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Modernising procurement – will the Commission deliver?

Wednesday April 20th, 2011

By Nick Maltby, Senior Commercial Lawyer at Bircham Dyson Bell LLP

Public sector cuts and the Government’s spending review has put procurement process and efficiency under the spotlight as the deadline for comments on the European Commission’s Green Paper on the modernisation of procurement rules passed this week.

Input has been gathered into how European procurement rules could be better utilised to ensure the most efficient use of public funds across Member States, with a view to supporting growth and job creation and helping small and medium-sized businesses to tender for more public sector contracts. The results of this evaluation and the Green Paper consultation will be discussed at a high level conference on public procurement reform, planned for 30 June 2011 in Brussels. The Government’s current view is that the public procurement regime needs to be radically simplified to reduce red tape and improve value for money.

The reduction of red tape is a primary focus. The Green Paper identifies a number of key areas for possible reform and has asked for interested parties’ views on options for changes to legislation, to be certain that the correct procedures are in place to make public sector procurement more efficient and cost-effective and to ensure it supports job creation and competition in the tender process. The paper is wide ranging in the issues that it covers, but there are four key areas of focus for reform which we believe should be prioritised.

Firstly, current procurement rules are too inflexible. They adopt a ‘one size fits all’ approach and it’s clear that this is not appropriate. The rules take away the ability for public sector organisations to think for themselves and apply the rules more liberally. Instead there should be ‘guidelines’ that allow organisations to decide for themselves what makes most sense and what constitutes the best solution.

Secondly, the rules are uncertain and need clarification so thats it’s simpler to ascertain what is caught. There should be more certainty around exclusions to the procurement rules. The current threshold below which procurement rules do not need to be followed is £101,323, which is arguably too low. There is a good case for increasing the threshold to give power back to public sector organisations and allow greater decision-making at local level.

Thirdly, public sector organisations should be allowed to interact with each other when buying and selling services, outside of the procurement processes which govern external organisations. Much like a multinational company would expect its subsidiaries, group companies, regional offices or departments to interact seamlessly, so removing red tape between public sector bodies to allow them to more freely provide services to each other would be the first obvious advance in making it a more cost-effective and efficient process overall.

Finally, small to medium-sized organisations make up 58 per cent of our economy; yet only 31 per cent of public sector contracts are won by SMEs. It’s time that balance was redressed so that smaller organisations can tender for public sector contracts. It’s very hard for most SMEs to compete for major contracts due to the prequalification stages of the tender process. Organisations are judged on track record, and smaller players who have been in business for less time than larger players may find this goes against them in the tender process.

It’s time organisations were judged on what they can offer in relation to the current procurement. Entrants from abroad may be best placed to service a public sector contract, but may be removed from the process due to having no track record in the UK. Such overseas investment has the potential to boost economic performance and help grow the UK economy. Whether we will see the radical change required to update the procurement processes remains to be seen, and pressure needs to be maintained as the Commission now considers the respones to its consultation.

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