A new landscape for procurement

6 July 2005
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07 July 2005 | Rebecca Ellinor

The European Union is aiming for a simpler public-sector purchasing regime. Rebecca Ellinor assesses the main features and how it is likely to work in the UK

The total public procurement spend across Europe is big business. It represents more than ?1,500 billion (about £1,000 billion) - more than 16 per cent of the gross domestic product of the European Union. So new rules governing the award and tendering of contracts for that business are also a big deal.

The directives - 2004/18/EC and 2004/17/EC - cover public-sector and utilities contracts. The former combines three previous directives covering supplies, services and works.

The idea is to simplify procedures, clarify existing rules and bring them into line with purchasing technology, such as e-auctions.

Experts say this is good news because it puts the UK on a level playing field with other Europeans countries to bid for work. It also means only one or two set of instructions need to be digested instead of several.

In addition, they believe the use of clearer directives and new technology makes tendering cheaper and allows more small and medium-sized companies to get in on the act.

The directives have already been adopted at the European level and cannot be changed, although the UK has until 31 January 2006 to implement them. Draft plans were released by the Office of Government Commerce (OGC) on 20 June.

The Confederation of British Industry (CBI), CIPS and Trades Union Congress are among those that have broadly welcomed the proposals. All have been in detailed discussions with the OGC throughout the process, although they are yet to make their final comments on the draft regulations.

René de Sousa, senior procurement specialist at CIPS, who covers work in Europe, said: "These will be better than what we've had. They allow frameworks and recognise that more technology is being used."

The rules will also make tendering authorities spell out the relative weight to contract criteria, he continued, but people need to make themselves aware of the changes to ensure they comply.

The OGC says the directives are based on the principles of transparency, non-discrimination and competitive procurement, and "value for money for the taxpayer as well as promoting the single European market".

One of the more significant changes concerns the "competitive dialogue procedure", which allows limited pre-tender negotiation with interested suppliers (see Law, 3 February 2005). The OGC says it can be used when clients consider that "use of the open or restricted procedures will not allow the award of the contract".

James Worron, senior policy adviser at the CBI, says that while this option existed before, the intention was only to use it in special circumstances. The OGC said: "It is intended to allow bidders to produce innovative solutions and for the purchaser to enter into dialogue with them on how they propose to meet the broad requirements of the project."

The changes mean contracting authorities may ask the tenderer to indicate any share of the contract it would subcontract, and to which companies.

There is also a clarification on the scope to include environmental and social issues in the public procurement process (see News).

Most of the EU directives are a foregone conclusion, but member states still have a slight degree of freedom as to how to apply them.

Fred Harvey, chairman of CIPS's EC procurement directives group, said: "They can make some little changes to the actual directives, but there are only a few areas where they can decide how to implement them."

One such area, which has been the subject of some criticism by anti-corruption lobbyists, is the OCG's interpretation of article 45, which refers to the "personal situation of the candidate or tenderer".

This contains a new provision concerning the mandatory exclusion of candidates or tenderers if the contracting authority is aware they have been found guilty of certain criminal offences. But the OGC says if there is an "overriding consideration", the ban can be overlooked.

This is one of the sections that the OGC emphasises it is still looking at and would particularly welcome views on.

The CBI's Worron believes flexibility is key: "The liberal, permissive approach to the regulations gives contracting authorities options."

Readers have until 12 September to make comments on the draft regulations, which can be downloaded from www.ogc.gov.uk


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