Comment: Are you ready for the new tendering rules?

Lindy Patterson on changes coming to the public sector

The Scottish Government is now consulting on how best to introduce these changes north of the Border. Picture: TSPL

New regulations introducing a more flexible and modern regime for firms tendering for public sector work take effect in Scotland by the end of this year. They implement three EU directives published last year which aim to simplify the current procurement process and make it more accessible to SMEs.

The new procurement rules were implemented by the rest of the UK in February this year. The Scottish Government is now consulting on how best to introduce these changes north of the Border with responses due by the end of this month. So, how will its proposals change the tender process for public sector contracts?

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A key principle of the new rules is to better recognise a contractor’s experience and competence in a particular area. When awarding contracts, authorities will no longer be able to determine the most economically advantageous tenderer on the basis of price alone. Instead contracts will be awarded according to the best “price-quality ratio” with reference to factors such as the bidder’s technical competence, level of experience and qualifications of its staff.

Tenderers submitting “abnormally low” tenders will be required to explain their bids. Case law provides that a bid should be considered abnormally low when it is beyond and below the range of anything which might legitimately be considered normal. This signals a change from the current position where there is no obligation to reject an abnormally low tender with authorities only having to request an explanation for the higher priced bids they plan to reject. The new directives require authorities to seek justification for all such bids and reject those whose price is low due to lack of compliance with environmental, social and employment laws or if they have failed to give a satisfactory explanation for their pricing.

One of the issues with the current regime is its inflexibility for longterm contracts. For example, in PFI or maintenance contracts, parties may wish to vary a contract’s terms either because of efficiency/value for money initiatives or a changing marketplace. The new rules seek to address this by increasing an authority’s ability to modify a contract without triggering a new procurement process. Decisions of the European Court have previously found that where such changes are considered material they would amount to a new award of a contract. However, the issue of identifying what is “material” has proved problematic so the new rules explicitly state when modifications can be made without the need to retender.

Attempts have also been made to reduce red tape with the introduction of a new Standard European Single Procurement Document. This will cut down the current time consuming accreditation process with only the winning bidder required to submit certificates and documents for verification. It is proposed to delay this until 2018 to allow parties to prepare. Authorities will also, where possible, be expected to divide contracts into separate lots to make it easier for SMEs to submit a bid where they may have insufficient capacity or experience to fulfil the full contract.

The new rules will require bidders to be more responsive and efficient in applying for public sector contracts. Non-central government bodies will be able to reduce timescales for responses in order to speed up the process.

There will also be serious consequences for companies’ unsatisfactory behaviour. A mandatory five-year exclusion period is proposed for any party guilty of specific crimes such as bribery, corruption or money laundering. A bidder could also be potentially excluded for up to three years for presiding over significant or persistent deficiencies in performing a prior public contract which led to damages or early termination.

The Scottish Government also proposes setting up a specialist tribunal to hear procurement challenges as .a quicker and cheaper alternative to the courts for those operating within the tight timescales for raising a procurement challenge (currently 30 days).

There is a lot to get to grips with these proposals for both tenderers and contracting authorities. It is hoped they will lead to a more accessible process. Much will depend on the outcome of the consultation and the draft regulation due later this year – watch this space.

• Lindy Patterson QC is a partner specialising in construction law at CMS,­ www.cms-cmck.com