Another step in the right direction – new EU procurement rules are on the horizon

Some of you may have read my post in December, ‘A step in the right direction – procurement reforms planned for 2014’, where I outlined government plans aimed at making it easier for smaller organisations to compete for public sector contracts.

Last month the European Parliament agreed on a further set of measures that – if implemented correctly – could make the commissioning process simpler and more effective.

New rules that should become law later this year…

A new ‘light touch’ regime for certain contracts below €750,000

It is often argued that the current ‘Part B’ regulations, which this system will replace, do little to highlight the distinct characteristics of social services, and haven’t reduced the regulatory burden on providers and procurers.

The new regime offers an opportunity for a fresh start: provided it is understood and implemented correctly by local bodies, this could help alleviate unnecessary red-tape for everyone.

To make Most Economically Advantageous Tender (MEAT) the mandatory basis for the award of public contracts

Contracting authorities will be obliged to consider wider social and environmental objectives alongside price and cost when evaluating tenders. It’s widely reported that price and cost continues to increasingly trump quality and value for money in public procurement. This is despite the Social Value Act 2012 and the UK government’s Best Value Guidance which both seek to improve procurement in this respect.

There are, however, a couple of caveats that could dilute this new rule:

• While MEAT will compel procurers to consider other factors such as value for money and social outcomes, it still – perplexingly – allows the award of contracts on price and cost alone if this is deemed ‘appropriate’.
• Obliging procurers to apply MEAT to contracts below the new EU threshold of €750,000 (the ‘light touch’ regime) is a ‘policy option’ currently being considered by the UK government. NCVO believes it is counterintuitive to exclude MEAT from these contracts, many of which are community focussed ‘services to the person’. We have strongly urged the government to make the most of this opportunity afforded by Brussels.

The option for the UK government to prohibit local bodies from using cost or price only as the sole evaluation criterion when awarding contracts

This policy choice is different to MEAT – it explicitly forbids the award of contracts on bottom line price or cost alone. If adopted by the government, contracting authorities will have to consider other factors, such as quality and social value, when evaluating tenders.

Given that existing policy has not adequately embedded these principles into commissioning culture, NCVO has urged government to make the most of this flexibility afforded by the European Commission, and, at a minimum, apply it to all the ‘services to the person’ covered by the ‘light touch regime’.

Public bodies will be encouraged to divide large contracts into smaller lots

This measure could help support smaller organisations compete against large scale commercial bids. One of the main barriers facing the sector in public procurement is the increased use of large scale contracts.

NCVO fully supports this measure. We are pressing government to make clear in any new regulations that local bodies must explain, where applicable, their reasons for not splitting up large contacts. The march towards larger contracts is leading to a diminution of local knowledge and expertise, so it’s important something is done to reverse this trend.

A turnover cap to help smaller organisations participate more in service delivery

Local bodies will no longer be able to require that an organisation’s turnover is more than twice a contract’s value. Unreasonable turnover requirements are a problem long-reported by the sector –  they can arbitrarily prevent suitable providers from bidding for contracts.

As with the SME reforms, NCVO cautiously welcomes the new rules out of Brussels, but as we’ve previously argued, the proof of the pudding will be in the eating; the effectiveness of the new rules will depend on how they are interpreted and implemented.

What’s more, as with the planned SME reforms, the new EU rules primarily focus on process and procedures, rather than behaviour and culture. To combat the risk-averse behaviour that often characterises public procurement – particularly where EU rules are involved – practitioners need to feel secure in the decisions they make. For this to happen they need high quality guidance and training. We’re pleased that part of the government’s reforms package includes ‘supporting all public sector organisations to understand the changes and how to put these into practice’, though we’ll be keeping an eye on what this actually entails on the ground.

What next?

We’ll keep you posted on this and further developments in the world of procurement and public service delivery as these reforms go through. In the meantime, feel free to get in touch and let us know what you think about the reforms or your experiences of commissioning and procurement more generally.