Public authorities in Scotland, and tenderers, have to get to grips not only with a new regime for Procurement Directive contracts, but also with a parallel regime for some contracts of lower value

Scotland has a new procurement law regime, imposing significant new obligations on public authorities and new requirements and risks on those bidding for public sector contracts.

The key aspects of the new regime came into force on 18 April 2016, and apply to all procurements commenced from that date. Other changes took effect on 1 June, imposing new duties on public authorities. Further rules will come into force between December 2016 and October 2018. The timeline at the foot shows when the principal changes take effect.

The Public Contracts (Scotland) Regulations 2015 impose a number of new rules for contracts awarded above the financial thresholds specified at EU level. The Procurement Reform (Scotland) Act 2014 for the first time imposes formal rules and procedures on the award of contracts below the EU thresholds but above specified national thresholds. The relevant thresholds for each regime, and each type of contract, are as shown in the table below.

Type of contract The 2015 Regulations* The Act
Central Govt Other authorities Lots**
Supply of goods/services £107k £164k £80k £50k
Health, social, legal, administrative, community etc services*** £589k £589k £N/A £50k
Works £4.1m £4.1m £1m £2m

 * Thresholds set by the European Commission in euro. Sterling figures change from time to time due to changes in the Commission’s official exchange rate. **An individual lot is exempt from the requirements of the 2015 Regulations where it is below the specified threshold AND the value of the lots to be awarded without following the regulations is no more than 20% of the total value of all lots under the contract. *** Per sched 3 to the 2015 Regulations

EU regime: principal changes

The 2015 Regulations make a number of important changes from their 2012 predecessor, some procedural and administrative, and others more substantive. They also codify certain rules that did not previously feature in legislation, but instead come from court decisions.

Codifying case law: public sector structures and contract modification

Regulation 13 puts into legislative form the Court of Justice’s Teckal and Hamburg Waste decisions, which allowed public authorities to award contracts directly to non-arm’s-length bodies, or to other public authorities, under certain conditions. While the 2015 Regulations are codifying rather than creating these rules, authorities may be pleased to have the conditions set out expressly in legislation rather than having to divine them from CJEU case law.

Similarly, reg 72 codifies the case law on contracts being amended so significantly, relative to their original terms, that they should be treated as an award of a new contract. The regulations note various circumstances in which changes will be permitted, including where there is a clear review clause in the initial procurement documentation (something authorities should now consider including as standard); a change of contractor would be impracticable; unforeseen circumstances arise; and/or the amendment does not increase the value of the contract above certain limits. The rules also allow a change in contractor where the original party has been subject to a good faith takeover (i.e. for reasons other than because the buyer wanted the contract).

This is again not a new principle, as the courts have been clear for some time that making significant changes to a contract without retendering risks damages awards, early termination and even ineffectiveness orders. However, the fact that the rule is now set out expressly in the 2015 Regulations should increase the visibility of the issue, making a challenge much more likely if a contract is amended outwith one of the permitted circumstances.

New “competitive procedure with negotiation”

Regulation 30 essentially allows authorities to advertise their desire to achieve a particular goal and invite tenderers to suggest how best to do that. The authority can then negotiate with bidders to develop the proposal, and invite further bids on the identified solution. This can be an iterative process if necessary.

New exclusionary grounds, and “self-cleansing”

Regulation 58 updates the grounds for excluding an economic operator from participating in tenders, including by adding blacklisting and non-payment of taxes to the list of disqualifying acts. The length of “sentence” that should be served is also now specified, at either three or five years depending on the offence.

However, bidders now have the opportunity to satisfy the authority that they have changed their ways, including by providing evidence that they have compensated for any damage their actions caused, co-operated with any investigation, and taken appropriate steps to prevent further infringements. If the authority persuaded, it must allow the bidder to take part; if not, it must give reasons for its decision.

No more price-only contracts

The Procurement Directive allowed member states to choose whether to continue allowing price-only contract awards, and reg 67 states that awards may only be made on the basis of the most economically advantageous tender, using a price-quality ratio. Authorities can no longer award contracts on a price-only or cost-only basis.

This could significantly increase the administrative burden on authorities seeking to award straightforward contracts that would previously have been price-only. To take a (possibly extreme) hypothetical, it may not be easy to come up with relevant quality criteria if all an authority wants to do is purchase paperclips.

The change also pushes Scottish procurement law further from that in the rest of the UK, as the UK Government retained the possibility of price-only awards.


Regulation 60 requires authorities to accept the European Single Procurement Document (ESPD), which replaces the old Standard Pre-Qualification Questionnaire (SPQQ). The ESPD allows bidders (and key subcontractors) to self-declare their compliance with any exclusion grounds and selection criteria. Where a bidder has previously submitted an ESPD to an authority, it can simply confirm that the contents remain correct. The goal is to reduce the administrative burden on bidders by allowing them to use and re-use the same form for bids anywhere in the EU.

A bidder need only produce evidence to support their self-declaration before it is awarded the contract, or where evidence is necessary to ensure the integrity and proper conduct of the process. The ESPD must be exclusively electronic by April 2018.

New regime for health, social etc services

Contracts for those services previously referred to as “Part B”, including health, social care and legal services, are now listed in sched 3 to the 2015 Regulations. Where sched 3 contracts are above the £589,000 threshold, they should be dealt with under the new “light touch” regime in regs 74 to 76. This allows authorities much more discretion over the process they adopt, though publicity is still required via a contract notice or PIN plus a contract award notice.

Other new procedural obligations

The 2015 Regulations introduce various other new administrative requirements, including obligations on authorities to:

  • include conditions in contracts to ensure compliance with environmental, social and employment law (reg 19(4));
  • document all oral communications with bidders which could have a substantial impact on the content or assessment of tenders (reg 23(10));
  • give reasons where they choose not to use lots; and where lots are used, to indicate in the contract notice whether operators can tender under one, several or all lots (reg 47);
  • make procurement documents fully accessible online (reg 54); and
  • conduct all procurement communications electronically where possible (reg 23), though this has been delayed until October 2018 for most authorities (April 2017 for central purchasing bodies).

Double effect: the 2014 Act

Procedural requirements

For contracts and framework agreements between the EU thresholds and the Act’s thresholds, the Act contains a range of new formal requirements very similar to those that apply under the 2015 Regulations. These include making express the familiar “general duties” of equal treatment and non-discrimination, transparency, and proportionality, as well as introducing specific obligations, such as giving reasons to unsuccessful bidders and providing further information to them on request.

The Act also requires the publication of all contract notices and contract award notices on the Public Contracts Scotland website, including those for contracts and framework agreements covered by the 2015 Regulations. There will therefore be a dual publication requirement for those contracts, with notices appearing both on Public Contracts Scotland and in OJEU.

The Procurement (Scotland) Regulations 2016 (made under the Act) broadly mirror the 2015 Regulations on issues such as the valuation of contracts, the content of contract and award notices, and the mandatory and discretionary exclusion criteria.

The Scottish Government’s guidance on the Act notes that the ESPD should be used for all procurements covered by the Act. The aim therefore seems to be to create consistency between the two regimes.

Intriguingly, however, the Act does not seem to replicate the 2015 Regulations’ exclusion of call-off contracts from the requirement to publicise a contract award. While authorities do not have to publish contract notices for call-off contracts covered by the Act, they are not exempted from the requirement to publish contract award notices. It would be interesting to know whether that difference was intended.

Contracts for health and social care services (though not the other sched 3 services) again benefit from a lighter touch regime under the Act. Authorities are not required to seek offers for those contracts and so contract notices are not required, though the exclusion criteria still apply and contract award notices must still be produced.

Where an authority fails to comply with the general duties or the Act’s procedural requirements, aggrieved bidders can take action in court seeking damages or interdict. However, as the Act does not replicate the challenge-enabling standstill and automatic suspension provisions of the 2015 Regulations, litigation under the Act may be less common.

Wider duties

Beyond the Act’s new formal requirements, it also places a number of more general duties on contracting authorities in relation to their procurement functions. This includes an obligation to put in place a publicly available contracts register recording certain details of every contract awarded under the Act or the 2015 Regulations.

As of 1 June, authorities also became subject to two additional duties: the sustainable procurement duty set out in s 9, and the duty to consider community benefit provisions, per s 25.

The former requires authorities to assess, prior to tendering, how each procurement can:

  • improve the “economic, social, and environmental wellbeing” of its area;
  • include local SMEs, third sector bodies and supported businesses; and
  • promote innovation.

Authorities also now need to consider whether to include community benefit provisions in every contract above £4 million. These would cover contractual requirements relating to training and recruitment, subcontracting opportunities or otherwise intended to improve the economic, social and environmental wellbeing of the authority’s area. The contract notice for a £4 million+ contract must then either summarise the community benefit requirements that are to be included, or give reasons for not including any.

The Act says specifically that (for the sustainable procurement duty at least) improving wellbeing includes reducing inequality, and the Scottish Government’s guidance also points to the concept of wellbeing in the Local Government in Scotland Act 2003, as well as giving specific examples of improvements that might be pursued. However, authorities that do not have a specific geographic scope (e.g. regulators or commissioners with a Scotland-wide remit) may appreciate additional guidance on how to define their “area”.

Authorities should be careful not to go too far in pursuit of these duties, as the general duties of equal treatment etc must take precedence over both of them (and a failure to comply with the general duties is actionable by a bidder, whereas these new duties are not). Authorities should nevertheless be building these considerations into their processes.

Another issue on which authorities should take care is the living wage. EU case law has made clear that it is not lawful to expressly require tenderers to pay wages above the national legal minimum. However, the Act does include measures designed to encourage payment of the living wage, including s 29’s requirement to have regard to Scottish Government guidance. The guidance on fair work practices encourages authorities, when assessing bidders for quality, to have regard to their recruitment and remuneration policies (including on the living wage) to the extent these could affect their ability to perform the contract – but authorities should be aware of the risk of challenge if they take too strict an approach on that issue.

Strategies and reports

The Act will make authorities’ general procurement activity more transparent, as it requires every authority expecting to spend more than £5 million per year on contracts covered by the Act or the 2015 Regulations to publish an annual procurement strategy and then report on that strategy’s implementation. The Scottish Government will then produce a consolidated annual report. The first procurement strategies will have to be published by the end of 2016, covering whatever remains of the relevant authority’s then-current financial year plus all of the following one.

Time to bed in

Contracting authorities and bidders, or at least their procurement and legal teams, should by now be fully up to speed on the new procurement rules and duties, and should have made the necessary changes to their processes. The new rules and their consequences will nevertheless require some time to bed in and be fully appreciated. Authorities or bidders who are unclear on any particular point, or who generally remain unsure about what the changes mean for them, should seek legal advice.



18 April 2016

Public Contracts (Scotland) Regulations 2015

  • New competitive procedure with negotiation
  • New thresholds and “light touch” procedures for “sched 3” services (health, social care, legal etc)
  • New regulations on contract modification and use of public sector structures
  • Mandatory use of European Single Procurement Document
  • Use of lots – new rules and thresholds
  • Mandatory contract conditions: environmental, social and employment law
  • “Self-cleansing” for exclusionary criteria
  • Price-only awards no longer allowed

Procurement Reform (Scotland) Act 2014

  • New formal rules for contracts over £50,000/£2 million (other than health/social care)
  • General duty: equality, non-discrimination, transparency, proportionality
  • Contract and award notices to be published on Public Contracts Scotland
  • Exclusion criteria and minimum standards requirements
  • Duty to give reasons to bidders, and provide further information on request
  • Duty to maintain contracts register
  • Rights for bidders to challenge certain failures

1 June 2016

Procurement Reform (Scotland) Act 2014

  • Sustainable procurement duty
  • Duty to consider community benefit requirements in £4 million+ contracts

31 December 2016

Procurement Reform (Scotland) Act 2014

Contracting authorities with annual procurement spend >£5 million must publish first annual procurement strategy to cover remainder of the financial year plus the subsequent year (and ASAP after the end of that year publish first annual procurement report).

April 2017

Public Contracts (Scotland) Regulations 2015

Central purchasing bodies to be using electronic communications only

18 April 2018

Public Contracts (Scotland) Regulations 2015

European Single Procurement Document must now be exclusively in electronic form.

18 October 2018

Public Contracts (Scotland) Regulations 2015

  • All other contracting authorities to be using electronic communications only
  • Contracting authorities no longer permitted to request supporting documents they already possess
  • Contracting authorities must have recourse to e-CERTIS, and require primarily forms of documentation and types of certificates that are covered by e-CERTIS


The Author
Charles Livingstone and Roger Cotton are partners with Brodies LLP 
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