Council publishes (protectionist) conclusions on public procurement

The Council of the European Union published about a week ago some conclusions on public procurement and how it can be used to help a sustainable recovery and the rebooting of a resilient EU economy. As with any document of the kind it is more of a (confusing and contradictory) statement of intentions than anything else. It does not constitute a source of law but at least gives us an indication about the coming battle lines for public procurement regulation at EU level. If the calls on Member States to do something or the other can be dismissed as wishful thinking, the same should not be argued about the paragraphs targeting the European Commission. Let's not forget the Council is one of the two key lawmakers of the Union and that it can ask the Commission to initiate legislative processes.

This document has three main sections. The first on enhancing public procurement to boost recovery and tackle future crises, a second on aligning incentives for innovative and sustainable investment and growth via public procurement and a final on using public procurement to set up a more resilient EU economy. Overall, it paints a very protectionist and nationalist image for the future of public procurement.

At this moment in time, the most relevant one I think is the first, especially the messages for the European Commission on paras 7 to 9.

Paragraph 7

On para 7, the Council calls on the Commission "to review the economic effects on the single market, resulting from the application of the thresholds, in light of the need to boost investment throughout Europe in the aftermath of COVID-19, bearing also in mind SME's access to public procurement markets[...]" and "[...] to consider suggesting and increase of the threshold amounts [...]." The Council appears to forget that the current thresholds are tied to the GPA commitments as I argued a few years ago.

I think the message here is easy to decode: let's move the thresholds higher under the guise of 'investment' and 'protecting SMEs'. This is a clearly protectionist move and should be called out as such. Funny that the battle for higher thresholds was spearheaded by the British on the run up to the 2014 Directives, but it seems the Council has picked up the mantle and is using the COVID crisis to push for the same goal. The Council appears oblivious to the fact that the majority of contracts and spend in at least a few Member States is already below the current thresholds.

What the Council is asking for here is a rollback of the EU internal market in the field of public procurement by reducing its scope of application of EU public procurement rules. Subjecting even more contracts to the vagaries of the uncertain cross-border interest test is the certain if stupid outcome of this proposed move.

In any case, this shows a clear departure from the Council's view from 2014 where it accepted the maintenance of the current threshold system with only a modification around social services contracts. It may well be the case that the Commission will simply resist any calls to initiate a process to review the current round of Directives any time soon, leaving us with the 2014 Directives as the rulebook for the foreseeable future.

Paragraph 8

On para 8, the Council calls on the Commission to find new ways to reduce the bureaucratic burdens, compliance costs and procedural constraints as to facilitate public investment, while at the same time ensuring 'maximum competition' and improving the functioning of the Single Market. I would argue here that considering the previous para 7 these objectives are orthogonal and you either aim for the first set (the reductions) or the second  (maximum competition and protection of the internal market).

This is not to say that they need to be orthogonal, far from it. I am a firm believer of reducing opportunity and transaction costs to improve competition, but those are not to be achieved from deregulation but instead of standardisation: requirements, processes, procedures and yes, language. Deregulation will mean an even bigger degree of 'desharmonisation' between Member States and inside each Member State as well, increasing the complexity for economic operators.

In this para 8, the Council asks the Commission clearly and directly to:

• Assess the efficiency and effectiveness of the EU public procurement framework in line with the GPA
• Exploring an expansion of the light touch regime currently available for social services
• If feasible, increase the flexibilities in the use of framework agreements
• To review the economic effects on the internal market of applying public procurement rules in sectors where there might be no cross-border interest such as youth and elderly care
• Examine the possibility and suitability of approximating some arrangements applicable to contracting authorities and contracting entities of Directive 2014/25/EU

This wishlist leaves no room for confusion in relation to the line of thought of the Council: it really wants to roll back EU public procurement regulation and, in consequence, shrink the internal market effectively bringing us back to a time with less transparency, competition or equal treatment.

It is fair to say I am not particular fan of the light touch regime for social services, but the truth is that while they were out of the Directives they were simply out of sigh and out of mind. Their inclusion now looks as a Trojan horse by providing a comparator with the regular approach of the Directive.

It is worth noting that Dynamic Purchasing Systems are not mentioned here and that the focus remains on the competition blackbox that are framework agreements.

Having said this, my view is that there are fundamental issues with the current crop of Directives. They are focused on the wrong things (to an extent) and miss out a number of important points that would facilitate cross-border tendering such as language (the big one), acceptance of documents from other Member States & automation of processes, cross-border integration of eprocurement platforms and administrative data, proper contract (not contract info) publication in machine readable formats and eventually forum shopping for remedies.

It doesn't help that most of the recent additions to the public procurement framework such as the expansion in exclusion grounds or shoehorning secondary objective policies into public procurement are a terrible idea in terms of improving competition and cross-border participation of tenderers. But, of course, the Council has no interest in hearing about these and in fact doubles down on the "innovative and sustainable investment" angle disregarding the increased complexity it naturally entails.

In addition, let's not forget the Directives started as regulating public works before expanding to goods soon after and services only much later in the 90s. I do feel that this origin is part of the current problem at least in what concerns services as the mental models and frameworks developed for works do not map out necessarily for services. How can we award services in an efficient, transparent and non-discriminatory way? It surely it is not via the light touch regime, but this is a key question we should be looking at today.

Paragraph 9

Para 9 is less interesting than the other two, but still provides an insight to the Council's view on the future of procurement, in this case connected with COVID-19. First the Council asks for more clarity from the Commission on the use of the negotiated procedure without prior notice which should include guidance on the reasons for extreme urgency. The Commission has already done so and, in my view, gone further than it should in the process.

In addition, and more worrying, the Council also asks the Commission to evaluate the need to introduce *further* exclusions to the application of procurement rules for strategic goods and services in emergency and crisis situations, resulting from pandemics, terrorist attacks, state of defence (?), serious and present threats to public safety or natural disasters.

Oh, please. The current rules *already* provide with ample of exceptions for these and expanding the list would simply, once more, help roll back the internal market for public procurement.

Conclusion

I do not have much to add to my comments above. If anything, this shows how the winds inside the EU have changed in the last decade or so and how Member States are now more interested in (national) protectionist measures than to really integrate public procurement into the internal market. This does not bode well for the future.