RESPONSE TO THE GREEN PAPER - MODERNISATION OF EU PUBLIC PROCUREMENT POLICY TOWARDS A MORE EFFICIENT EUROPEAN PROCUREMENT MARKET About the Legal

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1 RESPONSE TO THE GREEN PAPER - MODERNISATION OF EU PUBLIC PROCUREMENT POLICY TOWARDS A MORE EFFICIENT EUROPEAN PROCUREMENT MARKET About the Legal Services Commission and legal aid The Legal Services Commission (the LSC) is responsible for delivering legal aid through high quality service providers to people with legal problems in England and Wales. The LSC was established under the Access to Justice Act 1999 ( the Act ), replacing the Legal Aid Board in April It is a non-departmental public body sponsored by the Ministry of Justice. Legal aid enables people to safeguard their rights and address their legal problems. Our work is therefore essential to the fair, effective and efficient operation of the civil and criminal justice systems. It is also critical in helping to provide access to justice and fair trials (with professional representation) to over two million people each year. We commission the legal services people need from solicitors, advice agencies, barristers and commercial organisations (known as our providers ). We deliver legal services through two schemes: the Criminal Defence Service (CDS) and the Community Legal Service (CLS). Both schemes have eligibility criteria in relation to the means of the client and the nature of the problem, with certain limited exceptions. The services we commission are delivered to clients both face-to-face and via the telephone. Legal services are defined as Part B Services and are currently procured by us in accordance with the Public Contract Regulations However, the LSC also engages in Part A procurement of services such as the infrastructure through which some legal services are delivered (e.g. telephone call centres) and administration services to facilitate the normal running of our offices. As our core business revolves around the commissioning and delivery of legal services, the questions of key importance to our organisation in the consultation relate to the proposals to remove the distinction between Part A and Part B Services and apply the standard Part A regime to all service contracts. This would cause us significant difficulties, given the nature of the legal services we procure and the limited resource available to us to administer the procurement exercises. We contract with an unusually large number of providers, currently around 4,500 separate organisations almost all of which are SMEs. Tendering across England and Wales on this scale requires a great deal of time, effort and resource, the timings of which are driven by policy produced by our sponsoring department and over which we have little influence. In addition to national procurement exercises, we must also ensure ongoing access to services throughout the duration of our respective crime and civil legal aid contracts. Where significant gaps emerge we fill these through small scale tender activity and it is not practical or realistic to work to the timescales required of Part A procurement in undertaking this activity as it would unnecessarily delay services being introduced to meet the needs of vulnerable people. Further, the delivery of publicly funded legal services is restricted to England and Wales, meaning that much of the cross-border considerations of Part A services are unlikely to be applicable, particularly as our providers regularly emphasise to us the need for localised services, for example to take account of local referral networks. 1

2 Our responses to the consultation questions are at Annex A. We hope that you will find this response useful. If you have any queries about its content, please do not hesitate to contact David Price in our Procurement team at Yours sincerely, Carolyn Downs Chief Executive Legal Services Commission 2

3 Annex A Purchasing Activities Do you think that the scope of the Public Procurement Directives should be limited to purchasing activities? Should any such limitation simply codify the criterion of the immediate economic benefit developed by the Court or should it provide additional/alternative conditions and concepts? The Directives have a useful role to play in ensuring the fair purchasing of supplies, services and works. However, it would be highly restrictive if the Directives were to extend to other parts of the commissioning lifecycle (such as contract issue and contract operation). We therefore consider that the Directives should remain specifically focussed on procurement activity although we would welcome guidance (rather than further codified rules) arising out of Court rulings. Public Contracts Do you consider the current structure of the material scope, with its division into works, supplies and services contracts, appropriate? If not, which alternative structure would you propose? Yes. Although we recognise that a simpler structure may make bidding for contracts simpler for those organisations that tender for contracts across the works, supplies and services contracts types, in reality we consider this would affect few bidders. Maintaining differentiation allows the Directives to be as applicable as possible to the different contract types. If these were to be merged, there is a high risk that the Directives would become less appropriate to all contact types. A/B Services Do you think that the distinction between A and B services should be reviewed? As alluded to in, and further to, our introductory comments, a review of the distinction between Part A and B services is a cause for concern for the LSC. The implied outcome of such a review as set out in the Green Paper would be to abolish Part B and require all public sector procurement to operate under Part A rules. Although question 5 refers to flexibility in the standard regime, no indication is given as to what this standard regime may look like. Without further detail it is difficult to see this proposal as anything other than an increase on Part B service requirements to more closely align them to Part A services. The rationale for this type of review appears to be to allow greater cross-border competition. Whilst there may be a justification for doing this in some instances, we consider that legal services should continue to operate as Part B services for the purposes of procurement for the reasons set out above and in response to question 5 below. Do you believe that the Public Procurement Directives should apply to all services, possibly on the basis of a more flexible standard regime? If not please indicate which service(s) should continue to follow the regime currently in place for B-services, and the reasons why. Each member state has its own legal jurisdiction and legal practitioners qualified in one state will not normally be qualified to practice in another jurisdiction (unless they also have a qualification in the other jurisdiction). For example solicitors qualified in Scotland are not able to practice law in England and Wales. There is therefore no cross-border element to the procurement of this type of service and although in practice it would be possible to advertise across Europe our view is that this would be of very limited value as it would be very unlikely 3

4 to increase competition. For this reason, legal services, however delivered, should continue to feature on the Part B list. We consider that it is appropriate for the procurement of legal services to remain outside any standard regime for the following reasons: Jurisdiction Whilst we appreciate that there needs to be open and increased competition, because of the nature of member state jurisdiction, introducing a requirement to advertise legal services procurement across the whole EU adds an unnecessary level of bureaucracy and is not suitable for the procurement of legal services, where knowledge of and qualification in the law operating in the relevant jurisdiction is a pre-requisite to offering quality legal services to the public. Further, it may complicate matters. Legal services are less suitable for crossborder services as jurisdiction limits the location and qualification of those able to deliver advice. By its very nature the pool of potential economic operators is limited by geography. This means that any move to open up the market to greater cross-border competition is not appropriate to this type of work. Being qualified to practice in another jurisdiction Any economic operator wishing to tender for legal aid services in England and Wales would need to (as well as satisfying our tender requirements) be qualified in accordance with the relevant professional body rules to practice law in this jurisdiction. Given the significant length of time it takes to achieve the relevant qualification and the essential requirements based on experience which are placed on gaining a legal aid contract to ensure quality services for vulnerable clients, we do not consider that cross-border advertising would necessarily result in increased competition in this sector as it is unlikely that bidders in other member states would be able to meet this thresholds of qualification and experience in order to bid. Maintenance of advice for vulnerable people and A-services timescales Unlike tender activity to procure most A-services, legal services are commissioned to ensure access to legal advice for many vulnerable people. The LSC operates three-year contracts (which it may extend for up to two years) for the delivery of face-to-face legal services across approximately 4,500 individual economic operators. In commissioning legal aid services under a new contract, we should maintain services under existing contracts while tendering for advice. We have a statutory duty to ensure access to justice to services set out in the Access to Justice Act 1999; this includes a statutory obligation to fund particular categories of work, including criminal cases (subject to means testing), mental health review tribunal cases and public law children cases. This means that the timing of tender processes is critical to ensure the legal aid market is not prematurely shaped. Starting the process too early leaves a significant risk of insufficient services being available for clients as unsuccessful providers wind down prior to new contracts starting and lead to us being unable to meet our legal obligations. Where we commission legal services, this may be national procurement to identify economic operators to deliver work under a new contract or may be targeted procurement to introduce services to meet a specific, identified need in specific geographic locations. Where we undertake procurement activity to urgently address access gaps in specific geographic locations, (e.g. because of withdrawal from contract by one or more economic operators following award) being required to adhere to the minimum and maximum timings as specified in section 4.8 of the Directive would prove highly problematic and would result in delays to the introduction of services for clients which may represent a failure to meet our statutory duties. 4

5 In addition we would contend that that a legal telephone triage service, which is a key access point for legal services, should be tendered following the regime in place for part B services. There is a key requirement for the providers of this service to understand national law and link with providers of legal advice on a national and local level. A client s journey to access legal services can be complex and success is dependent on a seamless network of advice services. Thresholds Would you advocate that the thresholds for the application of the EU Directives should be raised, despite the fact that this would entail at international level the consequences described above? We have no objection to the principle of an increase to the threshold which we recognise would in some circumstances reduce bureaucracy, facilitate the faster procurement of contracts for reasonably low value work and simplify the bidding process for applicants. However, as an organisation which is subject to significant legal challenge and scrutiny we do not foresee a situation where, regardless of thresholds, we would opt to tender legal services without following the full proscribed process for the procurement of legal services. Therefore a change to Directives would be unlikely to impact on our business behaviour. Taking past performance into account Do you think the Directive should explicitly allow previous experience with one or several bidders to be taken into account? If yes, what safeguards would be needed to prevent discriminatory practices? We would agree with a proposal to explicitly allow previous experience to be taken into account. In the procurement of legal services, the market place is highly specialised (i.e. qualified in English and Welsh law and willing and able to deliver services in England/Wales). It is not a market where price competition applies at the current time. In consideration of tenders at the award stage, we are limited by these factors in the criteria we can use to distinguish between economic operators, particularly as tendering opportunities must be open to new and existing legal aid providers alike. Given the specialist nature of this work and the fact that the advice we fund protects vulnerable people from situations where their life and / or liberty is at risk (such as criminal cases, asylum cases, cases for clients detained under the Mental Health Act and clients suffering domestic abuse) we wish to have assurances at award that we prefer organisations which have greater experience of delivering legal advice in the relevant category of law. Appropriate tools for aggregation of demand / joint procurement In general, are you in favour of a stronger aggregation of demand/more joint procurement? What are the benefits and/or drawbacks in your view? We are in favour of joint commissioning as an option only to be pursued where the parties are all agreed and signed up to it. We would not support any measures to force it and having gained experience in jointly commissioning services with other advice funders it has highlighted the difficulties and intensive resource requirements encountered with taking this approach. We have some experience of joint commissioning as we have jointly commissioned 10 Community Legal Advice Services (CLAS) in different locations throughout England. 5

6 Each service was joint commissioned and is funded in partnership by the LSC and the local authority(s) covering the area in which a service has been developed. More information on the experience of joint commissioning and its successes and challenges are set out in the LSRC s research report Community Legal Advice Centres and Networks: A Process Evaluation. The benefits that joint commissioned CLAS have brought are: A better service for advice seekers in the area More efficient use of public funds for advice provision (i.e. removal of double funding) The drawbacks have been: Very time consuming/ resource intensive to set up, manage and monitor Managing the different stakeholders with different agendas and bottom lines Reliance on the political will of local authorities (LAs) / managing the local political clout of local providers Competing interests at local authority level both in conflict of interest (e.g. relationship of commissioners with potential bidders) but also conflicting priorities (e.g. LAs have a responsibility to promote the voluntary sector which conflicts with the need to be impartial when tendering as to nature of provider. In some cases LAs were unable to overcome this and withdrew from the initiative). Possible creation of monopolies/ dominant suppliers in local areas (and TUPE implications associated with this if jointly commissioned services are discontinued) Resource involved in managing tripartite contract post award Our hypothesis remains untested but we would consider potential benefits as: Economies of scale would lead to a lower unit cost and could make it affordable to invest in new technology Better service for clients e.g. more comprehensive/ calls answered quicker Potential for innovative ideas and processes through shared knowledge and expertise We would consider the drawbacks as: The resource required to align the service specification and manage the relationships between the commissioning organisations. Potentially more resource intensive contract management Less able to refer clients to local non-legal sources of advice and help Are there in your view obstacles to an efficient aggregation of demand/joint procurement? Do you think that the instruments that these Directives provide for aggregating demand (central purchasing bodies, framework contracts) work well and are sufficient? If not, how should these instruments be modified? What other instruments or provision would be necessary in your view? We do not intend to comment on specific instruments or provisions in response to these questions but contribute as an organisation with experience of joint procurement. The rules should support joint commissioning where the parties mutually agree to work together but joint commissioning should not be forced. 6

7 The LSC has undertaken joint procurement activity, primarily with local authorities in England and Wales to pool funding and expertise in the commissioning of legal services in the categories of Debt, Housing, Welfare Benefits, Community Care and Employment. We have found this a positive experience in terms of delivering best value for public funds to better meet client need and encouraging holistic service availability. However, we would emphasise that joint procurement is heavily time and resource intensive to achieve successfully and the ability to jointly procure services is heavily dependent on the participating organisations objectives being aligned. Although we remain clear that joint procurement of services can deliver positive outcomes, we would not favour greater requirements on contracting authorities to undertake this approach mainly because of competing interests and priorities of the different public bodies involved as well as the different pressures/ restrictions on them. Do you think that a stronger aggregation of demand/ joint procurement might involve certain risks in terms of restricting competition and hampering access to public contracts by SMEs? If so, how could possible risks be mitigated? As already referred to in our response, we primarily commission face-to-face advice contracts with a large number of individual and local providers, currently around 4,500 separate organisations almost all of which are SMEs. As an alternative to this, the LSC has undertaken joint commissioning for Community Legal Advice Services (CLAS). The aim was to offer larger, more sustainable contracts which gave providers stability and the opportunity to innovate in the provision of services; and to have a single legal entity delivering the contract. In practice however as our market is mainly SMEs, no provider has been able to bid for and deliver the full CLAS service without subcontracting and/or forming a consortium with other providers. If we had not permitted sub contracting it is possible in some areas we would have had no bids. This commissioning strategy carried a risk that local monopolies would be created, as the LSC and local authority are the two main sources of funding for legal and advice services. Indeed, sub contracting has arguably reduced competition because providers have shown a preference for working together as opposed to competing. Do you think that joint public procurement would suit some specific product areas more than others? If yes, please specify some of these areas and the reasons. It is our experience that joint procurement is less suitable for areas such as legal and advice services, where joint procurement opportunities are limited by there being few funders of this type of service (the main funders being the LSC and local authorities), funding relationships can be multi-faceted, the services provided are non-standard and the client journey can be complex. It is less suitable because of the time and resource required to undertake the process, negotiating requirements and priorities with partner organisations. Success is also dependent on whether there was a willing and committed purchasing partner and whether the benefits achieved for clients and the commissioning organisations outweighed the costs of undertaking the joint commissioning. In our view joint procurement would be better suited to areas where a stand-alone service with clear and objective quality requirements are procured. Do you see specific problems for cross border joint procurement (e.g. in terms of applicable legislation and review procedures)? Specifically, do you think that your national law would allow a contracting authority to be subjected to a review procedure in another Member state? For the reasons set out in our answer to question 5 we do not think that cross border joint procurement would be suitable for legal services, nor do we consider cross border joint procurement would be possible given the limits jurisdiction places on the commissioning of legal services which has already been raised in our response. 7

8 Address concerns relating to contract execution Should the public procurement Directives regulate the issue of substantial modifications of a contract while it is still in force? If so, what elements of clarification would you propose? Currently, substantial modifications of a public contract while it is still in force are considered unlawful where the effect of such changes would constitute a new award of a contract for the purposes of the Public Contracts Regulations 2006.The LSC has been successfully challenged by the Law Society on this basis in past legal proceedings, as its previous mainstream contracts contained a wide amendment clause. Since then the LSC has included a clause in its legal aid contracts to make clear what its amendment powers are. Where material changes need to be made to the contract, we have made clear that we will not amend the contract but will terminate it in whole or in part in accordance with the terms of the contract. However, the concept of materiality remains unclear despite further guidance contained in European law; in particular the Pressetext case. Accordingly, we would welcome clarification/clear rules on this point through the Directives. In particular, rules on any modifications that may or may not be undertaken during the life of an existing contract will be useful and inform the approach we take in future including the clauses we may wish to include in our future contracts on this issue. Where a new competitive procedure has to be organised following an amendment of one or more essential conditions would the application of a more flexible procedure be justified? What procedure might this be? We would welcome a more flexible approach to procurement in the event of an amendment to one or more essential conditions. All applicants must be given a fair and reasonable opportunity to consider the amendments and whether they wish to submit, amend or withdraw a tender (already submitted) within a prescribed time period. Changes concerning the contractor and termination of contracts Do you think that EU rules on changes in the context of contract execution would have an added value? If so, what would be the added value of EU-level rules? In particular, should the EU rules make provision for the explicit obligation or right of contracting authorities to change the supplier/terminate the contract in certain circumstances? If so, in which circumstances? Should the EU also lay down specific procedures on how the new supplier must/may be chosen? Any clarification on these issues would be welcome at EU level to inform the decisions we make. Whilst we have provision in our contracts to deal with changes concerning the contractor/novations, additional clear information would support us in our decision making and ensure that we adopt a fair and consistent approach to all economic operators. Do you think that certain aspects of the contract execution and which aspects - should be regulated at EU level? Please explain. We do not consider that regulation of contract execution would benefit the LSC or the organisations we contract with. As already referred to, at present there is no price competition in the contracts we offer for legal aid work. The elements that appear to be considered for regulation appear primarily to be focussed on the procurement of Part A services such as construction (delays, pricing of adjustment) and are not applicable to a contract for legal services, the scope of which is defined by primary and secondary legislation. 8

9 Subcontracting Do you think that contracting authorities should have more possibilities to exert influence on subcontracting by the successful tenderer? If yes, which instruments would you propose? The LSC agrees that stronger restrictions on subcontracting should be put in place to ensure that contracting authorities such as ourselves can exert more influence/control on the performance of the contract and would welcome any guidance/rules the EU can provide on the matter, which we can use to inform our position and the clauses we include in future contracts. Currently we make provision for but do not allow subcontracting in relation to the delivery of mainstream legal services, as the LSC is not in a position to influence/control/manage the work that the providers undertake with limited resources/public funds. However as discussed above subcontracting is permitted for the delivery of CLAS to enable providers to bid for and deliver significantly larger contracts. Where subcontracting has been permitted, obligations have been placed on the main contractor to ensure that the subcontractors carry out work in accordance with the terms of the contract. However, subcontracting has not been without its challenges, the most notable perhaps ineffective co-working between contract holders and subcontractors and ineffective accountability for contract performance and ensuring quality standards of work delivered through subcontractors. In instances where subcontracting has been / would be permitted, we would wish to retain step-in rights allowing mitigation should the contractor/sub-contractor default. Would you be in favour of a solution which would require submission and verification of evidence only by short-listed candidates/ the winning bidder? The LSC agree that this seems a more pragmatic approach and could potentially reduce costs where we commission services under Part A. However, where undertaking a procurement exercise across many hundreds of applicants winning bidders, we consider that self certification by bidders is the only practicable solution with detailed verification by exception. What are the advantages and disadvantages of an option for Member States to allow or to require their contracting authorities to oblige the successful tenderer to subcontract a certain share of the main contract to third parties? Although most of our tender processes exceed the thresholds for EU procurement, many of the individual contracts that are awarded as a result are small and separately would not exceed the threshold. As a result, we consider that many of the LSC s contracts are too small to be attractive to subcontracting and obliging this would result in unviable levels of work being available for either the lead contractor or the subcontractor(s). For most of our contracts subcontracting is not permitted. Whilst we would support subcontracting as an option in contracting arrangements, we would not however support the obligation to subcontract, including obligations to subcontract a certain share of the contract to third parties, for the reasons set out in response to question 48. Strategic use of public procurement in response to new challenges Do you think that EU level obligations on "what to buy" are a good way to achieve other policy objectives? What would be the main advantages and disadvantages of such an approach? For which specific product or service areas or for which specific policies do you think obligations on "what to buy" would be 9

10 useful? Please explain your choice. Please give examples of Member State procurement practices that could be replicated at EU level. Do you think that further obligations on "what to buy" at EU level should be enshrined in policy specific legislation (environmental, energy-related, social, accessibility, etc) or be imposed under general EU public procurement legislation instead? Do you think that obligations on "what to buy" should be imposed at national level? Do you consider that such national obligations could lead to a potential fragmentation of the internal market? If so, what would be the most appropriate way to mitigate this risk? Do you think that obligations on what to buy should lay down rather obligations for contracting authorities as regards the level of uptake (e.g. of GPP), the characteristics of the goods/services/works they should purchase or specific criteria to be taken into account as one of a number of elements of the tender? What room for manoeuvre should be left to contracting authorities when making purchasing decisions? Adding policy related criteria in the procurement of legal services is largely meaningless and creates a burden of costs for the LSC. It is extremely difficult to objectively assess policy related criteria rendering these hard, if not impossible, to compare. For example, asking for situations where the organisation has promoted social inclusion means you could end up with a number of examples where you can t say one is better than the other so all end up with the same marks. There needs to be an allowance for/ understanding of the resource required to understand the responses to the policy related questions and mark them, for example. it can be difficult for a lay person know what to look for. It would be more appropriate to use policy criteria as baseline criteria (either in prequalification questions or essential criteria). Alternatively, it may be more appropriate to permit the applicants to self-certify or commit in their tender to meeting certain requirements. Verification can take place on successful bidders. Should mandatory requirements set the minimum level only so the individual contracting authorities could set more ambitious requirements? Adding policy related criteria is costly for the tender process so they need to be limited to key areas and there needs to be clear guidance on using and assessing them. In addition, if one of the areas was not relevant to the tender process at all then there should be the opportunity to omit it (guidance would be sought on this). Avoiding unfair advantages Do you think that the problem of possible advantages of incumbent bidders needs to be addressed at EU level and, if so, how? Many bidders for legal aid contracts are incumbent contract holders given the nature of the services we buy and the volume of contracts we issue. Although incumbent bidders can be advantaged by the fact of an existing relationship with a contracting authority, from experience, we have found that being an incumbent bidder can disadvantage applicants due to them submitting poor bids/tenders that lack detail hoping/assuming that the LSC will consider past experience/knowledge during the evaluation process. Indeed, failure to consider previously known details about organisations not provided as part of tender responses has been used as grounds in legal challenges we have received and these have been granted permission to proceed to hearing. However, we do not consider that incumbent bidders cause problems of such a scale as to require 10

11 EU level rules to prevent this. Indeed, proposals to introduce rules against this seems to contradict proposals earlier in this paper to allow contracting organisations to take into account previous experience (be it positive or negative). Access of third country suppliers to the EU market Are there any other issues which you think should be addressed in a future reform of the EU public procurement Directives? Which issues are these, what are - in your view - the problems to be addressed and what could possible solutions to these problems look like? The LSC feel that it is the interpretation and application of public procurement policy/ regulations which creates potential issues/ problems/ challenges, relating to complexity, size and timescales associated with the tender. This increases the risk of challenge when the process is poorly thought through and the tender documentation is poorly constructed. 1) The tender documentation needs to be structured more succinctly to reflect the required business outcomes (be it the specifics of civil or crime legal aid, the LSC s business processes including financial governance to deliver and / or the technical IT platform). 2) The UK central government transparency agenda has already changed the structure and questions of the pre-qualifications questionnaire making it more consistent, namely: a. Market shaping b. Filtering out suppliers who cannot meet the LSC s requirement and including those that can Ccapability assessment including required financial stability or not (e.g. SMEs) and capacity for innovation c. Should not be show us your policies for training, CSR, diversity, Health and Safety, accounts for the past five years' etc that all standard large organisations will have capacity for. d. The buying/contracting authority should be working with the potential innovative supplier to create the policies and put them in place on the basis that it has the capability to deliver the required business outcome e. Should be biased to deliver the business outcome / service to be contracted for and not by size. 3) Commercial, customer focussed (citizen centric access to justice versus legal service provider ) legal aid commissioning (business outcome and procurement orientated) organisation should create access to justice through innovative businesses (SMEs, Large, multinationals?) a. Use of pilots - as a way of encouraging inventive approaches without the need to implement OJEU as an interim step demonstrating value? b. Quality PQQs focus on the required business outcomes c. How can the LSC evaluate PQQ responses without understanding the supplier organisations? d. Remove bias - ask questions that are only relevant to the business outcome and eventual performance of the contract that can be assessed properly and weighted on meaningful criteria e. The PQQ is a useful step in the process to find capable suppliers and must be used to encourage required behaviours f. Issue tenders which are fit for purpose to deliver the desired business outcomes. 11

12 Please indicate a ranking of the importance of the various issues raised in this Green Paper and other issues that you consider important. If you had to choose three priority issues to be tackled first, which would you choose? Please explain your choice. As indicated in our introductory comments and throughout our response to this Green Paper, our three priority areas are as follows: The need to maintain a split between Part A and Part B services and legal services should continuing to be regulated under Part B as cross-border elements are unlikely to apply We would very much welcome guidance on the concept of materiality in relation to the issue of substantial modifications of a contract while it in force i.e. what constitutes a material change? We welcome moves to exert greater influence on subcontracting but would not advocate enforced sub-contracting requirements. 12