First thoughts on the Commission's bid rigging exclusion guidance -- what difference will it make?

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On 18 March 2021, the European Commission officially published its Notice on tools to fight collusion in public procurement and on guidance on how to apply the related exclusion ground (the ‘bid rigging exclusion guidance’). This document has been a long time in the making and officially announced almost four years ago, so it is no exaggeration to say that it was keenly awaited (by competition and procurement geeks like yours truly, at least).

The guidance is clearly addressed to contracting authorities — not economic operators — and is distinctly ‘pro exclusion’ in its minimisation of the practical difficulties and legal constraints inherent in the adoption of exclusion decisions. However, even with such clearly programmatic orientation, after a first reading, I have a few thoughts that do not make for an optimistic assessment of the guidance’s likely practical impact.

Mostly, because I do not think the Commission’s bid rigging exclusion guidance provides much by way of actionable practical advice to contracting authorities—and it certainly does not really go beyond already existing guidance, such as the OECD’s 2009 guidelines for fighting bid rigging in public procurement. By contrast with more general documents e.g. the OECD guidance, the Commission’s bid rigging exclusion guidance intends to concentrate on the possibility to exclude operators engaged in the manipulation of a tender. However, it includes lenghty discussion of measures to prevent collusion, as well as complementary measures such as training and data analysis and, when it comes to the specific issues that the interpretation and application of Art 57(4)(d) of Dir 2014/24/EU generates, it is mainly restricted to setting out issues that Member States’ domestic legislation cannot do — rather than focusing on what contracting authorities can (and should) do.

Moreover, its likely limited practical impact results from the fact that the guidance simply ignores that the EU rules (especially discretionary ones) need to be embedded in the Member States’ administrative/public law system and, in many places, the guidance is at odds with the latter. In that regard, the guidance seems to presume a sort of sphere of subjective rights for contracting authorities that they are capable of exercising even against the decisions of other (superior/centralised) administrative authorities, or in disregard of broader constraints and requirements for administrative action—such as burden of proof, the duty to state reasons, the increasing enforceability of exclusion grounds against other tenderers, or the very practical implications of risking damages compensation for unlawful exclusion—which is (as far as I know) an area of constant interest for tenderers and practitioners alike.

To be fair, this in part follows from the stance of the Court of Justice in some recent cases (referred to in the guidance), but that is still no excuse for the Commission’s guidance not to recognise that Member States retain significant discretion in their administrative self-organisation and that some of the issues raised in the practical implementation of the relevant provisions will be conditioned by pre-existing administrative law doctrines and procedures.

The most glaring example of this approach that sidesteps the difficulties in the domestic implementation of EU procurement law is the fact that the guidance simply states that ‘The possibility to exclude an economic operator for suspected collusion is not construed in the Directive as a penalty for its behaviour before or during the award procedure’ (section 5.2). That is at face value fine. But the Directive also does not say that exclusion is not a penalty or a sanction and, consequently, establishing the legal nature of an exclusion will be dependent on the relevant public/administrative law framework at Member State level. Moreover, exclusion has been framed as a penalty in at least one recent preliminary reference and the Court of Justice has not disabused the referring court from that prima facie legal classification (see eg Tim, C-395/18, EU:C:2020:58). Given the increasing relevance of the Charter of Fundamental Rights in the interpretation of economic operators’ rights in the context of procurement litigation, I think it is far from certain that exclusion will not be construed as a (quasi)penalty, in particular when it is grounded on the infringement of prohibitive legal rules (such as Art 101 TFEU), rather than on shortcomings in the standing of the economic operator or non-compliance of its tender with substantive and formal requirements included in the tender documents.

To my mind, this (ie the nature of exclusion measures) can be one of the thorniest interpretive issues in this area, particularly because of the due process implications of exclusion being treated as a penalty or sanction—which is also not helped by the absence in the Remedies Directive of any procedural requirements applicable to the exclusion stage. The perpetuation of this disconnect with the Member States’ administrative law framework can in itself constitute the quicksands where the bid rigging exclusion guidance disappears, and certainly can continue to prevent an adequate use of the possibility to exclude tenderers suspected of bid rigging, because the fundamental issues raised by Art 57(4)(d) Dir 2014/24/EU remain unresolved — coupled with other sweeping statements concerning e.g. the level of demonstrability of the suspected collusion that contracting authorities need to meet (as discussed below).

For these and the reasons given below, I am afraid that the bid rigging exclusion guidance will not leave up to the expectations. I will carry out a more detailed and formal assessment of the guidance in a future research paper (likely after my shared parental leave… so not until mid summer or so), but here are my further initial observations, which do not attempt to be comprehensive.

Framing the issue

For those interested in understanding how to interpret and apply Art 57(4)(d) and the associated Art 57(6) self-cleaning possibilities, only section 5 and the Annex of the bid rigging exclusion guidance will be relevant. Indeed, the bid rigging exclusion guidance includes a rather lengthy explanation of what the Commission has done and what it expects to do (or for Member States to do) in the broader area of professionalisation and promotion of collaboration between competition and procurement authorities, which makes the document not very practical. This raises some questions on the fitness for purpose of the document, and whether alternative guidance format that had discharged most of sections 1 to 4 onto a different policy document would have been preferable, but perhaps this is mostly just presentational.

One of the most welcome aspects of the bid rigging exclusion guidance is that, in section 5.2, it makes it clear that the ground for exclusion based on suspected ‘contemporaneous’ collusion (or bid rigging) in Article 57(4)(d) of Directive 2014/24/EU is separate from (and compatible with) the possibility of excluding infringers of competition law as economic operators ‘guilty of grave professional misconduct’ under Article 57(4)(c). It is also to be welcome that, also in section 5.2, the Commission shares the view that, despite the different wording of Art 57(4)(d) and Art 101 TFEU, the former needs to be interpreted in a Treaty-consistent manner, which means that the exclusion must be possible for all types of behaviours caught by Art 101 TFEU — notably, concerted practices and decisions by associations of undertakings, in addition to agreements [for discussion, and advancing the positions now confirmed by the guidance, see A Sanchez-Graells, Public Procurement and the EU Competition Rules (2nd edn, Hart 2015) 296 ff].

The Commission also rightly stresses that contracting authorities in principle retain discretion not to exclude economic operators suspected of bid rigging, as the exclusion ground in Art 57(4)(d) is discretionary. However, this obviates not only the possibility for Member States to transpose it as a mandatory exclusion ground, but also more general EU law duties (such as the duty not to deprive Art 101 TFEU of its effet utile), and domestic administrative law duties (such as equivalent duties not to promote or tolerate illegal activity, or duties mandating inter-administrative collaboration with competition authorities). In that regard, the bid rigging exclusion guidance could have usefully developed a checklist of reasons that could (objectively) justify not excluding economic operators despite there being sufficiently plausible indications to conclude that the economic operator had entered into agreements with other economic operators aimed at distorting competition. In the end, it will not (or should not) be entirely up to the contracting authority to decide to turn a blind eye on those indicia.

Lack of practical guidance, or guidance that is impractical

Despite the largely correct framing of the issue, and despite acknowledging that tackling bid rigging in procurement is fraught with difficulties, the bid rigging exclusion guidance fails to deliver the much needed practical orientations on how to identify contemporaneous bid rigging and how to apply (as opposed to interpret) the relevant exclusion ground of Art 57(4)(d) Dir 2014/24.

The guidance does not really provide practical tips on how to identify bid rigging in a single tender scenario (which is the most likely to be faced by most contracting authorities). If indications of the existence of bid rigging that require cross-sectional or time series analysis are left to one side (as those are generally not for contracting authorities, but rather for competition authorities to screen for and analyse), and with the exception of flagging as suspicious unexpected tender withdrawals (annex, section 3), the only indications highlighted in the guidance (section 5.3) are:

  • The text of the tenders (for instance, the same typos or phrases in different tenders or comments left by mistake in the text of the tender indicating collusion among tenderers).

  • The prices offered in the award procedure (for instance, tenderers who ... offer excessively high or low prices) [although the interaction of this with the rules on abnormally low tenders is not explored]

  • Administrative details (for instance, tenders submitted by the same business representative)

This is then slightly expanded in the annex (section 3), which details indicia such as:

  • Identical mistakes or spelling errors in different tenders.

  • Different tenders drafted with similar handwriting [in 2021!] or typeface [except default in most commonly used software applications, one would hope!].

  • Tenders using another tenderer’s letterhead or contact details.

  • Different tenders with identical miscalculations or identical methodologies to estimate the cost of certain items.

  • Tenders submitted by the same person or with persons having the same contact details.

This can only help contracting authorities identify clumsy economic operators, potentially involved in collusion. However, in all seriousness, this is unlikely to result in much practical results as once these types of issues are included in official guidelines, it is likely that economic operators will make sure to avoid those mistakes when thy submit rigged bids [for discussion, in the context of automated treatment of bids, see A Sanchez-Graells, '"Screening for Cartels" in Public Procurement: Cheating at Solitaire to Sell Fool’s Gold?' (2019) 10(4) Journal of European Competition Law & Practice 199–211].

The guidance also incurs in temporal inconsistencies, such as when it uses as an indication of bid rigging that contracting authorities should take into account for the purposes of exclusion: ‘The selected tenderer subcontracting work to unsuccessful tenderers for the same contract or the selected tenderer not accepting to sign the contract and later found to be a subcontractor of the tenderer that is finally awarded the contract may be considered sufficiently plausible indications of collusion’ (annex). This can well be an indication of bid rigging, but at this stage no exclusion can take place because the contract will have been awarded. Consequently, the relevant consequence here should be reporting this issue to the competition authority as well as, where possible, terminating the contract (which is not, however, explicitly foreseen in the Directive).

The guidance is also somewhat naive or flippant, for example in its remarks concerning the contracting authority’s (potential) knowledge that a tenderer ‘has pre-ordered the material needed to perform the specific contract in question well before the evaluation of the tenders is concluded’. Quite how a contracting authority would get to this knowledge, or how specific the pre-order should be for it not to be susceptible of confusion with just a standard supply of the economic operators is anybody’s guess.

It can also generate confusion when it, on the one hand, recommends resorting to centralised procurement as a way of avoiding collusion and, on the other, stresses that framework agreements managed by central purchasing bodies are more susceptible to collusion than ordinary tender procedures (annex, section 2).

Moreover, the guidance lacks detail in crucial aspects and, in particular, concerning the extremely complex analysis of joint tenders and subcontracting among (potential) competitors (section 5.6). Here, the Commission’s guidance does not even cross-refer to the more detailed guidelines published by some Member States’ competition authorities — notably, the Danish Competition and Consumers Authority. Similarly, the guidance largely brushes over the complex issue of multiple participation by economic operators belonging to the same corporate group (section 5.5), and also sets aside the difficulties of deciding the scope of application of exclusion decisions that need to respect the doctrine of the single economic entity under competition law [for discussion, see K Kuzma and W Hartung, Combating Collusion in Public Procurement (Elgar, 2020)].

Let’s ignore the administrative legal framework

The Commission’s bid rigging exclusion guidance largely ignores the administrative legal framework at Member State level. This is not only in relation to the treatment of exclusion as (not) a penalty, but also in relation to evidentiary requirements and the related duty to provide reasons. In that regard, the literal interpretation of the Directive leading to the conclusion that ‘national rules should comply with both the letter and the spirit of the Directive, which requires only “indications” of participating in illegal agreements that distort competition in an award procedure and not formal evidence, such as a court judgment confirming such participation’ (section 5.4) is misleading and conflates the need for a prior administrative or judicial decision with the existence of ‘evidence’ of collusion.

First, the guidance is right to exclude the need for a previous administrative or judicial decision, but that should not be treated as excluding ‘evidence’ of collusion, but rather as a precedent decision that has the effects of (quasi) res iudicata or, at least, constitutes a legal fact that the contracting authority cannot ignore. It is also wrong to indicate that ‘plausible indications’ of collusion include, for example, ‘information brought to the attention of the contracting authority of an investigation launched by the competition authority or of penal charges brought against the management of the operator for suspected collusion either in the pending award procedure or in other award procedures’, as this raises fundamental issues concerning the presumption of inocence (which treatment will also differ across jurisdictions, depending on e.g. the trigger for the opening of an administrative investigation). Here the guidance makes the reverse mistake of conflating a formal decision with the evidence (presumably) underpinning it.

Second, the guidance ignores the legal meaning of ‘evidence’ when it establishes that ‘contracting authorities are not required to have evidence of collusion in a pending award procedure, as this would contradict the letter of the Directive’. ‘Plausible indicia’ are a type of evidence, falling short of direct (uncontrovertible) evidence, but clearly above the absence of evidence. This should have been clear from the excerpt that the guidance quotes, where the CJEU stressed that ‘anti-competitive behaviour, “may be proved not only by direct evidence, but also through indicia, provided that they are objective and consistent and that the related tenderers are in a position to submit evidence in rebuttal”’ (Specializuotas transportas, C-531/16, EU:C:2018:324, paragraph 37).

Indiciary evidence is still evidence and the unresolved problem is where to draw the line to decide that the contracting authority has enough evidentiary support to adopt an exclusion decision. Moreover, this is of paramount relevance to the adequate discharge of the duty to state reasons. Here, it not only is impossible for a contracting authority to act in the absence of evidence, but the administrative file will usually be accessible to the economic operator for the purposes of its legal defence. This makes the further recommendation for contracting authorities not to disclose to economic operators that they suspect the existence of bid rigging largely impractical, as the contracting authority will only be able to keep this under wraps up to the point where it must make a formal decision and notification to the economic operator affected by the (potential) exclusion.

Some problematic statements

Unfortunately, in addition to the shortcomings stressed above (and some others), the guidance includes some unhelpful statements concerning the interpretation and application of Art 57(7) of Directive 2014/24/EU, in particular when it states that ‘If an economic operator, who has been excluded from award procedures for a certain period under Article 57(7) of the Directive, submits a tender during the period of exclusion, the contracting authority, without any further need for assessment, must automatically reject that tender’ (section 5.9), and when it reiterates that ‘It goes without saying that if the economic operator has been excluded from all award procedures in your country for a period of time and submits a tender during this period, you must exclude it from your award procedure without assessing the tender submitted.’ (section 3 of Annex) (both emphases added).

These statements are, at best, confusing and misleading and, at worse, legally incorrect. In that regard, it should be stressed that Art 57(6) Dir 2014/24/EU is very clear that the conditions for lengthy exclusions stipulated by Member States in the implementation of Art 57(7) are to be applied ‘if no measures as specified in paragraph 6 are taken by the economic operator to demonstrate its reliability’. Therefore, the statements above should have made it clear that further assessment is required and contracting authorities must carry it out where an economic operator, who has been excluded from award procedures for a certain period under Article 57(7) of the Directive, submits a tender during the period of exclusion and it claims to have implemented the sort of measures detailed in Art 57(6).

This is the sort of problematic drafting that should be avoided in official guidance and, in this instance, rectified by the Commission as soon as possible.

Final thoughts

On the whole, a first reading of the guidance does not call for optimism. While the Commission’s bid rigging exclusion guidance does contain some useful information, it is at its weakest in relation to the particularities of the interpretation and application of Art 57(4)(d) and related provisions of Directive 2014/24/EU, which are supposed to constitute its core concentration.

I would not be surprised if contracting authorities found little to no comfort in the guidance when pondering how to address the key issue of how to spot collusion in single-tender settings, how to decide if there are sufficient plausible indications, and how to go about the adoption of an exclusion decision that is, in almost all likelihood, going to be challenged on the basis that it constitutes a sanction/penalty for a (suspected) breach of competition law that the contracting authority has no competence to enforce, or which has not followed the heightened procedural requirements of procedures leading to the imposition of a sanction. It should be obvious that exclusion on these grounds generates the additional risk of a follow-on investigation by the competition authority and/or private litigation, so no economic operator should be expected to just accept an exclusion on grounds of contemporaneous bid rigging under Art 57(4)(d) Dir 2014/24/EU (or, rather, its domestic transposition).

I will continue reflecting on the guidance and its implications, and I am sure there will be a lively debate in the months and years to come. As always, any feedback and comments will be most welcome.

UK regulation after Brexit -- Public procurement

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Negotiating the Future’ – a part of ‘UK in a Changing Europe’ – together with the Centre for Competition Policy, and Brexit & Environment have published a very interesting report on 'UK regulation after Brexit' that maps the new regulatory settlement in the wake of the UK’s withdrawal from the EU. The report shows how Brexit has not resulted in significant regulatory divergence except in some areas (such as immigration or agricultural subsidies), how the potential for future deviation from the EU baseline is constrained by the EU-UK TCA and other international treaties, and how the UK regulatory infrastructure is now rather strained and faces significant challenges to ensure the effectiveness of important regulatory areas, in particular concerning environmental protection or the yet to be defined mechanism for the control of subsidies.

I was invited to contribute my analysis of the immediate regulatory changes on procurement (below), which I believe show similar trends to other areas of regulation discussed in the report by leading colleagues. I would recommend reading the report in full to get a good sense of where UK regulation may be headed in the next few years, as well as the more immediate regulatory gaps.

Public procurement regulation

 EU public procurement law creates a regulatory regime that is best understood as comprising two tiers. The lower tier is largely procedural and creates specific obligations for contracting authorities running procurement procedures. The higher tier imposes substantive obligations on the member states that aim to ensure the proper functioning of the internal market for public contracts. EU procurement law also creates mechanisms for the gathering and sharing of information across Member States, such as the Single Market Scoreboard and, especially, e-Certis. While the lower regulatory tier is enforced domestically, though preliminary references can be made to the Court of Justice of the European Union for its interpretation of particular provisions, the higher regulatory tier and the system as a whole is monitored by the European Commission.The UK has transposed EU public procurement law through two sets of regulations: one applies in England, Wales and Northern Ireland, the other in Scotland. The UK Government has consistently limited the transposition of EU public procurement rules to a very strict ‘copy-out’ approach to avoid gold-plating, i.e. to avoid going beyond the minimum required by EU rules. The close alignment of UK and EU rules has the benefit of ensuring compliance with the World Trade Organisation Government Procurement Agreement (GPA), of which the UK was, until the end of the transition, a member through its membership of the EU.

 What changes after the end of transition?

The UK Government has attempted to keep the regulatory status quo as unchanged as possible. However, since the mechanisms for collaborating with EU member states have disappeared, the UK has introduced secondary rules to replace EU-wide platforms, and to reallocate powers and functions previously assigned to the European Commission. The Public Procurement (Amendment etc) (EU Exit) Regulations 2020 included the creation of a UK e-notification service to replace the current EU-wide publication of procurement notices through the Official Journal of the EU (TED), and the reallocation to the Minister for the Cabinet Office of the powers and functions of the European Commission.

The issue of the platform where contract opportunities are published has become less important in an age of open data, since a common standard will facilitate automated processing. Also, most of the powers of the Commission are limited to adjusting EU rules to changes in the GPA, which the UK will have to carry out as well, and to monitoring compliance with the EU rules. This has probably kept the reallocation of the Commission’s powers to the Cabinet Office relatively unnoticed, although it can result in diminished scrutiny of the exercise of ministerial discretion—which the Covid-19 crisis has already evidenced. The key operational change is the decoupling of the UK from e-Certis and the associated system of European Single Procurement Document (ESPD). The effect will be to raise the administrative costs of EU companies seeking to tender for contracts in the UK and UK companies wanting to tender for contracts in the rest of the EU—although the EU-UK TCA seeks to minimise this impact by providing that ‘procuring entities [should] not require suppliers to submit all or part of the supporting evidence … unless this is necessary to ensure the proper conduct of the procurement’ (Art PPROC.5). This opens the door to mutual recognition of the EU’s ESPD and the UK’s new Single Procurement Document (SPD).

 Limited change?

The UK gained GPA membership on its own right on 1 January 2021. To facilitate that process, the UK ‘Government has sought to replicate the EU’s coverage schedules under the GPA … in a form that is as close to the form of the EU’s agreements as possible’. The same strategy has been followed in other bilateral agreements between the EU and third countries, which the UK is also seeking to reproduce. Here, too, the UK Government’s approach is to minimise change, at least as it concerns its access to non-EU procurement markets, and the openness of its own markets to third countries.

The UK’s accession to the GPA already guaranteed a high level of continuity in EU-UK procurement-related trade (safe in utilities and defence)because the EU is also a GPA member. Beyond that, in the Political Declaration, the UK and the EU agreed that they ‘should provide for mutual opportunities in [their] respective public procurement markets beyond their commitments under the GPA in areas of mutual interest, without prejudice to their domestic rules to protect their essential security interests.’

The EU-UK TCA indeed creates GPA+ market access, as detailed in Section B of Annex PPROC-1, including a range of services but with the explicit exclusion of healthcare. That high level of mutual access to procurement markets can only be subjected to future modifications, but not reductions (Art PPROC.15). Crucially, the EU-UK TCA requires national treatment beyond covered procurement for ‘suppliers of the other Party established in [one Party’s] territory through the constitution, acquisition or maintenance of a legal person’ (Art PPROC.13), which effectively ensures a continuation of current requirements for procurement below EU/GPA-thresholds where there is a ‘domestic’ presence of suppliers engaged in EU-UK procurement-related trade. This may however trigger the need to legally incorporate existing business branches on both sides of the Channel, for those suppliers previously relying on general free movement rules.

Any disputes regarding market access will be dealt with by a newly created Trade Specialised Committee on Public Procurement (Art INST.2). The EU and the UK have also agreed to cooperate ‘in the international promotion of the mutual liberalisation of public procurement markets’ (Art PPROC.19), which is more likely to be productive if their own market access commitments remain aligned.

Lastly, there is the issue of the more detailed regulation of public procurement – the lower tier of EU procedural rules or ‘procurement law’. The wording of the commitment in the Political Declaration ‘to standards based on those of the GPA ensuring transparency of market opportunities, public procurement rules, procedures and practices’ had suggested that the UK might move away from the detail of EU procurement law, albeit within the narrow margin of variation allowed by the GPA. The UK Government repeatedly expressed a willingness to reform (and deregulate) UK public procurement law. There is nothing in the EU-UK TCA preventing that, save for some explicit procedural rules eg on the use of electronic means (Art PPROC.3), on selective tendering (Art PPROC.8), or procurement remedies (Art PPROC.11). The UK Government recently published a green paper laying out reform options that will be open to public consultation until early March 2021.

Although the green paper formulates some ambitious proposals and there have been calls from some involved in the shaping of the green paper to introduce a significant reform, it is uncertain whether the UK Government will end up pushing for a model significantly different from the existing one—not least because the green paper follows an ‘EU law+’ approach.(*) The current EU-based regime is highly flexible and the introduction of a radically different set of rules would raise barriers for companies looking to tender across borders. It could also lead to greater divergence between the four nations of the UK, even if the UK Government expects public procurement to be covered by the ‘common frameworks’ that it is developing with the devolved administrations.
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This was not included in the report but, for those interested in the Green Paper, there is further analysis here, here and here.

New SSRN article on the UK's 'Transforming Public Procurement' Green Paper

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I have uploaded on SSRN the new article ‘The UK’s Green Paper on Post-Brexit Public Procurement Reform: Transformation or Overcomplication?’, which will appear in the European Procurement & Public Private Partnership Law Review soon. The article builds on my earlier submission to the ongoing public consultation (still open, submissions accepted until 10 March 2021). The abstract is as follows:

In December 2020, seeking to start cashing in on its desired ‘Brexit dividends’, the UK Government published the Green Paper ‘Transforming Public Procurement’. The Green Paper sets out a blueprint for the reform of UK public procurement law that aims to depart from the regulatory baseline of EU law and deliver a much-touted ‘bonfire of procurement red tape’. The Green Paper seeks ‘to speed up and simplify [UK] procurement processes, place value for money at their heart, and unleash opportunities for small businesses, charities and social enterprises to innovate in public service delivery’. The Green Paper seeks to do so by creating ‘a progressive, modern regime which can adapt to the fastmoving environment in which business operates’ underpinned by ‘a culture of continuous improvement to support more resilient, diverse and innovative supply chains.’ I argue that the Green Paper has very limited transformative potential and that its proposals merely represent an ‘EU law +’ approach to the regulation of public procurement that would only result in an overcomplicated regulatory infrastructure, additional administrative burdens for both public buyers and economic operators, and tensions and contradictions in the oversight model. I conclude that a substantial rethink is needed if the Green Paper’s goals are to be achieved.

The full paper is free to download: Sanchez-Graells, Albert, The UK’s Green Paper on Post-Brexit Public Procurement Reform: Transformation or Overcomplication? (February 17, 2021). To be published in (2021) European Procurement & Public Private Partnership Law Review, forthcoming, Available at SSRN: http://ssrn.com/abstract=3787380. As always, feedback most welcome: a.sanchez-graells@bristol.ac.uk.

'Public procurement' for Global Dictionary of Competition Law

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I have been invited to contribute an entry on ‘public procurement’ for a new Global Dictionary of Competition Law (Concurrences Books, forthcoming). The initial draft of the entry is below. Comments welcome: a.sanchez-graells@bristol.ac.uk.

Public Procurement
Albert Sanchez-Graells
University of Bristol Law School

Definition

Public procurement rules govern the award of government or public contracts for the acquisition of supplies, works or services, including the direct provision of public services to citizens. Public procurement rules seek to foster effective competition for public contracts to generate value for money, and to harness competition as an anticorruption tool to ensure integrity and probity in the expenditure of public funds. The main challenges to effective competition in public procurement settings are bid rigging (or collusion among bidders), which risk is heightened by the transparency inherent to procurement processes, and anticompetitive requirements imposed by the public buyer.

Commentary

The effectiveness of public procurement and its ability to deliver value for money depend on the existence of two layers of competition: competition in the market for the goods, works or services to be acquired, and competition within the tender for a specific contract. While most competition analysis focuses on the existence (or absence) of competition within the tender and tends to assimilate this with models of competition for the market, this is a short-sighted approach. Except for very rare public contracts for goods, services or works for which the public buyer is a monopsonist—mainly in sectors such as defence—most public tenders take place in a framework of competition in the market, and one with many private and public buyers seeking to purchase from a range of potential suppliers (for example, tenders for the acquisition of cloud services, general supplies, or school meals). Therefore, it is important not only to ensure that procurement rules and administrative practices prevent distortions of competition within a given tender, but also that they do not generate negative knock-on effects on (dynamic) competition in the relevant market.

The most commonly discussed distortion of competition within a public tender concerns anticompetitive agreements between bidders (bid rigging) that seek to manipulate the competition for the public contract and to extract excessive rents from the public buyer. The mechanics of bid rigging schemes are widely understood, including predominant strategies such as cover bidding, bid suppression, bid rotation and market allocation. However, these anticompetitive practices are also difficult to prevent in oligopolistic or concentrated markets because the transparency inherent to public tenders significantly facilitates monitoring of the cartelists’ bidding behaviour, and because the atomisation of public tenders requires a significant investment in market screening tools to spot suspicious patterns across regional markets and over time. Fighting cartels in public procurement settings has become a high priority for most competition authorities in recent years, in part as a result of the OECD’s work on this area—see its 2012 Recommendation on Fighting Bid Rigging in Public Procurement—as well as the push by the International Competition Network. There is also hope in the development of effective systems of automated screening and red flags where public procurement is conducted electronically (of which there is longstanding experience eg in Korea in relation to its eProcurement platform KONEPS), but these require a solid procurement data architecture which absence has marred recent attempts in jurisdictions such as the UK and its now abandoned ‘Screening for cartels’ tool.

An additional difficulty in ensuring effective competition within a given tender derives from the unclear boundary between anticompetitive practices such as bid rigging and procompetitive cooperation through teaming, joint bidding and subcontracting arrangements between bidders. There is currently significant debate about the limits to cooperation between (potential) competitors in the context of procurement procedures, as well as whether it should be treated as a restriction of competition by object or by effect for the purposes of Article 101 TFEU. The debate is particularly alive in Scandinavian countries, following a 2016 Decision by the EFTA Court in the Ski and Follo Taxi case, and a more recent 2019 Judgment by the Danish Supreme Court in the Road Markings case, which has led to a revision of the Danish Competition and Consumer Authority’s guidelines on joint bidding. The main points of contention about the state of the law concern the counterfactual to be used to determine that joint bidders are (potential) competitors, as well as the measurement of any efficiencies passed on to the public buyer.

In order to empower public buyers to self-protect against bid rigging and to strengthen the effectiveness of competition law in public procurement settings, EU procurement rules have created discretionary grounds for the exclusion of bidders ‘where the contracting authority has sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition’, as well as in cases ‘where the contracting authority can demonstrate by appropriate means that the economic operator is guilty of grave professional misconduct, which renders its integrity questionable’—which the Court of Justice of the EU has interpreted as inclusive of non-procurement related breaches of competition law (Generali-Providencia Biztosító). Recent Court of Justice case law has clarified the extent to which these exclusion grounds are applicable where bidders have benefitted from leniency, as well as the intensity of the duty to cooperate incumbent upon bidders seeking to avoid exclusion through self-cleaning measures (Vossloh Laeis). The system created under the EU rules is converging with those of other major jurisdictions, such as the US, where the Federal Acquisitions Regulations allow for similar approaches to assessing the responsiveness (or reliability) of bidders engaged in anticompetitive practices.

Beyond the abovementioned issues, which are all concerned with bidder behaviour, it is important to stress that competition within a public tender can be restricted through decisions made by the public buyer, such as the imposition of excessive participation requirements, the choice of suppliers in less than fully open procedures or foreclosure through eg the use of excessively broad and excessively long framework agreements. Such restrictions of competition can not only generate losses of value for money in the allocation of the specific contract, but also have negative effects on dynamic competition in the relevant market. Unfortunately, the direct application of competition law (ie Article 102 TFEU) to the public buyer has been excluded by the case law of the Court of Justice, except in rather rare situations where the public buyer is engaged in downstream market activities (FENIN). However, a principle of competition has been explicitly enshrined in EU public procurement law to prevent public buyers from ‘artificially narrowing competition’, in particular where ‘the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators’. This is a promising tool to prevent publicly-generated restrictions of competition in public procurement settings, although its interpretation generates some difficulties and its application is yet to be tested in the EU Courts.

Case References

Case C-205/03 P FENIN v Commission, EU:C:2006:453.

Case C-470/13 Generali-Providencia Biztosító, EU:C:2014:2469.

Case C-124/17 Vossloh Laeis, EU:C:2018:855.

EFTA Court, Judgment in Case E-3/16, Ski Taxi SA, Follo Taxi SA og Ski Follo Taxidrift AS v Staten v/Konkurransetilsynet, 22 December2016.

Danish Supreme Court, Judgment in the Road Markings case, 27 November 2019. The case is not available in English, but a comprehensive discussion by Heidi Sander Løjmand can be found at https://www.howtocrackanut.com/blog/2019/11/28/the-danish-supreme-courts-ruling-in-the-road-marking-case-the-end-of-a-joint-bidding-era-guest-post-by-heidi-sander-ljmand-msc [accessed 22 Jan 2021].

Bibliography

Robert Anderson, William Kovacic and Anna Caroline Müller, Promoting Competition and Deterring Corruption in Public Procurement Markets: Synergies with Trade Liberalisation (2016) http://e15initiative.org/publications/promoting-competition-and-deterring-corruption-in-public-procurement-markets-synergies-with-trade-liberalisation/ [accessed 22 Jan 2021].

Alison Jones, ‘Spotlight on Cartels: Bid Rigging Affecting Public Procurement’ (Concurrentialiste, 16 Nov 2020) https://leconcurrentialiste.com/jones-bid-rigging/ [accessed 22 Jan 2021].

Katarzyna Kuźma and Wojciech Hartung, Combating Collusion in Public Procurement. Legal Limitations on Joint Bidding (Edward Elgar 2020).

Albert Sanchez-Graells, Public Procurement and the EU Competition Rules (2nd edn, Hart 2015), Chapter 5.

Albert Sanchez-Graells, ‘“Screening for Cartels” in Public Procurement: Cheating at Solitaire to Sell Fool’s Gold?’ (2019) 10(4) Journal of European Competition Law & Practice 199-211.

Response to Consultation on the Green Paper 'Transforming Public Procurement'

I have submitted a response to the public consultation on the Green Paper ‘Transforming Public Procurement’. The executive summary is below, and the full submission is accessible (via dropbox). The submission raises a number of issues that are likely to be debatable, so I look forward to engaging in further discussions. As always, feedback most welcome: a.sanchez-graells@bristol.ac.uk.

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An early winter present? The UK's 'Transforming public procurement' green paper

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The UK Government has published today its green paper on ‘Transforming public procurement’. This is a much awaited publication that will be subjected to public consultation until 10 March 2021. Contributions are encouraged, as this is perhaps a one in a generation opportunity to influence procurement rules. In this blog post, I just aim to provide a hot take on the green paper.

The green paper presents a vision for post-Brexit reform of the UK procurement ‘rule-book’ (for there should be a new, consolidated one), that partially aligns with the proposals of Prof Arrowsmith (see here and here)—and, in fact, Prof Arrowsmith has already published a comparison between her proposals and the green paper (here).

I have just had a read through the green paper and there will be plenty to comment in a submission to the public consultation (stay tuned towards the end of the consultation period). For now, I just have a few observations or rather, general thoughts, that I will need to mull over.

In very many respects, the green paper is is an indictment of the copy-out approach to the transposition of the EU rules in the UK (on which see here). For example, many of the reform proposals are compatible with the current EU rules and relate to areas where the UK decided not to transpose discretionary mechanisms (eg around subcontractor pay). Similarly, most of the proposals on remedies and enforcement mechanisms would be compatible with the current remedies rules. Other proposals seek to create some flexibility beyond the existing EU constraints although, to be fair, most of those are subjected to exceptional circumstances to be regulated by ‘clear regulatory frameworks’ yet to be defined, and which workability raises a few questions.

Other reform proposals concern the (past) unwillingness to impose more demanding standards (eg on publication of transparency) than those mandated by the Directives on grounds of avoiding gold-plating, which now seems to be gone—or the unwillingness or inability to impose obligations to which the UK Government had committed (eg in terms of OCDS or, again, concerning the publication of information). In that regard, the vision behind the green paper seems to be willing to create a much more developed (or far-reaching) regulatory architecture for procurement, which would be welcome.

However, this is directly in tension with another of the driving forces underpinning the green paper’s vision: deregulation and the will to create spaces for the exercise of ‘commercial judgement’ at contracting authority level. This creates a dual tension. On the one hand, the more sophisticated architecture would rely on bare bones procedural rules and would ultimately impose high transaction costs on both contracting authorities and tenderers (which the green paper acknowledges, but dismisses as ‘bedding in problems’). This could be a high-powered incentive to rely on centralised procurement organised by central purchasing bodies, although there is no clarity on the strategic approach to this in the green paper. On the other hand, relatedly, it should be noted that (if read between the lines?) the green paper is also an indictment on the current status of the commercial capacity of (most of the) UK’s public sector, as there are constant calls for more training, upskilling and quality control in the functioning of the procurement function.

This creates a chicken and egg problem on the suitability of the deregulatory approach to reforming the rules to create more commercial space. Most of the proposals are advanced on the (implicit empirical) basis that the flexibility of the existing framework is insufficient (or, rather, insufficiently exploited). This should raise a few questions on whether seriously committing to increase commercial capability and training investment would not suffice. Additionally, if we are starting at a low level of commercial capability, it would seem that creating a more deregulated framework will require even higher (ie beyond catch-up) investment in commercial upskilling. Whether the two moves should take place at the same time should be thought-trough (not least because it will be difficult to train anyone on a new system, on which there will be limited, if any, amount of reliable trainers).

In quite a few other respects, the green paper seems premised on the existence of large regulatory divergences between the GPA and the EU regime (on which see here). While this is the case in some areas, such as remedies, in most other areas the space between both regulatory baselines is narrower than the green paper would suggest, and the scope for reform is limited. This is most evident in the relabelling of procedures or award criteria, which effectively seem to seek to mask the narrowness of the regulatory space (if you cannot really change something, at least call it something different).

I am also surprised at the apparent EU-obsession underlying the green paper, which is also largely a criticism of the current EU rules (as directly copied into UK law, see above), and the complete lack of reference to useful tools for the design of a procurement system, such as the UNCITRAL Model Law and its guide to enactment. It may not have been a bad idea to seek to rely on that sort of guidelines to a larger extent, at least if the new regime is to draw on tested solutions. However, much of the green paper seems to want to achieve an ‘EU+’ level of procurement regulation (notoriously, in the regulation of a new so-called DPS+ commercial vehicle) or, perhaps, to create the next ‘world leading’ system of procurement (which would not be totally disaligned with other approaches of the current UK Government). Whether this will be a successful strategy remains to be seen.

Finally, there are a few strange elements in the green paper, which may be the result of current times (such as the extensive focus on the creation of new rules for crisis procurement), or a reflection of the particular interests of some of the actors involved in driving the reform forward (such as the explicit recognition of the possibility to charge suppliers fees for their participation in commercial vehicles, such as the proposed new DPS+, which seems to be of strategic importance to central purchasing bodies).

All in all, there is plenty to reflect upon. So this may be a good note on which to close the ‘procurement year’. I hope all readers will have a good winter break and to see you back here after the (long) hiatus, as I disappear into the horizon on my period of shared parental leave. All the best!

Combating collusion in procurement: webinar recording and slides

It was a pleasure to host today the book launch of Katarzyna Kuźma and Dr Wojciech Hartung's Combating Collusion in Public Procurement. Legal Limitations on Joint Bidding (Edward Elgar, 2020). The authors were joined by Dr hab. Piotr Bogdanowicz and Jesper Fabricius, as well as yours truly, to discuss recent developments in the treatment of joint bidding under Article 57 of Directive 2014/24/EU, as well as the outstanding legal uncertainty on the interpretation and application of this provision, which Katarzyna and Wojciech have analysed in detail in their book. The slides used for the presentation are available (via dropbox) and a recording of the session (minus Q&A) is also available via the image below (or this link).

The authors would be happy to receive feedback or more general questions about the book and its subject-matter. They can be contacted at katarzyna.kuzma@dzp.pl and wojciech.hartung@dzp.pl.

Open Contracting: Where is the UK and What to Expect?

I had the pleasure of delivering a webinar on ‘Open Contracting Data: Where Are We & What Could We Expect?‘ for the Gloucester branch of the Chartered Institute of Procurement & Supply. The webinar assessed the current state of development and implementation of open contracting data initiatives in the UK. It also considered the main principles and goals of open contracting, as well as its practical implementation, and the specific challenges posed by the disclosure of business sensitive information. The webinar also mapped potential future developments and, more generally, reflected on the relevance of an adequate procurement data infrastructure for the deployment of digital technologies and, in particular, AI. The slides are available (via dropbox) and the recording is also accessible through the image below (as well as via dropbox).

As always, feedback most welcome: a.sanchez-graells@bristol.ac.uk.

PS. For some an update on recent EBRD/EU sponsored open contracting initiatives in Greece and Poland, see here.

Healthcare procurement: a service of general economic interest?

With thanks to Dr Mary Guy (Lancaster University) for the invitation to speak at her innovative ‘Health in Europe - Virtual Discussion Forum’, below is the recording of my presentation on the treatment of healthcare procurement as a service of general economic interest. The slides are also available.

The presentation explores the case study of the English NHS Supply Chain (for a detailed account of how it works, please see here). However, broader issues of potential relevance in EU jurisdictions considering ways of reforming (and centralising) healthcare procurement are also explored.

This is work in progress for me, so comments most welcome: a.sanchez-graells@bristol.ac.uk.

As a side note, it is worth stressing that NHS Supply Chain is currently under fire due to its failure to react properly to the PPE challenges derived from the COVID-19 crisis after a scathing National Audit Office report (on which you can watch some comments here).

Collusion in procurement book launch, 10 Dec 2020

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Dear How to Crack a Nut friends,

You are kindly invited to the book launch of Katarzyna Kuźma and Dr Wojciech Hartung's Combating Collusion in Public Procurement. Legal Limitations on Joint Bidding (Edward Elgar, 2020). It will take place online on 10 December 2020 at 11.30 UK time via Zoom. The authors will be joined by Dr hab. Piotr Bogdanowicz and Jesper Fabricius, as well as yours truly, to discuss recent developments in the treatment of joint bidding under Article 57 of Directive 2014/24/EU, as well as the outstanding legal uncertainty on the interpretation and application of this provision, which Katarzyna and Wojciech have analysed in detail in their book.

More details and free registration here: https://www.eventbrite.co.uk/e/combating-collusion-in-public-procurement-book-launch-and-discussion-tickets-130271675087.

All the best, Albert

Two new working papers on procurement & COVID-19

I have uploaded two new, short working papers on procurement and COVID-19 on SSRN. Comments most welcome: a.sanchez-graells@bristol.ac.uk.

  1. Procurement and Commissioning during COVID-19: Reflections and (Early) Lessons (October 8, 2020). Northern Ireland Legal Quarterly, forthcoming. Available at SSRN: https://ssrn.com/abstract=3709746.
    Abstract: This piece reflects on some common themes that are starting to emerge in the early analysis of the healthcare procurement and commissioning response to the COVID-19 pandemic. Although it largely results from the observation of the situation in the English NHS, the most salient issues are common to procurement in other EU healthcare systems, as well as more broadly across areas of the public sector that have strongly relied on the extremely urgent procurement exception in the aftermath of the first wave of the pandemic. Given the disfunction and abuse of ‘unregulated procurement’ in the context of COVID-19, the piece reflects on the longer term need for suitable procurement rules to face impending challenges, such as Brexit and, more importantly, climate change.

  2. COVID-19 PPE Extremely Urgent Procurement in England. A Cautionary Tale for an Overheating Public Governance (October 14, 2020). To be published in D Cowan and Ann Mumford (eds), Pandemic Legalities (Bristol University Press, forthcoming). Available at SSRN: https://ssrn.com/abstract=3711526.
    Abstract: In this short paper, I reflect on the case study of the procurement of personal protective equipment (PPE) for the English NHS during the first wave of the COVID-19 pandemic. I put forward two main claims. My first claim is that the UK Government not only was particularly ill-positioned to deal with the pandemic as a result of years of austerity and the institutional unsettling resulting from the continuous reform of the NHS, its internal market and its supply chain—but also due to the imminence of Brexit and its political ramifications. My second contribution is that, in its desperate reaction to the PPE fiasco, the UK Government misused and abused the disapplication of the standard procurement rules on the basis of the ‘extremely urgent need’ exemption. This resulted in the opaque award of large numbers of high value contracts to companies that would not survive basic screening under normal conditions. Overall, my goal is to lay bare the more general problems in the UK Government’s approach to the governance of public procurement and its increasing insularity as a result of Brexit, with the hope that this will show a path for change that could avert even more significant fiascos in the face of the massive challenges that climate change will bring.

I just got off social media. Perhaps you should too

After writing this blog post, I would usually have twitted it, put it on some facebook groups, and on linkedin. This will no longer be the case (except for the blog twitter account), as I have decided to go off social media. I have deleted my twitter account, deactivated my facebook account and will no longer check my linkedin.

I have taken this decision after watching and digesting ‘The Social Dilemma’, although I had been ruminating on it since I watched ‘The Great Hack’. If you watch them, in under 4 hours, you will get a much better explanation for the reasons behind this decision than I could ever articulate. And perhaps you will decide that you, too, should go off social media — or at least change your usage of and relationship with this technology.

I am hoping that this decision will not only make my personal life better, but also my research (though this may perhaps seem bizarre for someone that is precisely researching digital technologies’ use for public governance) and, perhaps, make a small contribution to the sea change required for social media to become a force for good. Of course, I also have a few worries about whether this will muffle my voice, but I hope that there will be other ways of making myself heard where it counts (and, to be honest, I do not think all my shouting into the twitter abyss ever had any effect, so probably not much is lost at all). Whatever happens, at least, I have already felt some relief from knowing I am no longer feeding the data mining while it is an evil force.

Anyone interested in staying touch can still do so through this blog, and I can always be reached at a.sanchez-graells@bristol.ac.uk. I look forward to staying in touch.

Regulatory trends in public procurement from a competition lens -- 3 short, provocative presentations

I was asked to record three short (and provocative) presentations on some procurement regulatory trends seen from a competition lens. I thought this could be of some interest, so I am sharing them here. The three presentations and the three sets of slides should be available through the links below. Please email me (a.sanchez-graells@bristol.ac.uk) in case of any technical difficulty accessing them, or with any feedback. I hope to start some discussion through the comments section, so please feel free to participate!

1. Transparent procurement: some reflections on its inherent tensions

This short presentation reflects on the tensions between transparency and competition in procurement, with a particular focus on the heightened risks posed by the 'open contracting' movement. It advocates a more nuanced approach to the regulation of procurement transparency in the age of big data [slides].

2. Smart, streamlined procurement: too high hopes for procurement?

This presentation discusses some of the implications and risks resulting from recent regulatory trends in public procurement, from a competition perspective. It focuses on procurement centralisation and the use of procurement to deliver horizontal policies as two of the most salient regulatory trends. It stresses the need for more effective oversight of these more complex forms of procurement [slides].

3. Effective procurement oversight: what to look for & who should do it?

This presentation addresses some of the challenges in creating an effective procurement oversight system. It concentrates on the availability of high quality data, its access by relevant institutions and stakeholders, and the need for a joined up and collaborative approach where multiple entities have oversight powers/duties. It pays particular attention the need for collaboration between contracting authorities and competition authorities [slides].

NHS commissioning and procurement - 2 short lectures and a reading list

I have recorded a series of short lectures on NHS commissioning and procurement for my blended teaching at the University of Bristol Law School this coming academic year. In case they are of any interest, I am sharing two of them here.

The first one covers the organisation and regulation of NHS commissioning and procurement and primarily concentrates on the commissioning of health care services. The second lecture covers the centralisation of ‘hospital procurement’ through the NHS Supply Chain. They should be accessible through the click-through images at the end of the blog post.

The two short lectures aim to provide a (hopefully) accessible introduction to the issues covered in more detail in the accompanying reading list, which mainly comprises the following papers for each of the topics:

1. Organisation and regulation of NHS internal market, with a focus on commissioning and procurement

  • A Maynard and M Dixon, ‘Should the NHS abolish the purchaser-provider split?’, BMJ 2016;354:i3825, available at https://doi.org/10.1136/bmj.i3825.

  • C Paton, ‘Garbage-Can Policy-Making Meets Neo-Liberal Ideology: Twenty-five years of redundant reform of the English National Health Service’ (2014) 48(3) Social Policy & Administration 319-342.

  • L Jones, M Exworthy and F Frosini, ‘Implementing Market-based Reforms in the English NHS: Bureaucratic coping strategies and social embeddedness’ (2013) 111(1) Health Policy 52-59.

  • B Collins, ‘Procurement and Competition Rules. Can the NHS be exempted?’ (2015) King’s Fund briefing, available at https://www.kingsfund.org.uk/publications/nhs-procurement-competition-rules.

  • M Guy, ‘Between “Going Private” and “NHS Privatisation”: Patient choice, competition reforms and the relationship between the NHS and private healthcare in England’ (2019) 39(3) Legal Studies 479-498.

  • P Allen et al, ‘Public Contracts as Accountability Mechanisms: Assuring quality in public health care in England and Wales’ (2016) 18(1) Public Management Review 20-39.

  • D Osipovič et al, ‘Interrogating Institutional Change: Actors' Attitudes to Competition and Cooperation in Commissioning Health Services in England’ (2016) 94(3) Public Administration 823-838.

  • P Allen et al, ‘Commissioning through Competition and Cooperation in the English NHS under the Health and Social Care Act 2012: Evidence from a qualitative study of four clinical commissioning groups’, BMJ Open 2017;7:e011745, available at http://dx.doi.org/10.1136/bmjopen-2016-011745.

  • M Sanderson, P Allen and D Osipovič, ‘The Regulation of Competition in the National Health Service (NHS): what difference has the Health and Social Care Act 2012 made?’ (2017) 12(1) Health Economics, Policy and Law 1-19.

  • D Osipovič et al, ‘The Regulation of Competition and Procurement in the National Health Service 2015–2018: Enduring hierarchical control and the limits of juridification’ (2020) 15(3) Health Economics, Policy and Law 308-324.

2. Centralisation of NHS procurement

Feedback and suggestions on additional readings most welcome: a.sanchez-graells@bristol.ac.uk.

Pausing the blog until summer of 2021

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Dear How to Crack a a Nut  readers and friends,

I hope you and your loved ones are keeping well and slowly starting to see a path towards a ‘new normal’.

Whether you are in practice, policy-making or academia, I am sure this period is throwing unimaginable challenges at you on a daily basis. It certainly feels like that on this side of the screen. I am sure there will be plenty learning to be had once the dust settles, both on what went wrong and what actually worked out during the pandemic and immediately after—for procurement is certainly lined up to be a key area of economic intervention in the near future.

In academia, the current uncertainty and the challenge of developing a new high-quality online or blended and flexible teaching model will probably absorb most of our energies for quite a while. This will bring opportunities, but also risks burning quite a few of us out if we are not careful. In particular if/while working from home under less than ideal circumstances, including increased caring responsibilities eg due to childcare or home schooling. If you find yourselves in that position, please be kind to yourselves, whatever the institutional pressures and expectations. We can only do our best, but not more than that…

All of this would be enough for me to need to take a break from non-essential work at the best of times. In fact, given very increased teaching and administration demands on my time, I have already had to scale down to bare minimum all my research and, thankfully, been given pretty long extensions on my current two book contracts (massive thanks to Oxford University Press and Bristol University Press).

But, in addition to everything else, we are expecting a second baby in a few weeks—which is both exciting and terrifying in the current context—and will certainly make the months ahead particularly amazing and challenging. Once again, I need to dedicate additional time to my personal life to enjoy this exciting period, and to try to make the transition into having a sibling as smooth as possible for my oldest one (I know… please send any tips).

I will be on paternity leave for a few weeks this summer, and then for the first half of 2021. I do not think I will have the headspace to blog until after going back to work next summer (whether that will be in an office or still in my living room remains to be seen) and, to be honest, pausing the blog has previously given me some peace of mind, as I do not constantly feel like I should be publishing something to keep ‘my audience’ engaged—which is pretty presumptuous of me, anyway, because you all have better things to do than be wondering when the next HTCaN entry will come live and what will it be about…

So, this is my long way of saying that it is again time for me to pause the blog to concentrate on wrapping up a few things before facing the greatest privilege of starting the parenting adventure all over again. Bottles, nappies, sleepless nights, bring ‘em on!

Luckily, this is not a bad time to be pausing the blog at all as, on top of the consolidated and reliable commentary from Dr Pedro Telles and Professor Chris Yukins (who’s been doing a truly remarkable job with his COVID-19 webinars), there are now two recent additions to the public procurement blog/podcast-sphere. If you have not checked them out yet, do not miss Dr Marta Andhov & Dr Willem Janssen four-hand English version of Willem’s Bestek procurement podcast, and keep an eye on Michael Bowsher QC’s hot off the oven blog. I look forward to continue learning from them during my period of self-imposed suspension and, hopefully, to return to an even more crowded procurement blogging and podcasting scene.

I hope to find you here in 2021. In the meantime, I hope you and yours will stay well, and be happy.

All the best,
Albert
20 May 2020

A note on Reg 73 of the Public Contracts Regulations (and by extension Art 73 of the EU Public Procurement Directive) [Guest post* by Dr Aris Christidis]

In this guest post, Dr Aris Christidis follows up on the issue of termination of contracts where the contracting authority has exceeded the limits of permissible contract modifications under Article 72 of Directive 2014/24/EU, focusing in particular on the shortcomings of Art 73 thereof and its transposition in the UK through reg.73 Public Contracts Regulations 2015.

A note on Regulation 73 of the Public Contracts Regulations (and by extension Article 73 of the EU Public Procurement Directive)

In this earlier post about the alleged unlawfulness of the NHSX contract modification, Albert argued that ‘the cause for termination could not be waived because reg.73 is meant as a safeguard against abuses of reg.72 and, thus, is unavoidably triggered the moment the boundaries of reg.72 are exceeded’.

I want to pick up on this point and provide some thoughts on the scope of Regulation 73 and by extension on Article 73 of the EU Public Procurement Directives.

Let me start by examining the position under the EU Directives. The 2014 directives have included a provision (Art 73 of Dir 2014/24/EU and the equivalent of Art 90 of Dir 2014/25/EU and Art 44 of Dir 2014/23/EU) which requires the Member States to empower their contracting authorities, under their national laws with the option of unilaterally terminating a contract during its term at least under the following three situations:

(a) the contract has been subject to a substantial modification, which would have required a new procurement procedure pursuant to Article 72;

(b) the contractor has, at the time of contract award, been in one of the situations referred to in Article 57(1) and should therefore have been excluded from the procurement procedure;

(c) the contract should not have been awarded to the contractor in view of a serious infringement of the obligations under the Treaties and this Directive that has been declared by the Court of Justice of the European Union in a procedure pursuant to Article 258 TFEU.

While such a remedial measure is in the right direction because it allows contracting authorities to correct their violations after a contract comes into effect, it does not address various issues on how this remedy is supposed to operate. These issues are to be determined solely by national laws.

Also, it is not clear why the only option for contracting authorities is to terminate a contract, instead of providing other remedial alternatives such as the shortening of the duration of the contract—similarly with the ineffectiveness remedy.

Surely, even if contracting authorities are under an obligation to terminate a contract, this should not be automatic. Public interest considerations such as the urgency of executing the contract should be carefully considered before any decision to prematurely discharge such a contract is made.

Finally, the EU legislator does not explain convincingly the rationale behind the reason why in the aforementioned violations the contracting authorities should have the right (rather than the obligation – see next section) to terminate an existing contract and why other violations should not necessarily constitute reasons to terminate an existing contract (e.g. finding of conflict of interest or direct awards).

Does Article 73 impose a positive obligation?

Undoubtedly, Article 73 (c) - unlike the other two– has a mandatory effect. This is because it concerns a violation that has been declared under Article 258 TFEU, which Member States must comply with under Article 260 TFEU.

The purpose of this provision seems to be to ensure that a duty of a Member State to terminate a contract is fulfilled as quickly as possible and avoid any possible cumbersome procedural issues that may be imposed under national law.

An issue that requires some consideration is what amounts to a ‘serious infringement’ that may lead to an obligation to terminate a contract (interestingly, the proposal for the 2014 directive (COM (2011) 896) did not refer to the wording ‘serious infringement’ rather it stated: ‘…a Member State has failed to fulfil its obligation under the Treaties…’).

Following the ruling of the CJEU in Waste (C-503/04), which concerned a decision under Article 258 TFEU, a ‘serious infringement’ will constitute any violation that restricts the fundamental freedoms of the internal market, in that case, the fact that an unlawful direct award had the effect of restricting other economic operators from providing the particular service. 

It is submitted that serious breach may constitute any violation that influences the outcome of competition and that termination of an existing contract seems relevant, inter alia, in the following situations: when a tender should have been excluded because of prior involvement of candidates in the submission of bids, when a conflict of interest is found or when a tender should have been rejected because it did not comply with tender conditions.

What seems to be certain is that a ‘serious infringement’ would most probably be regarded by the CJEU as any violation of the other two explicit reasons for termination as provided in the Article at hand - namely, violations with regards to the modification of contracts (see case C-601/10 Commission v Hellenic Republic available in French and Greek) and the entering to a contract with a provider who should have been disqualified from the awarding process.

This argument, in turn, raises the concern on whether the provisions of Article 73 are facultative or in effect contracting authorities are under an obligation to terminate a contract when the prescribed violations take place. In other words, whether EU law raises a positive obligation for contracting authorities.

On the one hand, the wording of this Article is clear: ‘Member States shall ensure that contracting authorities have the possibility… under the conditions determined by the applicable national law, to terminate a public contract during its term…’ (emphasis added).

On the other hand, this wording does not align with the rationale behind the adoption of this measure. According to Recital 112, ‘contracting authorities are sometimes faced with circumstances that require the early termination of public contracts in order to comply with obligations under EU law in the field of public procurement’ (emphasis added).

I lean towards the more formalistic interpretation, that is, there is no positive obligation. In my view, the Directive is not sufficiently clear on this and, as discussed below, the UK has not made termination a requirement but rather an option for the contracting authorities.

The implementation in the UK

Regulation 73 of the Public Contract Regulations 2015 (PCR) has transposed the EU law requirement of empowering contracting authorities to terminate an existing contract. Regulation 73 did not opt to include other violations that could give the right to a contracting authority to terminate an existing contract.

Two things should be noted about this unilateral power. The first is that Regulation 73(1) makes it clear that it is up to the discretion of a contracting authority to terminate a contract or not. It specifically states that ‘…contracting authorities shall ensure that every public contract which they award contains provisions enabling the contracting authority to terminate the contract where…’ (emphasis added; see for example the Model Contract for Services by the Government Legal Department at clause 33). Therefore, contracting authorities can simply refrain from exercising such power even if the relevant violations have taken place.

The second is that Regulation 73(3) clarifies that when provisions for termination are not provided within the terms of the contract, such power shall be an implied term of the contract. In other words, Regulation 73 overrides the absence of express contractual terms by providing a statutory basis for such unilateral power to be exercised.

In my view, Regulation 73 has little practical effect. In principle, it is a very good idea to empower contracting authorities to unilaterally terminate a contract. They are, indeed, in the best position to correct any unlawful acts especially when these are unintentional. Also, the disposal of such power minimises the possibility of litigation by third parties and ensures that any violations are remedied with minimum costs and in the public interest.

However, the way Article 73 was implemented in the UK shows the problematic design of this measure. There is nothing to compel contracting authorities to terminate an existing contract even if, on the face of it, they have violated the relevant rules. To require compliance, you need some form of external enforcement or recommendation. Otherwise, who is to determine whether the prescribed rules have been violated or not and who may induce a contracting authority to terminate a contract?

The only way for the government to be compelled to terminate a contract which is the result of unlawful modification or other serious infringement is if the Commission brought a case before the CJEU under Article 258 TFEU. In the current, COVID-19, and Brexit environment, I very much doubt that this will happen.

What if the government decides to terminate a contract under Regulation 73?

A final issue that perhaps requires some attention, is how are consequential matters between parties treated where the government decides to terminate the contract based on Regulation 73.

The first point to note is that Article 73 Directive 2014/24/EU does not give any indication as to how such consequential matters are to be regulated by the Member States and this is another problematic aspect of the design of this provision at the EU level.

Indeed, if the purpose of this remedial measure is to correct violations by returning a contract to the status quo ante then surely any compensation to the contractor due to early termination should be reasonable and proportionate.

Therefore, any form of redress must in principle be based on restitution, that is, a contractor must not be able to recover anything further that the value of what has been performed and has benefited the contracting authority.

The Commission had indicated that this is a requirement for the ineffectiveness remedy. In particular, Recital 21 of the Remedies Directive states that the objective to be achieved where the Member States lay down the rules which ensure ‘that the rights and obligations of the parties under the contract should cease to be enforced and performed’.

It goes on to say that ‘the consequences concerning the possible recovery of any sums which may have been paid, as well as all other forms of possible restitution, including restitution in value where restitution in kind is not possible, are to be determined by national law’. Similar careful thinking and considerations were not given for Article 73.

In the content of the PCR, Regulation 73(2) provides that consequential matters in case of termination should be regulated by express contractual provisions. Hence, the provisions of a contract itself will stipulate how these matters are to be regulated between parties and not some contract or administrative law principle.

The Model Contract for Services by the Government Legal Department provides some signs as to how the government will treat consequential matters in case of termination pursuant to Regulation 73. For instance, clause 34.5 (b) provides that in case of termination due to a substantial modification any costs from this termination should lie where they fall. This seems to be an appropriate form of compensation.

Some final thoughts

The current crisis has triggered a conversation about the design of the procurement rules all over the world. Perhaps this is also a good time both for the EU and the UK to think harder as to the scope of the exercise of unilateral termination powers by contracting authorities.

This is an excellent remedial tool. It is less costly and more time-efficient than any other form of enforcement when a contract has been concluded unlawfully. However, various issues need to be considered carefully. The following are some suggestions:

  1. Careful consideration of the type of violations that should give rise to termination. Legislators could consider the gravity of the violation and perhaps make a distinction between violations that require termination and violations for which a contracting authority can exercise discretion as to whether to terminate or not.

  2. An independent body with powers to compel contracting authorities to terminate or at least make suggestions to consider termination. In the UK, for instance, such power may be exercised by the Public Procurement Review Service which current remit does not allow the exercise such powers.

  3. Clear indication as to how consequential matters are treated. As argued above, any compensation in case of unilateral termination due to violation of procurement rules should be based on restitution to align with the purpose of this remedy, which is to restore the public contract market in the status quo ante.

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Dr Aris Christidis

Dr Aris Christidis is a Lecturer in Law at Newcastle Law School, which he joined in January 2018. He previously taught at the University of Nottingham, where he completed his PhD in December of 2018 (without corrections). He currently teaches Introduction to Business Law and Contract Law. Aris’ current research lies in public procurement law and the interaction of public with private law in the context of public contracts. His research interests are in comparative law, the law of obligations, public procurement law and in the economic analysis of law.

Guest blogging at HTCAN: If you would like to contribute a blog post for How to Crack a Nut, please feel free to get in touch at a.sanchez-graells@bristol.ac.uk. Your proposals and contributions will be most warmly welcomed!

1 billion problems in using extremely urgent public procurement to evade accountability?

© Guardian design team

© Guardian design team

The Guardian has reported that the UK ‘state bodies have awarded at least 177 contracts worth £1.1bn to commercial firms in response to the Covid-19 pandemic. Of those, 115 contracts – with a total value of just over £1bn – were awarded under the fast-track rules bypassing competitive tenders. They include two contracts worth more than £200m, both awarded by Whitehall departments.’

This has raised concerns, such as those voiced by a spokesperson for Transparency International UK, who said ‘“The alarming number of contracts seemingly awarded without any competition risks setting a dangerous precedent which may harm the public interest and reduce confidence,” he said. “When lucrative deals are awarded with no competitive tender and away from public scrutiny, taxpayer money could easily be wasted on overpriced equipment or substandard services.”

There are two aspects of these concerns. One seems to be the possibility of this ‘deregulated’ procurement constituting a precedent and, implicitly, creating scope for more deregulated procurement once the pandemic is over; while the other aspect relates to the transparency (not) being given to the directly awarded contracts. In my view, while the first aspect is largely unwarranted, the second deserves some serious thought and closer scrutiny. Beyond that, I think the piece highlights a more fundamental issue related to the UK Government’s excessive reliance on consultancy firms to make up for the depleted capacity of its civil service after years of austerity, which is a much more worrying long-term trend. I touch upon these three issues in turn below.

‘Extremely urgent’ procurement as a precedent or a wedge towards more deregulated procurement post-pandemic?

It is clear that the deactivation of public procurement rules to free up public buyers to fulfil the extremely urgent needs arising from the pandemic sits uncomfortably with the standard system of checks and balances usually in place to ensure probity and value for money in the expenditure of public funds. However, the negative governance impacts of deregulated direct procurement are a collateral effect of the need to ensure that the procurement function meets its most basic goal: to make sure the public sector has the material means to discharge its duties in the public interest. It would be unacceptable for procurement rules to get in the way of, in this case, the purchasing of life-saving kit and equipment, as the scale of values implicit in our democratic societies surely ranks higher protecting lives than ensuring probity (where these are incompatible, at least temporarily).

It is also worth stressing that the deactivation of most procurement rules in the face of extreme urgency is not a ‘blank cheque’. This is for clear reasons, embedded in the scape clause of reg.32(2)(c) of the Public Contracts Regulations 2015 (and Art 32(2)(c) of Dir 2014/24/EU, which it transposes). First and foremost, this exemption from standard rules is clearly exceptional and needs to be narrowly construed. It can also only cover procurement that is directly linked to the extremely urgent need, and the scope of the directly awarded contract needs to be proportionate to that need (for very clear interpretive guidance, see the Commission’s COVID-19 procurement notice discussed here).

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There is very limited available public information but, on the basis of The Guardian’s piece, at first sight, there does not seem to be a reason for concern regarding the object of the contracts directly awarded (see side graph), as all of them concern what can legitimately be claimed to constitute extremely urgent supplies to tackle the immediate aftermath of the pandemic and the ensuing lockdown. There is thus no indication that the exemption is used beyond its proper scope—though, of course, an analysis of proportionality would require more information.

There can be more questions on the value of the contracts, given that some of them have rather large total values. However, this should be put into perspective by recognising that, for example the contracts for children meals, food boxes or test materials and test services are bound to include millions of units, which will then yield much smaller prices that can reasonably be expected to be roughly at market prices (bearing also in mind the current distortions to the markets’ ability to effectively act as price setting mechanisms).

Take the example of the children’s meals vouchers, on which the piece says: ‘The largest contract, worth up to £234m, was handed by the Department for Education to a French-owned firm, Edenred, to feed more than a million pupils eligible for free school meals. Edenred has since been accused of “woeful” preparation which caused children to go hungry and humiliated parents.’

The additional linked article provides more details: ‘The contract runs for up to three months, indicating that the Department for Education expected the firm – which has fewer than 150 staff – to distribute the £15-a-week vouchers to the 1.3 million children in England eligible for free school meals.’ It is remarkable that 12 weeks’ worth of £15 vouchers for 1.3 million children amounts exactly to £234 million. This raises additional questions on how does the provider obtain its commercial margin and whether children will be receiving vouchers worth even less than the £15/week—which is an incredibly low value of economic support, certainly not in keeping with the general wealth of the UK.

Of course, much more pricing and commercial margin analysis will be required once more information is available — and this should be undertaken by the National Audit Office at the first possible opportunity — but whether these are lucrative deals remains to be seen and, at any rate, the availability of the extreme urgency procurement exemption will not last long.

A related, but separate issue concerns the effective capability and the level of readiness of the companies directly awarded contracts. Here, the reports of the initial problems encountered by Edenred (website collapse, long waits for the delivery of the vouchers and rejection at the supermarket till) are reminiscent of the issues faced in other contracts, such as Deloitte’s strongly criticised role in the coordination of PPE purchases. Differently from the inability of some of the awardees of contracts for ventilators to deliver, which in my view determined the illegality of the direct awards, the limited capability and lack of readiness of the awardees of some of these other contracts may not be an illegality ground, but is still a very worrying dimension, not only of COVID-19 related procurement. I will come back to that in the final part of this blog.

Breach of the transparency requirements associated to extremely urgent procurement

From a public governance perspective, in my opinion, the way in which the UK Government is failing to meet the transparency requirements associated to extremely urgent procurement is much more worrying than the issue of the total value of the contracts, despite the eye watering headline figure of more than £1 billion.

Despite the fact that some information on these contracts must be publicly available—as ‘The Guardian’s research was based on public databases in the UK and the EU, and aided by information gathered by the research organisation Tussell, which said it had noticed a surge in work awarded without competition in recent weeks’—there are serious concerns about the level of transparency given to these contracts and, more importantly, whether it will be possible to engage in meaningful ex post oversight and effective accountability by looking at the documentation supporting the decisions to award these contracts.

Indeed, The Guardian raises that ‘[t]he contracts reviewed … may only constitute a portion of those awarded without a competitive tender for Covid-19 work. The government is declining to release a full list, despite guidelines which state any contract awarded using emergency powers should be published within 30 days.’

On that point, the piece refers to the Cabinet Office Public Procurement Notice 01/20 (on which see here), which is very clear that contracting authorities ‘should ensure [they] keep proper records of decisions and actions on individual contracts, as this could mitigate against the risk of a successful legal challenge. If [they] make a direct award, [they] should publish a contract award notice (regulation 50) within 30 days of awarding the contract.

This not only applies where ‘new’ direct contracts are awarded, but also where existing contracts are modified to add new services (or supplies) within their scope. This was also explicitly covered in PPN 1/20, which stressed that ‘[c]ontracting authorities should keep a written justification …, including limiting any extension or other modification to what is absolutely necessary to address the unforeseeable circumstance. This justification should demonstrate that [their] decision to extend or modify the particular contract(s) was related to the COVID-19 outbreak with reference to specific facts, eg [their] staff are diverted by procuring urgent requirements to deal with COVID-19 consequences, or [their] staff are off sick so they cannot complete a new procurement exercise. [They] should publish the modification by way of an OJEU notice to say [they] have relied on regulation 72(1)(c).’ The added difficulty here is that there is no set deadline for the publication of this type of notice. However, there are good reasons to require timely publication and it also seems reasonable to expect compliance with a similar timeframe to the 30 days required for new contracts.

The UK Government and all relevant departments are generally and systemically failing to meet these requirements. This is rather clearly the case of, for example, NHSX’s contract modification/s in relation to the UK COVID-19 dashboard (see here), as no contract modification notice has been published in the Tenders Electronic Daily (TED), to the best of my knowledge, at the time of writing. More generally, The Guardian’s piece reports that a spokesperson for the department of health said that 'publication of contract information is being carried out as quickly as possible in line with government transparency guidelines’ (emphasis added).

Despite the seemingly lenient language in PPN 1/20, the fact that these notices are not being published in a timely manner—and within 30 days from award for new contracts—is a breach of the applicable procurement rules and creates legal risks for the UK Government (though, in practical terms, they are likely to be seen as small because the standing and time limits to challenge, and the available remedies are restricted—on which see a forthcoming post in this blog).

In my view, this constitutes a major infringement by the UK Government and the relevant departments by failing to meet the extremely minimum requirements that procurement law imposes in the context of an extremely urgent situation. This is not only worrying in itself, but also as an indication that there may be a risk that the relevant information is not only not being published, but also not being properly documented and subjected to adequate record-keeping.

Just to be clear, there is no discretionality involved in the decision whether to publish the contract award/modification notice and most of its content is also predetermined, although there are complex clauses aimed at protecting commercially sensitive and other confidential information that could be at play. Remarkably, for ‘new’ contracts awarded under the extreme urgency procurement exemption, reg.50 PCR2015 (and Art 50 Dir 2014/24/EU, in relation to Annex V, part D thereof) requires that the contract award notice ‘in the case of negotiated procedure without prior publication, [includes its] justification.’

Relatedly, reg.84 PCR2015 (and Art 84 Dir 2014/24/EU) establishes the obligation to write up and keep an individual procurement report for each direct award, including in particular ‘for negotiated procedures without prior publication, the circumstances referred to in regulation 32 which justify the use of this procedure’ (84(1)(f)), as well as ‘the name of the successful tenderer and the reasons why its tender was selected’ (84(1)(d)) and, not least important, ‘where applicable, conflicts of interests detected and subsequent measures taken’ (84(1)(i)).

These reports, and the associated notices (which will raise public awareness of their existence) will (or, perhaps, ought to) be the basis for effective ex post oversight and effective accountability of the UK Government and its departments. If the current lack of transparency by means of the relevant notices is an indication of a lack of proper documentation and record-keeping, these would be very bad news for any prospects of a meaningful post-crisis public inquiry into the management of these extraordinary amounts of public funds spent through unregulated procurement. And, in my opinion, should lead to an investigation of the reasons for any such lack of documentation under public law (and perhaps, even criminal law) rules, which discussion exceeds this post.

Excessive reliance on consultancy firms, not only under extreme urgency

The final point worth considering is a more fundamental issue related to the UK Government’s excessive reliance on consultancy firms to make up for the depleted capacity of its civil service after years of austerity, which is a much more worrying long-term trend.

The information on the Government’s reaction to COVID-19 that is slowly emerging is starting to paint a picture of rather extreme outsourcing of strategic and fundamental coordination and operational tasks to consultancy firms. There can be several reasons for that but, in my view and on the basis of the longer term trends I have been observing in UK outsourcing practice, there are two that are probably quite determinative of this approach.

First, the UK public sector, including but not only its civil service, has been constantly eroded and reduced to bare bones capacity, which makes it impossible for it to effectively take over such large tasks at short or no notice. This requires the Government to ‘buy capacity’ where available and almost regardless of the true suitability (ie expertise) or level of readiness of that capability, as *some* capability may be better than none. Moreover, the Government is probably buying capacity without even being able to clearly specify what needs to be done, which would put the relevant services contracts on a ‘best effort’ basis, as the engaged consultant would need to both design and implement the necessary solution. In that context, whether the consultant had or not the relevant expertise and capability can be very difficult to assess, not least because most of the outsourced tasks will be unique and not have a clear precedent against which to benchmark the required expertise and experience. In that context, size matters. As also probably does a successful consultant’s ability to package ill-defined goals into politically-digestible soundbites.

Second, and linked to the above, there seems to be very limited ability (or willingness) on the Government’s commercial function to scrutinise and challenge the promises made by outsourcing firms. The problems in the implementation of the outsourced contracts can in part derive from the complexity of the task and the inexistence of previous preparations—which, in fairness, should have been undertaken by the Government (or its pre-appointed contractors), not by those called upon to plug the hole)—but they are also likely to result from the fact that the consultancy firms did not have the necessary expertise or organisation in place and are likely just developing it as they engage in the provision of the services (or, more plainly, winging it). The extent to which this can lead to a satisfactory outcome in the medium to long-term is debatable, as well as who should shoulder the consultants’ learning costs. However, in cases of acute and extremely urgent needs, this is hardly conducive not only to value for money but, more generally, to an acceptable level of stewardship of the public interest.

The lack of sufficient capacity to directly take on strategic coordination and operational tasks, compounded by the limited capacity to scrutinise the promises made by consultancy companies, is a recipe for disaster. And this is a long-term trend that is particularly difficult to revert, as it generates a self-fulfilling prophecy. I do not hold high hopes for change, as previous recent crises (eg Carillion’s demise) have not really led to significant, meaningful change. However, this is something that will require further research and debate post-crisis. Having a proper and comprehensive public inquiry into all this would be an adequate starting point.

Challenges and Opportunities for UK Procurement During and After the Pandemic

On 30 April, I delivered a webinar on “Challenges and Opportunities for UK Procurement During and After the Pandemic” for the LUPC/SUPC Annual Conference. The slides are available via SlideShare and the recording is available via YouTube (below). Feedback most welcome: a.sanchez-graells@bristol.ac.uk.

LUPC/SUPC Conference 2020 30th April - Webinar 1 Challenges and Opportunities for UK Procurement During and After the COVID-19 Crisis Led by: Professor Alber...

Keeping an eye on Brexit while assessing 'COVID-19 pandemic and international trade' -- written evidence

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The UK House of Commons’ International Trade Committee has an open inquiry into ‘The COVID-19 pandemic and international trade’, to which I submitted written evidence (available in HMTL and in PDF). In short, the document stresses that the extremely likely negative impact of the COVID-19 pandemic for UK businesses trading internationally and for the parts of the UK’s public sector that rely on trading with international suppliers and contractors in the medium- and long-term can only be compounded by the uncertainty surrounding the on-going negotiations of a future UK-EU trade relationship. The single most effective intervention at this stage would be for the Department for International Trade to lead on the negotiations with the EU for a two-year extension of the transition period in conformity with Article 132 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community.

The executive summary of my submission is as follows:

  1. Publicly available UK economic forecasts and surveys are clearly indicating both a very sharp negative economic impact of the COVID-19 crisis during 2020 and longer-term unemployment challenges, as well as a very substantial decline in trade between the UK and third countries.

  2. Most medium- and long-term impacts will be dependent on the severity of the economic crisis to follow the pandemic, both in the UK and abroad. However, there should be little doubt that supply chains will be severely disrupted, at least in the medium-term, and in particular if any relevant trading country needs to enter a second or ulterior period of lockdown.

  3. Given its close trade ties, the UK is particularly exposed to the continuity of its trade with the European Union (EU), which has last been estimated to represent 45% of all UK exports and 53% of all UK imports. The intensity of these trade ties is likely to mean that, given a breakdown of existing supply chains, alternative arrangements available to UK businesses are likely to remain significantly concentrated in the EU and, likewise, UK businesses could take the position of bankrupt or temporarily unavailable suppliers in EU businesses’ supply chains.

  4. Under the current circumstances, the added uncertainty surrounding the on-going negotiations of a future UK-EU trade relationship can only compound the likely negative impact of the COVID-19 pandemic for UK businesses trading internationally and for the UK’s public sector in the medium- and long-term. The uncertainty surrounding the continuity of existing and new supply chain arrangements between the UK and the EU once the transition period ends can have severe chilling effects on UK businesses trading internationally and EU businesses supplying the UK.

  5. Any material change to the trading terms between the UK and the EU is bound to have a very large negative impact for the UK economy. Before Brexit, the UK Government had assessed it at a loss of between 6.7 and 9.3% in GDP level in 15 years compared to staying in the EU. Under the current circumstances, the negative economic impact could be even larger.

  6. The single most effective intervention at this stage would be for the Department for International Trade to lead on the negotiations with the EU for a two-year extension of the transition period under Article 132 of the Agreement on the withdrawal of the United Kingdom from the European Union and the European Atomic Energy Community. Concerns about the UK’s contribution to the EU budget as a result of an extension of the transition period are unwarranted.

  7. Postponing the end of the transition period to 31 December 2022 would create the necessary space not only for the future UK-EU trade relationship to be properly negotiated, but also to avoid adding the pressure of no-deal contingency planning to the already extreme circumstances under which UK businesses trading internationally and the parts of the UK public sector that rely on trading with international suppliers and contractors, are expected to operate post COVID-19.

As mentioned above, my full submission is available in HMTL and in PDF from the Select Committee website.

A tidal wave for (UK) universities IT procurement? -- Some thoughts on post COVID-19 challenges

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All around the world, university campuses have been closed and will remain closed for a while, then reopen and likely close again, then reopen (and repeat for a few iterations), as we transition to a ‘new normal’. The current lockdown and the likelihood of continued social distancing measures for the foreseeable future are putting a lot of pressure on the higher education sector to adapt to ‘online delivery’ in no time and with no proper planning.

This is a massive (almost impossible) task and will require massive investment, whatever dire financial straits higher education institutions have to navigate as a result of the imminent (or current?) economic crisis and Governments’ funding decisions. Without such investment, the sector will not be able to adapt—except in the very few countries where some of these investment were already made. And that investment will have to be channelled through proper (and largely rethought) procurement strategies and processes, which I think require some attention in the very near future.

But, ‘online teaching’ is happening with (almost no) additional investment …

Not really. The fact that the immediate transition into (some sort of) online delivery (of teaching and, in a larger magnitude, meetings) has not (yet) required such massive investment in the higher education context is just a matter of luck. In particular in the case of the UK, with which I am most familiar (and which is likely to be rather similar to most in other developed countries), universities have a completely inadequate IT infrastructure to support working from home and online teaching and research. The situation can only be worse elsewhere. However, the shortcomings of the IT infrastructure are largely hidden behind the private investment in IT infrastructure by the (UK) higher education workforce.

More generally, the entire transition to the online environment is currently unsustainably relying on individual resources and creativity. I half-joked about the challenges of working from home on twitter, but the serious fact is that large proportions of the academic and professional services communities do not have an adequate work space at home or, for that matter, adequate IT equipment. Issues of space and office furniture may well be nigh impossible to fix (except, perhaps, better chairs), but an improvement on the current IT shortcomings will certainly be necessary sooner rather than later.

Right now, I am writing this blog post on my personal computer—from which I have also been lecturing, attending endless meetings and completing some research tasks (to the limited extent my current circumstances allow). My university (desktop) computer is gathering dust in my office. My laptop was bought a few years ago and is giving worrying signs of likely malfunctioning (please, remember to back up your hard disk!). I have no certainty that I will remain able to do my job if my laptop goes. Moreover, my laptop is struggling with the increased demands of advanced videoconferencing software and the larger amounts of information to be uploaded and downloaded from the cloud. It was simply never intended for this intense use and its technical specs are likely insufficient for some software I will likely need to use if all my teaching goes online in a more serious manner for next academic year.

If my laptop goes or at some point proves unfit for purpose, what should I do? I could try to buy another one online from my own pocket and hope it gets delivered soon enough (as dealing with emails on my phone will definitely not do my eyes and hands any favours), but should I? Or is this now the obligation of my employer? I think the latter, as ‘my’ laptop is no longer something I marginally use for work (eg when travelling to conferences) or as a convenient way of time shifting (to try to minimise time in the office as much as possible in search of a better life/work balance), but is mainly dedicated to my personal use. Right now, my laptop is the bit if University IT architecture that keeps me connected and working from home.

My impression is that the same is true for a vast majority of the (UK) higher education workforce, as most members of staff have not been given laptops or other equipment. The unsustainability of the situation creates an impending tidal wave of IT procurement for (UK) universities.

Challenge and opportunity in post COVID-19 IT procurement for HE institutions

As ‘online higher education’ (in whatever form, including blended, flexible and any other labelled models) becomes the ‘new normal’, universities will have to make sure all members of staff have adequate IT equipment (and internet connections, energy supply, etc, but that is a can of worms on its own). This will require all sorts of measures, from moving existing desktop computers to private homes in the shorter term, to heavily investing in a transition to portable IT hardware (probably not the right label) for all staff—including the possibility of emergency deliveries for those situations (and there will be a few) where the existing (privately owned) laptops, routers and other kit stop functioning the day before the most important event (usually a student-facing one, of course).

The challenge will not only be in funding this, which will itself be difficult. The challenge will be in procuring all this IT equipment sustainably. And this challenge comes with a big opportunity for the development of a (more) sustainable IT landscape in the higher education sector (and elsewhere).

The point of departure, I think, should be a reassessment of the technical specs required for adequate working from home activities, depending on the specific activities to be carried out by each member of staff. Some will have extremely demanding requirements (eg if they have to run VR based activities, such as lab replacement work, or have to run heavy duty big data analysis software), whereas others (most of the law academics, eg) will just require basic functionalities for quality videoconferencing, email and cloud storage. The specs should include some leeway to future-proof investments, but should not be such that we are all given flashy top-end laptops with more computing power than we could possibly use.

To my mind, another point of departure should be that the new investment will have to have the smallest possible environmental impact. This means that the strategy should start by reallocating existing IT equipment, continue by acquiring refurbished equipment and, only where nothing else is available, acquire new equipment—all of it having a clear view of life cycle impacts and, in particular, recyclability at the end of expected use life. On the contrary, if all newly required IT equipment was bought new, this could create a significant negative environmental impact in the transition to the ‘online new normal’ of higher education (and other sectors). It must be avoided.

Finally, this also creates an opportunity to undo the shortsighted cuts in IT support that some higher education institutions have been implementing, as well as develop new capacity that could generate teaching and research synergies. Universities are complex institutions and there seems to be certainly a lot to teach and research about how they design, create, revise, adapt, maintain and dispose of their IT infrastructures and equipment. I am sure some engineering departments could make great contributions to the improvement of the system if some tasks where reconsidered and, in particular, brought back from the myriad outsourcing arrangements currently in place.