Surprise, surprise: The UK has the most expensive public procurement system in Europe by Dr. Pedro Telles

Editor’s Note: Today’s post is by our newest Procurement Insights European Union Edition contributing columnist Dr. Pedro Telles from Bangor University. Dr. Telles joined Bangor Law School in January 2011 as a member of the acclaimed Winning in Tendering project team. He is a specialist in public procurement law. Dr. Telles has previously worked as a lawyer in Portugal and Spain advising public and private clients in public procurement and commercial practice between 2003 and 2007.

CEBR published a report last month stating the UK has the most expensive public procurement system in the EU. Apparently, procedures last in average 53 days longer and cost 90% more than the average as well. To anyone involved in practice that should not come as a surprise. What the CEBR did not explain clearly is why procurement is so expensive in the UK.

EU procurement rules are often pointed out as a convenient scapegoat for bureaucracy, but the reality may be a lot simpler. The answer lies closer to home, in the practice followed by contracting authorities. After all, only 25% of all procurement exercises done in the UK are above thresholds and have to follow the EU Directives. For the remaining 75% contracting authorities can pretty much do what they want.

So, what practices can be pointed out then? At least a few:

– Preference for the restricted procedure

– Preference for detailed PQQs even in the open procedure

– No effort in adapting the open procedure to lower valued contracts

– Excessive safeguards (health and safety, insurance requirements)

It is no secret that UK contracting authorities have a strange love affair with the restricted procedure and detailed PQQs. No country in the EU uses it as much as the UK. The restricted procedure implies a thorough investigation of the bidders quality as to shortlist them. In effect the suppliers are “bidding” to make it to the tender stage and then again to win the contract. The contracting authority has to evaluate both as well, adding time and cost to the procedure, not to mention that SMEs are more likely to be squeezed out at the selection stage. After all, as the saying goes, no one was ever fired for buying IBM.

In addition, there is a national practice of having detailed PQQs even on open procedures, probably as a measure for “crowd control”, that is to reduce the number of bids that get analysed at the end. That is not why the selection stage exists in the open procedure, where it was devised as a very simple pass-fail mechanism as a means of weeding out weak companies. Again, this leads to longer procedures and higher transaction and opportunity costs for both sides of the table.

As mentioned above, for contracts below thresholds it is up for contracting authorities to establish their practice. However, instead of adapting the open procedure to lower valued contracts, contracting authorities have simply imported the practice they had already developed for contracts above thresholds. Again, procedures become unnecessarily long and expensive.

For example, the UK Government wants the open procedure to last around 120 days, which is a reasonable objective for larger contracts. However, through our work at Bangor University’s “Winning in Tendering” project we reduced the average duration of an open procedure down to 38/40 days. We accomplished this by getting rid of everything that was unnecessary (including the PQQ). Surprisingly, both procurers and companies prefer this simplified open procedure to the traditional one. Once more, this is a question of practice and not legal obligations.

Finally, there are a number of stakeholders involved in procurement in the UK that contribute to the overall bureaucracy and costs of procurement here, such as health and safety and risk managers. They are called into the procurement process adding entropy to a system that is in comparison to those of other countries already overly inefficient and unnecessarily complex.

Furthermore, the risk manager’s interests are not necessarily aligned with the interests of the procurer or the supplier. To keep their job by “managing risk” ̶ a euphemism for risk aversion ̶ a risk manager will demand high insurance values that suppliers will have to provide by paying higher premiums.

Is government procurement unnecessarily complicated?

Link to report: http://www.cebr.com/reports/uk-procurement-most-expensive-in-eu/

Link to ICPS: http://icps.bangor.ac.uk/

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