The new EU directive on the procurement of goods and services by entities operating in the water, energy, transport and postal services sector has recently been published and its impacts in the UK could be significant.
Uddalak Datta, a lawyer from commercial law firm SGH Martineau, explained: “The relationship between this country and the EU is at the centre of the current political debate, with a growing clamour for the UK to leave. The recently published EU public procurement directives will do little to calm those demanding our exit, as a number of unexpected consequences look set to ensure UK businesses will be adversely affected by yet more Brussels red tape. The EU public procurement rules regulate how public bodies buy goods, services and works. These rules, which are often described as the bane of anyone who has the misfortune of having to navigate them, have the laudable aim of guaranteeing equal access to and fair competition for public contracts within the EU market. There are a number of key changes introduced in the new measures, but an increase in legal certainty is perhaps the most significant. The public procurement directives and the implementing regulations in the UK have been overtaken by judicial decisions of the European Courts, based on general EU principles. This means it can be difficult to understand the precise content of the obligations as the legislation does not provide a complete regulatory code. The revised public procurement directive attempts to remedy this by codifying decisions of the European Court.
These measures include:
· clarifying the concept of conflicts of interest and measures required to prevent, identify and remedy them.
· clarifying the circumstances under which a modification to an existing public contract is allowed and when, on the contrary, it must be considered to be a new contract and re-tendered.
· clarifying the circumstances under which public bodies may pool their public service delivery activities without having to go out to tender.
· the distinction between the criteria used for the two-stages of contract award – the selection of tenderers and award of the contract – has been made more flexible. This allows contracting authorities to take into account the organisation and quality of the staff assigned to perform the contract as an award criterion.
· grounds for exclusion of candidates and tenderers have been reviewed and clarified. Contracting authorities will be entitled to exclude economic operators that have shown significant or persistent deficiencies in performing prior contracts.
“An increase in the scope of contracts subject to detailed regulation under the new rules will undoubtedly impose additional red-tape for a range of services, which have up to now, been subject to a less stringent regime.
“Under the current legal framework, the procurement of service contracts is divided into Part A services, which are subject to a detailed regulatory regime, and Part B services subject to a lighter touch regime. Service concession contracts which are ostensibly excluded from regulation altogether, are subject to a more amorphous obligation to advertise and competitively procure on an analogous basis. The revised package now provides that the current Part A/Part B services distinction is abolished, meaning all service contracts be subject to the more detailed procurement process and service concession contracts will have their own, separate regulations. The revised directive provides for two new procedures by which to procure public contracts – the ‘competitive procedure with negotiation’ and the ‘innovation partnership’ procedure. Both provide for a certain degree of flexibility in procurement processes, with the innovation partnership aimed at the procurement of an innovative product, service or works that cannot be met by a commoditised product.
“The competitive procedure with negotiation provides for more flexibility than the competitive dialogue procedure permits, but the detail is still to be developed in the final text. There is a clear intention to make the new procedures more SME-friendly. Contracting authorities will be encouraged to split up the required works or services into smaller lots, or explain why they were unable to do so. The turnover requirements have also been cut to just twice the estimated contract value, bringing many more into reach for smaller businesses, but in reality, the administrative burden on the Utility companies will be increased in terms of time taken to split contracts and assess many more bids. In addition, the move to adopt e-procurement processes with publication and communication with bidders undertaken electronically, might be intended to promote access and reduce the cost of procurement, but it will undoubtedly increase the workload for Utility companies in the UK.
“Whilst there is more appetite for change within the Utilities sector, these new directives will require a significant change in commercial and project planning activities, with Utility companies having to publish all the procurement documents at the time of the initial advertisement. I suspect procurement teams will now have to engage with their professional advisers far earlier in the process, being unable to develop the contract between advertising the work and selecting bidders, as is currently the practice. These appear yet more regulations devised by civil servants with little experience of the commercial world, as the increase in legal certainty has been at the cost of the weight of additional regulatory requirements. By attempting to increase transparency and extract best value from suppliers, the EU has unfortunately only added to the confusion in the utilities sector, which is already suffering a loss of investor confidence, following mixed messages from Government and news of a competition enquiry.”