Procurement Bill [HL] (HL Bill 4)

Procurement Bill [HL]Page 80

(a)adopted by an international organisation of which the United
Kingdom is a member, and

(b)that is inconsistent in any material respect with the procedure for the
award of the contract in accordance with this Act.

5But this paragraph does not apply to a defence and security contract (as to
which, see paragraph 26).

National security

21A contract that the contracting authority determines should not, in the
interests of national security, be subject to this Act or a part of this Act.

10Intelligence activities

22A contract for the purposes of carrying out, facilitating or supporting
intelligence activities.

Defence and security contracts

23A defence and security contract where—

(a)15the supplier is located in an area outside the United Kingdom in
which the armed forces are deployed, and

(b)the operational needs of the armed forces require the contract to be
awarded to that supplier.

24A defence and security contract where—

(a)20the supplier is located in a state or territory outside the United
Kingdom in which the armed forces maintain a military presence,

(b)that state or territory requires, in connection with that presence, that
the supplier supplies the goods, services or works to which the
contract relates.

25(1)25A defence and security contract where the supplier is the government of
another state or territory.

(2)In this Schedule “government” includes—

(a)any governing authority;

(b)the government of a region or locality within a state or territory.

2630A defence and security contract awarded under a procedure adopted by an
international organisation of which the United Kingdom is a member.

27A defence and security contract awarded under an arrangement between the
United Kingdom and one or more other states or territories, where the
purpose of that arrangement is, or is in connection with—

(a)35the joint development of a new product by or on behalf of the parties
to the arrangement, or

(b)the exploitation of that product once developed.

Utilities contracts

28(1)A utilities contract for the supply of goods, services or works to a utility
40other than one acting as a centralised procurement authority, where—

(a)the purpose of the contract is to allow the further sale or lease of
those goods, services or works to a third party,

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(b)the utility does not have a special or exclusive right, within the
meaning given by section 5(5), to sell or lease those goods, services
or works, and

(c)other persons may sell or lease those goods, services or works under
5the same conditions as the utility.

(2)In this Schedule, “utility” means—

(a)a public authority, or public undertaking, that carries out a utility
activity;

(b)a private utility.

2910A utilities contract for the supply of water to a utility carrying out a utility
activity referred to in paragraph 3(1)(a) or (b) of Schedule 4.

30A utilities contract for the supply of energy, or fuel for the production of
energy, to a utility carrying out a utility activity referred to in paragraph 1,
2, or 6 of Schedule 4.

31(1)15A utilities contract between a utility and a relevant joint venture to which
that utility is party, where—

(a)the joint venture was formed for the purpose of carrying out a utility
activity for at least three years, and

(b)the parties to the joint venture are committed, by way of a written
20agreement, to continue to be parties to the joint venture for a period
of three years following the date of that agreement.

(2)In this Schedule, “relevant joint venture” means a joint venture—

(a)formed for the purpose of carrying out a utility activity;

(b)where each party to the joint venture is a utility.

32(1)25A utilities contract awarded for the supply of goods, services or works—

(a)by a utility to a person affiliated with the utility, or

(b)where the utility in question is a relevant joint venture, by the utility
to a person affiliated with any member of the joint venture,

but only if the turnover test is met by the affiliated person in relation to
30goods, services or (as the case may be) works.

(2)A person is “affiliated” with another if the person is in the position of a
group undertaking of the other person, within the meaning given in section
1161(5) of the Companies Act 2006, whether or not either of them is an
undertaking within the meaning given in section 1161(1) of that Act.

(3)35The “turnover test” is met in relation to goods, services or works if the
affiliated person’s turnover deriving from the supply of goods, services or
(as the case may be) works to the utility and other persons affiliated with the
utility (their “affiliated turnover amount”) exceeds 80 per cent of their total
turnover amount deriving from the supply of goods, services or works.

(4)40An appropriate authority may by regulations make provision about how to
calculate a person’s affiliated turnover amount and total turnover amount
for the purposes of sub-paragraph (3).

(5)The regulations may, in particular, make provision—

(a)for those amounts to be calculated by reference to—

(i)45an average amount for a period specified in the regulations;

(ii)another reasonable method so specified;

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(b)to secure that, in calculating those amounts in relation to a person
(“A”), turnover of a person who is an affiliated person in relation to
A is to be treated as part of A’s turnover.

Concession contracts

335A concession contract for the carrying out of a utility activity within
paragraph 3(1) or (2) of Schedule 4 (water services), ignoring for this
purpose the effect of paragraph 3(4) of that Schedule.

34(1)A concession contract for air services provided by a qualifying air carrier.

(2)In sub-paragraph (1)—

(a)10“air services” means a flight, or a series of flights, carrying
passengers or cargo (including mail);

(b)“qualifying air carrier” has the meaning given by regulations made
by an appropriate authority.

35A concession contract for the provision of public passenger transport
15services.

Section 3

Schedule 3 Estimating the value of a contract

General rule

1(1)A contracting authority must estimate the value of a contract as the
20maximum amount it could expect to pay under the contract including,
where applicable, amounts already paid.

(2)The amount a contracting authority could expect to pay includes the
following—

(a)the value of any goods, services or works provided by the
25contracting authority under the contract other than for payment;

(b)amounts that would be payable if an option in the contract to supply
additional goods, services or works were exercised;

(c)amounts that would be payable if an option in the contract to extend
or renew the term of the contract were exercised;

(d)30amounts representing premiums, fees, commissions or interest that
could be payable under the contract;

(e)amounts representing prizes or payments that could be payable to
participants in the procurement.

(3)In estimating the value of a contract, a contracting authority must take into
35account all of the facts which are material to the estimate and available to the
authority at the time it makes the estimate.

(4)This paragraph is subject to the rest of this Schedule.

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Frameworks

2(1)A contracting authority must estimate the value of a framework as the sum
of the estimated values of all the contracts that have or may be awarded in
accordance with that framework.

(2)5In the case of a framework awarded under an open framework, the value of
the framework is to be treated as including the value of all frameworks
awarded, or to be awarded, under the open framework.

(3)In this Schedule, “framework” has the meaning given in section 44(2).

Concession contracts

3(1)10Paragraph 1 does not apply to the estimation of the value of a concession
contract.

(2)A contracting authority must estimate the value of a concession contract as
the maximum amount the supplier could expect to receive under or in
connection with the contract including, where applicable, amounts already
15received.

(3)The amount a supplier could expect to receive includes the following—

(a)amounts representing revenue (whether monetary or non-monetary)
receivable pursuant to the exploitation of the works or services to
which the contract relates (whether from the contracting authority or
20otherwise);

(b)the value of any goods, services or works provided by the
contracting authority under the contract other than for payment;

(c)amounts that would be receivable if an option in the contract to
supply additional services or works were exercised;

(d)25amounts that would be receivable if an option in the contract to
extend or renew the term of the contract were exercised;

(e)amounts representing premiums, fees, commissions or interest that
could be receivable under the contract;

(f)amounts received on the sale of assets held by the supplier under the
30contract.

Anti-avoidance

4(1)Sub-paragraph (2) applies where—

(a)a contracting authority estimates the value of two or more contracts,
and

(b)35the goods, services or works to be supplied under the contracts could
reasonably be supplied under a single contract.

(2)The contracting authority must estimate the value of each of the contracts as
including the value of all of the contracts, unless the authority has good
reasons not to do so.

40Cases where estimate not possible

5If a contracting authority is unable to estimate the value of a contract in
accordance with this Schedule (for example because the duration of the
contract is unknown), the authority is to be treated as having estimated the

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 value of the contract as an amount of more than the threshold amount for the
type of contract.

Section 5

Schedule 4 Utility activities

5Gas and heat

1(1)The following are utility activities—

(a)the provision or operation of a fixed network for the provision of a
service to the public in connection with the production, transport or
distribution of gas or heat;

(b)10the supply of gas or heat to such a network.

(2)But the supply of gas or heat to a network is not a utility activity if—

(a)the person supplying it (the “operator”) is a private utility or a public
undertaking,

(b)the production of gas or heat by the operator is a necessary
15consequence of carrying out an activity other than a specified
activity, and

(c)the amount of gas or heat supplied to the network represents not
more than 20 per cent of the operator’s turnover amount.

An appropriate authority may by regulations make provision about how to
20calculate an amount referred to in sub-paragraph (2)(c).

(4)The regulations may, in particular, make provision for such an amount to be
calculated by reference to—

(a)an average amount for a period specified in the regulations;

(b)another reasonable method so specified.

25Electricity

2(1)The following are utility activities—

(a)the provision or operation of a fixed network for the provision of a
service to the public in connection with the production, transport or
distribution of electricity;

(b)30the supply of electricity to such a network.

(2)But the supply of electricity to a network is not a utility activity if—

(a)the person supplying it (the “operator”) is a private utility or a public
undertaking,

(b)the operator produces electricity because it needs electricity to carry
35out an activity other than a specified activity,

(c)the supply consists only of electricity that was produced by the
operator as mentioned in paragraph (b) but which it has not
consumed, and

(d)the amount of electricity supplied represents not more than 30 per
40cent of the amount of energy produced by the operator.

(3)An appropriate authority may by regulations make provision about how to
calculate an amount referred to in sub-paragraph (2).

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(4)The regulations may, in particular, make provision for such an amount to be
calculated by reference to—

(a)an average amount for a period specified in the regulations;

(b)another reasonable method so specified.

5Water

3(1)The following are utility activities—

(a)the provision or operation of a fixed network for the provision of a
service to the public in connection with the production, transport or
distribution of drinking water;

(b)10the supply of drinking water to such a network.

(2)The following are utility activities to the extent that they are carried out by a
person who also carries out activities within sub-paragraph (1)—

(a)any activity connected with a hydraulic engineering project,
irrigation or land drainage in circumstances where the condition in
15sub-paragraph (3) is met;

(b)any activity connected with the disposal or treatment of sewage.

(3)The condition is that a person carrying out the activity would reasonably
expect that more than 20 per cent of the water made available by the project,
irrigation or land drainage is to be supplied as drinking water to a network
20within sub-paragraph (1)(a).

(4)The supply of drinking water as mentioned in sub-paragraph (1)(b) is not a
utility activity if—

(a)the person supplying it (the “operator”) is a private utility or a public
undertaking,

(b)25the operator produces drinking water because it needs drinking
water to carry out an activity that is not a specified activity,

(c)the supply consists only of drinking water that was produced by the
operator as mentioned in paragraph (b) but which it has not
consumed, and

(d)30the amount of drinking water supplied represents not more than 30
per cent of the amount of drinking water produced by the operator.

(5)An appropriate authority may by regulations make provision about how to
calculate an amount referred to in sub-paragraph (4).

(6)The regulations may, in particular, make provision for such an amount to be
35calculated by reference to—

(a)an average amount for a period specified in the regulations;

(b)another reasonable method so specified.

Transport

4(1)An activity is a utility activity if it relates to the provision or operation of a
40network for the provision of a service to the public for transport, whether by
rail, tram, bus or other means.

(2)There is a network for the purposes of sub-paragraph (1) if the provision of
a service on the network is subject to requirements imposed by a regulator,
including requirements as to—

(a)45the routes to be served;

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(b)the capacity of the service;

(c)the frequency of the service.

Ports and airports

5(1)An activity relating to the exploitation of a geographical area for the
5following purposes is a utility activity—

(a)the provision of an airport to carriers of passengers or goods by air;

(b)the provision of a port or other terminal facilities to carriers of
passengers or goods by sea or inland waterway.

(2)In this paragraph “airport” has the same meaning as in Part 1 of the Civil
10Aviation Act 2012 (see section 66 of that Act).

Extraction of oil and gas and exploration for, or extraction of, coal or other solid fuels

6An activity relating to the exploitation of a geographical area for the
following purposes is a utility activity—

(a)extracting oil or gas;

(b)15searching for or extracting coal or other solid fuels.

Utility activities exposed to competition

7(1)An activity is not to be treated as within any of paragraphs 1 to 6 if an
exemption determination has been made in relation to the activity.

(2)An “exemption determination” is a determination made in accordance with
20regulations made by an appropriate authority that—

(a)there is fair and effective competition in the market in which the
activity is carried out, and

(b)entry to that market is unrestricted.

(3)The regulations may, in particular, make provision—

(a)25specifying who is responsible for making exemption determinations
(the “decision-maker”);

(b)about the amendment or revocation of exemption determinations by
the decision-maker;

(c)about who can apply for an exemption determination, or its
30amendment or revocation, and the procedure for making an
application;

(d)about the evidence and other information that must accompany any
such application (including the form in which it must be provided);

(e)for circumstances in which the decision-maker may, of their own
35motion, make, amend or revoke an exemption determination;

(f)about the factors to be taken into account in, and the procedure for,
making, amending or revoking exemption determinations;

(g)in relation to the publication of applications and decisions as to
whether or not to make, amend or revoke exemption determinations;

(h)40for appeals in relation to decisions of the decision-maker.

(4)A reference in this paragraph to an activity includes a reference to an activity
so far as it is carried out only in a particular part of a sector or a particular
part of the United Kingdom.

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8(1)Sub-paragraph (2) applies to an activity that was, immediately before the
coming into force of this paragraph, covered by any of the following
Commission Decisions (which are revoked by this Act)—

(a)Commission Decision 2006/211/EC (electricity generation in
5England, Scotland and Wales);

(b)Commission Decision 2007/141/EC (supply of electricity and gas in
England, Scotland and Wales);

(c)Commission Decision 2010/192/EU (exploration for and
exploitation of oil and gas in England, Scotland and Wales).

(2)10An exemption determination is to be treated as having been made in relation
to the activity on the coming into force of this paragraph and, accordingly,
such a determination may be amended or revoked in accordance with
regulations under paragraph 7.

Interpretation of Schedule

915In this Schedule—

  • “specified activity” means an activity specified in paragraph 1(1), 2(1),
    3(1) or 4(1);

  • “supply” includes—

    (a)

    production, but not the production of gas in the form of
    20extraction (as to which, see paragraph 6), and

    (b)

    generation and wholesale or retail sale.

Section 40

Schedule 5 Direct award justifications

1This Schedule contains the direct award justifications.

25Prototypes and development

2The public contract concerns the production of a prototype, or supply of
other novel goods or services, for the purpose of—

(a)testing the suitability of the goods or services,

(b)researching the viability of producing or supplying the goods or
30services at scale and developing them for that purpose, or

(c)other research, experiment, study or development.

3In paragraph 2, “novel goods or services” means goods or services designed
or developed at the request of the contracting authority.

Single suppliers

435The public contract concerns the creation or acquisition of a unique work of
art or artistic performance.

5The following conditions are met in relation to the public contract—

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(a)due to a particular supplier having intellectual property rights or
other exclusive rights, only that supplier can supply the goods,
services or works required, and

(b)there are no reasonable alternatives to those goods, services or
5works.

6The following conditions are met in relation to the public contract—

(a)due to an absence of competition for technical reasons, only a
particular supplier can supply the goods, services or works required,
and

(b)10there are no reasonable alternatives to those goods, services or
works.

Additional or repeat goods, services or works

7The public contract concerns the supply of goods, services or works by the
existing supplier which are intended as an extension to, or partial
15replacement of, existing goods, services or works in circumstances where—

(a)a change in supplier would result in the contracting authority
receiving goods, services or works that are different from, or
incompatible with, the existing goods, services or works, and

(b)the difference or incompatibility would result in disproportionate
20technical difficulties in operation or maintenance.

8The public contract concerns the supply of goods, services or works by the
existing supplier that are similar to existing goods, services or works
where—

(a)the existing goods, services or works were supplied under a public
25contract that was awarded in accordance with a competitive
tendering procedure within the period of five years ending with the
day on which the transparency notice is published, and

(b)the tender notice or any tender document in respect of that earlier
contract set out—

(i)30the contracting authority’s intention to carry out a
subsequent procurement of similar goods, services or works
in reliance on this direct award justification, and

(ii)any other information specified in regulations under section
86.

935In paragraphs 7 and 8

  • “existing goods, services or works” means goods, services or works
    already supplied, or contracted to be supplied, to the contracting
    authority;

  • “existing supplier” means the supplier that has already supplied, or
    40contracted to supply, the existing goods, services or works.

Commodities

10The public contract concerns goods purchased on a commodity market.

Advantageous terms on insolvency

11The award of the public contract to a particular supplier will ensure terms
45particularly advantageous to the contracting authority due to the fact that a

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 supplier, whether or not the one to whom the contract is to be awarded, is
undergoing insolvency proceedings.

12A supplier is “undergoing insolvency proceedings” if it has—

(a)become bankrupt or, in Scotland, the estate of the supplier has been
5sequestrated,

(b)become subject to insolvency or winding-up proceedings,

(c)had its assets subject to administration or receivership, including by
a liquidator or court,

(d)entered into an arrangement with its creditors,

(e)10become subject to a petition or application for any such procedures
or arrangements, or

(f)in any jurisdiction, been subject to a procedure or an application that
corresponds to any procedure or application mentioned in
paragraphs (a) to (e).

15Urgency

13Where—

(a)the goods, services or works to be supplied under the public contract
are strictly necessary for reasons of extreme and unavoidable
urgency, and

(b)20as a result the public contract cannot be awarded on the basis of a
competitive tendering procedure.

14For the purpose of paragraph 13, urgency is unavoidable if it—

(a)is not attributable to any act or omission of the contracting authority,
and

(b)25could not have been foreseen by the contracting authority.

Necessary to protect life, etc

15The public contract falls within regulations made under section 41.

User choice contracts

16The public contract is a contract for the supply of user choice services and
30the conditions in paragraph 18 are met.

17In paragraph 16, “user choice services” means services—

(a)that are of a kind specified in regulations under section 8 (light touch
contracts),

(b)that are supplied for the benefit of a particular individual, and

(c)35in respect of which a contracting authority would, in awarding a
contract for their supply, be required under an enactment to have
regard to the views of the individual, or a person providing care to
the individual (their “carer”), in relation to who should supply the
services.

1840The conditions are that—

(a)the individual to whom the services are to be supplied or their carer
has expressed a preference as to who should supply the services, or
the nature of the services to be supplied is such that only one
supplier is capable of providing them, and