UK: New Flexibility In Public Procurement: New "Part A"-Line For Health, Social And Education Service Contracts?

On 9 March 2015, the Cabinet and Crown Commercial Service ("CCS") issued guidance on a new "Light Touch Regime" (LTR) for the procurement of contracts for certain social, health and education services. This new regime, although originally resisted by the UK, is provided for under the EU's new Public Procurement Directive EC/24/2014 ("2014 Directive") and has now been implemented into UK law by the Public Contracts Regulations 2015 (which came into force on 26 February 2015).

No more Part B!

The headline change which the new LTR brings about is to introduce a new 'layer' of regulation for tendering certain types of contracts which used to be known as "Part B" procurements under the previous regime governed by the EU Public Sector Directive 2004/14/EC and the Public Contracts Regulations 2006. Part B services were subject to a much reduced form of regulation, with no automatic requirement to publicise the tender opportunity in the Official Journal of the EU ("OJEU") and relief from many of the stricter procedural obligations faced in relation to Part A procurements, notably in terms of following a strict type of procedure, observing statutory timetables and complying with prescribed rules on award evaluation.

However, through the 2014 Directive, the European Commission ("Commission") decided to address its concern that many Part B services with a so-called "cross-border" interest (i.e. such that they would potentially attract bids from suppliers in other Member States of the EU) were being "under-advertised", by abolishing the distinction between Part A and Part B services altogether. This means that contracts for former Part B services not covered by the LTR will now be subject to the full public procurement rules.

Who will benefit from the LTR?

The LTR is designed to provide a specific set of rules for certain types of essential services previously categorised within Part B, which the Commission identified as tending to be of relatively lower interest to cross-border competition. Those services regulated under the LTR are listed in Schedule 3 to the Public Contracts Regulations 2015 ("2015 Regulations"), and include, among others (as per those EU Commission 'Common Procurement Vocabulary' or 'CPV' codes listed in the Regulations) healthcare staffing, education and training, community and benefits services, hotel and catering and most forms of legal services.

What do procurement managers need to do under the LTR?

In particular, the LTR regime will mean that tender competitions for contracts for affected services which exceed a threshold value of €750,000 (to note, this is more than four times higher than the equivalent threshold for existing "Part A" services) will need to be advertised in OJEU.

This does create a potentially onerous advertisement obligation for bodies procuring at above this value. However, the fact that the threshold has been set at a higher level does at least give comfort to procurement managers and advisors that many contracts, which are below this value, are now officially regarded as not being of cross-border interest. This removes some of the uncertainty that used to surround important categories of Part B services as to whether or not they should be advertised in this way.

Above threshold – advertise in OJEU and be fair and equal!

For services governed by LTR whose value exceeds €750,000, a contract notice or so-called Prior Information Notice ("PIN") will need to be placed in OJEU (other than in those limited circumstances where a negotiated procedure without a call for competition may be appropriate).

However, unlike for contracts regulated under the full rules, when procuring contracts under the LTR awarding bodies will simply have to:

• publish a notice on award of contracts (or issue 'group' notices on a quarterly basis);
• comply with fundamental EU principles of equal treatment and transparency – notably, this means being clear on criteria and the authority's requirements and avoiding any perception that a particular candidate might be unduly favoured;
• conduct the procurement in line with the conditions, time limits and award process set out in the OJEU contract notice or PIN; and
• ensure any time limits (e.g. for responding to the OJEU advert, submitting clarification requests etc.) are reasonable and proportionate, in the circumstances.

These are the only official mandatory elements of LTR procurements that will need to be observed, so the LTR regime allows a significant degree of flexibility to authorities in designing their process.

BUT - wait a minute: the CCS recommends observing standstill...

Despite LTR procurements not officially being governed by the provisions of the 2015 Regulations dealing with the giving of notice of its award decision (and feedback) to tenderers, and observing a standstill period, the CCS nonetheless recommends that:

"the position is not wholly clear. Therefore, CCS suggests that contracting authorities will usually wish to send award notices and observe the standstill period... as this will avoid the risk that the contract (or framework agreement) might be subject to the draconian remedy of ineffectiveness if the case law does clarify that these requirements do apply to the LTR."

The CCS does go on to acknowledge in its Guidance Note that particular circumstances may justify awarding contracts on a more urgent basis, but at the same time warns that authorities may "want to weigh the urgency against the risks of proceedings without a standstill". Declarations of ineffectiveness prospectively cancel all contractual obligations entered into pursuant to a procurement award reached on a fundamentally non-compliant basis (e.g. having failed to issue adequate notice of award). They were made available to the UK courts in 2011 and, although none have as yet been successfully obtained by an unsuccessful tenderer / complainant, the threat of such a remedy being granted should nonetheless act as a serious warning to authorities and suppliers alike.

However, LTR is generally much more flexible...

As indicated above, LTR contracts will benefit from far greater flexibility than those whose procurement is fully regulated under the 2015 Regulations. There is no strict requirement to follow any certain type of procedure; it will be open to contracting authorities, like NHS Trusts, to use these (such as competitive dialogue and restricted procedure) to the extent they see fit, and also to shape them to suit the particular needs and demands of the project in question.

There will also be broad flexibility as to how award criteria are formulated and the way in which the award decision is reached, albeit subject to the requirement that the authority is wholly transparent from the outset about the criteria it will be employing and does not engineer them in such a way as to unduly favour one or more individual providers. The CCS also advises, as one would expect, that any price/quality ratio or other scoring mechanism that is applied follows any relevant national and/or local policies, citing the specific example of the Government's "longstanding" policy of obtaining value for money, contained in HM Treasury's publication Managing Public Money.

In fact, beyond the fundamental requirements set out above, procurement managers for LTR service contracts will only need to take into account, generally, the following considerations in designing and implementing its chosen tendering procedure:

• ensuring "quality, continuity, accessibility, affordability, availability and comprehensiveness" of the services;
• catering for the specific needs of different categories of users, including disadvantaged and vulnerable groups;
• promoting the "involvement and empowerment" of users; and
• any innovation the market may be able to offer / which the authority may be seeking to benefit from.

Even in relation to mandatory and discretionary grounds for excluding candidates / tenderers, there is no legal requirement under the LTR that authorities follow these. However, the CCS advises that authorities procuring LTR-governed contracts would nonetheless normally be expected to exclude tenderers found guilty of offences (like breaches of the Bribery Act 2010) giving rise to mandatory exclusion under the full rules.

Meanwhile, discretionary grounds for exclusion (such as for acts of "gross misconduct") would also be available, as normal, but it will be open to authorities under the LTR to invoke "additional grounds" for exclusion, provided that these are fair, reasonable and communicated to tenderers as possible grounds for exclusion at the outset of the process. That being said, the CCS recommends that authorities under the LTR continue using the mandatory and discretionary grounds set out in the 2015 Regulations (at Regulation 57).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.