January 23, 2012

Introduction

Suppliers to the public sector, such as suppliers to the NHS, local authorities and government departments, will be aware that the tendering of public sector contracts is subject to detailed rules set out in the Public Contracts Regulations 2006. These Regulations in turn are based on Directive 2004/18/EC, the Public Sector Directive. On 20 December 2011, the European Commission published a proposal to overhaul the Public Sector Directive. This note considers the main changes proposed.

Proposed Revision of the Public Sector Directive

The main changes proposed are:

• Amendments to the procedures. The existing open and restricted tendering procedures are retained. However, the proposal provides greater scope for use of the negotiated procedure, to be called "competitive procedure with negotiation" and the competitive dialogue procedure. For example, these procedures may be used where the technical specifications on a supplies or services contract cannot be established with sufficient precision. There will also be a new innovation partnership procedure based on the competitive dialogue procedure.
• Technical specifications, selection criteria and award criteria. Contracting authorities will have the option of considering award criteria before considering selection criteria. The quality of staff assigned to performing the contract may be used as an award criterion and technical specifications and award criteria may refer to the production process of the goods or services to be purchased. There is also greater provision for pre-tender dialogue.
• Abolition of the distinction between Part A and Part B services. In the existing Directive, certain contracts for Part B services, such as legal services, do not have to be tendered in accordance with the full requirements of the regime. This is because they were not considered to have cross border interest.  This distinction will be abolished and contracts for these services will be subject to the full procedural rules.
• New lighter regime for contracting authorities below central government level. There will be a new, simpler regime for contracting authorities below the central government level, such as regional and local contracting authorities. They will be able to replace the publication of individual contract notices by the publication of a general notice for their planned procurement for the coming year.
• New lighter regime for social services. There will be a new, simpler regime for the procurement of social, health and education services and such contracts will be subject to a higher threshold of €500,000.
• Amendments to existing contracts. In light of case law, the proposed Directive clarifies that substantial amendments to existing contracts during their term, such as extension of the contract scope, are to be considered as a new award and will require the contract to be retendered.
• Increased access for SMEs. A range of measures will be introduced to improve SME access to public contracts. For example, bidders will be able to self-declare that they fulfil the pre-conditions for tendering, such as no conviction for corruption. Only the winning bidder will then be obliged to supply the documentary evidence to prove the facts that he declared in his self-declaration. Further, yearly turnover requirements may not generally exceed three times the estimated contract value and contracting authorities will be encouraged to split contracts into lots allowing for the participation of more bidders.
• Strategic use of public procurement.  The proposed Directive includes a number of measures which will enable procurement to be used to improve innovation, the environment, employment, public health and social conditions.
• Governance. Each Member State will appoint a body to monitor the implementation of and compliance with the public procurement rules. 

When will the new rules enter into force?

The Commission's proposals will now be considered by the European Council and the European Parliament. The Commission anticipates that they will be adopted by the end of 2012. If this deadline is achieved, the new rules must be implemented in the UK and other EU Member States at the latest by 30 June 2014.

Other developments in public procurement law

Proposed revision of the Utilities Directive

Directive 2004/17/EC, the Utilities Directive, governs procurement in the water, energy, transport and postal sectors. As part of the same legislative package, the European Commission has published a proposed revision to the Utilities Directive. The revision introduces many of the same changes proposed in relation to the Public Sector Directive.

Proposed new Concessions Directive

Service concessions are not currently regulated by any directive. The European Commission has proposed a new Directive to regulate service concession contracts.  It will apply only to concession contracts with a value of over €5 million.

Thresholds

The new legislative proposals do not affect the thresholds, which will continue to be revised every two years. The latest revision took effect on 01 January 2012: