Where are we now?
There is a quiet, fearful anticipation in the trenches. After a barrage of consultations from the Cabinet Office on how to implement the new European procurement Directives in the UK, the consultation process has now fallen silent.
Given the Cabinet Office’s "big push" to "fast track" UK implementation of the new Directives, the UK Regulations are imminent. Although the Directive allows up to two years for implementation, the Cabinet Office clearly wants to be fully EU updated "by next Spring".
We don’t know exactly why the Cabinet Office wants to implement the UK Regulations so quickly (there are several rumours), but we do know it is in response to political pressure.
Housing providers need to be aware of some key risks from the implementation of the new rules.
There is one major change in the new rules that stands out above all others. Article 51 states that,
"Contracting authorities shall, by electronic means offer unrestricted, full and direct access free of charge to the procurement documents from the date of publication of the OJEU notice"
"Procurement documents" are defined in Article 2(15) as,
"any document produced or referred to by the contracting authority to describe or determine elements of the procurement or the procedure, including the OJEU notice, the technical specifications, the descriptive document, proposed conditions of contract, formats for the presentation of documents by bidders, information on generally applicable obligations and any additional documents".
In order to minimise the risk of challenge under the new Regulations, housing providers will therefore need to make drafts of all the procurement and contract documents available on their website before submitting the OJEU notice. Preparation of these documents needs to start now for procurements later this year.
New financial prequalification rules
The Directive will limit the financial prequalification information that can be asked for. This is a major concern in relation to contractor solvency. Housing providers will no longer be able to use credit reference reports and a contractor’s financial strength will need to be assessed primarily from financial ratios in its annual accounts.
The Directive also limits the minimum turnover threshold to twice the annual contract value. This could mean the housing provider’s work representing up to a third of the contractor’s turnover.
Housing providers must therefore be much more wary over potential contractor insolvency. Planning for this could involve, for example, setting up framework agreements with "reserve" contractors, and making more use of performance bonds and retentions.
The Directive envisages that contractors will self-declare that they have met the minimum prequalification requirements. This will not be checked until the end of the procurement. Whilst this may be helpful in terms of reducing administration, it is likely to increase the risk of challenges. A contractor that has tendered and "won" the contract is almost certain to challenge if they are deselected for failing to meet minimum prequalification requirements, despite having self-declared that they did meet them.
This is a particular concern where a contractor is excluded for "serious deficiencies" in performing prior public contracts. The risks here mean that it is going to be very difficult for a housing provider to exclude a contractor for poor prior performance other than in the most obvious of cases.
Inevitably there will be some casualties, in terms of both procurement challenges and contractor insolvencies, in the march towards the new regime. Housing providers should maximise their chances of surviving these through proper preparation.
This article first appeared in the 2014 bulletin publication.
Read the original publication here