This is Think Local Act Personal / the National Market Development Forum’s executive summary of its briefing on Procurement, State Aid And Consultation Matters Relevant To Provision Of Social Care Services, which the Site Proprietor was involved in writing in 2011.
The National Market Development Forum has identified the need for better clarity, consistency and simplicity in the legal side of procurement processes for care and support services. This paper addresses this requirement and assists care providers, councils and their partners to adopt efficient and streamlined procurement practices, using appropriate, proportionate legal approaches. The current legal framework already allows for less formality than would sometimes be expected, in relation to procurement of works, services and supplies, for or on behalf of the public sector in the area of social care. Areas focused on include identifying the key principles of public procurement law, consultation obligations and state aid rules, in the context of social care purchasing.
The key findings are outlined in this summary, with detailed explanations available in the full paper.
- Social care purchasing will generally be categorised as Part B services under the Public Contracts Regulations 2006
For these services, limited public procurement rules apply (eg requiring contract award notices after the procurement) together with a duty to treat suppliers equally, transparently, and in a non-discriminatory way. Purchases of Part B services do not require the full application of the Regulations.
- If the value of a social care purchase is under the threshold (currently £156,442) not even the limited regulations apply – all that is needed is a fair procurement process, regardless of whether the services are categorised as Part A or Part B.
- Any process devised by an authority to award a contract for the purchase of goods, works or Part B services, regardless of value, should:
- undertake a proportionate level of advertising;
- ensure equal treatment between all those who respond;
- be non-discriminatory to general categories of, or of particular, bidders
- make transparent how the process will be run, how bidders can participate, how responses will be evaluated, and when the contract will be awarded
- Personal Budgets:
4a. Where a person has been recorded as electing to receive a direct payment, the procurement rules do not apply, and the person is free to choose whoever they prefer to meet their needs, subject only to lawful conditions under the direct payment regulations. Even where such an individual chooses an agent, including the council itself, to manage their direct payment, the public procurement rules still do not apply. This outcome applies to the purchases of individual service users who join together in order to collectively purchase services, because they are not a public authority.
4b. Where the council is ‘managing’ an individual’s personal budget, either directly or through a commissioning agent, public procurement rules will continue to apply.
- Framework agreements can be used to secure supplies from a single provider or several providers. These are useful for authorities wishing quickly to access services for the benefit of service users where the authority is obliged to control the contractual arrangements (as in the directly managed form of personal budget as opposed to a direct payment). This is different from an authority signposting direct payment recipients to local providers, and from making lists of suppliers available for individual service purchases to choose from when making their own decisions as to whom to contract with (see next point).
- Authorities may set up recommended draft agreements or lists or websites with providers’ details, and make these available to individual service users purchasing services with their Direct Payments or their own money. But it must be understood that direct payment clients cannot be limited to providers who are pre-approved by a Council acting as a commissioner of public services; they are free to buy from virtually anyone. The Public Contract Regulations do not apply to the facilitation of agreements between direct payment recipients and providers. Giving providers a space to advertise their services is not inherently risky for a council but if a council is providing any form of endorsement of providers’ services, standards, registration status or viability it is good practice to have in place reasonable quality assurance arrangements and make public any available information about how providers on these lists have performed, regardless of whether the customer was a public or private sector purchaser. In the interests of transparency the basis of any ‘approval’ or inclusion in a list given to direct payment clients must be made clear: one example would be a list of providers who have indicated that they are willing to provide services at the rate allowed for by the council in its Resource Allocation system.
- Sharing information and experience with enterprises of all sizes outside of the tendering process is crucial to ensure the market is well briefed on how to approach the process. The procurement process should be tailored to the target market that the required services are aimed at (for example, small providers, voluntary sector, large commercial organisations). It would be disproportionate for small providers or the voluntary sector to have to run their businesses along the same lines as a large commercial organisation.
- A ‘fair’ tendering process must include proportionate advertising together with a non-discriminatory, transparent process. Even if a below threshold (Part A orB) service is being purchased, local authority auditors customarily look for this to demonstrate value for money and take the view that advertising helps satisfy the State Aid rules. The website of the authority is one example of a place to advertise contract notices or offers of subsidy using minimal resource.
- An extension, renewal or material amendment to a public contract can make for a ‘new’ contract under the public procurement regime if these changes fall outside of specific variation clauses. Whilst it is usual for a contracting authority to reserve rights to amend the contract the variation right must not amount to a right to redraft the contract, because that breaches the requirement of transparency. A key test is whether there is a material change in the contract by adding new terms, new services or extending timescales – local or commissioned legal advice should be sought if in doubt.
- If providers are concerned they have not had a fair opportunity to participate in the letting process for below threshold or exempt contracts, perhaps where they feel the process has not been fair and transparent, then they may raise issues with senior council officers or members of the council or ask for the matter to be considered by the relevant Scrutiny Board or the Council’s Audit Committee. Matters of serious concern should be raised with the council’s Monitoring Officer or Chief Finance Officer.
- Local Authorities may be required to undertake a consultation procedure (see page 40 of the appended full paper for details) prior to de-commissioning, changing service delivery models, cutting grants, changing charges, or changing the FACS threshold. A failure to meet the consultation duties, and in particular, the public sector equality duties, may result in being exposed to legal challenges. It is desirable to be explicit about the aims and positive outcomes expected from any change within the course of consultation. The appended paper sets out some practical advice to ensure that adequate, albeit proportionate, consultation is offered, and flags up requirements arising from the new Equality Act 2010.
- A contract which allows for termination does not require consultation with the provider, it simply requires contractual notice of termination. Other legal rules giving the client rights, or the public a right to consultation, may however contribute to the requirement to do the equivalent of at least something akin to consultation (see page 38 of the appended full paper for details).
State Aid – Grants, subsidies or other assistance to local organisations
- Most authorities are scrutinising the amount and use of grant funding critical to delivering services through the voluntary sector. Authorities should ensure that making use of public funding by giving grants, subsidy or other assistance does not trigger the application of the State Aid rules. The most practical and certain way of avoiding any breach of the state aid rules, whilst remaining compliant, particularly at a time when grant funding may be critical to the survival of much of the voluntary sector, is to have an open and competitive procurement or subsidy-allocating process.
- State aid rules may be complied with in the case of support for either very localised businesses, where the effective competition can only ever be from another business which also operates on the same purely localised basis, or very small businesses, where the de Minimis Block Exemption Regulation rules (http://www.legislation.gov.uk/uksi/2006/5/pdfs/uksi_20060005_en.pdf) are available for aid of less than €200,000 within any rolling period of 3 fiscal years.
- In order to avoid State aid issues arising authorities should:
- ensure that payments are made in return for the provision of goods or services with evidence in place that no more than the market rate has been paid for such goods or services (procured in accordance with the UK and EU rules where applicable or, where such rules are not applicable, by way of a transparent benchmarking exercise); or
- provide state resources to the recipient entity on purely commercial terms (e.g. a loan at a commercial rate on interest); or
- limit any grant to a level consistent with the requirements of the De Minimis Aid Block Exemptions.