Thoughts on the European Commission's Strategy to deepen the internal market

The Commission put out last week its strategy for a Deeper and Fairer Internal Market. Part of it is dedicated to public procurement and Albert commented on it here, pointing out the collusion risks of contract registers (which I do not subscribe entirely) and the perennial language problems in cross-border procurement (which I do agree with).

But there is more to drill out of the Commission's strategy. In my view, the focus on compliance is overstated. Most countries transpose the Directives on time and by and large compliance with EU requirements is ok, so that is not really the problem. The focus should have been instead on literally deepening the internal market for public procurement. It is time for the Commission to show some initiative in this area and solve the problem posed by the thresholds. I have a paper precisely about this coming out in the near future, explaining how they came about 40 years ago and how they are now effectively defined by the EU's external commitments with the GPA.

Today, due to the thresholds, only around 18% of public procurement spend is covered by the EU Directives, with the rest subject only to national rules. Well, not "only" national rules as if the contract has cross-border interest, then the Treaty principles of non-discrimination and transparency should be respected. As I wrote back in 2013, that is pretty much impossible to establish in advance and the Court has spent 15 years trying to solve the problem on a case-by-case approach.

There is another reason to deepen the internal market: digital services. By definition, digital services are cross-border (or at least they are not pry to the same transaction costs as other services) and tend to be cheaper than normal services. The vast, vast majority of digital services will come well below the current thresholds. This is for me a critical reason to review them in the near future, as if we do not do so, the digital services internal market will be as "complete" as the regular one.

As for the language issues, well Google translate is getting better and maybe Skype Translator will be the real deal.

Court of Auditors is unhappy with public procurement in EU funded projects

Widespread problems persist in the way public authorities across the EU contract out work, according to a new report from the European Court of Auditors. Even though the European Commission and the Member States have started to address the problem, there is still a long way to go, say the Auditors. If the situation has not improved by the end of next year, 2016, they recommend that 2014-20 payments to the Member States concerned should be suspended. 

The Court of Auditors put out a report after analysing the procurement practice in projects carried out in the Czech Republic, Italy, Spain and the United Kingdom funded with EU money. The Court found a litany of mistakes and bad procurement with errors detected in 40% of procurement procedures which affected competition and transparency. Apparently some contracts were awarded not to the best "bidders". Surely this was a slip up by whomever wrote the press release as one is supposed to award the contract based on the quality of the bid, not the bidder...

While I cannot say I am surprised by the results, there are quite a few caveats to be made here based on my own experience in EU funded projects:

1. Requirements are more demanding than either the Directives, Public Contracts Regulations or internal organisation. You are usually requested to go out to tender at values much lower than the EU thresholds and while I am in favour of a wholesale reduction of thresholds, this is a reminder of the pitfalls arising from a piece meal approach.

2. Practice may be poorer than normal (is it really?!) as usually the people doing the procurement have limited procurement experience and certainly limited procurement experience with "EU-level" procedures. That tells us as well of the importance to design low friction procedures with reduced transaction and opportunity costs for lower contracts. Like these ones.

3. It does not help each funder has its own specific procurement guidelines. How many times can you re-invent the wheel? But it tells millions that procurers whinge and whine against having to follow different procurement guidelines imposed by different funders but see no problem in having their "own" procurement guidelines/practice different from all other contracting authorities. In one case it is called "ad hoc procurement", in the other "flexible or bespoke procurement".

4. Data is bad everywhere in procurement and is not limited to EU-funded projects. I am glad to see the Court of Auditors banging the same drum on this.

5. If auditors want to find problems, they will find problems. I have seen some really **** (sorry, picky) auditors which were effectively looking for problems where there were none. I suspect if all are that thorough then they will indeed spot problems in many situations. That 40% number is incredible.

PS: Here's the actual report.

 

 

Improving public procurement is not rocket science

I have had this opinion for a number of years. As we move to procurement systems where new features target "advanced" users (innovation partnership & competitive procedure with negotiation, I am looking at you) we forget how much low hanging fruit still exists in public procurement waiting to be picked.

Allow me to illustrate the point. 4 years ago I set out to improve public procurement practice for contracts with a value below-thresholds. Low value, low risk contracts, constituting the bread and butter of procurement as we know it. If you're so inclined, you can find all the outputs here (non-academic publications tab).

What crazy ideas did I come up with?

  • A one page summary with key information for a supplier to go/no go decision
  • Getting rid of the selection stage, replacing it with a self-declaration
  • Vetting and Getting rid of all unnecessary questions
  • Simplifying remaining questions
  • Imposing word limits
  • Tight(er) deadlines & turnaround
  • Using e-procurement

Really small and incremental changes, hardly the stuff of science fiction. Furthermore, I cannot really claim that anything in this list is entirely new. I am sure other people have done variations of the theme in other settings. What I had was time to think about improvements to procurement procedures as well as a mandate to push them through in a couple of pilots in Wales. There was another fundamental difference, one of emphasis: I was starting with the "job to be done" objective in mind. What is procurement supposed to achieve? What is the end result we want to have after the contract is performed? Contrary to what some of my colleagues may think, procurement (like lawyering) is not an end in itself, but simply a tool to achieve an end. With that frameset in mind, ending up with those ideas was obvious. That they all constituted low hanging fruit was a welcome bonus.

It surprised me back in 2012/13 when the pilots were being run was seeing procurement officers (and ancillary functions) really happy with the end results. They were spending less time per procedure than the alternatives and focused on the stuff that really mattered. Turns out that getting rid of the cruft made their work easier too. That level of buy in was not expected.

Fast forward a few years and yesterday I came across these new ideas by the Government Digital Service on Creating simpler, clearer contracts for the Digital Services framework:

  • Making contracts simpler
  • Top level summaries
  • Open and transparent contracts
  • More digital, less documentation

In a different guise, we are both aiming for the same kind of changes albeit with a much bigger potential impact this time around. If rolled out, these small changes to procurement practice, can have a much bigger impact in making procurement more accessible for SMEs/third sector suppliers than centrally mandated objectives or even regulation. Regular readers know how seldom I prefer guidance/practice info over cold, hard legal regulations. But here it just makes sense.

I have not been shy criticising the Government for failing to come up with real simple ways for contracts below-thresholds to be awarded. The Government did not fully understand the "job to be done" PQQs had for contracting authorities (barrier to procurement) nor was able to communicate effectively how to procure differently. Credit where its due, this time around they are on the right track.

Furthermore, they're doing it in a way that is very close to my heart. Using a multidisciplinary team approach really helps this kind of work. This is a (well) informed guess: without a whiteboard and the hard work of Carmarthenshire County Council's procurement team (Alan, Gemma, Claire et all) those ideas would have never gone into the whiteboard at all. Nor would the pilots have been successful.

PS: The downside of improving practice bit by bit (instead of regulation) is that some more entrepreneurial spirits will ride your coattails and butcher the methodology, keeping with the previous practice while claiming to fully support the new ideas. Not fun.

EDIT: What was done in Wales is such low hanging fruit that the Aragon Government created a similar simplified open procedure in 2011 which has been included in the draft national legislation transposing Directive 2014/24/EU.

 

Public Contracts Regulations 2015 - Regulation 112

Regulation 112 - Publication of information on Contracts Finder about contracts awarded

Regulation 112 caps Chapter 8 with a set of rules on how contracting authorities are to publish contract award information on Contracts Finder. As we are talking about below-thresholds contracts, the obligation this is a purely national obligation. As for the information that needs to be uploaded, it is fairly similar to what is required in Regulation 108 with a significant addition. Under Regulation 112, contracting authorities have to disclose if the contractor is an SME or VCSE.

There is no confusion on what constitutes an SME as paragraph 4 refers to the definitions on Commission Recommendation of 6 May 2003. As for what constitutes a VCSE, this is the first time I encounter this acronym which apparently stands for "voluntary, community and social enterprise". Paragraph 4 defines VCSE as "a non-governmental organisation that is value-driven and which principally reinvests its surpluses to further social, environmental or cultural objectives." Would it not be simpler to just refer to third-sector organisations? Or charities (although this is a more restricted definition)?

The usual restrictions on disclosing information (impeding law enforcement, affecting legitimate commercial interests or fair competition) which we have seen before are applicable here as well. 

Finally, guidance issued by the Minister for the Cabinet Office shall be regarded but there is no obligation to provide explanations or reports to the Minister in case it is not followed.

Public Contracts Regulations 2015 - Regulations 110

Regulation 110 - Publication of contract opportunities on Contracts Finder

This Regulation establishes the obligation for contracting authorities to publish contract award opportunities on Contracts Finder, in addition to any other advertising means they may find appropriate. If the contracting authority does indeed use any other advertising means, the required information has to go on Contracts Finder within 24 hours of said publication (paragraph 3). Note that this regulation applies to any contract award opportunity (paragraph 6) and not to a more restricted definition such as contract notice. In consequence, even prospective information which would be considered as a prior information notice had it been covered by Part 2, is deemed an opportunity for the purposes of this Regulation (paragraph 7).  

Paragraph 5 defines what constitutes an advertisement of an opportunity. Anything activity that puts the contract opportunity out on the public domain or that targets a class of economic operators (i.e., a trade journal, Linkedin group etc) constitutes an advertisement and triggers the obligation to advertise on Contracts Finder and needs to be advertised for a non-disproportionate period of time (paragraph 9). On the other hand, if the information is passed to only a number of economic operators which have been selected for that purpose, then no advertisement is carried out and there is no obligation to upload the information to Contracts Finder. The textbook example here are framework agreements, singled out explicitly in paragraph 5(b).

As for what information should go on Contracts Finder, paragraph 8 sets the following requirements:

(a)the time by which any interested economic operator must respond if it wishes to be considered;

(b)how and to whom such an economic operator is to respond; and

(c)any other requirements for participating in the procurement.

The advertisement obligation covers also free and unrestricted access to any relevant documents (paragraph 12 and 15) and the whole period of the opportunity, so details cannot be taken out of Contracts Finder before the deadline (paragraphs 10 and 11). There are some exceptions to paragraph 12's disclosure obligation on paragraphs 13 and 14, namely if "relevant reasons" as conceived by Regulation 53(3) and (4) are applicable.

 

Finally, as with some previous regulations, according to paragraph 16, contracting authorities "shall have regard to any guidance" which the Minister for the Cabinet Office may decide to issue. This "compliance" obligation only covers guidance related to the form and manner of the publication on Contracts Finder and the definition of what is a non-disproportionate period of time for the opportunity to stay available on the website. 

Public Contracts Regulations 2015 - Regulation 109

Regulation 109 - Scope of Chapter 8

This Regulation defines the scope of Chapter 8 which applies to contracts with a value below the thresholds of Regulation 5. This chapter is particularly important as it constitutes the first time contracts below-thresholds are subject to regulations. As such, the rules contained within Chapter 8 are purely national.

Most of the Regulation deals with exceptions to the coverage rules as not all contracts excluded from application of Part 2 are subject to Chapter 8. Contracts that would not be covered for reasons other than value are not included for example. Contracts with a value below £10,000 are also excluded.

There are also exceptions dependant on the contracting authority and the contract value. As such, contracts valued at less than £25,000 and awarded by the NHS or a sub-central contracting authority are not covered either. The NHS benefits from another derogation, as the procurement of health care services for the purposes of the NHS as defined by National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013(1) are excluded as well.

Finally, Regulations 110 and 112 are not applicable when the contracting authority is a maintained school or an Academy.

Public Contracts Regulations 2015 - Regulation 76

Regulation 76 - Principles of awarding contracts

Regulation 76* introduces a number of rules, nay principles, applicable to the contracts that are awarded under this new "light touch regime" of Section 7. By and large the logic of the Regulation is to provide a basic framework leaving a lot of flexibility for contracting authorities to decide how they want to award the contract. In this Regulation we trade (more) flexibility for (less) legal certainty. We trade as well standardisation for customisation. Time will tell if this emphasis in flexibility will bring about better procurement in the contracts covered. I remain sceptical and not optimistic.

Before reading my entry, check Albert's one from yesterday where he nails in the head the errors in transposition which I do not cover here.

For contracts awarded under this section, contracting authorities need to comply with the principles of transparency and equal-treatment/non-discrimination. This is similar to what happens already for contracts with a value below-thresholds and cross-border interest. The difference are the ancillary rules applicable to the Section 7 contracts.

Paragraphs 3 and 4 establish a number of ancillary rules which make the whole system more complex than it needed be for a light touch regime, that is. According to paragraph 3, if a contract or PIN notice were used as required by Regulation 75, then the contracting authority is bound to conduct the procurement in accordance with the information published in the notice regarding the conditions of participation, time limits and award procedure. The problem is paragraph 4.

Paragraph 4 introduces exceptions and loopholes to the above rules - sorry, principles - bringing about layers of complexity to the system. Under this paragraph, contracting authorities may change the "rules of the game" as long as the changes comply with certain cumulative requirements. They cannot amount to a breach of the principles of transparency and equal treatment/non-discrimination (paragraph 4(a)). To ensure there is no breach of said principles, the contracting authority needs to "give due consideration to the matter", document the decision making process and inform the suppliers of the outcome. The administrative lawyer in me looks in glee to these rules as they are a textbook example of what is expected of public bodies to carry out in any administrative decision. Oh, the irony. I am sure that this "painting by numbers" guide to administrative decisions would have been helpful to the Environment Protection Agency...

Having said the above, I am not sure on how a contracting authority can change the terms of procedure after the notice has been published without violating the principle of transparency. Perhaps this is just a small concession to those small mistakes that are corrected quickly after being detected? If so then indeed this is a little flexibility being introduced here at least in traditionally more formalistic countries like Portugal, Spain or Italy (Note: Before I get hammered in the comments, I am thinking about the Directive here and not the Regulations).

The principle of proportionality is used in this Regulation, in addition to the principles of transparency and equal-treatment/non-discrimination. According to paragraph 6 all time limits imposed on economic operators need to be "reasonable and proportionate". Courts and lawyers are going to have a field day with this one.

Paragraph 7 explicitly allows contracting authorities to either design new procedures from scratch or to adapt the ones that already exist in any way or form that they may see fit. What I think will happen here is that contracting authorities will either "scale up" the procedures they already use below-thresholds (RFQ type of procedures) or scale down the traditional procedures. By scaling down I essentially mean "shortening time limits" because we all know how fundamental those detailed PQQs are. As for the people waiting to see a breadth of new excellent procurement practices arising from this flexibility I think you are too optimistic. If flexibility was the key ingredient for incredible procurement practice, contracts below-thresholds would have provided plenty of evidence by now.

When I read paragraph 8 for the first time I was puzzled and unsure if I should laugh or grin. Paragraph 8 is essentially a laundry list of statements of intentions:

"(8) In relation to the award of contracts subject to this Section, contracting authorities may take into account any relevant considerations, including —

(a)the need to ensure quality, continuity, accessibility, affordability, availability and comprehensiveness of the services;

(b)the specific needs of different categories of users, including disadvantaged and vulnerable groups;

(c)the involvement and empowerment of users; and

(d)innovation."

I could not make this up. All procurement processes should start with the users/beneficiaries and the objectives that need to be met and then work backwards to define what is the best way to achieve the outcome. That this does not happen more often is (again) a problem of practice and not rules.

My problem with paragraph 8 is that it has nothing to do with the bulk of the Regulation. They are not principles of awarding contracts, they are "pie in the sky" nice things some people would like to happen.  It looks out of place here but would be perfect as a Recital. If you doubt my analysis read again the first sentence of the paragraph and check which modal verb is being used: may or shall.

* Apologies for the late entry. I managed to lose my draft halfway yesterday evening when the laptop ran out of battery. Picture cartoon like donkey's ears and that is pretty much how I felt.