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Public Contracts Regulations – Scotland consults on how to follow Westminster’s lead

Monday March 9th, 2015

PASS - UK Public Contracts Regulations 2015

Westminster has acted quickly to implement the new EU Directives on procurement, concessions and utilities (the “EU Directives”) in England and Wales with the Public Contracts Regulations 2015 (the “2015 Regulations”) which came into force on 26 February 2015.

While the Scottish Government hasn’t been quite so quick off the mark, it released a consultation on 9 February 2015 on the changes to the public procurement rules in Scotland.

Kelly Sleight

Kelly Sleight

The consultation period ends on 30 April 2015 and the Scottish Government has indicated its intention to transpose the EU Directives (which came into force on 14 April 2014) into national law by the end of 2015, ahead of the deadline of 18 April 2016.

We consider some of the key points from the consultation below, together with a comparison against the 2015 Regulations which transpose the EU Directives into the law of England and Wales.

OVERVIEW – A consultation on changes to the public procurement rules in Scotland
Overall, the approach proposed by the Scottish Government is in similar terms to that taken by the UK Government (as regards transposition of the EU Directives into the law of England and Wales) with regard to implementing the minimum requirements set down by the EU Directives in order to retain discretion and flexibility.

This approach aims to avoid “gold plating” the EU Directives and will, it is hoped, result in good news for both contracting authorities and economic operators. That being said, this appears to be in marked contrast to the Procurement Reform (Scotland) Act 2014 (the “Act”) which received royal assent last year but has not yet come into force. The Act is not a requirement of the EU Directives and it arguably imposes some fairly considerable burdens on contracting authorities.

(See article from June 2014 for further information on the Act

One of the key areas of focus across the EU Directives, the Act and the consultation relates to facilitating the involvement of micro, small and medium-sized businesses (“SMEs”). The EU Directives and Sections 8 and 9 of the Act have the aim of making the bidding process for public procurement exercises more accessible for SMEs.

In particular, Article 58 of the public procurement EU Directive requires that the minimum annual turnover required from economic operators as a selection criterion shall not exceed two times the estimated contract value, except in exceptional circumstances. Whilst the EU Directives do not give Member States discretion in how this requirement is implemented into national law, the Scottish Government proposes to apply it to the lower value procurements which will be regulated under the Act, utilising its power under Section 28 of the Act to make regulations on selection criteria.

Conflict of interest
In addition, the Scottish Government proposes to allow conflict of interest to be a ground for exclusion in relation to provisions under the public procurement and utilities EU Directives where the conflict might mean that the economic operator is less able to deliver the contract. Where this is the case, the EU Directives provide that contracting authorities can treat economic operators as not having the professional ability needed for the contract. Again, the Scottish Government proposes to make regulations under Section 28 of the Act to apply this requirement to lower value regulated procurements. Both these points are contained within question 16 of the consultation.

One requirement within the EU Directives which contracting authorities may be relieved to hear that the Scottish Government is proposing not to make mandatory is the requirement on contracting authorities to check whether sub-contractors fail any selection criteria. This proposal is despite the Scottish Government having the option to make this a requirement if it wished to do so and it will be interesting to see if this remains the case once the results of the consultation are known.

Part A and Part B
The removal of the distinction between part A (“priority”) and part B (“non-priority”) services is one of the most notable reforms in the EU Directives. Currently, services listed in part B, for example legal services, are not subject to the full procurement regime but this will no longer be the case following the transposition of the EU Directives into national law. In particular, the catch-all “other services” category in part B will no longer be available to contracting authorities.

Whilst the part B services category has been abandoned, the EU Directives maintain a list of social, health, cultural and assimilated services which will be subject to a lighter touch regime under a new simplified procedure. This new regime will only apply where the contract value is more than €750,000 and requires contracting authorities to: (i) publish a contract notice or prior information notice to advertise the contract; (ii) publish a contract award notice; and (iii) follow any national rules relating to the procurement process itself. The new categories of services, however, are very limited in comparison to those services listed under part B.

The Scottish Government consultation provides that only limited regulation will apply to these services and proposes that the approach to be taken in the new Scottish regulations will be similar to the approach taken by the UK Government by requiring compliance with the basic EU Treaty principles (transparency, equal treatment and non-discrimination) together with the publication requirements outlined above.

Prior information notices
The Scottish Government is also consulting on whether a Prior Information Notice (PIN) is a sufficient call for competition in some situations. A PIN is used by contracting authorities to publish their annual purchasing plans for the next year without actually commencing the relevant procurement exercise at the time of publishing the PIN. Under Article 26 of the public procurement EU Directive, the Scottish Government proposes to allow all or some non-central contracting authorities to use a PIN as a call for competition. This would mean that a contract notice at the time the contracting authority starts the competition would no longer be required. There would be specific requirements for what is to be included in PINs and this option could be used in either a restricted procedure or in a competitive procedure with negotiation. In addition, the Scottish Government plans to utilise the power under Section 23 of the Act to allow this option for lower value regulated contracts as well. It will be interesting to see how this would work in practice, depending on the results of the consultation.

Shorter deadlines for submissions
The utilities and public procurement EU Directives make provision for contracting authorities and economic operators to agree shorter deadlines for submission of bids in a restricted procedure. The Scottish Government is consulting on its proposals to allow non-central contracting authorities to set shorter deadlines with agreement. The aim behind this proposal is to make the process simpler, easier and faster and is likely, in our view, to have a fairly major impact if introduced.

Call-off contracts
The Act introduces a requirement for contracting authorities to publish award notices when calling-off contracts from a framework agreement for contracts with a value of at least £50,000 for goods and services and at least £2 million for works. This does not apply to utilities contracts and the consultation includes the Scottish Government’s proposal to include this requirement for utilities contracts under Article 15 of the utilities EU Directive, subject to the relevant threshold.

Limitations of the Consultation
The Scottish Government consultation relates only to those matters where it has discretion under the EU Directives. The consultation is not a full description of analysis of the EU Directives and does not shed much light on the format of the proposed new Scottish regulations, which will be introduced prior to the 18 April 2016 deadline.

For example, the consultation makes no mention of the codification of the ‘Teckal’ test which makes provision for an ‘in-house’ exemption, subject to a tripartite test, or the implementation of the rules flowing from the Pressetext judgment in respect of contractual amendments and supplier insolvency.  We can, however, consider the 2015 Regulations that came into force in England and Wales on 26 February 2015 as an indicator of what the new Scottish regulations might look like.

The 2015 Regulations
The Westminster Government has expedited the 2015 Regulations so that they come into force more than a year before the deadline set down by EU law in order to take advantage of the “flexibilities” offered by the EU Directives. The Westminster Government has signalled its intention to undertake separate consultations on the utilities and concessions EU Directives during the course of 2015.

The Westminster Government has undertaken what it describes as the “copy-out approach” to implement the EU Directives, which means that the 2015 Regulations directly implement a number of provisions from the EU Directives. It was reported that most respondents to the Westminster Government’s consultation on the UK’s transposition of the EU Directives supported this approach, particularly with regard to its proposal to adopt a minimalist approach to the implementation of the light-touch regime for specified social services.

Will Holyrood mirror Westminster?
Whilst the EU Directives contain a number of mandatory requirements which must be implemented by Member States, the Westminster Government has implemented the minimum requirements in respect of provisions in the EU Directives under which it has discretion. It will be interesting to see the results of the Scottish Government’s consultation and the new regulations produced thereafter to compare its approach with the 2015 Regulations.

Judging from the structure of the Scottish Government’s consultation, we consider it likely that its approach will mirror that of the UK Government’s and we assume that the Act will come into force at the same time as the new regulations, although we await confirmation of this.

The Act and new regulations combined will result in further regulation for contracting authorities, particularly in relation to lower-value procurement exercises, which will be caught by the provisions of the Act. That being said, we are hopeful that the new regulations will also offer greater flexibility for contracting authorities if the Scottish Government implements the minimum requirements from the EU Directives.

Words: Kelly Sleight

Kelly is a Solicitor with Harper Macleod LLP

Twitter: @HarperMacleod

PASS - UK Public Contracts Regulations 2015

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