Understanding procurement change
The term procurement, for many, conjures up a myriad of complex rules and regulations which do little to encourage businesses to compete for lucrative public contracts, writes Caroline Prunty of Millar McCall Wylie.
The UK Government spends more than £300 billion per year on goods and services. In Northern Ireland there is a heavy reliance upon public contracts and the economy here is largely underpinned by government spending. In the circumstances, it is therefore essential for all businesses in this area to fully understand and keep up to date with the ever changing rules and regulations.
“The Award of Public Contracts by or on behalf of Member States’ Authorities has to comply with the principles of the Treaty on the Functioning of the European Union and, in particular, the free movement of goods, freedom of establishment and freedom to provide services as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency. However, for public contracts above a certain value, provision should be drawn up coordinating national procurement procedures so as to ensure that those principles are given practical effect and public procurement is open to competition” (Directive 2014/24/EU).
The current public sector Directive is 2014/24/EU and there is a further Directive covering works and services. Both Directives were published in the Official Journal of the European Union on 28 March 2014. As a consequence, legislation was introduced in England, Wales and Northern Ireland in the Regulations known as The Public Contracts Regulations 2015 (PCR 2015). Separate rules were introduced for energy, water and transport and these are governed by the Utilities Contract Regulations 2016.
Where a contract or procurement has started before 26 February 2015, the Public Contract Regulations 2006 will continue to apply and where started after this date, the PCR 2015 will apply. Regulation 118 of the PCR 2015 defines what is meant by the start of a contract and the procedure also covers issues regarding framework agreements and dynamic purchasing systems.
Many procurement practitioners and stakeholders are of the view that under the old Regulations there were significant deficiencies. Overall, the aim of the PCR 2015 is to provide a more open and accountable system. Inter alia, the aim was undoubtedly to enable contracts to be awarded quickly and at less expense to those involved. On the one hand, the CPD should be able to more efficiently match the supplier and best tender. On the other hand, those bidding in the process should find it quicker and less costly, and as a consequence be more competitive in their tender. Whilst this is welcome, it is clear that on any reading of the PCR 2015, that there are still areas which are very much open to interpretation. Words and phrases are used in the PCR 2015 which are subjective, capable of various interpretations and as a consequence it is inevitable that cases will come before the courts on issues of interpretation.
The Regulations prescribe thresholds which trigger the amount of regulation governing the tender process. For Central Government, the threshold is £106,047 (€134,000) and for Sub Central Government the threshold is £164,176 (€207,000). Sub Central Government covers police, local government and higher education. In respect of contracts above these thresholds, the process must comply fully with the Regulations. For figures falling below these thresholds, the principles of procurement will apply.
Note that the sterling figures provided are those as converted by the European Commission on 1 January 2016 and will be reviewed again on 1 January 2018.
The Regulations also introduces a ‘Light Touch Regime’. This applies to procurement of services set out in Schedule 3 of the Regulations. A much greater threshold of £589,148 (€750,000) applies to this sector and contracts above the threshold must comply with a dedicated set of rules. It is therefore essential than all parties concerned properly identify into which sector of the Regulations a particular tender process falls. One of the main issues is that those contracting organisations must advertise any contract over the new threshold in the Official Journal of the European Union rather that just advertising it nationally. This will in turn undoubtedly involve greater competition for significant contracts from overseas competitors.
Whilst the PCR 2015 are aimed at making the system of procurement more open, effective and less costly, it is abundantly clear that challenges to the procurement process will continue from dissatisfied suppliers. MMW’s Caroline Prunty is experienced in advising in relation to these regulations throughout all stages of the process. In many instances remedies have been achieved with the contracting authority without recourse to litigation. In other instances it has been necessary to litigate to achieve the desired remedy.
It is a contracting authority’s duty to ensure they are compliant with the Regulations. An aggrieved supplier is entitled to bring an action and with it an automatic suspension of the award. Where a breach has occurred there are a significant variety of remedies available both pre and post award. It is likely that the process of procurement will continue to present practitioners with many challenges even before the effects of Brexit are known.
This article is not legal advice. MMW Caroline Prunty, Head of Commercial Litigation at Millar McCall Wylie, is a member of the Procurement Lawyers Association and advises in the field of public procurement.
If you need any advice on procurement issues, please contact: Caroline Prunty
E: Caroline.Prunty@mmwlegal.com
T: (028) 9020 0050
