Five housing procurement tips

New EU tendering rules that came into force in February last year were intended to cut red tape and create more opportunities for small and medium-sized enterprises (SME) bidders. For social landlords, the Public Contracts Regulations 2015 provide more procurement freedoms, but also the need for greater caution. Landlords can make changes to existing contracts and, in certain circumstances, extend without having to retender. There is also more flexibility allowed for housing providers within framework agreements.

1. Don’t wait until the end of the framework to negotiate a better deal

In the past, social landlords generally accepted the rates a supplier tendered at the outset to get on to a framework. This was because it wasn’t clear that ‘mini-competitions’ could be used to get keener prices from those suppliers. A mini-competition is a secondary tender process where suppliers already on the framework bid for a specific piece of work without the landlord needing to go through a full Official Journal of the European Communities (OJEC) procurement exercise.

The new rules specifically encourage using mini-competitions in this way, so landlords can ensure they continually get the best prices. Given the tough financial climate, the sector should be looking to make much more use of this flexibility.   

2. Check and then double-check the paperwork

Inverclyde Council was forced to cancel a £1.6m street lighting services contract in December due to a ‘clerical error’. It had been awarded to Amey Public Services – a firm that wasn’t listed as a framework supplier – rather than its sister company, Amey OW, which was included. Following a legal challenge from another company, the Court of Session in Scotland ordered the council to scrap the contract and pay the supplier’s legal fees. This is the first time a UK court has made an ‘ineffectiveness’ declaration on a public contract and shows landlords how costly seemingly minor paperwork mistakes can be.

3. Make use of your wriggle room

Many landlords assume that the criteria they use to award contracts under a mini-competition have to be identical to the measures used to set up the framework.

This doesn’t have to be the case. Where the framework allows it, landlords can set additional or more detailed award criteria for their mini-competitions under a multiple supplier framework. This is a prime opportunity for social landlords to tailor the award criteria to their precise needs, helping them choose the right framework supplier for their work and maximise value for money.

4. Don’t forget to ‘standstill’ – it could pay off in the long run

The standstill process gives unsuccessful bidders 10 days to challenge a decision before contracts are signed. Letters are sent out to all bidders to tell them who won the contract and why. Although this stage is optional for call-offs from frameworks under the EU rules, it is good practice after a mini-competition.

This short pause offers landlords important protection against supplier challenges. Failing to hold a proper standstill process with adequate feedback given to unsuccessful suppliers can result in costly ‘ineffectiveness’ challenges from aggrieved bidders if there have been problems with your mini-tender process.

5. Watch out for the leaseholder service charge consultation ‘trap’

Social landlords may not be able to recover all their costs from leaseholders and tenants who pay variable service charges if they use an existing framework agreement. The maximum recharge is £250 a year for maintenance work or £100 per year for an agreement (for example, to cover energy supply) lasting more than 12 months, unless statutory consultation is carried out or a ‘dispensation’ is obtained from a tribunal.

Remember, the first stage of consultation with leaseholders and tenants has to be done before starting the procurement process. This is not possible where an existing framework agreement is being used.

Assuming the call-off from the framework is done properly, for example through a mini-competition, a tribunal is likely to give a dispensation. However, the landlord will end up having to pay their own legal costs and usually the service charge payer’s costs as well.

The biggest update of EU procurement rules for a decade creates opportunities for the social housing sector. But landlords must make the most of them at the same time as being wary of administrative mistakes that could cost them dear.

Andrew Millross, partner, Anthony Collins Solicitors LLP. He will be leading a session at Procurement for Housing in June