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Government proposals for procurement reform

Peter Ware discusses some of the key highlights from the Green Paper on procurement reform including a re-scoping of the underlying principles of public procurement, a streamlining of the recognised procurement procedures, and some potentially controversial proposals in relation to remedies.

The Cabinet Office has now published the much-anticipated Green Paper “Transforming public procurement” setting out the Government’s proposals for reform of the public procurement system in England. The proposals are now subject to a consultation period ending on 10th March 2021.

A change of form

The Paper suggests combining the current law around procurement in to one single set of regulations. This means the Public Contract Regulations (PCR), the Utilities Contracts Regulations 2016 (UCR), the Concession Contracts Regulations 2016; and the Defence and Security Public Contracts Regulations 2011 being replaced with one single set of regulations.

New Principles

The Paper proposes that public procurements will be conducted on the basis of a set of six core principles:

  • public good
  • value for money
  • transparency
  • integrity
  • fair treatment of suppliers
  • non-discrimination

These are different to those in the existing procurement regime. The introduction of the principle of “public good” is new and the Government’s priorities in this area will be captured in a new National Procurement Policy Statement to which contracting authorities must have regard. The principle of acting in a manner which is “proportionate” which currently features in the PCR does not feature in the new list.

Streamlined set of procedures

The Paper suggests replacing the seven different procedures seen under the current procurement regulations with three. These are:

  • the open procedure – for simpler procedures
  • a new competitive, flexible procedure – giving contracting authorities the freedom to negotiate and innovate
  • the limited tendering procedure – the new name for the negotiated procedure without prior publication (direct awards). 

The impact of these proposals will be that all contracts caught by the public procurement regime will be able to benefit from the flexibilities of the current Light Touch Regime procedure. Whilst many contracting authorities may welcome this, there could be understandable concern amongst bidders who value the certainty of the current structure. On a related note, there is also the suggestion that a new justification for a direct award is introduced for procurements in a time of “crisis”.

The Most Advantageous Tender

The Government proposes to alter the basis on which tenders are evaluated from the current “Most Economically Advantageous Tender” basis to that of the “Most Advantageous Tender” which is in line with the requirement of the Government Procurement Agreement. This is likely to allow for a greater range of factors to be taken into account as part of evaluation.

Furthermore, it would no longer be necessary for a contracting authority to evaluate tenders solely from its own point of view, wider benefits may be taken into account.

Changes to DPS and Frameworks

The Government proposes replacing the current DPS provisions with a new system - the DPS+. This new purchasing tool is intended to be available for all types of contracts not just off the shelf goods.

Contracting authorities will need to advertise a DPS+ describing the conditions for participation and those notices must remain open so suppliers can submit an application anytime. All suppliers who meet the selection criteria must be admitted to the DPS+. DPS+ will not be time limited but termination rights can be specified in the original advert. Contracts under a DPS+ can only be awarded after a procurement exercise run using the new competitive flexible procedure.

The Paper proposes to have two categories of framework agreements: closed and open. The rules on the former will remain much the same as they are now. The new ‘open’ framework would allow for frameworks with a duration of up to eight years. Following an initial closed period of three years new suppliers would be able to apply for a place on the framework at predetermined points. Existing suppliers would have the opportunity to submit new bids when the framework is reopened allowing them to update their offers.

Changes to challenges and remedies

The changes in the Paper broadly fall in to two categories: Changes to the court process; and changes to remedies available to challengers. The changes to the court system will:

  • allow for matters to be dealt with on an expedited basis through use of a tailored fast track system
  • allow for certain categories of challenge to be dealt with on papers dispensing with the need, in those cases, for hearings to be held
  • introduce new rules/guidance on disclosure
  • introduce common timescales for certain stages of proceedings including the submission of pleadings.

These proposed changes could see a seismic change in the approach to procurement challenges which are currently almost all dealt with via oral hearings once a claim is issued.

In terms of changes to remedies, the Paper is clear that a focus should be on pre-contractual remedies rather than damages due to the changes being made to the Court process allowing claims to be resolved quicker. In support of this there is a proposal that, subject to some limited exceptions, any award of damages as a result of litigation be capped at legal fees plus 1.5 x bid costs. This proposal is likely to provoke much debate and criticism.

Contract Modifications

The Paper also sets out changes to the current safe harbours in Regulation 72 of the PCR, which allow contracts to be varied without being in breach of procurement rules. The primary changes of note are:

  • mandating the publication of contract modification notices in all but a limited number of circumstances
  • the addition of there being a “crisis” as an additional justification for an extension, as with direct awards.
  • except where a modification is driven by extreme urgency or a crisis situation that a ten day standstill period will apply in the case of all contract modifications

Peter Ware is Head of Government at law firm Browne Jacobson.