Can English universities adopt a more commercial approach and stop complying with EU public procurement law?

By Dr Albert Sanchez-Graells, Senior Lecturer in Law (University of Bristol Law School).

© NTSU magazine.

© NTSU magazine.

Since the introduction of student fees, and particularly after the 2011 White Paper ‘Students at the Heart of the System’, English universities have been exposed to increasing commercial pressures. This has encountered significant opposition, and both the path of reform of the higher education sector and the resistance against it are echoed overseas.

However, this trend will not reverse in the immediate future, whatever the outcome of the consultation based on the 2015 Green Paper ‘Fulfilling our Potential: Teaching Excellence, Social Mobility and Student Choice’. English universities will continue needing to adapt to increasing commercial pressures. However, they seem to have the cards stacked against them. English universities are not entirely free to pursue whichever commercial approaches they see fit. Their activity is highly regulated, and they are bound by significant constraints, both under domestic and EU law.

One area of increasing controversy is the possibility for English universities to move away from what are considered burdensome and restrictive public procurement procedures and adopt a strict commercial approach to the way the purchase supplies, services and commission works. Such flexibility would allow them to choose their suppliers and contractors more freely, reduce the red tape associated to their day to day operations, and some claim that this would unleash innovation. Unsurprisingly, this is catching the attention of practitioners in the field, and the Higher Education Procurement Academy is prioritising this issue. The trouble is that, while some practitioners have made claims supporting the adoption of such a commercial approach, others consider that reforms in the English higher education system are insufficient to warrant such a change.

In order to tackle these issues, together with my colleague Andrea Gideon, I looked in detail into the constraints that EU public procurement law impose on English universities. In our paper*, we analysed the possibility for English universities to adopt a commercial approach to the way the buy goods and contract services. We went beyond this and also analysed whether, being increasingly commercial economic operators, universities had already started offering teaching and research services that had to be put out to tender by HEFCE and the UK research councils. We reached the following main conclusions.

First, when universities act as buyers, they are bound to comply with EU public procurement law. Despite the introduction of significant student fees, the funding channelled to universities by the BIS through the Students Loan Company does not detract from its public nature. Thus, if together with other sources of public funding, the funding received from the SLC exceeds 50% of their overall revenue, English universities remain bound to comply with EU public procurement rules in their role as buyers and this situation is likely to remain in the future. This can be perceived as a disadvantage where the provision of higher education services is opened to competition by alternative providers, including for-profit providers, which may support the possibility to create a mechanism of exception for activities exposed to competition similar to the one existing under the special EU rules applicable to utilities procurement. This would require a reform of EU public procurement, which is unlikely.

Second, when universities act as providers of teaching and research services, they can only be directly entrusted with the provision of teaching or research activities that can be conceptualised as services of a non-economic nature. Conversely, where these activities are of an economic nature because they are provided under conditions of market competition, their entrustment to universities need to comply with the EU public procurement rules. In the case of higher education teaching activities in England, HEFCE should subject the award of teaching funding through grants to the light touch regime created by Directive 2014/24 (art 77). As regards research activities, most publicly funded research will be of a non-economic nature since it is conducted ‘for more knowledge and better understanding’. Yet, if a more clearly defined piece of research which could be conducted in the market by a private provider is commissioned by the state, it does constitute an economic activity regardless of how it is labelled. In these cases, if the assessment established that the activity is economic in nature, it would need to comply with Directive 2014/24 or the alternative arrangements under the EU Framework for State aid for research and development and innovation. Research procurement that does not fall under these instruments can still be assessed under the Pre-commercial Procurement Communication.

Overall, thus, our conclusions oppose the possibility for English universities to adopt a more commercial approach and stop complying with EU public procurement law, both as buyers and sellers. This may be seen as an unnecessary straitjacket for universities undergoing  commercialisation-oriented changes. Conversely, it can also be seen as a powerful brake against the pressures for commercialisation. One way or the other, though, it seems clear that the extent to which English universities are bound by EU public procurement law needs to be widely understood. Once that happens, any decisions on further reform of the English higher education sector will probably be more consistent and reduce the current risks of findings of infringement by the European Commission.

* A Gideon and A Sanchez-Graells, ‘When Are Universities Bound by EU Public Procurement Rules as Buyers and Providers? – English Universities as a Case Study’ (2016) 1 Ius Publicum art 4, available in open access. Previous versions of this post appeared in Albert’s personal blog howtocrackanut, and in the blog of the research group on the Europe of Knowledge to which Albert and Andrea belong.

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