Kelly Sleight explains what new procurement laws mean for the third sector

From 18 April 2016, any organisation that issues tenders for services, goods or works in Scotland will have seen significant changes in the rules that apply as new legislation came into force.

The definition of “contracting authority” remains the same as before so housing associations and third sector organisations as “sub central authorities” covered by the existing Public Contracts (Scotland) Regulations 2012 will be required to comply with the new regime.

That being said, there are some new flexibilities for “sub central authorities”. These include the use of prior information notices and the ability to set their own time limits for certain procedures.

The new regime illustrates the focus now placed on adherence to social, environmental and tax requirements on the part of bidders and striking a balance between price and quality for contracting authorities

Kelly Sleight

The new legislation, the Public Contracts (Scotland) Regulations 2015 (PCRs) and the majority of the Procurement Reform (Scotland) Act 2014 (the Act) come into force on 18 April 2016, applying to all procurement exercises commenced on or after that date.

The new regime illustrates the focus now placed on adherence to social, environmental and tax requirements on the part of bidders and striking a balance between price and quality for contracting authorities.

There are a number of changes introduced by the PCRs in relation to the procedures used, grounds for exclusion of bidders, and removal of awarding contracts on the sole basis of lowest price. The PCRs also remove the distinction of part A and B services and introduce a new light touch regime for certain social, health and other services.

Of particular importance to housing associations within a group structure and charities with wholly owned subsidiaries is the codification of some key principles arising from EU case law. The PCRs now make provision for contracting authorities to contract directly with wholly owned subsidiaries without the need to procure based on the “Teckal” exemption. The so-called “reverse Teckal” has also been codified to provide an exemption for a subsidiary to procure services from its parent.

Procurement Reform (Scotland) Act 2014 introduces a new procurement regime in Scotland to sit alongside the European rules and also applies to housing associations and third sector organisations as “contracting authorities”.

While a number of the introductions under the Act will only apply to larger contracting authorities, all contracting authorities will need to take into account the thresholds for “regulated procurements”.

In particular, any contracts for supplies and services with an estimated value of more than £50,000 will be subject to regulation by the Act and works contracts with an estimated value of more than £2m, which are much lower than the EU thresholds.

The key changes include:

• sustainable procurement duty – from 1 June 2016 contracting authorities will need to consider particular points and carry out procurement exercises with a view to securing these;
• a procurement strategy must be prepared and published online if expected regulated procurement expenditure be £5m or more in a financial year;
• contracting authorities will also be required to prepare and publish online an annual procurement report. The Act sets out what the report must cover;
• for any regulated procurement of £4m or more, contracting authorities must consider whether to impose community benefit requirements as part of the procurement exercise from 1 June 2016; and
• contracting authorities must comply with any guidance published by the Scottish Government on selection of tenderers and award of contracts.

If you procure services or goods to the extent that you fall under the new rules, now’s the time to review and update your policies, procedures and standing orders; standard form tender documentation and standard form contracts.

If you’d like to find out more detail about both the PCRs and the Act, and what they mean for your organisation, please get in touch.

Kelly Sleight is a solicitor at Harper Macleod and advises many charities and social enterprises on structures, governance and compliance issues