Procurement — overviewProcurement law

The Treaty of Rome (the Treaty) is the foundation of modern procurement law. The EU procurement regime consists of a series of directives that have been implemented in each EU member state.

Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts covers the procurement of works, services and supplies.

The Public Contracts Regulations 2006 (PCR 2006) implement Directive 2004/18/EC into national law and govern the operation of public procurement law in England and Wales.

Local authorities are contracting authorities. There are three main types of contract covered by PCR 2006:

• works

• supplies

• services

Only contracts that exceed the financial thresholds set by the EU are subject to PCR 2006. An OJ notice is effectively an advertisement for contracts subject to PCR 2006, which is published in the Official Journal of the European Union (OJEU).

PCR 2006 contain several procedures for procuring contracts:

• open procedure

• restricted procedure

• accelerated restricted procedure

• negotiated procedure

• competitive dialogue

Particular care should be taken in compiling selection and evaluation criteria as recent case law has implied that contracting authorities must provide full details. There must be a minimum period of 10 days (the Alcatel period) between notification to all tenderers and formal contract.

Private Finance Initiative

The Private Finance Initiative (PFI) is a form of public private partnership (PPP). As central government provides financial support for PFI projects through PFI credits, it must approve both the project and the legal agreement. PFIs operating in different local authority sectors have their own sector-specific guidance.

One of the core objectives of a PFI contract is to achieve the proper allocation of risk between the public and private sectors, and to allocate risk to the party best able to manage it. In most cases the PFI contractor is a special purpose vehicle or company, owned by the PFI sub-contractors, whose function is to contract with the authority and the funder. Obligations are passed down from the PFI contractor to its sub-contractors to undertake or deliver the works/services.

All PFI contracts require the PFI contractor to ensure that the availability standard (an obligation to ensure the PFI facility is available for use) and the PFI contractor's performance do not fall below key performance indicators (KPIs).

TUPE's effect on PFIs/PPPs

PFI and PPP projects can contain transfers of undertakings and service provision changes that are caught by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE 2006). Although the debate about whether TUPE 2006 applies now occurs less frequently, the issue about which employees it applies to remains a significant issue.

As well as TUPE 2006, public sector organisations should have regard to:

• Staff Transfers in the Public Sector — Statement of Practice

• Code of Practice on Workforce Matters in Local Authority Service Contracts

• Code of Practice on Workforce Matters in Public Sector Service Contracts

Joint ventures

Local authorities often form joint ventures with the private and third sectors to meet the challenge of improving services while reducing costs and achieving efficiencies.

Local authorities must act within the express and reasonably implicit powers granted to them by Parliament otherwise their act(s) will be deemed outside their powers (ultra vires) and vulnerable to challenge by way of judicial review or auditor challenge.

Examples of powers are:

• Local Government Act 2000, s 2 (the well-being power)

• Local Government Act 2003, s 95(1)

Most commercial joint ventures use companies limited by shares or LLPs as the corporate vehicle. A local authority's Monitoring Officer and Section 151 Officer need to ensure that a local authority joint venture company complies with the propriety controls.