Coronavirus (COVID-19): procurement regulations for public bodies SPPN 4/2020

Purpose

1. This policy note raises awareness on handling some procurement related issues as a consequence of the current COVID-19 outbreak. In such exceptional circumstances, public bodies in Scotland may need to procure goods, services and works with extreme urgency. It provides information on options available to purchasers in these circumstances.

2. This SPPN does not offer general or health-specific advice. The Scottish Government provides advice on Coronavirus on its website and has published a Coronavirus Action Plan. 

3. The content of this SPPN is not legal advice and should not be construed as such. Public bodies are advised to seek their own legal advice in relation to any questions and issues they may have.

4. All references to a regulation in this SPPN are to those in the Public Contracts (Scotland) Regulations 2015 unless otherwise stated.

Current contracts

5. If public bodies have not already done so, they may wish to contact suppliers of key contracts to seek assurance they have plans in place to ensure continuing performance of contracts over the coming weeks. The Scottish Government has already taken this step and a copy of the letter issued to suppliers is attached at Annex A to the SPPN. Public bodies may wish to adopt or adapt this letter for their own purposes. 

6. To address the consequences of COVID-19 public bodies may be required to make new purchases with extreme urgency. This is permissible under the current procurement regulations. The means of doing so may vary depending upon a number of variables.

Procurements above the OJEU threshold values

7. For OJEU threshold procurements, the following options may be considered as a means of making an urgent purchase:

• call off contract from an existing framework agreement/Dynamic Purchasing System
• modification of an existing contract
• new procurement procedure – using accelerated timescales
• direct award of a new contract
• contract awarded under the light-touch regime
• using the small lots option available in the regulations

8. Depending on the specific nature of a requirement there may be further options under the Public Contracts (Scotland) Regulations 2015 (2015 Regulations), such as the additional delivery of supplies from an existing supplier (regulation 33(4)), additional similar works or services from an existing supplier (regulation 33(8)), or using the services of a subsidiary of another contracting authority (regulation 13). These are not covered in this guidance and do have their own specific requirements.

9. It is important to note that in the absence of a competition, care must be exercised to ensure the contract terms and price are set at what can be described as the market level. Agreeing to pay above the market level/rates could be deemed to be an overpayment constituting an unlawful state aid, and if public bodies have any such concerns, legal advice should be sought.

10. The decision to award a contract without running a competition may be challenged by another supplier. Public bodies should therefore ensure they keep proper records of decisions and actions on individual contracts, as this could mitigate against the risk of a successful legal challenge. If a public body makes a direct award, they must publish a contract award notice (regulation 51) on Public Contracts Scotland (PCS) website, within 30 days of awarding the contract.

11. Public bodies procuring under the Utilities Contracts (Scotland) Regulations 2016 and the Concession Contracts (Scotland) Regulations 2016 will need to check similar provisions in those Regulations.

Procurements below the OJEU thresholds values

12. Procurement officials are reminded that the procurement procedures and associated timescales set out in the 2015 Regulations do not apply to procurement exercises below the OJEU thresholds and thus there is greater flexibility to run competitions quicker for lower value requirements.

13. For contracts regulated by the Procurement (Scotland) Regulations 2016 (£50,000 goods/services £2,000,000) works) public bodies are required to advertise the opportunity on PCS, and apply exclusion and selection criteria.

14. For all contracts below these thresholds, public bodies are free to use any process or procedure they choose to run and are not required to use the standard procurement procedures (open, restricted etc) and are also free to set timescales for the competition as long as they are reasonable and proportionate. 

Call-off contract

15. Public bodies should check whether a framework agreement or Dynamic Purchasing System (DPS) can be used to put in place a call-off contract. Call-off procedures are a quick and efficient way to provide services, goods or works from an agreed supply chain and many have direct award ability or a quick minimum 10 day call-off period. 

16. Public bodies should check within their own sectors for any framework agreements or DPSs that exist and may offer a quick means of securing any urgently needed goods/services. Annex B provides a list of collaborative resources available in sectors.

17. As always when considering the use of a framework agreement or DPS it is important that the procurement official is satisfied that it was set up in a way that entitles the purchasing body to use it.

Modification of an existing contract

18. Consider whether there is an existing contract which could be modified in order to provide the goods, services or works. A contract established under the 2015 Regulations can be modified to cater for the new purchase when certain grounds exist. Details of these grounds are summarised in Annex C.

19. In all circumstances where a contract modification is made, public bodies should keep a written justification and they should limit requirements to only what is absolutely necessary for the period that extreme urgency reasons apply, both in terms of what is being procured and the length of contract.

20. This justification should demonstrate that the decision related to the COVID-19 outbreak with reference to specific facts. For example, there is extreme urgency and the circumstances were unforeseen or staff are diverted by procuring urgent requirements to deal with COVID-19 consequences.

New procurement procedure – using accelerated timescales

21. If there is no scope to call-off from a framework agreement or DPS or to modify an existing contract, a public body can consider whether the goods, services or works can be purchased following normal procurement procedures using reduced (sometimes referred to as accelerated) timescales. Details of timescales are at Annex D.

22. A public body must set out in the contact notice published on PCS their reason for accelerating timescales, for example:

“The COVID-19 outbreak has given rise to an urgent need for the supply of [description of what is being procured] because [explanation of urgency]. This does not give [name of public body] sufficient time to comply with the standard [open procedure / restricted procedure / competitive procedure with negotiation] timescales for this procurement. [Public body] considers this to be a state of urgency which it has duly substantiated. Accordingly, [contracting authority] is using the accelerated time limits permitted under the Public Contract (Scotland) Regulations 2015 (regulation [28(5) for the open procedure / 29(11) for the restricted procedure / 30(11) for the competitive procedure with negotiation]) in respect of this procurement”.

Direct award

23. COVID-19 is serious and its consequences pose a risk to life. Public bodies are able to enter into contracts without competing or advertising the requirement where specific circumstances apply.  See Annex E for a list of options and the tests that apply.

24. In all circumstances where a direct award is made, public bodies should keep a written justification that satisfies these tests and they should limit requirements to only what is absolutely necessary for the period that extreme urgency reasons apply, both in terms of what is being procured and the length of contract.

25. It is also important to undertake a separate assessment of the ongoing applicability of tests before undertaking any subsequent or additional procurement to ensure that they are all still met, particularly to ensure that the events are still unforeseeable. For example, as time goes on, what might amount to unforeseeable now, may not do so in future.

26. Delaying or failing to do something in time does not make a situation qualify as extremely urgent, unforeseeable or not attributable to the public body. This is because procurement rules expect a public body to plan its time in order to use a competitive procedure.

27. It is important that public bodies continue to achieve value for money and use good commercial judgement during any direct award. Whilst prices may be higher than would be expected in a regular market, public bodies should exercise caution if they consider any prices to be abnormally high and may wish to have internal processes in place to review any such pricing. Additionally, public bodies are encouraged to consider contractual mechanisms to ensure that they have the ability to secure pricing reductions through the life of the contract. Where this is not possible, it is recommended a log should be kept and reasoning provided for future auditing. 

Light touch regime

28. Public bodies can also consider how they apply the light touch regime in a way that is able to respond to urgent requirements. This regime applies to all social and other specific services, including health and social care related services (see regulations 74-76).

29. While public bodies are required to advertise contracts in OJEU and publish contract award notices, public bodies are free to use any process or procedure and are not required to use the standard procurement procedures (open, restricted etc) and are also free to set timescales for the competition as long as they are reasonable and proportionate. 

Separate lots

30. Public bodies may also wish to take account of the flexibility offered by regulation 5(3) to break down an otherwise large contract requirement into smaller contracts (sometimes referred to as lots) that can individually be awarded without requiring a competitive process under the 2015 Regulations provided:

• No smaller, individual contract exceeds £70,778 (or in the case of a works contract £884,720).
• The estimate total aggregate value of all smaller contracts does not exceed 20% of the estimated total contract requirement.

Action required

31. Public bodies are asked to note the measures and apply the procurement rules on all ongoing public contract requirements.

Additional information

32. The full policy note, including annexes, is contained within the attached document.

Dissemination

33. Please bring this SPPN to the attention of all relevant staff within your field of responsibility to whom it may be of interest.

Coronavirus - procurement regulations during outbreak: SPPN 4/2020

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