The Changing Face of Public Procurement

The new DNA for public sector commercial activity £ Procurement Process Contract and supplier management High Before going to market Time spent on value added activity Improving contract and supplier management capability through application of new standards Developing requirements that shape markets and the supply base to Government Simplifying process and reducing turnaround times & supplier bid costs The key point of this slide is the recognition that public procurement needs to concentrate much more of its attention on market and supplier management, and ensuring the contract itself is properly managed, The approach taken to the procurement process needs to be simplified. The procurement directive reforms form a key part of the Crown Commercial Service’s approach to this goal. Low Before Execution of sourcing strategy Supplier relationship management and negotiation Business need identification Market analysis Sourcing strategy Supplier identification Finalisation of contract Contract management Goal

Value for Money is YOUR responsibility, NOT the Regulations The EU Procurement Regulations (I know it’s early in the morning, stick with me here) Value for Money is YOUR responsibility, NOT the Regulations Transparency - contract procedures must be transparent and contract opportunities should generally be publicised Equal treatment and non-discrimination - potential suppliers must be treated equally Proportionality - procurement procedures and decisions must be proportionate Mutual recognition - giving equal validity to qualifications and standards from other Member States, where appropriate Spot the obvious mistake. There is nothing in here about securing Value for Money, Efficiency, control of public spending etc. That bit is YOUR responsibility, NOT the treaty

Awaiting adoption – expected in Jan 2015 What ‘s changing? Awaiting adoption – expected in Jan 2015 None of the following altered: “Contracting Authorities” Thresholds (apart from “Part B”) £172,514 (Goods and Services) £4,322,012 (Works) Remedies Directive, i.e. potential legal and financial penalties remain in place as before

Local Authority trading companies (“Teckal”) Exemptions! (1) Local Authority trading companies (“Teckal”) where the authority exerts on the ‘supplying authority’ a control similar to that which it exercises over its own departments and where 80% of the activities of the ‘supplying authority’ are for the ‘buying authority’ or other bodies controlled by it and where there is no direct private capital participation in the ‘supplying authority’ Teckal case concerned a group of local authorities in Italy (the Commune of Viano) procuring energy and fuel supplies together. Dates from 1999. Has been tested in UK law – RMP vs LB Brent; court found for RMP in 2009, overturned in 2011 by the Supreme Court

Inter-municipal Co-operation (“Hamburg”) Exemptions! (2) Inter-municipal Co-operation (“Hamburg”) the participating authorities co-operate to perform public services they must provide, meeting common objectives and the co-operation is for public interest reasons only and the participating authorities perform less than 20% of the activities on the open market Waste disposal case between authorities in Germany (2009). Covers shared services essentially but only applies to statutory services (in effect the open market consideration is unlikely to be met)

Reservation of certain contracts for mutuals and social enterprises objective of a public service mission linked to the delivery of these services reinvest profits to meet this objective (where profits are distributed this should be based on participatory considerations) owned/managed on the basis of employee ownership/participatory principles or the active participation of employees, users or stakeholders not have been awarded a contract for the services concerned by the contracting authority concerned pursuant to this reservation within the past three years The duration of the contract to be reserved must not exceed 3 years Such ‘reserved’ contracts must be open to all relevant suppliers with rights under the directive and must be awarded using the procedures in the directive, including a call for competition in OJEU Use once for a spin-out and then they’re on their own

Treaty principles must be applied Light Touch Regime These contracts will only be covered by the directive if their value exceeds Eu750,000 Mainly former “Part B” services, now referred to as “Annex XIV” (some cultural services included, mainly around events and festivals) Still require “Call for Competition” and “Contract Award” but discretion over process outside of that – UK govt has promised lots of flexibility Treaty principles must be applied Will affect services not previously covered by the directive – care, legal, some bits of HR

Innovation Partnerships New procedure allowing authorities to encourage suppliers to develop works, supplies or services not currently available on the market through long term partnerships Awarded to one or more suppliers using the competitive procedure with negotiation Procedure may be constructed in phases to match the research/innovation process – authority could reserve right to terminate process or reduce the number of partners Authority must make clear the position on property rights and must not disclose suppliers’ confidential information without agreement Not expected to apply to much LA spending – more like contracts for MOD etc bringing in national initiatives. Wait and see.

Shorter Timescales! Open: 35 days (30 electronic, 56 current) Restricted: 60 days (40 electronic, 77 current) Competitive Negotiated (CN) and Innovation Partnerships (IP): 60 days (40 electronic, no current equivalent) Competitive Dialogue: 30 days to participate, no explicit time limits beyond that, no acceleration Restricted, CN and IP can all be reduced by a further 5 days using a Prior Information Notice (PIN) as a “Call for Competition” Restricted = 30 + 30; Electronic = 15 + 25

Exclusion of poorly performing suppliers from re-tendering A supplier may be excluded where there are ‘significant or persistent’ deficiencies in performance of a contract or concession for an authority or utility body that led to early termination of the contract or other sanctions If you have terminated a contract early or know of someone else that has (with justification) or imposed fines / penalties and there is supporting evidence, then you can exclude them from a tender at your discretion – must be relevant and comparable though.

Plus Other Useful Clarity Market Consultation explicitly permitted Need to be able to justify “Lotting” strategy Environmental / Social labels can be must be linked to the subject matter of the contract (challengeable) Encourages use of: Life Cycle Costing Including costs incurred or saved through the adoption of a specific supplier or solution (“Outcomes Based”) Most Economically Advantageous Tender (MEAT) Challenging “Abnormally Low Tenders”

The Small Business, Enterprise and Employment Bill Para 37: Regulations about procurement (1) The Minister for the Cabinet Office or the Secretary of State may by regulations impose on a contracting authority duties in respect of the exercise of its functions relating to procurement (2) For the purposes of this section “the exercise of functions relating to procurement” includes the exercise of functions in preparation for entering into contracts and in the management of contracts …(& follows) Para 38 Investigation of procurement functions (1) In this section “a Minister” means the Minister for the Cabinet Office or the Secretary of State (2) A Minister may investigate the exercise by a contracting authority of relevant functions relating to procurement. Lord

Lord Young’s Proposed Reforms Abolition of the PQQ for sub-threshold procurement Mandating of a standard “Suitability Check” to replace the PQQ in above threshold procurement Mandating 30 day payments terms for sub-contractors by your main or Tier 1 contractor Advertising all contract opportunities above a certain value (mooted as £25K) on the national portal, Contracts Finder

Social Value Act Underused legislation to date Consider economic, environmental and social benefits WITHIN your geographic area only as part of the tender evaluation Only applies to Service contracts above threshold Review is under-way to consider extending scope Could form part of the powers referred to in the new UK Government procurement legislation Can be used in any circumstance if relevant to the contract. Must be considered above threshold but not necessarily applied

Contact details Eddie Gibson East of England LGA eddie.gibson@eelga.gov.uk 01284 758300 www.eelga.gov.uk