10 February 2016
Public Contracts Regulations 2015: What's new for SMES?
One of the Government’s stated aims for the Public Contracts Regulations 2015
(PCR 2015) is to create ‘a simple and more consistent approach to procurement
across all public sector agencies. This would support small and medium-sized
enterprises (SMEs) and voluntary organisations in gaining better and more direct
access to contract opportunities. This note looks at some key provisions in PCR
2015 that may be helpful to ACE’s SME members. We would invite any feedback
from members on PCR 2015 or this note. Please note that ACE’s legal affiliate, BLM,
have produced more detailed guidance on PCR 2015.
Division of public contracts into lots
Regulation 46 allows contracting authority to award a contract in the form of separate
lots and even to limit the number of lots that may be awarded to a single tenderer.
Notably, contracting authorities must provide in the procurement documents an
indication of their main reasons not to subdivide a contract into lots.
If awarding the lots in accordance with stated award criteria would result in award of
more lots than the maximum specified to the same tenderer, then the contracting
authority must publish the objective non-discriminatory criteria they will apply for
determining which lots will be awarded. We anticipate that setting this criteria may be
challenging in practice.
Financial standing and PQQs
Regulation 58 limits the maximum turnover requirements that contracting authorities
may impose at PQQ stage. The maximum turnover requirement is now twice the
contract value, unless a higher maximum can be justified due to special risks
associated with the contract works, services or supplies. Other financial criteria may
be imposed which are similar to the 2006 Regulations and associated guidance,
including the requirement that financial assessment requirements are “proportionate,
flexible and not overly risk averse” [1].
Notably, under Regulation 11 in procurements that are below the EU value
thresholds a contracting authority may not include a pre-qualification stage.[2] In
practice, this means no PQQ may be used. Contracting authorities may, however,
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ask "suitability assessment" questions relating to a potential supplier provided that
the questions are proportionate and relevant to the subject matter of the
procurement.
The changes to PQQ criteria are supported by the requirement in Regulation 59 for
contracting authorities to accept an ESPD, which is a standard EU form of selfcertification for use by a supplier to demonstrate it is not within the exclusion criteria
and that it meets the technical capability and financial standing criteria. It is hoped
that ESPD will make the process less burdensome. Other supporting documents or
evidence may be requested by the contracting authority, but the authority must itself
make use of central databases to obtain information where it is possible to do so.
ESPD’s may be re-used where they remain accurate.
Advertising of under-threshold Contracts
Implementing one of Lord Young’s proposed reforms, Regulations 110 to 112 require
that in cases where contracting authorities, with some exemptions, choose to
advertise contracts that are under the relevant EU value thresholds the contracts
must be advertised on the Government’s “Contracts Finder” portal. This requirement
applies to contracts as low as £10,000 (£25,000 for sub-central contracting
authorities).
Payment of Invoices
Regulation 113 requires that contracts (with some exceptions) entered into by
contracting authorities contain provisions requiring the authority to pay all validated
and undisputed invoices within 30 days of the date of validation. Validation must be
carried out in a timely manner. These new requirements are supported by a
requirement on public authorities to report their payment practices, similar to
requirements which have been imposed on large undertakings under the Small
Business, Enterprise and Employment Act 2015.
Additionally, any contract granted by a contracting authority with a lead contractor
must contain provisions requiring any sub contracts entered into by the lead
contractor to contain equivalent payment provisions to those required in the lead
contract.
Where there is a failure to include such payment provisions in the lead contract, then
those provisions (including the stipulations as to provisions to be included in subcontracts) will be implied terms. We look forward to seeing the extent to which this
requirement is adhered to and enforced and how the courts approach the
requirements for provisions in sub contracts. It is not immediately clear how a subcontractor will enforce its entitlement to be paid in 30 days, if the contract does not
state it expressly; the sub-contractor may not have a contractual relationship with the
contracting authority pursuant to which it may seek a remedy.
For more information on the PCR 2015 please see BLM LLP’s.
Please be aware that ACE presents this guidance note to assist ACE members with
managing their commercial risk. We also have a Business Helpline. Please note that
the guidance and Helpline are not intended as a substitute for specific independent
legal advice. ACE recommends that independent legal advice is taken in any
individual case and before pursuing a course of action. Members may also gain a
referral to one of ACE's Legal Affiliates who can provide approximately 15 minutes of
free advice.
ACE Legal and Compliance Team, April 2015
[1] S.6 CCS 2015 Guidance on PQQs
[2] Currently £112,000 in central government and £173,000 outside central
government and in NHS Trusts.