My new paper about direct awards in Portugal is out

This happened last week but completely forgot to mention it here. My most recent paper about the use of direct awards (negotiated procedure without notice) in Portugal is out in the newest number of the e-Publica journal. Here's the abstract:

The Portuguese Revised Public Contracts Code misses an opportunity to change the paradigm of how public contracts valued at below EU thresholds are awarded. This paper argues that the changes for low value contracts, where the direct award was replaced for some contracts by the prior consultation procedure (request for quotes) amount to little more than window dressing. This is problematic since 90.2% of all public contracts in Portugal are awarded via direct award, meaning 47.9% all public procurement expenditure is not subject to transparency. As the lack of transparency in low value public contracts is associated with procurement risks such as corruption, strategic behaviour by contracting authorities and bidders or lack of accountability, it is apparent the recent public procurement reform did not really address the behaviours behind these risks.
Portugal could have instead improved transparency in low value contracts by adapting already existing provisions within its legal framework, or following the footsteps of the Public Contracts Regulations 2015 (England and Wales) and the Draft Public Sector Contracts Law (Spain) which introduced significant transparency reforms for low value contracts. Although, there is room for improvement on these, either solution would have provided a marked improvement in the regulation of low value public contracts in Portugal.

The full PDF is available on the usual place (SSRN) but also on the e-Publica website as well.

IRS awards $7M fraud-prevention contract to Equifax

The no-bid contract, which pays $7.25 million, is listed as a “sole source” acquisition, meaning the IRS has determined Equifax is the only business capable of providing this service—despite its involvement in potentially one of the most damaging data breaches in recent memory.

By now my opinion about single source/direct award/request for quote(s) contracts should be well known to regular readers. This is yet another example of a decisions which may have been the correct one (or maybe not) but just by using a non-transparent procedure it can look terrible.

The contract itself is available here.

More from Politico:

The IRS defended its decision in a statement, saying that Equifax told the agency that none of its data was involved in the breach and that Equifax already provides similar services to the IRS under a previous contract.

”Following an internal review and an on-site visit with Equifax, the IRS believes the service Equifax provided does not pose a risk to IRS data or systems,” the statement reads. “At this time, we have seen no indications of tax fraud related to the Equifax breach, but we will continue to closely monitor the situation.”

Equifax did not respond to requests for comment.






Lisbon City Council and direct awards of public works in Portugal

One of Portugal's top newspapers investigated the direct award of a €5.179.873,44 public works project by the Lisbon City Council to Teixeira Duarte, one of the largest construction companies in the country. The piece is an example of how direct award (negotiated procedure without competition or notice) is wrongly used and abused in the country. The contract covered works to repair/sustain the Miradouro de Sao Pedro de Alcantara, one of the many scenic viewpoints in the city which is alleged to be in risk of collapse.

The Council claims the urgency of the works required the contract to be awarded quickly, therefore justifying the need to award the contract directly and without competition. Needless to say, this is an exceptional use of direct award and the material justification is supposed to reflect such exceptionality. Herein lies part of the problem: that specific reason to use the direct award procedure does not appear to comply with the requirements for its use.

The Miradouro de Sao Pedro de Alcantara has been monitored since 2006, with a detailed study carried out in 2016 so there is no factor external to the Council justifying the use of the direct award procedure. In other words, if it became urgent to repair the Miradouro its because the Council did not act as quickly as it should and created itself the situation of urgency (i.e., an internal reason for the urgency). By itself, this amounts to poor management at the very least, since the detailed report was handed to the Council in December 2016 and the decision to award the contract directly taken in May, on the same date another company was commissioned to prepare the works project. And surely by coincidence it is the same exact consultancy which produced the 2016 report. The works contract itself was signed only on July 4th, again raising the question of what 'urgent' really means in the context of this contract.

But it gets worse. It appears the National Civil Engineering Lab produced an opinion sustaining that the intervention was not urgent, contradicting the consultants' view from 2016.

Without seeing the actual decision and the arguments produced by the Council, I frankly cannot accept at face value that it was a clear cut case of urgency which would justify the use of this 'exceptional' approach to procurement. 

There is, unfortunately even more to this case. According to the newspaper piece, it seems the works contract covers not only the repairs on the wall (i.e., the 'urgent' bit) but also the works at the surface. Using the contract available on it is impossible to confirm this information. However, if true those works (~€1,000,000) were not strictly needed and therefore not urgent at all. They could (and should) have been subject to the regular public procurement rules in the country.

One final note for the value of contract: €5.179.873,44. The current EU financial thresholds for public works are €5.225.000 and until January 2016 they were €5.186.000. There* is a growing body of evidence that contracts valued close to the thresholds are more likely to have been manipulated and are associated with corruption risks.

PS: I will be publishing soon a paper about the excessive use of direct award in Portugal. Will link it here when it happens.


*Thanks for pointing out the typo Domingos :)


Public Contracts Regulations 2015 - Regulation 32

Regulation 32 - Negotiated procedure without prior publication

In the previous legal regime the negotiated procedure was divided into procedures with or without publication. The old negotiated procedure with publication has been effectively upgraded to competitive procedure with negotiation we analysed in Regulation 29. In Regulation 32 we can find the rules regulating the negotiated procedure without prior publication instead.

As argued by Albert earlier today, Regulation 32 transposes Directive 2014/24/EU Article 32 by reshuffling the paragraph or section order but without really changing the content significantly. This procedure is still an exceptional procedure, to be used only in the specific circumstances set for by Regulation 32, and the whole draft emphasises this exceptional nature. Personally, I think that the grounds for use should have been included in Regulation 26 and do not understand neither the cross-reference of Article 26(6) to Article 32, nor the idea of including most but not all grounds for use in Regulation 26. For consistency sake, it would have been preferable for all grounds for use for all procedures to be in the same place (Regulation 26/Article 26) or with each procedure.

In general, the negotiated procedure can be used in case of preceding failure by a more transparent procedure or more substantive grounds: urgency, production of art, lack of competition for technical reasons or protection of intellectual property rights. Except for the first case, all others require a bullet proof justification by the contracting authority that this procedure needs to be used and not any other. It is tempting for contracting authorities to claim lack of competition or protection of intellectual property rights (particularly if a competitive dialogue or innovation partnership were used successfully in the past), but as Albert cautioned, please check the Fastweb case (C-19/13) for the Court of Justice's view on the use of this procedure.

Sections 5, 7 and 9 extend the grounds for use of the procedure to other situations such as additional deliveries of supplies (maximum of three years), after design contests or additional works and services that are similar to the original one (maximum of three years). They do not provide particular difficulty as they were already included in the 2006 version of the contract regulations albeit they are now much clearer and easier to understand. Regulation 16 of the Public Contracts Regulations 2006 was convoluted to say the least.

How do you run the procedure itself?

Well, that is for contracting authorities to find out by themselves. Regulation 32 contains a grand total of 0 words about running the procedure. Just remember that the principles of transparency, equal treatment and non-discrimination are still applicable.