Modern times

July 7, 2011

The European Commission’s consultation on modernising public procurement laws attracted 623 submissions. Janet Lewis and Elizabeth Cooper summarise Nabarro’s response.

Summary and implications

The European Commission’s consultation on the modernisation of the public procurement rules is wide-ranging, covering both policy and procedural aspects of procurement. It is heartening that the EU has identified public procurement as a key area for delivery of a more competitive market where reform is required.

The consultation covered the scope of the public procurement rules, the effectiveness and flexibility of the procurement procedures, access to SMEs and tendering in other member states.
Our response recommended greater clarity and increased flexibility in certain key areas and cautioned against greater regulation in areas where the public sector should be allowed to make its own judgements.
The resulting legislative changes are likely to have a significant effect on the way in which public procurement operates in the UK, both for the public sector and for private sector bidders.

Procurement as a market-based instrument

The consultation relates to ideas set out the European Commission’s weighty Green Paper on the modernisation of EU public procurement policy.

In the European Commission’s European 2020 Strategy, which details the vision for Europe’s competitive social market economy for the next decade, public procurement was identified as a market-based instrument that ought to play a key role in the delivery of strategic aims.

The Strategy calls on public procurement to:

Improve the conditions for business to innovate;
Support the shift towards a resource efficient and low carbon economy;
Improve the business environment.

Objectives

Respondents were invited to comment on a host of issues related to public procurement, from both a policy and procedural perspective. The context was set by its stated objectives linked to public spending, societal goals and issues not sufficiently covered.

The consultation closed at the end of April 2011. Following consideration of responses, the European Commission intends to publish proposals for legislative changes in early 2012.

Given the wide-ranging nature of the consultation, amendments to the legislation are not likely to come into effect until later in 2012 or during 2013.

The Nabarro response

Nabarro responded to the following areas:

The scope of the public procurement rules;
The toolbox for contracting authorities;
A more accessible European market;
Strategic use of public procurement.

The consultation also covered ensuring sound procedures and access of third country suppliers to the EU market.

a) The scope of the public procurement rules

The European Commission recognises that public procurement is intended to apply to “purchasing” by the public sector. The Commission asked a series of questions related to how the scope of the current rules is defined, the exclusions to the rules and the categorisation of contracts.

We said:

A test linked to “economic benefit” is helpful as it introduces an element of objectivity to define “purchasing”;
The categorisation of contracts into works, services and supplies remains valid;
The level of detail in the rules is sporadic;
The distinction between Part A services (to which the full set of rules apply) and Part B services (certain “priority” services to which a more limited set of rules apply) is confusing and ought to be reviewed;
Greater clarity is required on the exclusions to the rules, in particular the exclusion for land disposals in the context of development schemes.

b) The toolbox for contracting authorities

The Commission noted the need for leaner and more flexible procurement procedures and asked questions on the current procedures, the need for new procedures, public-public co-operation, joint procurement, and variations to existing contracts.

We said:

The level of detail in the rules is sporadic with too much detail on the pre-qualification stage and too little detail on the procurement procedures themselves;
It is not always clear which procedure ought to be used, in particular when the negotiated procedure is permitted;
Greater flexibility is required for the restricted procedure (in particular in relation to discussion on terms and conditions) and the competitive dialogue procedure (in relation to post tender clarifications);
Competition and transparency could be ensured by requiring authorities to be up front about what will and will not be up for discussion;
New types of procedures are not required;
It is possible to conduct a simplified process within the existing procedures;
There should not be separate procurement rules on public private partnerships;
More detail is required on the distinction between the pre-qualification and award stages, but the timing of when each is considered is not crucial to ensuring fair competition – authorities ought to be able to take account of matters relating;
The rules on below threshold contracts are not sufficiently clear;
Some forms of public-public co-operation ought to be excluded from the rules – the Teckal rules on in-house exemptions were not intended to apply in this context and have confused matters;
Aggregation of demand and joint procurement are commercial decisions for contracting authorities to be made on a case by case basis and should not be regulated;
The four-year maximum term for framework agreement should be extended, the restriction on the length of call offs should be set at five years from the end of the framework, and the rules on framework agreements should only apply to multi-supplier frameworks;
The procurement rules should regulate substantial variations to contracts but this should be limited to circumstances where the variation distorts competition and should not apply where there are variation procedures within the contract which demonstrate value for money.

c) A more accessible European market

The Commission is keen to ensure that the rules allow access to opportunities in other member states.

We said:

The difficulties of tendering in other member states include lack of experience and administrative burdens;
The selection criteria, in particular excessively strict turnover requirements, often exclude small and medium sized enterprises (SMEs);
There should not be any requirements at EU level to split contracts into lots or to sub-contract certain proportions of contracts.

d) Strategic use of public procurement

The procurement rules should permit societal goals to be taken into account. This includes social and environmental considerations.

We said:

Performance and functional requirements (rather than detailed technical specifications) can work to enable authorities to achieve policy needs;
Environmental, social, accessibility and innovation policies can be taken into account in procurements but it can be difficult to express such factors in measurable ways;
Objectivity in the award process could be compromised if too great a weight is given to policy considerations;
Restrictions to local or regional suppliers could be open to abuse and should not be applied;
Lowest price should remain an available award criteria but the weighting given to price should not be limited by the rules – authorities must take their own views on this;
The “most economically advantageous tender” is sufficient to cover policy objectives.

Janet Lewis is a senior associate and Elizabeth Cooper is a partner at Nabarro. Janet can be reached at 020 7524 6067 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it., while Elizabeth can be contacted on 0114 279 4029 or at This email address is being protected from spambots. You need JavaScript enabled to view it..