Public Procurement Regulation in Scotland

The rules below apply only to public procurement contracts in Scotland. Different rules apply to public procurements in England, Wales, and Northern Ireland (please see our separate e-Guide for these jurisdictions).

Following Brexit, the rules have been amended with effect from 1 January 2021. The Public Contracts (Scotland) Regulations 2015 (PC(S)R 2015) remain in force in Scotland, as amended by the Public Procurement etc. (EU Exit) (Scotland) (Amendment) Regulations 2020/468 (Scottish SI). These amendments are largely technical in nature and do not make substantial changes to the existing body of national public procurement law.

The UK Government is currently reviewing its procurement rules and set out its proposals for reform in its Green Paper, with the UK Government’s response most recently published on 6 December 2021.  The UK Government is engaging with the devolved administrations, including the Scottish Government, on these reforms which for the time being will only affect public procurement law in England.  Nevertheless, the Scottish Government has not made any announcements that it seeks to reform public procurement law in Scotland and its current rules remain closely aligned to the previous EU regime.

This section reflects the law as applicable on 1 January 2022.

Contract notifications for both above and below GPA thresholds continue to be published online on the Public Contracts Scotland (PCS) portal (https://www.publiccontractsscotland.gov.uk/).

As of 1 January 2021, the UK launched its own e-notification system “Find a Tender” service (FTS) (https://www.find-tender.service.gov.uk/) and notices are no longer published on Tenders Electronic Daily (ted.europa.eu).  PCS is linked with FTS so that above GPA threshold contract notifications in Scotland will appear on FTS as well as on PCS. 

Other services such as MOD Defence Contracts Online remain unaffected.

The PC(S)R 2015 require competitive processes to be followed for contracts with estimated values exceeding the GPA thresholds (unless any relevant exclusions or exceptions apply).

The thresholds are reviewed by the Scottish Government every two years to verify whether they correspond with the thresholds established for those purposes in the WTO GPA.  The thresholds, inclusive of VAT, are set at the WTO level and thereafter transposed into domestic legislation.  The public procurement thresholds in Scotland recently changed, effective 1 January 2022. These changes are communicated in Scottish Procurement Policy Notes (SPPNs) by the Scottish Government and came into force by the Public Procurement (Agreement on Government Procurement) (Thresholds etc.) (Amendment) (Scotland) Regulations 2021/378 (Scottish SI).

The current public sector thresholds (inclusive of VAT) are as follows:

It should also be noted that there is a separate Scottish regime for regulated public procurements below GPA thresholds which are not subject to the GPA requirements.  These below threshold contracts are governed by the Procurement Reform (Scotland) Act 2014 and secondary legislation.  Unlike the GPA-based thresholds, these below GPA thresholds are exclusive of VAT.  These thresholds are as follows:

The open and restricted procedures are generally preferred for more straightforward (and often recurrent) procurements, where no negotiation is required (and is not permitted). The competitive procedure with negotiation and competitive dialogue procedure are used for more complex procurements. The innovation partnership procedure is used where a contracting authority wishes to procure the initial development of an innovative good, service or work that is not already available on the market and subsequently purchase the results of that development. We have also included the limited situations in which the negotiated procedure without prior publication (i.e. a lawful direct award) can be utilised.

• Open Procedure – Regulation 28
  This procedure must be open to all interested parties and there is no initial selection stage. Tenders are invited on the basis of the specification, evaluated as received and an award decision reached without significant negotiations. This procedure is generally only suitable for the most straightforward procurements where the contract specification is clear and can be priced, with no need to negotiate with bidders.
• Restricted Procedure – Regulation 29
  All interested parties can submit an expression of interest in response to a call for competition, but only those meeting the pre-qualification or selection criteria will be invited to submit a tender. The initial selection stage must be conducted using the Single Procurement Document (Scotland) (SPD(S)), a document similar to the EU’s ESPD. This two-stage procedure allows authorities to limit the number of candidates that will be invited to tender to a minimum of five, assuming that five or more candidates satisfy the minimum pre-qualification requirements.
• Competitive Procedure with Negotiation (CPN) Procedure – Regulation 30
  Reserved for more complex contracts, this procedure involves an initial selection or pre-qualification stage using the SPD(S), after which a minimum of three eligible candidates are invited to negotiate the contract. Authorities are able to negotiate the initial and any subsequent tenders (except for the final tender) to improve their content. No negotiations are permitted on the minimum requirements or the award criteria. The contracting authority may award the contract on the basis of the initial tenders if it has reserved the right to do so in the contract notice or invitation to confirm interest. The negotiation phase may be conducted in successive stages to reduce the number of tenders (provided this was provided for in the contract notice). When the contracting authority concludes negotiations, bidders submit new or revised tenders, which serve as the basis for making the award. The authority must not conduct any further negotiations with bidders following the submission of final tenders.
• Competitive Dialogue (CD) Procedure – Regulation 31
  This procedure is also reserved for more complex contracts and involves an initial selection or pre-qualification stage using the SPD(S), after which a minimum of three eligible candidates are invited to participate in dialogue. The aim of the dialogue is to identify and define the means best suited to satisfying the contracting authority’s needs. It generally takes place over successive stages and involves a reduction in the proposed solutions by applying the award criteria. Once the authority is satisfied it has at least one solution capable of meeting its needs and requirements, it can close the dialogue phase and invite final tenders from the remaining bidders on the basis of the solution(s) presented and specified during the dialogue. The final tenders must contain all the elements required and necessary for the performance of the project. After the submission, the tenders may be clarified, specified and optimised at the request of the contracting authority and the terms of the contract can be finalised. However, any negotiation and finalisation of the contract terms must not involve changes to the essential aspects of the tender or the procurement, including the authority’s needs and requirements, where such changes are likely to distort competition or cause discrimination.
• Innovation Partnership Procedure – Regulation 32
  This procedure is limited to the situation where there is a need for the development of an innovative good, service or work not already available on the market. It allows authorities to establish a long-term innovation partnership for the development and subsequent purchase of the resulting good, service or works without the need for a separate procurement procedure. The innovation partnership procedure involves an initial selection stage, after which a minimum of three eligible candidates are invited to participate in the procedure. The selection may involve the application of criteria concerning the candidates' capacity in the field of research and development and ability to develop and implement innovative solutions. After the submission of the initial tender (and any subsequent tenders except for the final tender), contracting authorities are required to negotiate with bidders to improve their content. The minimum requirements and the award criteria shall not be subject to negotiation. The award must be based on the final tender submission and can be made to one or more partner, with each successful partner conducting separate research and development activities.

In terms of the structure and operation of the partnership once awarded, it is generally structured in successive phases following the sequence of steps in the research and innovation process. It must set intermediate targets to be attained by the partners and provide for payment of the remuneration in appropriate instalments. The contracting authority may decide to terminate the innovation partnership on the basis of these targets or where there are multiple partners, reduce the number of partners by terminating their individual contracts on the basis of their performance.

• Use of the negotiated procedure without prior publication – Regulation 33
  In limited circumstances, authorities may award contracts without the need to advertise them to the market:

1. where no tenders or suitable tenders have been submitted in response to an open procedure or a restricted procedure;
2. where the works, supplies or services can only be supplied by a particular economic operator; or
3. where for reasons of extreme urgency, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with.

Under Regulation 27(4) of the PC(S)R 2015, the use of both the competitive procedure with negotiation and competitive dialogue procedure is only available to authorities where:

1. the needs of the authority cannot be met without adaptation of readily available solutions;
2. the works, supplies or services required include design or innovative solutions;
3. the contract cannot be awarded without prior negotiations because of specified circumstances related to the nature or complexity of the works, supplies or services or the legal and financial make-up or because of the risks attaching to any of them;
4. the technical specifications of the works, supplies or services cannot be established with sufficient precision by the authority; or
5. in response to an open or restricted procedure only irregular or unacceptable tenders are submitted.

As noted above, the use of the innovation partnership procedure is also limited to circumstances where:

1. the contracting authority intends to procure the initial development of works, products, or services and subsequently purchase the results of that development; and 
2. the works, products, or services in question are “innovative” and not already available on the market.

Regulation 72 of the PC(S)R 2015 includes specific provisions on the circumstances in which changes or variations can be made to an awarded contract without requiring a new procurement procedure to be carried out:

1. where the modifications have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses (such as price revision clauses or options), provided that any such review clauses state the scope, nature and conditions for possible modifications and do not alter the overall nature of the contract;
2. where additional works, services or supplies were not included in the initial procurement but are now necessary and a change of contractor cannot be made for economic or technical reasons, and because it would cause significant inconvenience or substantial duplication of costs for the contracting authority, provided that any increase in price does not exceed 50% of the value of the original contract;
3. where the need for modification has been brought about by circumstances which a diligent contracting authority could not have foreseen, the modification does not alter the overall nature of the contract and any increase in price does not exceed 50% of the original contract value;
4. where a new contractor replaces the original contractor as a consequence of either an unequivocal review clause or option (which conforms with (a) above), or universal or partial succession into the position of the original contractor following corporate restructuring, provided that this does not entail other substantial modifications to the contract;
5. where the value of the modification is below the relevant threshold (see question 2 above), and below 10% of the initial contract value for service and supply contracts and 15% of the initial contract value for works contracts.

Modifications are also permitted where they “are not substantial”. The circumstances where a modification is considered substantial are set out in Regulation 72(8) PC(S)R 2015 and include where:

1. the modification renders the contract materially different in character from the one initially concluded;
2. if the modification was part of the initial procurement procedure, it would have resulted in: the admission of other candidates, the acceptance of a tender other than that originally accepted, or additional participants being attracted to the procurement;
3. the modification changes the economic balance of the contract in favour of the contractor in a manner which was not provided for in the initial contract;
4. the modification extends the scope of the contract considerably; or
5. a new contractor replaces the original contractor (in circumstances which do not comply with (d) above).

Almost all public procurements in Scotland are now conducted online, and mostly through the online tendering platform, PCS-T.  Regulation 54 of the PC(S)R 2015 requires contracting authorities to provide online access to procurement documents from the publication date of the contract notice or the date on which the invitation to confirm interest is sent. The text of the notice or the invitation to confirm interest must specify the internet address at which the procurement documents are accessible.  It is however recognised that in two-stage procedures, it is not necessary for authorities to provide all detailed tender stage documentation when issuing the initial contract notice and Selection Questionnaire.

More generally, all communication and information exchange must also take place by electronic means, including electronic submission (Regulation 23(1) of the PC(S)R 2015). There are certain exceptions to the requirement to use e-procurement set out in Regulation 23(3), including where bidders are required to submit physical or scale models which cannot be transmitted using electronic means. Advanced e-signatures are not mandated. Provision is made for advanced e-signatures in Regulation 23(19), which provides a framework for contracting authorities to consider when requiring them.

Any decision of a contracting authority can be challenged if it can be considered to amount to an actionable breach of the authority’s duties to a bidder or other economic operator (see Regulation 87 of the PC(S)R 2015). Such a breach is only actionable where the bidder or other economic operator can show it has suffered, or risks suffering, loss or damage as a consequence of the breach (see Regulation 88 of the PC(S)R 2015).

As contracting authorities are public bodies acting in pursuit of a public function it may be possible to challenge decisions by way of judicial review. Judicial review actions will, however, not be competent where a right of action exists under the PC(S)R 2015 and any challenger will be required to show they have standing.

The general time limit for bringing proceedings is 30 calendar days running from the date when the economic operator ‘first knew or ought to have known that grounds for starting the proceedings had arisen’. The Court has the discretion to extend the time limit where it considers there is a “good reason” to do so, provided that period does not exceed 3 months from the date of 'first knowledge' (see Regulation 88(4)(b) of the PC(S)R 2015).

Separate time limits for the bringing of proceedings apply where seeking an ineffectiveness order (see Regulation 88(4)(a) of the PC(S)R 2015):

1. within 30 days from either (i) the day after the contract award notice was published on the FTS or (ii) the day after the authority informed the economic operator of the conclusion of the contract and a summary of the relevant reasons; or
2. in any other case, within six months beginning with the day after the date the contract was entered into.

Under Regulation 86 of the PC(S)R 2015, the issuing of award decision letters (containing certain prescribed information) to all unsuccessful bidders triggers a standstill period that must be at least ten (10) calendar days (where communication of the letter is by electronic means). Only after this period has elapsed may the authority enter into the contract with the successful bidder.

Proceedings for breach of a duty owed to an economic operator under the PC(S)R 2015 must be brought in the Sheriff Court or the Court of Session (see Regulation 88(2) of the PC(S)R 2015). In practice, most procurement challenges are brought in the Court of Session, particularly where the claim is for more than GBP 100,000.

Proceedings may not be brought unless the claimant has informed the authority of the breach or apprehended breach of the duty owed to it and of its intention to bring proceedings in respect of that breach or apprehended breach, by way of a pre-action letter. In addition, those proceedings must be brought within the relevant time limit (as described above at point 7).

The usual practice is to file a Summons in the Court of Session, where the filing fee under Schedule 3 of The Court of Session etc. Fees Order 2018 is GBP 319.00, effective from 1 April 2020.

Where proceedings are served at any point before the contract has been entered into, the authority must not into the contract until those proceedings are ‘determined, discontinued or otherwise disposed of’, unless the Court agrees to lift the prohibition by interim order (see Regulation 89 of the PC(S)R 2015). Otherwise, it is necessary to apply for interim measures.

The Court must make an ‘ineffectiveness order’ if satisfied that one of three grounds applies (Regulation 91 of the PC(S)R 2015):

1. the authority has awarded a contract without prior publication of a contract notice, where one was required (i.e. makes an illegal direct award);
2. the authority has failed to impose a standstill period or suspend the contract award following a challenge, which has prevented the challenger from bringing proceedings or obtaining a remedy before the contract was entered into, and there has also been a breach of the duty to comply with the other regulations governing the contract award procedure which has affected the chances of the economic operator obtaining the contract. (i.e. an aggravated breach when following an advertised tender process); or
3. the authority has breached the rules on mini-competitions under a framework agreement or dynamic purchasing system and the value of the call-off contract is above the relevant threshold (i.e. an illegal call-off contract).

To protect against the risk of an ineffectiveness challenge to the lawful direct award of a contract, an authority can publish a Voluntary Ex-Ante Transparency (VEAT) notice on PCS. The purpose of a VEAT notice is to notify the market of an intention and justification for a direct award. Provided the authority then observes a 10-day standstill period before entering into the contract, the first ground for ineffectiveness does not apply.

The third ground of ineffectiveness (illegal call-off contract) does not apply where the authority has communicated the contract award decision to bidders and observed a valid standstill period.

Otherwise, if one of the ineffectiveness grounds is satisfied, the Court will make an ineffectiveness order, setting aside the contract and rendering unenforceable all rights and obligations under it from the date of the order. The Court may, however, decline to make an ineffectiveness order where it is satisfied that overriding reasons relating to a general interest require that the enforceability of the rights and obligations arising from the contract should be maintained.

When a contract is declared ineffective, the Court must also impose a financial penalty on the authority (there is no upper limit) and deal with consequential matters, making such other orders as it considers necessary to address the consequences of the ineffectiveness order (see Regulation 92 of the PC(S)R 2015).