Should government abandon the OJEU?
Catching up with a well-respected colleague who is trying to sell his services to the public sector, he bemoaned their insistence upon public sector and OJEU experience. Why would you insist on this experience – bring in more of the same – to bring about change? We both agreed this is the last thing you need if you want to bring about a real transformation.
In another conversation with the owner of a procurement recruitment company, it was stated they choose not to go after public sector business because of excessive bureaucracy and lack of genuinely strategic expectations of candidates. This is not a favourable image for the public sector – and as we know, perception is often reality.
We all know change only happens by doing something different, so below I take aim at procurement regulations, which I argue are to the overall detriment of the effectiveness of public purchasing.
The intentions behind the regulations are noble. The OGC describes that their purpose is “to open up the public procurement market and to ensure the free movement of goods and services within the EU”. The problem is they seek to do so in a prescriptive manner, while also ensuring openness and transparency in purchasing. The result is a disconnect between the procurement process and any overall strategy.
In contrast, the very best procurement organisations in the private sector achieve the same objectives via applying appropriate use of local and global sourcing strategies. They do this while following a consistent and open process that supports the overall strategy of the business. They recognise an unfair process only serves to damage their reputation with suppliers and ultimately will reflect in the terms they negotiate.
The OJEU process is bureaucratic, widely misinterpreted and serves to diminish the role of procurement to the transactional. Purchasing’s role becomes focused upon steering the organisation through a complex system of regulation to protect the organisation from litigation by bitter bidders. This disturbing trend is on the increase, which implies a further disconnect. If a supplier is willing to litigate over process, there is no concern for a longer-term relationship.
The prescriptive nature of regulations serves to the detriment of any strategic focus on individual procurements. And the fear of litigation also serves to stifle innovation, doing nothing to attract and retain the best talent in the public sector – which is the exact opposite of what the government would like to see happen.
I would argue OJEU itself is at least in part, responsible for the ineffectiveness of public sector procurement and represents a formidable barrier to public sector buyers in deploying modern purchasing practices.
So should the government call time on OJEU?
Since it is public money being spent, there will be a need for some regulation. But this must not bring about an undue focus on procedures to the detriment of strategy and adopting best practices. It should also not promote a culture suppliers can later exploit in the courts.
There is much to be learnt from the private sector, and with the right guidelines there is no reason why the public sector cannot behave more like it.
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Dave, whilst accepting the bureaucracy of the OJEU system it does have procedures which now allow the design and competitiveness to include suppliers at early stage as well as well as to derive competitive pricing through esolutions eg. eAuctions.
It has opened up the market for provision of services and encouraged smaller suppliers to bid for public sector contracts and this would not necessarily be the case of private sector; and this throughout the EU. (Pros/cons accepted).
Lastly, it would not be a simple withdrawal(never is) as there has been UK and EU legislation passed which now supports this process.
It is difficult to disagree with your arguments. However, the Government cannot, as I understand it, abandon OJEU, unless it also abandons the EU. If we remain in the EU, we must abide by it’s regulations. Failure to do so may well result in litigation.
I couldn’t agree more. It’s unfortunate that our best value aims are stiffled by the overbearing bureaucracy imposed by the EU and fear of litigation. During 25 years in the private sector I was able to deliver best value, fairness and transparency in a competitive ethical environment. During 10 years in the public sector the ability to deliver is being eroded more and more by each directive.
I would suggest that the fault isn’t with the EU Public Procurement framework but how it is translated into procurement processes by individual Contracting Authorities.
Everyone needs to grasp a central truth – the EU Procurement Directives have never been, and will never be, intended for the benefit of public sector buying organisations; they are intended to benefit the private sector selling organisations in several ways including more opportunities to be considered at all, more chances for SME’s, more chances for export & more recently more opportunities to demonstrate innovation. Each time the rules are amended it is an opportunity to extract a bit of benefit for the public sector. Each public sector organisation has a choice – either totally comply with the rules and totally avoid litigious and reputational risk, pay lip service to the rules thereby having high litigious and reputational risks but increase negotiating power, or the middle path of largely comply and have occasional litigious and reputational risk. Any public sector organisation which reduces its compliance with the rules should be clear about that strategy and be able to clearly demonstrate that the benefits outweigh the risks.
This whole system is dire and conterproductive.
It costs everyone too much money.
Restricts ability to bid productively.
Undermines confidentiality.
Usually provides the wrong solution.
Pins buyer down so any change in spec costs them.
A recipe for disaster.
Apart from that it is fine….and I am being serious.
Interesting mix of responses.
I’ve had a niggling doubt about how other EU countries view the Regulations.
Is there a published statistic regarding compliance, i.e. how much of a country’s relevant expenditure is open to competitive bidding through OJEC?
How can I, a private sector buyer, find out more about the nitty gritty of the OJEU, so I can make an informed decision about whether to be interested in work in the public sector?
It would be difficult for the government to abandon the ‘Ojeu rules’ because they flow from consolidated EC Directives last updated in March 2004. I work in the public sector and in the 6 years I’ve been managing procurement, not one tender have we received from another EU member state; we’ve had more interest from suppliers in India than from within the EU. Our average contract value is c.£270K, which probably doesn’t mean it’s worth non-UK EU members tendering for our contracts, yet we award over 100 new ones every year (75% of which go to SMEs through proper competition). Possibly the issue is that the thresholds for services and supplies are too low – I think they should be at least 500,000 euros and we should be able to reserve contracts not just for supported businesses but charities and not-for-profit groups that clearly put money back into the community – ‘social enterprise’ is too wishy-washy a term. That way, the added bureaucracy of the ‘Ojeu rules’ – which, as Dave Henshall points out, are theoretically a good idea – would at least add social value as well as competitive ‘fairness’. After all, one of the key aims of the EU is to promote social justice and equality across the union as much as economic prosperity.
Having worked in several EU countries, a number of them still appear to pick & choose which Regulations they want to apply.
For example, the Hispanic territories like to cite the “cultural clash” card in order to avoid the application of TUPE-style requirements.
The EU doesn’t do itself, or its members, any favours when amending public sector procurement regulations. It tend to highlight the obvious failings of the previous versions…
I agree with the initial comment and many of the other comments, but perhaps we can have our cake and eat it. Increasing the thresholds before OJEU kicks in to, say, one million for supplies and services and 10 million for works would lift a lot of the current activity out of the Directives (but not the principles of the Treaty – ie transparency and vfm never go away) thereby removing much of the bureaucracy surrounding lower amounts. It seems too neat a solution to get off the ground but increasing or reducing limits of anything is an effective way to criminalise or decriminalise all kinds of activity.
Working within local government procurement, I can’t help feeling that if the EU rules were revoked, procurement would still be bureaucratic and unproductive, with the added disadvantage that it would be restricted to a few preferred suppliers (usually managed by ex-gov employees).
The only real disadvantage with the rules is the overly-harsh restrictions on negotiations. When you don’t know exactly what it is you want or the best way of delivering it, your only recourse is to the Competitive Dialogue procedure (which is largely only used for major procurements like PFI). There is very little scope for suppliers to suggest best practice.
It has been interesting to follow the blogs on this topic. I would suggest that as with many rules/regulations it is their interpretation and application that fundamentally alters their intention. The underlying rationale for them has already been well covered but it is the petty bureaucrats who interpret them; it is the poor standard of District Audit who assess against them; matched only by the inept audit regimes in many Local Authorities and sadly it is the few individuals who have neither the competence or expertise to deliver a professional procurement service who because of their lack of expertise and inappropriate actions and behaviour cause the frustrations and inefficiencies on both market and customer sides. I hope that the current governments excellent start continues and they see through the ‘smoke and mirror’ approach to procurement so often a feature and indeed still a feature in the public sector. Unfortunately to expose the truth will take tenacity and expertise which has never been shown before; I truly hope that it is this time so that the various intermediary/consortia that have survived and indeed thrived by delivering poor service at a high cost and divert education funds from profits back into LAs. Given the relatively small size of England/Wales it has to make sense to develop a truly national procurement capability to cut out the wasteful middlemen. What has this to do with OJEU, well if every public sector organisation was professional and transparent and acted in the best interests of the Public Sector as a whole then OJEU would become redundant. All actions would be in the spirit of the OJEU principles and achieve, fairness, transparency and value for money.
…”When you don’t know exactly what it is you want or the best way of delivering it”…
ie, exactly the type of purchases most likely to go spectacularly wrong – and be complete and utter wastes of money rather than merely a little overpriced.
I see no contradiction between best in class procurement practices driven by self interest in the private sector, and the requirements of OJEU.
Surely no procurement organisation wants to issue a tender until a strategy has been developed. Surely a strategy will always be based on sound demand analysis and market testing which reaches out to all qualified suppliers regardless of where they are based.
Where’s the problem with that?
Richard, how long have you got!
Of course you need a strategy and of course anyone has self interest.
The problem OJEC provides is it ties the buyer up in knots of bureaucracy, wasted effort and fixed parameters whilst preventing sellers from articulating their value in detail and cost effectively. That is why other EU countries simply cherry pick the bits they like.
I was at the sharp end of 5 mega million bids of which my company won two. We did well but I actually ended up trying to help these organisations from doing themselves ongoing damage.
The key issue (out of many) is they are absolutely restricted to make clear from the start what they are putting out to bid with minimal contact with prospective bidders or that industry in general. So having committed themselves they then find out at a later stage that their scope was wrong. It is then that the supplier makes their real profits by charging outside contract for these ‘out of scope’ activities.
Better still look up the regulations by putting ‘European procurement directive’ in any search engine.
The reason it makes me so vocal is that it is frequently yours and my money they are wasting!
[...] and whether EU rules are bad news for public procurement triggered by Dave Henshall’s piece here. It has stimulated a wide range of thoughtful comments and argument across a number of [...]
I’ve been sleeping on this for a couple of days now. The original OJEU rules were produced in 1993 (the 2004 directive merely consolidated them and only amended them slightly), and I’ve come to the conclusion that the reason for the restrictions on negotiating and the requirement to specify everything exactly in advance of going to the market is because procurement was (and sometimes still is) largely viewed as the simple purchasing of goods. You only need to look at the CPV codes to see what I mean – those relating to goods are very extensive, while those relating to services are usually inadequate.
Having spent so long trying to convince our CEOs and Boards/Executives that procurement is much more than just purchasing, maybe we should start focusing that argument on the EU bureacrats who make the rules?
Eureka!
Daniel, you have it so right.
Procurement is much more than just purchasing.
The sooner more people realise this the better.
I recall an interesting interaction when I first entered Government over seven years ago, when I was brought in to shape and drive the transformation of a high profile procurement function. I announced that one of the initiatives I would be launching would be to review the existing Procurement Policies and Procedures, outlining the areas where I would want to update and why etc. The senior members of the existing procurement team rolled their eyes and with wry smiles said “Rob, sorry, but we’ve already done that”, and so I went away. But then I had a ‘light bulb’ moment, and came back to the room and said “when?”. With every bit of confidence (in the world) they said “1976″. I immediately pressed ahead, and reviewed, rewrote and published a new set, which were aligned to a new strategy and new ways of working (we implemented Category Management).
Although I’ve found OJEU to be a hurdle, it’s never curtailed any creativity, and has, in fact, provided a further challenge to ‘stretch’ that creative thinking.
But there is no doubt that the OJEU process is highly bureaucratic – too much so – for everyone. I can understand and appreciate Ray’s comments that it is generally for the benefit of suppliers, but when bid costs in some procurements rise to tens of millions and there’s little doubt in anyone’s mind that bidders build those into their cost models (ie: we pay for them somewhere, somehow) and those who lose bids have to find those costs from their bottom line (or bill them to other similar clients). It is a massive inefficient process.
The big question is: if we abandon it, what would replace it to maintain transparency, provide far more value and far less efficiency? A single procurement portal, through which we would to promote all government contracts? (Who knows, but I’m keen to see change.)
Not surprisingly, only a handful of people provide the challenge to the EU and its regulations (in creating the UK set), which is led by a very, very small team from within the OGC. Perhaps the real challenge needs to start there. It would be terrible to think that there may be concepts still being perpetuated in our own regulations today that may well have been very popular back in the 70s…
Seems to me that the transparency is on the wrong wall(s)
The point of it is to give the taxpayer value.
Total transparency towards the bidders means that the contract has to both predict and head off every possible cheap trick but yet let allow supplier expertise and innovation.
Apologies! Meant to say, the big question is: if we abandon it, what would replace it to maintain transparency, provide far more value and far less INEFFICIENCY!? (Freudian slip.)
[...] buyers expressed this frustration in response to Dave Henshall’s posting on the SM blog, entitled “Should government abandon the OJEU?”. You can read it and log your own comments here: [...]
“Procurement is much more than just purchasing” – that’s only if you are from the school that thinks these 2 words (which has the common convention in the English language, because of it’s evolution from the merging of Old English and Old French, of having a word from each old language with the same overall meaning, eg “frighten” & “scare”, but twisted over time to have subtle differences imposed on them) actually mean 2 different things. I don’t come from that school and therefore have used both words interchangeably with whoever I’m talking to; I also do that with other similar examples like “frighten” & “scare”. Remember CIPS is not the “Chartered Institute of ordering & expediting stuff & Supply”. The “purchasing” in its name is correctly intended to include the other “P” word, not instead of it.
Going back to the original question, the reason that you need people with Public Sector experience to to large ounblic sector procurements is so that they understand the legislative framework in which the public secotr operates. Unfortunately many people who have been working in the public sector for years still don’t have a good technical grasp of the rules and insist on applying them in an over-bureaucratic way which does not add any value to the process. The Government organisations like OGC which are meant to provide guidance are no better. I’ve been doing public sector tendering for many years now and I don’t think there needs to be a problem at all – just some better training and a bit more imagination.
I agree with Michelle van Toop. Know the rules, understand them and then be ‘a maverick’ if you have to. And always remember that every big procurement project is a new case in its own rights. Just do not be afraid of applying common sense, best practice and logical reasoning for your decisions.
You make a very good point Michelle and one which I was intimating within my own post – that one can still be very creative within the EU rules, but one has to first understand them before navigating the right way through them to achieve the right outcome. However, they are still a costly burden for everyone.
We need to have the very best procurement people within the UK when negotiating for our own UK regulations – and we need some break-through thinking (based upon some sound analysis) to define and promote the most efficient set of regulations for us.
Agree with Michelle and Renata (and others). As long as we have to comply with these things then as Procurement or Purchasing professionals present the benefits of best practice procurement first – then advise colleagues that we have to go through a prescriptive process but make sure the benefits of that process are highlighted too (accentuate the positive, eliminate the negative is the phrase). And if you decide not to comply then do that on the basis of a risk assessment – decisions with eyes wide open. The Regulations will never stop this procurement person from striving to deliver the best value and achieving best value.
Why would any body wish to get rid of the EU rules on public sector procurement. This is something which has been around since the late 70s. Yes it might be a struggle to understand what is required but the organisations should be well aware that they need to plan well in advance. This is a simple meganisum which helps many public sector professional ensure that they have enough money to undertake the project and ensure that they provide value for money.
After all its comes out of everyone’s pocket in one form or another. This give private sector a chance of getting some of it back into the community.
No we should not give it up. The principles are well thought through: free trade which stimulates an evolving healthy market and value for money to Government. The challenge, and its downfall, is poorly thought through strategies and procurement priocedures. To get the best out of the policy is to focus on outcomes, work from right to left and develop business and procurement strategies which get the best from the regulations. It is possible to deliver contracts on time, to cost and with the outputs and outcomes needed. make sure you have the right experienced expertise for your sourcing project.
Whilst I agree with the principle of OJEU I do find it very restrictive, bureauocratic and pain stakingly long! I have come from the private sector into public sector, I strongly agree with Gavin’s comments above, focus on outcomes and plan ahead, it is possible to deliver contracts on time, to etc… What we need is a simple system that everyone understands. Suppliers need to understand what is expected of them and procurement need consistency across the profession.
I totally agree with Dave Henshall article. I have come from the private sector back to the public sector and I think OJEU adds abour 10/15% in cost the the public purse along with the bureacracy. We are now more concerned with developing ITT’s to avoid challenge than constructing them to achieve best vlaue over time. I’m all for competition, transparency and fairness but the OJEU pendulum has swung too far. If the public sector really wants to save the tough targets on it, scrap OJEU but keep all the basic elements of it as indicated above but without the bureaucracy.
Interesting article in the Telegraph which adds a political perspective: The Politics of Buying Things:
http://tinyurl.com/2vbx2hf
OJEU and the Public Procurement Directives exist because of the provisions of the European Treaty. The principle was to foster a competitive market which would give taxpayers across Europe value for money. We always hear that other countries don’t apply the rules correctly or to the same extent as the UK. It’s easily said but much harder to come up with any sort of supporting evidence whatsoever.
What I think is often overlooked is that the rules are there to support businesses within member states as well as across member states. That very few tenders come from elsewhere in Europe rather misses the point – the rules afford protection, foster competition, open opportunities and offer remedies to UK companies who are involved in UK public sector procurement.
Having run some procurements and also been on the other side by submitting proposals it never ceases to amaze me that public bodies continue to publish notices with requirements that are vague and unprofessional, and written by people with no knowledge of what they are procuring.
I have several examples of Local Authorities providing requirements contained within a single or double page of A4 paper despite the budget being £500,000. They then seem surprised that they get back all sorts of replies that cannot be judged and compared.
Even the most basic research before going to market is often not conducted. It never seizes to amaze me that the same people running procurements are happy to risk half a million pounds based on a page of A4 paper, but wouldn’t buy a £10,000 car or fit a kitchen without more paperwork.
over the last decade we have seen both PQQ and tender submissions increase in quality and volume as SMEs attempt to protect their workflow from the big boys who can afford large teams of document designers and consultants to make their bids look wonderful. I now regularly see every bid reach 100% score in terms of Quality under a MEAT scheme that is split 60/40 Quality/Price. So, all that distinguishes them from each other is the price. Does that sound familiar? Exactly; precisely where we were pre-OJEU! The lowest bid wins. Marvelous; what was that all about apart from the invention of a new profession called “Procurement” and a legal gravy train?