Procurement in a nutshell – multi-supplier agreements and direct awards

Last week’s procurement in a nutshell update provided a reminder of the process involved in calling off contracts under multi-supplier framework agreements whereby the contracting authority (CA) conducts a mini competition to select an appropriate contractor. To view the previous update, please click here.

Direct awards

Direct awards can be made under multi-supplier framework arrangements which set out all the terms under which contracts may be called off without further agreement.

Regulation 33(8)(a) of the Public Contracts Regulations 2015 (PCR 2015) sets out the criteria for making a direct award:

• all the terms governing the provision of the works, services and supplies concerned are set out in the framework agreement, and
• the objective conditions for determining which of the suppliers on the framework agreement shall perform them are set out in the procurement documents.

The above criteria are most likely to be applicable to commoditised products. In such circumstances the specific contract will be offered to the supplier who will be able to fulfil the order most efficiently.

Efficiency will be assessed in terms of price, timing, scale or some other factor predetermined by the framework agreement.

In the event that a supplier is unable to fulfil the order then, provided that the provisions of the framework agreement so provide, the CA can offer the call off contract to the next supplier in line.

A ‘catalogue’ mechanism can be used in order to provide more opportunity for the CA to take advantage of this option throughout the duration of the framework agreement.

During the initial procurement process as much information should be obtained from suppliers as possible. A catalogue can then be produced, based on this information, allowing the CA to make value judgements about who is the most capable supplier.

Transparency

It is vital that transparency and objectivity are central to the process of making a direct award. These general EU treaty principles are core to the procurement regime and must be observed to ensure that CAs do not engage in any conduct which would distort competition.

The framework agreement must clearly set out how CAs are to make the choice between different suppliers for the award of each called off contract.

CAs should note that even in catalogue-style agreements described above, it is not permissible to order directly from a favoured supplier if the terms of the framework need to be refined and/or it cannot be immediately identified which product or service in the catalogue provides best value for money.

Why is this important?

The failure of a CA to award a call off contract on a transparent and objective basis could fall within the scope of regulation 99 PCR 2015, i.e. it would amount to an illegal direct award. A court finding of an illegal direct award prospectively cancels out any obligations under a contract that has been entered into.

CAs will undoubtedly continue to make the most of the commercial advantages of using framework agreements such as reduced timescales of procurement procedures and innovations and savings delivered through supply chain relationships.

The case of Lightways (Contractors) Limited v Inverclyde Council [2015] CSOH 169 was the first instance of a remedy of ineffectiveness being applied by a UK court. For those sceptical as to whether a court would actually impose such a harsh remedy it serves as a reminder that the courts will take such action where appropriate.

When in any doubt as to the transparency and objectivity of frame-working practices or procedures, a CA should seek appropriate advice in order to mitigate the costly risks of compliance failure.

How can I find out more?

If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.