On 5 February, new EU public procurement laws were laid by parliament which are due to come into effect 26 February 2015.
The changes may not be as radical as those introduced in 2004, but companies that struggle to understand 2015’s EU public procurement rules will face an uphill battle when trying to procure new business from European public sectors.
This is your high-level guide to the new laws – below we’ve documented everything you need to know about the EU public procurement rule changes.
Why make any changes?
The key motivation behind the rule changes is to make the procurement of outsourced public sector contracts more accessible to smaller businesses. Many of the measures have been imposed to cut the cost of bidding for these contracts, which will benefit bidders of all sizes, but will be a particular godsend for SMEs.
Ed Green, deputy director of EU and domestic procurement policy at the Crown Commercial Service, claimed that the new rules should encourage public sector buyers to focus more on market engagement and contract management.
He was quoted saying ‘Procurement is a strategic priority to drive public service reform, support economic growth and tackle the deficit.
‘You can drive much more value by engaging with the market pre-procurement and in contract management. The new rules should help with that.’
What will change?
The answer is, not as much as you might expect. When they were originally drafted, the new laws had some radical elements: parliament considered forcing all contracting authorities to divide public contracts into lots, and also requiring all public bodies to use electronic communications during all tender processes. However, changes along those lines have been predictably watered down and constrained by red tape.
Here are some of the changes you should prepare for:
• Public services concessions will be regulated in the same way as public works concessions contracts.
• There will be a new ‘route to market’ for buyers based on a competitive negotiation procedure – the buyer will go to market for one or more partners, and innovation will be fostered through their competition. This should result in more IPs (innovation partnerships).
• Use of a new Most Economically Advantageous Tender (MEAT) formula will be compulsory. Under current directives, contracting authorities can award contracts based on lowest price, but no longer. The new form of MEAT encourages evaluation of the bids offering the best price-quality ratio.
• There will be no more Part A/Part B distinction. Part B services are being replaced by a new ‘light touch’ regime, which requires the advertising of requirements at an EU level and will have a higher threshold of €750,000 (public)/€1 million (utilities).
• Bidders may now be excluded due to poor past performance.
As well as increasing SME participation, these changes should also encourage public-to-public cooperation and generally clear up past confusion regarding rules. Changes to the framework are minor, but it’s certainly worth wrapping your head around the above changes sooner rather than later to stay ahead of the game.
What do the experts think?
Pinsent Masons’s public procurement law expert Stuart Cairns said ‘The new regulations contain significant changes and introduce some innovative new ways that public bodies can procure, but there will be uncertainty around how some of these newer rules will work…
‘These reforms have the potential to deliver benefits for the public sector, but authorities must first spend time understanding the news rules.’
Gatewit recently commissioned a report on the current state of public sector procurement in the UK. Gatewit CEO Pedro Paulo said ‘a focus on awarding long-term, multi-billion pound contracts to large multinational companies has traditionally left smaller businesses unable to compete in the UK public sector procurement processes.
‘But the EU’s new procurement directives should make the public sector bidding process much more accessible by making it significantly easier for SMEs to take part.’
Gatewit’s commissioned research found that that the average cost of a procurement competition in the UK public sector is £45,200; 90 per cent higher than the EU average of £23,900 and the highest in the European Union.
Futhermore, at 53 days longer than the EU average, the length of public sector procurement competitions in the UK is likely to be a contributory factor in the high costs of the overall process.
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