The last few months have marked another step on the path to refreshing the EU’s procurement directives. On 24 June 2011 the European Commission published the results1 of its evaluation of the impact and effectiveness of EU public procurement legislation. This finds that the EU rules have resulted in greater transparency and greater levels of competition for advertised contracts, generating savings through lower prices that far outweigh the costs of procurement procedures. However, cross-border procurement has not increased as much as was anticipated and many bidders remain deterred from competing for tenders in other member states by a variety of factors. Implementation of the EU rules also varies across the member states particularly with regard to the time taken to complete procedures and the cost involved. This indicates that there is considerable scope within the Directives for reducing the cost of public procurement administration by aligning with the practices of the most efficient member states. The widespread use of frameworks may be having an adverse effect on efficiency. The report finds that the original objectives of removing legal and administrative barriers to participation in cross-border tenders remains a worthwhile ambition.

Consultation on modernising the regime

The Commission also published on 24 June a synthesis2 of the main views expressed by the respondents to the consultation on the modernisation of EU public procurement legislation launched in January 2011. The responses show a general desire to update EU procurement rules. A total of 623 replies were received, 40% of which came from businesses and 29% from public bodies. The UK submitted the most replies out of the 22 Member States from which responses were received. Most respondents welcomed the Commission’s Green Paper. The three issues which were raised the most were the need for a generalised negotiated procedure, raising threshold values and a review of the A/B services distinction.

A strong emphasis was placed on the need to simplify the rules, including introducing a more flexible approach to the organisation and sequence of the examination of the selection and award criteria, and allowing previous experience to be taken into account. There was a general desire to retain the distinction between works, supplies and services and the approach to defining procuring bodies. There were, however, mixed views on a number of issues, such as, for example, the strategic use of public procurement to support other policy objectives and the A/B distinction. The Commission will use the responses to the Green Paper and its evaluation of the procurement rules to formulate legislative proposals, which it intends to publish before the end of 2011.

UK Response

On 25 July 2011 the Cabinet Office published the UK Response1 to the European Commission’s Green Paper on modernisation of EU public procurement policy. Like the majority of consultees, the UK supports greater simplification of the EU’s rules. In particular, it considers that the main priorities in the revision of the directives should be to make clear that, in certain circumstances, such as the development of employee led organisations/mutuals, employees should be able to gain experience of running public services for a period of, for instance, three years, to reduce lengthy and burdensome processes that that add cost to business and barriers to market competition, to provide more flexibility to purchasers to follow best commercial practice and to support measures to enhance SME access to public procurement. The thresholds for the application of the EU Directives should also be increased. It also advocates the removal of, at least, private utilities from the application of public procurement rules. The UK also calls for clarification and clearer guidance on how social and environmental issues can be taken into account.

These UK proposals to modernise public sector procurement sound refreshingly promising, but they show up a number of contradictions in Government policy. Firstly, through this document the Government has finally admitted that it cannot carry out its ‘mutualisation’ programme, which aims to move 100,000 civil servants into joint ventures with the private sector and then award the JV contract, without a change to the rules. As this is the main goal of the ‘Opening Public Services’ White Paper2 it is not clear where this leaves the programme, as it will be several years before any new procurement directive becomes law. Secondly, having stated that it would back procurement bids from UK based companies over foreign competition in the context of the Thameslink contract, where Siemens won, the Government now says it would always choose the most competitive, value-for-money bid regardless of nationality. It would be helpful if the Government could confirm if this represents Government policy rather than the gnashing of teeth which followed the announcement. Thirdly, after backing the ‘competitive dialogue procedure’ as recently as last November in its Review of Competitive Dialogue1 and notwithstanding the huge increase in bid costs arising from competitive dialogue, the Government is now advocating a generally available negotiated procedure where negotiation is possible once a bid has been submitted, which was where we were five years ago. Finally, although the Government suggests opening bids to more SMEs it still seems unmoved on changing the rules to allow SMEs to fulfil government contracts.

Procurement Information Note 05/11

On 11 August the Cabinet Office published an Information Note2 to coincide with the European Commission’s current review of EU-wide procurement rules. The Note follows the Government’s response and outlines the steps the Government intends to take to implement its proposals.

The Note confirms that the Government will be actively influencing the Commission, other EU Member States and the European Parliament in the run up to the publication of the Commission’s proposals for revised and updated directives, and calls on those in the public procurement community who may have links to such bodies or other stakeholders to participate in that process and push the UK message.

It also recommends the Note be circulated throughout organisations, agencies and other bodies and that its content be brought to the attention of those with a procurement role.

Negotiations on the Commission’s legislative proposals are due to commence early in 2012. The Cabinet Office will keep stakeholders updated on developments.