The purchase of goods and services by the public sector is highly regulated. The rules are set out in the Public Contracts Regulations England and Wales 2006. The Regulations catch contracts exceeding the following thresholds:
- £4,348,350 for works contracts.
- £113,057 for supplies in the case of a central government body, or £173,000 by other public sector bodies.
The buyer is referred to as the contracting authority. The seller is referred to as the economic entity.
What services are caught?
Services are divided in to type A and type B services. A lighter regime applies in the case of part B services. Examples of part A services include computer, accounting and consultancy services. Part B applies to health care, education and social care.
Part B services escape the requirement for any form of prior advertising. They are however still subject to the obligations of transparency, equal treatment and non-discrimination as well as proportionality.
What about contracts below the threshold?
The regulations do not govern these contracts. However, it has been decided by case law that where the contract is capable of cross border interest i.e. of interest to suppliers located in other EU member states, the tender process should be conducted within the general principles of non-discrimination, equal treatment and transparency. This effectively means the contract has to be advertised and some form of competition held.
Where should contracts be advertised?
During the UK’s membership of the EU, these should be advertised in the Official Journal of the European Union (OJEU). In the unlikely event that the UK leaves the EU without a deal, advertisements will be via the UK e-notification service.
Tender procedures by type
Open: Used for straight forward purchase of commodities. No negotiation is permitted. All interested parties can submit a bid through OJEU and demand a copy of the contract documents.
Restricted: Bidders responding to the OJEU advertisement are subject to selection criteria. Those selected are invited to submit tenders. No negotiation is allowed. At least 5 candidates should be invited to tender.
Competitive dialogue: Those expressing an interest in tendering for the contract will have to pass the authority’s criteria and will be invited to engage in dialogue working up a solution to the tender. Once dialogue has ended, the parties are requested to submit final tenders and no further negotiation is permitted. At least 3 candidates should be invited to tender.
Negotiated: In certain limited circumstances (e.g. an emergency), a negotiated procedure can be adopted either with or without advertising. At least 3 candidates should be invited to tender.
The contract award
This should be based on either the “lowest price” or “the most economically advantageous tender” (MEAT). When MEAT is the criteria, those should be set out in the OJEU notice or the tender documents.
The standstill period
The contracting authority is required to write to all unsuccessful bidders notifying them of its decision and its reasons. The contract must not be completed until 10 days after this letter. This is sometimes known as the Alcatel letter. If the unsuccessful bidder issues proceedings within those 10 days, the contracted is stayed. The authority may, however, apply to have to the judge to have the stay lifted.
Failures in the tender process can lead to expensive legal disputes as unsuccessful bidders have remedies in damages if there are breaches of the regulations. The following tips can help avoid arguments:
- Be clear and transparent about what you are going to do and how you are going to do it.
- Ensure all bidders are treated fairly and equally.
- Ensure the decision letter explains clearly the decision and the reasons for it.
If you need advice running a public tender or wish to challenge one, contact Ken McEwan our procurement Director.