Thursday, 12 January 2012

Minister admits Public Procurement Litigation Agency overspend

Today the new Secretary of State responsible for procurement was questioned by the influential Public Administration Committee on why there had been a five fold increase in the costs associated with running the Public Procurement Litigation Agency.  She explained that a new industry had grown up on the back of the The Public Contracts (Amendment) Regulations 2009.  The Regs were introduced to implement the Remedies Directive (2007/66/EC) and according to the SoS have changed the dynamics within the public procurement market.  The Regs were the first justification for the overspend.

The SOS then reminded PAC that a former Cabinet Minister had publicly admitted a bias amongst the public procurement community against UK suppliers.  Independent academic research then revealed
that many SMEs and Third Sector Organisations had found public procurement strategies of aggregation, longer-term contracts and a switch from grants to contracts had effectively compounded the impact of the credit crunch.  The perceived bias and change of procurement strategy were acknowledged as a factors leading to the overspend.

She went on to explain that the austerity strategy had led to a fall in advertising budgets which had impacted on the marketing industry. The legal profession had also suffered as a result of the austerity strategy. One catalyst, with the benefit of hindsight, was that many long-serving public procurement professionals  had retired or been made redundant as a result of 'the cuts' to be replaced by a new breed of former private sector cost-cutters who were unfamiliar with the nuances of regulated public procurement - it appears little knowledge transfer had either been welcomed or taken place.

All the ingredients of a lethal mix were in place.  The legal eagles got together with the ad men and developed new products.  At the core of the new products was an offer to potential public sector providers of a 'no win no fee' challenge service using the Regs.  An aggressive advertising campaign was embarked upon by the legal eagles and the ad men promoting the service.  Former public procurers became 'challenge farmers' identifying weakness in procurement processes with tools provided through the former transparency agenda. Those leads were then passed to call centre staff, based outside the UK, to cold call those unsuccessful in public sector bidding.  With nothing to lose and everything to gain, SMEs and TSO viewed the 'no win no fee' challenge service as their last chance for weathering the financial crisis. 

Within six months the Public Procurement Litigation Agency was swamped.  The Agency were overwhelmed by the sheer volume of public procurement challenges and had no choice but to outsource some of the work.  The outsourcing contract had been let through the Regs and won by an organisation based in Greece and Italy staffed by former civil servants.  The Greeks and Italians turned out to be unfamiliar  with some aspects of the Regs and inadvertently sought to settle challenges quickly. 

Challenged by PAC why the Greek and Italian organisation had been awarded the contract when they clearly lacked capability, the SOS answered that a different Government had been in place and their policy had been lowest price wins.         

The SOS parting words to PAC were, "I only wish someone had explored what might have happened, and told the former SOS before the almighty mess conspired against us"

Ironically the former SOS, who now chairs PAC, replied "So do I, but I doubt if I would have listened".

Fortunately nightmares stop when you wake up - or do they?

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