Are you really prepared to go public?

There has been a lot of publicity about the government’s announcement that registered social landlords should be seen as public bodies for the purpose of the European Union procurement directive.

Most of this has surrounded letting works contracts and the impact on RSL development programmes following the EU processes.

But for some RSLs, the impact on letting service contracts will be at least as great. If outside organisations provide you with any services, or if you provide services to other RSLs, you need to be aware of what follows.

If last time you let a service contract it cost more than about £153,000 (excluding VAT), you may need to go through the procurement process when you retender it. Services covered by these provisions that could well affect RSLs include insurance, management consultancy, accountancy, computer services, architectural services, urban planning and landscape design, advertising, building cleaning and property management, sewage and refuse disposal. If in doubt, check the list in the Public Services Regulations 1993 (SI 3228). There have been a few amendments, but none of them affect the basic principles.

You will have to go through the process of advertising these contracts in the European Union’s Official Journal. The set timescales, limits to what information bidders can request and the need to set out your selection criteria carefully will all apply, just as they do for works contracts.

As with works contracts, you can select between the open and restrictive procedures and in some circumstances you can use the negotiated procedure.

But what about contracts that go on for some years, where you do not know how long they will last or how much you will be buying? Are these within the provisions or not? At this point the services regulations get quite complicated.

First of all, there are anti-avoidance provisions, so if you actually need £200,000 worth of service, you can’t get around the regulations by letting five £40,000 contracts. If the amount is not clear and you need to estimate it, you take the aggregate of the value paid under public service contracts for similar services the previous financial year, and an estimate of the value over the following 12 months.

But if there is a definite term to the contract and it is for more than 12 months, you have to look at the whole term of the contract. If you have an indefinite period of four years or more, then you look at the amount you expect to pay for each month and multiply it by 48.

If you actually need £200,000 of service you can’t avoid the rules by letting five £40,000 contracts

If these various methods of calculation come up with different answers, you must use the highest answer.

The services listed above are those in Part A of Schedule 1. There are other services I have not mentioned and anyone involved in letting contracts needs to check the complete list. All services not in Part A are in Part B. Part B services are subject to the parts of the regulations that relate to technical specifications in contract documents and certain reporting and publication of notices requirements.

There is no obvious exclusion that would take service contracts between different members of the same group out of these provisions.

In the kind of group structure arrangements where essential services are all provided by the parent, you will need to think about this carefully. If the parent claims the services it provides cannot be priced overall because of special risks, the negotiated procedure could be used, but because historically those services have been priced, arguing they cannot be might be difficult.

The regulations could also apply to management agreements, where property is being managed on behalf of the RSL by another agency.

And having managed to work out what you need to do to comply with the regulations, don’t forget the following:

• if you are letting a service contract for services for which tenants or leaseholders are being charged a variable service charge, and
• if the cost of that contract to the tenants or leaseholders is more than £100 per year, and
• if the contract lasts more than 12 months, there are special regulations to deal with consultation with tenants and leaseholders under the Commonhold and Leasehold Reform Act and Schedule 2 of the Service Charges (Consultation Requirements) (England) Regulations 2003 (SI 1987).

All this may be enough to make you want to do everything in house, but local authorities have complied with these regulations for years, so it is possible. It is a question of building them into your internal procedures and making everyone aware of them.