“Sub-public” procurement regulations? Crown Commercial Service Policy Note could mean public sector contractors have to put sub-contract opportunities out to tender
The Government announced in April a new policy requiring main contractors and suppliers under contracts with central government to advertise sub-contract opportunities arising under their head contract.
The policy could have a major impact on procurement timescales and advertisement and tendering requirements throughout the supply chain for large-scale public-funded construction and infrastructure projects.
A Procurement Policy Note (Action Note 01/18) (“PPN”) was issued by the Crown Commercial Service on 10 April 2018 outlining the new measures. The PPN claims that advertisements by lead contractors through Contracts Finder will allow them to access over 25,000 potential supply chain partners, of which 63% are SMEs.
New obligation to advertise opportunities
The policy applies to all contracts let on or after 1 May 2018 worth more than £5 million. The principal supplier/contractor will be required to advertise all subcontract opportunities with above £25,000. Authorities can opt to increase this threshold (albeit never to more than £100,000) if they think it would disproportionately burden suppliers otherwise – it will be of great interest to the sector to see how this is applied in practice.
The new requirements will not apply to sub-contracts arranged or which were in place prior to the award of the main contract. The new requirements may also be waived in case of national security concerns, where the contract is to be performed overseas (and only local subcontractors can feasibly deliver what is required and/or local laws or security issues preclude advertisement) or where there will be no sub-contracted expenditure.
This development will affect central government, primarily, since it is guidance from the CCS and relates to Contracts Finder – that is not to say, though (as with other CCS policies) that this will not filter down to sub-central level by way of best practice in the fullness of time.
Receiving and evaluating bids – like a public body?
Having placed the requisite advertisement in Contracts Finder pursuant to the new conditions of contract, suppliers are expected to allow a “reasonable and proportionate” period of time for bidders to respond. They will then have to consider each of the bids that come in and evaluate their respective strengths and weaknesses before identifying the successful tenderer.
Whilst this ought to promote enhanced value for money by opening up subcontracts to wider competition, it could equally increase the overall cost of procurement itself."
Furthermore, it is also possible that aggrieved unsuccessful sub-contract tenderers will argue that, since the head contract is governed by the public procurement rules, sub-contract tendering exercises must also comply with fundamental procurement principles such as transparency and equal treatment. They might also argue that, as a minimum, contractors are required to treat all bids fairly, in line with the key case of Blackpool and Fylde Aero Club v Blackpool BC  3 All ER 25. It will be interesting to observe how unsuccessful tenderers for subcontract opportunities are advised in practice.
Additional reporting requirements
In addition, suppliers are required to report separately on the amount they are spending on sub-contracting and, separately again, how much they spend directly with SMEs and VCSEs (Voluntary, Community and Social Enterprises), such as “small local community and voluntary groups, registered charities, foundations, trusts and the growing number of social enterprises and co-operatives”.
Suppliers will have to monitor the number, type and value of subcontract opportunities that are advertised and awarded through Contracts Finder over the duration of their contract, and report to the awarding contracting authority/utility in the manner specified by that authority under a new clause of their head contract.
Authorities are advised to draw these measures to the attention of suppliers and to help them register on Contracts Finder for advertising and monitoring purposes. They are also told to “encourage their large suppliers to proactively use Contracts Finder to provider greater visibility of supply chain opportunities”, including when ‘refreshing’ their supply chain (such as by updating approved supplier lists or conducting early market engagement).
A model clause for contracting authorities to include the requirements in their head contracts is contained at Annex A to the PPN.
So, what do we think this will mean?
Our initial view is that where a head contract is publicly procured so, at least, the procurement of sub-contractors by lead contractors ought to be bound by the fundamental procurement principles and the duty to treat bidders fairly and equally under Blackpool & Fylde. Whilst we await greater clarity, it seems to us best to assume that disgruntled sub-contractors will be advised that these awards could arguably be challenged under these principles, so seeking advice on conducting compliant tenders for sub-contracts will become essential.
Paula Boast, Glenn Bull, Anna Hackworth and Sarah Alaiwat write for CDR - Essential Intelligence: The Belt and Road Initiative
A useful reference for BI disputes in project finance, investment and construction.
Residential property developer tax: Draft legislation published and technical consultation launched
While a number of important issues have been addressed in the legislation, there is still a lot outstanding.
When can you set off claims against different elements of a project
The Court’s decision raises important drafting considerations for construction contracts involving multiple elements of a project.
Drafting terms and conditions or negotiating a contract? Be wary of "unusual" and "exorbitant" exclusion clauses
When drafting a set of terms and conditions, companies must adhere to the requirements contained in the Unfair Contract Terms Act 1977
Preparing your company for sale
We set out here some initial steps to consider in anticipation of a sale.
ESG investment and the challenges for trustees
What challenges does the ESG revolution present for trustees of private family trusts?
The impact of COVID-19 on commercial and residential tenancies
What impact has COVID-19 had on commercial and residential tenancies? Read more here.
Charles Russell Speechlys advises discoverIE on its acquisition of Antenova
discoverIE is a leading international designer, manufacturer and supplier of customised electronics to industry.
Q&A: Separate blocks, common parts and enfranchisement
Miriam Seitler and Lauren Fraser answer queries relating to leaseholders seeking to acquire the freehold.
Coded messages for landlords and tenants
“What does the code of practice mean for landlords and tenants? Read more here”
The family court’s role in micro managing 'trivial' disputes
The recent decision has dealt with the family court’s role in micro managing “trivial” disputes in relation to children
International Arbitration in India and Around the World
Rupa Lakha joined the panel discussing the latest developments in construction and dispute resolution.
Taxing horizons and fiscal black holes
A super-massive black hole at the centre of the nation’s finances means that tax reform and rates rises look increasingly likely.
Charles Russell Speechlys advises Acora on acquisition of Westgate IT
Westgate IT specialises in providing IT support to businesses in the South West.
Q&A: Wrestling with restrictive covenants
Camilla Lamont (barrister at Landmark Chambers) and Real Estate Disputes Partner Emma Humphreys answer a pair of covenant queries
Charles Russell Speechlys advises Grape Paradise on the acquisition of a fine wine business
Charles Russell Speechlys has advised Grape Paradise on the acquisition of the Sarment Group in the China Mainland territories.
Grab the tail by the horns - Why is tail spend so critical in today’s outsourced portfolio?
It’s usually invisible, but in all likelihood, you’ve got tail spend.
Collateral Warranties – Are they also a ‘Construction Contract’?
What are collateral warranties and what do they mean for your construction contracts? Read more here.
Succession Planning for Landed Estates
The first in our series of articles on succession planning for landed estates covering a wide variety of matters.
eCommerce and the Post-Brexit State of Play
Key UK and EU legislation governing how online platforms deal with consumers and their business users.