Brave New World for UK University Procurement? Well, maybe…

(We're delighted to feature a guest post from Andy Davies, Director of the London Universities Purchasing Consortium. He writes a mean blog himself, too... but Andy, why did you get turned down as a Games volunteer??)

Procurement in England’s universities sector could be on the verge of a new dawn.  Or, it might not be, depending on who you believe.

The Government, in the shape of universities minister David Willetts, has declared universities and colleges free from the dreaded EU public procurement regulations.  Well, almost.

What he actually said, in the Government's response to the White Paper on the future of higher education, was that the Government believes that student loans don’t count as public funding.  The rationale is that student loans help private individuals meet the costs of tuition and sustenance, to be re-paid once they reach a certain level of salary after they graduate.

This is important because once an institution’s proportion of income from the public purse dips below 50%, Willetts believes you shouldn’t have to follow the EU rules for advertising and tendering contracts.  With proceeds from foreign students, privately-funded research and commercial ventures already accounting for a growing proportion of their income, this decision will see a great many more institutions passing the test under the ‘50% rule’.

For many procurement professionals, this would be like throwing off the shackles that have for so long prevented them showing the kind of creativity and invention that their colleagues in the private sector have been enjoying in abundance.  It would speed up their work, allowing them to anticipate the needs of their institutions and vastly increase their agility in the marketplace.  It would also free them from the near-constant threat of litigation, a cloud that hangs menacingly over procurement in public service.

That said, removing the discipline of the EU rules wouldn’t be welcomed by all buyers in HE.  Some are worried they would lose their principal weapon in the battle to maintain influence over spend.  In these less enlightened universities, procurement teams have struggled to regulate expenditure by faculty heads eager to part with their hard-won research cash.  The EU rules, with the threat of severe penalties for non-compliance, have been the only way some purchasing managers have retained control.  Without them, a whole new approach would be needed and fast, before anarchy sets in.

It would be interesting to see how many have the skill and substance to do it.  Those who have already established the strategic worth of good procurement - whose function is valued internally as vital to the competitive advantage of the university - will benefit greatly from their new-found liberation.  But those for whom procurement is seen as merely an administrative headache – as an obstacle to progress, rather than an enabler – will struggle unless they can find an answer, and fast: the cap on tuition fees climbs to £9,000 a year from September.

Willetts thinks removing red tape like the EU rules is vital for universities to compete, both on the global stage, where competition among the elite for prestigious research and lucrative international students is intensifying, and at home, where the Government wants private universities and FE colleges to challenge complacent, traditional institutions and re-vitalise the sector.   He’s advised universities to take their own legal advice to confirm their exemption under the ‘50% rule’.

The trouble is that the legal profession can’t agree on whether Willetts is right.  One London-based institution has already sought one QC’s opinion, confirming that student loans don’t count as public funding.  But this week law firm Mills & Reeve obtained another QC’s opinion that says the complete opposite.

And so we are now in the frankly ludicrous position where very nearly an entire sector, spending £7bn a year, does not know whether it needs to follow EU rules in its procurement, or not!

And it’s likely that the only way the confusion will finally be sorted out is in court, if and when a supplier should ever take it upon itself to mount a legal challenge.

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Voices (4)

  1. bitter and twisted:

    Surely the clever people at one of our leading universities can engineer a cheap test case ?

  2. Ian Heptinstall:

    “students must pay their loans back”….is that actually the case? Doesnt the state provide indemnity for all those students who never earn above the minimum income threshold? Or do the private sector loan schemes take this on the chin?

    Re the QC’s. Not surprised in the slightest they have a differing view. That is the basis of their business model. If there isnt 100% certainty, find the person who gains from the alternative view, tell them there is some chance (often close to 2/3rds) of winning, get paid to work on thier argument. If you win take the plaudits, if you loose you can remind them you said their was a 33% chance it might go that way….. Oh, and why is there rarely 100% certainty?….clue – who writes the rules?

    Also, am I alone in believing that the EU rules are not as constraining as I had been led to believe. The negotiated procedure looks very much like it allows “good practice, private sector-style” selection, just with the odd bit of EU terminology, and some standstill periods.

    But the governement doesnt like this procedure…it relies on professionals using their skill & judgement, and we couldnt allow that now could we?

    Disclaimer – I’m far from an expert on EU rules, though I have done procurement under them. Maybe I’ve found a way around the treacly bureaucracy, or maybe I just havent been caught out for cutting corners. Would welcome discussion with some better informed members of Pete’s Gang

    1. Dan:

      You’re only allowed to use the negotiation procedure in exceptional cases. You have to be able to justify why it wasn’t appropriate to use the other procedures first.

  3. Rob:

    Good article Andy.

    On the face of it, it might stretch the imagination to say that loans will enable universities to be free due to <50% test. (All roads lead to Treasury.) But students must pay their loans back. So, ultimately, it is the students' cash. Also, they have choice over where to spend it – Treasury can't dictate this (aside from specific Educational rules/legislation).

    Treasury hands out considerable sums to many independent entities, and crosses its fingers hoping that they might one day pay it back.

    LOCOG has been a mystery to many lawyers – it only fails one of the [five] key tests and yet has never followed any of the rules.

    There are precedents, including Personal Budgets (and a trial in post-natal, in the NHS, where the equivalent of Personal Budgets are being tested). And they are never paid back by the individuals.

    Perhaps it's the law firms that are most nervous. A lot of existing (and future potential) business is wrapped-up in the Education sector.

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