Academies: is public procurement a blessing or curse?

One of the unintended consequences of becoming an academy, free school or university technical college (UTC) is that your school will become responsible for its own purchasing of goods, works and services. David Hansom reports

Many schools will not be familiar with the obligations and responsibilities that this creates. In particular, your school will generally be a "contracting authority" for the purposes of the EU public procurement regime. This means that detailed, and sometimes complex, rules apply to your higher value spend and there are pitfalls for the unwary.

Getting procurement right
Public procurement considerations will apply to all that you purchase for your school - from paper and catering through to major ICT infrastructure. Which rules apply will depend, broadly, on the type and value of the spend, so as a general principle, the higher the value, the greater the obligations on you.

Even the most basic of purchases will be covered by your own internal purchasing policy or that which you may have inherited from the local authority, together with the Academies' Financial Handbook. It is good practice to have a standardised policy in place to detail your school's approach to buying which should set out where competition must take place and require a transparent and fair mechanism to select your winning supplier(s). Above the EU thresholds (which are currently £156,442 for services and supplies, and circa £3.9m for works) detailed rules apply, including obligations to provide certain information to unsuccessful bidders as to why they were unsuccessful and to run a minimum ten-day standstill, or cooling off, period between notification and entering into the contract. Regardless of the value, the fundamental EU principles of ensuring transparency, non discrimination, equality of treatment and proportionality will always apply to all of your contracting.

There are real consequences in getting it wrong: there are legal remedies for dissatisfied bidders who want to question (or even, where the EU rules apply, force the courts to cancel) your procurement decision. Due to a dearth of new public sector-driven opportunities in the market place, there is fierce competition for those that remain and we are seeing more and more formal legal procurement challenges taking place in the difficult economic climate as the private sector must fight for work.

Procurement risks do not just apply in relation to new contracts. Even existing contracts which you may have inherited from previous arrangements can lead to procurement issues where your school may not be able to join in without risk of reopening the original process. On every academy conversion, care needs to be taken to ensure that existing agreements which the school may have been a party to can be lawfully amended to pick up the academy once converted.

Buying together?
These risks and pressures are leading schools to sensibly start to co-ordinate their purchasing and buy together. So, if one school needs to buy paper by adding in the spend on paper for a neighbouring school, you can buy all of the paper in one procurement which could result in a lower cost per sheet Other benefits include reducing duplication, cost and delay inherent in running lots of separate procurement processes. If every academy buys for itself, it is harder to be sure of value for money being secured.

Firstly, schools should check to see whether they can make their purchases from an existing "framework" agreement. These are contractual arrangements set up to establish basic terms and conditions and prices for a range of commodities and services. Once established, the prices and base terms and conditions are set for the duration of the framework which is generally four years. Rather than needing to run a new procurement each time, schools could simply buy from the existing framework at set prices and more quickly than a new procurement. What is key here legally is that the school is specifically entitled to use the framework (and it is always sensible to check with the body which set the framework up), and that you are happy with the basic terms and conditions as these cannot be changed for your own needs.

More widely, any academy, UTC or free school could act as what is known as a Central Purchasing Body (CPB) for others. Here, one school effectively acts as the purchasing agent for a wider list of institutions. This means that legally all of the procurement risk of challenge will sit with the school in the lead role, and it will be important to ensure that all schools using the CPB arrangement are identified to reduce risk of a contract being outside the scope of the procurement and at risk of complaint or challenge.

Some chains of academies are also pioneering through establishing new special purpose companies to act as procurement "hubs" for schools. These new companies ring fence the procurement risk liability within the company structure and allow each school to be a shareholder in the company. Provided there is no private sector involvement in the company, the schools will be able to rely on a exemption to the EU rules which allows the company not only to act as a CPB for them, but also potentially to provide services directly back to the schools lawfully outside of procurement.

The operation of the company can be bespoke to specific needs. Models include each academy simply instructing the company to procure requirements on its behalf as and when needed, or the company can set up framework arrangements that will appoint providers and the academies can call off under these frameworks.
This can have real advantages and is an example of how flexibilities and innovation in public procurement can really help schools to deliver their corporate goals. Important issues here include being clear that an academy is able to undertake wider activities both through its articles and under education and charity law and that that the new company is correctly incorporated and is permitted to undertake the procurement function.

Some good news
The procurement rules can appear daunting for those who may not have needed to worry before. Whilst the EU rules in particular can be onerous, many of the services which schools buy are what are known as "Part B", or residual, services to which these rules will generally not apply regardless of the value of the spend. Part B services include catering, health and legal services. Contracts for information technology or facilities management, however, will be caught by the detailed rules depending on their value and here schools may wish to seek additional support.

David Hansom is a partner and head of public sector at Veale Wasbrough Vizards. David can be contacted on 020 7665 0808 or dhansom@vwv.co.uk.

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