Public procurement rules and outsourcing in the EU – time for change?
The EU Commission published a Green Paper in January 2011 seeking views on modernisation of the much criticised EU public sector procurement regulation regime. The period for consultation expired on 18 April and it will be interesting to see whether proposals for significant reform follow. The aim is to propose legislative reforms by early 2012.
For outsource service providers, the key question will be whether this will lead to more efficient, flexible and faster procurement processes in the public sector. The UK public sector procurement process lasts on average about 17 months and there is a widespread view that the procurement regulations cause inefficiency, inflate bid costs and stifle innovation in outsourcing. Bid costs are especially prohibitive to SMEs and this defeats the aim of the UK government and the EU to increase representation of SMEs in the public sector outsourcing market.
Amongst the many areas covered by the Green Paper, the Commission is open to reviewing the procedural “toolbox” provided by the procurement regulations for possible improvements. The toolbox consists of four main procedures (open, restricted, negotiated and competitive dialogue) with most use being made of the restricted and competitive dialogue procedures in ITO projects. The competitive dialogue procedure was introduced in 2006 and it has helped to create more flexibility in complex contract procurements but use of this procedure is only possible in restricted circumstances. The Commission is open to suggestions on new procedures, whether the level of detail required by the current procedures is appropriate and whether more flexibility can be allowed in negotiation. In an ideal world, public authorities tendering out services in the highly competitive ITO and BPO segments would be free to use much more streamlined and “real world” procurement processes which would give them the freedom to develop innovative outsource solutions with supplier partners.
The Commission also recognises the need to clarify areas of uncertainty. One area often encountered in practice relates to material contract changes which trigger the need for a fresh procurement. The Commission appreciates that greater clarity is needed in this area to specify what changes trigger a procurement process and also asks for views on whether a simpler procurement process could be used in such circumstances. This is especially topical given the variations proposed by the UK government to its major IT services contracts and the procurement issues this may cause. Again, it would be good to see much more freedom for public authorities to develop their own processes to deal with change management.
We will wait and see what responses the EU Commission receives from the outsourcing service provider community. I would expect there to be strong views stated on the cost and time burdens of the procedures and a general desire to simplify and streamline (and the UK government will echo that sentiment).
In addition to the Green Paper the Commission is conducting a market-based analysis of the impact of the procurement regulations which will be published in the summer and we will see whether the perceptions of procurement regulations creating inefficiency are backed by empirical evidence. Will this analysis reveal that inefficiency is caused as much by cultural values in the public sector as by the effect of the regulations?