What is procurement?
Procurement covers the process by which goods, works and services are acquired from suppliers.
Procurement is about making transparent decisions and ensuring fairness to everyone. It is not necessarily to achieve best results but the fairest and most transparent process conceivable.
Procurement is supervised by EU and UK level legislation, policies, strategies and principles as well as by statutory contracting authorities’ regulations.
Good procurement matters because:
- The scale of the procuring public bodies undertaking is significant: over £150 billion spent on goods and services every year;
- Public authorities are accountable to the citizens for spending their money as sensibly as possible;
- Treasury principles rule that purchasing services must follow ‘value for money’.
Who has to follow procurement laws?
The EU and UK legislations are applicable to 'statutory commissioning authorities'; to public authorities that characteristically grant, contract or fund voluntary and civil society organisations (VCOs). Whatever definition we use, the organisations that fall within the scope of procurement directives are as follows:
- Local and regional authorities (and associations thereof);
- The State (interpreted from a functional viewpoint);
- Bodies covered by public law (e.g. bodies designed to meet general needs, not having industrial or commercial character and having legal personality).
EU Principles and Civil Society Organisations
EU procurement regulations do not apply to the overwhelming majority of social services (e.g. welfare services) that VCOs are likely to be contracted under.
Instead, EU Procurement Directive applies to all acts of procurement by statutory commissioning bodies.
These four principles all act to make procurement fair and effective:
- Equal treatment
- Free movement and non-discrimination
EU law applies to contracts over a certain financial value.
These are separated into two types of service according to the type of service being procured: Part A and Part B services.
Services under Part B are also known as ‘services to the person’.
Based on their local experience and intelligence, the voluntary sector is often well placed to provide these services. They are:
- Legal services;
- Health and social care services;
- Recreational and cultural services;
- Other services e.g. those that do not fit in Part A services
When do EU rules apply?
Full EU procurement rules only apply to Part A services above a financial value.
For Part B service contracts, the current threshold is €250,000 over three fiscal years. Below this amount, only the general EU Treaty principles apply to contracting authorities and organisations. Above the €250,000 threshold, only a few procurement rules are relevant to organisations involved in the procurement process.
Read about the regulations (e.g. quality of treatment, transparency and non-discrimination; notice of contract award; confidentiality, means of communication and subcontracting) that apply to Part B services over the threshold on our NCVO website.
If you wish to look into EU Procurement Law and what is in it for VCS, please see our NCVO/NAVCA 'Pathways through the Maze: A Guide to Procurement Law' (pdf).
There is also a new useful and detailed Compact Voice guide on 'Understanding Commissioning and Procurement: A guide for local Compacts' . Go to the Compact Voice website to download the publication.
Download the European Parliament fact sheet on Public Procurement Contracts.
Under the EU public procurement rules, contracting authorities may take multiple aspects into account – such as the need to protect the environment or consider social implications. Find out more on the European Commission website which lists the various EU initiatives (such as Europe 2020) to integrate such aspects into public procurement procedures.
New procurement rules are on the way
In 2011, the European Commission launched a consultation on EU Procurement modernisation to address issues of high public deficits and tackle the growing demand for public procuring. The aim is to spend public money as efficiently as possible by achieving innovation, fighting climate change and promoting social inclusion. See the new legislative proposals on the Commission website.
NCVO drafted its recommendations for the now closed review. You can read our recommendations here (pdf). The report evaluates current UK and EU policies related to public services and social policies, and the role of VCOs as service providers.
Key recommendations to improve CSOs’ ability to bid for public sector contracts are:
- Simpler and more practical guidance on implementation of the Directives;
- Create wider exemptions and higher thresholds for SSGI on the basis of service type and not contract size, since they do not significantly affect competition and cross-border trade;
- Encourage flexibility for emerging social business models and CSOs;
- Reduce administrative obligations and red-tape;
- Provide greater clarity and simplification;
- ‘Value for money’ should be reframed as quality of service for the cost, rather than lowest cost;
- Encourage “small-lots” contracts to allow SMEs, start-ups, and CSOs to enter the procurement market and enable innovative solutions to service delivery.
In 2012, NCVO and key sector umbrella organisations released a statement on proposals of the new European Directives.
Where are we now?
On 5 September 2013, the Council adopted the revised EU Procurement Directives. Member States have 2 years to impose rules into national laws; The Cabinet Office launched a public consultation and intends to transpose regulations as early as possible, by the end of 2014.
Current public procurement directives will remain in force until 17 April 2016.
The new procurement rules will substantially change the existing system for Part B service contracts, and will introduce a new ‘Light-Touch Regime’ for social and other specific services.
For this group of contracts, a higher threshold has been agreed of EUR 750,000. Below this amount, only general EU Treaty principles will apply; to service contracts above this ceiling, similarly to the old Part B category, a new “Light-Touch Regime”. This means that less and different procurement rules will apply to contracts delivering ‘services to the person’.
The new Directive also proposes the following changes:
- Social value to be the mandatory basis for public contracts;
- UK government to prohibit local bodies from using cost or price only;
- Division of large contracts into smaller lots;
- Deletion of turnover cap to help smaller organisations participate more in service delivery.
While many of these new rules are advantageous to VCSEs, effectiveness depends on interpretation and implementation by the UK Government.