Procurement - overviewProcurement law

The Treaty of Rome 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 addresses contracts awarded by:

Directive 2004/17/EC addresses contracts awarded by operators of utilities services, particularly:

The Public Contracts Regulations 2006 (PCR 2006), SI 2006/5 and the Utilties Contract Regulations 2006 (UCR 2006), SI 2006/6 implement Directive 2004/18/EC and Directive 2004/17/EC, respectively, into national law and govern the operation of public procurement law in England and Wales.

There are three main types of contract covered by PCR 2006:

Only contracts that exceed the financial thresholds set by the EU are subject to PCR 2006. An OJEU notice advertises for contracts subject to PCR 2006 and are published in the Official Journal of the European Union (OJEU).

There are four procedures that a contracting authority may follow for procuring contracts:

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' or standstill period) between notification to all candidates and tenderers and award of the 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 (a 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).

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

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:

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.

Localism Act

The Localism Bill received Royal Assent on 15 November 2011. When the Localism Act 2011 goes into effect on 1 April 2012, it will provide for a general power of competence for local authorities in England. The effect of this will be that local authorities can essentially act in the same way as an individual. This means that no action (except raising taxes) will be ‘beyond the powers’ of local government, unless the local authority is prevented from taking that action by the common law, specific legislation or statutory guidance. Only the Secretary of State would be able to veto a local authority’s action.