Much attention has been focussed on improving the efficiency of public spending. The new government has stressed its intention to target spending rather than taxation and to avoid cutting spending on front line services.
Getting better public procurement deals should be a fairly painless way of improving efficiency and there is anecdotal evidence that public sector buyers would like the opportunity to lead in this field. And yet… how much freedom do they have to deliver these savings?
All public sector buyers are required to award large contracts under detailed requirements of the EU procurement legislation, which is designed to ensure equal opportunity for all suppliers by maximising competition.
A key part of the legislation is the right for suppliers to take civil action in the UK courts for breaches of these (complex) rules.
There is anecdotal evidence that more suppliers are starting court proceedings against public sector buyers, although most of those proceedings are settled out of court. Even so, the number of ‘decided’ cases in the UK courts under the legislation increased sharply between 2008 and 2009.
The increase in legal challenges is probably, in part, a result of greater supplier awareness of their rights. Since 2006 each supplier that fails in a procurement competition has had the right to be told in some detail why they failed. The increase probably also reflects a greater appetite for legal action by suppliers who have been losing business in the recession.
One often quoted strategy to reduce future public expenditure is to increase collaborative procurement, allowing much larger contracts, or frameworks, for use by a large number of public authorities who would normally have carried out their own procurement competitions. Losing one of these much larger contracts will thus result in a much larger impact on a supplier’s business, increasing the incentive for a supplier to start or even threaten legal action.
The law was tightened up at the end of 2009 to increase the effectiveness of legal challenges by suppliers. One result of this is that, in some circumstances, the court can issue an order cancelling an authority’s contract, accompanied with a fine at a level determined by the court.
The increased risk of legal challenge and consequences of successful action is already making authorities more cautious in their procurement. A number of procurements have been reported to have been withdrawn by authorities as a direct result of supplier challenges.
This caution could well have the unintended effect of making public procurement more of an administrative procedure, rather than one driven essentially by seeking better value.
Like some World Cup soccer teams, the emphasis may be on ‘not conceding’ goals, rather than scoring them.
Glenn Fletcher is a specialist consultant on the application of EU procurement policy.
He has worked for over 20 years for energy businesses and for the UK Treasury and now directs EU procurement business for Achilles, where he advises over 500 public and private sector businesses. With pressure on costs and increased risk of legal challenge under more complex EU legislation he believes that it is time for professional purchasers to use their practical knowledge of ‘EU risk’ to ensure best commercial outcomes.
