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What is public procurement and why is it regulated?

Public procurement is the purchase of goods, works or services by the government and other public bodies. In order to ensure the free movement of goods and services, the EU issued a series of public procurement directives to provide that:

• Contracts are awarded fairly and without discrimination on the grounds of nationality.
• All potential bidders are treated equally.
• Suppliers of goods and services have the right to take action against public bodies, if contracts are not advertised or awarded on an open and fair basis.

The EU directives have been implemented in England and Wales by regulations for public contracts (the regulations) and separate, but similar, regulations for utilities contracts. Scotland has also adopted regulations, which are in much the same form.

In addition, the Government Procurement Agreement (GPA) of the World Trade Organisation gives non-EU suppliers based in GPA signatory countries the right to compete on equal terms for many public contracts awarded within the EU.

Who must comply with the regulations?

Any public body that is a contracting authority.

The definition of contracting authorities includes:

• Certain public bodies (including central government departments and local authorities) that are listed in the regulations.
• Other bodies that fall within a general definition set out in the regulations. This definition is wide and may include some entities that would not ordinarily be considered to be 鈥減ublic bodies鈥�

What contracts do the regulations apply to?

Contracts which are subject to the full procurement regime

• Contracts for the supply of goods (public supply contracts).
• Contracts for carrying out works (public works contracts).
• Contracts for services (public services contracts) that are listed as 鈥淧art A鈥� services in the regulations.
• Specific types of contract defined by the regulations, for example, framework agreements

The regulations only apply to contracts that are in writing and for consideration (whatever the nature of the consideration). The regulations may also apply, if an existing contract is renewed or extended on different terms or there are material changes to an existing contract.

Contracts which are subject to less onerous procedural requirements

Contracts for services that are listed as 鈥淧art B鈥� services in the regulations are largely excluded from the procurement regime and only limited rules apply.

However, any contract that may interest providers from a different member state will have to comply with EC Treaty principles. Therefore, procurement processes must be transparent. As a minimum, this will mean that contract opportunities will need to be advertised. All procurements will also need to comply with government requirements to obtain value-for-money.

Contracts which fall outside the regulations

The regulations do not apply, if a proposed contract:

• Is an in-house arrangement where specified conditions are met
• Falls within one of the exclusions listed in the regulations
• Has an estimated value that is below the relevant threshold. In most cases, the aggregation rules require that the value of purchases under individual contracts must be added together, although there are exemptions.

Even if it falls outside the scope of the Regulations, any contract that may interest providers from a different member state will still have to comply with EC Treaty principles.

What are the obligations if the regulations apply?

The contract must be advertised at EU level

In most cases, the contracting authority must publish a notice (known as an OJEU or contract notice in the Official Journal of the European Union.

The contracting authority must follow one of four award procedures

• Open procedure
• Restricted procedure
• Competitive dialogue procedure
• Negotiated procedure

Minimum time limits apply to the various phases of each procedure. The open procedure provides for a one stage procurement, while the other procedures have a short-listing (selection) stage prior to tenders being submitted. Contracting authorities must:

• Apply certain selection criteria to choose suppliers to tender.
• Apply certain award criteria to assess tenders.
• Disclose details of these criteria to the tenderers.

Detailed reporting and debrief requirements

Various reporting and debrief requirements apply to contracts falling within the scope of the regulations. The most important is that after a contracting authority has made its decision to award a contract, it must send out a notice to everyone involved in the tender process. The contracting authority must then allow a standstill period between the notice being sent out and the contract being entered into. The precise nature of the obligations of the contracting authority will depend on whether the public procurement was commenced before or after 20 December 2009, when a new legislation affecting the debrief requirements came into force.

What are the consequences of failure to comply?

Proceedings may be brought in the High Court

Compliance with the public procurement rules is a duty owed by contracting authorities to suppliers from member states. A supplier harmed as a result of a breach may bring proceedings under the regulations.

Court can suspend a procedure, set aside a decision or award damages

If proceedings are brought, the court can take interim measures to suspend an award procedure. If the court is satisfied that there has been a breach of the regulations, it can either order a decision to be set aside or award damages for the loss of opportunity. If a procurement was started before 20 December 2009, the court cannot order any remedy other than an award of damages if the contract has already been entered into. However, following the implementation of the a new Remedies Directive, for procurements that started on or after 20 December 2009, courts will be able to declare contracts that do not comply with the regulations ineffective in certain circumstances.

European Commission can take action

The European Commission can also take action against the Government for any breach of the procurement regime by a contracting authority in the UK.