Regulation 20 – Reserved contracts

Commentary

Regulation 20 follows very closely Art 20 of Directive 2014/24/EU creating a special regime of reserved contracts for sheltered workshops and sheltered employment programmes for the integration of disabled or disadvantaged persons. This represents the EU version of the US set-asides for specific types of undertakings which is linked to the issue of reservation of contracts to specific categories of undertakings under Regulation 77. The logic of this provision is to restrict competition to certain economic operators.

Under Regulation 20, contracting authorities may reserve the right to participate in public procurement procedures to sheltered workshops and economic operators whose main aim is the social and professional integration of disabled or disadvantaged persons or may provide for such contracts to be performed in the context of sheltered employment programmes, provided that at least 30 % of the employees of those workshops, economic operators or programmes are disabled or disadvantaged workers. There is nothing to say from the perspective of the implementation of EU rules in England, Wales and Northern Ireland.

In our view, though, it is worth stressing that procurement set-asides are always a bad idea. As developed in further detail elsewhere (see A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 100ff), their effectiveness should be questioned given the structural shortcomings of this regulatory instrument (see DE Black, ‘An Evaluation of Federal Contract Set-Aside Goals in Reducing Socioeconomic Discrimination’ (1986–1987) 20 National Contract Management Journal 87, 93–97; ibid, ‘Socioeconomic Contract Goal Setting within the Department of Defense: Promises Still Unfulfilled’ (1988–1989) 22 National Contract Management Journal 67; and TA Denes, ‘Do Small Business Set-Asides Increase the Cost of Government Contracting?’ (1997) 57 Public Administration Review 441). 

Consequently, it would have been desirable for the UK Government to forgo that option under Directive 2014/24/EU and not implement this possibility under Regulation 20. However, the approach has been the opposite, and the goal has always been to maximise this flexibility (see Cabinet Office, Consultation Document on the UK Transposition of new EU Procurement Directives (2014) 13). This is not only the approach in the UK – see eg the situation in Germany as described by E Sarter, D Sack & S Fuchs, Public Procurement as Social Policy? An introduction to social criteria in public procurement in Germany (2014) Universität Bielefeld Working Paper Series on Comparative Governance No. 1. 

In our view, this general approach should be lamented, as it creates significant losses of effectiveness in the procurement system itself and it is highly doubtful that the ultimate social policy goals are achieved–either at all, or at an efficient cost for society. Of course, this is a politically incorrect approach to the issue of social considerations into public procurement, and one that can hardly be presented to EU and domestic decision-makers.

It is interesting to note that Regulation 2 includes a long list of definitions but none for “sheltered workshop” or “disabled or disadvantaged persons”. However, the aforementioned Consultation Document produced by the Cabinet Office asserts in p.13 that guidance will be produced to explain these concepts. So far no guidance appears to have been produced and it would have been preferable if the PCR2015 included a clear definition in Regulation 2.

Last modified: July 5, 2016 by Pedro Telles

20.—(1) Contracting authorities may—

(a) reserve the right to participate in public procurement procedures to sheltered workshops and economic operators whose main aim is the social and professional integration of disabled or disadvantaged persons, or

(b) provide for such contracts to be performed in the context of sheltered employment programmes, provided that at least 30% of the employees of those workshops, economic operators or programmes are disabled or disadvantaged workers.

(2) In such cases, the call for competition shall make reference to Article 20 of the Public Contracts Directive.