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Changes to the EU procurement rules - how will it affect you?
1. Changes to the EU procurement rules how will they affect you?
Clare Reddy and Owen Williams
14 November 2013
2. Agenda
• The new Directives
• The process for changing the UK Regulations
• A look at some of the key changes and areas for
consultation
• Questions
3. New Directives
• 3 new Directives
Classic
Utilities
Concessions
• These replace the current Classic and Utilities Directives
• Remedies Directive is not being changed
• This seminar looks at the new Classic Directive
4. New Directives
• First drafts published December 2011
• Political agreement reached in July 2013
• Text being tidied up and translated
• European Parliament reading scheduled for 9 December
2013
• Directives come into force 20 working days after
publication in OJEU
5. UK Regulations
• Implementation:
2 years from Directives coming into force (4.5 years for fully
electronic communication) BUT
Cabinet Office wants to implement ASAP so that parties can
take advantage of greater flexibilities
• Cabinet Office discussion papers where there is flexibility
in implementation: SME access; Light touch regime for
social, health and other services; Procedures; Termination
of contracts (e.g. where modified)
• Formal consultation expected in 2014
6. UK Regulations
• 3 new Regulations to match Directives
• Remedies provisions included in each Regulation, rather
than separate Remedies Regulations
• Policy is “copy out” and “avoid gold plating”
• Articles 7- 82 anticipated to match new Regulations 7- 82
• Some changes for UK style and UK drafting rules
• Won’t seek to resolve ambiguities
7. Electronic communication
• All procurement to be conducted electronically within 4.5
years
• System must be generally available and in general use so
as not to restrict access or discriminate
• Very limited exceptions: difficulties with file formats,
requirement for specific equipment, requirement for
physical models, security/sensitivity issues
• Oral communication allowed for non-essential elements
provided that content is documented sufficiently
8. Electronic communication
• From implementation: unrestricted full direct access free of
charge to procurement documents by electronic means
from date of Contract Notice
• Same exceptions as mentioned before and time limit for
tender returns extended by 5 days if can’t provide
everything electronically
9. Procedures
• Free choice of Open and Restricted remains
• Competitive Dialogue available in wider circumstances (no
longer just complex contracts)
• Competitive Negotiated Procedure can be used in the
same circumstances as Competitive Dialogue
• Member States to decide whether Negotiated procedure
without prior publication will apply
• New Innovation Partnerships procedure
• Minimum time limits generally shorter
10. Use of Negotiated Procedure and CD
• Competitive Negotiated Procedure/Competitive Dialogue
can be used where:
needs cannot be met without adaptation of readily available
solutions
works/services include design or innovative solutions
negotiation needed due to complexity, legal, financial makeup or risks
technical specifications cannot be established with sufficient
precision
irregular/unacceptable tenders were received under another
process
11. Negotiated without prior publication
• The Directive provisions relating to use of negotiation
without prior publication are optional for Member States
• Cabinet Office discussion paper issued to consider
whether to keep or remove the current provisions (which
are essentially the same in the new Directive)
12. Restricted Procedure
• Largely unchanged save for shortening timescales
• Option for Member States to allow sub-central contracting
authorities to set timescales for receipt of tenders by
agreement with the selected candidates
• Default minimum of 10 days if can’t agree
• Cabinet Office discussion paper with options to:
Allow this for all sub-central contracting authorities
Limit this to certain categories of sub-central contracting
authorities OR
Not allow this option
13. Innovation Partnerships
• Use where:
need for an innovative product, services or works;
cannot be met by purchasing products, services or works on
the market
• Negotiate tenders but not minimum requirements or award
criteria
• Partnership with one or several partners, structured in
phases, intermediate targets and payment and can
terminate or reduce partners after each phase
14. Frameworks
• Directive clarifies current case law position in that only the
contracting authorities who are party to the framework
agreement at the outset can use the framework
• Cabinet Office is consulting on option for Member States to
require quarterly grouped contract award notices for calloff contracts
15. SME Access
• Minimum yearly turnover requirement cannot exceed twice
estimated contract value
• In Classic and Utilities there are options for Member States
to decide whether:
it should be obligatory to award contacts as separate lots
(e.g. different trades in a works contract)
bidders can combine lots (e.g. submit a bid for all lots which
could differ from the separate bids for individual lots)
16. Subcontracting
• Changes to subcontracting provisions are largely for
Member States to decide so we won’t know detail until
consultation/ draft Regulations published
• Directive includes options for:
Direct payment to subcontractor if subcontractor requests
Automatic direct payment to subcontractors
Obligations to notify changes to subcontracting
arrangements
Possibility of applying provisions further down contractual
chain
17. Abnormally Low Tenders
• Abnormally low tenders
Now an express duty to investigate (follows European rather
than UK case law)
Must reject if low price is because does not comply with EU
social or environmental laws
May reject if low price is due to state aid and tenderer
cannot prove that it is lawful
Cannot reject if low price is satisfactorily explained
But not clear what you have to do if low price is not
satisfactorily explained – can the contracting authority
decide what to do?
18. Contracts between public sector entities
• Scenario 1
Contracting Authority with Company A
Contracting
Authority
Company A
19. Contracts between public sector entities
• Scenario 1
Contracting Authority with Company A
> Contracting Authority exercises control over Company A
similar to that it exercises over its own departments
> More than 80% of Company A’s activities are in
performance of tasks given by the Contracting Authority
or other legal persons controlled by the Contracting
Authority
> No direct private capital participation in Company A save
“non-controlling and non-blocking ..required by
applicable national legislation.. in conformity with the
Treaties”, which don’t exert a decisive influence over
Company A
20. Contracts between public sector entities
• Scenario 2
Company A with Contracting Authority or Company B
Company A
Company A
Contracting
Authority
Contracting
Authority
Company B
21. Contracts between public sector entities
• Scenario 2
Company A with Contracting Authority or Company B
> Company A is a contracting authority
> Contracting Authority exercises control over Company A
similar to that it exercises over its own departments
> Contracting Authority exercises control over Company B
similar to that it exercises over its own departments
> No direct private capital participation in Company B save
non-controlling and non-blocking ..required by national
legislation in conformity with the Treaties, which don’t
exert a decisive influence over Company B
22. Contracts between public sector entities
• Scenario 3
Contracting Authority 1 jointly exercising control over
Company A
Contracting Contracting
Authority 1 Authority 2
Company
A
Contracting
Authority 3
23. Contracts between public sector entities
• Scenario 3
Contracting Authority 1 jointly exercising control over
Company A
> Contracting Authority exercises control over Company A
jointly with other contracting authorities similar to that
exercised over their own departments
> More than 80% of Company A’s activities are in
performance of tasks given by the Contracting
Authorities or other legal persons controlled by them
> No direct private capital participation in Company A save
non-controlling and non-blocking ..required by national
legislation in conformity with the Treaties, which don’t
exert a decisive influence over Company A
24. Contracts between public sector entities
• Scenario 3 (cont)
Joint control:
> Company A’s decision making bodies are comprised of
representatives of all participating Contracting
Authorities. Individual representatives may represent
several Contracting Authorities
> The Contracting Authorities jointly exercise decisive
influence over Company A’s strategic objectives and
significant decisions
> Company A does not pursue interests contrary to those
of the Contracting Authorities
25. Contracts between public sector entities
• Scenario 4
Contracting Authority 1 contracts with Contracting
Authority 2
Contracting
Authority 1
Contracting
Authority 2
26. Contracts between public sector entities
• Scenario 4
Contracting Authority 1 contracts with Contracting
Authority 2
> Contract establishes/ implements co-operation between
Contracting Authorities with the aim of ensuring the
public services they have to perform are provided with a
view to achieving their common objectives
> Implementation of co-operation governed solely by
considerations of public interest
> Contracting Authorities perform on the open market less
than 20% of the activities governed by the co-operation
27. Modifications under the Directive
• Scenario 1
The modification is catered for in the initial procurement
documents
> Requires clear, precise and unequivocal review clauses
> Must specify the conditions in which the review clauses
may be used
> Must not alter the overall nature of the contract/
framework
28. Modifications under the Directive
• Scenario 2
Additional works, services or supplies
> Provided by the original contractor
> They have to become necessary
> Where a change of contractor:
» Can’t be made for economic/ technical reasons AND
» Would cause significant inconvenience and
substantial duplication of cost for the Contracting
Authority
> The increase in price is not higher than 50% of the
original contract (NB if a number of modifications, this
applies to each)
29. Modifications under the Directive
• Scenario 3
Where:
> The need arises from circumstances a diligent
contracting authority could not foresee
> The modification does not alter the overall nature of the
contract
> The increase in price is not higher than 50% of the
original contract (NB if a number of modifications, this
applies to each)
30. Modifications under the Directive
• Scenario 4
A new contractor comes in because of:
> Operation of the unequivocal review clause
> A corporate restructure (including takeover, merger,
acquisition or insolvency) that fulfils the criteria for quality
selection initially established if no other substantial
modifications to the contract and this is not aimed at
circumventing the Directive OR
> The Contracting Authority steps in to the main
contractor’s obligations to sub-contractors (IF the UK
decides to implement this)
31. Modifications under the Directive
• Scenario 5
Modifications irrespective of value are not substantial
Substantial means:
> Renders the contract/ framework “materially different in
character from [that] initially concluded”
> Introduces conditions which would have:
» Allowed admission of additional/ different candidates
» Allowed acceptance of a different offer OR
» Attracted additional participants
> Changes the economic balance in favour of the
contractor
32. Modifications under the Directive
• Scenario 5 (cont)
Considerably extends the scope of the contract/ framework
Replaces the contractor other than as set out at Scenario 4
above
33. Modifications under the Directive
• Scenario 6
Where the value of the modification is below:
> The relevant threshold (ie at which the Directive applies
to procurements)
> 10% of the initial contract value for services and supplies
> 15% of the initial contract value for works
BUT
> May not alter the overall nature of the contract /
framework
> Successive modifications in Scenario 6 are assessed on
a net cumulative basis
34. Modifications under the Directive
• Where a modification is made under Scenario 2 or 3:
The Contracting Authority must publish a notice in the OJEU
Annex VI Part G sets out the information required, including
the nature of the modification, why it is required and the
value of it
35. Part B Services
• Replaced with an exhaustive list of “social and other
services”
• Higher threshold applies (€750,000)
• Requirements:
Express requirement to publish a contract notice or PIN
Publish a contract award notice (can be done quarterly)
36. Part B Services
• Member States must put in place rules:
To ensure transparency and equal treatment
To ensure contracting authorities may take into account the
need to ensure quality, continuity, accessibility, affordability,
availability, comprehensiveness of services, specific needs
of different categories of user including disadvantaged and
vulnerable groups, involvement and empowerment of users
and innovation
May provide for taking account of quality and sustainability
criteria for social services in assessing MEAT
37. Links to the Directives
• Classic:
http://register.consilium.europa.eu/pdf/en/13/st11/st11745.en13.pdf
• Utilities:
http://register.consilium.europa.eu/pdf/en/13/st11/st11746.en13.pdf
• Concessions:
http://register.consilium.europa.eu/pdf/en/13/st11/st11748.en13.pdf