Procurement in a nutshell – procuring steel in major projects
15th April, 2016
In October 2015, the Crown Commercial Service published a procurement policy note (PPN) for Central Government Departments procuring infrastructure and construction (or other major projects with a significant steel component), where the overall project requirement has a capital value of £10 million or above.
The PPN identifies a number of recommended steps including: early market engagement and transparency regarding subcontracting opportunities; robust application of exclusion and selection criteria, including those related to health and safety and environmental compliance; the application of whole-life costing to steel purchases including the cost of emissions; and use of environmental and social award criteria. More specifically, the action note asks public sector procurers to:
- signal the future pipeline of requirements on steel sourcing and best practice in pre-procurement market engagement;
- ensure there is clear visibility of opportunities at sub-contractor level where the source of steel has not been identified by a Tier 1 contractor;
- assess the health and sustainability of potential suppliers in the supply chain at selection stage;
- ensure that the price or cost calculations are based on an assessment of the whole life cost and not lowest purchase price; and
- take account of appropriate social and environmental impacts at the award stage where they are linked to the subject of the contract.
The enhanced ability to take non-pricing considerations into account under the Public Contracts Regulations 2015 gives scope to these approaches.
The Government’s stated purpose of developing these rules under the new EU procurement directives was to encourage procurement which is sustainable in the environmental, social and economic sense.
In response to the decision by Tata Steel to sell its Port Talbot plant, the Government has extended the application of the PPN. It now applies to the entire public sector, including the NHS.
The controversy
It has been stated that the timing of the PPN as well as its wording – to ensure that UK steel suppliers can ‘compete effectively’ – indicate that the actual purpose of the measures is to reduce the proportion of foreign steel being used in public contracts.
There is a risk that sustainability considerations will be equated with protectionism. However, the EU legislative rhetoric supports the contention that environmental and social considerations can coexist with competition and cost-effectiveness in procurement.
Why is this important?
The PPN is one for contracting authorities to be aware of at the early stages of construction or infrastructure project planning or procurement where the project has a capital value of more than £10 million.
The Government’s updated PPN is notwithstanding existing procurement law obligations. Contracting authorities will need to tread a fine line between following the guidance in the PPN to achieve sustainability objectives on the one hand, and on the other, making sure that their procedures comply with the EU procurement directives to ensure that contracts are awarded fairly, transparently and without discrimination on the grounds of nationality.
How can I find out more?
If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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