The UK and Scottish Governments have issued procurement policy notes acknowledging that contracting authorities may need to procure goods, services or works urgently in response to the COVID-19 outbreak. The procurement regulations in Scotland and the UK provide a number of routes by which contracting authorities can procure where circumstances do not allow for the standard processes to be followed.
Direct Award Due to Extreme Urgency
Contracting authorities can award public contracts by a negotiated procedure without prior publication in situations of urgency, provided that:
- the procurement is strictly necessary;
- there is genuine extreme urgency;
- the events that led to the need for urgent goods, services or works were unforeseeable; and
- it would be impossible to comply with the ordinary time limits for procurement under the relevant regulations.
If the above criteria are satisfied in relation to the particular need for goods, services or works, procurement required in response to COVID-19 would likely fall within this exemption.
The Procurement Policy Note (“PPN”) warns that contracting authorities must still ensure that they obtain value for money in such circumstances. Likewise, the Scottish Procurement Policy Note (“SPPN”) cautions that contracting authorities should ensure that contracts are awarded at market value or there could be scope to argue that the award amounts to state aid.
It is important to remember that a contracting authority delaying or failing to do something in sufficient time would not justify circumventing the usual process on the grounds of extreme urgency. The events must also be genuinely unforeseeable. It is unclear how long the COVID-19 outbreak will last; contracting authorities must be mindful that the longer the crisis persists, the less likely it will be that the circumstances will be considered unforeseeable. The PPN highlights that knowing that something needs to be done, means it is foreseeable. This point was well demonstrated by the challenge received by the Department for Transport in relation to the ‘no-deal Brexit’ ferry contracts it awarded. The contracts were awarded without publication on the grounds that there was extreme urgency brought about by an unforeseen event, namely, a no-deal Brexit. The award was challenged, among other reasons, on the grounds that a no-deal Brexit was foreseeable at such a time that would have allowed the normal competitive process to be followed.
Direct award due to absence of competition or protection of exclusive rights
The negotiated procedure without prior publication may be used where the works, supplies or services can only be supplied by a particular economic operator due to:
- absence of competition for technical reasons: the PPN suggests that this exemption may be relevant where there is only one supplier with the necessary expertise or capacity to supply the goods, services or works required; or
- the protection of exclusive rights, including intellectual property rights: the PPN notes that this may be applicable where one supplier owns the rights to use or exploit intellectual property rights in whatever it is that the contracting authority requires. A good example of this would be means for testing whether an individual has COVID-19.
In both circumstances, there must be no reasonable alternative or substitute and the absence of competition cannot be the result of an artificial narrowing down of the parameters of the procurement.
Direct awards do attract a greater risk of challenge by suppliers that feel they missed out on the opportunity. When faced with a situation of urgency, it can be a difficult balancing act between the need to obtain essential goods and services and mitigating the risk of a procurement challenge, with high stakes. It is essential that the justification for making such an award is properly considered and recorded.
Call off from an existing framework agreement or dynamic purchasing system
If a contracting authority identifies a framework agreement or dynamic purchasing system in place with a central purchasing body like the Scottish Government or Crown Commercial Services, under which a supplier supplies goods, services or works that it requires, the framework or system can be used, provided that:
- the contracting authority is identified as a permitted customer in the original contract notice or the invitation to confirm interest; and
- the relevant contracts comply with the applicable procurement regulations and the terms do not require substantial changes for the contracting authority’s needs.
Using a standard procedure with accelerated timescales due to urgency
The timescales in the various procurement procedures may be shortened provided that the contracting authority can justify doing so. Different rules apply to each procedure. A contracting authority that chooses to do this should include the justification they are relying upon in the contract notice. Both notes provide an example of a justification that might be used in the context of a procurement with a shortened time frame in response to COVID-19.
Procurements below the OJEU thresholds
The SPPN reminds contracting authorities that there is much greater flexibility in terms of the process to be followed when procuring for goods, services or works when the value falls below the OJEU thresholds. There are no prescribed time limits for below-threshold procurements, subject to the condition that they must be reasonable and proportionate.
Contracting authorities can explore the possibility of extending or varying existing contracts with suppliers to procure the goods, services or works they require.
Supply Chain Disruption
Both notes acknowledge that the COVID-19 outbreak will likely cause supply chain issues for contracting authorities and that suppliers may seek to rely on force majeure clauses or claim that their performance of certain contracts has been frustrated. The PPN confirms that it will issue further guidance on these matters. The SPPN offers a style letter to contracting authorities (that the Scottish Government has used with its own suppliers) that may be used to communicate with existing suppliers to ensure they have adequate business continuity processes and procedures in place.
If you require assistance navigating supply chain disruption or assessing public procurement risks in light of COVID-19, please get in touch with Roger Cotton or your usual Brodies contact.
Scottish Government Procurement Policy Note: “Coronavirus – procurement regulations during outbreak: SPPN 4/2020″
Procurement Policy Note – “Responding to COVID-19” – Information Note PPN 01/20
On March 27, 2020