May 17, 2020

Comment: ditching the OJEU-approved public sector procurement rules could bring risks

European Union
Dr. Niels Tholen
2 min
The Official Journal of the European Union (OJEU) regulations, which protect against fraud and ensure fairness in the way public sector contracts are aw...

The Official Journal of the European Union (OJEU) regulations, which protect against fraud and ensure fairness in the way public sector contracts are awarded in the UK, have been widely criticised for driving up costs and slowing down procurement processes. But should the system be replaced and if so, with what?

Far from simply being an example of burdensome EU red tape, the UK’s consistent high ranking in global anti-corruption tables is proof that the system is doing its job and protecting the interests of UK tax payers. The OJEU directives require the publication of contract notices for all public sector procurement over £100,000 in spend, providing transparency and enabling all interested parties to participate. 

Despite their effectiveness, however, recent research has found that UK procurement processes take on average two months longer and are £20,000 more expensive compared to the rest of Europe. Rather than scrapping OJEU regulations altogether in order to tackle the UK’s inefficiencies, the UK government should prioritise improving engagement with the existing framework to improve efficiency whilst maintaining fairness and transparency. 

In order to deliver changes that will improve engagement with the regulations, it is essential that procurement professionals first stop blaming the system. Instead, there should be a drive to raise standards and upskill those responsible for public sector procurement at all levels.

If not replaced with an equally robust framework, repealing or amending the OJEU system could open the door to corruption within the sector; negatively impacting private sector investment. Furthermore, replacing OJEU with a system that favours British contractors could place significant pressure on certain industries, such as the nuclear industry, which are reliant on offshore talent to bridge current and future skills gaps.

The procurement regime adopted by the UK Government post-Brexit is likely to depend on the nature of the relationship that is adopted with the EU over the coming months. With key drivers such as access to market, tariff-free trade and tariff barriers yet to be determined, public sector organisations can put themselves in the best position for potential changes by taking steps to maintain agility at all levels of the supply chain. 

With many battles ahead over the coming months, replacing a system which has proven its effectiveness in increasing fairness and transparency is likely to be low down the Government’s agenda. Instead of changing the wheel, all those involved in public sector procurement should be doing more to increase engagement with the existing OJEU-compliant system and focus on trying to make it work more efficiently.  

Dr. Niels Tholen is a senior consultant and industry expert at supply chain and procurement strategy firm, Vendigital

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Jun 16, 2021

EU and US agree end to Airbus-Boeing supply chain tariffs

3 min
Supply chains embroiled in Airbus-Boeing dispute will no longer be impacted by $11.5bn tariffs imposed on food and beverage, aircraft and tobacco

The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic. 

Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years. 

It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC. 

The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn. 

In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products. 

Boeing-Airbus dispute by the numbers  

  • The dispute began in 2004
  • Tariffs suspended for 5 years 
  • $11.5bn worth of goods affected by tariffs
  • $3.3bn in duties paid by businesses to date 
  • 15% levy on aircraft and 25% on non-aircraft goods suspended

Both sides welcome end to tariffs 

European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.

“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.

Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”. 

The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."

This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.

Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”

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