Which contracts do the 2015 Public Contracts Regulations for contracting authorities apply to?

This is a different approach to that adopted by the UK when it transposed the last EU Public Sector Procurement Directive in 2006. The regulations make it clear that expressions used will, for the most part, have the same meaning as they have in the new Directive.

The regulations came into force on 26 February 2015 and as with the 2006 Public Contracts Regulations which they replace, the 2015 regulations will take some time to bed in. Interpretation is likely to evolve over time, not least in light of the various guidance notes with the Cabinet Office has published and will publish and no doubt, in due course, case law from the courts. The majority of the provisions will apply from 26 February 2015 with some exceptions, including the requirement to ensure that tender processes are run on a fully electronic basis which will apply to all contracting authorities only from 18 October 2018.

Scotland has recently begun its own consultation process on how to implement the new EU directive, which it is expected to do later in 2015.

This guide will provide a brief overview of the circumstances in which the new regulations apply, as well as some exceptions. For more information on what has changed, please see our separate Out-Law guide.

When do the new regulations apply?

The scope of the 2015 regulations will be broadly familiar to contracting authorities working with the 2006 regulations. They will continue to apply where a contracting authority seeks offers in respect of a public works, services or supply contract with a value in excess of the applicable financial threshold. Thresholds are largely unchanged as they must remain aligned with the thresholds set out in the World Trade Organisation's Government Procurement Agreement.

The 2015 regulations do away with the Part A/Part B services distinction and introduce a new 'light touch' regime. This applies to the procurement of health, social and other services that fall within the CPV codes listed in Schedule 3 where the contract value is above a higher financial threshold of €750,000. All other services that fall outside of the light touch regime will be subject to the 2015 regulations in full. Limited obligations apply to the award of these contracts, including:

• a contract notice must be published or a prior information notice used as a call for competition (the circumstances for doing so are prescribed);
• the award procedure must comply with principles of equal treatment and transparency;
• the contract must be awarded in line with the advertised procedure;
• time limits must be reasonable and proportionate.

In an update to the draft 2015 regulations on which the Cabinet Office consulted in autumn 2014, the new regulations specify limited circumstances in which an authority may depart from the procedure it has previously outlined to bidders. However, there is an obligation on authorities to inform bidders of this variance. The Cabinet Office indicated in its consultation response document that it sees this update as enabling flexibility in exceptional circumstances, e.g. the extension of time limits where new information has come to light following publication of the contract notice. Arguably, this only reflects what an authority is permitted to do in practice already, and is justified under the general EU Treaty Principles.

Exclusions from the regulations

In addition to a number of the general exclusions that continue to apply, a number of additional exclusions have been introduced in the 2015 regulations:

Exemptions for public to public arrangements

The new regulations confirm, and expand on, two exemptions for cooperation between entities within the public sector, confirming the position previously established under EU case law. The regulations will not apply to:

• 'in-house awards' ('Teckal' arrangements) where a contracting authority awards a contract to an entity which it controls. This exemption is typically relied on by local authorities who set up wholly-owned subsidiaries;
• 'inter-authority cooperation' ('Hamburg Waste' arrangements) where two or more contracting authorities come together to deliver a public service with a view to achieving objectives they have in common. This exemption will only apply where the cooperation is implemented in a manner governed solely by public interest considerations, and where the participating authorities perform less than 20% of the activities covered by the cooperation on the open market.

The 'mutuals carve-out'

The UK pushed for and succeeded in securing a right to hold competitions limited to mutual-type organisations in certain circumstances. This exemption is only available for the award of certain types of service contracts, including administrative services in relation to education, healthcare and housing, health and social work services, and library and other cultural services. It can only relate to the award of contracts for not more than three years, and the mutual-type organisations must meet certain criteria.

What is your choice of procedure?

For public contracts, an authority's choice of award procedure is essentially the same under the 2015 regulations: open procedure; restricted procedure; competitive dialogue; and competitive procedure with negotiation (equivalent to the previous negotiated procedure with prior advertisement). There are, however, a number of important changes even to these familiar procedures, including:

• accelerated forms of the open procedure and competitive procedure with negotiation will be available in addition to the accelerated form of the restricted procedure which was already available under the 2006 regulations. In all cases, an authority can only rely on this expedited procedure in situations of urgency that it can duly substantiate;
• minimum time limits are generally shorter across all of the procedures;
• grounds for use of the competitive dialogue or competitive procedure with negotiation have been aligned and, arguably, widened. For most complex projects, authorities should therefore have a choice between these two procedures and may be able to justify use of one or other procured on the basis that design or innovative solutions are involved or the contract cannot be awarded without prior negotiation due to specific complexities;
• calls for competition using prior information notices rather than contract notices will be possible for local authorities and other non-central government entities adopting restricted procedures or competitive procedures with negotiation;
• confirmation that negotiations are not mandatory under the competitive procedure with negotiation, provided that this possibility is highlighted from the outset;
• more flexibilities post-tender under the competitive dialogue have been introduced. An authority may clarify, specify and "optimise" final tenders. Negotiations with the preferred bidder are also now allowed within certain parameters.

The biggest change of all to the procedures is the introduction of the innovation partnerships procedure. This is intended as a new procedure that sits alongside the other procedures set out above. Innovation partnerships are designed to enable both the development and subsequent purchase from the same supplier(s) of an "innovative" work, service or product. The idea seems to be that high level product proposals are submitted during the competitive tender process and the solutions developed post-appointment; in contrast to, for example, the competitive dialogue procedure where dialogue is required to continue until the authority identifies the solution that best meets its needs. There is also scope to appoint more than one innovation partner, but for partners' contracts to be terminated as the development progresses post-appointment.

For many, this procedure raises more questions than it answers and there are a number of restrictions that apply, including to the form the innovation partnership contract must take, that might put some authorities off. That said, as a concept the innovation partnership seems potentially to represent a great opportunity for suppliers and a new avenue for authorities that are interested in working with the private sector to commercialise new products and services to explore. However, authorities should be alert to the potential state aid and competition issues that may arise through the use of the innovation partnership procedure; for example due to joint public/private sector working and investment.