UK approach to EU procurement a 'false economy'

The decision to award the contract to build Thameslink trains to the German company Siemens rather than British-based Bombardier exposes the UK public sector's fixation with economic considerations, writes professor Christopher Bovis

Economic devastation for an industrial sector and extensive job losses have been the main arguments fuelling the debate of what might have gone wrong with the award of the procurement contract to build trains for Thameslink to the German company Siemens rather than Bombardier.

Procurement of public service contracts is a tricky and difficult exercise. It balances legal principles such as transparency and non-discrimination, objectivity and competitiveness, with policy considerations, such as industrial policy, socio-economic policy, environmental protection, employment policy, regional development and cohesion policy.

The public sector has wide discretion as to what and how it buys from the private sector in order to deliver services. It can set the tender parameters to suit its needs and requirements. There is only one caveat: it cannot protect or discriminate. But the public sector can innovate. The European public procurement rules are a good example of using best practice and afford a great deal of discretion to contracting authorities in setting selection and award criteria for public contracts.

The most prominent demonstration of flexibility is the MEAT criterion – the most economically advantageous tender. The public sector has ample discretion to set factors which comprise, in its own view, the element of economically advantageous offers received by the private sector during a procurement process. There is a list in the European directives which comprises of non-exhaustive features of the criteria which could be taken into consideration by contracting authorities. The MEAT criterion has provided for the opportunity to balance the economic considerations of public procurement with policy choices.

So could features of industrial policy, such as skilled employment, sectoral competitive advantages, cluster industry management, efficiencies, value engineering, and inward investment have played a part in the award process? Definitely, yes. Most European Union member states, and particular Germany and France, utilise advanced procurement processes such as institutional public private partnerships and concessions to deliver public services.

In such arrangements, the issues of socio-economic policies and their balancing with purely cost considerations are best addressed. Most parties to the World Trade Organisation government procurement agreement also use procurement mechanisms and systems to promote domestic policy considerations. The UK public sector is fixated with costs and solely economic considerations in public procurement. This is a false economy and not best practice, as its delivery is procedurally correct but substantively wrong.

Christopher Bovis is HK Bevan chair in law and professor of European business law at the University of Hull in the UK