As the effects of the coronavirus begins to bite, a number of contracting authorities (“CAs”) are asking what the effects may be for (a) new procurement in this emergency, (b) currently active procurement competitions and (c) current contracts. In this blog we briefly examine the impact on each.
During this crisis, contracting authorities are highly likely to have to procure goods, services and works with extreme urgency. For procurements that must take place under the Public Contracts Regulations 2015 (“PCR”) (and see PPN 06/19 for the updated financial thresholds), regard should be had to the Government’s recently issued Procurement Policy Note – Responding to COVID-19 (PPN 01/20, March 2020). Contracting authorities are being encouraged to consider the following:-
- Direct awards due to extreme urgency under Reg 32(2)(c) PCR,
- Direct awards due to absence of competition or protection of exclusive rights under Reg 32(2),
- Call offs from an existing framework agreement or dynamic purchasing system,
- Call offs for competitions using a standard procedure with accelerated timescales under Reg 27, 28 or 29 PCR, (or, for health and social care related services, use the Light Touch Regime under Regs 74-77 PCR),
- Extending or modifying a contract during its term under Reg 72(1) PCR.
Depending on the facts of the case, other options such as procuring additional supplies, or similar works or services from an existing supplier under Reg 32(5) and (9) PCR, or using the services of a subsidiary of another CA under Reg 12, may be available.
If a direct award is made, authorities should publish a contract award notice under Reg 50 within 30 days.
Currently active procurements
We understand that the sudden pressure on the public purse has led some CAs to consider whether to abandon ongoing competitions.
The legal framework in such circumstances was recently reviewed in Amey v West Sussex CC  EWHC 1291 (TCC) and Ryhurst Ltd v Whittington Health NHS Trust  EWHC 448 (TCC). In short, it remains open to a CA to abandon a procurement exercise at any stage of the process, and they have a broad discretion as to what factors to take into account. It may consider, for example, whether it is in the public interest to take a competition to its conclusion, bearing in mind changing factual or economic circumstances. The decision not to continue is not limited to exceptional cases and need not be based on ‘serious’ grounds. A CA must, however, comply with the fundamental principles of EU law (such as transparency and equal treatment) and not commit a manifest error (broadly equivalent to making a Wednesbury unreasonable decision). Those who have entered the competition must be notified of the decision not to conclude it (Reg 55 PCR).
At the time of writing, no PPN has yet been circulated regarding currently open competitions. We expect, given the importance of keeping cash flowing to suppliers (as outlined below) that any guidance will likely encourage CAs to continue with competitions, and to find innovative ways to continue the process.
Currently existing contracts
PPN 02/20 contains a list of current actions CAs are expected to undertake, the thrust of which is to ensure that supplier cashflow continues. This includes contacting the suppliers they consider most at risk of disruption, and putting in place particular measures to support supplier cashflow, including forward ordering, payment in advance (ordinarily restricted without Treasury consent) or, if the contract depends on results, basing this on previous invoices. This is so even where the goods and services to be supplied are reduced or paused temporarily. As the potential for abuse of this system is obviously, CAs and suppliers are expected to work collaboratively to ensure there is transparency, with suppliers agreeing to proceed on an ‘open book’ basis.
Where a supplier seeks to invoke a clause providing contractual relief (such as force majeure or frustration), the CA should try to work with the supplier to amend or vary the contract instead, for example through providing an extension of time for performance or waiving/delaying the right of a CA to exercise a contractual right. If a supplier continues to press a claim for contractual relief, CAs should take legal advice and consider the claims on a case by case basis.