The UK government buys a huge variety of goods and services – most of which are governed by EU rules on procurement. Suzannah Brecknell reports on the latest attempts to reform this wide-ranging legislation.
In almost any discussion about how the civil service can be more innovative or efficient, it isn’t long before someone complains that European procurement rules are an obstacle to reform. Most people love to hate the directives which govern how public authorities buy goods and services, so it’s little wonder that the UK government has leapt at what Cabinet Office minister Francis Maude describes as a “once-in-a-decade opportunity to achieve a simpler, less bureaucratic and more effective public procurement regime”.
This opportunity has arisen because the European Commission is reviewing public procurement legislation, and says it hopes to publish a “modernised set of public procurement rules” in draft form by the end of this year. It has already carried out an evaluation of EU-wide public procurement – estimating that the total cost of compliance with EU procurement legislation is €5.2bn, while the directives have saved public authorities around €20bn by sharpening price competition – and held a consultation which received 623 responses from member states and other interested organisations.
Ninety of those responses came from UK-based organisations, including the government – making Britain the most vocal member state in this consultation. This level of interaction with the commission will no doubt please Maude. In the foreword to a Cabinet Office Procurement Policy Note (PPN) published last month, he said the government is “determined to play a positive and pivotal role in promoting change”, and urged all members of the public procurement community to get involved and support reform as the EU review process moves on.
The note goes on to say that officials can support these efforts by, for example, promoting the UK’s objectives at international procurement events, and briefing senior officials and ministers when they are engaging with the EU on “policy issues with a procurement angle”.
So what are the UK’s objectives? The government’s response to the EU consultation includes four main priorities for revision: allowing a “flexible approach” towards mutuals and employee-led organisations; supporting measures which will give SMEs greater access to public contracts, without undermining the basic objectives of public procurement rules; allowing purchasers more flexibility to follow commercial best practice; and streamlining procurement processes.
The response then goes on to outline a number of specific recommendations – the majority of which, says Ruth Smith, a partner at legal firm Pinsent Masons, will widely be “applauded as sensible”. Peter Smith, procurement consultant and writer on the Spend Matters blog, agrees that the UK suggestions are “in the main pretty considered and sensible”, recognising that “the fundamental principles [behind the regulations] are not bad principles”.
Indeed, several of the UK’s preferred revisions were widely supported by other respondents. For example, most contracting authorities supported the idea of raising the value threshold at which goods or services come under the regulations, according to the commission’s summary of consultation replies.
In some cases the UK is just calling for a clarification in law of the best practice which most procurement teams already follow, says Peter Smith. For example, the UK backs the idea that supporting documents should only be provided by successful bidders, to reduce the burden on suppliers.
Yet there are some parts of the UK response which seem more “tricky”, as Ruth Smith has it. Specifically, all the experts contacted by CSW had reservations about the government’s suggestion that the rules are amended to allow temporary exemptions for mutual and employee-led public sector spin-offs, letting the government protect these new organisations from full market competition in their early years.
Exemptions to procurement rules “have to be used rarely and [be] strictly interpreted by a court”, says David Hansom, a partner at Veale Wasborough Vizards – and he thinks it’s unlikely the Commission will accept this proposal. “It goes against the fundamental principles of the directives,” he continues, noting that “Whenever I’m dealing with the European Commission I’m stunned at the black-and-white, rather than practical, approach they take to the rules.”
Nick Maltby, of Bircham Dyson Bell, believes that the government’s proposal amounts to an admission that “it can’t carry out its mutualisation programme… without a change to the rules”, but Ruth Smith disagrees, saying: “The mutuals policy is currently alive and well, and there are schemes going through,” though a change to the rules “would obviously facilitate and help the policy”.
Ruth Smith says this proposal highlights the “tensions between a great policy objective [and] the objectives of the European rules”; and this tension is also broadly apparent in the review itself. For the commission is also exploring the possibility of making more use of public procurement as a policy instrument to achieve socio-economic or environmental aims.
“There’s quite a lot of that sort of social flavour to the EU proposals,” says Peter Smith, adding that some of it seems rather prescriptive and at odds with the parallel goal of simplifying procurement rules. For example, the commission’s green paper included proposals that procurement directives should include requirements on what to buy in order to achieve social goals, as well as how to buy to promote open competition.
The UK response “struck a pretty good balance” in this area, he says. It didn’t say these social objectives should be a much bigger concern, but “equally, it didn’t say we should scrap [the concern] altogether. Sensible people in procurement would say there’s a place for considering those issues but it shouldn’t override value for money, and the main UK suggestion seemed to be we just need a bit more clarity on the rules.”
Although Ruth Smith says that this is a “root and branch” review of procurement rules, others provide a note of caution for those hoping to see rapid or wide-ranging changes. Hansom says that this won’t be an opportunity to entirely tear up procurement rules, but instead a chance to consolidate lessons from case law “into a set of rules that everyone can follow”.
And everyone agrees this will be a slow process. The commission is aiming to table draft legislation by the end of the year, and Ruth Smith understands that it hopes to have this legislation passed by member states at the end of 2012. Member states then have around two years to implement the directives in their own law, so the earliest we might see changes would be 2014. But these timelines would be “extremely challenging”, she says. As Peter Smith notes, the last EU procurement review took ten years to get from consultation to legislation.
In the meantime, procurement rules will evolve as new directives are issued – a recent directive changed the rules about defence procurement, for example, so that the government must now follow EU rules for all but the most secret of military purchases. Yet Hansom believes that even as procurement regulations evolve, there will continue to be a political tension between EU rules which are there “to ensure that there is free movement of goods, people and services”, and domestic policies on procurement. He suggests, for example, that the UK government’s current focus on relationship-based purchasing doesn’t sit comfortably with EU rules.
Then there is the issue of whether public money should be used to support domestic jobs, in contrast to the EU rules which focus only on open competition and value for money – a tension which recently raised its head when the transport department awarded the contract for Thameslink trains to a German company.
So this may be a once-in-a-decade opportunity to simplify procurement rules, but it won’t remove the underlying tensions between value for money and supporting social objectives, or squaring domestic with EU-wide concerns. Those are things with which procurement teams will continue to wrestle; but at least they may be able to do it within a clearer framework.