EU procurement rules and Registered Social Landlords.

How do EU procurement regulations affect social landlords?

In Autumn 2004 the UK government made it clear to RSLs that they were covered by EU legislation that regulates the way in which procurement is carried out.

This legislation, which applies to all contracts, for works, supplies and services let by so-called 'contracting authorities', is implemented in UK regulations that require RSLs to follow a detailed procurement 'code'. Breach of that code can lead to action by the UK courts (leading to damages awards or even the suspension and cancellation of a contract).

Key features of the 'code' set out in the regulations are:

• equality of opportunity in bidding for all public procurement contracts (whether for works, goods or services) - all suppliers in the EU and certain other states including the USA have rights of access to these contracts (no preference for local or national suppliers);
• the legislation applies to 'contracts' over the relevant threshold value (for RSLs this value is currently £139,893 for goods and services: for works it is currently £3,497,313);
• EU-wide advertisement of contracts well in advance of need - lead-times from commitment decision to formation of contract of 6-9 months are very common;
• open technical specifications (including restrictions on the use of trade names);
• limitations on the length of commercial agreements, with great emphasis placed on the need for periodic public competition;
• restrictions on the criteria used to select/pre-qualify suppliers;
• disclosure of the detailed criteria to used to award contracts;
• reporting of the reasons for procurement decisions to participating suppliers and to the European Commission.

If housing organisations use PfH deals does that mean social landlords don't have to go through the EU tendering procedure? Why is this?

A key part of the legislation is the need to publish a 'call for competition' in the OJ. This makes clear to suppliers that the RSL is seeking requests to participate in a contract process. One of the ways to comply with this requirement is to rely on a call for competition published on the RSL's behalf.

The deals arranged by PfH on behalf of RSLs are so-called 'framework agreements'. These have many of the features of a term contract (requirements are ordered or 'called-off' by the user as needed). Unlike term contracts however there is no commitment to a particular value of business, or to a pattern of call-off. The PfH frameworks have already met the EU obligation because they have been advertised in the OJ and let according to the 'code' referred to above.

Provided an RSL follows the terms of a framework let by PfH to let a contract, it need not itself advertise in the OJ and the time taken to obtain the goods or services is greatly reduced (as of course is the resource cost to the RSL).

Frameworks are used extensively by contracting authorities to meet their EU obligations.

How do EU regulations affect long-term partnership agreements already in place (e.g. for capital works)?

The legislation applies to 'contracts' over the relevant threshold.

If a contract is already in existence then there would be no need to stop and re-advertise the contract.

It is understood however that 'partnership agreements' are not in themselves contracts, rather a non-legally binding programme of works that the RSL has agreed with the contractor.

This is close to the concept of the framework (discussed above). If therefore the 'partnership agreement' had been let following the appropriate procedures (including OJ advertisement) then there would be no need to apply the rules to any contracts during the period of the agreement.

However, it is understood that in the majority of cases existing partnership agreements will not have been let following the appropriate EU procedures. In this case the RSL must either let each contract following the appropriate EU procedures or let a new partnership agreement (=framework) following the appropriate procedures.

The risk of continuing to use a partnership agreement without an EU call for competition is that the courts would consider this a breach of the statutory obligation placed on the RSL by the UK regulations. The contract might be stopped and/or damages awarded against the RSL. If EU funding is involved there is also a risk that funding would be clawed back by the EU Commission.

RSLs should urgently review the status of any partnership agreements in force and take steps to ensure EU-compliance of future agreements.

Further information on any of the information contained in this article can be obtained from glenn.fletcher@achilles.com.

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Answers supplied by Glenn Fletcher, Head of EC legislation for Achilles Information Limited