New EU Procurement Directives – getting into the risks

Recently, we took a deliberately provoking position by suggesting that the well-meaning changes to the EU procurement regulations could lead to doom, gloom, corruption and ultimately the end of the EU, as countries and regions put supporting local business (or their favoured firms) top of their agendas, aided by the more 'flexible' regime which is to be introduced.

OK, that was a little extreme, although as we go through the specific changes in more detail now, we will come back to some of the concerns around factors other than value for money increasingly intruding into the procurement process. In all honesty, there are some positive changes here, but we're interested in identifying the risks rather than just taking the official line about how wonderful the new rules will be. So let’s get started with some of the overarching changes.

The old distinction between Part A and Part B services is going – no such thing as part B any longer. However, there is a  new ‘simplified regime’.  For services ‘with a limited cross-border dimension’, procurement exercises below a value of €750,000 will not be subject to the full regime. That includes health and social care, and postal services for instance.  (By the way, the Supply Management article on this got it the wrong way round – they say services above a threshold of €750,000 when of course it is those below).

It’s hard to see too much wrong with this other than a general propensity to cause confusion, although part B was confusing anyway. Explaining to users that you 'don't have to follow all the rules on part B' but on the other hand 'treaty principles apply and you do still have to follow some rules' was never easy, and I was involved in a few cases where people just ended up saying 'let's treat is as part A to avoid any doubt'.  So, overall, this will perhaps lead to more work for procurement people as more exercises will have to follow the full process although, as we said, many used a pretty full process anyway. And the €750K limit threshold may cause some further added confusion, we suspect.

There’s also a rather odd change covering ‘exemption for sub-central bodies’. So organisations outside central government, which we assume includes local authorities, health, police and so on, can use a prior information notice in some cases without the need to publish an OJEU notice afterwards. On the positive side, that may reduce the timescales for some contract processes, but if this leads to less transparency and openness, it could be bad news. Back to our prophecies of doom – this could open the door to more biased or even corrupt decision making and deliberate obscuration of contract opportunities. A retrograde step.

One of the more interesting changes in the new directives covers a new procedure – the 'competitive negotiated'. It resembles the current Competitive Dialogue process, but with the ability to be more streamlined than that rather cumbersome process. This is one of the elements that excites people like Francis Maude, the Minister for Procurement, who sees it as giving ‘flexibility’ to buyers.  The problem is that people may perceive this as an opportunity to make sure their favoured supplier wins through bias in the negotiating  process. “If you just drop your price by 3% Jim, we can make sure you win this one. Oh, and thanks for the *donation to party funds”.

That’s the danger; and it may be politicians or senior line executives who see that opportunity rather than procurement professionals.  The risk mitigation needs to be around good record keeping  and using the appropriate sourcing technology to manage the process and provide a strong audit trail. And of course the EU is aware of this danger, so the directive does say that the process “should be accompanied by adequate safeguards, ensuring observance of the principles of equal treatment and transparency”.

So if I ask Jim for 3%, I have to give Mary the same opportunity. But will that happen? I see some real potential for challenges here, and suspect the lawyers might have a great time unpicking exactly how people conducted their negotiations.

More to come shortly…

*this comment is intended to be  political party neutral

First Voice

  1. Roger Holloway:

    Some of the ‘politics’ around these changes are really starting to grate on me. Some of the nonsense spouted by all sides of the political divide in this SM article (http://www.supplymanagement.com/news/2014/meps-agree-changes-to-public-sector-procurement-rules) particularly riles me.

    I just love how Malcolm Harbour states “it must not be a legalistic process” given the whole point of the EU Directives is to make it a legally binding process. Can’t say I was too impressed with his First Person article in SM recently with its “Buyers need to sharpen up their act” introduction. Would love for him to pop in and deliver a training session for me and my team so we can learn from his wisdom in this area!

    I just hope that when CCS start running their nationwide training sessions, it cuts through the crap and we actually get a balanced and informed view of what the new (limited) freedoms may entail.

    Like Peter, this is not meant to be party political, just getting rather tired of public beratings from people who probably haven’t a clue as to how the new regs will operate in the real world.

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