In an effort to ensure that the legislative framework can support the objectives for further economic growth which the procurement regime is intended to deliver, the European Commission (Commission) has proposed a number of welcome amendments to the existing regime which are timetabled for adoption at the end of the year. The reality of the European legislative process means, however, that these changes are unlikely to be adopted before spring 2003.

The so-called Classic Directives that govern the award of contracts by public bodies are:

The Public Works Contracts Regulations 1991, the Public Supply Contracts Regulations 1993 and the Public Services Contracts Regulations 1992 (Public Sector Regulations) implement these Directives in the UK.

The utilities sector (transport, telecommunications, water and energy) is dealt with separately under the Utilities Directive 93/38 (as amended) and is implemented by the Utilities Contracts Regulations 1996 (Utilities Regulations).

Separate Directives address remedies and enforcement: Directive EEC/89/665 for the public sector and Directive EEC/93/13 for utilities. The Public Sector Regulations and the Utilities Regulations implement these Directives.

Public Sector Regulations. These apply to public bodies commonly referred to as "contracting authorities" which are either specifically listed in the Regulations or caught by a "catch all" set out in each of the Regulations.

Not all contracts entered into by a contracting authority will be caught by the regime. As it would be administratively burdensome to impose the procurement regime on contracting authorities awarding contracts for little economic value, the Public Sector Regulations only apply to procedures above certain thresholds (£100,410 for supply contracts; £100,410 for service contracts; and £3,861,932 for works contracts). Supply, works and services contracts are defined in the various Regulations. Some contracts are excluded from the regime including contracts for the acquisition of land and contracts which impact on national security.

Utilities Regulations. The Utilities Regulations apply to:

Like the public sector, only contracts over a particular threshold will be subject to the regime (£308,955 for supply contracts, £308,955 for services contracts and £3,861,932 for works contracts).

Procedure. Once a utility or authority has determined that it wishes to contract for works, supplies or services falling over the relevant threshold, it is obliged to provide advance notice to the market and then to publicise each contract caught by the Utilities or Public Sector Regulations usually by advertising in the Official Journal of the European Communities (OJEC)(call for competition). Following this, it must determine which parties showing an interest in the project meet pre-determined minimum requirements (known as pre-qualification) in the Public Sector and Utility Regulations.

It is the bidding entities and not their proposals that are being judged at this stage. Entities successful in the pre-qualification will be invited to submit proposals for evaluation. The number invited to bid must be sufficient to ensure genuine competition but must be determined by balancing the need for competition against the increased cost of having a large number of participants.

Making an award. There are three award procedures and contracting authorities are required, subject to certain restrictions, to select one of them:

The Utilities Regulations allow the use of the negotiated procedure at any time. In the public sector, as transparency and objectivity are considered best achieved through the use of the open or restricted procedures, the negotiated procedure is available to authorities in limited circumstances such as:

PPP/PFI projects. The use of the restricted or open procedure makes the negotiation of private finance initiative (PFI) projects difficult. Instances of projects proceeding on the basis of the restricted or open procedure are rare if not non-existent, although there is at least one project which began on the restricted procedure and then, following the failure of that procedure, was re-tendered under the negotiated procedure. The government has issued guidance which supports the availability of the negotiated procedure in the context of PFI projects (Treasury Taskforce: Private Finance Initiative Technical Note No 2 "How to follow E.C. Procurement Procedure and Advertise in The OJEC"). The guidance states that PFI requires scope for tenderers to offer innovative ideas for technical solutions and allocation of risk and that this is best accommodated by the use of the competitive form of the negotiated procedure. However, it does not (nor does it seek to) provide definitive legal advice on the circumstances in which the negotiated procedure would be appropriate.

Selecting the bid. Each of the Regulations prescribes the process which must be undertaken in selecting the best bid. Fundamentally, the authority or utility is required to select either the most economically advantageous bid or the enterprise offering the lowest price. It is important that, in selecting a bid, the authority or utility is objective.

In 2000, the Commission published its proposals for modifying the existing regime (for both the public sector and utilities) focusing on seeking to improve compliance by acceptance or "buy-in" to the process rather than seeking to supplement or make more severe the remedies available for breach (http://simap. eu.int/EN/pub/src/welcome.htm).

The proposed changes are intended to modernise the rules to take account of changing procurement practices such as the introduction of e-procurement, the simplification and, in some cases, consolidation of differences within the Classic Directives.

Competitive dialogue. The proposals attempt to address the inability to discuss and negotiate by the introduction of a new procedure in the public sector, the competitive dialogue which will be available where it is impossible to define the technical, financial or legal means for satisfying the contracting authority's requirements. Discussions on all areas of the proposed contract will be conducted with participants although the principles of equality of treatment and non-discrimination must be adhered to. Participants will be invited to tender on the basis of the solutions resulting from that dialogue. No further negotiation will be permitted. It is difficult to describe this procedure as a true negotiation. Although an improvement on the existing regime, it is unclear whether the competitive dialogue addresses concerns raised by participants in the PFI/PPP market. One view is that many contracting authorities will continue to seek to rely on the exceptions which allow the use of the negotiated procedure.

Electronic auction. The proposals will allow, under any of the contract award procedures, the use of electronic auctions in both the public sector and utilities market. The proposals require that only in circumstances where the precise requirements of the contract specifications can be detailed can procurement be conducted by an electronic auction. Bidders must be able to determine, at any stage of the auction, how they rank against others.

Framework agreements. The use of framework agreements by the public sector will be legitimised. Once the proposals take effect it will be possible for contracting authorities to award framework agreements setting out the main terms of their likely requirements over a specified period. Contracts entered into within this framework (commonly referred to as call offs) can then be made, without the need for a further call for competition.

Liberalisation. The extent to which competition exists in the various utility markets across Europe has changed since the procurement regime first came into being. Therefore, the proposals recognise that, as many markets now operate on a free market basis, regulation is no longer required. "Free Market" exemptions already exist in the Utilities Directive, however, the proposals introduce further exemptions for the utilities sector. Firstly, the telecommunications sector will automatically be excluded. Also, in other regulated sectors, where there is effective competition and access to the relevant market is unrestricted, a formal Commission exemption specific to a member state, may be given.