10 Key Changes in Public Procurement

November 7, 2014

On 28 March 2014 three new Directives were published in the Official Journal of the European Union (OJEU) updating and amending the current regime.

This article intends to focus on Directive 2014/24/EU which governs how public authorities can award public works, supply and service contracts.

The Directives prescribe a two year period for transposition into national law by the Member States and a further 30 months for implementing full electronic procurement. The UK Government, however, has stated it intends to achieve transposition as soon as possible and before the end of 2014. New legislation will not have retrospective effect and so all current tenders are subject to the current regime.

What has changed under the new rules?

This article focuses on the 10 key changes in Directive 2014/24/EU.

1. The distinction between Part A and Part B services has been abolished

Currently, there is a distinction between Part A services which are fully subject to the Procurement rules and Part B services which are subject to only limited requirements and which do not require the use of an OJEU contract notice. This distinction will be abolished and instead, all above threshold service contracts will be subject to the Procurement rules. There is however one key exception, in that there will be a new light-touch regime for health and social services and a limited number of other specified services listed at Annex XIV. All contracts in these sectors must meet a higher threshold of €750,000 to be subject to the Procurement rules.

2. Improved access for SMEs

Under the Directive there are new measures that will facilitate better access to the market for SMEs. This includes ‘self-declaration’ and limiting turnover requirements to a maximum of twice the estimated contract value. In addition, contracts for goods and/or services over €500,000 or for works over €5 million must be divided into lots. While this is not compulsory, a contracting authority who does not divide a contract into lots will have to set out its main reasons for not doing so. The aim is to encourage participation by SMEs where they lack the resources to bid for the entire contract and therefore are often eliminated at the PQQ stage. If the contract is split into lots, the authority can limit  the number of lots any individual tender can win.

3. Award Criteria must be on the Most Economically Advantageous Tender and be based on a cost-effectiveness approach

Currently, contracting authorities can select the tender that is the most economically advantageous tender or the tender that offers the lowest price. This choice will be removed and contracting authorities must award contracts to the most economically advantageous tender.

4. Mandatory use of electronic communications

Contracting authorities will have 30 months after the Directive has been implemented into national law to move to fully electronic tendering in all procurement procedures.

5. Amending Contracts post-award – Pressetext codified

The Pressetext case which governs variations to contracts will be codified into the Directive. Article 72 sets out the rules as to what is and is not permitted by way of variation without the award of a new contract. Variations to a contract will therefore fall into one of two categories:

(i) “substantial” changes which will require a tender process for a new contract; and
(ii) changes which are “not substantial” will not.

6. Teckal – in-house exemption codified

The new Directive codifies the existing case-law known as the Teckal exemptions where the Directive does not need to be followed. Essentially, a two part test has to be satisfied, relating to control and activity for the exemptions to apply:

• Control: the controlling authority has to exercise sufficient control over the controlled body; and

• Activity: the controlled body has to carry out the essential part of its activities for its owner authority.

7. A new ground for discretional exclusion

Contracting authorities may now exclude a bidder where they have shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contract which led to early termination, damages or comparable sanction. It is also worth noting that the Directive provides for defence – if the bidder can show that they have taken measures to remedy the situation and change its practices they cannot be excluded. However, this is not the case where the exclusion results from a “final judgement”.

8. Compulsory acceptance of self-declarations

Only the winning tenderer needs to submit all the documentation proving that it qualifies for the contract. To participate in the procedure, it will be sufficient to submit a self-declaration that it fulfils these conditions.
9. Minimum deadlines to submit tenders shortened

Timescales for the procedures will be shortened under the new Directive. For example, in the open procedure, the minimum timescale for retuning tenders will be reduced to 35 days where tenders can be submitted electronically. This can be further reduced to 20 days where a Prior Information Notice (PIN) is used and specific conditions met.

10. Competitive Negotiated Procedure

There has been a relaxation of the rules on use of the competitive negotiated procedure. The aim is to allow more scope for negotiation with tenderers. The contacting authority will be able to negotiate with bidders who have submitted their tenders to improve the content of their offers. There will need to be a “final tender” stage during which bidders will then be invited to submit a revised tender.

If you have any queries on any aspect of the new Procurement Directives please contact:

Lisa Boyd
Director
028 9027 1348
l.boyd@cfrlaw.co.uk

This article provides only a summary of the key changes under the new Directive and is not exhaustive, nor does it contain definitive advice. Specialist advice should be sought from a member of the Cleaver Fulton Rankin Procurement Team.