Some thoughts about blockchain and public procurement

This past semester I have been teaching a module on blockchain and the law as part of our LLM in LegalTech. It is not directly about public procurement, but preparing classes forced me to organise my thoughts about the possible uses of blockchain overall. What I think about blockchain as a technology in general maps out quite well to public procurement too.

As a broad stroke, blockchain (permissionless or permissioned) cannot really compete in terms of efficiency with centralised or decentralised databases. The shared ledger approach of blockchain is simply too slow and (thus far) unable to scale to process transactions as efficiently as a database. In my view this makes it highly improbable that we will see blockchain replace existing technologies already deployed.

Its killer feature however is to provide a good enough technological solution where none is currently available. In other words, to do electronically what we have been unable to do at all thus far. For that, slowness and cumbersome may be good enough.

Where does this takes us in procurement then? Out of the top of my head to two areas. One I mentioned 4 years ago in this same blog (reputation mechanism - which I have to elaborate upon). More recently I have thought about another area where the current approach is lacking: cross-border technology.

Currently, each Member State is stuck on its own silo and even inside each Member State you have multiple non-communicating silos. I see a potential use for a (permissioned) blockchain solution is for this problem we are yet to solve. ESPD is a mess and e-Certis simply a 2010 mindset at attempting to solve the problem of sharing what is *public* information. How do we then 'integrate' multiple databases across multiple countries, preferably with a single codebase?

A centralised database with APIs for connection to the various national databases is always an option but then I look at TED which remains as, cumbersome and user (un)friendly as ever. It painfully shows its late 90s/early 2000s roots and mental models.

So what would we do with a magic blockchain solution to do away with the syncronization of information contained in the myriad databases?

We could force compatibility via APIs with a single blockchain maintained at EU level. Only the entities holding the information would be able to inscribe new data in the blocks. Ie, Companies Registries would sync company data, Criminal Registries criminal data, etc. This should be done automatically as new data is inscribed in the original database itself. In effect, all that boiler plate data that suppliers are expected to produce today or indicate the contracting authority where it can find it. Restricting writing permissions to the official entities holding the canonical data solves the oracle problem regarding data soundness.

Who could read the data included there then? Only each contracting authority in the context of a procurement procedure and *after* obtaining consent from the economic operator. This authorization could be limited in time/milestones for example. Another alternative might be a querying system whereby the contracting authority would query the blockchain if candidate X met certain conditions and all the blockchain would answer would be yes or no.

What this allows for is for the automation of what is still in 2019 a manual, menial job that does not really add value to procurement process. Yes, perhaps a database is a more efficient way of doing it but so far we have been unable to really iron the kinks of cross-border information management.

There are two important points I have not touched in this blogpost. The first compliance with GDPR - that needs a lot more thinking on my part and I'm simply not ready at the moment for such task.

The second the competencies of the Union to force Member States to change their administrative systems since this might fall under administrative rules where the competence of the Union is more limited than the general internal market competence. But then, the same could be said about the ESPD in itself.

Some thoughts on the frustrations of carrying out Brexit-related research (in the UK)

Myself and Albert co-authored a blogpost at the University of Bristol’s Law School blog reflecting on the frustrating state of trying to undertake EU law research in these times of Brexit and fitting it into the good old REF framework. Here’s a snippet:

Brexit, its research and its teaching are increasingly becoming a field of study on their own—see eg the illuminating contributions to the special issue edited by C Wallace & T Hervey on ‘Brexit and the Law School’ (2019) 53(2) Law Teacher 133-229, some of which build on the earlier series of SLS ‘Brexit and the Law School’ Seminars, one of which Albert had the pleasure to host at the University of Bristol Law School in July 2017. This seems rather natural, as it is hard to overstate the impact that Brexit is having on the work of academics active in all areas, but particularly for public and EU law scholars. In this post, we offer some personal reflections on the frustrations of carrying out Brexit-related research, some of which are related to Brexit and its unforeseeability, while others are derived from more general constraints on the ways legal research is published and assessed.

First best practices are the worst practices

I do not remember well when I first came across with the 'best practices' concept. Maybe during my Ph.D or soon after starting working at Bangor. But back then I was already puzzled by it. What are 'best practices'? How and why are they considered to be 'best practices'? What are the the 'bad practices'?

Time went on but the fuzzyness remained: best practices this, best practices that, until I started to ignore the 'best' and simply reading them as 'practices'. The 'best' bit simply becoming another oddity of the English language. A non-threatening euphemism if you may.

I can no longer maintain such a relaxed view about the 'best practices' concept though. The reason for that being that it tends to ingrain early 'practices' as being the best way to get something done, as it happened in the UK with the cack handed approach to finish the dialogue stage on the competitive dialogue as quickly as possible and have in depth negotiations with the preferred bidder. Madness.

The issue of 'best practices' is particularly acute in public procurement. First, they're everywhere and any organisation loves to beat the drum that whatever it does is 'best practices', especially if no one else has claimed 'best practices' on that area before. It is like the wild west where you have to be the first to stake your claim which then stays unchallenged, leading to paralysis in the evolution of practices in a given area. Madness, once again.

Second, we do not really have appropriate measurement mechanisms in place. How do we now if a 'best practice' is a good practice at all? Empirical research in procurement remains limited and experimentalist research a pipe dream. Can we imagine if medical research (itself fraught with problems) simply adopted a 'best practices' claims approach instead of the scientific method? We are in the medieval bloodletting stage of applied/practical procurement research.

By definition decisions that may constitute 'best practices' involve choices and hierarchies of value. For something to be done in a way, other options have been discarded, leading to trade offs. However, when we read about 'best practices' we don't get to see or know what was not done and what trade offs the decisions entail. If you are not willing to talk about the downsides or trade offs you are not providing all the information necessary. In a field like public procurement which moves significant amounts of money this can be sub-optimal to say the least. First best practices are the worst practices.

How do we go about and change the state of affairs? I'm an experimentalist at heart and although I have resisted being drawn into it, the vortex pull is becoming ever stronger. As such, I'm *finally* starting to work in this area and putting some plans in place to work on this in the near future.

Some thoughts on academic air travel and (a) future for conferences

Last week, Albert fired the starting gun on the discussion regarding the climate change impact of academic air travel and put a marker on the sand regarding his participation on any future conferences. Long story short, he is putting himself out of contention for conference engagements that imply flying.

I spent a few years thinking about this and going backwards and forwards with my feelings. On my end, I’m not ready to simply pull the plug completely on academic air travel because I still see them as a valuable part of my work. They are overrated as a content delivery mechanism (it is not efficient or cheap to put so many people in the same room at the same type) but they are invaluable on the social aspect. That has always been the bit I like about conferences the most.

Having said that, I cut significantly cut back my involvement on conferences (in general) for purely selfish motives. I have long stopped doing “pay to speak” kind of conferences which are the conference equivalent of predatory publishing. I also restricted my participation in conferences to 2 per year as each conference carries opportunity costs around the time they take to prepare and the clash with ever increasing work commitments at my university. I have also done so for more prosaic reasons as any conference abroad implies leaving my wife alone with parenting duties and we all know what that tends to do to women’s careers. Plus, after my health problems from 2017 I can no longer work at the same rate as before so I need to be even more ruthless with how I spend my time.

Albert’s plea is genuine and shows a deep level of care about the impact of his decision, not only for his career but also how it would be perceived in the wider academic community. I genuinely do not think his career has anything to suffer from the lack of participation in conferences requiring air travel but it is true that he (and to an extent myself) have reached a level in our careers where we can afford to take measures like this. His based on environmental concerns, mine on family, health and work/life balance. For us, good conferences are cherries on a cake and something we enjoy doing.

Paradoxically, taking this decision now is a easy option (the wide communication of it is not, as he put himself out to dry and inviting criticism) and frankly an option junior researchers might not have, especially due to the social element of the conferences. You show your wares and meet up the important people in your field - those that may be in hiring committees in the future. And my take about social relationships is that everything else being equal, the one with a wider network wins. That, I think, will be the crux of the matter for early career researchers on top of their difficulties on getting funding to go to those conferences too.

But there are things we can do to help out those further down the ladder. The first is when invited offer our place to a junior colleague. I benefited hugely from refusals by more senior people earlier in the career and I have long started to pay it back to the more junior ones.

Then there’s other stuff we can do. Maybe I should restart the Public Procurement Podcast and see who is out there early in their careers and in need of a boost of their profile. Or, as I suggested Albert earlier today on twitter, perhaps design an online only conference. These days I’m watching more and more videos on Youtube (aham gaming videos in case you’re interested) and their quality is excellent. Livestreaming with tools like Twitch is very convenient and way more accessible than in the past. Technology has evolved significantly from the days of the dreaded ‘webinars’ of 10 years ago. Communication with the audience is possible in real time and that can help create the effect of a community.

All this has made me think on how I would do my BARSEA project today in comparison with 2015? The podcast would stay as it is way more mainstream today than then, but instead of doing an ECR day in person I would do it online and keep the videos on Youtube/Vimeo or any other provider of the like.

So, let’s keep the conversation going.

Launch of Buying Into the Future report

I’m delighted to be speaking on Friday at the launch of the Buying into the Future report by PUBLIC. I will be part of a panel on ‘How can Government do more to buy from startups and innovators?’ with Tanya Filer, Digital State Lead - Bennet Institute for Public Policy and Robyn Scott CEO of Apolitical.

The event will be held on Bird & Bird London Office from 09:00 to 12:30 and registration is free.

PhD opportunity at Manchester Institute for Innovation Research

My good friend Dr. Elvira Uyarra sent me this opportunity for prospective Ph.D students interested in working in public procurement at the Manchester Institute for Innovation Research:

This project seeks to exploit unstructured data from patents, publications and new open sources of “big data” to investigate the influences of public procurement on innovation. It will address the following major questions:

  • To what extent, and how, are government actors strategically using public procurement to pursue industrial policy goals?

  • How does public demand shape the innovative performance of firms?

  • How does public procurement influence industrial structure, industrial renewal and diversification?

Applications are sought from UK, EU and international candidates with an outstanding academic background, particularly in economics, data science, innovation studies or a related discipline. Demonstrable quantitative skills will be essential and an interdisciplinary background will be an advantage. The candidate should be willing to attend specialist innovation policy courses as well as advanced training in data science, and be familiar with key programming languages (e.g. STATA and R), social network analysis techniques, and/or have some experience with text mining or other work with unstructured data.

More information on entry requirements and application process can be found here: Public procurement and innovation: measuring policy and impact

Application deadline: 29th March 2019

I don't have any extra information other than what is above so if you’re interested or have any query please follow the link above.

Spain publishes guidance for low value contracts

Spain’s current public procurement law imposes strong transparency requirements for most contracts below the financial thresholds, restricting the use of non-transparent procedures to contracts value at below €15,000 (services) or €40,000 (works) only. My take is that overall this is a positive step and one that I regret Portugal not following.

That does not mean the move is painless or without difficulties. To clarify the requirements and operational implications of the move, Spain’s Procurement Regulator Body (something Portugal should have copied too…) published its first ever binding guidance specifically on Art 118 of the Spanish Public Contracts Law.

The guidance makes a very restrictive interpretation of the grounds enabling the use of the non-transparent procedure, from the requirements (deemed as cumulative) to the potential loopholes of contract splitting or recurrent yearly contracts with the exact same object. Julio Gonzales has a few extra comments (in Spanish) on the Global Politics and Law blog.

UK (re)joins the GPA

The GPA members and the UK have reached an agreement allowing for the country to acceed to the Agreement if and when it leaves the European Union. This agreement ensures a continuity of the international procurement legal regime for UK-based undertakings and those based on the GPA members.

Back in 2017 myself and Albert Sanchez-Graells concluded that the UK was not a party to the current GPA in its own right and would have instead to apply for accession. Our colleague Ping Wang from Nottingham reached a similar conclusion.

In the paper we posited that the accession could follow a streamlined process but we assumed that even then it would take a significant amount of time. In this instance we were proved wrong, with the accession ocurring quicker than we anticipated.

Regarding possible change to the UK's legal regime(s) post-Brexit, we remain convinced that the accession to the GPA limits the scope of the changes that can be introduced.

Department For Transport sued for *that* ferry contract

Eurotunnel is suing the Department for Transport due to the ferry contract(s) awarded back in December without proper tendering procedures. This turn of affairs is not really surprising and a logical consequence of the poor handling of those contracts.

The merits of the actual complaint, they appear obvious. In my opinion, the use of the negotiated procedure without prior publication based on the grounds for extreme urgency was not legal since said urgency arose from a lack of timely action by the Government. In other words, incompetence by the contracting authority is never a ground to use a non-transparent procedure. It has been public since March 2017 that the departure date from the Union is scheduled for 29 March 2019, therefore the lack of preparation for the consequences of the default scenario for such departure (no-deal Brexit) runs from that moment as well and is not unforeseen (or unforeseeable). This is pretty much well established at EU level and probably one of the reasons why the rules about contract notice transparency are as draconian as they are.

As Albert and myself said back in 2016 about Regulation 32(2), the negotiated procedure without prior notice is exceptional in nature and as such its grounds need to be interpreted strictly as not to create competitive distortions. And the latter seems to be exactly what happened in this instance.

PS: As for piling on Chris Grayling for spending £800k on consultants to prepare the contracts that is probably uncalled for based on the total amount being procured and that time was of the essence (which is different than saying the grounds for the negotiated procedure were met). And let’s not forget one of them actually flagged up Seaborne Freight lack of trading history as a risk factor. That no one heeded such advice, on the other hand, is more than fair game.

UK Competition and Markets Authority finds cartel in construction

This may not come as a surprise to anyone working in this area of practice, but the CMA has provisionally found guilty two companies operating in the construction sector, specifically in the pre-cast concrete drainage sector. These two companies have admitted being part of a cartel whereas a third one is also under investigation but has not admitted any wrongdoing.

Stanton Bonna and CPM together had 90% plus of the market from 2010 and have agreed to pay fines as part of their settlement for their price coordination practice.

It remains to be seen if the companies will be debarred from future public contracts based on Reg. 59 PCR 2015/Art. 59(4) of Directive 2014/24/EU but I suspect the grounds are too narrow to allow for such interpretation.

UK publishes anti-corruption strategy update

The UK adopted in late 2017 a anti-corruption strategy for the 2017-2022 period. One year on from the publication of the original strategy, an update has just been released.

Reducing corruption in public procurement and grants was and remains a key objective of the strategy, but whereas the original strategy included some loftier ambitions, the update provides some information on how the strategy is being pursued.

Some of the information is interesting to say the least, such as attributing an increase in 31% of the number of notices being published on ContractsFinder to a specific single Procurement Policy Note and that the open contracting standard work appears to be ongoing but without any firm commitments on the deployment of the open contracting data standard for example.

The CMA cartel screening tool also gets mentioned (and I think correctly - brownie points for it to be available on GitHub) as does the National Fraud Initiative and its work with local authorities to identify risk factors.

Going forward, the bit I am personally more interested in is buried under goal 3 - greater confidence in efficient and legitimate contract management an area that is sorely lacking attention. Not necessarily only regulatory attention, but also that of the practical type. The update mentions a Contract Debarment trial that was successfully completed in June 2018 and that a preferred approach will be forthcoming in 2019. Contract debarment is an area fraught with practical difficulties and one I think needs to be tackled centrally and not at authority level.

Finally, the update also promises specific guidance on how to apply exclusions in public procurement in December 2018, so that means within the next couple of weeks. This is once more welcomed but in all honestly should have been produced in 2015 or 2016 soon after the Public Contracts Regulations 2015 came into force

New report on the scale and nature of contracting in the UK

The Institute for Government published today a report on the UK government procurement practice, specifically on the scale and nature of public expenditure via public procurement. Here’s the abstract:

Government procurement: the scale and nature of contracting in the UK reveals that four departments – the Ministry of Justice (MoJ), the Department for Transport (DfT), the Department for International Trade (DIT) and the Department for Environment, Food and Rural Affairs (Defra) spent more than half of their entire budgets with external suppliers last year.

Across government, the money is spent on a wide range of things from goods such as stationery and medicine to the construction of schools and roads, and from back office functions such as IT and human resources to frontline services such as probation and social care.

The report finds that the largest suppliers are winning more and more government business. Last year, roughly a fifth of all central government procurement spending was spent with ‘strategic suppliers’ – companies that receive over £100m in revenue a year from government – up from around an eighth in 2013. This is risky for government, given that its top three suppliers have all experienced financial difficulties in recent years.

Despite the scale of spending on procurement and outsourcing – and increasing financial problems in parts of the sector – the data available on procurement and outsourcing is poor. Every day, public bodies procure hundreds of millions of pounds’ worth of goods, works and services. With a clearer picture of how much is spent, on what and with which suppliers, government could make better-informed spending decisions and make significant savings

Today is 'electronic procurement day' in the EU

Although the general deadline for transposition of the 2014 public procurement Directives was April 2016, Article 90 of Directive 2014/24/EU provided the Member States more time to get their act together in what concerns electronic procurement.

Well, the deadline for transposition of the remaining electronic procurement obligations contained in the Directive is today.

Now the million dollar question in the Member States that are yet to transpose (or implement) such provisions is: which have direct effect?

Asymmetric retaliation in the UK GPA accession

Last week, Bloomberg ran an article claiming the USA and two other countries were blocking the UKs accession to the GPA agreement. Yesterday, it doubled down on the story stating New Zealand and Moldova as the two other members blocking the UK. and provided more information about why Moldova is making life difficult for the UK. The Moldovan reasons are simply delicious and a prime example of asymmetric retaliation. In hindsight, they capture beautifully the zeitgeist of Brexit. All in all, what myself and Albert predicted about a year ago in our paper is panning out: UK going for a straightforward accession as possible but with the flank exposed to demands from current members.

So far it seems that the current members are willing to run down the clock to November 27th when the WTO government procurement meeting occurs. To be fair, there is no reason or incentive to do otherwise for a number of reasons. First, because the UK is not leaving the European Union until March 29th, 2019, so there may be time for an agreement until then. If ratifications are required, then agreeing now or in March does not make a significant difference.

Second, the longer the uncertainty lasts the weaker the UK bargaining position and the more willing it will be to make concessions. And herein lies the rub: those demands for concessions can come from anywhere in the spectrum of interests of the other members, effectively meaning they may be completely unconnected with procurement. Procurement is simply being used as leverage to obtain concessions elsewhere (again, read between the lines of the Moldovan reasons…).

Finally, contrary to popular perception, the UK procurement market is not that open to foreign bidders. Only large contracts are subject to the GPA rules and those tend to be of interest to large companies. And which countries have large companies operating in foreign public procurement markets? Above all, two: USA and the UK. So, the USA is effectively reducing competition for procurement contracts inside its market and also - probably more crucially - taking key players out of competition abroad. So for the USA it makes sense to make life as difficult as possible to the UK unless really good sweeteners are thrown in (NHS privatisation anyone?). So for the price of losing access to the UK market the USA is blocking competition in all other markets (exception may be EU of course) as the UK also has no Free Trade Agreements in place. As for Moldova, it sits on the other side of the spectrum. It knows its companies stand no chance in hell of winning contracts in the UK so why open its home procurement market for free? Better to try and win a concession elsewhere like, say, visas.

Overall, I suspect the overarching interest of all parties will lead to a deal sooner or later, but so far we’re still in the multidimensional chess part of the game.


PS: The irony of New Zealand being the third blocker is not lost on me. Eat your hat, brexiteers.

Regulations and Directives - food for thought

EU Law 2018 - Unit IIA Extract.png

This is a slide I will be using on Monday’s EU law lecture. I have not drilled down into the details, namely if there is any evolution or if there has been an increase on Commission’s delegated Regulations but I was suprised at the findings.

The EU legal secondary law framework is mostly one of Regulations and not Directives, with all the implications that brings.

Some thoughts on the Brexit "no deal" guidance for public procurement

The UK Government published recently a guidance note on the potential impact for public contracts access in case there is no deal with the EU before March 29 2019. There is not really much actionable information and perhaps calling it “guidance” is a slight misnomer as the document is more of a “heads up, this may happen” type of document.

Post March 29 2019, the Government implies that UK contracting authorities will be using a new UK-based e-notification service instead of OJEU/TED. However, there is no information whatsoever about this new service, who will set it up, by what date and how it will operate. In short, it adds no legal certainty to the implications of the UK departure. It might have been preferable to simply refer to the need to use Contracts Finder and similar regional portals for the time being instead of re-inventing the wheel once more.

Looking into the part about procedures ongoing at that date also yields reasons for concern. Here’s what the guidance contains:

“There will be more engagement on about how to deal with ongoing procurement procedures in the handover period between the two systems nearer the time. This will be described via appropriate communication channels and in guidance, which will be made available on GOV.UK.”

Again, not exactly reassuring. What will happen to those situations whereby the contracting authorities (and suppliers) are reliant on the European Single Procurement Document or e-Certis and associated databases to get data about economic operators taking part in ongoing procedures? And would the EU economic operators (and GPA ones) lose their status halfway through the procedure?

Finally, a word about the GPA. The guidance confirms that the UK is seeking individual accession to the agreement (as forecast by myself and Albert Sanchez-Graells). As the accession request was submitted in June 2018, the process will take time and it is simply impossible that the accession would be wrapped up by the end of March 2019. In consequence, UK economic operators would not only lose access to the EU procurement market but also to those of GPA members. As for economic operators from GPA countries, it would be up to the UK to decide how to treat them, but even if they were admitted to tendering doubts will remain about their eligibility for remedies.



New project on Curbing Corruption in Government Contracting

Liz David-Barret and Mihaly Fazekas have a new research project called Curbing Corruption in Government Contracting, funded by the Department for International Development Anti-Corruption Evidence Programme. The project aims to look at how corruption can manipulate procurement and strategies to identify variables, patterns and trends that may indicate a corruption risk.

As the project evolves, it will be possible to find on the website working papers, policy briefs, datasets and a stream of blog posts on their work. You can find them as well on Twitter.