Changes to EU procurement

1. Changes to EU procurement • David Hansom, Partner, London • 3 December 2013

2. Overview • In the next 20 minutes, we will cover • The current context • Current proposals for reforming the rules • The future

3. Procurement is changing (again) Procurement going up the corporate agenda Government view is “gold plating” of purchasing Promotion of SMEs Social Value Act PQQs now banned for central government routine spend Mystery shopper scheme BUT Balance of risk and speed Still lots of challenge activity New directives coming soon

4. The 2014 procurement rules • Consultations to “simplify and speed up” procurement started in 2010 • All member states now approved new procurement directives for • Public sector • Utilities • Services concessions • Treaty principles – equality, non discrimination and transparency • Remedies and Defence directive unchanged • Recent news that the adoption by EU to be delayed until early next year – there will then be 2 years to introduce • UK Government pleased with outcome • “Faster, less costly and more effective”

5. Transitional provisions • Full texts of directives now publicly available • Majority of provisions are mandatory • Some optional areas out for consultation • Cabinet Office is adopting ambitious timescale • Rules will apply to any new procurement commenced after the implementation date • “Commenced” likely to include OJEU notice/other call for competition • Could also include services concession negotiations started before implementation date • Guidance to follow from Cabinet Office

6. Pre qualification changes • Simpler pre qualification • Early market engagement/testing expressly permitted • Bidders will be able to self certify - only the winner(s) need evidence • Reduction of minimum time limits by a third • Poor performance on previous contracts a ground of exclusion • Turnover cap of maximum 2x contract value - to help SMEs • Relevant skills and experience can be taken into account at the award stage as well as during selection • Use of lots encouraged but not mandatory (a change)

7. Tender stage changes • Part A/B services distinction abolished but thresholds raised • New light touch regime for certain services with higher threshold • Negotiated procedure now a default route for any non “off the shelf” purchase • Shorter timescales • New procurement route – innovation partnership • E – procurement mandatory within 4.5 years • Use of socio economic labels or equivalent

8. No more Part B services • Lots of activity is currently Part B eg • Catering • Leisure • Education • More will be within scope of OJEU procurement • New light touch regime for “social, health and some other services” • Will still need an OJEU • Will still need a transparent and fair process with a disclosed mechanism to choose winner(s) • Increased contract threshold of 750,000 euro ex VAT • All out for consultation

9. Mutuals • Historic issue – how to award a contract to your “employee led organisation” • Now an express right to • Limit a competition to mutuals • Award a contract for a limited period (was up to 3 years but to be confirmed) where certain conditions are met • Limitations on private sector involvement in the company • Social and environmental characteristics now specifically permitted to be taken into account • Note - not a right to directly award!

10. Codifies the case law • Crystallises some key case law decisions: • On material contract changes (Pressetext) if change below • the relevant financial threshold • 10% of the initial contract value for services /supplies • below 15% of the initial contract value for works • On awarding contracts to in-house suppliers (Teckal) • more than 80% of the activities of that legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authority • Allows some incidental wider role?

11. Codifies the case law • Crystallises some key case law decisions: • On inter-authority co-operation (Hamburg) where • establishes a co- operation between participating contracting authorities with aim of ensuring public services are provided with a view to achieving objectives they have in common; • implementation of co-operation is governed solely by considerations relating to the public interest; and • participating contracting authorities perform on the open market less than 20% of the activities concerned by the co-operation • Turnover test

12. Areas for consultation • How will light touch arrangements for health and social care work • “Appropriate measures” to remedy conflicts of interest • Maximum period bidders can be excluded for prior poor performance subject to “self cleaning”. Note - Directive suggests 3 or 5 years • Grounds of termination of contracts

13. Areas for consultation • Local authorities (and other “sub central” bodies) can make a call for competition via a PIN rather than an OJEU • On how central purchasing bodies (CPBs) will work • Open procedure – first sift for compliance before tender • New grounds of mandatory exclusion • New rules on sub contracting

14. The future • Are you ready? • Lots of change • New standard documents e.g. OJEU notice may not be available by the time UK goes live • Training for teams – note Cabinet Office training • Updating standard documents • Updating risk registers • Audit of current contracts by type, value and re-procurement dates

15. Any questions?

16. David Hansom Partner dhansom@vwv.co.uk 0207 665 0808