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Procuring for the future

Following the Brexit vote, what next for public procurement rules and their application to universities?

Posted by Rebecca Paddick | December 26, 2016 | Finance, legal, HR

Following the UK referendum vote on 23 June, a recurring question to procurement lawyers is whether the current procurement regime will continue to exist on exit. 

Whether that is wishful thinking or one of the many possible consequences of the UK’s proposed withdrawal from the European Union is too early to tell. It will be driven by the negotiations with the other 27 member states and the European Commission. If the UK were, for example, to remain part of the EU single market and/or as a member of the European Economic Area, the current procurement regime would likely remain unchanged. Any bespoke exit with negotiated terms of access to the single market are likely to require reciprocal opening up of public sector spend markets across all areas of trade. Even in the event of the current regime ceasing to apply, there will be no awarding contracts on the golf course. The World Trade Organisation’s Government Procurement Agreement (GPA) provides many of the founding principles captured in the EU procurement regime, and have been adopted by many other countries around the world including Australia and New Zealand. Principles of equal treatment of bidders, of transparency in contracting and of competition form, a key part of the UK’s approach to standards in public life. Whatever the outcomes of the forthcoming negotiations, procurement in some form is here to stay.

For major redevelopment projects and IT systems, a competitive negotiated or competitive dialogue procedure is still the best bet

Do the rules still apply to us?

Many higher education institutions are looking at whether they continue to be caught by the procurement regulations, and whether they can lawfully move to a ‘non-regulated’ procurement position (much in the way of a private school). There are a number of important legal considerations when considering whether the institution is a ‘body governed by public law’ for the purposes of the Public Contracts Regulations 2015, and a number of potential unexpected consequences. Institutions looking at this area will want specific legal and financial advice on the issues and the potential impact on existing purchasing and funding.

Creative procurement

Using the procurement rules (whether the EU rules, or your own – which often need to be as detailed as the statutory regulations) creatively can generate innovation and efficiency. It is often fear of the unknown which can lead diligent procurement officers to follow a well-trodden path of procurement. There are a wide range of potential carrots and sticks in the latest EU regulations which, if used properly, can speed up procurements, introduce more negotiation and help achieve best value by looking at the whole lifecycle cost of a particular product, service, or work. Environmental and social factors can be evaluated, provided they are relevant to the contract and not generic corporate requirements, and changes introduced in 2016 include certain offences under the Modern Slavery Act 2015 as a ground of mandatory exclusion from procurement processes for up to five years from the date of the conviction.

Greater use of negotiated procurement procedures allows universities more flexibility to discuss and negotiate contract terms with suppliers. These negotiations can be very streamlined; focusing for example on key contract terms or commercial points to prevent long and expensive negotiation phases which are not needed. This helps to ensure that stakeholders across the university are ‘getting what they want’ and that suppliers fully understand and appreciate the scope of the contract from the start. There is much talk in the sector about innovation partnerships; this type of procurement route is suitable for genuinely new or developing technologies and solutions. There are specific requirements in relation to intellectual property ownership in the procurement rules that effectively limit the use of this route for anything other than a limited range of research-driven projects or ideas. For major redevelopment projects and IT systems, a competitive negotiated or competitive dialogue procedure is still the best bet. 

Electronic procurement?

E-procurement technology is developing apace, and the new European Single Procurement Document (ESPD) is now in use. Many institutions use portals to run their procurement activity and to receive tenders. The focus is on moving away from paper-based submissions into a ‘self declaration’ regime where only the winning bidder provides certain documentation or policies. The ESPD effectively allows a bidder to refer to pre-existing material for the purposes of pre-qualification for your tenders. If an ESPD is referred to, it must be taken as evidence of compliance – or not – with any minimum selection requirements that it covers. Institutions will want to update their procurement portals to ensure that they can respond to and evaluate ESPD solutions. 

Using checklists or “term sheets” can help to drive procurements to close quickly, as can greater use of soft market testing to drive awareness and help to set specifications within the institution. More strategic involvement of procurement teams before the decision to ‘do the procurement’ is made, helps to inform the thinking and that the market can provide what you need, and that the institution can afford to buy what it has specified.

Greater use of negotiated procurement procedures allows universities more flexibility to discuss and negotiate contract terms with suppliers 

A bright future 

As responsible purchasers, and often as the largest buyers in their local areas, universities will want to ensure that their procurement policies are up to date. Well drafted, a buying guide can help to reflect not only the strategic procurement aims of the institution, but can also capture innovation and wider social responsibility requirements. The future in procurement is bright, whichever way the road takes the sector. 

David Hansom is a partner and head of procurement law at national law firm Veale Wasbrough Vizards (www.vwv.co.uk), which is number one-rated for its work in the education sector. For further information or advice on any issue you may be facing, please contact David via dhansom@vwv.co.uk or at 020 7665 0808

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