The UK government said its decision to award the contract to produce Britain’s new dark blue passports to French-Dutch company Gemalto will save around £100-120m.
Gelmalto, a security firm based in Paris, won the new contract, worth £490m over 10 years, ahead of British firm De La Rue, which currently holds the contract for producing Britain's burgundy passports.
De La Rue has cried foul over the loss of the contract and demanded the government explain its decision to “manufacture offshore a British icon”.
A Home Office (HO) spokesperson said: “The chosen company demonstrated that they will be best able to meet the needs of our passport service with high quality and secure product at the best value for money for our customers and the taxpayer.
“It’s been the case since 2009 that we do not require passports to be manufactured in the UK. A proportion of passports have been made overseas since then with up to 20% of blank passport books currently produced in Europe with no security or operational concerns.”
The preferred bid would save the taxpayer around £100-120m, depending on actual volumes of passports produced during the lifetime of the new contract, said the HO.
It added that Gemalto's new UK factories in Fareham and Hayward would create up to 70 jobs.
However, critics reacted to the news with anger and said the new blue passports – seen as a symbol of Brexit – should be produced by a British firm.
Former cabinet minister Priti Patel called the decision "perverse", while Unite the Union general secetary Len McCluskey warned that the move would lead to job losses.
Speaking on BBC’s Today programme, Martin Sutherland, the chief executive of De La Rue, said: “I think we have heard over the last few weeks and months ministers more than happy to come on the media and talk about the blue passports and the fact that the blue passports is an icon of British identity – now this icon of British identity is going to be manufactured in France.
“The [De La Rue] passports are manufactured in Gateshead – I would like to invite Theresa May or Amber Rudd to come to my factory and explain to my dedicated workforce why they think this is a sensible decision to manufacture offshore a British icon.”
Matt Hancock, culture secretary, blamed EU procurement rules and suggested that post-Brexit, the UK would be able to award government service contracts to British firms.
EU laws on public procurement state that the award of contracts by EU countries must be non-discriminatory to prevent “buy national” policies and promote free movement of goods and services between EU countries.
“The procurement rules are very clear – as it happens, one of the advantages of leaving the European Union is that we will be able to have more control over our own procurement rules but as I understand it, this procurement is not fully complete,” he said.
Speaking to SM, Andrew Black, principal at procurement consultancy Efficio, said the UK still had to abide by EU procurement rules until it leaves the EU.
“If feels a little bit like a manufactured controversy [by Del La Rue] – the rules of EU procurement stipulate that you have to treat EU countries that tender for a contract fairly and that works to the advantage of all countries because firms within Britain are able to bid for work tendered by, for instance, the French or Italian governments,” he said.
“Those rules won’t apply when we’ve left but until we do, we are still subject to those EU regulations.”
Asked if Hancock’s suggestion that UK government tenders could exclusively be awarded to British firms after Brexit, Black said the UK would have to accept that British firms could be “cut off” from EU tenders in return.
“I think after Brexit there will be more cases where we could stipulate that firms bidding to provide services to the government have a presence in the UK since we’ll no longer be subject to EU law but I think that what might be some cause for pause is if we go too far down that road, British firms wanting to bid to provide services to countries within the EU will find themselves cut off from EU markets,” he said.
"In theory, the UK could design its own public sector procurement framework on leaving the EU, in practice our ability to exercise complete freedom in who we award public sector contracts to would likely be constrained by our need to agree a free-trade deal with the EU - with the EU almost certainly insisting on continued access to public sector tenders as part of such a big deal.
"Failing this, the UK would likely base its future public sector procurement approach on the World Trade Organisation's Government Procurement Agreement, which, while less restrictive than the EU, would still mean we are committed to 'openness' in who we award contracts to - with some execptions, for example, low-value contracts."
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