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This article was first published on Lexis®PSL Public Law on 19 October 2016. Click for a free trial of Lexis®PSL.
Most procurement of goods and services by public authorities and regulated utilities has long been subject to EU and UK procurement law, including, most recently, the Public Contracts Regulations 2015, SI 2015/102 (PCR 2015) and the Utilities Contracts Regulations 2016, SI 2016/274 (UCR 2016).
By contrast, until the CCR 2016 came into force:
Many important high value public concession contracts are awarded by contracting authorities every year. To ensure a level playing field, the European Commission included concessions in their modernisation proposals for the EU procurement rules, which led to the Concessions Contracts Directive 2014/23/EU being adopted.This Directive was implemented in England, Wales and Northern Ireland by the CCR 2016.
Most concession contracts for either works or services must now be procured following a competitive tendering process. This process is started by placing an advertisement in the Official Journal of the European Union (OJEU). Previously service concessions could be advertised less formally (for example on the contracting authority’s website). Although significantly more flexible than the processes under the UCR 2016 and PCR 2015, procurements under the CCR 2016 must comply with the EU Treaty principles as well as with many new requirements such as obligations to:
Additionally, disgruntled bidders who are prejudiced by breaches of the CCR 2016 have access to a full range of remedies. These remedies mirror the procedures under the PCR 2015 and the UCR 2016. If court proceedings start before contract signing, this automatically suspends the contracting authority’s/utility’s right to sign the contract, the courts can set aside the contract award decision and it can award damages. If court proceedings start after the contract is concluded, the courts can declare a contract ineffective (void) and it can fine the contracting authority/utility.
Contracting authorities will be familiar with the procurement processes under the UCR 2016 and PCR 2015 and can, if they wish, mimic or adapt their procedures them to suit their needs when procuring concessions. This may make compliance with the CCR 2016 relatively ‘familiar’ and straightforward.
However, a practical challenge will be to avoid this temptation in cases where it is not necessary and could discourage good providers from coming forward. A particular risk group will be SMEs, which often struggle to win contracts that are awarded following a formal public procurement process.
Contracting authorities and utilities will also continue to find it difficult to identify the boundary between whether a contract should be treated as a concession (now under the CCR 2016) or a services contract/works contract (under the PCR 2015 or the UCR 2016). The distinction is still important given the very different levels of regulation.
The most significant EU case concerns an agreement to settle litigation—case C-549/14 Finn Frogne A/S v Rigspolitiet ved Center for Beredskabskommunikation. As part of the settlement the parties made changes to the public contract. The Court of Justice held that settlement agreements which vary public contracts must be dealt with in the same way as other changes to public contracts: the fact that there are objectively justifiable reasons for agreeing the changes to the contract is not relevant.
The Court of Justice also made clear that this applies even where the settlement resulted in a reduction in scope and price of the contract. The logic is that the smaller contract could have been accessible to smaller firms that were not able to bid for the original, larger contract.
The case is potentially relevant to procurements under both the PCR 2015, UCR 2016 and the CCR 2016. It demonstrates to authorities the importance of considering whether changes to the contract are permitted under the procurement rules, even when the changes are agreed in an attempt to settle litigation in order to ensure continued performance or to avoid termination of the contract. Changes can be made to contracts if the change control provisions are sufficiently robust. In particular, they should be clear and precise, anticipating the specific scope and nature of the possible changes and (preferably) the impact on price. This case highlights the increased importance now for authorities to carefully consider the change control clause on a case by case basis when drafting the original contract, rather than treating it a standard boilerplate clause.
As is the case under the PCR 2015, it is not clear whether declarations of ineffectiveness are available for certain types of public procurements. This relates to procurements of certain social and other services that can be started by publication of a prior information notice (PIN) rather than a contract notice.
For the time being, the CCR 2016 continue to apply despite the Brexit vote. In the longer term, there could be changes, depending on the outcome of the Brexit negotiations. However, since regulation of concession contracts is light touch, it is possible we will only see minor changes such as a requirement to advertise on Contracts Finder rather than in the OJEU. Additionally, many works concession contracts are regulated under World Trade Organization rules, and this will limit the ability to repeal the CCR 2016.
Beyond monitoring government policy and progress in Brexit negotiations, contracting authorities should continue to deliver best value through good practice competitive tendering. Complying with the current CCR 2016 should assist in this.
For an introduction to the rules on concessions, it is worth reading Crown Commercial Service’s Handbook for the Concession Contracts Regulations 2016.
Learn more on this topic by contacting James on +44 (0)1392 411221 or email [email protected]
