SME access by splitting contracts into lots

In 2014 the European Union adopted new procurement Directives for Public sector, Utility sector and Concessions contracts.  With the reform of the Directives they hope to achieve better access to public contracts for SMEs. One of the measures set into place to do this is the rule encouraging contracting authorities to split contracts into lots. The Public Contracts Regulations 2015 transposed the 2014 Public Sector Directive in February 2015, and with it the “Split your lots” rule. With this blog I hope to make it a bit more clear what a contracting authority is required to do.

What does a contacting authority have to do?

Regulation 46 sets out the details, in its simplicity it reads that contracting authority may split into lots or explain why not. This is not that different from the old rules, where contracting authorities still had the same choice that they “may split into lots”. The biggest difference here is that if the contracting authority does not to split into lots they have to explain their decision.

So, if the decision has been made not to split into lots, to whom does the contracting authority have to explain themselves? Regulation 46 gives them a choice between providing the reason in the procurement documents or providing the reason in the report required by Regulation 84. If you look at this closer, the contracting authority chooses between being up front with the supplier from the start by providing the reason in the procurement documents or “hiding” the reason if they choose to provide it in the report. It is not clear by Regulation 84 if the supplier has any right to read the report, only that the contracting authority shall communicate the report to the Commission or the Cabinet Office on request.

What about the reason?

Regulation 46 does not define what a reason should be. In fact it can be argued that it does not even read that the contracting authority has to go into details as it only states that they have to indicate the main reasons. This leaves it open for debate and what an acceptable reason could be.

Impact

In reality not much has changed for the contracting authority. They still have a choice between dividing into lots or not. It seems the only real difference is that a contracting must provide a reason. Since there is no definition on what is an acceptable reason, it is likely that the reasons contracting authorities had for not splitting into lots before will continue to be the same.

SMEs might find this measure a disappointment as there does not seem to be any real incentive to split into lots when it has not been made mandatory to do so. When the reason is not provided for in the tender documents, I would recommend suppliers to contact the contracting authority and question why they chose not to split into lots. This will at least raise awareness among contracting authorities about this rule and increase the chance of them considering splitting into lots in the future.