Top economists lambast new procurement law

Top economists lambast new procurement law
Sunday Herald, By Colin Donald

New law proposed by the Scottish Government to regulate over £9 billion a year of public spending procurement in Scotland is "extremely weak", "nebulous", and "unlikely to achieve much", according to a pair of influential economists.

The damning critique of the Procurement Reform (Scotland) Bill by Jim and Margaret Cuthbert came in a session of the Scottish Parliament’s Infrastructure and Capital Investment Committee last week, providing an unexpectedly contentious start to the expected three-month parliamentary scrutiny process. Introduced to the Parliament in October, the bill is expected to be voted on by the Scottish Parliament by February.

Committee members were visibly taken aback as the husband-and-wife team, respectively a former Scottish Office chief statistician and an academic economist, lambasted the bill as a "dreadfully missed opportunity" to ensure public spending in Scotland is geared to promoting the development of Scottish SMEs. They also warned the drafting of the bill "has so much fluidity and flexibility that it can mean all things to all men."

The couple’s forceful attack, expanding on their 2012 paper on procurement for the left-wing Jimmy Reid Foundation, contrasted sharply with the rosy introductory depiction of the bill by the Scottish Government’s head of procurement, Alastair Merrill.

He described it as: "Maximis[ing] the contribution that public procurement can make to Scotland’s economic recovery [and seeking] value for money as the best balance of cost with sustainability, seen through lenses of social, economic and environmental sustainability."

However, the Cuthberts, whose ­previous research has lent support to Scottish independence and an independent Scottish currency, lambasted the bill as "missing a golden opportunity … to right the wrongs of the past 30 years", a reference to a perceived procurement bias towards large companies, often outside Scotland, which they claim has thwarted Scottish business in the construction and other sectors.

Dismissing accusations that they were "protectionist", they claimed their research into European competitors suggested Scotland as a "small, peripheral European country" should devise a system that favoured small company growth and the promotion of research and development.

Jim Cuthbert said: "The provisions [of the bill] are fairly general, and I was surprised that specific things that could be done weren’t done. There could have been a requirement to split down contracts as is done in other European countries. That was not done. There is an ambiguity in the bill about the duties to be laid down to central purchasing bodies."

Margaret Cuthbert said: "Procurement is [worth] over £9 billion, and can be estimated up to £11bn. [The bill] is a golden opportunity to address the problem of how can we use it to improve the economy, promote R&D and innovation, and address the gap between Scotland and other competitor states out there.

"I think it’s a dreadfully missed opportunity. The bill is light, it doesn’t address the fact of different types of procurement, like PFI and its successor [NPD], the Scottish Futures Trust, Scottish Water as well as central government bodies and universities. Each of these is contributing in their own way in holding back growth in Scotland."

She continued: "At least since 2006 the policy on procurement has been to chase ‘value’, meaning lowest price … [in] a race to the bottom. If you look through some of the contracts through … over the last four years, you will see that although there is an nod and wink to economy and training, this is a small percentage [of the requirement].

"We have to be doing things to encourage innovative forms, and small businesses, we need to right the wrongs of the last 30 years."

In the same session the committee also heard from Barry White, chief executive of the Scottish Futures Trust, who registered support for the bill and distanced himself from the "negative" view of the Cuthberts.

Also giving evidence was Duncan Osler, a partner with lawyer MacRoberts and an expert on EU procurement law. Scottish legislation is meant to "dovetail" with the EU overhaul, with new directives expected from Brussels in January 2014.

Speaking after the meeting, committee member Alex Johnstone, a Scottish Conservative MSP, said: "What we heard from Government officials was sound common sense. I like evolution rather than evolution and the aim of this bill is to institutionalise the good practice we have seen over the last five years and clean up that which has less successful."

"Procurement has to be a dynamic process and I think that the kind of changes the Cuthberts were talking about would lead to a process that would be more rigid and probably less likely to produce what we want from it.

"While I respect and learned a great deal from the Cuthberts, I suspect they will not have as much influence as they would like in the direction of the bill."

The committee will hear more evidence and make fact-finding tours during November and December, before a stage one debate in the Chamber by February 6.