Post-Brexit Public Procurement: Divided views in respect of the Green Paper proposals

As part of the session, a series of polls were taken to gauge attendees' views on some of these proposals. This article sets out a brief summary of the Government's proposals for these areas as well as the poll results and our commentary.

Following its publication in December 2020, the Green Paper has caused a stir in public procurement circles. Along with many others, three of the key proposals relate to:

1. Significant proposed changes to the existing statutory framework – this involves the consolidation of the existing four sets of Regulations into a single set of rules applicable to all procurements (with sector-specific schedules), with substantial new legislation and statutory guidance to deliver the Government's transparency agenda, and set up a Cabinet Office unit to oversee public procurement;
2. Changes to procedures and procurement tools – this involves reducing the number of procurement procedures available, with the introduction of a "competitive flexible" procedure which can be tailored to suit a contracting authority's requirements, and changes to framework agreements and Dynamic Purchasing Systems; and
3. Reform of the challenge process with the intention to make it swifter to bring a challenge and to change the focus from post-award damages to pre-contractual remedies.

The statutory framework

The Government intends to "slash" the 350+ regulations which are currently contained within four separate statutory instruments and integrate them into a single, uniform set of Regulations. Anybody who has grappled with the application of the current four sets of Regulations to a particular procurement will doubtless welcome this attempt to simplify the regime, although for utilities this may have the result of increasing procurement obligations and bringing more contracts within the scope of the full procurement rules if thresholds are aligned with the public sector.

The Green Paper goes on to explain that the new Regulations will more closely reflect the structure and content of the Utilities Contracts Regulations 2016; whilst acknowledging that most public bodies are familiar with the operation and content of the Public Contracts Regulations 2015. 

While the Green Paper's proposals for simplification may be laudable, as the single set of Regulations will be supplemented by sector-specific schedules, further legislation, and substantial statutory/non-statutory guidance which contain further rules, it will be interesting to see whether this achieves the Government's aim of reducing bureaucracy. 

The Green Paper explains that other relevant legislation, such as the Public Services (Social Value) Act 2012, will not be consolidated into the single set of Regulations. Indeed, it is likely that the Government will enact significant new legislation in order to deliver its transparency agenda, to ensure effective oversight from the Cabinet Office, and other proposed material changes. Public Bodies will therefore have to comply with this additional legislation and guidance and the Government will not achieve a truly "one stop shop".

If the Government is not careful, this "slashing" of Regulations might, in practice, be more of a re-formatting of the current Regulations into one document than a genuine simplification of the law. It remains to be seen whether the drive to reduce bureaucracy will be delivered when combined with the likely material new legislation and statutory/non-statutory guidance requiring practical steps to be taken by public bodies. 

It is notable that only 35% of attendees at our webinar expressed the view that the Green Paper proposals, as a whole, will improve the public procurement regime. A larger proportion – 47% - were unsure as to whether the proposals will improve the public procurement regime or not; and 18% expressed the view that the proposals will not improve the regime. We will monitor these views as the Green Paper proposals are developed by the Government and further detail is known. 

Procedures

Furthering its simplification agenda, the Government also proposes to reduce the number of procedures from the current seven options to just three ("open", "limited tendering" and the "competitive flexible" procedure). The open and limited tendering procedures mirror the current procedures with "limited tendering" being a renaming of the negotiated procedure without prior publication (Regulation 32 PCR 2015). The Government has removed the restricted procedure despite explaining that 90% of procurement processes currently use this or the open procedure. 

The Green Paper's proposals in this area represent a conflict of simplification and flexibility. In striving for maximum flexibility, the Government proposes to replace the majority of processes with the new "competitive flexible" procedure. This procedure affords a great level of discretion to public bodies with the Green Paper stating that the procedure will have "minimal detailed rules". 

Whilst this might appear to be a major positive, in practice, it is difficult to understand how the introduction of a procedure that allows countless variations will simplify procurement for either purchasers or suppliers. Rather than the current position, where the processes are standardised and generally understood, the introduction of the competitive flexible procedure means processes could diverge greatly across public bodies and, in practice, mean greater complexity (and cost) rather than simplification.  Over time, new tried and tested 'model' processes may emerge which contracting authorities could choose to adopt, but initially there is a risk that freedom to create new bespoke procurement processes may lead to duplication of efforts by procuring authorities and confusion for suppliers trying to grapple with an array of processes that differ (to varying degrees) from those with which they are familiar.

In our webinar, 40% of attendees expressed the view that the "minimal detailed rules" for the competitive flexible procedure are a welcome change while 29% disagreed with the proposal and 31% did not think it was either a positive or negative proposal. This mixed reaction appears to highlight how procurement practitioners are divided on whether it is simpler to comply with the law when it is clearly prescribed rather than set out in very loose terms and supported by guidance. It may be that these opinions shift once further detail (including the guidance) is released by the Government. 

Challenges

Procurement challenges are something that always generate a lot of interest and the Green Paper proposals do not disappoint. While the focus of reform is on the existing Court system, which is maintained to a large extent, the Green Paper proposes:

1. change in focus from post-award damages to pre-contractual remedies;
2. removal of the requirement to provide bidders with contract award decision ("standstill") letters;
3. a fast-track system allowing expedited trials;
4. investigating the use of a tribunal system for low value claims;
5. certain categories of challenge being dealt with on paper-only submissions;
6. new guidance and rules on disclosure; and
7. capping damages at 1.5 x bid costs plus legal fees (with limited exceptions including for unlawful direct awards and incidents of intentional malfeasance) and capping profit margins during contract extensions where the incumbent challenges the award of the replacement contract.

A notable point is that the Government is keen to eliminate speculative claims, which it argues are issued by disgruntled bidders, often incumbents who want to delay losing an existing contract. While we see sabre-rattling during pre-action correspondence, the Green Paper does not reflect our practical experience of advising on claims actually issued in the High Court. Challenges are rarely initiated on a speculative basis as:

1. costs of issuing a challenge are expensive, even for the largest suppliers; 
2. in order to have any chance of success, challengers must be able to demonstrate there has been a breach of the Regulations and but for this breach, they would have won the contract; and
3. once proceedings are issued, challengers take on the potential liability for the defending party's costs.

Considering these costs and the legal threshold for success, it would be a very brave/foolish bidder that would issue a purely speculative claim. 

In our webinar, 41% of attendees expressed the view that capping the level of damages as proposed will provide a wronged bidder with appropriate redress (while 29% disagreed and 30% neither agreed not disagreed). While capping liability may be a welcome reform for public bodies, in our view, capping damages in this way will not provide redress to bidders which have lost out on contracts due to an authority breach. There is also the potential for public bodies to be less concerned about compliance with the Regulations if the consequences of breach are limited in this way.

The results from our polls show that procurement professionals and practitioners are divided in their views on the Green Paper proposals. While 35-40% of people were in favour in respect of key proposals, similar proportions were either unsure or had negative views of the proposals. With such divergence, it is important to note that the Government is in listening mode and now is the time to provide them with your views to try and shape the future of procurement. DWF will be submitting its response to the Cabinet Office before the consultation window closes on 10 March 2021 and welcomes any and all views from clients or commentators.