Public Contracts Regulations 2015 - Regulation 37

Regulation 37 - Centralised purchasing activities and central purchasing bodies

We can find on Regulation 37 the rules pertaining  to centralised procurement, both procurement activities and bodies involved in such activities. Regulation 36 transposes Article 36 of Directive 2014/24/EU into England, Wales and Northern Ireland. You can find Albert's commentary here.

Central purchasing bodies have been the "next big thing" in public procurement for a number of years (decades?). In the UK, the Crown Commercial Service is the 800 pound gorilla of centralised purchasing, but other governments are paying attention to it as well. In 2014 Wales set up the National Procurement Service to centralise common repetitive spend. As far as I know the standard modus operandi for both is to carry out centralised procurement by offering framework agreements to the public sector at large. Whether we like it or not, the new procurement rules (and practice) require a degree of knowledge, experience and skills that will be hard to give to all procurement officers out there, which connected with ever smaller operational budgets provides a degree of incentives for smaller contracting authorities to outsource the heavy lifting of procurement where possible.

Regulation 37 allows for other centralised procurement practices/procedures to be used in addition to framework agreements. For example, it is possible to use supplies/services from a contract that has been awarded by another contracting authority. This could be used in category management scenarios where various contracting authorities pool their procurement work together and one of them does all the procurement for particular categories. One of the problems with this (and other centralised purchasing practices models) as always been liability and identifying where the proverbial buck stops if something goes wrong.

To their credit, both the Regulations (paragraph 6) and the Directive try to clearly divide the responsibilities of both the central purchasing body and the contracting authority which will benefit from what is being purchased, by leaving squarely in the shoulders of the second the responsibility for the parts of the procedure it conducts, such as awarding the contract or conducting a call off on a framework agreement. Regarding the rest, I suspect it will have to be negotiated and contractually agreed between the central purchasing authority and the beneficiary.

One of the things that struck me as possible when reading the Regulation is that call offs can be done differently inside the same framework agreement depending on who is organising the call off. For example, some contracting authorities could decide to select just a few suppliers to submit a bid (or just one...) whereas others may adopt a rota system or pick suppliers randomly. I cannot make my mind if this is a good or bad thing. On the one hand, we could argue that this leads to unequal treatment and that framework agreements are at the very least still subject to the procurement principles. On the other hand, it may actually be good for competition (bear with me Albert) as it inserts a degree of uncertainty in the framework, as suppliers will not know for sure who may ask for bids, when and under which format. Having said that, I still see framework agreements operated by centralised purchasing bodies, especially if mandatory, to have the potential of being particularly nefarious for competition. I would be a lot more comfortable if central purchasing bodies moved from the "best practice" of framework agreements into dynamic purchasing systems.

The Regulations departs slightly from the Directive in paragraph 10. Whereas the Directive contains a cross-reference to the definition of central purchasing activity contained in Article 2, the Regulations contain the actual definition in Regulation 37 instead. As we mentioned before the Regulations took an haphazard approach to cross-referencing of definitions: sometimes they are contained in Regulation 2, sometimes they have been included in the appropriate Regulation as it happened here. Personally, I think this is a bad legislative technique and we had been better off with a consistent approach: either all definitions are on Regulation 2 or none is.

Another difference between Regulation 37 and Article 37 is that, once more the Directive gave Member States the possibility to mandate the use of centralised procurement for certain contracts. Once more, the UK Government passed on that opportunity.