UK Cabinet Office Consultation on New Procurement Regulations

The UK Cabinet Office (CO) has published a consultation on the transposition of the new EU public procurement directives. The three new directives came into force on 17 April 2014. Member States have until 17 April 2016 to transpose them into domestic law.

Policy choices and “copy out” new PCRs

The consultation primarily focuses on the new Public Sector Directive (Directive 2014/24), but is being used to consult on policy choices that are also relevant for the transposition of the new Concessions Directive (Directive 2014/23) and the new Utilities Directive (Directive 2014/25). In addition to consulting on these limited policy choices – i.e. where the Member States have a degree of discretion as to how they transpose the new Directives – the CO has issued a complete set of new public contracts regulations: the Draft Public Contracts Regulations 2015. These follow HMG’s “copy out” approach to transposing EU Directives, arguably sacrificing what limited scope there is for adopting a more coherent set of rules for the sake of avoiding being accused of “gold-plating” EU laws.

In Scotland, the Scottish Government will make its own, separate implementing regulations, procurement being a devolved matter. It plans to issue its consultation shortly, with a view to new Scottish Regulations coming into force at the end of 2015.

Key issues for consultation include:

Light-touch regime: One of the most eagerly anticipated issues has been how the Government intended to give effect to the “light-touch regime” for social and health related services (replacing the previous distinction between Part A and Part B services with a much more limited exclusion for these services). Those services covered by the new “light-touch” regime are listed in Schedule 3 of the new PCRs, following the list of services in Annex XIV to the new Public Sector Directive. Authorities will be required to comply with the “light touch” obligations for any contracts for the procurement of these services where the estimated contract value exceeds the €750,000 threshold. As well as introducing detailed rules on the advertising of these contracts, the PCRs also make provision for principle-based rules for their award requiring compliance with the principles of transparency and equal treatment. In effect, this is essentially the same as the current position for Part B services contracts.

From 18 April 2016 in England, the light-touch regime for health and social services will still sit alongside health sector specific requirements (currently contained in the NHS Procurement, Patient Choice and Competition Regulations (PCCR) 2013), in the same way that the Part B Services regime currently does. To ensure consistency with the general requirements in regulation 3 of the existing PCCR 2013 Regulations, the “mutual reservation” set out in Article 77 of the new Public Sector Directive will not apply to healthcare commissioning in England. Until 18 April 2016 in England, commissioners of clinical healthcare services must continue to follow the existing Part B service regime and the PCCR 2013. Implementation has been delayed to allow healthcare commissioners time to adapt to the new requirements of the light-touch regime.

Sheltered workshops: The new Public Sector Directive extends the ability for Member States to reserve contracts for “sheltered workshops”. It allows contracts to be reserved to supported businesses employing both “disadvantaged” and/or “disabled” persons, the previous rules only covering supported businesses employing disabled persons. It also reduces the percentage requirement for the numbers of disadvantaged and/or disabled employed from 50% to 30%. The CO is seeking views on the guidance it proposes to provide on how to interpret “disabled persons”, “disadvantaged persons”, “sheltered workshop”, and “sheltered employment programme”.

Mandatory e-procurement: In line with the new Public Sector Directive the CO has chosen to defer implementation of the mandatory electronic communication until April 2017 for central purchasing bodies and October 2018 for contracting authorities. There is no discussion of the separate issue we have highlighted as to the extent of the procurement documents that must be made electronically available together with the OJEU contract or other form of call for competition.

Termination of contracts: A new requirement that contracting authorities include a condition in contracts allowing, but not obliging, them to terminate if any of the prescribed three grounds for termination are found to apply. If such a provision is not included for any reason, the new PCRs provide a “deeming” provision whereby it shall be an implied term of the contract that the authority is entitled to give notice of termination in the event that any of the three grounds should arise.

New regime for below-threshold contracts: The new PCRs also refer to new measures recommended by Lord Young of Graffham, the Prime Minister’s Enterprise Advisor. Lord Young’s report ‘Growing Your Business’ (published in May 2013) recommended a number of key reforms to open up public sector procurement to SMEs. These are designed to simplify public procurement, increase transparency and reduce bidding costs, enabling better value outcomes for both Government and industry. The new PCRs implement some of these recommendations, including a requirement that all public sector contracts be advertised on Contracts Finder. These obligations will apply to all central government contracts with a value of ≥ £10,000 (net of VAT) and all sub-central government contracts with a value of ≥ £25,000 (net of VAT). However it will not apply to the procurement of NHS health care subject to the PCCR 2013. The new PCRs also abolish PQQs for contracts below the EU thresholds, introducing in effect a new regime for below EU-threshold procurements.

It should be noted that the 2015 Regulations will only apply to new procurement processes beginning on or after the date on which the 2015 Regulations take effect. It is anticipated that the 2015 Regulations will enter into force in spring 2015.

The deadline for responses to the consultation is 17 October 2014.