Scotland's new procurement regulations came into force on 31 January 2006, meaning the country is covered by a separate set of procurement  rules than the rest of the UK. This is a major change from the previous regime.

The Public Contracts (Scotland) Regulations and the Utilities Contracts (Scotland) Regulations, both 2006, were introduced to ensure the procurement regime in Scotland complies with the European Union's new directives on procurement in the public and utilities sectors.  Separate regulations have been implemented to cover England, Wales and Northern Ireland.

This move to separate implementation in Scotland has been criticised by many who claim that it could lead to increased cost of compliance with near duplicate regimes and jurisdictional problems in the case of cross-border procurement.

Previously, there were four separate European procurement directives, three covering the public sector (works, services and goods) and one for the utilities sector.  These directives were implemented by a set of regulations covering all of the UK.  The EU has now consolidated these four directives into just two directives, EU Directive 2004/17/EC, dealing with utilities and EU Directive 2004/18/EU, covering all aspects of procurement by public bodies.

The regulations (which implement the new directives) do not make wholesale changes to the substance of existing procurement rules.  There are, however, a few significant developments which are outlined below. 

Other changes introduced by Scotland's new regulations include:

  • Competitive dialogue procedure: under the public procurement regulations, contracting authorities will be allowed to discuss a candidate's bid with that candidate.  Following this discussion, the contracting authority can revise its project specifications, if necessary, and then go back to the bidders requesting modified tenders.  This process is iterative and can therefore be repeated until such time as the contracting authority is happy with the specifications.  

    The procedure is intended for use with particularly complex contracts and it is anticipated that it will allow for the development of more innovative project solutions. However, it may lead to delays in the tendering procedure.

    The new procedure also introduces a potential risk that the contracting authority could disclose one bidder's innovative solution to the competing bidders.  Though there are provisions aimed at eliminating this risk, confidence in them is likely to remain low until challenges have shown them to be appropriate and sufficient.

  • Mandatory standstill period: challenges to decisions taken by contracting authorities and utilities are made easier with the introduction of formal rules relating to mandatory "standstill" periods.  Following determination regarding the award of a contract, there must be a mandatory "stand-still" period of at least ten days, during which time unsuccessful bidders can challenge any perceived breaches of the procedural rules.  It is possible that the interaction of the new competitive dialogue procedure with this standstill provision could lead to an increased risk of challenge.
  • Framework agreements: the regulations introduce provisions relating to the establishment of framework agreements.  These provisions reflect existing good practice in relation to the use of such agreements.
  • Advertising: The new regulations, incorporating developments in case law, require contracts – including contracts the value of which fall below the thresholds or would otherwise have been exempt – to be advertised to such a degree as is sufficient to ensure open competition.  Unfortunately, there are presently no rules or guidance on what constitutes sufficient advertising in any given circumstance. This uncertainty is likely to lead to challenges on this point.
  • Electronic procurement: the new regulations also allow for the use of electronic mechanisms in procurement.  For some time, many contracting authorities and utilities have been using some forms of electronic procurement, although there was some doubt as to whether its use was consistent with procurement rules.    The use of electronic mechanisms is likely to speed up the procurement process in some circumstances, especially as, where the contracting authority/utility submits its contract award notice electronically, it will be able to take advantage of reduced timescales.  This is likely to result in the more efficient operation of the procurement process.
  • Evaluation criteria: contracting authorities and utilities are now permitted to take account of social and environmental measures when formulating any evaluation criteria. These changes, as well as the introduction of separate regimes in Scotland and England and Wales, usher in a period of uncertainty that are set to last until the limits and areas of vagueness have been clarified.  What impact this uncertainty has on the effective operation of procurement in Scotland remains to be seen.

Kelly Harris is a public law specialist with commercial law firm Shepherd and Wedderburn. 0131 473 5382.

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