On the purposes of public procurement rules in the EU

I found this paragraph on a recent decision by the CJEU (Case C-264/18):

24      According to the Court’s settled case-law, the purpose of coordinating, at European Union level, the procedures for the award of public contracts is to eliminate barriers to the freedom to provide services and goods and therefore protect the interests of traders established in a Member State who wish to offer goods or services to contracting authorities established in another Member State (see, to that effect, the judgment of 13 November 2007, Commission v Ireland, C‑507/03, EU:C:2007:676, paragraph 27 and the case-law cited).

I would dispute the merits of the procedural focus, but other than that this statement is spot on. Procedures are coordinated to reduce trade barriers, effectively meaning the use of Art. 114 as grounds for the Directive is perfectly correct.

On procurement conferences and unconferences

Yesterday I had the pleasure of taking part on my second ever procurement unconference. For those not aware of how unconferences work, these are events where the agenda is not defined in advance but only on the day by the participants who pitch sessions they would like to chair and work on. It is chaotic, but fun and thought provoking.

The opportunity cost of taking part in the Procurement Unconference meant of course I could not be elsewhere at the same time. In this case at another procurement conference happening about an hour and half away from London. The fact two very different events on procurement ocurred in the same day got me reflecting about my choice of one over the other. And frankly, there was never any dispute about which I would pick.

In the last few years I dialled back my participation in conferences - not for altruistic reasons like Albert - but mostly for personal, selfish reasons such as health (alluded multiple times here) or a preference to dedicate my time to other matters (like taking a certain three year old to the playground).

I'm now down to mostly two conferences a year. This year it was Opatija in Croatia in May and (hopefully) Rome next month where, for the first time I can remember I will be attending a conference without any engagement whatsoever in the programme. For once, I expect to enjoy a conference as a simple participant.

Circling back to the binary choice between those two events, as mentioned earlier, there was no real choice. I never applied to the conference nor had any interest on taking part on it, to the point I sent a message to a friend simply stating: "FOMO of Conference X? 0" . Why?

My reservation towards larger events (procurement or otherwise) has grown stronger over the years. I still feel there is a need for *some* events but certainly not the number and the scope we have consistenly seen over the last decade or so. I am fairly at ease speaking about this precisely because of my involvement in setting up and running Procurement Week between 2012 and 2015. They are an analog dissemination method in an increasingly digital world.

Larger conferences still have their place though. They are usually the only time in the year when we can see in person friends and colleagues. They may be the only opportunity to chase down that author/speaker you want to talk to for whatever reason. Plus, networking. In essence, that's it in my view. Social, not content as the main reason for a large conference.

As for the content, I find it a sub-optimal avenue to expose good content. If it is already published, people moan it is not original. If it is original, then a conference is not the place to share it (certainly if you are in the UK and want to survive the REF...). Honestly, aren't we beyond working in private in our ivory tower to then go to the unwashed masses and present our work for their adulation? I know that some strive in this environment, but usually not in my age group and certainly not in the younger crowd.

If I want to get my message out there, I will hit a lot more people with a blogpost or a podcast than I can ever achieve with a 15 minute talk at a 200 pax conference with 2 or 3 parallel tracks. It really is sub-optimal communication vehicle.

But I have a have long moved from reservations to a more stringent personal position regarding a specific type of conference which seems out of place in this day and age and that is "pay to play" conferences, those where speakers are expected to not only pay their way but also pay for the privilege of speaking. We're no longer in the 1990s where access to speaking outlets were few and far between. I reserve a special circle in my conference hell for those conferences "where all speakers pay"* but then you find out some are never asked to pay.

On this I have simply become unable to compromise and wish to make this commitment publicly.

I do have a preference for non-commercial events, but recognise that there is still scope for commercial conferences to be run and that we would be worse off if all of them disappeared. But if they are running on commercial terms, then they need to run on *full* commercial terms. And that means *paying* speakers instead of seeing them as another source of revenue. No speakers, no conference.

Back to the unconference then. What do I think it is special about these type of events? For one they are smaller and self-selecting. Only the people that want to participate are there and reallistically there is not room for passengers just to simply sit and take in information without contributing. Now, if the event only attracts participants not interested in participating, the end result is predictable though.

Then, the agenda reflects the interests of the people taking part on the event and enough scope for you to literally vote with your feet and join another session. It makes for a more engaging day where your brain is teased and prodded and you have to think about issues or problems you would not have had otherwise.

And that, for me, is much more enjoyable and rewarding to be talking and learning than taking part in a succession of 15 minute monologues.

Plus, at least yesterday, the lunch was so much better than at any pay to play conference I ever attended. It just goes to show that with the righ attitude it is possible to run a great event where people are well treated and all that without shaking their pockets.

*Yes, more than one procurement conference is run on this basis.

Some thoughts about blockchain and public procurement

This past semester I have been teaching a module on blockchain and the law as part of our LLM in LegalTech. It is not directly about public procurement, but preparing classes forced me to organise my thoughts about the possible uses of blockchain overall. What I think about blockchain as a technology in general maps out quite well to public procurement too.

As a broad stroke, blockchain (permissionless or permissioned) cannot really compete in terms of efficiency with centralised or decentralised databases. The shared ledger approach of blockchain is simply too slow and (thus far) unable to scale to process transactions as efficiently as a database. In my view this makes it highly improbable that we will see blockchain replace existing technologies already deployed.

Its killer feature however is to provide a good enough technological solution where none is currently available. In other words, to do electronically what we have been unable to do at all thus far. For that, slowness and cumbersome may be good enough.

Where does this takes us in procurement then? Out of the top of my head to two areas. One I mentioned 4 years ago in this same blog (reputation mechanism - which I have to elaborate upon). More recently I have thought about another area where the current approach is lacking: cross-border technology.

Currently, each Member State is stuck on its own silo and even inside each Member State you have multiple non-communicating silos. I see a potential use for a (permissioned) blockchain solution is for this problem we are yet to solve. ESPD is a mess and e-Certis simply a 2010 mindset at attempting to solve the problem of sharing what is *public* information. How do we then 'integrate' multiple databases across multiple countries, preferably with a single codebase?

A centralised database with APIs for connection to the various national databases is always an option but then I look at TED which remains as, cumbersome and user (un)friendly as ever. It painfully shows its late 90s/early 2000s roots and mental models.

So what would we do with a magic blockchain solution to do away with the syncronization of information contained in the myriad databases?

We could force compatibility via APIs with a single blockchain maintained at EU level. Only the entities holding the information would be able to inscribe new data in the blocks. Ie, Companies Registries would sync company data, Criminal Registries criminal data, etc. This should be done automatically as new data is inscribed in the original database itself. In effect, all that boiler plate data that suppliers are expected to produce today or indicate the contracting authority where it can find it. Restricting writing permissions to the official entities holding the canonical data solves the oracle problem regarding data soundness.

Who could read the data included there then? Only each contracting authority in the context of a procurement procedure and *after* obtaining consent from the economic operator. This authorization could be limited in time/milestones for example. Another alternative might be a querying system whereby the contracting authority would query the blockchain if candidate X met certain conditions and all the blockchain would answer would be yes or no.

What this allows for is for the automation of what is still in 2019 a manual, menial job that does not really add value to procurement process. Yes, perhaps a database is a more efficient way of doing it but so far we have been unable to really iron the kinks of cross-border information management.

There are two important points I have not touched in this blogpost. The first compliance with GDPR - that needs a lot more thinking on my part and I'm simply not ready at the moment for such task.

The second the competencies of the Union to force Member States to change their administrative systems since this might fall under administrative rules where the competence of the Union is more limited than the general internal market competence. But then, the same could be said about the ESPD in itself.

First best practices are the worst practices

I do not remember well when I first came across with the 'best practices' concept. Maybe during my Ph.D or soon after starting working at Bangor. But back then I was already puzzled by it. What are 'best practices'? How and why are they considered to be 'best practices'? What are the the 'bad practices'?

Time went on but the fuzzyness remained: best practices this, best practices that, until I started to ignore the 'best' and simply reading them as 'practices'. The 'best' bit simply becoming another oddity of the English language. A non-threatening euphemism if you may.

I can no longer maintain such a relaxed view about the 'best practices' concept though. The reason for that being that it tends to ingrain early 'practices' as being the best way to get something done, as it happened in the UK with the cack handed approach to finish the dialogue stage on the competitive dialogue as quickly as possible and have in depth negotiations with the preferred bidder. Madness.

The issue of 'best practices' is particularly acute in public procurement. First, they're everywhere and any organisation loves to beat the drum that whatever it does is 'best practices', especially if no one else has claimed 'best practices' on that area before. It is like the wild west where you have to be the first to stake your claim which then stays unchallenged, leading to paralysis in the evolution of practices in a given area. Madness, once again.

Second, we do not really have appropriate measurement mechanisms in place. How do we now if a 'best practice' is a good practice at all? Empirical research in procurement remains limited and experimentalist research a pipe dream. Can we imagine if medical research (itself fraught with problems) simply adopted a 'best practices' claims approach instead of the scientific method? We are in the medieval bloodletting stage of applied/practical procurement research.

By definition decisions that may constitute 'best practices' involve choices and hierarchies of value. For something to be done in a way, other options have been discarded, leading to trade offs. However, when we read about 'best practices' we don't get to see or know what was not done and what trade offs the decisions entail. If you are not willing to talk about the downsides or trade offs you are not providing all the information necessary. In a field like public procurement which moves significant amounts of money this can be sub-optimal to say the least. First best practices are the worst practices.

How do we go about and change the state of affairs? I'm an experimentalist at heart and although I have resisted being drawn into it, the vortex pull is becoming ever stronger. As such, I'm *finally* starting to work in this area and putting some plans in place to work on this in the near future.

Launch of Buying Into the Future report

I’m delighted to be speaking on Friday at the launch of the Buying into the Future report by PUBLIC. I will be part of a panel on ‘How can Government do more to buy from startups and innovators?’ with Tanya Filer, Digital State Lead - Bennet Institute for Public Policy and Robyn Scott CEO of Apolitical.

The event will be held on Bird & Bird London Office from 09:00 to 12:30 and registration is free.

Department For Transport sued for *that* ferry contract

Eurotunnel is suing the Department for Transport due to the ferry contract(s) awarded back in December without proper tendering procedures. This turn of affairs is not really surprising and a logical consequence of the poor handling of those contracts.

The merits of the actual complaint, they appear obvious. In my opinion, the use of the negotiated procedure without prior publication based on the grounds for extreme urgency was not legal since said urgency arose from a lack of timely action by the Government. In other words, incompetence by the contracting authority is never a ground to use a non-transparent procedure. It has been public since March 2017 that the departure date from the Union is scheduled for 29 March 2019, therefore the lack of preparation for the consequences of the default scenario for such departure (no-deal Brexit) runs from that moment as well and is not unforeseen (or unforeseeable). This is pretty much well established at EU level and probably one of the reasons why the rules about contract notice transparency are as draconian as they are.

As Albert and myself said back in 2016 about Regulation 32(2), the negotiated procedure without prior notice is exceptional in nature and as such its grounds need to be interpreted strictly as not to create competitive distortions. And the latter seems to be exactly what happened in this instance.

PS: As for piling on Chris Grayling for spending £800k on consultants to prepare the contracts that is probably uncalled for based on the total amount being procured and that time was of the essence (which is different than saying the grounds for the negotiated procedure were met). And let’s not forget one of them actually flagged up Seaborne Freight lack of trading history as a risk factor. That no one heeded such advice, on the other hand, is more than fair game.

UK Competition and Markets Authority finds cartel in construction

This may not come as a surprise to anyone working in this area of practice, but the CMA has provisionally found guilty two companies operating in the construction sector, specifically in the pre-cast concrete drainage sector. These two companies have admitted being part of a cartel whereas a third one is also under investigation but has not admitted any wrongdoing.

Stanton Bonna and CPM together had 90% plus of the market from 2010 and have agreed to pay fines as part of their settlement for their price coordination practice.

It remains to be seen if the companies will be debarred from future public contracts based on Reg. 59 PCR 2015/Art. 59(4) of Directive 2014/24/EU but I suspect the grounds are too narrow to allow for such interpretation.

UK publishes anti-corruption strategy update

The UK adopted in late 2017 a anti-corruption strategy for the 2017-2022 period. One year on from the publication of the original strategy, an update has just been released.

Reducing corruption in public procurement and grants was and remains a key objective of the strategy, but whereas the original strategy included some loftier ambitions, the update provides some information on how the strategy is being pursued.

Some of the information is interesting to say the least, such as attributing an increase in 31% of the number of notices being published on ContractsFinder to a specific single Procurement Policy Note and that the open contracting standard work appears to be ongoing but without any firm commitments on the deployment of the open contracting data standard for example.

The CMA cartel screening tool also gets mentioned (and I think correctly - brownie points for it to be available on GitHub) as does the National Fraud Initiative and its work with local authorities to identify risk factors.

Going forward, the bit I am personally more interested in is buried under goal 3 - greater confidence in efficient and legitimate contract management an area that is sorely lacking attention. Not necessarily only regulatory attention, but also that of the practical type. The update mentions a Contract Debarment trial that was successfully completed in June 2018 and that a preferred approach will be forthcoming in 2019. Contract debarment is an area fraught with practical difficulties and one I think needs to be tackled centrally and not at authority level.

Finally, the update also promises specific guidance on how to apply exclusions in public procurement in December 2018, so that means within the next couple of weeks. This is once more welcomed but in all honestly should have been produced in 2015 or 2016 soon after the Public Contracts Regulations 2015 came into force

Asymmetric retaliation in the UK GPA accession

Last week, Bloomberg ran an article claiming the USA and two other countries were blocking the UKs accession to the GPA agreement. Yesterday, it doubled down on the story stating New Zealand and Moldova as the two other members blocking the UK. and provided more information about why Moldova is making life difficult for the UK. The Moldovan reasons are simply delicious and a prime example of asymmetric retaliation. In hindsight, they capture beautifully the zeitgeist of Brexit. All in all, what myself and Albert predicted about a year ago in our paper is panning out: UK going for a straightforward accession as possible but with the flank exposed to demands from current members.

So far it seems that the current members are willing to run down the clock to November 27th when the WTO government procurement meeting occurs. To be fair, there is no reason or incentive to do otherwise for a number of reasons. First, because the UK is not leaving the European Union until March 29th, 2019, so there may be time for an agreement until then. If ratifications are required, then agreeing now or in March does not make a significant difference.

Second, the longer the uncertainty lasts the weaker the UK bargaining position and the more willing it will be to make concessions. And herein lies the rub: those demands for concessions can come from anywhere in the spectrum of interests of the other members, effectively meaning they may be completely unconnected with procurement. Procurement is simply being used as leverage to obtain concessions elsewhere (again, read between the lines of the Moldovan reasons…).

Finally, contrary to popular perception, the UK procurement market is not that open to foreign bidders. Only large contracts are subject to the GPA rules and those tend to be of interest to large companies. And which countries have large companies operating in foreign public procurement markets? Above all, two: USA and the UK. So, the USA is effectively reducing competition for procurement contracts inside its market and also - probably more crucially - taking key players out of competition abroad. So for the USA it makes sense to make life as difficult as possible to the UK unless really good sweeteners are thrown in (NHS privatisation anyone?). So for the price of losing access to the UK market the USA is blocking competition in all other markets (exception may be EU of course) as the UK also has no Free Trade Agreements in place. As for Moldova, it sits on the other side of the spectrum. It knows its companies stand no chance in hell of winning contracts in the UK so why open its home procurement market for free? Better to try and win a concession elsewhere like, say, visas.

Overall, I suspect the overarching interest of all parties will lead to a deal sooner or later, but so far we’re still in the multidimensional chess part of the game.


PS: The irony of New Zealand being the third blocker is not lost on me. Eat your hat, brexiteers.

Some thoughts on the Brexit "no deal" guidance for public procurement

The UK Government published recently a guidance note on the potential impact for public contracts access in case there is no deal with the EU before March 29 2019. There is not really much actionable information and perhaps calling it “guidance” is a slight misnomer as the document is more of a “heads up, this may happen” type of document.

Post March 29 2019, the Government implies that UK contracting authorities will be using a new UK-based e-notification service instead of OJEU/TED. However, there is no information whatsoever about this new service, who will set it up, by what date and how it will operate. In short, it adds no legal certainty to the implications of the UK departure. It might have been preferable to simply refer to the need to use Contracts Finder and similar regional portals for the time being instead of re-inventing the wheel once more.

Looking into the part about procedures ongoing at that date also yields reasons for concern. Here’s what the guidance contains:

“There will be more engagement on about how to deal with ongoing procurement procedures in the handover period between the two systems nearer the time. This will be described via appropriate communication channels and in guidance, which will be made available on GOV.UK.”

Again, not exactly reassuring. What will happen to those situations whereby the contracting authorities (and suppliers) are reliant on the European Single Procurement Document or e-Certis and associated databases to get data about economic operators taking part in ongoing procedures? And would the EU economic operators (and GPA ones) lose their status halfway through the procedure?

Finally, a word about the GPA. The guidance confirms that the UK is seeking individual accession to the agreement (as forecast by myself and Albert Sanchez-Graells). As the accession request was submitted in June 2018, the process will take time and it is simply impossible that the accession would be wrapped up by the end of March 2019. In consequence, UK economic operators would not only lose access to the EU procurement market but also to those of GPA members. As for economic operators from GPA countries, it would be up to the UK to decide how to treat them, but even if they were admitted to tendering doubts will remain about their eligibility for remedies.



New project on Curbing Corruption in Government Contracting

Liz David-Barret and Mihaly Fazekas have a new research project called Curbing Corruption in Government Contracting, funded by the Department for International Development Anti-Corruption Evidence Programme. The project aims to look at how corruption can manipulate procurement and strategies to identify variables, patterns and trends that may indicate a corruption risk.

As the project evolves, it will be possible to find on the website working papers, policy briefs, datasets and a stream of blog posts on their work. You can find them as well on Twitter.

Public procurement and contracts: new briefing paper by the House of Commons Library

The House of Commons Library has just published an interesting new briefing paper on public procurement and contracts. It is an introductory text, but one that sets up the scene well to explain how public procurement works in the UK.

The briefing paper can be found here.

It's 2018 and contracting authorities are still struggling with justifying their decisions

Arecent decision by the Technology and Construction Court (Lancashire Care NHS Foundation Trust v Lancashire County Council [2018] EWHC 1589) is a tour de force on how contracting authorities are often still unable to deal properly with the need to have good decision making models *and* keeping track of their decision making processes. Discretion does not mean arbitrariness...

Even bearing in mind that the contract at hand was for care services and as such subject to the "light touch" regime of Articles 74-76 of the Public Contracts Regulations 2015, that does not mean contracting authorities can simply run the procedure as they see fit. The award decision must follow the award criteria disclosed (it did in this case) and any element of the decision that is material needs to be logged and justified.

It is also worth noting the importance that should be given to moderation when multiple individuals are involved in the assessment process and on this point paras 30-40 of the judgment. are scathing "[a]s this summary shows, there was no consistency either in identifying what were said to be key points or in highlighting points to show that they had been influential.  The approach differed even within the record of the same question(...)."

Well.

Free lunches and public procurement

Here's an article (in Spanish) that caught my eye this morning. A couple of interesting tidbits:

"The Spanish cleaning companies Association and the Unions trust that the new Public Contracts Law covers labour costs and to guarantee the social rights of workers in all tenders from the various contracting authorities."

 Here's what is meant by it, in the words of the Association president:

"...to include in the award criteria various elements related to the service quality, such as the working conditions offered by the companies..."

I find this article interesting for a couple of reasons. First, it is very uncommon to see both business and unions agreeing on labour costs. Second, it is possible to explain it by looking at the incentives and how they are both aligned in this instance. Let's start with the companies.

Cleaning services are incredible price sensitive and (as it is claimed) 90% of the cost incurred with each contract is simply labour costs. Companies hate competition and honestly price is the most liquid of comparators wether we like it or not. Since those contracts tend to be awarded based on price, if the costs is essentially fixed (the minimum wage) then they are effectively competing in the narrow sliver of their margin (those 10%) and that is where it  hurts. No wonder they want to either take price out of the equation or dilute with "service quality" criteria. More about this in a second.

As for the unions, they simply want a better deal for their members and there is nothing wrong with that, so they also want prices to rise assuming they translate into higher wages (they won't) or at least better working conditions for cleaning staff.

So, both parties interests are aligned in reducing price importance in the equation. In other words, both want the contracts to get more expensive. One side wants better margins, the other either more pay or better working conditions.

About the "service quality" then. The second citation above is a direct citation. The example of service quality provided by the President of the cleaning companies association has nothing to do with service quality (well, at least not directly) but with working conditions instead. To conflate the two is disingenuous to say the least. Working conditions are a problem for companies like cleaning services companies due to attrition and costs of training/recruiting new staff.

It is not surprising for me that he did not pick up other award criteria for quality. No mention of efficiency (although price is a proxy for it), availability/turn around of staff in case of spike in cleaning needs, technology to manage the contract/communications, etc. It may well be, however, that he did mention them but the reporter chose that tidbit instead.

In any case this is a roundabout way of solving the fundamental problem: wages are probably too low. It will lead to worse outcomes than solving the fundamental problem. And even then, let's be honest and assume that solving that problem implies higher taxes. There are no free lunches in public procurement.

Some comments on 'Fair and Transparent Blockchain based Tendering Framework' paper

I came across this paper on Hacker News yesterday and decided to have a look at it since it merges two of my interests: distributed ledgers and procurement. The paper by Hardwick, Akram and Markantonakis proposes a theoretical framework for a tendering system based on smart contracts, running on the Ethereum blockchain.

I cannot comment on some of the substance, particularly the security arguments presented, but keeping to the theoretical framework for now I have two comments on (i)mutability and the idea behind smart contracts to provide.

(I)mutability of a tender is not a feature, but a bug.

The authors approach the problem of public contract tendering from a vector broadly in the citizen participation/open governance/system integrity/trust scope. Nothing wrong with that, and it is refreshing to see new takes on existing ideas without the constraints imposed by the current mental models.

On p.4 the authors put forward as a security feature of their proposal:

"R1) The tendering Organisation cannot change the tender once it is placed on the blockchain. If due to some unforeseeable reasons they have to change it, then they have to create a new tender (smart contract) on the blockchain." 

Keeping legal considerations out of the way, I can understand the theoretical underpinnings of this proposal for immutability. However, it is very problematic on a practical basis: time and opportunity cost for everyone involved. Going back to square one every single time a minor error with the tender is detected or due to further information having been requested by the bidders is simply inefficient and disproportionate. If the objective is to ensure the security of the process and enable auditing ex post facto, this could be achieved by allowing changes to be made to the smart contract by the contracting organisation as long as all those changed states are tracked/timestamped as well. This would allow in my view to achieve the same objective but with lower transaction costs for the parties.

Smart contracts, not contracts

Next semester I will be teaching law and blockchain (also smart contracts) and this paper is a timely reminder how prose language can be tricky to interpret. What is described here as a smart contract (ie, the set of operations between launching a tender and awarding the contract) is perceived in legal terms not as a contract at all, but pre-contractual actions which may or not impose obligations on the parties (it varies from jurisdiction to jurisdiction) but not those of a contractual nature. The contract is the end result and usually it only involves two parties (the contracting body and the private party), not all participants in the procedure.

In essence as far as I can define smart contracts they are a set of scripts that run automatically in the same way they already exist in other areas that can lead to the formation of a contract (stock buying/selling orders at a pre-defined value come to mind). They are not (necessarily) by themselves a contract. Having said that, depending on the jurisdiction it is possible that smart contracts really are contracts assuming a) all the elements for contract formation are present (again, jurisdiction specific), or b) definition of what constitutes a contract changes in the future.

Where could this be used?

Coming back to the idea behind the paper - running public tenders on Ethereum blockchain - and where it could be used. My view about the use cases for blockchain in general is that it will be useful and used in scenarios where no other current technological alternative has been deployed or where trust issues are so profound that a centralised database would be more efficient but cannot be used due to lack of trust in the operators.

In both cases I cannot see countries which have already adopted centralised electronic procurement systems to jettison those in favour of a blockchain based system any time soon. Let's not forget the public sector tends to be a laggard in terms of technology and that even today electronic procurement is not mandatory in many countries (EU, I'm looking at you...) even though buying over the internet has been commonplace for more than 15 years. Small elements of what is proposed in the paper are being trialled in Aragon (Spain) but only as a mechanism to timestamp the delivery of bids and I have in the past called for a similar system to be created to gather contract feedback data.

I suspect the potential bulk of use cases will thus be in the developing world, especially those that do not currently have electronic procurement systems and where trust is a paramount issue. It is no surprise that mobile banking (on feature phones) took off in countries without strong bank branches penetration or even internet. And if banking can be done on low bandwidth phones, there is no reason why tendering could not follow a similar development path. Plus, on the long run piggy backing on a major blockchain like Ethereum may lead to a cheaper alternative than the set up and management of a centralised system.

Another potential scenario for use is for regime transitions, ie countries that have changed regimes and where the new one wants more transparency, quickly and where trust is - once more - an issue. Ukraine takes great pride (and rightly so) on developing and using ProZorro after the Maidan Revolution but the next Ukraine may find it easier and cheaper to achieve a similar result but without the need to deploy a centralised system.

On the importance of designing public contracts well

Very interesting piece on Wired about how Barcelona is dealing with smart city surveillance, even if I do not buy the whole political worldview.* On the procurement side, this bit at the start caught my eye:

“Now we have a big contract with Vodafone, and every month Vodafone has to give machine readable data to city hall. Before, that didn’t happen. They just took all the data and used it for their own benefit”

I will take this at face value, but even so it shows the importance of understanding where value (and risk) lies. By giving Vodafone free reign on using the data generated in that contract the City Council was effectively paying them twice for the same service: first, in cash. Then, in data Vodafone could use as well for its own purposes. That the current City Council understands that the value generated by its contract is valuable (and also a key reason why incumbents usually have a built in advantage IMHO) is a welcome development.

In general I am in favour of more, not less transparency even though it is not exactly risk free in some markets due to the collusion opportunity it offers. But my experience in public procurement tells me that more detailed data provided to tenderers helps them reduce uncertainty and provide more detailed bids based on that data (it just so happens it might as well help collusion).

There is another important point to think about here as well and that is the potential State aid implications. If usage data has value for the incumbent and it is already being paid to deliver the contract then it is arguable the intrinsic data value goes beyond the market rate and that might constitute a case of implicit (?) State Aid. 

The fact the data is controlled by the City Council and (hopefully) made available to tenderers in the following tender allows to level the ground between the incumbents and challengers, negates part of their inbuilt advantage and the value the data has for the first.

*The idea behind Barcelona as a smart city predates 2015 and the current preoccupation with data ownership as well. 

Public procurement is a meaty, tricky law business.

Thanks to Joelle Grogan who is running the excellent TrickyLaw series for covering public procurement and allowing me to take part!

Social audits flawed as a way of driving sustainable change

Thought provoking piece on The Guardian from an Oxfam manager about social audits as means to drive change in supply chains:

"The ethical audit industry is estimated to be worth $80 million dollars a year. The World Bank recently calculated that parallel, or duplicate, audits in the Vietnamese garment industry had added $50 to the cost of each worker per year. In terms of "lean manufacturing", audits could be seen as a form of waste, adding cost but not real value."

Funny how social/ethical audits do not seem to work for NGOs but somehow they will be great in procurement as I have seen mentioned time and time again at conferences? 

As I argued in my paper about the growth of external compliance in procurement (of which sustainable procurement is a key example), it is important to follow the money and the interests behind such proposals. I am yet to see their proponents having an honest debate about the costs and downsides of their proposals.

Procurement is complex, more cumbersome than needed, but not inane.

CityMapper which ran a on-demand bus service in London for a while had this to say about public procurement:

"It’s hard for the public sector to buy good software

Government entities need to utilise complex and bureaucratic procurement systems. These are won by companies with project managers and sales persons who are willing to deal with inane procurement processes, rather than product or technology companies that have the capability to do the best job."

It is true that there is plenty of scope for improvement on public procurement practices (transaction and opportunity costs I'm looking at you) and that economic operators without a track record have the deck stacked against them. But a system less transparent or 'inane' would be even worse for a small company to deal with. Such small company would not even know an opportunity exists and if it did, why should the public buyer listen to you when it can simply do a deal with the IBM of that particular field?

In fact that what already happens for contracts below EU-thresholds. There are barely any procurement rules and contracting authorities mostly do as they please (if they prefer to jack up the transaction costs, that is their problem - not that they need to follow "complex and bureaucratic systems"). Also, EU procurement rules on utilities (like transport) are a lot more flexible than people give them credit for.

Less transparency in a procurement system increases the risk of corruption too.

How would that be a less 'inane' system?

PS: There are plenty of cities in the UK where transport systems are open to competition (Nottingham is a good example) and do not rely on public procurement at all, but I digress.