Debunking Vote Leave procurement "misconceptions"

Last month, Vote Leave came up with some "new research" on the terrible, terrible plight inflicted by EU procurement rules on UK contracting authorities (well, those of England, Wales and Northern Ireland I suppose). Colin Cram put out a very polite rebute in The Guardian earlier this week, but I think a firmer answer is in order.

Here's Vote Leave claims:

EU public procurement law imposes extremely onerous requirements on public authorities, which can apply regardless of the value of a contract and/or whether any tenderers are from outside the UK. The Government pledged to change this, but EU procurement law remains unaffected by the renegotiation.

Right. I don't even know where to start. Are some features of the rules onerous, yes particularly if your own processes are lacking. If you already have good internal processes then the rules are not that onerous. Same claim could be laid against any project management standards. The fact they are more onerous than the alternative "roll your own, every time you want to tender" creates a degree of uniformity, standardisation and legal security. By and large they do not enable great procurement - but that is not why they exist in the first place. Their primordial job is to prevent really bad procurement. Not only the corruption kind of it, but just plain lack of knowledge.

Does EU public procurement law apply "regardless of the value of a contract and/or whether any tenderers are from outside the UK." Lie. It does apply to all contracts above the thresholds (ie, depends on value) and below-thresholds only the Treaty principles (equal treatment, non-discrimination) apply and *only* to contracts where there is a certain cross-border interest. That needs to be determined in advance of course as otherwise Vote Leave would be suggesting defining what is the applicable law after the fact. I have written extensively about this problem here and here.

It is true that EU procurement law remains unaffected by the negotiation, but as Colin Cram rightly points out the current procurement Directives have the UK's fingerprint all over them. Plus, Michael Gove was a minister in the Government who transposed Directive 2014/24/EU into the Public Contracts Regulations 2015 in a rush...

 

EU public procurement law imposes an annual cost of at least £1.69 billion to the taxpayer. This is five times what is spent on the NHS Cancer Drugs Fund, 34 times what is spent on the Government’s dedicated Pothole Action Fund, or enough to pay for 273,000 basic state pensions.

Apparently £1.69 billion is the average yearly cost of running procurement procedures in the UK between by taking the 0.7% expenditure rate calculated by this PwC study from 2011 and applying it to all years. If spending 0.7% of the contract value in the procedure is a bad outcome (due to those, onerous, onerous rules) I would like to know how Vote Leave would magically make procurement processes be free. Are they suggesting them being done by a commune of volunteers? A third sector organisation working for the greater good? There is no such thing as free unicorns in the procurement sky...

 

Between 2010 and 2014, EU public procurement legislation imposed costs of at least £8.4 billion in real terms on the taxpayer. This is three times what will be spent on flood defences in England between 2015 and 2021, six times the cost of the new Queensferry Crossing in Scotland, or enough to build 25 new hospitals.
It is also possible to calculate the delays to the execution of public contracts caused by procurement rules. A 2011 study for the European Commission found that the mean length of time between the tendering of a contract and its award in the UK was 193 days, longer than every member state other than Greece and Malta

One has to wonder however if Vote Leave is the proverbial bad carpenter blaming his tools. Every time I hear "the rules do not allow me to do it" there is usually a lack of capacity (or willingness to take risk) from the people involved. It is so much easier to blame the rules instead.

I love the claim about the slowness of procurement in the UK in comparison with the EU average. If the rules are the same (or similar) across the EU, whose fault is it if the UK practice is so below average? How can the other countries do better with the same sets of rules?

Let's talk about two UK examples of practice: restricted procedure and competitive dialogue.

Under Directive 2014/24/EU (as with its predecessor Directive 2004/18/EC) the open and restricted procedure are the standard procedures which may be used alternatively for any procurement process. It is up for the contracting authorities to decide which one to use. The restricted procedure allows contracting authorities to reduce the number of economic operators before the tender stage by making them go through a pre-qualification questionnaire which allows it to select the ones to invite forward. Until recently, the only Member State in the EU which used more the the restricted procedure than the open procedure. Now, the restricted procedure by definition is longer than the open procedure (which can now be reduced to a single stage). No surprise then the UK is a laggard in "procedure race" with the average procedure lasting 120 working days, 53 more than Germany. The situation got so bad the last Government (yes, the one where Mr. Gove was a minister) decided to clamp down on the use of pre-qualification questionnaires and by definition the restricted procedure as well.

Competitive dialogue is another good example. Under the 2004 Directive, it was supposed to be used only if certain grounds were met. It was not a standard procedure, but lo and behold again the UK decided to use it very often. So often that in 2012 the previous Government decided to ban its use, throwing the baby out with the bath water. While the competitive dialogue was being widely used, a "good practice" developed of racing towards identifying the preferred bidder and then having negotiations with said economic operator with no one else in the frame. Again, I have written at length about the limitations of this approach (clawing back of concessions, longer procedures, etc) here.

 

‘If we Vote Leave we can scrap the EU’s foolish rules on how Whitehall runs procurement processes which add billions to the cost of Government every year. I’ve experienced firsthand in the Department for Education how these rules add significant operational costs and generate expensive delays to construction projects. Across Whitehall, there are billions to save after we Vote Leave.’

Michael Gove is really channelling the bad carpenter here. Gosh, he really does not like equal treatment, non discrimination and standardised procurement rules. Much better to allow each contracting authority to just tailor the procedure to their needs and pick up a couple of "random" economic operators it trusts to bid for the contract. What could possibly go wrong in the Govean view of procurement nirvana? By the way, was it the rules fault that led to the G4S 2012 Olympics scandal? Or the Serco one? Or the West Coast mainline fiasco? Just imagine how much worse procurement would get without the safety net afforded by the current rules.

The elephant in the room is that most procurement spend actually happens below the thresholds where EU Member States are pretty much free to do whatever they want. (Sketchy) data from 2010 indicated that over 80% of EU procurement spend occurred below thresholds. Slightly sketchy data from Portugal puts the figure at 50% but probably this figure is under represented.

So where is the magnificent regulation the UK can today have without interference of that pesky EU law Directive? In Sections 109 to 112 of the Public Contracts Regulations 2015 and in countless guidance and policy documents available on the Government's website. Easy as pie to follow.

As for his diatribe against the "EU's foolish rules", remember, it was the Coalition Government that:

i) negotiated the current round of Directives;

ii) implemented them by copying and pasting way too quickly the Directive 2014/24/EU into national law (to the point the Public Contract Regulations have already been amended);

The irony here is that Directives set the objectives and it is up for the Member States to decide how to best achieve them. I concede the point that Directive 2014/24/EU is particularly detailed but there is always scope to tweak the rules. But hey, that takes time, knowledge and risk taking. Much easier to kick those difficult decisions to the long grass of judicial review, guidance and policy notes.