First draft of the Revised Portuguese Public Contracts Code is now available

The Portuguese Government has just published a first public draft of the Revised Public Contracts Code (PCC) which aims to transpose Directives 2014/23/EU, 2014/24/EU and 2014/25/EU. The draft is available here (Portuguese only) and a public consultation open until September 23rd.

The PCC revision suffered delays and a difficult birth to say the least. I was told by sources in the know that the previous Government (2011-15) prepared two very different drafts: one with significant changes to the structure of the code and the other only with the nips and tucks needed to make it compliant with the new set of Directives.

The current Government appointed a taskforce earlier in the year to work on a third draft and this appears to be their output.

Links I Liked [Public Procurement]

1. Public Works Slowdown Following Implementation of the New Italian Public Procurement Code.

2. Public Procurement Single Market scoreboard for 2015 is out. I think Albert has criticised the scoreboard in the past, but there is a measurement I find quite interesting - procedures with a single bidder. The figures for some countries like Poland and Hungary are really telling, but it would be important to know as well what is the percentage of procedures without transparency where that is happening.

3. World Bank Public Procurement Benchmarking: Behind the Numbers. More here.

4. UK’s Ministry of Defence No Closer to Winning the War on Procurement Waste.

5. Public Procurement Trade-offs: Commerciality Versus Corruption. Peter Smith raises some important and obvious points about trade-offs in public procurement. Beware the siren's call for more "negotiations".

No one really likes competition

Although procurement rules are usually conceived to pursue increased competition via transparency and say non-discrimination, those which benefit from the increased access to procurement contracts coming from the private sector are not really keen in more competition that what is strictly necessary. Particularly, they do not like competition coming xfrom the public sector.

It is no surprise then that in the US private suppliers to the Government are throwing fits of rage with the work being done by 18F (a public agency) to improve procurement practice and procedures within the US Federal Government. It appears lobbyists from industry associations are busy trying to clip 18F's wings as its activity is affecting their profits. Apparently, the problem is not only the work carried out by 18F itself but its role in increasing competition from new private suppliers. 

I for, one welcome competition irrespective of its public or private origin.

More details (and a great writeup) here.

Links I Liked [Public Procurement]

1. Mexico City starts publishing live public procurement open data (Spanish only).

2. GDS is looking for help to design "digital first" public contracts that are easy and simple to use. I am fully supportive of initiatives like this.

3.  On the same vein, is now easier to sign contracts/documents in the G-Cloud 8 framework.

4. We need more contract implementation data says the OKF. Having been a procurement lawyer myself, contract implementation stage is always a good moment to try and extract concessions from the contracting authority. This view is supported by the whole body of research by Jean Tirole and colleagues on incomplete contracts. As there is no competition and limited transparency, economic operators have all the incentives to bend arms and rules at this stage. 

Even then I would not be surprised if added transparency at performance stage would simply shift the focus from cost increases (which can be quantified) to quality decreases (which cannot be quantified easily). 

Soft launching the joint Public Contracts Regulations 2015 Commentary

As hinted a few times before, Albert and I have been busy setting up a joint Public Contracts Regulations 2015 Commentary over the last six months of so. As a recap, we concluded our "procurement tennis" match in the Summer 2015 and a few months later we got a generous grant from the Society of Legal Scholars Small Projects fund to set up a proper website where we could merge a final* and "authoritative" version of our commentary.

The real deal is available at www.pcr2015.uk

The real deal is available at www.pcr2015.uk

So, without further ado we are (soft) launching today the Public Contracts Regulations 2015 Commentary! The reason why we are soft launching it now is that the content is not yet complete. So far we merged the first 24 Regulations and are aiming for releasing the second part (25-73) in early September before finishing at the tail end of October. That will not be the end of the work as this is a live commentary and one that will be updated on a case-by-case approach as required in the future and as time permits!

What we tried to achieve with the Commentary was to provide a clear view of what the law means and the major practical issues we see with each Regulation. By and large both our views are coincidental so merging was mostly an issue of style and avoiding repetition. On the odd topic we disagree on we either took the disagreement out of the commentary (ie, more theoretical arguments such as transparency vs competition) with cross-references to our respective blogposts or if really unavoidable we agree to disagree with a clear note of what each other thinks.

The content on most entries published so has been updated and reflect the alterations introduced by the Public Procurement (Amendments, Repeals and Revocations) Regulations 2016. Most entries hover between 500-1,500 words long but we have a few going close to 3,000. We cross-reference where relevant to appropriate case law and where possible we try to point you towards existing free resources to explore matters further. If we missed any good resources feel free to use the comments section so that we can add them in the future.

The commentary is available with a CC-BY-SA Creative Commons License, so while free to use, attribution to the authors is required. I know a number of you have tried to use our individual blog entries in the past for teaching purposes, you are welcome to continue to do so but our preference is for everyone to use the Public Contracts Regulations 2015 Commentary instead.

Finally, a big thank you to the SLS for supporting the Public Contracts Regulations 2015 Commentary.

*By final I mean consolidated. We plan on updating the content from time to time.

 

Links I Liked [Public Procurement]

1. There's an "official" English translation of the Danish public procurement law. This reminds me of a project idea I had a couple of months ago of translating into English a number of very different public procurement laws. Thanks Carina for the heads up.

2. Court of Auditors publishes Special report no 17/2016: The EU institutions can do more to facilitate access to their public procurement.

3. A public works cartel is found out in Spain (Spanish only).

4. Change rules around public contracts to let charities compete fairly, Big Society Capital tells government. For once, the proposed headline changes are reasonable and are not what we usually see from vested interests (ie, tilt the playing field in my favour). Having said that, "prior market engagement" gives me shivers. Report itself can be found here.

5. Single-Supplier Framework In London – Guaranteeing Value Will Not Be Easy. Agreed. My views on framework agreements in general are bearish and especially single supplier ones.

Food for thought, competition and procurement edition

Another factor that is often not taken into account, he argues, is government purchasing. Monopolists, he notes, often sell to “large intermediary organizations, which may distribute the incidence of monopoly charges progressively.” In the US, federal procurement accounts for roughly one-seventh of the GDP, not including state and local governments. Government, he argues, pays these monopoly overcharges and ultimately transmits them to taxpayers. Since the U.S. tax code is generally progressive, he argues, those overcharges are being borne progressively. Meaning: wealthy people should, in theory at least, pay a greater share, “which actually means that an antitrust intervention that diminishes anticompetitive conduct in government procurement actually has the effect of increasing wealth inequality.”
— https://promarket.org/antitrust-answer-rising-wealth-inequality/

Interesting discussion about the effects (or not) of competition law enforcement and inequality and how procurement in the US may function as redistribution mechanism. The problem with Crane's argument I suspect is that larger companies generate more profit but can pay a lower effective rate of corporation tax than smaller ones by being able to shift profit to cover for unprofitable divisions or using the tax regime to their advantage.

Links I Liked [Public Procurement]

1. Company Owned by Former Kotayk Governor Wins 34 Million AMD in "Non-Bid" State Contracts. Oh the joys of lack of transparency and competition.

2. Agency connected to Conservative Party donor receives £3.9m Treasury contracts.

3. Public Procurement Trade-Offs Should Be Acknowledged and Addressed, Not Ignored. Agreed and I have been saying the same for years. Anyone wants to talk about social considerations in procurement?

4. How the GDS is iterating on Digital Outcomes and Specialists.

5. Only a quarter of councils have social value commissioning policy. See 3 above. The Social Value Act is working as intended - social clauses have to be considered, not used. The fact they are not being used more indicates they imply tradeoffs proponents are not willing to address or acknowledge. If there were no tradeoffs they would simply be used a lot more.

Some thoughts about Bulgaria's law demanding open source software

Bulgaria has apparently passed a law recently demanding all software purchased in the future by the country to be open source. This raises a couple of procurement related questions which are worth covering here.

Art 58 of the E-Government Act states that:

Art. 58a. (New - SG. 50 of 2016, effective 07.01.2016) Upon preparation of technical and functional assignments for public procurement to develop, upgrade or implementation of information systems and e-services administrative authorities must include in the job following requirements:
1. where the subject of the contract includes the development of computer programs:
a) computer programs must meet the criteria for open source software;
b) all copyright and related rights on the relevant computer programs, their source code, the design of interfaces and databases whose design is subject to the order should arise for the principal in full, without limitations in the use, modification and distribution;
c) Development should be used repository and revision control maintained by the Agency in accordance with Art. 7c pt. 18;

(Translation via Google Translate)

It appears this law mandates Bulgarian contracting authorities to only acquire open source software from now on, although that not extends to licensing agreements. In other words if the contract calls for software to be developed, then it needs to be open source whereas if the contracting authorities wants to simply license commercial software it can continue to do so. Effectively, the open source mandate only kicks in for the creation of new software.

By demanding open source to be used, Bulgaria is taking steps to owning the software outright, instead of paying to a contractor to develop the software and then keep the underlying intellectual property which is a more common model and one that may have State Aid implications.

I think this is a good and reasonably balanced approach taken by Bulgaria. In addition to what has already been said by others (and here), one can think about added benefits from this measure. First, it avoids the lock in of the contracting authority to a piece of software which is fundamental to its operations (or else it would not have gotten it developed in the first place) and whose control lays in the hands of the contractor. I think this is probably the biggest benefit from a public sector perspective and it is worth nothing the ownership of associated IP is also demanded by the new law. Out of the top of my head I can remember a case where a Government had to pay an outgoing contractor to get data out of a database as said contractor owned the underlying source code and refused to play ball without being paid. It is important that contracting authorities understand the relevance of "owning" the underlying custom code they use, even if it is just for the purposes of making it available in open source.

On the long run, by making the code open source and having it in a central repository which is easily accessible ensures that Bulgarian future contractors can easily re-use the existing code, ensuring continuity of service and pushing costs down over the long run.

There are, however a few procurement related potential downsides to this approach.

First, it may be perceived as violating the rules demanding technical specifications not to be discriminatory, as any economic operator developing commercial software would potentially at a disadvantage. I do not see this as a real problem since any economic operator can still take part in the procedure nonetheless and the demand of open source can be seen as a requirement to own the software outright instead of just its use (which is pretty much the model for commercial software). As a comparison its like the contracting authority buying a vehicle outright instead of leasing it - the leasing companies are also at a disadvantage. At their core all technical specifications are discriminatory.

Second, there may be extra costs associated with the open source approach (at least at the beginning). The usual suppliers may try to increase prices since they will not be able to re-use the code at profit in other projects down the line. However, the added competitive pressure may actually put a lid on prices quite quickly. Even if it makes contracts more expensive now,  over time I suspect the fact code is open source and can be iterated by different economic operators will lead to lower prices overall.

Third, it is important to ensure liability is correctly allocated on each contract, especially if existing code is being re-used or re-purposed. This, however, is a problem for all software contracts or in procurement of innovation in general.

There's a new excellent procurement blog around

 

Prof. Chris Yukins from George Washington University Law School has launched a new blog dedicated to international public procurement. Chris is a great writer and in my view his emphasis on international procurement is great. We need more people engaging with the public and writing with different points of view on procurement topics.

His first blogpost is on a topic too close to home: Brexit and its potential impact on the TTIP trade agreement between the EU and the USA. These are high quality entries and I look forward to see how these discussions will evolve in the future.

Now if only he could convince his good friend and colleague Steven Schooner to start writing blogposts as well...

Denmark is first out of the gates with a Innovation Partnership

The innovation partnership is finally getting some use. The first tender (call?) was published only a couple of days ago on the Tenders Electronic Daily. The project is for a partnership looking to develop innovative means for overcoming elderly dehydration. The tender is being launched by the Market Development Fund in conjunction with a number of different Danish local authorities.

I look forward to see the developments on this project. It is interesting that although the Innovation Partnership was transposed into England, Wales and Northern Ireland almost 18 months ago it is yet to be used here. So much for the UK Government mantra of "making sure contracting authorities can use the novelties straight away."

As I said many times before, this procedure (as the competitive procedure with negotiation) is going to be used sparingly and in reality most of its use cases would fit on a generous interpretation of competitive dialogue.

Hat tip to Willem for mentioning the launch on Twitter.

 

Episode #22 of the public procurement podcast is up

I uploaded episode #22 of the Public Procurement Podcast to its website yesterday. The interivewee is Willem Janssen, Lecturer and PhD Researcher at the Public Procurement Research Centre of Utrecht University and Twente University. His PhD researches the influence of EU public procurement law on the performance of services by cooperating public authorities and the issues of regulating and enforcing the make-or-buy decision of public authorities. 

You can subscribe to the PPP on iTunes.

Procurement Week presentation on electronic procurement in Portugal

A couple of weeks ago I delivered a presentation on electronic procurement in Portugal at this year's Procurement Week conference in Bangor. As some of you have asked for the presentation, here it is embedded in all its glory. A downloadable PDF is available on the Presentations tab.

Debunking Vote Leave procurement "misconceptions"

Last month, Vote Leave came up with some "new research" on the terrible, terrible plight inflicted by EU procurement rules on UK contracting authorities (well, those of England, Wales and Northern Ireland I suppose). Colin Cram put out a very polite rebute in The Guardian earlier this week, but I think a firmer answer is in order.

Here's Vote Leave claims:

EU public procurement law imposes extremely onerous requirements on public authorities, which can apply regardless of the value of a contract and/or whether any tenderers are from outside the UK. The Government pledged to change this, but EU procurement law remains unaffected by the renegotiation.

Right. I don't even know where to start. Are some features of the rules onerous, yes particularly if your own processes are lacking. If you already have good internal processes then the rules are not that onerous. Same claim could be laid against any project management standards. The fact they are more onerous than the alternative "roll your own, every time you want to tender" creates a degree of uniformity, standardisation and legal security. By and large they do not enable great procurement - but that is not why they exist in the first place. Their primordial job is to prevent really bad procurement. Not only the corruption kind of it, but just plain lack of knowledge.

Does EU public procurement law apply "regardless of the value of a contract and/or whether any tenderers are from outside the UK." Lie. It does apply to all contracts above the thresholds (ie, depends on value) and below-thresholds only the Treaty principles (equal treatment, non-discrimination) apply and *only* to contracts where there is a certain cross-border interest. That needs to be determined in advance of course as otherwise Vote Leave would be suggesting defining what is the applicable law after the fact. I have written extensively about this problem here and here.

It is true that EU procurement law remains unaffected by the negotiation, but as Colin Cram rightly points out the current procurement Directives have the UK's fingerprint all over them. Plus, Michael Gove was a minister in the Government who transposed Directive 2014/24/EU into the Public Contracts Regulations 2015 in a rush...

 

EU public procurement law imposes an annual cost of at least £1.69 billion to the taxpayer. This is five times what is spent on the NHS Cancer Drugs Fund, 34 times what is spent on the Government’s dedicated Pothole Action Fund, or enough to pay for 273,000 basic state pensions.

Apparently £1.69 billion is the average yearly cost of running procurement procedures in the UK between by taking the 0.7% expenditure rate calculated by this PwC study from 2011 and applying it to all years. If spending 0.7% of the contract value in the procedure is a bad outcome (due to those, onerous, onerous rules) I would like to know how Vote Leave would magically make procurement processes be free. Are they suggesting them being done by a commune of volunteers? A third sector organisation working for the greater good? There is no such thing as free unicorns in the procurement sky...

 

Between 2010 and 2014, EU public procurement legislation imposed costs of at least £8.4 billion in real terms on the taxpayer. This is three times what will be spent on flood defences in England between 2015 and 2021, six times the cost of the new Queensferry Crossing in Scotland, or enough to build 25 new hospitals.
It is also possible to calculate the delays to the execution of public contracts caused by procurement rules. A 2011 study for the European Commission found that the mean length of time between the tendering of a contract and its award in the UK was 193 days, longer than every member state other than Greece and Malta

One has to wonder however if Vote Leave is the proverbial bad carpenter blaming his tools. Every time I hear "the rules do not allow me to do it" there is usually a lack of capacity (or willingness to take risk) from the people involved. It is so much easier to blame the rules instead.

I love the claim about the slowness of procurement in the UK in comparison with the EU average. If the rules are the same (or similar) across the EU, whose fault is it if the UK practice is so below average? How can the other countries do better with the same sets of rules?

Let's talk about two UK examples of practice: restricted procedure and competitive dialogue.

Under Directive 2014/24/EU (as with its predecessor Directive 2004/18/EC) the open and restricted procedure are the standard procedures which may be used alternatively for any procurement process. It is up for the contracting authorities to decide which one to use. The restricted procedure allows contracting authorities to reduce the number of economic operators before the tender stage by making them go through a pre-qualification questionnaire which allows it to select the ones to invite forward. Until recently, the only Member State in the EU which used more the the restricted procedure than the open procedure. Now, the restricted procedure by definition is longer than the open procedure (which can now be reduced to a single stage). No surprise then the UK is a laggard in "procedure race" with the average procedure lasting 120 working days, 53 more than Germany. The situation got so bad the last Government (yes, the one where Mr. Gove was a minister) decided to clamp down on the use of pre-qualification questionnaires and by definition the restricted procedure as well.

Competitive dialogue is another good example. Under the 2004 Directive, it was supposed to be used only if certain grounds were met. It was not a standard procedure, but lo and behold again the UK decided to use it very often. So often that in 2012 the previous Government decided to ban its use, throwing the baby out with the bath water. While the competitive dialogue was being widely used, a "good practice" developed of racing towards identifying the preferred bidder and then having negotiations with said economic operator with no one else in the frame. Again, I have written at length about the limitations of this approach (clawing back of concessions, longer procedures, etc) here.

 

‘If we Vote Leave we can scrap the EU’s foolish rules on how Whitehall runs procurement processes which add billions to the cost of Government every year. I’ve experienced firsthand in the Department for Education how these rules add significant operational costs and generate expensive delays to construction projects. Across Whitehall, there are billions to save after we Vote Leave.’

Michael Gove is really channelling the bad carpenter here. Gosh, he really does not like equal treatment, non discrimination and standardised procurement rules. Much better to allow each contracting authority to just tailor the procedure to their needs and pick up a couple of "random" economic operators it trusts to bid for the contract. What could possibly go wrong in the Govean view of procurement nirvana? By the way, was it the rules fault that led to the G4S 2012 Olympics scandal? Or the Serco one? Or the West Coast mainline fiasco? Just imagine how much worse procurement would get without the safety net afforded by the current rules.

The elephant in the room is that most procurement spend actually happens below the thresholds where EU Member States are pretty much free to do whatever they want. (Sketchy) data from 2010 indicated that over 80% of EU procurement spend occurred below thresholds. Slightly sketchy data from Portugal puts the figure at 50% but probably this figure is under represented.

So where is the magnificent regulation the UK can today have without interference of that pesky EU law Directive? In Sections 109 to 112 of the Public Contracts Regulations 2015 and in countless guidance and policy documents available on the Government's website. Easy as pie to follow.

As for his diatribe against the "EU's foolish rules", remember, it was the Coalition Government that:

i) negotiated the current round of Directives;

ii) implemented them by copying and pasting way too quickly the Directive 2014/24/EU into national law (to the point the Public Contract Regulations have already been amended);

The irony here is that Directives set the objectives and it is up for the Member States to decide how to best achieve them. I concede the point that Directive 2014/24/EU is particularly detailed but there is always scope to tweak the rules. But hey, that takes time, knowledge and risk taking. Much easier to kick those difficult decisions to the long grass of judicial review, guidance and policy notes.

Public Procurement Podcast is back!

 

I have just uploaded episode 21 of the Public Procurement Podcast, interviewing Petra Ferk (Graduate School of Government and European Studies) to the PPP website. We talked at length about electronic procurement in the EU, particularly the current legal framework introduced by Directive 2014/24/EU.

This is the first episode of the second season and I will be posting a new one every two weeks except for August. Next on the line is Willem Janssen from Utrecht University. 

The show is available for subscription on iTunes, and if you want to give it a helping hand please consider rating it there.