Public Contracts Regulations 2015 - Regulation 33

Regulation 33 - Framework agreements

In Regulation 33 we can find the rules applicable to framework agreements. This Regulation transposes Article 33 of Directive 2014/24/EU. Regulation 33 also starts the section on "Techniques and Instruments for Electronic and Aggregated Procurement". How exciting!

Framework agreements have become remarkably popular in the UK over the last few years and I have already covered some of their problems before. Albert had a lot to say today about competition (scathing, scathing!) and this is an area of intense interest for me in terms of research opportunities in the future.

For creation of a framework agreement, contracting authorities can use any procurement procedure included in part 1, thus meaning that they can even use the negotiated procedure assuming there was a benefit in doing so. One of most interesting uses of framework agreements I have seen over the last few years was done by the FiredUP project, where a competitive dialogue was used to create a framework agreement. Abby Semple gets full credit for that work.

Framework agreements can either be single or multi-supplier, with different rules for each type. Rules for the first are contained in paragraph 7 and state that any subsequent contracts must respect the limits set by the framework and that the operator may be consulted to supplement its tender if needed. One of the problems with these rules is that due to the lack of transparency after the institution of a framework it is nay impossible to know if these rules are being complied with.

Multi-supplier rules can be found in paragraph 8 and are divided into three sets: i) without reopening competition; ii) by partly reopening competition; iii) by completely reopening competition.

Contracts can be awarded without reopening competition if the terms and conditions of the framework agreement were detailed enough and in an objective manner in the procurement documents leading to framework agreement. The litmus test is thus: do the suppliers need any extra information to be able to perform the contract and does the contract authority has enough information from them, or more is needed?

Even if the framework agreement sets out all the necessary terms for awarding subsequent contracts, contracting authorities can still reopen competition if such possibility was mentioned in the procurement documents.

Finally, in case the terms governing the framework are not detailed enough, then the contracting authority is entitled to reopen competition within the framework to award subsequent contracts.

Issues with framework agreements

Framework agreements have a number of issues associated with them in my view: duration, market foreclosure, lack of transparency and collusion. I will focus on the first three and redirect you to Albert's excellent tirade on the last.

The first issue I see with framework agreements is their duration. According to Regulation 33, framework agreements can last for 4 years, which seems like a reasonable duration until it is obvious that the limitation is for the framework agreement in itself and not the subsequent contracts. In other words, it is possible for contracts to extend long after the supposed 4 year deadline. And as the UK does not have a 3 year limitation for the starting term of a contract as other Member States do, I have a feeling they can last for long. If they should last for long is another question, my view is that they should not (they should be called every year to reduce market foreclosure, collusion and keep suppliers on their toes).

The second issue is market foreclosure. This is particular important as the use of framework agreements is on the rise in the UK. Framework agreements may have a market foreclosure by restricting access to billions of pounds worth of spend every year to the few suppliers which are admitted to them. Now multiply that for at least four years and the potential effect is quite big. In my view, framework agreements represent the opposite of what procurement rules were originally designed for: transparency and opening the internal market.

The third problem is lack of transparency. Framework agreement proponents argue that they are subject to transparency, procurement rules and principles in their creation stage. They are right, but to a point. The problem is that by then not a single penny has been spent yet. So effectively transparency only applies to a "pre-award stage". Imagine that we apply the same standard to the open procedure: we would get transparency for a PIN notice or a selection stage, but no transparency whatsoever for the award stage. Would we say that the the principle of transparency had been served well then?

Lack of transparency has other pernicious effects. It is pretty much impossible to know what happens on a framework agreement once it is set in place. How are the calloffs done? How often are they done? What has changed from the original documents of the framework agreement? How many contracts have been awarded? How much money was spent via said contracts? I am not arguing that all practice is bad, but the lack of transparency ensures that is impossible to answer those questions and others.

Framework agreements are information black holes: we know they exist, they attract a lot of attention, but nothing ever leaks out.