Tenders Direct Blog

Comment from the experts at Tenders Direct.

New 2015 Procurement Regulations – Will SMEs benefit from the changes?

Posted by Gemma Waring on February 13, 2015

The official public contracts regulations which govern UK public sector procurement have been published and are coming in to force on the 26th February 2015.

One of the main aims of the regulations and their precursor strategies ( such as Europe 2020 and the Lord Young report) was to encourage more participation from SME companies in tendering exercises and ultimately to get more SMEs supplying to the public sector.

The current government set the lofty target of 25% of government spend going to SMEs by 2015, a target which is a long way from being met so the key questions for organisations looking to supply into the public sector in light of the new regulations are 1) What has changed? and, more importantly, 2) What does this actually mean for me?

What has changed?

Some of the more significant changes in the new regulations are:

 

  • Tendering documents have to be available from the date of OJEU advertisement – no more registering interest and chasing for updates from the contracting authority.

 

  • Reduced timescales for procurement – on average they have reduced timeframes by a third and have introduced the new Accelerated Open procedure for OJEU tenders and have prohibited the use of a PQQ stage for low value contracts.

  • Contracting Authorities are now only allowed to ask for suppliers to have a turn over that is twice the value of the contract they are applying for.

 

  • New mandatory exclusions mean companies with individuals who have been found guilty of Terrorism or Serious Crime offences must be excluded from the competition – unlikely to affect the majority of companies.

 

  • New discretionary exclusions means that poor performance on a previous contract (including any damages paid not just cancellation of contracts) can be grounds for exclusion for up to 5 years.

 

  • Buyers are now being ‘encouraged’ to break contracts down into smaller lots – not as strong a measure as most hoped for as it could have been mandated for all contracting authorities.

 

What does this mean for you?

The over all impression SME suppliers might take from the new regulations is that there are a number of conflicting changes that means they are being impeded rather than encouraged to participate.

For example, the limitation on the company turn over to contract value ratio would largely be seen as a positive step for SMEs but without mandating buyers to break contracts down in to lots, many SMEs might still find that contracts remain out of reach due to their size.

There are also the conflicting ideals between reducing red tape and the removal of PQQ stages for low value contracts. Given the issue stated above about larger contracts and restrictive turn over requirements,  SMEs are often encouraged to tender for smaller contracts to break in to the public sector but now these will effectively be run as an open procedure, it will mean more work for SMEs and more form filling – draining resources with no guaranteed return on investment.

Although the introduction of E-Certis or a European Single Procurement Document will alleviate the burden somewhat, these will not become mandatory in the UK until October 2018, leaving  a period of more than 2½ years  in which  suppliers have lengthy documents to fill in rather than the less burdensome PQQs documents – only putting in additional resources if successful at this stage.

 

Only time will tell what impact the changes will make and the Crown Commercial Service has advised ‘more guidance’ will be forthcoming on implementing the Lord Young Report but for now its hard to see how SMEs will benefit, certainly in the short term, from the changes in the new regulations.

Perhaps a lack of input from the business sector in the consultation phase can be attributed to this or a lack of practical awareness from the public sector of the rigors of tendering for SME companies and the strain it places on resources.

 

Either way it seems there is a way to go before SMEs can access the market as simply or effectively as they would hope to.

 

These changes are only a selection of issues SMEs need to consider as part of the new regulations – we will be posting separate blogs in the coming weeks on ‘How suppliers can prepare for Life Cycle Costing Questions’ and ‘Changes to Procurement Procedures’.

Our Successful Tendering courses are all being updated to incorporate the changes to the legislation and what it means to you – our course programme can be found on our website.

15 Responses to “New 2015 Procurement Regulations – Will SMEs benefit from the changes?”

  1. paul said

    hi, is there a specific section in the 2015 procurement regulations which relates to buyers being encouraged to break contracts down to smaller lots.

  2. Tom Heath said

    If we have received a tender prior to this new legislation to expires after the new legislation date how will that affect the tender?

    • Gemma Waring said

      Hi Tom,

      The tender you received prior to the new legislation will still follow the older procurement regulations. The new rules only apply from the 26th Feb and do not get applied retrospectively to existing tenders.

      Gemma

  3. Fabian Ashun Jnr said

    As the European Single Procurement Document (ESPD) is only exempt in electronic format until 18/04/2017 (I think) – Does that mean we have to ask suppliers to provide hard copy of the ESPD? Or only implement once it is in electronic format?

    • Tim Williams said

      Fabian,

      Paragraph 7 of Regulation 59 states – the ESPD shall be provided exclusively in electronic form.

      Regulation 1 states that 59(7) comes into force on 18th April 2017.

      While it could certainly be clearer this appears to mean that an authority in England, Wales or Northern Ireland must accept the ESPD from the date the Regulations come into force, i.e. 26th February 2015. Presumably this means that you can accept an ESPD in either hard copy or electronic format at the moment, but from April 2017 it must be electronic.

      The implication therefore is that an authority must have the facilities to accept and process electronic ESPD’s by April 2017.

  4. Ritchie said

    ‘Contracting Authorities are now only allowed to ask for suppliers to have a turn over that is twice the value of the contract they are applying for’.

    – Does this relate to ‘live’ PQQ’s or only those PQQ’s issued after 26th February?

    • Gemma Waring said

      Hi Ritchie,

      As with all the changes this only comes into force after the 26th of February so any existing procurement exercises follow the old regulations.

      Gemma

      • Ritchie said

        Thank you Gemma,
        Could you confirm what you understand ‘twice the value of the contract’ to mean. For example, if a whole building contract is worth, say, £20M, but the associated fee for an individual consultant was in the region of £500,000 would twice the value of the contract be £40M or £1M? I had presumed £1M, but am not now certain after re-reading.
        Regards,
        Michael Ritchie.

      • Gemma Waring said

        Hi Michael,

        Having re-read article 58 I would agree with you that the meaning could be interpreted to be the contract value in its entirety. The regulations state ‘The minimum yearly turnover that economic operators are required to have shall not exceed twice the estimated contract value’. Note however that is says ‘contract value’ and not ‘total contract value’ so this leaves it open to interpretation in my opinion.

        I would assume that in the example you have given the contracting authority would need to break the contract down into separate lots in order to work around this and err on the side of caution.

        I know this isn’t a concrete answer but it will definitely be one to ask the CCS for clarity on.

        Gemma

      • Tim Williams said

        I think Regulation 58 is fairly clear that the minimum turnover requirement relates to the value of the work an authority expects to award to an individual company. So on a large construction project, with an overall value of £20m, but which is divided into lots where the fee for say Quantity Surveying services is £500,000 then the minimum turnover for a QS firm bidding on that lot would be £1 million.

        Paragraph 9 states:

        The minimum yearly turnover that economic operators are required to have shall not exceed twice the estimated contract value, except in duly justified cases, such as by reference to special risks attached to the nature of the works, services or supplies, in which case the contracting authority shall indicate their main reasons in the procurement documents or in the report referred to in regulation 84(1).

        Paragraph 11, clarifies that the turnover requirement relates to each lot:

        Where a contract is divided into lots this regulation shall apply in relation to each individual lot.

        Paragraph 12 adds the rider that if the authority thinks that a firm may potentially bid on several related lots then the minimum turnover required would be the aggregate value of that group of lots:

        But the contracting authority may set the minimum yearly turnover that economic operators are required to have by reference to groups of lots in the event that the successful tenderer is awarded several lots to be executed at the same time.

        Paragraph 13 sets out how the minimum turnover requirement should be calculated when a framework agreement is being awarded:

        Where contracts based on a framework agreement are to be awarded following a reopening of competition, the maximum yearly turnover requirement referred to in paragraph (9) shall be calculated on the basis of the expected maximum size of specific contracts that will be performed at the same time, or, where it is not known, on the basis of the estimated value of the framework agreement.

  5. Jamie Fry said

    More consultation with local authority procurement teams wouldn’t have gone a miss either!

    Question for you, when you say tender documents have to be ready from the release of the OJEU ,does this mean the ITT as well as the PQQ under the Restricted procedure?

    Regards

    • Gemma Waring said

      Hi Jamie,

      Regulation 53 just states that contracting authorities must ‘offer unrestricted and full direct access free of charge to the procurement documents from the date of the publication in the Official Journal’.

      If it were a restricted procedure I would imagine it would just be the PQQ documents as the ITT would only be sent to the companies selected to the next stage of the tender as is the case now.

      Obviously for an open procedure they would need to supply both PQQ and ITT questions.

      Hope that helps,

      Gemma

      • Jamie Fry said

        Thanks, that’s what we do anyway. Who on earth is not releasing the tender docs following the advert!

      • Tim Williams said

        Gemma,

        The definition of procurement documents is set very widely and is intended to include all documents applicable to the competitive process. The change that this directive and its implementation in national law introduce, are that all of these documents must be published at the same time as the contract notice.

        In the past it has been common practice to publish a contract notice and then issue a PQQ and while the pre-qualification process has been underway the authority will continue to work on the tender documents. This is no longer permissible, all of the documentation must be available at the outset.

        My understanding is that this is designed to allow suppliers to read the full specification and to decide whether they intend to bid, before they go to the bother of completing the PQQ. I have certainly had the experience of completing a PQQ, being shortlisted and only at that point when I have received the tender documents find that it isn’t a contract that we are interested in, or capable of fulfilling.

        Tim

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: