Where does the proposed EU AI Act place procurement?

Thinking about some of the issues raised in the earlier post ‘Can the robot procure for you?,’ I have now taken a close look at the European Commission’s Proposal for an Artificial Intelligence Act (AIA) to see how it approaches the use of AI in procurement procedures. It may (not) come as a surprise that the AI Act takes an extremely light-touch approach to the regulation of AI uses in procurement and simply subjects them to (yet to be developed) voluntary codes of conduct. I will detail my analysis of why this is the case in this post, as well as some reasons why I do not find it satisfactory.

Before getting to the details, it is worth stressing that this is reflective of a broader feature of the AIA: its heavy private sector orientation. When it comes to AI uses by the public sector, other than prohibiting some massive surveillance by the State (both for law enforcement and to generate a system of social scoring) and classifying as high-risk the most obvious AI uses by the law enforcement and judicial authorities (all of which are important, of course), the AIA remains silent on the use of AI in most administrative procedures, with the only exception of those concerning social benefits.

This approach could be generally justified by the limits to EU competence and, in particular, those derived from the principle of administrative self-organisation of the Member States. However, given the very broad approach taken by the Commission on the interpretation and use of Article 114 TFEU (which is the legal basis for the AIA, more below), this is not entirely consistent. It could rather be that the specific uses of AI by the public sector covered in the proposal reflect the increasingly well-known problematic uses of (biased) AI solutions in narrow aspects of public sector activity, rather than a broader reflection on the (still unknown, or still unimplemented) uses that could be problematic.

While the AIA is ‘future-proofed’ by including criteria for the inclusion of further use cases in its ‘high-risk’ category (which determines the bulk of compliance obligations), it is difficult to see how those criteria are suited to a significant expansion of the regulatory constraints to AI uses by the public sector, including in procurement. Therefore, as a broader point, I submit that the proposed AIA needs some revision to make it more suited to the potential deployment of AI by the public sector. To reflect on that, I am co-organising a webinar on ’Digitalization and AI decision-making in administrative law proceedings’, which will take place on 15 Nov 2021, 1pm UK (save the date, registration and more details here). All welcome.

Background on the AIA

Summarising the AIA is both difficult and has already been done (see eg this quick explainer of the Centre for Data Innovation, and for an accessible overview of the rationale and regulatory architecture of the AIA, this master class by Prof Christiane Wendehorst). So, I will just highlight here a few issues linked to the analysis of procurement’s position within its regulatory framework.

The AIA seeks to establish a proportionate approach to the regulation of AI deployment and use. While its primary concern is with the consolidation of the EU Single Digital Market and the avoidance of regulatory barriers to the circulation of AI solutions, its preamble also points to the need to ensure the effectiveness of EU values and, crucially, the fundamental rights in the Charter of Fundamental Rights of the EU.

Importantly for the purposes of our discussion, recital (28) AIA stresses that ‘The extent of the adverse impact caused by the AI system on the fundamental rights protected by the Charter is of particular relevance when classifying an AI system as high-risk. Those rights include ... right to an effective remedy and to a fair trial [Art 47 Charter] … [and] right to good administration {Art 41 Charter]’.

The AIA seeks to create such a proportionate approach to the regulation of AI by establishing four categories of AI uses: prohibited, high-risk, limited risk requiring transparency measures, and minimal risk. The two categories that carry regulatory constraints or compliance obligations are those concerning high-risk (Arts 8-15 AIA), and limited risk requiring transparency measures (Art 52 AIA, which also applies to some high-risk AI). Minimal risk AI uses are left unregulated, although the AIA (Art 69) seeks to promote the development of codes of conduct intended to foster voluntary compliance with the requirements applicable to high-risk AI systems.

Procurement within the AIA

Procurement AI practices could not be classified as prohibited uses (Art 5 AIA), except in the difficult to imagine circumstances in which they deployed subliminal techniques. It is also difficult to see how they could fall under the regime applicable to uses requiring special transparency (Art 52) because it only applies to AI systems intended to interact with natural persons, which must be ‘designed and developed in such a way that natural persons are informed that they are interacting with an AI system, unless this is obvious from the circumstances and the context of use.’ It would not be difficult for public buyers using external-facing AI solutions (eg chatbots seeking to guide tenderers through their e-submissions) to make it clear that the tenderers are interacting with an AI solution. And, even if not, the transparency obligations are rather minimal.

So, the crux of the issue rests on whether procurement-related AI uses could be classified as high-risk. This is regulated in Art 6 AIA, which cross-refers to Annex III AIA. The Annex contains a numerus clausus of high-risk AI uses, which is however susceptible of amendment under the conditions specified in Art 7 AIA. Art 6/Annex III do not contain any procurement-related AI uses. The only type of AI use linked to administrative procedures concerns ‘AI systems intended to be used by public authorities or on behalf of public authorities to evaluate the eligibility of natural persons for public assistance benefits and services, as well as to grant, reduce, revoke, or reclaim such benefits and services’ (Annex III(5)(a) AIA).

Clearly, then, procurement-related AI uses are currently left to the default category of those with minimal risk and, thus, subjected only to voluntary self-regulation via codes of conduct.

Could this change in the future?

Art 7 AIA establishes the following two cumulative criteria: (a) the AI systems are intended to be used in any of the areas listed in points 1 to 8 of Annex III; and (b) the AI systems pose a risk of harm to the health and safety, or a risk of adverse impact on fundamental rights, that is, in respect of its severity and probability of occurrence, equivalent to or greater than the risk of harm or of adverse impact posed by the high-risk AI systems already referred to in Annex III.

The first hurdle in getting procurement-related AI uses included in Annex III in the future is formal and concerns the interpretation of the categories listed therein. There are only two potential options: nesting them under uses related to ‘Access to and enjoyment of essential private services and public services and benefits’, or uses related to ‘Administration of justice and democratic processes’. It could (theoretically) be possible to squeeze them in one of them (perhaps the latter easier than the former), but this is by no means straightforward and, given the existing AI uses in each of the two categories, I would personally be disinclined to engage in such broad interpretation.

Even if that hurdle was cleared, the second hurdle is also challenging. Art 7(2) AIA establishes the criteria to assess that an AI use poses a sufficient ‘risk of adverse impact on fundamental rights’. Of those criteria, there are three that in my view would make it very difficult to classify procurement-related AI uses as high-risk. Those criteria require the European Commission to consider:

(c) the extent to which the use of an AI system has already caused … adverse impact on the fundamental rights or has given rise to significant concerns in relation to the materialisation of such … adverse impact, as demonstrated by reports or documented allegations submitted to national competent authorities;

(d) the potential extent of such harm or such adverse impact, in particular in terms of its intensity and its ability to affect a plurality of persons;

(e) the extent to which potentially harmed or adversely impacted persons are dependent on the outcome produced with an AI system, in particular because for practical or legal reasons it is not reasonably possible to opt-out from that outcome;

(g) the extent to which the outcome produced with an AI system is easily reversible …;

Meeting these criteria would require for the relevant AI systems to basically be making independent or fully automated decisions (eg on award of contract, or exclusion of tenderers), so that their decisions would be seen to affect the effectiveness of Art 41 and 47 Charter rights; as well as a (practical) understanding that those decisions cannot be easily reversed. Otherwise, the regulatory threshold is so high that most likely procurement-related AI uses (screening, recommender systems, support to human decision-making (eg automated evaluation of tenders), etc) are unlikely to be considered to pose a sufficient ‘risk of adverse impact on fundamental rights’.

Could Member States go further?

As mentioned above, one of the potential explanations for the almost absolute silence on the use of AI in administrative procedures in the AIA could be that the Commission considers that this aspect of AI regulation belongs to each of the Member States. If that was true, then Member States could further than the code of conduct self-regulatory approach resulting from the AIA regulatory architecture. An easy approach would be to eg legally mandate compliance with the AIA obligations for high-risk AI systems.

However, given the internal market justification of the AIA, to be honest, I have my doubts that such a regulatory intervention would withstand challenges on the basis of general EU internal market law.

The thrust of the AIA competential justification (under Art 114 TFEU, see point 2.1 of the Explanatory memorandum) is that

The primary objective of this proposal is to ensure the proper functioning of the internal market by setting harmonised rules in particular on the development, placing on the Union market and the use of products and services making use of AI technologies or provided as stand-alone AI systems. Some Member States are already considering national rules to ensure that AI is safe and is developed and used in compliance with fundamental rights obligations. This will likely lead to two main problems: i) a fragmentation of the internal market on essential elements regarding in particular the requirements for the AI products and services, their marketing, their use, the liability and the supervision by public authorities, and ii) the substantial diminishment of legal certainty for both providers and users of AI systems on how existing and new rules will apply to those systems in the Union.

All of those issues would arise if each Member State adopted its own rules constraining the use of AI for administrative procedures not covered by the AIA (either related to procurement or not), so the challenge to that decentralised approach on grounds of internal market law by eg providers of procurement-related AI solutions capable of deployment in all Member States but burdened with uneven regulatory requirements seems quite straightforward (if controversial), especially given the high level of homogeneity in public procurement regulation resulting from the 2014 Public Procurement Package. Not to mention the possibility of challenging those domestic obligation on grounds that they go further than the AIA in breach of Art 16 Charter (freedom to conduct a business), even if this could face some issues resulting from the interpretation of Art 51 thereof.

Repositioning procurement (and other aspects of administrative law) in the AIA

In my view, there is a case to be made for the repositioning of procurement-related AI uses within the AIA, and its logic can apply to other areas of administrative law/activity with similar market effects.

The key issue is that the development of AI solutions to support decision-making in the public sector not only concerns the rights of those directly involved or affected by those decisions, but also society at large. In the case of procurement, eg the development of biased procurement evaluation or procurement recommender systems can have negative social effects via its effects on the market (eg on value for money, to mention the most obvious) that are difficult to identify in single tender procurement decisions.

Moreover, it seems that the public administration is well-placed to comply with the requirements of the AIA for high-risk AI systems as a matter of routine procedure, and the arguments on the need to take a proportionate approach to the regulation of AI so as not to stifle innovation lose steam and barely have any punch when it comes to imposing them on the public sector user. Further, to a large extent, the AIA requirements seem to me mostly aligned with the requirements for running a proper (and challenge proof) eProcurement system, and they would also facilitate compliance with duties of good administration when specific decisions are challenged.

Therefore, on balance, I see no good reason not to expand the list in Annex III AIA to include the use of AI systems in all administrative procedures, and in particular in public procurement and in other regulatory sectors where ex post interventions to correct market distortions resulting from biased AI implementations can simply be practically impossible. I submit that this should be done before its adoption.

Useful new briefing paper: Building a Vocabulary for Sustainable Procurement (Schooner and Matsuda, 2021)

(c) Michelle Ress (2007).

Steve Schooner and Evan Matsuda have published the useful briefing paper ‘Sustainable Procurement: Building Vocabulary To Accelerate The Federal Procurement Conversation’ (2021). This comes fast on the heel’s of Schooner and Markus Speidel’s earlier ‘‘Warming Up’ to Sustainable Procurement’ (2020), and represents a forceful and useful push to get the discussions on the urgency of a quick transition to (net-zero) sustainable procurement started (in the US), or intensified (elsewhere, perhaps especially in the EU, where the SAPIENS network is also starting to catalyse important aspects of the debate).

Their briefing paper is useful in setting out accessible definitions, and a general overview, of key aspects of an emerging body of knowledge on sustainable procurement (and climate change more generally) and, from that perspective, it can also serve the purpose of offering a blueprint for similar or twin mapping exercises in contexts other than the US. Having a common vocabulary and understanding of key concepts can certainly allow practitioners (and academics) to skip discussions on labelling (or conceptual issues, if this jargon is more palatable to an academic audience) and cut to the chase of exchanging knowledge on practical implementations that are comparable and readily understandable.

The briefing paper also contains a useful rich section on existing resources and, as such, it is a good one stop shop for anyone interested in (US-based) sustainable procurement regulation. And it is intensely referenced, which will also help researchers find a broad number of leads to more specific literature on each of the topics it covers. Lat but not least, the paper formulates punchy and actionable guidelines (or principles) on how to engage with its recommendations.

The briefing paper is perhaps even more useful in sketching how (in the US context) sustainable procurement is a long standing (neglected) aspiration which implementation does not require reinventing the wheel, but rather operating a few levers that have been available to public buyers for a long time. And the paper is also remarkable in politely but clearly putting out the statement that failing to use those levers is no longer acceptable.

I hope the paper will be widely read (even outside the US context) and that the procurement community will get (even more) alive to the urgency of the transition (or transformation) to sustainable procurement.

Perhaps Steve Schooner and co-author/s (or others) could be tempted into bring their guidelines down to a more specific level of practicality, eg writing another paper along the lines of ‘Nobody ever got fired for …’ in relation to sustainable procurement (not a branded ICT supplier) as, in my view, one of the major roadblocks to the adoption of widespread sustainable procurement practices are misunderstandings and myths on the constraints that the legal system imposes (of which there are a fair few, but not as many or as insurmountable as the urban myth would have it), which can have chilling effects on practitioners.

Having a clear boundary drawn on what is legally permissible (and should thus be carried out as a matter of policy, and urgency) and what is not (so pitfalls are avoided and the bad reputation of the legal rules as hindrances on sustainable procurement is not fuelled by the emergence of more bad cases) would be another major contribution. And one that could be replicated in other jurisdictions to establish a benchmark of ‘legal’ sustainable procurement practices, hopefully launching a ‘race to the top’ in years (not many) to come.

Doing your best, and yet feeling like failing -- let's talk more about challenges for academics be(com)ing parents

(c) Evangeline Gallagher/Guardian.

I have recently had a few exchanges with younger academic colleagues that have become parents. Given my own experience during the just over three years since I became a dad, I was not surprised (but still deeply saddened) to hear them express frustration at the lack of time to engage with research and intellectual stimulation in the way they wanted, and a consequent certain loss of their identity and sometimes sense of self-worth, and fears and worries about the impact that juggling new childcare responsibilities (which everyone found to be extremely fulfilling and rewarding, though) will have on careers and reputations, or even job stability.

What did surprise me, however, is that most colleagues felt that the situation was made worse because nobody talks about it, which fuels feelings of isolation and imposter syndrome (which I very much experience myself too), or can even push some to try to hide or certainly not volunteer the fact of their imminent or recent parenthood. So this post just tries to start a conversation and to say to each and every one of my academic colleagues facing a similar struggle, that I see you and I am always happy to talk about it. Please do reach out if you feel like it.

I am, of course, consciously aware of my privileged position as a middle-class, white, male professor, but I am also acutely aware of the fact that I got to this stage in my career before becoming a parent and I am also entirely convinced that I would not have progressed so quickly in academia if I had been a parent at a younger age. As a result of this, in my mind, I hold very complicated and contradictory thoughts and feelings: I have no reason to complain or to expect things to be any better, but I also do not deserve my position because it is one reflective of the merits and contribution of an Albert that no longer exists (the one always available, willing to overwork, to travel, the one that ‘was everywhere’ and was the first one to react to developments in my field). I feel bad that I cannot make the same sort of contribution I used to. And that is because I left it (and the reputation, prestige, or simply ego resulting from it) define me. I am no longer that person, so who am I and how can I still occupy the same space or have the same aspirations as the Albert that no longer is?

I am very happy that I took extended periods of shared parental leave to bond with and take care of my kids when they were babies, but I also struggled a fair bit during those periods of absence from academia. Especially during my second shared parental leave because I took it 'solo' (my partner went back to work) and I found myself craving some 'adult' / 'intellectual' conversation regularly. This led me to accept invitations to participate in training programmes and webinars during my period of leave, as I thought that would make the feeling subside. But, to the contrary, after each event I was left exhausted and feeling that I had both failed as an academic (my performances were well below what I would have liked due to sleep deprivation, mental rustiness and the unavoidable distractions of ‘zooming with a baby on your arms’) and, worse, that I had neglected my child and robbed her of some precious quality time.

And this has not stopped. To be 100% honest, I keep struggling with my new identity of parent academic (and increased imposter syndrome that comes with the need to say no even more than before, with the prioritisation of parent over academic) after having returned from the second leave a few months ago. I still have serious difficulty facing (and are yet to accept) the prospects of a more constrained academic life that really needs to be balanced with (a lovely) family. And this is not helped by the fact that I had set the bar so high for myself (both in my head and regarding institutional expectations), that I cannot but keep failing in my futile attempts at trying to clear it. I am honestly doing my best, and yet, every day, I feel I am failing.

When I can take a step back from those feelings (and it is hard not to swim, or even indulge in them), I can see that most of these feelings are probably in common with everyone else that becomes a parent and therefore sees their lives decentered (or recentered), but I think that perhaps this is particularly challenging for academics given ‘the way the system now works’ and the underappreciated role of self-confidence and self-believe in enabling us to perform our jobs at the level of ‘continuous and ever-increasing excellence’ expected from us.

I also think that the challenges are particularly acute for academics becoming parents because it is a major shock that probably puts a mirror in front of (most of) us that reflects how unsustainable and unbalanced our work/research/life was, although of course the challenges remain for academics being parents (at least for a good few years, I hear from most colleagues further advanced in their parenthoods).

And I also think this is probably only getting worse given the perverse dynamics of permanent assessment and benchmarking of our performance, as well as a de facto ‘up or out’ system where you are seen to fail unless you go from promotion to promotion in short periods of time — because, in the end, the social status of the profession has been degraded so significantly that there is a worrying perception that *just* having a permanent entry-level academic job (Assistant Professor or Lecturer, depending on the system) does not really recognise you as a weighty expert in your field (which it does, in my opinion).

So, here it is. At least I have emptied my brain. And I hope someone, somewhere will find some value in the reflection. And perhaps a conversation will start. I am here, and I am listening.

How to do 'doughnut procurement'? -- Re Raworth (2018)

(C) K Raworth.

Probably quite late — and thanks only to the recommendation of Prof Steve Schooner — I have now read Kate Raworth, Doughnut Economics : Seven Ways to Think Like a 21st-Century Economist (Cornerstone 2018).

It is a fascinating book that makes a compelling case for a paradigm shift in the ways in which we approach Economics — and in particular consumption economics and economic growth — so that we can (quickly, urgently) move from unsustainable and unequitable economic structures and dynamics towards sustainable and fair ones. This is represented by the doughnut (and you must read the book to understand it but, once you do, it provides a very helpful mind map).

In short, in my reading, the book makes a compelling case for a quick acceleration towards sustainability and redistribution and, in developed countries, for degrowth.

I have been left wondering how to to do ‘doughnut procurement’, as it is challenging to apply the model to specific areas of economic activity (see eg this brief approach to ‘doughnut procurement’ in Amsterdam, with contributions from Raworth herself). But there are two or three ideas I would be interested in discussing:

1. What is the role of data and metrics in establishing both the ecological ceiling and the social foundation for ‘doughnut procurement’ and how to address their trade-offs — in the end, this is the perpetual clash between the tensions derived from scarcity (public budgets are not infinite and the needs of the society procurement is meant to satisfy tend to exceed them) and quality (in terms of the social and environmental ‘externalities’ of what is procured), except the book makes it clear that there is no such clash because both are dimensions of scarcity and, as such, the trade-offs need to be understood from a different perspective. I really wonder how to operationalise this in the context of award criteria in particular, as that seems to be where it all boils down to. Is MEAT capable of capturing this?

2. What time horizon must public buyers be mandated to report about? So far, there is limited accountability of the way public funds are spent and, in many ways, the reporting system is extremely short-termed: hardly any information is generated or published beyond award and, certainly, not much if at all beyond completion of public contracts even if a significant volume of ecological and social impacts are only ‘visible’ many years down the line (eg at disposal of acquired equipment).

3. Linked to that, what obligations need to be imposed on public buyers concerning the ownership (whether direct or imputed) of the assets (and the Xaas they can substitute them for) they procure, so that they engage in an adequate level of reassignment, refurbishment, recycling and minimisation of the waste resulting from procurements?

I never thought much about it, but it seems to me that public buyers have been (where at all) more concerned with trying to engage with ‘doughnut providers’ than in trying to become ‘doughnut buyers’, and I wonder if they really are in a much better position than you or me to make ‘doughnut choices’ in the absence of a legislative framework that eg completely prohibits the purchase of specific products (or specific packaging; single use plastics anyone?), and in the absence of adequate economic incentives/subsidies that make it possible for everyone to exercise ‘doughnut discretion’.

Could it be that by centering (or framing) the need to quickly boost (in exponential terms) the uptake of green and social procurement in the public, academic and political discourse around the exercise of discretion, we are falling into the same trap of soft law and self-regulation that has pervaded the corporate social responsibility movement? Is there really much justification for ‘procurement only’ legal requirements (eg environmental), rather than a more aggressive regulation of the entire economy to the extent that it affects the environment? How do we get procurement (geared towards buying, buying, buying) to degrow??

Well, I seem to have digressed quite a bit. But I hope there is some kernel of a fruitful discussion in the above. As ever, comments and challenges most welcome: a.sanchez-graells@bristol.ac.uk.

Emerging technologies and anti-corruption efforts -- re Adam and Fazekas (2021)

(c) Sara Alaica/Flickr.

I am working on a paper on digital technologies and corruption in procurement (or rather, trying to work on it in the midst of a challenging start of term). While researching this topic, I have come across this very interesting paper: Isabelle Adam and Mihály Fazekas, ‘Are emerging technologies helping win the fight against corruption? A review of the state of evidence’ (2021) Information Economics and Policy, available on pre-print here.

In their paper, Adam & Fazekas carry out a systematic review ‘of the academic and policy literature on the six most commonly discussed types of ICT-based anti-corruption interventions: (i) Digi- tal public services and e-government, (ii) Crowdsourcing platforms, (iii) Whistleblowing tools, (iv) Transparency portals and big data, (v) DLT and blockchain, and (vi) AI’ (at 2).

The analysis is clear and accessible and offers good insights on the positive and negative impacts that digital technologies can have for anti-corruption efforts, given that technology ‘is not per se a panacea against corruption, and it can also play into the hands of corrupt officials’ (ibid). The paper is well worth reading in full.

One of their insights I found particularly valuable is that ‘ICTs for anti-corruption operate against the background of given societal divides and power relations which are often supported by corruption. They risk further entrenching these unless their design and implementation take into account corruption and associated power imbalances. Hence, it is arguable that the success of ICT interventions against corruption hinges on their suitability for local contexts and needs, cultural backgrounds and technological experience‘ (at 1).

This directly links with Uta Kohl’s view that digital ‘technologies, whether the internet or blockchain, are tightly and on multiple levels interconnected with existing social orders and those interconnections decide upon the configurational latencies of the technological innovation within concrete settings: who uses the technological innovation in what configuration, for what purposes and against whom’ (see here for details).

To my mind, all of this stresses the need to operationalise a gatekeeping function tasked with the analysis of which digital technologies are adopted by the public sector and for what purpose, and this gatekeeping function needs not only consider downstream ethical implications in terms of impacts on citizens and service users, but also upstream implications concerning the way in which technologies will disrupt, support or entrench existing governance dynamics — and in particular those that the adoption of the technology is seeking to remedy.

Bringing this to procurement, these insights show that the public procurement function — to the extent that the adoption of these technologies is subjected to the regulatory framework of innovation procurement — is de facto playing (or failing to play) such gatekeeping function. More than in other settings, the procurement function needs to closely scrutinise the ‘use case’ of the digital technologies it is tasked with procuring. This is arguably a new regulatory function for procurement, and one that is not yet embedded in procurement theory, regulation or practice. But one that is inescapable nonetheless. So one that is worth thinking about.

The institutional framework of the UK/EU Trade and Cooperation agreement — Public Procurement

The UK Parliament’s European Scrutiny Committee is conducting an inquiry into the ‘The institutional framework of the UK/EU Trade and Cooperation agreement’, which will remain open until 24 September 2021. In July, I submitted the written evidence below, which has now been published by the Committee. As always, comments or feedback most welcome (a.sanchez-graells@bristol.ac.uk).

I look forward to further outputs of this inquiry, as the functioning and effectiveness of the governance mechanisms (rushedly) created in the EU-UK TCA will take some time to fully understand.

Written Evidence to the House of Commons European Scrutiny Committee on “The institutional framework of the UK/EU Trade and Cooperation agreement”

Submitted 20 July 2021
By Professor Albert Sanchez-Graells
Professor of Economic Law
Co-Director, Centre for Global Law and Innovation
University of Bristol Law School
a.sanchez-graells@bristol.ac.uk

Submission

This document addresses some of the questions formulated by the House of Commons European Scrutiny Committee in its inquiry on “The institutional framework of the UK/EU Trade and Cooperation agreement” and, in particular:

• What are the most important powers of the Trade and Cooperation Agreement (TCA) Partnership Council and the different Specialised Committees and what could the practical impact of the exercise of these powers be?

• "What are the key features of the dispute resolution procedures provided for in the TCA and what are the likely legal and policy implications of these for the UK? How closely do they follow precedent in other trade agreements and do they raise any concerns with respect to the UK’s regulatory autonomy?

• How could the UK/EU TCA institutions be utilised by the UK and EU to raise and, where possible, address, concerns about legal and policy developments on the other side which are of importance to them respectively (e.g. for the UK, changes in EU regulation in key areas like financial services, pharmaceuticals and energy)?

• What should the Government’s approach to representing the UK in meetings of the TCA’s joint bodies be? Should the Devolved Administrations be involved in discussions that relate to devolved competences?

1. Background

01. This submission focuses on the field of public procurement, which is of primary economic interest to both the UK and the EU. According to a recent report for the European Commission,[1] cross-border procurement from the EU27 represented on average 20% by value of the UK’s total procurement expenditure for the period 2016-2019.[2] In turn, cross-border procurement from the UK represented on average 15% by value of EU27 procurement expenditure for the same period.[3] Most of this cross-border procurement was indirect (17.6% for EU27 in UK, and 9% for UK in EU 27), meaning that tenders were won by companies located in the same country as the contracting authority but controlled by companies in a foreign country[4]—in most common cases, this meant that public contracts were awarded to subsidiaries of large foreign corporate groups, or to SMEs controlled by those groups. Direct cross-border procurement—where contracts are awarded to companies located in a foreign country, which are either independent or controlled by companies in the same or a third foreign country—had a smaller but still relevant economic scale (2.3% for EU27 in UK, and 6% for UK in EU 27).

02. The economic relevance of both types of cross-border procurement is reflected in the bilateral market access commitments resulting from the UK’s accession to (and the EU’s continued membership of) the World Trade Organisation Government Procurement Agreement (WTO GPA),[5] and the additional bilateral market access commitments in the UK-EU Trade and Cooperation Agreement (TCA)[6]—which Annex 25 largely replicates the pre-Brexit reciprocal market access commitments between the UK and EU27,[7] with the only exception of the explicit exclusion of healthcare services. However, given that the pre-Brexit procurement-related import penetration for human health services had an average value close to null percent of public expenditure in both the UK and most EU27 countries,[8] this exclusion is unlikely to have significant practical effects.

03. The TCA contains several relevant provisions to facilitate direct and indirect cross-border trade through the award of public contracts in Title VI of Heading One of Part Two (Arts 276 and ff). Of those provisions, and particularly in view of the UK’s intended reform of domestic procurement rules,[9] the rules more likely to trigger practical implementation issues seem to be: Article 280 on supporting evidence; Article 281 on conditions for participation relating to prior experience; Article 282 on registration systems and qualification procedures; Article 284 on abnormally low prices, in particular as it relates to subsidy control issues;[10] Article 285 on environmental, social and labour considerations;[11] Article 286 on review procedures; and Article 288 on the national treatment of locally established suppliers, which is applicable beyond ‘covered procurement’ (Art 277) and of particular importance to indirect cross-border procurement. The TCA also includes specific rules for the modification and rectification of market access commitments (Arts 289 to 293), which can become highly relevant if new trading patterns emerge during the implementation of the TCA that show a rebalancing of previous trends (see above para 01).

04. Institutionally, in addition to being under the general powers of the Partnership Council (Art 7(3)), public procurement regulation falls within the remit of the Trade Partnership Committee (Art 8(1)(a)), and even more specifically within the remit of the Trade Specialised Committee on Public Procurement (Art 8(1)(h), the ‘TSC on Procurement’), which is specifically tasked with addressing matters covered by Title VI of Heading One of Part Two, under the supervision of the Trade Partnership Committee (Art 8(2)(d)).[12] The TSC on Procurement is meant as the primary forum for the Parties to exchange information, discuss best practices and share implementation experience (Art 8(3)(f)), and has the tasks of monitoring the implementation of the procurement title of the TCA (Art 8(3)(a)) and discussing technical issues arising from TCA implementation (Art 8(3)(e)).

05. It can be expected that any future disputes over the regulation of public procurement will first emerge in the context of the activities of the TSC on Procurement, with potential escalation to the Trade Partnership Committee so that it can exercise its function of exploring the most appropriate way to prevent or solve any difficulty that may arise in relation to the interpretation and application of the TCA (Art 8(2)(e)); further escalation to the Partnership Council in relation to its power to make recommendations to the Parties regarding the implementation and application of the TCA (Art 7(4)(b)); and, ultimately, the possible launch of a formal dispute under Title I of Part Six of the TCA. Therefore, this submission will be primarily concerned with the configuration and likely operation of the TSC on Procurement and will only touch briefly on the more general powers of the Trade Partnership Committee and the Partnership Council. Dispute resolution mechanisms are not considered, except in relation to the potential overlap with those of the WTO Government Procurement Agreement.

2. Powers of the TSC on Procurement and of the Trade Partnership Committee, and practical impact of their exercise

06. The powers of the TSC on Procurement, like those of all other Trade Specialised Committees, are detailed in Article 8(3) TCA. Other than the general powers to monitor the implementation of the TCA, discuss technical issues and provide an information exchange forum mentioned above (para 04), the most important practical power would seem to be that of adopting decisions where the TCA (or a supplementing agreement) so provides (Art 8(3)(d)). However, it should be noted that the TCA does not foresee this possibility and that the TSC on Procurement is only mentioned in the provision that envisages its creation (Art 8(1)(h)). Therefore, the TSC on Procurement is currently devoid of decision-making powers and it can only be seen as a consultative technical forum primarily geared towards information exchange and technical dialogue. This is reflected in eg the way the European Commission presents the role of the TSC on Procurement, which is only envisaged as a feeder mechanism towards discussions at the Trade Partnership Committee, seen as the ‘principal formation for trade matters’.[13] This is also reflected in the current UK Government’s view of the TSC on Procurement.[14] Logically, it should also be the forum for the setting of common approaches to the UK and EU’s cooperation in the international promotion of the mutual liberalisation of public procurement markets (Art 294(1)), and the most suitable forum for the mutual provision of annual statistics on covered procurement (Art 294(2)).

07. It should also be stressed that the TSC on Procurement and the Trade Partnership Committee are not involved in the procedures leading to the modification or rectification of the market access commitments of the UK and the EU under the TCA (Arts 289 to 293). Indeed, these procedures are foreseen as strictly bilateral. While it is possible (and likely) that any discussions and possible consultations launched by one of the Parties in relation to market access commitments are initially hosted in the TSC on Procurement, it is clear that the latter has no decision-making powers. It is also clear that the only power of the Trade Partnership Committee in relation to market access commitments is to formally amend the relevant Sub-section under Section B of Annex 25 once these have been mutually agreed, or as a result of a final decision ending a dispute (Art 293).

08. On the whole, the TCA does not grant any of its bodies with decision-making powers regarding the regulation of public procurement or their mutual market access commitments and, as a consequence, any future changes and any related disputes will remain strictly inter-governmental, with the TSC on Procurement and the Trade Partnership Committee simply serving as a forum for the discussion of the relevant issues and for the exploration of amicable solutions that could prevent the launch of a formal dispute under Title I of Part Six of the TCA.

3. Dual dispute resolution regime

09. In case disputes could not be solved, it should be considered that there is a dual regime applicable in case of the TCA’s procurement obligations that are ‘substantially equivalent’ to those resulting from the WTO GPA. Given that the TCA procurement rules are clearly based on the GPA (GPA+ approach), and that a significant part of the market access commitments directly derive from the UK’s and the EU’s GPA coverage schedules, this can be the case of the majority of potential disputes arising from the implementation of the TCA.

10. In connection to the dual dispute resolution regime, it should be noted that Article XX of the GPA provides that the WTO's Understanding on Rules and Procedures Governing the Settlement of Disputes also applies to disputes under the GPA. Therefore, as foreseen in Article 737 TCA, the party seeking redress would be able to select the forum in which to settle the dispute and, once chosen, it would be barred from initiating procedures under the other international agreement, unless the forum selected first failed to make findings for procedural or jurisdictional reasons. It is difficult to establish which of the two available routes is more likely to be used in case of a dispute under the TCA procurement rules, but it would seem that the TCA-specific dispute resolution mechanism would allow the UK and the EU to have their interests taken into account within the specific context of their bilateral relationship, rather than in the broader context of the multilateral relationships emerging from the WTO GPA. In that regard, this could be the preferable route.

4. How to best utilise these fora to address legal and policy developments

11. Like in most other trade areas, one of the challenges in keeping open trade in procurement markets across the UK and the EU concerns non-tariff barriers. This is clearly recognised in the TCA, for example in relation to documentary requirements applicable to the participation in tenders for public contracts (Art 280),[15] or concerning conditions for participation such as prior experience (Art 281).[16] One of the main risks going forward is that, in seeking to leverage public expenditure to achieve environmental and social goals (but also economic recovery goals, post-pandemic), both the UK and the EU are likely to create both mandatory and discretionary requirements that will increase compliance costs for economic operators seeking to tender for public contracts both in the EU and in the UK, as well as potential (implicit) preferential treatment for domestic suppliers. A clear recent example can be found in the UK’s policy on ‘net zero’ for major government contracts, which seeks to impose ‘as a selection criterion, a requirement for bidding suppliers to provide a Carbon Reduction Plan (using the template at Annex A) confirming the supplier’s commitment to achieving Net Zero by 2050 in the UK, and setting out the environmental management measures that they have in place and which will be in effect and utilised during the performance of the contract’.[17] This could disadvantage tenderers with no specific plans coming from jurisdictions without such a requirement, as well as those with net zero plans with a different time horizon, or with a different geographical concentration, which could nonetheless be in compliance with the requirements applicable in the EU. It is easy to imagine alternative scenarios where the disadvantage could be against UK-based tenderers, or their EU subsidiaries. Therefore, one of the main roles of the TCA fora, and in particular the TSC on Procurement, should be to minimise trade friction resulting from this type of initiatives, ideally by discussion of options and the co-creation of acceptable common solutions ahead of their adoption in law or policy. There is a potential overlap between the work on general standardisation issues, covered by other parts of the TCA, and procurement-specific standardisation. However, given the current trend of leveraging procurement to achieve environmental, social and economic/industrial goals, it is likely that a large number of non-tariff barriers will be procurement-specific.

12. Conversely, another of the challenges in procurement regulation going forward will be tackling challenges that exceed the regulatory capacity and purchasing power of a single State, or which are much more likely to be successful if undertaken as part of an international collaboration. The development of adequate frameworks for the procurement of Artificial Intelligence (AI), and for the deployment of AI in the management of procurement are clear examples, where the UK has positioned itself as a frontrunner.[18] In these fields, seeking regulatory collaboration would be to both the UK and EU’s advantage, as their united approach to procurement regulation should not only encompass market liberalisation (Art 294), but also broader issues.

13. As emerges from the previous two paragraphs, it seems that the best use of the institutional mechanisms created by the TCA is one premised on a proactive approach to maintaining and developing regulatory convergence. This could work well, given the starting point of almost complete alignment of UK and EU procurement regulation and policy,[19] and pre-empt the emergence of disputes resulting from uncoordinated legislative and policy reforms.

14. By contrast, one of the worse possible uses of the TCA institutional framework would be to use it to channel disputes concerning single tender procurement disputes, which would likely unavoidably lead to a quick escalation of highly politicised disputes. Both parties should be able to resist political pressures to bring to these fora issues that must be adjudicated through the domestic review procedures implementing the obligations resulting from Article 286 TCA (and equivalent WTO GPA obligations).

5. UK position and participation of the Devolved Administrations

15. There is a Provisional Public Procurement Common Framework of March 2021 that sets out proposed four-nation ways of working for domestic and international public procurement policy and legislation. It is intended to guide the actions of policy officials of all four nations as they develop policies on public procurement.[20] Notably, there were two sections of the Common Framework that were still under discussion at the time of its publication: one on UK Government engagement with the Devolved Administrations on WTO GPA business; and another one to reflect International Agreements.

16. It seems impractical to have different arrangements for the participation of the Devolved Administrations on WTO GPA and on UK-EU TCA business, in particular given the significant overlap between both sets of regulatory instruments. A common approach should be developed for both situations and included in the final version of the Public Procurement Common Framework. It would seem advisable to have a flexible system whereby the standard procedure is for a single four-nations position to be agreed ahead of the UK’s engagement in discussions with the EU in the context of the TCA institutions, but where it should also be possible for a representative of a Devolved Administration to directly participate in discussions concerning nation-specific matters. This could be the case, for example, where one of the four nations took a different approach to a specific issue and that was queried by the EU.

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Biographical information

Professor Albert Sanchez-Graells is a Professor of Economic Law at the University of Bristol Law School and Co-Director of its Centre for Global Law and Innovation. He is also a former Member of the European Commission Stakeholder Expert Group on Public Procurement (2015-18) and of the Procurement Lawyers’ Association Brexit Working Group (2017), as well as a current Member of the European Procurement Law Group.

Albert is a specialist in European economic law, with a focus on competition law and procurement. His research concentrates on the way the public sector interacts with the market and how it organises the delivery of public services, especially healthcare. He is also interested in general issues of sectorial regulation and, more broadly, in the rules supporting the development and expansion of the European Union's internal market, as well as the EU’s trade relationships with third countries, including the UK.

His influential publications include the leading monograph Public Procurement and the EU Competition Rules, 2nd edn (Bloomsbury-Hart, 2015). He has also co-authored Shaping EU Public Procurement Law: A Critical Analysis of the CJEU Case Law 2015–2017 (Wolters-Kluwer, 2018), edited Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018), and coedited Reformation or Deformation of the Public Procurement Rules (Edward Elgar, 2016), Transparency in EU Procurements. Disclosure Within Public Procurement and During Contract Execution (Edward Elgar, 2019) and European Public Procurement. Commentary on Directive 2014/24/EU (Edward Elgar, 2021). Most of his working papers are available at http://ssrn.com/author=542893 and his analysis of current legal developments is published in his blog http://www.howtocrackanut.com.

___________________

Notes

[All websites last visited on 20 July 2021.]

[1] Prometeia SpA, BIP Business Integration Partners – Spa, Economics for Policy a knowledge Center of Nova School of Business and Economics Lisboa, Study on the measurement of cross-border penetration in the EU public procurement market. Final report (Mar 2021), available at https://op.europa.eu/s/pmUR.

[2] These figures aggregate direct and indirect procurement as reported in Table 2-5 of the Report (n 1).

[3] These figures aggregate direct and indirect procurement as reported in Tables 2-6 and 2-8 of the Report (n 1).

[4] Report (n 1) 18.

[5] WTO, Revised Agreement on Government Procurement and WTO related legal instruments (2012) available at https://www.wto.org/english/docs_e/legal_e/rev-gpr-94_01_e.pdf.

[6] Trade and Cooperation Agreement between the United Kingdom of Great Britain and Northern Ireland, of the one part, and the European Union and the European Atomic Energy Community, of the other part, made in Brussels and London, 30 December 2020. Treaty Series No.8 (2021), available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/982648/TS_8.2021_UK_EU_EAEC_Trade_and_Cooperation_Agreement.pdf.

[7] In part, this is a result of incorporating the UK’s and EU27’s market access commitments under the WTO GPA; Article 277(1) UK-EU TCA. See A Sanchez-Graells, ‘Public procurement regulation’, in H Kassim, S Ennis and A Jordan (eds), UK Regulation after Brexit (Feb 2021) 23-24, available at https://ukandeu.ac.uk/wp-content/uploads/2021/02/UK-regulation-after-Brexit.pdf.

[8] See Table 1-6 of the Report (n 1).

[9] Cabinet Office, Green Paper Transforming Public Procurement (15 Dec 2020), available at https://www.gov.uk/government/consultations/green-paper-transforming-public-procurement. For analysis, see A Sanchez-Graells, “The UK’s Green Paper on Post-Brexit Public Procurement Reform: Transformation or Overcomplication?” (2021) 16(1) European Procurement & Public Private Partnership Law Review 4-18, pre-print version available at https://ssrn.com/abstract=3787380.

[10] Subsidy control issues are not covered in detail in this written submission, as they are the object of parallel regulation in the UK-EU TCA.

[11] Environmental, social and labour considerations are not covered in detail in this written submission, as they are the object of parallel regulation in the UK-EU TCA.

[12] For a general description of the governance and dispute resolution mechanisms in the TCA, see House of Commons Library (S Fella), The UK-EU Trade and Cooperation Agreement: governance and dispute settlement (19 February 2021) Briefing Paper Num. 9139, available at https://researchbriefings.files.parliament.uk/documents/CBP-9139/CBP-9139.pdf, and idem, ‘Governing the new UK-EU relationship and resolving disputes’ (24 Feb 2021), available at https://commonslibrary.parliament.uk/governing-the-new-uk-eu-relationship-and-resolving-disputes/.

[13] European Commission, Trade Policy, UK fact sheet (undated), available at https://ec.europa.eu/trade/policy/countries-and-regions/countries/united-kingdom/.

[14] See eg answer to written question UIN 25876 of 1 July 2021, available at https://questions-statements.parliament.uk/written-questions/detail/2021-07-01/25876.

[15] ‘Each Party shall ensure that at the time of submission of requests to participate or at the time of submission of tenders, procuring entities do not require suppliers to submit all or part of the supporting evidence that they are not in one of the situations in which a supplier may be excluded and that they fulfil the conditions for participation unless this is necessary to ensure the proper conduct of the procurement.’

[16] ‘Each Party shall ensure that where its procuring entities require a supplier, as a condition for participation in a covered procurement, to demonstrate prior experience they do not require that the supplier has such experience in the territory of that Party.’

[17] Procurement Policy Note 06/21: Taking account of Carbon Reduction Plans in the procurement of major government contracts (15 Jun 2021), available at https://www.gov.uk/government/publications/procurement-policy-note-0621-taking-account-of-carbon-reduction-plans-in-the-procurement-of-major-government-contracts.

[18] Office for Artificial Intelligence, Guidelines for AI procurement (8 Jun 2020), available at https://www.gov.uk/government/publications/guidelines-for-ai-procurement.

[19] Subject to changes derived from the Government’s response to the green paper consultation, above (n 9).

[20] Available at https://www.gov.uk/government/publications/public-procurement-provisional-common-framework.

Re Blockchain and Public Law (Pollicino and De Gregorio eds, Edward Elgar 2021)

There is an interesting recent release in the area of Govtech: O Pollicino & G De Gregorio (eds), Blockchain and Public Law. Global Challenges in the Era of Decentralisation (Edward Elgar 2021).

It is an edited collection prefaced by a sharp critical account of the blockchain utopia (Kohl), and comprising a broad spectrum of analyses of the potential implications of blockchain on a range of public law areas, including: sovereignty (De Caria), citizenship (Gstrein & Kochenov), democracy (Goossens), authoritarianism (Bell), public administration (Hermstrüwer), freedom of expression (De Gregorio), or privacy (De Hert & Kumar). It also includes sectorial analyses in healthcare (Motsi-Omoijiade & Kharlamov), FinTech (Annunziata), antitrust (Maggiolino & Zoboli) and the broader issue of smart contracts (Sirena & Patti).

The chapters engage with analysis at different levels, from high level doctrinal considerations premised on the feasibility of completely decentralised blockchain implementations, to bottom-up reflections based on the emerging evidence of more limited blockchain implementations and their difficult coordination with existing legal frameworks. The diversity of approaches to the analysis of the public law implications of blockchain technology is in itself very thought-provoking, as it forces the reader to (eventually) take a stance on the likelihood of some of the scenarios considered in the book. There are two chapters that stood out to me.

The first one is Kohl’s ‘Blockchain utopia and its governance shortfalls’ (13-40). In this convincingly argued chapter, Kohl ‘sows seeds of scepticism about blockchain governance and liberation narratives’. Indeed, Kohl dissects the blockchain utopia and raises a number of heavy criticisms of essentialist approaches to the impact of this technology, mainly relying on a legal realist critical approach to the potential functionalities and the contextual constraints on the adoption of new technologies. Some of Kohl’s insights are worth highlighting, reproducing in full, and keeping in mind when thinking about these issues and, more generally, about the potential impact of digital technologies on public governance and law.

… the uptake of blockchain is premised on an assumption of the continued validity and relevance of established legal orders (even if their precise application may often still be uncertain), which is consistent with its transition into legitimacy and its endorsement by those for whom the legal system provides important protection of their proprietary interests. To be sure, new blockchain entrants may challenge existing intermediaries and bottlenecks and, in the course of doing so, disrupt the redistribution of assets and thereby unsettle existing ‘value asymmetries’, but overall the incorporation of blockchain technologies into mainstream society is likely to see it tamed, rather than unleashed. The broader point is that technologies, whether the internet or blockchain, are tightly and on multiple levels interconnected with exiting social orders and those interconnections decide upon the configurational latencies of the technological innovation within concrete settings: who uses the technological innovation in what configuration, for what purposes and against whom. This is not to deny the possibility of socio-technological disruptions to existing orders, but rather to emphasise how dominant political and economic actors will look to new technology for opportunities for maintaining, reinforcing and enhancing the status quo, and some of these ways may produce the very opposite outcomes to those articulated in utopian narratives (24-25, reference omitted and emphasis added).

Although blockchain may guarantee the authenticity and integrity of information as per creation, it cannot comment on the substantive value or quality of that information in its interface with reality. This quality exists on a different ontological level, not susceptible to verification by any distributed ledger. In a subscription contract for an online news service, blockchain applications may facilitate secure payments and even certify the provenance of the news item. Yet, it cannot certify the factual truth of the story or the competent interpretation of facts. However, it is in respect of these quality aspects of information production that important forms of trust are invoked; in the case of news, the trust in another’s construction of reality. This extra layer of trust, on the one hand, calls into question the validity of the distinction between the ‘internet of value’ and the ‘internet of information’ as generated by the blockchain phenomenon. Although blockchain applications can facilitate certain transactional aspects with security, and thereby enable new forms of value exchanges, the ‘internet of value’ is constituted of informational exchanges and there are important quality aspects of information to which blockchain does not speak. These can only be addressed by traditional gatekeepers acting as trusted third parties … (30-31, references omitted).

When decentralisation or disintermediation blockchain narratives argue for the substitution or marginalisation of existing corporations (such as banks or online platforms …) through distributed networks or decentralised organisations, they achieve much less than meets the eye. First, in essence they seek to replace one collective action mechanism for another - on the basis of the preferability of a flatter or distributed decision-making structure within the network or organisation … Essentially, public blockchain networks and organisations are ‘entities’ without a central management. This, however, only addresses the internal side of the organisation (by empowering its members …); the corporation’s cooperative arrangement, however, was also designed to present a unified front to the outside and thereby cushion its members from volatile markets. Assuming that even in a blockchain landscape, there would still be markets for blockchain networks competing with each other …, the decentralised networks or organisations would just become another intermediary, or centre of economic power, and thus recreate some of the very dependencies vis-à-vis users, that utopian accounts seek to redress. In other words, the replacement of a centralised management within an organisation does not touch upon its centralised position within a market: disintermediation within does not affect intermediation outside (35-36, references omitted).

Coupled with transaction costs analysis (which Khol also addresses eg at 40, and on which see here), these three insights put together seem to me to point towards the conclusion that blockchain is structurally incapable of creating an alternative institutional framework that is completely decentralised and, more specifically, that blockchain will not deliver a meaningful disruption of current institutions, even if it is suited to alter some of their processes.

From that perspective, the second chapter I find a must-read is Hermstrüwer’s ‘Blockchain and public administration‘ (105-122), which is a perfect concretization and further elaboration of the above insights. In this chapter, Hermstrüwer convincingly argues that ‘blockchain technology provides a much weaker basis for truly decentralized and legitimacy-preserving public administration than blockchain evangelists tend to claim. The main reason … [being] that [blockchain] is too static and rigid to be aligned with principles of administrative law without further ado’ (106).

Hermstrüwer demostrates this by explicit reference to problems or inconsistencies between blockchain and the foundational characteristics of public administration, such as: centralization; the incompleteness of administrative rules and decisions requiring interpretation; the tensions inherent in the unavoidability of the exercise of discretion in some contexts and the discretion aversion of public servants in other contexts; variability and intertemporal effects concerning the validity of administrative decisions, or the efficiency of public administrative action. The chapter further considers important issues of legitimacy of administrative action, including the security of and accountability for administrative decision-making. The conclusion that ‘Neither blockchain technology nor smart public contracts will be able to supplant centralized administrative agencies and courts … Blockchain technology might facilitate more cost-effective, secure and accurate procedures in the areas of public registration, verification, permissions and cross-agency cooperation … blockchain may remain what it currently is: a useful distributed ledger’ (122) can but be entirely shared.

To my mind, these two chapters and the broader variety of perspectives in the book, make an important contribution to current scholarly debates. Hopefully this research will also be noticed by policymakers presented with opportunities (or pressures) to adopt blockchain technologies.

[No more] free procurement books: first come first served

Update: all books gone in the first hour. Thank you all for your interest and for lovely emails.

* * * * *

Going back to the office after along time has made me realise that I had been squirrelling away quite a lot of materials and books that, to be perfectly honest, I have not missed during lockdowns etc (I missed others, though!). More strangely (in retrospect), I had been keeping multiple copies of my own books, or books to which I had contributed. And this is something I would like to correct, in case those books can be of use to somebody else.

So, dear HTCaN friend, if you are interested in any of the books in the following list, please email me (a.sanchez-graells@bristol.ac.uk) and I will gladly post it to you for free (with or without dedication, your choice).

I offer them on a first come, first served basis, but I would be interested to know why you are interested in a specific book/s (academics are notoriously known for our egos, are we not?). This is what is available:

• 1 copy of A Sanchez-Graells, Public procurement and the EU competition rules (Hart 2011). [This one is only for collectors, I guess …]

• 1 copy of A Sanchez-Graells, Public procurement and the EU competition rules (2nd edn, Hart 2015).

• 1 copy of A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards:Pushing the Discussion after RegioPost (Hart 2018).

• 1 copy of G S Ølykke and A Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar 2016).

• 3 copies of A Sanchez-Graells and C De Koninck, Shaping EU Public Procurement Law: A Critical Analysis of the CJEU Case Law 2015-2017 (Wolters Kluwer 2018).

• 3 copies of M Comba and S Treumer (eds), Award of Contracts in EU Procurements (DJØF 2013).

• 3 copies of M Burgi, M Trybus and S Treumer (eds), Qualification, Selection and Exclusion in EU Procurement (DJØF 2016).

• 3 copies of KM Halonen, R Caranta and A Sanchez-Graells (eds), Transparency in EU Procurements. Disclosure Within Public Procurement and During Contract Execution (Edward Elgar 2019).

I hope this is of interest to some of you — and that the books will not end up in Amazon …

Can the robot procure for you? -- a short reflection a propos Chesterman (2021)

I am reading the very interesting new book by Simon Chesterman, We, the Robots? Regulating Artificial Intelligence and the Limits of the Law (Cambridge University Press, 2021). One of the thought-provoking issues the book addresses is the non-delegability of inherently governmental functions to artificial intelligence (AI). And one of the regulatory analogies used in the book concerns the limits to outsourcing as regulated by procurement law (see pages 109 ff).

The book argues that, for ‘certain decisions, it is necessary to have a human “in-the-loop” actively participating in those decisions’ (109), and states that to reach such determination, a ‘useful analogy is limits on government outsourcing to third parties’ (110).

In that regard, Chesterman leads us to consider the US approach to establishing ‘inherently governmental’ functions for the purposes of outsourcing, on which there is a very detailed and useful Office of Federal Procurement Policy (OFPP) Policy Letter 11–01, Performance of Inherently Governmental and Critical Functions.

I was curious to see whether procurement itself was considered an inherently governmental function not susceptible of outsourcing, and was glad to find this very nuanced specific treatment of the issue (I can hear my US colleagues and friends laughing at my previous ignorance).

It seems thus arguable that, in the US context and unless the decisions of an AI are somehow re-attributed to a Federal Government employee by some legal fiction, some aspects of procurement decision-making (at contract formation phase, but not only) cannot (yet?) be delegated to an AI (or fully automated. let’s say).

Which prompts me to reflect on what would be the treatment under EU law—and under different Member States’ approaches to constraints based on public functions and the exercise of public powers. This may be the seed for a research paper — or perhaps just a follow-on blogpost — but I would be very interested in any thoughts or comments, particularly if this is an issue someone has already thought or published about! As always, feedback and engagement most welcome at a.sanchez-graells@bristol.ac.uk.

How to rethink the role of procurement to foster economic recovery and the green transition -- re Mazzucato (2021, 2020)

I have read Mariana Mazzucato’s, Mission Economy. A Moonshot Guide to Changing Capitalism (Allen Lane, 2021). As the marketing blurb explains, in the book ‘Taking her inspiration from the “moonshot” programmes which successfully co-ordinated public and private sectors on a massive scale, Mariana Mazzucato calls for the same level of boldness and experimentation to be applied to the biggest problems of our time. We must, she argues, rethink the capacities and role of government within the economy and society, and above all recover a sense of public purpose.’ I must admit that I found the book less than persuasive — and it is a consolation to see that this was also the take of Stiglitz in his book review for The Lancet, The Economist’s reviewer’s take, as well as Whalley’s in his book review for the Journal of Economic History [paywalled].

Mission Economy advances some ideas hard to disagree with, in particular concerning the need to boost public sector capability and competence in order to increase the public sector’s ability to drive complex (strategic) procurement and to effectively monitor supplier and provider performance (as discussed eg here, just a couple of days ago, or here in more general terms); or to raise current levels of public expenditure (by reference to pre-pandemic standards, that is), especially in research, development, and innovation (R&D&I).

However, there are also quite a few proposals that can hardly muster much support, as they simply ignore, or worse reject, the very serious governance difficulties that would result from Mazzucato’s approach. Her proposals for a significant relaxation of procurement-related constraints fall squarely in this latter group.

Given the influential nature of Mazzucato’s work, and the fact that policy-makers around the world are currently thinking about how to leverage procurement expenditure to reactivate the economy and accelerate (or launch?) the green transition, I think that a detailed assessment of her views and proposals on public procurement can be useful. To match Mazzucato’s more detailed analysis (in a 2020 report discussed below), my analysis here refers primarily to EU and UK current rules (ie, mostly, the 2014 Public Procurement Package), in particular as they relate to the bypassing of competitive tendering and the pursuit of public-sector led innovation [on which see the recent piece by Roberto Caranta and Pedro Cerqueira Gomes, ‘Public procurement and innovation' (2021) ERA Forum, and the latter’s extended analysis in EU Public Procurement and Innovation. The Innovation Partnership Procedure and Harmonization Challenges (Edward Elgar, 2021)]. However, the thoughts below are hopefully of interest and relevance to other jurisdictions too.

References to procurement and innovation in ‘Mission Economy’

Unsurprisingly (but uncommonly) for a book on the role of the State in the face of tall order challenges — in particular the climate emergency, public health crises, and the growing digital divide — there are quite a few references to the role that procurement governance needs to play for it to be a catalyst of change, as opposed to the almost caricaturesque stereotype that procurement rules are a hindrance to the State’s ability to spearhead innovation. In fact, on the basis of the book, I would say that the most accurate summary of Mazzucato’s views is that (i) procurement rules should regularly be set aside in an innovation context, so that the State is free to directly award grants and contracts to whoever it sees fit; and (ii) public contracts should be reformed in a way that is primarily outcomes-based and offers rewards for innovative approaches to problem solving.

As an example of her support for bypassing competitive tendering, Mazzucato clearly has a positive take on the fact that, in the context of NASA’s procurement for the Apollo programme (which is the foundation of her analysis), the then current rules were often used ‘to waive formal advertising requirements so as to hire the best possible partners in the business community as quickly as possible — even if they might cost more than others’ (at 93). Quite how those ‘best possible business partners’ were identified and on what basis remains unexplored, as is whether they were actually the best possible partners, or simply the partners known to the contracting administrators, or the partners that ended up doing the job. In a nutshell, Mazzucato seems to be a proponent of rather unconstrained procurement decision-making (or at least procurement free from competition requirements). On this point, I find Mazzucato’s views to starkly clash with the evidence on the undesirability of unregulated procurement that keeps being thrown at us, eg in relation to the dog’s breakfast of pandemic-related procurement in the UK.

As an example of her views on the need to reform the structure of public contracts once (directly?) awarded, Mazzucato repeatedly refers to the need to use procurement budgets as innovation budgets (at 121), to redesign ‘procurement contracts to foster new ideas for solving problems’ (at 126), and to ‘enable experimentation’ (at 128). This is reiterated, when she stresses that ‘… it is important to have a clear goal in mind. That goal can be used to drive innovation, aided by procurement or prize schemes that nurture creativity and allow a scaling-up process for organizations that are willing and able to experiment‘ (at 154).

As a seemingly positive implementation of such an approach, she ventures that ‘Procurement to solve public goals, including the production of ventilators during a health pandemic, can be used to drive innovation in business—with the focus on the goal rather than the static metrics around commercialisation’ (at 127). It may be that the example she chose was a hostage to fortune at the time of writing, but also on this Mazzucato’s views fly on the face of the evidence on the governance problems and significant wastage of public funds that can follow a rushed ‘mission-oriented’ approach to using procurement and public contracts to generate innovation [see eg the evidence on the ‘ventilators challenge’ in the NAO’s 2020 ventilators report, as well as the following evidence that it basically resulted in the loss of over £140 million, eg in The Guardian/Observer].

Mazzucato offers another example of mission-oriented procurement concerning the development of the BBC Micro computer in the UK in the 1980s (at 158). However, it is worth stressing that the award of that contract was competed—albeit only amongst British companies and under a process that seemed to resemble current restricted procedures, or even a competitive dialogue by invitation [see Blyth (2012)]—and that the award seemed to be for the supply of an initial estimate of (fixed-price?) 12,000 computers to be partially subsidised by the Department of Trade and Industry if acquired by schools [see Yi (2012)]. So, even if the details are hard to find given the time that has elapsed, this hardly looks like a procurement procedure or public contract structure resembling the general proposals made by Mazzucato. If anything, it is an example of the use of procurement for industrial policy purposes that is not only highly problematic, but also mostly proscribed by international and bilateral trade agreements.

The repeated (if passing or superficial) references to procurement and the need for it to develop a different role in Mission Economy, as well as the (in my view ill-judged) brushing aside of governance and other crucial procurement regulation issues, picked my curiosity (and if you have read this long, they probably have picked yours too). A quick follow-up search led me to Mazzucato’s more specific ‘Mission-oriented public procurement: lessons from international examples’ (2020) UCL Institute for Innovation and Public Purpose, Policy Report, IIPP WP 2020-20. This report offers more detail on Mazzucato’s position on procurement and how to make it ‘mission-oriented’, so it is worth taking a close look.

‘Mission-oriented public procurement’, some critical comments

General issues

This report advances that ‘using the procurement process to direct and steer can have important effects on the social and economic structure of different countries’, and uses four case studies to support that position. It largely seeks to provide more details on how to operationalise a ‘mission-oriented’ approach to procurement than Mission Economy, but it does not really engage with the existing literature on ‘strategic procurement’, which has largely sought to promote the same outcomes. Despite its title, the report is primarily concerned with the use of procurement to support or foster green innovation within the EU regulatory context.

The report is also largely normative and seeks to rely on the broader ‘mission-oriented’ framework described in detail in Mission Economy, as well as in two earlier reports by the same author. In seeking to relabel or repackage well-known ideas on strategic procurement, the report makes some general statements that, while relatively accurate, are disconnected and decontextualised from the regulatory framework and show a superficial understanding of procurement rules and governance (see the less than bare bones description at 3, or the superficial description of different types of procurement, including pre-commercial procurement, and the lack of engagement with neighbouring important rules, such as those on R&D State aid, at 4).

For example, one of the opening salvoes is that ‘… in order to implement a series of missions, the instrument of public procurement — and therefore the supply of goods, services and technologies to public entities — must also be able to respond to criteria that are based on more than just the highest (sic) bidder, based on cost’ (at 1, emphasis added). This is not only reflective of a likely mindless oversight — for, if anything, cost or price-based procurement would seek to award the contract to the lowest (compliant) bidder — but also absolutely uncontroversial and completely aligned with e.g. EU procurement policy since (at the very least) the early 2000s.

Another example of the limited understanding of procurement (and its terminology) concerns the way in which Mazzucato wants to instrumentalise procurement, when she states that ‘… missions require rethinking the setting and implementation of procurement, moving towards schemes based on the allocation of prizes for the achievement of specific quantitative objectives but also, more importantly, qualitative objectives’ (at 1, emphasis added). This is quite unclear, in particular as procurement is rarely ever involved in the allocation of prizes (except, perhaps, in the context of the seldom used design contest). What she may mean is that public contracts (not procurement procedures) need to have in-built (financial) incentive mechanisms that are linked to performance or outcomes, measured in quantitative and qualitative terms. Again, this is a rather uncontroversial statement of principle and the object of rather voluminous economic literature. However, the difficulties in setting adequate outcomes-based KPIs and quality control mechanisms need to be scrutinised in great detail — and the report is of no help there. If, alternatively, Mazzucato was arguing for a complete revolution and the adoption of an approach seeking to reward ‘any qualified provider’ (or, more generally, anybody) making a measurable quantitative or qualitative contribution to pre-defined governmental goals, then that would have required a lot more explanation, as well as some consideration on the feasibility of its implementation and management.

A further example is the statement that ‘The mission-oriented approach … offers the potential to structure different economic policy objectives by specifying the final results to be obtained (such as safe driving on the roads) rather than the solution (for example, self-driving cars). This allows margins for experimentation and coordination of the public procurement process across different institutions and value chains’ (at 2). Quite. But this is generally (and uncontroversially) termed a functional or performance-based approach to the setting of technical specifications (which, incidentally, is discussed later in the report, at 5), and is also long-standing policy in the EU context.

And the difficulties in making sense of the ‘mission-oriented’ approach by contrast to existing regulatory and policy approaches are perhaps most evident in trying to make sense of the statement that ‘An effective procurement system for missions can create a positive dynamic that selects “willing” actors (picking the willing) instead of predetermined “winners” (picking the winners)’ (at 2).

All in all, despite its fancy labelling as mission-orientatedness, the framing of the report seems to mainly be linked to the standard approach to using procurement to foster (green) innovation as a demand tool, as it emphasises that ‘Public organisations can support innovation through procurement in different ways within a mission-oriented approach. They can create new markets for cutting-edge products and systems thanks to the boosting effect of public demand, which enables them to bear the risk of companies that invest to obtain technological innovations. Similarly, procurement can encourage innovation by creating a lead market for new technologies and solutions or by providing a testing ground for innovative products’ (at 3). Again, hard to disagree with this, but the approach is solely reflective of the ‘what to buy’ decision, which is fundamentally unconstrained by the (EU and UK) procurement rules. In failing to explore ways in which the current rules allow contracting authorities to take proactive steps towards demanding, or rewarding, (green) innovation within procurement tenders and in public contracts, the report falls well short of painting a full picture of the potential of the existing regulatory framework.

Agreement on the need to boost public sector capability

Much like in Mission Economy, the one section of the more detailed procurement report with which one can but agree, concerns Mazzucato’s call for more investment in procurement-related capabilities, in particular from a technical/scientific perspective (section 2.4, at 6-7). As she rightly puts,

The state must invest in its own resources, developing internal capabilities in strategic areas, including the ability to design contracts aimed at achieving public policy objectives. Without these key competences, which the private sector normally develops, the public sector will not be able to achieve its objectives. Investing in the capabilities within the public administration, especially in the procurement area, becomes a prerequisite for rethinking the relationship that public procurement agencies establish with private suppliers in a more dynamic and symbiotic way (at 7).

The point is broader than the issue of public-private interaction or collaboration, though, and it should be stressed that without more internal capabilities, all efforts to leverage procurement expenditure to pursue economic, green, social or innovation goals (or whatever mission we wanted to label them under) are likely to result in poor implementation and wastage of public resources.

A look at the international examples

The first set of examples concerns the US’ Small Business Innovation Research (SBIR) programme, and the UK’s Small Business Research Initiative (SBRI) programme — both of which can be drawn together by the fact that they largely involve pre-commercial procurement, have a clear industrial policy-orientation, and are carefully designed to remain below economic thresholds that could trigger competitive tendering and other (non-discrimination) obligations. Moreover, the discussion ignores that, in particular the US programme and broader SME protectionism in US trade commitments are a constant bone of contention (with the EU). It also seeks to illustrate the US experience by referring to the same NASA example as above, which has no connection whatsoever with the SBIR. The discussion of the UK’s approach is also fudged by discussion of eg the 2012 Social Value Act, which not only has nothing to do with SBRI, but also can hardly be seen as an instrument of effective policy orientation (with its insufficiency being acknowledged in recent efforts to push for the inclusion of social value considerations well beyond the requirements of the social value act — see eg PPN 6/20 on taking account of social value in the award of central government contracts).

The second set of examples concerns the Swedish approach to green public procurement and a host (or rather, random collection) of policy and pilot projects that have taken place in the last 20 years or so. There is no clear point to be extracted from these examples, other than the fact that green procurement has been growing in importance as a policy issue over the last two decades, and that Sweden and other Nordic countries (see below) have been front-runners in the that respect, at least in the European context.

The third example concerns the City of Copenhagen’s approach to green procurement, in particular one competitive dialogue for street lighting. Other than the mere description of the case, there is no analysis of the procurement or its practical implications.

The final example concerns Italy and simply bunches together discrete examples of pandemic-related emergency procurement (for ventilators and PPE) and broader green procurement policies of recent years. Again, there is no analysis or clear line or argumentation. The ‘case study’ also includes superficial comments on the Italian transposition of the EU Directives, which are extremely naïve in their face value reading of the relevant rules.

Where do those conclusions come from?

The concluding section is completely unrelated to the ‘empirical evidence’ offered by the international case studies. Mazzucato claims that the analysis in the report offers lessons, including the need for discretionality, directionality, capabilities and flexibility in procurement and, more generally, that ‘… it is essential to nest the dynamics of public procurement within a new logic for public administration (PA). A PA driven by public value and public purpose. One that is focussed on catalyzing investment and innovation across a wide variety of actors in the economy, in the public, private and civil society sectors. Only in this way can public purpose be brought to the centre of economic growth that is more inclusive and sustainable’ (at 17).

While some of this would require some unpacking, the level of generality and abstraction of these recommendations make them hard to disagree with, as a point of principle. They are, however, not based on even an acceptable level of engagement with the reality of procurement regulation and practice in the jurisdictions the report claims to cover. Not to mince words, the quality of the report should be embarrassing to a professor of the economics of innovation sincerely interested in making proposals for an improved system of governance, as those can only really be built on a proper understanding of the current structures and practices (boring as procurement law may be, to some).

Mission confusion?

All in all, I have come to realise that I have a big problem with Mazzucato’s discussion of new approaches to procurement and how to use them to unlock the very much required green innovation that needs to lead us to a net zero economy, or beyond, in the already too late response to the climate crisis. Much like Mission Economy more broadly, the specific report on ‘mission-oriented public procurement’ is not more than a (relatively) well-written piece with an imaginative use of labels that seek to camouflage both a poorly informed and very general analysis of procurement regulation and practice, and a complete omission of both earlier scholarship and policy-making trends, as well as all discussion of the likely (for there have to be some) downsides of the proposed ‘changes in approach’.

And this is reflective of one of the broader problems in scholarship and policy-making surrounding innovation and social challenges, not only in procurement, where there is also a lot of repackaging of old ideas (garbage can theory, anyone?) and abstract or high-level promises that are undeliverable (makes me think of the snake oil and hype surrounding many a proposed ‘application’ of digital technologies for procurement, in particular blockchain). Doing mostly the same, or advancing the same old ideas, but calling them something else is not innovative, and certainly not the way to rethink or reinvent anything. And it won’t fly for procurement either.

Some thoughts on the Commission's 2021 Report on 'Implementation and best practices of national procurement policies in the Internal Market'

In May 2021, the European Commission published its report on the ‘Implementation and best practices of national procurement policies in the Internal Market’ (the ‘2021 report’). The 2021 report aggregates the national reports sent by Member States in discharge of specific reporting obligations contained in the 2014 Public Procurement Package and offers some insight into the teething issues resulting from its transposition—which may well have become structural issues. In this post, I offer some thoughts on the contents of the 2021 report.

Better late than never?

Before getting to the details of the 2021 report, the first thing to note is the very significant delay in the publication of this information and analysis, as the 2021 report refers to the implementation and practice of procurement covered by the Directives in 2017. The original national reports seem to have been submitted by the Member States (plus Norway, minus Austria for some unexplained reason) in 2018.

Given the limited analysis conducted in the 2021 report, one can wonder why it took the Commission so long. There may be some explanation in the excuses recently put forward to the European Parliament for the continued delay (almost 2 and a half years, and counting) in reporting on the economic effect of the 2014 rules, although that is less than persuasive. Moreover, given that the reporting obligation incumbent on the Member States is triggered every three years, in 2021 we should be having fresh data and analysis of the national reports covering the period 2018-2020 … Oh well, let’s work with what we have.

A missing data (stewardship) nightmare

The 2021 report provides painful evidence of the lack of reliable procurement data in 2017. Nothing new there, sadly—although the detail of the data inconsistencies, including Member States reporting ‘above threshold procurement’ data that differs from what can be extracted from TED (page 4), really should raise a few red flags and prompt a few follow-up questions from the Commission … the open-ended commitment to further investigation (page 4) sounding as too little, too late.

The main issue, though, is that this problem is unlikely to have been solved yet. While there is some promise in the forthcoming implementation of new eForms (to start being used between Nov 2022 and no later than Oct 2023), the broader problem of ensuring uniformity of data collection and (more) timely reporting is likely to remain. It is also surprising to see that the Commission considers that the collection of ‘above threshold’ procurement data is voluntary for Member States (fn 5), when Art 85(1) places them under an obligation to provide ‘missing statistical information’ where it cannot be extracted from (TED) notices.

So, from a governance perspective (and leaving aside the soft, or less, push towards the implementation of OCDS standards in different Member States), it seems that the Commission and the Member States are both happy to just keeping shrugging their shoulders at each other when it comes to the incompleteness and low quality of procurement data. May it be time for the Commission to start enforcing reporting obligations seriously and with adequate follow-ups? Or should we wait to the (2024?) second edition of the implementation report to decide to do something then — although it will then be quite tempting to say that we need to wait and see what effect the (delayed?) adoption of the eForms generates. So maybe in light of the (2027?) third edition of the report?

Lack of capability, and ‘Most frequent sources of wrong application or of legal uncertainty’

The 2021 report includes a section on the reported most frequent sources of incorrect application of the 2014 rules, or perceived areas of legal uncertainty. This section, however, starts with a list of issues that rather point to a shortfall of capabilities in the procurement workforce in (some?) Member States. Again, while the Commission’s work on procurement professionalisation may have slightly changed the picture, this is primarily a matter for Member State investment. And in the current circumstances, it seems difficult to see how the post-pandemic economic recovery funds that are being channeled through procurement can be effectively spent where there are such staffing issues.

The rest of the section includes some selected issues posing concrete interpretation or practical implementation difficulties, such as the calculation of threshold values, the rules on exclusion and the rules on award criteria. While these are areas that will always generate some practical challenges, these are not the areas where the 2014 Package generated most change (certainly not on thresholds) and the 2021 report then seems to keep raising structural issues. The same can be said of the generalised preference for the use of lowest price, the absence of market research and engagement, the imposition of unrealistically short tendering deadlines implicit in rushed procurement, or the arbitrary use of selection criteria.

All of this does not bode well for the ‘strategic use’ of procurement (more below) and it seems like the flexibility and potential for process-based innovation of the 2014 rules (as was that of the 2004 rules?) are likely to remain largely unused, thus triggering poor procurement practices later to fuel further claims for flexibilisation and simplification in the next round of revision. On that note, I cannot refrain from pointing to the UK’s recent green paper on the ‘Transformation of Public Procurement’ as a clear example of the persistence of some procurement myths that remain in the collective imagery despite a lack of engagement with recent legislative changes aimed at debunking them (see here, here, and here for more analysis).

Fraud, corruption, conflict of interest and serious irregularities

The 2021 report then has a section that would seem rather positive and incapable of controversy at first sight, as it presents (laudable) efforts at Member State level to create robust anti-fraud and anti-corruption institutions, as well as implementations of rules on conflict of interest that exceed the EU minimum standard, and the development of sophisticated approaches to the prevention and detection of collusion in procurement. Two comments come to mind here.

The first one is that the treatment of conflicts of interest in the Directive clearly requires the development of further rules at domestic level and that the main issue is not whether the statutes contain suitable definitions, but whether conflicts of interest are effectively screened and (more importantly), reacted to. In that regard, it would be interesting to know, for example, how many decisions finding a non-solvable conflict of interest have led to the exclusion of tenderers at Member State level since the new rules came into force. If anyone wanted to venture an estimate, I would not expect it to be in the 1000s.

The second comment is that the picture that the 2021 report paints about the (2017) development of anti-collusion approaches at Member State level (page 7) puts a large question mark on the need for the recent Notice on tools to fight collusion in public procurement and on guidance on how to apply the related exclusion ground (see comments here). If the Member States were already taking action, why did the (contemporaneous) 2017 Communication on ‘Making public procurement work in and for Europe’ (see here) include a commitment to ‘… develop tools and initiatives addressing this issue and raising awareness to minimise the risks of collusive behaviours on procurement markets. This will include actions to improve the market knowledge of contracting authorities, support to contracting authorities careful planning and design of procurement processes and better cooperation and exchange of information between public procurement and competition authorities. The Commission will also prepare guidelines on the application of the new EU procurement directives on exclusion grounds on collusion.’ Is the Commission perhaps failing to recognise that the 2014 rules, and in particular the new exclusion ground for contemporaneous collusion, created legal uncertainty and complicated the practical application of the emerging domestic practices?

Moreover, the 2021 report includes a relatively secondary comment that the national reports ‘show that developing and applying means for the quantitative assessment of collusion risks in award procedures, mostly in the form of risk indicators, remains a challenge’. This is a big understatement and the absence of (publicly-known?) work by the Commission itself on the development of algorithmic screening for collusion detection purposes can only be explained away by the insufficiency of the existing data (which killed off eg a recent effort in the UK), which brings us back to the importance of stronger data stewardship if some of the structural issues are to be resolved (or started to be resolved) any time soon.

SMEs

There is also little about SME access to procurement in the 2021 report, mainly due to limited data provided in the national reports (so, again, another justification for a tougher approach to data collection and reporting). However, there are a couple of interesting qualitative issues. The first one is that ‘only a limited number of Member States have explicitly mentioned challenges encountered by SMEs in public procurement’ (page 7), which raises some questions about the extent to which SME-centric policy issues rank equally high at EU and at national level (which can be relevant in terms of assessing e.g. the also very recent Report on SME needs in public procurement (Feb 2021, but published July 2021). The second one is that the few national strategies seeking to boost SME participation in procurement concern programmes aimed at increasing interactions between SMEs and contracting authorities at policy and practice design level, as well as training for SMEs. What those programmes have in common is that they require capability and resources to be dedicated to the SME procurement policy. Given the shortcomings evidenced in the 2021 report (above), it should be no wonder that most Member States do not have the resources to afford them.

Green, social & Innovation | ‘strategic procurement’

Not too dissimilarly, the section on the uptake of ‘strategic procurement’ also points at difficulties derived from limited capability or understanding of these issues amongst public buyers, as well as the perception (at least for green procurement) that it can be detrimental to SME participation. There is also repeated reference to lack of clarity of the rules and risks of litigation — both of which are in the end dependent on procurement capability, at least to a large extent.

All of this is particularly important, not only because it reinforces the difficulties of conducting complex or sophisticated procurement procedures that exceed the capability (either in terms of skill or, probably more likely, available time) of the procurement workforce, but also because it once again places some big question marks on the feasibiity of implementing some of the tall asks derived from eg the new green procurement requirements that can be expected to follow from the European Green Deal.

Overal thoughts

All of this leads me to two, not in the least original or groundbreaking, thoughts. First, that procurement data is an enabler of policies and practices (clearly of those supported by digital technologies, but not only) which absence significantly hinders the effectiveness of the procurement function. Second, that there is a systemic and long-lasting underinvestment in procurement capability in (most) Member States — about which there is little the European Commission can do — which also significantly hinders the effectiveness of the procurement function.

So, if the current situation is to be changed, a bold and aggressive plan of investment in an enabling data architecture and legal-commercial (and technical) capability is necessary. Conversely, until (or unless) that happens, all plans to use procurement to prop up or reactivate the economy post-pandemic and, more importantly, to face the challenges of the climate emergency are likely to be of extremely limited practical relevance due to failures in their implementation. The 2021 report clearly supports aggressive action on both fronts (even if it refers to the situation in 2017, the problems are very much still current). Will it be taken?

Joint cross-border procurement in the EU/EEA (plus UK) 2019-2021 -- update on Locatelli's (2019) TED analysis

A couple of years ago, Ivo Locatelli — a Senior Procurement Expert at the European Commission — published a first analysis of the emerging trends in cross-border procurement in the EU/EEA based on TED data and, in particular, based on the publication of contract award notices (CANs). His paper is available as: I Locatelli, ‘Do European public buyers purchase together? An assessment of joint cross-border procurement contracts published in TED in 2017 and beyond’ (2019) 1 Ius Publicum art 1.

Locatelli reported that, in 2017 only, 34 CANs were published concerning joint cross-border procedures involving buyers in different Member States. The paper provides detailed analysis and classification of those 34 instances of cross-border joint procurement. The paper acknowledged that, in the grand scheme of things, this was meagre (but important) cross-border experimentation, and Locatelli was hopeful for more intense cross-border joint procurement in the future, once the best practices of a ‘group of brave buyers’ were disseminated and some policy interventions by the European Commission took root.

I am now working on a paper on cross-border procurement with Kirsi-Maria Halonen, so I thought it would be a good idea to try to update Locatelli’s analysis, following as close a methodology as I could. This should allow for a longer view analysis of emerging trends over an almost five year period (2017, as per Locatelli's analysis, plus 2018-2021 to date). This blogpost reports the results and reflects on some issues preventing a proper understanding of the emergence of cross-border joint procurement ‘on the ground’ [for theoretical analysis, see A Sanchez-Graells, ‘The Emergence of Trans-EU Collaborative Procurement: A “Living Lab” for European Public Law’ (2020) 29(1) Public Procurement Law Review 16-41].

‘Mining’ TED for 2018-21

Given how counterintuitive I find the advanced searches in TED, I thought I would cast my net wide (if anyone has suggestions for a more effective approach, I would be most grateful to receive them). So, I searched TED for CANs with the free text “joint procurement” and then manually checked whether there was a cross-border element. I thought the search would, if anything, be overinclusive, as the mandatory CAN standard form requires in part I.2) to indicate whether there is any element of joint procurement and ‘In the case of joint procurement involving different countries, state applicable national procurement law’.

184 results were returned. This is the breakdown of what came up, organized by country of the buyer:

The results were a little surprising, if nothing else for being such few, as well as for the very clear bulges of ‘activity’ in the UK and Norway and, to a lesser extent, Denmark. In order make the analysis of the CANS for the 2018-2021 period comparable to Locatelli’s for 2017, I screened them manually and applied the same exclusion criteria detailed in the paper.

To carry out his analysis of emerging trends in ‘true’ cross-border procurement, Locatelli conducted an ‘assessment of joint cross-border procurement … limited to cases of a contract being awarded, or a framework agreement being concluded, either jointly or via a joint entity, by several contracting authorities located in various Member States or via two foreign CPBs. Therefore, coordinated procurement implying several parallel procedures managed by buyers in different Member States is not covered here.’ The paper also clarified that ‘CANs relating to European Union (EU) institutions’ procurement procedures that are open to agencies and institutions located in different Member States are not covered by this assessment’, and that ‘CANs concerning pre-commercial procurement are not included since public procurement Directives apply to public service contracts for research and development services only where specific conditions are met’.

Doing that resulted in only 11 eligible cross-border joint procurement projects for the period 2018-2021 — with only very few pre-commercial procurements and procurements of the EU Institutions excluded. Interestingly, the bulk of the CANs referred to single-country joint procurement and mostly to municipal or regional collaboration in Norway and the UK, to utilities collaboration in Denmark, as well as collaboration within the English national healthcare system.

What was in TED for 2018-21?

The CANs identified above show a limited picture of cross-border collaboration mainly in the Nordic countries (and remarkably in defence and security procurement), and mostly where there is either a physical or regulatory network requiring (or justifying) cross-border management, or where there is EU funding for a specific activity. The sample is way too small to try to extrapolate any clear trends, so it is worth listing the 11 projects here (from newer to older), in case anyone wants to dive deeper:

General procurement (with EU funding)

• Spanish-led collaboration with UK for the procurement of innovative healthcare services, funded by the EU (project RITMOCORE) [2021/S 040-100288 (and also 2020/S 255-642149)]

• Swedish-led collaboration with Finland for a digital service gathering travel information for visitors in the Stockholm and Turku archipelago, with EU funding (EU Central Baltic funding: CB767) [2020/S 107-259917]

• French-led collaboration (with Spain, Germany and Italy) for the acquisition of super-computers, funded by the EU (under PPI4HPC) [2020/S 092-219297]

  Network procurement (not necessarily utilities)

• Swedish-led Nordic (plus Dutch) collaboration for the maintenance and further development of software for financial reporting via the Northern Transaction Reporting System (NTRS), which was already jointly procured in 2016 [2021/S 094-247849]

• Austrian-led collaboration (with Slovakia, Croatia, Bulgaria and Romania) for the setting up of a transnational Waterway Monitoring System (“WAMOS”) within the Framework of the programme “FAIRway Danube”, co-financed by the Connecting Europe Facility (CEF) programme [2018/S 097-221820]

• German-led collaboration (for the entire Eurosystem, under the auspices of EPCO) to acquire rating agency services [2018/S 069-153490]

• Finnish-led collaboration (with Estonia, Latvia and Lithuania) regarding the identification of the most suitable option for a Baltic-Finnish energy market [2018/S 014-029097]

  Defence and security procurement

• Norwegian-led collaboration with Denmark for a joint procurement for inspections and maintenance of the respective countries’ C130J Hercules planes [2021/S 076-195801]

• Swedish-led collaboration with Norway to acquire UAS-Systems (Unmanned Air System) for their police forces [2019/S 182-442948]

• Danish-led collaboration with Norway for the purchase of type rated courses to maintain the C-130J Block 6.1 Hercules air crafts [2018/S 179-407131]

• Swedish-led collaboration with Finland to procure strategic sealift operations [2018/S 031-068254]

Is this really all the cross-border joint procurement there is?

I think there are problems with this information. Anecdotally, I am aware of a cross-border joint procurement between France and Italy in 2019 that did not show in the search results. There are also some examples in this recent iProcureNet report that also do not show in the search results. More broadly, I think that the poor form-filling that tends to affect TED notices may mask some of the joint cross-border procurement taking place, in particular because mistakes in a small sample can have more relevant effects than in a large sample (contra, Locatelli 2019: 7-8).

Be it as it may, even if the search was defective and the results were massively under-reported by (say) 10 to 1, the picture that emerges is one of extremely limited action in joint cross-border procurement. If the EU-funded projects are excluded and Nordic defence collaboration is set aside, all that is left is joint procurement linked to physical or regulatory network activities with an obvious EU dimension. Therefore, there seems to be very little ‘grassroots’ collaboration on the public buyer side of the EU’s public procurement internal market, except at its margins.

What then?

To my mind, this poses a few relevant questions. First, whether the existence of language and legal barriers that are generally brushed under the carpet in EU policy-making need a serious reconsideration (and I am not the only one to think this; see eg MA Simovart, ‘Choice of law applicable to joint cross-border public procurement by central purchasing bodies or under occasional collaboration agreements’ (2021) 1 Procurement Law Journal 1-18). Second, whether joint cross-border procurement can really be the channel for trans-EU collaboration that the European Commission hopes — eg in relation to the adoption of AI, where the Commission considers that ‘collaborative cross-border procurement has the potential to exploit synergies and achieve higher critical mass in bringing AI solutions to the public sector market across Europe‘ [as announced in the 2018 Coordinated Plan on AI, and detailed in a recent Innovation Procurement Newsletter]. Third, whether the low uptake of collaboration between public buyers and the structurally low level of (direct) cross-border tendering by foreign potential suppliers (as recently reconfirmed, in this new Study on the measurement of cross-border penetration in the EU public procurement market) warrant the current regulatory approach, not only by the Commission, but also by the European Court of Justice.

As you see, there is plenty to think about and discuss. Kirsi and I hope to publish a draft of our paper in a few months. So stay tuned if this is of interest. And, as always, all comments and suggestions most welcome: a.sanchez-graells@bristol.ac.uk.

UK tenderers' access to procurement by EU agencies: when the EU is also protectionist

One of the often overlooked implications of Brexit is that, despite the UK’s accession to the WTO GPA and the procurement chapter of the EU-UK TCA, UK companies are practically left out of the procurement procedures carried out by the decentralised and executive EU agencies—despite the obligation of National treatment of locally established suppliers (Art 288), which would only apply to UK suppliers ‘established in [the EU’s] territory through the constitution, acquisition or maintenance of a legal person’. This is a result of the UK tenderers being treated as third country operators for these purposes.

The current advice of the European Commission (DG BUDGET) to those agencies is that participation by UK tenderers in public procurement procedures governed by Regulation 2018/1046 to which the EU-UK Withdrawal Agreement does not apply is to be treated as exceptional, as follows:

So it is fair to stress that the EU is as protectionist of its public funds as the next trading partner …

More UK procurement deregulation proposals, this time for healthcare [catching up with the proposed new provider selection regime for NHS England]

I came back from shared parental leave a couple of weeks ago and have been trying to catch up with the last six months’ worth of developments in the regulation of procurement in the UK and the EU. I do not even dare write down the list of instruments and proposals to consider … It seems that it has been a half year full of procurement news. I hope you have all been keeping well and abreast of so much change!

One of the relatively recent developments is the February 2021 proposal for the replacement of the current rules on the commissioning of healthcare services for the purposes of the English national health service (NHS England) with a new provider selection regime (‘the proposal’). There was a public consultation on the proposal that closed in April, so I am coming late to the party. However, I think there is still some point in jotting down a few critical comments, as the likelihood that the future secondary legislation deviates from the proposal seems minimal.

Background

By way of background, it is worth saying that NHS commissioning is a peculiar procurement activity resulting from the creation of an NHS internal market in the 1990s with the aim of harnessing market incentives and competition-based governance to improve the efficiency of the English healthcare system (see here). NHS commissioning takes place in a largely in-house environment where NHS buyers commission services primarily from NHS suppliers, but also with mixed private participation by both for-profit and third sector providers (for further background, you can watch here). Discussion of the rules on NHS commissioning is always tarnished by the linked controversy on the privatisation of the NHS (for a good explainer, see here).

NHS commissioning is currently subjected to both the Public Procurement Regulations 2015 (PCR2015, aka the UK’s copy-out transposition of Directive 2014/24/EU) and the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013. The proposal seeks to take NHS commissioning out of the scope of application of the PCR2015 — which is possible, given the exclusion of healthcare services from the UK’s schedules of coverage under the WTO GPA, as well as the explicit exclusion of healthcare services from the EU-UK TCA (see Annex 25) — and to repeal the 2013 Regs. NHS Commissioning would then be subjected to a new provider selection regime described (at a high level of generality) in the proposal.

The proposal thus continues with the de-regulatory approach already taken in the 2019 legislative proposals to implement the NHS Long-term Plan, and seeks to dismantle large chunks of the market-based regulation of the NHS internal market, which is a political aspiration of both current UK Government and opposition and, to some extent, is also seen as a Brexit dividend — though I have argued it is not, and that the proposal is undesirable, not least because most of what it seeks to achieve is possible under the current EU-based procurement rules of the PCR2015 (see here). It should be noted that the proposal runs in parallel to the also de-regulatory approach underpinning the December 2020 green paper Transforming Public Procurement [on which see here, here, and here, while we wait for the Government’s response to the public consultation].

Key elements of the proposal

In a nutshell, the proposal seeks to debunk tendering as the sole (or rather, primary, for there are exceptions in reg.32 PCR2015) mechanism for the award of healthcare contracts, and to create three routes to contract award (for a quick overview see e.g. here, or here). This is the first fundamental area of change in the proposal, which would create an ‘NHS-specific’ set of procurement rules. Those ‘new’ routes would be: (route 1) contractual extension/renewal with the incumbent provider; (route 2) NHS commissioner’s non-competitive unilateral determination of the most suitable provider; and (route 3) competitive procurement. Competitive procurement would not necessarily be tightly regulated in detail, but rather subjected to some principles or basic requirements detailed in the proposal (point 5.9), which would require decision-making bodies to:

• have regard to relevant best practice and guidance; for example, HM Treasury’s managing public money guidance

• ensure the process is transparent, open and fair (original emphasis)

• ensure that any provider that has an interest in providing the service is not part of any decision-making process (...)

• formally advertise an opportunity for interested providers to express interest in providing the service

• compare providers against the criteria set out in the regime and any other relevant factors, and according to any hierarchy of importance they decide is necessary – which must be published in advance

• publish their intention to award the contract with a suitable notice period (eg 4–6 weeks unless a shorter period is required due to the urgency of the case).

In choosing across routes and in making decisions within a given route, commissioners would have to ‘ensure that services are arranged in the best interests of patients, taxpayers and the population’, and would have to follow the ‘key criteria’ of: (a) Quality (safety, effectiveness and experience) and innovation; (b) Value; (c) Integration and collaboration; (d) Access, inequalities and choice; and (e) Service sustainability and social value. Each of these criteria are explained in more detail in the proposal’s Annex.

Other than compliance with the above key criteria, the regime would primarily only impose transparency (and standstill) obligations on NHS commissioners (see part 8 of the proposal). This is the second fundamental area of change in the proposal. Notably, ‘Where contracts are being continued or rolled over, or a change in providers is being considered, decision-making bodies must publish their intended approach in advance’ (point 8.2). Specifically, commissioners have a duty to publish their intended decisions ‘with a suitable notice period (eg 4–6 weeks unless a shorter period is required due to the urgency of the case)’ in all cases, save (apparently) in the rollover of contracts to incumbent providers where the type of service means there is no alternative provision (point 5.5.A), or where the alternative provision is already available to patients through other means such as the exercise of patient choice (point 5.5.B).

During that notice (and standstill) period, ‘representations can be made to the decision-making body once it has published its decision. Judicial review would be available for providers that want to challenge the lawfulness of the decision’ (point 8.3). The proposal further establishes that ‘If representations objecting to the process or outcome are received from other providers in that time, the decision-making body must: i. discuss the issue with the providers or their representatives[; and] ii. publish a response to the objections before the award, setting out its decision to either: (a) not to proceed with the contract award as intended and reconsider its process and/or decision; or (b) award the contract as intended and publish reasons for so proceeding as part of the contract award procedure’ (point 8.6). Presumably, the avenue to judicial review challenges open up here — as disappointed providers can reasonably be expected to exhaust the possibility of complaining to the commissioner before launching legal proceedings.

Comments on the ‘three route’ model

Tendering optionality. Under the proposal, competitive tendering would become optional for NHS commissioners: ‘It would be for the decision-making body to decide when a competitive procurement is the most appropriate means to select a provider‘ (point 5.9). Further, in general, there is a strong anti-tendering narrative underpinning the proposal that somewhat comes to make competitive tendering the mechanism of last resort — to be applied only where ‘after considering the key criteria the decision-making body does not identify a single candidate that is the most suitable provider, and/or concludes that the most suitable provider can only be identified by carrying out a competitive procurement‘ (ibid). This seems to leave open the possibility for a commissioner unable to identify a single best candidate to still consider that tendering is not the way to identify it — in which case there could be space for a ‘fourth’, completely unregulated, route to contract award (surely that is not the intention, though!). Additional, clear (and restrictive) criteria supporting a decision not to use competitive tendering seem necessary.

Rolling out contracts. Why create such a regulatory black hole? From a practical perspective, the main problem with route 1 (direct award of a contract extension/renewal) is that it covers two very different sets of circumstances. One where the optionality of tendering is uncontroversial, and one where it can be extremely problematic.

Regarding the first set of circumstances, it should be stressed that two of the grounds for the use of direct contractual extension/renewal with the incumbent provider (route 1) already exclude the need for a tender under the current rules. Where there there is no alternative provision (route 1A), there is no obligation to tender (see reg.32(2)(b)(ii) CR2015). Where the service is to be provided under a patient choice mechanism (ie where specific choice is not exercised by the commissioner), the inclusion of providers in the relevant ‘any qualified provider’ list is not covered by the scope of the procurement rules (reg. 2 PCR2015, incorporating the definition of “procurement” in Art 1(2) Dir 2014/24, as interpreted by the CJEU in Falk Pharma and Tirkkonen). Moreover, the proposal includes specific rules on the management of such lists (points 7.7 and 7.8).

Conversely, route 1C encompasses a set of circumstances that makes the possibility of a direct award quite worrying and potentially very problematic. Indeed, route 1C foresees that ‘If a decision-maker wants to continue with existing arrangements, they may do so where: … C) The incumbent provider/group of providers is judged to be doing a sufficiently good job (ie delivering against the key criteria in this regime) and the service is not changing, so there is no overall value in seeking another provider’ (point 5.5, emphasis added). The test for establishing that a provider is ‘doing a sufficiently good job’ not only seems too open-ended (it may be the informality with which this part of the proposal is drafted), but also defies logic.

If the incumbent’s contract was designed to deliver against the regime’s key criteria (and it should otherwise not be in place, to begin with), compliance with the contract cannot be grounds for its renewal. It should be the other way around: failure to meet the contractual requirements should lead to contract renegotiation or termination. But the mere fact that a contract is being complied with should not generate legal grounds for its (indefinite) extension. Not least because the opportunities for rent-seeking and corruption that this option generates are precisely the reason why public contracts cannot be perpetual and why there have to be external checks on both the commissioner and the provider.

Moreover, given the transparency and standstill obligations controlling the rollout of contracts, it is very likely that any such arrangement will be challenged by potential alternative suppliers (leading to a waste of time, see below). It is hard to see how a system that is premised on the need for potential alternative suppliers to have to actively challenge (and litigate?) contract rollout benefitting the incumbent provider can be considered a ‘decision-making process that makes space for real collaboration to happen; that does not frustrate integration by creating adversarial relationships’ as the proposal claims to intend (point 1.5). It is hard to see how the judicial review of this type of decision could be effected, as the relevant test (the provider is ‘doing a sufficiently good job’) seems to lay squarely within the technical discretion of the commissioner. If that is true (or once that is established in case law), then there may be no point in challenging or litigating contract rollout, which would simply result in a regulatory black hole.

Are there really alternatives to tendering where there is service change or the incumbent needs to be replaced? Where rolling out contracts is not an option, the optionality of tendering can be doubted in practical terms.

The only way to avoid competitive procurement where ‘the decision-making body is changing a service/existing contract considerably; a brand new service is being arranged; the incumbent no longer wants to or is no longer able to provide the services; or the decision-making body wants to use a different provider’, is for ‘the decision-making body [to have] reasonable grounds to believe that one provider/group of providers is the most suitable provider (which may or may not be the incumbent), they may award the contract directly’ (point 5.8). Reaching this reasonable determination requires the commissioner to ‘be satisfied that they can justify that the provider they are proposing to select is the most suitable provider by reference to the criteria set out in the regime and any other relevant factors, and according to any hierarchy of importance the decision-making body decides is necessary' and 'have carefully considered other potential options/providers within the relevant geographical footprint' (ibid).

How exactly this is possible without the information-revelation process of a competitive tendering is quite difficult to fathom. The proposal seems to presume a level of (dynamic, updated) market intelligence on commissioners that seems quite an implausible standard. Further, such an approach is at odds with the proposal’s stated goal of wanting to promote innovation (indeed, one of the key criteria requires ‘Ensuring decision-making bodies seek to innovate and improve services delivered by either existing or new providers, proactively developing services that are fit for the future’). Innovation must necessarily be co-produced (if not market-led) in this context — as recognised in the Annex to the proposal: ‘Decision-making bodies should give due consideration to any particular innovative approaches offered by providers that could help to deliver better outcomes, and avoid assuming that what is currently provided will match current or future need’. Unless commissioners have a crystal ball, this can only be done through proper market engagement and there is no clear reason why that engagement cannot be effectively channelled through competitive procurement.

Moreover, once again, given the transparency and standstill obligations and the likelihood of challenge, is it reasonable to expect any commissioner to engage in such non-competitive unilateral determination with limited information?

No time to waste, or risk aversion? In both routes 1 and 2, there is a presumption that ‘given that the commissioner knows best’, there is no need to subject contract award to competitive tendering. In the slightly more elegant words of the proposal:

‘In practice, the bulk of current NHS services are arranged without competitive processes or tendering (though this approach is sometimes not without legal risk). There is a justifiable reason for this. … in many circumstances the choice of service provider will be constrained by the nature of the service and its interdependencies with other services. Our proposed regime explicitly recognises this reality and makes it clear that such core NHS services can be arranged without NHS decision-making bodies being pushed through valueless bureaucratic exercises’ (para 5.2).

The real reason for the proposed approach is then not to avoid useless competitive tendering — which is not taking place anyway — but to rid NHS commissioners from legal risk. Well, two comments seem warranted here. The first one is that legal risk is not at all reduced in the proposal. Both routes 1C and 2 are riddled with open-ended legal concepts and commissioners willing to rely on them will have to accept legal risks no smaller than those implicit in findings that a service is to be directly awarded to a sole-source provider (which is presumably the legal risk the proposal indirectly refers to).

The second one is that the way this legal risk is to be excluded — ie via transparency and standstill — can generate a significant delay (of 4 to 6 weeks) in the launch of a competitive tendering procedure where the commissioner’s approach is challenged. A competitive tendering procedure that could, by the way, last less than 6 weeks — were it not for the proposal’s double transparency requirement of advertising the contact opportunity and then also imposing a 4-6 week standstill prior to award (which much extends the current standstill obligation under the PCR2015).

Of course, commissioner’s may decide to dismiss challenges, reaffirm their decisions, and carry on. The question then becomes what remedies are available to disappointed providers at the stage of judicial review. If damages enter the picture (and they may), the accumulated disincentive of delay and liability exposure can hardly provide a more comfortable mix than the current rules — or the foreseen cap on damages for procurement litigation under the green paper proposals, for that matter.

There's more than one way to skin a cat. Much like the green paper, the proposal is deceptively simple in the deregulation of route 3 and the subjection of competitive tendering to minimum principle-based requirements. Given the likelihood that route 3 becomes THE route (other than for 1A and 1B awards), it seems too open-ended for the proposal to solely require that commissioners

• have regard to relevant best practice and guidance; for example, HM Treasury’s managing public money guidance

• ensure the process is transparent, open and fair (original emphasis)

• ensure that any provider that has an interest in providing the service is not part of any decision-making process (...)

• formally advertise an opportunity for interested providers to express interest in providing the service

• compare providers against the criteria set out in the regime and any other relevant factors, and according to any hierarchy of importance they decide is necessary – which must be published in advance

Unless the expectation is for a single competitive tendering procedure to be created in secondary legislation — but this is not the obvious implication of the proposal, and would run counter to the approach to eg transposing the rules on the award of social and special services contracts (see reg.76 PCR2015) — each commissioner would be free to create its own procedure. This would in fact subject NHS competitive tendering to the same ‘anti-procedure’ regulation envisaged for the competitive flexible procedure in the green paper. And it would thus open it up to the same criticism, on the basis of the explosion of transaction costs (as well as legal uncertainty) it would create. Allow me a cross-reference to the points made in my response to the green paper’s consultation.

Conclusion

To put it simply, by following the lead of the green paper and seeking to deregulate NHS commissioning, the proposal can generate very negative unwanted effects in terms of the cost, complexity and exposure to challenge and litigation of the system. In my view, it would mainly create an ex ante layer of accountability that (while welcome in principle) would burden commissioners and in most cases result in the tendering of contracts anyway, but subject to under-specified rules. How this can be seen as an improvement over the current situation escapes my imagination.

New interesting paper on green public procurement -- re Halonen (2021)

Dr Kirsi-Maria Halonen has just published in advanced open access her new paper ‘Is public procurement fit for reaching sustainability goals? A law and economics approach to green public procurement’ (2021) Maastricht Journal of European and Comparative Law.

This is a very interesting paper that takes a law and economics approach to assess recent proposals to make some aspects of green public procurement mandatory, in particular in the context of the EU Green Deal and its expected implementing measures. The discussion relies on European examples and data, but the insights offered by the paper are relevant to all jurisdictions considering using public procurement to tackle the climate emergency.

The paper is well worth reading in full and, to my mind, makes two main original contributions that should be stressed, as they should carefully be taken into account by anyone seeking to leverage public procurement for environmental goals (or sustainability, more generally) by means of a ‘hardening’ of current soft law approaches—that is, via the imposition of procurement-specific mandatory (green) legal requirements. The following is my understanding of those two main points, which Kirsi presents slightly differently in her paper.

First, the paper warns against blanket approaches that would apply across all areas of public expenditure or, relatedly, across types of procurement specified by reference to relatively random administration-based criteria (eg tenders of a value above a certain amount). The paper evidences how the effectiveness of mandatory requirements will vary by industry and, consequently, how the design of mandatory requirements should not be based on demand-side considerations, but rather on supply-side analysis.

More than ever, the need for sophisticated market intelligence to underpin the design of green procurement requirements comes to the fore. Relatedly, the paper shows that, for some industries (or more generally), it is possible (or likely) that regulatory measures other than mandatory public procurement requirements are more effective in promoting the desired green transition. Consequently, an analysis of alternative policy interventions should be carried out ahead of the imposition of such mandatory requirements.

Second, and more originally, the paper shows that one of the key considerations in assessing the effectiveness of mandatory green public procurement requirements has to be their knock-on effect on private consumption patterns. Relying on substitution policy analysis, the paper makes it plainly clear that changes in public demand for green (or sustainable) products will create a mix of incentives that can well result in the increased consumption of dirty (or unsustainable) goods and services by private consumers (both corporate and individual) as a result of rigidities in the supply side of the relevant markets—which, at best, can be resolved as the green transition advances and, at worse, could be structurally resistant.

This shows how, despite public procurement representing anything between 10% and 20% of most economies, policy interventions that are procurement centric can generate net negative environmental (or social) effects if the remainder of the economy (or rather, part of the rest of the economy) is displaced towards goods and services that do not meet the required standards. This once again brings home the message that procurement-specific interventions may not be the preferable (or even desirable) way to try to tackle the climate emergency and that a broader, supply (or industry)- based assessment of alternative regulatory interventions is necessary.

Taken all insights together, I would read Kirsi’s paper as making a very strong argument that green (or sustainable) public procurement must not be seen as a goal in itself, or as intrinsically desirable, and that a broader embedding of procurement within larger legislative initiatives (eg economy-wide minimum requirements, or the imposition of consumption taxes regardless of the public or private nature of the buyer) is likely to be a better way forward.

I also read the paper as offering a persuasive argument against claims that ‘mandating green procurement is better than doing nothing’, or that ‘green procurement is a low-hanging fruit that should be collected before reaching for more difficult targets like individual consumer behaviour’. Without proper analysis of the substitution effects that mandatory green public procurement requirements can generate, none of that should be taken at face value. Which is interesting because it is exactly the same way broader market dynamics operate in public procurement, and precisely the reason why the desirability of the exercise of public buying power needs to be assessed with caution, regardless of the policy goal it seeks to achieve.

Short comments on the proposed regulation on foreign subsidies distorting the internal market, as it relates to procurement

The European Commission is currently consulting on its recent Proposal for a Regulation on foreign subsidies distorting the internal market (COM(2021) 223 final, 5 May 2021). The public consultation will be open until 15 July 2021. I have just submitted my views on chapter four of the proposal, which concerns the rules for the analysis of foreign subsidies distorting tenders for contracts with a value above €250 million. The feedback form only allows for 4,000-character submissions, so here are mine. As always, comments welcome: a.sanchez-graells@bristol.ac.uk.

The proposed Regulation on foreign subsidies distorting the internal market (RFSDIT) is both (1) undesirable and (2) problematic, in particular as it concerns the investigation of foreign subsidies linked to public procurement procedures. The following is limited to chapter 4.

1. Primarily, ch 4 RFSDIT is undesirable because it adds a layer of scrutiny and red tape that will affect high-value tenders submitted by tenderers from jurisdictions that have either signed up to the WTO Government Procurement Agreement, or that have a plurilateral or bilateral trade agreement covering procurement with the EU. Tenderers from other jurisdictions can already be excluded on the basis of the current rules (see Art 25 Dir 2014/24; Art 43 Dir 2014/25), as emphasised in the Commission's 2019 guidance on the participation of third-country bidders and goods in the EU procurement market. First, the (inadvertent) targeting of GPA- or FTA-originated tenders is in itself undesirable on trade policy terms and could erode third countries' bilateral relationships with the EU within the GPA framework, as well as under the relevant FTA (or the UK TCA) even if those already include subsidy-related provisions. Second, it is also undesirable due to the technical shortcomings of the proposal, as below, as there could be a basis for claims of unequal treatment concerning the non-scrutiny of EU-originated tenders that are tainted by illegal State aid. Finally, it is also undesirable because the ex ante nature of ch 4 screening can dissuade economic operators from participating in public tenders even if they think that subsidies they have received could overcome the tests in Arts 3-5 RFSDIT. Recipients of foreign subsidies may rather forgo their chances of being awarded a public contract than trigger an investigation they could avoid under the general motu proprio regime. Such loss of international competition is to the EU public buyers' detriment.

2. Ch 4 RFSDIT is also highly problematic because of its incompatibility with the mechanisms in the EU procurement Directives, as well as the inconsistency of approach with the rest of the chapters in the RFSDIT. First, the proposed rules are incompatible with the trigger for an investigation of the distortive effects of State aid granted to an EU-based tenderer, which derives from the prima facie abnormally low character of its tender (ALT) (see Art 69 Dir 2014/24). EU-generated non-ALT bids are not screened for receipt of (illegal) State aid, even if they can be 'winning tenders' in a given procedure. As above, this can trigger claims of discrimination against non-EU generated tenders. Second, procurement case law pre-empts tenderers from offering commitments related to the tender at hand to the Commission's satisfaction without materially altering their tenders. Such changes would be impermissible under EU procurement law. This is an inescapable limit, which is partly but insufficiently acknowledged in Art 30(1) RFSDIT. This means that any tender where the Commission found an unbalanced distortion of the internal market would lead to the inevitable exclusion of the tender. This is at odds with the appearance of 'correctability' created by Art 30 RFSDIT. This evidences the inadequacy of applying a merger or State aid control logic to the public procurement context. Third, the relative intensity of the foreign subsidy is much lower for procurement than for concentrations under the RFSDIT. Art 18(3) creates a safe harbour of up to 10% of the value of a concentration. Art 27(2) contains no parallel rule. Thus, Art 3(2) offers the only (soft) safe harbour for procurement, which means that subsidies of 2% or less of the tender value would be caught. The reason for this different treatment under RFSDIT opens it to challenge on proportionality grounds. Moreover, it is unclear how a 2% subsidy could create a situation comparable to that of an ALT, which further reinforces concerns of unequal treatment, as above.

Transatlantic efforts against bid rigging in procurement [free webinar alert]

Prof Chris Yukins and Michael Bowsher QC have put together an excellent webinar on the current approaches to detect and sanction bid rigging in procurement in the US and the EU, as well as the possible future approach the UK may take post-Brexit.

Among other things, the webinar will include discussion of the European Commission’s recent bid rigging exclusion guidance (for initial comments see here).

The webinar will take place on 2 June 3pm CET / 2pm GMT. All welcome. Further details and free registration here.

Interesting proposals for post-Brexit strengthening of UK approach to corruption and collusion in procurement -- re Jones (2021)

Prof Alison Jones has recently published on early view an interesting paper on ‘Combatting Corruption and Collusion in UK Public Procurement: Proposal for Post‐Brexit Reform’ (2021) Modern Law Review, forthcoming.

The paper provides a very good, comprehensive overview of the current rules and enforcement practices in the UK, their more than likely shortcomings, and four groups of proposals to tighten up the rule book and enforcement approach to the prevention and repression of corruption and bid rigging post-Brexit.

Except for some proposals on the transparency of procurement data (at p 32) and Prof Jones’ faith in the potential of the (now abandoned) ‘Screening for Cartels’ tool — both of which deserve a more in-depth discussion (see eg here on procurement transparency, and here on the SfC tool) — the UK legislator would do well to take these proposals seriously as it progresses in its review of procurement and competition laws post-Brexit.

First thoughts on the Commission's bid rigging exclusion guidance -- what difference will it make?

On 18 March 2021, the European Commission officially published its Notice on tools to fight collusion in public procurement and on guidance on how to apply the related exclusion ground (the ‘bid rigging exclusion guidance’). This document has been a long time in the making and officially announced almost four years ago, so it is no exaggeration to say that it was keenly awaited (by competition and procurement geeks like yours truly, at least).

The guidance is clearly addressed to contracting authorities — not economic operators — and is distinctly ‘pro exclusion’ in its minimisation of the practical difficulties and legal constraints inherent in the adoption of exclusion decisions. However, even with such clearly programmatic orientation, after a first reading, I have a few thoughts that do not make for an optimistic assessment of the guidance’s likely practical impact.

Mostly, because I do not think the Commission’s bid rigging exclusion guidance provides much by way of actionable practical advice to contracting authorities—and it certainly does not really go beyond already existing guidance, such as the OECD’s 2009 guidelines for fighting bid rigging in public procurement. By contrast with more general documents e.g. the OECD guidance, the Commission’s bid rigging exclusion guidance intends to concentrate on the possibility to exclude operators engaged in the manipulation of a tender. However, it includes lenghty discussion of measures to prevent collusion, as well as complementary measures such as training and data analysis and, when it comes to the specific issues that the interpretation and application of Art 57(4)(d) of Dir 2014/24/EU generates, it is mainly restricted to setting out issues that Member States’ domestic legislation cannot do — rather than focusing on what contracting authorities can (and should) do.

Moreover, its likely limited practical impact results from the fact that the guidance simply ignores that the EU rules (especially discretionary ones) need to be embedded in the Member States’ administrative/public law system and, in many places, the guidance is at odds with the latter. In that regard, the guidance seems to presume a sort of sphere of subjective rights for contracting authorities that they are capable of exercising even against the decisions of other (superior/centralised) administrative authorities, or in disregard of broader constraints and requirements for administrative action—such as burden of proof, the duty to state reasons, the increasing enforceability of exclusion grounds against other tenderers, or the very practical implications of risking damages compensation for unlawful exclusion—which is (as far as I know) an area of constant interest for tenderers and practitioners alike.

To be fair, this in part follows from the stance of the Court of Justice in some recent cases (referred to in the guidance), but that is still no excuse for the Commission’s guidance not to recognise that Member States retain significant discretion in their administrative self-organisation and that some of the issues raised in the practical implementation of the relevant provisions will be conditioned by pre-existing administrative law doctrines and procedures.

The most glaring example of this approach that sidesteps the difficulties in the domestic implementation of EU procurement law is the fact that the guidance simply states that ‘The possibility to exclude an economic operator for suspected collusion is not construed in the Directive as a penalty for its behaviour before or during the award procedure’ (section 5.2). That is at face value fine. But the Directive also does not say that exclusion is not a penalty or a sanction and, consequently, establishing the legal nature of an exclusion will be dependent on the relevant public/administrative law framework at Member State level. Moreover, exclusion has been framed as a penalty in at least one recent preliminary reference and the Court of Justice has not disabused the referring court from that prima facie legal classification (see eg Tim, C-395/18, EU:C:2020:58). Given the increasing relevance of the Charter of Fundamental Rights in the interpretation of economic operators’ rights in the context of procurement litigation, I think it is far from certain that exclusion will not be construed as a (quasi)penalty, in particular when it is grounded on the infringement of prohibitive legal rules (such as Art 101 TFEU), rather than on shortcomings in the standing of the economic operator or non-compliance of its tender with substantive and formal requirements included in the tender documents.

To my mind, this (ie the nature of exclusion measures) can be one of the thorniest interpretive issues in this area, particularly because of the due process implications of exclusion being treated as a penalty or sanction—which is also not helped by the absence in the Remedies Directive of any procedural requirements applicable to the exclusion stage. The perpetuation of this disconnect with the Member States’ administrative law framework can in itself constitute the quicksands where the bid rigging exclusion guidance disappears, and certainly can continue to prevent an adequate use of the possibility to exclude tenderers suspected of bid rigging, because the fundamental issues raised by Art 57(4)(d) Dir 2014/24/EU remain unresolved — coupled with other sweeping statements concerning e.g. the level of demonstrability of the suspected collusion that contracting authorities need to meet (as discussed below).

For these and the reasons given below, I am afraid that the bid rigging exclusion guidance will not leave up to the expectations. I will carry out a more detailed and formal assessment of the guidance in a future research paper (likely after my shared parental leave… so not until mid summer or so), but here are my further initial observations, which do not attempt to be comprehensive.

Framing the issue

For those interested in understanding how to interpret and apply Art 57(4)(d) and the associated Art 57(6) self-cleaning possibilities, only section 5 and the Annex of the bid rigging exclusion guidance will be relevant. Indeed, the bid rigging exclusion guidance includes a rather lengthy explanation of what the Commission has done and what it expects to do (or for Member States to do) in the broader area of professionalisation and promotion of collaboration between competition and procurement authorities, which makes the document not very practical. This raises some questions on the fitness for purpose of the document, and whether alternative guidance format that had discharged most of sections 1 to 4 onto a different policy document would have been preferable, but perhaps this is mostly just presentational.

One of the most welcome aspects of the bid rigging exclusion guidance is that, in section 5.2, it makes it clear that the ground for exclusion based on suspected ‘contemporaneous’ collusion (or bid rigging) in Article 57(4)(d) of Directive 2014/24/EU is separate from (and compatible with) the possibility of excluding infringers of competition law as economic operators ‘guilty of grave professional misconduct’ under Article 57(4)(c). It is also to be welcome that, also in section 5.2, the Commission shares the view that, despite the different wording of Art 57(4)(d) and Art 101 TFEU, the former needs to be interpreted in a Treaty-consistent manner, which means that the exclusion must be possible for all types of behaviours caught by Art 101 TFEU — notably, concerted practices and decisions by associations of undertakings, in addition to agreements [for discussion, and advancing the positions now confirmed by the guidance, see A Sanchez-Graells, Public Procurement and the EU Competition Rules (2nd edn, Hart 2015) 296 ff].

The Commission also rightly stresses that contracting authorities in principle retain discretion not to exclude economic operators suspected of bid rigging, as the exclusion ground in Art 57(4)(d) is discretionary. However, this obviates not only the possibility for Member States to transpose it as a mandatory exclusion ground, but also more general EU law duties (such as the duty not to deprive Art 101 TFEU of its effet utile), and domestic administrative law duties (such as equivalent duties not to promote or tolerate illegal activity, or duties mandating inter-administrative collaboration with competition authorities). In that regard, the bid rigging exclusion guidance could have usefully developed a checklist of reasons that could (objectively) justify not excluding economic operators despite there being sufficiently plausible indications to conclude that the economic operator had entered into agreements with other economic operators aimed at distorting competition. In the end, it will not (or should not) be entirely up to the contracting authority to decide to turn a blind eye on those indicia.

Lack of practical guidance, or guidance that is impractical

Despite the largely correct framing of the issue, and despite acknowledging that tackling bid rigging in procurement is fraught with difficulties, the bid rigging exclusion guidance fails to deliver the much needed practical orientations on how to identify contemporaneous bid rigging and how to apply (as opposed to interpret) the relevant exclusion ground of Art 57(4)(d) Dir 2014/24.

The guidance does not really provide practical tips on how to identify bid rigging in a single tender scenario (which is the most likely to be faced by most contracting authorities). If indications of the existence of bid rigging that require cross-sectional or time series analysis are left to one side (as those are generally not for contracting authorities, but rather for competition authorities to screen for and analyse), and with the exception of flagging as suspicious unexpected tender withdrawals (annex, section 3), the only indications highlighted in the guidance (section 5.3) are:

• The text of the tenders (for instance, the same typos or phrases in different tenders or comments left by mistake in the text of the tender indicating collusion among tenderers).

• The prices offered in the award procedure (for instance, tenderers who ... offer excessively high or low prices) [although the interaction of this with the rules on abnormally low tenders is not explored]

• Administrative details (for instance, tenders submitted by the same business representative)

This is then slightly expanded in the annex (section 3), which details indicia such as:

• Identical mistakes or spelling errors in different tenders.

• Different tenders drafted with similar handwriting [in 2021!] or typeface [except default in most commonly used software applications, one would hope!].

• Tenders using another tenderer’s letterhead or contact details.

• Different tenders with identical miscalculations or identical methodologies to estimate the cost of certain items.

• Tenders submitted by the same person or with persons having the same contact details.

This can only help contracting authorities identify clumsy economic operators, potentially involved in collusion. However, in all seriousness, this is unlikely to result in much practical results as once these types of issues are included in official guidelines, it is likely that economic operators will make sure to avoid those mistakes when thy submit rigged bids [for discussion, in the context of automated treatment of bids, see A Sanchez-Graells, '"Screening for Cartels" in Public Procurement: Cheating at Solitaire to Sell Fool’s Gold?' (2019) 10(4) Journal of European Competition Law & Practice 199–211].

The guidance also incurs in temporal inconsistencies, such as when it uses as an indication of bid rigging that contracting authorities should take into account for the purposes of exclusion: ‘The selected tenderer subcontracting work to unsuccessful tenderers for the same contract or the selected tenderer not accepting to sign the contract and later found to be a subcontractor of the tenderer that is finally awarded the contract may be considered sufficiently plausible indications of collusion’ (annex). This can well be an indication of bid rigging, but at this stage no exclusion can take place because the contract will have been awarded. Consequently, the relevant consequence here should be reporting this issue to the competition authority as well as, where possible, terminating the contract (which is not, however, explicitly foreseen in the Directive).

The guidance is also somewhat naive or flippant, for example in its remarks concerning the contracting authority’s (potential) knowledge that a tenderer ‘has pre-ordered the material needed to perform the specific contract in question well before the evaluation of the tenders is concluded’. Quite how a contracting authority would get to this knowledge, or how specific the pre-order should be for it not to be susceptible of confusion with just a standard supply of the economic operators is anybody’s guess.

It can also generate confusion when it, on the one hand, recommends resorting to centralised procurement as a way of avoiding collusion and, on the other, stresses that framework agreements managed by central purchasing bodies are more susceptible to collusion than ordinary tender procedures (annex, section 2).

Moreover, the guidance lacks detail in crucial aspects and, in particular, concerning the extremely complex analysis of joint tenders and subcontracting among (potential) competitors (section 5.6). Here, the Commission’s guidance does not even cross-refer to the more detailed guidelines published by some Member States’ competition authorities — notably, the Danish Competition and Consumers Authority. Similarly, the guidance largely brushes over the complex issue of multiple participation by economic operators belonging to the same corporate group (section 5.5), and also sets aside the difficulties of deciding the scope of application of exclusion decisions that need to respect the doctrine of the single economic entity under competition law [for discussion, see K Kuzma and W Hartung, Combating Collusion in Public Procurement (Elgar, 2020)].

Let’s ignore the administrative legal framework

The Commission’s bid rigging exclusion guidance largely ignores the administrative legal framework at Member State level. This is not only in relation to the treatment of exclusion as (not) a penalty, but also in relation to evidentiary requirements and the related duty to provide reasons. In that regard, the literal interpretation of the Directive leading to the conclusion that ‘national rules should comply with both the letter and the spirit of the Directive, which requires only “indications” of participating in illegal agreements that distort competition in an award procedure and not formal evidence, such as a court judgment confirming such participation’ (section 5.4) is misleading and conflates the need for a prior administrative or judicial decision with the existence of ‘evidence’ of collusion.

First, the guidance is right to exclude the need for a previous administrative or judicial decision, but that should not be treated as excluding ‘evidence’ of collusion, but rather as a precedent decision that has the effects of (quasi) res iudicata or, at least, constitutes a legal fact that the contracting authority cannot ignore. It is also wrong to indicate that ‘plausible indications’ of collusion include, for example, ‘information brought to the attention of the contracting authority of an investigation launched by the competition authority or of penal charges brought against the management of the operator for suspected collusion either in the pending award procedure or in other award procedures’, as this raises fundamental issues concerning the presumption of inocence (which treatment will also differ across jurisdictions, depending on e.g. the trigger for the opening of an administrative investigation). Here the guidance makes the reverse mistake of conflating a formal decision with the evidence (presumably) underpinning it.

Second, the guidance ignores the legal meaning of ‘evidence’ when it establishes that ‘contracting authorities are not required to have evidence of collusion in a pending award procedure, as this would contradict the letter of the Directive’. ‘Plausible indicia’ are a type of evidence, falling short of direct (uncontrovertible) evidence, but clearly above the absence of evidence. This should have been clear from the excerpt that the guidance quotes, where the CJEU stressed that ‘anti-competitive behaviour, “may be proved not only by direct evidence, but also through indicia, provided that they are objective and consistent and that the related tenderers are in a position to submit evidence in rebuttal”’ (Specializuotas transportas, C-531/16, EU:C:2018:324, paragraph 37).

Indiciary evidence is still evidence and the unresolved problem is where to draw the line to decide that the contracting authority has enough evidentiary support to adopt an exclusion decision. Moreover, this is of paramount relevance to the adequate discharge of the duty to state reasons. Here, it not only is impossible for a contracting authority to act in the absence of evidence, but the administrative file will usually be accessible to the economic operator for the purposes of its legal defence. This makes the further recommendation for contracting authorities not to disclose to economic operators that they suspect the existence of bid rigging largely impractical, as the contracting authority will only be able to keep this under wraps up to the point where it must make a formal decision and notification to the economic operator affected by the (potential) exclusion.

Some problematic statements

Unfortunately, in addition to the shortcomings stressed above (and some others), the guidance includes some unhelpful statements concerning the interpretation and application of Art 57(7) of Directive 2014/24/EU, in particular when it states that ‘If an economic operator, who has been excluded from award procedures for a certain period under Article 57(7) of the Directive, submits a tender during the period of exclusion, the contracting authority, without any further need for assessment, must automatically reject that tender’ (section 5.9), and when it reiterates that ‘It goes without saying that if the economic operator has been excluded from all award procedures in your country for a period of time and submits a tender during this period, you must exclude it from your award procedure without assessing the tender submitted.’ (section 3 of Annex) (both emphases added).

These statements are, at best, confusing and misleading and, at worse, legally incorrect. In that regard, it should be stressed that Art 57(6) Dir 2014/24/EU is very clear that the conditions for lengthy exclusions stipulated by Member States in the implementation of Art 57(7) are to be applied ‘if no measures as specified in paragraph 6 are taken by the economic operator to demonstrate its reliability’. Therefore, the statements above should have made it clear that further assessment is required and contracting authorities must carry it out where an economic operator, who has been excluded from award procedures for a certain period under Article 57(7) of the Directive, submits a tender during the period of exclusion and it claims to have implemented the sort of measures detailed in Art 57(6).

This is the sort of problematic drafting that should be avoided in official guidance and, in this instance, rectified by the Commission as soon as possible.

Final thoughts

On the whole, a first reading of the guidance does not call for optimism. While the Commission’s bid rigging exclusion guidance does contain some useful information, it is at its weakest in relation to the particularities of the interpretation and application of Art 57(4)(d) and related provisions of Directive 2014/24/EU, which are supposed to constitute its core concentration.

I would not be surprised if contracting authorities found little to no comfort in the guidance when pondering how to address the key issue of how to spot collusion in single-tender settings, how to decide if there are sufficient plausible indications, and how to go about the adoption of an exclusion decision that is, in almost all likelihood, going to be challenged on the basis that it constitutes a sanction/penalty for a (suspected) breach of competition law that the contracting authority has no competence to enforce, or which has not followed the heightened procedural requirements of procedures leading to the imposition of a sanction. It should be obvious that exclusion on these grounds generates the additional risk of a follow-on investigation by the competition authority and/or private litigation, so no economic operator should be expected to just accept an exclusion on grounds of contemporaneous bid rigging under Art 57(4)(d) Dir 2014/24/EU (or, rather, its domestic transposition).

I will continue reflecting on the guidance and its implications, and I am sure there will be a lively debate in the months and years to come. As always, any feedback and comments will be most welcome.

UK regulation after Brexit -- Public procurement

‘Negotiating the Future’ – a part of ‘UK in a Changing Europe’ – together with the Centre for Competition Policy, and Brexit & Environment have published a very interesting report on 'UK regulation after Brexit' that maps the new regulatory settlement in the wake of the UK’s withdrawal from the EU. The report shows how Brexit has not resulted in significant regulatory divergence except in some areas (such as immigration or agricultural subsidies), how the potential for future deviation from the EU baseline is constrained by the EU-UK TCA and other international treaties, and how the UK regulatory infrastructure is now rather strained and faces significant challenges to ensure the effectiveness of important regulatory areas, in particular concerning environmental protection or the yet to be defined mechanism for the control of subsidies.

I was invited to contribute my analysis of the immediate regulatory changes on procurement (below), which I believe show similar trends to other areas of regulation discussed in the report by leading colleagues. I would recommend reading the report in full to get a good sense of where UK regulation may be headed in the next few years, as well as the more immediate regulatory gaps.

Public procurement regulation

 EU public procurement law creates a regulatory regime that is best understood as comprising two tiers. The lower tier is largely procedural and creates specific obligations for contracting authorities running procurement procedures. The higher tier imposes substantive obligations on the member states that aim to ensure the proper functioning of the internal market for public contracts. EU procurement law also creates mechanisms for the gathering and sharing of information across Member States, such as the Single Market Scoreboard and, especially, e-Certis. While the lower regulatory tier is enforced domestically, though preliminary references can be made to the Court of Justice of the European Union for its interpretation of particular provisions, the higher regulatory tier and the system as a whole is monitored by the European Commission.The UK has transposed EU public procurement law through two sets of regulations: one applies in England, Wales and Northern Ireland, the other in Scotland. The UK Government has consistently limited the transposition of EU public procurement rules to a very strict ‘copy-out’ approach to avoid gold-plating, i.e. to avoid going beyond the minimum required by EU rules. The close alignment of UK and EU rules has the benefit of ensuring compliance with the World Trade Organisation Government Procurement Agreement (GPA), of which the UK was, until the end of the transition, a member through its membership of the EU.

 What changes after the end of transition?

The UK Government has attempted to keep the regulatory status quo as unchanged as possible. However, since the mechanisms for collaborating with EU member states have disappeared, the UK has introduced secondary rules to replace EU-wide platforms, and to reallocate powers and functions previously assigned to the European Commission. The Public Procurement (Amendment etc) (EU Exit) Regulations 2020 included the creation of a UK e-notification service to replace the current EU-wide publication of procurement notices through the Official Journal of the EU (TED), and the reallocation to the Minister for the Cabinet Office of the powers and functions of the European Commission.

The issue of the platform where contract opportunities are published has become less important in an age of open data, since a common standard will facilitate automated processing. Also, most of the powers of the Commission are limited to adjusting EU rules to changes in the GPA, which the UK will have to carry out as well, and to monitoring compliance with the EU rules. This has probably kept the reallocation of the Commission’s powers to the Cabinet Office relatively unnoticed, although it can result in diminished scrutiny of the exercise of ministerial discretion—which the Covid-19 crisis has already evidenced. The key operational change is the decoupling of the UK from e-Certis and the associated system of European Single Procurement Document (ESPD). The effect will be to raise the administrative costs of EU companies seeking to tender for contracts in the UK and UK companies wanting to tender for contracts in the rest of the EU—although the EU-UK TCA seeks to minimise this impact by providing that ‘procuring entities [should] not require suppliers to submit all or part of the supporting evidence … unless this is necessary to ensure the proper conduct of the procurement’ (Art PPROC.5). This opens the door to mutual recognition of the EU’s ESPD and the UK’s new Single Procurement Document (SPD).

 Limited change?

The UK gained GPA membership on its own right on 1 January 2021. To facilitate that process, the UK ‘Government has sought to replicate the EU’s coverage schedules under the GPA … in a form that is as close to the form of the EU’s agreements as possible’. The same strategy has been followed in other bilateral agreements between the EU and third countries, which the UK is also seeking to reproduce. Here, too, the UK Government’s approach is to minimise change, at least as it concerns its access to non-EU procurement markets, and the openness of its own markets to third countries.

The UK’s accession to the GPA already guaranteed a high level of continuity in EU-UK procurement-related trade (safe in utilities and defence)because the EU is also a GPA member. Beyond that, in the Political Declaration, the UK and the EU agreed that they ‘should provide for mutual opportunities in [their] respective public procurement markets beyond their commitments under the GPA in areas of mutual interest, without prejudice to their domestic rules to protect their essential security interests.’

The EU-UK TCA indeed creates GPA+ market access, as detailed in Section B of Annex PPROC-1, including a range of services but with the explicit exclusion of healthcare. That high level of mutual access to procurement markets can only be subjected to future modifications, but not reductions (Art PPROC.15). Crucially, the EU-UK TCA requires national treatment beyond covered procurement for ‘suppliers of the other Party established in [one Party’s] territory through the constitution, acquisition or maintenance of a legal person’ (Art PPROC.13), which effectively ensures a continuation of current requirements for procurement below EU/GPA-thresholds where there is a ‘domestic’ presence of suppliers engaged in EU-UK procurement-related trade. This may however trigger the need to legally incorporate existing business branches on both sides of the Channel, for those suppliers previously relying on general free movement rules.

Any disputes regarding market access will be dealt with by a newly created Trade Specialised Committee on Public Procurement (Art INST.2). The EU and the UK have also agreed to cooperate ‘in the international promotion of the mutual liberalisation of public procurement markets’ (Art PPROC.19), which is more likely to be productive if their own market access commitments remain aligned.

Lastly, there is the issue of the more detailed regulation of public procurement – the lower tier of EU procedural rules or ‘procurement law’. The wording of the commitment in the Political Declaration ‘to standards based on those of the GPA ensuring transparency of market opportunities, public procurement rules, procedures and practices’ had suggested that the UK might move away from the detail of EU procurement law, albeit within the narrow margin of variation allowed by the GPA. The UK Government repeatedly expressed a willingness to reform (and deregulate) UK public procurement law. There is nothing in the EU-UK TCA preventing that, save for some explicit procedural rules eg on the use of electronic means (Art PPROC.3), on selective tendering (Art PPROC.8), or procurement remedies (Art PPROC.11). The UK Government recently published a green paper laying out reform options that will be open to public consultation until early March 2021.

Although the green paper formulates some ambitious proposals and there have been calls from some involved in the shaping of the green paper to introduce a significant reform, it is uncertain whether the UK Government will end up pushing for a model significantly different from the existing one—not least because the green paper follows an ‘EU law+’ approach.(*) The current EU-based regime is highly flexible and the introduction of a radically different set of rules would raise barriers for companies looking to tender across borders. It could also lead to greater divergence between the four nations of the UK, even if the UK Government expects public procurement to be covered by the ‘common frameworks’ that it is developing with the devolved administrations.
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This was not included in the report but, for those interested in the Green Paper, there is further analysis here, here and here.