Fears that EU proposals on the bidding process would demolish PFI are easing as lobbyists from the UK put their case to Europe
Contractors across the UK are cautiously optimistic that the European Commission (EC), which threatened to abolish the 'preferred bidder' system, will vote to keep the current bid tendering structure intact when it announces its decision later this month.

Keeping the 'preferred bidder' system would allay fears about the future of PFI projects and other public private partnerships, not only in the UK but also across Europe.

The EC is, however, still debating whether the 'preferred bidder' process is anti-competitive and should be outlawed under European Law.

Although industry experts are more positive than they were in June, when the EU published its draft proposals for amendments to EU procurement regulations, they have warned that until the legislation has gone to the vote the future remains uncertain.

Under the draft proposals, the commission said the 'preferred bidder' process should be replaced by continued 'competitive dialogue', allowing negotiations to continue between the client and provider up until the final choice has been made. This would see contractors competing for longer, right up until the final contract award.

The result would be a substantial increase in bidding costs — some estimates suggest it would cost five times as much to tender, causing a jump from around £1m per bid to nearly £5m.

If this happens it would make bidding too risky and too expensive, contractors have said, and this would endanger the future of PFI.

EC procurement policy advisors drafted the 1996 European Green paper because the commission was concerned about the lack of openness in the construction industry.

Allegations of bribes and pay-offs surrounding construction projects on the continent spurred demand for change. But the proposed changes caused the UK industry to worry.

When the EC procurement policy advisors drafted the policy they seem to have had little idea how PFI works. Because of this they failed to appreciate that the proposals could substantially increase bidding costs for contracts in the UK, according to one government source.

Contractors are not out of the woods yet, but I’m less worried than I was

Dermot Gleeson

Under the preferred bidder system, the final elements of a contract are ironed out after a preferred bidder is appointed. The EC believed that this could lead to corruption.

But both the Construction Confederation and UK government advisors stressed the need for more flexibility in the process.

One insider said the UK industry and government is confident that warnings have been heeded, but it is still a waiting game for all involved, with the revised rules expected to be agreed by the end of the month.

Since June, when a delegation of the Construction Confederation and Major Contractors Group members met with representatives of the European Commission and MEPs, discussions have been behind closed doors.

The June delegation was lead by Dermot Gleeson, executive chairman of MJ Gleeson, who was joined by representatives from Carillion, Bovis Lend Lease and John Mowlem. They told the commission of their fears that the proposed new rules on public procurement would ruin the UK PFI programme. Commenting then, Gleeson said the changes 'would significantly undermine the PFI process and derail the government's ambitious investment programme for the next four years.'

But now he is more confident. He told TheFB he believes there has been 'some success in persuading some member states' that the UK position is acceptable. The situation is probably manageable and PFI may survive, he said, but contractors are 'not out of the woods yet'. However, he said: 'I am a great deal less worried than I was.'

He said during the visit the commission listened carefully and clearly wanted to be helpful. The commission, he said, had little knowledge about PFI, and it needed to be explained.

But, said Gleeson, it seemed that they would try to incorporate UK requirements into what they saw as necessary law changes.

John Bromley, European director of the Construction Confederation, said he is also confident that PFI will be saved.

It’s taken a leap of imagination for Europe to understand PFI

John Bromley

He said the problems arose because Europe didn't understand what PFI was and how it worked. 'It's different to what they are used to and it's taken a leap of imagination for them to understand.'

The commission, he said, could not understand how a contractor could have such a massive hand in the design process.

The PFI method — where the contractor is told to solve a problem, such as housing 400 prisoners, and come up with an innovative solution, is very different from traditional construction procurement.

For months the Construction Confederation has been trying to make the commission understand that PFI is not is not anti-competitive. Bromley thinks it has succeeded.

A decision is still not 'certain', he said. But this is because it still has to go through the voting process and that can't be guaranteed.

The UK position is not that every member state should use PFI — just that the UK wants to have the option to use it. 'It's now a process of finding the words that don't open the doors to anti-competitive behaviour,' said Bromley.

He pointed out that the use of private finance in Europe is nothing new. France and Germany are already doing PFI-type deals and have been for some time. He cited the construction of the Eiffel Tower, over one hundred years ago, as an early example of the use of private finance in Europe.

The European Council is due to draft the text by the end of the month. It will then have to be agreed by the Parliament before becoming law. When it becomes law the UK will have between 18 months and three years to incorporate it in local legislation.

Norman Rose, director general of the BusinessServices Association, said that UK organisations have put a lot of work into the protest against the proposals and he believes, and hopes, they will get the changes they want.