EU procurement proposals are an iceberg that will sink UK reforms
Just before Christmas, the EU sneaked out proposals for a new public procurement directive. You could lose the will to live in trying to digest the hundreds of pages of draft new laws. While some of it sounds good, the devil is in the detail. But the net effect will be to sink a series of flagship policies from the coalition government. For instance:
- The ‘right to challenge’ in the Localism Act – the ability for communities to take over public services – and subsequent ‘big society’ reforms will be made more difficult, as suggestions to support the creation of mutuals have been ignored.
The Localism Act mandates a procurement if an expression of interest is successful. There’s a big gap between setting up an organisation and the ability to mount a successful bid, due to legacies and contingent liabilities. The UK government sought to introduce a delay of up to three years in holding a procurement process until the new organisation is ready. These UK recommendations have been ignored, so how can the new organisation gain experience and trade without a public contract? The EU reforms will inhibit the formation of mutuals and big society initiatives. The options now would be a trade sale or externalisation with assets, but probably not the mutualisation that would benefit stakeholders.
- In the NHS, the Clinical Commissioning Groups (CCG) – GPs that will soon be responsible for buying services – will have to perform full procurements on all services, which will be subject to a test of full competition. In proposing to remove the “Part B” classification of services, any semblance of cooperation could be deemed anti-competitive. By removing Part B definitions, all services become Part A and by current law, would be subject to the Remedies Directive. This can make contracts ineffective if they haven’t been advertised properly or mishandled.
The “Any Qualified Provider” status in the recent health bill was a compromise to encourage cooperation as well as competition, which could be facilitated due to the looser Part B regime. Without a Part B definition, there will be claims of anti-competitiveness. The so-called concession of raising the limits to €500,000 is a chimera as the combination of Part A and the aggregation rules means that most expenditure will be subject to the rules. I doubt CCGs realise the extent of the problem.
- Education policy will also be challenged by the proposals. Local solutions and initiatives for free schools and academies will opened to competition which many parents groups and head teachers will be unable to service. Even with a contract value of €500,000, all schools will be subject to the new Directive. A potential bright light is the unspecified “innovation partnership” technique which has also been suggested.
- Legal aid awards will also be affected, so slowing up the provision of fair trials and justice. The abolition of Part B services will only affect this but the whole raft of legal advice used by the CPS and other institutions to support their functions. The Law Society will no doubt be voluble on these matters as €500,000 is a low figure when aggregate legal expenditure is examined.
So across local government, health, education and justice, key policies will be threatened. Just as the Titanic was sunk by an iceberg – the bulk of which was unseen and below the water – this new directive is an iceberg where the unintended consequence will be to sink key government policies. We should spot the iceberg looming on the horizon.
☛ Doug Forbes is director of Barony Consulting
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Doug,
You’re right that the three-year policy has been ignored.While it would support certain “big society” aims, it does strike me as fundamentally anti-competitive so there are two sides to that argument.
You then seem to be under the illusion that part B services don’t require competition and you can do what you want in terms of “local initiatives”, collaboration etc. Not so. The EU Treaty principles – openness, competition, equality of treatment etc – all still apply to Part B. The main difference is you don’t have to advertise in OJEU – but there isn’t the scope currently for creativity under Part B that you seem to suggest. For instance an “appropriate” level of advertising is still required, so I can’t see that CCGs could just stitch up some local collaborative deal without advertsing the requirement.
I think you’ll also find that the Legal Services Commission who buy all Legal Aid services also run very open, transparent procurement processes that are pretty much indistinguishable from full part A processes. They won’t I suspect be fazed by the removal of Part B (I was a non-exec for that organistaion for a while).
Finally, your point about the Remedies Directive is a good one and that hadn’t occurred to me – so that will increase the potential penalties for dodgy procurement of currently part B services – not a bad thing, I might say. (Although as you can see here, the standstill period could apply even to Part B sevrices in some situations).
http://www.bevanbrittan.com/articles/Pages/ProcurementAlert.aspx
1. This wasn’t “sneaked” out. The consultation on the review of the EU Procurement rules was underway at this time last year and I, on behalf of my employer, gave our views directly, plus as a member of the CIPS Public Sector Group, helped CIPS to contribute via the European Public Procurement Group (EPPG) on behalf of the Europe-wide public sector procurement profession. Also recently the Cabinet Office sought consultation on these proposals, & CIPS worked on that, therefore is actively able to influence the development of these proposals on behalf of the UK government.
2. When the CCG’s begin work they will need as much guidance as possible, including working with EU rules experienced procurement professionals to effectively carry out their procurement roles including, but not only, compliance with the EU rules.
Should it be and will it work?
Interesting comments given that HMG wanted to roll back the influence of the EU on the basis of proportionality and no evidence that Eastern European firms bid for lower value contracts. The SME sector and Third Sector have been withdrawing from public sector markets due to bidding costs. This is causing market failure in specific sectors.
The article is an impact study, is highly valid and should be used as evidence by HMG to pursue its negotiating objectives. So that answers the case for ‘should it be’ for elimination of Part B. HMG should stick to its goals.
Will it work? If HMG is happy for the Health reforms, schools reforms, mutualisation and legal support to be jeopardised and administrative input, legal and contractual ineffectiveness costs to soar, then yes. So working here means this should be about achieving UK policy outcomes not ticking the boxes of increased EU bureaucracy.