Housing associations have never loved OJEU.
The EU procurement rules that require over threshold contracts for services, supplies and works to be advertised across the EU, have sometimes been decried as a bureaucratic behemoth complicating procurement since 2004 when they were reluctantly applied to housing associations by then deputy prime minister John Prescott under threat from the European Commission.
But despite its perception as a hefty millstone OJEU has its uses, and once Britain leaves the EU there will be both opportunities and threats for housing associations as procurement evolves from its current highly regulated regime.
In the absence of a specific Brexit deal on entry to the common market, housing associations may no longer be subjected to OJEU and would gain significant perceived flexibility over their procurement practices. However, a significant upside of the OJEU regime is to bring rigour and transparency to procurement, placing a sharp focus on due diligence in the selection questionnaire stage followed by an interrogation of value for money in the tender stage. How housing associations move away from this regime needs to be carefully considered.
It is in no-one’s interests to gloss over questions about conflicts of interest, a supplier’s health and safety record, whether its directors are fit and proper persons, whether it has policies in place to counter modern slavery or what constitutes value for money. This approach has been sewn into procurement, including in frameworks developed by organisations such as PfH, for good reason. They protect housing associations’ financial health, efficiency and reputation and the requirement for these protections isn’t going away.
Those who fantasise about flicking through the Yellow Pages and doing a quick ring around to find a supplier should remember that a significant number of procurement challenges were made where local authorities and housing associations had greatest flexibility to depart from the regulations, for example in health and social care. If housing associations are going to adopt a new approach, it must be much more sophisticated than taking the path of least resistance at the time when you need to buy something. So where to start?
If we move on from OJEU as a result of Brexit, we need to think about what is wrong with the current outcomes and what needs to change to improve our procurement processes. Perhaps associations will be able to take a more proportionate approach to procuring lower value supplies and services? The low OJEU threshold of £164,176 for services and supplies (compared to £4.1million for works) often caused significant frustration and a higher figure could be the starting point for more rigorous procurement processes. Alternatively, could associations more easily take into account different award criteria, such as the impact of suppliers on the local economy? Perhaps frameworks longer than 4 years could be created to enable associations to develop long-term relationships and negotiate better deals with suppliers?
Any flexibility will need to be within the parameters of the common law, charity law and the requirements of the housing regulator, all of which are still there to guide process and behaviour, and housing associations may still be subject to World Trade Organisation rules when, for example, developing grant funded homes through the HCA. However, there is a clear opportunity to think again about what good looks like in procurement.
In the short term, housing associations should not expect to burn the OJEU regulations and start a procurement revolution. Instead, it would be best to understand what could be achieved with any new flexibility. Life without OJEU may be like giving someone a powerful sports car. They could use it wisely, take control and get from A to B more quickly, or they could cut corners, be reckless and lose control.
Richard Brooks is a partner at Anthony Collins LLP in Birmingham, specialising in procurement, state aid, construction and energy for housing associations, charities and the public sector.