UK Government publishes long-awaited Green Paper on transforming public procurement

The UK Government has published a Green Paper proposing fundamental reforms of the public procurement rules governing the purchase of goods, works and services by the public sector and certain utilities. Those rules are currently set out in a series of UK regulations that are based very closely on EU directives. Following Brexit, the Government wishes move away from the EU blueprint and to introduce new legislation which it claims will be more effective, flexible and transparent.

Public procurement legislation in the UK is currently dictated by EU law. As from 1 January 2021, the UK is no longer bound to follow EU law. Although the UK will still be obliged to respect the procurement rules laid down by the international Agreement on Government Procurement (GPA), these are much less detailed and prescriptive than the EU procurement directives. The Government therefore believes that Brexit has given it an historic opportunity to overhaul the current public procurement regime, which it sees as outdated and overly restrictive.

Some of the main ideas and proposals put forward in the Green Paper are briefly outlined below.

Consolidating the current regulations

The UK procurement rules are currently spread across four separate measures: the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016, the Concession Contracts Regulations 2016 and the Defence and Security Public Contracts Regulations 2011.

The Government proposes to replace these parallel regulations with a single, uniform set of rules for all contract awards.  This consolidated instrument will be supplemented by sector-specific sections where different rules are required for effective operation or to protect the UK national interest, for example in relation to defence or utilities.

Changes to procurement procedures

The current regulations provide for at least seven different types of award procedure, including competitive dialogue, competitive procedure with negotiation and innovation partnerships.  The Government proposes replacing this range with just three procedures:

  • a new competitive, flexible procedure, with minimal detailed rules, which will give buyers maximum freedom to negotiate and innovate;
  • the open procedure, which buyers can use for simple, ‘off-the-shelf’ requirements, as at present; and
  • the limited tendering procedure (equivalent to the current negotiated procedure without prior publication), where a reduced competition is justified by urgency, crisis or other exceptional circumstances. Purchasers would be obliged to publish a prior transparency notice whenever they have recourse to this procedure.

The Green Paper also proposes numerous changes within these procedures, including:

  • Establishing a single digital platform for supplier registration that ensures they only have to submit their data once to qualify for any public sector procurement.
  • Widening the grounds on which suppliers may be excluded for poor past performance of public contracts, and adding a new mandatory exclusion ground relating to the non-disclosure of beneficial ownership.  The Government will also explore the option of setting up a centrally-managed list of debarred suppliers.
  • Basing evaluation of bids on the most advantageous tender (MAT), instead of the current basis of most economically advantageous tender (MEAT): the Government believes that this change will encourage purchasers to place more emphasis on non-economic factors, including social values.
  • Allowing purchasers, in certain circumstances, to apply evaluation criteria that are not related to the subject-matter of the contract, such as criteria assessing a supplier’s record on prompt payment of sub-contractors or its plans for achieving environmental targets across its operations.
  • Allowing framework agreements to last longer than the current maximum of 4 years, provided they are re-opened to allow new suppliers to join at certain pre-defined points.
  • Removal of the mandated requirement to provide an individual debrief letter to each bidder at the end of a procurement process.  However, purchasers would still be required to publish some “basic” information, including the basis of the award decision, before initiating contract award and respecting a standstill period.
  • Greater flexibility to amend existing public contracts in times of crisis, but also a new requirement to publish notices describing any amendments to existing contracts

Reforming the regime for challenging procurement decisions

The current regulations allow aggrieved parties to seek remedies in the High Court for alleged breaches of the procurement rules.  The Green Paper proposes certain fundamental reforms to the current system, including:

  • The introduction of a tailored expedited process, to speed up the review system and make it more accessible.
  • Possible introduction of a specialised tribunal to determine low-value claims and issues on ongoing procurements
  • Introducing a new test for assessing whether the automatic suspension of a contact award procedure should be lifted by the Court
  • Removing automatic suspension on the award of contracts let competitively in situations of crisis or extreme urgency.
  • Capping the level of damages available to aggrieved bidders to legal fees and 1.5 times their bid costs, and excluding damages for loss of chance or loss of profit, in order to reduce the attractiveness of speculative claims.  However, this cap would not apply where the supplier had no opportunity to challenge the procurement before award, as in the case of illegal direct awards or unlawful contract amendments.

Conclusions and next steps

The Green Paper paves the way for the most significant reform of UK procurement law for a generation.  In doing so, it provides a very concrete example of the possibilities for change afforded by Brexit.  The proposals are bound to generate widespread interest and debate among all parties interested in this substantial sector of the economy.  We intend to provide further analysis and commentary on the proposed reforms in the New Year.

Interested parties are invited to respond, by 10 March 2021, to various questions posed at the end of each chapter of the Green Paper.  It will then take some months for the Government to digest the responses and to reflect them in proposed new legislation, which may then become law in late 2021 or during 2022.

Tim Briggs
Tim Briggs
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Andrew Lidbetter
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Rachel Lidgate
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Jasveer Randhawa
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The UK gears up for public procurement outside the EU

The Government continues to prepare the ground for the regulation of public procurement after the Brexit transition period expires on 31 December 2020. On 19 November it enacted the Public Procurement (Amendment etc.) (EU Exit) Regulations 2020, which amend the existing UK procurement regulations in order to reflect the fact that the UK will no longer be bound by EU law from 1 January 2021. Read our Competition Notes item here on the impact of these Regulations and also the Government’s planned Procurement White Paper.

Our booklet on procurement disputes can be found here: Procurement Disputes Booklet – August 2020, which collates a number of significant cases from recent years in order to provide an overview of the current procurement regime for running evaluation processes and the issues which arise in High Court litigation when procurement processes are challenged.

Andrew Lidbetter
Andrew Lidbetter
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Nusrat Zar
Nusrat Zar
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Jasveer Randhawa
Jasveer Randhawa
Of Counsel
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Tim Briggs
Tim Briggs
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Adrian Brown
Adrian Brown
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Dorothy Livingston
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Parliamentary Committee considers remit of the proposed Constitution, Democracy and Rights Commission

The House of Commons’ Public Administration and Constitutional Affairs Committee (the “PACAC”) is conducting a Call for Evidence as part of its inquiry (the “Inquiry”) in relation to the commitment in the 2019 Conservative Party manifesto (at page 48) that the Government would establish a Constitution, Democracy and Rights Commission (the “Commission”).

Background

According to the manifesto commitment, the Commission’s purpose would be to make proposals “to restore trust in our institutions and in how our democracy operates”. The manifesto stated that the role of the Commission would be to examine: the relationship between the Government, Parliament and the courts; the functioning of the Royal Prerogative; the role of the House of Lords; and access to justice for ordinary people. It appears the intention was that the Commission would also “update” the Human Rights Act and administrative law, as well as ensure that judicial review is “available to protect the rights of the individuals against an overbearing state, while ensuring that it is not abused to conduct politics by another means or to create needless delays”.

The Government subsequently announced that it had appointed a panel of experts to examine whether there is a need to reform the judicial review process and there was a Call for Evidence by the Government’s Independent Review of Administrative Law (the “IRAL”; see Public Law Notes updates of 3 August 2020 and 27 October 2020). As regards the remaining commitments, the Government has made no announcements about the form or timing of the Commission except in the Queen’s Speech.

The Call for Evidence seeks submissions on the form which the Commission should take, its main purpose and output, and any particular issues which should be a priority for the Government. This Call for Evidence gives members of the public the opportunity to have their say and influence the findings of the Inquiry.

Evidence to the Inquiry

Oral evidence has been given to the Inquiry by a number of individuals including Lord Sumption, former Justice of the Supreme Court, and academics.

The focus of the oral evidence given so far has been on what should be the priorities for the Commission. The suggestions covered a broad array of topics including (among others):

  • The context of the reforms that the Commission would consider in that Brexit is “affecting the relationships between the different institutions in the Constitution” in any case and so it may be sensible to consider significant constitutional issues at this juncture;
  • The opportunity to “rebuild public trust” in the institutions following the divisive Brexit debates;
  • The electoral system;
  • The House of Commons’ ability to control the legislative agenda;
  • The implications of the Human Rights Act 1998;
  • The separation of powers;
  • The role of the public and how the public might be engaged with the Commission;
  • Whether the Government is approaching the issues which the Commission will consider with an open mind.

The PACAC has not yet stated when the findings of the Inquiry will be published.

Selecting a tactical or strategic approach to constitutional reform

The New Labour Government’s constitutional reform programme in the 1990’s and 2000’s took what some have described as a “piecemeal” approach as it introduced devolution, enacted the Human Rights Act 1998; established a freedom of information regime and reformed the House of Lords. Given the pressure of COVID-19, the Government may find that it does not now have the time to consider constitutional reforms in the round. Therefore, there is a real possibility that this Government could replicate New Labour’s approach, by thinking about issues tactically and thus leaving some dissatisfied.

Evidence given to the Inquiry by Professor Russell, Director of the Constitution Unit at University College London, suggested that there has been a “sort of scattergun” approach by Government, including proposals such as moving the House of Lords to York; abolishing certain regulators or weakening their powers; and establishment of the IRAL. Further, there have been reports over the weekend that the Government is backing plans to reform the Supreme Court by reducing the number of Justices and renaming the institution. Lord Lisvane, a Member of the Constitutional Reform Group Steering Committee, has also suggested that the overlap between the Commission and the IRAL is “a recipe for unconstructive confusion”.

Lord Lisvane has rightly pointed out to the Inquiry the potential scale of the Commission’s remit:

The daunting thing about what is proposed is the sheer size of the canvas. As soon as you start unpacking the individual elements they expand further. For example, how do you do Government and Parliament relations without looking at the devolution settlements? How do you do access to justice for—in the condescending phrase—ordinary people without looking at the structure and resourcing of the justice system and legal aid? As soon as you start looking in more detail, the sheer size of the task starts to increase. I think that that is going to be a major challenge…

The Call for Evidence closes on 16 November. It will be interesting to see how the Committee’s findings fit with the remit of and any recommendations made by IRAL, which is due to report back later this year.

Andrew Lidbetter
Andrew Lidbetter
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Nusrat Zar
Nusrat Zar
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Jasveer Randhawa
Jasveer Randhawa
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Shameem Ahmad
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Policy making through the back door – Spotting issues and challenging Brexit-related SIs

With the European Union (Withdrawal Agreement) Act 2020 (the Withdrawal Agreement Act) now formally on the statute books, Britain is set to exit the EU at the end of January. Exit day, however, only marks the next step in the Brexit process. The UK will enter into a transition period until 31 December 2020, during which time the UK and the EU will seek to negotiate a trade deal.

Meanwhile, work is continuing to fill the gaps in the UK’s legislative landscape following Brexit in accordance with the scheme laid down in the European Union (Withdrawal) Act 2018 (the Withdrawal Act). These gaps are largely being filled through statutory instruments (SIs) rather than primary legislation. Research by the Public Law Project as part of its Statutory Instruments: Filtering and Tracking (SIFT) project suggests that a total of nearly 1000 SIs will have been laid down by exit day. Introducing secondary legislation is undoubtedly quicker and administratively easier for law makers, and in most cases the legislation will go no further than is permitted by the Withdrawal Act, as amended by the Withdrawal Agreement Act. Brexit-related Statutory SIs may, however, provide cause for concern for businesses and individuals if there is a risk that SIs are being used to introduce significant legal and policy changes.

What are Statutory Instruments?

The power to make an SI is usually conferred on a Minister through an Act of Parliament, and the Minister is then able to make law on the matters identified in the relevant Act. SIs typically do not go through the same Parliamentary scrutiny as Acts of Parliament. Some SIs are subject to the “affirmative procedure”, which means that they are scrutinised by the Joint Committee on Statutory Instruments (JCSI), and then approved by both Houses before being signed by a Minister. However, the majority of SIs in Parliament are laid under the “negative procedure”, by which they become law (after the JCSI scrutinises them) on the day the Minister signs them, and automatically remain law unless a motion to reject the SI is agreed by either House within 40 sitting days. Such a motion has not been agreed in the House of Commons since 1979 and in the House of Lords since 2000. Additionally, there is now a European Statutory Instruments Committee (ESIC) in the Commons. The ESIC ‘sifts’ through Brexit-related SIs and can recommend that a different procedure be used to make a particular SI. The Secondary Legislation Scrutiny Committee (SLSC) is tasked with a similar sifting exercise in the House of Lords. However, there remain concerns around whether this sifting process is effective (and in any case, it does not apply where a Minister makes a declaration of urgency).

In the context of Brexit, sweepingly broad powers have been given to the executive under the  Withdrawal Act to make regulations in order to ensure that the law functions as normal on exit day. Section 8 of the Withdrawal Act gives ministers the power to “make any provision that could be made by an Act of Parliament” to “prevent, remedy or mitigate” any failure of retained EU law to operate effectively, or any other deficiency in retained EU law, arising from the withdrawal of the UK from the EU. Additionally, the Withdrawal Agreement Act inserts a number of new powers into the Withdrawal Act – including powers under a new section 8A to modify any provision made by or under an enactment for purposes connected with the arrangements for a transitional period. Further, the so-called ‘Henry VIII power’ to amend primary legislation via secondary legislation (which has been subject to considerable criticism) has been extended to Ministers for use in a number of other contexts.

Possible impact

Brexit is a period of exceptional legislative change and challenge. There is therefore a chance that the body of SIs being introduced is not entirely cohesive and joined up. There is also a risk that new SIs are introduced which go further than was envisaged in the primary legislation whilst, in practice, being subject to little or no scrutiny by Parliament.

This is not merely an academic issue. SIs that have been introduced or proposed in the lead up to exit day cover a wide range of topics including cross-border taxation, pharmaceutical testing, financial services, energy regulation, and environmental protections. Often, they contain the nuts and bolts of the regulatory framework that primary legislation does not cover, and deal with complex technical topics that only businesses and experts may fully be able to understand and analyse. Consequently, unless businesses are vigilant, there is a risk that the raft of SIs introduced could inadvertently bring in new obligations on businesses through the back door or fundamentally alter the regulatory landscape.

For instance, the Cross-border Trade (Public Notices) (EU Exit) Regulations 2019 were laid and would have empowered officials to amend VAT or customs and excise law by public notice following Brexit. These regulations would have represented a fundamental shift in tax law in the UK as it would have equipped Treasury officials with the power to amend the law simply by giving public notice. However, HMRC were forced to back down and revoke this SI following the threat of legal action.

On the other hand, the suite of SIs dealing with the financial services sector have been the subject of extensive consultation involving both the financial regulators and the affected institutions as well as lawyers operating in the relevant area, in a way which reduces the risk of legislative overreach.

Spotting issues and challenging SIs

The HMRC example shows why it would be prudent for businesses to keep a close eye on SIs relevant to their industry or sector and to engage with the relevant government department directly, or through a trade association on the contents of such legislation.

Courts do not generally have the power to strike down Acts of Parliament save in EU law cases (and there could be a “declaration of incompatibility” in Human Rights Act cases). However, the position is different for statutory instruments as they can be challenged on administrative law grounds and potentially struck down. For example, the Supreme Court recently reaffirmed the position that secondary legislation is subordinate to the requirements of an Act of Parliament (RR v Secretary of State for Work and Pensions [2019] UKSC 52). [1] There is therefore scope for challenging SIs if they are ultra vires i.e. where they go beyond the scope of the power conferred by the relevant Act of Parliament.

In the Brexit context, it is important to note that the legislative purpose underpinning section 8 and the new section 8A of the Withdrawal Agreement is to plug legislative gaps and fix deficiencies following Brexit, and not to introduce new policies. Consequently, any SIs that introduce wider policy changes could be open to challenge. There may also be other substantive grounds to challenge SIs. For example:

  • If its provisions contravene the European Convention on Human Rights (ECHR);
  • If it can be demonstrated that the SI is irrational; or
  • If irrelevant considerations were taken into account, or relevant considerations not taken into account, when the SI was made.

There is also the possibility that an SI could introduce new wording that is open to interpretation. While the wording itself might on its face be interpreted as being within the scope of the Withdrawal Act powers given to Ministers, the Government could in the future interpret such wording in a way that could be considered to be beyond such powers. The English Courts have not yet had occasion to fully set out how it would deal with such situations. However, in an early challenge against three separate Brexit-related SIs (R on the application of Client Earth and anr v Secretary of State for Environment, Food and Rural Affairs [2019] EWHC 2682 (Admin)), the High Court indicated that challenges could in theory be brought against “a specific future decision” relying on the terms of an SI.

In any event, a decision to challenge an SI (or an act of the Government relying on the terms of an SI) will have to be taken swiftly. Applications for judicial review must be made promptly and, in any event, within three months of the relevant decision. It is therefore essential for businesses and organisations to take immediate legal advice to consider whether an SI throws up concerns, whether it can be challenged by way of judicial review, and if so, how and when to bring such a challenge.

Conclusion

The Government’s use of SIs to fill legislative gaps is understandable. That being said, there remains a concern that SIs could introduce wider legal and policy changes. In the circumstances, it is important for businesses and their advisers to monitor whether these SIs impact their operations (or, indeed, whether they could impact their operations in the future). If there is a risk of that happening, businesses should consider whether seeking the court’s oversight via judicial review proceedings is necessary.

[1] HSF acted for three charities who jointly intervened before the Supreme Court in this case. More detailed insight into the judgment is available in our e-bulletin here and in our Public Law podcast here.

Andrew Lidbetter
Andrew Lidbetter
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Nusrat Zar
Nusrat Zar
Partner
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Jasveer Randhawa
Jasveer Randhawa
Of Counsel
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Sahil Kher
Sahil Kher
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