New EU Procurement Directive

Three new EU directives are set to be adopted in 2014 to reform and modernise the way in which public bodies and utilities procure goods and services.  The proposed directives relate to:
  • Public contracts
  • Procurements by utilities
  • Concession contracts
The procurement directives will apply to contracts above the minimum thresholds which are:
  • €130,000 for goods and services contracts awarded by central government authorities
  • €200,000 for goods and services contracts awarded by sub-central government authorities
  • €5,000,000 for public works contracts
The old distinction between  Part A and Part B services is to be removed and a higher threshold of €750,000 will apply to procurements relating to health, social services, education, religion, hotel and restaurant services,  legal services, security,  prisons and postal services. There will be some relaxation on the rules relating to the choice of procurement procedure where either the negotiated or competitive dialogue procedures are being used. A new procedure called the Innovative Partnership is being introduced for research and development contracts where the contracting authority requires a product or service that is currently unavailable. One of the major criticisms of the current procurement regime is that it is logistically very difficult for smaller companies to tender. In an effort to remedy this, the new procurement regime seeks to assist SME’s by imposing a duty on contracting authorities to consider dividing contracts into separate lots.  In another effort to assist SME’s, the requirements to demonstrate eligibility and capacity are being simplified. The grounds for exclusion of tenders is being widened to include corruption and tax evasion as mandatory grounds for exclusion. There are a number of other changes to the rules. For example, sub-contractors will have a right to claim payment direct from the contracting authority and the rules on framework agreements are being clarified. There is also to be a clarification of the rules governing where a material change in the initial contract requires a new procurement. The change will not be deemed to be material if the change to the initial contract value is less than 10% in respect of service and supply contracts and 15% in respect of works contracts. In exceptional cases such as where there are unforeseen circumstances or exceptional technical difficulties in running a new procurement, percentage will be 50%. It is anticipated that the new directives will be adopted in 2014, after which national governments including the UK government will have to implement the new rules into national legislation. This information is for guidance purposes only and is does not constitute legal advice. For further information, please contact Richard Abbott at rabbott@setfords.co.uk