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Reform of Public Procurement Law

Just before Christmas 2011, the European Commission announced its proposals for the reform of public procurement law. Since the last major overhaul in 2004 the case law of the European Court of Justice has identified and addressed a number of issues.  Further Directives have tightened up the remedies against non-compliance and extended EU law into most areas of defence procurement.  Over the years concerns have grown about the cost of compliance and the risks arising from continuing legal uncertainties. The reform proposals follow an extended consultation period and will be the subject of a Commission-hosted conference in June of this year. They fall into two broad categories: new concepts and clarifications or developments of existing law. 
The truly new:
Each member state is to appoint an “oversight body” a “single independent body responsible for the oversight and coordination of [procurement] implementation activities”. In Scotland, the lead on public procurement is taken by the Scottish Procurement and Commercial Directorate, part of the Scottish Government. The lead in the rest of the United Kingdom was taken by the Office of Government Commerce until it was disbanded in late 2011 and its functions added to those of the UK Cabinet Office, albeit in a much less accessible form than previously. As public procurement is a devolved matter and the Directives to be replaced were implemented separately in Scotland and the rest of the UK, it is not clear how a single UK oversight body could work.  The UK implementation of the “single point of contact” requirements of the Services Directive may provide some pointers.
Concessions are to be the subject of a new Directive. This will cover not only “works concessions” (where the concessionaire obtains part of its reward by commercially  exploiting the  work  that it builds – such as a toll road) but also “service concessions” (where the concessionaire obtains part of its reward by charging users of a facility  for the service made available – such as an (already-built)  municipal car park or swimming pool. 
Certain “social and other specific services” are to have a much reduced procurement regime. This is a development of the “Sodemare” principle relative to personal care services and is likely to be of particular interest to not-for-profit care providers. It should also remove some of the procurement law problems that can exist relative to “Right to Request” applications by primary care staff in the NHS in England wishing to continue to deliver care but as independent contractors, not staff. 
In the procurement of services the distinction between “Annex I” and “Annex II” is to end. So all services including, for example, the services of lawyers and hoteliers will, if they exceed the threshold, be subject to the full procedure.
There is to be a new kind of public/private “innovation partnership” for a research and innovation process for innovative products, with staged steps that may stretch to manufacture of product or supply of services.
The “competitive dialogue” procedure is to continue. The existing “negotiated procedure with prior advertisement” is to become the “competitive procedure with negotiation”. It has been found that negotiated procedures have often led not only to better meeting of needs but also to an increase in cross-border awards. 
For contracting authorities that are “sub-central [government]” (the Scottish Government has never been treated as sub-central, unlike Catalunya), it is proposed that publication of a Prior Information Notice (PIN) warning of future requirements will in future amount to a  sufficient “call for competition” to alert interested providers,  without the need to publish  a Contract Notice as such.
The developments and clarifications:
The definition of “bodies governed by public law” is restated but not really changed.  A private sector body that gets half or less of its funding from public grants can still be a “body governed by public law” for procurement purposes if it is micro-regulated. But micro-regulation is not enough to make it “governed by public law” for VAT purposes.
There is some more detail on the right way to bring environmental and social factors into procurement. Life-cycle costing, production methods, social integration and working conditions are explicitly mentioned, as are “fundamental ILO Conventions” although these may not include the Labour Clauses (Public Contracts) Convention of 1949 which provided the subtext to the Ruffert case (Case 346/06).  Contract performance conditions with a social dimension are also mentioned but the requirement that these must relate to the “subject matter of the contact” remains intact. 
Although the “European Code of Best Practices facilitating access by SMEs to public procurement contracts” was published in 2008, the scale of Small and Medium Enterprises’ involvement in public contracts has been disappointing. The proposals seek to address this by a number of measures, including banning disproportionate turnover selction requirements, demanding explanations for failure to divide contracts (over €500,000) into manageable lots, enabling direct payment to subcontractors and requiring the compliation of national statistics on awards to SMEs. By this means it is hoped to ensure that “the aggregation and centralisation of purchases” (as encouraged by the McClelland Report on Public Procurement in Scotland) does not lead to a denial of opportunity to (for example) local butchers and bakers to supply local schools and hospitals, just because they do not have the capacity to supply entire regions. 
The law on the use of companies that are “quasi-departments” (Teckal etc.) and on collaboration between contracting authorities (Hamburg – waste, etc.) is codified.  It is made clear what kinds of collaboration between contracting authorities are truly collaborations not involving procurement. Other alleged collaborations can then be more easily correctly classified as truly procurements needing to be treated as such even where a provider is itself a contracting authority in its own right. This might be a good opportunity for the Scottish Government to take a fresh look at the Local Government in Scotland Act 2003 Part and consider again how or whether it fits into the laws of procurement and state aid.
The new legislation is intended to be ready and adopted in a year’s time and implemented in the EU member states and the rest of the European Economic Area by June 2014. (Switzerland, in the European Free Trade Area but not the EEA, may take a little longer)  The new directives will leave more room for the exercise of national discretion in implementation than did the existing regime.  The proposed new laws are likely to produce some effects long before they become law. To the extent that they included authoritative restatements of the current law and best practice they should be taken into account even now in conducting procurement procedures and making or resisting challenges to them.
For further information relating to Procurement Law, please contact Jim McLean.