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.

Interesting paper on effects of open procurement data on outcomes: Duguay, Rauter & Samuels (2019)

A recently published working paper has assessed the impact of increased availability of procurement data on competition for public contracts and on procurement outcomes in the EU context: R Duguay, T Rauter & D Samuels, ‘The Impact of Open Data on Public Procurement’ (November 22, 2019).

Duguay, Rauter & Samuels concentrate on the increased availability of TED data in a (more) user-friendly format in July 2015 (when the data started being available for a bulk download on CSV format) to assess the effects that easier access to procurement data has on the functioning of procurement markets and on procurement outcomes. The paper is very interesting and their results are quite striking.

However, it is important to stress the important caveat that their analysis is still based on TED data and, thus, potentially affected by the quality shortcomings of that data. As mentioned in other occasions, the TED database has problems because it is constructed as a result of the self-declaration of data by the contracting authorities of the Member States, which makes its content very inhomogeneous and difficult to analyse, including significant problems of under-inclusiveness, definitional fuzziness and the lack of filtering of errors—as recognised, repeatedly, in the methodology underpinning the SMSPP itself (see here and here).

With that in mind, however, it is interesting to look closely at their findings.

A seemingly striking insight derived from the paper is that ‘the new European government contracting provisions have anti-competitive effects‘ (at 17). This is in the context of an analysis of the ‘likelihood that government agencies allocate public contracts through an open procedure‘ and should thus not be surprising, given the flexibilisation in the use of procedures involving negotiations. However, even with this regulatory effect, the authors find that more open data triggers more use of open procedures, in particular in EU countries with weaker institutional frameworks (at 18-19, and see below). This could be symptomatic of the fact that more complexity in procurement subjected to higher levels of transparency pushes for a risk-averse approach to procurement compliance. The same would be supported by their finding of higher levels of award of contracts on the basis of price-only award criteria (at 25, and see below).

This tension between procurement complexity and transparency is generally strongly evidenced in the paper.

On the one hand, and in line with claims of the pro-competitive nature of more openness in procurement data (note, not of more openness or transparency of contract opportunities), the authors find that

• the likelihood of competitive bidding increases sharply for TED contracts around July 2015 and that this increase persists through the end of our sample period [ie to the end of 2018] (at 18);

• open procurement data leads government officials to implement more competitive bidding processes [ie open procedures], and that this increase in competitive bidding is driven by countries that do not have the institutions to effectively monitor public officials (at 19);

• the number of bids increases sharply for TED contracts soon after the open data initiative, and this increase persists throughout our sample period (at 20);

• public officials are 8.7 percentage points more likely to award government contracts to new vendors after the open data initiative (at 21);

• contract values fall by approximately 8% ... after the open data initiative (at 23).

On the other hand, and also in line with theoretical expectations of a degradation of procurement decisions subjected to higher levels of transparency (and the fact that this transparency does not concern contract opportunities, but more general open procurement data), the authors also find that

• [the results] are inconsistent with the idea that easier access to procurement data fosters cross-border competition throughout the European Union … open procurement data fosters local competition among vendors by reducing barriers to entry but does not promote cross-border competition across the European single market (at 22);

• after the open data initiative, the likelihood of a contract modification increases by 2.9 percentage points for contracts above TED publication thresholds (at 24);

• after the open data initiative, public officials are 38% ... more likely to award contracts above TED publication thresholds exclusively based on price (at 25);

• the performance ... is significantly worse if price was the only award criterion in the allocation decision (at 26);

• the increase in modifications is driven by contracts awarded to new government suppliers, consistent with information asymmetries contributing to the observed deterioration in contract performance. Moreover, this evidence suggests that procurement relationships before the open data initiative were not necessarily corrupt or otherwise inefficient (at 26);

• the decline in contract performance is stronger for complex procurements, consistent with project complexity exacerbating the potential allocative distortions of open procurement data (at 27).

Their overall conclusion is that

Comparing government contracts above and below EU publication thresholds, we find that increasing the public accessibility of procurement data raises the likelihood of having competitive bidding processes, increases the number of bids per contract, and facilitates market entry by new vendors. After the open data initiative, procurement prices decrease and EU government agencies are more likely to award contracts to the lowest bidder. However, the increased competition comes at the expense of lower contract performance, particularly if suppliers are new, procurement projects are complex, and contracts are awarded solely based on price.

Overall, our results suggest that open data on procurement awards facilitates competition and lowers ex-ante procurement prices, but does not necessarily increase allocative efficiency in government contracting (at 27-28, emphases added).

I find these results striking and difficult to assess from the perspective of evidence-based policy-making. There are two issues of particular concern/interest to me.

One, the finding that more availability of data does not generate more cross-border procurement, and that the push for more competitive (ie open) procedures is mostly appreciable in countries with weaker institutional frameworks. This could support the position that institutional robustness is an alternative to data transparency, which would significantly alter the prioritisation of systemic procurement reforms and take the sides of systems that favour strong institutional oversight in a context of relative opacity.

Second, that transparency exacerbates problems at execution phase, in particular in complex projects and/or projects with new suppliers. This would take the wind out of the sails of reform and policy-making approaches concentrating on perceived or apparent competition for the contract at award stage, and rather force a refocus on an analysis of procurement outcomes at the end of the relevant project. This would also side with approaches that would advocate for more robust institutional approaches to contract design and performance management, rather than relying on transparency to correct contract execution problems.

The mixed results of the paper are also interesting in the context of the long-term effect of more open procurement data on competition, as well as on cartelisation and bid rigging risks, which are not assessed in the paper.

On the round, I think that the paper offers some interesting evidence to back up that there is a need to reconsider the level of transparency given to procurement data. I do not think this should stop the development of an improved procurement data architecture in the EU. To the contrary. I think this should reignite and prioritise discussions concerning the level of disclosure or public access to that information (ie its openness), which cannot be simply assumed to be positive in what, in my view, is currently an excessively simplistic approach in leading policy-making and think tank proposals. For more (but not new) discussion, see here and here.