Utilities Contracts Regulations 2016 and Concession Contracts Regulations 2016

Wednesday, 30th March 2016

On 12 February 2016, we discussed the government''s consultation on the new Utilities Contract Regulations 2016 ("UCRs") and Concession Contracts Regulations 2016 ("CCRs"). Our overview and the government''s consultation can be accessed below:

Government Response to Consultations: Utilities Contracts Regulations 2016 and Concessions Contracts Regulations 2016  - click here to read the article. Click here to view the full Government response to these consultations. 

The regulations were laid before Parliament on 17 March 2016 and are due to come into force on 18 April 2016, so here is a reminder of the key features and changes to be introduced.

Key features

Utilities Contract Regulations 2016

The main changes for utilities to be aware of are:

Provision Change
Regulation 5

 

- Who does the UCR cover and what types of contracts are caught?
Unlike the 2006  regulations, there is no list of entities to which the UCRs apply.

 

Relevant entities will now have to consider whether they are covered by the UCRs in accordance with the provisions of Regulation 5. This includes whether the entity is a public undertaking or contracting authority which pursues one of the activities referred to in Regulations 9-15 (gas/heat/electricity/transport services/postal services/ports and airports/oil and gas). It also covers entities which are not public undertakings or contracting authorities but whose activities include one of those mentioned above and operate on the basis of special or exclusive rights granted.
Regulations 48 and 49

 

Procedures

Two new procedures will be available to utilities. These are:

 

Regulation 48 - competitive dialogue. This procedure was available under the Public Contracts Regulations 2006 and has now been extended to utilities.  Competitive dialogue enables utilities to explore commercial solutions through "dialogue" with bidders. However, unlike under the Public Contracts Regulations 2015, there are no restrictions on when this procedure can be used.

 

Regulation 49 - innovative partnerships. This is a brand new procedure which enables a utility to set up an innovation partnership with one partner or several partners, in order to conduct separate research and development activities.  The stages of the process must be designed to follow the stages of research and development, with the partners being remunerated for their work throughout the process. 

Regulation 51

 

Framework agreements and duration
The maximum term of framework agreements has been limited to 8 years. This is in contrast to this the UCR 2006, where there were no restrictions on the length of the framework agreement. 

Regulations 58 and 59

 

Consulting the market
The UCRs contain new provisions in respect of market testing and the involvement of candidates/tenderers in the planning process. Such market testing and planning involvement is now expressly permitted provided that the utility takes appropriate measures to ensure that competition is not distorted. 

Regulation 65

 

Division of contracts into lots
Utilities may decide to divide contracts into separate lots and may determine the size and subject matter of such lots. Utilities may also limit the amount of lots awarded to one tenderer, provided the maximum number of lots is stated.
Regulation 80 UCR and Regulation 57 Public Contracts Regulations ("PCR")

 

Exclusion

This states that utilities that are also contracting authorities must refer to the mandatory grounds listed in Regulation 57 PCR when excluding candidates. There are also discretionary grounds which all utilities may employ when selecting bidders.

 

The list of discretionary grounds when excluding potential tenderers has also been expanded under the PCR to include deficient past performance of contractual regulation, environmental, social or labour law, conflict of interest and being party to an anti-competitive agreement. 

Regulations 82 and 83

 

Selection and award criteria
Utilities must now award contracts on the basis of the most economically advantageous tender using a best price-quality ratio. Assessment of price can include life-cycle costing which takes into account costs over the lifetime of the project such as costs of acquisition and maintenance, as well as costs relating to environmental externalities and other climate change mitigation costs.

 

Regulation 82(3)(a) states that quality, including technical merit, aesthetic and functional characteristics and accessibility to design for all users can be taken into account as part of the selection criteria and Regulation 82(3)(b) sets out that organization, qualification and experience of staff can also be a factor in selection.

Regulation 84

 

Abnormally low tenders

There is now a positive obligation on utilities to investigate a tender which is abnormally low in relation to the works, supplies or services and require an explanation on why the bid price is low. 
Regulations 88 and 89

 

Modification to contract terms
Sets out the grounds under which an existing contract can be modified without a new procurement procedure. It codifies the decision in Pressetext in respect of material change and provides additional circumstances in which a contract can be modified without the need for a new procurement process.

 

Regulation 89 will imply a term into all contracts allowing a utility to terminate if an unlawful modification is made.

Regulation 99

 

Keeping information
There will be increase the amount of documentation which utilities are required to keep on each contract and framework agreement. Utilities should ensure that they retain sufficient documentation to justify decisions taken throughout all stages of the procurement procedure. 

Concessions Contracts Regulations 2016

Provision Change
Interpretation The CCRs are brand new regulations which govern the procurement of concession contracts. A concession is a contract whereby the consideration consists of the right to exploit works or services. The regulations apply to both contracting authorities and utilities, collectively referred to as "concession granters".

Regulation 8

 

Thresholds
The regulations will apply to contracts only over EUR 5,186,000 in value which is a relatively high threshold.

Regulation 17

 

Duration

The term of a concession contract must be limited. The maximum duration is the time by which a concessionaire could reasonably be expected to recoup investments made in operating the concession together with a return on invested capital.

Regulation 36

 

Procedure
There are no set procurement procedures in the CCRs and concession granters have discretion as to how to structure the procurement process. However, concession granters must follow a set of minimum requirements (referred to as "procedural guarantees") throughout the procurement process so as to ensure effective competition, equal treatment and transparency.

Regulation 43

 

Modifications

Concession contracts may be modified during their term under certain circumstances as specified in the UCR.

Regulations 57 and 58

 

Remedies

The remedies are essentially the same as those in the Public Contracts Regulations 2015, including suspension of contract award, declaration of ineffectiveness and damages. Concession granters will also be required to hold a standstill period before awarding a contract.

For further information on the implication of these changes, please do not hesitate to contact our Projects team.
 

This article was written by Ruth Yates and Naomi Pakenham.