Changes to procurement law

The Transforming Public Procurement Green Paper

On 15 December 2020, the Government published its Green Paper, Transforming Public Procurement. The stated aims of the Green Paper are to simplify and modernise public procurement procedures and regulations.

To do so, the Green Paper proposes the repeal of the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011 and replace them with a single set of rules. They will be based on six independent principles: public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination.

There are also plans for the introduction of a National Procurement Policy Statement (NPPS), the first of which was published in June 2021. These statements will set out the national priorities for public procurement and ensure these are met. The 2021 document identifies the current priorities as social value, commercial and procurement delivery, and skills and capacity for procurement. This will be the current NPPS until the end of the current parliament, unless withdrawn, amended or replaced if the Minister for the Cabinet Office considers appropriate.

The Green Paper is an 82-page document that sets out reforms to the whole procurement regime. Amongst the proposed reforms are significant changes to the process of challenging a procurement decision and the remedies available.

Challenges to procurement decisions

Chapter 7 of the Green Paper is entitled ‘Fair and fast challenges to procurement decisions’, outlining proposals for reforms to the process of making and defending challenges, along with the remedies obtainable. The Government says the purpose of any reforms are to reduce time and cost, whilst ensuring just outcomes. As part of its strategy to achieve this, proposals are made for greater reliance on pre-contractual measures, thereby reducing the number of challenges made in the court to obtain post-contractual measures. This will likely be welcomed by contractors who still wish to win the contract, as opposed to having to claim for damages only for the loss of opportunity to do so.

Review Process Reform

Whilst complimentary of the Technology and Construction Court (TCC), the Green Paper recognises that its processes can create lengthy and costly challenges. It identifies that this can encourage early settlements in the interest of bringing the dispute to an end, even where a more just outcome could have been obtained by pursuing the matter. The Green Paper therefore proposes the following:

• The introduction of new Civil Procedure Rules (CPR) and Practice Directions dealing specifically with procurement challenges;
• A tailored fast track system to allow for an expedited trial process that is specific to each case;
• The introduction of a presumption that certain types of claims would be reviewed on the basis of written pleadings only, saving the cost of instructing counsel in more straightforward matters;
• The release of information relating to each procedure once contracts are awarded and clear rules relating to disclosure for various types of challenges, designed to avoid the disclosure process prolonging challenges;
• To increase the court’s capacity to hear cases by encouraging the use of the TCC District Registries across the UK, along with the introduction of a procurement only Judge;
• The new CPR would also contain common timescales for the submission of pleadings, in addition to clarifying timelines for amended claims, altering the process for judicial reviews to be transferred to the TCC and provision made for challenges on a point of law to be heard at half day hearings.

Should these reforms not be sufficient to have the desired effect, the paper discusses the possible introduction of a specialist procurement tribunal system. The idea is that this would be the venue for cases that would otherwise have not come before the court, perhaps those with a low value or those concerning challenges to process. No further detail is provided on this matter and therefore questions remain on how this would work in practice. We are simply told that the Government will continue to explore this idea with Her Majesty’s Courts and Tribunals Service.

Lifting the automatic suspension

Under the current system, when the automatic suspension is imposed by the issue of a claim form, the courts have adopted the American Cyanamid principles when deciding whether the suspension should be lifted. This case concerned an interim injunction and is therefore not specific to procurement challenges. This leads to a significant number of suspensions being lifted, as one element of the test requires challengers to show that damages would not be an adequate remedy and as such the suspension needs to remain in place. Given that the purpose of bidding for a contract is predominantly to profit from it, challengers often fall at this hurdle, the suspension is lifted and they can then only seek a remedy in damages.

The Green Paper proposes replacing the American Cyanamid test with a new test that is specific to procurement challenges to ‘balance public interest, urgency, the upholding of the regulations and the impact on the winning bidder against the right for the claimant to be able to participate in the contract’. Unfortunately the Green Paper does not provide specifics on what this test will be. Responses on how the test can meet these aims were sought as part of the consultation.

Also included within the proposals is a provision for the automatic suspension not to apply to contracts under the crisis and extremely urgent provisions, which are eligible for a limited tendering procedure, other than where a proper procedure has not been followed. It is hoped that this will avoid the delays caused where the automatic suspension is triggered, in addition to encouraging informal competition over direct awards, which has lower risk of delay but is less competitive. Supporting guidance will apparently indicate that informal competition is the preferred approach.

Capping the level of damages

Another proposed reform relates to the capping of damages available to 1.5x the bid costs, except in limited circumstances. The rationale behind this proposal is to deter bidders from making speculative claims, whilst also encouraging innovation.

This limit is likely to be of concern to prospective bidders, particularly on occasions where bid costs are low but the contract is of high value. The Green Paper touches on concerns that this may discourage contractors from bidding for public contracts, but questions the appropriateness of the use of public funds in paying damages to those who lost the chance to win the contract.

No detail is provided in relation to how bid costs would be calculated and the document states the aim is for this to be done in a fair and transparent manner. The plan is to develop a ‘should-cost’ modelling tool and this is another matter upon which responses were sought as part of the consultation.

Provision is made for damages above this limit to be awarded in specific circumstances and examples given include illegal direct awards, failure to publish the required notice and in the demonstration of malfeasance. Again, it is not known how these exemptions will apply in practice.

The removal of mandated debrief letters

The Green Paper dedicates a whole chapter to transparency in the procurement process. It proposes basic disclosure be provided once the contract is awarded, including ‘bidder identities, basis of award decisions, basic disclosure of tenders submitted, evaluation reports and basic evaluation disclosure information’, subject to the Freedom of Information Act 2000, Environmental Information Regulations 2004 and the Data Protection Act 2018. In light of these changes, the Government suggests the removal of mandated debrief letters, which set out information to unsuccessful bidders regarding the winning bid. The Green Paper suggests that that this will be a more straight-forward and less time consuming approach for contracting authorities, whilst also being sufficiently transparent with unsuccessful bidders.

The Procurement Bill

The consultation on the Green Paper closed on 10 March 2021 and the Government is still analysing the responses. Whilst the outcome of the consultation is awaited, in the 2021 Queen’s Speech, it was announced that a Procurement Bill would be introduced in the next session of parliament. Initial indications from Minister of State, Lord Agnew, were that the bill would be introduced ‘from September 2021’, so this is something to watch in the coming weeks and months.

The response of the Welsh Government

Considering the impact that changes to procurement legislation would have in Wales, on 18 August 2021, Rebecca Evans MS, Minister for Finance and Local Government in Wales, published a written statement addressing the planned procurement bill due to be introduced in Westminster and the Welsh position on whether to use the legislation to reform procurement processes. The statement confirms that the Welsh Government had sought and obtained guarantees from the UK Government that the legislative changes proposed would not fetter the Welsh Government’s ability to achieve the policy outcomes planned in its own Social Partnership and Public Procurement (Wales) Bill. The written statement confirms that officials from Wales will be collaborating with those working on the bill in Westminster to ensure that these assurances are followed through and that specific provision for Welsh contracting authorities is made in the UK legislation.

This article has been written by Sarah Street. Please contact Joanne Thompson if you have any enquiries.