UK Government tests protectionism in public procurement, social and enviromental considerations style.

The Government put out late last week a new Procurement Policy Note - Procuring Steel in major projects. The first two lines read as follows:

“”  — p.1

Any doubts about the intended objective of the Policy Note?

I have nothing against reducing barriers in public procurement. But as becomes apparent once we start reading the policy note, the logic is simply to tilt the balance in favour of domestic suppliers. To do so, the Government is requiring that for contracts over £10M involving steel, some measures need to be followed by contracting authorities covered by the Policy Note. At least one of the measures has a clear protectionism intention and as such is discriminatory and illegal under EU law. Two others can potentially be interpreted in a similar fashion.

1. Effective market engagement

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”  — p.2

Again, market engagement when well done is perfectly legal, but the problem here is that the Government shows its hand and intention on i) singling out UK Steel as advisory body in pre-market engagement and ii) referring to the domestic market. As all* public procurement contracts over £5M are subject to Directive 2014/24/EU, this is immediately a discriminatory measure and one I have alerted for the last 18 months.

2. Life-cycle costing

“”  — p.3

At first instance there is nothing irregular or strange about this measure. However, some have already pointed out that transport costs can be taken into consideration and that these will benefit local producers. That is indeed true, however for life-cycle costing to be done correctly other externalities must be used as well. For example, steel making is incredibly energy intensive and the British grid is not exactly the greenest in Europe, so that criteria may help producers outside the UK. And if we see a "life cycle costing" formula which magically only includes transportation, then this is another indication of discrimination against foreign suppliers.

3. Social considerations:

“”  — p.3

At face value I do not have a lot against the proposed measure. There is, however, something important missing in it that is usually associated with social clauses: the place where they produce their effects. In other words, the Policy Note does not mention local or national benefits which is the usual bandwagon people jump in when talking about social considerations in public procurement. I am glad it did not mention local benefits but I am not sure contract authorities will note the omission and its importance.

A couple of years ago I decide to test the bias of procurement officers in what concerned social considerations. On a simulated competitive dialogue that lasted two days, one of the suppliers in the dialogue offered to put in employment the long term unemployed in Romania and creating apprenticeships there. One participant (head of procurement, no less) howled about the idea. That was precisely the point I was trying to make.

I have very strong reservations against social considerations, but for these clauses to work, we need to make sure they are not used for discrimination against foreign suppliers.

*Yes, I am not even paying attention to concessions or utilities to make my argument.