Public procurement reform – ‘Crisis? what crisis’
On 6 December 2021, the Cabinet Office published the Government’s response to its consultation on proposed reforms to English procurement law. In our most recent blog (“Procurement Challenges – the future”), we considered the Government’s proposals to reform the procurement remedies regime. In this blog, we consider an aspect of the proposed reforms as they relate to procurement procedures, namely that relating to the use of urgent procedures in response to a ‘crisis’.
Presently, contracting authorities are able to procure on an urgent basis pursuant to regulation 32(2)(c) of the Public Contracts Regulations 2015 (“PCR 2015”) (and equivalent provisions under the sector specific regulations, e.g. the Utilities Contracts Regulations 2016). This provision allows a contracting authority to place a contract award to a single supplier without having to advertise the tender opportunity.
In response to the COVID-19 pandemic, contracting authorities have made great use of regulation 32(2)(c) to purchase goods, works and services. By way of an illustration, see the ongoing work of the National Audit Office (“NAO”) in respect of central government procurement. The NAO has found (see here) that, from the outset of the pandemic to 31 July 2020, some £10.5 bn of contracts were awarded by central government to suppliers pursuant to regulation 32.
By any measure, this constitutes a considerable amount of procurement activity, especially so given that the Courts (at both a domestic and EU level) have consistently held that regulation 32 is an exceptional procedure representing a departure from the general position under the public procurement regime, i.e. that public contracts should be open to competition so as to further integrate the EU single market.
Accordingly, this procurement activity has been subjected to criticism from a variety of different quarters. For example, the House of Commons Public Accounts Committee has argued (see for instance its report on the Government’s procurement of PPE) that the Government has been overly reliant on regulation 32(2)(c,) and that this has resulted in wasted public money.
The extensive use of regulation 32(2)(c) has also been the subject of legal challenge. See for example R (Good Law Project Ltd) v Minister for the Cabinet Office  EWHC 1569 (TCC). (Albeit, and thus far, challenges based on this ground have been unsuccessful. For instance, in the Good Law Project challenge, O’Farrell J held that there was extreme urgency due to the COVID-19 pandemic and that this was unforeseeable).
Government’s original reform proposals
In its 2020-21 Green paper, the Government appeared cognisant of these criticisms and legal challenges. Whilst the Government sought to retain the “current circumstances for allowing limited tendering in cases of extreme urgency brought about by unforeseeable events”, it proposed to provide greater clarity by defining what constituted a “crisis” namely:
“• an event which clearly exceeds the dimensions of harmful events in everyday life and which substantially endangers or restricts the life or health of people;
- where measures are required to protect public morals, order or safety; or
- where measures are required to protect human, animal or plant life or health.”
Furthermore, “to provide greater certainty”, the Government proposed to “give the Minister for the Cabinet Office new powers to declare a crisis” and, in so doing, creating the basis to permit contracting authorities to rely on this crisis ground.
The Government’s response to its consultation
In its consultation response, the Government maintains that there is a need for “contracting authorities to be able to act quickly and effectively in an emergency” but that this should “be balanced against inadvertently allowing too much discretion to directly award contracts under the limited tendering procedure where that is unjustified”. In this regard, the Government believes that the COVID-19 pandemic has “exposed some uncertainty in applying Regulation 32 where the situation is prolonged or evolving”. However, in light of consultation feedback, the Government says that it plans “to move away from the term “crisis” given the concerns raised”. To this end, the Government also proposes to retain the proposal allowing a “Minister … to ‘declare when action is necessary to protect life’ and allow contracting authorities to procure within specific parameters without having to meet all the tests of the current extreme urgency ground”, and that this ground would be based on “Article III of the WTO Agreement on Government Procurement (GPA)” (i.e. that such procurement was necessary to “(a) protect human, animal or plant life or health, or (b) protect public order or safety”).
We agree that contracting authorities must continue to be able to procure urgently in response to events beyond the control of the contracting authority. For all of the criticism of the Government’s procurement response to the pandemic, the Courts have thus far found repeatedly in favour of the Government when it has relied on regulation 32(2)(c). This suggests that some of the concerns about the scope of the current regulation 32(2)(c) may be misplaced. The pandemic has demonstrated that contracting authorities can successfully procure on an urgent basis.
It is also clear that the Government intends on using the maximum amount of flexibility under the GPA. However, significant details remain unclear. Further details will thus be required to translate Article III into a domestic legislative regime.
Finally, we have concerns about the Government’s proposal to “declare” via a statutory instrument when circumstances exist permitting contracting authorities to place contract awards via the urgent tendering procedure. Irrespective of its label (‘crisis? what crisis’) this approach is likely to prove unworkable and/or problematic for the following reasons.
First, it affords a considerable degree of power (hitherto reserved to individual contracting authorities) to the Cabinet Office over a core aspect of the procurement activity of all public bodies subject to the procurement regime. This level of centralisation is inconsistent with a more general theme of the Government’s reform proposals of allowing individual contracting authorities to conduct procurements as they deem fit in light of their own particular circumstances. This factor is especially pertinent at a non-central government level, e.g. with local authorities.
Second, the proposals are likely to be administratively unworkable. The Cabinet Office would have to put in place a system (and provide the necessary resources to manage that system) to filter and review all requests for the Cabinet Office to issue the necessary statutory instrument to declare an emergency. By their very nature, emergencies arise without notice and often require urgent decision-making on an expedited basis. In such circumstances, contracting authorities may not enjoy the luxury of time and certainly not the time to allow the Cabinet Office to consider a request to issue the necessary statutory instrument. To this end, there may also be parliamentary scrutiny to take into account. In summary, the process for laying the instrument is unlikely to be quick.
Third, the proposals would expose the Cabinet Office itself to risk of legal challenge: from contracting authorities whose requests for an emergency to be declared are refused (or indeed from those who do not consider that such a request should be granted); from bidders who consider themselves aggrieved that such declarations have been granted (or have not been granted) and who have lost out on contract opportunities as a result; and from public interest campaign groups which think that Cabinet Office has improperly issued a declaration (or not issued a declaration). Pursuant to its supervisory jurisdiction, the Court does not have the power to strike down primary legislation. However, the position is different in respect of secondary legislation, such as the envisaged ‘emergency’ procurement statutory instrument. Secondary legislation may be subject to judicial review by the High Court, and may be quashed.
Fourth, the possibility of legal challenge (referred to above) will necessarily create uncertainty for any contracts let under the challenged regulations. Thus, the effects of a single successful challenge may be more profound under the proposed regime than is presently possible.
As noted above, the Cabinet Office is still considering how best to articulate its reform proposals into detailed plans. We will no doubt blog further once these details are forthcoming.