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Public procurement: new rules, new opportunities

Public procurement: new rules, new opportunities

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Public procurement is big business.  The estimated value of contracts advertised by Governments and other public bodies across the EU is said to be over 420 billion euro.  Most EU public contract awards are regulated under EU law.  This means that public bodies in all EU Member States generally have an obligation to advertise contracts above certain value thresholds and give suppliers from across the EU a fair opportunity to win these. 

EU public procurement law is not only about procedural rules.  It is underlined by a remedies system which seeks to ensure the effective protection of suppliers’ rights.  This includes the possibility of complaining (even anonymously) to the European Commission and the possibility for national courts to set aside contracts that have been awarded illegally in certain circumstances. 

EU procurement has been in transition in the past few years with a number of legislative changes taking place, many of which are particularly beneficial to suppliers seeking public contract opportunities.  The UK has been at the forefront of implementing these changes. 

In February 2015 a new set of public procurement regulations came into force in the UK. [1]  The new rules implement into national law the first of three 2014 EU directives which, among other things, seek to modernise and simplify EU procurement legislation.  The UK was the first EU country to implement these rules, with the express intention of ensuring that the greater flexibility which the new rules allow could be relied upon as soon as possible.

For example, the new rules make it easier for public bodies to carry out negotiations with bidders before determining a contract award.  New provisions also seek to facilitate and promote the procurement of innovative solutions while there are also helpful clarifications as regards the type of contractual changes that would be acceptable after the conclusion of a contract, without the need for carrying out a new procurement procedure. 

However, what would be of particular interest to suppliers seeking to take advantage of public contract award opportunities is the fact that the new rules have made it more difficult for public purchasers to disqualify interested parties from a competition.  For example, the new regulations, in line with the previous legislation, set out grounds which permit or require the disqualification of applicants expressing an interest in participating in a contract award competition.  While it is true that the new regulations incorporate some additional grounds for mandatory or discretionary disqualification, what has changed is that the procurer is not permitted to disqualify an applicant if the offence was committed more than three or five years ago (depending on the offence). 

Under the old rules, no such restrictions existed so that it would have been possible for a public purchaser to disqualify an applicant even if the offence was committed a long time ago.  In addition, even in cases where an applicant has committed an offence within the three or five-year period, the purchaser may not disqualify the applicant if the latter can demonstrate that, among other things, it has taken appropriate action to remedy the causes which had led to it committing the offence in question.

In addition, where participation in a competition involves applicants demonstrating that they meet certain levels of economic and financial capacity, the new rules provide that such requirement should not be disproportionate.  More specifically, other than in duly justified cases, the minimum yearly turnover that applicants may be required to have so as to participate in the competition must not be more than twice the estimated value of the advertised contract.

Separately, the new rules create additional obligations on public purchasers that seek to increase transparency and allow, in the event of a dispute, verification of the extent to which the procurer has complied with its obligations of equal treatment.  For example, procurers are now required to document the progress of a procurement procedure and keep sufficient documentation so as to be able to justify decisions taken at all stages of a procurement procedure, including as regards the selection of bidders, the conduct of negotiations and the award of a contract.  Such documentation must be kept for a minimum of three years.  Public purchasers must also draw up a report for each contract award, incorporating key information about the carrying out of the procedure that led to such an award.  Finally, the new legislation requires public purchasers, in certain circumstances, to provide bidders (including disqualified bidders) with information about the conduct and progress of negotiations in an ongoing procurement procedure, thereby facilitating once more transparency and making it easier for bidders that might be concerned about the conduct of a procedure to seek to intervene where appropriate.

Most of these new provisions will now find their way into the new utilities regulations - that is the procurement rules which apply to certain utility companies, irrespective of whether or not they are public bodies - when these new rules come into force on 18 April 2016.

A separate set of regulations will also come into force on the same date, regulating for the first time by means of specific national legislation the award of concession contracts by public bodies and certain utility companies. 

The new rules are creating new opportunities for suppliers, making it easier for them to qualify for contract award opportunities, engage in negotiations with purchasers and ultimately ensure that their rights are protected.

[1]  Other than Scotland which is legislating separately

Totis is re recognised nationally and internationally as a pre-eminent expert in public procurement law.  He leads Eversheds’ public procurement group and regularly advises companies bidding for contracts, utilities and Governments on all aspects of procurement law compliance, including in the context of litigation. 

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