Conservatives wants to scrap EU public procurement rules

According to the Telegraph, the Prime-Minister wants to get rid of EU public procurement rules and their (alleged) obligation of awarding contracts to the lowest bidder. A veritable “bonfire of red tape” as they like to say.

I have written multiple times about the straw man argument that EU procurement rules are bad for public procurement, eventhough I am the first to recognise they exist to avoid crap procurement not to lead to great outcomes. But the argument presented of the lowest price “obligation” is new and shows, once more, that Boris Johnson does not understand much about public procurement rules.

EU rules do not mandate the usage of lowest price as an award criterion. If anything they have been trying to move procurement into the alternative “most economically advantageous tender”. In fact, if you look at Art. 67 of Directive 2014/24/EU this is what you will find regarding price as the sole award criterion:

1. Without prejudice to national laws, regulations or administrative provisions concerning the price of certain supplies or the remuneration of certain services, contracting authorities shall base the award of public contracts on the most econ? omically advantageous tender.

A little bit further down, in the final paragraph of 2. it gives Member States the possibility of including price only as a criterion:

Member States may provide that contracting authorities may not use price only or cost only as the sole award criterion or restrict their use to certain categories of contracting authorities or certain types of contracts.

Taken together, the logic of the Directive is very simple. The default award criteria should be the most economically advantageous tender but Member States are free to decide otherwise. Let me rephrase that: Members States decide if lowest price is available as a criterion in general or only for specific types of contracts. The Public Contracts Regulations 2015 Reg. 67 omits any mention to price as the only award criterion but does not effectively ban it either.

The preference for contracting authorities in the UK to still use price as the only award criterion today is thus not a problem of rules but one of practice instead. Why do they use it then?

It is possible to posit a few reasons. First, inertia. Using price only is the traditional way of awarding contracts so all players (public and private) are used to it. Second, it is easier to compare a price than a basket of different characteristics. This reduces complexity and risk for the contracting authority. The risk minimisation benefit is for me, the third reason why value only tenders are still the norm. Incentives also play a part as a potential fourth reason. Procurement officers are not rewarded for taking up on risk or failure, both because it affects them directly in their professional lives as well as the organisation itself (reputation risk).

It is unsurprising that price only is still popular even if it technically does not mean “lowest price”…

The SME angle

The Telegraph article also includes a helpful SME angle as this will make life better for SMEs. Bullshit. The more complex the award criteria the more difficult it will be for SMEs to put tenders together and the higher transaction costs they suffer with each bid.

It doesn’t help that below the EU financial thresholds where EU rules do not apply (with caveats here and here) and Member States are pretty much free to regulate as they see fit. Other countries have longstanding traditions of regulating below-threshold public contracts. The UK? Not really. The PCR2015 do include a few very light touch rules but nothing major.

If Boris Johnson wants to change rules to help SMEs then perhaps it should start with the low hanging fruit and regulate low value contracts instead. These are the ones of more interest to SMEs and where a degree of standardisation would help, not hinder them. The same way that a uniform highway code helps us amateur drivers go from A to B.

The larger battle

It is obvious to me that the larger battle is to find reasons and ways to move away from the “European standard” of public procurement rules (ie, economic efficiency). Setting up workshops/brainstorm sessions with academics to see what could be changed shows an indication of an interest in changing rules and, I assume, in that very British way of keep on claiming on the surface that reality is different from the appearances.

As for the scope of such changes, I restate that low value contracts are the low hanging fruit and that above the financial thresholds the commitments made as part of the GPA accession process will impose significant limits to this “bonfire of regulations”.