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The Local Government Association, which has produced a Procurement Pledge which commits local and central government to work more closely on these issues, is concerned that moves are afoot which could make it virtually impossible for councils to give preference to local suppliers, and will force those wishing to pool services with neighbouring local authorities into an unnecessarily lengthy and costly EU-wide tendering process.

The LGA is concerned that instead of addressing the problems inherent in the current system an up-coming revision of procurement regulations is in danger of making them worse. It is calling on the Government to go into bat for the UK and ensure the re-write of the European directives delivers for British council tax-payers.

Council leaders want a significant increase in the ludicrously low £170,000 procurement threshold above which local government has to open out contracts to the entire EU. This is a process which takes several months to complete and creates a significant and costly barrier to entering a money-saving shared service agreement with a neighbouring authority.

Councils also want more freedom to award contracts to local suppliers, including the relaxation of rules which currently demand procurement contracts to employee organsiations or staff mutuals be opened up to providers across Europe.

Despite the barriers being placed in their way, more than 200 local authorities have already entered into money-saving shared service agreements with neighbouring councils to pool back-office functions like IT and legal, and services like road maintenance and waste disposal. The LGA believes EU reform would see that number climb even further, generating millions in additional savings.

Councils also spend 49 per cent of procurement budgets with small to medium sized businesses, compared to central government which spends less than 14 per cent with SMEs. The LGA believes that figure would be even higher if councils were allowed to target spending at local businesses to promote growth and job creation in their area.

Cllr Peter Fleming, Chairman of the LGA's Improvement Board, said:

"Ridiculous EU procurement rules are making it harder for councils to save money by sharing services, and opportunities to promote local jobs and economic growth are being missed. Opaque Internal Market regulations, which fail to distinguish public sector goals from the private sector's profit motive, are standing in the way of councils delivering better value for money to taxpayers.

"We desperately need the Government to take the fight to Brussels on our behalf and promote a re-write of the rules which are stifling public service innovation and limiting councils' ability to promote growth in their area.

"Local authorities have the best record on procurement in the public sector, spending nearly half of procurement budgets with small to medium sized businesses and teaming up with each other to get lower prices on everything from office paper to complex IT systems. Many would dearly love to be able to use more of their spending power to boost the local economy too. It is crucial that the new rules, expected to be introduced in a few years, clearly address these issues."

Examples of the kind of innovation that is being made more difficult and costly due to unnecessarily bureaucratic EU processes include:

• Cambridgeshire and Northamptonshire county councils – LGSS: Established in 2010 it covers over a dozen services including back-office and professional services and some front-line services, such as social care financial assessments. It has so far delivered savings of around £3.8 million.
• Devon and Somerset Fire and Rescue Authority: Established in 2007 with the Somerset Fire Service being extricated from Somerset County Council in order to combine with Devon Fire and Rescue Service. It has so far delivered savings of £5.8 million.
• Herefordshire Council, Herefordshire Primary Care Trust and Wye Valley NHS Trust – Hoople Ltd: Established in 2011, this is an example of a shared service arrangement that incorporates parts of the NHS to deliver functions like finance, HR and training. It has so far saved £620,000.
• Procurement Lincolnshire: Established in 2008, Procurement Lincolnshire is a single function shared service for the local authorities in the county – a county council, six district councils and a borough council, providing procurement. It has so far saved £10.4 million.
• Vale of the White Horse and South Oxfordshire district councils: The process started in 2007 with a shared chief executive. These two district councils now share officers down to the third tier and deliver most of their services jointly across both councils. So far the arrangement has saved £10.13 million.

Notes to editors

The LGA report ‘Buying into Communities' provides examples of how to work effectively within the EU rules and use them to local advantage, maximising value from every taxpayer pound spent:

Read the LGA report and the case studies
Buying into Communities

Information about the Local government procurement strategy
Local government procurement strategy

Read the LGA's Procurement Pledge
Procurement pledge for local government

Author:  LGA Media Office
Contact: Dale Atkinson, Local Government Association, Telephone: 020 7664 3333