Choosing not to choose – the procurement loophole that threatens G-Cloud?
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In a recent European decision the court expanded further the relatively new line of case law that allows authorities to avoid a public procurement process if they are not 'choosing' those to be awarded the contract. The court found that a framework agreement did not have to be procured under the EU procurement directives; as all bidders meeting the pre-defined criteria were admitted to it, there was no choice exercised by the authority and choice is fundamental to falling within the procurement directives.
The Facts
In the case considered, Tirkkonen, the Finnish government ran a tender process to appoint advisers to its farm advisory framework agreement. Those who wanted to be a party to the framework agreement had to demonstrate that they met certain aptitude criteria, as well as all minimum requirements set out in the call for tenders and its annexes. The terms and conditions were appended to the ITT, in a draft framework agreement, and were non-negotiable.
The ultimate choice of which advisors were to provide services is left to farmers, with the services paid for by the government under its contract with the advisors.
Falk Pharma
The Finnish case was preceded by a German case – Falk Pharma. A contracting authority, a German health insurance fund, ran a process to 'authorise' providers of certain medicinal products to sign a contract to participate in a rebate scheme. Anyone could become authorised provided they met the conditions that had been laid down – the insurance fund did not do any assessment of the products or pricing beyond checking that they met the selection criteria that had been established in advance. The terms of the contract were fixed and non-negotiable. Access to the scheme remained open to anyone who met the conditions. The ultimate 'purchasers' were then the pharmacists or patients, who themselves decided which products to buy.
The basis for the decision
In both cases, the court concluded that a contracting authority's choice of the winning bidder(s) is fundamental to whether the scheme/framework agreement falls within the public procurement rules. No choice is made if:
- all those who meet the criteria are appointed;
- there is no comparison of the tenders.For example, if experience is a relevant access condition the authority must limit itself to checking the stated condition is met, rather than undertaking a qualitative assessment of which bidder is more qualified; and
- -no scored evaluation takes place in order to compare the bids and decide to whom to award the contract(s).
This is the case even if access to the scheme is a 'one off' opportunity - it does not need to remain open to others who may meet the conditions in the future.
The consequences of the decision
There are obvious consequences for similar schemes – which are now firmly outside the formal procurement rules under this line of case law. It would seem of particular interest for suppliers who sell in and authorities who buy from small markets; for example, vaccines, where there are often very few providers who are able to provide the required vaccines. In any event, contracting authorities are still bound by the European Treaty principles if the contract is of a type that is of cross border interest. So, whilst not bound by all the formal rules, they must nonetheless advertise the opportunity, not choose discriminatory admission criteria, treat bidders equally etc. Such principles may though be harder for bidders to enforce under general public law remedies than through the specialist procurement remedies regime, and their remedies may be more limited – that is certainly the case in the UK for example.
It is not clear whether similar schemes would remain outside the procurement rules if the downstream 'decider', the person ultimately choosing between the providers on the scheme, was itself a contracting authority. It was not a point which the court considered, as in both Tirkkonen and Falk Pharma, the farmers/pharmacists/patients who were making the choices, were not themselves contracting authorities.
It is, however, a point that could have potentially significant consequence – many framework agreements in the UK are very large, with no real selection. G-Cloud is an example. Crown Commercial Services appears only to verify that applicants meet the stated criteria; it is at least arguable that CCS does not 'choose' between bidders before appointing them to G-Cloud. If the consequence of Tirkkonen is that G-Cloud cannot be a regulated framework, then arguably there is no procurement cover for authorities using G-Cloud to award regulated contracts to providers using the G-Cloud call-off procedure. Put simply, if G-Cloud is not a framework agreement under the Regulations, even if seemingly let under those Regulations, then the call-off contracts let under it are not 'call-off contracts' under the Regulations. It is therefore arguable that they should be let properly under one of the full procedures. It is a concerning thought and one that UK authorities may need to turn their mind to going forward.
Our international projects and procurement team would be delighted to speak further with you about the consequences of this unusual decision. Contact any of the team below, or your usual contact.
