16 May 2014
Article written by Robin Wilkison, National Assembly for Wales Research Service
Public procurement is the process whereby organisations that spend public money (known as “contracting authorities”) buy goods, services and works. In the European Union this process is governed by EU-wide Directives. The UK Government implements these Directives through Regulations that cover England, Wales and Northern Ireland. The Welsh Government then has responsibility for issuing advice and guidance as to how public sector organisations in Wales should carry out their procurement activities, which it does through its Value Wales division.
After a lengthy legislative process that began in December 2011, the Council of the European Union finally agreed three new Directives on public procurement on 11 January 2014. Member States now have about two years in which they must implement the Directives, though the UK Government has stated that it intends to implement them by 28 October 2014 so as to maximise what it takes to be the benefits of the new procurement regime.
The new Directives were discussed in detail by a Task and Finish Group of the Assembly’s Enterprise and Business Committee back in early 2012, soon after the European Commission first published them in draft form. The Group’s subsequent report made a number of recommendations as to how the Directives should best be modernised from a Welsh perspective, as well as reflecting more generally on the state of public procurement in Wales.
The Group was supportive of the general thrust of the draft Directives, which reflected the European Commission’s desire to see “simpler and more flexible procurement procedures for contracting authorities and [to] provide easier access for companies, especially SMEs.” Broadly speaking, this focus has been maintained in the agreed Directives, which include measures such as:
- Contracting authorities are encouraged to divide contracts into smaller “lots”, and to provide an explanation where this is not done, so as to encourage SMEs to bid for these smaller contracts;
- Minimum turnover requirements are to be limited to twice the value of the contract so as to exclude fewer SMEs from bidding;
- The documentation required is reduced, notably through the compulsory acceptance of self-declarations from bidders (through a standardised European Single Procurement Document) – only the winning bidder will have to submit formal evidence;
- The mandatory use of electronic communication in public procurement: a move intended to increase accessibility to procurement, especially for SMEs.
At the time, the Group welcomed the increased possible use of negotiation between purchasers and suppliers allowed by the draft Directives, but expressed “grave concerns” about the fact that Member States were to be able to transpose the relevant procedures into national law, or not, as they saw fit. The agreed Directives appear to have foregone this element of choice, with Member states now required to transpose into national law all procurement procedures but the “negotiated procedure without prior publication”.
Interestingly, during the negotiation process in Brussels, the UK Government lobbied for, and achieved, the inclusion of a provision allowing certain contracts for health, social and cultural services to be reserved for competition by social enterprises. This provision will be reviewed by the European Commission within five years to assess its impact.
Though the Directives have now been finalised, the opportunity to influence the laws that will govern procurement in Wales is not yet over. This is because the Directives allow a small amount of freedom as to how they are transposed by Member States into domestic law.
Perhaps importantly for the Welsh Government, the Westminster and Welsh governments seem to have different views as to what makes public procurement successful. The Welsh Government is keen to promote the use of procurement to further environmental and social policy objectives, through tools such as its Community Benefits policy. Conversely, UK Government Cabinet Minister Francis Maude has stated:
My predilection in general is that you should not load procurement with values and requirements other than getting what you want at the best price. There is always a temptation to use procurement to deliver other desirable objectives. My preference always is to keep it as stripped down and limited as it can be.
The Welsh Government will therefore want to ensure that the UK Government transposes the Directives in a sufficiently flexible form that will enable both the UK and Welsh Governments to fulfil their, possibly divergent, procurement objectives. Stakeholders can engage with this transposition process when the UK Government consults on its proposed regulations. More information can be found on the Gov.uk website here.
Other useful sources of information about the new Directives include:
- Public procurement reform on the European Commission website
- New EU procurement directives: Comparing the final texts to earlier versions on the Public Procurement Analysis website;
- The EU’s New Public Procurement Directives on the law firm Taylor Wessing’s website;
- Progress on Improving Public Procurement: oral statement by Jane Hutt AM, Welsh Government Minister for Finance. The subsequent debate referenced the accordance between Welsh Government procurement policies and the new Directives, as well as discussing the UK Government’s transposition process.