Project Delivery - Part 1 - Procurement Bidding Strategies

Welcome to our new series of articles which is designed to provide practical assistance to cover all the key stages of the delivery of projects in the built environment, from inception to handover. We start our journey at the very beginning with a practical introduction to public sector contracting, and the legal procurement regime. Next month we will continue with the topic of public procurement, looking at challenges to a public sector contract award decision under the Public Contracts Regulations 2015.

We hope you find this series interesting, if you would like to discuss the article series further, please contact Steve Cannon and Victoria Peckett.

Procurement: Bidding for UK Public Sector Construction Contracts 

Tendering for public sector construction contracts

Public bodies are required to comply with a legal procurement regime when awarding contracts for goods, works and/or services. The regime is in place to ensure transparent, fair and proportionate spending from the public purse. Different rules apply depending on the value and type of the contract. If you want to deliver works for the public sector, you will likely have to participate in a formal procurement process. This may be to deliver specific works under a contract or be appointed to a framework agreement (see further on framework agreements below).

The legal regime

The current rules surrounding public procurement are encompassed in various sets of regulations - the Public Contracts Regulations 2015, the Concession Contracts Regulations 2016, the Utilities Contracts Regulations 2016, and the Defence and Security Public Contracts Regulations 2011.

With the exception of the Defence and Security Public Contracts Regulations (which apply on a UK-wide basis), the above legislation does not apply in Scotland and the Scottish regime is (currently) substantively similar to the rules in the rest of the UK.

Each of these regulations set out key aspects of public procurement relevant to different sectors and contract types. For the purposes of this article, we focus on works contracts procured under the Public Contracts Regulations 2015. However, public sector contracts may be tendered in accordance with any of the above regulations depending on the contract type, scope and the public body procuring the works. 

The Public Contracts Regulations 2015 (the Regulations) 

Which public bodies need to comply with the Regulations?

Public bodies that meet the definition of a “contracting authority” must comply with the Regulations. “Contracting authority” is a broad term that captures the overwhelming majority of public bodies, including central government departments, Non-departmental public bodies (NDPBs), local authorities, housing associations, most universities/education institutions and NHS bodies. 

When do the Regulations apply to works contracts? 

From 1st January 2024, the financial threshold for works contracts is £5,372,609, inclusive of VAT​​​. This means that if a works contract is estimated to be worth that sum or above, it will be subject to all of the Regulations.

The procurement principles

The procurement regime in the Regulations is underpinned by a set of principles applicable to all procurement processes. 

The principles require contracting authorities, when conducting the procurement process and assessing tenders, to: 

• treat contractors equally and without discrimination; 
• act in a transparent manner; 
• act in a proportionate manner; 
• not design a procurement with the intention of excluding it from the scope of the Regulations or of artificially narrowing competition. (For this purpose, competition is to be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain contractors.)

Are there different procurement routes available to contracting authorities? 

Contracting authorities must follow one of six procurement procedures, some of which can only be used in limited circumstances. The two most commonly used procedures are the Open Procedure (a single stage process) and the Restricted Procedure (a two-stage process). The Restricted Procedure is used where the contracting authority requires an initial pre-qualification stage to down-select the number of contractors it invites to submit a tender. Neither the Open nor Restricted Procedure allow for negotiation of tenders or contract terms. 

The other procedures available under the Regulations include the Competitive Procedure with Negotiation, the Competitive Dialogue procedure, the Innovation Partnership procedure and the Negotiated procedure without Prior Publication of an advertisement. These procedures allow for negotiation in some form and their use is limited. 

Apart from where the Negotiated Procedure without Prior Publication is used, a procurement procedure is commenced with the publication of an advert (see more on this below). This invites contractors to take part in the procurement process for the relevant contract or framework agreement.  

Commonly asked questions on the Regulations

Do the Regulations ever apply to the private sector?

Generally speaking, the answer is no. The Regulations only apply to “contracting authorities”. However, the Regulations do apply to the award of above threshold works contracts which are entered into between two private sector entities, subsidised directly by a contracting authority by more than 50%, and involve any of the following activities:

(i) certain defined civil engineering activities;
(ii) building work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes. 

These contracts are known as subsidised works contracts. It is up to the contracting authority providing the subsidy to ensure that the award process is carried out by the private sector in accordance with the Regulations, even where the authority itself does not enter into the subsidised works contract.

Where do I find adverts for public contracts being tendered? 

Contracting authorities in the UK must advertise above threshold contracts on the Find a Tender Service website (known as ‘FTS’). They do this by publishing a Contract Notice on the website, which contains information about the contract opportunity including the estimated contract value, the specific nature of the requirement, the chosen tendering procedure, and the timescales for award. The Contract Notice also contains a link to the procurement documents.

Although the Regulations do not require contracting authorities to advertise below threshold contracts, if they choose to advertise such opportunities, they must do so via an online portal known as ‘Contracts Finder’.

What is a framework agreement?

A framework agreement is an agreement between one or more contracting authorities and one or more contractors, under which a contracting authority can ‘call off’ individual contracts in accordance with the terms set out in the framework agreement.

A framework agreement is not in itself a commitment to purchase works. Instead, it will establish the terms, particularly regarding price and quantity, for future purchases. If a framework agreement is established in accordance with the Regulations, future contracts can be awarded in accordance with the award process set out in the framework agreement without the need to run a new procurement process. 

Where a framework agreement is entered into with more than one contractor, contract awards can be made either directly to one supplier, or by way of a mini competition between all suppliers on the framework. The process setting out when and how each award process (direct award or mini competition) can be used, must be set out as part of the framework agreement terms. 

Call off contracts entered into under a framework agreement cannot contain substantial modifications to the contract terms previously agreed as part of the framework agreement. 

In all procurement processes, tenders are evaluated using a combination of selection and award criteria. Selection and award criteria can be distinguished as follows:

Selection criteria relate to a contractor’s current capacity, financial standing and technical and professional ability to perform the proposed contract. Under a two-stage procurement process, selection criteria is applied at the initial or pre-qualification stage of the procurement (also known as ‘selection stage’). The purpose is to short-list bidders to be invited to tender. 

In a single-stage, Open Procedure process, contractors must usually satisfy minimum selection criteria as part of the overall tender submission. The contracting authority will usually evaluate the selection criteria first and if the contractor meets the authority’s minimum selection requirements, the rest of the tender will be considered.

Award criteria relate to a contractor’s proposed delivery of the relevant contract and are used by the contracting authority to identify the tender that is the most economically advantageous. The criteria used is usually based on a combination of price and quality. Award criteria must be linked to the subject matter of the contract being procured and can, for example, relate to qualitative, environmental and/or social aspects. 

How will I be informed of the outcome of a procurement? 

Once a contracting authority has identified the winning contractor, it must send an award decision notice to each contractor that has taken part. Award decision notices must set out the name of the contractor to be awarded the contract and the reasons for the award decision, including the characteristics and relative advantages of the successful tender. Unsuccessful contractors are also entitled to receive their scores and the reasons for their scores. 

The contracting authority must not enter into the contract with the successful contractor until (at the earliest) midnight at the end of the working day that is 10 calendar days after the date the award decision notice was sent electronically to the participating contractors.

What if I disagree with a contract award? Can I do anything about it?

Where a procurement process has not been compliantly run in accordance with the Regulations and, as a result, a contractor has suffered or risks suffering loss or damage, there are remedies available to challenge the actions of the contracting authority. The next article in this series will look at the legal rights of contractors to challenge a procurement process. 

Change is coming - the Procurement Act 2023

You may have read about the Procurement Act 2023 which received Royal Assent in late October 2023 and will change how public procurement is conducted. Although the law has been officially passed, the new regime is not expected to be in force until October 2024. The new rules will bring about fundamental change to how public procurement is run in the UK. Please see our separate updates on the Act, which we will be releasing in due course.

If you have any questions about the content above or are looking for assistance with a public procurement contract, please get in touch with members of our procurement team below.