Procurement in a Nutshell: Passport Blues – French company set to win the bid to make new blue British passports

This decision has led to discontent among various UK sectors – with the matter even being raised in parliament where a group of MPs called for a review of the decision. However, it is worth noting that this process was conducted under EU procurement rules and, as a consequence, the UK Government is bound to select the most economically advantageous bidder and not discriminate against any supplier.

The controversy

Following the announcement that after leaving the EU, the UK will revert back to the old blue passport, the Government launched a procurement inviting companies to tender for the new contract, which will begin in September 2019. As the UK is still a member of the EU, this procurement was conducted under the EU’s procurement procedures, in line with EU procurement rules.

Following evaluation, it was announced that the Franco-Dutch firm Gemalto had secured the best score in the tendering procedure ahead of British company De La Rue, the current producer of British passports.

This result has been called a humiliating symbol of the post-Brexit future by some critics with calls to rethink this decision not just coming from industry but also from within Parliament where members of the House of Lords called on the Government to reconsider awarding the contract to the Franco-Dutch firm and former cabinet minister and pro-Brexit supporting Priti Patel described the decision as ‘disgraceful’ and ‘perverse’.

De La Rue had previously expressed its intention to appeal the decision and at the beginning of April was granted an extension to allow it to formally launch an appeal, which was  made on the basis  that although it was not have delivered the best value on price, it had the highest score on quality and was best for security.

On 18 April 2018 De La Rue announced they would not be appealing the decision after the company revealed the failed bid cost them £4m.

The role of procurement

Ultimately, the UK is bound by the EU procurement rules. As such, any central government contract over the procurement threshold, such as the one in this instance, must follow the EU Procurement Regulations.

The fundamental purpose of the EU Procurement Directives is to promote open and transparent competition for European public contracts, to support the free market and help secure value for money in public purchasing. In engaging in procurement, a Contracting Authority seeks to find the most economically advantageous tender i.e. the one which gives them the highest quality for the best value for money.

If De La Rue had gone ahead with their appeal and the UK accepted it and reversed their decision, they would be discriminating against Gemalto in favour of a national company. This would contravene a core principal of procurement that Contracting Authorities must not discriminate against foreign bidders. Gemalto appear to have won the procurement fairly, through an open, competitive dialogue satisfying the requirements of procurement.

Further, Gemalto has been shown to be the bidder which satisfies the requirement of being the best value for money. Engaging in a procurement process would be ineffective if the Contracting Authority did not choose the tenderer that satisfies this, particularly when there are public funds at stake.

Theresa May has explained that going ahead with Gemalto will save the tax payer around £120 million over the five year contract duration, which could instead be invested into other Public Sector areas. Further, the Home Office explained that this new deal would create 70 new jobs in the UK at sites in Fareham and Heywood in Lancashire.

However, it is interesting to note that a large proportion of the work De La Rue completes involves printing passports and bank notes for other countries in the EU, contracts that have presumably been open to De La Rue because of the EU procurement rules.

Why is this important?

This contentious news issue has brought to light the fact that, the UK is bound to follow EU procurement rules and cannot discriminate in favour of UK suppliers. Furthermore, although some have suggested that these rules will cease to apply once the UK leaves the EU (after transition), in reality are likely to remain as part of UK law if the UK wants its suppliers to still have access to bid for European contracts and face no discrimination when they do.

How can I find out more?

If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.