Procurement Bill could “significantly” limit ability of councils and other public sector bodies to collaborate through shared service arrangements: LGA

November 30, 2022

The Local Government Association (LGA) has warned that the Procurement Bill, which is currently at the report stage in the House of Lords, would "significantly limit” public bodies from using the current vertical and horizontal procurement exemptions, which enable councils and public sector bodies to enter into collaborative arrangements to run efficient public services.

In an assessment of the Bill's provisions, the LGA said: "Shared service arrangements enabled by these exemptions help to drive significant efficiencies in local government through achieving economies of scale and by pooling resources.”

According to the LGA, the Bill introduces a new "reasonableness" test which stipulates that the current exemptions can only be used if the contract "could not reasonably be supplied under a separate contract".

The LGA said: “It will often be the case that public services, whether front-line or back-office, could 'reasonably be supplied' by a provider that is not a public entity.

“As a result, the legislation would require the public sector to have to engage the market, even for arrangements wholly within the public sector, such as one council wishing to collaborate with a neighbouring council(s) for example.

"The change comes to the detriment of efficient service delivery and closes down certain models of service delivery which save public money."

Previous LGA research has shown that in 2018/19, shared service arrangements partly contributed to saving the taxpayer nearly £200m.

Despite its concerns about the changes to vertical and horizontal procurement, the LGA said it broadly welcomed the provisions in the Bill.

The organisation voiced strong support for plans for a single digital platform to simplify the public procurement system for both buyers and suppliers and enhance transparency.

It also praised the Government's amendments to the Bill, which aim to support the participation of small and medium-sized enterprises (SMEs) in public contracts, but added that a similar focus to supporting voluntary, community, and social enterprises (VCSEs) should be considered.

The LGA also commended government amendments that aim to reduce bureaucracy.

"We also welcome the proposed flexibility for contracting authorities to only set performance indicators (amendment 78) and only publish modifications for public contracts over £5m instead of £2m (amendment 104), and revise the obligation to publish information about mitigating perceived conflicts to only apply only to those that the contracting authority considers are likely to arise", the LGA added.

The LGA said it wants to see the Government go as far as possible in reducing red tape for both the public sector and businesses.

On Monday there were three votes in the House of Lords on amendments to the Bill covering:

An amendment ensuring that the National Health Service is included in the definition of a public authority under the new law.
An amendment which requires the government to consider a set of principles before publishing the National Procurement Policy Statement. These principles include: economic, social, environmental and public safety priorities; value for money, transparency and accountability for public spending; fair treatment of suppliers and non-discriminatory decision making.
An amendment which ensures that legal requirements regarding climate change, the environment, public services, supplier innovation and abuse of public money become strategic priorities in the National Procurement Policy Statement.

A majority of votes were in favour of these amendments so the changes were made.

The report stage was set to continue today (30 November). Further amendments were to be discussed, with subjects expected to include: