Public procurement: draft Public Contracts Regulations 2015 published

We have been waiting for them since April. On Friday Cabinet Office finally launched its consultation on the wording of the draft Public Contracts Regulations 2015 (“PCR2015”), which will implement the new EU Directive 2014/24/EU. The consultation ends on 20 October 2014.

Cabinet Office has carried out a “copy out” of the wording of the Directive. The resulting draft Regulations are therefore not just a refresh of the Public Contracts Regulations 2006 that we all know well. The style and lay out feels very European and will take some time to get used to. The draft PCR2015 have been prepared in light of the UK’s policy position of maximising flexibility in the rules, deregulating where possible and avoiding going beyond requirements in EU Directives (known as “gold plating”).

The substantive changes are not as big as some commentators would have you believe. However, for anyone who either runs procurements in compliance with the PCR, or is bidding for contracts with the public sector under a regulated procurement, I would recommend a training session on the changes – the OC regulated procurement team would be happy to provide a bespoke session for your business.

This consultation runs until 20 October 2014. There will be subsequent consultations covering new regulations for the Utilities Directive (2014/25/EU) and Concessions (2014/23/EU).

It is worth flagging the main changes:

1. Central Purchasing Bodies can only procure or on behalf of public bodies, not private entities.
2. Contracting authorities can use CPB’s in other member states.
3. The provision for the award of contracts directly by one contracting authority to another without an advertised and competitive tender (the Teckal exemption) has been codified in the regulations.
4. The case law that set out the extent to which a public contract could be changed before it became a “new” contract, “materially different”, that must be put out for a fresh tender (the line of cases starting with Pressetext), has been codified.
5. Contracting authorities will be required to include a condition in all contracts that allows them (but does not oblige them) to terminate a contract if the contract has been subject to a material change (“substantial modification” is the phrase used in the draft PCR2015).
6. The procedures that can be followed to procure a contract have been tweaked and one completely new procedure has been added for “Innovation Partnerships”. The “competitive procedure with negotiation” and “competitive dialogue” have both been played with. Government guidance however is that where possible the open or restricted procedures should still be used.
7. There is a new “light touch” procurement regime for social and other specific services (health services – including nurses, home help, education and training services). This puts in place national rules but leaves considerable discretion as to procedures to be followed. From 18 April 2016 this light touch regime will sit alongside health sector specific requirements (currently contained in the NHS Procurement, Patient Choice and Competition Regulations (PCCR) 2013). Until then, commissioners of clinical healthcare services must continue to use the existing Part B service regime and the PCCR 2013. Practical guidance for commissioners will be published in due course.
8. A ‘self-cleaning’ provision has been added If an economic operator is in a situation where it might excluded from taking part in a public procurement (e.g. one of its directors has been convicted of a fraud offence) it may provide evidence that measures have been taken to demonstrate its reliability, despite a relevant ground for exclusion existing.
9. Wording has been included that makes it explicit that contracting authorities can engage in market consultations with suppliers before a procurement commences, but that where this takes place there is an obligation to ensure that competition is not distorted by the subsequent participation of economic operators that were involved in the market engagement.
10. Government has taken the option open to it under the Directive not to mandate that all contracts should be divided into lots, this will be left to the discretion of each contracting authority, but if lots are not used, contracting authorities will be required to explain their decision in the procurement documents or report.
11. If a procurement is being run with Lots, contracting authorities can award a single contract to cover several lots, but only if it is clear in the procurement documents that the contracting authority reserves the possibility of awarding on this basis and indicates that the lots might be combined.
12. Lord Young’s report ‘Growing Your Business’ (published in May 2013) recommended a number of key reforms to open up all public sector procurement opportunities and to streamline procurement to remove barriers to SMEs. The draft PCR2015 implement some of these recommendations, including: Abolishing PQQs for contracts below the EU Threshold; 30 day payment terms are passed down the supply chain through a standard clause and a requirement to report on late payment of invoices; all public sector contracts have to be accessible on Contracts Finder.
13. For each tender process that leads to the award of a public contract or framework the contracting authority must produce a written report to include all the key information on the process followed, reasons for decisions taken (including choice of procedure used) and why the successful tenderer was chosen. Documents relating to the progress of all procurement procedures must be kept by contracting authorities for three years.
14. The PCR 2015 will only apply to new procurement processes beginning on or after the PCR 2015 take effect.
15. There have been no changes to the remedies section of the regulations.