EU gives green light to new Public Sector Procurement Directive – small and employee owned businesses to benefit

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The EU has given the green light to its new Public Sector Procurement Directive, making it much easier for charities, social enterprises and public sector mutuals to deliver public services, says law firm Winckworth Sherwood.

The Directive, first announced in August 2013, was ratified on the 15 January 2014.

The changes will, amongst other things, allow local authorities to award time limited service contracts to mutuals or social enterprises without first having to advertise them in official channels. Under the new Procurement Directive only public service contracts for social and other specific services that exceed €750,000 will need to be advertised.

The new rules also:

· Allow local authorities to take into account the relevant skills and experience of individuals at award stage;

· Allow local authorities to break contracts into smaller lots to facilitate greater SME participation;

· Allow and actively encourage preliminary market consultation between buyers and suppliers to help shape better specifications, outcomes and shorter procurement times with more freedom;

· Improved rules permitting social and environmental aspects to be taken into account in letting contracts; and

· Encourage local authorities to adopt award criteria which take into account social and environmental issues plus innovation in contract delivery.

Simon Randall, a consultant at law firm Winckworth Sherwood who provided informal advice to the UK Government on these changes said: “This new Directive is enormously welcomed and is designed specifically to make it easier for groups of employees to form public sector mutual or cooperatives and successfully deliver public services.”

He adds: “Changes were needed as the previous Directive made it extremely difficult for local authorities to award contracts to run local services to employee-owned mutuals as those mutuals could not compete effectively against the big service providers who have long track records and substantial funding.”

Joanna Bussell, a Partner in Winckworth Sherwood’s Local Government Projects team adds: “Local authorities wanting to award a contract to a group of employees found themselves under the old procurement rules having to award the contract to large service providers. We would expect to see a significant increase in the number of new public sector mutuals created to deliver public services.”

Member States must adopt the new rules within two years, but the UK government is planning the changes quickly as it pushes ahead with its plans to outsource more services.

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