Following a process which started back in December 2011, some of the key Directives relating to public procurement are being overhauled in an attempt to make the procurement process simpler and more efficient. It is also hoped that this will make it easier for SMEs to tender for works and services.
On 19 September 2014, the Government issued a consultation paper seeking views on how to incorporate the new Directives into UK law. This consultation closed on 17 October 2014. The Directives must be implemented into UK law by April 2016.
The key changes coming into effect are:
Part A and Part B services: The distinction between Part A and Part B services will be removed. This means that all services over the relevant financial threshold will be subject to the EU procurement regime.
Awarding contracts on the basis of MEAT: All contracts will have to be awarded on the basis of the "most economically advantageous tender" (MEAT). Contracting authorities will no longer be able to award contracts purely on the basis of lowest price.
However, there is a shift in the definition of MEAT so that contracts can be awarded on the basis of "best price/quality ratio". In other words, contracts can still be awarded on the basis of price, providing the tenderer still satisfies the minimum quality thresholds set by the contracting authority.
Access for SMEs: SMEs have understandably criticised the existing regime on the basis that they simply do not have the resources or time to invest in lengthy and complicated tender processes and are often excluded from tendering by spurious minimum turnover requirements.
Under the new regime, it is hoped that Pre-Qualification Questionnaire (PQQ) requirements will be less onerous. There will be a cap on the minimum turnover requirements set at twice the contact value. However, some commentators have suggested that a more accurate representative of a tenderer's financial position is its ratio of assets to liabilities which is arguably a better indication of solvency.
In certain circumstances, it will be possible to reduce the length of the tender process. This should increase efficiency and reduce cost, though may put additional time pressures on SMEs who don't have full-time bid writing teams.
Streamlining the process should hopefully reduce the number of irrelevant questions asked by some contracting authorities in their PQQ/ITTs (though there is no sanction if such questions continue to be asked!).
In addition, contracting authorities will be encouraged to split their contracts into smaller "lots", so for example, a construction and maintenance contract could be broken up into different trades. Whilst there will be no obligation to split contracts into lots, any decision will not have to be justified in the tender documentation.
One issue is that contracting authorities having to enter into multiple contracts will have increased administrative burdens and could lose economies of sale.
That said, sub-contractors argue that they can often deliver works and services direct to clients at a lower cost than if provided via a main contractor. Sub-contractors will also welcome the opportunity to be paid directly by the contracting authority rather than having to wait to be paid by the main contractor, speeding up all important cash flow.
Framework agreements: The current rules regarding the calling off to individuals contracts under a framework agreement with multiple suppliers e.g. by way of direct awards or mini-competitions will also be clarified.
Abnormally low bids: At present, before rejecting a tender which appears to be "abnormally low", a contracting authority must ask for further details such as methods of proposed construction in order to satisfy itself that its minimum quality criteria have been met. The emphasis there is therefore on protecting the tenderer against the unjustified rejection of tenders.
Under the new regime, if a contracting authority suspects a tender is abnormally low it must investigate it. There is therefore a slight change of emphasis so that if a low tender is accepted it cannot later be challenged (save where in breach of minimum tax or wage obligations) whereas a decision not to investigate such a tender will be open to challenge.
In conclusion, contracting authorities will need to keep abreast of these developments though on the whole, the changes to the tendering process should have a positive impact.
