Scottish Governments clarify how the public sector procurement rules can be applied in COVID-19

United Kingdom

Correct as of 5pm on 26/03/2020. This article is being maintained.

Useful clarification on the application of the procurement rules to the current COVID-19 crisis has now been published by the UK and Scottish governments. Procurement Policy Note on Responding to COVID-19 (PPN) and the Coronavirus - procurement regulations during outbreak: SPPN 4/2020 (SPPN) set out key information and guidance for contracting authorities and suppliers on how goods, services and works can be urgently procured in response to the COVID-19 outbreak in England and Wales, and Scotland respectively. 

The PPN and SPPN highlight several options available to contracting authorities under the Public Contracts Regulations 2015 (PCRs) and the Public Contracts (Scotland) Regulations 2015 (PC(S)Rs) to expedite and streamline the procurement process in compliance with the procurement rules. The guidance does not seek to change the rules, but instead to clarify how various features of the procurement rules can be used to enable contracting authorities to respond quickly to fast-changing needs. 

That said, contracting authorities will need to ensure their actions in taking advantage of the streamlined processes are properly justified, and suppliers will need to ensure that the mechanisms are not being misused. As such, if there is a need for an urgent procurement, contracting authorities should first explore whether they can, for example, expedite timescales or exploit existing framework contracts, before turning to making a direct award. And in circumstances where a contracting authority may look to extend a contract beyond its termination date due to the disruption caused by COVID-19 (such as workforce changes), it will need to properly test the practical reasons which are impeding it from running a normal procurement process.

Whilst no specific guidance has been produced, contracting authorities procuring under other regulations such as the Defence and Security Public Contracts Regulations 2011 or the Utilities Contracts (Scotland) Regulations 2016 will need to separately assess the COVID-19 position under similar provisions in those regulations. 

The UK Government has also recently published its Procurement Policy Note on Supplier relief due to COVID-19 offering useful guidance on how contracting authorities can ensure the payment of their suppliers and maintain service continuity during and after the current COVID-19 outbreak. In addition, the note provides practical advice on the actions a contracting authority can take to respond to supplier claims of 'force majeure' or contract 'frustration', including working with suppliers to amend or vary contract requirements instead.

Direct award due to extreme urgency, absence of competition or protection of exclusive rights

In certain circumstances, contracting authorities can directly award a contract without competing or advertising the requirement. Both regulations set out a four-part test that needs to be met when directly awarding a contract due to extreme urgency, which the guidance explains further within the context of COVID-19:

  1. Are there genuine reasons for extreme urgency, for example, the need to respond to COVID-19 immediately because of public health risks?
  2. Are the events that have led to the need for extreme urgency unforeseeable, for example, because COVID-19 and its consequences are not something the authority could have predicted?
  3. Is it impossible to comply with the usual timescales in the PCRs or PC(S)Rs, and is there no time to run an accelerated procurement or to place a call-off contract under an existing commercial agreement?
  4. Is the situation attributable to the contracting authority, for example due to it failing to deliver something in time?

Contracting authorities are advised to record written justifications of the reasons above, and should re-assess these tests for any subsequent procurements, especially considering that COVID-19 may no longer be considered as an unforeseeable event in the future.

Alternative grounds for a contracting authority to make a direct award include where the works, goods or services needed for COVID-19 could only be supplied by a particular supplier due to technical reasons, such as only one supplier having the capacity to respond on the scale required, or because only that supplier owns the exclusive rights (including intellectual property rights) to exploit a technology. However, in using this basis, contracting authorities will need to ensure that they are not artificially narrowing the scope of the requirement by over-specifying the requirement and there is no reasonable alternative or substitute available.

Using a standard procedure with accelerated timescales due to urgency

Contracting authorities can also reduce the minimum timescales using the open, restricted or competitive procedure with negotiation if a state of urgency for COVID-19 renders the standard procurement timescales impracticable. For procurements carried out under the open procedure, timescales can be reduced to 15 days for receipt of tenders plus a minimum of 10 days for the standstill period. Contracting authorities should set out clear justifications for using the reduced timescales in their OJEU contract notices and the PPN and the SPPN helpfully suggest wording for COVID-19 circumstances.

Using the light-touch regime or small lots options available in the regulations

Contracting authorities can also consider the use of the Light Touch Regime for specific health and social care related services or structure their procurement if possible, to fall within the small lots regime available under each set of regulations. 

Using an existing framework agreement or dynamic purchasing system

Established framework agreements or dynamic purchasing systems are also an effective and efficient means of rapid procurement to respond to COVID-19 as long as:

  • the authority was originally identified as a customer in the contract;
  • the contract was originally procured in accordance with the PCRs/PC(S)Rs;
  • the goods, services or works being procured fall within the scope of the contract; and
  • the terms of the contract already meet the contracting authority’s requirements without the need for significant changes.

Extending or modifying an existing contract

Contracting authorities may be able to extend or modify an existing contract under Regulation 72 of the PCRs and PC(S)Rs in response to COVID-19 as long as: 

  • the need to modify was brought about by circumstances which a diligent contracting authority could not have foreseen;
  • the modification does not alter the overall nature of the contract;
  • any increase in price does not exceed 50% of the value of the original contract or framework agreement.

Modifications should be limited to what is necessary to address the unforeseeable circumstance, but multiple modifications are permitted so long as each one does not exceed 50% of the original contract value. The modifications should be published in an OJEU notice and written justifications should demonstrate that the authority’s decision was related to the COVID-19 outbreak by reference to specific facts, for example, because staff are off sick and cannot complete a new procurement exercise. Authorities are also advised to consider the other grounds available under regulation 72 for extending a contract and if more than one ground applies to ensure that all relevant grounds are included in its written justification.

Changing the way suppliers are paid

The UK Government’s  Procurement Policy Note on Supplier relief due to COVID-19 covers supply chain disruption, payment mechanisms and action in response to supplier claims of 'force majeure' or contract 'frustration'. Contracting authorities are encouraged to urgently review their contract portfolio and put in place suitable payment mechanisms such as forward ordering or advance payments to ensure supplier cash-flow and avoid suppliers claiming other forms of contractual relief such as force majeure. Pragmatic advice for the authorities includes recording these payment decisions appropriately, contacting at-risk suppliers and ensuring contingency measures are put in place, so that invoices and payments are not delayed due to staff illness from COVID-19. In exchange, suppliers are expected to act on an open book basis, making cost data available to authorities and continuing to pay employees and subcontractors. Suppliers are warned they should not expect to make profits on elements of a contract that are undelivered during this period and that if they are found to be taking undue advantage, or failing in their duty to act transparently and with integrity, contracting authorities will take action to recover payments made.

Where contracts are difficult to perform due to COVID-19, the UK government advises that contracting authorities should work with suppliers and, if appropriate, provide relief against their current contractual terms (for example relief on KPIs and service credits) to maintain business and service continuity rather than accept claims for other forms of contractual relief, such as force majeure or frustration. This should be undertaken in compliance with the relevant procurement regulations. Suppliers are advised to identify which amounts in their invoices relate to services they are continuing to supply (i.e. business as usual) and which are attributable to the impact of COVID-19 and to actively discuss any issues with the contracting authority.