Links I Liked [Public Procurement]

1. World Bank starts MOOC on PPPs (French only). Older English version here. I sincerely hope they cover also the downsides of PPPs.

2. 18F publishes beta website with US Government spending. Now if only we would do the same in Europe...

3. Night bus service in Barcelona to be re-tendered (Spanish only). Never understood why the night bus service in Barcelona uses different buses from the day ones. All that capacity sitting idle during the day? Makes no sense.

4. Just Another Paperclip? Rethinking the Market for Complex Public Services. Good report by Gary Sturgess.

5. An Exercise in Underachievement–The UK’s Half-Hearted Half-Measures To Exclude Corrupt Bidders from Public Procurement. Talk is cheap.

Links I Liked [Public Procurement]

1. Big tech's grip loosens on UK.gov IT spend.

2. World Bank puts out it "Benchmarking Public Procurement 2017" report. Albert has the lowdown of it.

3. The best way to build big is to start small. Agreed, way too many initiatives in public sector are based in delusions of grandeur when there is plenty of low hanging fruit yet to be picked.

4. A more transparent public procurement (Catalan only). Mostly about how perspectives on public procurement have changed in Catalonia, albeit those reductions are fairly minor. 

5. Compliance and public procurement (Spanish only). I suspect this will be a bigger topic in the years to come as procurement gets dragged more and more into a compliance frameset.

Links I Liked [Public Procurement]

1.  Government of Western Australia shows Minimum Viable Product version of its new online procurement portal. Great to see a Government taking up on cheaper, more agile ways of developing services instead of building the whole widget without external feedback. Well done.

2. Is raising the micro-purchase threshold from $3,500 to $10,000 in the USA a good idea? In general, I am against raising thresholds for the reasons highlighted in the article, but allowing 18F to expand its micro-transaction platform would not be a bad outcome.

3.  Albert publishes an article about blacklisting.

4. Chicago has an hands on approach to innovation accelerators. Now, if only anyone in Europe would use the innovation partnership for the same purpose... 

5. Speaking of innovation accelerators, the Omidyar Network invested in CityMart. 

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.

Thoughts on the White House Source Code Policy

According to this GitHub post by Mark Hopson from 18F, the US Government is considering introducing a policy whereby custom made code should include (some) distribution rights and not only the right of use. In other words, the US Government is mulling requiring developers to grant a more expansive license to the Government, so that the code can be be re-used by Federal agencies other than the acquirer. These are interesting developments, well worth some comments.

I find it fascinating that the policy is open to discussion and comments, even on GitHub as done by Mark. Here are my views on the proposed Policy as well as Mark's suggestions.

1. What is at stake

When someone buys say a license for Windows, that license includes only the use of the programme and not the rights to modify or redistribute the source code. Buying a "off the shelf" license to use Windows is manifestly different from asking a developer to come up with a custom solution for a specific problem. The proposed Source Code Policy targets the latter and not the former, ie new code that is developed specifically for the a need the Federal Government has. In general, I am in favour of making as much source code publicly available as possible under the guise of a public good.

From a procurement perspective, I find the Source Code Policy very interesting as it mitigates two major problems in procurement of innovation, albeit at a cost: (1) IP ownership and (2) State Aid.

2. IP ownership

In the last 4-5 years I have written a few times about the issue of intellectual property as the key problem in public procurement of innovation. When a new idea/implementation/solution is created as a consequence of a public procurement procedure, who should own the resulting intellectual property? Art 31 of the Directive 2014/24/EU - referring to the innovation partnership - only states that intellectual property rights need to be addressed during the procedure. We can get very specific and detailed depending on the type of intellectual property generated,* but on a general note the IP will belong either to the contracting authority or the economic operator(s) who created in the first place.

Mark suggests in its post a change in the draft policy so that it entails an acquisition of all rights to the custom code. In my view, a full blown IP acquisition by the public sector is not a great solution - managing IP is not the core business of virtually all contracting authorities and all the IP generated was a means to an end. In addition, if the contracting authority acquires the IP, it becomes responsible for both for the good and the bad which it may lead to. Case in point, if said IP infringes someone else's existing IP, guess who will be left holding the proverbial can? Sure, we can include back to back liability clauses in the original contract but that regulates the relationship between the contracting authority and the economic operator, without binding the owner of the infringed IP. Plus, if the economic operator goes bust all those nice and shiny indemnity clauses are not worth the paper they are written on.

Another downside of a complete IP assignment to the contracting authority is the loss of said IP from the wider society. Let's be honest as any IP acquired by the public sector would end up as the Lost Ark from Indiana Jones: locked in a "warehouse" of sorts, far from prying eyes and without generating any benefit for the society at large other than the contract where it was deployed. Mark's proposal of making all the code freely available would solve this problem.

The solution proposed by the US Federal Government is particularly interesting as it mitigates both downsides of a full blown acquisition. For the second it even strikes a good balance as it ensures other Federal Agencies can use it for free. As for the first, the economic operator is still on the hook for any infringement since it keeps ownership of the custom code. It may however increase the risk of litigation as more users will be deploying the code potentially raising the visibility of any IP infringements committed in the development of the custom code.

3. State Aid

Coming from an EU angle, The second problem with procurement of innovation in the EU is the potential for it to breach State Aid rules, namely Article 107 of the Treaty on the Functioning of the European Union. State Aid occurs when a an advantage to an undertaking is given by a public authority. Paying for a contract to develop an innovation while allowing the economic operator to commercially exploit the innovation would constitute, prima facie, a violation of EU's State Aid rules.

The problem, however, is somewhat mitigated by the Commission's own assumption (cf para 32) that it will not sue anyone involved in pre-commercial procurement where "an open tender procedure" has been followed, the underlying issue is still present as the primary law has not been changed and only the Commission pledge not to enforce it. In other words, the distortion to the internal market is still present - albeit legalised by the Commission pledge not sue the beneficiaries. Communications of the Commission, however do not constitute a source of EU law and ultimately the power to legislate in this matter remains with the Council (Art 109 TFEU). Do I see the Council meddling in this? Not really, hence my comment in the two preceding paragraphs.

Notwithstanding the above, it is clear that a license for a Government to re-use custom code acquired by any agency reduces the market value of said code. After all, a number of potential customers has just evaporated leaving the economic operator only with the possibility to re-use it with private clients or other public bodies not covered by the license. This reduces the level of state aid involved but does not fully solve this problem. The reduction in the potential number of customers brings me to the downsides though.

4. Other downsides

I suspect one of the unintended consequences of this policy will be an increase in prices. If economic operators know in advance they will not be able to re-sell the code to other Federal Government clients, the logical consequence is for them to jack up their prices. How much, I have no idea. Mark's solution would exacerbate this problem as the only opportunity a developer had to make money directly with the code is in that single transaction.

Ultimately, it may also lead to potential economic operators not turning up in the first place, reducing competition. Unless the code is completely separate from existing code-bases, no economic operator will accept creating a variant/fork of its "crown jewel" to be used for free by all other Government agencies. Unless, that is only the completely new code is covered by the sharing obligation. This, however, would be useless as the rest of the code would not be made available.

Another downside I see with this policy is the risk for the Government - by obtaining a license to share to other Federal Agencies but not the wider world - the Government becomes the custodian of that code. So what happens if after a security breach the code is leaked to the internet, coming from one of those private repositories? Who will be held responsible for the license violation? Mark's approach would solve this issue.

These downsides are valid both in the US (as afar as I can tell) as they would be here in the EU.

5. Bottom line

I do not want to rain on the Federal Government parade nor to chill any similar developments in the EU. If anything, I view this as the right way to go and one which balances well competing interests. Having said that, there are downsides and shortcomings to take into account.

 

*Whereas the main IP issue surrounding source code are by definition copyright, they do not end there. Out of the top of my head, there can be design rights (patents in US parlance) involved and in specific circumstances patents may be involved (yes, more common in the US than the EU).

 

Links I Liked [Public Procurement]

1. The first season of the Public Procurement Podcast is almost over and interview #19 with Stephan Litschig is now up. The final interview will go live later this week.

2. A good post mortem of the Coalition's Government "SME friendly" public procurement policy. Interesting analysis from Stephen Allot who was the Crown Representative for SMEs. Full of praise for G-Cloud and another example how moving procurement online actual makes life easier for SMEs (as I have argued for many years). On G-Cloud SMEs win 50% of the business (!).

3. 18F Launches Acquisition Innovation Pilot. Looks like (yet another) great idea by 18F and another example how procurement can be done differently in this day and age. Looks like a refined version of what I piloted back in 2011-13 with Welsh local authorities.

4. Tech trends and the future of local waste services. Plenty of scope to use data to improve wast management and thus, procurement.

5. White House Seeks Feedback on GitHub for Government-Wide Open Source Software Policy.

Links I Liked [Public Procurement]

1. 18F (USA) tries micro-purchases again. This time with their own tool, instead of using GitHub.

2. Visualising €1.3 trillion worth of EU public procurement contracts. Wow. Great to see connections where they are not obvious.

3. The Death Star bankrupted the far, far away galaxy. Not really public procurement, but the implications of the failure of a massive project on a supply chain. 

4. Scotland has a new public procurement law. I am yet to spend some quality time looking into it the Public Contracts (Scotland) Regulations 2015, but want to do so in the near future to compare it with the Public Contracts Regulations 2015. Policy note here. No, I will not be commenting on them one by one...

5. Too much outsourcing in the UK? Speculative.

Links I Liked [Public Procurement]

1. Legal Aid contract(s) go pear shaped with dozens (hundreds?) of challenges. Whistleblower claims process was a shambles. Apparently, the tender document imposed 17 questions (sub)-divided into 3/4 parts each. Do you really need 50 different questions to identify the best bid (not bidder!) for the contract(s)? On the other hand, legal services are reaping what they sowed: if instead of lobbying for special treatment for ages (Part B Services anyone?), they had accepted to be a service like any other, both the MoJ and the bidders themselves would be used by now to the practice (and pitfalls) of procurement.

2. CJEU rattles the social considerations cage in RegioPost case. Albert cannot resist commenting on it at length and is preparing an event on the topic.

3. Programmer who bid $1 on 18F's open source contract experiment, speaks up. Again, I do not see anything wrong with his attitude and he garnered incredible levels of (free) publicity for his skills. Would this free publicity constitute a case of indirect State Aid in the EU? Nah...

4. Washington DC ponders more transparency to tackle corruption in public procurement. Open Contracting Partnership weighs in. On this side of the pond, claims that contract transparency is now stalled.

5. Cabinet Office considering Crown Marketplace, built around the Digital Marketplace platform. Would local government take it up?

Remember 18F's idea of doing reverse auctions for small pieces of work?

I wrote here last week about a reverse auction trial that 18F was undergoing on GitHub for small pieces of work involving computer code. Well, the first results are in and the winning bid was...$1. The bid was not a fluke and the code worked as it was supposed to, passing the acceptance criteria. 18F is puzzled with the result, particularly the value of the winning bid, but why should they be?

A reverse auction will always have an effect on price and by lowering the transaction costs to near zero it encourages the S of SMEs to turn up, including "one man bands". Many developers are familiar with GitHub and half of them registered in the SAM service after the job was posted. The fact that 10,000 people looked at the tender and only 16 bids were received also indicates a reasonable interest from this specific sector to get involved in the action but without being overpowering. So far I have not seen anything that would be considered unexpected. The numbers are higher than my experience with the simplified open procedure pilots I ran a few years ago but provide further (anecdotal) evidence that lowering the procurement barriers does not have as a consequence a deluge of bids.

But what about the $1 bid?

There is nothing wrong with a $1 bid. Economic operators are free to set the prices they deem appropriate for their work. Discounting the fact that a contract of only $3500 would never be covered by the Directives, In the EU such bid could have led to an abnormally low price analysis but only that.

But is $1 not below the minimum wage?

That may or may not be a problem, depending on the actual circumstances. First, if there are no employees (ie, the winner is self-employed or runs his own company) there is no violation of minimum wage rules as there are literally no wages to be paid. Minimum wage rules only cover employment relationships and in the absence of one, they are inapplicable. Second, if the code had already been produced in advance - for example for another customer - what forbids a company to sell effectively a second copy at its marginal cost? It may have recouped all the costs in the original contract with the other client.

There are however other potential problems

One of the things I would like to know is where the liability for that code lies. For example, if it violates someone else's intellectual property, who is on the hook for this liability? If something goes wrong with that code once it is put in production - ie knocking an important Government service out - who is left holding the liability can?

Now, for really small, self contained pieces of work probably the above are just red herrings. If that is the case, there is no point in saddling the procurement procedure with unnecessary transaction costs which will effectively push the price upwards and negate at least part of the benefits that can be achieved by it.

Links I Liked [Public Procurement]

1. Lord Carter's report on NHS procurement is out. Apparently it recommends a deep cleaning. Or a good scrubbing.

2. 18F tests GitHub for reverse auctions for small pieces of coding work. Contracts start at $3499 and contractors bid down the price and are only paid if they deliver the code on time and with the expected quality. I think this is an incredible idea, but one of commenter has already put the finger where it hurts: potential collusion. However, in liquid markets such as web design/website coding, I think we'll be better off overall.

3. Abby Semple writes about the living wage in public procurement.

4. Corruption in Malaysian public procurement?

5. Albert writes about the definition of body of public law and illegal presumptions in restrictions of competition in public procurement.

Links I Liked [Public Procurement]

1. Government outlines 'smartphone state', via Uber and blockchain. Great Wired interview with Matt Hancock (UK Government). I am ever so more bullish on the potential of the blockchain to be used in public procurement, particularly as a distributed contract ledger and "reputation repository".

2. Spanish Government takes ham fisted approach to slow payments in public procurement supply chains (Spanish). This is a tough nut to crack and I keep going in circles if the State  should interfere with purely private relationships, even though the problem of slow payments to sub-contractors is indeed real. But the Spanish state idea of awarding points for prompt payment seems way too far fetched too me. There has to be a better way.

3. More blockchain & banks. 

4. Announcing the Agile BPA awards: A conversation about the process. Very interesting initiative by 18F, the USA equivalent to the UK Digital Service.

5. What if citizens (and economic operators) could rate public authorities? Speculative but the more I think about the issue of reputation in public procurement cuts both ways. There is no reason why economic operators should not factor that piece of information in their go/no go decisions.