The Changing Face of Public Procurement

The new DNA for public sector commercial activity

£

Goal

High

Low

Time

spent on

value

added

activity

Before going

to market

Procurement

Process Contract and

supplier

management

Developing requirements that

shape markets and the supply base to Government

Improving contract and supplier management

capability through application of new

standards

Simplifying process and reducing turnaround times & supplier bid

costs

Before

The EU Procurement Regulations (I know it’s early in the morning, stick with me here)

Transparency - contract procedures must be transparent and contract opportunities should generally be publicised

Equal treatment and non-discrimination - potential suppliers must be treated equally

Proportionality - procurement procedures and decisions must be proportionate

Mutual recognition - giving equal validity to qualifications and standards from other Member States, where appropriate

What

Awaiting adoption – expected in Jan 2015

None of the following altered:

– “Contracting Authorities”

– Thresholds (apart from “Part B”)

• £172,514 (Goods and Services)

• £4,322,012 (Works)

– Remedies Directive, i.e. potential legal and financial penalties remain in place as before

‘s changing?

Exemptions! (1)

Local Authority trading companies (“Teckal”)

– where the authority exerts on the ‘supplying authority’ a control similar to that which it exercises over its own departments and

– where 80% of the activities of the ‘supplying authority’ are for the ‘buying authority’ or other bodies controlled by it and

– where there is no direct private capital participation in the ‘supplying authority’

Exemptions! (2)

Inter-municipal Co-operation (“Hamburg”)

– the participating authorities co-operate to perform public services they must provide, meeting common objectives and

– the co-operation is for public interest reasons only and

– the participating authorities perform less than 20% of the activities on the open market

Reservation of certain contracts for mutuals and social enterprises

objective of a public service mission linked to the delivery of these services

reinvest profits to meet this objective (where profits are distributed this should be based on participatory considerations)

owned/managed on the basis of employee ownership/participatory principles or the active participation of employees, users or stakeholders not have been awarded a contract for the services concerned by the contracting authority concerned pursuant to this reservation within the past three years

The duration of the contract to be reserved must not exceed 3 years

Such ‘reserved’ contracts must be open to all relevant suppliers with rights under the directive and must be awarded using the procedures in the directive, including a call for competition in OJEU

Light Touch Regime

These contracts will only be covered by the directive if their value exceeds Eu750,000

Mainly former “Part B” services, now referred to as “Annex XIV” (some cultural services included, mainly around events and festivals)

Still require “Call for Competition” and “Contract Award” but discretion over process outside of that – UK govt has promised lots of flexibility

Treaty principles must be applied

Innovation Partnerships

New procedure allowing authorities to encourage suppliers to develop works, supplies or services not currently available on the market through long term partnerships

Awarded to one or more suppliers using the competitive procedure with negotiation

Procedure may be constructed in phases to match the research/innovation process – authority could reserve right to terminate process or reduce the number of partners

Authority must make clear the position on property rights and must not disclose suppliers’ confidential information without agreement

Shorter Timescales!

Open: 35 days (30 electronic, 56 current)

Restricted: 60 days (40 electronic, 77 current)

Competitive Negotiated (CN) and Innovation Partnerships (IP): 60 days (40 electronic, no current equivalent)

Competitive Dialogue: 30 days to participate, no explicit time limits beyond that, no acceleration

Restricted, CN and IP can all be reduced by a further 5 days using a Prior Information Notice (PIN) as a “Call for Competition”

Exclusion of poorly performing suppliers from re-tendering

A supplier may be excluded where

– there are ‘significant or persistent’ deficiencies in performance of a contract or concession for an authority or utility body that led to early termination of the contract or other sanctions

Plus Other Useful Clarity

Market Consultation explicitly permitted

Need to be able to justify “Lotting” strategy

Environmental / Social labels can be must be linked to the subject matter of the contract (challengeable)

Encourages use of:

– Life Cycle Costing

• Including costs incurred or saved through the adoption of a specific supplier or solution (“Outcomes Based”)

– Most Economically Advantageous Tender (MEAT)

– Challenging “Abnormally Low Tenders”

The Small Business, Enterprise and Employment Bill

Para 37: Regulations about procurement(1) The Minister for the Cabinet Office or the Secretary of State may by regulations impose on a contracting authority duties in respect of the exercise of its functions relating to procurement

(2) For the purposes of this section “the exercise of functions relating to procurement” includes the exercise of functions in preparation for entering into contracts and in the management of contracts …(& follows)

Para 38 Investigation of procurement functions(1) In this section “a Minister” means the Minister for the Cabinet Office or the Secretary of State

(2) A Minister may investigate the exercise by a contracting authority of relevant functions relating to procurement.

Lord Young’s Proposed Reforms

Abolition of the PQQ for sub-threshold procurement

Mandating of a standard “Suitability Check” to replace the PQQ in above threshold procurement

Mandating 30 day payments terms for sub-contractors by your main or Tier 1 contractor

Advertising all contract opportunities above a certain value (mooted as £25K) on the national portal, Contracts Finder

Social Value Act

Underused legislation to date

Consider economic, environmental and social benefits WITHIN your geographic area only as part of the tender evaluation

Only applies to Service contracts above threshold

Review is under-way to consider extending scope

Could form part of the powers referred to in the new UK Government procurement legislation

Contact details

Eddie Gibson

East of England LGA

eddie.gibson@eelga.gov.uk

01284 758300

www.eelga.gov.uk