UK: Reform: Top 6 Changes To Procurement In New Directives

Last Updated: 27 March 2013
Article by Laura Thornton

The proposed new public procurement directives have been in gestation since April 2010. The latest text was published in November 2012 with final versions expected in April 2013. These have been the subject of substantial criticism and we provide here a summary of the top six proposals and an insight into the debate with the Committee of the Regions.

The focus of the revisions to the current regime has been to promote the effectiveness of procurement as a tool for the promotion of the single market by ensuring it delivers cross-border purchasing activity. Small and medium sized enterprises (SMEs) are particularly identified as a group for whom improved access to public contracts should be secured. It has also been noted that wide variations exist in both the time and cost of procurement exercises across the EU and the new Directives seek to address this with the aim of reducing both.

1. Part A and part B

The established regime divides service contracts into two parts: A and B. Part A services are subject to the full rigour of the regime, while part B services which are 'inherently local' need only comply with more limited aspects, principally the advertising requirements in addition to the overarching Treaty principles.

The draft directives remove this distinction with the result that all above threshold procurements not able to avail themselves of an exception, will be required to comply with the full process. The distinction between the two parts had reduced in importance since the 2006 Regulations were enacted. Part B contracts which are of 'cross border interest' were none the less required to comply with the full extent of the Regulations and the number of contracts which could fairly be said not to have such cross-border interest has declined. The abolition of the distinction may not therefore have as much impact as might at first glance be expected.

There is a saving provision to create a separate category of 'social services' to which only a more limited regime will apply. The inherent locality of social, health and education services is recognised and a separate threshold of €500,000 will apply. Below this level, only the principles of transparency and equal treatment will apply.

There has been much criticism of the abolition of part A and B services, not least from the Committee of the Regions which calls for the reinstatement of the distinction as the limited protection retained for social services is thought to be insufficient compensation for the disadvantages of removing the part B distinction. It is also interesting to note that the UK government has estimated that the cost of implementing the full regime to part B services currently stands at £14m per annum with estimated benefits of £4.5bn per annum. Conducting a procurement in full compliance with the regime can be a costly process and we suggest these figures will ultimately be somewhat closer together.

2. Promoting involvement of SMEs

There are a number of provisions within the draft directives aimed at promoting the opportunity for SME involvement in supplying the public sector. These include requiring that contracting authorities divide procurements into lots wherever possible and in cases where a procurement could have been so divided but is not, providing an explanation for this.  It is open to contracting authorities to limit the number of lots for which any one bidder may tender and permit appointment of a single supplier to a maximum number of lots.

The Committee of the Regions suggests that one of the key barriers to SME progress to securing public sector contracts is the complexity of the regime and that these changes to the directive exacerbate rather than alleviate that situation. They suggest that fewer, simpler rules would assist SME bidders in securing contracts. A comparison is drawn with the World Trade Organisation's Government Procurement Agreement which is simpler than the EU rules.

3. In-house suppliers

The draft directives seek to improve uniformity of interpretation of case law across the EU by codifying a number of cases. Of particular interest is the codification of the Teckal exemption for 'in-house' procurement, found at article 11 of the draft directive. The two stage test set out in that case is now expressed in three parts; the authority is exempt from procurement requirements where it:

  • exercises control over the contractor as if it were an internal department;
  • 80% or more of the contractor's activities (based on turnover) is for the authority; and
  • there is no private sector ownership of the contractor.

4. Flexibility - Modification of contracts

The revised directives adopt a more flexible approach to modification of contracts, in effect, codifying the Pressetext case. Changes would be permitted where they are not material. Materiality is considered to be below 5% of the contract value, provided that percentage remains below threshold. In addition, there are some exceptions allowing changes to take account of a change in circumstances which could not have been foreseen by the contracting authority, provided they do not affect the overall nature of the contract and do not increase the price by more than 50%.

The Committee recommended the wholesale removal of this provision as the directives create procedural rules related to the carrying out of procurement rather than addressing issues related to the modification of contracts during their term. Inclusion of these provisions was therefore seen as an unnecessary administrative burden on contracting authorities.

5. E-procurement

One area of agreement between the Commission and the Committee was over the move towards e-procurement. The draft directives require contracting authorities to make procurement documents freely available by electronic means from the date of publication of the notice. It will also be mandatory to submit notices in electronic form and fully electronic procurement, including all communication and submission, must be in place within two years.

6. Thresholds

The final point to note is not technically a change proposed in the new Directive, but rather a decision to retain the current situation. Thresholds are subject to periodic revision and the Commission has decided not to use the opportunity of the new Directives to introduce a change to the thresholds above which the regime applies.

There are, however, calls for this to be revisited as it suggests that the number of procurements which are caught by the regime but are not, in fact, of genuine cross-border interest renders the system expensive for contracting authorities without advancing the single market. The Committee of the Regions argues that of contracts concluded under the regime in 2009 only 1.4% were of cross-border interest. They therefore suggest that the threshold for services should be increased to €1,000,000 from its current level of €200,000.

What happens next?

The Commission is now revising the draft directives with the final drafts expected in April 2013 and adoption anticipated to follow shortly afterwards. These changes must then be adopted by member states within 24 months, though it is anticipated that the UK will make the changes more quickly. Like it or not, the public procurement regime is subject to some substantial changes shortly and procurement departments and lawyers alike will need to get to grips with the new rules

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Laura Thornton
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.