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Point of law - Buying time by Stephen Cirell and John Bennett

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09 September 2005

Current UK procurement rules were drawn up decades before the Internet existed and globalisation took off. Now draft regulations aim to bring these up to date and put a new EU directive into effect

The shape of public procurement activity over the next decade has become clearer with the publication of draft new regulations by the Office of Government Commerce. This whole area of law has been characterised by uncertainty, especially in terms of fitting modern practice in with European Union rules that originally crystallised in the 1970s, long before e-procurement and other innovations.

A major review at European level, which began in 1996, led to a directive in 2004 (Directive 2004/18/EC). Member governments have until January 31, 2006 to bring in conforming legislation. The OGC's draft regulations form the second part of a two-part consultation exercise for the UK (Scotland will introduce its own regulations under devolved government arrangements).

The second exercise focuses on the exact wording of the regulations. The deadline for submissions is September 12.

The first consultation exercise dealt with the wider issues and specifically alerted consultees to the fact that the new directive itself reflected a compromise and that therefore there was little scope for significant change.

Nevertheless, that exercise did show strong interest in certain discretionary elements in the directive. These included clauses dealing with modern procurement practice and provisions for awarding work without competition to sheltered workshops, which provide jobs and training for disabled people.

So it is no surprise that the draft regulations include all these optional elements. The UK government has exercised its discretion to allow contracting authorities to take advantage of several new provisions, which are largely designed to promote modern practices, such as

e-procurement.

Three areas are particularly worthy of note: framework agreements, central purchasing bodies and e-auctions. The new measures will regularise practices that have been used in the UK for the past few years but that were not expressly included in the earlier directives or UK regulations. This means that their legal basis in the past has had to be found in basic EU Treaty principles rather than in a specific legislative provision.

It is hardly surprising therefore that the bulk of the public sector has joined the government in welcoming discretionary measures that will remove any lingering doubt as to the legality of current practices.

But this means that there are now proper definitions in place and rules to follow — so existing practices will need to be reviewed to ensure that they fall within the permitted scope of the new legislation. It also means that standardisation will be necessary.

As an example, framework agreements (agreements to purchase), which are widely used, will now be officially allowed. But under the draft regulation, each framework can last only four years. In the past, because of the absence of regulation, many authorities would have longer framework periods.

Another discretionary measure, which will again regularise much existing practice, is the use of central purchasing bodies. Any public sector body can potentially become a CPB, which allows it to purchase goods and services not only for itself, but also for other parts of the public sector. This means, for example, that one local authority can enter into a framework agreement for computer supplies and then offer it to neighbouring local authorities and other public bodies. The neighbouring authorities would purchase through the first local authority. Providing that council conformed to the rules when setting up the framework, all the others will be deemed to have conformed.

This make collaborative procurement between different authorities easier, but pre-planning will still be necessary as the total value of all the purchase orders under the framework needs to be advertised. This is difficult enough to estimate for a single authority and even more tricky when other authorities are allowed to join at a later date.

A third area that will help in this process is electronic auctions. These are now included in the directive and in the draft regulations; but their use for certain areas of 'intellectual endeavour, such as the design of works' has been expressly excluded.

This is just a brief outline of some of the main draft regulations, and even these leave outstanding questions. So it is not surprising that one outcome of the first consultation exercise was a request for more guidance. The second exercise confirms that guidance is planned in many areas.

In the circumstances, the procurement law mist has not yet fully cleared, but at least the view is better.

Stephen Cirell is head of local government and Professor John Bennett is a consultant solicitor with Eversheds. They are authors of Best Value law and practice and Charging and trading in local government

PFsep2005

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