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COVID-19 – purchasing from frameworks and dynamic purchasing systems

COVID-19 – purchasing from frameworks and dynamic purchasing systems

Published

Mar 24 2020

Written By

Stuart Cairns

Partner
UK

This is the second in a series of articles focussing on the impact of COVID-19 and public procurement. As recognised in a Procurement Policy Note ("PPN") recently published by the Cabinet Office, there are a range of mechanisms available to the public sector to counter various issues which arise as a result of COVID-19.

In our previous article, we considered when a contracting authority is permitted to enter into a contract without competing or advertising the requirement due to grounds of urgency. However, recognising that this exemption can only be utilised in very limited circumstances, this article considers how frameworks and dynamic purchasing systems may be able to offer an alternative, efficient and compliant route to procurement.

What is a framework agreement?

In a public procurement context, a framework agreement essentially establishes a 'panel' of suppliers. Suppliers compete to obtain a place on the framework (via a process which complies with the Public Contracts Regulations 2015 ("PCRs") or pursuant to similar legislation which covers defence and utilities procurement depending on the requirement) and then enter into a framework agreement (or 'panel' agreement) which sets out the over-arching terms which govern how the framework will operate.

Once the framework is in place, authorities can then 'call off' goods, services and works by conducting a mini-competition, or (if included in the framework) following a procedure set out in the framework to directly award a contract without conducting a competition. Once a supplier has been selected, the authority 'calling off' from the framework will then enter into a call-off contract with that supplier.

As framework agreements effectively 'close off' a share of the market, they are restricted to a maximum of four years, unless exceptional circumstances apply (note that the maximum duration for utilities is eight years or seven years for defence procurement).

How does an authority call off from a framework?

The PCRs permit direct awards (i.e. where the authority does not conduct a further competition and directly awards the order to a supplier on the framework), if the framework terms are clear in respect of how authorities identify who gets the work and 'mini-competitions'. The framework agreement itself should describe the call-off mechanism in further detail, e.g. it may include an 'ordering procedure' or 'call-off procedure' within the terms.

Common examples of direct award mechanisms include 'cab rank' (e.g. Supplier A gets the first order, Supplier B gets the second order and so on and so forth) or "winner takes all" where 'Supplier A' essentially gets first refusal of all work coming through the framework. Where there is no clear/objective mechanism to identify who gets the work, this could be problematic. As the PCRs derive from EU law (and the UK is obliged to adhere to EU law during the Brexit transition period) which promotes open competition across the EU and transparency in procurement, a supplier could challenge a direct award if the award of that call-off contract lacked transparency.

The PCRs also permit authorities to hold mini-competitions amongst suppliers who are "capable of performing the contract". This means that authorities do not need to invite all suppliers on the framework, if it is clear that some suppliers would not be able to fulfil the requirement. Bearing in mind the over-arching objectives of the PCRs to promote transparency and equal treatment, authorities would need to exercise care in how they decide who to invite to participate in the mini-competition. In a lot of cases, this should be fairly straightforward as frameworks are commonly divided into Lots, e.g. Lot 1 = pharmaceutical products; Lot 2 = hospital beds, etc. Where this is the case, it should be fairly clear that if an authority wishes to purchase hospital beds, it would only need to invite the suppliers on Lot 2 to participate in the mini-competition. However, the approach varies across frameworks and some frameworks may not have a clear delineation of suppliers by specialism/category. Therefore, to mitigate any risk in these circumstances, an authority should invite as many suppliers, who are likely to be capable of fulfilling the contract, as possible.

What is a dynamic purchasing system ("DPS")?

A DPS is similar to a framework in that it establishes a 'panel' of suppliers and can be divided into categories/Lots. However, there are some key differences as follows:

a DPS remains open throughout the validity of the system – meaning that suppliers can apply to join the DPS at any time;

the system is conducted entirely electronically;

authorities must follow the 'Restricted' procedure (described in the PCRs) to procure supplies or services. This means that to obtain a place on the DPS, suppliers complete a selection questionnaire (sometimes referred to as a 'pre-qualification questionnaire'). If a supplier meets the minimum criteria, they are awarded a place on the DPS. The number of suppliers admitted to the DPS cannot be limited. Further, the authority must evaluate the selection questionnaire within 10 days of their receipt (or 15 where justified);

contracts are then awarded by inviting all admitted participants to submit a tender (note that this is not required if the DPS is divided into categories – the authority is only required to send an invitation to suppliers within the relevant category only). The minimum timeframe for receipt of tenders must be at least 10 days from the date that the invitation is sent (which can be varied by agreement in respect of sub-central contracting authorities); and

the authority is not permitted to charge participants who are interested in or a party to a DPS (unlike frameworks where it is often the case that management fees are to be paid to the framework 'owner' in respect of each order obtained by the supplier under the framework).

The concept of a DPS is unique to the PCRs, however a similar mechanism exists for utilities procurement referred to as a 'qualification system', albeit there are some specific differences (n.b. not covered within the scope of this article). To date, there is no similar mechanism for defence procurement.

Checklist:

Prior to calling off from a framework agreement/DPS authorities should check the following:

1. Are you permitted to use the framework/DPS?

Before calling off from a framework/DPS, authorities should check that they are able to use it. This means that the contracting authority needs to be listed in the original contract notice which advertised the framework agreement/DPS opportunity to suppliers (i.e. the notice which was published in the Official Journal of the European Union or "OJEU"). If the authority is not listed by name, it is sufficient that the authority is included within the category of authorities listed (e.g. "All NHS Trusts in England and Wales"). The UK has previously been criticised by the EU for failing to be sufficiently precise in respect of who can utilise a framework. Therefore wording such as "all contracting authorities in the UK" is not likely to be considered sufficiently precise (see previous procurement policy note issued by the cabinet office here which re-iterates this requirement).

2. Is the scope of your requirement covered by the framework/DPS?

Authorities can only utilise a framework if the requirement is included within the category of goods, services and works which are covered by the framework/DPS. If not, this can give rise to a range of issues including a potential procurement challenge and/or utilising terms which are not fit for purpose (which can then create later issues such as if a dispute arises between the authority and the supplier).

3. Was the framework/DPS originally procured in a compliant manner?

Note that if the framework agreement/DPS itself was not advertised and procured in a compliant manner, any call-off contracts entered into under it could constitute an unlawful award. Authorities should be particularly vigilant where the framework does not appear to have been established by a recognised public sector body with experience of conducting procurements under the PCRs.

4. Do the terms of the framework agreement/DPS meet your needs without significant amendment?

Call-off contracts pursuant to framework agreements must not entail substantial modifications to the terms laid down in the framework agreement. Both authorities and suppliers should therefore be cautious about amending key terms of the framework agreement/template call-off agreement (or, as per a few cases we have seen, using entirely different terms such as the supplier's own standard supply terms). In respect of a DPS, whilst the PCRs do not appear to contain such similar restrictions (perhaps due to the fact that a DPS is not a 'closed' system unlike a framework), in the interests of complying with the principles of transparency and equal treatment, it would seem arguable that the same principle would apply.

Where can I find a list of frameworks/DPSs?

Unfortunately there is not a central repository capturing this information. However, the following websites are often helpful and cover a range of supplies and services:

Crown Commercial Services: https://www.crowncommercial.gov.uk/agreements

NHS Shared Business Services: https://www.sbs.nhs.uk/proc-framework-agreements-support

UK Shared Business Services: https://www.uksbs.co.uk/services/procure/Pages/Buyers.aspx

Where can I find out further information?

A copy of the PPN referred to in the opening paragraph can be found here. Additionally/alternatively, we have a strong team of public procurement specialists who have significant experience advising both public and private sectors on all aspects of public procurement law compliance, including the use of exemptions as discussed in this article.

Please get in touch with any member of the team if any of the issues raised in this article are relevant to you.

See also our Coronavirus (COVID-19) page.