In the exceptional circumstances of the COVID-19 pandemic, contracting authorities (including central government departments, executive agencies, non-departmental public bodies, local authorities, NHS bodies and the wider public sector) may need to procure goods, services and works with extreme urgency.
Last week, the Cabinet Office published a procurement policy note (PPN 01/20) setting out guidance on the public procurement regulations in the context of the outbreak.
Detailed rules contained in various procurement regulations (e.g. Public Contracts Regulations 2015 SI 2015/102 (PCRs)) set out the legal processes that public bodies and others must follow when awarding contracts.
Generally, these rules require contracts over certain value thresholds to be awarded further to an advertisement of the opportunity and a competition. These competitions can take significant time and resources which, in cases of extreme urgency, will not be acceptable.
PPN 01/20 does not opt for emergency legislation or a wide-ranging relaxation of the rules; instead, it reminds contracting authorities of the five key options available within the existing procurement regulations for awarding contracts quickly in cases of extreme urgency:
- direct award due to extreme urgency;
- direct award due to absence of competition or protection of exclusive rights;
- call off from an existing framework agreement or dynamic purchasing system (DPS);
- call for competition using a standard procedure but with accelerated timescales;
- extending or modifying a contract during its term.
It is therefore necessary for those contracting with the UK Government to familiarise themselves with these provisions and to take steps now to understand how they can best position themselves to respond to a contracting authority’s urgent needs.
When can contracting authorities use these options?
The options above are only available in limited circumstances. In particular:
- A direct award due to extreme urgency is only lawful in circumstances that are (i) current (i.e. not attributable to a contracting authority’s mitigation of future circumstances); (ii) unforeseeable (the PPN expressly states that the pandemic qualifies); and (iii) not due to the contracting authority’s own (in)action. It must be impossible to resolve the situation using the accelerated timescales permitted by the PCRs.
- Where a direct award is made for lack of competition/protection of exclusive rights, there must be no reasonable alternative. The contracting authority must also ensure it has not artificially narrowed the scope of the procurement exercise.
- For a call off from an existing framework agreement or DPS to be lawful, the contracting authority must have been clearly identified as a permitted customer in the original OJEU notice, the goods or services must fall within the scope of the original framework (which must itself be suitable for current needs and not need significant changes) and the original framework or DPS must have been procured in accordance with the PCRs.
- Modifications or extensions of existing contracts are only permissible if the circumstances are unforeseeable (see above), do not alter the overall nature of the contract and do not entail price increases of over 50 per cent.
Risks for government contractors
Given these tight restrictions, there is a risk of contracting authorities getting it wrong, and of aggrieved competitors challenging the process as being unlawful. (For an example of such a challenge in the context of Brexit, see here.)
In the worst-case scenario, such challenges give rise to lengthy and expensive legal disputes and may result in a contract being declared “ineffective”, with all future contractual obligations thereunder being cancelled.
How can contractors protect their position?
As the COVID-19 situation unfolds, it is more important than ever for government contractors to be alert to these risks and familiar with the relevant procurement rules.
If there is any indication that the authority intends to bypass the ordinary procurement process on the grounds of urgency, contractors are well advised to engage and collaborate with the authority as early as possible, in order to determine its rationale and precise needs.
The ongoing pandemic will clearly have wide-ranging implications for those already contracting with public authorities, including issues with meeting existing contractual obligations. These considerations will not be addressed here.
The Cabinet Office has also just published PPN 02/20 in relation to supplier relief, which will be covered in a separate blog post.
Steps taken in EU jurisdictions
EU member states are finding different ways of dealing with the current pressures on public procurements.
Portugal has passed legislation (Decree 10-A/2020) allowing all public authorities to use the negotiated procedure without prior publication of notice in cases of urgency and necessity, and for performance to commence immediately without publication of a notice on the national procurement portal.
Meanwhile, urgent legislation passed by Italy (Decree 18/2020) loosens the procurement rules in a similar way for authorities procuring certain goods and services in the IT sector.
In the coming weeks we can expect more foreign governments to take such measures in order to help public services cope in these unprecedented circumstances.
See our coronavirus alert hub for more details.