Some further thoughts on the European Single Procurement Document

A couple of days ago, Timo Rantanen posted on Facebook the following comments about the ESPD (reprinted with his permission). I will provide my own responses inline, and expand a little bit on some of the ideas included in my recent paper about the ESPD.

"- not all countries and CAs have required the attestations from EOs when submitting the tender when 2004 Direcrive was in power. At least in Nordic countries it was already common to require self-declarations from EO at the time of submitting the tender. Most of these were not standardised like ESPD is - so the EO had to fill in different styles of self-declarations for each procedure and CA. However, these were MUCH easier and shorter for EOs to reply."

Agreed, that was the case as well in Portugal (and in the small number of pilots I ran here in the UK). However, the problem with that approach from a systems perspective is that "national islands" are created ending up making life more difficult for economic operators wanting to bid for cross-border contracts. The ESPD trades flexibility (to be shorter and easier) for a standardised approach in all Member States. The same way the container traded flexibility for standardisation of cargo.

"ESPD on lots: planned new 2.0.0 version includes 'improved handling of lots (See: https://github.com/ESPD/ESPD-EDM). However, to me this is far too complicated for EOs and I hope it would vanish from the final version. If the CA uses lots it can do separate XML files for each lot if and when the selection criteria vary (the exclusion criteria are in most cases always the same). Hence, EO would only need to read in and fill in XML files for those lots that it bids for. Personally, I think this importing and exporting of XML files is a crappy solution. We can no much better (and at least we have in 🇫🇮) by doing our own national solution inside our eTendering platform that still complies with the Commission Data Model."

I don't know enough about the technology implications (hey, I could not code an "Hello World!" if my life depended on it!) but if I read correctly, there is still room for improvement both on the standard and even on national implementations if the standard does not offer the granularity required.

"A philosophical thought: in eTendering and when making the invitation to tender as structured data (I wish everyone would get rid of those darn PDFs) it is very easy to make each lot a separate call for tender. Why do we need this lot thing anymore? I think the main reason for using lots was the CAs laziness in paper world to provide separate piles of paper for each call for tender. But in electronic form is just copy-paste and changing information in the few places where it varies between lots. Or actually this can and should be done even without copy-paste as one call for tender can act as master to all others."

That's a very good point and drives home the message that lots are in reality no more than smaller contracts which could be disaggregated if it wasn't for the current "bundle up everything up as much as possible" mantra. What you have highlighted here is a permanence of the previous paradigm irrespective of the technological change that was introduced. We used PDFs and not structured data because doing it in plain text is what we have been doing so far in paper. Even the PDF is a representation of the paper we used before!

Remember when in the 90s the internet was referred to "cyberspace" (still is in the criminal area...) and we would "surf" the internet as one surfs the waves? Those metaphors are quite useful of describing the new world for a transition period from technology A to technology B. It can be quick or slow. For example, we still refer to car power in "horsepower," but at least that metric is not present in electric cars!


"- ESPD and other entities: (relied or not relied on): when discussing the version 2.0.0 it was decided to use term 'entity' in meaning of both relied on other companies and those that are not relied on. So the version 2.0.0 no longer uses term subcontractor but talks about entities relied on and entities not relied on. Tricky!"

Well, if that is the case then we are bound for some confusion down the line. Any idea on the rationale to use the same term to describe two very clearly distinct underlying concepts?


"- Commission ESPD Service: I would like to see the Commission ESPD Service to be shut down soonest possible. It contains too many errors, particularly translation errors, that using it may causes also legal problems if a country has not transposed the Directives 'as is' but has done some 'gold plating'. The Commission should maintain the ESPD data model and require the Member States to comply with it in their national solutions (build inside eTendering solutions). Further, the ESPD Service is written in 'the Commission English' or 'the Commission Portuguese" that is very alien to sales reps in companies - especially SMEs. Can you imagine them understanding what 'entity relied upon' means! Also, the Commission has indicated that it would like to shut down the ESPD Service in 2019 by which time all countries and suppliers of eTendering solutions should have implemented their own ESPDs. At the moment I do not see this happening and the big MS have done little to implement national ESPDs that would comply with the commission data model."

Whether we like it or not, the Commission ESPD service is fundamental at this time since the Commission guessed (correctly) that Member States would not do their home work in time for the transposition of the Directives even if they made use of the extension for electronic procurement until 2018. Upon reflection, I think you are right however that by making the service available for longer than needed will reduce the incentive for Member States to actually implement the ESPD on their national systems. After all, why spending money if the canonical version is available for free?

An alternative would be instead to keep it going for the foreseeable future, keeping it sync with updates to the underlying data model and working out its kinks. You correctly highlighted one: language. The more inaccessible language is, the more SMEs will be turned off from participating in public procurement. This is an area of interest to me and one I hope to work in the future. Had not considered to do so within the context of an ESPD, but perhaps that would be an interesting angle.

"- Costs related to ESPD: while it is true and I do agree and support reducing transactions costs related to bidding, everything that is 'won' by introducing ESPD is lost with the need for awarded supplier to present the except of criminal records. This is an arising issue at last in the Nordic countries. Let me give a real life example: the Directive requires the self-declaration to be replaced by official documents - in this case excerpt of criminal records. With the 2004 Directive we only requested these documents If we had a hunch that something fishy is taking place (as professional buyers we are pretty good 😊 in detecting this kind of foul play. Often we can smell it when opening the bids). Now we need to get this damned criminal records excerpt from numerous persons and we have no idea who should present us their records. We had a case that included awarded suppliers for Finland, Denmark and the UK. We searched far and wide (eCertis was of little help) what we should request from the supplier and its relied on partners. Finland was easy for us, somehow also Denmark but the UK proved difficult as we found out that there was no criminal records database and self- declaration (that we already had in ESPD) would be the only thing we'd get from the 🇬🇧. Now, this puts suppliers in unequal ground: Finnish supplier needed to present us some 20 excerpts of criminal records each costing 12 € + the company criminal record costing 22€. I do not know what the Danish costs were but the UK relied on company only needed to provide us one piece of paper stating the all persons (see the exact wording for the Directive) involved do not have entries in criminal records. In an other case we had a FA where we needed to see some 200+ persons criminal records. It took nearly two months to get these as some people were away and could not request their except online. In many countries there are serious data protection and privacy issues with the criminal records."

Let's unpack this: self-declaration is different from providing documentary evidence afterwards. By internalising the cost in the contracting authority it forces the contracting authority to consider which information to request and also from which economic operators. If you use the open procedure, there is no obligation for you to check the information of all economic operators and you can simply check the information of the winner. Therefore you will be simply incurring in the transaction cost for one economic operator instead of all of them. Why do you need to check that information from everyone? What is the added value?

The inequality you mention was already present in some Member States that required criminal records. Portugal and Spain would traditionally ask for those certificates in each tender although Portugal switched to self-declaration with information checking of the winner only in 2009. By asking for evidence only from the winner you are negating that unequal treatment: costs of certificates are different in all Member States the same way corporate tax rates or minimum wages are (and we don't consider those as being a source of unequal treatment).

It is true that the final bit of Article 57(1) is too broad by demanding checking the information from administrative(?), management, supervisory bodies or those individuals with powers of representation, decision or control. It would be preferable to have restricted that to management and those with powers of representation, decision or control relevant for that contract. That is not the case and so, another reason to simply ask those certificates from the winners. Having said that, I would argue that on a de minimis principle,  there is reason to interpret the requirement as for those involved in the tender at least for those with powers of representation, decision or control.

As for who is going to be more affected by this measure: clearly bigger economic operators with complex governance structures will face higher costs. They will also adapt more quickly to those requirements. SMEs will have more difficulty if those requirements were not already common in the country and yet again that is a reason to interpret the requirements in the lightest way possible.

One final word for eCertis: yes it is not useful today because there is no information in there - a classical chicken and egg situation. eCertis is subject to Metcalfe's law, as its usefulness grows proportionally to the square of the nodes (data sources in this case) present. It can be useful in the future if everyone pulls their weight instead of waiting for the others to do their bit.

Unintended consequences of using procurement as a compliance tool

About 10 days ago I gave a presentation at the CEVIA conference in Copenhagen (slides here)on how public procurement in the EU was slowly but surely being transformed into a compliance tool or enforcement system for policy objectives. 

As it happens I have also just published a paper on the ESPD* and how it internalises in the contracting authority the compliance cost which until now had been pushed out to the market via the requirement of presenting documentary evidence. Collecting all those documents and information, turns out, is not free as perhaps contracting authorities would have thought.

Today, Hansel - the Finnish Central Purchasing Body - published a blogpost aptly entitled Sometimes I feel like I am Sherlock, which included the following section:

Where it was assured that the ESPD would reduce the amount of attachments, it also included a brand-new requirement derived from the directive. As a part of the mandatory exclusion grounds set for the tenderers, they must ensure that the tendering business or any person who is a member of its administrative, management or supervisory body or has powers of representation, decision or control therein been the subject of a conviction on crimes such as corruption, fraud, terrorism and child labor etc. The contracting authority must also check the criminal records of such people from the tenderer which has been selected as a supplier. At this stage I wanted to cry a bit.

Are we becoming the procurement police?

I understand that this is an important feature. It would be nasty if the public sector would fund criminal operations through procurements. But what I don’t understand is why is checking these things the responsibility of the contracting authorities? How does making procurement units Sherlocks help the EU to reduce the black market? Do we not have any other means to prevent criminals from operating businesses’ in general?

I have completed many tender processes now where the ESPD and its requirements have been in use. The checking of the criminal records requires skills in Finland. The process consumes resources from both the private and public sector operators. The businesses’ must first ask permission in writing to retrieve the records from all the people involved. The records cannot be copied or sent via regular email. The contracting authorities can only check the records, but they can’t restore them anywhere. The records should be either destroyed, or returned to the sender. Due to the complex nature of this process, the tenderers are starting to prefer a visit the contracting authority to show the original records physically instead of exploiting the benefits of digitalization.

The rest of the entry is self-recommended but touches rightly on the nerve of the unintended consequences arising from making procurement a bona fides enforcement proxy and lack of consideration for transaction costs. We, the procurement police.

 

*Will give out SSRN link as soon as paper is up on there.

Episode #29 of the PPP with Suvi Taponen is available

I have just uploaded the last episode of 2016 for the Public Procurement Podcast. This time the interview is with Suvi Taponen, Doctoral Researcher at Aalto University School of Business, who also works as a Procurement Consultant. She will defend her thesis entitled ‘Improving the efficiency of public service delivery through outsourcing and management’ in the beginning of 2017, and she has worked previously at Hansel, the Finnish centralised purchasing body.