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Draft Public Contracts Regulations published for consultation

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30/09/2014

On Friday 19 September the Cabinet Office issued for consultation a set of draft Regulations to implement the new Public Contracts Directive in England, Wales and Northern Ireland. The Directive came into force on 17 April 2014 (see our article) and the UK has two years to enact it into national legislation. The Cabinet Office has said all along that they want to enact it as early as possible “to take advantage of the new flexibilities as soon as possible”.

It is not clear when the Cabinet Office envisages that the new Regulations will become law, but the fact that they are dated 2015 suggests it will be sooner rather than later. This could cause problems in that the new Regulations require the use of new EU forms that the EU has not yet issued, and there is a suggested workaround for this. The new Regulations will also come into force before regulations implementing the new Concessions Directive. There seems to be a feeling that they are being somewhat rushed through. The consultation period to comment on the draft Regulations is only four weeks, until 17 October, the reason being that the Cabinet Office has been consulting on policy issues with key stakeholders throughout the summer.

Approach to drafting the new Regulations

The Cabinet Office has adopted a ‘copy out’ approach to avoid ‘gold plating’. To translate the jargon, this means that they have simply transposed the Directive word for word into Regulations where possible, to avoid making the rules harsher in the UK than they are in Europe (which is what ‘gold plating’ means). Unfortunately, the wording of the Directive is not always clear, or indeed consistent, and so in the Technical Note on Drafting that accompanies the consultation, the Cabinet Office explain the approach they have taken and invite comments on this.

The draft Public Contracts Regulations have been issued first for consultation and it is intended that the approach agreed following this consultation will be adopted for the analogous provisions in the Utilities and Concessions Regulations that will follow.

Helpfully, the structure of the draft Regulations closely follows the structure of the Directive and in fact, Regulations 7 to 82 are numbered the same as the corresponding article in the Directive, making it easy to refer back to the Directive. Part 3 of the Regulations reproduces the wording of the Remedies Directive, which should mean that there will not be a need to refer to a separate set of regulations on remedies.

The ‘light touch’ regime for social and other services

Most of the Directive is mandatory so the UK has had to adopt it without amendment (in accordance with its policy of ‘copy out’ and no ‘gold plating’ mentioned above). There are some areas where it does have discretion and a key one is what it is calling the ‘light touch’ regime for social and other services that in effect replaces some of Part B (the other Part B services are now subject to the full regime). As predicted, the Cabinet Office has adopted a ‘light touch approach’ to implementing the light touch regime and has simply copied out the mandatory parts of Articles 74 and 75. Article 76 of the Directive requires Member States to put in place national rules for the award of social and other services contracts in order to ensure contracting authorities comply with the principles of transparency and equal treatment of economic operators. They are free to determine the procedural rules applicable as long as such rules allow contracting authorities to take into account the specificities of the services in question. The UK has implemented this through Regulation 76 which gives contracting authorities considerable freedom to conduct such procurements as they see fit, imposing “reasonable and proportionate” time limits on economic operators.

This regime will apply to the types of contracts specified in Schedule 3 of the draft Regulations (such as health, social and related services, administrative social, educational, healthcare and cultural services, most legal services, and hotel and restaurant services), if they are above a threshold of EUR 750,000. However, it will not apply to contracts that are covered by the NHS Procurement, Patient Choice and Competition Regulations 2013 until 18 April 2016, “to allow healthcare commissioners time to adapt to the new requirements of the light touch regime”.

Help for SMEs – Lord Young’s reforms

Alongside the EU procurement reform, the Government was also looking at how UK procurement law could be changed to make it easier for small and medium sized enterprises (SMEs) to participate in public procurement. Lord Young issued a report, ‘Growing Your Business’, in May 2013 recommending a number of key reforms. The Government accepted these recommendations and consulted on the principles of these reforms in September 2013, announcing the results and its intention to legislate in its ‘Small Business: Great Ambition’ publication in December 2013.

Regulations 105-109 implement these reforms by:

  • Abolishing PQQs for below-threshold contracts but requiring an award notice to be published on Contracts Finder
  • Introducing a standardised PQQ for above-threshold contracts. The PQQ will be contained in Cabinet Office guidance
  • Requiring all public sector contracts (except those from maintained schools or Academies or those that are not advertised in any other way) over £10,000 (central government) or £25,000 (local authorities) to be advertised on Contracts Finder
  • Requiring that all public contracts (except those awarded by maintained schools or Academies) and sub-contracts contain 30 day payment terms (which will be implied if they are not expressly included).

Policy decisions by the UK

Some aspects of the Directive were left open for Member States to implement via national measures. We now know the stance that the UK has taken on some key issues such as:

  • Dividing contracts into Lots – The UK has chosen not to implement the option of requiring all contracts to be divided into separate lots but has opted for the flexibility to combine several or all lots and award them to one tenderer, provided that they reserved this right to do so in the contract notice.
  • Mandatory and discretionary exclusions – Regulation 57 sets out the specific offences which are grounds for mandatory exclusion of bidders from the tender process and has chosen to implement the maximum five year exclusion period. The grounds for discretionary exclusion are reproduced from the Directive and again the UK has chosen to implement the maximum three year exclusion period for these grounds.
  • Reserving contracts to staff mutuals – given that the UK lobbied hard for this to be included, it is no surprise that Regulation 77 reproduces Article 77 allowing contracts for certain health, social and cultural services that fall within the ‘light touch’ regime’ to be offered only to staff mutuals, as long as the contract does not last more than three years.

Links

The consultation document, draft Regulations and Technical Note on Drafting can be found at https://www.gov.uk/government/consultations/transposing-the-2014-eu-procurement-directives.