Public sector bodies of all types in the EU and UK are scrambling to acquire a range of goods, services and infrastructure as the COVID-19 pandemic unfolds. Many of these purchases are subject to the public procurement rules, which require tendering of contracts. In the current situation, there is a often mismatch since purchases are needed urgently while the formal tender processes can be slow.
Recognising the difficulties, both the European Commission and the UK government have published guidance which explains how to comply with the rules where urgent purchases need to be made during the crisis. These guidance documents are important for both public sector purchasers and their suppliers, since failure to tender properly can have serious consequences, including suspension of a contract and an award of damages.
EU Guidance
The European Commission guidance is relevant EU-wide and also in the UK during the Brexit transitional period (which runs to 31 December 2020). It explains the flexibility allowed under the rules in situations of extreme urgency:
“This guidance focusses especially on procurements in cases of extreme urgency, which enable public buyers to buy within a matter of days, even hours, if necessary. Precisely for a situation such as the current COVID-19 crisis which presents an extreme and unforeseeable urgency, the EU [public procurement] directives do not contain procedural constraints.”
The guidance provides both practical and legal advice. On the legal side, it explains that the rules allow for a range of options. The deadlines under the standard “open procedure” or “restricted procedure” can be substantially reduced where justified by urgency. This accelerates the timetables under those procurement routes, while still allowing for publication of an advertisement and the running of a competition.
If that is not sufficient, a “negotiated procedure without publication” can be used in certain circumstances where there is “extreme urgency” (this is to be distinguished from the “competitive procedure with negotiation” route, which requires advertising/publication). Under this procedure, which should be used only “to cover the gap until more stable solutions can be found,” direct negotiations with potential providers take place. In practice, certainly for healthcare providers while the infection curve rises, this is likely to be the most common route since it allows public buyers to sign contracts within the shortest possible time frame. There are no advertising requirements, no time limits, no minimum number of candidates to be consulted or other procedural requirements. Purchasers can act as quickly as is technically/physically feasible.
Ultimately, but exceptionally, a direct award to a preselected economic operator is permissible. This can be done where only one undertaking is able to deliver within the technical and time constraints imposed by the extreme urgency.
On the practical side, the EU guidance suggests a number of options which can actively be used to identify potential suppliers. These range from the most basic — contacting potential contractors by phone — to more sophisticated ideas, such as launching “hackathons for new concepts that enable reusing protective masks after cleaning, for ideas on how to protect medical staff effectively, for ways to detect the virus in the environment, etc.”
Purchasers are also encouraged to procure jointly and to take advantage of the Commission’s joint procurement initiatives launched with EU member states.
UK Guidance
The UK government guidance covers ground similar to that covered in the EU guidance. (This is unsurprising, since during the Brexit transitional period, EU law — including public procurement law — continues to apply in the UK.) However, in addition to the purchasing routes identified in the EU guidance, the UK guidance refers to other possibilities which may be relevant during the crisis. It also provides more explanation in relation to some of the routes.
As noted in the EU guidance, in some limited cases, a direct award to one supplier can be made, without even parallel negotiations with other potential suppliers taking place. This route can be used where there are no alternative suppliers for technical reasons or due to the existence of intellectual property rights owned by a supplier. There must be no reasonable alternative or substitute suppliers. In addition, the contracting authority cannot be artificially narrowing the scope of the procurement, such as over-specifying the requirement.
The guidance also points out that where a relevant pre-existing framework purchasing agreement or dynamic purchasing system is in place, a public sector purchaser might be able to use this to make call-off purchases. This could in some cases be by way of a direct award to the supplier.
Finally, the UK guidance explains that in certain circumstances it is possible — within the public procurement rules — to extend or modify an existing contract during its term. There are specific grounds for this under the regime, but if relevant, this can provide a very simple route to making the required purchases.
Practical Issues
The public procurement rules are complex, and specific legal advice should be taken before employing any of these — or other — options to make urgent purchases. In any event, in all circumstances, a public sector purchaser should ensure that it has a paper trail. It should keep a written justification that the procurement satisfied the relevant tests and also carry out a separate assessment of the tests before undertaking any repeat procurement.
Equally, although the supplier is less at risk, a contract award can still be subject to an injunction, so it will want to ensure that the public sector purchaser is making valid use of the public procurement rules when making an urgent purchase.
Proper record keeping could mitigate the risk of a successful legal challenge. This is not a theoretical issue. For example, the UK government, as part of its “no deal Brexit” planning, ran into procurement issues in 2019 when it tried to put in place extra freight ferry capacity across the English Channel at short notice. There is no doubt that competing suppliers will be watching contract awards made during the crisis with particular care.
For more information on antitrust/competition law issues generally, please see McGuireWoods’ related alerts:
- EU, UK Governments and Antitrust Regulators Permit Limited Competitor Cooperation Due to COVID-19
- EU, UK Antitrust Regulators Monitor Price Increases Resulting From COVID-19 Demand
- Don’t Overlook EU, UK Antitrust Issues With Vertical Arrangements During the COVID-19 Pandemic
- Government Funding or State Aid in the EU, UK During the COVID-19 Pandemic
- UK Guidance on Application of Competition Law to Business Cooperation in Response to COVID-19
- New EU Guidance: Applying Competition Law to Business Cooperation During COVID-19
Watch for more detail on these topics in future alerts.
For questions or additional guidance on these recommendations and other COVID-19 considerations, please contact any of the McGuireWoods COVID-19 Response Team members.