COVID-19: Options for Regulated Procurement in the Utilities Sector
In these unparalleled times, Authorities and Contracting Entities more than
Date: 05 May 2020 | Time to read: 5 mins
The economic impact of the COVID-19 pandemic and the astonishing upheaval created in the aftermath of the Brexit referendum have created uncertainty and challenges for procurement, the purchasing process and how to manage goods and services. Professor Sue Arrowsmith QC (hon) addressed a few of these issues in the latest webinar ‘Procurement issues in a world of uncertainty’.
Professor Arrowsmith, a member of the Government’s Procurement Transformation Advisory Panel, advising on the post-Brexit reform of the Procurement Regulations, and also of the Department of Trade’s Expert Trade Advisory Group, which is advising on the procurement aspects of trade negotiations with non-EU countries, is well positioned to provide advice and guidance.
An outline of the main topics and themes covered during the Procurement webinar included:
With regard to Brexit, there is unlikely to be any change in UK Procurement legislation for at least a couple of years. Under a “transition” agreement with the EU, the EU rules themselves must be applied until at least the end of 2020. After that the EU rules themselves will no longer apply (unless the UK agrees to apply them as part of a trade deal with the EU, but this does not look very likely). However, the UK will not have a free hand in designing its procurement rules, as it has already committed to signing up in its own right to the Government Procurement Agreement (GPA) of the World Trade Organization, which opens UK public contracts to other trading partners. The GPA is a “skeleton” version of the EU Directives which, like the EU Directives requires transparent tendering procedures and remedies for suppliers to enforce them. However, it regulates major contracts only and is considered more flexible and much less detailed than the current legislation, which gives the UK some scope to have a more flexible procurement system. Obviously, this could take a while to design and adopt, and legislation provides for the current procurement regulations to stay in place while this is done.
Under the GPA rules the remedy of damages for loss of profits is not required so this aspect of the remedies system could be dropped, if the UK wished. There is also a lot of interest in making remedies cheaper, speedier and more effective. Another important point that was highlighted was that there was an appetite for an ‘Open Contracting’ approach after the transition period, i.e. the whole contracting process is online which will be more transparent, simpler, accessible and inclusive, to maximize participation and efficiency and allowing monitoring by both government and stakeholders.
Professor Arrowsmith further explained that her own view was that there should a single and uniform regime of rules (instead of the current separate systems for public sector, utilities, defence and concessions), with significant legislative simplification. She considered that the system should retain use of familiar concepts and terminology where appropriate (open procedure, restricted procedure etc) but involve rebalancing of interests and a move towards value for money, sustainability and reduced procedural costs – for example, by allowing free access to negotiation in all procurement procedures her proposals are explained more detail in this paper.
Key cases were also considered. These included:
AEW v Basingstoke & Dean Borough Council. The outcome of this case was that if a project is materially changed during the award procedure or after the contract is concluded, even if that change is unlawful under the Directives and the contract awarded does not directly correspond with what was advertised in the Contract Notice, the remedy of ineffectiveness does not necessarily apply. The fact that a notice has been published that has ‘sparked’ the competition is enough to say that there is a Contract Notice related to the project to negate the ineffectiveness remedy. This reduces the legal risk involved in making contract modifications – ineffectiveness often will not apply to unlawful modifications, and suppliers are unlikely to able to get damages either.
Amey Highways v West Sussex County, this case confirms the broad discretion to abandon a procurement procedure. However the abandonment does not extinguish accrued breaches in the procurement – in other words, if the procuring entity has already committed a breach, such as a manifest error in evaluation, that has wrongly deprived a tenderer of a contract award, simply terminating the procedure and starting again does not prevent the tenderer from claiming damages. Ryhurst v Whittington Health NHS Trust also confirms the broad discretion to abandon a procurement and that the contracting authority does not have to provide a running commentary regarding its internal decision-making process to the tenderers.
All cases are available in THEMiS.
Concerning the COVID-19 situation the focus was on the Procurement Regulations and the legality of direct awards, modifications of contracts, framework agreements and dynamic purchasing systems, making reference to Procurement Policy Note (PPN) 01/20 – Responding to COVID-19. Discussed was the application of Regulation 32 (2)(c), which allows direct awards. This provision is available for urgency and the Government’s PPN clarified that COVID-19 is a ground that can be relied on. To rely on this, however, you must show extreme urgency, that you cannot use other methods, unforeseeable circumstances and that the urgency is not attributable to procuring entity. However, courts will take a strict interpretation and the burden of proof is with the contracting authority. Furthermore, and interestingly, the subject of how long ‘unforeseeable’ circumstances can be relied on was debated.
The accelerated open and restricted procedures were addressed and their reduced time scales which may be appropriate for some contracting authorities.
The webinar concluded with the legality of modifying contracts under Regulation 72 (1)(c) for unforeseeable events up to 50% of the contract value and referring to the Basingstoke Case that the risk of ineffectiveness of modifications is minimal.
Overall, Professor Arrowsmith provided clarity regarding the Procurement decisions that have to be made and the legality of such decisions, reflecting that there is some scope and flexibility to meet organisational objectives in these uncertain times.