New Public Contracts Regulations risk increasing the burden on buyers and SME suppliers

Philip Prince
posted by Philip Prince
7 June 2015

The Public Contracts Regulations 2015, the UK’s transposition of the new EU procurement directive came into force in February, more than a year ahead of the EU deadline. The new rules aim to make public procurement faster and less costly and enable better value for the public sector with a particular focus on helping SMEs.

In draft regulations published in October the government said that it wished to avoid any ‘gold-plating’ of the directive, such as not extending its regulations beyond the minimum requirements set out in the EU directive.

However, chapter eight of the regulations - covering below-threshold procurements, also known as the Lord Young Reforms - reset the rules around the prequalification stage as part of the tendering process below the OJEU threshold.

While these were put forward with the best intentions of reducing the time and cost burden involved in completing PQQs, particularly on SME firms, there is a risk they will have exactly the opposite effect and increase the workload for buyers and suppliers.

The prequalification stage allows buyers to filter out unsuitable suppliers on the basis of their financial and technical capability - known as stage one criteria. Buyers then create shortlists of potential contractors who go through to the ITT stage. Those suppliers who did not meet the stage one criteria do not have to fill out the entire tender application, meaning less work for the buyers and for the suppliers.

Under the new regulations, contracts over £10,000 and under £112,000 for central government, and over £25,000 and under £173,000 for the wider public sector, are now subject to open tendering: the use of the prequalification stage as a filter has been prohibited.

The result is that all suppliers wishing to bid for a contract have to complete the entire tender process. PQQs have not disappeared; the questions are vital to buyers. They have become the suitability assessment questions (SAQ) that are included as part of the full tender.

This means that firms bidding for work will have to complete an entire tender document even though they could have been ruled out on simple information they submitted at the early stages. Given that the time and cost in submitting tender information has the largest impact on the smallest firms, this new process could potentially discourage engagement from SMEs and buyers will still have to sift through significantly greater volumes of detailed information, some of it unnecessary.

In the construction sector, buyers can still use the PAS 91 question sets for pre-qualification, which is a standard question set developed with the objective of streamlining and reducing the cost of pre-qualification within the full tender document. Where PAS 91 is utilised in the procurement process some of the dangers of additional work for suppliers and buyers from the new regulations can be mitigated.

The abolition of a pre-qualification stage for below-threshold procurement was intended to make public procurement more accessible to businesses, especially SMEs. But it appears that these well-meant changes could in effect increase the amount of work and therefore the burden on small firms, creating new barriers when buyers are increasingly trying to include more SMEs in their supply chains.

☛ Philip Prince is director at Constructionline.

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