Colleagues at The Digital Constitutionalist have put together a really thought-provoking symposium on ‘Safeguarding the Right to Good Administration in the Age of AI’. I had the pleasure of contributing my own views on the need to extend and broaden good administration guarantees in the context of AI-assisted decision-making. I thoroughly recommend reading all contributions to the symposium, as this is an area of likely development in the EU Administrative Law space.
UK REGULATION AFTER BREXIT REVISITED -- PUBLIC PROCUREMENT
‘Negotiating the Future’ and ‘UK in a Changing Europe’ have published a second edition of their interesting report on ‘UK Regulation after Brexit - Revisited’. I had contributed a procurement chapter to the first edition (which has recently been cited in this interesting report for the European Committee of the Regions on the impact on regions and cities of the new trade and economic relations between EU-UK). So I was invited to update the analysis, paying special attention to the (slow) progress of reform of the UK procurement rulebook with the Procurement Bill.
The procurement analysis is below, but I would recommend reading the report in full, as it gives a rather comprehensive picture of how regulation is moving in the UK. For more targeted analysis on regulatory divergence with the EU, this other UK in a Changing Europe ‘Divergence Tracker’ (v5.0) will be of interest.
Public procurement
Public procurement regulation is the set of rules and policies that controls the award of public contracts for works, supplies, and services. Its main goal is to ensure probity and value for money in the spending of public funds – to prevent corruption, collusion, and wastage of taxpayers’ money. It does so by establishing procedural requirements leading to the award of a public contract, and by constraining discretion through requirements of equal treatment, competition, and proportionality. From a trade perspective, procurement law prevents favouritism and protectionism of domestic businesses by facilitating international competition.
In the UK, procurement rules have long been considered an excessive encumbrance on the discretion and flexibility of the public sector, as well as on its ability to deploy ambitious policies with social value to buy British products made by British workers. The EU origin of UK domestic rules, which ‘copied out’ EU Directives before Brexit, has long been blamed for perceived rigidity and constraint in the allocation of public contracts, even though a ‘WTO regime’ would look very similar.
Capitalising on that perception during the Brexit process, public procurement was ear-marked for reform. Boris Johnson promised a ‘bonfire of procurement red tape to give small firms a bigger slice of Government contracts’. The Johnson Government proposed to significantly rewrite and simplify the procurement rulebook, and to adopt an ambitious ‘Buy British’ policy, which would reserve some public contracts to British firms. However, although one of the flagship areas for regulatory reform, not much has changed in practical terms. Reforms are perhaps on the horizon in 2023 or 2024, but the extent to which they will result in material divergence from the pre-Brexit EU regulatory baseline remains to be seen.
Post-Brexit changes so far, plus ça change…
To avoid a regulatory cliff edge and speed up its realignment under international trade law, the UK sought independent membership of the World Trade Organisation Government Procurement Agreement (GPA) from 1 January 2021 on terms that replicate and give continuity to its previously indirect membership as an EU Member State. The UK’s current individual obligations under the GPA are the same as before Brexit. Moreover, to maintain market access, the EU-UK Trade and Cooperation Agreement (TCA) replicates obligations under EU law that go beyond the GPA in substantive and procedural elements (‘GPA+’), with only the exception of some contracts for healthcare services. The Free Trade Agreements (FTAs) with Australia and New Zealand, and the envisioned accession of the UK to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) foresee further GPA+ market access obligations and increasingly complicated constraints related to trade.
These commitments prevent the adoption of an expansive ‘Buy British’ policy and could in fact restrict it in some industries, although healthcare is explicitly excluded from procurement-related trade negotiations. Despite misleading claims to the contrary in UK governments reports, such as the January 2022 Benefits of Brexit report, which gives the impression that Brexit ‘enabled goods and services contracts below £138,760 (central government), £213,477 (sub-central authorities) and £5.3 million (construction throughout the public sector) to be reserved for UK suppliers’ (art 8), official procurement guidance makes clear that the situation remains unchanged. Contracts above the values quoted above – those covered by the GPA, the TCA, and Free Trade Agreements – remain open to international competition. In other words, the government has not achieved its stated Brexit aspiration of reserving ‘a bigger slice’ of procurement to domestic businesses.
A similar picture emerges in relation to procedural requirements under procurement law. While the UK Government declared that its aim was to ‘rewrite the rulebook’ (as discussed below), the pre-Brexit ‘copy out’ of EU procurement rules remains in effect as retained EU law. Brexit required some marginal technical adjustments, such as a change in the digital platform where contract opportunities are advertised and where high value contract opportunities are published in the Find a Tender portal rather than the EU’s official journal, or the substitution of the European Single Procurement Document (ESPD) with a near-identical Single Procurement Document (SPD). The main practical change following Brexit is the UK being disconnected from the e-Certis database. The lack of direct access to documentary evidence makes it more difficult and costly for businesses and public sector entities to complete pre-award checks, especially in cases of cross-border EU-UK tendering. However, TCA provisions seek to minimise these documentary requirements (Art 280) and could mitigate the practical implications of the UK no longer being part of the e-Certis system.
With Brexit, the Minister for the Cabinet Office assumed the powers and functions relating to compliance with procurement rules. Even if the bar was already quite low before Brexit, since virtually no infringement procedures had been opened against the UK for procurement breaches, this change is likely to result in a weakening of enforcement due to the lack of separation between Cabinet Office and other central government departments. The shortcomings of current oversight mechanisms are reflected in the proposed reforms discussed below, which include a proposal to create a dedicated Procurement Review Unit.
Future change
The government has been promoting the reform of the UK’s procurement rulebook. Its key elements were included in the 2020 Green Paper Transforming Public Procurement. The aim was ‘to speed up and simplify [UK] procurement processes, place value for money at their heart, and unleash opportunities for small businesses, charities and social enterprises to innovate in public service delivery’, through greater procedural flexibility, commercial discretion, data transparency, centralisation of a debarment mechanism, and regulatory space for non-economic considerations. The Green Paper envisaged the creation of a new Procurement Review Unit with oversight powers, as well as measures to facilitate the judicial review of procurement decisions. Despite the rhetoric, the proposals did not mark a significant departure from the current rules. They were ‘EU law+’, at best. However, a deregulatory approach that introduces more discretion and less procedural limitations carries potential for significantly complicating procurement practice by reducing procedural standardisation and increasing tendering costs.
The 2021’s government response to the consultation mostly confirmed the approach in the Green Paper and, on 11 May 2022, the Procurement Bill was introduced in the House of Lords, the day after the Queen’s Speech. The Procurement Bill is hardly an exemplar of legislative drafting and it was soon clear that it would need very significant amending. As of 1 September 2022, the Bill had reached its committee stage in the Lords. Five hundred amendments have been put forward with over three hundred of those originating from the government itself. The amendments affect the ‘transformative’ elements of the Bill, and sometimes there are competing amendments over the same clause that would result in different outcomes. It is difficult to gauge whether the government’s proposals will result in a legislative text that materially deviates from the current rules. It is also unclear to what extent the new Procurement Review Unit will have effective oversight powers, or enforcement powers.
The Procurement Bill, moreover, contains only the bare bones of a future regime. Secondary legislation and volumes of statutory guidance will be adopted and developed once the final legislation is in place. Given the uncertainty, the government has committed to provide at least six months’ notice of the new system. It is therefore unlikely that the new rules will be in place before mid-2023. The roll-out of the new rules will require a major training exercise, but most of the government’s training programme is directed towards the public sector. Business can expect to shoulder significant costs associated with the introduction of the new rules.
These legislative changes will not apply UK-wide. Scotland has decided to keep its own separate (EU-derived) procurement rules in place. Divergence between the rules in Scotland and those that apply in the rest of the UK is governed by the 2022 revised Common Framework for Public Procurement. The Common Framework allows for policy divergence, and has already resulted in different national procurement strategies for England, Wales and Scotland, as well as keeping in place a pre-existing policy for Northern Ireland. It is too early to judge, but different policy approaches may in the medium term fragment the UK internal market for public contracts, especially non-central government procurement.
Conclusion
The process of UK procurement reform may be the ‘perfect Brexit story’. Perceived pre-Brexit problems and dissatisfaction were largely a result of long-lasting underinvestment in public sector capacity and training and constraints that mostly derive from international treaties rather than EU law. As an EU member state, the UK could have decided to transpose EU rules other than copying them, thereby building a more comprehensive set of procurement rules that could address some of the shortcomings in the EU framework. It could have funded a better public sector training programme, implemented open procurement data standards and developed analytical dashboards, or centralised debarment decisions. It decided not to opt for any of these measures but blamed the EU for the issues that arose from that decision.
When Brexit rhetoric had to be translated into legal change, reality proved rather stubborn. International trade commitments were simply rolled over, thereby reducing any prospect of a ‘Buy British’ policy. Moreover, the ongoing reform of procurement law is likely to end up introducing more complexity, while only deviating marginally from EU standards in practice. Despite all the effort expended and resource invested, a Brexit dividend in public procurement remains elusive.
Urgent: 'no eForms, no fun' -- getting serious about building a procurement data architecture in the EU
‘EU Member States only have about one year to make crucial decisions that will affect the procurement data architecture of the EU and the likelihood of successful adoption of digital technologies for procurement governance for years or decades to come’. Put like that, the relevance of the approaching deadline for the national implementation of new procurement eForms may grab more attention than the alternative statement that ‘in just about a year, new eForms will be mandatory for publication of procurement notices in TED’.
This latter more technical (obscure, and uninspiring?) understanding of the new eForms seems to have been dominating the approach to eForms implementation, which does not seem to have generally gained a high profile in domestic policy-making at EU Member State level despite the Publications Office’s efforts.
In this post, I reflect about the strategic importance of the eForms implementation for the digitalisation of procurement, the limited incentives for an ambitious implementation that stem from the voluntary approach of the most innovative aspects of the new eForms, and the opportunity that would be lost with a minimalistic approach to compliance with the new rules. I argue that it is urgent for EU Member States to get serious about building a procurement data architecture that facilitates the uptake of digital technologies for procurement governance across the EU, which requires an ambitious implementation of eForms beyond their minimum mandatory requirements.
eForms: some background
The EU is in the process of reforming the exchange of information about procurement procedures. This information exchange is mandated by the EU procurement rules, which regulate a variety of procurement notices with the two-fold objective of (i) fostering cross-border competition for public contracts and (ii) facilitating the oversight of procurement practices by the Member States, both in relation to the specific procedure (eg to enable access to remedies) and from a broad policy perspective (eg through the Single Market Scoreboard). In other words, this information exchange underpins the EU’s approach to procurement transparency, which mainly translates into publication of notices in the Tenders Electronic Daily (TED).
A 2019 Implementing Regulation established new standard forms for the publication of notices in the field of public procurement (eForms). The Implementing Regulation is accompanied by a detailed Implementation Handbook. The transition to eForms is about to hit a crucial milestone with the authorisation for their voluntary use from 14 November 2022, in parallel with the continued use of current forms. Following that, eForms will be mandatory and the only accepted format for publication of TED notices from 25 October 2023. There will thus have been a very long implementation period (of over four years), including an also lengthy (11-month) experimentation period about to start. This contrasts with previous revisions of the TED templates, which had given under six months’ notice (eg in 2015) or even just a 20-day implementation period (eg in 2011). This extended implementation period is reflective of the fact that the transition of eForms is not merely a matter of replacing a set of forms with another.
Indeed, eForms are not solely the new templates for the collection of information to be published in TED. eForms represent the EU’s open standard for publishing public procurement data — or, in other words, the ‘EU OCDS’ (which goes much beyond the OCDS mapping of the current TED forms). The importance of the implementation of a new data standard has been highlighted at strategic level, as this is the cornerstone of the EU’s efforts to improve the availability and quality of procurement data, which remain suboptimal (to say the least) despite continued efforts to improve the quality and (re)usability of TED data.
In that regard, the 2020 European strategy for data, emphasised that ‘Public procurement data are essential to improve transparency and accountability of public spending, fighting corruption and improving spending quality. Public procurement data is spread over several systems in the Member States, made available in different formats and is not easily possible to use for policy purposes in real-time. In many cases, the data quality needs to be improved.’ The European Commission now stresses how ‘eForms are at the core of the digital transformation of public procurement in the EU. Through the use of a common standard and terminology, they can significantly improve the quality and analysis of data’ (emphasis added).
It should thus be clear that the eForms implementation is not only about low level form-filling, but also (or primarily) about building a procurement data architecture that facilitates the uptake of digital technologies for procurement governance across the EU. Therefore, the implementation of eForms and the related data standard seeks to achieve two goals: first, to ensure the data quality (eg standardisation, machine-readability) required to facilitate its automated treatment for the purposes of publication of procurement notices mandated by EU law (ie their primary use); and, second, to build a data architecture that can facilitate the accumulation of big data so that advanced data analytics can be deployed by re-users of procurement data. This second(ary) goal is particularly relevant to our discussion. This requires some unpacking.
The importance of data for the deployment of digital technologies
It is generally accepted that quality (big) data is the primary requirement for the deployment of digital technologies to extract data-driven insights, as well as to automate menial back-office tasks. In a detailed analysis of these technologies, I stress the relevance of procurement data across technological solutions that could be deployed to improve procurement governance. In short, the outcome of robotic process automation (RPA) can only be as good as its sources of information, and adequate machine learning (ML) solutions can only be trained on high-quality big data—which thus conditions the possibility of developing recommender systems, chatbots, or algorithmic screens for procurement monitoring and oversight. Distributed Ledger Technology (DLT) systems (aka blockchain) can manage data, but cannot verify its content, accuracy, or reliability. Internet of Things (IoT) applications and software oracles can automatically capture data, which can alleviate some of the difficulties in generating an adequate data infrastructure. But this is only in relation with the observation of the ‘real world’ or in relation to digitally available information, which quality raises the same issues as other sources of data. In short, all digital technologies are data-centric or, more clearly, data-dependent.
Given the crucial relevance of data across digital technologies, it is hard to emphasise how any shortcomings in the enabling data architecture curtail the likelihood of successful adoption of digital technologies for procurement governance. With inadequate data, it may simply be impossible to develop digital solutions at all. And the development and adoption of digital solutions developed on poor or inadequate data can generate further problems—eg skewing decision-making on the basis of inadequately derived ‘data insights’. Ultimately, then, ensuring that adequate data is available to develop digital governance solutions is a challenging but unavoidable requirement in the process of procurement digitalisation. Success, or lack of it, in the creation of an enabling data architecture will determine the viability of the deployment of digital technologies more generally. From this perspective, the implementation of eForms gains clear strategic importance.
eForms Implementation: a flexible model
Implementing eForms is not an easy task. The migration towards eForms requires a complete redesign of information exchange mechanisms. eForms are designed around universal business language and involve the use of a much more structured information schema, compatible with the EU’s eProcurement Ontology, than the current TED forms. eForms are also meant to collect a larger amount of information than current TED forms, especially in relation to sub-units within a tender, such as lots, or in relation to framework agreements. eForms are meant to be flexible and regularly revised, in particular to add new fields to facilitate data capture in relation to specific EU-mandated requirements in procurement, such as in relation with the clean vehicles rules (with some changes already coming up, likely in November 2022).
From an informational point of view, the main constraint that remains despite the adoption of eForms is that their mandatory content is determined by existing obligations to report and publish tender-specific information under the current EU procurement rules, as well as to meet broader reporting requirements under international and EU law (eg the WTO GPA). This mandatory content is thus rather limited. Ultimately, eForms’ main concentration is on disseminating details of contract opportunities and capturing different aspects of decision-making by the contracting authorities. Given the process-orientedness and transactional focus of the procurement rules, most of the information to be mandatorily captured by the eForms concerns the scope and design of the tender procedure, some aspects concerning the award and formal implementation of the contract, as well as some minimal data points concerning its material outcome—primarily limited to the winning tender. As the Director-General of the Publications Office put it an eForms workshop yesterday, the new eForms will provide information on ‘who buys what, from whom and for what price’. While some of that information (especially in relation to the winning tender) will be reflective of broader market conditions, and while the accumulation of information across procurement procedures can progressively generate a broader view of (some of) the relevant markets, it is worth stressing that eForms are not designed as a tool of market intelligence.
Indeed, eForms do not capture the entirety of information generated by a procurement process and, as mentioned, their mandatory content is rather limited. eForms do include several voluntary or optional fields, and they could be adapted for some voluntary uses, such as in relation to detection of collusion in procurement, or in relation to the beneficial ownership of tenderers and subcontractors. Extensive use of voluntary fields and the development of additional fields and uses could contribute to generating data that enabled the deployment of digital technologies for the purposes of eg market intelligence, integrity checks, or other sorts of (policy-related) analysis. For example, there are voluntary fields in relation to green, social or innovation procurement, which could serve as the basis for data-driven insights into how to maximise the effects of such policy interventions. There are also voluntary fields concerning procurement challenges and disputes, which could facilitate a monitoring of eg areas requiring guidance or training. However, while the eForms are flexible, include voluntary fields, and the schema facilitates the development of additional fields, is it unclear that adequate incentives exist for adoption beyond their mandatory minimum content.
Implementation in two tiers
The fact that eForms are in part mandatory and in part voluntary will most likely result in two separate tiers of eForms implementation across the EU. Tier 1 will solely concern the collection and exchange of information mandated by EU law, that is the minimum mandatory eForm content. Tier 2 will concern the optional collection and exchange of a much larger volume of information concerning eg the entirety of tenders received, as well as qualitative information on eg specific policy goals embedded in a tender process. Of course, in the absence of coordination, a (large) degree of variation within Tier 2 can be expected. Tier 2 is potentially very important for (digital) procurement governance, but there is no guarantee that Member States will decide to implement eForms covering it.
One of the major obstacles to the broad adoption of a procurement data model so far, at least in the European Union, relates to the slow uptake of e-procurement (as discussed eg here). Without an underlying highly automated e-procurement system, the generation and capture of procurement data is a main challenge, as it is a labour-intensive process prone to input error. The entry into force of the eForms rules could serve as a further push for the completion of the transition to e-procurement—at least in relation to procurement covered by EU law (as below thresholds procurement is a voluntary potential use of eForms). However, it is also possible that low e-procurement uptake and generalised unsophisticated approaches to e-procurement (eg reduced automation) will limit the future functionality of eForms, with Member States that have so far lagged behind restricting the use of eForms to tier 1. Non life-cycle (automated) e-procurement systems may require manual inputs into the new eForms (or the databases from which they can draw information) and this implies that there is a direct cost to the implementation of each additional (voluntary) data field. Contracting authorities may not perceive the (potential) advantages of incurring those costs, or may more simply be constrained by their available budget. A collective action problem arises here, as the cost of adding more data to the eForms is to be shouldered by each public buyer, while the ensuing big data would potentially benefit everyone (especially as it will be published—although there are also possibilities to capture but not publish information that should be explored, at least to prevent excessive market transparency; but let’s park that issue for now) and perhaps in particular data re-users offering for pay added-value services.
In direct relation to this, and compounding the (dis)incentives problem, the possibility (or likelihood) of minimal implementation is compounded by the fact that, in many Member States, the operational adaptation to eForms does not directly concern public sector entities, but rather their service providers. e-procurement services providers compete for the provision of large volume, entirely standardised platform services, which are markets characterised by small operational margins. This creates incentives for a minimal adaptation of current e-sending systems and disincentives for the inclusion of added-value (data) services potentially unlikely to be used by public buyers. Some (or most) optional aspects of the eForm implementation will thus remain unused due to these market structure and dynamics, which does not clearly incentivise a race to the top (unless there is clear demand pull for it).
With some more nuance, it should be stressed that it is also possible that the adoption of eForms is uneven within a given jurisdiction where the voluntary character of parts of the eForm is kept (rather than made mandatory across the board through domestic legislation), with advanced procurement entities (eg central purchasing bodies, or large buyers) adopting tier 2 eForms, and (most) other public buyers limiting themselves to tier 1.
Ensuing data fragmentation
While this variety of approaches across the EU and within a Member State would not pose legal challenges, it would have a major effect on the utility of the eForms-generated data for the purposes of eg developing ML solutions, as the data would be fragmented, hardly representative of important aspects of procurement (markets), and could hardly be generalisable. The only consistent data would be that covered by tier 1 (ie mandatory and standardised implementation) and this would limit the potential use cases for the deployment of digital technologies—with some possibly limited to the procurement remit of the specific institutions with tier 2 implementations.
Relatedly, it should be stressed that, despite the effort to harmonise the underlying data architecture and link it to the Procurement Ontology, the Implementation Handbook makes clear that ‘eForms are not an “off the shelf” product that can be implemented only by IT developers. Instead, before developers start working, procurement policy decision-makers have to make a wide range of policy decisions on how eForms should be implemented’ in the different Member States.
This poses an additional challenge from the perspective of data quality (and consistency), as there are many fields to be tailored in the eForms implementation process that can result in significant discrepancies in the underlying understanding or methodology to determine them, in addition to the risk of potential further divergence stemming from the domestic interpretation of very similar requirements. This simply extends to the digital data world the current situation, eg in relation to diverging understandings of what is ‘recyclable’ or what is ‘social value’ and how to measure them. Whenever open-ended concepts are used, the data may be a poor source for comparative and aggregate analysis. Where there are other sources of standardisation or methodology, this issue may be minimised—eg in relation to the green public procurement criteria developed in the EU, if they are properly used. However, where there are no outside or additional sources of harmonisation, it seems that there is scope for quite a few difficult issues in trying to develop digital solutions on top of eForms data, except in relation to quantitative issues or in relation to information structured in clearly defined categories—which will mainly link back to the design of the procurement.
An opportunity about to be lost?
Overall, while the implementation of eForms could in theory build a big data architecture and facilitate the development of ML solutions, there are many challenges ahead and the generalised adoption of tier 2 eForms implementations seems unlikely, unless Member States make a positive decision in the process of national adoption. The importance of an ambitious tier 2 implementation of eForms should be assessed in light of its downstream importance for the potential deployment of digital technologies to extract data-driven insights and to automate parts of the procurement process. A minimalistic implementation of eForms would significantly constrain future possibilities of procurement digitalisation. Primarily in the specific jurisdiction, but also with spillover effects across the EU.
Therefore, a minimalistic eForms implementation approach would perpetuate (most of the) data deficit that prevents effective procurement digitalisation. It would be a short-sighted saving. Moreover, the effects of a ‘middle of the road’ approach should also be considered. A minimalistic implementation with a view to a more ambitious extension down the line could have short-term gains, but would delay the possibility of deploying digital technologies because the gains resulting from the data architecture are not immediate. In most cases, it will be necessary to wait for the accumulation of sufficiently big data. In some cases of infrequent procurement, missing data points will generate further time lags in the extraction of valuable insights. It is no exaggeration that every data point not captured carries an opportunity cost.
If Member States are serious about the digitalisation of public procurement, they will make the most of the coming year to develop tier 2 eForms implementations in their jurisdiction. They should also keep an eye on cross-border coordination. And the European Commission, both DG GROW and the Publications Office, would do well to put as much pressure on Member States as possible.
Initial comments on the UK's Procurement Bill: A lukewarm assessment
Having read the Procurement Bill, its Impact Assessment and the Explanatory Notes, I have some initial comments, which I have tried to articulate in a working paper.
In the paper I offer some initial comments on the Bill and related documents, including: (i) the economic justification in its impact assessment; (ii) some general comments on legislative technique and the quality of the Bill and its Explanatory Notes; (iii) some observations on what may have not been carried over from the Transforming Public Procurement consultation and government response; (iv) a mapping of important aspects of procurement regulation that the Bill does not cover and will thus have to wait for secondary legislation and/or guidance; (v) some general considerations on the unclear impact of different wording for ‘terms of art’, including their interpretation; and (vi) fifty selected issues I have spotted in my first reading of the Bill. I close with some considerations on the difficulty of ensuring a sufficient fix along the legislative process.
In case of interest, the paper can be dowloaded here: https://ssrn.com/abstract=4114141.
More than ever, this is work in progress and I would be grateful for any feedback or discussion: a.sanchez-graells@bristol.ac.uk.
Doing procurement differently after Brexit? [update]
The UK in a Changing Europe (UKICE) has published a new report: ‘Doing things differently? Policy after Brexit‘. The report provides an update on last year’s ‘UK regulation after Brexit', as well as additional analysis.
‘Doing things differently? Policy after Brexit’ brings together a number experts in their respective fields to investigate how policy and policymaking have changed in a range of sectors. UKICE asked them to consider how changes so far compare to what was promised before Brexit, and to analyse what changes lie ahead and what their impact might be.
I contributed a section on public procurement. For more details and broader developments in UK procurement regulation, you can also see my recent country report for EPPPL.
What changes were promised after Brexit?
Public procurement regulation is a set of rules and policies controlling the award of public contracts for works, supplies, and services. Its main goal is to ensure probity and value for money in the spending of public funds, to prevent corruption, collusion, and wastage of taxpayers’ money. As pandemic-related procurement has shown, the absence of procurement rules (or their disapplication due to an emergency), all too often leads to the improper award of public contracts. Nonetheless, the benefits of constraining discretion in the award of public contracts are easily forgotten in ‘normal times’, and procurement regulation is permanently challenged for creating an administrative burden on both the public sector and on companies tendering for public contracts, and for stifling innovation.
Procurement has long been heavily influenced by international and regional agreements, which constrain domestic choices to facilitate cross-border tendering for public contracts. Before Brexit, the UK was directly bound by the procurement rules of the European Union (EU), and indirectly by those of the World Trade Organisation’s Government Procurement Agreement (GPA), to which EU rules are aligned. As a result, UK regulatory autonomy was limited to the spaces left by general EU rules requiring domestic transposition. The UK decided not to exercise that limited discretion and consistently took a copy-out approach to the transposition of EU rules, so pre-Brexit UK procurement regulation was virtually identical to the EU’s.
During the Brexit process, public procurement was ear-marked for reform. Boris Johnson promised a ‘bonfire of procurement red tape to give small firms a bigger slice of Government contracts’ and his Government proposed to significantly rewrite the procurement rulebook, and to adopt an ambitious ‘Buy British’ policy to reserve some public contracts to British firms.
What has changed so far?
Despite those promises, the UK Government has made big efforts to replicate international and regional procurement agreements post-Brexit, which means it will continue to be hard to introduce an effective ‘Buy British’ policy. The UK gained GPA membership in its own right on 1 January 2021. This now directly constrains domestic choices on procurement regulation. The EU-UK Trade and Cooperation Agreement (TCA) also includes a chapter on public procurement that leaves mutual market access commitments virtually unchanged.
The UK Government was slow to understand (or at least clearly communicate) the implications of this continuity in the trade-related aspects of procurement regulation. On 15 December 2020, the Cabinet Office issued a Procurement Policy Note (PPN) on ‘Reserving below threshold procurements’ that formulated the new ‘Buy British’ policy in terms of reserving contracts by supplier location (either UK-wide, or by county) and/or reserving them for small and medium sized enterprises (SMEs) or voluntary, community and social enterprises (VCSEs). Aggressive implementation could have contravened international agreements to which the UK had signed up. This led to the publication on 19 February 2021 of a new PPN on ‘The WTO GPA and the UK-EU TCA,’ stressing that the pre-Brexit limits on a ‘Buy British’ policy remain in place and virtually unchanged post-Brexit.
On 15 December 2020, the UK Government published the green paper ‘Transforming Public Procurement’ to consult on planned legislative changes to the procurement rulebook. The original timeline envisaged the introduction of a Procurement Bill in Parliament after summer 2021. However, the volume of responses to the public consultation (over 600) and the complex issues they raised, as well as the intrinsic difficulty in seeking to significantly change procurement law in a manner that is compliant with international obligations led the Cabinet Office to adjust the timeline. The 6 December 2021 Government response to the public consultation clarified that the new regime will not come into force until 2023 at the earliest.
So far, then, the Brexit-related changes have been modest. There have been some policy developments, such as the adoption of a National Procurement Policy Statement seeking to embed government goals such as growth and jobs and climate change in procurement decision-making; a push for a fresh approach to assessing social value in the award of government contracts; new requirements for firms applying for major contracts to have Carbon Reduction plans; and to also require those firms to have systems in place that ensure prompt, fair and effective payments to their supply chains. None of these will reduce procurement red tape and most, if not all, would have been possible pre-Brexit.
What are the possibilities for the future?
Given the commitments in the GPA and TCA, there is virtually no scope for a Buy British policy. The UK could be more aggressive in the exclusion of tenderers from non-GPA jurisdictions such as China, India or Brazil (something the EU is increasingly doing) as a practical way of seeking to boost contract awards to UK companies.
By contrast, the process of reform of the UK’s procurement rulebook is likely to result in a new set of streamlined regulations, as well as a voluminous body of guidance. Despite the Government’s prioritisation of simplification as a primary goal of legislative reform, the extent to which procurement can be significantly deregulated is unclear, as a result both of international commitments and, more importantly, the need to create a legislative framework fit for purpose that does not overwhelm the public sector in its complexity.
There is an opportunity for the Procurement Bill to make some progress on the modernisation and digitalisation of procurement systems, which has been slow in the UK despite it being a shared strategic goal with the EU. It is likely that the new rules will bring a clearer focus on open procurement data, which could enable a change of approach to the practice and management of procurement and offer some benefits from a red tape perspective. However, the green paper was criticised, among other things, for a lack of ambition in the automation of public procurement, so the extent to which tech will be a pillar of procurement ‘transformation’ in the UK remains unclear.
Overall, not much has changed and, rhetoric apart, there is limited scope for further change.
What's in a consultation? -- comments on the UK Government's Transforming Public Procurement response
On 6 December 2021, almost a year after launching the public consultation on Transforming Public Procurement in the UK post-Brexit, the Cabinet Office published its long-awaited Government response (the response). This now moves the process of reform of the UK procurement rulebook to the pre-legislative stage, with a Procurement Bill expected to be introduced in Parliament in the relatively near future and changes entering into force not earlier than 2023 — and, in any case, with a planned six months’ notice of “go-live”, once the legislation has been concluded.
The response has been published a few months later than initially expected (due to the high level of interest it attracted, see below) and legislation is likely to be introduced to Parliament with a significant delay as well. The legislative reform process is unlikely to generate practical results much earlier than 2024. This can only be an indication (if any was needed) of the complexity and the difficulty of significantly changing the procurement rulebook, which the consultation and now the response largely gloss over. For comparison, it is worth recalling that the process of reform of the EU procurement rules spanned a period of roughly three years (2011-2014), which the UK’s reform (despite not requiring complex inter-governmental and inter-institutional discussions and negotiations, or does it?) is unlikely to beat by much.
The response is meant to reflect on the 629 (unpublished) submissions to the public consultation and, in itself, the way the analysis of the responses has been carried out deserves some comment. The content of the response, perhaps less so, as it largely leaves the proposals unchanged and is thus liable to the same criticisms the original proposals attracted (in addition to my own comments here, here and here, see eg those of Pedro Telles, or the Local Government Association).
Consultation process: all submissions are equal, or are they?
Shortly after the response was published, it became apparent that the Cabinet Office had dealt with the feedback it received in the same ‘consultation by numbers’ approach that has characterised recent consultations on the reform of other aspects of UK procurement regulation, such as the rules applicable to the commissioning of healthcare services for the English National Health Service (NHS, see comment here) that seek to implement the NHS Long-Term Plan. This is not unique to the UK and, in fact, EU-level consultations on procurement reform broadly followed the same method.
Under this approach, the response provides limited or no engagement with specific submissions or arguments, and simply discloses statistical information on the level of support for each of the different parts of the consultation (as per the government’s own coding of the responses, that is). As the response makes explicit, ‘Throughout this document ‘[clear] majority’ means more than [70%] 50% of respondents, ‘about half’ means 50% ± a few percentage points, ‘some’ means 30-50%, ‘a few’ means 10-30% and ‘a small number’ means less than 10%’ (page 10, fn 1).
This is far from unproblematic, given the diversity of backgrounds and positions of those making submissions to the public consultation. While this was half-jokingly but well encapsulated by Peter Smith on twitter (see image), it is a serious flaw in the approach to public consultations for two reasons. The first and rather obvious is that not all submissions should carry the same weight because the institution or person making the submission and their expertise (own agenda, etc) matter, especially in fields of technical regulation where there is limited scope for canvassing general support for policy direction and the consultation is rather focused on complex legislative changes. While such a ‘referendum-like’ approach to public consultation may suit yes/no policy questions (eg should the UK de-legalise a specific substance?), it can hardly work for more complex proposals. If nothing else, the limited suitability of the approach is implicitly recognised in the response and its frequent indication that a significant number of submissions stressed the need for much more detail on the proposals before passing judgement on them.
The second problem is that such a bunching of responses and presentation of proposals as being supported by the majority can make the relevance of the changes introduced in view of the ‘minority’ opinion of respondents difficult to understand, as well as hide the origin of those changes. This is important from the perspective of accountability in the policy formulation process, but also more prosaically in terms of crediting good ideas and suggestions where credit is due.
Taking Q1 on principles of procurement as an example, the response indicates that ‘a clear majority of respondents (92% of the 477 responses to this question) were in favour of the principles [of public procurement: the public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination]’ (at [28]). The rest of the summary of submissions indicates some concerns with the removal of proportionality (20%), and some issues around labelling of the principle of ‘fair treatment’, or how they can be implemented in practice. There is no reference to calls for maintaining the principle of competition, which were quite forcefully made by the Competition and Markets Authority (CMA), or myself if I can say so.
Given that the criticism of an absence of a competition principle is not reflected in the summary of submissions, it is probably difficult to understand (for anyone not having made that point themselves, or having read the very few submissions that are publicly available) why, in the response — seemingly out of the blue — the government indicates that ‘We will introduce an additional objective of promoting the importance of open and fair competition that will draw together a number of different threads in the Green Paper that encourage competitive procurement’ (at [39]). It is also unclear whether this will be narrowly understood as an anti-collusion goal/principle seeking to focus contracting authorities’ attention in the reduction of the risk of illegal bid-rigging cartels, as proposed by the CMA (at [3.3]), or a broader goal/principle in line with my own proposals (at pp 11-12) (or someone else’s).
Of course, it would be difficult and tedious (and probably not very useful) to provide a comprehensive discussion of all submissions received, but the response should be expected to provide much better reasons for changes on the initial proposals, as well as some traceability of the origin of those counter-proposals. In their absence, it is difficult to assess whether the changes are properly justified, or rather reflect some sort of ‘mob rule’ (where a ‘majority’ supported the change) or, conversely, an instance of regulatory capture by a special interest (where a change is untraceable, but likely to have originated from a (super)minority, or perhaps a single or limited number of submissions).
In any case, the response makes it clear that there are limited changes resulting from the public consultation process and that the Procurement Bill will be largely based on the initial consultation proposals. The rest of this post highlights some of the (few) notable changes.
What will change after the consultation?
It would take long to stress what has not changed in the Cabinet Office’s approach to procurement reform after the public consultation, but a couple of unchanged elements of the overall strategy merit some highlight.
The first one is the continuation of the claim that the process will simplify the procurement regulatory framework, while it is clear that this is not a true simplification exercise, but rather one of legislative offloading that will complicate enforcement. This is, in my view, obvious in the response’s proposed next steps, which include the ‘plan to produce a detailed and comprehensive package of published resources (statutory and non-statutory guidance on the key elements of the regulatory framework, templates, model procedures and case studies)’ (at [24]). Post-reform, procurement practitioners will have to fully understand not only the new legislation (primary and secondary), but also the entirety of that ‘comprehensive package’ and the interaction between the different documents. This is not a scenario I would be looking forward to if I hoped for a simpler rulebook post-reform.
The second one is the continued lack of commitment of funding for the training programme (and additional recruitment?) required to deliver the gains expected of the reform. The response continues to indicate that ‘subject to future funding decisions, we intend to roll out a programme of learning and development to meet the varying needs of stakeholders’ (at [24]). This perpetuates the uncertainty on whether the rollout of the new regulatory package will be properly supported and it is difficult to understand why the commitment to fully fund this transformation programme has not yet been made (not even at a political level, unless I missed something). Given the state of UK finances in the foreseeable future, this is a major implementation risk that should have required a different approach.
Moving on to the changes in the original proposals, the following is a non-exhaustive list of the primary changes and some short comments relating to a few of them.
The response announces the introduction of a distinction between objectives and principles of procurement, ‘so that the obligations on contracting authorities are clearer’ (at [34]). Further, some ‘other concepts set out in the Green Paper will be established as statutory “objectives”, ensuring that they will influence decision-making in the procurement process. With some limited exceptions these objectives will apply throughout the procurement lifecycle (at [38]).
Quite how this will provide clarity is anybody’s guess, or at least it escapes me (and it has since 2009, as I already struggled with distinguishing between a goal and a principle of competition in my PhD thesis…).
It is also not clear which will be the statutory objectives, but it seems that ‘public good’ (framed as maximising ‘public benefit’), ‘value for money’ and ‘integrity’ will be statutory objectives (at [40]). This would leave the principles of transparency, fair treatment of suppliers and non-discrimination as the only procurement principles (stricto sensu) and would, in the end, solely imply a repeal of the principle of proportionality (or, rather, its relabelling as ‘fair treatment’), largely neutralised (confusingly) by an atomisation of proportionality requirements throughout the new regulations (at [42], eg in relation to award criteria at [128]). It is hard to see much of a (substantive) change compared to the current regulation of procurement principles in reg.18 PCR2015. Plus ça change …Introduction of ‘an additional objective of promoting the importance of open and fair competition’ (at [39]). This is a welcome development, but the devil will be in the detail (see above).
Revision of the proposal for the creation of a new Procurement Review Unit (PRU) (at [46]), supported by a non-statutory panel of subject-matter experts (at [49], and see also [61-3]), tasked with delivering the same service as the Public Procurement Review Service (at [47]) but with a main focus on ‘on addressing systemic or institutional breaches of the procurement regulations’ (at [48]). Legislation will provide the PRU with new powers (at [52]). PRU will be able to issue mandatory recommendations to address legal compliance (at [53-4]), but not in relation to specific procurement decisions (at [53], ie it will not act as a review body). PRU will also be able to issue statutory guidance if it identifies common patterns of non-compliance (at [56]).
The response maintains the goal of creating a single rulebook combining the existing four sets of regulations, but there will be exceptions for utilities (see also [78-85]), defence & security procurement (see also [87-91]), and a completely separate regime for healthcare services commissioning (at [69-72]). There will also be some specific rules concerning concessions (at [86]).
The extent to which there will be a single rulebook other than in name will depend on the scope and number of such special rules, but I have my doubts that there will be much of a practical change other than (harmless) duplication of (mostly identical) provisions across the existing sets of regulations.The response proposes to abandon the regulation of a new regime of ‘crisis procurement’ and to instead ‘include a limited tendering ground, in the form of a new power for a Minister of the Crown (via statutory instrument) to “declare when action is necessary to protect life” and allow contracting authorities to procure within specific parameters without having to meet all the tests of the current extreme urgency ground’. This would be based on Article III of the WTO Agreement on Government Procurement (GPA) and only be used extremely rarely and subject to parliamentary scrutiny (at [102]).
Re-introduction, with some (unspecified) modifications of the light-touch regime for social and special services, including the possibility to exempt from competition those services where service user choice is important (at [118-121]).
Here, the response seems to fail to recognise that user-choice systems are not covered by the PCR2015 (as interpreted in line with CJEU case law such as Falk Pharma and Tirkkonen).Creation of a new exclusions framework going beyond the more limited original proposals (at [151-8]), including abandoning the proposal to include Deferred Prosecution Agreements (DPAs) as discretionary exclusion grounds (at [161-165]).
Much detail is still to be published in the draft Procurement Bill and secondary legislation, guidance, etc, but the retention of the distinction between mandatory and discretionary exclusion grounds, as well as the classification of some of them (eg ‘risk to national security’ being a discretionary ground) raise quite a few questions. If a complete overhaul of the system is planned, would it not be better to have a single category of exclusion grounds and a clear set of requirements for their disapplication (eg due to self-cleaning, or in the public interest)? Here, it seems that UK policymakers have been unable to break away of the EU legislative design, even in an area where there are clear practical problems in the EU Directives.The response proposes to retain the creation of a DPS+ mechanism, but relabelling it as Dynamic Market, which will be available not only for common purchases, but for all types of procurement (at 198-203]).
The response proposes some limited changes to the transparency requirements included in the original consultation (at [220-8]), including: not requiring disclosure of tenders submitted in a procurement (at [221], a good development); introducing a value threshold of £2 million for the requirement to publish redacted contract documents (at [222], which however means that large parts of eg services procurement could remain below the threshold. Should transparency thresholds relative to coverage thresholds be considered instead?); introducing a restricted disclosure of evaluation documents implying ‘sharing with all participants certain redacted evaluation documents (on the winning bid only) and sending the unsuccessful bidders their own documents privately’ (at [223], also a welcome development, but one that makes the changes regarding debriefing letters rather unclear, see [263-6]); and changes to some of the proposed transparency notices, in particular concerning beneficial ownership (at [224]).
The response abandons the process of independent contracting authority review proposed in addition to the review system (at [241-2]).
The proposal abandons the possibility of using an existing tribunal to deal with low value claims and issues relating to ongoing competitions (at 246-7]).
This is perhaps one of the most regrettable changes in the response, as the creation of a review tribunal (not in the terms of the original proposal, but still) is very much needed, especially in a context of more regulatory complexity and increased discretion.Significant changes in remedies, including abandoning specific proposals on pre-contractual remedies (at [249}), and abandoning the cap on the level of damages available to aggrieved bidders (at [254-5]), as well as the proposal to cap profits on contract extensions where the incumbent supplier challenges a new contract award (at [294-5]). However, the proposed new test concerning lifting of automatic suspensions remains on the table (at [251-2]).
Increased scope for the (de)regulation of contract modifications, including specific rules for the modification of complex contracts (at [281]), flexibility for uncapped modifications in utilities contracts (at [282]), and minimisation of constraints in the modification of defence & security contracts (at 283]).
Final thoughts
In my view, the outcome of the consultation is mostly unsatisfactory in its limited effect on the initial proposals (other than some very high level issues regarding the principles of the system), its introduction of further sources of complexity through an increased number of exceptions (eg for utilities and defence), but also for social and special services, and its abandonment of the few procedural and remedy-related innovations (ie the creation of a new tribunal) that could have made a practical difference.
Linked to the criticism of the way in which the consultation was carried out (above), it seems like a significant number of these changes could be the result of regulatory capture by specific groups (utilities, MOD, third sector providers of care services) and the reasons for abandoning proposed changes are not always very clear.
All in all, however, the post-consultation Transforming Public Procurement agenda remains largely intact and, as above, liable of the same criticism already raised in relation to the original proposals. Not much more can be said until a Procurement Bill is made public and, then, it will be interesting to see to which extent it can survive the legislative process without suffering a Frankenstein-like deformation in the hands of special interest groups and other agents with specific agendas. The seeming ease with which some interest-specific changes have cropped up after the consultation does not, in my view, bode well for the new UK procurement rulebook.
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.
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.
New SSRN article on the UK's 'Transforming Public Procurement' Green Paper
I have uploaded on SSRN the new article ‘The UK’s Green Paper on Post-Brexit Public Procurement Reform: Transformation or Overcomplication?’, which will appear in the European Procurement & Public Private Partnership Law Review soon. The article builds on my earlier submission to the ongoing public consultation (still open, submissions accepted until 10 March 2021). The abstract is as follows:
In December 2020, seeking to start cashing in on its desired ‘Brexit dividends’, the UK Government published the Green Paper ‘Transforming Public Procurement’. The Green Paper sets out a blueprint for the reform of UK public procurement law that aims to depart from the regulatory baseline of EU law and deliver a much-touted ‘bonfire of procurement red tape’. The Green Paper seeks ‘to speed up and simplify [UK] procurement processes, place value for money at their heart, and unleash opportunities for small businesses, charities and social enterprises to innovate in public service delivery’. The Green Paper seeks to do so by creating ‘a progressive, modern regime which can adapt to the fastmoving environment in which business operates’ underpinned by ‘a culture of continuous improvement to support more resilient, diverse and innovative supply chains.’ I argue that the Green Paper has very limited transformative potential and that its proposals merely represent an ‘EU law +’ approach to the regulation of public procurement that would only result in an overcomplicated regulatory infrastructure, additional administrative burdens for both public buyers and economic operators, and tensions and contradictions in the oversight model. I conclude that a substantial rethink is needed if the Green Paper’s goals are to be achieved.
The full paper is free to download: Sanchez-Graells, Albert, The UK’s Green Paper on Post-Brexit Public Procurement Reform: Transformation or Overcomplication? (February 17, 2021). To be published in (2021) European Procurement & Public Private Partnership Law Review, forthcoming, Available at SSRN: http://ssrn.com/abstract=3787380. As always, feedback most welcome: a.sanchez-graells@bristol.ac.uk.
An early winter present? The UK's 'Transforming public procurement' green paper
The UK Government has published today its green paper on ‘Transforming public procurement’. This is a much awaited publication that will be subjected to public consultation until 10 March 2021. Contributions are encouraged, as this is perhaps a one in a generation opportunity to influence procurement rules. In this blog post, I just aim to provide a hot take on the green paper.
The green paper presents a vision for post-Brexit reform of the UK procurement ‘rule-book’ (for there should be a new, consolidated one), that partially aligns with the proposals of Prof Arrowsmith (see here and here)—and, in fact, Prof Arrowsmith has already published a comparison between her proposals and the green paper (here).
I have just had a read through the green paper and there will be plenty to comment in a submission to the public consultation (stay tuned towards the end of the consultation period). For now, I just have a few observations or rather, general thoughts, that I will need to mull over.
In very many respects, the green paper is is an indictment of the copy-out approach to the transposition of the EU rules in the UK (on which see here). For example, many of the reform proposals are compatible with the current EU rules and relate to areas where the UK decided not to transpose discretionary mechanisms (eg around subcontractor pay). Similarly, most of the proposals on remedies and enforcement mechanisms would be compatible with the current remedies rules. Other proposals seek to create some flexibility beyond the existing EU constraints although, to be fair, most of those are subjected to exceptional circumstances to be regulated by ‘clear regulatory frameworks’ yet to be defined, and which workability raises a few questions.
Other reform proposals concern the (past) unwillingness to impose more demanding standards (eg on publication of transparency) than those mandated by the Directives on grounds of avoiding gold-plating, which now seems to be gone—or the unwillingness or inability to impose obligations to which the UK Government had committed (eg in terms of OCDS or, again, concerning the publication of information). In that regard, the vision behind the green paper seems to be willing to create a much more developed (or far-reaching) regulatory architecture for procurement, which would be welcome.
However, this is directly in tension with another of the driving forces underpinning the green paper’s vision: deregulation and the will to create spaces for the exercise of ‘commercial judgement’ at contracting authority level. This creates a dual tension. On the one hand, the more sophisticated architecture would rely on bare bones procedural rules and would ultimately impose high transaction costs on both contracting authorities and tenderers (which the green paper acknowledges, but dismisses as ‘bedding in problems’). This could be a high-powered incentive to rely on centralised procurement organised by central purchasing bodies, although there is no clarity on the strategic approach to this in the green paper. On the other hand, relatedly, it should be noted that (if read between the lines?) the green paper is also an indictment on the current status of the commercial capacity of (most of the) UK’s public sector, as there are constant calls for more training, upskilling and quality control in the functioning of the procurement function.
This creates a chicken and egg problem on the suitability of the deregulatory approach to reforming the rules to create more commercial space. Most of the proposals are advanced on the (implicit empirical) basis that the flexibility of the existing framework is insufficient (or, rather, insufficiently exploited). This should raise a few questions on whether seriously committing to increase commercial capability and training investment would not suffice. Additionally, if we are starting at a low level of commercial capability, it would seem that creating a more deregulated framework will require even higher (ie beyond catch-up) investment in commercial upskilling. Whether the two moves should take place at the same time should be thought-trough (not least because it will be difficult to train anyone on a new system, on which there will be limited, if any, amount of reliable trainers).
In quite a few other respects, the green paper seems premised on the existence of large regulatory divergences between the GPA and the EU regime (on which see here). While this is the case in some areas, such as remedies, in most other areas the space between both regulatory baselines is narrower than the green paper would suggest, and the scope for reform is limited. This is most evident in the relabelling of procedures or award criteria, which effectively seem to seek to mask the narrowness of the regulatory space (if you cannot really change something, at least call it something different).
I am also surprised at the apparent EU-obsession underlying the green paper, which is also largely a criticism of the current EU rules (as directly copied into UK law, see above), and the complete lack of reference to useful tools for the design of a procurement system, such as the UNCITRAL Model Law and its guide to enactment. It may not have been a bad idea to seek to rely on that sort of guidelines to a larger extent, at least if the new regime is to draw on tested solutions. However, much of the green paper seems to want to achieve an ‘EU+’ level of procurement regulation (notoriously, in the regulation of a new so-called DPS+ commercial vehicle) or, perhaps, to create the next ‘world leading’ system of procurement (which would not be totally disaligned with other approaches of the current UK Government). Whether this will be a successful strategy remains to be seen.
Finally, there are a few strange elements in the green paper, which may be the result of current times (such as the extensive focus on the creation of new rules for crisis procurement), or a reflection of the particular interests of some of the actors involved in driving the reform forward (such as the explicit recognition of the possibility to charge suppliers fees for their participation in commercial vehicles, such as the proposed new DPS+, which seems to be of strategic importance to central purchasing bodies).
All in all, there is plenty to reflect upon. So this may be a good note on which to close the ‘procurement year’. I hope all readers will have a good winter break and to see you back here after the (long) hiatus, as I disappear into the horizon on my period of shared parental leave. All the best!
A couple of papers on procurement and discretion
I am preparing a paper on discretion and competition under the EU public procurement rules for a workshop at Lady Margaret Hall (Oxford) in November. In looking for new ideas and making sure I cover the necessary background, I have been reading recent economics and political science papers on the topic.
After a few reads, I think I am starting to identify an emerging trend of support for both (i) expanded use of discretion and (ii) claims of positive effects of the exercise of that discretion on procurement outcomes. I think both issues are interesting and tricky, and have found the two papers below thought-provoking (even if not entirely convincing). I would recommend reading them if you are interested in this topic.
- J Gutman, 'Is there room for discretion? Reforming public procurement in a compliance-oriented world' (2014) Brookings Global Economy and Development Working Paper No 74 (published online June 2016).
This is a political science paper aimed for a non-academic audience and it maps the discussions behind the choice on whether to promote or constrain discretion by procurement officers. It follows the US discussion and goes back to the arguments developed by Kelman in 1990. However, the paper largely ignores the ensuing discussion in the US where, primarily Schooner (2001, 2004), raised important issues around the oversight of the exercise of discretion. The interested reader would be well advised to incorporate Schooner's insights in the mix.
Gutman also stresses the need to extend procurement regulation and the possibility to exercise discretion to the execution phase. In that, he raises issues that are currently being asked across the EU, in particular concerning oversight of contractual modifications (see here). A reader familiar with these issues will not find much new in Gutman's paper, but it offers a good entry point for newcomers to the issue.
D Coviello, A Guglielmo & G Spagnolo, 'The effect of discretion on procurement performance' (2017) Management Science (published in advanced access in February 2017).
This is an econometrics paper that uses an interesting (and rather large) database of Italian contracts to 'document the causal effect of increasing buyers’ discretion on procurement outcomes'. They design their study around two different procedures for the award of works contracts: 'Works with a value above a given threshold have to be awarded through an open auction. Works below this threshold can be more easily awarded through a restricted auction, where the buyer has some discretion in terms of who (not) to invite to bid.' Or, in other words, they compare situations where the contracting authority is free to engage in a negotiated procedure with situations where a restricted procedure was mandated. In that regard, they consider that the contracting authority has a larger ability to exclude tenderers from the negotiation than from restricted procedures. I am not convinced about this, as the screening for a restricted procedure under the EU rules is rather strict and contracting authorities are not prevented from adopting any controls they would in a choice of negotiating partners. However, even with that in mind, reading the paper is interesting.
Coviello, Guglielmo & Spagnolo claim that 'Our main result is that discretion increases the probability that the same firm wins repeatedly, and it does not deteriorate (and may improve) the procurement outcomes we observe. The effects of discretion persist when we repeat the analysis controlling for the geographical location, corruption, social capital, and judicial efficiency in the region of the public buyers running the auctions'. I think that the first part of their findings is rather important, as they find discretion to entrench incumbents, either as a result of corruption or any other unobservable incumbency or first mover advantages. It is important to stress that this result is not affected by any assumptions or qualified by causality claims, as this is the straightforward result of crunching the numbers.
On the contrary, the claims of causality of discretion over improved procurement outcomes is affected by assumptions and their claims are weaker and depend on counter-explanations for the same results. On that, I am not sure that the authors carried out all controls that would be necessary or possible in terms of the advantages they find (which are small in scale, in any case), as a control by complexity of the project seems a rather clear missing piece in their testing strategy. Therefore, their results need to be taken with a pinch of salt.
As mentioned above, I think that these two papers reflect a broader trend of support for the exercise of discretion in the context of procurement -- in particular during the execution phase -- and emerging evidence (or at least claims to that evidence) that the exercise of such discretion can result in positive effects beyond the procurement phase of the public expenditure cycle. On the whole, this could push for reduced controls on the exercise of that discretion (or a lax approach to it) and a move of the focus on the design and award of the contract towards its execution.
This triggers me to think about the constraints on the exercise of that discretion (during the execution phase, but also in earlier procurement stages) that can be necessary to ensure that only positive results are achieved. Not surprisingly, I think that the key will be in the principle of competition and a pro-competitive orientated application of the proportionality principle. Roughly, that is what I will try to do in my forthcoming paper. I will post it here when ready. In the meantime, comments are most welcome.
EU law-making in the shadow of the CJEU case law: looking at the “trilogue” black box
This blog first appeared in Elgar Blog on 7 December 2016 as part of our promotion of the recently published book Grith Skovgaard Ølykke and Albert Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar, 2016). You can now also read Chapter 1: The EU legislative process. An introduction from a political science perspective free on Elgaronline.
After six decades of economic and legal integration, when the European Union (EU) seeks to adopt new rules or to revise existing ones, it hardly ever operates on a clean slate. EU law-making is not only constrained by the political and economic realities of the time, but also by the pre-existing acquis communautaire of rules and general principles as interpreted by the Court of Justice of the European Union (CJEU). By any account, the CJEU has been a great force in the development of EU law, and its case law has pushed the policy-making agenda in rather clear, if controversial ways. EU law-makers thus operate in the shadow of the CJEU case law. This influences law-makers’ starting points and conditions the final solutions to be politically agreed, which will unavoidably be open to scrutiny (and quashing) by the CJEU.
In that space amongst the shadows of the CJEU case law, EU law-makers interact in an increasingly informal manner. They seek ways of flexibilising the legislative process so as to achieve easier and swifter compromises and overcome the criticism of immobilism, sometimes at the cost of renewed criticism of a democratic deficit that the Lisbon Treaty aimed to do away with. Indeed, even if the ordinary legislative procedure is heavily regulated by the EU Treaties and should channel most of the EU’s law-making, informal EU law-making is on the rise. As recently as July 2016, this led the European Ombudsman to call for more transparency of informal negotiations between the European Commission, European Parliament and the Council of the EU, also known as “trilogues” meetings.
It is no exaggeration to say that such “trilogues” are the black box of EU law-making. Under their current operation, it is possible to observe what comes in—legislative proposals are published by the Commission and initial reports by both Council and Parliament are also published—and what comes out of it—in the form of legislation eventually published in the Official Journal of the European Union. But, even after carrying out significant research efforts, it is impossible to crack what happens within the black box and to trace the origin and reasons behind important amendments to proposed legislation, as well as the way in which the final text is drafted.
This creates potential legal uncertainty in terms of the likely interpretation of the texts, which sometimes deviate from previous case law of the CJEU in unexplained ways. It also makes for difficult political assessments of the balance of interests that went into EU law-making and the weight that competing EU, national and group interests carried in shaping the new or revised rules. It can also significantly diminish the technical quality of the final rules, particularly where the trilogues are structured in sequence or address issues in a piece meal fashion, which prevents a final check for internal consistency and eventually leads to difficult systematic interpretation issues.
The case study of the reform of the EU public procurement rules in the period 2011-2014 clearly evidences these issues. The results of our two year research project, now published as Reformation or Deformation of the EU Public Procurement Rules, show both that the entirety of the legislative process was influenced by the CJEU case law, and that some of the most remarkable modifications of the pre-existing EU public procurement rules came about in an unexplained way at trilogue stage. As Dr Grith Skovgaard Ølykke and I stress in our conclusions,
The informal part of the procedure taking place between the 2011 Proposal and the first reading and adoption of the 2014 Directive prevented a repetition of the lengthy process of adopting the 2004 Directive (four years and a full-fledged ordinary legislative procedure, several amended proposals, conciliation and all). However, the early retreat to the trilogue and, hence, informality, significantly reduced transparency compared to that available in the legislative procedure leading to the adoption of the 2004 Directive, where e.g. the amended proposals contain the Commission’s argumentation for accepting proposed amendments or not.
… this still does not clarify the role and influence of the Commission in the post-Lisbon trilogue … Indeed, as stressed by the [European] Parliament itself, ‘given the Commission’s important and active role during Council working party (and even COREPER) discussions, its status as “honest broker” during trilogue negotiations is sometimes questioned in practice’.
A close analysis of the results of our research project helps gain a better understanding of the influence of the CJEU case law in EU law-making, both shaping it and as a benchmark from which policy-makers sometimes try very hard to deviate. However, the results of the research project also stress the limitations of an analysis of the travaux preparatoires and the negotiations throughout the legislative process when important changes and their reasons cannot be observed because they took place in the trilogue black box.
These insights will be interesting in guiding legal interpretive efforts, both in the area of EU public procurement law and more broadly. They will also be high quality and detailed evidence of the need to reform the way trilogues operate, both from a perspective of ensuring high standards of governance through accountability and transparency as stressed by the European Ombudsman, as well as from the perspective of preserving the value of interpretive aids in the context of an ever increasingly complex acquis communautaire.
Additional Thoughts on Brexit and Public Procurement
I had the pleasure of participating in last night's seminar on Brexit and Public Procurement, which was part of the Brexit Seminar Series 2016/17 organised by the Centre of European Law of King's College London. There was interesting discussion of the WTO GPA, UNCAC and UNCITRAL model law requirements and the possibilities they bring after Brexit, including a rather subtle argument why the UK may retain its condition of party to the WTO GPA on the basis of its final provisions in its Article XXII--which I either did not fully understand, or really do not see working out.
However, there was also a good measure of wishful thinking based on the opportunities that dropping the 'straitjacket of the EU single market approach' to procurement regulation could provide, as well as the possibilities that Brexit would bring in order to mend a system that is broken (with reference to both EU public procurement and State aid law), and which covers up an anti-British bias that can only get worse in the future if the Commission manages to adopt its 'Fortress Europe' strategy. I guess that, after this, my remarks (see presentation below) came in as a minoritarian and pro-EU reaction to these arguments. The rest of this post provides a synthesis of the arguments I made.
In order to counteract some of the arguments being made and, hopefully, to put the issue into broader perspective, I focused my remarks around whether the reform of [British] procurement regulation is feasible or a utopia (which links to my broader ideas on the difficulties of reimagining public procurement regulation). I broke this down in four parts: (1) the unavoidable costs of adopting a distinct 'Very British Model' (borrowing this label from Sarah Hannaford QC); (2) what is likely to happen with the Public Contracts Regulations 2015 immediately after Brexit; (3) what level of coordination between UK (Eng) and EU law should be achieved in the future; and (4) what can and should realistically be done to further reform (UK) public procurement law in the future.
1. On the unavoidable costs of a Very British Model, I guess that the simple insight I was trying to stress was that having diverging regulatory regimes increases the cost of doing business for companies aiming to serve markets where different procurement regimes apply. From the perspective of British companies (particularly SMEs, which PM May seems to be intent on actively supporting), this de facto makes it more difficult for them to export to the EU if they get used to a different domestic regulatory regime.
This can in turn result in a change of supply chains where EU 'importers' acquire the goods (works less well for services) from UK manufacturers and then sells them to the public sector in the rest of the EU, which will require the creation of commercial mark-ups / margins that may well wipe out any financial advantage derived from the taking of the Sterling, as well as any increases in productivity in the future.
Moreover, a Very British Model that significantly deviated from the current EU system would create a significant barrier for cross-border collaboration with other public buyers in the EU (which was mentioned could be particularly relevant in terms of defence procurement, given recent policies to boost EU's military capabilities through a joint defence fund), but also with potential third countries (eg Canada). It would also make negotiations to gain (or retain) membership of the WTO GPA and to subject internationally funded (large infrastructure) projects to the revised Very British System because international partners may need to be convinced that, though different, that new system complied with their requirements. If nothing else, this will be a drain of international and trade negotiators' time and energy.
2. On the likely immediate future of the Public Contracts Regulations 2015, it is hard to make a forecast. Short of their total repeal and the creation of a massive regulatory vacuum in the control of public expenditure in the UK (which I do not think likely, and certainly hope not to be pursued), the PCR2015 are likely to stay in the books for a while (with or without Great Repeal Bill).
It is possible that the UK Government is tempted to chop bits of them off the statute book. Either suppressing the remedies they create for non-domestic bidders, as suggested by Prof Arrowsmith, and which I consider a daft strategy--for the lack of a better term--because it will not only alienate foreign bidders and international trading partners, but also be easy to circumvent through formal submission of tenders by UK-based entities. Or else shooting holes in the PCR2015 to get rid of parts that may be considered particular examples of bar procurement regulation (say, the use of self-declarations in the form of the ESPD). That would diminish the consistency of the regulatory system and could create undesirable effects.
Overall, as I said before, in the short run, the would be better off by completely keeping the status quo ante Brexit (including remedies for international tenderers and investors) if it wants to preserve its (diplomatic) options of a swift conclusion of procurement-related trade agreements, as well as preventing disruption in investment and infrastructure projects.
3. On the desirable level of coordination between future UK rules and EU public procurement law, including the CJEU case law, I submitted that, regardless of the formal legal obligations to comply with CJEU case law under EEA or other types of agreements, from a normative point of view and at least for as long as the law on the books reads the same way (ie up and until there is a repeal and substitution of the PCR2015), UK law should continue to be substantively coordinated with EU public procurement law.
For two reasons. First, because deviations will create the same additional costs of doing business indicated above (1). And, second, because on the whole (and I am not one to cosy up to the CJEU), I consider that its public procurement case law has been progressive and positive, and helped shape a regulatory system that is massively misunderstood and misconstrued, particularly but not only in the UK (more below).
4. On the productive ways in which [British] public procurement can be reformed in the longer run, I took the seemingly radical view that legal reform should not be the main focus and that there are more pressing issues that can only be sorted out with significant investment (which, of course, triggered the reaction from the floor that 'it ain't gonna happen' in this context and with the massive black hole that Brexit will create in the UK's public finances between now and, at least, 2021). I also stressed that the UK had shown no regulatory creativity whatsoever in the transposition of the 2014 Public procurement package, which indicates that there is a lack of direction and strategy on which to build a significant reform of the current system.
I stressed that most of the complaints against the EU public procurement rules coming from the business community, and particularly SMEs, would equally exist with any regulatory regime that imposed any level of red tape on businesses because that is, quite simply, in the nature of things. Same goes for the criticisms from the public sector. Of course, the existing rules are perfectible (topically, on the need to reform the Remedies Directive), but no system will ever be perfect and there is a level of discomfort with public procurement rules that needs to be accepted as trade off for the anti-corruption and pro-competitive / value for money results they achieve.
Additionally, significant problems of legal certainty and difficulties in the coordination of different sets of procurement rules are exclusively a domestically created issue. For example, the difficult coordination of general procurement rules under the PCR2015 and those applicable to healthcare procurement in the context of NHS England are a UK problem that can, and must, be resolved domestically (see eg here, with a focus on conflicts of interest).
Moreover, I also stressed that the EU public procurement rules are greatly misunderstood and construed as imposing a tight straitjacket on both procurers and businesses. That is simply not the case, particularly after the revision of the 2014 Public procurement package, which has created enormous spaces for administrative discretion and negotiations--that have in turn triggered the need, more than ever, for a competition-oriented interpretation and implementation of the rules.
My view, and I am happy to expand it, is that properly understood and applied, the current EU rules allow for all the goals I have so far heard businesses and public sector officials indicate they want from a revised [British] public procurement system--except those linked to a protectionist industrial policy, which are economically unwise and undesirable in any case.
The real problem is that an improvement of procurement practice requires three main (and very expensive) changes: (a) a serious investment in technology and the effective roll out of eProcurement; (b) significant investment in human capital and the upgrade of the public sector skill set (particularly in non-legal aspects linked to market intelligence and procurement best practice, along the same lines stressed by the European Court of Auditors in the context of EU institutional procurement); and (c) significant investment in strengthening the public oversight powers of entities such as the National Audit Office and the Office for Budget Responsibility (on the worrying contrary trend, see here) so as to reduce the dependence on (and incentives for) private litigation as the only (meaningful?) check on the way procurement is carried out.
Overcoming this problem requires investment and long-term planning. Two things that seem to go against the very grain of the Brexit process. So, overall, I would not hold my breath. I would more generally not expect any significant change in the way procurement is carried out in the UK in the short to medium term, which in itself can create problems in the longer run.
Musings about the constraints to a reimagination of public procurement regulation
I have been thinking for a while on a research project I would call "Reimagining Public Procurement". It may well be too ambitious (even as an abstract endeavour), but I would like to start shaping it so that I can dedicate my future research efforts to its completion. The purpose of this post is to structure some of my own thoughts, as well as to spur some discussion and seek feedback from you, dear reader.
The broad idea would be to structure the project along three phases or layers of interconnected issues. Briefly, they would be as follows:
First, to identify the main reasons why public procurement rules are criticised and possibly fail to create a practical and administrable system that ensures that the public sector can acquire the goods, services and works it needs in order to carry out its public interest missions in the best possible conditions, while ensuring the probity and efficiency of the expenditure of public funds.
Second, to identify the main constraints that regulatory reform and policy implementation face in this area, and which imply that, despite significant efforts to enhance public procurement regulation and practice, the resulting improvements are at best marginally incremental and the underlying problems remain fundamentally unaddressed.
Third, to formulate an alternative view for public procurement regulation and practice that has a good chance of overcoming the defects of current rules and avoiding the constraints of past reform processes, so as to achieve a superior system. Needless to say, this alternative view will have to integrate its technological dimension to a much more essential level than previous efforts.
Of the three layers of issues (and while acknowledging that all of them are deeply intertwined), I have been concentrating mostly on the second, and giving some thought to what constraints have affected the reform of public procurement rules in recent years. The regulatory reform experience that I know best is that of the 2011-2014 review of the EU public procurement rules [on which I have co-edited the book Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar, 2016, forthc), with Grith S Ølykke], and this directly informs my thinking. However, I would hope that some of these ideas will resonate beyond the EU.
In a brief (and incomplete) account, I would suggest that the following are some of the main constraints that limit (or prevent) a fundamental reimagination of public procurement regulation and practice:
- The assumption that changing the procurement rules changes the underlying practice--or viewing procurement law as a deus ex machina. With this, I mainly refer to the starting position or assumption that good procurement outcomes can be mandated and that they necessarily derive from process-based regulation. Most of the efforts to improve procurement (as an activity) have been focusing on a revision of the regulatory framework in which it takes place, hoping that legal reform would carry better results. This strategy may also have been affected by tendencies of insanity because the same strategy has been adopted over and over despite the fact that it has never actually been proven to deliver the expected results. Professor Schooner has been saying for a long time that procurement (regulation and practice) needs to move its focus from process to outcomes and I could not agree more. Any useful reimagination of procurement regulation needs to respect the premiss that the rules need to be adaptive to the desired outcomes, rather than the opposite assumption that proper outcomes will result from tightly/neatly regulated procedures.
- Excessive legocentrism and marginalisation of other types of expertise/input. In short, lawyers have been (almost) exclusively leading public procurement reform and the insights from other groups of professionals/experts tend to be marginalised--or, worst, left to 'public consultations' that rarely inform reform decisions in a meaningful way. A reimagination of public procurement needs to incorporate the insights from a wider range of fields of expertise, clearly including economics, management, political science, as well as healthcare and engineering--for, ultimately, big infrastructure and healthcare systems are two of the largest expenditure items in non-defence markets. I have come to realise that lawyers talk about issues such as technical specifications or award criteria as if they were solid realities. However, they are not; and the feeling of achievement derived from the creation of concepts such as 'functional specifications' or 'technologically-neutral award criteria' (both of which I have used enthusiastically in my research to date) falls apart once they are confronted with the (technical) difficulties of their implementation in practice. Ultimately, then, maybe the constraint is that regulation is based on concepts while practice is based on functions, and a reimagination of public procurement regulation will then have to be function-oriented rather than built around highly abstract concepts or categories.
- The assumption that regulatory perfection or completeness is achievable--particularly in a context of multi-layered regulation, multi-layered policy and multi-layered enforcement. This may be an EU-centric constraint, but I would expect these issues to apply in other settings too. The constraint to which I refer here consists in the difficulty of applying a set of complex rules in a way that allows for no margin of tolerance. This constraint has two sources. First, the complexity of procurement rules that are EU-hybrids and, consequently, have two built-in layers: an EU harmonised layer and a domestic layer--which not always interact smoothly, particularly where the EU layer has encapsulated legal irritants (think about self-cleaning, which is a very foreign concept if a number of jurisdictions) or where the domestic layer is somehow insulated from EU pressure by virtue of the split of competences between the EU and Member States. This has over time created pressure on the EU rules to expand, so as to minimise the diversity of approaches in different Member States, while at the same time exacerbated difficulties in the coordination of the enforcement of these EU-hybrids in the broader context of the given Member State public law system. The second source of the constraint derives from the rigidity of the remedies system, which does not have much of a margin of tolerance for substantive but not formal compliance with the EU rules, as well as not much of a margin of tolerance for substantial but not perfect compliance. Overall, the mix of over-prescriptive but incomplete EU-hybrid rules and a strict (and too rigid) remedies system still falls short of regulatory perfection or completeness--which is simply unachievable. This creates several issues, such as the unspoken (or rather unspeakable) high level of non-(absolute) compliance with the EU rules, or the existence of instances where potentially good procurement outcomes are killed in the cross-fire of ensuring regulatory (EU) compliance. Ultimately, then, a reimagination of public procurement regulation should aim to create more room for substantial substantive compliance, and lessen the focus on prescriptiveness and strict enforcement of formality.
- Inertia against technological substitution and disruptive technologies and processes. So far, public procurement reform has simply side-stepped a true assessment of how technology can change the procurement function and its oversight. Electronic procurement still remains an ideal based on doing by electronic means things we used to do on paper. However, this probably falls rather short from exploiting all the possibilities created by technology. There are unexplored issues, such as the automation of the procurement of some types of standard goods, or the use of electronic marketplaces similar to the ones readily available in the private sector. And certainly much more provocative and potentially revolutionary options must be out there. However, once more, it can well be that lawyers are not the best placed to assess this potential and adapt procurement regulation in a way that enables technological substitution and the incorporation of disruptive technologies and processes. A reimagination of public procurement should at least complete the assessment of what current technology can do to reduce the burden of procuring goods, services and works and, to the extent that it is possible (law has always lagged behind reality), be open to further technological changes.
- Wilful ignorance of the investment required to deliver an effective and efficient procurement system. Procurement regulation has so far developed with no consideration for the costs that the system creates, particularly in terms of the need to invest heavily in human capital. Complex and sophisticated rules are useless without a body of public sector professionals able to apply them and maximise their possibilities. Regulatory reform has not taken into account the difficulties of training large bodies of professionals and task forces that struggle to cope with the speed at which reforms are introduced. A reimagination of public procurement needs to take this constraint into account. It is not sufficient to incorporate claims for more professionalisation or for the State to dedicate more resources to the procurement function. It seems necessary to find ways to really simplify procurement regulation and make it user friendly, particularly for less complex procurement activities. Technology can support this.
- Renunciation of the idea that public oversight and public enforcement can protect the public interest--or the reverse assumption that procurement is for the masses. A final constraint derives from the fact that enforcement of public procurement, at least in the EU, has become the primary field of private challenges to procurement decisions. Public enforcement through audit and oversight bodies has significantly deteriorated, to the point that procurement litigation is the only meaningful check on the system in many a jurisdiction. This has impacted the development of procurement regulation in various ways, but it has certainly put pressure on the move from a regulatory framework based on diffuse oversight in the public interest, towards one based on individually judiciable rights and increasing incentives to private litigation. This has also led to the assumption that exposing the entirety of the procurement process to society will bring additional (private) oversight, on the assumption that private citizens have an actual interest in sifting through great volumes of information (but not necessarily big data) in order to keep the public sector in check. The major defeat of the proposal for the creation of national public oversight bodies in the recent reform of the EU rules is a testament to this trend and a worrying warning shot. A reimagination of public procurement needs to relocate procurement oversight squarely in the public sector and create mechanisms that enable oversight bodies to carry out their functions in the public interest and in real time. It also needs to aim to de-judicialise procurement disputes to a large extent, particularly when they are from a technical nature, for which the courts are not the best situated decision-makers.
If these constraints are real, then, a shortlist of some of the main characteristics of a reimagined formulation of public procurement regulation and practice would include for it to be:
- Focused on outcomes and their facilitation rather than on procedures.
- Built upon functions rather than abstract concepts.
- Aimed at ensuring substantial substantive compliance with incomplete rules (or principles) rather than strict and formal adherence to overly prescriptive requirements.
- Adapted to existing technologies and adaptive to further technological change.
- Simplified and with the objective of minimising professionalisation and training costs.
- Overseen and enforced by the public sector itself, while including dispute resolution mechanisms of a technical nature that reduce the pressure on judicial bodies.
I would be very interested to discuss these ideas with you, either in this blog, or at a.sanchez-graells@bristol.ac.uk.
A second look at the CJEU's public procurement activity--and a reflection on its implications in terms of remedies and the effectiveness of eu judicial activity
The Court of Justice of the European Union (CJEU) has now published the final version of its Judicial Activity 2015 Annual Report. The release of these final statistics on the CJEU activity for the past year provides a chance to take a second look at the evolution of procurement cases over a long(ish) time period--statistics are now available for a full decade regarding the General Court (GC) and for the period since 2010 for the Court of Justice (ECJ). A quick look at the the statistics shows a continuation of the trend of increasing backlog in this area (see here), and a closer look reveals how the backlog at the ECJ level has been deteriorating rather quickly in recent years.
There are some limitations of the statistical information that need to be stressed from the outset. First, as with previous editions of the judicial activity report (see previous comments of the 2012 and 2014 reports), having had more information on the status of pending cases would have helped gain a better understanding of the situation, particularly at ECJ level. It is still hard to understand why the GC explicitly reports on pending cases, while the ECJ does not. Second, not all cases are exactly comparable. While the activity at GC level is limited to challenges to procurement procedures carried out by the EU Institutions, the activity of the ECJ includes a mix of preliminary references (the vast majority of new cases) and appeals against GC decisions. In 2015, of the 26 new cases before the ECJ, 22 were preliminary references and 4 were appeals. This makes the assessment of the overall evolution of public procurement activity not very meaningful. Thus, I will rather discuss the evolution at the GC and ECJ level separately.
Evolution of procurement cases at GC level--what are the implications in terms of the effectiveness of remedies for eu institutions' procurement?
The GC has been managing to slightly reduce its backlog of pending cases in the last 5 years and the trend seemed to roughly remain stationary in 2015, when it opened 23 new cases and completed another 22. Provided that no cases are "left at the bottom of the pile", it would thus seem that the GC is in a position to manage and cope with its public procurement docket.
However, this should not be too surprising, given the low pressure that being the review court for all the procurement activities developed by the EU Institutions creates. According to the recent Special Report No 17/2016 of the European Court of Auditors (ECA) on EU institutional procurement (see here), the EU Institutions carried out procurement for a value of €4.2 bn in 2014. According to ECA: "In the 6‑year period from 2009 to 2014 the General Court completed 3,419 cases of which 106 dealt with public procurement by the EU institutions (3.1 %), or on average 17.6 cases per year. The 106 cases relating to public procurement gave rise to a total of 123 decisions: 66 judgments and 57 orders" (p. 44).
The Commission generally estimates that it awards more than 9,000 contracts per year. However, on average, there are less than 20 challenges of those procurement decisions per year. This would roughly indicate that less than 0.25% of procurement decisions of the EU Institutions get challenged before the GC. This is a very low caseload for a court in charge of reviewing procurement activity of a value of €4.2 bn. Searching for valid comparators is difficult because each jurisdiction organises procurement remedies in different ways and there are important cultural and practical factors that can determine very different litigation rates (going from the possible extreme of high litigation in Italy, where around 40% of the cases in the administrative courts are public procurement cases, to the UK, where there is only a handful of public procurement cases every year).
However, one gets the sense that 20 cases per year is a very low litigation rate by taking into consideration that EU Member States with similar or lower estimated procurement expenditure show more intense litigation. For example, based on the Commission's data, Bulgaria has over 1,000 cases per year (estimated procurement covered by the EU rules of €2.83 bn), Latvia has over 200 cases (€3.55 bn), Luxembourg has over 50 cases (€0.56 bn), and the Slovak Republic has over 1,000 cases (€3.98 bn). If we calculate the incidence of litigation by volume of (estimated) expenditure (covered by the EU rules), we would get the (very, very) rough measure of cases by billion Euro of expenditure. Using the information available (which is far from ideal), we can construct the table on the left-handside column.
This information should be taken with immense caution, and none of the specific figures for any of the countries of the list should be used as an indication of the actual intensity of litigation in that jurisdiction. However, I think that his serves to make the broader point that the level of litigation of procurement decisions adopted by the EU Institutions is indeed very low, at least by an order of magnitude.
The implication of this insight in terms of a potential review of the remedies mechanisms available to challenge procurement decisions by the EU Institutions--which has been advocated by ECA and should be strongly supported (see here)--is that the GC (in its current configuration and without a significant expansion of resources) is probably incapable of digesting any relevant increase of procurement litigation to a level in line with the jurisdictions of the Member States, except those with a lower intensity of procurement litigation.
In my view, thus, it would seem advisable to explore suitable alternatives, such as the creation of a procurement review agency in charge of the oversight of the procurement carried out by the EU Institutions, the submission of the procurement of the EU Institutions to the procurement remedies system of the relevant Member State, or some other similar option--including the possibility of creating a specialised chamber within the General Court, in case the provision of additional resources to this entity was considered preferable than a more substantial reform of the remedies system.
Evolution of procurement cases at ECJ level--will a new wave of preliminary references flood the court and dampen the papers?
The ECJ has been accumulating a significant backlog of procurement cases over the last 5 years (no earlier statistics are available). What seems worrying is that, for the last 3 years, the backlog has been increasing at a pace of approximately 10 cases per year, and the total backlog at the end of 2015 trebled the level in 2010.
In view of the expiry of deadline for the transposition of the 2014 Public Procurement Package in 2016 (and even if a significant number of Member States are delayed), it seems reasonable to expect a new wave of preliminary references for the interpretation of the ever so complex new rules and their coordination with the previous case law in this area of EU economic law. Thus, it would seem reasonable to expect the ECJ to consider strategies to cope not only with the existing backlog, but also with the likely increase in referrals in the period between now and, say, 2020.
Of course, it is difficult to develop a strategy that prioritises public procurement over other areas of judicial activity, and there may be good reasons to consider other types of cases (including within EU economic law, such as tax avoidance cases) equally or more relevant or urgent. However, the advantage of procurement is that, it being a very specialistic and relatively self-contained area, it would not be too difficult to create a task force to deal with procurement cases in a swift manner. This would require an investment in human capital for a temporary period.
The European Commission did this in the wake of the financial crisis in order to deal with the increased volume of State aid cases [for discussion, see A Sanchez-Graells, “Digging itself out of the hole? A critical assessment of the Commission’s attempt to revitalise State aid enforcement after the crisis” (2016) Journal of Antitrust Enforcement, forthcoming]. The possibility of introducing similar flexibility at ECJ level could help boost the effectiveness of EU law (and public procurement law in particular) through a swifter process for the clarification of new rules that, otherwise, may remain in legal limbo for quite some time.
In terms of looking for resource to do so, of course, the elephant in the room is the issue of the cost of language management (as in translation and interpretation) at the CJEU. This is probably heretical, but I think that a reduction of the resource dedicated to language management would be the easiest and quickest way of boosting the ability of the CJEU to deal with a larger docket of legal issues. The Management Report in the 2015 Annual Report makes this overwhelmingly clear. To my mind, the fact that 37.4% of the posts at the CJEU are judicial (including Cabinets, Registries, Research and Documentation, Library, Protocol, Communication and Publications), while 51.0% of the posts are languages positions (including Translation and Interpretation), is troubling. Basically, because this heaviness of language management has the combined effect of: a) draining resource that could be put to a different use and, b) delaying the functioning of the CJEU.
Overall conclusion
It is probably not surprising that a look at the statistical information on judicial activity shows that the CJEU is not prepared for the likely developments in litigation in the area of public procurement law. It may well be overwhelmed by developments at the EU level that triggered a higher intensity of procurement litigation--should the remedies system for EU Institutional procurement be developed along the lines proposed by the European Court of Auditors; and it is most certainly in a bad position to absorb any significant increase in the number of questions referred for a preliminary ruling that results from the Member States application of the 2014 Public Procurement Package in a systematic manner.
In my opinion, the CJEU (and the EU Institutions more generally) should look for creative ways of preparing for these changes. Otherwise, the effectiveness of the EU public procurement rules may be jeopardised and/or significantly delayed, particularly concerning the interpretation of the 2014 Public Procurement Package, which is certainly not without legal controversy.
Some bold thoughts about the (distant?) future of public procurement in the EU
I was invited by the European Commission (DG Internal Market, Industry, Entrepreneurship and SMEs, Unit E4 - Economic Analysis and E-Procurement, @EU_Growth), to participate in a very stimulating brainstorming session on cooperative public procurement, public procurement aggregation and, in particular, Central Purchasing Bodies (CPBs). For yesterday's session, DG Growth assembled an interesting panel of practitioners, institutional representatives and academics, and made sure that very different opinions were represented and properly voiced. DG Growth must be praised for that.
On the substance, the general arguments for and against cooperative procurement strategies (centralisation, aggregation, occasional joint procurement) were discussed in some detail [for background, see A Sanchez Graells and I Herrera Anchustegui, "Impact of Public Procurement Aggregation on Competition: Risks, Rationale and Justification for the Rules in Directive 2014/24" (2014)
University of Leicester School of Law Research Paper No. 14-35] and the representative of the OECD advanced some interesting statistics on OECD Member States' adoption of centralised and cooperative procurement that undeniably present it as a very strong trend in public procurement reform. Not a surprising insight, but the trends that emerge from their questionnaire (hopefully, soon to be published) raise a significant number of questions on how to support and/or regulate this phenomenon.
In my view, this is the point were the discussion got all the most interesting after Joaquim Nunes de Almeida, Director for Public Procurement at DG Growth, asked the experts two seemingly simple questions: 1) Should the existing and growing trend of cooperative/aggregate/centralised procurement be considered as something positive and favoured/supported or not? 2) If so, how can the European Commission do it?
The majority of experts presented their personal views and were generally very supportive of the general trend of cooperative/aggregated/centralised procurement as a lever to achieve smart/lean procurement and an enhanced strategic use of procurement, and suggested some soft law and cooperative interventions for the Commission to undertake in close cooperation with Member States and the emerging (informal) CPB network. I was more skeptical. Let me give present some of my bold thoughts for the (maybe not so) distant future of public procurement in the EU. They may seem shocking, but I hope there is some value in them.
1. Centralisation is not necessarily here to stay
Centralisation will not be the dominant trend for a very long time and technology will generate a very significant increase of unregulated public procurement by facilitating direct award of very small procurement contracts through (alternative) electronic platforms. Centralisation or cooperative procurement is a result of the increased pressure to achieve savings (as a result of the crisis, and more generally) and is facilitated by the technological opportunities that e-procurement creates. These two levers are bound to be short (or mid) lived and to phase out in the future.
On the one hand, because the savings that centralised procurement creates cannot grow indefinitely. There are limits to the economies of scale potentially achievable and, in a scenario of very quick expansion of centralised procurement volumes, there will soon be dis-economies of scope and, generally, x-inefficiency within CPBs as organisations that will loose their flexible and dynamic configuration as they grow and become more and more assimilated to 'classic' public sector institutions.
Moreover, 'individual' contracting authorities will always retain procurement duties and, consequently, it is unavoidable that the organisation of a system with partial centralisation creates duplication of administrative resources, particularly if recourse to CPBs is voluntary for the 'individual' contracting authority. Additionally, the financial models of CPBs will create issues and, unless they operate on a cost and no margin basis, contracting authorities may decide to not resort to CPBs at all in order to save that part of the administrative cost of procurement, particularly if they do not perceive the CPBs as a generator of significant savings (or other advantages) as compared to the conduct of their own e-procurement processes (once they have the technology in place). There will always be delicate issues of political instrumentalisation of CPBs that may make cooperation difficult in day to day issues. And in case CPBs push for the strategic use of procurement (green, social, innovative) in ways that increase costs or risks, 'individual' contracting authorities' interests may not be alligned or best served by CPBs (as agency theory very clearly explains, see CR Yukins, Christopher R., "A Versatile Prism: Assessing Procurement Law Through the Principal-Agent Model" (2010) 40(10) Public Contract Law Journal 63].
In that regard, the mandatory uptake of e-procurement by April 2018 as a result of the implementation of the 2014 Directives will erode, if not suppress, the technological advantage that CPBs now enjoy as first movers. Once all contracting authorities have migrated to e-procurement (and they must do so, unless they completely transfer their procurement activities to CPBs, which does not seem like a plausible scenario because CPBs will never get to manage absolutely all the categories of products and services that contracting authorities need), the advantage of resorting to CPBs will be diminished. Once e-procurement is truly rolled-out, contracting authorities will have all technological tools in place to buy from alternative vendors, such as amazon or ebay, and they may as well do it.
Once (if) aggregation is not the major consideration, 'individual' contracting authorities will have all incentives to carry out below the thresholds (unregulated) e-procurement and buy electronically all supplies (particularly) and services (possibly) they need. Of course, this will issue potential problems of circumvention of the Directives and the domestic rules that implement them. However, in a scenario of truly rolled-out e-procurement where each 'individual' contracting authority can buy for itself, it is unlikely that schools, hospitals, universities or small and medium sized public organisations will ever reach the value thresholds actually in place by purchasing commoditised goods (and services), which are the ones that CPBs trade in. Hence, the complex system of rules in the 2014 Directives may be come substantially unfit for purpose (or, as a colleague summed it up yesterday, 'obsolete').
2. Private competition will emerge and must be favoured through strict enforcement of competition law over CPBs
It follows from the above that one of the implicit and very significant future difficulties created by the emergence and growth of CPBs and other mechanisms of cooperative/centralised/aggregated procurement is that they are vulnerable to private competition. The system is currently being developed on the basis of an (implicit) legal monopoly granted to CPBs as the only organisations providing aggregation/rationalisation/e-procurement services to the public sector--or, in terms of Directive 2014/24 ancillary purchasing services. This is now legally protected as potentially unassailable under the rules of Art 37 Dir 2014/24, particularly with the protection for direct award of those services contracts to CPBs [art 37(4)], to the exclusion of competition from private suppliers of those services. However, this is not a desirable or even sustainable situation in the future.
Firstly, because the system is hoping for inter-CPB competition, particularly of a cross-border nature, so that CPBs compete to attract 'business' from 'individual' contracting authorities in other Member States (or regions within the same Member State). Secondly because CPBs are also authorised to offer services and goods in the private market (or at least not prohibited from doing so). This will have major implications for competition law enforcement on CPBs [see Sanchez Graells & Herrera Anchustegui, above, and A Sanchez Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 58-60, 255-57 and 347-52] and it is not only desirable, but very likely that DG Competition will have to, at some point, issue guidance on the application of Articles 101 and 102 TFEU to CPBs, without the protection of Article 106(2) TFEU for services of general economic interest (SGEIs) being necessarily available. State aid issues related to the application of Art 107(1) TFEU will also arise.
Second, because private competition is bound to appear (or, more likely, be strengthened), particularly as a result of technological development. Not only because existing online vendors will continue being the natural competition of any e-procurement system (be it run by a CPB, or otherwise). But also at platform level. Any company that can successfully develop a two-sided platform that offers procurement aggregation/rationalisation at a lower cost than CPBs, or that works in a more effective manner, will necessarily find a space in the market and challenge the incumbent position of CPBs (however big they can be at the time). It will be politically indefensible to insist on the use (voluntary or mandatory) of a CPB that is less efficient than alternative market players, particularly if the CPB also competes with them for private business--at which point, the issue would be also legally untenable and would trigger issues of competitive neutrality of the highest order [for background and general discussion, see TK Cheng, I Lianos and DD Sokol (eds), Competition and the State, Global Competition Law and Economics (Stanford, CA, SUP, 2014) and D Sappington and GJ Sidak, "Competition Law for State-Owned Enterprises" (2003) 71(2) Antitrust Law Journal 479-523].
3. The Commission can play an important role by creating training materials
The Commission can have a very important role at this stage, clarifying the limits of the regulatory framework derived from the 2014 Directives and creating useful training tool-kits that can be made available on-line for all contracting authorities in the Member States to acquire the necessary knowledge. They could also create new prizes, or refresh/boost the existing ones, to recognise and disseminate good practices.
Of course, training contrating officers is very difficult due to their sheer numbers, as well as the complexity of the 2014 procurement system. However, it should not (must not) be impossible. If it was impossible, then the deeper problem would be that EU public procurement law would be manifestly unfit for its purpose and a very significant transformation and simplification would be urgently needed (it is and will be more and more necessary, of course, but not desperately urgent; in any case, for criticism of the 2014 rules due to their complexity, see R Caranta, "The changes to the public contract directives and the story they tell about how EU law works", (2015) 52(2) Common Market Law Review 391-459; and S Arrowsmith, "Modernising the European Union’s Public Procurement Regime: a Blueprint for Real Simplicity and Flexibility" (2012) 21 Public Procurement Law Review 71-82).
* * *
In short, then, my view is that in the long-run, public procurement centralisation/aggregation/cooperative procurement will become a part of the system, but by far not the entirety of the system, and that its relative importance will be diminished in the future by technological and market developments. In my view, the role for the Commission is twofold. DG Growth should focus on training and professionalization of all contracting authorities (and they have some initiatives under consideration) and DG Comp should focus on developing early guidance and a close monitoring system of the activities of CPBs and, more generally, powerful public buyers. Reversely, if centralisation and the market and legal protection of CPBs is embraced and protected, then this will be an instance of (inadvertent?) creation of a legal monopoly (and monoposony, in many markets) that can only result in social loss. I hope that my views, even if possibly extreme or shocking, at least contribute to a debate on centralisation that takes the long view.
The CJEU's maximalism and minimalism in the treatment of experience as a procurement award criterion (C-601/13)
In Ambisig, C-601/13, EU:C:2015:204, the Court of Justice of the EU (CJEU) has been confronted again with the issue of the use of the experience and qualifications (ie academic and professional background) of the staff assigned to performance of the contract as an award criterion under EU public procurement rules (ie the Lianakis distinction of selection and award criteria). The Ambisig Judgment still applies the rules of Directive 2004/18, but the reasoning and principles will remain relevant for the interpretation of Directive 2014/24.
At first reading, and depending on one's view of the strictness of Lianakis, it may seem that Ambisig is fundamentally a repetition of the discussion on the assessment of staff's experience as an award criterion that was recently rehearsed in Spain v Commission (financial support for cuenca hidrográfica del Júcar), C-641/13, EU:C:2014:2264 (not available in English, see my comments here).
However, some close reading may lead to a different (or at least more nuanced) conclusion, given the tone that the CJEU has used in two such close cases. It may be worth reminding that the rhetoric used in Spain v Commission presented Lianakis as follows:
... as is apparent from paragraphs 30-32 of the judgment Lianakis and others (EU:C:2008:40) ... the Court has clearly distinguished award criteria from the selection criteria that are essentially linked to the assessment of the bidders' ability to perform the contract in question, and considered that the criteria relating to the experience, qualifications and means of ensuring proper performance of the contract in question belong to the latter category and, therefore, do not have the character of award criteria (C-641/13, para 36, own translation, emphasis added).
We could call this the maximalist reading/reporting of Lianakis. However, as we shall see below, this is not the position adopted in Ambisig, where the referring Portuguese court was concerned with two aspects that in its view seemed to make it difficult to apply such a maximalist reading of Lianakis: (1) that the contract was for intellectual services (ie training and consulting); and (2) that the 2011 proposal for a new Directive (now Dir 2014/24) "constitute[d] a new factor in relation to the case-law of the Court in this area".
25 ... the case-law highlighted in the judgment in Lianakis and Others (C‑532/06, EU:C:2008:40) concerns the interpretation of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1), which was repealed by Directive 2004/18, and that that judgment does not rule out the possibility that the contracting authority may, in certain circumstances, fix and apply a criterion [enabling evaluation of the teams specifically put forward by the tenderers for the performance of the contract and which takes into consideration the composition of the team and the experience and academic and professional background of the team members] at the stage of awarding the contract.
26 That judgment concerns the staff and experience of the tenderers in general and not, as in present case, the staff and experience of the persons making up a particular team which must actually perform the contract.
27 It should be noted, in relation to the interpretation of Article 53(1)(a) of Directive 2004/18 which is the subject of the referring court’s question, that that directive introduced new elements into the Union legislation on public procurement in relation to Directive 92/50.
28 First of all, Article 53(1)(a) of Directive 2004/18 provides that ‘the tender most economically advantageous’ is to be identified ‘from the point of view of the contracting authority’, thereby giving the contracting authority greater discretion in its decision-making.
29 Secondly, the third paragraph of recital 46 in the preamble to Directive 2004/18 states that, where the contracting authorities choose to award a contract to the most economically advantageous tender, they are to assess the tenders in order to determine which one ‘offers the best value for money’, which tends to reinforce the importance of quality in the award criteria for public contracts.
30 Furthermore, Article 53(1) of Directive 2004/18 does not set out an exhaustive list of the criteria which may be used by the contracting authorities in determining the economically most advantageous tender, and therefore leaves it open to the authorities awarding contracts to select the criteria on which they propose to base their award of the contract. Their choice is nevertheless limited to criteria aimed at identifying the tender which is economically the most advantageous (see, to that effect, Lianakis and Others, C‑532/06, EU:C:2008:40, paragraphs 28 and 29 and the case-law cited). To that end, Article 53(1)(a) of Directive 2004/18 specifically requires that the award criteria be linked to the subject-matter of the contract (see judgment in Commission v Netherlands, C‑368/10, EU:C:2012:284, paragraph 86).
31 The quality of performance of a public contract may depend decisively on the ‘professional merit’ of the people entrusted with its performance, which is made up of their professional experience and background.
32 This is particularly true where the performance of the contract is intellectual in nature and, as in the main proceedings in the present case, concerns training and consultancy services.
33 Where a contract of this nature is to be performed by a team, it is the abilities and experience of its members which are decisive for the evaluation of the professional quality of the team. That quality may be an intrinsic characteristic of the tender and linked to the subject-matter of the contract for the purposes of Article 53(1)(a) of Directive 2004/18.
34 Consequently, that quality may be included as an award criterion in the contract notice or in the relevant tendering specifications (C-601/13, paras 25 to 34, emphasis added).
In the end, it is worth reminding that one of the justifications for the revision/repeal of Dir 2004/18 by Dir 2014/24 was to address the "Lianakis issue" [see S Arrowsmith, "Modernising the European Union's public procurement regime: a blueprint for real simplicity and flexibility" (2012) 21(3) Public Procurement Law Review 71, 80; and rec (94) dir 2014/24]. To some extent, then, the Ambisig Judgment renders a significant (if relatively hidden) justification for the 2014 generation of EU public procurement rules useless.
This may have implications for the future, where the lack of clarity of the CJEU's case law in certain new/revamped areas of public procurement (let's just mention life-cycle costing or asymmetrical negotiations, for now) may trigger calles for further legislative reform--which should, in my view, be avoided to the extent that they rest on maximalistic interpretations of the CJEU's usually sparse and confusing passages, as we now know that it only (?) takes some adequate prompting for the CJEU to provide minimalistic twists that exclude the need for reforms.
Current Proposals on Exclusion, Qualitative Selection and Shortlisting in EU Public Procurement
I have just uploaded on SSRN a short new paper, which provides some initial thoughts on the new rules on exclusion, qualitative selection and short-listing in the 2011 proposal for a new public sector procurement Directive, as amended by the 30 November 2012 Compromise Text published by the Council. The assessment is based on a comparison with the equivalent rules under current Directive 2004/18/EC, as well as on the implementation difficulties that I envisage.
In the paper, I reach the following conclusions:
As this brief overview of the novelties and changes proposed by the Compromise Text on the rules concerning exclusion, qualitative selection and short-listing has shown, the Commission has presented (and the Council is willing to allow for) reform proposals that aim to generate some simplification and flexibilisation of the current rules. The Compromise Text has also tried to clarify and improve the drafting of the current Directives and to consolidate requirements and avoid duplication where possible.The search for flexibility and simplification is particularly clear concerning the rules that aim to make exclusion of economic operators a dynamic activity (§2.2), that increase the scope and power for contracting authorities to seek clarifications and source additional information from tenderers (§2.4), that allow for an evaluation of the effectiveness of self-cleaning measures adopted by economic operators that should otherwise be excluded (§3.3), or that allow for a ‘certificate-less’ qualitative selection of candidates, subject to an ex post verification of the self-declarations submitted (§4.5). However, such flexibility does not come without risks and contracting authorities must tread lightly if they want to avoid challenges based on potential abuses of their (increased) administrative discretion. Moreover, the extent and weight of the obligations derived from the principle of good administration are expanding and this needs being duly taken into consideration.There are also clear indications of a clearer integration of public procurement and competition rules (such as the possibility to exclude bid riggers, §3.2) and of the use of public procurement as a lever to ensure compliance with social, labour and environmental rules, in a classic example of pursuit of secondary (or horizontal) considerations in procurement (§2.3). This shows that, despite the search for simplification, the (asymmetrical) integration of public procurement and other economic and non-economic policies by necessity depicts a more complicated scenario that requires further professionalism and capacity building in the Member States, as well as more cooperation between contracting authorities and other competent authorities, such as national competition or environmental agencies.All in all, in my view, EU public procurement regulation continues becoming more and more sophisticated (and complicated), the Compromise Text does not solve all problems and creates some new and, consequently, public procurement litigation will continue playing a key role in the clarification of the applicable rules.
One more #publicprocurement Judgment in the Evropaïki Dynamiki Saga (T-9/10)
The General Court's Judgment of 21 February 2013 in case T-9/10 Evropaïki Dynamiki v Commission (Microsoft SharePoint) is a new addition to this seemingly never-ending saga of cases where the Greek IT company challenges procurement award decision on the two-fold basis of failure to state reasons and presence of manifest errors of assessment.
This Judgment basically reiterates the position of the EU Courts on the duty to state reasons but, interestingly, includes an obiter paragraph that is not always expressly mentioned in the growing case law in this area of EU public procurement.
In my opinion, paragraph 26 of this latest Evropaïki Dynamiki Judgment deserves emphasis, as the GC indicates that
It should also be borne in mind that the requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations (see Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 63 and case-law cited, and Case T‑465/04 Evropaïki Dynamiki v Commission, paragraph 49) (emphasis added).
This offers the basis for a far more restricted disclosure of information to unsuccessful candidates and disappointed bidders than usually provided by contracting authorities, and could (should) be used as the basis to rationalise this area of the law--where contracting authorities are indeed under significant pressure to provide excessive information during debriefing and bid protest procedures.
In fact, in the case at hand,
the Commission considers that it provided a statement of reasons exceeding that laid down in Article 100(2) of [the Financial Regulation] by informing the applicant of the reasons why its tender had been rejected as well as providing the scores obtained by the tenderers at the award stage, even though the applicant had not passed the selection phase (T-9/10 at para. 24, emphasis added).
Situations such as this should be avoided, given the negative impacts that excessive transparency can generate in terms of potential collusion and access to confidential information and business secrets of competitors. Therefore, once again, it seems desirable to clarify and rationalise this area of EU public procurement law in the current process of revision of the EU Directives on public procurement.
The Future of European Legal Education -- Comment on Maduro's views
Prof. Miguel Poiares Maduro has published an interesting piece on The Future of European Legal Education, where he identifies some challenges derived from a tension between law as legal practice and law as science and highlights how those challenges can become an opportunity to reform legal education.
In my view, his critical analysis is mostly accurate and supports his (relatively implicit) claim for a study of law in context, following the 'classic' proposals of Weiler (with whom Maduro has been working closely in related academic projects) and Snyder, who 23 years ago stressed that
So far European Community law has been conceived mainly as 'black-letter law' [...] it is time to draw upon perspectives from other social sciences and to move in new directions. We must place European Community law in its social, economic and political context. Only in this way can we achieve the deeper and broader understanding—both practical and theoretical—of European Community law [F Snyder, New Directions in European Community Law (Law in Context) 30 (2nd edtn. 1990)].
Some of this certainly not-so-new worries go beyond Europe and are echoed by the work of the American Bar Association's Task Force on the Future of Legal Education, which is also concerned with the challenges that legal education faces as a result of the rapid and substantial changes in the legal profession, legal services, the national and global economy, and markets affecting legal education.
The issue is, therefore, of high currency and of global relevance, and deserves some good thought. In that regard, I think that it is remarkable that one of Maduro's main claims is that
These changes [derived from increased global economic and social integration] are bound to challenge not only the content of the law but also how it needs to be taught. This context of legal pluralism and legal miscegenation requires different hermeneutics and the interaction between legal cultures, which is triggered by the Europeanisation of the law, will confront each national legal culture with many of its unarticulated assumptions. Change in what you study is often the fastest way to break path-dependencies on how you study (p. 456).
While I agree that these global aspects need to be understood and mastered in order to become a well-rounded lawyer (be it in practice, be it in the academy, or anywhere in between), I remain skeptical that such a 'global' or 'delocalised' approach can be adopted from minute one in anyone's legal education.
Not to sound parochial, but I think that law is and will always be a jurisdiction-specific phenomenon (in our case, EU+Member State-specific) and I doubt that you can understand the very complex issues of the global legal reality if you have not first been (solely and thoroughly) trained in the law of one specific jurisdiction.
This does not mean that legal studies throughout the EU need not be more 'Europeanised' (as, indeed, restricting EU law to a self-standing module is no longer a sensible option), but I think that it raises the issue that before you can engage in highly sophisticated comparative and contextualised legal analysis, you need to have a deep knowledge of a (self-contained) domestic system. As the saying goes, you must learn to walk before you can run.
Therefore, I would agree with Maduro's diagnosis and recommendations for the development of better postgraduate legal education programs, but I think that extending them to initial or basic legal studies may overshoot the mark. Maduro himself hints at this by the end of his contribution (p. 461), which maybe would have required some clearer disclosure in his general criticism to the development of legal theory.