Why reform the existing procurement regime?
The Bill is set to streamline the current legislation governing the UK’s procurement regime by introducing one single framework, which will replace each of the Public Contracts Regulations 2015, Concession Contracts Regulations 2016, Utilities Contracts Regulations 2016 and Defence and Security Public Contracts Regulations 2011.
Amongst other reasons, the Bill is intended to assist with:
- strengthening national security;
- increasing transparency surrounding procurement data; and
- helping SMEs to compete with bigger, established businesses for future public contracts.
Strengthening national security
The Bill “will protect our sensitive sectors from companies which could threaten national security and are a firm deterrence to hostile actors who wish to do Britain harm” (Minister for the Cabinet Office and Paymaster General Jeremy Quin).
The government is seeking to implement various measures within the public procurement space in order to protect national security. Some of these measures include:
- establishing a ‘National Security Unit’ for procurement which will allow for the investigations of suppliers who may pose a risk to national security and determine whether certain companies ought to be barred from public procurements;
- the introduction of new powers to ban certain suppliers from contracting within specific sectors, such as sectors relating to defence and national security; allowing such suppliers to be awarded with contracts within non-sensitive sectors only (please see further detail below).
The Bill will create a central digital platform in order to enhance transparency of public procurement activity. The digital platform will:
- allow suppliers to register contracts; and
- ensure that contracting authorities publish procurement data throughout the contract lifecycle through the introduction of several procurement notices. The access to such data will enable suppliers to identify new bidding and collaboration opportunities.
Helping SMEs to compete
The Bill “puts the government in a stronger position to get the best deal for taxpayers, while prioritising growth by cutting red tape and removing barriers for small businesses” (Cabinet Office Minister Alex Burghart).
As well as the government’s aim to reduce red tape in order to drive growth within the UK procurement market, the Bill:
- seeks to offer further opportunities for SMEs by making the new procurement regime “simpler, quicker and cheaper”; and
- imposes a duty on contracting authorities to consider the barriers that SMEs may be confronted with when participating within the public procurement market.
As such, there is a clear emphasis on the Bill having regard to the SME market and increasing the public procurement opportunities for such businesses. Further discussion of the SME impact is set out below.
The provisions of the Bill
The Bill will largely incorporate the provisions of the existing regime, with the addition of some significant changes.
Firstly, there is provision for specific objectives to be upheld by contracting authorities when engaging in the procurement process which includes:
- delivering value for money;
- maximising public benefits;
- increased transparency; and
- acting with integrity.
Reducing the number of procedures for the tendering process
The existing regime offers contracting authorities a selection of five procedures to complete in relation to the procurement tendering process. The Bill reduces such procedures to two types of procedures which are:
- an open procedure – ‘a single-stage tendering procedure without a restriction on who can submit tenders’; and
- a new competitive flexible procedure – ‘other competitive tendering procedure as the contracting authority considers appropriate’.
The Bill seeks to retain the existing open procedure but introduces the new competitive flexible procedure. The new competitive procedure will offer flexibility to contracting authorities as they will have the freedom to create their own procurement procedure (although contracting authorities must comply with the general rules stated within the Bill).
Exclusion of suppliers
In a similar manner to the existing regime, the Bill has provisions relating to the exclusion of suppliers from the procurement process, which include the mandatory and discretionary grounds for exclusion. Such grounds under the existing legislation state that:
Contracting authorities must exclude bidders where they have established or are aware that the bidder has been convicted of certain offences under UK law. Some of these include offences relating to:
- conspiracy; and
- money laundering.
Contracting authorities can exclude bidders under certain circumstances (and therefore contrary to the mandatory ground which includes specific offences). Some of these circumstances may include:
- where a bidder is bankrupt, subject to insolvency or winding-up proceedings or is in administration (along with further related insolvency events);
- where a contracting authority can appropriately demonstrate that a bidder is guilty of grave professional misconduct;
- where a bidder has shown significant deficiencies in the performance of a material requirement under a prior public contract; and
- where a contracting authority can appropriately demonstrate a violation of environmental, social or labour law obligations by the bidder.
The above examples are potential scenarios in which the discretionary grounds for exclusion may apply, as ultimately, the contracting authority will consider specific circumstances on a case-by-case basis when deciding whether to apply the discretionary ground for exclusion.
The Bill builds upon the existing, mandatory and discretionary grounds of exclusion by:
- amending key terminology;
- incorporating further offences; and
- including a provision relating to the likelihood of certain circumstances reoccurring.
Initially, contracting authorities will need to determine whether a supplier is:
- an “excluded supplier” – a supplier who meets the mandatory ground for exclusion and the contracting authority deems that the circumstances giving rise to the application of the mandatory ground, is likely to reoccur; and
- an “excludable supplier” - a supplier who meets the discretionary ground for exclusion and the contracting authority deems that the circumstances giving rise to the application of the discretionary ground is likely to reoccur.
The Bill also includes new offences to be applied under the mandatory and discretionary grounds of exclusion.
The new offences for the mandatory ground include:
- corporate manslaughter;
- competition law infringement; and
- failure to co-operate with debarment investigations (discussed below).
The new offences for the discretionary ground include:
- acting improperly during any procurement process; and
- prior poor performance of public contracts.
Further, the Bill not only sets out provisions for the existence of the exclusion grounds, but it also requires contracting authorities to consider whether “the circumstances giving rise to the application of the exclusion ground are likely to occur again”. If a contracting authority seeks to rely on this provision, they may consider matters such as:
- evidence that the supplier has taken the conduct or offence seriously;
- any measures the supplier has taken to prevent any further occurrences; and
- the time that has passed from the initial circumstances occurring.
The Bill introduces a central ‘debarment’ register which includes a list of suppliers debarred from engaging in the procurement process for a certain period. Suppliers will be added to the debarment list where a relevant minister:
- conducts an investigation of a supplier;
- determines that the exclusion grounds apply; and
- determines that the supplier should be added to the list.
Suppliers will receive notice of any such investigations and also for any debarment decisions that are made by ministers. Where notice of a debarment decision is taken, the supplier is granted an eight-day standstill period during which they can initiate court proceedings to suspend their name from being added to the debarment list.
During an investigation, a supplier can request relevant documents to be provided by the supplier within a certain period. The mandatory exclusion ground can be applied where a supplier fails to meet such a request, provided that a minister deems the failure to be “sufficiently serious” (Schedule 6, paragraph 42). It is unclear exactly what “sufficiently serious” means, and no doubt this will need to be tested by the courts.
Key performance indicators (KPIs)
Where any contract value exceeds £2 million, contracting authorities must set and publish a minimum of three KPIs before entering into such a contract – although this obligation will not apply under the following:
- framework contracts;
- Utilities contracts awarded by private utilities;
- Concession contracts;
- Light touch contracts; and
- where the contracting authority considers that the supplier’s performance could not be appropriately assessed by KPIs.
Where KPIs are set by a contracting authority, the authority must:
- annually review the supplier’s performance against such KPIs during the contract lifetime;
- and publish specific data regarding the supplier’s performance. Such data is likely to be published on the central digital platform, but this is yet to be confirmed by the government.
Publishing contract performance information
Further, the Bill introduces the requirement for contracting authorities to publish information regarding contract performance if certain circumstances arise.
Such circumstances include:
- a supplier’s breach of a public contract which results in:
- termination of the contract;
- damages being awarded; or
- a settlement agreement between the parties; or
- where a contracting authority considers that:
- a supplier’s performance of the contract is not being carried out to the authority’s satisfaction; and
- the supplier has failed to remedy a breach or rectify performance after having the opportunity to do so.
This clearly has implications for confidentiality (particularly as to settlement agreements) and careful drafting will therefore be required in this respect to potentially address these issues.
Remedies under the Bill
Many of the existing remedy provisions are retained under the Bill with the addition of some key changes such as:
- the reduction of the standstill period;
- changes to automatic suspension; and
- changes to the set aside remedy.
Reduction of the standstill period
Under the Bill, a minor change has been made to the ‘standstill period’ – the period in which a contract award process is suspended (and therefore the contract must not be entered into), as this period will change from ten calendar days to eight working days.
The Bill has made various changes to the application of an automatic suspension – this is where a contracting authority is notified of a claim prior to entering into a contract which consequently prevents the contracting authority from entering into the contract.
The changes under the Bill note that:
- the automatic suspension will not apply where a contracting authority is notified of a claim after the expiry of an applicable standstill period; and
- a new test for the court to determine whether an automatic suspension should be lifted. The court will consider the following matters when deciding whether to lift the suspension:
- the public interest in:
- ensuring the contract is awarded in accordance with the law; and
- avoiding delay in the supply of the goods, services or works provided for in the contract,
- the interests of suppliers, including whether damages are an adequate remedy for the Claimant (i.e. a challenging bidder); and
- any other matters the court considers appropriate.
New set aside remedy
A contract will be set aside if the court is satisfied that the Claimant (i.e. an unsuccessful supplier bidding for the contract in question) was denied a proper opportunity to seek pre-contractual remedies because:
- a required contract award notice was not published;
- the contract was entered into or modified before the end of any applicable standstill period;
- the contract was entered into or modified during a period of automatic suspension or in breach of a court order;
- if the court is satisfied that a decision made or action by a contracting authority breached its duty under the legislation (“the Breach”) and the Breach became apparent only on publication of a contract award notice or a contract change notice;
- the Breach became apparent only after the contract was entered into or modified.