How public procurement can boost the economy

Government in the UK – at central, regional and local level – enjoys enormous purchasing power. In 2011-12, the UK Central Government alone spent £45 billion buying goods and services for the public sector – equivalent to 3 per cent of our GDP.

Using its massive purchasing power, Government can drive economic growth, and advance its policy objectives – subject to the constraints imposed by EU procurement rules. Government can also screw up massively, wasting millions on failed procurement projects. Iain Duncan Smith’s Department of Work and Pensions has already had to write off £40 million on its flawed Universal Credit implementation. The last Labour Government did not have a flawless record on IT procurement either.

Underpinning public procurement is the conservatism – with a small ‘c’ – with which British Governments of all colours have interpreted EU public procurement rules when designing projects. By contrast, other Member States – notably Germany, France and Italy – have used those same rules much more creatively to promote their domestic policy agenda in government contracting, including local employment, training opportunities, and environmental sustainability. One reason for this is that – with notable exceptions – there is an insufficient understanding in central, regional and local government in the UK about how much freedom is actually allowed within the rules to pursue such wider policy objectives when awarding public contracts.

This issue came to the fore in 2011, when Bombardier missed out on the Thameslink rolling stock contract to a German company, with a threatened loss of 1,400 jobs at its Derby factory. The contract was ultimately signed in June of 2013. Could this result have been avoided if the procurement had been managed differently? We will never know. However, what is clear to public procurement experts is that there is much more scope than most people realise to promote economic and social objectives within the constraints of EU public procurement rules. This understanding must form the basis of Labour’s next manifesto.

Ed Miliband has shown that he gets it by committing the next Labour Government to say to any business: “If you want a major government contract, you must provide apprenticeships to the next generation.” That’s a good start. But it’s only a start, and there is much more that could be done to promote Labour values through public procurement.

To this end, a joint Task Force on Public Procurement has been established by the Labour Finance and Industry Group and the Society of Labour Lawyers. Its membership includes procurement experts from both groups. It aims to produce a joint report for consideration by the Labour Party in time to help shape the Party’s manifesto for the 2015 General Election. The Task Force is working closely with the Labour Front Bench to ensure that its report addresses issues of key concern to incoming members of the next Labour Government. The target date for publication is June this year.

The Report will fall into three parts:

1. An overview of the EU Public Procurement Directives with particular reference to the rules allowing public policy to be taken into account in tendering for and performing public contracts, and the key decisions of the European and domestic courts in interpreting those rules.
2. Examples of best practice in the UK and abroad in which contracting authorities have successfully used the EU Public Procurement Directives to achieve desirable public policy objectives in their public procurement activities. The Welsh Labour Government in Cardiff and the London Borough of Camden will be cited as exemplars of best practice.
3. A suggested statement of how the next Labour Government could use public procurement rules to deliver a progressive agenda of economic, social, environment and other policy objectives through public procurement of goods, services and construction.

The Task Force is being kept deliberately small in order to ensure rapid progress in drafting and finalising the report. However, it is consulting widely across the Party, among affiliated organisations (including trade unions) and with procurement experts.