Public Procurement & Government Contracts 2021

The new Public Procurement & Government Contracts 2021 guide features 15 jurisdictions. The guide provides the latest legal information on the entities and types of contracts subject to procurement regulation, tender procedures, evaluation criteria, transparency obligations and review procedures.

Last Updated: April 07, 2021

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Pinsent Masons has one of the largest and most dynamic procurement practices in the UK and Europe. The practice spans all major sectors, including regeneration, defence, transport, energy, water and infrastructure, and advises both regulated procurers as well as suppliers bidding for public or regulated utility contracts. The practice is recognised for its ability to provide practical and commercially focused advice on complex procurements across the UK and abroad. Contentious and non-contentious procurement lawyers in the team work closely together to ensure that clients are provided with innovative strategic advice that anticipates and minimises legal risks. The team covers a diversity of matters, covering all aspects of procurement regulation, including the highly specialised defence sector, utility procurements in the transport, energy and water sectors, major central government procurements as well as local authority, health and education sector procurements. The team also advises clients on all aspects of the World Trade Organization’s plurilateral Agreement on Government Procurement.


Transforming UK Public Procurement

Whilst the UK was a member of the European Union, domestic procurement legislation consisted primarily in the implementation of EU procurement directives, the key aim of which was to ensure that public (and in some cases, private sector utility) contracts were opened up to competition across the EU single market and awarded on the basis of certain principles, including those of transparency, non-discrimination and equality of treatment.

Having now left the EU, the UK intends to amend its procurement legislation so as to reflect better its own priorities, idiosyncrasies and policy objectives. To that end, the government published a Green Paper (“Transforming Public Procurement”) in December 2020, inviting comments on a set of proposals for the reform of UK public procurement legislation.

Key amongst the aims of this legislative reform agenda is the desire to simplify, streamline and introduce rules that allow for greater flexibility. At the same time, changes to the domestic procurement legislation must remain compliant with the UK’s international law commitments, including the WTO’s plurilateral Agreement on Government Procurement (GPA). Whilst these parameters render the broad shape of the new domestic procurement legislation discernible, certain key aspects, such as review procedures and the availability of remedies for breaches of the legislation, remain, for the moment, less clear. These issues are discussed in more detail below.

A simpler and more flexible regulatory regime

That simplification is a key aim of the legislative reform exercise is, perhaps, not surprising. Currently, different sets of regulations apply to the award of public contracts, utility contracts and concession contracts, as well as defence and security contracts. There is no obvious reason as to why this web of distinct regulatory regimes should not be streamlined so as to create a single set of rules for all regulated contract awards. Where necessary, the new legislation can also incorporate provisions so that modified or additional rules apply in relation to specific types of contract awards, such as those that relate to defence and security. Indeed, this is the approach that the Green Paper is proposing.

The new legislation is also likely to do away with the current set of EU law-inherited contract award procedures in preference of aligning domestic legislation with the less structured contract award procedures for which the GPA provides. On that basis, instead of seven tender procedures, the new procurement rules are likely to provide for only three:

  • the open procedure for simpler "off the shelf" purchases;
  • a new flexible procedure that will permit contracting authorities greater flexibility in structuring negotiations and other aspects of the contract award process; and
  • a limited tendering procedure that – as is the case with the current negotiated procedure without prior publication – will permit direct contract awards in certain circumstances.

The Green Paper also proposes the introduction of a new ground that would justify the use of the limited tendering procedure, namely, where a minister declares that there is a crisis that requires immediate, short-term procurement decisions to be made. When relying on the limited tendering procedure, there would also be an obligation to publish a notice and, except in the event of a crisis or extreme urgency, a ten-day standstill period should be observed before entering into the relevant contract.

In addition, the new legislation is likely to simplify and expand the availability of “safe harbours” for the amendment of contracts once they have been concluded. Except for certain de minimis modifications, contracting authorities would also be required to publish a contract modification notice and observe a ten-day standstill period before effecting contract modifications, unless the amendments are made as a result of a crisis or extreme urgency.

Separately, it is the intention that the new legislation should provide for open framework agreements of up to eight years. According to this proposal, framework agreements longer than four years must be re-advertised at least once after the third year by assessing new entrants against the original requirements and evaluation criteria. At the time of re-advertising the framework, existing framework suppliers would be given the opportunity either to remain on the framework on the basis of their original tenders or compete anew for a place on the framework by submitting updated tenders.

Underlying the new legislation would be six interdependent legal principles, namely, the public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination. None of these principles is controversial. At the same time, the express inclusion of the public good as an underlying principle is notable in that it indicates an intention to use public procurement as an instrument in the furtherance of public interest objectives. Accordingly, under current proposals, contracting authorities would be required to assess the public benefits that would accrue as a result of the procurement. In this context, contracting authorities would also be required to have regard to the government’s priorities and key outcomes as set out in a National Procurement Policy Statement. Such outcomes could include the creation of new businesses, jobs and skills, improving supplier diversity and innovation as well as tackling climate change.

International law commitments

As noted earlier, any changes to the procurement legislation must maintain compliance with international law obligations, whether these arise under the GPA or the UK’s free trade agreements. For example, the UK cannot generally raise the value thresholds that trigger the application of the procurement rules. The reason for this is that these thresholds reflect commitments under the GPA, to which the UK is now a party in its own right.

Equally, with some notable exceptions (including as regards defence and security contract awards), UK procurement legislation cannot reserve the award of public contracts to UK suppliers only. Again, the ability to do so is curtailed by GPA commitments and the requirement to allow suppliers of other GPA parties to participate in most UK public contract award procedures on the same basis as UK suppliers.

If the UK can...

All in all, there is a lot to praise in the Green Paper proposals, the drive towards simplification and the creation of a more flexible regulatory system than that which the UK has inherited from its membership of the EU. That is not to criticise the EU procurement legislation, which owes its complexity – reflected in the number of different procurement legislative instruments as well as the number of, sometimes overlapping, contract award procedures, for example – to its historical context and iterative development.

Equally, what might appear as procedural rigidity in the detailed rules that govern the application of various contract award procedures is in fact a reflection of the need for the EU to err on the side of more rather than less legislation. This is so as to facilitate compliance among disparate contracting authorities across national borders and promote single market integration by opening up otherwise fragmented national public procurement markets to fair and EU-wide competition.

Such concerns are absent in the context of a national regulatory regime, which, by definition, is easier to review, amend and shape as flexibly or rigidly as national conditions and considerations require.

Thornier issues

At the same time, the effectiveness of a procurement regulatory regime should not be measured by its simplicity and flexibility alone. Equally important is the extent to which the legislation provides robust incentives, in the form of an effective remedies system, for contracting authorities to comply with their regulatory obligations when using public funds at their disposal to award contracts for goods, works or services.

To a large extent, the Green Paper is mindful of these considerations and, amongst other things, proposes that court rules and processes should be reformed with a view to making it easier for bidders, and other affected parties, to defend their rights in the event of a breach of the legislation. To that end, the government would be considering the possibility of a tailored fast-track court system for procurement challenges, the establishment of clear and detailed rules for pre-litigation disclosure and the possibility of reviewing contracting authority decisions by means of written pleadings alone.

Equally relevant and welcomed in this regard is the government’s intention to revise the test on the basis of which the courts determine applications for the lifting of the automatic suspension that applies, under certain conditions, to tender procedures following a challenge to an award decision. The application of the existing test has led to a substantial majority of such applications being granted, allowing the contracting authority to award the contract, despite the legal challenge, and limiting the remedy available to a successful claimant to that of the, arguably, less effective remedy of damages.

However, more problematic in this context is the proposal to limit generally (there are certain exemptions) damages awards to legal fees and 1.5 x bid costs, thereby removing the ability of successful claimants to seek damages for loss of profit. Behind this proposal lies the concern that the potential for large payouts can encourage speculative claims from bidders, and the view that such remedy would seem inappropriate where there have been unintentional errors in the carrying out of a procurement process.

It might be arguable that, even if this proposal were to be implemented, this should not make a substantive difference in practice. The reason for this is that it is generally difficult for claimants to obtain damages for loss of profit given the need to demonstrate causation in that, but for the breach, the claimant stood a real chance of being awarded the contract. This has not been possible to establish other than in a small number of cases. In addition, the ability to claim damages more generally has been made even more difficult in recent years, in the light of a court ruling, according to which, damages are only available where the breach is “sufficiently serious”.

Despite such difficulties, the risk that a claimant might be able to claim successfully for damages for loss of profit creates an important incentive for contracting authorities to consider carefully their procurement law obligations and seek to maintain legal compliance in the award of public contracts. Promoting regulatory compliance in this way helps to ensure that businesses have the necessary confidence in the regulatory system to invest their resources in bidding for public contracts, which in turn leads to more effective competition, more innovative proposals and better value-for-money contracts.

Accordingly, the concern with the substantial curtailing of the right to seek damages for loss of profit is that this will invariably weaken compliance incentives, rendering the risk of having to pay legal and bid costs to a successful claimant merely one of many considerations that a contracting authority takes into account when seeking to assess the costs and benefits of legal compliance in the award of a particular contract.

In light of these risks, it is therefore important to give further due consideration to the ramifications of this proposal and, ultimately, seek to avoid the substantial removal of this remedy becoming the Achilles’ heel of what should otherwise be a fair, flexible and modern public procurement regulatory regime.

Author



Pinsent Masons has one of the largest and most dynamic procurement practices in the UK and Europe. The practice spans all major sectors, including regeneration, defence, transport, energy, water and infrastructure, and advises both regulated procurers as well as suppliers bidding for public or regulated utility contracts. The practice is recognised for its ability to provide practical and commercially focused advice on complex procurements across the UK and abroad. Contentious and non-contentious procurement lawyers in the team work closely together to ensure that clients are provided with innovative strategic advice that anticipates and minimises legal risks. The team covers a diversity of matters, covering all aspects of procurement regulation, including the highly specialised defence sector, utility procurements in the transport, energy and water sectors, major central government procurements as well as local authority, health and education sector procurements. The team also advises clients on all aspects of the World Trade Organization’s plurilateral Agreement on Government Procurement.