The ‘State’ of Procurement: Rewriting the Public Procurement Playbook following Brexit

They think it’s all over. Well, it’s only just begun! With apologies to history (1966 and all that) the United Kingdom’s eventual exit from membership of the EU offers a once in a lifetime opportunity to introduce greater efficiency into public sector procurement and by doing so to remove the unnecessary ideological baggage that accompanies this area.

In a brief article one cannot develop a theme in detail but I would contend that the aim of EU competition policy, reinforced by public procurement as one of its tools, is single market integration sometimes at the expense of economic efficiency. For example, the significant EU control over vertical agreements via block exemptions may not adequately protect the investment of distributors in territorial agreements against challengers who haven’t made a corresponding investment.

Current UK public sector procurement is more concerned with freedom of access of opportunities rather than conducting the most economically efficient procurement process. This can be seen in the cumbersome procedures mandated for use by public authorities. Barriers to entry could be demolished in the future through various measures including loosening the current procedures and an increase in the thresholds, where stricter rules apply.

Public procurement today is like a barge which has accumulated a large number of barnacles as ideological goals unrelated to essential aims have been built onto it. For example, Regulation 113 of the Public Contracts Regulations 2015 (“PCR 2015”) interferes with the contract between the prime contractor and the subcontractor by requiring the authority to ensure that contractors to an authority pay subcontractors’ invoices within 30 days. The requirement in Regulation 62 contemplating environmental management standards is another.

The effect of the current regulations flows down into the state’s conduct towards suppliers. The CCS Model Services Contract contains a provision in clause 15.10 obliging contractors to an authority to include provisions in their subcontracts enabling them to terminate the subcontractor if they don’t comply with “legal obligations in the fields of environmental, social or labour law”. This is vague and ill-thought through as is the provision in clause 5.5(m) obliging a supplier not to embarrasses the authority or otherwise bring the authority into disrepute.

With the eventual removal of the EU as the ultimate arbiter of the rules of UK public procurement now is the time to consider adoption of a new approach by ensuring the state “withers away” from enforcement of non-economic goals in this area. This would involve dismantling many of the social goals currently built into public procurement. Social policy is best left to general legislation rather than to be enforced by the state buying goods or services, which is a selective and ineffective means of achieving this goal.

Retreating from the current EU underpinning doesn’t mean that we emerge into a lawless dystopian future. Rather, we should adopt economic efficiency as our philosophical guiding star. Social policy could also be indirectly achieved but it would be a by-product as it would have to be underpinned by a rational economic case. For example, if increased use of SMEs could be shown to promote greater allocative efficiency in public sector procurement, then a post Brexit Britain could positively discriminate in their favour and thereby enhance social benefits. Work should therefore begin immediately on replacement of the PCR 2015, with each section having to be judged on this new philosophy, so that a draft is able to be implemented immediately formal departure of the UK from the EU is implemented. Arise Britain – you have nothing to lose but your chains!

*The contents of the article are my own personal views and don’t reflect the views of my organisation.

Author: Chris Hoyle

Date: December 2016

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