In the first in a two-part series, Kieran McGaughey provides top tips for contracting via the procurement process.
Recently I have been advising clients on a number of concession procurements. Prior to this, The Concession Contracts Regulations 2016 were much like a certain (former) President’s tweets – I knew they were there, I just didn’t need to read them. Then, all of a sudden, two concessions came along at once. Like buses! (or e-scooters, as it happens….)
Cue much scrambling around to source a model concession contract online (there isn’t one, believe me I’ve tried…) This reflects the fact that, as any commercial lawyer will attest, your terms and conditions should always reflect the actual service being delivered.
This got me thinking: what are the other key factors to consider when procuring your contracts? (whether concession or otherwise) How can you ensure, pardon the pun, that the wheels don’t come off your procurement? (last one I promise…)
This is Part 1 of a 2-part series, which aims to provide some practical tips for procurement officers and lawyers alike. To help you stay in the driving seat! (oh dear…)
1. Get your (contractual) house in order
When was the last time you reviewed your council’s standard terms and conditions? Are they fit for purpose? Consistent? Up to date? Whether councils or businesses, I am always surprised how many people are still talking about the Data Protection Act 1998. Last week I saw a clause referencing the Commission for Racial Equality. “That doesn’t sound right,” I thought to myself. A quick Google search revealed the Commission was abandoned all of 13 years ago (That supplier can rest easy they won’t be making any findings against them anytime soon…)
In-house clients are, in my experience, very rarely chasing us lawyers to update an organisation’s standard documents. Queries tend to be on specific live projects (“Kieran can you stop writing articles and get back to me on this procurement please?”) The danger then is that, in 13 years’ time, you still haven’t gotten around to updating those terms you planned to….
When you take a step back and consider the sheer number of projects your standard terms will be deployed against, it really is worth investing the time to make sure they do the job properly. Aside from the technical legal aspects, there are practical considerations too. Is it clear to procurement officers which bits need populated, amended or removed each time? These are simple areas but ones fraught with risk. A missing company name, service level credits left blank, an unpopulated liability cap – these can all have significant consequences.
Drafting notes and highlighted sections can assist but are not sufficient on their own. Staff should be trained to understand which contracts are needed when, what they need to do with those contracts, and when to seek legal advice.
2. Get the subject matter right
Ask yourself in any given case: What is it your authority are procuring? Is it goods, services, or works? (or even a mixture of those?) These questions will inform the contract terms you need to put in place.
Most councils will have standard terms and conditions covering the provision of goods and services. If your contract is for works however, you will probably instead be looking to adopt standard form construction contracts (such as the JCT or NEC suite of documents).
Where it is a goods or services procurement, your contract is likely to need a slightly different focus in either case. For example, a goods contract may require more detailed provisions on orders, deliveries, acceptance, transfer of title and risk etc. A services contract, on the other hand, may require more detailed provisions on TUPE, data protection etc.
Even where services are being procured, you may wish to consider whether your standard service terms are appropriate. Particular services, such as software, are likely to need a bespoke form of contract, tailored specifically for that area. This may include terms around user licences, a service level agreement, service credits etc.
This consideration as to what contract form is needed can often fall by the wayside in the hurry to get a procurement out the door. However, such short-term gain will often lead to long-term pain!
3. Check it’s not a concession
At this initial stage you should also quickly ask: will this operate as a “normal” contract, or rather on a concession basis? An example is given below:
(a) Normal contract:
You engage a contractor to fit out a new café in your council offices. They are paid a fixed price for the works. You remember to use a works contract because you’ve read this article....
(b) Concession contract:
You allow a contractor to operate the new café. They are remunerated not via council payment, but rather their takings. As operator they take the risk that the revenue generated will not cover their investment/costs incurred.
Most contracts will not be concessions. However, it is useful to ensure your staff are able to spot them. I have seen quite a few concessions over the years procured with service contract terms in the background, which on further scrutiny just doesn’t stand up. The distinction here is not merely academic. Aside from ensuring the contracts reflect the reality as above, concessions also have a much higher procurement threshold – currently £4,733,252. This then offers more flexibility, including shorter timescales where procuring below threshold.
Whether a contract is a concession is fact specific in any given case (see Regulation 3 of The Concession Contracts Regulations 2016). However, some examples might include: canteens/cafes; road tolls; vending machines in council buildings; an outsourced leisure centre; a car park operator.
4. Consider whether it is in fact a framework
Are you procuring a contract with a guaranteed commitment to purchase? Or, rather, are your clients seeking to implement a framework where such contracts are optional and will only arise where the council place future orders. Lay clients, unfamiliar with the intricacies of contracts and procurement law, can easily muddle the two. Where a specification starts talking about placing orders etc then you should be alive to the fact this might not be a contract after all.
If it is a framework, you will need a separate contract beyond your standard terms and conditions of contract – namely, a framework agreement. Don’t throw away your standard terms just yet though, these are likely to form a useful basis for any “call-off terms” for orders placed. Often these terms form schedules as part of the framework agreement. The “main” framework agreement itself should cover issues like:
- the length of the framework
- whether it can be extended and how
- how the call-off process will work (mini-competition, direct award etc.).
Again, it is easy for someone in a rush to publish contract terms with a framework procurement, so care must be taken.
5. Be consistent!
Your initial procurement documents will in most cases come to form part of your end contract/framework agreement. For example, a service specification is often the first contract schedule. You should ensure then that these documents are consistent. It is preferable even to adopt the same language throughout your ITT, specification and contract:
“The Supplier”/”The Contractor”/”The Provider” etc.
It is even more important to ensure the substantive content is the same. Does your specification say it is a fixed term contract, but your contract says there is a right to extend? Are the payment terms and delivery timescales the same across all documents?
Some clients got themselves in a sticky position a few years back when the specification said one thing, and the contract said another. Yes, most contracts will have order of precedence clauses saying: “A overrides B in the event of conflict” etc. However, I just think it is best to avoid those disputes in the first instance. So, be consistent!
(Part 2 of this series of articles, with the 5 remaining top tips, will be published on Local Government Lawyer next week)