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After Brexit, will Britain choose to retain the EU Procurement Directive?

After Brexit, will Britain choose to retain the EU Procurement Directive?

5th July 2016

British parliament will have thousands of key policy decisions to make when Article 50 is filed, with the potential to save £1.6bn of the taxpayer’s money, where will the EU Procurement Directive fall in terms of priority?

The public sector, according to the Crown Commercial Service, spends over £230 billion a year on goods and services needed to deliver the UK’s public services, totalling 11% of GDP.

How this £230 billion is spent is subject to a legal framework, with set regulations implemented by the EU Procurement Directive, yet surprisingly, this was not a high profile policy in the EU referendum debate.

Once Article 50 has been triggered – with a possible schedule of this October, Britain will have two years to decide whether it would be more efficient to create its own version or retain the directive bestowed upon it.

On the latest edition of Prime Minister’s Questions, Prime Minister, David Cameron revealed:

“Following the ‘leave’ vote in the EU referendum, the procurement rules that implement the EU procurement directives will continue to apply until the UK has actually left the EU.

“At that time, the European Communities Act 1972 would be repealed, as would the UK implementing regulations which were made under the Act. There are a number of options for alternative procurement legislation, ranging from “do nothing” to a repeat of the EU rules if the UK were to adopt the Norway model and join the European Economic Area (EEA) Agreement to gain access to the EU Single Market.

“There are pros and cons associated with each option, which would need to be considered carefully in the context of the Government’s objectives for the UK outside of the EU.”

John Tizard, of Public Finance, believes that, “It is almost certain that a condition of favourable trade deal and access to the bloc’s Single Market would require the UK to continue to have public procurement legislation closely aligned with the wider EU regulations, including ‘state aid’ rules.”

Therefore, he believes, it is likely to be in the best interest of the public sector to retain the directive.

The Leave campaign however, has branded the current EU procurement rules as ‘foolish’ arguing that, local government, that has powers bestowed enabling each respective council to choose the procurement, or eProcurement system they wish to implement - is failing.

The National Procurement Strategy, unveiled by Local Government Association in July of 2014, set out a vision for the best practice across all local government procurement to provide a framework to raise standards.

So how is the best value obtained?

Adhering to the best practices in procurement is an essential component to obtaining the best value. Strong leadership is required to ensure a multiple quotation policy, setting a requirement of a purchase order for each transaction can improve purchasing processes and also increase tractability and accountability within an organisation.

For each transaction, each council will have its own viewpoint on how best value is obtained, whether that be from a local supplier a few miles from its offices or a multi-national business.

However, they have always had to adhere to the guidelines of the EU Procurement Directive. In 2015, for instance, the EU Procurement Directive added a requirement for public sector buyers to divide up contracts, or explain why they have not – a little noticed but fundamental change.

This is particularly relevant, as Meg Hillier, the Chair of the recent Public Accounts Committee hearing on government procurement from small and medium-sized enterprises, revealed that smaller suppliers have been delivering ‘big’ savings on important projects.

David Cameron promised the breaking of larger contracts, “wherever possible” in 2011. By requiring larger contracts to be split, SMEs stand a better chance of working together to compete against larger corporations for a contract.

eProcurement is believed to have an increasing role in obtaining the best value for business transactions.

The National Procurement Strategy specifically stated that, “Adopting eProcurement can increase efficiency and productivity and realise full benefits. In particular, councils should consider how e-invoicing will help them and their suppliers to streamline administrative process and improve supplier liquidity.

“Taking advantage of the opportunities presented by the new EU directives which allow council procurement processes to be quicker, simpler and less costly to run.”

Stuart Brocklehurst, CEO of Applegate Marketplace, commented, “The current procurement process can be prohibitively expensive and is not providing a level playing field for small companies to compete with larger corporations. Innovation in the procurement industry is attempting to widen markets, reduce costs and create a more transparent, less restrictive process with easy access to tenders.

“With Applegate PRO, our new e-procurement service, we are revolutionising the way businesses buy while at the same time putting smaller companies on a level playing field with their corporate, more established peers. “We will help businesses that want to lower their costs to save money and for businesses that need things fast, we will source the supplier that can deliver on time. For those that have specific technical requirements, we will get them the product that best matches their needs.”