Draft Utilities Contracts Regulations 2016

The Cabinet Office has issued draft regulations intended to implement the new Utilities Directive in England, Wales and Scotland. We look at the draft regulations and the changes they will bring for Utilities when they come into force (expected to be 18 April 2016).

Many of the new elements of the Public Contracts Regulations 2015 have also been included in the draft Utilities Contracts Regulations 2016 (UCR 2016), for example:

• The use of electronic communication.
• The introduction of the new innovation partnership.
• The new Light Touch regime for certain health, social and other services and the ability to “reserve contracts” to certain employee mutual.
• Codification and clarification of the Teckal and Hamburg tests for in-house contracts and joint co-operation, and of the Pressetext test around modification of public contracts.
• A new requirement at Regulation 99 to keep a report of each procurement, containing the information set out there.

Interestingly, however, the draft UCR 2016 do not contain the equivalent of the “Lord Young” provisions found in Part 4 of the PCR 2015 (these are requirements around the use of Contracts Finder and the way in which selection criteria can be used).

The key new utilities-specific features of the draft UCR 2016 are as follows:

• The parent Directive no longer contains a list of named “Utilities” so all utilities will need to consider whether or not they are caught by the definition.
• As a reminder, a body will be a Utility for these purposes if it is (a) a contracting authority carrying out a “regulated activity” listed at Regulations 9 to 15, or (b) it is not a contracting authority but it carries out a “regulated activity” on the basis of “special or exclusive rights”.
• The draft UCR 2016 contain a new definition of “special or exclusive rights” which confirms that, where a body has been granted a right to operate following a competitive process that was adequately advertised and the granting of the rights was based on objective award criteria, then this will not amount to a “special and exclusive right” for the purposes of the definition of a “Utility”.
• The new Directive contains a simplified exemption mechanism under which a member state can apply for exemption for activities which are directly exposed to competition. The UK applied for, and received, exemptions for the following activities (a) electricity generation in England, Wales and Scotland, (b) supply of electricity and gas in England, Wales and Scotland, and (c) exploration for and exploitation of oil and gas in England, Wales and Scotland.