Following the release of Article 1 “Procurement: pitfalls and tips”, we now focus on Article 2 “Contractual negotiations: pitfalls and tips” which is the second topic of the trio of challenges for Trusts procuring EPR systems which we are focusing on in this suite of articles.
Contractual negotiations: pitfalls and tips
There are various procedural milestones throughout the procurement cycle of an EPR system when the commissioner must consider the structure and terms of the draft contract itself, including the contractual provisions and how risk is allocated. This article has been drafted on the basis that a framework will be adopted by the commissioner for the purpose of procuring an EPR System. The milestones we refer to above are as follows:
- Pre-market engagement;
- Prior to release of ITT; and
- Negotiating the contract with your preferred supplier.
Key issues for consideration during each of these milestones are as follows:
- Pre-market engagement (PME): prior to going out for PME, the commissioner needs to consider the contract it plans to award in detail and ensure it is familiar with the main terms, including by having a clear understanding of its preferred position on key operational and risk matters in its role as the commissioner. This will then allow the commissioner to discuss with possible bidders during PME if there are any specific provisions they will not accept which, as a result, may cause a lack of engagement and bidding. The sort of provisions which might cause bidders to become disengaged might be some of the following: contract duration and break rights, unlimited or onerous liability provisions, lack of “allowable assumptions”, or extensive termination rights for the benefit of the commissioner.
- Prior to release of ITT: the PME process will give commissioners an indication of whether any amendments to its proposed contract (and the procurement process itself) are needed prior to going out formally to tender for example following issues raised on the terms we set out in point 1 above during the PME stage. Any amendments to the contract should be considered carefully, and expert advice should be sought prior to agreeing to any such changes, to ensure that any risk factors have been carefully considered in the round. Furthermore, as part of the procurement process being adopted the commissioner will need to set out in the ITT which terms in the contract are for negotiation depending on the preferred bidder’s solution. Being clear from the outset with bidders as to the approach adopted will put you in good stead but this can mean that some bidders may choose not to bid if they cannot negotiate specific terms in the contract e.g. exclusions and limitations, milestones, KPIs and service levels, testing and implementation.
- Negotiating the contract with your preferred supplier: given the complexity of EPR project solutions, there will always be issues that arise after contract award during the contracting stage as the details of the supplier’s bid EPR solution comes under scrutiny. This may be permitted but needs to be considered carefully in the context of the procurement process, to avoid future challenges which may arise if the contract terms end up departing materially from those advertised. We recommend that commissioners are aware of the common pressure points when it comes to negotiating the contract, taking account of the terms agreed for negotiation as part of the process including those we have identified in points 1 and 2 above. Getting it right at the outset will reduce the risks and delays that could arise during the implementation stage and the early days of when the contract is live.
More and more commissioners are approaching us at the earlier stages of these projects, prior to undertaking pre-market engagement and commencing full procurement procedures in order to try better to manage and mitigate against the impacts of these risks and pitfalls arising.
If you have any specific questions or want to discuss any matters highlighted in this article, please contact Christiana Demetriou or Mark Fitzgibbon to find out more.
How our health and social care lawyers can support you
If you’re experiencing any issues in relation to EPR systems, our experienced health and social care lawyers can provide invaluable guidance and ongoing support.
For further information, please contact:
Mark Fitzgibbon, Partner, Hill Dickinson
mark.fitzgibbon@hilldickinson.com
