If your company, or organisation, deals with public bodies, you should familiarise yourself with some important changes looming under the EU procurement rules.
In December 2011, the European Commission put forward its proposals to substantially amend the existing EU procurement rules. Following a series of consultations and negotiations that took place through early 2012, a revised proposal was published by the Commission in August. It is anticipated that the proposals could be adopted at EU level from early 2013 and will need to be implemented in the UK 18 months later.
The changes are far too many and detailed to go into any depth and are still being reviewed but the following is a summary of some of the key changes that the UK Government has been concerned about.
Removal of Part B services
One of the key changes is the removal of the distinction between part A services (fully covered by the regulations) and part B services (only partially covered). The Commission’s view is that this distinction should be removed and that all services above the relevant threshold should be fully subject to the procurement rules.
This was something that the UK Government strongly opposed and, although the UK was outgunned by the majority of other member states, who supported removing this distinction, it did manage to achieve some important concessions.
Under the latest proposal, certain social services will be subject to a higher threshold and a greatly reduced regime; essentially this will only require publication of a contract notice and contract award notice.
This reduced regime will apply to contracts for health, social and related services, administrative educational, healthcare and cultural services, religious services and certain other community, social and personal services.
Use of competitive negotiation
In the UK in particular there has always been a view that the EU procurement regulations are overly restrictive in relation to the ability to use of some form of negotiated procedure. Achieving greater flexibility was therefore one of the key items that the UK Government campaigned for during the negotiations on the new proposals. Under the latest proposals the negotiated procedure can now be used in most circumstances where the contract is something other than “off the shelf”, including, for example, where the contract includes design.
Exclusion for poor performance
Contracting authorities will be allowed to use performance on previous contracts as a ground for excluding someone from the tender process.
Some contracting authorities already ask for information about non-performance on other contracts when assessing tenders, such as asking about suppliers having to pay liquidated damages for late delivery. However, explicitly permitting poor performance as a ground for exclusion is going to significantly increase the pressure on suppliers to avoid incurring contractual penalties.
100% electronic communication
The current proposal is that within two years of the new directive being implemented in the UK all communication in EU procurement processes must be electronic.
Thresholds
Thresholds are changed every two years but only to verify that the thresholds correspond to the thresholds in the Government Procurement Agreement. However, after significant lobbying, the latest proposal now includes a requirement to fully review the thresholds 3 years after the directive comes into force. The UK Government is keen for work on reviewing the thresholds to start as soon possible and is pushing for the Commission to start this.
Contract modifications
One area that has created a lot of debate and case law is the question as to what modifications can be made to a contract without needing to re-tender. The current proposal includes specific provisions to try and address this which state that any substantial modification will mean that the contract has to be re-tendered. A substantial modification includes any change that changes the economic balance of the contract in favour of the supplier but changes below 10% of the initial contract value that do not alter the overall nature of the contract will not be considered to be substantial.
Next steps
The UK Government will be consulting around mid-2013 in relation to implementation of the directive into UK law and, based on the Commission’s current timetable, the changes could come into effect around the end of 2014.
The latest proposal for the new directive is available here.
For more information on these issues please contact Owen Williams or your usual Lewis Silkin contact.