SME contractors set to gain from changes to EU public procurement law

Reforms to the EU Procurement Directive, due for approval by European ministers this week, set out a range of measures intended to streamline project prequalification and tendering, reduce bureaucracy and open up contracts to smaller firms. The Cabinet Office expects the Directive to be in its final form by early 2013, with the UK version of the law coming into force by mid-2014.

The rules will require public contracting authorities tendering any building works contract above the OJEU threshold, currently £4.3m, to divide it up into separate tenders more suited to smaller organisations, or otherwise report to the EU Commission explaining why. In addition, minimum turnover thresholds for contractors will be capped at three times the estimated contract value, and authorities will be required to retain on file certain prequalification documents for use with future tender submissions, reducing the administrative burden on firms.

“Most experts expect the current draft legislation to be implemented in the UK mostly unchanged, which should be very positive for SME builders,” said Alison Walton, principal associate at law firm Eversheds. “The turnover requirement currently placed on tendering firms is often completely arbitrary and well above the capability of smaller businesses, but now the Commission is saying the figure must have relevance to the contract and cannot be unreasonable. It will make local authorities think twice before stating blanket requirements on any prequalification questionnaire they issue.”

Brian Berry, CEO of the Federation of Master Builders added: “Splitting contracts into smaller bundles would definitely benefit SMEs as many are currently excluded from being able to tender. It could open up the market and encourage more firms to come forward.”

Under the new system, contracting authorities will have to retain certificates and accounting documents submitted by firms during a bidding process and then keep them on file to consult should the firm enter a subsequent tender. The process is designed to reduce the admin requirement on bidders and introduce a more tick box-like scenario.
“Rationalising the PQQ process would be a big help as one of the big problems faced by SMEs is the admin burden,” said Berry.

But the benefits of the revised legislation to SMEs may depend on how local authorities choose to interpret the changes, warned Berry: “One of the problems we have with procurement in UK is how councils interpret the government’s rules. For example, PAS 91, sponsored by the Department for Business, Innovation and Skills (BIS), aims to promote best practice for procurement, but it is not uniformly applied by local authorities.”

Main image: <a href=’http://www.123rf.com/photo_21310301_eu-commission-building-europe-flags-in-brussels.html’>teka77 / 123RF Stock Photo</a>