In May 2021, the European Commission published its report on the ‘Implementation and best practices of national procurement policies in the Internal Market’ (the ‘2021 report’). The 2021 report aggregates the national reports sent by Member States in discharge of specific reporting obligations contained in the 2014 Public Procurement Package and offers some insight into the teething issues resulting from its transposition—which may well have become structural issues. In this post, I offer some thoughts on the contents of the 2021 report.
Better late than never?
Before getting to the details of the 2021 report, the first thing to note is the very significant delay in the publication of this information and analysis, as the 2021 report refers to the implementation and practice of procurement covered by the Directives in 2017. The original national reports seem to have been submitted by the Member States (plus Norway, minus Austria for some unexplained reason) in 2018.
Given the limited analysis conducted in the 2021 report, one can wonder why it took the Commission so long. There may be some explanation in the excuses recently put forward to the European Parliament for the continued delay (almost 2 and a half years, and counting) in reporting on the economic effect of the 2014 rules, although that is less than persuasive. Moreover, given that the reporting obligation incumbent on the Member States is triggered every three years, in 2021 we should be having fresh data and analysis of the national reports covering the period 2018-2020 … Oh well, let’s work with what we have.
A missing data (stewardship) nightmare
The 2021 report provides painful evidence of the lack of reliable procurement data in 2017. Nothing new there, sadly—although the detail of the data inconsistencies, including Member States reporting ‘above threshold procurement’ data that differs from what can be extracted from TED (page 4), really should raise a few red flags and prompt a few follow-up questions from the Commission … the open-ended commitment to further investigation (page 4) sounding as too little, too late.
The main issue, though, is that this problem is unlikely to have been solved yet. While there is some promise in the forthcoming implementation of new eForms (to start being used between Nov 2022 and no later than Oct 2023), the broader problem of ensuring uniformity of data collection and (more) timely reporting is likely to remain. It is also surprising to see that the Commission considers that the collection of ‘above threshold’ procurement data is voluntary for Member States (fn 5), when Art 85(1) places them under an obligation to provide ‘missing statistical information’ where it cannot be extracted from (TED) notices.
So, from a governance perspective (and leaving aside the soft, or less, push towards the implementation of OCDS standards in different Member States), it seems that the Commission and the Member States are both happy to just keeping shrugging their shoulders at each other when it comes to the incompleteness and low quality of procurement data. May it be time for the Commission to start enforcing reporting obligations seriously and with adequate follow-ups? Or should we wait to the (2024?) second edition of the implementation report to decide to do something then — although it will then be quite tempting to say that we need to wait and see what effect the (delayed?) adoption of the eForms generates. So maybe in light of the (2027?) third edition of the report?
Lack of capability, and ‘Most frequent sources of wrong application or of legal uncertainty’
The 2021 report includes a section on the reported most frequent sources of incorrect application of the 2014 rules, or perceived areas of legal uncertainty. This section, however, starts with a list of issues that rather point to a shortfall of capabilities in the procurement workforce in (some?) Member States. Again, while the Commission’s work on procurement professionalisation may have slightly changed the picture, this is primarily a matter for Member State investment. And in the current circumstances, it seems difficult to see how the post-pandemic economic recovery funds that are being channeled through procurement can be effectively spent where there are such staffing issues.
The rest of the section includes some selected issues posing concrete interpretation or practical implementation difficulties, such as the calculation of threshold values, the rules on exclusion and the rules on award criteria. While these are areas that will always generate some practical challenges, these are not the areas where the 2014 Package generated most change (certainly not on thresholds) and the 2021 report then seems to keep raising structural issues. The same can be said of the generalised preference for the use of lowest price, the absence of market research and engagement, the imposition of unrealistically short tendering deadlines implicit in rushed procurement, or the arbitrary use of selection criteria.
All of this does not bode well for the ‘strategic use’ of procurement (more below) and it seems like the flexibility and potential for process-based innovation of the 2014 rules (as was that of the 2004 rules?) are likely to remain largely unused, thus triggering poor procurement practices later to fuel further claims for flexibilisation and simplification in the next round of revision. On that note, I cannot refrain from pointing to the UK’s recent green paper on the ‘Transformation of Public Procurement’ as a clear example of the persistence of some procurement myths that remain in the collective imagery despite a lack of engagement with recent legislative changes aimed at debunking them (see here, here, and here for more analysis).
Fraud, corruption, conflict of interest and serious irregularities
The 2021 report then has a section that would seem rather positive and incapable of controversy at first sight, as it presents (laudable) efforts at Member State level to create robust anti-fraud and anti-corruption institutions, as well as implementations of rules on conflict of interest that exceed the EU minimum standard, and the development of sophisticated approaches to the prevention and detection of collusion in procurement. Two comments come to mind here.
The first one is that the treatment of conflicts of interest in the Directive clearly requires the development of further rules at domestic level and that the main issue is not whether the statutes contain suitable definitions, but whether conflicts of interest are effectively screened and (more importantly), reacted to. In that regard, it would be interesting to know, for example, how many decisions finding a non-solvable conflict of interest have led to the exclusion of tenderers at Member State level since the new rules came into force. If anyone wanted to venture an estimate, I would not expect it to be in the 1000s.
The second comment is that the picture that the 2021 report paints about the (2017) development of anti-collusion approaches at Member State level (page 7) puts a large question mark on the need for the recent Notice on tools to fight collusion in public procurement and on guidance on how to apply the related exclusion ground (see comments here). If the Member States were already taking action, why did the (contemporaneous) 2017 Communication on ‘Making public procurement work in and for Europe’ (see here) include a commitment to ‘… develop tools and initiatives addressing this issue and raising awareness to minimise the risks of collusive behaviours on procurement markets. This will include actions to improve the market knowledge of contracting authorities, support to contracting authorities careful planning and design of procurement processes and better cooperation and exchange of information between public procurement and competition authorities. The Commission will also prepare guidelines on the application of the new EU procurement directives on exclusion grounds on collusion.’ Is the Commission perhaps failing to recognise that the 2014 rules, and in particular the new exclusion ground for contemporaneous collusion, created legal uncertainty and complicated the practical application of the emerging domestic practices?
Moreover, the 2021 report includes a relatively secondary comment that the national reports ‘show that developing and applying means for the quantitative assessment of collusion risks in award procedures, mostly in the form of risk indicators, remains a challenge’. This is a big understatement and the absence of (publicly-known?) work by the Commission itself on the development of algorithmic screening for collusion detection purposes can only be explained away by the insufficiency of the existing data (which killed off eg a recent effort in the UK), which brings us back to the importance of stronger data stewardship if some of the structural issues are to be resolved (or started to be resolved) any time soon.
SMEs
There is also little about SME access to procurement in the 2021 report, mainly due to limited data provided in the national reports (so, again, another justification for a tougher approach to data collection and reporting). However, there are a couple of interesting qualitative issues. The first one is that ‘only a limited number of Member States have explicitly mentioned challenges encountered by SMEs in public procurement’ (page 7), which raises some questions about the extent to which SME-centric policy issues rank equally high at EU and at national level (which can be relevant in terms of assessing e.g. the also very recent Report on SME needs in public procurement (Feb 2021, but published July 2021). The second one is that the few national strategies seeking to boost SME participation in procurement concern programmes aimed at increasing interactions between SMEs and contracting authorities at policy and practice design level, as well as training for SMEs. What those programmes have in common is that they require capability and resources to be dedicated to the SME procurement policy. Given the shortcomings evidenced in the 2021 report (above), it should be no wonder that most Member States do not have the resources to afford them.
Green, social & Innovation | ‘strategic procurement’
Not too dissimilarly, the section on the uptake of ‘strategic procurement’ also points at difficulties derived from limited capability or understanding of these issues amongst public buyers, as well as the perception (at least for green procurement) that it can be detrimental to SME participation. There is also repeated reference to lack of clarity of the rules and risks of litigation — both of which are in the end dependent on procurement capability, at least to a large extent.
All of this is particularly important, not only because it reinforces the difficulties of conducting complex or sophisticated procurement procedures that exceed the capability (either in terms of skill or, probably more likely, available time) of the procurement workforce, but also because it once again places some big question marks on the feasibiity of implementing some of the tall asks derived from eg the new green procurement requirements that can be expected to follow from the European Green Deal.
Overal thoughts
All of this leads me to two, not in the least original or groundbreaking, thoughts. First, that procurement data is an enabler of policies and practices (clearly of those supported by digital technologies, but not only) which absence significantly hinders the effectiveness of the procurement function. Second, that there is a systemic and long-lasting underinvestment in procurement capability in (most) Member States — about which there is little the European Commission can do — which also significantly hinders the effectiveness of the procurement function.
So, if the current situation is to be changed, a bold and aggressive plan of investment in an enabling data architecture and legal-commercial (and technical) capability is necessary. Conversely, until (or unless) that happens, all plans to use procurement to prop up or reactivate the economy post-pandemic and, more importantly, to face the challenges of the climate emergency are likely to be of extremely limited practical relevance due to failures in their implementation. The 2021 report clearly supports aggressive action on both fronts (even if it refers to the situation in 2017, the problems are very much still current). Will it be taken?