Examining changes to competitive tendering procedures under new Procurement Bill

In our previous article titled "differences between the new procurement bill and the government response to the green paper" (available here), we explored some of the preliminary changes brought about by the new Procurement Bill (the Bill). In this article, we will provide a more in-depth analysis of the changes to the procedures. 

At the time of writing, the Bill has passed through the third reading stage in the House of Lords (HL). This was, generally, a chance to "tidy up" the Bill before it is sent for the first reading in the House of Commons. The Bill will be reprinted by the Commons with all the HL amendments.

Procedures

Currently, under the Public Contracts Regulations 2015 (as amended) (PCR), there are a number of specific competitive tendering procedures available to contracting authorities, namely: open procedure, restricted procedure, competitive procedure with negotiation, and competitive dialogue and innovation partnership (see Regulations 27-31 PCR). 

Section 20(2) of the Bill seeks to reduce the number of competitive tendering procedures to just two procedures:

1. An 'open procedure' – "a single-stage tendering procedure without a restriction on who can submit tenders"
2. A 'competitive flexible procedure' – "such other competitive tendering procedure as the contracting authority considers appropriate". This is a return to the terminology used in the Government's Green Paper after previous departure.

Open procedure

The intention of the Procurement Bill is to retain the current open procedure set out in the PCR. Regulation 27 of the PCR is currently prescriptive in respect of the open procedure, for example, setting out minimum time limits between the publication of a contract notice and the deadline for receipt of tenders. Time limits are no longer procedure specific and are set out in Section 54 of the Bill (see below).

Competitive tendering procedure

The new competitive tendering procedure is designed to offer more flexibility to contracting authorities, enabling them to design their own procurement procedures, on the condition that they comply with the general rules set out in the Bill. 

Some of these new rules are:

• The tender must be a proportionate means for contracting authorities to award the contract having regard to its nature, complexity and cost (section 20(3))
• The number of participants may be limited generally or at each round of tendering or other selection processes (section 20(4)(a))
• The award criteria may be refined (including the adjustment of weightings) prior to the invitation to submit tenders, if: (1) this has been provided for in the tender notice or tender documents; and (2) the refinement would not have "allowed one or more suppliers that did not progress beyond an earlier round or selection process to have done so"; and (3) the contracting authority modifies and republishes, or provides again, the tender notice and any associated tender documents affected by the refinements (sections 20(4)(b) and 24)
• The process may not permit the participation of bidders who did not participate in the first round of tendering or who were excluded from an earlier round (section 20(4)(c))
• Contracting authorities may exclude suppliers based on the conditions of participation (which relate to the legal, financial and technical ability of the supplier to perform the contract, as set by the contracting authority) (sections 20(5)(a) and 22)
• Contracting authorities may exclude/deselect suppliers at each stage following the evaluation of initial or subsequent tenders by reference to the award criteria at the point of exclusion (section 20(5)(b) and section 20(6))
• If a contract is awarded by reference to lots, the procedure may limit the number of lots each supplier can submit tenders for (section 20(7)).

Under the PCR, minimum time limits between the publication of a contract notice and the deadline for receipt of tenders apply. Time limits are no longer procedure specific and are set out in Section 51 of the Bill (see below). The PCR also includes provisions relating to the minimum number of shortlisted tenderers for each procedure but there do not, as yet, appear to be similar provisions set out in the Bill.

The Procurement Bill also includes a shift from awarding public contracts to the "most economically advantageous tender" (Regulation 67 PCR) to the "most advantageous tender" (section 19(1)). The new "most advantageous tender" is the tender that "best satisfies the award criteria" (section 19(2)). 

Conditions of participation have been included by section 22. They allow for contracting authorities to set conditions for suppliers to satisfy before being awarded the contract (section 22(2)). The conditions must be proportionate to ensure a supplier has the legal, financial and technical capacity and ability to effectively carry out the contract. There are some restrictions on the conditions of participation in the Bill, including requiring particular qualifications without allowing for their equivalents (section 22(4)(c)). 

Award criteria

The rules regarding award criteria are now set out in section 23, which sets out that tenders may be assessed against award criteria, which must relate to the subject matter of the contract, be sufficiently clear, measurable, specific and proportionate. This is a departure from the position in the Green Paper, which explored breaking the link between the subject-matter of the contract and the award criteria in certain, prescribed, circumstances. While the proposed provision would not create a significant change in everyday procurement practice, there are certain procurements where a clear ability to take into account general policy or practice would have been useful.

The award criteria set by an authority must not break the rules set out in section 56 (technical specifications), which are:

• The procurement documents may not refer to design, a particular licensing model or a description of characteristics in circumstances where they could appropriately refer to performance or functional requirements
• The procurement documents may not refer to United Kingdom standards unless there is no internationally-recognised equivalent, and equivalent standards from other states or regions will be treated as having satisfied the United Kingdom standards
• Unless the contracting authority considers it necessary in order to make its requirements understood, the procurement documents may not refer to a particular trademark, trade name, patent, design or type, place of origin, producer or supplier
• If such matters are referred to, the procurement documents must also provide that tenders, proposals or applications demonstrating equivalent quality or performance will not be disadvantaged.

The subject matter of a contract, per section 23(5), includes references to:

• The goods, services or works to be supplied under the contract, including in respect of any aspect of their production, trading or other stage in their life-cycle
• How or when those goods, services or works are to be supplied
• The qualifications, experience, ability, management or organisation of staff where those factors are likely to make a material difference to the quality of goods, services or works being supplied
• Price, other costs or value for money in all the circumstances.

In theory, the competitive tendering procedure will allow contracting authorities to design a procurement process as they see fit, including replicating current procurement processes as prescribed and followed under the PCR, but also new, hybrid processes which combine features of two or more of the existing processes.

This new freedom to design processes will have to be balanced against the increased administrative requirements in the Bill, which seek to ensure transparency. It could be that designing new and innovative or hybrid procurement processes leads to an increased burden on contracting authorities in respect of their administrative duties, both in running those processes and discharging their transparency obligations. We will review these aspects in more detail in a subsequent article.

Direct award procedure

Direct awards will still be permitted under the provisions of the Bill. We will explore the grounds for this in a subsequent article.

Time limits

Section 54 of the Bill provides new time limits for competitive procedures, as well as two new terms:

• "Participation period", starts from the day after the day that contracting authorities invite submissions of requests to participate in the procedure and ends on the day by which those requests must be submitted

• "Tendering period", starts on the day after the day that contracting authorities invite submissions of tenders as part of the procedure and ends on the day by which the tenders must be submitted.

The new time limits are:

Participation period

Tendering period

Next steps

In our next article, we will summarise the alterations to awards under frameworks, direct awards and dynamic markets. Please keep an eye on our website and social media channels for our next instalment.

In the meantime, please do not hesitate to get in touch with our procurement team for more information.

Note: references to sections of the Bill were correct at the time of publication but may change during the passage of the Bill through Parliament.