We’re all familiar with the various thematic clichés associated with St Patrick’s Day celebrations: leprechauns, pots of gold, four-leafed clovers and good luck. But did you know that the phrase “luck of the Irish” does not necessarily refer to the good variety?
When procuring goods or services over the financial threshold a public authority must do so under the Public Contracts Regulations 2015 in England, Wales and Northern Ireland and the Public Contracts (Scotland) Regulations 2015 in Scotland.
The current thresholds are as follows:
|Supply, Services and Design Contracts||Works Contracts||Social and other specific services|
|Other contracting authorities||£164,176
Social and other specific services are subject to the new ‘light touch regime’ as described in a previous blog.
|Supply, Services and Design Contracts||Works Contracts||Social and other specific services|
Defence and security contracts
|Supply, Services and Design Contracts||Works Contracts||Social and other specific services|
|Defence and Security authorities||£328,352
For the first time Concession Contracts are covered in EU Law under a separate directive and therefore separate regulations in the UK.
The EU Directive is found here: http://eur-lex.europa.eu/legal-content/GA/TXT/?uri=celex:32014L0023
The UK regulations here: http://www.legislation.gov.uk/uksi/2016/273/contents/made
The UK Directive gives instruction on how the value of a concession contract should be calculated: http://www.legislation.gov.uk/uksi/2016/273/regulation/9/made
The thresholds for publication in the OJEU refers to Article 8 (1) of the EU Directive which is:
- This Directive shall apply to concessions the value of which is equal to or greater than EUR 5 186 000.
The Sterling equivalent is £4,104,394.
Calculating estimated value
The calculation of the estimated value of a procurement exercise shall be based on the total amount payable, net of VAT, as estimated by the contracting authority, including any form of option and any renewals of the contracts as explicitly set out in the procurement documents.
Contracts subsidised by public funds
All applicable contracts which are subsidised by 50% or more of public funds must be advertised in the OJEU. From time to time a public body may part fund a project and request that the recipient of funding must advertise the procurement in line with public contracts regulations even if their contribution is less than 50% of the overall value. As such any recipient of public funding on a project should verify with the funding body what is expected of them in procuring for the project.
What are small lots?
See this blog.
How do I know if a contract is classed as works?
Many contractual requirements are a mixture of works and services. Whichever element is the highest in value should be taken as the contract nature when determining what threshold to apply. If you are unsure whether a specific element is classed as works or services then you can refer to Schedule 2 of the regulations which lists all activities which constitute works by CPV code:
If the CPV code which fits your requirement is not in that list then it is not classed as a Works contract.
Questions? Leave a comment below.
Here ye, here ye, we’ve got some entertaining news.
2016 has drawn to a close. What happened in the 365 days that made up 2016?
In October of 2016, the European Commission announced details of a study on CPV codes – Common Procurement Vocabulary codes – which tender notices are classified under.
There are around 10,000 CPV codes, and the list of codes was last updated in 2008. The codes range from very niche; animal ear tags (03340000); mange-tout (03221222); zirconium (14735000), to more common areas; building construction work (45210000); health and social work services (85000000) and computer supplies (302373000). The codes don’t reflect new technologies and computing mimicking the advance in technology in recent years, branding a lot of CPV codes out of date.
Despite this, buyers still list their contract notices under these codes in the hope of them being found by suppliers who want to bid for it.
The research carried out by the European Commission this October threw up some sobering news: in a sample of 405 notices tested, 23% had the wrong code associated with the scope of work tendered.
In around 10% of cases the code applied did not describe the work/supply/service procured; in some 8%, the code applied was too general, and in about 4%, the code was too specific.
So amidst this muddle of what code gets used where, what does this mean? In fact, it’s a pretty big deal for both buyers and suppliers.
If an incorrect code is used, a buyer is minimising the chances of there being a range of suppliers for them to choose from. They may not be able to choose from varying prices or scrutinise against the MEAT criteria: most economically advantageous tender. Public contracts can be awarded either on the basis of lowest price or MEAT, and buyers have to justify why they have chosen to spend a certain amount of money.
If they have very little to make comparisons on, buyers can end up spending more, either by using an expensive supplier due to lack of choice, or by using the cheapest supplier and getting a shoddy result which may have to be re-tendered for in the future.
For suppliers who supply works, services and supplies in a specific field, if a wrong code is used they are less likely to find contracts that they can tender for. CPV codes are a very specific classification and if the code isn’t correct, the supplier is missing out on opportunities which are destined for them. These could be SMEs who survive on providing specific services, and using the wrong CPV codes doesn’t benefit these niche businesses.
For example, for a contract ‘Collection of key qualitative and quantitative information on the European Commission’s merger decisions’ the code for ‘market research’ (code 79310000) was used, when in fact, something more appropriate like the code for ‘economic research’ (79311400) or ‘research services’ (73110000) could have been used. Due to the misuse of CPV code, the contract was never awarded.
The ill use of codes also affects the public. When work finally passes the business case for approval within an organisation, and for various stages to be passed, the work is still ‘undone’. If the tender needs to be re-advertised, we are looking at a similar timeframe to. Across the UK we are waiting for better roads, new schools, these things are all part of a very long queue.
Time is money. So what help is out there? Suppliers who don’t have access to a comprehensive tender alert service like Tenders Direct could be potentially missing out on lots of business opportunities thanks to incorrect CPV codes.
Tenders Direct is a wide-ranging tender alerts service which relies on a team of tender reviewers reading the contract and then classifying it against a set of key words that ensure tenders are classified to meet supplier requirements. We do not rely on CPV codes, we rely on experienced reviewers who can read between the lines and figure out exactly what work is being tendered for.
Our service helps marry up buyers with suppliers. A supplier is notified of tenders which fit the criteria of work they are looking to deliver, which is the way our service works. With our site, there is less likelihood of suppliers missing out on potential opportunities.
Our procurement experts help make procurement easier, and we take pride in being able to minimise the noise and help a buyer classify what they want, and feed the right opportunities directly into the right supplier mailboxes.
To CPV or not to CPV? That is the question.
Legal Remedies in Public Procurement – how they are used in Framework Agreements and Call-Off contracts
Framework Agreements allow a contracting authority (buyer) to enter into an agreement with one or more economic operators (suppliers) for a set period of time. Buyers can run mini tendering exercises to call-off contracts from the frameworks under Regulation 33 of the 2015 Public Contracts Regulations (PCR 2015). In general, there are legal remedies which can be used where a supplier wants to raise a challenge against the buyer. These remedies operate differently for frameworks and call-offs from a framework. To read more about Framework Agreements, please follow this link to our previous blog.
So what are the remedies available where there is a breach relating to a framework or call off contract? It’s a complicated topic – there are four main remedies which are outlined below:
1. Notification and Standstill
The standstill period offers a 10 calendar day pause from the point when the contract award decision is notified to bidders, and the point when the final contract is finalised, during which time suppliers can challenge the decision and claim the call off from the contract or framework as ineffective. A court may preserve a contract for overriding reasons of public interest as per Reg 103(5) where there is a claim of ineffectiveness. The ability to challenge the decision is a legal requirement imposed through the remedies directives. It is worth noting that it is not mandatory for a buyer to give notification and standstill for call-offs under a framework, but, they can voluntarily do so for above EU threshold frameworks made after a mini-tender. Reg 99 states that frameworks will be ineffective where there is an illegal direct award, unless the authority believes it was lawful to do so and a VEAT (Voluntary Ex Ante Transparency Notice) is published and the standstill period is observed. This does not apply to call-offs.
Suppliers are limited to claim damages for call-offs and these can also available when there is a breach of the award of the framework agreement. This could happen when there are lost profits or loss of future profits and bid costs. Individual call-offs do not require call for competition and cannot be classed as ineffective for failure to publish a call for competition, and in this instance the notification and standstill period would not apply either.
3. Automatic Suspension
A contract arrangement can only be brought to an end as a result of an application made by a buyer to the court requesting suspension of the contract. If the court considers that automatic suspension is not an option, then it would not be appropriate to make an interim order suspending the award. Attendance at automatic suspension hearings and consequently at hearings to challenge the continuation of automatic suspension, adds substantially to the cost involved and places the emphasis firmly on the balance of convenience and damages as an adequate remedy, which can undermine a supplier’s ability to obtain an effective remedy
4. Freedom of Information
Freedom of Information Act 2000 (FOIA) enables anyone to request information from a public body which is to be answered within 20 days. The exceptions include prejudice towards commercial interests of any person, trade secrets, breach of confidence and where incompatible with EU law or any enactment.
The obligation to disclose information may be difficult when dealing with call-offs from a framework. Under Reg 55 buyers must provide suppliers with their decision in relation to the conclusion of a framework agreement. It is unclear how far this extends to call-offs. Buyers send a notice to those who submit an offer in a mini-competition/mini-tender when a notification and standstill period is applied in above threshold call-offs. The Crown Commercial Service guidance suggests that the notification and standstill information is to be sent to all supplier who consider themselves qualified to bid within 15 calendar days under Reg 55(2) (but it is not clear whether this does apply to call-offs or not).
PCR limits information obligations to suppliers and not to ‘concerned citizens’ or organisations. Only suppliers can seek remedies under the PCR which is a further limitation on enforcement for breach of the PCR, as special interest groups, individuals or trade unions who may wish to seek enforcement are required instead to seek a judicial review route.
The first and most recent case in the UK to deal with the remedy of ineffectiveness under the PCR 2015 is of Lightways (Contractors) Limited v Inverclyde Council CSOH 169. The facts of the case are as follows:
- In 2015 the Council ran a mini-competition and a call-off of a CCS (Crown Commercial Service) Framework agreement for street lighting services. It was awarded to “Amey Public Services LLP”. The contract was entered into and had been previously awarded to this company in 2013.
- Lightways was not on the framework and challenged the award on the grounds that Amey were not appointed under the framework and the contract award was in breach of Regulation 19(3) of the Public Contracts (Scotland) Regulations 2012, where only call-offs could be made to those appointed to the framework. Amey was in fact a different company, as it was “Amey OWE Limited” that was on the framework.
- Amey OWE and LLP both had links to Amey, but were substantially different as the LLP company was a joint venture between Amey and Lanarkshire Council, and Amey OWE’s principal activity was in engineering consultancy. Each company had their own assets, employees and were separate.
- Lightways’ argument was accepted and it was held that they had a right to challenge even though they were not party to the framework. The ruling did not accept the principle of proportionality applied to allow the court to correct the council’s mistake and substitute Amey OW to Amey LLP.
- The court concluded that the Council had no defence to the challenge under Reg 19(3) and therefore made an order for ineffectiveness. Lord Tyre concluded that the contract had been awarded to a non-framework provider without being advertised and, as a result, a breach of the Procurement Regulations had occurred.
Where an ineffectiveness order is granted, the court is also obliged to fine the contracting authority. At the moment, the level of the fine in this case has not been stated, but it is obviously a concern for authorities in times of austerity. Any fine would be payable along with any with potential compensation payments to the exiting provider as well as potential damages to the challenger – so it could get costly. Inverclyde Council have been granted leave to appeal and, at present, the ineffective contract will continue until the appeal has been resolved.
Overall, the UK does seem to provide a satisfactory system of legal remedies with regard to the Public Contracts Regulations 2015. While the range of remedies appears satisfactory, there is a relatively small number of reported procurement judgements in the UK. This can also suggest that the system is not being used to its full potential.
For those of us who enjoy scaring ourselves stiff with fictional nightmares, the run up to Halloween always sees a welcome upsurge of horror films on the television schedules. In the archetypal “haunted house” story, an inexplicable and increasingly threatening paranormal force torments the unfortunate victims. As with all good storytelling, our empathy for the characters derives from our own hopes and fears: we can be suspicious or even fearful of things we don’t understand, and this fear of the unknown leaves the fictional characters – and the viewers – feeling insecure and powerless.
Sometimes, though, the victims turn the tables on their tormentors by learning to fight back. With the right resources and assistance – silver bullets, holy water, mediums or exorcists – even the most terrifying ghoul can be cast out.
Just like a haunted house, the real world can sometimes be unnerving and disconcerting. Brexit – whether it fills you with hope or dread – has swept away old certainties and created a future filled with potential pitfalls and possibilities. For now, the level of access UK suppliers will have to the EU market – and almost everything else about the final deal and it’s consequences – remain frighteningly unclear.
Like a terrified victim in a horror film, it is easy to feel powerless in the face of uncertainty. As the old gives way to the new, do you cower under the covers and hope for the best or pluck up the courage to face down your demons? Like a vampire hunter arming themselves with silver bullets and wooden stakes, we should seek out the knowledge and expertise needed to defeat the mysterious forces undermining our confidence.
Millstream can’t protect you from things that go bump in the night, but we can certainly shed light on the shadows of public procurement and clear the cobwebs away. Do you find bid writing frightening? Does the ESPD give you the heebie jeebies? Our team of experts includes procurement professionals and experienced bid writers who know how to take the fear factor out of public sector tendering.
If your first or fiftieth bid fills you with foreboding, our newly updated training courses can help you to cast out the evil spirits holding you back. Our consultancy services have a success rate of over 80%, and 98% of delegates who attend our training courses would recommend them to others. So, if your company is haunted by a lack of experience or success in bidding for public contracts, Millstream could be the silver bullet you need.
Brexit: we don’t know what the impact on public sector spending will be and whether the approach to procurement as a result of the leave vote will change. The construction industry has seen uncertainty growing more recently and the impact of a potential EU exit is unknown.
Despite increasing uncertainty in the run-up to the referendum, over 1,900 public sector construction tenders were published, an increase of 29% compared to the six months prior and mirroring growth seen over the last two years with a particular increase in tenders for roads infrastructure, renewable energy and new build housing.
The public sector has a large construction project pipeline which includes new and ongoing infrastructure projects such as HS2 and the completion of affordable housing projects across the country which remain in high demand. Regardless of the leave vote, projects of this nature will carry on and continue to create future opportunities.
Public procurement is governed by UK regulations which originate from EU Directives, there won’t be any change for some time as the UK negotiates its exit. The current regulations will remain in force until they are repealed or revised. As we can see the Government has much higher priorities than revising a system that generally works well. So what could happen if the UK continues to have access to the Single Market? there will be very little change to public procurement and without it, the UK will likely operate under the World Trade Organisation’s Government Procurement Agreement (GPA). This provides similar access to bidders from the countries that are signatories meaning that UK construction contractors will be able to bid on contracts in Europe, whilst at the same time European contractors will be able to bid here in the UK.
For now, the approach from construction suppliers looking to bid for public sector work will not be altered by any changes to regulations. Companies must ensure that they continue to meet the requirements set out in the tender, demonstrate efficiencies and remain competitive against the competition – it’s business as usual.
Ultimately, there is no reason why leaving the EU should mean that the public sector ‘downs tools’ on construction projects. Continued investment in the sector will have a direct, positive impact on confidence, growth and continued recovery. For now, we will just have to keep a watchful eye on proceedings…
Back in June, the Competition & Markets Authority (CMA) published an open letter to procurement professionals announcing new guidance and learning resources designed to help combat collusion between suppliers bidding for public contracts. Along with a text summary, the new resources include an e-learning module and some admirably accessible and informative animated videos. Unsurprisingly, this development in the battle against illegal anti-competitive practices received a warm reception in procurement circles, with the Chartered Institute of Procurement and Supply and the Local Government Association making the resources available to their members. This move can be seen as a small but positive step forward in efforts to protect the public sector’s reputation as a fair and transparent place to do business and should be applauded.
We last touched on this subject in 2009 following a round of fines imposed by the Office of Fair Trading (superseded in 2014 by the CMA) on over one hundred construction firms found to be guilty of bid rigging. The size and stature of many of the companies involved was surprising: not so much dodgy purveyors of rickety garage conversions, more a who’s who of premier league construction companies. Some in the industry expressed concern over potential job losses resulting from the fines, but we felt that these sanctions were not overly punitive when framed as a percentage of turnover. Indeed, some of the firms had their fines reduced substantially under the CMA’s leniency policy in return for confessing when first confronted. Continue reading “Confronting collusion in public procurement”
After drawing Wales in the Euro 2016 office sweepstake a few weeks ago, I may have inadvertently given the impression to my colleagues that I was in some way not utterly ecstatic at the outcome. I now accept that my use of various profanities and the term “unmitigated disaster” may have misconstrued my true feelings on the subject. I am happy to clarify that I have always had the utmost confidence in the Welsh national team, fully expected them to make it to the semi-finals as a minimum and consider it a privilege to have invested £2.00 in their endeavour to stay in Europe (albeit for football and binge drinking only).
Although Millstream specialises in public procurement rather than football punditry, we have been impressed by the interest shown by some attendees of the tournament in our area of expertise: it was particularly gratifying to see a fringe element of Remain supporting England fans attempting to stimulate French public sector expenditure by facilitating massive overtime payments to the Gendarmes and street sweepers of Marseilles and Lille. Faced with a wave of criticism after the abject humiliation of his team of spoilt divas being defeated by plucky Icelandic amateurs, England manager Roy Hodgson reluctantly agreed to face the media despite being privately encouraged by Boris Johnson to follow his lead by abdicating all responsibility for the outcome.
As we all realise to our horror that developing a beach body in time for summer is now completely out of the question, we can at least take comfort in the knowledge that cold weather is now firmly behind us. With the exception of those of the ski holiday inclination, our experience of life is undeniably lessened by the harsh winter months. Perhaps the miserable success rate of the solemn resolutions we make to ourselves at the turn of each year has more to do with January being an inopportune time to enact behavioural change, rather than a personal lack of willpower: cravings for unhealthy snacks are more difficult to combat while enduring sub-zero temperatures, a glass of wine never so tempting than when stuck indoors on a wintry evening. But as we wake to sunshine and birdsong instead of darkness and rain, personal renewal feels more like an urge than an effort. Imagine you had felt as energised as you do on a day of blazing sunshine and outdoor activities when you were lazing on the couch gorging on chocolate in the first months of the new year… you could have had a beach body by now.
One of the pleasures of this time of year is the spectacle of the previously barren natural world flourishing with life and colour once more. In the countryside, fledgling crops of all kinds grow in the fields as farmers hope for a bountiful harvest in the autumn. While some of us may be inspired by springtime in our own efforts to grow, farmers are beholden to the seasons in a material sense. While the ancient endeavour of agriculture was initially driven by subsistence, in modern times it is an industry like any other. While most of us do not make a living from the soil, the acquired wisdom of a veteran farmer can be of use to a company in any sector: sow only the finest seeds, plant varied crops in different fields, use ever more efficient and productive techniques. Above all, avoid over-reliance on the same field lest the nutrients be drained from the soil. Like farmers, we would do well in our personal and professional lives to learn the lessons of past harvests and change our methods accordingly.