how will legislation shape procurement in the coming years?
DESCRIPTION
We discuss the implications that the new EU directive is having and what other legislation may be introduced in the coming decade that could shape procurement in the future? Presented by: Andrew Millross (Anthony Collins Solicitors LLP) at PfH Live 2014TRANSCRIPT
How will legislation
shape procurement in
the futurePfH Live
24 June 2014
Andrew Millross, Partner
CoverageLegislation – past, present and future
Recognition of Group Structures
The rise and fall of Development Agreements
Increased coverage
Death of the negotiated procedure
Major move to electronic tendering
Framework Agreements come of age
Attempts to simplify processes
Value for money and social and environmental issues
Control over Variations
Previous legislationPublic Works Contracts Regulations 1991
Supplies 1993, Services 1995
Consolidated Directive 2004 Public Contracts Regulations 2006
Forms Regulation 1564/2005 separate Utilities regime
Remedies Directive – 2007/66/EC
Public Contracts Regulations – further amendments 2007, 2009 & 2011
2014 Directives
3 new Directives: Public procurement – “Classical
Directive” Utilities Concessions – new Directive
Came into force on 17th April 2014
Implementation period 2 years for most of the Directive 54 months for compulsory e-tendering
Cabinet Office “early implementation” PPN5/13
“The basic principles of
the EU Treaty have not
changed so contracts still
have to be competed and
awarded transparently and without
discrimination”
Cabinet Office PPN 5/13
Why?
Deliver “Europe 2020” strategy
better efficiency and value for money
simplification flexibilisation
Easier support of common societal goals
environmental climate change innovation
Part of the process of moving to:
“competitive and dynamic knowledge-
based economy in the world, capable of
sustainable economic growth
with more and better jobs and greater social cohesion”
Lisbon Strategy 2000
Future legislationForms for new procedures
PIN, OJEU and contract award notice for “light touch regime” contracts notice of contract variation minor changes to other forms
Electronic invoicing Directive 2014/55 will enable all suppliers to submit electronic invoices in a prescribed
format contracting authorities must accept invoices submitted in that form implementation deadline November 2018
World Trade Organisation Government Procurement Agreement mirrors EU procurement rules covers a wider range of countries including USA, Japan and potentially
China
European Single Procurement Documentation standard form
Recognition of Group structures (Art 12)“Reverse” and “multiple Teckal” now covered by rules
Codification may lead to greater focus turnover must be derived from activities
“for the parent” change of terminology from “with” so check group structures now
Beware “20% test” for DLO greater freedom to work for third parties
if DLO is part of the provider
Public sector co-operation – (Dublin ambulances & Hamburg waste cases) but limited to “statutory functions” (not cleaning – Piepenbrock case)
“Teckal” testcodified
“Control test”
parent controls strategic objectives and significant decisions of subsidiary
“Activities Test”
80% of activities for parent authority
“Capital Test”
no private capital in subsidiary
Rise and fall of Development Agreements (Arts 2 & 10)
“Pure land transactions” exempt
Issues since Roanne about construction obligations in Development Agreements
Helmut Muller and subsequent cases reduced concerns
Definition of a “public works contract” still unclear in Directive
What is a “decisive influence” does it include a “right of veto” over
changes to specification? or does it apply only if the authority can
insist on the developer making changes?
Works contract includes a contract for :
“the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority exercising a decisive influence on the type or design of the work”
(Art 2(6))
Increased coverage & Part B abolition (Art 74) Part B regime abolished and replaced by light touch regime for
health and social services legal services educational services (but not training)
Threshold EUR 750 000 (approx £630K)
Must publish OJEU contract notice and CAN comply with Treaty obligations
(transparency, equal treatment etc)
“Other services” residual category eg grounds maintenance will be fully regulated
Contracts now subject to
“full” tendering
regime
•Grounds maintenance
•Agency staff (other than in care or health sectors)
•Rail transport
Death of the negotiated procedure (Arts 26 & 29)Commission concern over “abuses”
during preferred bidder stage
Competitive dialogue (CD) introduced in 2004
Negotiated procedure replaced with “competitive procedure with negotiation” (CPN)
“negotiation stage” equivalent to “dialogue stage” under CD
“minimum requirements” and award criteria not “subject to negotiation”
final tender stage – equivalent to BAFO – bidders can rely on previous “offers”
CPN & CD both available where
•“requirements cannot be met without the adaption of readily available solutions
•contract “includes design or innovative solutions”; or
•contract cannot be awarded without negotiations eg on “legal or financial makeup
Framework Agreements come of age (Arts 33 & 37)EU Commission concerns over UK use of frameworks Regulated in 2004 Directive
No major changes in 2014 Directive (Art 33) minor changes (to “fix problems”) confirm that
• contracting authorities “identified in the OJEU notice” (rather than “parties to the framework agreement”) can use it
• with direct award the choice of provider must be based on objective criteria
• both direct award and mini-competition can be used under the same framework agreement (but only with “objective” criteria to determine which applies when)
Buying clubs (Art 37) contract with buying club not subject to OJEU all buying club purchasing must be electronic (from
implementation) contracting authorities no longer liable for buying club
breaches
Major move to electronic tendering (Arts 22 & 53) Compulsory e-tendering & communications
extended implementation period (54 months) – but consultation whether to implement sooner
must document verbal communications impacting on tender submission or evaluation
data integrity requirements (eg no access to tenders until after deadline)
On line availability of “procurement documents”
from publication of OJEU notice - meaning? procurement documents =
• Specification• Contract conditions• Payment mechanism/cost model • ITT and supporting documents• OJEU notice & PQQ
“Contracting authorities shall by electronic means offer unrestricted and full direct access to the procurement documents from the date of publication of the OJEU notice” -
Art 53(1)
Electronic purchasing (Arts 34 & 36)
Dynamic purchasing system (DPS) (Art 34)
notice to suppliers on the DPS replaces need for OJEU notice on each purchase
minimum tender period of 10 days
Electronic catalogues (Art 36)
Must be “adequate” notice to suppliers to “update catalogue” before each call-off
interface with DPS – 10 day ITT operates as notice that information is to be collected from the (updated) catalogue
DPS
•Procured using restricted procedure
•30 days from OJEU notice to respond
•No limit on number of suppliers
•New suppliers can join at any time
•10 working days to assess new suppliers
•Suppliers cannot be charged for participating
Attempts to simplify procedures (Arts 46 & 48)
Single aggregated PIN covering several procurements over 12 months
at start of each procurement bidders that “express an interest” are sent a “notice to confirm interest”
Lots will be able to limit the number of Lots a tenderer
• can bid for, and/or • can win
must divide procurement into Lots or explain why not in the procurement documents
Simplification of prequalification & selection (Arts 24, 41 & 56 - 65)
Terminology changes Art 58 “selection criteria” – to
prequalify “suitable” bidders Art 65 can limit the number of
bidders “meeting the selection criteria” that are invited to tender
Self – declaration
Checked before contract award
Codification of exclusion grounds from case law
“Self-cleansing” provisions
Exclusion grounds
•evidence of collusion
•conflict of interest/prior involvement that “cannot effectively be remedied by less intrusive measures”
•“significant or persistent deficiencies in the performance of a prior public contract … resulting in early termination, damages or comparable sanctions”
•violations of environmental or employment legislation
Simplification of “selection” criteria (Arts 56, 58, 60 & Annex XII)
Economic and financial standing information limited to
• bank reference & insurance details• published accounts• turnover statement
cannot use credit reference agencies
Technical and professional ability references
• can use only to establish a “sufficient level of experience”,
• can consider at either “selection” or award but not both
limit on information that can be required to “prove selection criteria” are met – (Art 60)
Financial
Annual turnover no more than 2 times contract value unless “special risks”
Minimum turnover in “area” (of work) covered by the contract
Financial ratios
Minimum insurances
Simplification of “selection” (Art 65)Must state in OJEU notice
minimum and (“where appropriate”) maximum number of tenderers; and
“objective and non-discriminatory criteria or rules” to be applied to select tenderers
Not limited to financial strength or technical ability
Link to “subject matter of the contract” might be implied by future case law
So don’t throw out the PQQs yet – but they may need to be renamed
Value for money (Arts 40, 67, 68 & 71)Soft market testing specifically permitted (Art
40) but must ensure it does not distort competition (Art
41)
Award criteria (Arts 67 & 68) MEAT can now specifically include cost to the
authority/lifecycle costs Government consulting on banning “lowest price” can consider “organisation, qualification and
experience of staff assigned to the contract”
Direct payment of subcontractors (subject to national law) (Art 71)
Sustainability (Arts 42, 43 67 & 70)Technical specifications (Art 42)
can now include “method of production” if proportionate to contract value and objectives
must include accessibility criteria for people with disabilities
Labels (Art 43) can specify environmental, social eg “fair trade” labels, if
“label” is• “objectively and independently verified” • “international” • “linked to subject matter of contract” and • “equivalent labels” are accepted
Award Criteria (Art 67) can include “qualitative, environmental and/or social aspects”
provided “linked to the subject matter of the contract”
Contract performance conditions (Art 70) can include “environmental, social or employment-related
considerations” if “linked to the subject matter of the contract”
Regulation of Variations (Art 72) Permitted where variation:
is provided for in contract • “in clear precise and unequivocal
review clauses… • stating the scope and nature of possible
modifications or options • and the conditions under which they
may be used”• may not “alter the overall nature of the
contract” is a new contractor “following corporate
restructuring including takeover, merger, acquisition or insolvency” including “step-in” to subcontracts
has a value below both• applicable EU tendering threshold; and• 10% of initial contract value for
services/supplies or 15% of original contract value for works (plus inflation, if contract includes an inflation clauses) – value assessed cumulatively
is not “substantial” within Pressetext (see box)
“Substantial” changes – Pressetext
Changed contract would have attracted other tenderers or changed the tender result
Variation “changes the economic balance of the contract in favour of the contractor in a way not provided for”
“Considerable” extension to scope
New contractor (other than as left)
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