2. General Principles -  Application and Compliance with Contract Standing Orders

CS0 2.1

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The CSOs apply to all purchasing activities by, undertaken by or on behalf of the Council. The words “works”, “supplies” and “services” are the words used in the EU Rules to define different types of contracts. Put simply, “works” cover construction, refurbishment and other building related works. “Supplies” are all types of goods - from paperclips to photocopiers and vehicles, and “services” cover the full range of services provided or purchased by the Council in its day to day activities.  Some contracts can be hybrid arrangements covering works, supplies or services. If this is the case and you are not sure how to define a particular arrangement, please take advice from Legal Services or from the consultant you have employed to assist you with the tendering exercise.

CS0 2.2

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Words and terms used to describe types of arrangements which are often contracts: Do not be misled by the label for any particular arrangement.  The CSOs apply to all purchasing and contracts except where specific exemptions apply. A lot of purchasing is by way of formal contracts.  However, contracts can exist even when the word “contract” is not used. So, for example, "agreements", "purchase orders", "terms and conditions" and equipment or vehicle "leases" are nearly always a type of purchasing and so are contracts which are subject to the CSOs.  (Leases for land or property are not covered by these CSOs – see comment on CSO 2.3.2).  Sometimes a formal agreement may be preceded by a "memorandum of understanding" or "heads of terms", but take care that such preliminary documents do not themselves amount to a binding contract.

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Contracts can also be created by words or actions and so it is possible to have a contract without having anything in writing.

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Concessions are a specific type of contractual arrangement under which, rather than paying the contractor to deliver a work or service, the Council will grant the contractor the right to exploit an opportunity and receive some or all of its income from third parties.  A good example is the operation of catering or leisure facilities where some or all of a contractor’s income can come direct from paying members of the public.

5

The terms “service level agreements” and “grant” are particularly problematic and their usage is inconsistent.  Do not assume that a service level agreement or grant is not a contract. The term “service level agreement” can be used to describe a specification or technical requirements type document which sets out the level of service required under a contract.  It is also sometimes used to describe what is, in practice, a legally binding contract.  The same issues apply to arrangements classified as grants.

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Partnering arrangements: There have been considerable moves over the last few years toward the concept of working “in partnership” with other public, voluntary and private sector organisations. When the Council is entering into a partnering type arrangement, it may need to follow a tendering process resulting in a formal contract.  Please take advice.

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Some “partnering” arrangements – particularly those with other public bodies such as the NHS – are genuine partnering (as opposed to a legal partnership (see below)) involving, for example, the pooling of resources to deliver services. Other arrangements are labelled as partnering arrangements but are in reality, formal contractual arrangements.  A common example is the “partnering” approach used for construction contracts.

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A formal legal “Partnership” has a specific legal meaning.  A legal partnership will be caught by statute and other rules. It is possible to create a legal partnership without intending to do so and this can have significant consequences, as partners usually share both profits and losses arising from the partnership. Great care must be taken when using this term, to ensure that a legal partnership is not implied.    Legal Services will have a standard clause to deal with this.

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Summary: Wherever an arrangement means that works, supplies and/or services will be provided to the Council, or on behalf of the Council, in return for some sort of “payment” (which could be a monetary payment but could also be something else of value to the recipient), then you need to consider whether or not this is a type of contract and purchasing process which is subject to the CSOs and other Regulatory Provisions listed in CSO4.

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The best approach to adopt is to assume that the CSOs will apply to all of the Council’s purchasing activities with only very limited exceptions. You must take advice from Legal Services if you are uncertain about whether or not the CSOs apply.

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There are some specified types of contract to which the CSOs do not apply.  These are listed in CSO 2.3.  These are excluded, because it generally does not make practical or legal sense to require a full tendering process for these types of contract. However, these arrangements are subject to other specific requirements.

CSO 2.3

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CSO 2.3.1 Employment contracts: employment opportunities are usually advertised and people are appointed to their posts as a result of a formal appointment process.  Employees enter into individual employment contracts with the Council.

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However, contracts involving the purchase of services from individuals – such as consultancy or advisory service contracts – are often not “employment contracts” for the purposes of this exception and are likely to be subject to the CSOs. Similarly, contracts with employment agencies for the provision of temporary staff will be caught by the CSOs.

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CSO 2.3.2 Contracts relating solely to the transfer of interests in land (including existing buildings) are generally not caught. This includes the purchase or disposal of land by way of a freehold or lease. This will apply to most of the Council’s day to day conveyancing and land transactions.

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Take care over development type agreements, which may, for example, involve a combination of a land transfer plus a developer providing a building for the Council. These can be caught by the EU Rules as they can be classified as “works” contracts because of the building element. This is a complex area of European law.   You must seek advice from Legal Services.

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CSO 2.3.3 Contracts for the retention of legal counsel and the appointment of expert witnesses in legal proceedings: Corporate and Regulatory Services Manager is responsible for agreeing fees with and appointing legal counsel (barristers) to work on legal issues and for the appointment of expert witnesses.

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CSO 2.3.4 Service level agreements setting out the conditions which the Council applies to its funding of particular voluntary sector bodies: in some limited circumstances, funding arrangements for voluntary sector bodies may not be caught by the CSOs. An example of the type of arrangement, which may fall within this exception, is low value funding to a voluntary group in order to ensure the continued provision of a critical local service.

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Take care because some funding arrangements may, in reality, be more like a contract than a simple funding arrangement. The Council must ensure that it obtains appropriate value in respect of all funding and that it is not contravening State Aid, EU Rules or EC Treaty Principles.  You need to look carefully at each funding arrangement and consider whether it could be delivered better as a result of a competitive process. A Service Level Agreement is unlikely to be an appropriate method for large scale and/or long term funding.

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CSO 2.3.6 When, for technical or artistic reasons, or for reasons connected with the protection of exclusive rights, the goods, services or works may be provided only by a particular service provider.  For procurements captured by the EU Regulations, the negotiated process will apply, as allowed for within the provisions of the Procurement legislation.

Next page: General Principles Applying to All Contracts

• Introduction – Purpose of the Contract Standing Orders (CSOs)
• General Principles – Application and Compliance with Contract Standing Orders
• General Principles Applying to All Contracts
• Regulatory context
• Responsibilities of Directors, Service Managers and Responsible Officers
• Scheme of Delegation
• Financial Thresholds and Procedures
• Financial Thresholds and Processes Applying to Approval and Execution of Contracts
• Calculating the contract Value
• Principles Underlying Tendering Processes and Tender Evaluation
• Submission and Opening of tenders
• Evaluation of Quotes and Tenders
• Waivers
• Extensions to Existing Contracts
• Purchasing Schemes
• Review and Changes to these Contract Standing Orders
• Standard Clauses
• Appendix 1 - Risk Matrix
• Attachment 1 - Risk Assessment

Procurement

E-mail: contracts@thanet.gov.uk

Tel: 01843 577111