EU rules will spark rise in public sector mutuals

13 August 2013

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14 August 2013 | Will Green

Proposed EU procurement regulations will see a “significant increase” in the number of public sector mutuals created to run services, say lawyers.

Law firm Winckworth Sherwood says the new rules are “designed specifically” to encourage public sector staff to set up mutuals or co-operatives to run services.

The EU is expected to adopt three directives in the autumn covering the public sector, utilities and procedural rules, subject to a vote by MEPs.

The changes will allow local authorities to award time-limited service contracts to mutual or social enterprises without first having to advertise them in official channels – only service contracts exceeding £750,000 will need to be advertised.

Winckworth consultant Simon Randall, who advised the UK government on the changes, said: “This new directive is enormously welcome and is designed specifically to make it easier for groups of employees to form public sector mutuals or co-operatives to deliver services.”

The new rules also allow local authorities to break contracts into smaller lots to facilitate greater SME participation and they encourage preliminary talks between buyers and suppliers to shape better specifications and outcomes.

Local authorities are also allowed to take into account the skills and experience of individuals at the award stage, as well as social and environmental factors.

Randall said: “Changes were needed as the previous directive made it extremely difficult for local authorities to award contracts to run local services to employee-owned mutuals as those mutuals could not compete effectively against the big service providers, which have long track records and substantial funding.

“Local authorities, while wanting to award a contract to a group of employees, found themselves under the old procurement rules having to award the contract to these large service providers. We would expect to see a significant increase in the number of new public sector mutuals created to deliver public services.”

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