What is public procurement?

Public procurement is the purchase of goods, services and works by public authorities using public funds. This can be anything from public transport services to ventilators in hospital.

Background

As the UK has left the EU, it is no longer subject to the EU Directives on public procurement. All references to EU Directives have been removed from domestic legislation,[1] threshold figures (which determine which contracts fall within the procurement regime based on value) have been converted from Euros to Sterling, and previous references to European supervisory bodies have now been replaced with references to the Cabinet Office. Additionally, the UK’s new “Find a Tender” service for publishing contract notices went live on 1 January 2021, replacing the Official Journal of the European Union.

The UK is also now a signatory to the WTO Agreement on Government Procurement (the “GPA“) in its own right (having formerly been a member as part of the EU) and any new legislation will be based on GPA principles. This doesn’t mean that there will be radical changes to the public procurement regime automatically – the EU procurement laws (on which the UK rules are based) are largely reflective of the GPA provisions and thresholds.  However, the UK Government is now consulting on making wide-ranging changes in light of the UK’s exit from the EU.

Public procurement has been at the forefront of the public consciousness over the past year because of the COVID-19 pandemic. It has been well-reported that the UK Government has awarded approximately £18 billion of contracts since March 2020 using the extreme urgency provision of the Public Contracts Regulations 2015, as part of the response to the pandemic, to some criticism.  It is notable that the objectives of the changes proposed by the Government include giving contracting authorities more flexibility and discretion.

The Green Paper and Consultation

On 15 December 2020, the Cabinet Office published its proposals for a radical reform of the public procurement regime in order to “overhaul our outdated public procurement regime” and “abandon…[the]complicated and stifling rules and unleash the potential of public procurement“.[2]  Some of the key proposals are summarised below, but if you would like to learn more, please contact one of the authors.

  1. Consolidate existing public procurement legislation into a single set of rules

The single set of rules will replace the four sets of regulations that currently govern the public procurement regime[3] and will be supplemented with industry-specific rules and guidance.

  • Replace the seven current procurement procedures with three, simpler procedures
Current ProcedureProposed ProcedureSummary of features
Open procedure  Open procedureThe intention is that this procedure will be the default standard procedure for simpler ‘off the shelf’ competitions, and will be extended to suitable defence and security procurements.
– Restricted procedure
– Competitive procedure with negotiation
– Competitive dialogue
– Innovation partnership
– Design contests
Competitive flexible procedureThis procedure will have minimal detailed rules, being only those needed to comply with the proposed new principles of public procurement (e.g. public good, efficiency, fair treatment of suppliers) and the GPA.  It is intended that this procedure will provide greater flexibility for commercial teams, greater discretion as to how to conduct the procurement and encourage innovation.  It will also be used for the award of all concession contracts.
Negotiated procedure without prior publicationLimited tendering procedureThis will largely be identical to the existing negotiated procedure without prior publication.  The key change will be the introduction of a new ground on which this procedure can be used: in the case of crisis or extreme urgency (to be declared by the Minister of Cabinet Office).  The 10-day standstill period will not apply to contracts awarded in crisis or extreme urgency, but will apply to other contracts awarded under this procedure. Contract award notices must be published within 30 days of the contract award.
  • Introduce open framework agreements

In addition to the existing (to be renamed ‘closed’) framework agreement, ‘open’ framework agreements will enable new suppliers to join part-way through.  Open frameworks would have a duration of up to eight years, with an initial (up to) three-year closed period. If the framework is to be longer than four years, it must be opened at least once after the third year for new entrants to join and can be opened as many times as required, provided this is stated in the call for competition.  When the framework is opened, existing suppliers can remain based on their original bid, or submit an updated bid (but risk not being re-appointed if they choose this option).

  • Reform conduct of procurement challenges

The Green Paper proposes steps to refine the regime to ensure faster decisions are made, with a greater emphasis on pre-contractual rather than post-contractual remedies. Key features of the proposals are:

  • The possible introduction of a specialised tribunal to consider procurement challenges instead of the High Court and/or introducing a fast-track system in the High Court.
  • Establishing a quicker process to apply to seek, lift or retain automatic suspensions, which are imposed when an aggrieved bidder starts legal proceedings to challenge a contract award and prevent the contracting authority from proceeding any further with the contract award process.
  • Retaining the requirement for a buyer to publish some level of ‘basic disclosure information’ in a contract notice, but removing the requirement to send mandated debrief letters.
  • A proposed cap on damages available to aggrieved bidders who bring legal challenges to: legal fees plus 1.5 x bid costs, excluding damages for loss of chance/loss of profit.  The Government’s rationale is that this should act as a disincentive for suppliers making speculative challenges. This cap would apply where a supplier has been unable to challenge a procurement in advance of an award, which is not unusual as often suspicions of problems or possible illegality in the procurement process only arise after the award decision is communicated.
  • A proposed cap on the profit paid on contract extensions where the incumbent raises a legal challenge, which will be calculated based on a government standard rate and paid at that rate for the duration of the extension.

Concluding remarks

The Green Paper is a key opportunity for stakeholders to share their views on the proposed sweeping changes to the new procurement regime. The deadline for consultation responses on the Green Paper is in just under a month, on 10 March 2021.

The proposals envisaged by the Green Paper are wide-ranging and ambitious. Some (such as the explicit focus on transparency and simplification) will be very welcome to suppliers. Others – including the curtailing of post-award legal remedies – are likely to be more of a cause for concern.

Following the consultation, the new public procurement regime is expected to come into force in late 2021 or early 2022.  We will continue to publish updates as matters develop.

Read the Green Paper here.


[1] Specifically, references to EU Directives have been removed from the Public Contracts Regulation 2015, Concession Contracts Regulations 2016, Utilities Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011.

[2] Transforming public procurement – December 2020, Ministerial foreword, p. 5.

[3] See footnote 1.

Author

Yindi is a partner in the Baker McKenzie Dispute Resolution team based in London, and a member of the Compliance and Investigations group. Yindi’s practice includes a broad spectrum of complex and high-value international and domestic commercial litigation for multinational clients, with specialist expertise in anti-bribery and corruption investigations, compliance and trust disputes.

Author

Kimberley is a trainee solicitor at Baker McKenzie.

Author

Will is a senior associate in the Baker McKenzie Dispute Resolution team based in London. He is a member of the office's Arbitration and Regulatory, Public and Media Law sub-practice groups, and the Global Healthcare Industry Group.

Author

Joanna Ludlam is a partner in the Dispute Resolution team in the Firm's London office, where she leads the market-leading Regulatory, Public & Media law team in the London office and also co-leads the office's Compliance & Investigations practice group. At an international level, she chairs the Firm's EMEA Compliance & Investigations Group, and is a member of the steering committee of the Global Compliance & Investigations Group.

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