OGC warns of dangers of non-compliant framework agreements

The Office of Government Commerce has fired a warning to contracting authorities of the risks of joining “framework agreements” set up by private organisations.

In a procurement policy note published this month, the OGC said it had come to its attention that “certain private organisations which are not contracting authorities are either setting up or in the process of setting up contracting arrangements which are described or promoted as being equivalent to framework agreements for use by the public sector”.

The OGC said the issue appeared to be a particular concern amongst public sector energy buyers, who are being approached by bodies promoting energy frameworks which are described and promoted as being compliant with the public procurement rules. But it added that the practice was not exclusive to the energy sector.

The policy note highlighted the fact that compliance with the rules cannot be demonstrated adequately by only pointing to the fact that a contract opportunity has been advertised in a particular way, for example by an OJEU notice or by reference to a term such as a framework agreement which is found in the rules.

It is also clear from the definitions of “framework agreements” in the Public Contracts Regulations 2006 and the Utilities Regulations 2006 that only contracting authorities and contracting entities are able to establish framework agreements, the OCG said.

The policy note added: “An organisation which is not a contracting authority could not set up a compliant framework agreement (as defined in the public procurement rules) on its own. Where a non-contracting authority is acting on behalf of a contracting authority a framework can be established for use by the particular contracting authority and other contracting authorities, if appropriate.”

The OGC went on to say that it was unlikely that an organisation can legitimately promote a contracting arrangement as a framework agreement, which contracting authorities can use, if:

• the organisation is not a contracting authority or acting demonstrably on the instructions of a contracting authority as the authority’s agent;
• the terms of any relationship of agency between it and a contracting authority are inconsistent with the requirements of the public procurement rules;
• the arrangement was set up at the organisation’s initiative, as part of its general business activities/interests with contracting authority participation secured subsequently.

The policy note warned authorities that they risked breaching the public procurement rules if they used an agreement set up by an organisation that is not a contracting authority, leaving them open to a challenge and possibly substantial penalties.

“In essence, any resulting contract could constitute an illegal direct award for the purposes of the procurement rules, regardless of the extent of competition that occurred either during the award of the (non)-framework agreement or at call-off stage,” it added.

The note also said that the UK government would be at risk of infringement proceedings brought by the European Commission.

The OGC identified a number of steps authorities should take before accessing a framework agreement, including assuring itself that the framework has been established by a contracting authority as defined by the regulations.