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Procuring the Future – The New EU Public Procurement Directive

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15/05/2014

The new Directives
On 28 March 2014 there was published in the OJEU a new Public Procurement Directive (Directive 2014/24/EU) which will form the legal framework for procurement over the coming years. Two others were published at the same time, one dealing with Concession Contracts (Directive 2014/23/EU), the other with procurement by Utilities (Directive 2014/25/EU). Each will come into force on 17 April 2014 and require to be implemented in Member States within two years. The Cabinet Office has announced that it has an ambitious timetable for implementation and is currently consulting on a range of issues that require to be settled at national level. Whilst we do not yet know the final detail of the new regime we will be working to, it does seem very likely that not only will we know but they will be implemented here well before the end of 2014.

The new rules in our view are more evolution than revolution but they do introduce some important changes and clarifications as well as codifying some of the case law which has arisen over the years. Accordingly public bodies and utilities who will procure under the new regime (not to mention businesses who will bid under the new rules) need to start considering how their procedures will need to be amended to comply with the changes and to take advantage of some of the new tools they will provide.

Abolition of Part B services
Looking at the Public Procurement Directive, amongst the most important change is that more contracts will be subject to the full regime. The distinction between Part A and Part B services has gone. Therefore all service contracts above the threshold will require full procurement. This will bring into scope a range of services which have until now been largely not subject to the full regime. Amongst those will be health and social care services. There will be a lighter touch regime for these with a higher threshold (€750,000). The Concessions Directive will also subject service concessions, up until now exempt, to procurement requirements.

Staff mutuals
The UK Government has secured a partial concession for some staff mutual spin outs. It will be possible to reserve the right to bid for certain contracts (as is currently the case with sheltered workshops) to mutuals or similar bodies that meet certain tests. As well as involving staff these could also involve users in the structure. However the contracts will still have to be procured and they will only have a maximum duration of three years.

New procedure
A new procedure, the Competitive Procedure with Negotiation, will be introduced to replace the old Negotiated Procedure with Notice. This will allow negotiation of submitted tenders, though this must be with all bidders, subject to the ability to apply the criteria part way through to reduce the number of bidders. As with Competitive Dialogue, at the end of negotiation a final tender is then submitted for evaluation. The other procedures, Open, Restricted and Competitive Dialogue, will be retained, though the grounds for using Competitive Dialogue are made less exacting.

Dynamic purchasing system
The Dynamic Purchasing System, introduced ten years ago but little used because of its complexity, has been refined and simplified. It will now potentially provide a useful tool for certain procurements. It will need to be completely electronic and appropriate software will therefore need to be available to make use of it. In essence it is very much like a framework with the very important exception that, unlike a Framework where the membership of the panel is fixed for its lifetime, in the Dynamic Purchasing System, an economic operator can apply to be admitted at any time during its life and must be if it in effect meets the relevant PQQ criteria. Other new features include the use of an electronic catalogue to assess price for particular contracts and an Innovation Partnership for use in research and development situations.

Help for SMEs
Some of the measures introduced are claimed to be to help SMEs bid for public contracts. One important measure in this respect is that an Authority will have to justify not dividing contracts into Lots. This is clearly something which needs to be built into procurement processes. There is also clarification on the ability to restrict the number of Lots which a bidder may bid for or be awarded.

Simplified PQQ
Another such measure is an attempt to simplify the PQQ process. Candidates will initially be allowed to self certify that they are not subject to exclusion, and meet the necessary financial and technical/professional standard and the selection criteria. They will not be required to submit full proof with the PQQ. Initially, this will be done using a standard document to be issued as a template by the Commission called the European Single Procurement Document. Whilst they must accept the initial self-certification, an Authority can at any stage ask candidates/bidders to submit supporting evidence and cannot let a contract unless they have received necessary proof of compliance from the intended Contractor. There will also be increased reliance on national data bases and approved lists of contractors.

Other important changes to the PQQ process include a new discretionary ground for exclusion that the Economic Operator had had significant or persistent deficiencies in the performance of a substantive requirement under a public contract. However this must have led to either termination or compensation or another sanction. On the other hand there are new limitations on the mandatory and discretionary grounds for exclusion. In particular an economic operator can avoid exclusion if they can show they have taken sufficient steps to demonstrate their reliability notwithstanding the grounds for exclusion. Further, time limits will be imposed after the elapse of which an event which otherwise would give rise to a ground for exclusion will cease to do so. In effect they will be “spent convictions” for this purpose.

Codified case law
The Directive also codifies in statute some important cases that have come before the Courts and in doing so makes them a little more precise. For example in terms of the Teckal [1] case which allowed direct award to a wholly owned subsidiary company of the Contracting Authority, the Directive specifies the level of control which the Authority must have and also specifies that it must perform 80 per cent. of its activities for the Authority. Similarly it codifies the Commission v Germany (Hamburg Waste) [2] case making it clear that true public co-operation between authorities in the public interest is not subject to procurement whilst at the same time making it clear that in a commercial transaction the fact that the Contractor is itself a public body does not exempt the arrangement from procurement. It also specifies, in line with the Pressetext [3] case that a substantial change to a contract will require procurement. And it defines what is “substantial” and also sets out some detailed exceptions.

Other changes
Amongst other items introduced are requirements for dealing with staff conflicts of interest, removing any unfairness form prior involvement of a bidder, dealing with abnormally low tenders and a number of further measures to allow social environmental and labour law issues to be built into the procurement

Conclusion
To sum up, whilst the regime under the new Procurement Directive will still bear a strong resemblance to the process and procedures used for the past ten years and more, there are a lot of refinements. Authorities will need therefore to carry out a thorough review of their processes, procedures and documentation to ensure that they will be compliant when it is enacted into UK law. Moreover, on this occasion we may not have anything like the two years we had last time, so the review needs to start with some urgency.

[1] Teckal Srl v Comune de Viano and Azienda Gas-Acqua Consorziale (AGAC) di Reggio Emilia (C-107/98) [1999] ECR I-8121.
[2] Commission v Germany (C-480/06)
[3] Pressetext Nachrichtenagentur GmbH v Republik Österreich (Bund) Case C-454/06