Made in Europe

On 17 April 2014, three European Union public procurement laws came into effect: a general public sector directive; a directive on procurement in the utilities sector; and a directive on concession contracts that applies to all public sectors.

EU member states have two years to implement them, but the UK government plans to get a head start, and could start applying them as early as this Christmas, and intends to implement them as early as next spring.

Those working in procurement need to get up to speed – and fast. Here are some of the key changes.

Removal of the distinction between ‘part A’ and ‘part B’ services

Under the old regime, contracts for services that were divided between Part A and B ‘part A’ and ‘part B’.

Part A were subject to the full regime of European procurement rules, and had to be advertised in the Official Journal of the European Union.

‘Part B’ services were those with a strong domestic connection and could be procured through a ‘light touch’ regime.

Under the new regime this Part A/B distinction will be removed but an exception will be retained for contracts that cover ‘social and other specific services’, which can be awarded with minimal procedural requirements. However, this exception will only applies to a closed list of service categories. Unless the service is specified on this list, the full scope of the rules will apply in future.

A new regime for concessions

The new concessions directive does not significantly change the existing rules of this type of contract - under which, instead of committing to paying a fee for a service, you appoint someone to perform a service for which they generate their own fee by exploiting that service.

But consolidation of the rules is welcome and a new financial threshold does apply. Where concessions have an estimated value over their lifetime of more than €5,186,000, they must be tendered for through the Official Journal of the European Union.

New and updated procurement procedures

The ‘innovation partnership’ is a new procedure, to be used when a contracting authority requires ‘an innovative product, service or works that cannot be met by purchasing [those] already available on the market’ - for example, significant research and development exercises.

Mandatory time limits, particularly those that relate to open and restricted procedures, have generally been reduced. This should assist contracting authorities to speed up their procurement exercises.

Other general changes and updates to the procurement rules

Poor performance under previous public contracts may now be used as a selection criterion under which bidders can be excluded from a procurement process during the initial stage.

To encourage the participation of small and medium-sized businesses in procurement exercises, a minimum turnover requirement cannot be set as a selection criterion where it exceeds twice the value of the contract being let.

The new directives shift emphasis from price to overall cost as a determining mechanism under a procurement exercise. They specifically discourage the use of ‘lowest price’ in awards of public contracts, significantly preferring ‘most economically advantageous tender’, which takes account of full lifecycle costing of the supplies, service or works in question.

In conclusion, the new directives contain some novel concepts but need not be feared as redefining the procurement landscape. They offer a timely exercise in updating and consolidating the existing regime and an opportunity to modernise procurement procedures and practices.

Mark Fitzgibbon is a partner and James Clayton is an associate at law firm Hill Dickinson