Principles of awarding contracts for social and other specific services under Reg. 76 Public Contracts Regulations 2015

Reg.76 of the Public Contracts Regulations 2015 (PCR2015) sets out the principles of awarding contracts for social and other specific services and transposes Article 76 of Directive 2014/24. It does so in a way that deviates from the general copy-out approach and, in my view, incurs in potential instances of defective transposition that are very likely to result in infringements of the rules of the Directive. Pedro shares similar concerns (here).

Where the transposition keeps the defects of the the Directive
The only part where reg.76 PCR2015 follows Art 76(2) Dir 2014/24 is reg.76(8) PCR2015 where it is set out that, in the award of contracts for social and other specific services covered by reg.74 PCR2015, contracting authorities may take into account any relevant considerations, including the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services, the specific needs of different categories of users, including disadvantaged and vulnerable groups, the involvement and empowerment of users and innovation. However, reg.76 PCR2015 has not transposed the possibility given by Art 76(2) in fine Dir 201/24 whereby Member States may also provide that the choice of the service provider shall be made on the basis of the tender presenting the best price-quality ratio, taking into account quality and sustainability criteria for social services.

These provisions are not free from interpretive difficulties, particularly when it comes to their coordination with general principles for the award of contracts. Briefly, my general views are as follows [extracted, but updated, from A Sanchez-Graells and E Szyszczak, “Modernising Social Services in the Single Market: Putting the Market into the Social”, in JM Beneyto and J Maillo (eds), Fostering Growth: Reinforcing the Internal Market (Madrid, CEU Ediciones, 2014) 61-88].

Article 76 sets out the principles for the award of these contracts, although their regulation is left to the Member States (see below) provided that they take measures ‘to ensure contracting authorities comply with the principles of transparency and equal treatment of economic operators. Member States are free to determine the procedural rules applicable as long as such rules allow contracting authorities to take into account the specificities of the services in question’. The general requirement for contracting authorities to make sure that those procedures shall be at least sufficient to ensure compliance with the principles of transparency and equal treatment of economic operators is encapsulated in reg.76(2) PCR2015, whereas reg.76(1) in fine stresses that contracting authorities may take into account the specificities of the services in question.

A key element to take into consideration will be the need to further comply with the (more) general principles of procurement set out in Article 18, which requires that procurement also complies with the principles of competition and proportionality, and that economic operators participating in public procurement comply with applicable obligations in the fields of environmental, social and labour law. Given that Article 18 is nested in Title I and that the procurement of social and other specific services is regulated in Title III, Article 76(1) may be seen as a lex specialis that would de-activate the requirements for proportionality and undistorted competition in their procurement. However, such interpretation may not be welcome by the CJEU and it is my personal view that this is not the best approach.

With a permissive tone, Article 76(2) continues to regulate that: ‘contracting authorities may take into account the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services, the specific needs of different categories of users, including disadvantaged and vulnerable groups, the involvement and empowerment of users and innovation. Member States may also provide that the choice of the service provider shall be made on the basis of the most economically advantageous tender, taking into account quality and sustainability criteria for social services’. The drafting of the last sentences leaves an open question as to the obligation to choose the awardee of the contract on the basis of the most economically advantageous tender (MEAT), although (functionally) it seems to be out of the question, and the provision should simply be seen as allowing for the introduction of ‘specific’ criteria in the determination of the MEAT, such as quality and sustainability.

By not going beyond the wording of the Directive and, in particular, not offering guidance on how to interpret the elements of reg.76(8) PCR2015 when it comes to determining the MEAT, the PCR2015 do not provide any workable clarification and do not resolve difficult issues that were already present in sectoral procurement regimes, such as that applicable to healthcare [see A Sanchez-Graells, “New Rules for Health Care Procurement in the UK. A Critical Assessment from the Perspective of EU Economic Law” (2015) 24(1) Public Procurement Law Review 16-30]. 

Where the transposition seems defective and in breach of EU law

One of the initial difficulties in assessing the appropriateness of the transposition of Art 76 Dir 2014/24 by means of reg.76 PCR2015 derives from the opening clause of the EU provision, whereby "Member States shall put in place national rules for the award of contracts" for social and other specific services (emphasis added). In a literal reading, this may be seen as requiring the creation of a general (national) procedural framework for the award of these contracts or, in other words, a set of common, generally applicable rules. If that was the proper interpretation, then reg.76(1) PCR2015 may have failed to properly create those "national rules for the award of contracts" by determining that "[c]ontracting authorities shall determine the procedures that are to be applied in connection with the award of contracts" or social and other specific services.

By granting contracting authorities (almost) unfettered discretion to determine the applicable procedures--whether they correspond (with or without variations) to procedures, techniques or other features provided for in Part 2 PCR2015, or not--the PCR2015 may have failed to set any sort of specific "national rules for the award of contracts". However, such a literal reading of the requirement in Art 76(1) ab initio Dir 2014/24 may be opposed on the basis of the principles of procedural autonomy and subsidiarity, so this may not carry as much weight as one may initially have thought. In any case, it is also possible to read national as domestic, in which case this discussion would be moot.

Be it as it may, however, looking at the details of the very light touch approach adopted by reg.76 PCR2015, the defects seems even more apparent. Reg.76(3) PCR2015 sets out bare minimum requirements for procedures initiated by one of the notices mentioned in reg.75 PCR2015, whereby the contracting authority shall conduct the procurement, and award any resulting contract, in conformity with the information contained in the notice about conditions for participation, time limits for contacting the contracting authority, and the award procedure to be applied. Reg.76(6) PCR2015 adds that all time limits imposed on economic operators, whether for responding to a contract notice or taking any other steps in the relevant procedure, shall be reasonable and proportionate. Taken together, this barely creates any specific rule other than implicitly following the case law preventing substantial modifications of tender procedures without cancellation and readvertisement.

The big problem comes, in my view, with reg.76(4) PCR2015 whereby contracting authority may, however, deviate from the content of the previous notice and conduct the procurement, and award any resulting contract, in a way which is not in conformity with that information. It is true that reg.76(4) PCR2015 imposes a relatively stringent set of conditions, so that disregard for the (procedural) information disclosed in the previous notice can take place only if all the following conditions are met: (a) the failure to conform does not, in the particular circumstances, amount to a breach of the principles of transparency and equal treatment of economic operators; and (b) the contracting authority has, before proceeding to deviate from the published information, (i) given due consideration to the matter, (ii) concluded that there is no breach of the principles of transparency and equal treatment, (iii) documented that conclusion and the reasons for it in accordance with regs.84(7) and (8) PCR2015, and (iv) informed the participants of the respects in which the contracting authority intends to proceed in a way which is not in conformity with the information contained in the notice. For these purposes, "participants" means any economic operators which have responded to the notice and have not been informed by the contracting authority that they are no longer under consideration for the award of a contract within the scope of the procurement concerned [reg.76(5) PCR2015].

In my view, there are two main difficulties. First, it adopts a very narrow interpretation of the principle of equal treatment that falls into a participation trap that will result in de facto discrimination and an unavoidable infringement of the principle of transparency. And, second, this is very likely to trigger infringements on the rules applicable to cancellation and retendering of public tenders.

As to the participation trap or ‘trap of tender-specific reasoning’, by designing a system that allows contracting authorities to (1) disclose information that preselects a subset of potential suppliers and (2) later on, alter the rules of the procedure in a way that potential suppliers not included in that subset cannot challenge (because they are not informed and, seemingly, there is no further transparency/publication requirement), reg.76(4) PCR2015 fails to ensure actual compliance with the principle of non-discrimination [by analogy, see the reasoning of the EGC regarding the need for clarity of tender specifications in Commission v Cyprus, C-251/09, EU:C:2011:84 35-51 (not available in English)].

As to the infringement of the requirements for cancellation and retendering of procedures that would otherwise be substantially amended, it seems clear to me that the case law applicable to changes of disclosed contractual conditions applies (if nothing else, by analogy). In that regard, the CJEU has been clear that "where the amended condition, had it been part of the initial award procedure, would have allowed tenders submitted in the procedure with a prior call for competition to be considered suitable or would have allowed tenderers other than those who participated in the initial procedure to submit a tender" (emphasis added) are to be deemed substantial modifications of the tender conditions and, consequently, not acceptable [Case C-250/07 Commission v Greece [2009] ECR I-4369 52. See also, by analogy, Case C-454/06 Pressetext Nachrichtenagentur [2008] ECR I-4401 35]. Thus, unless contracting authorities could clearly prove that no other tenderers would have participated had the modified (procedural) conditions been disclosed from the beginning, reliance on reg.76(4) PCR2015 is bound to trigger an infringement of EU law.

For all of the above, I consider reg.76 PCR2015 a very clear instance of defective (if not outright improper) transposition of the requirements in Art 76 Dir 2014/24 and, consequently, I think that it should be modified as soon as possible and substituted by a sensible, fully-developed set of procedural rules applicable to the award of contracts for social and other specific services.