The big news for procurement watchers is that the Government has finally published its Procurement Bill. The Bill follows a public consultation and announcement during the 2021-22 Parliamentary Session, but failed to find Parliamentary time. The Procurement Bill re-regulating public sector procurement was introduced in the House of Lords on 11 May, and the Second Reading is scheduled for 25 May. This article considers some of the key issues which impact on the HE sector.
Impact on Higher Education Institutions
The first, and most fundamental question is whether Higher Education Institutions (“HEIs”) remain in scope of procurement law. To recap, under the current rules, the HEIs are treated as within scope of procurement law to the extent that they fall within the legal definition of “body governed by public law”. That term has a specific and narrow euro-definition, so that it is common across the EU. In brief, that usually means that HEIs undertake an annual assessment of their income streams. If more than 50% of its income is from public financing, then they are caught. This explains why some of the more historic institutions (with large endowments and extensive property and investments) or research-intensive institutions with commercial income have considered themselves outside of the scope of the procurement rules. There has always been a question whether student funding through the Student Loans Company is public finance. It is hardly a surprise that the lawyers can’t agree when the Office for National Statistics struggles with how to categorise it. Not only is this not clarified in the Bill, but this is made even more unclear.
On the one hand, neither the Green Paper nor the Explanatory Notes to the Bill raised any suggestion that the scope of procurement law would change. On the other hand, the Bill provides that the concept of public authority includes an authority with “functions of a public nature” that is “funded wholly or mainly from public funds” which echoes the broadly similar and widely drafted definition in the Human Rights Act and merged into an amalgam of both pieces of legislation.
The courts have already decided that a private provider of social housing could be a public authority under that Act as it performs “functions of a public nature”: R (Weaver) v London and Quadrant Housing Trust. The courts have not decided whether SLC funding is public funding and, most importantly, have not decided whether that, in any event, matters. It merely “includes” those that are publicly funded and does not exclude those that are not, and creates new uncertainty for those HEIs that are currently outside of the scope of procurement.
What are the Key Changes?
The key change is that the Bill consolidates the current Public Contracts Regulations, Defence and Security Public Contracts Regulations, Concession Contracts Regulations and the Utilities Contracts Regulations into one handy Act. One of the benefits of the Bill is to “slash” red tape by “removing” more than 350 complicated and bureaucratic rules. The Bill is still 116 sections (not including Schedules) so the jury is out on whether that objective has been met.
The Bill does certainly have the useful change in that it streamlines the current raft of procurement procedures to three: open competitive procedure, the inelegantly described “other” competitive procedure and direct award. The “other” competitive procedure now encompasses the panoply of competitive procedures which range from the extremely formal restricted procurement procedure (i.e. inviting a manageable number of bidders to tender) through to the still pretty formal competitive dialogue and negotiated procedures. This will likely be unequivocally welcomed, in order to allow some sensible flexibility to the operation and management of a procurement process.
An end to MEAT
The Bill proposes an end to the requirement to award the contract on the basis of the “most economically advantageous” (“MEAT”) criteria and replace this with the “most advantageous tender” (“MAT”). MEAT provides for an evaluation of price or cost (which could include the best price-quality ratio), but only permitted social or other criteria which were linked to the subject-matter of the contract. This means that buyers can now include criteria that go beyond the subject matter of the contract and award contracts to suppliers that contribute to wider economic, social or environmental outcomes.
A real difficulty with the current state of procurement law is not so much the regulations, but law which is not part of the regulations. Despite their length, the Public Contracts Regulations are not a complete code of procurement law and are supplemented by rules which are derived from case-law derived from the EU Treaties, including on the advertisement and procurement of contracts which are below the value threshold set out in the Regulations. Section 4 of the EU (Withdrawal) Act 2018 maintains rights and remedies which are recognised under English law. This could certainly include the obligation to consider and to advertise below-threshold contracts, which has been recognised by the English High Court in Mansfield DC v DCLG. Unhelpfully the Bill does not set out whether those rights continue or whether they have been repealed leaving this puzzle very much one for my learned friends.
The Government notice promises that the Bill will deliver “a step-change in transparency and openness”. The Bill retains the existing current obligations to publish notices for contracts and award decisions, but now also includes new obligations. The Bill introduces “planned procurement notices” (which rename, rather than replace the optional “prior information notices”), and also oblige buyers who have an annual contract spend of £100 million to publish “Pipeline Notices” for any contracts which may have a value of £2million.
Buyers are obliged to include at least three key performance indicators in contracts with a value over £2 million and, in addition are obliged to publish details of the supplier’s performance against those KPIs including where there has been a settlement agreement between the parties. While the Green Paper alluded to the principle of “transparency by default”, I am not sure that the market was expecting transparency of defaults, including potentially, overriding the commercial confidentiality of settlements of claims.
Transparency will be implemented through a central data platform and enforced by, among other things, a new Procurement Review Unit (job advertisements are still open at the time of writing …) which proves, if nothing else, that even an efficiency drive can be implemented by another layer of government.
You can find out more at the Parliamentary website.
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