David Baybut examines the key changes for social landlords arising out of the new procurement rules and the attraction of joining frameworks.
The new EU Procurement rules for England, Wales and Northern Ireland mean big changes for social landlords looking to tender public contracts. The changes were first introduced through three new directives in April 2014, but the Government’s decision to allow for a one-year grace period meant many organisations would only just be encountering the new regulations this summer.
The EU’s Public Sector Procurement Directive is billed as the biggest overhaul of public procurement law for almost a quarter of a century. The European Commission, who drafted the new rules, hope that the change will create a leaner, simpler and more easily accessible process, particularly for smaller organisations who had previously found themselves ‘out-muscled’ by larger providers.
Despite the intentions of the new regulations, there are a number of practical changes to consider. Many of these are likely to present a greater demand on resources.
Those who are accustomed to issuing even a steady stream of tenders will notice a considerable increase in the number of contracts requiring a full tender process. Under the old rules, contracts for services were split into two parts. ‘Part A services’ demanded a complete tender process while ‘Part B services’ were, in the most part, exempt. Now, that distinction is being scrapped, meaning what would have been considered ‘Part B services’ will require the same treatment, meaning more work for social landlords preparing their tender process.
However, a new ‘light touch’ regime has been introduced for contracts that exceed €750,000 (approximately £532,000) in value for social services and care type contracts. These will require a simplified version of the formal tender process (those involving a notice in the Official Journal of the EU – OJEU.)
In addition to this, the formal tender processes will now require all procurement and contract documents to be published online from the date the OJEU notice is published. This means more work for social landlords, ahead of the process itself.
The new regulations will see the scrapping of the current pre-qualification stage for procurements in an attempt to ‘trim the fat’ around initial screening process. This usually consists of a series of pass-fail questions, covering the tender’s minimum requirements, as well as a graded score to find the best supplier among applicants. Now, the pass-fail questionnaire will be replaced with a ‘self-declaration’ with only the successful supplier’s declaration being checked before the final contact is signed. Despite the loss of the pass-fail criteria, the time-consuming ‘grade system’ remains in place and the addition of a self-declaration is likely to maintain, if not increase, the current demands as organisations become accustomed to the new format.
Furthermore, the pre-qualification stage will be dropped completely for contracts valued below the EU tendering threshold for services. This means all tenders received will need to be evaluated in turn, providing further cost and more work for social landlords considering an increasing number of contracts. The UK government has added to this with regulations which aim to open the door to small and medium sized organisations. Contracts valued over £25,000, but below the EU’s threshold requiring a full tender, which are advertised publically will have to be duplicated on the government’s Contract Finder website. This potentially means more contracts being available to more providers and increasing paperwork for the social landlord.
Sadly, this is just the tip of the iceberg for social landlords facing a raft of new regulations and getting a full understanding of the new processes required is no easy task.
The new procurement rules make it even more pressing for social landlords to consider the feasibility of working with a procurement framework. This is an agreement put in place with providers that allows those looking to procure services to avoid a lengthy full tendering exercise. Buyers will simply place orders for services from this group of providers who have already agreed to the framework’s terms and conditions. This means that the providers are screened by the framework’s own application processes, allowing for greater control over the quality of the services offered.
Futhermore, under the conditions of a framework, there is no obligation to hold any kind of tendering process among the registered providers. Buyers can simply ‘call-off the framework’ and deal directly with the supplier of their choice. Alternatively, the buyer can create a ‘mini-competition tender’, setting the parameters and scale of each process, without being obliged to allow every registered provider the opportunity to bid.
Providers may also be bound by ‘ceiling prices’, restricting the amount each can charge for their services.
As such, frameworks can provide significant savings for social landlords, both in terms of time and money. The timescale of a procurement exercise can be significantly cut, while financially, the costs of procurement can mean immediate and long term savings.
What’s more, provided the framework is established in compliance with EU and UK regulations governing procurement legislation, then there is no requirement for an individual social landlord member to keep abreast of the latest changes in regulations pertaining to procurement.
Given the wide-spread dissatisfaction from social landlords, who have faced the considerable red-tape of European buying rules since 2004, the new changes are unlikely to be widely welcomed. Despite the honourable intentions to make the procurement process fairer and more transparent, the work required to bring tender processes in line with the directive could provide a significant headache for social landlords.
For those wishing to avoid a potentially costly period of adjustment, procurement frameworks provide a viable alternative to self-tendering, not just in terms of financial benefit, but through freeing-up valuable resources.