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Home | News & events | Legal updates | Procurement Update: January 2010

Procurement Update: January 2010

18 January 2010

Not only did 2009 end with snow flurries in many parts of the country, there was a flurry of activity on the procurement front, too.

There were the following significant developments:publication of the new advertising threshold limits

• publication of the OGC guidance to accompany the new remedies rules
• decisions in several important cases
• publication of new forms of OJEU notices reflecting the new remedies procedures

With registered providers (RPs) needing to achieve economies and operational cost savings through ‘smart' procurement, 2010 is likely to see a lot of activity on the procurement front, particularly as the new remedies rules bed down.  So watch out for more procurement updates during the year.

New advertising thresholds

These will apply for the period 1 January 2010 to 31 December 2012: the relevant thresholds RPs must be aware of are:

TYPE	NEW THRESHOLD (POUND STIRLING)
Works	£3,927,260.00
Supplies and Services	£156,442.00

 
Changes have also been made to the thresholds for Central Government Contracts and under the Utilities Regulations: because the pound has been so weak against the Euro, the thresholds have gone up reasonably significantly - possibly meaning slightly fewer contracts could be caught by the full Regulations.

However, given that one of the grounds for an ineffectiveness challenge is where a contract has been awarded without the prior publication of a Contract Notice in the Official Journal, RPs must ensure:

• the new thresholds are known by all members of their procurement team
• are embedded in standard practice and policies
• that the appropriate mechanism is in place to ensure procurements which might otherwise start without a Contract Notice are reviewed before a potentially fatal step is taken

OGC Guidance published on New Remedies Rules

The final instalment in the process - the Guidance which OGC said would accompany the amended Regulations - was published on 15 December 2009: the Guidance was published in three parts, engagingly titled:

• Part 1: About the rule changes, including transitional provisions
• Part 2: The new rules on the standstill period
• Part 3: The new remedies rules

Helpfully, Part 3 also contains a number of appendices with useful observations around risk management options that contracting authorities - and therefore RPs - may wish to bear in mind.

In any event, RPs should note the following key points made in the Guidance:

• Transitional rules - the Guidance stresses the new rules only apply to procurements commencing on, or after 20 December 200
• Alcatel Letters - OGC's view is that the requirement in the new rules to give unsuccessful bidders information about ‘the characteristics and relative advantages' of their bid compared to the winning bid, means bidders should be given a breakdown of their mark for each award criteria and sub-criteria, a comparison with the winning bidders mark for each, and a brief narrative explaining the reasons for the lower marks.
  By implication, this means that Alcatel Letters will now become more bespoke and that standard template letters will need substantial tailoring to specific projects and specific bidders.
  
  This means more work for RP's procurement teams, which would be well advised to ensure the new requirements are known, that there is a process and procedure in place for reviewing Alcatel Letters before they are sent, and that the appropriate resources are made available for this part of a tender exercise.
• Pre-nuptial agreements - or as the OGC rather uninspiringly calls them, pre-agreed ineffective terms. The Guidance does not prescribe a form or model wording, but OGC makes suggestions about the likely content for a well drafted agreement observing this should cover matters such as: the basis on which compensation becomes available, treatment of assets, the date of any payments to be made, dispute resolution, and the binding nature of such agreements.
  
  Appendix 1 to Part 3 of the Guidance sets out OGC's view on the above matters. RPs should consider that appendix a useful starting point
• Ineffectiveness claims - recognising that the Alcatel Letter merely warns bidders of the intention to sign a contract at the end of a tender exercise, OGC suggests contracting authorities - and therefore RPs - send a further short letter mentioning that the contract has been signed (after waiting for expiry of the appropriate standstill period that is).
  
  OGC suggests the effect of such a letter will be to abbreviate what would be the six-month month longstop limitation period, shortening the period to 30 days from the date of the letter.

If you would like further assistance or guidance about any of the above, or indeed how to implement pre-nuptial agreements and how to cope with the requirements of the new remedies rules, please get in touch.

Case law

RPs should be aware of two interesting cases decided in December 2009.

Below threshold procurements - on 10 December 2009, the Court of Sessions in Scotland gave judgment in Sidey Limited v Clackmannanshire Council. Although it is a Scottish decision, it is important because the court in effect applied the provisions of the new remedies rules to a below threshold procurement.

The court held that a contract which otherwise avoided the full application of the rules (because its value was below the applicable threshold) was nevertheless still subject to the full regime because the contracting authority voluntarily applied the rules to the tender process.

Consequently, due to flaws in the process for evaluating tenders received, the court decided that the contracting authority's decision should be set aside. 

The tender exercise was for a proposed public works contract for the replacement of kitchens and bathrooms in council houses, the approximate cost of which work was stated to be £2.5m. The notice stated the type of procedure to be used was the restricted procedure.

The key lessons to be learned from the case are:

• the importance of getting the evaluation - and in this instance a de-brief - process correct
• it is important to follow the Regulations in full where you decide to apply them to what would otherwise be an excluded contract, for example a below threshold procurement
• if it is not intended to follow the Regulations, contracting authorities should be careful with the terminology used, because it does appear from this case that if authorities follow similar processes and use similar terminology, the Regulations may be applied by the courts. To avoid that consider using a disclaimer. 

European Dynamics SA v HM Treasury - the High Court in London refused to grant an injunction preventing Buying Solutions (HM Treasury) from entering into a Framework Agreement.

The relevance of the case is not so much in that fact, because under the new rules signature of the contract will be automatically suspended if proceedings are commenced. That suspension remains in force until the court brings it to an end through an interim order under the new Regulations, or the proceedings are determined or otherwise disposed of.

In deciding whether to bring an automatic suspension to an end, the court will consider and will apply the principles in a case called American Cyanamid, which is what the European Dynamics case was all about.

It is clear from this December decision that in order to continue suspension it must be shown:

• there are serious issues to be tried
• damages would not be an adequate remedy
• the balance of convenience lies with continuing the suspension

New OJEU notices

New Notices have been published to reflect the new remedies rules. The forms are available on SIMAP and e-Notices. 

The changes are:

• to amend the existing award notice, to allow for the new rules so that Authorities may put in place an Award Notice where they have not OJEUd a contract opportunity and include in that Notice their reasons for not OJEUing it in the first place
• to introduce the new ‘voluntary transparency notice'

There may be good tactical reasons for using such Notices from time to time, particularly transparency notices, but RPs will be wary in many cases of flagging the issue to bidders. Each of the Notices has a 500-word box where the authority must state its reason for not advertising in OJEU.  This box will need to be filled in with some care.

Should you have any queries in relation to this article please do not hesitate to contact us.

© Shoosmiths. This page is for general information: it is not legal advice. Please read our full terms and conditions for details of the disclaimers and exclusions which apply.

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Mark Robinson

Associate
T: 03700 86 4159
I: +44 (0)121 625 4159
E: mark.robinson@shoosmiths.co.uk