National Audit Office publishes report on Brexit consultancy expenditure

Well, it looks like today is transparency day in the blog as the NAO has just published a report on the spend by Central Government with consultants for Brexit related matters. Predictably it makes for grim reading and here’s a bit of the press release (the final paragraph):

The NAO found that departments have not met the standards of transparency expected by government when publishing details of contracts for EU Exit consultancy. In December 2017, the Crown Commercial Service issued guidance to encourage greater transparency in government procurement. It recommended that departments publish basic information about the award of contracts within 90 calendar days. However, the NAO found that it has taken on average 119 days for basic details of EU Exit consultancy contracts to be published, compared to 82 days for all consultancy contracts. The NAO also found that in its review of contracts for EU Exit consultancy that some had not been published as recommended, and all that had been published were significantly redacted.


That’s one well buried lede.


Brexit and public procurement: new working paper

Myself and Albert have just made available on SSRN a new working paper on Brexit and public procurement, focused mostly on the transition agreement. As usual, we welcome comments and criticism.

Here's the abstract:

On 29 March 2017, the UK notified its intention of leaving the EU. This activated the two-year disconnection period foreseen in Article 50 TEU, thus resulting in a default Brexit at the end of March 2019. The firming up of a draft agreement on a transition period to run until 31 December 2020 can now provide a longer timescale for the Brexit disconnection, as well as some clarity on the process of disentanglement of the UK’s and EU’s legal systems. The draft transition agreement of 19 March 2018 provides explicit rules on public procurement bound to regulate ‘internal’ procurement trade between the UK and the EU for a period of over 15 months. However, the uncertainty concerning the future EU-UK relationship remains, and the draft agreement does not provide any indication on the likely legal architecture for future EU-UK trade, including through public procurement. The draft agreement has thus not suppressed the risk of a ‘cliff-edge’ disconnection post-Brexit, but rather solely deferred it. The transition is currently not into an alternative system of procurement regulation, but rather into the void. There have also been very limited developments concerning the UK’s and EU’s repositioning within the World Trade Organisation Government Procurement Agreement (WTO GPA), which creates additional legal uncertainty from the perspective of ‘external’ trade in procurement markets due to the absence of a ‘WTO rules’ default applicable to public procurement.

Against the backdrop of this legal uncertainty, this paper critically assesses the implications for public procurement of the March 2018 draft transition agreement. In particular, the paper identifies three shortcomings that would have required explicit regulation: first, the (maybe inadvertent) exclusion from the scope of coverage of the of the draft transition agreement of procurement carried out by the EU Institutions themselves; second, the continued enforcement of the rules on contract modification and termination; and third, the interaction between procurement and other rules. The paper also and flags up some of the areas for future EU-UK collaboration that require further attention. The paper then goes on to revisit the continued uncertainty concerning the EU’s and UK’s position within the WTO GPA. It concludes that it is in both the UK’s and the EU’s interest to reach a future EU-UK FTA that ensures continued collaboration and crystallises current compliance with EU rules, and to build on it to reach a jointly negotiated solution vis-a-vis the rest of WTO GPA parties.

Timely reminder public procurement rules still apply in the UK

It seems Gemalto, a French company has won the contract to produce the UK passports post-Brexit. FT has the scoop:


"Gemalto, a security company based in Paris, is expected to win a tender process ahead of the UK’s De La Rue, one person briefed on the decision said. De La Rue currently holds the contract for producing UK passports, worth £490m over 10 years.

Both the Sun and Daily Telegraph newspapers reported the news on Wednesday evening. Bill Cash, a pro-Brexit MP, said the decision was “incongruous to say the least” and “symbolically completely wrong”.

“The irony is unreal,” said Eloise Todd, chief executive of Best for Britain, the anti-Brexit campaign group.

The Home Office said the procurement process was ongoing, adding: “We do not require passports to be manufactured in the UK. A proportion of blank passport books are currently manufactured overseas, and there are no security or operational reasons why this would not continue.” "

While the UK is inside the EU (transition included) EU public procurement rules and general principles remain applicable. And there's no irony in that.

Updated Draft Agreement on the UK's withdrawal from the EU [Public Procurement]

The Commission published on March 19th a revised Draft Agreement on the UK's withdrawal from the EU, conveniently colour coded green, yellow and white to denote different levels of agreement between the parties. Green means the text has been agreed but is still subject to technical legal revision, yellow that the policy objective has been agreed upon but drafting changes are still required and white that no agreement has been reached yet.

As regards public procurement (Arts 71 to 74 of the Draft Agreement), the situation is as follows:

Article 71 - Green

Article 72 - All green except paragraph 2.

Article 73 - Yellow

Article 74 - Green

It seems that in what regards to public procurement, progress is being made in reaching an agreement. No major changes are visible to any of the articles in comparison with the original draft from a few weeks ago. As I said in the meanwhile, I find it odd that EU procurement rules will apply only until the procurement procedure is finalised, but not to the contract performance, thus meaning Articles 70 to 73 of Directive 2014/24/EU won't be applicable. Unfortunately, the draft remains unchanged in this point and the parties have accepted it (Draft Agreement Article 72(1) and (4)).

As for Article 72(2) where no agreement has been reached, I am puzzled as for the reasons why. Since Article 72(1) establishes the application of secondary rules to ongoing public procurement procedures, paragraph 2 only re-iterates the applicability of the principle of non-discrimination to the same set of procedures. That is the logical contextual reading of Articles 72(1) and 71 (which includes the definition of relevant rules). Another reading, however, would allow the extension of the principle of non-discrimination to contracts not covered by Article 71, that is contracts not-covered by the Directives: ie, those today subject only to the (horrible) certain cross-border interest. As I said, my guess is that those have been excluded from the scope of application of the Withdrawal Agreement via Article 71, but perhaps the definition of this scope is where the parties are yet to reach an agreement.

The only area where only policy agreement has been achieved is Article 73 pertaining to the Remedies Directives (Directives 89/665/EEC and 92/13/EEC). This can be understood in the negotiation context of the UK not wanting to be subject to the jurisdiction of the Court of Justice. This is, however, speculation on my part. 

The Commission's 6 strategic priorities for public procurement policy

Continuing the short game of procurement tennis with Albert Sanchez-Graells on the Commission's Communication Making Public Procurement work in and for Europe COM(2017) 572 today I will be talking about the Commission's 6 strategic priorities for public procurement policy. These are:

  • Ensuring wider uptake of strategic public procurement
  • Professionalising public buyers
  • Improving access to procurement markets
  • Increasing transparency, integrity and better data
  • Boosting the digital transformation of procurement; and
  • Cooperating to procure together.

Albert's comments on these priorities can be found here. He went for the catchy trumpesque title, whereas I went for the more listicle like one. Our views, are fairly similar in most of the priorities and I am happy he picked up on my earlier bugbear of the choice of language and lack of precision in the terminology used. He made some very critical remarks on the Commission's introduction and picked up an underlying trend (visible in other areas) of using procurement to achieve industrial policy goals. That objective is orthogonal to the idea of a single market in procurement: we achieve either one or the other, but not both at the same time. Plus, I would refer readers once more to the mounting body of evidence that buying national simply does not work

Albert's assessment of the Commission's example of "best practice" in innovative cross-border procurement (section 2) is brutal, but fair. Too much "practice" is passing off as "best practice" simply because someone somewhere says so and in absence of any evidence to back up the claim. It reminds me of a comment I felt compelled to make once to someone who is now a DG Director and was unfortunate enough to mention about a decade ago the Vasco Da Gama bridge in Lisbon as a leading example of PPP/PFI, soon after the Portuguese Audit Court published a review criticising the 15 contract amendments and extensions which always left the economic operator better off.

Ensuring wider uptake of strategic public procurement

The Commission starts by clamouring for more strategic public procurement. Albert claims, correctly (once more) that there is zero empirical evidence to justify this objective. As far as I can tell this "ambition" remains firmly grounded in the world of "policy goals" that do not have a solid reason for it. Why is it desirable? Will it leaves all better off?

My view (as well as Albert's) is that some strategic public procurement can be compatible with the single market, thus leaving us better off. This is mostly the green procurement part, since I have long accepted that internalising the true cost of pollution leads to a more complete single market than one that ignores such cost. Innovative procurement can also be compatible with the internal market but on a different basis. It is possible for procurement to function as a lead buyer for innovative products and services, but having said that those will always be the exception and never the rule for day to day expenditure (just the OJEU for innovation partnerships...). All in all, they may lead to more complex (expensive) procurement processes and also more expensive goods and services, but as long as they do internalise externalities or lead to products/services that otherwise would not exist I see them as fundamentally compatible with the single market (in this I depart slightly from Albert's reservations about higher cost while agreeing on the possible downsides for SMEs). Oh, and the amendment to the Clean Vehicles Directive 2009/33/EC could not come quick enough, but its remit is much wider than public procurement.

The problem lies with social considerations as strategic objectives. These range from the wooly to those that appear to be common sense (ie, demanding wages above the minimum wage or imposing one's minimum wage on other countries workers) or even those that are down right protectionist (demanding local labour/apprenticeships). These tend to be an anathema towards the objectives of the single market which remains (at this moment in time) at the core of the Union. I won't even talk (for now) about the exporting of European labour standards to third countries and what that does to both EU consumers and those producers, but Dani Rodrik does on his new book (p.229 I'm told!). But my worries about the growing compliance culture in procurement can be found here

Professionalising public buyers

Most of our views about this priority can be found in the first entry to this procurement tennis match (here and here). There is however an important angle we omitted the first time around. By asking for the professionalisation of public buyers the Commission indirectly recognises that procurement is today difficult and complex - thus requiring the said professionalisation and specialisation in some instances as well. 

Should we not be aiming for the opposite then? Making procurement so simple that it actually does not require that much specialist knowledge?* After all our phones today are mightly complex but said complexity is abstracted away for the benefit of the user. This goes hand in hand with my usual analogy that procurement rules are just like operating systems. And the one we use has really old roots.

*no, I'm not thinking about principles and negative obligations like in the 60s to be the solution.

Improving access to procurement markets

I share Albert's disappointment with this part of the communication. It reads (again) as a general enunciation of ideas that lack coherence or fit.

This is one of the most disappointing aspects of the October 2017 Communication. The Commission indicates that improving access to procurement is mainly geared "to increase the SME share of public procurement in line with their overall weight in the economy", in particular "in view of promoting more cross-border procurement". However, the only specific actions mentioned by the Commission concern (i) the Remedies Directive (and, specifically, its criticisable decision not to review it, see here and here), (ii) the initiative on third country access to EU procurement markets (see here), and (iii) a sectorial initiative to increase SME participation in defence and security contracts. This is puzzling. 

While those initiatives can have some effect on increasing SME access to procurement markets, they are unlikely to facilitate a step change. Much more is needed in terms of guidance and best practice on facilitating SME access to procurement domestically and in an EU cross-border context (which the Commission should undertake), and there are obvious limitations derived from the cost of having the administrative (and language!) capacity needed to export. In that regard, the proposals in the Communication do not even brush the surface of what could be done at EU-level--starting with practical guidelines on how to maximise the advantages derived from the fact that, in the Commission's own terms, "[t]he 2014 directives include measures that should facilitate the access of companies including SMEs to public procurement, also cross-border". It would certainly be helpful for the Commission to flesh that view out in more detail.

But there is more to criticise on that quote. The Commission claims we need to increase the share of SME spend in line with their overall weight in the economy, but earlier in the document it was claimed SMEs win 45% of the aggregate value of contracts above the EU thresholds. According to the OECD the added value of SMEs in advanced economies lies between 50 and 60%, so we are not exactly a magnitude away *and that is only for contracts above the EU thresholds* which are not really small or SME friendly anyway. As the Commission is worried about SME cross-border success rates (rightly so) is it proposing to lower the thresholds or remove the non-tariff trade barriers on lower contracts? No such thing is to be found in the document though.

The Commission could (but has not) made the point to justify the increase by including only those situations where SMEs have won by themselves or in a consortium a given bidder. It has, however, decided to include in the 45% figure also sub-contracting. Sub-contracting does not really have much to do with procurement rules or (practice) since main contractors are free to decide who they want to contract with and crucially how they want to spend their contract money. So in reality the figure of SME participation rate in public procurement may effectively be much lower - but we are left in the dark by the use of a questionable statistical method by the Commission.

There are some other questionable points about SMEs and public procurement. There is no explanation why it is desirable or better to have more SMEs tendering (and therefore, increasing their transaction and opportunity costs). It appears an article of faith that more SMEs tendering is simply better but without taking into account the tradeoffs it entails.

The Commission also claims that remedies are important for SMEs, but that could be argued about any sort of economic operator taking part in public procurement. Furthermore, if they are so important maybe the Commission should have taken the opportunity to review the Remedies Directive as well.

The Commission revisits as well in this section its ongoing battle with international cross-border procurement and third country access. I do not see how the words included here ("restoring a level-playing field is more than ever necessary") make any significant difference. More so, bearing in mind the poor level of direct cross-border procurement within the single market, maybe discussions about third country access will make the Commission lose the forest for the trees. 

But all that is low level hanging fruit. There is no spark, or transformational initiative that could really make a significant difference in cross-border procurement. Here's a few:

  • What about creating a set of procurement INCOTERMS that would make it easier for economic operators to understand the obligations arising from the contract? If we have CPV codes why can't we have INCOTERMS for procurement obligations as well?
  • What about solving the issue of different contract performance regimes? Only larger economic operators can actually invest in having subsidiaries (or access to legal teams in another country) to justify the legal risks arising from contract performance. Why are we not seeing a clear pathway to harmonising public contracts rules?
  • What about language issues? Is it a coincidence that most cross-border public procurement is literally cross-border or between Member States sharing a language? Ironically the Commission flags up language as potential issue on cross-border cooperation in procurement, but not in regular procurement activity...

Increasing transparency, integrity and better data

The Commission is right that making more procurement data available is a step in the right direction and will propose the adoption of new e-forms, ie standard public procurement forms. Nothing is earth shattering new about this and it can be useful as long as the data is kept on a machine readable format and available with permissive licenses. Like, for instance the Open Contracting Data Standard which is absent from any reference...

The suggestion of mandatory public registers is in my view the correct one, but the Commission stops short of solving the biggest issue behind this idea. After all, sending contract data to the OJEU is already mandatory, it is at the compliance level that reality its the proverbial skids. There is a simple way (for contracting authorities that is) to ensure compliance: ensuring that whatever system is used to make the purchased is connected to a central system capturing the information automatically. As each country is essentially developing its own standards and approaches to electronic procurement this is sadly a pipe dream for now and - yet again - a missed opportunity to make real progress.

I do not agree that Directive 2014/24/EU has strengthened the provisions on conflicts of interest, but precisely the opposite of making it clearly legal economic operators can take part in the process even if they help out drafting the technical specifications. It remains to be seen if I am wrong about this...

The Commission is also correct in its conclusion that more data allows for collusion to be more easily spotted. That is true, since it is akin to keeping urine samples from the Olympics to re-test in the future as more advanced tests are developed. The opposite is true as well for markets where collusion is advanced. By making the data public cartel members will be tempted to develop collusive techniques that either do not show up in the data or that show in ways the enforcers have not spotted yet. Solve for the (new) equilibrium as they say...

In addition, for all the references to use more and better data, the Communication is fairly light in providing empirical data to sustain any of its proposed solutions...

Boosting the digital transformation of procurement

This is a particularly disappointing section. The Commission is correct when it states that the benefits of electronic procurement will only be reaped when the whole process undergoes a digital transformation...which means? Not much if one trusts this section. The actual solutions provided by the Commission are simply re-hashes of previous initiatives such as the Single Digital Gateway or the European services e-card. And not a word about the roll-out of the ESPD and its teething problems...

Which is a shame since integrating different systems and processes digitally can really make a difference. I think the Commission should be looking at integrated cross-border payment systems for inspiration on how the process could be re-organised in a way that functions across multiple jurisdictions. Once more, I think we should be looking at how the private sectors solves its own cross-border transaction issues.

There is also no indication the Commission understands how digital services are different from regular services and how those by definition should always be part of the single market, irrespective of their value.

Cooperating to procure together

The final section cover cross-border cooperation in procurement and exemplifies yet again the Commission interest in looking to the accessory at the expense of the principal. Cross-border cooperation in procurement will remain a niche area and one that needs significant prior work before it can justify this kind of attention. I will defer to Albert's comments about the lack of legal certainty arising from this idea.

The wooly language used doesn't help the Commission's case: 'Their [CPBs] role in the standardisation of public procurement processes and market insight also represents a key element for the professionalisation of public administrations and it enables SME-friendly procedures.' Right.

In other words, we should be solving other more pressing problems (cross-border procurement in general) before spending time with vanity projects. In a way, this is no different from all the bruah about procurement of innovation (hey, innovation partnerships, competitive procedure and competitive dialogue I'm looking at you) at the expense of the day-to-day operations in procurement. There is a lot more that needs to be done for 99% of the procurement projects *before* we should spend time on the 1%.

Appendix

Going through the Appendix I was surprised to see some suggestions that were not mentioned at all in the main body of the Communication, leaving us in the dark of what they may actually refer to.

For example, on section 3 (improving access to procurement markets) the Commission will apparently "launch pilots to boost SME participation via business intermediaries and innovation brokers" whatever that means.

On section 6 (cooperating to procure together) another pilot on SME-firendly policies in Central Purchasing Bodies, whatever that may be.

All in all, a missed opportunity.

Information security needs to be taken seriously in public procurement

Good article on the Local Government Lawyer about information security:

Information security encompasses the strategies for managing the processes, tools and policies to prevent, identify, document, and counter threats to both digital and non-digital information. Procurement practitioners must be aware of the potential risks of information breaches in their day-to-day business. The nature of public procurement demands that measures to protect information security are an integral part of the process throughout the cycle of the procurement, including at the point of service delivery. The handling of sensitive information and the sharing of information with suppliers makes the topic a key concern for procurement officials. Information at risk includes:

bid information;
financial information;
organisation information, such as intellectual property; and
service user information.

That is all true, but the problem of information security/management is not valid for the duration of the procurement procedure only. It is valid for contract performance as well, something that as we saw a few weeks ago with the NHS ransomware attack is not really taken into account today.

The procurement angle behind the NHS ransomware attack

Last week's (and today's?) ransomware attack on the NHS has a procurement angle to it. It is not the only one and maybe not the most important but procurement mattered nonetheless. Here's why:

1. Vendor lock-in

All compromised computers ran either Windows XP (unsupported) or more recent versions that have not been patched up to fix the vulnerability. There maybe very good reasons for both situations, such as critical systems depending on software available only for Windows XP; medical devices only having drivers for Windows XP; uncertainty if patching would create problems elsewhere.

Those are all valid reasons to have both XP and more modern unpatched computers. They are, however, a good example of what happens when public sector falls prey to vendor lock-in. By throwing its lot with Microsoft and equipment vendors that only support a legacy OS like XP, the NHS is no longer in full control of its decision making. It cannot decide when to patch, what to patch or when to ask another supplier to step in and help solve any problems. The NHS is at the mercy of those external players which do not have their interests aligned. Microsoft wants to sell Windows 10 copies, medical device vendors want to sell more modern machines. Even if medical device vendors have support contracts for their equipment, those may not include software updates (remember Windows XP is 15 years old) or it may not be technically feasible to update the software on those devices to make it compatible with newer versions of Windows.

I have long harped about the risks arising from possible vendor lock in on innovation contracts, but current lock in is surely a lot more important in practice. In addition, last week's attack is also another example of the risks of accepting commercial secrecy as a given in public contracts.

2. The XP support contract

Microsoft stopped Windows XP mainstream support in 2014, and started charging organisations significantly sums of money to keep issuing patches for XP with consultancy/service contracts. The UK Government had a £5.5M contract with Microsoft for a year of support:

“We have made an agreement with the Crown Commercial Service to provide eligible UK public-sector organisations with the ability to download security updates to Windows XP, Office 2003 and Exchange 2003 for one year until 8 April 2015,” said a Microsoft spokesperson.

The UK's custom support agreement was not renewed or extended in April 2015, perhaps due to the costs involved: allegedly Microsoft double the cost from $200/machine to $400/machine and perhaps the UK Government was unable to negotiate a reduction on unit costs. Perhaps they even did not know how many computers in the public sector needed patching, making any negotiation difficult. As a comparison, the US Navy was paying Microsoft $9.1M for support until July 2016 and the extension for 2017 would have increased the cost once more.

From April 2015 onwards, all UK public sector XP machines became proverbial sitting ducks. The magnitude of the problem for the NHS was known since September 2016, when the Motherboard published an article based on a FoI request:

Motherboard has found that at least 42 National Health Service (NHS) trusts in England are still using the Windows XP operating system, with many of them confirming that they no longer receive security updates for the software. Legal experts say that the NHS hospitals may be in breach of data protection regulations.

As it happens the attack hit between 40 and 48 NHS trusts in England and I am sure that is not a coincidence. I suspect there is a significant overlap between those that were still using XP in September 2016 and the trusts hit last week.

I am not a data protection expert but would not be surprised if those Trusts were in violation of their obligations and remain less than assured about personal medical data having been stolen not in this attack but by others exploiting the same vulnerability since it was disclose over a month ago.

3. (Dis)Organisation and competing priorities

The final procurement angle is one of disorganisation and competing priorities. Having a decentralised health system in a day and age where IT is becoming more complex (and expensive) to manage well is a disaster (or two) waiting to happen. Procurement itself is becoming ever more complex - partly because of rules, partly because of bolt on policies, partly because of what is being procured is becoming more complex as well - and those two should dictate a move to a more centralised model.

I am not claiming that centralisation would magically solve the problems (funding would remain an issue) but that at least makes it possible to have somewhere the necessary expertise to do procurement and IT well. As it stands we expect each and all NHS trust to have that (and more) expertise on tap at any given moment. Since complexity is just going to increase (smart medical devices anyone?) the future looks grim.

Finally, time and time again I have seen IT managers pleading for resources to secure networks and/or upgrade/test their equipment. It is always a tough sell as the key decision makers simply do not understand the risks and what is at stake, preferring instead t allocate resources to priorities they understand and where they understand risk/consequences. Maybe on the NHS that will change going forward.

PS: A bit of perspective is important though. Let's not forget that those institutions have been victims of an attack, which may well constitute a criminal activity. If we should not blame victims of other crimes, the same standard should apply to the institutions involved on this.

New comparative report on separate operational units is out

Kirsi-Maria Halonen has written an excellent report for the Swedish Competition Authority on the the issue of separate operational units and how they work in different jurisdictions:

In Swedish legal literature the definitions of contracting authorities and separate operational units have often been misunderstood to be synonyms. It has been submitted that in the context of public procurement rules these separate operational units would also be separate contracting authorities. This approach seems to be contradictory to the European Commission’s views as well as views presented in the Swedish legislative proposal (Prop. 2015/16:195). According to the above- mentioned Commission’s policy guidelines the separate operational units are part of a contracting entity, not contracting entities as such. In addition, the wording of Art. 5 (2) of Directive 2014/24 clearly states that units are not contracting authorities but rather a part of it.

A difference between the concepts of a contracting authority and of a separate operational unit should be made - aggregation rules apply within the same contracting authority, but not among different contracting authorities unless such contracting authorities have decided to run a joint contract award procedure.

Full report available for download here.

Procurement conferences in the horizon

There's a few procurement related conferences coming up in the next few months:

1. Procurement Week 2017 - London, March 21-23

2. Procurement beyond price: Sustainability and CSR in public purchasing (Copenhagen, May 4th and 5th)

3. Global Revolution VIII - Nottingham, June 12-13

I will be chairing a session on transport for Procurement Week 2017 and delivering a paper on the compliance implications of social considerations for the Copenhagen one.

Is public procurement becoming less competitive in the EU?

Excellent article on The Economist:

Governments use competitive bidding in procurement both to obtain the best service for the lowest price, and to prevent cronyism and graft. The fewer the bids, the higher the risk of bid-rigging, says Mihaly Fazekas, a corruption expert at Cambridge University. Single-bid contracts are the worst, but even a drop from eight bidders to four increases the risk of collusion. Experts see the drop in the number of bidders per tender as a worrying sign.

Great plug for Mihaly Fazekas and Spend Network on the article.

Shame the piece only focus on contracts above thresholds, which as mentioned in some of the graphs only represent about 26% of all EU procurement spend. Whatever is happening beneath the surface is surely not better.

Debunking Vote Leave procurement "misconceptions"

Last month, Vote Leave came up with some "new research" on the terrible, terrible plight inflicted by EU procurement rules on UK contracting authorities (well, those of England, Wales and Northern Ireland I suppose). Colin Cram put out a very polite rebute in The Guardian earlier this week, but I think a firmer answer is in order.

Here's Vote Leave claims:

EU public procurement law imposes extremely onerous requirements on public authorities, which can apply regardless of the value of a contract and/or whether any tenderers are from outside the UK. The Government pledged to change this, but EU procurement law remains unaffected by the renegotiation.

Right. I don't even know where to start. Are some features of the rules onerous, yes particularly if your own processes are lacking. If you already have good internal processes then the rules are not that onerous. Same claim could be laid against any project management standards. The fact they are more onerous than the alternative "roll your own, every time you want to tender" creates a degree of uniformity, standardisation and legal security. By and large they do not enable great procurement - but that is not why they exist in the first place. Their primordial job is to prevent really bad procurement. Not only the corruption kind of it, but just plain lack of knowledge.

Does EU public procurement law apply "regardless of the value of a contract and/or whether any tenderers are from outside the UK." Lie. It does apply to all contracts above the thresholds (ie, depends on value) and below-thresholds only the Treaty principles (equal treatment, non-discrimination) apply and *only* to contracts where there is a certain cross-border interest. That needs to be determined in advance of course as otherwise Vote Leave would be suggesting defining what is the applicable law after the fact. I have written extensively about this problem here and here.

It is true that EU procurement law remains unaffected by the negotiation, but as Colin Cram rightly points out the current procurement Directives have the UK's fingerprint all over them. Plus, Michael Gove was a minister in the Government who transposed Directive 2014/24/EU into the Public Contracts Regulations 2015 in a rush...

 

EU public procurement law imposes an annual cost of at least £1.69 billion to the taxpayer. This is five times what is spent on the NHS Cancer Drugs Fund, 34 times what is spent on the Government’s dedicated Pothole Action Fund, or enough to pay for 273,000 basic state pensions.

Apparently £1.69 billion is the average yearly cost of running procurement procedures in the UK between by taking the 0.7% expenditure rate calculated by this PwC study from 2011 and applying it to all years. If spending 0.7% of the contract value in the procedure is a bad outcome (due to those, onerous, onerous rules) I would like to know how Vote Leave would magically make procurement processes be free. Are they suggesting them being done by a commune of volunteers? A third sector organisation working for the greater good? There is no such thing as free unicorns in the procurement sky...

 

Between 2010 and 2014, EU public procurement legislation imposed costs of at least £8.4 billion in real terms on the taxpayer. This is three times what will be spent on flood defences in England between 2015 and 2021, six times the cost of the new Queensferry Crossing in Scotland, or enough to build 25 new hospitals.
It is also possible to calculate the delays to the execution of public contracts caused by procurement rules. A 2011 study for the European Commission found that the mean length of time between the tendering of a contract and its award in the UK was 193 days, longer than every member state other than Greece and Malta

One has to wonder however if Vote Leave is the proverbial bad carpenter blaming his tools. Every time I hear "the rules do not allow me to do it" there is usually a lack of capacity (or willingness to take risk) from the people involved. It is so much easier to blame the rules instead.

I love the claim about the slowness of procurement in the UK in comparison with the EU average. If the rules are the same (or similar) across the EU, whose fault is it if the UK practice is so below average? How can the other countries do better with the same sets of rules?

Let's talk about two UK examples of practice: restricted procedure and competitive dialogue.

Under Directive 2014/24/EU (as with its predecessor Directive 2004/18/EC) the open and restricted procedure are the standard procedures which may be used alternatively for any procurement process. It is up for the contracting authorities to decide which one to use. The restricted procedure allows contracting authorities to reduce the number of economic operators before the tender stage by making them go through a pre-qualification questionnaire which allows it to select the ones to invite forward. Until recently, the only Member State in the EU which used more the the restricted procedure than the open procedure. Now, the restricted procedure by definition is longer than the open procedure (which can now be reduced to a single stage). No surprise then the UK is a laggard in "procedure race" with the average procedure lasting 120 working days, 53 more than Germany. The situation got so bad the last Government (yes, the one where Mr. Gove was a minister) decided to clamp down on the use of pre-qualification questionnaires and by definition the restricted procedure as well.

Competitive dialogue is another good example. Under the 2004 Directive, it was supposed to be used only if certain grounds were met. It was not a standard procedure, but lo and behold again the UK decided to use it very often. So often that in 2012 the previous Government decided to ban its use, throwing the baby out with the bath water. While the competitive dialogue was being widely used, a "good practice" developed of racing towards identifying the preferred bidder and then having negotiations with said economic operator with no one else in the frame. Again, I have written at length about the limitations of this approach (clawing back of concessions, longer procedures, etc) here.

 

‘If we Vote Leave we can scrap the EU’s foolish rules on how Whitehall runs procurement processes which add billions to the cost of Government every year. I’ve experienced firsthand in the Department for Education how these rules add significant operational costs and generate expensive delays to construction projects. Across Whitehall, there are billions to save after we Vote Leave.’

Michael Gove is really channelling the bad carpenter here. Gosh, he really does not like equal treatment, non discrimination and standardised procurement rules. Much better to allow each contracting authority to just tailor the procedure to their needs and pick up a couple of "random" economic operators it trusts to bid for the contract. What could possibly go wrong in the Govean view of procurement nirvana? By the way, was it the rules fault that led to the G4S 2012 Olympics scandal? Or the Serco one? Or the West Coast mainline fiasco? Just imagine how much worse procurement would get without the safety net afforded by the current rules.

The elephant in the room is that most procurement spend actually happens below the thresholds where EU Member States are pretty much free to do whatever they want. (Sketchy) data from 2010 indicated that over 80% of EU procurement spend occurred below thresholds. Slightly sketchy data from Portugal puts the figure at 50% but probably this figure is under represented.

So where is the magnificent regulation the UK can today have without interference of that pesky EU law Directive? In Sections 109 to 112 of the Public Contracts Regulations 2015 and in countless guidance and policy documents available on the Government's website. Easy as pie to follow.

As for his diatribe against the "EU's foolish rules", remember, it was the Coalition Government that:

i) negotiated the current round of Directives;

ii) implemented them by copying and pasting way too quickly the Directive 2014/24/EU into national law (to the point the Public Contract Regulations have already been amended);

The irony here is that Directives set the objectives and it is up for the Member States to decide how to best achieve them. I concede the point that Directive 2014/24/EU is particularly detailed but there is always scope to tweak the rules. But hey, that takes time, knowledge and risk taking. Much easier to kick those difficult decisions to the long grass of judicial review, guidance and policy notes.

Some good procurement events on the horizon

1. Procurement Week Bootcamp in Bangor next week (09-10 June)

2. VIIth International Conference  Contracts, Procurement, and Public-Private Arrangements, Paris June 14th and 15th. Price unknown and hat tip to Piotr for the mention.

3. Taking stock of NHS governance after the 2013 reforms: Public procurement... Albert is running another free event in Bristol. Another one I need to register for.

4. 1st Global Procurement Conference in Rome, July 4th and 5th. Very interesting programme and speaker line up. It appears to be free.

5. Public Procurement Summer School – II Edition, Catholic University Porto September 5th to 8th. Once again I will be part of the programme, this time only on the international strand. Registration for the International Strand costs a very reasonable €210.

6. 3rd Interdisciplinary Symposium on Public Procurement, Belgrade September 28th-30th. I am very much looking forward to this one where I'll be the "legal" rapporteur on localism, one of my pet topics.

More than enough to keep us busy over the Summer!