Strict Compliance versus Commercial Reality: The Practical Application of EC Public Procurement Law to the UK's Private Finance Initiative

• DOI: http://doi.org/10.1046/j.1468-0386.2003.00193.x
• Published date: 01 December 2003
• Date: 01 December 2003

Strict Compliance versus Commercial

Reality: The Practical Application of EC

Public Procurement Law to the UK’s

Private Finance Initiative

Peter Braun*

Abstract: The Private Finance Initiative (PFI) has been described as the largest cultural

change for decades in the way the public sector operates in the United Kingdom. Most of

these projects have to be delivered within the framework of public procurement law. This

article investigates whether the divergence between the legal framework and the commer-

cial requirements of PFI has resulted in the development of a ‘PFI procurement practice’.

If so, it is aimed to examine the reasons for developing the practice and whether it devi-

ated from procurement law. The results of the qualitative empirical study, on which the

article is based, are not limited to PFI procurement, but have wider implications for EC

procurement law and the general debate over whether it is suitable for modern procure-

ment practice. The findings are also of interest to legal sociologists and European Union

lawyers as they describe circumstances under which addressees of the law deviate from

supra-national rules.

I Introduction

The emergence of Private Finance Initiative (PFI) in the 1990s has been described as

the largest cultural change for decades in the way the public sector operates in the

United Kingdom. PFI projects distinguish themselves from traditional methods of

public purchasing by their commercial complexity and long contractual term. Most of

these projects have to be delivered within the regulatory framework of public procure-

ment, which has remained largely unchanged since the 1970s.

The overall objective of the study has been to gain a complete picture of PFI

practice in the light of the apparent divergence between EC procurement law and

commercial requirements of PFI projects. It was aimed to investigate whether this

European Law Journal, Vol.9, No. 5, December 2003, pp. 575–598.

© Blackwell Publishing Ltd. 2003, 9600 Garsington Road, Oxford OX4 2DQ, UK

and 350 Main Street, Malden, MA 02148, USA

*Ph.D. (Nottingham), LL.M. (Wales). The article is based on my Ph.D. thesis successfully submitted to

the University of Nottingham. I am indebted to my supervisor Professor Sue Arrowsmith and to the

scholarship received from Achilles Information Ltd.

divergence has resulted in the development of a ‘PFI procurement practice’. If so, it

was aimed to examine the reasons for the emergence of the practice and whether it

deviated from procurement law. To achieve these objectives, PFI practice was investi-

gated by conducting a qualitative empirical study based on interviewing PFI experts

and analysing the legal grey areas.

The results of the research are not limited to PFI procurement, but have wider impli-

cations for EC procurement law and the general debate over whether it is suitable for

modern procurement practice or whether other approaches should be tried.1The find-

ings are also of interest to legal sociologists2and European Union lawyers3as they

describe circumstances under which addressees of the law deviate from supra-national

rules.

In the following, Section II will introduce the EC procurement rules and PFI pro-

jects. Section III will then briefly turn to the methodology employed in collecting the

qualitative data, mapping out how the study aimed to learn more about the practical

application of procurement law. Thereafter, Section IV will summarise the main dis-

crepancies between the law and the practical necessities. It was discovered that as a

result of those discrepancies, practitioners developed a practice, and this will be out-

lined in Section V. Section VI will then highlight the main characteristics of the prac-

tice. Section VII will explore the salient question what impact procurement law has had

on PFI procurement practice.It is submitted that practitioners have constantly assessed

the risks arising from diverging from the law. Section VIII will address this question

and highlights the considerations taken into account by authorities and bidders.

II EC Procurement Law and Public-Private Partnerships

Procurement law in the United Kingdom was developed on the basis of five EC Council

Directives.4The major rationale of enacting supranational rules in this area of law has

been to open public procurement markets for foreign competitors as part of the Single

European Market policy.5The European legislator enacted transparent procurement

procedures to warrant fair competition and equal access to government contracts for

European Law Journal Volume 9

576 © Blackwell Publishing Ltd. 2003

1S. Arrowsmith, ‘The EC procurement directives, national procurement policies and better governance:

the case for a new approach’ (2002) European Law Review 3; A. Haagsma, ‘Re-thinking the regulatory

framework—reaching common goals through tripartite agreements and co-regulation’ paper presented

at the conference Public procurement—Global Revolution II,University of Nottingham, September 2001.

2With further references: S. Vago, Law and Society (Prentice-Hall, 1995), 326 et seq.

3F. Snyder, ‘The Effectiveness of European Community Law: Institutions, Processes, Tools and Tech-

niques’ (1993) Modern Law Review,19; J. A. E. Vervaele,Compliance and Enforcement of European Com-

munity Law (Kluwer, 1999).

4Public Works Contracts Regulations (‘Works Regulation’),SI 1991/2680, as amended by Public Supply

Contracts Regulations 1995, SI 1995/201; Public Services Contracts Regulations 1993 (‘Services Regu-

lation’), SI 1993/3228, as amended by Public Supply Contracts Regulations 1995, SI 1995/201; Public

Supply Contracts Regulations 1995 (‘Supply Regulation’), SI 1995/201; Utilities Contracts Regulations

1996 (‘Utilities Regulation’),SI 1996/2911. The UK Regulations are based on: Council Directive (‘Works

Directive’) 93/37/EEC (OJ (1993) L 199 at 54); Council Directive (‘Services Directive’) 92/50/EEC (OJ

(1992) L 209 at 1); Council Directive (‘Supply Directive’) 93/36/EEC (OJ (1993) L 199 at 1); Council

Directive (‘Utilities Directive’) 93/38/EEC (OJ (1993) L 199 at 84).

5S. Arrowsmith, The Law of Public and Utilities Procurement (Sweet & Maxwell, 1996); L. Digings and

J. Bennett, E.C. Public Procurement (Sweet & Maxwell, 1992); J.M. Fernandez Martin, The E.C.Public

Procurement Rules: a critical Analysis (Clarendon, 1996); P. Trepte, Public Procurement in the E.C.

(CCH Europe, 1993); F. Weiss, Public Procurement (Atlone, 1993).