Portugal's plan for mandatory green public procurement (III - food procurement)

After the first two entries (here and here) of a more general nature, this one will be focused on contract specific critiques, in particular food procurement (contract types 9 and 15). I will be doing the post on vehicles sometime later this week

Contract type 15 - food products, catering and automated vending

For food procurement, the text of the Resolution and contract type 15 include a reference to the need to have 'short supply chains'. Having a percentage of products from a 'short supply chain' will be a mandatory award criterion in Portugal. So what is a 'short supply chain'? It is defined in the Annex as a 'supply made via direct purchases from the producer or through one single intermediary.' In a nutshell, the government will ban significant parts of the food distribution network within the EU from participating in food procurement in Portugal and thus tilt the market in favour of suppliers and distributors closer to the customer. While the drafting is ingenious in comparison with other more ham fisted approaches elsewhere in the Annex, it is hard not to see this as a potential measure with equivalent effect to a quantitative restriction caught directly by Art. 34 TFEU.

Let's look at an example: a group of schools in the Algarve wants to buy pork meat for its meals. Pigs are reared in similar ways both in the Alentejo and Andalusia, so from an actual sustainability point of view, the product is equivalent. The supply chain for the Alentejo pigs contains only one intermediary (say a large distributor based just outside Lisbon) whereas the Spanish supply chain includes two: a distributor in Andalusia and a smaller Portuguese distributor based in the Algarve itself. Congratulations, those schools are now bound to buy the meat from the Alentejo even though from a sustainability perspective it can be argued it is net negative since the meat travels north from the Alentejo all the way to Lisbon and then south again to the Algarve.

The draft is also questionable for the uncertainty it raises, since it is not clear what the percentage refers to. Is it of the contract value? The volume? The weight? The number of units? What's the unit from which the percentage is to be calculated?

Furthermore, beyond the legal analysis I think this measure was not really thought through and potentially has the impact to wipe out smaller (yes, local) distributors from this market. If you can only have one loop in the chain that will become a choke point and enhance the market power of larger distributors. The law of unintended consequences in full swing.

There seems to be also no consideration on the compliance costs this measure entails, in particular for economic operators which even if they comply with this requirement they will need to show that they do so on a product by product basis up to the percentage determined. It should be self-evident that any increase in compliance costs will disadvantage smaller suppliers over larger ones who are better prepared to absorb those costs and requirements.

Contract type 9 (prepared meals)

In contract type 9 (prepared meals) we can find some very questionable drafting choices, this time not on award criteria but instead on contract performance clauses/technical specifications:

"i) using food products local to the place of meal preparation - recommended

ii) Using seasonal products - mandatory

iii) Food products not from agricultural or livestock intensive practices - recommended"

All these are problematic in different ways. The first one is the proverbial smoking gun of the intention behind the idea of 'short supply chains', it is there plain to see without any sugar coating. This is a protectionist measure of the type I have been warning about for ten years how sustainability was going to be weaponised as a protectionist move. This is a textbook example of artificially narrowing down competition as established by Article 18(1) of the Directive 2014/24/EU. Not even being a recommended contract performance clause or technical specifications saves this one.

The second is more puzzling. What is a growing season? What is it meant to be in season? Let me rephrase: what is meant to be in season *where*? Take strawberries for example, their growth season has expanded significantly over the last 15 or 20 years due to new agricultural techniques (yes, poly-tunnels and use of energy). What is more, if you have an innovative technique to grow particular plants all year round including their 'off season' (say a warehouse kitted out with led lamps that uses little soil, water or pesticides) and it is physically in the same neighbourhood as the purchaser, then, in those 'off season' months you need to find other customers for your products. This will have a detrimental effect on innovation in food production.

Furthermore, if the definition of growth season is geographically limited to Portugal then once more we're back to measures with equivalent effect to a quantitative restriction, since grow seasons vary throughout the EU, GPA parties and countries with a FTA with the EU. If it is not, then the scope of this measure will be quite limited since any given product can be in season somewhere in the world at that time. Either way, once more paradoxically, it may have the effect of reducing the variety of food consumed and the benefits for nutrition that come from a varied diet. Can you imagine bread being ineligible for purchase for months on end because the wheat season has finished in Portugal? Or olive oil from a previous campaign since that particular product is off season now?

To make matters worse this also shows a complete lack of knowledge on how commodities work, how they're store or how they're traded. Once more, the compliance costs arising from this measure will be incredible and not taken into consideration.

The third one once more amounts to a 'recommended' ban of practices that are legal within the EU, so I will leave the question of its legality at that for the time being. My main concern here is one of practical nature and unintended consequences. The reason we can feed so many people on the planet (and Portugal) is because intensive agricultural practices. Abandoning them means a reduction of the calories that an individual can consume as well as an increase in land usage (at least) to achieve the same level of output. That is an aggregate effect that was plain to see when Sri Lanka decided to go organic overnight with disastrous results. It is not that intensive farming cannot or should not be improved (usually that means also more oversight and enforcement of existing rules and that, well, costs money) but that throwing it out of the window will bring us back to a world pre-Green Revolution and pre-artificial fertilizer. Just compare cereal production in 1961 and 2021 for an idea of the difference in output.

Now let's imagine that in Portugal all contracting authorities from the 1st of January follow this 'recommendation' and start including in the technical specifications that ban intensive methods. Where will they source the food that also is mandatory to be in season? And 'recommended' to be local? How small is the potential field of suppliers (and supply) once we layer down these requirements together?

It is evident that there is no immediate overabundance of supply meeting those requirements that is seating on a warehouse somewhere waiting to find a customer so all those contracts would fail. From then onwards the obvious solution for any contracting authority would be to consider that this requirement is to be set aside and it is as if it never existed in the first place, so I find it doubtful that it would be able to move the needle to increase supply bearing in mind the other constraints that are to be complied with as well. Furthermore, it is inevitable food complying with this requirement will be more expensive than the alternatives so that means paying more for the same amount of food or having less food and produced with less efficient methods.