Procurement, State Aid and Social
Value Update
The new Public Contracts
Regulations –what to expect and how
to be prepared
13 January 2015
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Timetable
9:45am – Introduction (Stephen Pearson)
9:50am – 10:30am – The New Public Procurement
Directive (Annie Moy)
10:30am – 11:15am – State Aid Update (Stephen
Pearson)
11:15am – 11:30am – Coffee
11:30am – 12:30am - Exercises
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The New Public
Procurement Directives
An overview of the changes
Annie Moy – Sharpe Pritchard
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Aims of the reforms:
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Simpler, more flexible procurement
Better access to EU market for SMEs
Consolidating case-law
Improved governance and more professionalism
in procurement
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Key changes
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Removal of Part A and B distinction
New procedures
Shortlisting and award criteria
Electronic procurement
Procurement between public authorities
Contract changes
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Removal of Part A and Part B
Default position: all service contracts have to be
advertised and procured in accordance with the
requirements of the Directive
Exclusions:
• Many of the current B Services will benefit from lightertouch regime and a higher threshold
• (Specific Exclusions set out at Articles 7 – 12 e.g legal,
health and social)
• BUT: OJEU Notice requirement if above threshold
• Threshold = currently €750,000
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Choice of procedure (1)
The existing four procedures with reduced
timescales:
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Open Procedure: 35 days (old regime = 52 days)
Restricted Procedure: 30 days (old regime = 40 days)
Plus PIN reduction
Plus electronic reduction
Plus two new procedures:
• Competitive procedure with negotiation (Article 29)
• The innovation partnership procedure (Article 31)
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Choice of procedure (2)
Competitive Negotiation (Art 29) or Competitive
Dialogue (Art 30) can only be used where:
• Needs cannot be met without adaptation of readily
available solutions
• Include design or innovation solutions
• Nature, complexity or legal and financial make-up or risk
• Cannot establish specifications with sufficient precision
• Or – only irregular or unacceptable tenders received
following open or restricted procedure.
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Choice of procedure (3)
Competitive Procedure with Negotiation (Art 29):
• Purpose of negotiation: to improve the content of the offers
in order to better correspond to the award criteria and
minimum requirements
• Authority will need to:
– Know exactly what it wants, and
– Be able to specify its requirements,
• Authority is allowed to negotiated to ensure that the bid is
an improvement in terms of meeting requirements.
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Choice of procedure (4)
Innovation Partnership Procedure (Article 31):
• Purpose: to establish a structured partnership for the
development of an innovative product, service or works not
already available in the market.
• Procedure is the same as the Competitive Procedure with
Negotiation BUT Council only able to use this if there is not
already a solution on the market.
• Select partly on innovation
• Negotiate apart from final tender
• Final contract will have intermediate stages (with targets).
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Shortlisting and award criteria (1)
Shortlisting (Article 58.1):
• suitability to pursue the professional activity
• economic and financial standing
• technical and professional ability
Factors must be proportionate and relate to the
subject matter of the contract
Financial turnover threshold limited to 2x contract
value (or each individual lot).
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Shortlisting and award criteria (2)
Award based on Most Economically Advantageous
Tender (MEAT) only:
• MEAT may be based on price or cost using costeffectiveness approach e.g. life-cycle costing
• May be the best price-quality ratio mix of qualitative,
environmental and/or social aspects linked to the subject
matter of the contract
• Cost element may be fixed price/cost on the basis of which
economic operators will compete on qualitative criteria
alone
• No unrestricted freedom to choose
• Must specify relative weighting given to criteria
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Procurement between public
authorities (1)
Teckal Companies (in house companies): Case C-107/98
(Article 12 (1))
A Contract will fall outside the scope of the Directive if:
• Contracting authority exercises control which is similar to
that which it exercises over its own departments
• More than 80% of the activities of the controlled company
are carried out in the performance of tasks entrusted to it
by the contracting authority
• No direct private capital participation
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Procurement between public
authorities (2)
Pooled Funding: Hamburg, Case C-480/06 (Article 12(4))
A Contract will fall outside the scope of the Directive if:
• Establishes or implements a co-operation between
authorities
• The implementation of that cooperation is governed solely
by considerations relating to the public interest
• The participating authorities perform on the open market
less than 20% of the activities concerned by the
cooperation
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Procurement between public
authorities (3)
Mutuals (Art 77): Reserved contracts for certain CPV codes
in health, social and cultural
Maximum duration is 3 years
Call for competition to cite this article
Cumulative conditions for “mutual”:
• Public service mission
• Re-investment of profits
• Employee ownership/participation
• No award to organisation by the authority under this article
in last three years
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Contract changes (1)
Existing contracts may be varied if:
a)Variation was already provided for in the procurement;
b)Additional works, services or supplies where no change of
contractor is realistic – 50% rule (modification not to exceed
50% of the value of the original contract);
c)Modification is not foreseeable, no fundamental change and
50% rule;
d)Change of contractor – partial succession; or
e)Where not substantial, a de-minimis change both below
10% contract value (15% works) and also below threshold;
and
f)for the Pressetext reasons (see next slide)
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Contract changes (2)
Where the modifications, irrespective of their value, are not
substantial (Article 72.1(e) – the “Pressetext” criteria).
A modification will be deemed substantial if:
• It would have allowed for the admission of other
candidates/acceptance of another tender/attracted additional
participants;
• It changes the economic balance of the contract in favour of
the contractor in a manner not provided for in the initial
contract;
• It extends the scope of the contract considerably; or
• It results in a change of contractor other than the case
provided for at (d) on previous slide.
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Preparing for implementation
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Ensure ICT systems can handle electronic procurement
Monitor changes to existing contracts carefully
Consider how Part B services will be advertised in future
Consider how to encourage greater involvement of SMEs
Review procurement processes with a view to simplifying /
making use of new procedures
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Thank you – any questions?
amoy@sharpepritchard.co.uk
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State Aid
What fresh hell is this?
Refresher & Update
Stephen Pearson (Partner)
Freeths LLP
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Why is State Aid Important?
• Free Trade – part of the founding principles of the
EU
• Article 107 TFEU “Any aid granted … through
state resources … which distorts … competition
by favouring undertakings … shall … be
incompatible with the internal market”
• Increased intervention by DCLG in ERDF Projects
• Awareness of public and private sectors / funders
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What is State Aid?
• Key cases and principles
–2014/3292 – Block Exemption
Regulation
–Advice
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What is State Aid Cont’d?
• Advantage
– granted by State
– to an undertaking providing goods / services
– distorts competition
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Key Cases – New and Old
• Altmark Trans [2003] ECR 1-7747, Case C280/00
• Leipzig – Halle [2012] Case C-288/11P
• R (SkyBlue) v Coventry City Council (2014)
EWHC 1747
• Konsum Nord v Commission (2011) Case T244/08
• The “German Incubator” Case
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GBER 2014/3292
• Adopted 21 May 2014
• Simplifying “aid compatible with internal market”
• Examples:
– Research and development support –
fundamental, industrial and experimental
– Innovation aid for SMEs
– Training aid
– Culture and heritage conservation
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BUT !
• New requirement for Member States to disclose
all exempt State Aid:
– Legal basis
– Budget
– Type of support
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Key Advice
• Consider loans > 1.99%
• Review payments carefully
• Keep DCLG “on side”
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Conclusion
• Increased fear of State Aid
• Interventional approach by HMG
• More awareness required !
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Q&A
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