Britain guilty of "over-interpreting EU law" on procurement, says minister

Britain has been guilty of “over-interpreting" EU law on procurement and over-reacting to fears of bias in favour of British suppliers, the Cabinet Office Minister has claimed.

In a speech to potential government suppliers, Francis Maude announced a range of measures intended to improve public sector procurement.

These include a target for all but the most complex procurement processes to be completed within 120 days. There will also be a presumption against the use of the “clunky and protracted” competitive dialogue procedure, “which slows things up unnecessarily”.

Maude told delegates that there had been “an almost deliberately short-sighted approach to working with business” and a bias against British based firms.

The minister cited statistics suggesting that British companies won £432m of EU contracts over a 12-month period, while French firms secured £911m and German companies £3.6bn.

He added that the UK awarded 3% of public procurement by value to foreign suppliers, compared to 1.9% in Germany and 1.5% in France.

“It is not because France and Germany break any rules,” Maude said. “They don’t. The difference is the governments of these countries work closely with their domestic firms so they are geared up to win contracts at home and abroad.”

The minister likened the approach of the British public sector to speed-dating in contrast to the development of long-term relationships in Germany and France.

“It’s not even as if this approach has led to outstandingly good purchasing delivering brilliantly cheap deals,” he argued. “Actually the reverse. Because we have made it really difficult and expensive for smaller British suppliers even to bid for business, we’ve excluded some of the most innovative and competitive suppliers from doing business with us and for us.”

Maude said the government's package of measures was intended to “mark the end of the overly formal and legalistic relationships and the beginning of much longer-term and collaborative relationships with our supply chains”.

This approach includes the target for all but the most complex procurement processes to be completed within 120 days from January 2012. The current average is 200 days.

“By engaging earlier, and more openly with business and the wider supply chain, the government will be able to reduce the time taken during the procurement process. and provide the certainty and visibility of the forward pipeline to unlock investment,” the Cabinet Office claimed.

The minister plans to lobby Brussels for “a radical simplification” of relevant EU directives. Other measures also include:

• The government providing “an open door for current and future suppliers to discuss upcoming procurement opportunities, cutting the time taken in the procurement process”
• The government working with industry to identify and address any key capabilities needed to meet future demand; “actively helping them to remove barriers and supporting growth through spillovers that boost exports and drive innovation”
• Publication online of potential business opportunities across government worth £50bn. This detail will forecast potential contracts over £5m, with more than 150 potential opportunities.
• By April 2012 Whitehall departments will have published “rolling medium term pipelines” for their construction and infrastructure projects, other capital asset procurements such as pharmaceuticals and ICT, and FM and other Government service opportunities.
• The Cabinet Office and other departments working to ensure that SMEs can access the value of procurement, “including where relevant encouraging or challenging prime contractors to do more, or breaking up large contracts”.

The government is also to bolster procurement training by mandating that all civil servants responsible for running major procurements are trained in its new approach.

The Cabinet Office will also develop a “commissioning academy” to train those in the wider public sector. “There is a need for capable, confident and courageous procurement people in the public sector,” it said. “For example, this will bust myths prevalent across the public sector such as that it is against EU law to talk to suppliers – in fact, any rational business would do this to get a clearer picture of what the market can offer.”

In his speech Francis Maude said improvement in procurement was vital given government plans in the Open Public Services White Paper for more public services to be delivered from outside the public sector, whether by mutuals, joint ventures, social or charitable enterprises or conventional commercial providers.

The minister added that smaller and local providers were often forced out of the market by the inflated cost of bidding under public sector procurement.

He also attacked a “myth”, which he said was prevalent across the public sector, that talking to suppliers informally was somehow contrary to EU law.

“This is nonsense – straight forward nonsense,” he said. “So let me bust that myth today. It is not illegal for public sector procurers to talk to suppliers. Not only is it not illegal, it’s plain common sense and good commercial practice.”

The Cabinet Office Minister criticised the “comfort zone” of hiring consultants, arguing that this reduced the need and ability for public officials to develop the necessary skills and brings in people on day rates with no incentive to finish procurements speedily.

Maude went on to claim that far too many procurements featured “absurdly over-prescriptive” requirements.

“We should be procuring on the basis of the outcomes and outputs we seek, not the detailed inputs. We should be focusing on the ‘what’, not the ‘how’,” he argued. “This kind of procurement drives out innovative and competitive suppliers. So we will ensure that in future we focus on outputs and outcomes. And we now forbid the use of consultants in central government procurements without my express agreement.”

The Cabinet Office Minister insisted that the government’s approach would not skew public procurement in favour of UK firms.

He concluded: “It is imperative that the £60bn plus Whitehall spends and the £230bn the whole public sector spends on goods and services supports UK growth and gives taxpayers better value for money.”

Philip Hoult