House of Commons - Government Procurement - Public Administration Committee

Government Procurement - Public Administration Committee Contents

2 Procurement Process and the European Directives

7. Public sector procurement in the UK is governed by the Public Contracts Regulations 2006. These implement the EU Directives on public procurement intended to ensure equal and non-discriminatory treatment of bidders and transparency in the procurement process.[6]For procurements with a value above specified thresholds, the EU Directives require public bodies running a procurement to advertise in the Official Journal of the EU, and to allow minimum timescales for the completion of stages of the procurement.[7] The Directives specify the main procurement procedures which shall be used by public sector authorities. The most complex procedures are the competitive dialogue and negotiated procedures, which are generally most appropriate where the procuring authority has not been able to determine precisely what it needs to procure.

8. The Cabinet Office has taken some steps to improve the way in which Government bodies apply the procedures specified under the Directives. In November 2011, the Minister for the Cabinet Office, Francis Maude, announced a presumption against the use of the competitive dialogue procurement procedure on the grounds that "too often [...] public procurers have relied on it as a means of engaging in dialogue with suppliers, instead of engaging in thorough pre-market engagement".[8] Under the terms of this presumption, departmental accounting officers must formally approve the use of the competitive dialogue procedure, before it can be used by civil servants.[9]

9. To improve procurement timescales, the Government has also introduced training in "LEAN" sourcing—a streamlined procurement process which, as Andrew Coulcher, Director of Business Solutions at the Chartered Institute of Purchasing and Supply explained to us, involves "trying to do a lot more in parallel, rather than have this highly strung-out serial process of decision-making and building consensus".[10] The Cabinet Office wrote in its evidence to us that "by November 2012, 626 staff had completed a 1 day programme and 400 had completed a 3 day programme."[11] It claimed further that this improvement in technical skills had already begun to have an impact on the speed of procurements: "Partly as a result [of training in the LEAN sourcing approach] the average observed time for all but the most complex procurements in 2012 fell from 180 to 153 working days".[12] By applying LEAN processes and by having a presumption against competitive dialogue, the Cabinet Office expect to achieve and sustain a reduction in the average time taken to carry out procurements by government departments and agencies to below 120 days.[13]

10. A number of witnesses to this inquiry welcomed initiatives to train civil servants in the LEAN operating model. The CBI said that initiatives such as LEAN sourcing were positive and had some impact on the time taken to complete procurements.[14] Peter Smith, a former president of the Chartered Institute of Purchasing and Supply, similarly agreed that LEAN sourcing was "a useful initiative" for improving technical skills.[15] He thought that "it certainly covers elements of programme and project management, and a certain amount around getting your way through the EU regulations and things like that".[16] Nonetheless, suppliers to Government continue to argue that doing business with Government can and should be made much more efficient. Jim Bligh, the CBI's Head of Public Services Reform said that: "we still want to see a leaner, quicker process [...] Our process is 50% longer than France or Germany's".[17]

11. We commend the Cabinet Office for initiatives to make procurement practices across Government more efficient but the progress is inconsistent and business argues that processes are still slow and bureaucratic. It is intolerable that UK public procurement still takes 50% longer than it does in France or Germany; the Cabinet Office does not seem to know why this is the case. It should reassess the impact of its initiatives to streamline and modernise procurement practices; identify what key factors in the procurement process must be addressed; and report the results of this work in response to this recommendation.

12. The Chartered Institute of Purchasing and Supply pointed out that part of the problem has been the tendency of procurement staff in the UK public sector to focus too much on process laid down by European Directives rather than outcomes:

The public sector has always been focussed on demonstrable process and this has been underpinned by the European Procurement Directives which have left UK procurement professionals process driven and risk averse. Strict interpretation of the directives, process focus and the use of unnecessary procedures has often strangled innovation in the public sector and this has left suppliers and procurement professionals alike frustrated and trapped by prescription.[18]

13. Public procurements in the UK may also be subject to the EU Remedies Directive which requires contracting authorities to wait for 10 days after deciding who has won the public contract before it is signed. [19] This allows bidders time to examine the decision and decide whether to initiate a review triggering the automatic suspension of the procurement process. The Chartered Institute of Purchasing and Supply wrote that "the combination of the standstill period and the ability of rejected bidders to start a review procedure during this period has made procurement teams more conscious of the risk of challenge and therefore more anxious about following the process precisely".[20]

14. Several witnesses agreed that European Directives have not been sensibly applied in the UK. Social Enterprise UK argued that:

Across the UK, many public bodies follow the full EU procurement rules where it is not necessary to do so. Applying the full set of EU rules adds complexity and cost for organisations competing for contracts, which is both unnecessary and disadvantageous to small organisations.[21]

Baroness Greengross's Transport Forum similarly noted that: "No one would argue that there is anything wrong with the spirit of EU procurement rules [...] In practice though, particularly for SMEs, they can become rather bureaucratic and unwieldy".[22]

15. Tim Heywood, Director, Public Sector & Procurement, Burges Salmon LLP, agreed that: "there are lots of things wrong with the EU public procurement rules and yes, the regime is quite complex".[23] But he pointed out too that "if they did not exist we would have to write them".[24] The procurement consultant and former civil servant, Colin Cram, agreed that the Directives were necessary and said that the problem lay in how they had been applied. He also thought that blaming EU Procurement Directives themselves is often a cover for incompetence: "The EU procurement Directives have been responsible for increased procurement professionalism in much of the public sector. There is some room for improvement, but overall they do not inhibit the application of best practice".[25]

16. We recognise that the regulation of public procurement serves a valid purpose. However, we are concerned that the EU Directives, and the fear of breaching them, have driven a process-oriented, risk averse culture within the Civil Service which has inhibited efficient procurement and lengthened procurement times. The application of LEAN procurement training does not seem to have fully addressed this problem. The Cabinet Office should identify the factors which add to complexity and delays in government procurement. The Cabinet Office must also ensure that civil servants apply the minimum required by EU directives. The EU should not be used as an excuse for over complex process and delays which do not seem to affect other Member States.

17. In December 2011, the European Commission set out proposals for reforming the EU Directives on procurement, with a view to making them simpler and more flexible. The proposals to revise the existing public procurement rules are currently being negotiated through the EU Competitiveness Council and are subject to debate in the European Parliament. A draft of the reform proposals was approved by the European Parliament's Internal Market and Consumer Affairs Committee in December 2012.[26] The European Parliament is due to have its first reading of the proposals in autumn 2013.[27]

18. Among the reforms advocated by the UK Government in negotiations is an increase in the value thresholds above which the EU Directives should apply. The CBI and others, such as Social Enterprise UK, representing smaller businesses welcomed this.[28] During our Brussels trip, we learned that many would like to see EU procurement thresholds raised, but that the scope for changing the EU thresholds is circumscribed by wider international agreements—in particular the World Trade Organisation "plurilateral" Agreement on Government Procurement (GPA). We were advised that the Commission intends to defer any decision on this pending further analysis.

19. The European Commission is also proposing to implement the adoption of electronic procurement systems, or "e-procurement" within a target two year timeframe. In April 2012, the Commission published "a Strategy for E-Procurement" noting that "contracting authorities and entities that have already made the transition to e-procurement commonly report savings between 5% and 20%".[29] The Cabinet Office's response to the EU reform proposals supported the wider take up of e-procurement, but raised concerns over the achievability of the two year target.[30] A number of MEPs expressed the view to us that an ambitious declaration of intent was however needed in order to achieve progress.[31]

20. We welcome the principle that the European Commission should act to streamline public procurement, and we welcome in particular their plans to make procurement more efficient through the use of e-procurement technology. The Cabinet Office should publish its implementation plan for e-procurement in the UK in its response to this recommendation to ensure the public sector in the UK is able to meet the agreed timescale for completing the transition to e-procurement.

21. The Chartered Institute of Purchasing and Supply broadly welcomed the reforms to the main EU procurement directives in its evidence to us. It pointed out however that the European Commission has not proposed any reforms to the Remedies Directive. Therefore, while reforms to EU Directives on procurement may make processes simpler, the fear of a challenge under the Remedies Directive, may continue to prompt unnecessarily strict adherence to process.[32]

22. The EU Remedies Directive has made civil servants risk averse and adhere too rigidly to process. There is however value in a mechanism for challenging erroneous procurement decisions. The Cabinet Office must monitor the impact of the Remedies Directive and issue guidance on how its negative effects can be mitigated. If this is not effective, the Cabinet Office should insist that the Commission amend the Remedies Directive to minimise its potential to inhibit effective public procurement.

6 Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply Contracts and public service contracts; Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors Back

7 Cabinet Office, Procurement Policy Note - New Threshold Levels for 2012 and changes in the use of the Accelerated Restricted Procedure, Information Note 10/11, 12 December 2011 Back

8 Cabinet Office, Procurement Policy Note - Procurement Supporting Growth: supporting material for Departments, Action Note 4/12, 9 May 2012 Back

9 Cabinet Office, Procurement Policy Note - Procurement Supporting Growth: supporting material for Departments, Action Note 4/12, 9 May 2012 Back

10 Cabinet Office, Procurement Policy Note - Procurement Supporting Growth: supporting material for Departments, Action Note 4/12, 9 May 2012, Q 351 Back

11 Ev w75 Back

12 Ev w75 Back

13 Cabinet Office, Procurement Policy Note - Procurement Supporting Growth: supporting material for Departments, Action Note 4/12, 9 May 2012 Back

14 Qq 52-53 Back

15 Q 352 Back

16 Q 352 Back

17 Q 67 Back