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John Tizard: UK public procurement should learn from India and put ‘place’ first

Monday October 30th, 2017

Many local authorities are rightly keen to use their local procurement spending to boost their local economies and communities. While some are making good progress, it is perplexing to find others being hesitant, not least because (incorrectly) they are worried that such action may not be compliant with UK and EU regulations.

John Tizard

John Tizard

I have often felt that there is much more that could be done within the current regulatory framework. Provided there is compliance with public procurement regulations and Best Value policy, the reality is that local authorities are, in fact, allowed to work with suppliers to realise community benefits through their procurement activities.

And in case of doubt, I offer up some excellent examples of this happening in many local authorities including Manchester, Preston and Lambeth.

Public procurement can, in fact, be so arranged as to ensure that local SMEs, the local voluntary and community sector (VCS) and social enterprises can benefit from contracts for goods and services. In the case of the VCS, there are a multitude of opportunities to spurn competitive contracting and use grants to develop service partnership arrangements between the public sector and VCS groups.

Public procurement can also be designed to ensure local supply of goods, local employment and a local focus of development, as well as to promote economic activity in specific areas of social and economic disadvantage. The Social Value Act actually encourages public bodies to seek the fulfilment of social goals such as apprenticeships through their public procurement spend.

It is self-evident that the recycling of public money in this way can enhance local and inclusive growth strategies, and thus progressive local authorities ought to be meshing their public procurement, economic growth and community development strategies.

Sadly, it seems that central government and its agencies are much less likely to adopt such approaches – and yet, they could most surely learn much from local government.

In its recent discussion paper, ‘Opportunities for Public Procurement Post-Brexit’ – https://cles.org.uk/wp-content/uploads/2017/10/Opportunities-for-public-procurement-post-brexit-FINAL-web.pdf – CLES explains what has been achieved to date and what more could be done, especially if, post-Brexit, the UK reforms its public procurement legislation. Specifically, the CLES report states there has been significant progress towards more enlightened and progressive public procurement over the last decade or so. And as I have argued previously on this Government Opportunities site, much can be achieved without waiting for Brexit – http://www.govopps.co.uk/john-tizard-we-dont-need-brexit-to-improve-public-procurement/.

I have also argued that should Brexit happen, then as CLES argues, there will be a multitude of opportunities to strengthen socially and economically driven public procurement – http://www.govopps.co.uk/brexit-consequences-for-public-procurement/.

And here is a radical thought – the UK Government (of whatever political hue) could do worse than to consider the measures introduced earlier this year by the Indian Government. The latter has recently adopted a series of new policies which allow the public sector to decide that only local suppliers will be eligible to participate in the bidding for public contracts which are less than RS5m (about £60,000), provided that the Government is satisfied that there is sufficient local capacity and competition.

For bigger contracts, local suppliers who bid within a 20 per cent margin of the lowest-cost, non-local supplier will now be given the opportunity to match the price of the lowest-cost supplier. Additionally, the public sector may now also require suppliers to agree to arrangements which divide contracts between local and non-local suppliers.

Interestingly, it would appear that many Indian business groups have welcomed this initiative. The Financial Times has reported the Secretary-General of the Federation of Indian Chambers of Commerce and Industry as saying: “This was the long-standing demand of Indian industry and is essential to promote domestic manufacturing growth. This is a legitimate tool under our multilateral commitments, and as with a number of major government initiatives, this can be leveraged to promote value addition, create employment and give a much-needed boost to manufacturing.”

Given current UK practice and examples of pushing out the boundaries, as well as international examples such as this Indian initiative, I believe that the UK Government, along with the wider public sector, should urgently explore how far it can, within existing EU regulations, use its massive procurement expenditure to secure wider social, economic and environmental objectives. Such a review should also identify the revisions, which may be necessary to existing EU and UK regulations, to enable the public sector to push the boundaries still further.

I suspect that what is required (rather more than legal changes, though some of these will undoubtedly be necessary) is bold political leadership and behavioural change among public sector procurement and legal officials.

I am also firmly of the view that there is absolutely no need for public bodies to await a formal review. Rather, their leaders should simply learn from each other and, at the same time, push out the boundaries until such time (if ever) they are legally stopped. Just go for it!

All of this is worth doing, for as the research undertaken by CLES and other evidence indicates, the prize is very significant.

And, just as India is demonstrating, public procurement can and should have a ‘place’ focus.

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