Procurement the legal framework

Part of: Housing Association Guide, Procurement Guide

This section details the legislation from which the directives arise to ensure all public procurement is properly conducted.

Procurement governance

All public procurement in the UK is governed by the EU Treaty, the EU Procurement Directives and UK Procurement Regulations that implement the Directives. The Treaty’s fundamental principles of non-discrimination, equal treatment and transparency apply to all procurement activity regardless of value, including contracts with values below the thresholds at which advertising in the Official Journal of the European Union (OJEU) is not required.  This legal framework helps to ensure that public procurement is conducted in a fair and open manner both within the UK and across the EU.

For contracts over the relevant EU threshold value, which varies depending on what is being purchased, the Directives require that opportunities are advertised in OJEU. They also require that contracts are awarded in accordance with certain standard procedural rules, e.g. on timescales for the contracting process, advertising, information that potential suppliers should provide, and the basis on which bids may be assessed.

The EU Procurement Directives have been implemented into UK national law by the introduction of the following Regulations:

  • The Public Contracts Regulations 2015  
  • The Utilities Contracts Regulations 2016  

Contracting authorities

Public Bodies that are ‘Contracting Authorities’ are required to comply with the Regulations where the stated thresholds are exceeded.  The position regarding Housing Associations has been obscure in this regard.  However, regarding the status of Housing Associations (HAs) under the Regulations the UK Government, in September 2004, accepted that the European Commission was correct in its view that Registered Social Landlords (RSLs) fell within the definition of Bodies Governed by Public Law (BGPL) within the European Procurement Directives. This means that it is now accepted that RSLs and HAs fall within Regulation 3(1)(w) and are obliged to procure in accordance with the Regulations. For clarity, Regulation 3(1)(w) includes within the definition of contracting authorities:
“a corporation established, or a group of individuals appointed to act together, for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, and:

  • financed wholly or mainly by another contracting authority;
  • subject to management supervision by another contracting authority or
  • more than half of the board of directors or members of which, or, in the case of a group of individuals, more than half of those individuals, are appointed by another contracting authority”

For the purposes of the Regulations the current EU Procurement Thresholds are set out in Table 1 EU Procurement Thresholds which can be found on the HAG - Procurement Guide - tables page.

An obligation to comply with the Public Procurement Regulations rests, in the first instance, with the BGPL, i.e. the Housing Association, and although a breach of duty is not a criminal offence, proceedings may be assigned to the High Court. The High Court is given powers that can include setting aside a successful contract or awarding damages to unsuccessful contractors.

Treatment of Lots/Aggregation

The use of Lots and the issue of Aggregation may be relevant to the procurement of goods, works and services by a housing association.  Under the Public Contracts Regulations 2015 Treatment of Lots/Aggregation is dealt with under regulations 6 (11) to 6(15), which sets out the rules on how to calculate the value of a contract for the purposes of assessing whether the threshold is exceeded.

Regulation 6(11) states that where a proposed work or a proposed provision of services may result in contracts being awarded in the form of separate lots, account shall be taken of the total estimated value of all such lots. Where the conditions for aggregation are fulfilled, an association may have to treat the Regulations as applying in full to each individual contract, even though the value of that contract by itself may be below threshold.  

Associations should also note the importance of Regulation 6(6) which states that ‘A procurement shall not be subdivided with the effect of preventing it from falling within the scope of this Part (of the Regulations), unless justified by objective reasons.’ Therefore in relation to any procurement carried out by a PG / Association the PG / Association would have to form a view of whether same is a single requirement or whether it is one part of a number of contracts to fulfill a single requirement thereby meaning that it should be treated as an above threshold requirement and subject to the Regulations.

Advice may be sought from NIHE as CoPE in relation to the use of Lots and application of the Aggregation rules.

Framework agreements

Regulation 33 includes provisions in relation to the use of Framework Agreements. A Framework Agreement can be a useful option and is defined under Regulation 33(2) as “an agreement between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged.”

The agreement sets out terms and conditions under which specific purchases (call-offs) can be made throughout the term of the agreement (a framework agreement may not normally exceed 4 years, except in exceptional circumstances).

EU Remedies Directive

The Remedies Directive 2007/66/EC published on 20 December 2007 contained a number of provisions intended to improve the effectiveness of review procedures concerning the award of public contracts. This was transposed by the Public Contracts (Amendment) Regulations 2009 and thereby amended the Public Contracts Regulations 2006.

The Public Contracts Regulations 2015 now includes the relevant provisions of the Remedies Directives (Directive 89/665/EEC as amended by Directive 2007/66/EC), on remedies and review procedures for public procurement, as implemented by the UK in the Public Contracts Regulations 2009.

CPD had developed PGN 01/10 (Information Disclosure throughout the Procurement Process and Application of the Rules on the Standstill Period) to provide interim guidance until the review procedures could be incorporated into a single set of regulations. Following the introduction of The Public Contracts Regulations 2015 this guidance was withdrawn by CPD.

Guidance for procurement practitioners

Detailed guidance for procurement practitioners on the implementation of the Remedies Directive is available from the Cabinet Office - EU Procurement website.

Disclaimer – this guidance is provided for the information of Registered Housing Associations operating in Northern Ireland.  It does not purport to be an authoritative interpretation of the various EU Procurement Directives and requirements, and its sole purpose is to alert Housing Associations, as Bodies Governed by Public Law (BGPL), to the requirements and the need for the Association to ensure compliance.  Associations, in operating the requirements, should refer to the relevant legislation and take appropriate legal and professional procurement advice where necessary. Advice may also be sought from NIHE as CoPE.

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