PQQs removed to assist small businesses

The government has recently announced that Pre-Qualification Questionnaires (PQQs) are to be removed for public sector contracts with a value under £100,000. The announcement is part of a package of measures which aim to open up public contracts to SMEs, charities and voluntary organisations.

What are PQQs and how do they hinder small businesses?

PQQs seek out information in order to shortlist bidders. They include questions on organisation information, compliance with legislation and technical ability. The aim of the PQQ is to eliminate bidders early on in the tender process to reduce the time and costs for all parties.

In practice, PQQs usually request bidders' accounts for the last five years, number of employees with the relevant skills, and environmental, health and safety, equality and diversity and sustainability policies. Understandably small businesses may find it difficult to pass the PQQ as they are less likely to be able to compete with large corporate bodies that tender extensively and have the resources to fine tune their relevant policies and practices. Not being able to provide a policy statement on, for example, sustainability does not necessarily mean that that business would be less able to perform the contract than a business that can provide a policy statement.

The requirement for PQQs

Legally, whether a PQQ is required for a public sector contract depends on the type of contract and the value of the contract. In terms of supply of goods and professional services contracts, for a PQQ to be required under EU public procurement law, the value must be above £101,323 where the public sector contracting authority is, for example, a local authority or educational institution, and above £156,442 where the contracting authority is, for example, an NHS Trust or Central Government Department (such as MOD). In terms of construction works contracts, the value must be above £3,927,260.

The wider implications of removing PQQs

The removal of PQQs for contracts with a value of less than £100,000 may not be completely ideal. The result is for all bidders for such contracts to go straight to tender which is generally far more time consuming than the PQQ. Perhaps another solution could have been for PQQs for smaller contracts to consist of questions specific to the contract to shortlist bidders instead of the generalised questions mentioned above that tend to hinder small businesses and are not really relevant to the ability to perform the contract.

Conclusion

The removal of PQQs for contracts with a value under £100,000 will assist small businesses that were previously unable to qualify for the tender stage. The measure is therefore expected to be welcomed by small businesses in a difficult economic climate.

View the Government announcement here.

This Procurement Bites update contains summaries of complex issues and should not be relied upon in relation to specific matters. We recommend that you take legal advice on particular matters and we will be happy to assist. If you would like further information on the topics discussed above, please contact: Jason Phelps, Head of Procurement, or Hannah Fisher, Solicitor on 01392 688 688.