Regulatory Outlook | Regulated Procurement | January 2021

Current issues

Planned reforms to post-Brexit procurement law

The government’s long-awaited green paper on ‘Transforming Public Procurement’ was published on 15 December 2020. The government’s aim is to “overhaul our outdated public procurement regime” in order to “create a regulatory frameork that delivers the best commercial outcomes with the least burden on our businesses and the public sector”.

The green paper sets out proposals for a new regime (all subject to consultation), including the following major changes:

•  Replacing the four existing sets of procurement regulations with a single piece of legislation.
• Amending current processes to leave only three procurement procedures which can be used by a contracting authority or utility.
• Allowing contracting authorities to include social value criteria beyond the subject matter of the contract.
• Requiring contracting authorities to publish basic disclosure information alongside the contract award.
• Requiring contracting authorities to record and publish key performance information on contracts.
• Introducing new Civil Procedural Rules for procurement challenges.
• Amending the legal test to lift automatic suspensions.
• Capping damages which can be awarded for breaches of rules, to legal fees plus1.5x bid costs.
• Removing the requirement for standstill letters, and replacing it with an extensive disclosure obligation on contract award.
• Applying a standstill period of 10 days for contract amendments.

For more, see our Insight on the green paper and other recent developments in regulated procurement, here.

‘Reserving’ low-value contracts

Public Procurement Notice (PPN) 11/20, which applies from 1 January 2021, introduces new provisions that allow contracting authorities to ‘reserve’ below-threshold contracts to (a) suppliers based and operating in specific geographical locations (for  example a county or the UK), and/or (b) small and medium sized enterprises/ voluntary, community and social enterprises (SMEs/VCSEs. The PPN is aligned with broader policy changes in the green paper, intending to “level up” the UK economy by enabling contracting authorities to make it easier for SMEs/VCSEs to win public sector contracts, as well as optionally limiting contract suppliers to certain geographic areas.

Our recent Insight sets out more detail on this PPN.

Major changes for social value in public procurement

As of 1 January 2021, all procurements run by central government bodies (and their executive agencies and non-departmental public bodies – including the NHS) must include a “social value” award criterion, weighted at a minimum of 10% of the overall score. The aim is for social value to have a heavy enough weighting to be a differentiating factor in bid evaluation and accordingly which bidders wins the contract.

The government guidance in Public Procurement Note 06/20 sets out a list of “areas of priority focus” for social value improvements. The Cabinet Office has created a model that commercial teams should use to measure and evaluate social value in procurements. This includes standard award criteria, delivery objectives that describe ‘what good looks like’, and metrics for contract management and reporting. Central government bodies are required to select objectives from the model that are relevant and proportionate to their procurement from the list of priority focus areas. These include:

• Covid-19 recovery.
• Tackling economic inequality.
• Fighting climate change.
• Equal opportunity.
• Wellbeing.

The announcement of this requirement by the Cabinet Office in September came amidst a wave of other social value initiatives in public procurement, including the NHS’s new sustainable development strategy. Our two-part Insight series gives an overview of the policy development and looks at what bidders can do to score highly on new evaluation criteria.

Covid-19: litigating the pandemic

In March 2020, the Cabinet Office published guidance around public procurement options available to public bodies to manage contract awards and extend existing contracts. In June, the government published a PPN focussing on the “new normal”, and encouraging public bodies to start to plan how to exit the relief measures and transition to “new sustainable operating models” reflecting “strategic and reprioritisation needs”.

We are now starting to see the first waves of cases in the High Court arising out of government procurement decisions made in the early days of the pandemic. We think this trend is set to continue, as any contracting authorities still relying on Regulation 72(1)(c) PCR 2015 to extend existing contracts will find it increasingly difficult to reasonably argue that Covid-19 is still an unforeseen circumstance warranting an urgent modification to a contract. Similarly, it will become more difficult for a contracting authority to justify a direct award of a new contract under Regulation 32(2)(c), as this exemption only applies where necessary “for reasons of extreme urgency brought about by unforeseen events” (and yet we are continuing to see examples of direct awards of public contracts).

Williams Rail Review

The delayed Williams Rail Review will set out recommendations for how contracts for the UK’s rail passenger routes will be structured and procured in future. With the end of the Brexit transition period, it is open for the UK government to depart from the key EU legislation governing the procurement of rail passenger services (Regulation (EC) 1370/2007). The review had been expected to be published before the end of 2020 so could be released imminently.

In Focus: Regulation after Brexit

What do UK businesses trading in the EU need to do now that the Brexit transition period has ended?

A UK-established company will have a right to bid for EU Member State public procurements via the UK’s new individual membership of the World Trade Organisation’s Agreement on Government Procurement (GPA).

Whether an EU Member State public sector contract is caught by the GPA is set out in the Schedule to the UK’s accession to the GPA. In addition, the EU-UK Trade and Cooperation Agreement (TCA) increases the range of contracts covered so that it is more in line with the existing arrangement within the single market (meaning that certain utilities excluded under the GPA remain covered in the bilateral trade agreement with the EU).

UK businesses should obtain specific advice to confirm whether defence contracts they wish to continue to bid for will be covered by the GPA, and if a significant volume are excluded, should consider establishing a European-based office in order to continue to be able to bid for such contracts with the same rights as businesses registered in an EU Member State.

Opportunities to bid for contracts in EU Member States will continue to be published in the official journal of the EU (OJEU). However, UK public sector contracting opportunities will no longer be advertised in OJEU Instead, contracting opportunities with UK contracting authorities will be advertised on the UK only electronic portal called “Find a Tender”. Businesses will need to sign up to receive alerts from this new portal. The requirement for contracting authorities to publish on Contracts Finder remains unchanged.

What do non-UK businesses trading in the UK need to do now that the transition period has ended?

EU established businesses should review whether they are heavily reliant on supplying under UK public sector contracts that are not covered by the GPA schedules.

Business from non-EU, GPA-member countries will not be affected as regards bidding for public contracts in the UK, given that the UK has become a member of the GPA in its own right.

Businesses from countries who are not GPA members should consider the Department for International Trade (DIT)’s periodically updated page which shows which Trade Agreements the UK has signed to replace those it benefitted from by virtue of its membership of the EU, to take effect on 1 January 2021. If the DIT page does not show that an agreement in respect of its country has been signed, bidders should seek legal advice before seeking to bid for a public contract in the UK.

Also, as discussed above, businesses should be aware that UK public sector contracting opportunities will be advertised on the UK-only Find a Tender portal, rather than on the OJEU.

Which incoming EU laws should UK businesses be aware of, and is the UK likely to implement similar rules?

There are currently no proposed EU legislative amendments to the procurement directives to come into force after the end of the transition period.

The TCA does not make any major changes to the current regulated procurement rules in the UK. Its principal effect is to widen the scope of UK-EU cross-border procurements that are covered by the rules beyond the GPA base line, particularly in the utilities sector, so that it is more in line with the status quo prior to Brexit.

Are there any other areas where the UK regime might start to diverge from that of the EU? If so, what should businesses do to ensure they are prepared?

The UK procurement rules have been amended from 1 January 2021 to correct deficiencies that result from the UK’s departure from the EU. Key changes include:

• The publication of notices in the new UK e-notification service, Find a Tender (rather than OJEU).
• Transferring functions previously exercised in relation to the regulations by the EU Commission (including for example, revising the minimum thresholds) ‘back’ to the Minister for the Cabinet Office.
• Removing the requirement to demonstrate compliance with the EU state aid regime in the case of an abnormally low tender.
• Removing of requirement for UK contracting authorities to have recourse to the EU online procurement certificate database e-Certis.

In the longer term, as discussed above, the government’s green paper demonstrates an intent to introduce sweeping reforms to UK procurement rules, on the basis that they no longer need to meet the standards in the EU Procurement Directives and EU Remedies Directive. The government will also need to take into account its commitments under the TCA in pursuing its agenda, although it appears that the plans outlined in the green paper already largely take into account the TCA.

Procurement law in the UK will still need to meet the GPA rules, which include many similar (but less stringent) requirements to the EU directives, such as the need to advertise a contract, apply published criteria and abide by general transparency and fairness principles.

Dates for the diary

10 March 2021

Consultation on UK government green paper (discussed
above) closes.

For more on what the EU-UK TCA means, across 17 areas of regulation, and what else is on the regulatory agenda, see our full Regulatory Outlook.