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Desperate times call for desperate measures: Public procurement in times of crisis

We have all become accustomed to a daily diet of news reports concerning the perceived continuing failure by the Government and Public Health England to act more quickly to source important medical equipment, whether it be ventilators or personal protective equipment.  In the last few days, for example, the BBC aired a Panorama programme on ‘How the Government has failed the NHS’, which purported to investigate ‘the delays and mistakes that have put the lives of NHS staff at risk’.

We will probably have to wait until after the present crisis has passed before we can establish the validity of the charge, but there is no doubt that the outbreak of the coronavirus crisis has placed public bodies under intense pressure to procure items of medical and other equipment in order to help the NHS to help fight the effects of the virus.

Despite the urgency of the need to obtain this or any other similar equipment, contracting authorities (i.e. public bodies) still have to comply with the Public Contract Regulations 2015 (‘PCR’) when awarding the relevant contract. If they fail to do so, they will run the risk of a subsequent challenge from those suppliers who were not awarded the relevant contract and who can properly claim that the procedure adopted was unlawful.

Recognising the difficulty, on 18 March 2020, the Government issued a Procurement Policy Note – ‘Responding to Covid 19’ (PPN 01/20) containing general advice for contracting authorities who may need to procure goods, services and works with extreme urgency. Whether and to what extent the Government (or Public Health England) has followed its own advice remains to be seen.

Normally, the PCR require contracting authorities to advertise the existence of the contract opportunity in advance and to conduct a competitive tender, with comparatively lengthy timescales prescribed by the rules. In cases of extreme urgency, those timescales may simply be too long.

PPN 01/20 draws the attention of contracting authorities to the various options which already exist under the PCR allowing them to procure goods, services and works with extreme urgency. Those options include:

  • 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;
  • Call for competition using a standard procedure with accelerated timescales;
  • Extending or modifying a contract during its term.

Direct Award

PPN 01/20 reminds authorities that Regulation 32(2)(c) of the PCR makes express provision for the direct award of a contract due to extreme urgency. Making a direct award involves dispensing with advertisement and competitive tender altogether. Regulation 32(2)(c) provides that:

“The negotiated procedure without prior publication may be used for public works contracts, public supply contracts and public service contracts in any of the following cases: …

(c) insofar as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with.

… the circumstances invoked to justify extreme urgency must not in any event be attributable to the contracting authority.” [Emphasis added]

However, as the Information Note makes clear, in order to take advantage of Regulation 32(2)(c), contracting authorities will need to be able to demonstrate that:

  • There are genuine reasons for extreme urgency (e.g. the need to respond immediately because of public health risks);
  • The events that have led to the need for extreme urgency were unforeseeable (i.e. because the Covid-19 situation was so novel that the consequences could not have been predicted);
  • It is impossible to comply with the usual timescales in the PCR (e.g. there is no time to run an accelerated procurement under the open or restricted procedures or competitive procedures with negotiation);
  • The situation is not attributable to the contracting authority (i.e. the need for extreme urgency must not result from the authority’s own delay).

It is that last point which may well prove the undoing of many contracting authorities. It will not avail a contracting authority to say that it had to procure, say, large quantities of PPE as a matter of extreme urgency if the evidence shows that it should have foreseen the need rather sooner than it did and the need for urgency has therefore only arisen as a result of its failure to act more promptly.

Direct award due to absence of competition or protection of exclusive rights

The Information Note also reminds authorities that, under Regulation 32(2), they can make a direct award where the works, goods or services needed to respond to Covid-19 can only be supplied by a particular supplier because either:

  • competition is absent for technical reasons (e.g. because there is only one supplier with the requisite expertise); or
  • it is necessary for the protection of exclusive rights, including intellectual property rights (i.e. where the supplier owns those rights).

However, and as the Note makes clear, a direct award will only be justified where (a) there is no reasonable alternative or substitute available and (b) the authority is not doing something which artificially narrows the scope of the procurement such as by over-specifying the requirement.

Whilst it is conceivable that there might be items of equipment which fall into one or other of these categories, neither is likely to apply in relation to the supply of either ventilators or PPE. For example, it appears that there are any number of companies such as Dyson, Rolls Royce and Airbus offering to adapt their production lines in order to manufacture and supply ventilators.

Call off from an existing framework agreement or dynamic purchasing system

A framework agreement is a contract made between a contracting authority and one or more economic operators under which the contracting authority can award a number of specific or call-off contracts over a period of years without the need to go through the whole tender process each time it wishes to do so.

As the Information Note explains, it is possible for an authority to use a framework agreement to meet its needs but only if:

  • the goods, services or works to be procured fall within the scope of the agreement;
  • the agreement was itself procured in accordance with the PCR; and
  • the terms of the agreement are suitable and meet the needs of the authority without the necessity of any significant changes.

Again, although not inconceivable, it seems unlikely that this provision will in fact assist many contracting authorities, given the huge increases in the quantities of equipment required in order to meet the demands created by the Coronavirus.

Using a standard procedure with accelerated timescales due to urgency

The Information Note also reminds authorities that Regulations 27(5), 28(10) and 29(10) of the PCR allow for a reduction in the minimum timescales normally required for the open procedure, the restricted procedure and the competitive procedure with negotiation if a state of urgency renders the standard timescales impracticable. For example, the timescale which normally applies under the open procedure can be reduced to 15 days for the receipt of tenders plus the minimum 10 days for the standstill period.

There is no express requirement for the situation to be unforeseeable or not attributable to the contracting authority, but a state of urgency rendering the standard timescales impracticable does have to be duly substantiated by the authority. There is no guidance as to whether a contracting authority can properly substantiate a state of urgency in circumstances where it has itself created the urgency. It seems unlikely because otherwise a contracting authority could always delay taking action in order to create a state of urgency.

Extending or modifying a contract during its term

Regulation 72(1) allows a contracting authority to modify a contract (e.g. to increase the number of units supplied) without a new procurement procedure where:

  • the need for modification has been brought about by circumstances which a diligent contracting authority could not have foreseen;
  • the modification does not alter the overall nature of the contract; and
  • any increase in price does not exceed 50% of the value of the original contract or framework agreement.

The Information Note explains that multiple modifications are permissible, but each one should not exceed the 50% of the original contract value. Authorities are also advised to consider limiting the duration and/or scope of the modification and running a procurement for longer term/wider scope requirements alongside it.

Again, and as with the framework agreements, it seems unlikely that this provision will assist many contracting authorities, given the scale of the increases in the quantities of equipment required.

Conclusion

Although designed to assist contracting authorities to procure supplies of equipment rather faster than would otherwise normally be possible under the PCR, the Information Note actually only serves to highlight the difficulties which contracting authorities may face in trying to take advantage of any of the provisions mentioned.

It might of course be hoped that, in the spirit of cooperation, unity and humanity, aggrieved suppliers might forebear from issuing challenges to procurement processes during the current crisis. However, the fact that all businesses are likely to be suffering a severe cash shortage as a result of the crisis may well make that a vain hope, as those suppliers who have not had a proper opportunity to tender consider what steps they might take to obtain redress.

In fact, far from reducing the risk of successful challenges, the PPN might unwittingly increase the risk, by encouraging contracting authorities to justify shortened timescales on the ground of extreme urgency, when it might subsequently be shown that the urgency arose purely as a result of the authority’s own delay.

Written by David Sears QC.



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