Business Law & Compliance

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Public sector Procurement Directive opens floodgate to employee owned businesses

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The changes will, amongst other things, allow local authorities to award time limited service contracts to mutual or social enterprises without first having to advertise them in official channels. Under the new Procurement Directive only service, contracts that exceed €750,000 will need to be advertised.

The new rules also:

  • Allow local authorities to take into account the relevant skills and experience of individuals at award stage;
  • Allow local authorities to break contracts into smaller lots to facilitate greater SME participation;
  • Allow and actively encourage preliminary market consultation between buyers and suppliers to help shape better specifications, outcomes and shorter procurement times with more freedom; and
  • Improved rules permitting social and environmental aspects to be taken into account in letting contracts.

Simon Randall, a consultant at law firm Winckworth Sherwood who provided advice to the UK Government on these changes said: “This new Directive is enormously welcomed and is designed specifically to make it easier for groups of employees to form public sector mutual or cooperatives to deliver public services.”

He adds: “Changes were needed as the previous Directive made it extremely difficult for local authorities to award contracts to run local services to employee-owned mutuals as those mutuals could not compete effectively against the big service providers who have long track records and substantial funding. We would expect to see a significant increase in the number of new public sector mutuals created to deliver public services.”

The new EU Procurement Directive will take effect when it is implemented across all Member States sometime next year.

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