Public Procurement Thresholds 2017 – update

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** 2018/19 Public Procurement Thresholds Update Available HERE **

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Just before the beginning of last year I wrote this blog introducing the new financial thresholds for mandatory publication of opportunities in the Official Journal of the European Union (OJEU). Since then we’ve received quite a number of queries on the subject. Although the current thresholds haven’t changed I thought I’d write an updated blog to include these discussion points.

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:

PUBLIC CONTRACTS

Supply, Services and Design Contracts Works Contracts Social and other specific services
Central Government £106,047

€135,000

 £4,104,394

€5,225,000

 £589,148             €750,000
Other contracting authorities £164,176

€209,000

 £4,104,394

€5,225,000

 £589,148            €750,000
Small lots £62,842

€84,000

 £785,530

€1,000,000

 n/a

 

Social and other specific services are subject to the new ‘light touch regime’ as described in a previous blog.

UTILITY CONTRACTS

Supply, Services and Design Contracts Works Contracts Social and other specific services
Utility authorities  

£328,352

€418,000

 £4,104,394

€5,225,000

 £785,530              €1,000,000

 

DEFENCE AND SECURITY CONTRACTS

Supply, Services and Design Contracts Works Contracts Social and other specific services
Defence and Security authorities £328,352

€418,000

 £4,104,394

€5,225,000

  n/a

 

CONCESSION CONTRACTS

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:

  1. 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?

My colleague Line recently wrote a blog to clarify this question: https://blog.tendersdirect.co.uk/2017/01/06/procurement-terminology-what-are-small-lots/

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:

http://www.legislation.gov.uk/uksi/2015/102/schedule/2/made

If the CPV code which fits your requirement is not in that list then it is not classed as a Works contract.

I hope you find this blog useful. If you want more help with understanding thresholds and other public sector tendering procedures, Millstream’s Training and Consultancy team are available to answer any of your questions. Or, leave us a comment below.

 

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Excluding suppliers based on poor past performance

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All of the UK has now transposed the new EUunacceptable Public Sector Directive 2014. One of the existing provisions is that buyers now have a discretionary right to exclude suppliers based on poor past performance.

We have all heard the stories. A supplier winning a contract because they make all the right promises, but when the contract starts, they just don’t meet the standards expected. The buyer is not happy. They are stuck in a contract that most likely ends up costing them more. In addition, the suppliers that didn’t win are demoralized. What is the point of bidding when other suppliers just lie and win? Therefore, this is a welcome provision by many, a hope of getting rid of the unscrupulous operators in the market.

But is it that easy? As a buyer, and you have had a bad experience with this one supplier who is bidding on your contract – or you have heard about their poor performance from someone else – can you decide to exclude them just like that?

Continue reading “Excluding suppliers based on poor past performance”

Procurement terminology: what are ‘small’ lots?

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In public procurement, lots, and in particular ‘small lots’ small lotare often an area of much confusion. What is a small lot and what does the small lot threshold mean?

Hopefully this SMALL blog entry will answer a LOT of your questions.

Continue reading “Procurement terminology: what are ‘small’ lots?”

Quirky Tenders: 2016’s most memorable tender notices

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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?

Continue reading “Quirky Tenders: 2016’s most memorable tender notices”

The end of onerous practices in UK Procurement?

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On Monday of this week the Crown Commercial Service (CCS) released a Public Policy Note (PPN) on ‘Onerous Practices in Procurement and Contracting’. Put simply they are referring to procurement practices which place far too much risk on the supplier. This in

Continue reading “The end of onerous practices in UK Procurement?”

CPV codes – are they accurate?

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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.

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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.

Link to Tenders Direct homepage

Legal Remedies in Public Procurement – how they are used in Framework Agreements and Call-Off contracts

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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.

2. Damages

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.

Case Study

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.

Tendering in Ireland: A new era of fair procurement practice?

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Working with customers in Ireland through our Tenders Direct Ireland service we have traditionally heard anecdotal tales of poor procurement practices. Worrying issues such as cartels controlling certain sectors, bid price rigging and corrupt evaluation processes have all been highlighted not just by our customers but through news sources in Ireland. The net impact of this on the spend of buying authorities in Ireland is catastrophic: an Continue reading “Tendering in Ireland: A new era of fair procurement practice?”

Shedding Light on the Shadows

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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.

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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.

Happy Halloween!

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Building on the outcome of Brexit

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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…

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