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15.10.13

EU Procurement Directives: Proposals for change

Source: Public Sector Executive Sept/Oct 2013

David Noble, chief executive of the Chartered Institute of Purchasing & Supply (CIPS), welcomes “long-overdue” changes to public procurement.

Introduction 

The UK Government is preparing plans to make the most of the proposed reforms to The EU Directives on Public Procurement. 

Public procurement makes up 18% of the EU’s annual gross domestic product, so it is critical that this area operates effectively. 

The European Parliament has set out rules, expected to be implemented at European level later this year and subsequently at national level, to ensure more effective and transparent use of public money for goods or services to guarantee best value. The proposed rules will establish a clear legal framework and a holistic approach to public procurement and set threshold spending levels for public authorities. The objectives of The EU Directives on Public Procurement are threefold:

• Simplify rules and reduce the length of procedures;

• Free up markets;

• Facilitate growth. 

The Chartered Institute of Purchasing & Supply (CIPS) welcomes the long overdue modernisation and standardisation of public procurement and is encouraging the implementation of these changes at national level. This article explains why. 

Good news for contractors

For contractors, modernising the procurement procedures will mean being able to run procurement processes faster, with less red tape, and engender best practice in suppliers. The directives will create a process of benchmarking performance and standards, so that cost advantage is not the main criterion for awarding a contract; instead, quality, continuity, accessibility, availability and comprehensiveness of service will be the key drivers for successful procurement practice. This will mean more efficient tendering processes and more emphasis on the best supplier, and ultimately delivering better public service for better value. 

In order to maximise this potential, public bodies must continue to prioritise the skill base of their procurement workforce. A more efficient process will only deliver results if the professionals responsible for implementing them have the experience and specialist knowledge required in procurement and supply management. 

CIPS has long been an advocate of the need for more skilled professionals in procurement. Taken together, skills and an efficient procurement process with well-established standards are the bedrock of any successful procurement process. Nowhere has this been more apparent than in the UK and the success of the London 2012 Olympic and Paralympic Games, where skilled professionals were making procurement decisions, resulting in goods and services delivered to time and quality, and saving £114m in the process. 

Another major step forward the Directives will establish is the Innovation Partnership (IP) Procedure. 

The IP will be introduced to encourage creative solutions where a requirement for goods, services or works cannot be met by the current marketplace and at the same time encourage long term partnership between public bodies and suppliers. The EU has already created a series of IPs for water, raw materials, smart cities and communities. 

In these instances, it has led to more open, inventive and less restrictive solutions which meet tight specifications. That it also ensures a long term relationship between contractors and suppliers is also welcome. 

CIPS has always advocated closer relationships between the two. They are critical to successful procurement, particularly in risk mitigation and addressing issues where they do occur. 

Good news for suppliers 

The directives will also be a boost to suppliers. The process of bidding for public contracts will be quicker, less costly, and less bureaucratic, enabling suppliers to compete more effectively and with more freedom to negotiate the terms of the contract. 

The directives will remove swathes of red tape by enabling suppliers to bid for contracts online. This is particularly important for SMEs, who are critical to the European economy and in most instances public bodies are obliged to contract a certain number. 

The new measures will also require public bodies to consider awarding contracts in the form of separate lots for collective bidding which will increase access to public procurement and encourage smaller firms to bid. We think this is an excellent move and very attractive to small suppliers, who are too rarely involved in the public market. 

Access to contracts will also be made easier through the Competitive Procedure, which sets out clear and transparent criteria to bid for a contract, thus ensuring equal treatment of all prospective suppliers. 

This means that on the one hand, the public sector will be able to enjoy a wider pool of suppliers, where they have previously been unable; on the other hand, this will lead to increased competition on price, as new and innovative suppliers that can add real value. 

The UK economy 

The EU directives represent a national programme of restructuring of public sector procurement and outsourcing that will allow for cost savings and for businesses to benefit from the economies of scale offered by the sector; this point was also made by the Institute of Directors in a recent report that revealed that at least £25bn of annual efficiencies can be made in the UK public sector. These new changes will support UK government priorities of securing sustainable economic growth and deficit reduction by reducing the lengthy and burdensome procurement processes that add cost to business and barriers to market competition. This will provide more flexibility and remove the barriers of entry for SMEs who will be able to participate in the market and at the same time stimulate the development of public-private partnerships. 

Closer co-operation and a legal framework will also provide safeguards that will limit the risk of fraud and corruption in public procurement, which still has disastrous and long-term implications, causing significant losses to the taxpayer. The recent fraud scandal with G4S and Serco over electronic tagging is just one example, highlighting a lack of accountability and the need for greater scrutiny not only in business, but also at local and national government levels. Setting out new rules, regulations and adjudication will allow for more control and transparency in the supply chain, increasing the understanding and mitigation against risk, and reduce the impact of events such as the tsunami in Japan and the floods in Thailand. 

At the same time, the proposed reform also aims to facilitate a qualitative improvement in the use of public procurement by ensuring greater consideration for social and environmental criteria such as life-cycle costs or the integration of vulnerable and disadvantaged persons. Following the tragic collapse of a factory complex in Bangladesh earlier this year, which cost more than 1,100 lives, social and governance standards have rightly been at the top of the agenda. CIPS is particularly supportive of this and has revised its own code of ethics, through which members are encouraged to adopt an ethical procurement and supply policy and to avoid poor decisions being made. 

Conclusion 

The new EU Directives on public procurement are a positive step towards securing better value for money, create more flexible procedures and secure social and environmental benefits. Modernising the process of public procurement should become a gateway in helping the UK economy to return to a period of robust growth, and we are working to help increase the understanding of the true economic value good procurement and supply management can bring. 

Even better, however, is the fact that the EU directives represent an overall programme, with scrutiny at a national level, and setting out the ‘rules of the game’.

Benchmarking performance and standards against the best of the best and enabling public bodies to purchase effectively, efficiently and sustainably will creates success for us all.

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