PROCUREMENT AND SUPPLY CHAIN
“Businesses in the rail sector need to take action to ensure responsibility for compliance remains fi rmly with the contracts department, or risk an expensive mistake.”
Three critical actions for the upcoming procurement directives impacting the rail industry
Liz Wilson-Lamb, EU Services Manager at Achilles – which operates Link-up, the supplier registration and qualifi cation scheme for the rail industry – explains how the European procurement reforms will affect rail industry companies.
E
arly in 2014 the European Commission is expected to unveil the biggest raft of change
in almost a decade to Procurement Directives, which will affect regulated procurement sectors – including rail. The development could be something of a ‘double-edged sword’; providing real opportunities for suppliers to rail companies, but signifi cant potential risk for rail industry buyers who are not up-to-speed on the new rules.
The main aims of the changes are to speed up and simplify procurement, to create a level playing fi eld for SMEs supplying the rail companies, and to clarify ‘gaps’ in legislation – where, historically, experts have had to fi nd a solution using only examples of case law or by applying the fi ve Treaty Principles.
It is welcome news for everyone, but extra protection for
suppliers means additional
potential risk for buyers, which need to be observed, recognised and mitigated. For example, the time and costs involved in fi ghting challenges could be very signifi cant, taking months or years to resolve and often with a bill of thousands of pounds for either compensation or out-of-court settlements.
Costs of failure to comply with EU procurement 54 | rail technology magazine Dec/Jan 14
regulations amount to hundreds of millions each year. Reports suggest that irregularities with the West Coast Main Line franchise tender alone are expected to cost the UK Government £40m.
Here are Achilles’ top three tips on how buyers and suppliers in the rail industry can protect themselves and get ahead of the game on changes to EU Directives:
1. Identify the main changes
Based on the current Directive draft, these are likely to be:
• Firstly, buyers will no longer be able to impose a minimum fi nancial turnover requirement on suppliers greater than two times the value of the contract. At present, there are no specifi c guidelines, other than that it should be ‘proportionate.’
• Next will come additional clarity on preventing the situation where the scope of an awarded contract ends up being signifi cantly different, or re-defi ned, from the original specifi cation. The new directives defi ne more closely what constitutes a substantial or material
change to a contract. If a contract changes beyond that scope, then the buyer may potentially be breaching the rules. For suppliers, that means additional protection from being unnecessarily precluded from bidding for contracts. Again, suppliers should be ready to question the process an awarding organisation has followed.
• Another potential pitfall for buyers is around contract management. Procurement departments frequently set up contracts that are then managed by another department, resulting in contracts that can ‘morph’ over time. Suppliers may well challenge awards during the delivery phase unless procurement managers remain vigilant and prevent scope creep.
• Another big change will be the removal of the distinction between ‘Part A’ and ‘Part B’ services. ‘Part A’ services are those opportunities clearly covered by EU legislation, which were likely to attract interest from providers beyond the awarding member state. These opportunities, if above threshold, would have to follow the full OJEU process. ‘Part B’ services were those opportunities
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