The Weird and Wasteful World of EU Procurement Legislation

There has been much scaremongering about the scale of job losses were the UK to leave the EU. The reality, especially in the small business sector, is very different. Nigel Moore runs a specialised technical consultancy business and has experienced considerable frustrations when competing for business within the public sector, thanks to EU legislation. Nigel writes:-

Purchasing by the Public Sector and applicable privatised industry (utilities, transport and postal services) from, in Euospeak, economic operators (aka private sector etc.) has to comply with EU procurement directives (laws). These rules are intended to standardise purchasing (or procurement) practices in the EU and open up the markets; they are enacted into UK law above defined thresholds.
Custom and practice, and successive UK governments have tended to ‘gold plate’ implementation with restrictive interpretations and some extension below the EU mandated thresholds. EU procurement legislation and its’ impact is a complex and somewhat esoteric field, with the lawmakers far removed from the purchasing ‘front line’ and consequently the detrimental effects go largely unreported. Also changes to the rules only occur when the EU Commission wills it and involves considerable time delay (years) as all member states are involved.

The EU rules mandate the procurement process that must be followed by the buying organisation. The rules include requirements for: advertising for potential suppliers (tenderers) in the European Journal; following defined timescales; how the goods or services required are described and specified; how suppliers are pre-qualified before being invited to submit tenders; how these tenders are evaluated (for technical and commercial compliance); how contracts are awarded; and rights of appeal by unsuccessful tenderers (potential suppliers). Under the rules, purchasing is an involved, time consuming process. If an apparent mistake is made, an unsuccessful tenderer can appeal ultimately as far as the European Court of Justice, which has developed a considerable body of case law. Recent changes are in the pipeline for procurement legislation but it is too earlier to say what user and business friendly effects they will actually produce.

Pity then the buyers involved with this process and the potential suppliers. Much of their time is spent carefully following the process including regulations and case law, and is unproductive because it does not improve the actual purchase; for buyers this includes processing unsuccessful potential suppliers and their tenders or, for potential suppliers, trying to bid for work that ultimately they don’t win or even pre-qualify.

Buyers often reduce the number of businesses invited to tender by pre-qualification using comprehensive questionnaires. Consequently good potential suppliers, usually smaller businesses, are often excluded using somewhat arbitrary criteria not necessarily related to carrying out the contract before they know exactly what the work is. And pre-qualification tends to be in secret so potential suppliers may never know why they are not being invited to tender. Utilities can also use a pre-qualification scheme to identify potential suppliers to invite to tender instead of advertising details of the prospective purchase. Not helpful to suppliers; you don’t know what work is coming up, when or how tenderers will be selected to tender. Having been selected to tender, potential suppliers are all then deemed equally capable of carrying out the work, to the required standard, even if during tender evaluation, under greater scrutiny, the opposite is indicated.

It is also common cut down how often buyers place new contracts by aggregating small purchases into single larger framework contracts or agreements that will run for several years. Sometimes the purchases have little in common. These frameworks tend to be only suitable for larger businesses offering a wide range of goods or services, and exclude the smaller, specialist or innovative businesses. Until recently trying to provide access to smaller businesses by dividing up contracts into smaller lots was prohibited. Sometimes a larger company has overall higher costs, and not the specialised skills required to cover everything required; the system then rewards some less ethical practices like exaggerating capabilities.

In this country, in compliance with the EU rules, award of a contract to a compliant tenderer has tended to be based largely on lowest purchase cost. Consequently, you get the minimum of what you’ve asked for, not something better (there is no way to evaluate it) and probably some contractual arguments later. Socio-economic factors, like closure of a local factory (as happened in Derby over train manufacture) or loss of expertise or career opportunities are not considered (although actually allowed).

As a small specialised technical consultancy we have direct experience of Public Sector and utility (transport) procurement over many years. We also discovered that the struggles we faced were replicated elsewhere in the Public Sector for small businesses trying to win work. And it was a fruitless task trying to get anyone interested in the difficulties. It is very disheartening after working hard on the most difficult work, having done everything the Client wanted and then to know we will never have a chance of competing to get more work; framework agreements now being place. In some cases we knew well who would be doing the work and how we could, if allowed to, have done a much better job at lower cost. Yet we could very successfully compete overseas.

Obviously shutting down much of the economy to real competition and innovation carries costs, not least that many small innovative businesses struggle to be viable, or may never start in the first place; so there are knock-on effects far removed from the EU procurement legislation, which itself costs the Public Sector far more than it should in running EU compliant procurement processes.

The EU procurement rules create a playing field tipped heavily towards big businesses that excludes smaller and innovative businesses from much potential work that they could carry out. Further, they are complex, esoteric, slow, time and resource wasting and create avoidable stress for all those involved. Of course we could do better in devising more streamlined mainstream Public Sector procurement, for example, taking out 70-80% of the workload, which facilitates transparency, fairness, innovation, encourages entrepreneurial businesses and reduces risks. Procurement people get excited when they see what can be done.

The bureaucratic nature of EU legislation does not operate in the best interests of the UK’s vital small business sector. It is hardly surprising that many people in Nigel’s position support our withdrawal from the EU. As the recent Global Britain/Democracy Movement report “The Scaremongers” shows, remaining within the EU, rather than withdrawing from it, is the biggest threat to UK employment.

Photo by Eoghan OLionnain

Keeping business on side

A battle has erupted between Ed Miliband and a number of business leaders. It began when Stefano Pessina, the Chief executive of Boots, warned that a Labour government would be a “catastrophe” for Britain and said the party’s wider platform was “not helpful for business, not helpful for the country and in the end it probably won’t be helpful for them”.

Labour’s response has been to draw attention to Pessina’s decision to live in Monaco’s low-tax economy rather than the UK, but this is at best an irrelevant sideswipe. Other leading figures from big business have rallied to the support of Boots’ boss, including Sir Stuart Rose, the former Chairman of Marks and Spencer, who accused Miliband of being a “1970s throwback”. He went on to claim that Labour offers a “steady drum-beat of anti-business policies” including tax rises and lacks a “credible plan” to tackle the deficit.

With the confrontation currently in full swing, it is too early to judge whether or not these attacks will dent Labour’s chances, but for Ed Miliband, there is one worrying and very recent precedent: the Scottish independence referendum last year. Business leaders concerned about the economic consequences of independence spoke out. Alex Salmond’s sums were analysed by companies such as Deutsche Bank and were shown not to add up. When it came to the crunch, the famous Bill Clinton adage, “It’s the economy, stupid” proved its potency in persuading a majority of Scots to vote to keep the Union.

The lesson for ourselves and other supporters of EU withdrawal are obvious: we have to prove that EU withdrawal will not be an economic calamity and we have to convince big business of the fact. We may not win all the major companies round, especially those that benefit from EU funding or else have sufficient lobbying power to influence EU legislation in their favour, but we must ensure we have plenty of big-hitters on board.

Many small businesses are on side – indeed, EU legislation and the damage it causes to small businesses is one of the best recruiting sergeants for the withdrawalist cause, but winning round the City and the big multinationals will prove much harder. “Of course the EU will want to trade with us because we run a trade deficit with the other member states” isn’t good enough. In the long term, free from the EU’s onerous legislative burden, we will prosper as a nation, but with no clear road map for negotiating our way through the withdrawal process, business will use all its power to torpedo the case for independence.

Thankfully, Dr Richard North and Robert Oulds, among others are working on exit strategies which will be painless for business. Meanwhile, Ian Milne, who set up Global Britain initially to brief MPs and Lords about EU-related issues, has refocused his organisation’s efforts on winning the business community round. We already have some allies, but there is still a long way to go before withdrawal is viewed by big and small business alike as an opportunity rather than a damaging uncertainty. If Ed Miliband is sunk by these salvos from the business community, it will mean we have only two years at most before that all-important referendum. We must not allow them the opportunity to turn their guns on us.

Annual UK/EU trade deficit soars to £56 billion

Lord StoddartFROM THE PRESS OFFICE OF THE LORD STODDART OF SWINDON (Independent Labour)

In response to a written question from the independent Labour Peer, Lord Stoddart of Swindon (Hansard 02.12.14), the Government has confirmed that the UK’s annual trade deficit with the EU has soared from £28.5 billion in 2010 to a colossal £56.5 billion in 2013.

Responding for the Government, the Minister of State at the Department for Business, Innovation and Skills & Foreign and Commonwealth Office, Lord Livingston of Parkhead said: The UK’s trade deficit with the European Union was £28.5bn in 2010, £21.7bn in 2011, £39.5bn in 2012 and £56.2bn in 2013.

Commenting on the Government’s response, Lord Stoddart said: “This massive trade imbalance graphically demonstrates that more than 40 years of EU membership has done nothing for our economy and for jobs. It also demonstrates that the situation in recent years has dramatically deteriorated with the deficit very nearly doubling in just four years. It is quite clear that EU membership is a millstone around our country’s economic neck.”

The full text of Lord Stoddart’s question and the Government’s reply is as follows:

Hansard 02.12.14
UK Trade with EU

Question Read more

Dyson, Paterson:- the momentum is building

A decade ago, supporters of EU membership might have got away with dismissing their opponents as mavericks and eccentrics whose objectives were opposed by all the big names in politics and the business community. Not any more. In the last few days, one of Britain’s leading entrepreneurs and a former Conservative Cabinet minister have both come out in support of withdrawal.

Sir James Dyson was interviewed on Radio 4’s Today Programme last Friday about his plans to make a considerable investment in the UK. During the course of the interview, the subject turned to the EU. Does Sir James want the UK to stay a member? “Not particularly; No”, he replied. He did not want to be in an EU which was “dominated or bullied by Germany.” He added that “in our particular field we have these large German companies who dominate standard setting and energy reduction committees, and so we get the old guard and old technology supported and not new technology.” Sir James also mentioned his support for EFTA.

Another important business figure, James Bardrick of financial servies group Citi UK was not so keen on withdrawal. In an interview with City AM today. he said he would prefer “to make the EU work better and more productively.” However, he did not view withdrawal with foreboding. “We’d have to make changes to our operating model to reflect some of the increased inefficiencies that being outside the EU would throw up, and there is no doubt that would lead to changes in the way we have to deploy some of our resources, both financial and people,” he said, but “we can cope if we have to cross borders between the UK and the EU.” These are perhaps the most laid-back words to date from a senior UK banker and proof that even if some big businesses would prefer us to stay in the EU, withdrawal would NOT be the calamity that some claim.

Also today, hot on the heels of Sir James’ welcome support for withdrawal, Owen Paterson, the former Environment Secretary, stated that the UK government should invoke Article 50 of the Lisbon Treaty, which is the mechanism by which a member state withdraws from the EU, if the Conservatives win next year’s General Election. Mr Patterson was making the obvious point that closer eurozone integration would inevitably force the UK to re-define its relationship with the EU as the status quo cannot be a long-term option. “The eurozone has already embarked upon a path that we can never follow,” he said. “We are simply recognising that reality. We must either be fully committed to ‘Le Project’ or we must build an entirely new relationship.”

Such comments from someone who was until recently such a senior figure in the government are unprecedented and a refreshing change from Mr Cameron’s prevarication. However, Mr Paterson also laid down a challenge to fellow supporters of withdrawal, stating that voters could opt to maintain the status quo unless they are given a “clear vision of what life outside the EU would look like”.

These are wise words. Enthusiasm for the EU has never been that strong in our country, but the bottom line is that we’ve been a member state for over 40 years. There are many among the UK public who still need to be convinced that unpicking that relationship is worth the effort. They especially need convincing that it can be done without hurting our economy. Still, where there’s a will, there’s a way and the support of both Sir James Dyson and Owen Patterson cannot but be to the advantage of those like Dr Richard North and Robert Oulds who have already done so much to devise an exit strategy that will chart a viable path out of the EU where we can reap the benefits of freedom from interference by Brussels (and domination by Germany) without suffering the economic consequences that many still fear.

A Commonwealth free trade area?

The Commonwealth Games may not generate the same passion as the Olympics, but as this 11-day sporting extravaganza draws to a close in Glasgow this Sunday, attention has once again been focused on this voluntary association of 53 nations, most of which were once part of the British Empire.

It makes us ask what exactly, apart from this sporting event, held once every four years, binds the Commonwealth of Nations (to give it its full title) together? The use of English as a common language and the Common Law-based legal systems are two obvious links. Maybe it’s a sense of all being part of one big family with the Queen as its head, even though only 16 nations recognise her as their monarch.

However, could the Commonwealth also develop into a Free Trade area? In 2005, a Canadian economist, Brent Cameron, wrote a book called The Case for Commonwealth Free Trade. He pointed out that the Commonwealth contains 13 of the world’s fastest growing economies and contains one third of the world’s population.

What is more, the Commonwealth is a voluntary organisation. The constituent nations are members are there by choice. Rwanda and Mozambique, which were never ruled by this country, have chosen to join, recognising the economic benefits of so doing. The member states have no legal obligations to each other. It does possess a secretariat, but unlike the EU’s secretariat, the European Commission, its employees do not spend all day devising debilitating legislation and working out what is the next thing that should be banned.

It makes sense, therefore, for the UK to pull away from the sclerotic EU and build closer economic ties with these countries. In Robert Oulds’ words, “Exiting the European Union and enhancing links with the Commonwealth will not only disentangle the UK from the growing influence of Corpus Juris {the EU’s legal system}, but also enhance links with nations with nations that Britain has more in common with, such as Australia, Canada and New Zealand.”

The former Indian Development Minister, Kamal Nath, is enthusiastic about the idea of a Commonwealth Free Trade area. In 2010, he said, “The Commonwealth is the ideal platform for business and trade… I hope that India’s ties with the Commonwealth will move from strength to strength, and that the new paradigm will only mean greater warmth, greater co-operation.” The Royal Commonwealth Society also claims that “there is a clear relationship between Commonwealth membership and increased trade and membership.”

Of course, membership of a Commonwealth Free Trade area need not be and indeed, is not, exclusive. Canada is also a member of NAFTA, Malaysia and Singapore both belong to ASEAN (the Association of South East Asian Nations) and Guyana is also a member of CARICOM, the Caribbean Free Trade area. However, the UK within the EU will always be hamstrung if it desires to be more actively involved with a Commonwealth Free Trade area. We are currently unable to negotiate our own trade agreements and free trade negotiations at EU level are always long and complex affairs, not least because some other member states aren’t actually that keen on free trade anyway.

Still, we can but hope that by the time the next Commonwealth Games begins in Australia in four years’ time we are at least on the way out of the failing EU and deepening our ties with these countries who are not only our real friends in the world but which also offer us far better opportunities to develop our trade.

Rules on lorries means Britain loses more ‘clout’ from EU membership

Edward Spalton

THE BBC Today programme reported that the EU parliament would shortly vote to introduce new regulations for lorries to have improved rear view mirrors and windows, designed to remove blind spots and improve the driver’s field of view.

This report was true, but also highly misleading. These regulations were not drawn up by the EU but by a superior interational body called UNECE (United Nations Economic Commission for Europe). That is where the real decisions are made. The EU institutions and parliament merely do as they are told.

UNECE consults with member countries in formulating regulations, but Britain has no voice there. The EU decides on a “common position” before going to the consultation. So the EU actually keeps Britain off the “top table” where the critical decisions are made. Regulations cover increasing aspects of our lives and the EU is merely the local enforcer.

Like Britain, Scandinavian countries frequently have different standards from those of the big, mainland European countries. So they are disregarded too. But they have a friend to speak up for them. Denmark and Sweden frequently ask Norway to make their case. Little Norway has a voice where it counts. As an EU member Great Britain does not. Neither do Denmark and Sweden.

Britain gains no “clout” at the negotiating table from its EU membership but rather loses it entirely.

Edward Spalton

This article appeared in the Derby Telegraph, 28th April