Ten things operators should know about the new EU Procurement Directive

Published:  30 May, 2014

Mark Robinson is Group Chief Executive of Scape, a local authority-controlled public sector procurement company. During the LAPV Fleet Procurement Forum (Edgbaston Cricket Ground, March 26, 2014) he delivered his presentation: 'Procurement for the public sector,Staying ahead of the game.'In this article – based on what he talked about on the day – he delivers an outline of the ten most important aspects of the new EU Procurement Directive.

The current EU public procurement laws have been in place since 2006 (subject to the occasional amendment) and they are soon to be replaced, following well over two years of consultation and negotiation. The new rules were formally adopted in February. In late March they were published in the Official Journal of the European Union (OJEU). They came into force on April 17, 2014, and Member States must implement them into national law no later than two years after that date. The UK Government has been positive about the new directive and is keen to implement as soon as possible. Why change?

So, what is the point of the changes? These are the top ten aims of the revised directive:

Strategic use of public procurement to address new challenges (fostering innovation, respecting the environment and so on)

  • Modernising the rules
  • Simplifying the rules
  • Greater flexibility for contracting authorities and economic operators
  • Improving efficiency in public spending
  • Increasing access for SMEs
  • Enabling sustainability and other societal goals to be incorporated into procurement process
  • Safeguarding against corruption
  • Promoting e-procurement
  • Codifying the existing law which has been made in the courts

In summary, therefore, the revised directive is intended to modernise and simplify the rules and to codify some of the existing law which has been made in the courts – and to make procurement easier for contracting authorities. Does it do that? Yes and no. There is some useful clarification of confusing areas of law and some procurement will be shorter and more flexible. Ironically, however, the overarching regime as set out in the directive is more complex than the existing arrangements.

1. Revised and new procurement procedures

Contracting authorities can use a competitive procedure with negotiation on much wider grounds than is currently the case. This is justifiable by specific circumstances relating to the nature, complexity or the legal and financial make-up of a given project or where the contracting authority's needs can't be met by an ‘off the shelf' answer – such as it would get under the restricted procedure. The new grounds justifying use of the 'negotiated procedure' will be the same as those permitting use of competitive dialogue, so it would be surprising if many bodies chose to use the latter. The new innovation partnership procedure allows co-operation with a business which has been selected via a competitive tender procedure to develop an innovative product, work or service, which doesn't exist on the market. Otherwise, the currently available tender procedures remain the same.

2. Abolition of distinction between Part A and Part B services

Currently, various services are listed as 'Part B' services and benefit from a 'light-touch' regime. Under the directives, Part A and Part B services will be abolished and a rather smaller set of specialist services (eg. legal, health, social and educational services) will be subject to a new 'lighter touch' regime, which apply only if the contract value exceeds €750,000. In addition, apart from the general EU Treaty principles (non discrimination, level playing field etc), the only additional obligations relate to transparency and publicity ie. a requirement to publish the tender via OJEU notice and then publish a contract award notice.

3. Clarification of pre-OJEU notice market engagement rules

Market consultation before the launch of a procurement procedure is now expressly permitted and the rules are clearer.

4. Incorporation of public-public contract exemptions

New rules codify and expand case law by setting out where procurement is not required for 'in-house' and 'public-cooperation' contracts. These apply where contracts are awarded by one or more public bodies to certain related public bodies or association of public bodies. The directive also clarifies the conditions under which more general cooperation between public entities is exempt from the application of the directive and the intent is to balance freedom of public authorities to organise public services and also allow some market access for economic operators.

5. New rules on evaluation and award criteria

There are a number of new rules which provide greater flexibility for contracting authorities. Grounds for excluding bidders can now include poor performance under previous public contracts. However, this is only allowed where there have been significant or persistent deficiencies in performance of a substantive requirement. In comparing tenders for services (ie at ITT stage), contracting authorities may take into account the qualifications and experience of the individual people assigned to perform that contract. Previous case law ruled that a bidder's relevant experience could only be taken into account only at PQQ stage and not as an award criterion when comparing tenders.The requirement that award criteria are linked to the subject-matter of the contract has been changed to allow indirect social and sustainable factors to be evaluated – including trading and production processes. It will also be possible to use life-cycle costing to determine the most economically advantageous tender.

6. SMEs

There are a number of changes which are intended to encourage SMEs to bid for public contracts:

  • Contracting authorities are limited to setting a minimum turnover requirement of no more than twice the contract value.
  • Contracting authorities must also consider whether contracts can be divided into lots and must provide reasons if they decide not to subdivide contracts into lots.
  • Bidders must be allowed to rely on self-declarations to demonstrate that they fulfil economic or technical selection criteria (rather than providing the evidence at PQQ stage).
  • Minimum time limits, which contracting authorities must allow for bidders to respond to notices or submit tenders, have been generally shortened. In the open procedure, for example, the minimum timescale for tender returns will be reduced from 52 days to 35 days.

8. Variations of contracts

Existing case law deals with when and how circumstances in which changes to an existing contract during its term mean that the contracting authority must back out to tender (the Pressetext case). The new directive codifies and clarifies this. One example is that a re-tender is not required where the monetary value of a change falls below the relevant OJEU threshold and represents less than 10% of the initial value of the contract (or 15% in the case of works contracts).

9. Are financial thresholds higher?

No, the thresholds remain at their current level, and this is because of the EU's international obligations under the World Trade Organisation's Government Procurement Agreement.

10. Mandatory use of electronic procurement with timetable for implementation

There will be mandatory use of means of electronic communication for public procurement. This is intended to increase accessibility to procurement and to bring efficiency gains. The estimated savings could amount to €100 billion annually throughout the EU.

What is happening now?

The UK Government is drafting implementing regulations. Discussion papers have been issued on some of the policy choices in the directive. Formal consultation on the draft implementing regulations will follow when they are issued. The Cabinet Office is also providing training on the new directive in every region to representatives of contracting authorities – this is being rolled out now.

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