British Steel Suppliers May Get Boost from New Procurement Guidelines

New Procurement Guidelines

November 2015 saw several firms within the UK steel sector go 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 utilizing a procurement practice as a method to deal with a serious economic issue shows the power of procurement.

Within this new set of guidelines, the organizers of public sector construction projects must calculate the potential negative impact upon the environment as a result of transporting steel. 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 organizers to prioritize the use of domestic steel.

Factoring in the carbon footprint will not only begin to address 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 and transportation of such materials are also included for the consideration of those organizing such qualifying projects, so that all the ‘invisible’ costs are taken into account when making decisions for public projects.

Another factor within steel procurement which must now be taken into consideration is what constitutes the workplace safety regime that abides 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.

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 applies 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 steels.

Ultimately these new guidelines should help UK steel supplies to be able to compete for major UK government projects alongside, and with equal footing to those international suppliers.

Read the UK government’s Procurement Policy Note: procuring steel in major projects here.