Many bodies which are contracting authorities for the purpose of the Public Contracts Regulations 2015 (“PCR 2015”), or equivalent contracting entities under the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and/or the Defence and Security Public Contracts Regulations 2011, will have a crucial role in responding to the COVID-19 outbreak. This may include a requirement to take urgent action, including procuring works, supplies or services, to address matters of public health and security. Notwithstanding the urgency of such action, contracting authorities must still comply with the requirements of the PCR 2015 (or other applicable procurement regulation) or risk legal challenge.
In cases of urgency, however, PCR does provide a number of options to contracting authorities to ‘shortcut’ the otherwise potentially lengthy procurement procedures which they would otherwise be obliged to employ.
On 18 March 2020, the Cabinet Office published Procurement Policy Note 01/20, ‘Responding to COVID-19’ (“PPN”). The PPN provides a helpful summary of the options available to contracting authorities to accelerate procurement procedures in exceptional circumstances. Whilst the PPN is not legally binding, its guidance is likely to be influential upon any Court should the actions of any contracting authority later be challenged.
In this note, we summarise the options for accelerated procedures outlined in the PPN and provide some practical tips to ensuring compliance with PCR 2015 when utilising those procedures.
Accelerated Procedure Options
The PPN identifies the following options available to contracting authorities:
- direct award due to extreme urgency, (PCR 2015, regulation 32(2)(c));
- direct award due to absence of competition or protection of exclusive rights, (PCR 2015, Regulation 32(2)(b));
- call off from an existing framework agreement or dynamic purchasing system, (PCR 2015, Regulations 33 and 34);
- call for competition using a standard procedure with accelerated timescales, (for example under PCR 2015, Regulation 27(5)); or
- extending or modifying a contract during its term, (PCR 2015, Regulation 72).
We summarise each option below.
Direct Award Due to Extreme Urgency, (PCR 2015, Regulation 32(2)(c))
PCR, reg. 32(2)(c) was designed precisely for the type of urgent, serious challenges posed by the COVID-19 outbreak. This option may be used where it is impossible to comply with the usual time limits for genuine reasons of extreme urgency brought about by events unforeseeable by the contracting authority. If those requirements are satisfied, the contracting authority may make a direct award of the contract without prior advertising using the negotiated procedure without prior publication.
- Keep an ongoing written record evidencing that the above tests are satisfied for each procurement. Keep in mind that what might constitute unforeseeable now may not be in future.
- Emphasis should still be on trying to achieve value for money. Prices may be higher than expected in a regulated market so ensure any abnormally high pricing is approved by an appropriate commercial director.
- Make sure the contractual mechanisms are in place to provide for pricing reductions through the life of the contract.
- On the occasion that pricing reductions cannot be secured, keep a log to show why mechanisms were not put in place to aid future auditing.
- A contract award notice must be published within 30 days of the award of any contract made following the use of the negotiated procedure without prior publication.
Direct Award Due to Absence of Competition or Protection of Exclusive Rights, (PCR 2015, Regulation 32(2)(b))
Where works, goods or services needed to respond to COVID-19 can only be supplied by a certain supplier because competition is absent for technical reasons or for the protection of exclusive rights (including intellectual property rights), the contracting authority may use the negotiated procedure without prior publication providing there is no reasonable or suitable alternative and the absence of competition is not due to an artificial narrowing of the scope of the procurement.
- Keep a written record of the reasons why and evidence that there was an absence of competition or a requirement to protect exclusive rights and why there is no reasonable or suitable alternative.
- On repeating procurement, make sure to carry out a separate assessment to ensure you are still able to make a direct award on these grounds.
- Again, a contract award notice must be published within 30 days of the award of any contract made following the use of the negotiated procedure without prior publication.
Call Off From an Existing Framework Agreement or Dynamic Purchasing System (PCR 2015, Regulations 33 and 34)
Contracting authorities may be able to employ the commercial agreements (including framework agreements and dynamic purchasing systems) offered by central purchasing bodies, such as the Crown Commercial Service, providing the contacting authority was identified as a permitted customer in the original contract notice or invitation to confirm interest. Note that direct awards and/or mini-competitions may be permitted by the agreements, offering a potential shortcut to procuring urgent supplies, works or services.
- Always follow the procedure for awarding a call off contract set out in the framework agreement or DPS.
- Remember the minimum time for receipt of tenders in a mini-competition is 10 days.
Call for Competition Using a Standard Procedure with Accelerated Timescales
Contracting authorities may reduce certain minimum timescales if the state of urgency renders the standard timescales impracticable (for example, in relation to the open procedure under PCR 2015, Regulation 27(5)). It is not necessary that the situation of urgency unforeseeable, nor is there a requirement that the urgency is not attributable to the contracting authority. Clear justification for the use of the accelerated timescales must be set out in the contract notice.
- The contracting authority is free to use any of the usual procedures available under PCR 2015 to run its competition.
- Ensure the timeframe for competition is reasonable and proportionate in the circumstances.
Extending or Modifying a Contract During its Term, (PCR 2015, Regulation 72)
Where a variation to a contract is required due to unforeseeable circumstances, the modification does not alter the overall nature of the contract and any price increase does not exceed 50% of the value of the original contract or framework agreement, a public contract may be modified without a new procurement procedure.
- Keep a written record of the reasons why it was decided to extend or modify the contract. Make reference to the specific facts surrounding the COVID-19 outbreak which caused the decision to employ this urgency provision.
- Consider limiting the duration and/or scope of the modification – is it possible to run a procurement for longer-term/wider scope requirements alongside it?
- Ensure all potential legal grounds for modifying/extending under PCR, reg.72(1) are included in your written justification as this may reduce the legal risk. You only need to succeed on one permitted ground of modification to succeed in any legal challenge.
The PPN notes further that the COVID-19 outbreak is likely to give rise to supply chain disruption and that contracting authorities may need to deal with supplier claims under force majeure provisions or pursuant to the principle of contractual frustration. In this regard, see the recent post on SPB’s Global IP & Technology Law blog by Paul Jinks in relation to force majeure.
Should you have any questions in relation to the subject matter of this article please contact Jenny Broderick.