Alex Neil was quoted in the Herald Newspaper last week saying that ‘economic impact should be taken into consideration, not just the price, before awarding a contract’ under the public procurement regulations. What he means by economic impact is the outcome on local communities if a tender is or is not awarded to a local business should be assessed before a contract is awarded.
What he says is only partially accurate, price is a key consideration, but procuring bodies can take into account the quality of tenders within the evaluation criteria. There is also added pressure on procuring bodies to not only secure value for money but meet public policies such as environmental targets and ensure some community benefit from the tender process. Evaluation criteria can be drafted so as to capture these requirements. The time to apply the mind to such matters is when deciding on the procurement strategy. When we advised Glasgow City Council on incorporating community benefits as part of recent tenders it was important we ensured that the drafting complied with current procurement rules.
In light of these competing pressures, the European Commission has issued a Green Paper on the modernisation of the EU public procurement rules to make them more efficient for governments, companies and taxpayers including amending the rules to take account of, as they describe, “societal” value of a contact i.e. taking account of the environmental, employment, health and social issues in the evaluation process. If implemented the changes will provide additional flexibility for procuring authorities to tackle the sorts of issues that Mr Neil highlights. But do the proposed changes go far enough?
Both the Scottish and UK Governments have responded to the consultation. The Scottish Government has asked the commission to consider the local economic impact of procurement spend such as the impact on local employment, local businesses and retention of skilled workforce. This could be seen as going beyond the commission’s proposals, and probably outside the Treaty as it clearly favours home country bidders.
The UK Government has taken a different viewpoint in its response by emphasising that the underlying objective of public procurement is to achieve value for money and that the procurement regulations should be clarified on how environmental or social criteria can be taken into account, whilst still achieving value for money and the evaluation criteria being relevant to the subject matter of the contract.
We shall have to wait to see what comes out of the review and whether it results in any changes in ability to include ‘societal’ value in the evaluation criteria. In the meantime, it is important for procuring bodies to establish early on in the procurement process how it will evaluate tenders and what is important in the overall outcome.
Brodies’ Project Team
On August 3, 2011