Modernising the EU procurement rules.

Sarah Sasse: The public procurement rules regulate many elements of public sector commissioning and public sector contracting, and they are all going to change with new proposals coming in at EU level. Head of our procurement team, Chris Brennan, is now going to explain a bit about what is going to change and when.

So, Chris, can you briefly paint a picture of the current procurement regime?

Chris Brennan: Well, currently we have three main EU directives which regulate procurement. The first is the so-called classic directive - that is the one which regulates procurement by the public sector and is probably the biggest and chunkiest of all of them. The second one regulates procurement by the so-called privatised utilities. And the third regulates procurement in the defence sector.

Now the public and utilities directives currently in force have been with us since 2004. The defence directive is much more recent than that; that's been with us since 2009.

Sarah: So the changes on the way - in a nutshell what will change and what will the impact be?

Chris: Well certainly public and utilities procurements regulations are twenty years old, really, and so it is those directives that are due to change. Defence will stay the same, because of course the 2009 directive is still pretty much up to date, but the principles really underlying the public and utilities sector - procurement in those sectors - are really well overdue for an overhaul.

And so what we're going to see is three new directives. The first will be an all-new public sector directive. The second will be an all-new utilities directive. And the third, and this will actually be a completely new feature, the third will be a new directive regulating procurement of what's called concession contracts.

Now a concession contract is a bit like a public contract and it might be, for example, to operate a leisure centre or a motorway, but it's a contract in which all or part of the payment consists of the right to exploit whatever it is that's being delivered. So, for example, a leisure centre might be awarded to the private sector to operate, but then the contractor is entitled to take revenues from the public as payment or part-payment; the same with, for example, a toll motorway, where the operator of the motorway might be entitled to take toll revenues. In return for doing that, it will assume a significant operating risk.

So an all-new directive regulating concessions.

Sarah: Why are these changes required?

Chris: It's all part of the European Commission's Europe 2020 strategy. The European Commission recognises, and perhaps this is as a result of all the various tribulations that Europe has just been through, that by 2020 Europe can be a more prosperous and more economically and socially well-managed place in which to do business. And so its strategy is that by 2020, procurement will have made Europe a more innovative and a more sustainable place in which to do business.

I think the Commission has rightly recognised that public procurement is a very good way of furthering the so-called common societal goals which Europe has set in terms of greater innovation, greater sustainability and really Europe just being a better place for business to be done generally.

Sarah: How will these changes affect both public sector commissioners and public sector providers?

Chris: By essentially doing four things. First of all by streamlining actual procurement processes, so rules are going to be introduced which will actually make the procurement process an easier and more flexible one.

Secondly, by introducing measures which are designed to drive better outcomes. So to increase the likelihood of any given procurement generating the right result, for example by encouraging procurers to look at price and other award criteria in slightly different ways.

Thirdly, by introducing new ways aimed at encouraging environmental and social considerations to be thought away in a smarter way. And fourthly, rules which will codify key case law which has grown up over the course of the last however many years, eight or ten years in some cases.

Sarah: I understand that the new regulations will help provide better access for SMEs. How are they going to achieve that?

Chris: Well, it's long been recognised that SMEs - small and medium-sized enterprises - don't really have a fair bite of the cherry when it comes to public procurement. So every so often access to big, meaty contracts by small companies has been just too difficult for them, because for example the bar at pre-qualification stage has been set too high, or because criteria have been wrong, or because the contract has simply been too big. And so there are a number of changes proposed which will facilitate access for them to public contracts by breaking down some of those barriers.

The first is around lots, so large contracts can sometimes be divided quite viably into small lots and SMEs are then more able to bid for individual lots and to win a slice of the cake in that way. The second aspect of the new directives which will hopefully facilitate access by SMEs to large contracts is by not setting the turnover bar too high, so making it easier for SMEs to pass the pre-qualification stage. So there will be a new rule which will require the minimum required turnover threshold not to be greater than twice the expected contract value.

Now there are a number of features of UK policy as it currently is which will be made part of our own law, and this is something which really comes over the top of the directives but which will again hopefully encourage access to contracts for SMEs and to make it easier for them to bid.

The first of these measures will be a feature of legislation on a domestic level, aimed at abolishing pre-qualification questionnaires for low-value contracts. The second will be to mandate the use of a standard pre-qualification questionnaire containing SME-friendly questions for higher value contracts, and the third will be a system of measures aimed at making contract opportunities more visible for small and medium-sized enterprises. So not only advertising in the official journal at EU level, but also making it a requirement for contract opportunities to be advertised on our own domestic portal, so hopefully it should be easier for small companies to actually find the contract opportunity in the first place.

Sarah: Do you think the changes will make public procurement processes any more efficient?

Chris: I think they will. They are likely to make them quicker, because there are going to be measures aimed at reducing overall procurement timetables. I think that will be welcomed in a number of areas.

In terms of making procurement more innovative and sustainable, yes I think they most certainly will. In terms of whether or not they actually do what the EU rules were designed to do in the first place - and that is to promote cross-border trade - well I'm a little bit more sceptical about that. Currently, the statistics say that about 98%25 of public contracts are awarded to suppliers in the same member state as the contracting authority, and I don't see that that's going to change. I'm sceptical about that.

Sarah: What timescales are we looking at for the implementation of these new rules?

Chris: Well the Commission is already arguably late in doing what it said it was going to do. We were expecting to have the new directives adopted by the European Council and therefore becoming law at EU level in November of 2013. We're now at the start of 2014 and still no new directives, but at some point during the early part of this year they will be adopted.

After that, each member state is under an obligation to transpose - so to implement into its own set of domestic laws - each of the directives within a period of two years thereafter. Now what we do know is that the cabinet office, which has the job of implementing the directives into the law of England and Wales, is planning to do the job much faster than that. So in a year's time I may well be sitting here again saying that we have our own all-new public procurement rules in place.

Sarah: To sum up then, Chris, in your opinion are these rules really going to make a difference?

Chris: I think they will. They've been in the pipeline for a long time. They've been debated inordinately by the European institutions, there have been thousands of amendments which have all been negotiated, deliberated on and finally now settled, and I think I do see positive steps in many of the new measures which we've been describing today.

Sarah: Thanks Chris, that's a really useful summary of the new rules and their impact, and as you say it will be interesting to sit here in a year's time and see what changes have come about.

Chris: Thank you very much.

This video may contain information of general interest about current legal issues, but does not give legal advice.