How will Brexit affect public procurement? This article looks at the key points to be aware of in the recently published PPN 11/20 and the Government’s Green Paper, ‘Transforming Public Procurement’.
The Public Contracts Regulations 2015 have been amended to allow for the implementation of a UK procurement system following the UK’s departure from the EU on 31 December 2020. This includes the publication of contract notices on the Find a Tender service, rather than the Official Journal of the European Union.
At the moment, the current procurement thresholds will remain in force. Under the European Union (Withdrawal) Act 2018, EU rules will continue to apply up until the point of contract award for any procurement processes that started before 31 December 2020, (this is likely to apply to those using competitive dialogue, innovation partnership or competitive procedure with negotiation) and framework agreements and call off contracts awarded before the end of the transition period.
Here are the key points to be aware of in the PPN 11/20 and the Government’s Green Paper, Transforming Public Procurement:
Procurement Policy Note 11/20: Reserving below threshold procurements
This procurement policy note set out the options that may be considered by contracting authorities when procuring contracts for goods, services and works with a value below the applicable thresholds. It highlights that the UK’s departure from the EU means that additional freedoms in relation to contract spend on goods, services and works contracts with a value below the applicable thresholds can be exercised.
The PPN applies to Central Government Departments, their Executive Agencies and Non Departmental Public Bodies (In Scope Organisations) in conducting procurements for public contracts. Other contracting authorities are encouraged to apply with the principles outlined in the PPN.
It provides that In Scope Organisations can structure a procurement specifying that only suppliers located in a geographical area can bid. It states that this could be UK-wide or by county but not by reference to the nations of the UK. It also provides that location should be described by reference to where the supplier is based or established and has substantive business operations and not by location of corporate ownership.
The PPN states that these options should be considered on a case-by-case basis and the measures can be used individually or together but in applying the policy it is important to achieve value for money and use good commercial judgement. It also highlights that when considering whether to reserve a procurement, the In Scope Organisation must comply with their own internal guidance, governance and procedures meaning that these will need to be updated to include the new flexibilities and measures in the PPN.
It sets out a list of relevant of considerations for In Scope Organisations in reserving procurements:
- Ensure value for money;
- Assess the sector / market;
- Identify and manage associated risks, including fraud and corruption;
- Ensure a budget is available and approved at an appropriate level(s);
- Use suitable model contracts;
- Develop simple and proportionate KPI and data reporting mechanisms;
- Undertake supplier due diligence checks;
- Ensure final approval is obtained at an appropriate level(s);
- Keep suitable records of commercial decisions; and
- Publish transparency notices on Contracts Finder as appropriate in a timely
manner.
The PPN also clarifies that to In-scope Organisations that Chapter 8 of the Public Contracts Regulations 2015 continues to apply to below threshold procurements.
Green Paper: Transforming public procurement
The Government launched a consultation on procurement reform on 15 December 2020. The Consultation closed on 10 March 2021 and the Government is currently considering the feedback received.
Key proposals in the Green Paper included:
- A series of proposals to rationalise the procurement regulations to cover public contracts, concessions and utilities.
- Changes to the procurement procedures, reducing these from seven under the Public Contracts Regulations 2015 to three:
- a “competitive flexible” procedure giving buyers freedom to negotiate and innovate, designing their own procedure (subject to basic parameters and safeguards);
- an open procedure that buyers can use for simpler, ‘off the shelf’ competitions; and
- a limited tendering procedure that buyers can use in certain circumstances, such as in crisis or extreme urgency.
- A reduced light touch regime. This proposal reduces the threshold for health and social services considerably so has the potential to bring many of these contracts into the regulated regime for the first time.
- Greater flexibility to evaluate bids on the basis of the Most Advantageous Tender rather than the Most Economically Advantageous Tender (MEAT) encouraging economic, social and environmental outcomes. The paper outlines that a National Procurement Policy Statement will be issued setting out the Government’s strategic priorities for public procurement.
- New ways of making public sector contracting “quicker and cheaper” and information “easier to find”. The proposals include focusing on the use of data via the implementation of an Open Contracting Data Standard, establishing a single digital supplier platform and a new Dynamic Purchasing System (DPS+) which can be used for all types of procurement. It also refers to the introduction of new “open” framework agreements of up to eight years.
- A centrally managed debarment list and proposals to deal with poor performance including giving contracting authorities the ability to take into account a bidder’s past performance and exclude them if they do not have the capability to deliver.
- A reform to the processes for determining procurement claims to make the process quicker and more accessible. It refers to capping the level of damages available to bidders and looking at a tribunal system approach to deal with low value claims and to address disputes arising in relation to ongoing procurements.
A copy of the consultation questions can be found here.
The impact of the Trade and Cooperation Agreement (TCA) on the Green Paper
The impact of the TCA on the Government’s ambitions remain unclear at this stage.
If the TCA had not been concluded the UK and EU would now be trading on “WTO terms”. The TCA offers a position which is between the EU Single Market and Customs Union, and trading on WTO terms.
The TCA ensures that the UK is able to implement a separate and independent procurement regime but it also imposes a framework of provisions relating to transparency and non-discrimination including in relation to the number of tenderers, handling of abnormally low tenders and ability to take into account environmental, social and labour considerations when evaluating bids. The TCA also imposes rules which go beyond those in the WTO’s General Procurement Agreement (which the UK has acceded to) and includes various specific sector arrangements for gas and heat distribution, hospitality, telecoms, real estate, education.
There are provisions within the TCA that set out the parameters for remedies. It will be interesting to see how these provisions are interpreted in the context of the reforms for challenging procurement decisions and capping the level of damages available to bidders with a view to “reducing the attractiveness of speculative claims” set out in the Green Paper.
This is an area of law which is expected to be subject of a number of further changes so we recommend that contracting authorities keep an eye on the emerging implications of Brexit on Government procurement policy.