New paper: The European Single Procurement Document

This paper will show that the European Single Procurement Document (ESPD) introduced by Directive 2014/24/EU and Commission Implementing Regulation 2016/07 constitutes a paradigm shift on how public procurement procedures are run in the EU and one with unintended consequences. Before its introduction, each economic operator wishing to take part in a public procurement procedure had to submit all qualifying information at the start of the procedure. This mean incurring in transaction costs that are certain to have the opportunity of an uncertain benefit: winning the contract. The ESPD alters the balance of power (and costs) by replacing the full documentation requirement with a simple self-declaration form, aiming for a reduction in transaction costs and the removal of a barrier to the participation of economic operators in public procurement procedures. It is unclear if in reality its use will amount to savings in transaction costs or if those will actually increase and if the change in incentives may lead to more strategic non-compliance by economic operators and reduced legal compliance by contracting authorities, which may be tempted to overlook at least minor shortcomings by winning bidders.

The paper is published on the most recent issue of Upphandlingsrättslig Tidskrift journal.

Brussels cannot "freeze Britain out of EU contracts"

The Financial Times ran a piece yesterday arguing a Commission internal memo contains instructions for: "[w]here legally possible, the commission and its agencies will be expected in all activities to “take account” of the fact that Britain may be “a third country” within two years, including in appointing staff and in awarding billions of euros of direct contracts for research projects or services." I had not problem calling out some wrongheaded and/or illegal suggestions on this side of the Brexit divide. In the interests of fairness (and equal treatment) I have no problem doing the same for the EU-side as this is another example of what I call the unravelling of EU law compliance on the run up to Brexit.

While it is true the UK triggered Art. 50, triggering the process does not affect any rights or obligations for the UK until its departure from the Union occurs and vice-versa. That is, for all intents and purposes the UK is as much a Member State today as it was on March 28th and entitled to not be discriminated against. Furthermore, the jury is still out if the Art. 50 process itself is reversible.

And yet, yesterday's news makes for uncomfortable reading. Albert pointed out on his commentary to this memo that both the Member State and the EU Institutions are subject to Art. 2 TEU and the rule of law. The fact that such a basic feature of the system needs to be pointed out (correctly) is a very worrying sign.

In this sense the (EU) law is simple: until the UK effectively departs the EU, nothing changes and UK-based economic operators cannot be discriminated against (either at tenders conducted by EU Institutions or in other Member States). If they are, they would have clear grounds to call for judicial review of the award decision.

On a related note, I recall a leading (British) academic privately arguing non-compliance with rules that are subsequently changed should go unpunished (in the context of the UK non-compliance with some EU procurement rules that were changed afterwards). Coming from a civil law background such cavalier interpretation to legal obligations/rule of law has always puzzled me. I shall keep an eye to see if said colleague's opinion has evolved now that it directly affects UK economic operators.

Some thoughts on two years of podcasting

I wrapped up the second season of the Public Procurement Podcast last week with a special episode where the guest was yours truly, interviewed by Albert-Sanchez Graells about contracts below-thresholds, centralisation of procurement and Brexit. After 32 episodes, it is time for a look back to these two years of podcasting. Before that, a heartfelt thank you to all interviewees and to the British Academy which made the PPP possible.

 

1. There's a big market out there for audio content

It was a pleasant surprise for me to see the size of the market for podcasts on a niche topic like public procurement. The PPP averaged 2,000 hits to the podcast feed which translates in a decent number of downloads every month - how decent it's impossible to say as SquareSpace's podcast analytics are quite poor. As for visits to the website itself, the average is 200-250/month around one third of this blog. Again, not too shabby for a side project.

I suspect one of the reasons for the continued increase in the number of downloads and visits to the Public Procurement Podcast is the network effect arising from the promotion of each episode's guest. Even with overlap, each interviewee had a slightly different network and on the long run that helps growing the audience for the show. 

Another reason for the good audience numbers (particularly the website itself) is due to publication in full of interview transcripts. It really helps with search engines like Google.

 

2. Podcasting leads to unexpected benefits

For me, podcasting provides a number of tangible benefits. First, it increases my network of professional contacts and keeps me up-to-date with developments not only in my field but also associated areas. In these times of "interdisciplinary research or perish" those contacts may be very helpful on the long run.  

Second, it allows for serendipity to occur. It is no surprise then, that from the podcast/ECR conference came out a fully fledged research project that was submitted for funding 3 weeks ago - composed exclusively by Early Career Researchers as defined by the British Academy. 

In addition, I am collaborating with some of my interviewees on research ideas and submitted an expression of interest for a large grant which benefited from the advice and help from a current holder of a grant from that programme.

 

3. Securing interviews is still the hard part

I have been running podcasts (on and off) since 2008 and one of the things that has not changed is the difficulty in securing interviews and get them done. Finding time from busy people when you're busy yourself is quite complicated. It does not help that my personal situation changed significantly in the last 13 months or so. A baby in the house meant no office and the likelihood of unexpected disruption as we all saw a couple of weeks ago live on the BBC.

 "Why don't you do them on your office in the University?" That would have worked if not for the jet engine noise of the building's AC, which sits right outside my window. A room averaging 70-72db is not conducive to audio recordings.

If there is something I would have liked to do have done differently is to get a research assistance to secure the interviews and manage the interview slots as that took a lot more of my time than I had anticipated. Lesson learned!

 

4. Technology has made it easier than the past, but there's room for improvement

As for the recording of the actual interviews, technology has improved significantly since I started almost a decade ago. We're on the cusp of being able to record just with a web browser and a microphone using services like Zencastr and even the editing/post-processing can be mostly automated. But we're not there just yet and those browser based solutions do not work with mobile devices such as iPhones or iPads. If and when that happens then most technical difficulties will really be abstracted away.

 

5. What's next for the PPP?

For now, the PPP is on ice. On the one hand, I have mostly drained the pool of Early Career Researchers working in public procurement and interested/available to be interviewed. A few interviews fell to the wayside for multiple reasons (see 2 above), but not enough to warrant a new season.

Having said all that, there are a couple alternatives worth exploring. One, would be to secure some "no strings attached" funding so that I could interview a broader swathe of people. I suspect £1,000-1,500 would be enough to record another 12 episode season, which at one per month ensures a steady drip of new content. If you're interested in sponsoring, drop me a line.

The second option is more grant based funding. As it happens, the PPP was included for funding on a larger project so we may end up having a special series with a few (3/4) episodes a year about that particular project. Time will tell.

 

 

 

Commission politely asks 15 Member States to transpose Procurement Directives

The European Commission sent reasoned opinions to 15 EU countries, requesting them to fully transpose one or more of the 3 new directives on public procurement and concessions into national law (namely, Directives 2014/23/EC, 2014/24/EC and 2014/25/EC). The countries concerned are: Austria (3 directives), Belgium (3), Bulgaria (1), Croatia (3), Cyprus (2), Estonia (3), Finland (3), Ireland (1), Latvia (3), Lithuania (3), Luxembourg (3), Portugal (3), Slovenia (1), Spain (3) and Sweden (3).
— http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.cfm?item_id=9057

Frankly, I find it incredible that almost 3 years after the Directives were published more than half the Member States are yet to transpose them fully. Plus, 11 Member States are yet to transpose a single Directive.

I wonder how many are aware of direct effect and indirect effect of many provisions in those Directives.

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. 

Episode #28 of the PPP with Baudouin Heuninckx is available

The next instalment of the Public Procurement Podcast is up, this time a relaxed conversation with my good friend Baudouin Heuninckx, Chief Counsel of the Belgian Armed Forces Procurement Division and a part-time academic at the University of Nottingham and also the Belgian Royal Military Academy. He has just published a book on defence procurement as of November 2016 entitled The Law of Collaborative Defence Procurement in the European Union.  

Full commentary to the Public Contracts Regulations 2015 is now available

The full version of the Commentary to the Public Contracts Regulations 2015 done by myself and Dr. Albert Sanchez-Graells is now available at www.pcr2015.uk. We consolidated the original separate entries from our blogs in a single comment to each of the 122 provisions of the Public Contracts Regulations 2015 as amended by the Public Procurement (Amendments, Repeals and Revocations) Regulations 2016.

We plan to update it as time goes on and the need for clarification arises, so if you do not agree with us or have any queries feel free to engage with us in the comments box for each entry.

Feel free to use it, all we ask is for it to be cited as such. Proposed citation: Albert Sanchez-Graells & Pedro Telles, (2016) Commentary to the Public Contracts Regulations 2015, available at: www.pcr2015.uk.

A big thank you to the Society of Legal Scholars without whose generous support we would not have been able to do the project.

Open consultation Supplier standard for digital and technology service providers

Programmes like ‘Government as a Platform’ mean we’re moving away from long-term, large-scale contracts towards more flexible, digital, agile and transparent interactions focused on joint delivery.

The supplier standard for digital and technology service providers describes our expectations of, and commitments to, the technology companies we’ll need to work with to make this approach successful.

The six guiding principles of this proposed new approach are:

  1. User needs first.
  2. Data is a public asset.
  3. Services built on open standards and reusable components.
  4. Simple, clear, fast transactions.
  5. Ongoing engagement.
  6. Transparent contracting.

Personally I am in favour of these guiding principles as a pathway to improve public procurement although I am cagey on the ongoing engagement as it will be an easy way fr supplier with preferential access to influence the procurement decision making outside of a formal procedure.

Links I Liked [Public Procurement]

1. Belgian Govt. approves procurement of software to track down terrorists. Gosh I would love to see the tender specifications for this one. Was it an output/outcomes based spec? Or did Belgium just accidentally acquired Twitter?

2. Albert kickstarts a big thinking discussion about what procurement should look like. I have a couple of ideas on this as well. As I said last year at the Global Revolution conference in Nottingham, our current system was designed on (and for) an analog world. It has aged as well as BladeRunner's imagination of 2015.

3. House of Commons Library publishes its view on Brexit implications for public procurement.

4. UK Government has a 6 point plan to open up the market for suppliers of all sizes. I for one, welcome any measure which lowers transaction costs for all participants in public procurement. I am worried however about 'continuing engagement.' In any case, the Guidance document is here and the public consultation open for the next three months. 

5. Michael Bowsher mentioned earlier this week at the Catolica Summer School, the recent case of EnergySolutions vs Nuclear Decommission Authority, where the contracting authority took conscious steps to render its decision-making process non-auditable. It is a very long judgment, but a great read.

Links I Liked [Public Procurement]

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

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

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

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

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

Food for thought, competition and procurement edition

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

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

Links I Liked [Public Procurement]

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

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

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

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

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

Some thoughts about Bulgaria's law demanding open source software

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

Art 58 of the E-Government Act states that:

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

(Translation via Google Translate)

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

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

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

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

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

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

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

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