We’ve talked about the way public procurement can be fairly inflexible due to the laws that surround it, but what of the actual legal framework itself? Before we delve into any definitions and specifics, it’s worth noting that while EU and UK law legislate for the process of procurement itself, they do not stipulate what outcomes must be achieved, aside from ensuring that processes are non-discriminatory and open to fair competition.
The over-arching requirements of public procurement policy is that the process must be based on value for money, defined more technically as “the best mix of quality and effectiveness for the least outlay over the period of use of the goods or services bought”. Public sector procurement is subject to a legal framework which encourages the free and open competition and value for money mentioned above, but is also compliant with internationally and nationally agreed obligations and regulations.
Therefore, the government aligns procurement policies with this legal framework, as well as with its wider policy objectives.
What is the legal framework for public procurement?
Broadly speaking, public procurement is governed by three fundamental sets of rules and regulations, as follows:
- The EU Treaty sets out the fundamental principles that govern the EU, which apply to all contracts.
- There is a broad framework of law that all public bodies must follow, including laws that govern contracts and a regulatory framework that defines public bodies’ duties and powers. These public bodies then establish their own internal procedures.
- EU Procurement Rules are set out in the EU’s ‘consolidated directive’ and implemented across the UK by the public contracts regulations 2006.
The Principles of EU Procurement Rules
The EU Treaty puts forward further principles that public procurement is subject to, namely: non-discrimination, free movement of goods, freedom to provide services and freedom of establishment. In addition to these, some general principles of law have emerged from the case law of the European Court of Justice. In the context of procurement, the most important of these include: equality of treatment, transparency, mutual recognition and proportionality.
When do such legal regulations apply?
Where the following pre-conditions are met, a contracting authority must normally advertise the contract in the EU’s Official Journal and follow the procedural rules decreed in the Regulations:
– The body doing the buying is a “contracting authority”
Contracting authority definitions are far-reaching and include central government, local authorities, and associations formed by one or more contracting authorities, as well as other bodies governed by public law such as universities and housing associations.
– The contract is for public works, public services or public supplies
Sometimes the contract will be a mixed contract (the supply and maintenance of computers, for instance). When this occurs, a contracting authority must determine which element (e.g. supply or maintenance) is the predominant element and, therefore, which set of rules will apply.
This is important since the rules vary slightly depending on the type of contract; for instance, lower financial thresholds apply to services and supplies contracts compared to works contracts.
– The estimated value of the contract equals or exceeds the relevant financial threshold
The rules expressly prohibit deliberately splitting contracts to bring them below these thresholds.
Current Financial Thresholds from 1st January 2020:
– £4,733,252 for the procurement of works
– £122,976 for the procurement of supplies and so-called Part A services by Central Government bodies
– £189,330 for the procurement of supplies and Part A services by other public sector bodies
The Public Contracts Regulations 2015
After enacting the 2014 EU Procurement Directives, the government worked to prioritise the Public Contracts Directive for early implementation, in order to deregulate and simplify the rules for where most procurement spend and activity takes place. On 26 February 2015, the implementation of the Public Contracts Regulations 2015 took effect, enabling buyers to speed up their procurements in a more streamlined manner, with the onus on getting the right supplier and best tender in accordance with sound commercial practice.
Companies buying supplies, services or works for central government, a non-ministerial department, executive agency, or non-departmental public body, must follow the procedures detailed within the Public Contracts Regulations before awarding a contract to suppliers. Wider public sector bodies, such as local government, health and education are also subject to the Public Contracts Regulations.
Likewise, public procurement is also subject to the World Trade Organisation Government Procurement Agreement, which upholds much of what has already been mentioned, including open, fair and transparent conditions.