Legal

Regeneration projects sometimes involve the provision of public works to central government departments, local authorities, fire and police authorities, non-commercial corporations or groups which are predominantly publicly funded or managed. All of these are defined as contracting authorities in new public procurement rules which came into force in England, Wales and Northern Ireland on 31 January. The Public Contracts Regulations 2006 and The Utilities Contracts Regulations 2006 implement new European directives and replace existing procurement regulations. This article is concerned only with the Public Contracts Regulations 2006.

To be caught by the regulations a public works contract must have an estimated value of *5,278,000 or more. Different thresholds apply to services contracts.

The regulations set out the procedures to be followed at each stage of the procurement process and are intended to ensure that public bodies award contracts in an efficient and non-discriminatory manner and with a view to securing value for money and transparency. The regulations seek to modernise the rules, provide for new procurement arrangements such as framework agreements and e-auctions and to take into account social and environmental considerations.

Failure to comply with the regulations can result in a successful contract award being set aside or in damages claims from unsuccessful contractors.

The regulations provide for four procurement procedures:

• The open procedure
• The restricted procedure
• The negotiated procedure
• The competitive dialogue procedure.

The first three of these have been in use for some years; the fourth is introduced by the new regulations.

Public bodies entering into contracts may choose between the open procedure and the restricted procedure. The negotiated procedure may be used only in exceptional circumstances, defined in the regulations. The competitive dialogue procedure may only be used where a contracting authority wishes to award a particularly complex contract, defined as one where the technical means of satisfying the authority's needs or objectives cannot be defined or the legal or financial make-up of a project cannot be specified.

Failure to comply with the new regulations can result in a successful contract award being set aside

The main features of the four procedures are as follows:

• Open procedure: All interested contractors may tender for the contract following at least 52 days' notice given by the contracting authority in the Official Journal. The period of notice can be shortened in certain circumstances.
• Restricted procedure: At least 37 days' notice must be given in the Official Journal which, again, can be shortened in certain circumstances but, subject to certain provisions, the contracting authority can select whom it will invite to submit tenders from those giving initial responses.
• Negotiated procedure: At least 37 days' notice must be given in the Official Journal inviting requests to be selected to negotiate. In exceptional circumstances, the negotiated procedure may be used without the prior publication of a contract notice.
• Competitive dialogue procedure: At least 37 days' notice must be given in the Official Journal, the notice in this case inviting requests to participate. A minimum of three participants is required.

The government currently prefers the use of the negotiated procedure for private finance initiative contracts. Whether this complies with EU requirements is unclear. The new competitive dialogue procedure may be suitable for complex PFI/PPP projects but the position remains far from certain.

A contracting authority must award a public contract on the basis of the offer which either is the most economically advantageous from the point of view of the contracting authority or offers the lowest price. The criteria to be used to determine that an offer is the most economically advantageous include quality, price, technical merit, aesthetic and functional characteristics, running costs, cost effectiveness, after-sales service, technical assistance, delivery date, delivery period and period of completion. Where the contracting authority intends to award a public contract on the basis of the offer which is most economically advantageous, it must state the weighting given to each criteria in the notice or contract documents. Abnormally low offers may be rejected.

The new regulations provide that a period of at least 10 days must elapse between the date of the contracting authority notifying its decision as to the contract award to the contractors who applied to tender or negotiate and the date on which the authority proposes to enter into the contract. This "standstill" period allows time for contract award decisions to be suspended or set aside in appropriate circumstances and is intended to comply with the decision in Alcatel Austria vs Bundesministerium für Wissenschaft und Verkehr.

The regulations are long and complicated and open to differences in interpretations. The government publishes a useful and relatively short explanatory memorandum.