New paper on competition and procurement regulation -- in memory of Professor Steen Treumer

Image credits: Steve Johnson.

Last year brought the saddest news with the passing of Professor Steen Treumer after a long illness. Steen was a procurement colossus and a fantastic academic. I was extremely lucky to count him amongst my mentors and champions, especially at the very early stages of my research and academic career, before he had to take a step back to focus on his health. I am particularly grateful to him for having opened the door of the European Procurement Law Group to me. And for his generosity in providing feedback, job and promotion references, and thoughtful and clever advice without ever asking for or expecting anything in return.

It is nigh impossible to do justice to the intellectual contribution Steen made to the procurement field and the influence his approach had on the research of others such as myself. It is now a humbling honour to have been invited to contribute to an edited collection in his memory (a Mindeskrift). If he could read my contribution, I am not sure Steen would agree with what I say in the paper, but we would certainly have an interesting and stimulating discussion on the basis of the sharp comments (even some devil’s advocate ones) he would surely come up with. I hope you will find the contribution worth discussing too.

Probably unsurprisingly, the paper is entitled ‘Competition and procurement regulation: a goal, a principle, a requirement, or all of the above?’ and its abstract is below. In the paper, I use the background of recent developments in UK and EU case law, as well as the UK’s procurement rulebook reform process, to reframe the issue of the role of competition in procurement regulation. While I do not provide any insights I had not already developed in earlier writing, I bring some scattered parts of my scholarship together and hopefully clarify a few things along the way. The paper may be particularly interesting to those looking for an entry point to the discussion on the role of competition in public procurement, but hopefully there is also something for those already well versed on the topic. As always, comments most welcome: a.sanchez-graells@bristol.ac.uk.

In this contribution, I reflect on the role of competition in public procurement regulation and, more specifically, on whether competition should be treated as a regulatory goal, as a general principle of public procurement law, as a specific (implicit or explicit) requirement in discrete legal provisions, or all of the above. This is an issue I had the pleasure and honour of discussing with Professor Steen Treumer back in 2009, when I was a PhD student visiting the Copenhagen Business School. While Steen never revealed to me what he really thought, his probing questions continue to help me think of this issue, which remains at the core of my research efforts. This contribution shows that the role of competition keeps cropping up in procurement regulation and litigation, as evidenced in recent UK developments. This is thus an evergreen research topic, which were Steen’s favourites.

The full citation is: Sanchez-Graells, Albert, ‘Competition and procurement regulation: a goal, a principle, a requirement, or all of the above?’, to be published in Steen Treumer’s Mindeskrift edited by Carina Risvig Hamer, Erik Bertelsen, Marta Andhov, and Roberto Caranta (Ex Tuto Publishing, forthcoming 2022). Available at SSRN: https://ssrn.com/abstract=4012022.

Excellent @E15Initiative Think Piece on Competition, Corruption and Trade dimensions of Public Procurement Regulation (Anderson, Kovacic and Müller: 2016)

The E15Initiative jointly implemented by the International Centre for Trade and Sustainable Development (ICTSD) and the World Economic Forum aims to generate strategic analysis and recommendations for government, business, and civil society geared towards strengthening the global trade and investment system for sustainable development. One of their great initiatives is to publish 'think pieces' to stimulate a more informed debate about how trade policy and institutions can best be adapted to the highly interconnected global economy of the 21st century.

One of these first think pieces is Anderson, Kovacic and Müller, Promoting Competition and Deterring Corruption in Public Procurement Markets: Synergies with Trade Liberalisation (Feb 2016). In this well-thought and persuasive piece, the authors expand on their previous thoughts in this area [“Ensuring integrity and competition in public procurement markets: a dual challenge for good governance,” in Arrowsmith & Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press, 2011) 681-718] and make a compelling case for the careful integration and balancing of competition, corruption and trade considerations in public procurement regulation. Their abstract is as follows:

Efficient and effective government procurement markets are critical to economic growth, development, and the welfare of citizens. Yet, two very serious challenges bear on the performance of these markets: (i) ensuring integrity in the procurement process (preventing corruption on the part of public officials); and (ii) promoting effective competition among suppliers. Typically, these challenges are viewed as separate and distinct: the former (corruption) is treated primarily as a principal-agent problem in which the official (the “agent”) enriches himself/herself at the expense of the government or the public (the “principal”); while the latter (promoting competition) involves preventing collusive practices among potential suppliers and removing barriers that impede participation in relevant markets. This think-piece demonstrates that these two problems often overlap, for example where public officials are paid to turn a blind eye to collusive tendering schemes or to release information that facilitates collusion. As well, while transparency requirements are often central to efforts to eradicate corruption, such measures can, if not properly tailored, facilitate collusion and thereby undermine efforts to strengthen competition. Thus, careful coordination of measures to deter corruption and to foster competition is needed. Further, the think-piece argues that participation in the WTO Agreement on Government Procurement (GPA), or in similar regional arrangements, can play an important role both in promoting competition and in deterring corruption. The GPA enhances possibilities for healthy competition in relevant markets through participation by foreign-based or affiliated contractors. It helps to prevent corruption by requiring adherence to appropriate (tailored) transparency measures, and by exposing procurement activities to checks and balances including domestic review (“bid protest” or “remedy”) systems and international scrutiny.

Focusing on my pet topic of transparency in public procurement regulation and how this can affect competition in markets where public procurement is an important demand component, I am thrilled to read that Anderson, Kovacic and Müller stress that:

... increasingly, some challenges in the design of appropriate levels of transparency at the different stages of the procurement process have been recognised in both the procurement and competition communities. The OECD (2007) points out that: 

Governments need to find an adequate balance between the objectives of ensuring transparency, providing equal opportunities for bidders, and other concerns, in particular efficiency. The drive for transparency must therefore be tempered by making transparent what sufficiently enables corruption control. 

Indeed ... certain kinds of transparency measures can clearly facilitate collusion and, consequently, are problematic from a competition policy point of view (Marshalland Marx 2012; Sanchez Graells 2015A). While, for example, there may be no way around the need for publication of award criteria and technical specifications in public procurement if responsive tenders are to be solicited, their usefulness as tools for facilitating inter-supplier agreement needs to be recognised. Similarly, the publication of procurement outcomes, while enabling monitoring by the public as the “principal,” can also serve cartel participants in policing anti-competitive agreements and thereby enhancing cartel stability. Sanchez Graells (2015B) discusses specific possible concerns regarding transparency measures that may be associated with centralised procurement registers. 

A further complication is that optimal transparency levels may differ from country to country. “Solutions” that are potentially workable in some contexts may be highly problematic in others. For example, in jurisdictions where outright corruption problems are believed to be minimal, some lessening of transparency measures might be considered, for the sake of preventing collusion. On the other hand, in economies where corruption is rampant, any lessening of transparency measures may be a recipe for disaster. This explains why the very high priority that is given to transparency in public procurement processes in some countries in Eastern Europe may, in fact, be appropriate notwithstanding possible collusion facilitation concerns, at least as an interim measure. In any case, as explained below, both competition law enforcement and competition advocacy are clearly part of the solution (pp.9-10).

Of course, I am really thankful that they picked up on some of my recent research and I hope that their think piece will help disseminate these insights, which I consider extremely important for the proper design of public procurement rules in a way that is socially advantageous [for further discussion, see A Sanchez-Graells, 'The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives' (November 2013)].