Friday, 3 July 2015

Decisions of the jury in design contests under Reg. 82 Public Contracts Regulations 2015

Reg.82 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 82 of Directive 2014/24 concerning decisions of the jury in design contests. These rules aim to ensure the independence that reg.81(1) PCR2015 facilitates through the avoidance of conflicts of interest, as well as to make sure that deliberations and exchanges of information are recorded in an accurate manner (but this may not have been needed, as reg.22(10) PCR2015 and 84(7) to (9) also impose similar documentary obligations for oral exchanges of information).

Under reg.82 PCR2015, it is clear that the jury shall be autonomous in its decisions and opinions [reg.82(1)], that it shall examine the plans and projects submitted by the candidates anonymously and solely on the basis of the criteria indicated in the contest notice [reg.82(2)] and that anonymity shall be observed until the jury has reached its opinion or decision [reg.82(4)].

Moreover, the jury shall record its ranking of projects in a report, signed by its members, made according to the merits of each project, together with its remarks and any points that may need clarification [reg.82(3)]. In that regard, candidates may be invited, if need be, to answer questions that the jury has recorded in the minutes to clarify any aspect of the projects [reg.82(5)]. And, in such case, complete minutes shall be drawn up of the dialogue between jury members and candidates [reg.82(6)].

Once more, the trouble with reg.82 PCR2015 is not so much about what it regulates, but for what it fails to address. It is not clear how the jury needs to conduct its deliberations, or how should it adopt its decisions (consensus, open voting, secret voting, role of the president, etc). These are not issues for the Directive to regulate, but the PCR2015 could have made the lives of contracting authorities easier by providing a default procedure that avoided them having to reinvent the wheel every time they decide to run a design contest. Luckily, maybe, that is not a very frequent occurrence.

Thursday, 2 July 2015

Composition of the jury for design contests under Reg. 81 Public Contracts Regulations 2015

Reg.81 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 81 of Directive 2014/24 and imposes two straightforward and minimal rules controlling the composition of the jury for design contests. See Pedro's remarks here.

Firstly, it is clear that the jury shall be composed exclusively of natural persons who are independent of participants in the contest [reg.81(1) PCR2015]. Secondly, where a particular professional qualification is required from participants in a contest, at least a third of the members of the jury shall have that qualification or an equivalent qualification [reg.81(2) PCR2015].

Regarding the first requirement of independence of the members of the jury, it seems quite natural that the absence of conflicts of interest will need to meet the requirements of reg.24 PCR2015 and that, in the case of unavoidable/unavoided conflicts of interest, the conflicted participant should be excluded from the design contest as per reg.57(8)(e) PCR2015 (although, once more, the fact that such ground for exclusion is discretionary does not really help much).

Regarding the second requirement, from a technical perspective, it makes sense to require that a significant part of the jury holds qualifications needed to assess the project from a technical point of view. Of course, the requirement for participants and members of the jury to hold such qualification needs to be justified and proportionate. And the general rules of the Services Directive and, generally, on professional regulation and free movement need to be respected. 

Those issues are not specific to design contests and would require comments beyond the scope of our procurement tennis. Suffice it to raise here that unreasonable or disproportionate requirements regarding (unjustified) professional restrictions could fall afoul of Art 101 TFEU as either a concerted practice or a recommendation of an association of undertakings [for an introduction to this general discussion, see IE Wendt, EU Competition Law and Liberal Professions: an Uneasy Relationship?, Nijhoff Studies in European Union Law vol. 2 (Leiden, Martinus Nijhoff, 2013)]. Hence, contracting authorities will be well advised to seek competition clearance where there are risks of illegitimate or unjustified foreclosure of non-qualified participants.

Wednesday, 1 July 2015

Extended comments on non-profit organisations, procurement and State aid implications of Spezzino (C-113/13)

I have just uploaded on SSRN a short paper that extends my previous comments on the Court of Justice of the European Union (CJEU) Judgment in Azienda sanitaria locale n. 5 «Spezzino» and Others, C-113/13, EU:C:2014:2440. It will be included in a special issue of the European Procurement & Public Private Partnership Law Review, with Prof Roberto Caranta as guest editor.

The paper assesses the competition law and State aid implications of the CJEU Judgment in Spezzino. It pays particular attention at the departure from the Altmark test for the assessment of public support granted to providers of public services; as well as on the change of mind by the CJEU regarding the special position of non-profit entities in the direct award of public service contracts.

The full citation for the paper is A Sanchez-Graells, "Competition and State Aid Implications of the Spezzino Judgment (C-113/13): The Scope for Inconsistency in Assessing Support for Public Services Voluntary Organisations" (June 30, 2015). Available at SSRN: http://ssrn.com/abstract=2625166. Comments welcome!

Rules on organisation of design contests and the selection of participants under Reg. 80 Public Contracts Regulations 2015

Reg.80 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 80 of Directive 2014/24 regarding rules on the organisation of design contests and the selection of participants. However, as Pedro has already pointed out, reg.80 PCR2015 does not contain rules, but rather some relatively broad principles to be followed in the adaptation of the general rules to the running of design contests. As he rightly stresses, reg.80 PCR2015 does not add much to the need to comply with the general principles of non-discrimination, transparency and competition when running design contests. Not much more to comment.

Tuesday, 30 June 2015

Notices for design contests under Reg. 79 Public Contracts Regulations 2015

Reg.79 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 79 of Directive 2014/24 regarding transparency obligations through notices connected to design contests. The rules fundamentally repeat the general obligations on the publication of notices, as well as the general possibility for contracting authorities to withhold information which disclosure would impede law enforcement, would be contrary to the public interest or would prejudice the legitimate commercial interests of a particular enterprise, whether public or private, or might prejudice fair competition between service providers. In my view, the provision does not deserve much comment.

Monday, 29 June 2015

Scope of rules on design contests under Reg. 78 Public Contracts Regulations 2015

Changing tack and moving on from the regulation of contracts for public and other specific services that we discussed last week, reg.78 of the Public Contracts Regulations 2015 (PCR2015) defines the scope of application of the rules governing design contests, and transposes Article 78 of Directive 2014/24 word by word.

It may be worth reminding that design contests are defined in reg.2(1) PCR2015 as those procedures which enable a contracting authority to acquire, mainly in the fields of town and country planning, architecture and engineering or data processing, a plan or design selected by a jury after being put out to competition with or without the award of prizes.

According to reg.78(1) PCR2015, the rules on design contests apply to two types of contests: (a) design contests organised as part of a procedure leading to the award of a public service contract [ie design contests leading to an award]; and (b) design contests with prizes or payments to participants [ie self-standing design contests or design contests leading to negotiations].

The regulation then goes on to establish the method for the calculation of the value of these contests for the purposes of determining the obligation to comply with EU rules for their tender. 

Regarding design contests leading to an award of a public service contract [reg.78(1)(a)], the value threshold mentioned in reg.5 PCR2015 shall be calculated on the basis of the estimated value net of VAT of the public service contract, including any possible prizes or payments to participants [reg.78(2)]. 

In turn, the case of self-standing design contests [reg.78(1)(b)], the threshold mentioned in reg.5 PCR2015 shall be calculated on the basis of the total amount of the prizes and payments [reg.78(2)].

However, where the design contest can be used for the award of a subsequent public services contract on the basis of negotiations entered into with the winner(s) of the design contest because the contracting authority has announced its intention to award such a contract in the contest notice in accordance with regs.32(7) and (8) PCR2015, its estimated value shall be calculated including the estimated value net of VAT of the public services contract which might subsequently be concluded following a negotiated procedure without prior publication.

The general criterion is, quite clearly, that the estimated value of the design contest must include the estimated value of any follow-up public services contracts derived from the contest. One may wonder why a design contest cannot be used to award public works contracts (Pedro does), but that is sorted out by the definition of public works contracts, which covers both design and execution phases. Consequently, where the potential follow up of a design contest is a public works contract, the contracting authority needs to either tender it as a public works contract or decouple the design contest from the award of the public works contract for its execution, and subject each to their own rules--which may trigger particular instances of application of reg.41 PCR2015 if the original "designer" bids for the construction of the public works, either directly or through undertakings related to them. 

The rest of the rules in reg.78 PCR2015 are pretty straightforward and, in my view, do not require much more comment.

Friday, 26 June 2015

Reserved contracts for certain services under Reg. 77 Public Contracts Regulations 2015

Reg.77 of the Public Contracts Regulations 2015 (PCR2015) establishes rules concerning the possibility to reserve contracts for certain services to specific categories of providers, in line with Article 77 of Directive 2014/24. In short, this is fundamentally an anti-competitive legally-tolerated way of advantaging certain service providers in the award of public contracts and I cannot but repeat that I think it is a very bad idea in the long run. Pedro concurs.

As I already discussed (here), this is probably the novelty within the light touch regime applicable to the award of contracts for social and other specific services that better suits the regulatory needs implicit in the UK public sector reform strategy, since Art 77 Dir 2014/24 allows contracting authorities to reserve for the participation of given types of organisations (such as ‘public sector mutuals’, for instance) the award of contracts for certain services in the areas of health, social and cultural services, which basically comprise all, or the most relevant, medical services, personal services, educational and training services (including eLearning), sports and cultural services.

In terms of reg.77(1) PCR2015, contracting authorities may reserve to "qualifying organisations" (below) the right to participate in procedures for the award of reservable public contracts, which are those comprised in the categories listed in reg.77(2) PCR2015, which include 75121000-0 (Administrative educational services), 75122000-7 (Administrative healthcare services), 75123000-4 (Administrative housing services), 79622000-0 (Supply services of domestic help personnel), 79624000-4 (Supply services of nursing personnel), 79625000-1 (Supply services of medical personnel), 80110000-8 (Pre-school education services), 80300000-7 (Higher education services), 80420000-4 (E-learning services), 80430000-7 (Adult-education services at university level), 80511000-9 (Staff training services), 80520000-5 (Training facilities), 80590000-6 (Tutorial services), from 85000000-9 to 85323000-9 (fundamentally, all types of medical services), 92500000-6 (Library, archives, museums and other cultural services), 92600000-7 (Sporting services), 98133000-4 (Services furnished by social membership organisations), and 98133110-8 (Services provided by youth associations).

However, reg.77(6) PCR2015 determines that this does not apply in relation to the procurement of health care services for the purposes of the NHS within the meaning and scope of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013. This exclusion and its meaning is very unclear to me, particularly in view of the coverage given in reg.77(2) PCR2015, which includes a significant volume of services that can be procured for the NHS (should those not have been excluded, then?). Furthermore, in view of the special rules applicable to NHS procurement, it seems odd that no attempt to reconcile all these bodies of exceptional, sector-based procurement regimes is attempted [for discussion of the rules applicable to NHS procurement, see A Sanchez-Graells, “
New Rules for Health Care Procurement in the UK. A Critical Assessment from the Perspective of EU Economic Law” (2015) 24(1) Public Procurement Law Review 16-30].

The guidance offered by CCS in this regard does not sort out the issue, but seems to defer resolving the need for harmonisation of these competing regimes until after ongoing consultations: "At present, it is not possible to use the reserved contracts provision for healthcare commissioning by NHS England or Clinical Commissioning Groups in England. This is to ensure consistency with the general requirements in regulation 3 of the existing NHS (Procurement, Patient Choice and Competition Regulations) (No. 2) 2013 Regulations, in particular the prohibition on favouring types of provider. This position is subject to further consultation with the sector. Part of the role of the Mutuals in Health: Pathfinder Programme is to consider any potential legislative hurdles to the further development of health mutual in clinical services" (
Guidance on the light touch regime, 14). We shall wait for further developments.

In the cases where reserving contracts under reg.77 PCR2015 is possible, the contracting authority will need to make sure that the (type of) organisation chosen to be awarded the contract--ie the "qualifying organisation" meets all of the following requirements [reg.77(3)]: (a) its objective is the pursuit of a public service mission linked to the delivery of the services to be contracted; (b) its profits are reinvested with a view to achieving the organisation’s objective (and where profits are distributed or redistributed, this should be based on participatory considerations); (c) the structures of management or ownership of the organisation performing the contract shall be based on employee ownership or participatory principles, or shall require the active participation of employees, users or stakeholders; and (d) the organisation shall not have been awarded a contract for the services concerned by the contracting authority concerned pursuant to this special rules within the past three years.

The main (only) deviation between reg.77 PCR2015 and Art 77 Dir 2014/24 concerns the requirement for  structures of management or ownership of the organisation performing the contract to be based on employee ownership or participatory principles, or require the active participation of employees, users or stakeholders. Whereas Art 77(2)(c) Dir 2014/24 requires this without any qualifiers, reg.77(3)(c) PCR2015 includes the following possibility: "the structures of management or ownership of the organisation are (or will be, if and when it performs the contract) based on ...". 
This seems to aim to allow for entities in the process of becoming "qualifying organisations" to already tender for these reserved contracts, maybe also enabling for brake provisions (of the mutualisation process) linked to an eventual lack of success in being awarded the contract--ie, the government seems to be aiming to be in a position to ensure that mutuals are only created and go ahead if contracts are awarded to them, which would certainly make the mutualisation option much more attractive by reducing the risk undertaken by public officials seeking to spin-off from the public sector.

However, in my view, this is not necessarily in line with EU law, particularly because it refers to a future-looking contract compliance clause that triggers access to the competition for the reserved contract--which, in my opinion, is not compatible with the exceptional nature of this set of special provisions [for discussion of this type of requirements, A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 390].

On top of complying with the above requirements (of the Directive), the maximum duration of the contract shall not be longer than three years [reg.77(4)] and the call for competition shall make reference to  Art 77 Dir 2014/24, so that there is sufficient transparency on the use of this set of special rules [reg.77(5) PCR2015].


General comments
Under these special rules within the light-touch regime, contracting authorities seem almost completely free to decide to award the contracts to public service mutuals (and, most likely, to a specific public sector mutual, given their initial lack of capacity to tender for contracts to be awarded by contracting authorities other than the one they have just “spun-off”).
This creates a significant risk of ‘sweet deals’ aimed at supporting, fostering and consolidating public sector mutuals, which may well end up resulting in (3-year long, local) monopolies for the provision of those services in the hands of the newly spun-off public sector mutuals, which may extend their dominance beyond that point in time as incumbency advantages pile up. That would result in distortions of competition similar to those just identified by the UK’s Competition and Markets Authority (CMA) in the market enquiry on private health care services (final report here) and, as such, it is an undesirable prospect.

Generally speaking, it is worth stressing that public procurement rules and the general principles of public procurement can be applicable beyond the regulated cases, as the CJEU has been expanding the coverage of the procurement regime and systematically imposed certain obligations to the tendering of contracts not, or not-fully, covered by the Directives. Hence, the possibility for the CJEU to significantly restrict the discretion to resort to reg.77 PCR2015 / Art 77 Dir 2014/21 cannot be totally excluded. 
However, in recent cases such as Libert and Others (C-197/11 & C-203/11, EU:C:2013:288; see here) and Azienda sanitaria locale n. 5 «Spezzino» and Others (C-113/13, EU:C:2014:2440; see here), the CJEU appears to show very significant (and I would claim ‘excessive’) deference towards social and special services. Consequently, it may be unlikely to extend obligations to the award of contracts under reg.77 PCR2015. And, ultimately, I would think that this will be a provision mostly litigated at domestic level on grounds of judicial review due to deviations of power or excess of competences.

Thursday, 25 June 2015

Principles of awarding contracts for social and other specific services under Reg. 76 Public Contracts Regulations 2015

Reg.76 of the Public Contracts Regulations 2015 (PCR2015) sets out the principles of awarding contracts for social and other specific services and transposes Article 76 of Directive 2014/24. It does so in a way that deviates from the general copy-out approach and, in my view, incurs in potential instances of defective transposition that are very likely to result in infringements of the rules of the Directive. Pedro shares similar concerns (here).

Where the transposition keeps the defects of the the Directive
The only part where reg.76 PCR2015 follows Art 76(2) Dir 2014/24 is reg.76(8) PCR2015 where it is set out that, in the award of contracts for social and other specific services covered by reg.74 PCR2015, contracting authorities may take into account any relevant considerations, including the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services, the specific needs of different categories of users, including disadvantaged and vulnerable groups, the involvement and empowerment of users and innovation. However, reg.76 PCR2015 has not transposed the possibility given by Art 76(2) in fine Dir 201/24 whereby Member States may also provide that the choice of the service provider shall be made on the basis of the tender presenting the best price-quality ratio, taking into account quality and sustainability criteria for social services.

These provisions are not free from interpretive difficulties, particularly when it comes to their coordination with general principles for the award of contracts. Briefly, my general views are as follows [extracted, but updated, from A Sanchez-Graells and E Szyszczak, “Modernising Social Services in the Single Market: Putting the Market into the Social”, in JM Beneyto and J Maillo (eds), Fostering Growth: Reinforcing the Internal Market (Madrid, CEU Ediciones, 2014) 61-88].

Article 76 sets out the principles for the award of these contracts, although their regulation is left to the Member States (see below) provided that they take measures ‘to ensure contracting authorities comply with the principles of transparency and equal treatment of economic operators. Member States are free to determine the procedural rules applicable as long as such rules allow contracting authorities to take into account the specificities of the services in question’. The general requirement for contracting authorities to make sure that those procedures shall be at least sufficient to ensure compliance with the principles of transparency and equal treatment of economic operators is encapsulated in reg.76(2) PCR2015, whereas reg.76(1) in fine stresses that contracting authorities may take into account the specificities of the services in question.

A key element to take into consideration will be the need to further comply with the (more) general principles of procurement set out in Article 18, which requires that procurement also complies with the principles of competition and proportionality, and that economic operators participating in public procurement comply with applicable obligations in the fields of environmental, social and labour law. Given that Article 18 is nested in Title I and that the procurement of social and other specific services is regulated in Title III, Article 76(1) may be seen as a lex specialis that would de-activate the requirements for proportionality and undistorted competition in their procurement. However, such interpretation may not be welcome by the CJEU and it is my personal view that this is not the best approach.

With a permissive tone, Article 76(2) continues to regulate that: ‘contracting authorities may take into account the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services, the specific needs of different categories of users, including disadvantaged and vulnerable groups, the involvement and empowerment of users and innovation. Member States may also provide that the choice of the service provider shall be made on the basis of the most economically advantageous tender, taking into account quality and sustainability criteria for social services’. The drafting of the last sentences leaves an open question as to the obligation to choose the awardee of the contract on the basis of the most economically advantageous tender (MEAT), although (functionally) it seems to be out of the question, and the provision should simply be seen as allowing for the introduction of ‘specific’ criteria in the determination of the MEAT, such as quality and sustainability.

By not going beyond the wording of the Directive and, in particular, not offering guidance on how to interpret the elements of reg.76(8) PCR2015 when it comes to determining the MEAT, the PCR2015 do not provide any workable clarification and do not resolve difficult issues that were already present in sectoral procurement regimes, such as that applicable to healthcare [see A Sanchez-Graells, “New Rules for Health Care Procurement in the UK. A Critical Assessment from the Perspective of EU Economic Law” (2015) 24(1) Public Procurement Law Review 16-30]. 

Where the transposition seems defective and in breach of EU law

One of the initial difficulties in assessing the appropriateness of the transposition of Art 76 Dir 2014/24 by means of reg.76 PCR2015 derives from the opening clause of the EU provision, whereby "Member States shall put in place national rules for the award of contracts" for social and other specific services (emphasis added). In a literal reading, this may be seen as requiring the creation of a general (national) procedural framework for the award of these contracts or, in other words, a set of common, generally applicable rules. If that was the proper interpretation, then reg.76(1) PCR2015 may have failed to properly create those "national rules for the award of contracts" by determining that "[c]ontracting authorities shall determine the procedures that are to be applied in connection with the award of contracts" or social and other specific services.

By granting contracting authorities (almost) unfettered discretion to determine the applicable procedures--whether they correspond (with or without variations) to procedures, techniques or other features provided for in Part 2 PCR2015, or not--the PCR2015 may have failed to set any sort of specific "national rules for the award of contracts". However, such a literal reading of the requirement in Art 76(1) ab initio Dir 2014/24 may be opposed on the basis of the principles of procedural autonomy and subsidiarity, so this may not carry as much weight as one may initially have thought. In any case, it is also possible to read national as domestic, in which case this discussion would be moot.

Be it as it may, however, looking at the details of the very light touch approach adopted by reg.76 PCR2015, the defects seems even more apparent. Reg.76(3) PCR2015 sets out bare minimum requirements for procedures initiated by one of the notices mentioned in reg.75 PCR2015, whereby the contracting authority shall conduct the procurement, and award any resulting contract, in conformity with the information contained in the notice about conditions for participation, time limits for contacting the contracting authority, and the award procedure to be applied. Reg.76(6) PCR2015 adds that all time limits imposed on economic operators, whether for responding to a contract notice or taking any other steps in the relevant procedure, shall be reasonable and proportionate. Taken together, this barely creates any specific rule other than implicitly following the case law preventing substantial modifications of tender procedures without cancellation and readvertisement.

The big problem comes, in my view, with reg.76(4) PCR2015 whereby contracting authority may, however, deviate from the content of the previous notice and conduct the procurement, and award any resulting contract, in a way which is not in conformity with that information. It is true that reg.76(4) PCR2015 imposes a relatively stringent set of conditions, so that disregard for the (procedural) information disclosed in the previous notice can take place only if all the following conditions are met: (a) the failure to conform does not, in the particular circumstances, amount to a breach of the principles of transparency and equal treatment of economic operators; and (b) the contracting authority has, before proceeding to deviate from the published information, (i) given due consideration to the matter, (ii) concluded that there is no breach of the principles of transparency and equal treatment, (iii) documented that conclusion and the reasons for it in accordance with regs.84(7) and (8) PCR2015, and (iv) informed the participants of the respects in which the contracting authority intends to proceed in a way which is not in conformity with the information contained in the notice. For these purposes, "participants" means any economic operators which have responded to the notice and have not been informed by the contracting authority that they are no longer under consideration for the award of a contract within the scope of the procurement concerned [reg.76(5) PCR2015].

In my view, there are two main difficulties. First, it adopts a very narrow interpretation of the principle of equal treatment that falls into a participation trap that will result in de facto discrimination and an unavoidable infringement of the principle of transparency. And, second, this is very likely to trigger infringements on the rules applicable to cancellation and retendering of public tenders.

As to the participation trap or ‘trap of tender-specific reasoning’, by designing a system that allows contracting authorities to (1) disclose information that preselects a subset of potential suppliers and (2) later on, alter the rules of the procedure in a way that potential suppliers not included in that subset cannot challenge (because they are not informed and, seemingly, there is no further transparency/publication requirement), reg.76(4) PCR2015 fails to ensure actual compliance with the principle of non-discrimination [by analogy, see the reasoning of the EGC regarding the need for clarity of tender specifications in Commission v Cyprus, C-251/09, EU:C:2011:84 35-51 (not available in English)].

As to the infringement of the requirements for cancellation and retendering of procedures that would otherwise be substantially amended, it seems clear to me that the case law applicable to changes of disclosed contractual conditions applies (if nothing else, by analogy). In that regard, the CJEU has been clear that "where the amended condition, had it been part of the initial award procedure, would have allowed tenders submitted in the procedure with a prior call for competition to be considered suitable or would have allowed tenderers other than those who participated in the initial procedure to submit a tender" (emphasis added) are to be deemed substantial modifications of the tender conditions and, consequently, not acceptable [Case C-250/07 Commission v Greece [2009] ECR I-4369 52. See also, by analogy, Case C-454/06 Pressetext Nachrichtenagentur [2008] ECR I-4401 35]. Thus, unless contracting authorities could clearly prove that no other tenderers would have participated had the modified (procedural) conditions been disclosed from the beginning, reliance on reg.76(4) PCR2015 is bound to trigger an infringement of EU law.

For all of the above, I consider reg.76 PCR2015 a very clear instance of defective (if not outright improper) transposition of the requirements in Art 76 Dir 2014/24 and, consequently, I think that it should be modified as soon as possible and substituted by a sensible, fully-developed set of procedural rules applicable to the award of contracts for social and other specific services.

Wednesday, 24 June 2015

Interesting paper on use of theory in public procurement research (Flynn & Davis, 2014)

I have just read A Flynn and P Davis, "Theory in public procurement research" (2014) 14 (21) Journal of Public Procurement 139-180, which had been on the "to read" pile for a bit too long. Their paper focuses on procurement/supply-chain management scholarship, which will make it seem "peripheral" for legal academics. However, I think that their findings on the need to beef up the use of theory in public procurement research will translate well to legal scholarship, particularly that of an interdisciplinary nature. Well worth reading.


Publication of notices under Reg. 75 Public Contracts Regulations 2015

Reg.75 of the Public Contracts Regulations 2015 (PCR2015) establishes requirements for the publication of notices linked to the award of public contracts for social and other special services, in line with Article 75 of Directive 2014/24. As part of the light touch regime applicable to the procurement of these services, the transparency obligations that contracting authorities need to comply with are reduced and made more flexible under reg.75 PCR2015, both at pre-award and post-award phase. See Pedro's remarks here.

When it comes to pre-award transparency, reg.75(1) PCR2015 gives contracting authorities a choice to advertise their intention to award a contract by means of either (a) a simplified contract notice, which shall contain the information referred to in part H of Annex V to Dir 2014/24; or (b) an enhanced prior information notice, which shall be published continuously (ie be made available throughout the period covered by the notice?), contain the information set out in part I of Annex V to Dir 2014/24, refer specifically to the types of services that will be the subject-matter of the contracts to be awarded, and indicate that the contracts will be awarded without further publication and invite interested economic operators to express their interest in writing. 

Of course, as recognised by reg.75(2) PCR2015, contracting authorities can dispense with these requirements where a negotiated procedure without prior publication could have been used in accordance with reg.32 PCR2015. In my view, the two cases that are more likely to trigger controversy are the use of reg.32(2)(b) PCR2015 whereby contracting authorities may be tempted to argue that particular social or special services can be provided "only by a particular economic operator" particularly under reg.32(2)(b)(iii) PCR2015 on the basis of "the protection of exclusive rights", such as an act of entrustment, licence or authorisation to provide certain services; as well as reg.32(9) PCR2015 for the award of new services which repeat similar ones, which would try to cover a clear renewal of an expiring contract as an extension of the previous contract.
The first argument could be devised in situations where (local) contracting authorities intend to keep the provision on social or other special services local/in hands of the incumbent. In that regard, the authorities could be tempted to argue that the existence of a de facto local monopoly requires them to award the contract directly and without publicity because there is no alternative provider in the market. This would simply be a misunderstanding of the applicable rules and cannot be accepted. It is worth stressing that the CJEU has permanently stressed the strict requirements that control decisions to proceed to the direct award of contracts under this ‘non-procedure’, which are subject to a strict assessment of whether the contracting authority "acted diligently and whether it could legitimately hold that the conditions [for recourse to this procedure] were in fact satisfied" [Fastweb, C-19/13, EU:C:2014:2194 50]. Consequently, there is no doubt that this procedure must be understood as exceptional [C-292/07 Commission v Belgium [2009] I-59 106].

In a refined form, the (local) contracting authority may try to justify the direct award on the basis of any sort of "exclusive right" they can see as being held by the local provider. In that regard, the case law of the CJEU as to what constitutes an exclusive or special right will gain significant prominence [for discussion in relation to utilities rules under Directive 2014/25, see T Kotsonis, "The 2014 Utilities Directive of the EU: codification, flexibilisation and other misdemeanours" (2014) 23 (4) Public Procurement Law Review 169-187], and will likely result in the conclusion that the local provider does not hold an exclusive right that merits protection for the purposes of excluding competition in the award of the contract. 

It is also worth stressing that the granting of such exclusive or special rights should have complied with fundamentally the same requirements in their award, which may make reliance on the apparent exclusivity equally illegal under EU law [see GS Ølykke, "Is the granting of special and exclusive rights subject to the principles applicable to the award of concessions? Recent developments in case law and their implications for one of the last sanctuaries for protectionism" (2014) 23 (1) Public Procurement Law Review 1-20]. Moreover, contracting authorities need to keep in mind the very high threshold imposed by the last caveat of reg.32(2)(b), which stresses that recourse to direct award under the argument of protection of exclusive rights can only take place "where no reasonable alternative or substitute exists and the absence of competition is not the result of an artificial narrowing down of the parameters of the procurement".
The second argument, based on the direct award of a contract for new services which repeat similar ones under reg.32(9) PCR2015 could be particularly tempting on a "second round" of award initially based on the reservation allowed for under reg.77 PCR2015 (commented in due course). The scenario would be as follows: a (local) contracting authority awards a "reserved contract" to a preferred non-profit qualifying organisation under reg.77 PCR2015. The contract is for 3 years [reg.77(4)] and foresees the possibility to resort to the additional services clause under reg.32(9) PCR2015--which in itself, and strictly speaking, may not be a breach of reg.77(4) PCR2015, but this promises to be highly contentious due to the exceptional nature of the reservation rules (and, in my personal view, should not be allowed to begin with). 

When the first 3-year period is over, the contracting authority effectively resorts to the possibility to directly award a contract for the same/similar services for another 3 years [or three times, consecutively, for 1 year, or any other combination of contract durations up to the 3 year limit established in reg.32(12) PCR2015]. In my view, this would be a circumvention of the exceptional circumstances that are covered by reg.77 PCR2015 and would amount to an infringement of reg.18(2) PCR2015 / Art 18(1) Dir 2014/24.
Consequently, overall, I would stress that the reference to reg.32 PCR2015 and the possibility to enter into directly-awarded contracts for social and special services should fundamentally be disregarded by contracting authorities if they want to avoid risks of legal challenge, unless very clear grounds exist and they can make sure that the lack of competition in the market / existence of exclusive rights is not a situation they created themselves (in contravention of EU law).
Post-award transparency is also flexibilised. Generally speaking, the award of a contract for services covered by reg.74 PCR triggers the obligation to make known the results of the procurement procedure by means of a contract award notice, which shall contain the information referred to in part J of Annex V to Dir 2014/24 [reg.75(3)] and be sent for publication in compliance with reg.51 PCR2015 [reg.75(5) PCR2015]. Contracting authorities may, however, group such notices on a quarterly basis, in which case they shall send the grouped notices within 30 days of the end of each quarter [reg.75(4) PCR2015]. My hunch is that quarterly publication will become the norm, which is not a bad thing.

Tuesday, 23 June 2015

Award of contracts for social and other specific services under Reg. 74 Public Contracts Regulations 2015

Reg.74 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 74 of Directive 2014/24 and simply opens the section on the procurement of social and special services by indicating that public contracts for social and other specific services listed in Schedule 3 (which replicates Annex XIV of Dir 2014/24) shall be awarded in accordance with the rules in regs.75 to 77 PCFR2015.

Other than creating this "light touch regime" for social and special services, reg.74 PCR2015 does not have much substantive content of its own. For discussion of the light touch regime, which we will be commenting during the rest of the week, see the Crown Commercial Services Guidance here and S Smith, "Articles 74 to 76 of the 2014 Public Procurement Directive: the new "light regime" for social, health and other services and a new category of reserved contracts for certain social, health and cultural services contracts" (2014) 23(4) Public Procurement Law Review 159-168.

For some background discussion on the role of the light touch regime in enabling Member States to reform their public sector and, in the specific case of the UK (England), to deepen the mutualisation strategy supported by the current Tory government and the previous Coalition government, see A Sanchez-Graells & E Szyszczak, 'Modernising Social Services in the Single Market: Putting the Market into the Social' (2013), as well as shorter comments here and here.

It may be worth pointing out that reg.74 PCR2015 deviates from Art 74 Dir 2014/24 in that it does not reiterate the value threshold above which those contracts are covered--which, however, is to be found in reg.5(1)(d) PCR2015 as a mere referral to the value determined in the Directive (see here and here). Ultimately, it is worth remembering that such value is of €750,000, which is converted into £625,050 for OJEC advertisement purposes (cfr with about £540,000 at today's exchange rate).

After having heard Pedro's presentation at Global Revolution last week (available here), where he criticised with good arguments the arbitrariness of EU thresholds in general, I am quite sure that he will have some specific issues concerning the threshold for social and special services, not least due to the unavolidable exchange risk fluctuation that imposed a strong de facto variation in coverage. Pedro?

Monday, 22 June 2015

Termination of contracts under Reg. 73 Public Contracts Regulations 2015

Reg.73 of the Public Contracts Regulations 2015 (PCR2015) transposes the new rules on termination of contracts set out in Article 73 of Directive 2014/24. In my view, the provision transposes the rules in the Directive correctly. Pedro harbours some doubts here. However, it does so in a way that, from a contract law perspective may require some comments. I split my reflections below in two parts. The first one addresses the issues raised by Dir 2014/24 itself, which apply equally to reg.73(1) PCR2015. The second one focuses on the contract law aspects under regs.73(2) and (3) PCR2015.

New EU rules on termination of contract
The restrictions on the admissible renegotiation of the basic or substantial elements of a contract sometimes leave the contracting authorities with limited alternatives for the cancellation of the tendering procedure or the termination of the contract, and its subsequent re-tendering [on the different, although related, issue of the obligation of contracting authorities to terminate contracts concluded in breach of public procurement rules—ie, of termination as a remedy, see Case C-503/04 Commission v Germany [2007] ECR I-6153 25–42; see also, with numerous references, S Treumer, ‘Towards an Obligation to Terminate Contracts Concluded in Breach of the EC Public Procurement Rules: The End of the Status of Concluded Public Contracts as Sacred Cows’ (2007) 16 Public Procurement Law Review 371, 377–78; and P Delvolvé, ‘Note à Trstenjak, Verica, Conclusions sur CJCE, 18 juillet 2007, Commission v Allemagne, affaire C-503/04’ (2007) 5 Révue française de Droit administratif 972, 975 and ff].

Given that the principles of non-discrimination, competition, objectivity and diligent administration (other than additional principles such as the duty of contracting authorities not to depart from their previous acts) restrict the circumstances under which the cancellation of a tender can take place—while the principle of legal certainty and of the protection of legitimate expectations, and the principle pacta sunt servanda, should be adapted so as not to impair the objectives of the public procurement directives and the rules of the TFEU [Case C-503/04 Commission v Germany [2007] ECR I-6153 33–36. For a critical view, see Treumer, Towards an Obligation to Terminate Contracts Concluded in Breach of the EC Public Procurement Rules (2007) 377 and 381–82]—it is submitted that the decision of the contracting authority as regards the termination of the contract and its subsequent re-tendering cannot be adopted freely [maybe the only exception to this rule is that of contracts entered into for an indefinite period of time, which should be looked at with disfavour, following the dictum of the Case C-454/06 Pressetext Nachrichtenagentur [2008] ECR I-4401 73]. 

Therefore, termination decisions should comply with the same general principles restricting the discretion of contracting authorities to cancel a tender procedure. This has now been supported in broad terms in recital (113) of Directive 2014/24, which recognises that contracting authorities are sometimes faced with circumstances that require the early termination of public contracts in order to comply with obligations under Union law in the field of public procurement, and requires Member States to ensure that contracting authorities have the possibility, under the conditions determined by national law, to terminate a public contract during its term if so required by Union law. This general approach to the termination of contracts has been further specified in the rules of article 73 of Directive 2014/24. 

Under this new provision, contracting authorities must have the possibility to terminate a public contract during its term, at least in three cases. Firstly, and in support of the restrictions on the modification of contracts, where the contract has been subject to a substantial modification not exempted under article 72 and, consequently, would have required a new procurement procedure [see JM Hebly and P Heijnsbroek, ‘When amending leads to ending: a theoretical and practical insight into the retendering of contracts after a material change’, in G Piga and S Treumer (eds), The Applied Law and Economics of Public Procurement: the economics of legal relationships (London: Routledge, 2013) 163–84]. Secondly, where the contractor should have been excluded from the procurement procedure because, at the time of contract award, was affected by one of the situations imposing its mandatory exclusion under article 57(1) of Directive 2014/24. And, finally, where the contract should not have been awarded to the contractor in view of a serious infringement of the obligations under the Treaties and Directive 2014/24 that has been declared by the CJEU in a procedure pursuant to article 258 TFEU. 

These are all very grave breaches of the rules of Directive 2014/24 (and the TFEU), but there seems to be no difficulty to expand the grounds for termination of the contract to other situations with identity of function, such as where the contractor is affected by domestic mandatory exclusion grounds, or by discretionary exclusion grounds where there is no good reason not to take them into account, or where the infringement of the TFEU or Directive 2014/24 is found by other jurisdictional bodies (either as a result of a case where a preliminary reference under art 267 TFEU is posed to the CJEU, or otherwise). Overall, however and as already stressed, a general restriction on the use of termination rights should be found in the requirement that contracting authorities discharge the same duties of good administration implicit in decision to cancel tenders.

The UK (Eng & W) adaptation through (implied) contract terms
I am not an expert in UK contract law by any stretch of the imagination but it strikes me as slightly odd that the regulatory option adopted in reg.73 PCR2015 combines a mix of contract requirements and implied contractual terms, rather than an alternative statutory power to terminate that would be more easily aligned with continental approaches.

On the one hand, reg.73(1) PCR2015 imposes a duty for contracting authorities to "ensure that every public contract which they award contains provisions enabling [them] to terminate the contract", whereas reg.73(2) further indicates that "[t]hose provisions may address the basis on which the power is to be exercisable in those circumstances, for example by providing for notice of termination to be given and by addressing consequential matters that will or might arise from the termination". On the other hand, and as a catch-all clause, reg.73(3) PCR2015 establishes that "[t]o the extent that a public contract does not contain provisions enabling the contracting authority to terminate the contract on any of the grounds mentioned in paragraph (1), a power for the contracting authority to do so on giving reasonable notice to the contractor shall be an implied term of that contract". In my view, this apparently establishes an unnecessary duplication.

Given that reg.73(3) PCR2015 sorts out the problem and reg.73(1) + (2) still fall short from imposing specific means of ensuring termination powers and ways of determining its consequences, it seems unnecessary to have included the latter provisions in the PCR2015. In my view, it would have sufficed to establish the provision on implied terms and simply have allowed contracting authorities to agree explicit terms provided they did not limit the contracting authority's power to terminate.

Additionally, the provisions of reg.73 PCR2015 are at the same time insufficient, since they do not indicate what are the consequences of the termination (on the basis of the implied term) and this lack of regulation triggers significant questions that revive old discussions on the scope of ineffectiveness under the remedies Directive. For instance, can/should/must the rules in reg.101 PCR215 on the consequences of ineffectiveness be applied in these cases (ie is the contract to be considered to be prospectively, but not retrospectively, ineffective) or can retrospective effects be determined? Can the contractor be compensated? Can the contracting authority avoid termination on the basis of public interest as per reg.57(6) PCR2015, particularly if reg.73(1)(b) is applicable? In my view, this is another instance of insufficient regulation (not improper transposition), where the UK legislator would have been well-advised to take some more time to think before enacting the PCR2015 as is [for further discussion, listen to the podcast here].

Friday, 19 June 2015

What level of transparency for award/call-off decisions within framework agreements?

During several recent conversations with participants at the Global Revolution conference, and particularly with my colleague Dr Marta Andrecka and some members of the European Institutions, I have been asked repeatedly about my views on the level of transparency that should apply to award/call-off decisions within framework agreements. 

There is no doubt that full transparency is mandated regarding the conclusion of the framework agreement itself and, subject to my general concerns about excessive transparency (here), I agree that this is the existing legal situation. However, there is significant uncertainty and an ongoing practical debate regarding the level of 'intra-framework' transparency that the EU rules require (as well as the applicability of rules on award criteria to those decisions, but that is a topic for another day).

There is no rule that expressly covers this issue from the perspective of the individual rights of information of contractors/tenderers either under Article 55 of Directive 2014/24 or reg.55 of the Public Contracts Regulations 2015 (PCR2015), which only make reference to transparency/debriefing obligations related to the conclusion (or not) of the framework agreement itself, but not the subsequent awards/call-offs within the framework. This creates uncertainty as to the applicability of these (or analogous) rights to be informed in relation to intra-framework awards/call-offs [for in-depth discussion, see S Arrowsmith, The Law of Public and Utilities Procurement. Regulation in the EU and UK, 3rd edn., vol. 1 (London, Sweet & Maxwell, 2014) 1153 and ff, esp 1156-57, and 1347].

More generally, when it comes to transparency of the awards/call-offs within framework agreements, the general transparency rules are clearly limited in Art 50 Dir 2014/24, according to which "[i]n the case of framework agreements... contracting authorities shall not be bound to send a notice of the results of the procurement procedure for each contract based on that agreement. Member States may provide that contracting authorities shall group notices of the results of the procurement procedure for contracts based on the framework agreement on a quarterly basis. In that case, contracting authorities shall send the grouped notices within 30 days of the end of each quarter." 

As I criticised in relation to reg.50 PCR2015 [see here], the drafting of this clause may make it susceptible of being interpreted as fully discretionary for Member States, which could opt  (like the UK) for not imposing any sort of transparency obligation (quarterly, or otherwise) connected to the results of the procurement procedure for contracts based on the framework agreement. I argued that such an approach could be an infringement of EU law and, more specifically, the requirements of the principle of transparency in Art 18(1) Dir 2014/24.

To my surprise (I should have known, though), the uncertainty seems to be much more limited when it comes to the draft new procurement rules for the European Institutions under the foreseen 2016 Financial Regulation (proposal available here), which Art 113 [equivalent to Art 55 Dir 2014/24] expressly excludes almost all 'intra-framework' transparency when it comes to award/call-off decisions. According to that provision,
2. The contracting authority shall notify all candidates or tenderers whose requests to participate or tenders are rejected of the grounds on which the decision was taken, as well as the duration of the standstill period referred to in Article 118(2). For the award of specific contracts under a framework contract with reopening of competition, the contracting authority shall inform the tenderers of the result of the evaluation.

3. The contracting authority shall inform each tenderer who is not in a situation of exclusion, whose tender is compliant with the procurement documents and who makes a request in writing of any of the following: (a) the characteristics and relative advantages of the successful tender and the name of the tenderer to whom the contract is awarded, except in the case of a specific contract under a framework contract with reopening of competition;
(emphasis added).
This comes to determine that there is no transparency obligation whatsoever for award/call-off decisions that do not follow a 'mini-competition' and, in even in the case of such reopening of competition, the transparency obligation is limited to the evaluation (likely of their own tender), but does not seem to cover other aspects of the award/call-off decision. 

The European Court of Auditors criticised this situation in its January 2015 Opinion on the draft revised Financial Regulation (available here) in the following terms: "The proposed wording of Article 113(2)(2) and (3)(a) would not require the contracting authority, in the case of specific contracts awarded under a framework contract with reopening of competition, to notify the contractors whose tenders have been rejected of the reasons for their rejection, the relative advantages of the successful tender and the name of the tenderer to whom the contract is awarded. This exception to the rules governing transparency and the obligation to state reasons cannot be justified" (para 37, emphasis added).

In my view, this is an indication that my previous assessment regarding the lack of compatibility with EU law of the total lack of transparency of intra-framework awards is not shared by the European Commission (unless that Institution is looking to impose stricter standards to Member States' procurement than to its own and that of the rest of European Institutions). It could also be that DG BUDGET has a more process-oriented (buyer) approach to procurement regulation than DG GROWTH, which would explain the difference in willingness to (self)impose transparency obligations. However, be it as it may, I still think that this is not a desirable regulatory option and I would like to see the proposal for a new Financial Regulation amended on this point.

I would not favour full transparency of intra-framework award decisions. However, I accept that contractors included in a framework agreement (and third parties) should be given information regarding the evolution of the intra-framework, at least of a 'historical' and overall nature, so that they can have a rough idea of how the implementation of the contract is being carried out. 

Moreover, there is no clear reason why frameworks would require being less transparent than dynamic purchasing systems (which are, in the end, open frameworks), particularly because the contracting authority is in a good position to identify any instances of intra-framework collusion in which the contractors could engage on the basis of the periodical reports they may get. 

Consequently, I would favour the creation of a system of delayed and grouped (quarterly) reporting of the intra-framework award/call-off decisions, along the lines of what Art 50(3) Dir 2014/24 and reg.50(5) PCR2015 establish for dynamic purchasing systems.