Social audits flawed as a way of driving sustainable change

Thought provoking piece on The Guardian from an Oxfam manager about social audits as means to drive change in supply chains:

"The ethical audit industry is estimated to be worth $80 million dollars a year. The World Bank recently calculated that parallel, or duplicate, audits in the Vietnamese garment industry had added $50 to the cost of each worker per year. In terms of "lean manufacturing", audits could be seen as a form of waste, adding cost but not real value."

Funny how social/ethical audits do not seem to work for NGOs but somehow they will be great in procurement as I have seen mentioned time and time again at conferences? 

As I argued in my paper about the growth of external compliance in procurement (of which sustainable procurement is a key example), it is important to follow the money and the interests behind such proposals. I am yet to see their proponents having an honest debate about the costs and downsides of their proposals.

Procurement is complex, more cumbersome than needed, but not inane.

CityMapper which ran a on-demand bus service in London for a while had this to say about public procurement:

"It’s hard for the public sector to buy good software

Government entities need to utilise complex and bureaucratic procurement systems. These are won by companies with project managers and sales persons who are willing to deal with inane procurement processes, rather than product or technology companies that have the capability to do the best job."

It is true that there is plenty of scope for improvement on public procurement practices (transaction and opportunity costs I'm looking at you) and that economic operators without a track record have the deck stacked against them. But a system less transparent or 'inane' would be even worse for a small company to deal with. Such small company would not even know an opportunity exists and if it did, why should the public buyer listen to you when it can simply do a deal with the IBM of that particular field?

In fact that what already happens for contracts below EU-thresholds. There are barely any procurement rules and contracting authorities mostly do as they please (if they prefer to jack up the transaction costs, that is their problem - not that they need to follow "complex and bureaucratic systems"). Also, EU procurement rules on utilities (like transport) are a lot more flexible than people give them credit for.

Less transparency in a procurement system increases the risk of corruption too.

How would that be a less 'inane' system?

PS: There are plenty of cities in the UK where transport systems are open to competition (Nottingham is a good example) and do not rely on public procurement at all, but I digress.

 

After Carillion, Government looks into partially changing its procurement practice

Cabinet Office minister David Lidington has told the Liaison Committee of the House of Commons the following:

“We in government have started to look at lessons in terms of how we go about contracting with companies, [and consider] whether we want to revisit the question of seeking best value for money by getting large contractors in to manage wide ranging, complex projects.

[...]

If a government department were to decide that they wanted to let smaller companies bid for a number of different contacts, that would mean more in-house resource and expertise in the procurement and management”.

I, for one, welcome the (partial) recognition that perhaps more in-house resource for procurement and contract management is not a bad idea overall. But I have not forgotten the multiple instances where Government officials had bragged how "efficient" (ie, cheap) procurement was done in the UK in comparison with other Member States.

Picking up pennies in front of the steamroller as they say.

The problem with Lidington's view is not that larger contracts are bad in themselves (or worse than a multitude of smaller contracts), is that *especially* those monoliths need more resource for procurement and management.

But bearing in mind the approach of delivering Brexit on a shoe string, that is really not going to happen.

The UK Technical Note on Other Separation Issues [Public Procurement]

The UK Government has just published a technical note detailing its approach in phase 2 to a number of different areas, including ongoing public procurement procedures.

The Government disputes the EU's assumption that Union law should be applicable to ongoing procedures and states instead that "in practical terms" the procedures should be carried out under the applicable *national* law. This is slightly disingineuous since it implies that only national rules are relevant for public procurement contracts. That is certainly not the case since contracts not covered by the EU public procurement Directives can nonetheless be subject to EU principles in certain situations (more here and here) as well as jurisprudence from the CJEU. Eventually there may be situations as well whereby direct effect of provisions from the EU Directives would be relevant as well. Neither are "national law" in the context presented by the Government in this technical note.

There are not many differences in the position expressed today by the UK Government and that of the Union a few days ago. But there are two points worth noting. 

In para 32 the Goverment (rightfully) asks for reassurances UK businesses will be able to bid for EU contracts (but strangely not those tendered in other Member States?) for procedures launched before the withdrawal. This is a reasonable request but one that requires reciprocity...

In the same paragraph, the Government also calls for these 'transitional arrangements' to be extended to existing contracts (at EU and Member State levels) instead of only ongoing procedures. When the Commission published its paper last week I noted that the 'transitional arrangements' would end with contract award notice being published and, by definition, did not cover the contract itself. While it is true most procurement rules are connected with the award stage, I made a point about Arts. 70 to 73 of Directive 2014/24/EU therefore not being applicable any longer. 

Personally, I agree with the UK Government view that contract performance for ongoing contracts at the date of exit should be subject to the current procurement rules. But that is a mix of EU and national rules...

Some thoughts on the procurement elements of the EU's Draft Withdrawal Agreement

The Commission has just published today a Draft Withdrawal Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community.

The Draft Withdrawal Agreement sets out the arrangements for the UK's withdrawal from the Union and Title VIII (Articles 71-74) refers to public procurement, namely ongoing procedures at the date of withdrawal.

Most of the content seems non-contentious with the rule of thumb being that public procurement procedures initiated before the date of withdrawal will still be subject to EU substantive and remedies rules as appropriate until they are finalised. This logic applies to traditional procedures (Article 72(1)(a)) and also to framework agreements (Article 72(1)(b)) concluded before the withdrawal. It does not seem to cover however dynamic purchasing systems though - at least not explicitly.

It is worth mentioning however what is meant by a procedure "being finalised". One would assume that for the purposes of Article 72(1)(a) it would be with the contract signature, but not necessarily:

"4. A procedure referred to in paragraph 1 shall be considered finalised:
(a) **upon publication of a contract award notice in accordance with the relevant rules** or, where those rules do not require the publication of a contract award notice, upon conclusion of the relevant contract; or

(b) upon informing tenderers or, according to the relevant rules, persons entitled to otherwise submit applications, of the reasons why the contract was not awarded if the contracting authority or contracting entity decided not to award a contract."

As contracts covered by the Directives do require the publication of contract award notices (even if compliance in practice is shoddy...) it is important to bear in mind the provision of Article 72(4)(a). 

There are no provisions in the Draft Withdrawal Agreement about contracts already awarded and under performance. As such, the conclusion is that performance of contracts post-withdrawal will be subject to the national laws only thus meaning Articles 70 to 73 of Directive 2014/24/EU on contract performance will no longer apply.

New working paper on European Union Citizenship available

I have uploaded to SSRN a new working paper entitled "Protection from Exclusion: A Reassessment of Union Citizenship in the Time of Brexit" co-authored with Volker Roeben, Keith Bush, Petra Minnerop and Jukka Snell.

Here's the abstract:

"The received wisdom on Union Citizenship is statist: it is thought to be intrinsically connected with the State of nationality being a Member State of the European Union, and so no one can be a Union citizen otherwise. The purpose of this article is to challenge this conception. It argues that Union Citizenship institutionalises the idea of individual membership in the EU and its legal order, into which individuals are included and from which they cannot be excluded en masse either by the European Union or the Member States. Citizens are protected against physical exclusion by way of extradition and expulsion and, even more so, against being stripped of Union Citizenship against their will. Union Citizenship, once conferred, cannot be removed without cause in the person of the citizen, even though the rights contained therein may change over time.

This is, however, precisely the spectre of Brexit. The effect of this first withdrawal of a Member State on the citizenships of UK and EU-27 nationals remains unclear, and the statist and individualist conceptions of Union Citizenship produce diametrically opposed consequences. The statist conception implies that Brexit extinguishes the Union Citizenship of UK nationals. But the individualist conception of Union Citizenship implies that the citizenships, and the rights contained therein, will survive the end of UK membership in the EU. This ‘Continuity’ Union Citizenship becomes the salient touchstone of this conceptual shift advocated here; EU (and UK) action to preserve it, either through the Withdrawal Agreement or legislation, is declaratory rather than constitutive. If this is correct, little changes as a consequence of Brexit.

The principal argument in support of the received statist conception is that the Treaties connect Union Citizenship with EU membership of the State of nationality. But the article argues that the individualistic idea of Union Citizenship has indeed been institutionalised by the Lisbon Treaty, with the analysis proceeding in four steps. First, Union Citizenship is not just a status but a fundamental right. Any interference with it is thus subject to the principle of proportionality and cannot affect its core. Second, deciding on the acquisition and loss of Union Citizenship is not a right but a competence of the Member States. This competence is not unlimited. Third, Union Citizenship is autonomous from the nationality of a Member State. Third-Country nationals may continue to hold the rights of Union Citizenship provided a sufficiently close link exists with the EU. Fourth and finally, the EU is obligated to ensure legal certainty for citizenships beyond the end of a State’s membership in the EU, and the Lisbon Treaty confers the requisite competence in line with the international law of treaties."

This paper is based on the report we co-authored last year for Jill Evans MEP entitled "The Feasibility of Associate EU Citizenship for UK Citizens post-Brexit."

The risks arising from single bidder tenders in the UK

Ian Makgill from SpendNetwork and OpenOpps ran a twitter thread a few days ago based on a presentation he did on procurement data analysis.

The whole thread is worth reading and Ian was kind enough to send around the slide deck. One of the slides immediately captured my attention:

File 26-02-2018, 09 38 49.jpeg


It seems that from 2015 onwards there has been an increase in the total number of single bid tenders in the UK as well as a decrease in the average number of days for tenders to be submitted. As far as I can tell, Ian is implying both are correlated since the Public Contracts Regulations 2015 allow for shorter timescales to submit tenders. On another slide he argues a total increase of single bid tenders of 476% since 2012 and that is visible on the slide above as well. There is a clear trend for 2016 and 2017 which is markedly different from the years prior to 2015.

It is unclear how the increase is distributed, ie if the increase is happening across the board or if it is concentrated around specific characteristics, such as sector, project complexity or choice of procedure. It may be that, for example, in large/complex contracts the reduction in timescales affects them more than smaller contracts or the opposite - it is in the smaller contracts that the very short turnaround times really impact competition.

Single bid tenders are problematic for competition since they imply an absence of real competition during the procedure. The Economist had already pointed out in late 2016 the decrease in competition for public contracts. Lack of competition is bad by itself on a traditional open or restricted procedure but potentially much more problematic on any procedure with negotiations or dialogue such as the competitive procedure with negotiation or the competitive dialogue. 

For example, between March 2015 and January 2018 the competitive procedure with negotiations was used 458* times in the UK. It may have displaced some use of competitive dialogue (502 contract notices in the same period) but I suspect most of the substitution happened with the restricted (6,467) and open procedures (22,428) since they remain the 'standard' procedures. I would love to see how likely it is for the competitive procedure with negotiation and competitive dialogue to end up with a single bidder. However, for now a change in procedural practice does not seem to hold the smoking gun.

There are a couple of additional potential explanations for Ian's finding in addition to his implied justification of reduced timescales. At this moment I don't think either of them fully explains what Ian found. The first is an increase in pre-market engagement which has long been touted as a "great" idea for public procurement. The second is a negative competition externality arising from the increase in transparency in contract award information.

Regarding pre-market engagement, it is now clearly allowed in Regulation 40 (Preliminary market consultations) for the contracting authority to engage with conversations with potential bidder(s) before launching an official tender. I have had reservations about the negative impact of said conversations on competition and guaranteeing a level playing field in the subsequent tender procedure. Combined with the shorter timescales for tender submission, any bidder with advance information about the contract will be in a better position than the competition to participate. 

As for the second, the argument in competition law circles goes that the more information you give to the market, the easier it is for cartels to collude. Overall this idea is not to be disputed but I find it unlikely we would observe in the data such a quick increase in collusion immediately after the new rules came into being. Especially as contract award data is still patchy and not really easy to parse.

How do we go about checking the reasons behind this sudden increase in single bid tenders? First, I think we need to narrow down on which sector/types of contracts this is really happening. Then we need to test those hypothesis and there are a few (non-robust) ways of going about to do so. Comparing with the previous status quo (ie, what was happening with contracts before the legal change) and comparing with other EU Member States where this data is reliably collected like Portugal or Slovakia. Portugal has just transposed the Directives so the reduction in timescales is effective only from January 1st onwards. And while the country publishes a monthly summary of procurement data, the monthly report does not include any information about the number of bidders whereas the larger yearly one does. 

* I used data directly from the TED which mostly covers contract above tje EU financial thresholds and as such is a lot less complete than Ian's.

Annual Conference on European Public Procurement Law 2018 (March 22nd and 23rd)

The ERA - Academy of European Law yearly procurement conference is scheduled this year for the 22nd and 23rd of March in Trier with the following topics:

  • Update on latest developments in EU policy
  • Recent jurisprudence at EU and national level
  • Public procurement and EU external trade relations
  • Procurement, competition and corruption

The programme is quite interesting and looks like a good conference to attend. If you use the code ERApublicprocurement2018 on checkout you will get a 25% off.

Call for papers for the 4th Interdisciplinary symposium on public procurement

The Sorbonne Business School and and the Faculty of Economics of the University of Rome Tor Vergata have announce the 4th Interdisciplinary Symposium on Public Procurement to be held on October 25th and 26th in Paris. The call for papers is now out.

The topics are:

1. Life cycle costing in public procurement
2. Calculating the costs and savings of public procurement

3. Corruption and probity in public procurement
4. Public procurement and international trade agreements: CETA, TTIP and beyond

The final paper together with the CV must be sent by no later than July 16th, 2018. 

 

 

My new paper about direct awards in Portugal is out

This happened last week but completely forgot to mention it here. My most recent paper about the use of direct awards (negotiated procedure without notice) in Portugal is out in the newest number of the e-Publica journal. Here's the abstract:

The Portuguese Revised Public Contracts Code misses an opportunity to change the paradigm of how public contracts valued at below EU thresholds are awarded. This paper argues that the changes for low value contracts, where the direct award was replaced for some contracts by the prior consultation procedure (request for quotes) amount to little more than window dressing. This is problematic since 90.2% of all public contracts in Portugal are awarded via direct award, meaning 47.9% all public procurement expenditure is not subject to transparency. As the lack of transparency in low value public contracts is associated with procurement risks such as corruption, strategic behaviour by contracting authorities and bidders or lack of accountability, it is apparent the recent public procurement reform did not really address the behaviours behind these risks.
Portugal could have instead improved transparency in low value contracts by adapting already existing provisions within its legal framework, or following the footsteps of the Public Contracts Regulations 2015 (England and Wales) and the Draft Public Sector Contracts Law (Spain) which introduced significant transparency reforms for low value contracts. Although, there is room for improvement on these, either solution would have provided a marked improvement in the regulation of low value public contracts in Portugal.

The full PDF is available on the usual place (SSRN) but also on the e-Publica website as well.

Crown Commercial Service is looking for senior public procurement policy advisors

So it seems, although the full description is "Senior Policy Adviser - Brexit - International Agreements."

Although I have the feeling this is one of those positions where you will either end up having a ton of interesting work or none at all depending on how the Brexit negotiations end up. Deadline is December 18th.

 

New paper on Brexit and public procurement published

Albert and I have just published a new paper on the impact of Brexit in the regulation of public procurement in the UK. The paper is called 'Examining Brexit Through the GPA’s Lens: What Next for UK Public Procurement Reform?' (2017) 47(1) Public Contract Law Journal 1-33 and the ungated copy is available here

Here's the abstract:

"The United Kingdom has formally started the process of leaving the European Union (so called Brexit). This has immersed the UK Government and EU Institutions in a two-year period of negotiations to disentangle the UK from EU law by the end of March 2019, and to devise a new legal framework for UK-EU trade afterwards. The UK will thereafter be adjusting its trading arrangements with the rest of the world. In this context, public procurement regulation is broadly seen as an area where a UK ‘unshackled by EU law’ would be able to turn to a lighter-touch and more commercially-oriented regulatory regime. There are indications that the UK would simultaneously attempt to create a particularly close relationship with the US, although recent changes in US international trade policy may pose some questions on that trade strategy. Overall, then, Brexit has created a scenario where UK public procurement law and policy may be significantly altered.

The extent to which this is a real possibility crucially depends on the framework for the future trading relationship between the UK and the EU. Whereas ”EU-derived law” will not restrict the UK’s freedom to regulate public procurement, the conclusion of a closely-knit EU-UK trade agreement covering procurement could thus well result in the country’s continued full compliance with EU rules. Nonetheless, this is not necessarily a guaranteed scenario and, barring specific requirements in future free trade agreements between the UK and the EU or third countries, including the US, the World Trade Organisation Government Procurement Agreement (GPA) seems to be the only regulatory constraint with which future UK public procurement reform needs to conform. However, the position of the UK under the GPA is far from clear. We posit that the UK will face a GPA accession process and GPA members may see Brexit as an opportunity to obtain new concessions from the UK and the EU, which could be both in terms of scope of coverage or regulatory conformity. Further, given the current trend of creating GPA plus procurement chapters in free trade agreements, such as the US-Korea FTA, the GPA regulatory baseline will gain even more importance as a benchmark for any future reform of public procurement regulation in the UK, even beyond the strict scope of coverage of the GPA. Given the diversity of GPA-compliant procurement systems (such as the EU’s and the US’), though, the extent to which the GPA imposes significant restrictions on UK public procurement reform is unclear. However, we argue that bearing in mind the current detailed regulation in the UK might itself limit deregulation due to the need to comply with the international law principle of good faith as included in the 1969 Vienna Convention on the Law of Treaties and, to a certain extent, the United Nations Convention Anti-Corruption. 

The aim of this paper is to try to disentangle the multi-layered complexities of Brexit and to explore the issues that Brexit has created in the area of international public procurement regulation, both from the perspective of ‘internal’ EU law-related issues and with regard to broader ‘external’ issues of international trade regulation, as well as to assess the GPA baseline regulatory requirements, and to reflect on the impact these may have on post-Brexit public procurement reform in the UK."

Thoughts on the UK Government £20 million pot for Govtech

Yesterday's budget announcement included a nice £20 million pot for GovTech projects:

GovTech Fund – The Budget commits up to £20 million over 3 years, starting in 2018‑19, of R&D NPIF funding for a GovTech Fund. Public bodies will be able to access this fund to support procurement of innovative products through the Small Business Research Initiative (SBRI), run by Innovate UK. 

What can the Government do with this? If I were Innovate UK I would be setting up an incubator/accelerator programme for startups to develop solutions based on the new innovation partnership procedure so that both R&D and procurement can be tied together. Take a small percentage of each company going through the programme and ensure the state has a stake in their future, a bit like Mariana Mazzucato has suggested in the Entrepreneurial State.

In fact, I pitched literally this idea to the Welsh Government and Nesta back in 2014 but no dice.

That would be my preferred option but I can think of a simpler alternative based on pure design competitions or challenges which have been done a little bit all over the place with varying degrees of success. Those however hit the skids when it comes down to bridging the gap between the R&D bit and public procurement.

A further alternative would be to look at what CityMart is doing these days with their platform which they call the world's largest directory of solutions for city governments. CityMart were an early horse in the city public procurement challenges.

Personally I quite like that responsibility for the money will sit with Innovate UK and outside traditional procurement hands. Why? Because innovation in procurement needs to be tackled coming from innovation and not from procurement. It needs to be understood as "special" (ie, 'different') from regular or day to day procurement. If you think otherwise, just look at the 'success' of the innovation partnerships so far...

Call for papers: Developing Life Cycle Analysis: Life Cycle Criteria tools and methodologies for public procurement in the EU

My good friends Marta Andrecka and Roberto Caranta are co-editing a book on developing life cycle criteria in public procurement and are accepting abstracts until December 31st. Here's their pitch:

This book project aims to contribute to the development of life cycle criteria tools and methodologies for public procurement in the EU. The project is interdisciplinary in nature and therefore we welcome contributions from various fields such as engineering, policy development, management, business and law. Contributors may focus on any of the EU jurisdictions, either providing a comparative perspective or focusing on a single jurisdiction. It is also possible  to focusing on general problems or specific sectors or product/service categories. Furthermore, we welcome case studies studying possible drivers for change, legal settings and current business frameworks.

 

My reservations about social and environmental criteria notwithstanding, I am all for the internalisation of external costs associated with procurement and so welcome this new initiative by Marta and Roberto.

Third International Conference on Public Procurement Law Africa

The African Procurement Law Unit is organising next year the Third International Conference on Public Procurement Law Africa (1-2 November at the Century City Conference Centre & Hotel, Cape Town, South Africa). Here's the information available:

The Conference theme is Procuring for Development in Uncertain Times. The theme will address a range of critically important issues relating to the uncertainty facing public procurement in Africa and beyond, especially in relation to digital innovations such as “smart contracts”; the integration between procurement and human rights issues such as modern slavery; global uncertainty in the face of Brexit and “America First” policies; the role of procurement in meeting the Sustainable Development goals; recession in many African countries and slow global economic growth, as well as issues of anti-corruption, governance and the operational context of procurement. Plenary speakers include some of the leading thinkers in public procurement in Africa and internationally, and the conference will feature numerous papers, and workshop presentations.

The call for papers is now open and can be downloaded below.

Important dates are:
Abstract submission opens: 10th November 2017
Abstract submission deadline: 30th April 2018
Acceptance Notification: 30th May 2018
Full paper submission deadline: 30th September 2018

The Commission's 6 strategic priorities for public procurement policy

Continuing the short game of procurement tennis with Albert Sanchez-Graells on the Commission's Communication Making Public Procurement work in and for Europe COM(2017) 572 today I will be talking about the Commission's 6 strategic priorities for public procurement policy. These are:

  • Ensuring wider uptake of strategic public procurement
  • Professionalising public buyers
  • Improving access to procurement markets
  • Increasing transparency, integrity and better data
  • Boosting the digital transformation of procurement; and
  • Cooperating to procure together.

Albert's comments on these priorities can be found here. He went for the catchy trumpesque title, whereas I went for the more listicle like one. Our views, are fairly similar in most of the priorities and I am happy he picked up on my earlier bugbear of the choice of language and lack of precision in the terminology used. He made some very critical remarks on the Commission's introduction and picked up an underlying trend (visible in other areas) of using procurement to achieve industrial policy goals. That objective is orthogonal to the idea of a single market in procurement: we achieve either one or the other, but not both at the same time. Plus, I would refer readers once more to the mounting body of evidence that buying national simply does not work

Albert's assessment of the Commission's example of "best practice" in innovative cross-border procurement (section 2) is brutal, but fair. Too much "practice" is passing off as "best practice" simply because someone somewhere says so and in absence of any evidence to back up the claim. It reminds me of a comment I felt compelled to make once to someone who is now a DG Director and was unfortunate enough to mention about a decade ago the Vasco Da Gama bridge in Lisbon as a leading example of PPP/PFI, soon after the Portuguese Audit Court published a review criticising the 15 contract amendments and extensions which always left the economic operator better off.

Ensuring wider uptake of strategic public procurement

The Commission starts by clamouring for more strategic public procurement. Albert claims, correctly (once more) that there is zero empirical evidence to justify this objective. As far as I can tell this "ambition" remains firmly grounded in the world of "policy goals" that do not have a solid reason for it. Why is it desirable? Will it leaves all better off?

My view (as well as Albert's) is that some strategic public procurement can be compatible with the single market, thus leaving us better off. This is mostly the green procurement part, since I have long accepted that internalising the true cost of pollution leads to a more complete single market than one that ignores such cost. Innovative procurement can also be compatible with the internal market but on a different basis. It is possible for procurement to function as a lead buyer for innovative products and services, but having said that those will always be the exception and never the rule for day to day expenditure (just the OJEU for innovation partnerships...). All in all, they may lead to more complex (expensive) procurement processes and also more expensive goods and services, but as long as they do internalise externalities or lead to products/services that otherwise would not exist I see them as fundamentally compatible with the single market (in this I depart slightly from Albert's reservations about higher cost while agreeing on the possible downsides for SMEs). Oh, and the amendment to the Clean Vehicles Directive 2009/33/EC could not come quick enough, but its remit is much wider than public procurement.

The problem lies with social considerations as strategic objectives. These range from the wooly to those that appear to be common sense (ie, demanding wages above the minimum wage or imposing one's minimum wage on other countries workers) or even those that are down right protectionist (demanding local labour/apprenticeships). These tend to be an anathema towards the objectives of the single market which remains (at this moment in time) at the core of the Union. I won't even talk (for now) about the exporting of European labour standards to third countries and what that does to both EU consumers and those producers, but Dani Rodrik does on his new book (p.229 I'm told!). But my worries about the growing compliance culture in procurement can be found here

Professionalising public buyers

Most of our views about this priority can be found in the first entry to this procurement tennis match (here and here). There is however an important angle we omitted the first time around. By asking for the professionalisation of public buyers the Commission indirectly recognises that procurement is today difficult and complex - thus requiring the said professionalisation and specialisation in some instances as well. 

Should we not be aiming for the opposite then? Making procurement so simple that it actually does not require that much specialist knowledge?* After all our phones today are mightly complex but said complexity is abstracted away for the benefit of the user. This goes hand in hand with my usual analogy that procurement rules are just like operating systems. And the one we use has really old roots.

*no, I'm not thinking about principles and negative obligations like in the 60s to be the solution.

Improving access to procurement markets

I share Albert's disappointment with this part of the communication. It reads (again) as a general enunciation of ideas that lack coherence or fit.

This is one of the most disappointing aspects of the October 2017 Communication. The Commission indicates that improving access to procurement is mainly geared "to increase the SME share of public procurement in line with their overall weight in the economy", in particular "in view of promoting more cross-border procurement". However, the only specific actions mentioned by the Commission concern (i) the Remedies Directive (and, specifically, its criticisable decision not to review it, see here and here), (ii) the initiative on third country access to EU procurement markets (see here), and (iii) a sectorial initiative to increase SME participation in defence and security contracts. This is puzzling. 

While those initiatives can have some effect on increasing SME access to procurement markets, they are unlikely to facilitate a step change. Much more is needed in terms of guidance and best practice on facilitating SME access to procurement domestically and in an EU cross-border context (which the Commission should undertake), and there are obvious limitations derived from the cost of having the administrative (and language!) capacity needed to export. In that regard, the proposals in the Communication do not even brush the surface of what could be done at EU-level--starting with practical guidelines on how to maximise the advantages derived from the fact that, in the Commission's own terms, "[t]he 2014 directives include measures that should facilitate the access of companies including SMEs to public procurement, also cross-border". It would certainly be helpful for the Commission to flesh that view out in more detail.

But there is more to criticise on that quote. The Commission claims we need to increase the share of SME spend in line with their overall weight in the economy, but earlier in the document it was claimed SMEs win 45% of the aggregate value of contracts above the EU thresholds. According to the OECD the added value of SMEs in advanced economies lies between 50 and 60%, so we are not exactly a magnitude away *and that is only for contracts above the EU thresholds* which are not really small or SME friendly anyway. As the Commission is worried about SME cross-border success rates (rightly so) is it proposing to lower the thresholds or remove the non-tariff trade barriers on lower contracts? No such thing is to be found in the document though.

The Commission could (but has not) made the point to justify the increase by including only those situations where SMEs have won by themselves or in a consortium a given bidder. It has, however, decided to include in the 45% figure also sub-contracting. Sub-contracting does not really have much to do with procurement rules or (practice) since main contractors are free to decide who they want to contract with and crucially how they want to spend their contract money. So in reality the figure of SME participation rate in public procurement may effectively be much lower - but we are left in the dark by the use of a questionable statistical method by the Commission.

There are some other questionable points about SMEs and public procurement. There is no explanation why it is desirable or better to have more SMEs tendering (and therefore, increasing their transaction and opportunity costs). It appears an article of faith that more SMEs tendering is simply better but without taking into account the tradeoffs it entails.

The Commission also claims that remedies are important for SMEs, but that could be argued about any sort of economic operator taking part in public procurement. Furthermore, if they are so important maybe the Commission should have taken the opportunity to review the Remedies Directive as well.

The Commission revisits as well in this section its ongoing battle with international cross-border procurement and third country access. I do not see how the words included here ("restoring a level-playing field is more than ever necessary") make any significant difference. More so, bearing in mind the poor level of direct cross-border procurement within the single market, maybe discussions about third country access will make the Commission lose the forest for the trees. 

But all that is low level hanging fruit. There is no spark, or transformational initiative that could really make a significant difference in cross-border procurement. Here's a few:

  • What about creating a set of procurement INCOTERMS that would make it easier for economic operators to understand the obligations arising from the contract? If we have CPV codes why can't we have INCOTERMS for procurement obligations as well?
  • What about solving the issue of different contract performance regimes? Only larger economic operators can actually invest in having subsidiaries (or access to legal teams in another country) to justify the legal risks arising from contract performance. Why are we not seeing a clear pathway to harmonising public contracts rules?
  • What about language issues? Is it a coincidence that most cross-border public procurement is literally cross-border or between Member States sharing a language? Ironically the Commission flags up language as potential issue on cross-border cooperation in procurement, but not in regular procurement activity...

Increasing transparency, integrity and better data

The Commission is right that making more procurement data available is a step in the right direction and will propose the adoption of new e-forms, ie standard public procurement forms. Nothing is earth shattering new about this and it can be useful as long as the data is kept on a machine readable format and available with permissive licenses. Like, for instance the Open Contracting Data Standard which is absent from any reference...

The suggestion of mandatory public registers is in my view the correct one, but the Commission stops short of solving the biggest issue behind this idea. After all, sending contract data to the OJEU is already mandatory, it is at the compliance level that reality its the proverbial skids. There is a simple way (for contracting authorities that is) to ensure compliance: ensuring that whatever system is used to make the purchased is connected to a central system capturing the information automatically. As each country is essentially developing its own standards and approaches to electronic procurement this is sadly a pipe dream for now and - yet again - a missed opportunity to make real progress.

I do not agree that Directive 2014/24/EU has strengthened the provisions on conflicts of interest, but precisely the opposite of making it clearly legal economic operators can take part in the process even if they help out drafting the technical specifications. It remains to be seen if I am wrong about this...

The Commission is also correct in its conclusion that more data allows for collusion to be more easily spotted. That is true, since it is akin to keeping urine samples from the Olympics to re-test in the future as more advanced tests are developed. The opposite is true as well for markets where collusion is advanced. By making the data public cartel members will be tempted to develop collusive techniques that either do not show up in the data or that show in ways the enforcers have not spotted yet. Solve for the (new) equilibrium as they say...

In addition, for all the references to use more and better data, the Communication is fairly light in providing empirical data to sustain any of its proposed solutions...

Boosting the digital transformation of procurement

This is a particularly disappointing section. The Commission is correct when it states that the benefits of electronic procurement will only be reaped when the whole process undergoes a digital transformation...which means? Not much if one trusts this section. The actual solutions provided by the Commission are simply re-hashes of previous initiatives such as the Single Digital Gateway or the European services e-card. And not a word about the roll-out of the ESPD and its teething problems...

Which is a shame since integrating different systems and processes digitally can really make a difference. I think the Commission should be looking at integrated cross-border payment systems for inspiration on how the process could be re-organised in a way that functions across multiple jurisdictions. Once more, I think we should be looking at how the private sectors solves its own cross-border transaction issues.

There is also no indication the Commission understands how digital services are different from regular services and how those by definition should always be part of the single market, irrespective of their value.

Cooperating to procure together

The final section cover cross-border cooperation in procurement and exemplifies yet again the Commission interest in looking to the accessory at the expense of the principal. Cross-border cooperation in procurement will remain a niche area and one that needs significant prior work before it can justify this kind of attention. I will defer to Albert's comments about the lack of legal certainty arising from this idea.

The wooly language used doesn't help the Commission's case: 'Their [CPBs] role in the standardisation of public procurement processes and market insight also represents a key element for the professionalisation of public administrations and it enables SME-friendly procedures.' Right.

In other words, we should be solving other more pressing problems (cross-border procurement in general) before spending time with vanity projects. In a way, this is no different from all the bruah about procurement of innovation (hey, innovation partnerships, competitive procedure and competitive dialogue I'm looking at you) at the expense of the day-to-day operations in procurement. There is a lot more that needs to be done for 99% of the procurement projects *before* we should spend time on the 1%.

Appendix

Going through the Appendix I was surprised to see some suggestions that were not mentioned at all in the main body of the Communication, leaving us in the dark of what they may actually refer to.

For example, on section 3 (improving access to procurement markets) the Commission will apparently "launch pilots to boost SME participation via business intermediaries and innovation brokers" whatever that means.

On section 6 (cooperating to procure together) another pilot on SME-firendly policies in Central Purchasing Bodies, whatever that may be.

All in all, a missed opportunity.