Regulatory Outlook | Regulated Procurement | February 2020

Current issues

Applications to lift automatic suspension

There have been two recent judgements in the High Court on applications to lift an automatic suspension – the injunction that comes into effect when a claim in the High Court is issued challenging a contract award before the contract is signed.

These cases make it clear that the Courts will apply the American Cyanamid test for whether an injunction should remain in place. This test requires the Court to look at:

• whether there is a serious issue to be tried,
• whether damages would be an adequate remedy for the claimant, and
• where the balance of convenience lies.

This test, when applied to challenges in a public procurement context, means it is very difficult for a commercial enterprise to maintain the automatic suspension. Only where the claimant will in effect cease to trade if it does not win the contract being challenged, or there is some other extraordinary public interest at play, will the courts order that the public body should not be allowed to proceed to enter into the contract. With the automatic suspension lifted, and the contract entered into, the claimant is left only with a remedy in damages.

Public procurement post-Brexit

During the 2019 General Election campaign, the Conservative Party pledged to replace the existing EU-based procurement regulations with new laws by the start of 2021. The government's ambition is to put in place a regime that is simpler, cheaper and geared more towards promoting British business and the local economy. However, as yet no details have been published on how this will be achieved.

The scope for change will depend on the outcome of the trade deal with the EU and is constrained in any event by the UK's adherence to the World Trade Organisation's Agreement on Government Procurement (GPA). The GPA requires its members – including the US, Canada, Japan, Australia, the EU and the UK in its own name – to award public contracts using transparent, competitive, non-discriminatory tender procedures. So a call to "buy British" is not possible under the terms of the GPA.

NHS Procurement

The NHS Long Term Plan, published in January 2019, sets out how the NHS plans to utilise extra funding to improve services, support staff better and "future-proof" the NHS, based on what staff and the public think the NHS needs. The Plan proposes to free the NHS from wholesale inclusion in the Public Contracts Regulations 2015 (PCR). Instead, the NHS would set out statutory guidance on procurement to be followed by all NHS entities.

The Conservative manifesto for the 2019 General Election pledged to enshrine the NHS Plan in law within the first three months of the new term of government. If this is done, any suppliers to the NHS will need to understand the new regime for NHS procurement. However, as yes, the new government has given no indication of if or when this will be implemented.

Updated Thresholds

With effect from 1 January 2020, the threshold values for contracts to fall under the PCR, Utilities Contracts Regulations 2016, Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011 were updated (as they are every two years).

The new thresholds apply to procurement procedures commencing on or after 1 January 2020. The previous thresholds will continue to apply to any procurements that commenced before this date.

Please click here to view the new thresholds.

Supply of goods to private companies under Framework Agreements procured by public sector Central Purchasing Bodies

Under Regulation 37 of the Public Contracts Regulations 2015 (PCR), a public body can act as a Central Purchasing Body (CPB) to run a procurement for contracts for the supply of goods that can then be supplied on to other public bodies (defined as Contracting Authorities in the PCR).

We have seen a recent trend towards CPBs entering into contracts that are then used to supply goods on to entities that are not Contracting Authorities (i.e. private companies). The PCR and Directive 2014/24/EU (from which the PCR is derived) are explicit that CPBs can procure contracts in compliance with the PCR that are then used by other Contracting Authorities. Suppliers bid for contracts on that basis. Expanding the scope of such contracts for use by private entities means suppliers risk goods being purchased by a potentially undefined number of customers – and notably at prices that suppliers would often only want to offer to public sector customers. CPBs attempting to expand the remit of their purchasing powers in this way risk challenge for breach of the PCR.

In Focus | Responsible business

Which aspects of responsible business are driving the regulatory agenda?

One of the objectives of the 2014 EU Procurement Directives was to drive public purchasers to make better use of public procurement to support common societal goals, including protecting the environment, energy efficiency, combating climate change and social inclusion. Public bodies can under the Directives incorporate social, ethical and environmental aspects into award criteria, specifications and contract terms. For example requirements for suppliers to be engaged in ethical trade, in particular steps to prevent modern slavery, is a requirement in a tender process to award public sector contracts. Businesses must comply with the Modern Slavery Act 2015 in order to bid for any public contract.

Contract specifications can also use "labels" as a means of proof that the deliverables under the contract meet specified environmental characteristics, such as the energy use of appliances.

The government's Prompt Payment Policy, which took effect from 1 September 2019, focuses on social responsibility. Any organisation bidding for a government contract in excess of £5 million a year may have to provide details about the percentage of supply chain invoices paid within 60 days. Failure to meet the government's standard of 95% could result in suppliers being prevented from winning government contracts.

Are responsible business considerations having an impact on the tools that regulators are using?

Public procurement in the UK harnesses public purchasing, rather than a prescriptive compliance regime, to encourage businesses to behave in a responsible way. There is no independent regulator but there is a set of regulations which provide a framework for public bodies to follow, and which provide a legally enforceable regime so that contractors know what to expect.

Contracting authorities are encouraged to use evaluation criteria to reward suppliers that meet certain standards that drive the responsible business agenda. For example, evaluation criteria for a contract to supply printers may include the costs of ink, electricity consumption, cost of recycling, plus factors for levels of noise emission, use of recyclable materials for the production of printers, and the involvement of persons from disadvantaged groups in the production process.

Contracting authorities can also use evaluation criteria to purchase goods that are produced with, for example, environmentally friendly processes, or in a manner that meets recognised ethical standard (for example, Fair Trade or equivalent to this standard). Bidders that can evidence compliance will score more highly and are therefore more likely to be awarded the contract being procured.

A more specific requirement for responsible business being driven by the NHS is a requirement for bidders for certain procurements to have achieved Level 1 accreditation with the Labour Standards Assurance System, which relates to labour standards in a supply chain, within six months of commencing a new contract.

Which of the recent or upcoming developments are based on international consensus or agreements?

Much of the drive for green and sustainable procurement in the UK has come from the policies of the European Commission. The European Commission's handbook "Buying Green!" is the EU's guidance document to help Contracting authorities in all Member States procure contracts that are sustainable, with the lowest environmental impact. The handbook recommends that a green public procurement process is adopted. Contracting authorities are encouraged to use design procurements to award contract to suppliers with environmentally friendly goods and that perform services and works in a way that is sustainable and with low negative environment impact.

"Procuring the Future" is a UK government action plan that has recommendations for sustainable procurement. It encourages contracting authorities to buy sustainably in a way that benefits society whilst minimising the damage to the environment.

The Government Buying Standards are a set of specifications for public procurers which are aligned to the EU's Green Public Procurement programme.

What are the main challenges for businesses in complying with these developments?

The challenge for businesses that want to contract with the public sector is to balance the requirements for responsible business practices within profitability. Businesses need to keep track of how the government is using the tools within the procurement regulations to drive its sustainable business agenda, which is not always easy.

While some responsible business requirements are mandatory if a business wants to contract within the public sector (such as not having convictions for corruption or compliance with the Modern Slavery Act), other requirements will be part of the evaluation criteria, which will differ for each procurement. There is no single information source that lists the types of "responsible business" requirement that the UK Contracting Authorities might evaluate, although the Crown Commercial Service (part of the Cabinet Office) does publish Procurement Policy Notes that provided some guidance.

Dates for the diary