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Agreement reached on new EU Public Procurement legislation

New EU rules on the way public bodies currently place contracts have just been agreed after negotiations between the key EU institutions concluded successfully.

Public Procurement in the UK

Public procurement law regulates the purchasing of contracts for goods, works or services by public sector bodies. In the UK, the EU public procurement rules are contained in the Public Contracts Regulations 2006 (England and Wales) (the Regulations).

The Regulations  specifically apply when the following conditions are met;

1. The body doing the buying is a contracting authority (includes central government and local authorities);

2. The contract is for public works, services or supplies; and

3. The value of the contract is over the financial thresholds of £4,348.350 (works), and £173,934 for goods  and  services.

Not all contracts over the thresholds are caught and the Regulations split services into Part A (priority) or Part B (residual) services. Part A services are fully covered by the Regulations whereas  Part B services are only partially caught by the Regulations. Part B services are considered  only to be of interest to 'national' bidders and therefore are governed by a lesser regime.

The newly agreed EU Public Procurement rules

The purpose of EU public procurement legislation is to open up the procurement markets between EU Member States. The aim is to increase competition in addition to enhancing economic growth, creating jobs and fostering innovation by supporting the most efficient use of public funds.  

The draft EU proposal on Public Procurement aims to;

  • Modernise the rules governing how public bodies purchase goods, services and works in order to ensure greater efficiency
  • Create simple and flexible rules
  • Reduce the administrative strain on public authorities and contractors
  • Encourage Small and Medium enterprise (SME) participation
  • Switch to E-procurement
  • Enhance greater competition across the single market
  • Promote innovation

Part of the simplification process will be the promotion of electronic procurement as a user friendly feature. The European Commission believe that the use of e-procurement will make it considerably easier for SMEs to take part in the tender process as there will be significantly lower administrative costs (less printing, postal costs etc). The World Bank predicts that using e-procurement will amount to savings of 13.5% of total public procurement expenditure.

Another potential benefit to SMEs is that the new rules aim to create better market access for SMEs by simplifying documentation obligations in procurement procedures. The new directives also allow for the creation of standardised documents for selection purposes. In addition authorities will have the opportunity to divide contracts into ‘batches’, making contracts more accessible to SMEs.

The new rules also allow authorities to use taxpayer’s money in a more strategic way when carrying out works, purchasing goods and services or outsourcing services. In particular, the focus will not be on  placing contracts based on the cheapest price but on the most ‘economically advantageous tender’. Other ‘selection’ criteria includes life-cycle costs, innovative characteristics and the experience of the staff carrying out the contract.

The thresholds, as mentioned above, will remain the same but the new proposal will get rid of the distinction between Part A and Part B services. The European Commission are of the opinion that it is no longer justified  to restrict the full application of procurement law to a limited group of services. However, in relation to social services and other services with no significant cross-border economic impact, the European Commission recognise that these services may not be adapted to the regular procurement regime and will be governed by a lighter regime.

Next steps

The key institutions have reached a provisional agreed and therefore the new rules will still need to be formally adopted by a vote in the European Parliament and the Council of Ministers (the Council represent the governments of the 28 Member States). The vote is likely to take place in September 2013.

Once the new rules have been formally adopted, the UK will have a time period of 24 months in which to change national legislation in line with the new EU rules.

About the author

Published: Monday 2nd September 2013
Categorised: Corporate Law, International

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