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Framework Agreements Pure thrift or a legal beast that needs taming?

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Presentation on theme: "Framework Agreements Pure thrift or a legal beast that needs taming?"— Presentation transcript:

1 Framework Agreements Pure thrift or a legal beast that needs taming?

2 www.olswang.com1 Session 1: what are we to cover? In this first session, I aim to: Outline the basic framework agreement rules Legislature: their motivations and concerns Long term, 2-tier structure, offered once to whole market Discuss some issues which have arisen in practice – your thoughts very welcome Flexibility – for purchasers and bidders Volumes – SME entry, competition Flow of work – use of mini-competitions, are FAs profitable? Transparency – many issues here Dynamism – FAs making up for the shortcomings of DPSs? We will then move on to Session 2: Remedies, Michael Bowsher QC

3 www.olswang.com2 FAs: The basics Once upon a time… In UK, FAs developed as a commercial practice and use growing in early 2000’s OGC Guidance on FAs in 2002 Obtained a place in the EU procurement legislation 2004: Different degrees of Member State development. Arguably, limited vision in relation to more novel purchasing structures – see clunky dynamic purchasing systems Legislature motivated by a need for a common definition and rules on framework agreements Imposing some controls, particularly re duration – competition concerns Interestingly, seemingly limited Commission concern re UK framework agreements since 2004 May well have been some “discussion” with UK government – hence the recent OGC Action Notes on FAs Very limited ECJ and UK case law relating to the operation of FAs – against the big boys (Buying Solutions, PASA, Departments) So, 6 years on, is all rosy in the FA garden…?

4 www.olswang.com3 FAs: The basics II Key tension: trading ongoing market competition for less procurement red tape Reflected in the structure of the regulated FAs (see our FA brochure for full flowcharts) Stage 1: Overarching “agreement” Full OJEU procurement procedure for the award of the coveted, “top-level” framework places – market opening Top- level FA can only last for 4 years (unless exceptional circumstances) – market opening Full procedural and remedial rights for bidders Transparency of award decision – market opening Can be single party – little red tape If multi-party, must be 3 parties (if suitable pool is that large) – market opening Stage 2: Specific “contract” Can avoid any further “competition”, if stick to FA – less red tape If FA terms not exhaustive, go to a form of limited competition (mini-tender) – less red tape Very limited transparency for FA providers, let alone those outside – less red tape Very limited procedural and remedial rights for “bidders” – less red tape

5 www.olswang.com4 Flexibility issues “WHAT” is being purchased? In some areas, government is purchasing very sophisticated things Can a FA structure service these purchases, e.g. fast-moving technology? Problem when establish FA scope at time of OJEU publication Difficulty where specification has to last for up to 4 years Balance: wide enough for innovation v too vague risks scope/transparency challenge Sometimes, subject matter means expert intermediaries are the framework providers Will be clear on face of OJEU notice that this is the model – draw out challenge If the intermediary offers products from a number of sub-contractor suppliers: How do you compete the FA in the first place (sample shopping basket?)? How much fluidity can there be at sub-contractor level? How can the public sector ensure that it is getting best vfm? Arguably, where such fluidity exists, should err towards using mini-competitions

6 www.olswang.com5 Flexibility II “WHAT” is being purchased? Where FAs are operated by a central purchasing body can impact on specification – the greatest happiness of the greatest number May be a reason for some authorities to purchase off-framework What about the ability to “merge” existing frameworks, to benefit from the cost and time savings E.g. for a design & build contract, could the authority call-off a designer from a design framework and a construction firm from a construction framework? Does this sort of flexibility open one/both of the FAs up to a procurement challenge on the basis that what is happening on the ground does not reflect the OJEU advert Would the public body need to select one and then the other, via separate call-off decisions/mini-competitions, or could there be a combined mini-tender allowing providers to pair up?

7 www.olswang.com6 Flexibility III “WHO” is purchasing? The legal definition of a FA controls who can establish such structures - must be (some) public sector involvement: ‘an agreement or other arrangement between one or more contracting authorities and one or more economic operators…’ NB: Public bodies may well not be asked if they want to be added to a FA, may be unaware of their inclusion Particularly re central purchasing body FAs, beware if the list of possible public customers looks: Too vague - See the OGC’s Procurement Policy Note – “Need to ensure that bodies permitted to use frameworks are adequately identified and clarification is issued if necessary” (Action Note 16/10 08 September 2010) - threat seems to be at the call-off contract stage; Too large – Are there any limits on how wide the FA can go? Geographical coverage codes in the OJEU notice Threshold values in the OJEU notice – who keeps an eye on compliance here? The new Coalition policy drive to assist SMEs to win public contracts Not unusual to see the potential pool of FA users drafted as widely as follows…

8 www.olswang.com7 Flexibility IV An example taken from an OJEU notice published in January 2010 by a UK government department highlights quite how widely such notices may be drafted: ‘on behalf of UK public sector bodies (and their statutory successors and organisations created as a result of re- organisation or organisational changes). These will include: Central Government Departments & their Agencies (a list of Executive Agencies can be found at:, Non Departmental Public Bodies (NDPB's)(a list of NDPB's can be found at Annex A to the Public Bodies Directory 2007 published by the Cabinet Office which can be found at bodies.aspx); NHS Bodies (i.e. Acute Trusts, Ambulance Trusts, Primary Care trusts, Care Trusts, NHS Hospital Trusts, Strategic Health Authorities, Mental Health Trusts, Special Health Authorities, Community Health Councils, Local Health Boards, NHS Trusts, NHS Scotland and its organisations and Special NHS Boards in Scotland (lists of such Authorities and Trusts can be found at:, and Local Authorities (i.e. a local authority as defined in Regulation 3(2) to (5) of the Public Contracts Regulations 2006 ('the Regulations') a list of such authorities can be found at: Z_LG) ), Police & Emergency Services Authorities (i.e. fire authorities, fire and rescue authorities (a list of fire authorities can be found at: )), police authorities and the Metropolitan Police Authority as defined by Regulation 3 (1)(j) to (p) of the Regulations, Educational Establishments (i.e. schools maintained by local authorities; Academies; City Technology Colleges; the Learning and Skills Council; further education establishments, Universities and Registered Charities (a list can be found at:’ bodies.aspx Z_LG

9 www.olswang.com8 Volumes In these times of “efficiency”, we see a retreat to the big, central FAs – easy way to cut costs, safe Despite the interest in and promises made to SMEs by the Labour and now Coalition governments, can they ever rise above sub-contractor level? E.g. see the facts of the B2Net case in the FA brochure What check, if any, upon the power of these FAs is reg. 19(12): ‘The contracting authority shall not use a framework agreement improperly or in such a way as to prevent, restrict or distort competition’? The reality is that the big FAs, run by central purchasing bodies, are very important, if not critical, to many companies.

10 www.olswang.com9 Volumes II Therefore there may well not be many options for small public bodies, apart from running own procurement (with obvious downsides) Query statements in the case law which say that, if there are delays to a FA becoming operative through interim relief, customers will go elsewhere in the, say, 6 months Risks for public sector: Over shooting the values in the OJEU notice – so what? Technically, could argue a “new” contract which should be advertised Sufficient capacity and service delivery levels from the provider firms Competition issues – creation of a few very strong market players, problematic for re-compete (useful discussion on competitive neutrality, albeit in mixed markets, in OFT Working Paper “Competition in mixed markets: ensuring competitive neutrality”, July 2010), and possibly convergence of products/solutions

11 www.olswang.com10 Flow of work Public sector may be concerned about going “off-framework” if the contract does not fall exactly within scope, as want to feed their framework providers (as well as save time and money) On the reverse of the coin, some FA providers complain about the lack of work obtained from the FA, or uneven distribution of work, which annoys given sunk bid costs Unless mini-competition held for call-off work, very hard for bidders to monitor how faring under the FA and equal treatment (mentioned in recital 11 of underlying EU Directive 2004/18/EC)

12 www.olswang.com11 Transparency Increasingly a big issue in procurement but particularly important at call-off stage of FAs Big questions - just exactly who is using the FAs, for what, at what price? Of interest to public bodies which can use the FA, FA providers, companies not on the panel and general public But limited obligations on the public sector re call-off stage: Limited accountability re certain decisions (e.g. extent to which the mini-competition is needed/on terms based on the FA and whether all those “capable of performing” are approached) No need under PCR to debrief (though this may now occur, as a protection against ineffectiveness remedy); and No OJEU contract award notices for call-off contracts Interesting to see how the new Coalition “Transparency” agenda will play out here, particularly given the value and importance of some call-offs. New requirement to publish procurement documents and contract documents - set out in David Cameron’s letter to Cabinet Ministers at the end of May 2010 OGC Action/Information Notes: 17/10 of 10 September 2010 and 13/10 of 30 June 2010

13 www.olswang.com12 Dynamism Were FAs ever meant to be dynamic? Traditionally, we used to talk about quick, repeat purchases such as stationery, office supplies for which the procurement rules were a pain Arguably, FAs are the most useful tool Member States have to reduce some of the procurement burden on government, whilst not distorting competition too much, and so they have been stretched Arguably, FAs are filling in for the weakness of the Dynamic Purchasing System provisions – which were meant to be dynamic, similar to an e-catalogue The future: will technology save the day, and FAs eventually be mothballed? For certain purchases, e-catalogues might ensure up-to-date products and pricing, with maximum market participation – but what would the legislature say!

14 www.olswang.com13 Remedies For public sector bodies buying through a central purchasing body’s FA, remember reg. 22 of Public Contracts Regulations: ‘Where a contracting authority makes purchases in accordance with para (1) [i.e. through a CPB], it shall be deemed to have complied with these Regulations to the extent that the central purchasing body has complied with them’ So, if the FA operator has breached the PCR, those purchasing via the FA run a procurement law risk Care needs to be taken in relation to how to attack or defend a FA where call-off contracts have been awarded under the FA Michael to discuss further in Session 2

15 Thanks for listening For more information please contact: Melanie Collier +44 (0)207 067 3606

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