In this procurement masterclass, we have selected framework agreements as our main topic. We cover key cases, guidance and address potential pitfalls, from when an authority seeks to set up a framework agreement to when a framework agreement ends. We also review the developing topic of Dynamic Purchasing Systems, and look into how the Cabinet Office Green Paper seeks to amend the current regime.
Simon Harris: Thank you very much Chris and thank you for the kind introduction. So just a little bit about myself. I have been working with a contracting authority for the last two years or so to help establish a framework agreement. So it is a really great opportunity to be with you all today to speak about our experiences to date. And I understand that there are about 300 or so of you here with us today so again, it is great to see that this is such a popular topic.
Right, so just looking at the agenda. So topic one we are going to cover in quite a bit of detail some framework principles that underpin the current system. Topic two we are going to look at a few developing issues that have arisen from those principles themselves. Topic three, a quick look at dynamic purchasing systems and what authorities have to do to set those up. The fourth topic, framework reform. So we will take a look at the Cabinet Office Spring Paper that was published in December 2020 and see what that means for both frameworks and DPS. And the last topic, the Green Paper update itself, we will take a look at some of the updates that have happened since we last spoke in February.
Topic 1: Framework Principles
So we will be focusing today's presentation on The Public Contracts Regulations 2015, what we refer to as the PCR. Now Regulation 33, that is the starting point when looking at a framework agreement. And you will see in these slides that there are a number of references in red, the Regulations, and you will see those throughout this presentation. If you want to have a look back at a later date just to see the exact Regulation reference.
So what is a framework agreement? Regulation 33 defines a framework as an agreement between one or more contracting authorities and one or more economic operators. And by economic operators, we mean suppliers. And the framework itself will establish the terms, government contracts to be awarded during a given period in particular in relation to price and where appropriate quantity envisaged.
The second point I want to bring, commitment to purchase or supply. So it is not usual to see a framework itself commit either party to purchase or supply the goods or services. It is just a tool to facilitate and enable the purchase of goods or services. However it is quite usual to see a framework established and immediately one or more call offs awarded to the supplier. Frameworks can either be sole supplier, so where there is one economic operator on the framework, or multi supplier, so where there are numerous parties on the panel to pick from.
Reasons for using a framework. So why would an authority chose to use a framework as opposed to a traditional way of procuring and awarding a contract? The main benefit of using a framework is that it streamlines and accelerates the process for awarding contracts. Secondly, it is really useful for common goods or services so where the authority can specify its requirements clearly up front and it does not have to negotiate for example with the suppliers what it actually requires. The last point there, contractual provisions, are already drafted. We see this as the main practical benefit in using a framework as opposed to a traditional contract. The call off contract terms will be set out in the framework so this really helps to speed up the process for awarding contracts once the framework has been established.
Now there is a general principle that there should not be material changes to the call off terms so this again helps to reduce the authority and supplier time. However both parties or all parties sorry to the framework, they may need to refine certain terms and to the call off when it actually comes to getting on with the contract itself. They may need to refine for example the charges schedule or there may be optional services under each call off and the authority and the supplier have to work together to identify from the broad list of services what actually will be required for each core.
And the penultimate point on the screen, principles of the procurement, I think that is something that we are probably quite familiar with, Regulation 18, that sets out the broad principles that underpin the procurement regime so equal treatments, transparency, non-discrimination and proportionality. They apply to every procurement including a framework and call off contracts. So right from setting up and establishing the framework to calling off services and re-procuring, an authority has to bear this in mind throughout the whole process itself.
The last point on the screen there. There is a four-year maximum term under the PCR. However in exceptional circumstances this can be extended. There are slightly different, longer maximum periods under the Defence Regulations and under the Utilities Regulations, but for the purposes of this presentation, we will not be going into either of those.
Again, some more framework principles. These are all based on Regulation 33 of the PCR. So we are going to take a quick look at some of the principles around establishing a framework and awarding the contracts themselves.
So the first point, there cannot be a substantial modification to the framework terms as this will in effect constitute a new procurement. The authority is permitted to consult the supplier in writing requesting it to supplement its tender.
And the second point down. There are three potential routes to select a supplier and a multi-supplier framework. The first one is a direct award without re-opening competition. The second is a mixture of direct award and then competition. And the third is a new competition itself. Now these are all quite similar, the last two in particular. The last two types, the last two routes, they have to be procured on the same terms as applied for the framework award. Regulation 33 sets out that the authority concludes more precisely formulated terms where necessary and they were terms referred to in the procurement documents where appropriate.
So what does an authority have to do when looking to set up a framework meeting one of these two processes? Firstly, there needs to be a written consultation with the suppliers that are capable of performing the contract. Secondly, the authority needs to set a time limit that is sufficiently long to allow tenders. Regulation 33 of the PCR, it does not set out what this time limit for receipt of tenders will be but the authority will need to take into account the complexity of the goods or services that are being procured. The penultimate point there is written tenders. So tenders will need to be in writing and not opened by the authority until the time limit has expired. And lastly, award criteria, so the procurement documents the framework that will need to specify the award criteria of the mini-competition process itself.
So we have looked at some principles when establishing a framework. So when there has been either a direct award or mini-competition, what does the authority have to do? So the first point, a contract notice is not required for each call off from the framework. However there are separate requirements in relation to Contracts Finder or contracts that are awarded based on a framework. Contracts Finder is something that can be overlooked sometimes by authorities but it is a very important part of the whole procurement process. The information that is required on Contracts Finder is relatively standard. So for example the contractor name, the date of the contract itself and the overall contract value. There is not a time limit specified for the publication of this information on Contracts Finder in the same way that there is for a contracts award notice. But it must be published by an authority within a reasonable period of time. So an authority cannot wait numerous months in which to publish its information.
The second point there, Regulation 55 of PCR, sets out the requirements for informed bidders of the outcome of the framework and this includes the requirement for an authority to notify the parties of the decision to conclude or not establish a framework or DPS.
Now the third point there, if requested by a potential supplier, an authority is required to provide further feedback and this includes for example the characteristics and relative advantages of the successful tender. The rest of this slide sets out the exact information that is required by Regulation 55. And lastly there, the authority can withhold certain information under Regulation 55 if this would for example prejudice fair competition. So for example, commercially sensitive information around the winning bidder or if there are intellectual property considerations then the authority may be able to maybe permitted to withheld this information.
So these are the last set of framework principles and they all relate to the documentation requirements. So a Regulation 84 report. That is required for every contract, framework or dynamic purchasing system and, similar to Contracts Finder, it is something that can be overlooked by authorities when establishing a framework. But it really helps to ensure that there is a good audit trail in place and helps when someone is looking at a contract cold in a few years' time, if there has for example been a change of staff, they can have a look at the Regulation 84 report and see what happened when the authority was procuring a framework.
Regulation 84 surprisingly sets out the exact requirements of what is required for this report but again, it is relatively standard information. So for example, the names of the candidates of tenderers, the reasons for their selection or rejection and any abnormally low tenders. Other specific requirements includes the requirement to list out the element that will be subcontracted to third parties. There are relatively limited circumstances in which a Regulation 84 report is not required and these include where there is a single supplier framework or where there has been no re-opening of competition. So a Regulation 84 report: it is not published in the same way that a contract award notice is but it is just made available to the Cabinet Office if it requests it. However this should not diminish the importance of a Regulation 84 report.
As for any other type of procurement, authorities are under the same obligations around publishing standstill letters and adhering to a standstill period.
And lastly, confirmation that a bidder's potential remedy when challenging a framework, it does include the possibility to declare the framework ineffective that is provided that the criteria in Regulation 103 is satisfied. Procurement remedies are quite details and it is slightly in itself to be a standalone topic for a future procurement masterclass so I will not go into any further detail at this stage.
Topic 2: Developing Issues
So we have looked at a number framework principles, we are now going to consider some developing points and practical considerations that an authority will need to take into account when setting up a framework and this is all based on relatively recent case law and our experience to date.
So the first point, identification of authorities / economic operators in procurement documents. The documents that establish the framework, they will need to clearly identify the authorities that can use it. This is really quite a fundamental point around frameworks in order that they are not using it properly or in such a way as to prevents, restricts or distorts competition. The parties to a framework , they can either be established by names, so directly, or by other means that make them clearly identifiable (for example, a defined region like specific authorities in the West Midlands or with a definition of a Central Government Body). This will clearly identify the parties to a framework. So frameworks should not be used by authorities which are not identified as this will be considered to be an unlawful direct award. Similarly, Frameworks should also not be open to the entry of new economic operators once they have been concluded. As again, this will go to the heart of procurement and being considered to be unequal treatment and a breach of transparency principles.
So the second point there, call-off duration. Call-offs may be longer than four years and they may be extend beyond the expiry of Framework itself. However, the call offs will need to be awarded before the end of the framework term itself. The length of each call off, that will depend on the number of circumstances. So for example whether there is a transition from the current provider of services, the authority will have to take into account for example the transition or exit plan just to see what the transition period will be. This is likely to have a bearing on the call off length.
The third point there, calculating the contract notice value. A relatively recent issue that we have seen has been around the practicalities of calculating the contract award notice's value. Regulations sits with the PCR, that sets out the relevant principles on how to actually calculate the values and it is seen really as a box ticking exercise but a lot of thought needs to be given to it to ensure that the most appropriate value is assigned. But an authority will need to bear in mind the proposed use and length of the framework so not just itself that is looking to use the framework, whether there will be any other contracting authorities that are looking to use the framework. The authority will have to bear this in mind when calculating the overall value.
An authority does not want to go through the time and expense of establishing a framework, putting it out to procurement, getting one or more suppliers on board and then finding part way through the duration of the framework that they are coming up to the maximum limit. Again, that would lead to potential issues around unlawful direct awards which bring us on to some more practical points around that, that for an authority it is really fundamental for them to have a clear purchasing plan in place right at the start of its procurement planning. So we recommend that an authority works with their commercial and Finance team quite early on to work out what the likely value of the framework will be and the resulting call offs. Again this will help to mitigate the risk of procurement challenge which brings us on to the next point there, Regulation 72 and modifications of a contract.
The principles around Regulation 72, they also apply to frameworks and call offs. So there are certain limited circumstances in which an authority can modify a contract under Regulation 72. So for example, if it is necessary to do so, if there are unforeseen circumstances or if the modification is not substantial, and all of these principles apply to frameworks and the resulting call offs too. We will not go into detail around Regulation 72 as, similar to procurement remedies, it is quite a detailed topic that it may be the subject of a future procurement masterclass.
So the last point on the screen. There have been two relatively recent European cases that focused on frameworks and they provide helpful guidance to reaffirm the principles that we have reviewed. I will go into the first of these cases, Lake Garda. The case concerned a sanitisation framework so, quite a glamorous procurement. The tender documents to the Framework allowed for one or more health bodies to enter into a contract with the supplier that was on the framework and this eventually took place. Two parties, they challenged the decision by the authority to do this on the basis that there was an unlawful direct award and the authority should have put out the contract to a new procurement.
The European Court of Justice, they had to decide two issues. The first was whether an authority could act on its own behalf and on behalf of other authorities that were indicated but not direct parties to the framework.
For the first question, the ECJ held that authorities that want to call off services at a later date they do not need to be signatories to the original Framework. However, they do need to be clearly identified as potential beneficiaries in the procurement documents that makes both the additional authority and the interested supplier aware that this might happen in the future. And this reaffirms the principles that we have viewed. The Court held that a reference can appear in the framework itself or in another document, so for example, extension clause in the tender specification.
In relation to the second question, the Court had to consider whether it was possible for an authority not to determine the quantity of services that may be required when concluding such contracts.
The Court held that a framework must set out at the start the maximum volume of supplies or services that were anticipated. The Court also held that, once this maximum volume had been reached, the agreement will no longer have any effect. In doing this the Court reaffirmed the principles of transparency and equal treatment and they provided the analogy that and agreement could be used by an authority artificially to divide contracts so that they sell below the procurement threshold which would be a breach of procurement rules.
Topic 3: Dynamic Purchasing Systems
So, that has concluded our review of framework principles and a few developing issues. We will move on now to consider dynamic purchasing systems.
So, what is a DPS? Now Regulation 34 of the PCR, that sets out the principles of a DPS. Like Regulations there to feeders for a framework. Regulation 34 of the PCT, it confirms that a DPS will be available for commonly used goods or services that are readily available and generally available on the market. The PCR does not expand on what is meant by this definition, however guidance from Crown Commercial Services in October 2016 confirms that it will normally be suitable for largely "off the shelf" requirements that can be specified by an authority in advance. So highly complex requirements, they are unlikely to be suitable for a DPS because they are unlikely to fall within the definition of "off-the shelf".
So onto the second point. A DPS is a two-stage process using the restricted procedure which falls within Regulation 28 of the PCR. The first step for an authority: all suppliers that meet the selection criteria and have not been excluded by the authority they will need to be admitted to the DPS. So this is like a framework and it will set out the terms that will operate under the DPS.
In the restricted procedure, the number of potential suppliers can be limited by an authority however Regulation 3 that is specifically excluded so an authority cannot do that.
So for the second stage of a DPS: individual contracts are awarded so this is like a call off to a framework.
Regulation 34 it also sets out the relevant time limits for requests to participate and for receipt of tenders. Now an important difference between a DPS and a framework is that under a DPS any supplier can be admitted throughout the life of the DPS. All communication under a DPS that will need to be made electronically. However, the CCS guidance from October 2016 which is really helpful it also confirms that electronic communication does not prevent human evaluation of bids, so it is nice to see that artificial intelligence is not quite yet involved in procurement evaluation fortunately.
The fourth point there: There is a four step process for awarding contracts that is set out in Regulation 34(14) of PCR. Firstly, the authority will need to publish a call for competition and that will make it clear to the suppliers that a DPS is involved.
Secondly, the authority will need to specify the nature and estimated quantity of purchases that are envisaged by the authority. So that is similar to what is required under a framework in terms of being clear around the likely purchase requirements and this again ensures transparency and ensures that an authority does not circumvent the procurement rules.
The third point there, division, the authority will need to make it clear if the contracts under a DPS will be divided.
The fourth point there, unrestricted and full access to procurement documents. This is a largely procedural point, but the authority needs to ensure that the procurement documents are made available throughout the duration of the DPS.
The fifth point there, award criteria. So the authority needs to award the contract to the supplier that submitted the best tender on the basis of the award criteria in the contract notice or in the invitation to confirm interest.
Contract award notices. So a contract award notice is not required once the dynamic purchasing system has been set up or when new suppliers are added to the DPS. However, an award notice is required for the specific contracts that are awarded under a DPS. The CCS guidance from 2016 it helpfully confirms that these award notices can be grouped and submitted on a quarterly basis so an authority does not have to issue an award notice each time it is awarded a contract under a DPC. It can batch these up which helps to reduce the administrative burden on authorities.
The last point there. There is no maximum duration for a DPS or the resulting contracts that fall under a DPS. However, the period of validity must be stated in the contract notice. There are no direct awards that are permitted under a DPS so that is a big difference between a framework and a DPS. In going back to the permitted term, the CCS guidance it does confirm that a longer running DPS that will help an authority reduce the need to re-compete the procurement. But if the DPS is running for too long, then it may become obsolete and the authority's requirements they might change. The market may change so there may be new suppliers or the technology itself might change. So again, that is worth bearing in mind for authorities that are looking to set up a DPS.
So we have looked at framework principles and a few developing issues together with a review of DPS. We are now going to consider the reforms that were proposed in the Cabinet Office Green Paper from December 2020.
So the Green Paper it was quite light in detail on proposed framework reform in comparison to other areas. They proposed a new system called DPS Plus which will be a flexible tool. The Green Paper sets out the relevant principles of DPS Plus and firstly it must be established using the capacitive flexible procedure. So, new suppliers can join the DPS at any time and there won't be any maximum term on the DPS Plus. However, an authority will need to ensure that there is live advertising of the DPS Plus itself or find a tender service so new suppliers can join at any time. The contract award notice that must be published when any contract is awarded under the DPS Plus itself. There was a proposal in the Green Paper to remove the limits on DPS just for commonly available purchases.
So what did the Green Paper proposed in relation to frameworks. So there were two proposed options for frameworks the first close and open so in relation to a close framework the markets of that would be closed to suppliers other than those that are on the framework for a maximum period of four years. Under an open framework that would last for eight years and there would be an initial three year close period under an open framework. Once this three year period passed any supplier could submit a bid to join the framework itself at predetermined points. The authority would have to notify the market that it was reopening the framework and it would do this through notice. An authority could open up an open framework again as many times as it wanted to to new suppliers this is provided that it was stated at the start of the procurement itself.
The Green Paper also set out further additional rules for both open and closed frameworks. The first step in relation to commercial tools so all commercial tools will need to be recorded onto a central register and the intention behind this is that it will to improve transparency and make it easy to find and compare information and on this central register all award notices will be visible and would be linked to the framework itself. Second point there is around direct awards so confirmation that a direct award is permitted if the authority can objectively determine a supplier that is capable of meeting the requirement. Penultimate point, single supply frameworks so confirmation from the Crown Commercial Services that single supply frameworks will only be available for closed frameworks and the last there on exclusion grounds. Confirmation that authorities will need to include terms that allow them to remove suppliers if an exclusion ground becomes present during the framework term and this is subject to the usual provisions around self-cleaning.
So there was a consultation process following the Green Paper and there were forty or so questions that were issued to the market to respond to by way of feedback.
Gowling WLG as a firm, we submitted our response to the Green Paper in March last year so that was exciting to feed into the legislation process. The Cabinet Office they produced a response to the consultation in December of last and this covered both the proposed new DPS Plus and framework machine. There are around 400 or so responses to the questions on DPS and frameworks so it has proved to be quite a popular area.
Firstly, looking at the response to the DPS Plus proposals, DPS Plus that'll be changed to dynamic market following feedback from the consultation.
The second is that dynamic market will not be limited to commonly news purchasers and it will be available for use with all types of works, services and goods.
The third point there new entrants, so confirmation that dynamic market will be open to new entrants at any point in the lifetime of the dynamic market so that is in line with the current DPS process.
The last point there contract award notices, there were concerns raised in the consultation response around the requirements for issue contracts award notices and the response indicated that the market wanted the ability to batch notices to be retained. The Cabinet Office has confirmed that award notices will only be required for contracts from frameworks that are over the relevant threshold.
In relation to the proposed changes to frameworks the Cabinet Office has confirmed that it will proceed with the open and close framework proposals.
And just to pick out some other things from the response. There were concerns raised around a potential loss of flexibility that is present in the existing regime for utilities. So in order to mitigate this risk utilities will be allowed to award longer term close frameworks. A longer term than the relevant term provided that justification is published in the tender notice and is related to the framework will also be permitted.
In relation to the estimated value confirmation that the requirement to identify in the contract notice or in the procurement documents, the nature, scope and overall maximum estimated value of the contracts that may be awarded under the framework.
So the last point there I mentioned briefly that we responded to the Green Paper and by way of commentary we consider that open frameworks they will offer opportunities to suppliers to join after three years which will be really helpful for authorities to drive competition. Central suppliers this may present a risk to them as they may lose their place in the framework if a better bid is received. However to mitigate this risk an authority could limit the frequency that it opens the framework and invites updated bids. So another concern potentially is that the re-evaluation process that may be expensive and quite resource heavy for authorities and suppliers. Our experience of the evaluation process is that it can be quite detailed and it usually takes longer than anticipated so again that is something to consider when to use an open framework. So last topic
Topic 5: The Green Paper Update
So Chris went into quite a lot of detail in last procurement masterclass in February around some of the bigger proposed changes. That Webinar is still available on our website and the last ten minutes or so goes into that detail.
The Cabinet Office does provide a regular monthly update on the Green Paper and you can sign up for these updates at the addresses that are on screen,
The April updates that was issued a few weeks ago it concerns that preparations are still in place to introduce the procurement bill as soon as Parliament's return allows.
There will be six months to prepare for the new regime before it goes live and this will provide authorities and suppliers with an opportunity to understand the new regime. So in order to meet this timeline we expect to see the draft procurement bill partway through this year hopefully.
The transforming public procurement page where the link is on screen it's been set up recently by Cabinet Office and it confirms that the new legislation will come into effect in 2023. We have received confirmation that the four sets of regulations that are currently in place they will be replaced by one unified regulatory framework. The aims of this new regime are to simplify procurement, reduce administration, create a fairer system for both buyers and suppliers and provide more flexibility to negotiate and talk with suppliers.
The second point on screen that is a short approach on the Green Paper which again summarises the proposed aims of the reform with value for money really being key and at the hearts of what looking to be changed.
In the April update issue a few weeks ago from Cabinet Office they refer to the new procurement policy note that was published in June last year and that indicates that legislative requirements around national procurement policy would be introduced in April 2022. These words require all authorities to have regard to the national procurement policy statement and they will be obliged to publish pipelines and benchmark their organisation against others. The latest update has confirmed that legislation will not now come into force this year however, it's likely to form part of the procurement bill itself or be introduced as secondary legislation. The update form April does strongly recommend that authorities continue to have regard to the procurement policy statement and to consider that publishing their procurement pipelines.
Now the last point on the slides. The Queen's speech was delivered by Prince Charles in Parliament yesterday and this confirms that the new regime is still intended to proceed and with the aim of providing more opportunities to small and medium size enterprises. So again, I think that demonstrates that the new regime it's going to have quite sweeping changes and we are going to be quite broad in what's looking to achieve. So that is brought us to the end of the presentation.
Christopher Brennan: Thanks very much Simon. I'm sure people will agree with me in saying that was extremely useful, clear and shows a lot of interest and insight and so we await the procurement bill with baited breath.
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