More on the EU proposed procurement regulation changes – part 3

Here is Part 3 – the final part - of our series on the proposed changes to EU regs. If you missed part 1 and part 2 follow those links

 ISSUE – New national oversight bodies; lame ducks before they’re out of their shells..

“National oversight bodies: The evaluation has shown that not all Member States are consistently and systematically monitoring the implementation and functioning of the public procurement rules. This compromises the efficient and uniform application of European Union law. The proposal provides therefore that Member States designate a single national authority in charge of monitoring, implementation and control of public procurement….It will be in the position to provide immediate feedback on the functioning of the policy and the potential weaknesses in national legislation and practice… To reinforce the fight against corruption and favouritism,  contracting authorities will be obliged to transmit the text of concluded contracts to the oversight body, which will thus be able to scrutinize these contracts for suspicious patterns…”,

Comment – I can see what they’re getting at but don’t really see the point.  I can’t see these bodies, funded by the National Government, really acting as representatives for the EU which is the suggestion here. And they simply can’t / won’t be resourced to “scrutinise” every contract sent to them. Waste of time and money.

 

ISSUE – The EU likes competition (take note, MOD)  

In view of the detrimental effects on competition, negotiated procedures without prior publication of a contract notice should only be used in very exceptional circumstances. This exception should be limited to cases where publication is either not possible, for reasons of force majeure in line with the standing case-law of the Court of Justice of the European Union, or where it is clear from the outset that publication would not trigger more competition, not least because there is objectively only one economic operator that can perform the contract. Only situations of objective exclusivity can justify the use of the negotiated procedure without publication, where the situation of exclusivity has not been created by the contracting authority itself with a view to the future procurement procedure, and where there are no adequate substitutes, the availability of which should be assessed thoroughly.

Comment – I just quoted this to show how wrong the MOD’s engagement of Alix Partners was (see here as a start if you haven’t followed the long running saga!) It was wrong under existing regs; this is just the EU strengthening things a little further to help avoid exactly the sort of non-competitive, rip-off procurement we saw in that case.

 

ISSUE – What to do about abnormally low bids?

Tenders that appear abnormally low in relation to the works, supplies or services might be based on technically, economically or legally unsound assumptions or practices. In order to prevent possible disadvantages during contract performance, contracting authorities should be obliged to ask for an explanation of the price charged where a tender significantly undercuts the prices demanded by other tenderers. Where the tenderer cannot provide a sufficient explanation, the contracting authority should be entitled to reject the tender. Rejection should be mandatory in cases where the contracting authority has established that the abnormally low price charged results from non-compliance with mandatory Union legislation in the fields of social, labour or environmental law or international labour law provisions.

Comment – There have been some interesting court cases around “low bids” and how buyers should handle them. This is trying to clarify and tidy up the regs; seems sensible stuff. And it gives some support to the “social” mechanisms as well.

Phew! That’s it for now at least. As we’ve seen over the last three episodes, there are some potentially quite significant changes here. I’m assuming Cabinet Office Procurement Policy will come out with some guidance, but not until all this actually passes into UK law, which is some time away.

But if any of our expert readers fancy writing a guest post around the changes, please let me know. (Dr Murray? Florence? Mr Furlong?) Anyway, I’m sure we will come back to many of these issues at a later date, one way or another.

Voices (12)

  1. Paul:

    As pointed out the National Oversight proposal, we should not forget that not all European countries apply the regulations in the same way. In the UK we may be able to be more commercially orientated without sliding into corruption and uncompetitive behaviour. Other countries in the EU may not be in the same position – which is one of the problems with a single regime covering 27 countries with quite different cultures.
    When we look at private sector procurement we also have to remember that some practicies would not be acceptable in the public sector for political reasons (I don’t mean party politics but what the papers would say). To paraphrase a quotation about economics on the BBC at the moment – good procurement is good politics, but good politics is not always good procurement.

  2. Final Furlong:

    Public sector purchasers need to be best practitioners outside of the ‘OJEU box’, and exploit known best practices once they’re inside it.

    It’s quite true, I think, in respect of B&T’s comment, that purchasers are still glued to the EU Treaty/Principles of ‘fair treatment, openness and transparency, and non-discrimination’ while trying to remember that they’re also supposed to be securing successful outcomes for the taxpayer and for the recipients of the services.

    You need to use a different part of your brain – the part that helps you think outside of the box – not the part that makes you worry about nothing but procurement risk once your in it…

  3. bitter and twisted:

    Isnt the fundamental problem that ‘fairness to the bidders’ has trumped ‘value for the taxpayer’ ?

    1. Dan:

      Its a sledgehammer to crack a nut. The rules are set to stop procurers awarding contracts to their favourite suppliers and to stamp out procurement fraud. However, as procurers have become more professional, this is less likely to happen, and the majority of challenges are about mistakes (e.g. selection criteria vs evaluation criteria), which results, in my opinion, in disproportionate consequences to innocent mistakes. Or where the procurer has proceeded in good faith but the law is a grey area which has subsequently been challenged. The inevitable outcome of this is that procurers are so scared of making a mistake that they rely on procedures instead of commercial nous.

      It seems the starting point for these changes was ‘what is the current situation, and what can we do to improve it?’. It should have been ‘what are the best private sector organisations doing, and what are the risks?’

    2. Final Furlong:

      ‘Value-for-money’ is an expression you won’t find anywhere in the UK Procurement Regulations.
      Nor will you find the word ‘taxpayer’.
      ‘Value’ is only ever used in the context of ‘amount’.
      ‘Value-add’ is only ever used in the same sentence as ‘tax’.

      And, of course, the UK Regulations aka Public Contracts Regulations 2006 (and subsequent amendments) is the Public Sector Procurement Bible.

      1. Dan:

        You will find the expression ‘best value’ in other legislation though – this is what superceded Compulsory Competitive Tendering.

        1. Final Furlong:

          Very good point Dan, and one worth pointing out, but not quite the point that is being made.

          There are plenty of other ‘bibles’, at a country level, including ‘policies’ and ‘guidance’ from Treasury, via the defunct OGC, and CLG (and so on…and on…) which decree that public bodies must be demonstrable in securing value-for-money or ‘best value’, irregardless of whether or not the Regulations apply. But purchasers seem to cling on to the Book of Contract Regs like a vicar holds on to his bible, quoting (vaguely) relevant passages to his ‘flock’.

          Perhaps I’ve never been a good sheep. (Let’s face it – it’s all become a bit woolly.) Or perhaps I’ve simply become a public procurement aetheist (or agnostic).

          1. Dan:

            I totally agree, but its inevitable. The Remedies Directive provides that, in the worst case of ‘ineffectiveness’, the court can order that:
            1) the challenger is awarded damages for loss of profit and anything else they can think of
            2) the procuring body is fined (unlimited; depends on what the judge thinks is appropriate)
            3) the contract is amended, or cancelled and the procurement is restarted.
            It can be any, or all of the above. In addition you have the costs while the procurement is delayed due to the challenge, when everything is effectively on hold (e.g site security).

            This was supposed to discourage anti-competitive practices, which is a laudable aim, but its being used against people who just make a mistake, or where the procurer thinks they are compliant with the law but it ends with the court interpreting the law in a different way (such as the Risk Management Partners case). With such serious ramifications, procurers don’t really have a choice but to put compliance with the Regs before everything else.

          2. bitter and twisted:

            (trying to reply to Dan)

            Well theres the absurdity-

            in order to protect the taxpayers interest in effective public procurement…we’ll make the taxpayer pay fines and damages when procurement goes wrong.

            Insane.

          3. Dan:

            Thats assuming that procurement is there solely to get value for money for the taxpayer. Its not. The initial purpose of the Directives is to increase competition across the EU and open up the market for the economic benefits it brings. It helps if you think of it going hand-in-hand with the EU Treaty principles of the free movement of goods and services.

            They’ve done in the usual EU manner – heavy-handed, bureaucratic and inflexible. They punish non-compliance for whatever reason, when IMO they should be looking at the intention behind the non-compliance.

  4. Dan:

    As a public sector procurer and a law graduate, the problem I have with these proposals is that, while needed, they reflect a missed opportunity.

    The original procurement rules were put in place in 1993 (the 2004 directive merely consolidated the legislation and added the competitive dialogue process). In those times, the public sector provided most services in-house and ‘procurement’ was synonymous with ‘requisitioning’. ‘Commissioning’ was unheard of. Procurers were just assigned to the team (usually because no-one else wanted them), and professional development was largely non-existent.

    The focus of procurers was purchasing goods, and the directive reflected this. For example, the early CPV codes were so detailed when it came to goods, you could find one for ‘costume jewellery’ (I would pay good money to know if anyone ever procured that!), but IT services were lumped together in as few codes as possible. The preferred method was open tendering, with little or no scope for negotiation, and pre-contract market testing was not really considered to be necessary.

    Since then, procurement, especially in the public sector, has undergone a massive transformation. Procurers have become much more professional and effective. There is more focus on services, and complex services such as outsourcing and shared services have become much more common. However, while the competitive dialogue process has been added to the repertoire, this can only be used in certain circumstances; the focus is still on tendering and no negotiation. The rules have only been tweaked rather than overhauled.

    I think the Commission could have taken the opportunity to undertake a root-and-branch review of public procurement and make it a better fit for the modern day, e.g. allowing more post-tender negotiation, making it easier to judge variant bids, allowing procurers to use outside knowledge of bidders instead of having to accept what they promised in their tenders etc. They could also make it slightly less bidder-friendly, as the remedies directive merely makes procurers more risk averse and bureaucratic

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