Incoming changes to the EU Procurement Directive are likely to trigger a rise in employee mutuals, according to Winckworth Sherwood.

The law firm says that reform of the regulations governing public sector purchasing around the union will make it much simpler for staff to come together and take ownership of the companies that deliver public services.

Under the new rules, local authorities will have the freedom to award time-limited service contracts to social or mutual enterprises without having to advertise them via official channels. Instead, the only contracts that will legally have to be officially advertised are those with a value of more than €750,000 (£639,500) – which are already more likely to be taken up by bigger private firms.

Simon Randall, consultant at Winckworth Sherwood, says that under the previous rules mutuals were at a disadvantage. Local authorities would struggle to justify awarding contracts to smaller enterprises which could not compete effectively with larger firms that already have a greater pool of resources to draw on.

Even if local government wanted to award these contracts to groups of employees and or any other social enterprise, Mr Randall adds, they would often find themselves expected to use larger service providers.

“We would expect to see a significant increase in the number of new public sector mutuals created to deliver public services,” he says.

The new rules are yet to come into force, since the directive must first be approved in each of the 27 member states of the EU.

Under the same regulations, a range of other measures are being introduced to make it easier to offer contracts to mutuals and other social enterprises. In making a decision, local government procurement teams will be permitted to consider the skills and experience of individuals within the bidding organisation, as well as the social and environmental issues surrounding any given deal.

In addition, they will be able to break contracts down into smaller lots so as to create more and better opportunities for small and medium-sized businesses looking to bid for tender.

Significantly for the whole of the procurement process throughout Europe, the rules will also encourage buyers and suppliers to consult on contracts to improve specifications and shape better, quicker outcomes.

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