UK government should 'come clean' on procurement

The UK government's proposals on the modernisation of public procurement are promising but there are contradictions which need clarifying

Last month the United Kingdom government published its response to the European Commission green paper on the modernisation of public procurement policy, setting out the government's vision for how the rules should be brought up to date. The government's proposals sound refreshingly promising but show up a number of contradictions in wider policy. In view of these contradictions, the government now needs to come clean on whether the positions set out in its response are accurate or not.

The response contains a number of pleasant surprises for the procurement community who have been asking for change. Foremost among these are the opening up of procurement to more small and medium-sized enterprises, the simplification of the general procurement rules, raising the threshold amounts and keeping public contracts outside the rules. However, the response reveals at least four contradictions that need explaining.

Firstly, mutuals: the government effectively admits in its response that it cannot carry out its much vaunted mutualisation programme; moving 100,000 civil servants into joint ventures within the private sector and then awarding it the contract, without a change to the procurement rules. As this is one of the main goals of the Opening Public Services white paper, it is unclear where it leaves that programme.

Secondly, foreign companies: having stated that it would back procurement bids from UK based companies over foreign competition in the context of Thameslink contract which Siemens won, the government now says it would always choose the most competitive, value-for-money bid regardless of nationality. While it is true that the government has recently announced a delay to the Crossrail rolling stock tender for this aspect to be reviewed in depth, the general principles embodied in the response would seem at odds with any outcome from the Crossrail review, other than business as usual. Interestingly, one of the bidders, Alstom, has already pulled out of the Crossrail tender following the announcement of the review.

Thirdly, the future of competitive dialogue: after backing the competitive dialogue procedure as recently as last November and notwithstanding the huge increase in bid costs arising from competitive dialogue, the government is now advocating a generally available negotiated procedure where negotiation is possible once a bid has been submitted, which was where we were five years ago. It would be interesting if someone in the Cabinet Office could join up the dots between the November 2010 report and the response.

Finally, SMEs: although the government suggests opening bids to more SMEs it seems unmoved on changing the rules to allow the fundamental things to happen so that SMEs can win government contracts. In particular, will lots be compulsory above certain thresholds, how will economic standing be measured for small new market entrants and will the government clamp down on the widespread use of frameworks throughout the public sector?

What is encouraging is that the penny seems to have dropped in government that procurement policy is central to getting the economy moving again and not simply the esoteric occupation of a small number of professionals. The government has now published a Procurement Policy Note (05/11) setting out how it intends to engage with the commission on the reform of the rules. The note states that the rules as they currently stand are too complex, onerous and costly and encourage a risk-averse and over-bureaucratic approach to procurement within the EU.

The note confirms that the government will be actively influencing the commission, other EU member states and the European Parliament in the run up to the publication of the commission's proposals for revised and updated directives, and calls on those in the public procurement community who may have links to such bodies or other stakeholders to participate in that process and push the UK message. Whether the government will be successful; only time will tell. In the meantime it could let us know where it stands on the above issues.

Nick Maltby is a partner at Bircham Dyson Bell, a UK law firm