Post

Jun 27
Brexit and Public Sector Procurement

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​The UK has voted to leave the EU but what will be the effect on public procurement?

Well, for the immediate future there will be no change. 

Until the exit is finalised the UK will continue to be required to comply with EU
Public Contracts Directive 2014/24/EC which was transposed into UK law by the Public Contract Regulations 2015 (PCR2015).  These regulations will continue to form the legal requirement to which public sector organisations in England Wales and Northern Ireland must adhere.  Separate legislation exists in Scotland where the Public Contracts (Scotland) Regulations 2015 apply, and they will continue to apply, the same as the PCR2015.

So, there will be no change to the PCR2015 whilst the UK is a member of the EU.  Once the UK government triggers Article 50 there will be a need, within two years maximum, to put into place the legal and constitutional infrastructure to take over when the EU arrangements cease.  Alongside this the government will be wanting to negotiate trade deals with the EU and the wider world. There will be a need to manage public and international relations and monitor and manage international reaction to the process.  In addition there will be the domestic 'day job'.  Amongst all this it may well be that the government will put changes to the PCR2015 near the back of the queue.  It may make minor amendment to remove the need to advertise Contract and Award Notices in the OJEU, but substantial change is unlikely.

The opening of opportunities to the whole of Europe may be changed; although this may be a requirement of the terms of any trade deal agreed with the EU anyway.

Unless some prohibition, or disincentive, were to be introduced European companies would still be able to bid for UK contracts.  If favouritism for UK businesses is allowed, this may enable real measures to be taken to allow public organisations to support UK suppliers and businesses.  This should be more pointedly in support of sectors, such as the steel industry, than previously possible.  In the 'Procurement Policy Note: procuring steel in major projects'  the policy explicitly allowed social value to be taken into account when tendering and was later promoted as the approach to be taken by the wider public sector in its procurement approach generally, however the policy is carefully worded to ensure adherence with Directive 2014/24/EC is maintained.

When you study the PCR2015 you may wonder what else needs to change anyway; much of the PCR2015 is about providing openness and equality of opportunity for businesses to compete for contract opportunities in the public sector.

It is always surprising how managers in the public sector respond to being told that the value of a contract is above the OJEU threshold.  So many times their immediate reaction is negative; they ask how they can avoid the process; can they repackage the contracts; can they move it from services to works and so on.  The reality is that if you are going to tender a contract, going through the OJEU process adds little in terms of timescales and the prospect of having a European company bid for anything other than the largest contracts is remote (certainly in the area of social housing, where I work, interest from Europe is minimal).

The outcome from all this is that any change to public sector procurement is some way off but even when it comes the change is likely to be small.  What do you think?

Jun 14
Electrical Test and Inspection

Electrical installations for general needs (including sheltered housing) accommodation must be in good working order and not pose a danger to residents at the start of a tenancy.  In general, the landlord is responsible for maintaining the electrical system throughout the tenancy.  This responsibility comes about as a result of the landlord's obligations under the Landlord and Tenants Act 1985; the Defective Premises Act 1972 and the Housing Health and Safety Rating System. 

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The Housing Act 1985 requires landlords to ensure that properties are fit for people to live in at the beginning of their tenancy and the property is kept in a state fit for living in during the tenancy.  Under the Defective Premises Act, if a tenant or resident should suffer injury or death due to a fault about which the landlord ought to have known then he may be liable for damages to the individual(s) and property; as social landlords generally reserve the right to inspect their residential properties they ought to be aware of the condition of those properties.  Under the Housing Health and Safety Rating System (HHSRS) if a landlord is aware of a fault that affects the safety of the premises he should recalculate the HHSRS score to establish its effect on the habitability of the property.  It should be noted that the risk does not need to relate to the electrical system, per se, it may be a consequential risk, for example an increased risk of tripping caused by a lighting failure.

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The Occupiers' Liability Act 1957 and Occupiers' Liability Act 1984 also place on landlords a duty of care for anyone visiting their property. In short, a landlord can be prosecuted if someone is injured on their land or premises, regardless of whether the visitor is there lawfully (the 1957 Act) or trespassing (the 1984 Act).

In addition, landlord's have responsibilities to their staff and whilst this is most obvious in relation to those staff working in communal areas of sheltered schemes it also extends to staff working in properties in the course of their work, for example when undertaking repairs in properties.

These risks must be managed by the landlord based on his knowledge of the stock and the residents living in the properties.  Unlike gas servicing there is no statutory frequency for the undertaking of electrical test and inspection (other than for Homes in Multiple Occupation, which must have their electrical installations inspected no less frequently than once every five years). 

Good practice for Registered Providers is for properties to have electrical inspection carried out once every five to ten years.  Furthermore, the frequency of inspection may be varied in accordance with the findings of the initial inspection.  For example, a newly built property may be inspected and considered to be in such a condition that a recommendation may be for a further inspection to be undertaken in ten years' time; meanwhile a property with an aging installation may be passed but with a recommendation that a further inspection be undertaken in five years.

As the responsibility placed on landlords is to maintain the properties in a safe condition, rather than specifically to undertake an inspection, the manner of checking is for the landlord to decide.  It is almost universally the case that the inspection is undertaken by an electrician accredited to work to the current edition of the Institute of Engineering and Technology Wiring Regulations (currently this is the 17th Edition), this standard is co-published with the British Standards Institute as BS7671.  A certificate of compliance with BS7671 is usually issued which will include extensive details of the electrical installation and list items for attention/note in one of four categories: 

  1. Requires urgent attention;
  2. Requires improvement;
  3. Requires further investigation;
  4. Does not comply with BS7671:2008 amended to …. This does not imply that the electrical installation inspected is unsafe.

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Portable appliances, such as washing machines, portable heaters, fridges and lamps, in communal areas should also be checked for safety under arrangements for Portable Appliance Testing (so called 'PAT testing').  Again, the frequency of PAT testing is not stipulated and it is for landlords to determine an appropriate frequency of test and inspection based on their knowledge of the appliances, their use and the environment in which they are used. 

PAT testing should be undertaken by trained people but not necessarily all inspections need to be undertaken by a qualified electrician; a mixture of inspection by non-electrician, but trained, staff can be intermixed with a more formal electrical test using test equipment, and undertaken by a qualified electrician, is often the most efficient and economic approach.  Portable appliances in residents' own homes are their responsibility and landlords have no responsibility for testing or inspecting these items.  Where the items were originally supplied by the landlord the landlord should ensure that the item is safe at the start of the tenancy and remains safe throughout the tenancy.

Jan 07
New OJEU thresholds take effect from 1st January 2016
The new OJEU threshold levels have been published.  These are the maximum potential contract values above which the full OJEU procurement process must be followed.EU Logo.jpg


The value for main contracts are:

Works: £4,104,394
Services*: £164,176
Supplies*: £164,176

*other than schedule 1 bodies (central government bodies) for whom the thresholds are £106,047 respectively.

The threshold for the Light Touch Regime for services is set at £589,148.

Small lots thresholds are:

Works: £785,530
Services: £62,842
Supplies: £62,842

The value of the contract includes the value of any potential contract extension.

Whilst the thresholds in sterling have reduced again the euro values have increased; this is due to the relative strength of the pound against the euro and so whilst continental authorities will see a reduction in the number of contracts over the threshold, here in the UK the number will increase.

The threshold for service contracts mean that a three year contract with potential for a two year extension and with an annual value of just £32,835 will need to be procured following the OJEU process.

There is speculation that the levels may be significantly increased when they are next reviewed to take effect from January 2018, or as part of the European Commission's review of procurement law that is required to be undertaken by April 2019.

The Cabinet Office Procurement Policy Note canbe found here: Procurement Policy Note
Feb 24
Domestic advertising of OJEU contracts

I have recently been investigating the appropriate timing of domestic (national) advertising of contracts that are subject to OJEU publication.

The Public Contracts Regulations 2006 says [para 42 (4) (a)] that the contracting authority shall not place a notice in any publication before the date on which the notice is despatched ​(to the OJEU as described in the Regulations).  I have recently come across a view that contracts should not be advertised domestically until the notice has been published in the OJEU; a quick post to the LinkedIn 'Procurement in UK Public Sector' group found a range of answers from 'you can advertise the minute you have despatched the notice to the OJEU' (this includes my own understanding) through to 'you really ought to wait five days'!

Well it seems this question must have been asked before (even though there is little consistency on how the process should work) because the new EU Directive on Public Procurement addresses the issue with what should be clear instruction: at Article 52 it is clearly stated that:

Notices referred to in Articles 48 [Prior Information Notices], 49 [Contract Notices] and 50 [Contract Award Notices] and the information contained therein shall not be published at national level before the publication pursuant to Article 51 [the process by which notices are submitted to the OJEU]. However, publication may in any event take place at the national level where contracting authorities have not been notified of the publication within 48 hours after confirmation of the receipt of the notice in accordance with Article 51.

So there we have it, subject to the transposition of the Directive into a UK Regulation it seems that in future we will dispatch the notice and publish at national level when the notice is published in the OJEU, or after 48 hours, whichever is the sooner.

The next question may be around how aligned should your 'national publication' advertisement be with the OJEU Notice.  The new EU Directive says:

Notices published at national level shall not contain information other than that contained in the notices dispatched to the Publications Office of the European Union or published on a buyer profile, but shall indicate the date of dispatch of the notice to the Publications Office of the European Union or its publication on the buyer profile.

Watch this space...


If you have been watching this space...

You might like to refer to the Public Contract Regulations 2015 which say in Regulation 52, much like the EU Directive discussed above, that contracts shall not be advertised nationally before they are published on the OJEU, or within 48 hours of their dispatch to the OJEU, effectively meaning whichever is the sooner.

You may also like to look at Regulation106 which says that contracts advertsied on the OJEU must be advertised on the Contract Finder website within 24 hours of when they are entitled to bedvertised nationally in accordance with Regulation 52.

As both regulations refer to hours and not working days (or working hours) the it may be that opportunities appear in Contract Finder at the weekend or on public holidays.


Feb 17
New EU Procurement Directive Published

The long awaited revised procurement directive from the EU has been published (see Link).  In a press released dated 11th February the revised directive is decribed as 'a major overhaul of public procurement rules across the EU' and it continues, 'It will improve a wide range of areas applying to the procurement of goods, works and service'.

The directive, which includes a range of new and revised requirements, including the requirement to publish all contracts on-line (with limited exceptions), now requires translation into UK law and the UK Government has stated that it will move quickly in this respect.  In the meanwhile procurment teams should interpret UK law but have an eye to what the EU requirments have to say.

Come back to this site to read our fuller description of the new directive which we will be publishing in the near future.

Jan 24
Gallions gas safety case throws new light on the HCA's approach

The HCA recently published its findings into the case of Gallions Housing Association's failure to undertake a gas safety inspection on a property due to access problems. 

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The HCA has said that the Association

a) has failed to meet the Home Standard;

b) as a consequence of this breach there was the potential for serious detriment to Gallions’ tenants; and

c) Gallions has now rectified the breach to the regulator’s satisfaction by implementing an agreed action plan and we have decided that there are not grounds for further action to be taken using enforcement powers.

"No one is suggesting that landlords shouldn't pursue access with vigour but to adopt shorter cycles means that the vast majority of inspections are undertaken more frequently than recommended at great cost to the landlord."

This is interesting because the case relates to a problem where there had been no gas safety inspection for the last three years in a property  because the tenant would not allow access for the check.  The HCA stated that the Association has subsequently streamlined its procedures for gaining access to properties and will now apply for injunctions 'within an appropriate time period', furthermore it will report to its board on cases of gas safety checks that are 90 days overdue.

You may recall that the requirement is for a gas safety inspection to be undertaken annually.  It would appear that the HCA is recognising that there may be occasions where, due to access difficulties, more than 12 months may elapse between inspections and so long as the landlord is taking diligent action to gain access in a timely manner there is no case to answer.

A number of social landlords currently undertake their gas safety inspections on a cycle less than 12 monthly so that they can be sure of gaining access within 12 months.  This came about as a result of the harsh approach adopted by the Tenant Services Authority when it was the social housing regulator.  The TSA threatened action if the time between inspections exceeded 12 months for whatever reason.

The effect of increasing the frequency of inspections was to increase costs by, in the case of a ten monthly cycle, 16%.  It can be seen that a landlord with 5000 properties, undertaking inspections at a cost of £100 will have an increase cost of £80,000 by using the reduced cycle!

No one is suggesting that landlords shouldn't pursue access with vigour but to adopt shorter cycles means that the vast majority of inspections are undertaken more frequently than recommended at great cost to the landlord.

The HCA's notice can be found here: Notice

Jan 17
Parent Company Guarantees and Performance Bonds

When letting large contracts there is often the need to consider the client’s interests in case there are performance or liquidity problems with the appointed contractor. 

Signing agreement Small.jpgTwo commonly used tools to protect this interest are the Parent Company Guarantee (PCG) (or Parent Company Indemnity as it is sometimes known) and the Performance Bond (PB).  So what are the differences between the two and which is most appropriate in any given situation?

Lets look at the two options and then compare and contrast them.

Parent Company Guarantee

A PCG is an undertaking given by the parent company where the Contractor is a subsidiary of a larger company.  The parent company undertakes to guarantee the due and proper performance of the contract generally – this means that if the Contractor fails to perform the contract in any respect the parent company can be held responsible as well as the Contractor (its subsidiary).

If the subsidiary should cease trading the parent will indemnify the Client from all losses and damage resulting from the non-performance or improper performance of the Contractor’s obligations.

If the parent company and Contractor go into liquidation at the same time the Client can be left without any recourse to be compensated.

The PCG provides the Client with a second party to hold responsible if the Contractor should fail to perform its obligations.

Performance Bond

A PB is an insurance taken out by the Contractor, usually at the Client’s expense.  This introduces a third party who is external to both the Client and the Contractor.  The Bond assures the Client that if the Contractor should fail to perform the duties under the contract the Client may recover losses from the Bond provider (usually an insurance company or bank).  Bonds are usually limited in value and are typically for 10% of the contract value.

It should be noted that there are two forms of PBs, the usual ‘adjudication bond’ where the Client has to prove the default of the Contractor, and a less common, and potentially problematic (for the Contractor) ‘on demand bond’. In an ‘on demand bond’ the client is not required to prove a default on the part of the Contractor, it is simply necessary to call in the bond.

Compare and Contrast

Firstly, a PB is a form of insurance and is provided by an external third party.  The fee for the bond is usually charged to the Client and is an immediate contributor to the cost of the contract.  A PCG is provided by the Contractor’s parent company and there is no corresponding charge to the Client unless the Contractor should choose to introduce an administration fee (but if he is alone in doing so it will of course affect his competitiveness).  In the case of a PB the Client needs to consider carefully whether the benefits of the Bond outweigh the costs involved.  This will be dependent on the level of cover, but also the nature of the works specified, an assessment of the Contractor and a number of other matters such as the Client’s appetite for risk!

The extent of the protection will differ between a PB and a PCG.  In the former, as has been said, the cover is limited in the bond agreement.  The level of cover may not be enough to cover the cost of delays due to appointing a replacement contractor and multiple problems can quickly exhaust the level of cover provided.  Often in projects there is more than just the costs to be considered, there is also reputation and goodwill.  A PCG will provide the Client with the same level of cover as if the Contractor himself was being held responsible.  Typically the Contractor will go into liquidation – at that stage the parent company will be responsible as though he were the original contractor (provided he hasn’t also gone into liquidation – and that is a real possibility).

This last point is particularly important.  If the parent company and Contractor go into liquidation at the same time the Client can be left without any recourse to be compensated.  It is for this reason that clients often seek both a PCG and a PB.  If there is no charge for a PCG and all bidders are required to provide a PB then the Client gets maximum cover for no additional cost.

The final difference is the period of liability under the two arrangements.  A PB will usually last throughout the contract period and for a limited time after practical completion as allowed in the contract; a PCG will place the parent company in the same position as the Contractor and this will usually mean that the parent company remains responsible for 12 years following practical completion.

Practical issues

During periods of business uncertainty the availability of bonds to smaller businesses may reduce (or the cost may increase to reflect uncertain times).  Clients should therefore think carefully about the need for bonds.

Some parent companies have a policy of not providing PCG and Clients need to consider how to handle such situations carefully.

As has been discussed above, ‘on demand’ PBs have a significant advantage to Clients and may be considered quite dangerous for Contractors.

If the Client makes it necessary for bidders for work to include a PCG, or a PB where there is no parent company, the playing field will not be level so far as costs are concerned.

Clients also need to consider that not all bidders will have parent companies and how they will safeguard the contract in these circumstances – here a PB may seem appropriate but consider how you balance this against those from whom you ask for a PCG.

Jan 01
New OJEU Thresholds from 1st January 2014

​The new OJEU threshold levels have been published.  These are the maximum potential contract values above which the full OJEU procurement process must be followed (albeit there are reduced requirements for Part B services).EU Logo.jpg

The value for main contracts are:

Works: £4,322,012
Services: £172,514
Supplies: £172,514

Small lots thhresholds are:

Works: £833,400
Services: £66,672
Supplies: £66,672

The value of the contract includes the value of any potential contract extension.

The threshold for service contracts continues to be relatively low (the revised thresholds simply recalculate the threshold based on exchange rates) and so a three year contract with potential for a two year extension and with an annual value of £34,503 will need to be procured following the OJEU process.

The Cabinet Office Procurement Policy Note canbe found here: Procurement Policy Note

Dec 08
New website

Well, after several years with the old faithfull website here we are with an new design, based on the old but with what we hope will be seen as a refreshing new style.​