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John Tizard: We don’t need Brexit to improve public procurement

Wednesday August 30th, 2017

The English Local Government Association (LGA) has called on the Government to reform public procurement regulations if Brexit occurs.

John Tizard

It is arguing that the Government should introduce a more efficient UK system of regulating how the public sector, and in particular local authorities, procure goods and services if and when the UK leaves the European Union.

The LGA said “this could include giving councils greater ability to use local suppliers, specify a minimum local living wage for their suppliers’ employees, or specify additional social value so that companies awarded contracts can be asked to employ or train a number of local people”.

These are commendable goals. Many of them can be achieved within existing regulations and some public sector bodies including local authorities are pursuing these wider policy goals and more when they procure goods and services.

Unfortunately, many local authorities are hesitant to do so in case they face legal challenge. Others use the excuse that such approaches are incompatible with the EU and consequently the UK regulations. In my experience, such excuses can be a shield for politically driven avoidance of wider social goals.

The LGA understandably questions the value of having to advertise contract opportunities across the EU, though of course this is not onerous.
This approach can potentially make it more difficult to support local suppliers but the same could be argued for having to advertise such opportunities across the UK. Very few such contracts are, in reality, ever awarded to non-UK companies. This is the case in other EU member states too though one can expect more cross-national border contracting where there are in effect open land boundaries and cross-border local economies.

Local authorities should have the right to argue the case for local supply and can best do this by adopting a holistic selection evaluation approach that considers economic, social and environmental considerations and not solely price and service quality. Of course, too many contracts, especially public service contracts, are awarded predominantly on price. And we know what the consequences of bargain basement contracting can be for service quality, contract and supply sustainability and employment conditions. The EU regulations specifically do not force any procuring body to use price as its only or its dominant selection criteria. This myth must be challenged.

Therefore, greater legal clarity could lead to better outcomes and greater political accountability. These should be pursued whatever the status of the relationship between the UK and the EU.

However, in my view that biggest threat to public procurement from Brexit will be the additional pressure that will be applied to contract at lower prices because of economic uncertainty, slower growth and continued austerity. I fear that this threat will outweigh any potential opportunities should the UK not be bound by EU procurement regulations.
The LGA also argues that the EU procurement process can lead to lengthy and expensive processes. It compares the timescales with ‘typical private sector procurements’. However, while the EU regulations do require adherence to certain processes and procedures, in my experience time delays are usually because of a public body’s and/or its advisors’ timescales and internal processes.

If Brexit – or any transitional arrangement – were to include membership of the Single Market or access to it, I would expect the EU to require the UK to continue to adopt the EU public procurement regulations or something very similar, so we may be better arguing for reform of the EU regulations and better interpretation and application of them in the UK. The same applies to the EU state aid rules which can also potentially impact on a public body’s, especially a local authority’s, ability to take a more rounded view of its procurement strategy and wider economic, social and environmental agendas.

Even if Brexit does occur and access or membership of the EU Single Market is not an issue to consider, I expect that any UK procurement regulations would be fundamentally very like the existing EU regulations which have evolved over many decades with the UK taking a leading role in shaping them. Rules are required for governance, transparency, fairness, anti-corruption and many other reasons. There is a logic and basis to the EU regulations though they could and should continue to evolve.

I think that the focus should be on making the existing regulations work effectively and be effectively implemented while consideration is given to evolution and reform.

Therefore, I would urge the Government nationally, the devolved governments and local authorities to work with suppliers from the business, charity, VCS and social enterprise sectors to consider how they can improve public procurement inside or outside the EU which allow:

  • adopting a holistic economic cost benefit analysis of procurement decisions, which would take into account wider public interests and costs – eg if goods or services are to be procured in a different way, what are the potential costs to the local economy and to employment?
  • strengthening the Social Value Act
  • enabling public bodies to take positive decisions to prefer bids from social enterprises, SMEs, charities, the VCS, etc if they wish to and for them to be accountable for such decisions
  • a duty to take factors such as bidders’ tax and remuneration policies and practices into account
  • prescribing employment, governance and environmental standards on suppliers of goods and services and throughout their supply chains, including trade union rights
  • loosening state aid rules to allow public bodies to support the development and sustainability of suppliers, especially VCSE ones and including public sector suppliers, especially when there is an economic and/or social imperative to do this
  • using grants rather than competitive contractual processes to support charities and the local VCS to provide public services, to innovate and to develop models of delivery that contribute to local sustainability

Many of these issues can be achieved under existing public procurement rules and we need greater understanding of what can be achieved and what cannot without major EU-level reform or Brexit-based UK law. I expect we do not need Brexit to secure improvements.

The LGA has raised some important points and hopefully will share my view that we must ensure that local authority public procurement always adds value to local governance, local economies and social and environmental well-being and delivers quality-based value for money. These must be our goals in or out of the EU.

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