Part B services: the end of the road?

Background

Services are classified in the Public Contracts Regulations 2006 (the "PCR") as either Part A or B. This was to reflect the Public Sector Directive 2004/18 which drew a distinction between services likely to be of interest to contractors in other member states, and those which were not. Part B, or so called "residual" services are not deemed to always be of a certain cross border interest because of the nature of the services provided. Part A services are an exhaustive list in Schedule 3 of the PCR - if your services are wholly or predominantly not in this list then they will be Part B services. The most frequently encountered Part B services for contracting authorities are education services, health and social services, legal services and leisure services.

What are the legal obligations for Part B services?

As "non-priority" services, Part B services are not subject to the full procurement regime under the PCR. For example, there is no general obligation to advertise in the Official Journal of the European Union by placing a contract notice. So, the authority must comply with the EU guidance on below threshold and Part B services awards, as well as its internal procedures and the Treaty on the Functioning of the European Union ("TFEU").

The TFEU contains a general set of principles that will still apply to Part B services procurements.  These are transparency, mutual recognition, non-discrimination and equal treatment. In addition, the guidance (and whilst it is just guidance, it is still persuasive) from the EU states that there must be, effectively, a transparent and fair advertisement and procurement process with a clear mechanism to select a winning bidder.

In summary, what this all means is that the contracting authority must consider whether a Part B services contract may be of interest to contractors elsewhere in the EU. The onus is squarely on the authority to comply with this, and to be able to demonstrate that it has done so. Issues to consider include the subject matter of the contract i.e. what do you want to buy, the estimated value, the nature of the market sector including its size and structure, what commercial practices are common within it and the location of where the service must be provided.

So what next?

If an authority concludes that a Part B contract may be of cross-border interest, then it will need to:

• place an advert that is suitable for the particular opportunity
• run a tender procedure that does not discriminate against bidders in other member states, for example by ensuring that it recognises equivalent qualifications
• act transparently throughout the procedure, for example by disclosing selection and evaluation criteria (if a two-stage process is used), and debriefing at contract award stage; and
• remember that some elements of the PCR still apply. For example, Regulation 4 reflects the TFEU principles of treating contractors equally, and acting in a non-discriminatory and transparent way and other parts of the PCR deal with technical specifications and placing a contract award notice, which also remain applicable.

Conclusion

The distinction between Part A and B services is likely to be removed in the near future but will be replaced by another definition of "social services contracts". Until then, contracting authorities should remember the flexibilities in Part B services procurements. Proper consideration must be given to each contract opportunity before making a decision about its classification. There are risks of legal challenge if a contract is wrongly classified as this would amount to an illegal direct award under the remedies regime, which in some circumstances is vulnerable to cancellation of the contract up to six months after it has been awarded. Care is needed, as with much in procurement, to ensure that the flexibilities do not create unintended problems.

Edward Reynolds is an Associate and David Hansom is a Partner and Head of Public Sector at Veale Wasbrough Vizards. David can be contacted on 0207 665 0808 or by This email address is being protected from spambots. You need JavaScript enabled to view it..