Natasha Levanti, ACE Group Communications Executive details how British steel suppliers may get a welcome boost from new procurement guidelines announced by the UK Government…
Recently, several firms within the UK steel sector have gone out of business due to falling prices in conjunction with increased global competition. As a response to this, the UK government has produced new purchasing or procurement guidelines for those projects occurring within the public sector.
This move is intended to help those domestic steel suppliers that are currently under strain. While this may be too little too late for the UK steel industry, it will hopefully mitigate the tremendous impact that international collaborations have upon the UK’s steel industry. Regardless, the UK government utilising a procurement practice as a method to deal with a serious economic issue shows the power of procurement processes.
These new standards shall apply directly to all Central Government Departments including but not limited to the Executive Agencies, as well as the Non Departmental Public Bodies. Released on the 30th of October by the Cabinet Office and Crown Commercial Service, the provisions of this Action Note are for immediate effect to those projects deemed applicable. The Government’s approach is also encouraged to be adopted by all other Contracting Authorities within the wider public sector.
Within this new set of guidelines, the organisers of public sector construction projects must calculate the potential negative impact upon the environment as a result of transporting steel from the supplier to the project location. This must then be factored in as an additional cost for those purchasing decisions, increasing the chance that even with the low cost of foreign steel it would be more cost effective for project organisers to prioritise the use of domestic steel.
Factoring in the carbon footprint will aid in addressing climate change concerns, which will likely be stressed greatly UK wide after the global summit in December on the topic.
Other environmental factors within the sourcing of such materials are also included for the consideration of those organising such qualifying projects, so that the majority of known ‘invisible’ environment costs are taken into account when making decisions for public projects.
Another factor within steel procurement that must now be taken into consideration is what constitutes the workplace safety regime that is abided by during the production of steel.
This coincides with an argument made by many domestic steel producers that the health and safety during UK production is required to be at a higher level than steel originating elsewhere, thus enabling the steel with other origins to be priced lower than domestic steel.
The health and safety considerations factoring into the evaluations of supplier bids is intended to cover the social factors at play within the different sources of steel. This includes but is not limited to the integration of disadvantaged workers, employment legislation, as well as the relevant health and safety requirement. Undeniably the health and safety standards that the UK steel industry abides by have a business cost, which then contributes to increased cost of the steel. Accounting for this difference in standards is intended to put the UK supplier through a more fair cost evaluation process.
Of course, within the UK government’s considerations on implementing this purchasing guideline, the EU and WTO competition laws had to be considered. This solution was reached as a way to ensure such competition laws were respected whilst also ensuring a new level of protection for the UK steel industry.
This new procurement rule must be applied, effective immediately from the 30th October, to all those construction or infrastructure projects that have a capital value estimated at more than £10 million, as well as are classed as containing a significant amount of steel.
To top off the consideration of social and environmental factors that must now be accounted for, the cost calculations must be made upon an analysis of the whole-life cost, not just the initial purchase price. This also addresses concerns from the steel industry, regarding the durability of higher price UK steel versus the potential lower durability of other steel sources.
Ultimately these new guidelines should help UK steel suppliers to be able to compete for major UK government projects alongside, and with a more equal footing, to those international suppliers.
ACE has done extensive research into the potential efficiencies, as well as strategic decisions that can be made within public procurement. This resulted in a comprehensive look at the 16 stages currently present within UK public procurement in the report entitled Procurement Landscape.
Group Communications Executive
Tel: 020 7222 6557