changes to the eu procurement rules - how will it affect you?

Changes to the EU procurement rules -how will they affect you?

Clare Reddy and Owen Williams

14 November 2013

Agenda

• The new Directives

• The process for changing the UK Regulations

• A look at some of the key changes and areas for

consultation

• Questions

New Directives

• 3 new Directives

� Classic

� Utilities

� Concessions

• These replace the current Classic and Utilities Directives• These replace the current Classic and Utilities Directives

• Remedies Directive is not being changed

• This seminar looks at the new Classic Directive

New Directives

• First drafts published December 2011

• Political agreement reached in July 2013

• Text being tidied up and translated

• European Parliament reading scheduled for 9 December • European Parliament reading scheduled for 9 December

2013

• Directives come into force 20 working days after

publication in OJEU

UK Regulations

• Implementation:

� 2 years from Directives coming into force (4.5 years for fully electronic communication) BUT

� Cabinet Office wants to implement ASAP so that parties can take advantage of greater flexibilities

• Cabinet Office discussion papers where there is flexibility

in implementation: SME access; Light touch regime for

social, health and other services; Procedures; Termination

of contracts (e.g. where modified)

• Formal consultation expected in 2014

UK Regulations

• 3 new Regulations to match Directives

• Remedies provisions included in each Regulation, rather

than separate Remedies Regulations

• Policy is “copy out” and “avoid gold plating”

• Articles 7- 82 anticipated to match new Regulations 7- 82

• Some changes for UK style and UK drafting rules

• Won’t seek to resolve ambiguities

Electronic communication

• All procurement to be conducted electronically within 4.5

years

• System must be generally available and in general use so

as not to restrict access or discriminate

• Very limited exceptions: difficulties with file formats, • Very limited exceptions: difficulties with file formats,

requirement for specific equipment, requirement for

physical models, security/sensitivity issues

• Oral communication allowed for non-essential elements

provided that content is documented sufficiently

Electronic communication

• From implementation: unrestricted full direct access free of

charge to procurement documents by electronic means

from date of Contract Notice

• Same exceptions as mentioned before and time limit for

tender returns extended by 5 days if can’t provide

everything electronically

Procedures

• Free choice of Open and Restricted remains

• Competitive Dialogue available in wider circumstances (no

longer just complex contracts)

• Competitive Negotiated Procedure can be used in the

same circumstances as Competitive Dialoguesame circumstances as Competitive Dialogue

• Member States to decide whether Negotiated procedure

without prior publication will apply

• New Innovation Partnerships procedure

• Minimum time limits generally shorter

Use of Negotiated Procedure and CD

• Competitive Negotiated Procedure/Competitive Dialogue

can be used where:

� needs cannot be met without adaptation of readily available solutions

� works/services include design or innovative solutions

� negotiation needed due to complexity, legal, financial make-� negotiation needed due to complexity, legal, financial make-up or risks

� technical specifications cannot be established with sufficient precision

� irregular/unacceptable tenders were received under another process

Negotiated without prior publication

• The Directive provisions relating to use of negotiation

without prior publication are optional for Member States

• Cabinet Office discussion paper issued to consider

whether to keep or remove the current provisions (which

are essentially the same in the new Directive)

Restricted Procedure

• Largely unchanged save for shortening timescales

• Option for Member States to allow sub-central contracting

authorities to set timescales for receipt of tenders by

agreement with the selected candidates

• Default minimum of 10 days if can’t agree• Default minimum of 10 days if can’t agree

• Cabinet Office discussion paper with options to:

� Allow this for all sub-central contracting authorities

� Limit this to certain categories of sub-central contracting authorities OR

� Not allow this option

Innovation Partnerships

• Use where:

� need for an innovative product, services or works;

� cannot be met by purchasing products, services or works on the market

• Negotiate tenders but not minimum requirements or award • Negotiate tenders but not minimum requirements or award

criteria

• Partnership with one or several partners, structured in

phases, intermediate targets and payment and can

terminate or reduce partners after each phase

Frameworks

• Directive clarifies current case law position in that only the

contracting authorities who are party to the framework

agreement at the outset can use the framework

• Cabinet Office is consulting on option for Member States to

require quarterly grouped contract award notices for call-

off contracts

SME Access

• Minimum yearly turnover requirement cannot exceed twice

estimated contract value

• In Classic and Utilities there are options for Member States

to decide whether:

� it should be obligatory to award contacts as separate lots � it should be obligatory to award contacts as separate lots (e.g. different trades in a works contract)

� bidders can combine lots (e.g. submit a bid for all lots which could differ from the separate bids for individual lots)

Subcontracting

• Changes to subcontracting provisions are largely for

Member States to decide so we won’t know detail until

consultation/ draft Regulations published

• Directive includes options for:

� Direct payment to subcontractor if subcontractor requests� Direct payment to subcontractor if subcontractor requests

� Automatic direct payment to subcontractors

� Obligations to notify changes to subcontracting arrangements

� Possibility of applying provisions further down contractual chain

Abnormally Low Tenders

• Abnormally low tenders

� Now an express duty to investigate (follows European rather than UK case law)

� Must reject if low price is because does not comply with EU social or environmental laws

� May reject if low price is due to state aid and tenderer � May reject if low price is due to state aid and tenderer cannot prove that it is lawful

� Cannot reject if low price is satisfactorily explained

� But not clear what you have to do if low price is not satisfactorily explained – can the contracting authority decide what to do?

Contracts between public sector entities

• Scenario 1

� Contracting Authority with Company A

Contracting Authority

Company A


• Scenario 1

� Contracting Authority with Company A

> Contracting Authority exercises control over Company A similar to that it exercises over its own departments

> More than 80% of Company A’s activities are in performance of tasks given by the Contracting Authority performance of tasks given by the Contracting Authority or other legal persons controlled by the Contracting Authority

> No direct private capital participation in Company A save “non-controlling and non-blocking ..required by applicable national legislation.. in conformity with the Treaties”, which don’t exert a decisive influence over Company A


• Scenario 2

� Company A with Contracting Authority or Company B

Company A Company A

Contracting Authority

Company B

Contracting

Authority


• Scenario 2

� Company A with Contracting Authority or Company B

> Company A is a contracting authority

> Contracting Authority exercises control over Company A similar to that it exercises over its own departments

> Contracting Authority exercises control over Company B > Contracting Authority exercises control over Company B similar to that it exercises over its own departments

> No direct private capital participation in Company B save non-controlling and non-blocking ..required by national legislation in conformity with the Treaties, which don’t exert a decisive influence over Company B


• Scenario 3

� Contracting Authority 1 jointly exercising control over Company A

Contracting Authority 1



Company A

Authority 1 Authority 2 Authority 3


• Scenario 3

� Contracting Authority 1 jointly exercising control over Company A

> Contracting Authority exercises control over Company A jointly with other contracting authorities similar to that exercised over their own departments exercised over their own departments

> More than 80% of Company A’s activities are in performance of tasks given by the Contracting Authorities or other legal persons controlled by them

> No direct private capital participation in Company A save non-controlling and non-blocking ..required by national legislation in conformity with the Treaties, which don’t exert a decisive influence over Company A


• Scenario 3 (cont)

� Joint control:

> Company A’s decision making bodies are comprised of representatives of all participating Contracting Authorities. Individual representatives may represent several Contracting Authoritiesseveral Contracting Authorities

> The Contracting Authorities jointly exercise decisive influence over Company A’s strategic objectives and significant decisions

> Company A does not pursue interests contrary to those of the Contracting Authorities


• Scenario 4

� Contracting Authority 1 contracts with Contracting Authority 2




• Scenario 4

� Contracting Authority 1 contracts with Contracting Authority 2

> Contract establishes/ implements co-operation between Contracting Authorities with the aim of ensuring the public services they have to perform are provided with a public services they have to perform are provided with a view to achieving their common objectives

> Implementation of co-operation governed solely by considerations of public interest

> Contracting Authorities perform on the open market less than 20% of the activities governed by the co-operation

Modifications under the Directive

• Scenario 1

� The modification is catered for in the initial procurement documents

> Requires clear, precise and unequivocal review clauses

> Must specify the conditions in which the review clauses may be usedmay be used

> Must not alter the overall nature of the contract/ framework


• Scenario 2

� Additional works, services or supplies

> Provided by the original contractor

> They have to become necessary

> Where a change of contractor:

» Can’t be made for economic/ technical reasons AND» Can’t be made for economic/ technical reasons AND

» Would cause significant inconvenience and substantial duplication of cost for the Contracting Authority

> The increase in price is not higher than 50% of the original contract (NB if a number of modifications, this applies to each)


• Scenario 3

� Where:

> The need arises from circumstances a diligent contracting authority could not foresee

> The modification does not alter the overall nature of the contractcontract

> The increase in price is not higher than 50% of the original contract (NB if a number of modifications, this applies to each)


• Scenario 4

� A new contractor comes in because of:

> Operation of the unequivocal review clause

> A corporate restructure (including takeover, merger, acquisition or insolvency) that fulfils the criteria for quality selection initially established if no other substantial selection initially established if no other substantial modifications to the contract and this is not aimed at circumventing the Directive OR

> The Contracting Authority steps in to the main contractor’s obligations to sub-contractors (IF the UK decides to implement this)


• Scenario 5

� Modifications irrespective of value are not substantial

� Substantial means:

> Renders the contract/ framework “materially different in character from [that] initially concluded”

> Introduces conditions which would have:> Introduces conditions which would have:

» Allowed admission of additional/ different candidates

» Allowed acceptance of a different offer OR

» Attracted additional participants

> Changes the economic balance in favour of the contractor


• Scenario 5 (cont)

� Considerably extends the scope of the contract/ framework

� Replaces the contractor other than as set out at Scenario 4 above


• Scenario 6

� Where the value of the modification is below:

> The relevant threshold (ie at which the Directive applies to procurements)

> 10% of the initial contract value for services and supplies

> 15% of the initial contract value for works> 15% of the initial contract value for works

� BUT

> May not alter the overall nature of the contract / framework

> Successive modifications in Scenario 6 are assessed on a net cumulative basis


• Where a modification is made under Scenario 2 or 3:

� The Contracting Authority must publish a notice in the OJEU

� Annex VI Part G sets out the information required, including the nature of the modification, why it is required and the value of it

Part B Services

• Replaced with an exhaustive list of “social and other

services”

• Higher threshold applies (€750,000)

• Requirements:

� Express requirement to publish a contract notice or PIN� Express requirement to publish a contract notice or PIN

� Publish a contract award notice (can be done quarterly)

Part B Services

• Member States must put in place rules:

� To ensure transparency and equal treatment

� To ensure contracting authorities may take into account the need to ensure quality, continuity, accessibility, affordability, availability, comprehensiveness of services, specific needs of different categories of user including disadvantaged and of different categories of user including disadvantaged and vulnerable groups, involvement and empowerment of users and innovation

� May provide for taking account of quality and sustainability criteria for social services in assessing MEAT

Links to the Directives

• Classic:

http://register.consilium.europa.eu/pdf/en/13/st11/st11745.en13.pdf

• Utilities:


• Concessions:


Thank you

changes to the eu procurement rules - how will it affect you?

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