EU Procurement
EU Procurement
EU Procurement
Public Procurement
By Lorna Booth
Inside:
1. Introduction
2. Procurement legislation
3. Government procurement
priorities
4. Buying local? Cross-border
procurement in the EU single
market
5. Contract performance
6. Further information on
procurement
Contents
Summary
1.
Introduction
2.
2.1
2.2
2.3
Procurement legislation
EU treaty principles
EU directives and their implementation in the UK
Other procurement legislation
6
6
7
10
3.
3.1
3.2
12
12
4.
12
12
13
14
4.1
4.2
16
16
16
5.
Contract performance
18
6.
20
Cover page image copyright: Whitehall by Justin Green. Licensed under CC BY-NC-SA
2.0 / image cropped
Public Procurement
Summary
In 2013/14, the UK public sector spent a total of 242 billion on
procurement of goods and services; this accounted for 33% of public
sector spending. It is often suggested that government could use this
considerable spending power to pursue a variety of public policy aims,
such as promoting small and medium-sized enterprises (SMEs) or
encouraging local growth, and both of these were taken up as aims by
the coalition government of 2010-2015.
At the heart of the priorities of the coalition government was a target
for central government to procure 25% of goods and services by value
from small and medium-sized enterprises, and it achieved this in
2013/14. The 2015 Conservative manifesto included a pledge to
increase the percentage spent with small and medium-sized enterprises
to a third.
The coalition Government looked at ways to change and simplify the
procurement process, including for smaller companies, to encourage
their involvement in public contracts. Towards the end of the coalition
government period, the emphasis of this work was extended from
central government to the wider public sector.
Value for money is a key principle in public procurement, normally
achieved through fair and open competition. The legal framework for
public procurement is largely made up of EU Treaty principles and EU
procurement directives along with some UK-specific legislation. The
procurement directives were revised in 2014; so far, one of the new
directives has been transposed into law in England, Wales and Northern
Ireland.
1. Introduction
Public procurement is the process by which public organisations buy and
rent things it covers the purchase of anything from paper to phone
services to PFI hospitals.
The public sectors broad approach to this is to seek value for money.
This is defined as:
Securing the best mix of quality and effectiveness for the
least outlay over the period of use of the goods or services
bought. It is not about minimising upfront prices. 1
Especially for larger purchases, value for money is generally achieved
through competitive tender, in other words the public sector says what
it wants to buy and various organisations provide competing offers to
supply the goods or services.
The European Union (EU) operates a free market to encourage greater
competition and better value in public procurements. To achieve this
free market almost all procurement must adhere to EU Treaty principles
relating to the free movement of goods, the freedom to provide
services, non-discrimination and equal treatment, transparency,
proportionality and mutual recognition.
A consequence of the free market is that most larger UK government
procurement opportunities are open to companies from other EU
member states on an equal footing to UK bidders. Similarly, UK
companies should be able to bid for public procurement opportunities
across the EU without facing local discrimination.
In 2013/14, the UK public sector spent a total of 242 billion on
procurement of goods and services (including capital assets); this
accounted for 33% of public sector spending (total managed
expenditure). 2 It is often suggested that the Government could use this
considerable spending power to pursue a variety of public policy aims,
such as promoting small and medium-sized enterprises (SMEs), local
growth or environmental sustainability.
Policy aims such as these can be considered so long as they comply with
EU Treaty principles, EU directives and national law. The coalition
government set itself an aim that by 2015, 25% of central government
procurement expenditure would be with SMEs (directly or indirectly).
The government aimed to achieve this by making the procurement
process simpler, more open and less bureaucratic so all businesses, no
matter what their size have a chance of success. 3 This is an example of
how governments can adhere to the EU principle of non-discrimination
whilst easing access to public contracts for smaller firms.
HM Treasury, Managing Public Money, Annex 4.6.3 (July 2013)
HM Treasury, Public spending statistics: April 2015 release
3
HM Government, Consultation Document: Making public sector procurement more
accessible to SMEs (September 2013)
1
2
A third of public
spending is on
procurement
Public Procurement
2. Procurement legislation
There are three main elements to the current legislative framework: EU
Treaty principles, the EU directives and the regulations that implement
them, and UK-specific rules.
Quantitative
restrictions on
imports and all
measures having
equivalent effect shall
be prohibited
between Member
States.
Article 34, TFEU
restrictions on
freedom to provide
services within the
Union shall be
prohibited
Article 56, TFEU
Public Procurement
The bulk of the Public Contracts Regulations 2015 came into force
on 26 February 2015 (following a consultation on a draft of the
regulations). 7 These implement the classic Public Procurement
Directive 2014/24/EU, along with a set of UK-specific rules on
procurement. 8
The new directive for authorities operating in the utilities sector and
the new directive on concessions have not yet been transposed. The
Utilities Contracts Regulations 2006, implementing the Utility
Contracts Directive 2004/17/EC, continue to apply.
Public Procurement
create a new special light touch regime for social, health and
some other types of services that is less stringent than for other
types of procurements. 13
This replaces the old type A and type B system, which was a system where tenders
would either, depending on the type of service being purchased, have to comply
with the directives regulations in full or only in part. Comparatively more industries
will fall under the scope of full compliance in the new directives. The threshold for
the new light touch regime is 750,000 euros, higher than previously.
14
Cabinet Office, Procurement Policy Note 03/15: reforms to make public procurement
more accessible to SMEs (18 February 2015)
15
See for example Social Enterprise UK, UK Transposition of new EU Procurement
Directives: Public Contracts Regulations 2015 Consultation response from Social
Enterprise UK (October 2014)
13
11 Public Procurement
16
3. Government procurement
priorities
3.1 Value for money
In the Foreword to Managing Public Money Danny Alexander MP, then
Chief Secretary to the Treasury, said that transparency and value for
public money are the essential results in public spending. Chapter 1 of
the same document explains that public services should be carried out
achieving value for money. 17
Achieving value for money is the responsibility of all public bodies in
central and local government, the NHS, and devolved administrations. In
central government, the Cabinet Office has a specific role as the
department with the responsibility for the effective running of
government, and for transforming government services to make them
more efficient and effective for users. 18 It is the Efficiency and Reform
Group (ERG) within the Cabinet Office that works in partnership with
HM Treasury and government departments to deliver efficiencies,
savings and reforms on behalf of UK taxpayers. 19 In 2013/14 the group
reported savings of 5.4bn in procurement and commercial savings
(compared with 2009/10) through the centralisation of procurement
for common goods and services, the better management of contracts
and commercial relations, and limiting discretionary spending on areas
such as marketing, consultants and temporary agency staff. 20
Moves to centralise contracts into larger agreements across the public
sector has been seen as potentially at odds with work to encourage
small organisations to bid for public sector contracts as discussed
below. Such contracts have the potential to become too large for small
organisations to bid for or manage, and paperwork may increase as
contracts become larger. 21
In the UK, SMEs account for about half of the total turnover of private
sector businesses and account for the vast majority of businesses in
However, compared to countries
terms of numbers (99.9%). 22
elsewhere in the European Union, a smaller percentage of businesses in
HM Treasury, Managing Public Money (July 2013)
Cabinet Office, Cabinet Office and Cabinet Office policies [online, accessed 8 August
2014]
19
Cabinet Office, Efficiency and Reform Group [online, accessed 8 August 2014]
20
Cabinet Office, End of year savings 2013 to 2014: handout and technical note (June
2014)
21
Social Enterprise UK and Locality UK, Response to HM Governments consultation on
making public sector procurement more accessible to SMEs (November 2013)
22
Department for Business Innovation and Skills, Business Population Estimates figures
for the beginning of 2014
17
18
austerity in public
finances is going to
be a fact of life for
some time to come
and there will always
be pressure on
governments of all
parties to deliver
more for less
Francis Maude,
Minister for the Cabinet
Office,
May 2015
13 Public Procurement
Central government
2009/10
6.5%
2010/11
6.8%
2011/12
10.0%
2012/13
10.5%
10.3%
9.4%
15.8%
19.9%
2013/14
26.1%
Source: Cabinet Office, Central Government Direct and Indirect Spend with SMEs (Feb/Mar 2015); Making Government
business more accessible to SMEs: Two Years On (Aug 2013).
The table shows that government spent 26% of its goods and services
procurement with SMEs in 2013/14, if you include both direct and
indirect spend, thereby exceeding its target of 25%. As the chart shows,
this varies considerably by department.
Over the latter part of the coalition government period, attention turned
to the public sector outside central government.
In October 2012, Lord Heseltine published his independent review on
increasing UK growth, No Stone Unturned. He recommended that the
Government should place a general duty on all public bodies, not just
those in central government, setting out the procurement standards to
29
Cabinet Office, Making sure government gets full value from small and medium-sized
enterprises
15 Public Procurement
30
The full Government Response to the Heseltine Review (March 2013) accepted the
recommendation in part, indicating that Government would consult on high level
standards, which all public bodies should be looking to achieve, after Lord Young
had reported.
31
32
17 Public Procurement
33
34
See Local Government Association, Wychavon District Council (12 Dec 2012)
Cabinet Office, Social Value Act Review (February 2015) has various examples of how
commissioners have worked to secure economic, social, or environmental benefits
for their areas when buying services.
5. Contract performance
In recent years contracts carried out by the private sector have been the
subject of increased scrutiny as reports of poor performance and value
for money have led to interest from the media and organisations such
as the National Audit Office (NAO).
Some examples include:
-
19 Public Procurement
Public Accounts Committee, Contracting out public services to the private sector
(HC777, February 2014)
40
National Audit Office, Transforming governments contract performance (HC269, Sept
2014)
39
6. Further information on
procurement
EU public procurement homepage:
http://ec.europa.eu/internal_market/publicprocurement/index_en.htm
National Audit Office procurement page with value for money reports
on procurement:
http://www.nao.org.uk/search/type/report/pi_area/procurement
Contracts Finder (a database of public sector contracts over 10,000 in
value) and similar sites for public sector bodies in Wales, Scotland and
Northern Ireland:
https://www.gov.uk/contracts-finder
TED (Tenders Electronic Daily EU site where above-threshold contracts
must be published): http://ted.europa.eu/TED/main/HomePage.do
Procurement Policy Notes (briefing documents on procurement
developments and policy):
https://www.gov.uk/government/collections/procurement-policy-notes
Gov.uk page on government buying (for general policy, updates and
guidance):
https://www.gov.uk/government/policies/government-buying
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