Competitive streak

The government announced on 10 September that it had accepted the European Commission’s view that Registered Social Landlords (RSLs) are “public bodies” for the purposes of EU procurement rules. What will this mean for RSLs and the contractors who work with them?

The EU rules in question say that contracts for services, supplies and works above a certain value have to be advertised throughout the EC – the so-called “call for competition”.

The rules, though, only apply to public bodies – the test being whether the organisation in question is “governed by public law”. Local authorities and urban development corporations have had to comply with these rules for some time. Until recently, though, the UK had taken a view that RSLs were not public bodies and so did not have to comply with the EU competition regime. Now RSLs are in the frame.

The background is as follows: in 2001, a European Court judgment brought low-rent housing bodies operating in France within the definition of public bodies. The case centred on whether the housing bodies were subject to “management supervision” by the public authorities that regulated them (one of the tests for deciding whether an organisation is a public body is whether it is subject to management supervision by another public authority). In this case the French regulating authorities had a number of powers over the low-rent housing bodies, and the European Court took the view that these powers meant that the authorities had permanent supervision of the French housing bodies and that they were therefore public bodies subject to the EU procurement rules.

Then, in December 2003, the European Commission announced that it had decided to take infringement proceedings against the UK because contracts awarded by RSLs were not being tendered in accordance with directives. In other words, the European Commission took the view that RSLs were public bodies.

The commission’s thinking was that RSLs are regulated by the Housing Corporation, which, arguably, has even greater powers over RSLs than its counterpart in France has over housing bodies there. The UK has now surrendered and conceded that RSLs are public bodies. The upshot is that RSLs will, in future, have to advertise relevant contracts for services, supplies and works above the specified value threshold and comply with the procurement rules.

The practical consequence of this is that every planned contract for works or services will now have to be reviewed to see if the rules apply or whether the contract falls within one of the exceptions. RSLs will have to factor in an appropriate time frame to undertake the necessary advertising, selection and bidding processes. These involve strict timetables and obligations on RSLs and the contractors that work with them, which will now have to accept the sometimes inflexible approach that the EU regime brings to procurement.

RSLs must also consider whether they can continue with existing partnering arrangements with suppliers and consultants. Partnering has been encouraged in construction procurement but the EU procurement regime may conflict with existing partnering arrangements in some areas, particularly long-term or “strategic” partnering contracts. This will give rise to a new breed of framework agreements, although these will need to be structured to take account of EU directives in this area.

Another likely change in the social housing area, contained in the Housing Bill, will be the availability to the private sector of funding from the Housing Corporation for schemes which include an element of social housing. Depending on the circumstances of each project, private-sector housebuilders may well fall outside the EU procurement regime.

This will allow them to be more flexible in their procurement, which may give them a competitive advantage over RSLs. On the other hand, private housebuilders involved with social housing may have less experience of procurement on a partnering basis (or the requirements of the EU procurement regime) and this, in turn, will encourage greater use of “golden brick” contractual arrangements.