Articulating the public interest in procurement law and policy

Earlier this year, I had some very interesting conversations with Bristol colleagues about the relationship between law, regulation, and the public interest. These conversations led to a series of blog posts that are being published in our Law School blog.

This prompted me to think a bit more in detail about how the public interest is articulated in public procurement law and policy. Eventually, I wrote a draft paper based on the review of procurement goals embedded in the UK’s new Procurement Act 2023, which will enter into force next month (on 28 October 2023).

I presented the paper at the SLS conference today (the slides are available here) and had some initial positive feedback. I would be interested in additional feedback before I submit it for peer review.

As always, comments warmly welcome: a.sanchez-graells@bristol.ac.uk. The abstract is as follows:

In this paper, I explore the notion of public interest embedded in the Procurement Act 2023. I use this new piece of legislation as a contemporary example of the difficulty in designing a 'public interest centred' system of public procurement regulation. I show how a mix of explicit, referential, and implicit public interest objectives results in a situation where there are multiple sources of objectives contracting authorities need to consider in their decision-making, but there is no prioritisation of sources or objectives. I also show that, despite this proliferation of sources and objectives and due to the unavailability of effective means of judicial challenge or administrative oversight, contracting authorities retain almost unlimited discretion to shape the public interest and 'what it looks like' in relation to the award of each public contract. I conclude with a reflection the need to reconsider the ways in which public procurement can foster the public interest, in light of its limitations as a regulatory tool.

Final EU model contractual AI Clauses available -- some thoughts on regulatory tunnelling

Source: https://tinyurl.com/mrx9sbz8.

The European Commission has published the final version of the EU model contractual AI clauses to pilot in procurements of AI, which have been ‘developed for pilot use in the procurement of AI with the aim to establish responsibilities for trustworthy, transparent, and accountable development of AI technologies between the supplier and the public organisation.’

The model AI clauses have been developed by reference to the (future) obligations arising from the EU AI Act currently under advanced stages of negotiation. This regulatory technique simply seeks to allow public buyers to ensure compliance with the EU AI Act by cascading the relevant obligations and requirements down to tech providers (largely on a back to back basis). By the same regulatory logic, this technique will be a conveyor belt for the shortcomings of the EU AI Act, which will be embedded in public contracts using the clauses. It is thus important to understand the shortcomings inherent to this approach and to the model AI clauses, before assuming that their use will actually ensure the ‘trustworthy, transparent, and accountable development [and deployment] of AI technologies’. Much more is needed than mere reliance on the model AI clauses.

Two sets of model AI clauses

The EU AI Act will not be applicable to all types of AI use. Remarkably, most requirements will be limited to ‘high-risk AI uses’ as defined in its Article 6. This immediately translates into the generation of two sets of model AI clauses: one for ‘high-risk’ AI procurement, which embeds the requirements expected to arise from the EU AI Act once finalised, and another ‘light version’ for non-high-risk AI procurement, which would support the voluntary extension of some of those requirements to the procurement of AI for other uses, or even to the use of other types of algorithmic solutions not meeting the regulatory definition of AI.

A first observation is that the controversy surrounding the definition of ‘high-risk’ in the EU AI Act immediately carries over to the model AI clauses and to the choice of ‘demanding’ vs light version. While the original proposal of the EU AI Act contained a numerus clausus of high-risk uses (which was already arguably too limited, see here), the trilogue negotiations could well end suppressing a pre-defined classification and leaving it to AI providers to (self)assess whether the use would be ‘high-risk’.

This has been heavily criticised in a recent open letter. If the final version of the EU AI Act ended up embedding such a self-assessment of what uses are bound to be high-risk, there would be clear risks of gaming of the self-assessment to avoid compliance with the heightened obligations under the Act (and it is unclear that the system of oversight and potential fines foreseen in the EU AI Act would suffice to prevent this). This would directly translate into a risk of gaming (or strategic opportunism) in the choice between ‘demanding’ vs light version of the model AI clauses by public buyers as well.

As things stand today, it seems that most procurement of AI will be subject to the light version of the model AI clauses, where contracting authorities will need to decide which clauses to use and which standards to refer to. Importantly, the light version does not include default options in relation to quality management, conformity assessments, corrective actions, inscription in an AI register, or compliance and audit (some of which are also optional under the ‘demanding’ model). This means that, unless public buyers are familiar with both sets of model AI clauses, taking the light version as a starting point already generates a risk of under-inclusiveness and under-regulation.

Limitations in the model AI clauses

The model AI clauses come with some additional ‘caveat emptor’ warnings. As the Commission has stressed in the press release accompanying the model AI clauses:

The EU model contractual AI clauses contain provisions specific to AI Systems and on matters covered by the proposed AI Act, thus excluding other obligations or requirements that may arise under relevant applicable legislation such as the General Data Protection Regulation. Furthermore, these EU model contractual AI clauses do not comprise a full contractual arrangement. They need to be customized to each specific contractual context. For example, EU model contractual AI clauses do not contain any conditions concerning intellectual property, acceptance, payment, delivery times, applicable law or liability. The EU model contractual AI clauses are drafted in such a way that they can be attached as a schedule to an agreement in which such matters have already been laid down.

This is an important warning, as the sole remit of the model AI clauses links back to the EU AI Act and, in the case of the light version, only partially.

the link between model AI clauses and standards

However, the most significant shortcoming of the model AI clauses is that, by design, they do not include any substantive or material constraints or requirements on the development and use of AI. All substantive obligations are meant to be incorporated by reference to the (harmonised) standards to be developed under the EU AI Act, other sets of standards or, more generally, the state-of-the-art. Plainly, there is no definition or requirement in the model AI clauses that establishes the meaning of eg trustworthiness—and there is thus no baseline safety net ensuring it. Similarly, most requirements are offloaded to (yet to emerge) standards or the technical and organisational measures devised by the parties. For example,

• Obligations on record-keeping (Art 5 high-risk model) refer to capabilities conforming ‘to state of the art and, if available, recognised standards or common specifications. <Optional: add, if available, a specific standard>’.

• Measures to ensure transparency (Art 6 high-risk model) are highly qualified: ‘The Supplier ensures that the AI System has been and shall be designed and developed in such a way that the operation of the AI System is sufficiently transparent to enable the Public Organisation to reasonably understand the system’s functioning’. Moreover, the detail of the technical and organisational measures that need to be implemented to reach those (qualified) goals is left entirely undefined in the relevant Annex (E) — thus leaving the option open for referral to emerging transparency standards.

• Measures on human oversight (Art 7 high-risk model) are also highly qualified: ‘The Supplier ensures that the AI System has been and shall be designed and developed in such a way, including with appropriate human-machine interface tools, that it can be effectively overseen by natural persons as proportionate to the risks associated with the system’. Although there is some useful description of what ‘human oversight’ should mean as a minimum (Art 7(2)), the detail of the technical and organisational measures that need to be implemented to reach those (qualified) goals is also left entirely undefined in the relevant Annex (F) — thus leaving the option open for referral to emerging ‘human on the loop’ standards.

• Measures on accuracy, robustness and cybersecurity (Art 8 high-risk model) follow the same pattern. Annexes G and H on levels of accuracy and on measures to ensure an appropriate level of robustness, safety and cybersecurity are also blank. While there can be mandatory obligations stemming from other sources of EU law (eg the NIS 2 Directive), only partial aspects of cybersecurity will be covered, and not in all cases.

• Measures on the ‘explainability’ of the AI (Art 13 high-risk model) fall short of imposing an absolute requirement of intelligibility of the AI outputs, as the focus is on a technical explanation, rather than a contextual or intuitive explanation.

All in all, the model AI clauses are primarily an empty regulatory shell. Operationalising them will require reliance on (harmonised) standards—eg on transparency, human oversight, accuracy, explainability … — or, most likely (at least until such standards are in place) significant additional concretisation by the public buyer seeking to rely on the model AI clauses.

For the reasons identified in my previous research, I think this is likely to generate regulatory tunnelling and to give the upper hand to AI providers in making sure they can comfortably live with requirements in any specific contract. The regulatory tunnelling stems from the fact that all meaningful requirements and constraints are offloaded to the (harmonised) standards to be developed. And it is no secret that the governance of the standardisation process falls well short of ensuring that the resulting standards will embed high levels of protection of the desired regulatory goals — some of which are very hard to define in ways that can be translated into procurement or contractual requirements anyway.

Moreover, public buyers with limited capabilities will struggle to use the model AI clauses in ways that meaningfully ‘establish responsibilities for trustworthy, transparent, and accountable development [and deployment] of AI technologies’—other than in relation to those standards. My intuition is that the content of the all too relevant schedules in the model AI clauses will either simply refer to emerging standards or where there is no standard or the standard is for whatever reason considered inadequate, be left for negotiation with tech providers, or be part of the evaluation (eg tenderers will be required to detail how they propose to regulate eg accuracy). Whichever way this goes, this puts the public buyer in a position of rule-taker.

Only very few, well-resourced, highly skilled public buyers (if any) would be able to meaningfully flesh out a comprehensive set of requirements in the relevant annexes to give the model AI clauses sufficient bite. And they would not benefit much from the model AI clauses as it is unlikely that in their sophistication they would not have already come up with similar solutions. Therefore, at best, the contribution of the model AI clauses is rather marginal and, at worse, it comes with a significant risk of regulatory complacency.

final thoughts

indeed, given all of this, it is clear that the model IA clauses generate a risk if (non-sophisticated/most) public buyers think that relying on them will deal with the many and complex challenges inherent to the acquisition of AI. And an even bigger risk if we collectively think that the existence of such model AI clauses is all the regulation of AI procurement we need. This is not a criticism of the clauses in themselves, but rather of the technique of ‘regulation by contract’ that underlies it and of the broader approach followed by the European Commission and other regulators (including the UK’s)!

I have demonstrated how this is a flawed regulatory strategy in my forthcoming book Digital Technologies and Public Procurement. Gatekeeping and Experimentation in Digital Public Governance (OUP) and in many working papers resulting from the project with the same title. In my view, we need to do a lot more if we want to make sure that the public sector only procures and uses trustworthy AI technologies. We need to create a regulatory system that assigns to an independent authority both the permissioning of the procurement of AI and the certification of the standards underpinning such procurement. In the absence of such regulatory developments, we cannot meaningfully claim that the procurement of AI will be in line with the values and goals to be expected from ‘responsible’ AI use.

I will further explore these issues in a public lecture on 23 November 2023 at University College London. All welcome: Hybrid | Responsibly Buying Artificial Intelligence: A Regulatory Hallucination? | UCL Faculty of Laws - UCL – University College London.

Digital procurement, PPDS and multi-speed datafication -- some thoughts on the March 2023 PPDS Communication

The 2020 European strategy for data ear-marked public procurement as a high priority area for the development of common European data spaces for public administrations. The 2020 data strategy stressed that

Public procurement data are essential to improve transparency and accountability of public spending, fighting corruption and improving spending quality. Public procurement data is spread over several systems in the Member States, made available in different formats and is not easily possible to use for policy purposes in real-time. In many cases, the data quality needs to be improved.

To address those issues, the European Commission was planning to ‘Elaborate a data initiative for public procurement data covering both the EU dimension (EU datasets, such as TED) and the national ones’ by the end of 2020, which would be ‘complemented by a procurement data governance framework’ by mid 2021.

With a 2+ year delay, details for the creation of the public procurement data space (PPDS) were disclosed by the European Commission on 16 March 2023 in the PPDS Communication. The procurement data governance framework is now planned to be developed in the second half of 2023.

In this blog post, I offer some thoughts on the PPDS, its functional goals, likely effects, and the quickly closing window of opportunity for Member States to support its feasibility through an ambitious implementation of the new procurement eForms at domestic level (on which see earlier thoughts here).

1. The PPDS Communication and its goals

The PPDS Communication sets some lofty ambitions aligned with those of the closely-related process of procurement digitalisation, which the European Commission in its 2017 Making Procurement Work In and For Europe Communication already saw as not only an opportunity ‘to streamline and simplify the procurement process’, but also ‘to rethink fundamentally the way public procurement, and relevant parts of public administrations, are organised … [to seize] a unique chance to reshape the relevant systems and achieve a digital transformation’ (at 11-12).

Following the same rhetoric of transformation, the PPDS Communication now stresses that ‘Integrated data combined with the use of state-of the-art and emerging analytics technologies will not only transform public procurement, but also give new and valuable insights to public buyers, policy-makers, businesses and interested citizens alike‘ (at 2). It goes further to suggest that ‘given the high number of ecosystems concerned by public procurement and the amount of data to be analysed, the impact of AI in this field has a potential that we can only see a glimpse of so far‘ (at 2).

The PPDS Communication claims that this data space ‘will revolutionise the access to and use of public procurement data:

• It will create a platform at EU level to access for the first time public procurement data scattered so far at EU, national and regional level.

• It will considerably improve data quality, availability and completeness, through close cooperation between the Commission and Member States and the introduction of the new eForms, which will allow public buyers to provide information in a more structured way.

• This wealth of data will be combined with an analytics toolset including advanced technologies such as Artificial Intelligence (AI), for example in the form of Machine Learning (ML) and Natural Language Processing (NLP).’

A first comment or observation is that this rhetoric of transformation and revolution not only tends to create excessive expectations on what can realistically be delivered by the PPDS, but can also further fuel the ‘policy irresistibility’ of procurement digitalisation and thus eg generate excessive experimentation or investment into the deployment of digital technologies on the basis of such expectations around data access through PPDS (for discussion, see here). Policy-makers would do well to hold off on any investments and pilot projects seeking to exploit the data presumptively pooled in the PPDS until after its implementation. A closer look at the PPDS and the significant roadblocks towards its full implementation will shed further light on this issue.

2. What is the PPDS?

Put simply, the PPDS is a project to create a single data platform to bring into one place ‘all procurement data’ from across the EU—ie both data on above threshold contracts subjected to mandatory EU-wide publication through TED (via eForms from October 2023), and data on below threshold contracts, which publication may be required by the domestic laws of the Member States, or entirely voluntary for contracting authorities.

Given that above threshold procurement data is already (in the process of being) captured at EU level, the PPDS is very much about data on procurement not covered by the EU rules—which represents 80% of all public procurement contracts. As the PPDS Communication stresses

To unlock the full potential of public procurement, access to data and the ability to analyse it are essential. However, data from only 20% of all call for tenders as submitted by public buyers is available and searchable for analysis in one place [ie TED]. The remaining 80% are spread, in different formats, at national or regional level and difficult or impossible to re-use for policy, transparency and better spending purposes. In order (sic) words, public procurement is rich in data, but poor in making it work for taxpayers, policy makers and public buyers.

The PPDS thus intends to develop a ‘technical fix’ to gain a view on the below-threshold reality of procurement across the EU, by ‘pulling and pooling’ data from existing (and to be developed) domestic public contract registers and transparency portals. The PPDS is thus a mechanism for the aggregation of procurement data currently not available in (harmonised) machine-readable and structured formats (or at all).

As the PPDS Communication makes clear, it consists of four layers:
(1) A user interface layer (ie a website and/or app) underpinned by
(2) an analytics layer, which in turn is underpinned by (3) an integration layer that brings together and minimally quality-assures the (4) data layer sourced from TED, Member State public contract registers (including those at sub-national level), and data from other sources (eg data on beneficial ownership).

The two top layers condense all potential advantages of the PPDS, with the analytics layer seeking to develop a ‘toolset including emerging technologies (AI, ML and NLP)‘ to extract data insights for a multiplicity of purposes (see below 3), and the top user interface seeking to facilitate differential data access for different types of users and stakeholders (see below 4). The two bottom layers, and in particular the data layer, are the ones doing all the heavy lifting. Unavoidably, without data, the PPDS risks being little more than an empty shell. As always, ‘no data, no fun’ (see below 5).

Importantly, the top three layers are centralised and the European Commission has responsibility (and funding) for developing them, while the bottom data layer is decentralised, with each Member State retaining responsibility for digitalising its public procurement systems and connecting its data sources to the PPDS. Member States are also expected to bear their own costs, although there is EU funding available through different mechanisms. This allocation of responsibilities follows the limited competence of the EU in this area of inter-administrative cooperation, which unfortunately heightens the risks of the PPDS becoming little more than an empty shell, unless Member States really take the implementation of eForms and the collaborative approach to the construction of the PPDS seriously (see below 6).

The PPDS Communication foresees a progressive implementation of the PPDS, with the goal of having ‘the basic architecture and analytics toolkit in place and procurement data published at EU level available in the system by mid-2023. By the end of 2024, all participating national publication portals would be connected, historic data published at EU level integrated and the analytics toolkit expanded. As of 2025, the system could establish links with additional external data sources’ (at 2). It will most likely be delayed, but that is not very important in the long run—especially as the already accrued delays are the ones that pose a significant limitation on the adequate rollout of the PPDS (see below 6).

3. PPDS’ expected functionality

The PPDS Communication sets expectations around the functionality that could be extracted from the PPDS by different agents and stakeholders.

For public buyers, in addition to reducing the burden of complying with different types of (EU-mandated) reporting, the PPDS Communication expects that ‘insights gained from the PPDS will make it much easier for public buyers to

• team up and buy in bulk to obtain better prices and higher quality;

• generate more bids per call for tenders by making calls more attractive for bidders, especially for SMEs and start-ups;

• fight collusion and corruption, as well as other criminal acts, by detecting suspicious patterns;

• benchmark themselves more accurately against their peers and exchange knowledge, for instance with the aim of procuring more green, social and innovative products and services;

• through the further digitalisation and emerging technologies that it brings about, automate tasks, bringing about considerable operational savings’ (at 2).

This largely maps onto my analysis of likely applications of digital technologies for procurement management, assuming the data is there (see here).

The PPDS Communication also expects that policy-makers will ‘gain a wealth of insights that will enable them to predict future trends‘; that economic operators, and SMEs in particular, ‘will have an easy-to-use portal that gives them access to a much greater number of open call for tenders with better data quality‘, and that ‘Citizens, civil society, taxpayers and other interested stakeholders will have access to much more public procurement data than before, thereby improving transparency and accountability of public spending‘ (at 2).

Of all the expected benefits or functionalities, the most important ones are those attributed to public buyers and, in particular, the possibility of developing ‘category management’ insights (eg potential savings or benchmarking), systems of red flags in relation to corruption and collusion risks, and the automation of some tasks. However, unlocking most of these functionalities is not dependent on the PPDS, but rather on the existence of procurement data at the ‘right’ level.

For example, category management or benchmarking may be more relevant or adequate (as well as more feasible) at national than at supra-national level, and the development of systems of red flags can also take place at below-EU level, as can automation. Importantly, the development of such functionalities using pan-EU data, or data concerning more than one Member State, could bias the tools in a way that makes them less suited, or unsuitable, for deployment at national level (eg if the AI is trained on data concerning solely jurisdictions other than the one where it would be deployed).

In that regard, the expected functionalities arising from PPDS require some further thought and it can well be that, depending on implementation (in particular in relation to multi-speed datafication, as below 5), Member States are better off solely using domestic data than that coming from the PPDS. This is to say that PPDS is not a solid reality and that its enabling character will fluctuate with its implementation.

4. Differential procurement data access through PPDS

As mentioned above, the PPDS Communication stresses that ‘Citizens, civil society, taxpayers and other interested stakeholders will have access to much more public procurement data than before, thereby improving transparency and accountability of public spending’ (at 2). However, this does not mean that the PPDS will be (entirely) open data.

The Communication itself makes clear that ‘Different user categories (e.g. Member States, public buyers, businesses, citizens, NGOs, journalists and researchers) will have different access rights, distinguishing between public and non-public data and between participating Member States that share their data with the PPDS (PPDS members, …) and those that need more time to prepare’ (at 8). Relatedly, ‘PPDS members will have access to data which is available within the PPDS. However, even those Member States that are not yet ready to participate in the PPDS stand to benefit from implementing the principles below, due to their value for operational efficiency and preparing for a more evidence-based policy’ (at 9). This raises two issues.

First, and rightly, the Communication makes clear that the PPDS moves away from a model of ‘fully open’ or ‘open by default’ procurement data, and that access to the PPDS will require differential permissioning. This is the correct approach. Regardless of the future procurement data governance framework, it is clear that the emerging thicket of EU data governance rules ‘requires the careful management of a system of multi-tiered access to different types of information at different times, by different stakeholders and under different conditions’ (see here). This will however raise significant issues for the implementation of the PPDS, as it will generate some constraints or disincentives for an ambitions implementation of eForms at national level (see below 6).

Second, and less clearly, the PPDS Communication evidences that not all Member States will automatically have equal access to PPDS data. The design seems to be such that Member States that do not feed data into PPDS will not have access to it. While this could be conceived as an incentive for all Member States to join PPDS, this outcome is by no means guaranteed. As above (3), it is not clear that Member States will be better off—in terms of their ability to extract data insights or to deploy digital technologies—by having access to pan-EU data. The main benefit resulting from pan-EU data only accrues collectively and, primarily, by means of facilitating oversight and enforcement by the European Commission. From that perspective, the incentives for PPDS participation for any given Member State may be quite warped or internally contradictory.

Moreover, given that plugging into PPDS is not cost-free, a Member State that developed a data architecture not immediately compatible with PPDS may well wonder whether it made sense to shoulder the additional costs and risks. From that perspective, it can only be hoped that the existence of EU funding and technical support will be maximised by the European Commission to offload that burden from the (reluctant) Member States. However, even then, full PPDS participation by all Member States will still not dispel the risk of multi-speed datafication.

5. No data, no fun — and multi-speed datafication

Related to the risk that some EU Member States will become PPDS members and others not, there is a risk (or rather, a reality) that not all PPDS members will equally contribute data—thus creating multi-speed datafication, even within the Member States that opt in to the PPDS.

First, the PPDS Communication makes it clear that ‘Member States will remain in control over which data they wish to share with the PPDS (beyond the data that must be published on TED under the Public Procurement Directives)‘ (at 7), It further specifies that ‘With the eForms, it will be possible for the first time to provide data in notices that should not be published, or not immediately. This is important to give assurance to public buyers that certain data is not made publicly available or not before a certain point in time (e.g. prices)’ (at 7, fn 17).

This means that each Member State will only have to plug whichever data it captures and decides to share into PPDS. It seems plain to see that this will result in different approaches to data capture, multiple levels of granularity, and varying approaches to restricting access to the date in the different Member States, especially bearing in mind that ‘eForms are not an “off the shelf” product that can be implemented only by IT developers. Instead, before developers start working, procurement policy decision-makers have to make a wide range of policy decisions on how eForms should be implemented’ in the different Member States (see eForms Implementation Handbook, at 9).

Second, the PPDS Communication is clear (in a footnote) that ‘One of the conditions for a successful establishment of the PPDS is that Member States put in place automatic data capture mechanisms, in a first step transmitting data from their national portals and contract registers’ (at 4, fn 10). This implies that Member States may need to move away from manually inputted information and that those seeking to create new mechanisms for automatic procurement data capture can take an incremental approach, which is very much baked into the PPDS design. This relates, for example, to the distinction between pre- and post-award procurement data, with pre-award data subjected to higher demands under EU law. It also relates to above and below threshold data, as only above threshold data is subjected to mandatory eForms compliance.

In the end, the extent to which a (willing) Member State will contribute data to the PPDS depends on its decisions on eForms implementation, which should be well underway given the October 2023 deadline for mandatory use (for above threshold contracts). Crucially, Member States contributing more data may feel let down when no comparable data is contributed to PPDS by other Member States, which can well operate as a disincentive to contribute any further data, rather than as an incentive for the others to match up that data.

6. Ambitious eForms implementation as the PPDS’ Achilles heel

As the analysis above has shown, the viability of the PPDS and its fitness for purpose (especially for EU-level oversight and enforcement purposes) crucially depends on the Member States deciding to take an ambitious approach to the implementation of eForms, not solely by maximising their flexibility for voluntary uses (as discussed here) but, crucially, by extending their mandatory use (under national law) to all below threshold procurement. It is now also clear that there is a need for as much homogeneity as possible in the implementation of eForms in order to guarantee that the information plugged into PPDS is comparable—which is an aspect of data quality that the PPDS Communication does not seem to have at all considered).

It seems that, due to competing timings, this poses a bit of a problem for the rollout of the PPDS. While eForms need to be fully implemented domestically by October 2023, the PPDS Communication suggests that the connection of national portals will be a matter for 2024, as the first part of the project will concern the top two layers and data connection will follow (or, at best, be developed in parallel). Somehow, it feels like the PPDS is being built without a strong enough foundation. It would be a shame (to put it mildly) if Member States having completed a transition to eForms by October 2023 were dissuaded from a second transition into a more ambitious eForms implementation in 2024 for the purposes of the PPDS.

Given that the most likely approach to eForms implementation is rather minimalistic, it can well be that the PPDS results in not much more than an empty shell with fancy digital analytics limited to very superficial uses. In that regard, the two-year delay in progressing the PPDS has created a very narrow (and quickly dwindling) window of opportunity for Member States to engage with an ambitions process of eForms implementation

7. Final thoughts

It seems to me that limited and slow progress will be attained under the PPDS in coming years. Given the undoubted value of harnessing procurement data, I sense that Member States will progress domestically, but primarily in specific settings such as that of their central purchasing bodies (see here). However, whether they will be onboarded into PPDS as enthusiastic members seems less likely.

The scenario seems to resemble limited voluntary cooperation in other areas (eg interoperability; for discussion see here). It may well be that the logic of EU competence allocation required this tentative step as a first move towards a more robust and proactive approach by the Commission in a few years, on grounds that the goal of creating the European data space could not be achieved through this less interventionist approach.

However, given the speed at which digital transformation could take place (and is taking place in some parts of the EU), and the rhetoric of transformation and revolution that keeps being used in this policy area, I can’t but feel let down by the approach in the PPDS Communication, which started with the decision to build the eForms on the existing regulatory framework, rather than more boldly seeking a reform of the EU procurement rules to facilitate their digital fitness.

Micro-purchases as political football? -- some thoughts on the UK's GPC files and needed regulatory reform

The issue of public micro-purchases has just gained political salience in the UK. The opposition Labour party has launched a dedicated website and an aggressive media campaign calling citizens to scrutinise the use of government procurement cards (GPCs). The analysis revealed so far and the political spin being put on it question the current government’s wastefulness and whether ‘lavish’ GPC expenses are adequate and commensurate with the cost of living crisis and other social pressures. Whether this will yield the political results Labour hopes for is anybody’s guess (I am sceptical), but this is an opportunity to revisit GPC regulation and to action long-standing National Audit Office recommendations on transparency and controls, as well as to reconsider the interaction between GPCs and procurement vehicles based on data analysis. The political football around the frugality expected of a government in times of economic crisis should not obscure the clear need to strengthen GPC regulation in the UK.

Background

GPCs are debit or credit cards that allow government officials to pay vendors directly. In the UK, their issue is facilitated by a framework agreement run by the Crown Commercial Service. These cards are presented as a means to accelerate payment to public vendors (see eg current UK policy). However, their regulatory importance goes beyond their providing an (agile) means of payment, as they generate the risk of public purchases bypassing procurement procedures. If a public official can simply interact with a vendor of their choice and ‘put it on the card’, this can be a way to funnel public funds and engage with direct awards outside procurement procedures. There is thus a clear difference between the use of GPCs within procurement transactions (eg to pay for call-offs within a pre-existing framework agreement) and their use instead of procurement transactions (eg a public official buying something off your preferred online retailer and paying with a card).

Uses within procurement seem rather uncontroversial and the specific mechanism used to pay invoices should be driven by administrative efficiency considerations. There are also good reasons for (some) government officials to hold a GPC to cover the types of expenses that are difficult to procure (eg those linked to foreign travel, or unavoidably ‘spontaneous’ expenses, such as those relating to hospitality). In those cases, GPCs substitute for either the need to provide officials with cash advances (and thus create much sounder mechanisms to control the expenditure, as well as avoiding the circulation of cash with its own corruption and other risks), or to force them to pay in advance from their private pockets and then claim reimbursement (which can put many a public sector worker in financial difficulties, as eg academics know all too well).

The crucial issue then becomes how to control the expenditure under the GPCs and how to impose limits that prevent the bypassing of procurement rules and existing mechanisms. From this perspective, procurement cards are not a new phenomenon at all, and the challenges they pose from a procurement and government contracting perspective have long been understood and discussed—see eg Steven L Schooner and Neil S Whiteman, ‘Purchase Cards and Micro-Purchases: Sacrificing Traditional United States Procurement Policies at the Alter of Efficiency’ (2000) 9 Public Procurement Law Review 148. The UK’s National Audit Office (NAO) also carried out an in-depth investigation and published a report on the issue in 2012.

The regulatory and academic recommendations seeking to ensure probity and value for money in the use of GPCs as a (procurement) mechanism generally address three issues: (1) limits on expenditure, (2) (internal) expenditure control, and (3) expenditure transparency. I would add a fourth issue, which relates to (4) bypassing existing (or easy to set up) procurement frameworks. It is worth noting that the GPC files report provides useful information on each of these issues, all of which requires rethinking in the context of the UK’s current process of reforming procurement law.

Expenditure limits

The GPC files show how there are three relevant value thresholds: the threshold triggering expenditure transparency (currently £500), the maximum single transaction limit (currently £20,000, which raised the pre-pandemic £10,000), and the maximum monthly expenditure (currently £100,000, which raised the pre-pandemic limits if they were lower). It is worth assessing these limits from the perspective of their interaction with procurement rules, as well as broader considerations.

The first consideration is that the £500 threshold triggering expenditure transparency has remained fixed since 2011. Given a cumulative inflation of close to 30% in the period 2011-2022, this means that the threshold has constantly been lower in comparative purchase parity. This should make us reconsider the relevance of some of the findings in the GPC files. Eg the fact that, within its scope, there were ‘65,824 transactions above £500 in 2021, compared to 35,335 in 2010-11’ is not very helpful. This raises questions on the adequacy of having a (fixed) threshold below which expenditure is not published. While the NAO was reluctant to recommend full transparency in 2011, it seems that the administrative burden of providing such transparency has massively lowered in the intervening period, so this may be the time to scrape the transparency threshold. As below, however, this does not mean that the information should be immediately published in open data (as below).

The single transaction limit is the one with the most relevance from a procurement perspective. If a public official can use a GPC for a value exceeding the threshold of regulated procurement, then the rules are not well aligned and there is a clear regulatory risk. Under current UK law, central government contracts with a value above £12,000 must be advertised. This would be kept as the general rule in the Procurement Bill (clause 86(4)), unless there are further amendments prior to its entry into force. This evidences a clear regulatory risk of bypassing procurement (advertising) obligations through GPC use. The single transaction limit should be brought back to pre-pandemic levels (£10,000) or, at least, to the value threshold triggering procurement obligations (£12,000).

The maximum monthly expenditure should be reassessed from an (internal) control perspective (as below), but the need to ensure that GPCs cannot be used to fraction (above threshold) direct awards over short periods of time should also be taken into consideration. From that perspective, ensuring that a card holder cannot spend more than eg £138,760 in a given category of goods or services per month (which is the relevant threshold under both current rules and the foreseen Procurement Bill). Current data analytics in basic banking applications should facilitate such classification and limitation.

(internal) expenditure controls

The GPC files raise questions not only on the robustness of internal controls, but also on the accounting underpinning them (see pp 11-12). Most importantly, there seems to be no meaningful internal post-expenditure control to check for accounting problems or suspected fraudulent use, or no willingness to disclose how any such mechanisms operate. This creates expenditure control opacity that can point to a big governance gap. Expenditure controls should not only apply at the point of deciding who to authorise to hold and use a GPC and up to which expenditure limit, but also (and perhaps more importantly), to how expenditure is being carried out. From a regulatory theory perspective, it is very clear that the use of GPCs is framed under an agency relationship and it is very important to continuously signal to the agent that the principal is monitoring the use of the card and that there are serious (criminal) consequences to misuse. As things stand, it seems that ex post internal controls may operate in some departments (eg those that report recovery for inappropriately used funds) but not (effectively) in others. This requires urgent review of the mechanisms of pre- and post-expenditure control. An update of the 2012 NAO report seems necessary.

Expenditure transparency

The GPC files (pp 10-11) show clear problems in the implementation of the policy of disclosing all expenditure in transactions exceeding £500, which should be published published monthly, 2 months in arrears, despite (relatively clear) guidance to that effect. In addition to facilitating the suppression of the transparency threshold, developments in the collection and publication of open data should also facilitate the rollout of a clear plan to ensure effective publication without the gaps identified in the GPC files (and other problems in practice). However, this is also a good time to carefully consider the purpose of these publications and the need to harmonise them with the publication of other procurement information.

There are conflicting issues at hand. First, the current policy of publishing 2 months in arrears does not seem justified in relation to some qualified users of that information, such as those with an oversight role (or fraud investigation powers). Second, in relation to the general public, publication in full of all details may not be adequate within that time period in some cases, and the publication of some information may not be appropriate at all. There are, of course, intermediate situations, such as data access for journalists of research academics. In relation to this data, as well as all procurement data, this is an opportunity to create a sophisticated data-management architecture that can handle of multi-tiered access to different types of information at different times, by different stakeholders and under different conditions (see here and here).

bypassing procurement frameworks

A final consideration is that the GPC files evidence a risk that GPCs may be used in ways that bypass existing procurement frameworks, or in ways that would require setting up new frameworks (or other types of procurement vehicle, such as dynamic purchasing systems). The use of GPCs to buy goods off Amazon is the clearest example (see pp 24-25), as there is nothing in the functioning of Amazon that could not be replicated through pre-procured frameworks supported by electronic catalogues. In that regard, GPC data should be used to establish the (administrative) efficiency of creating (new) frameworks and to inform product (and service) selection for inclusion therein. There should also be a clear prohibition of using GPCs outside existing frameworks unless better value for money for identical products can be documented, in which case this should also be reported to the entity running the relevant framework (presumably, the Crown Commercial Service) for review.

Conclusion

In addition to discussions about the type and level of expenditure that (high-raking) public officials should be authorised to incur as a political and policy matter, there is clearly a need and opportunity to engage in serious discussions on the tightening of the regulation of GPCs in the UK, and these should be coordinated with the passage of the Procurement Bill through the House of Commons. I have identified the following areas for action:

• Suppression of the value threshold triggering transparency of specific transactions, so that all transactions are subjected to reporting.

• Coordination of the single transaction threshold with that triggering procurement obligations for central government (which is to also apply to local and other contracting authorities).

• Coordination of the maximum monthly spend limit with the threshold for international advertising of contract opportunities, so that no public official can spend more than the relevant amount in a given category of goods or services per month.

• Launch of a new investigation and report by NAO on the existing mechanisms of pre- and post-expenditure control.

• Creation of a sophisticated data-management architecture that can handle of multi-tiered access to different types of information at different times, by different stakeholders and under different conditions. This needs to be in parallel or jointly with proposals under the Procurement Bill.

• There should also be a clear prohibition of using GPCs outside existing frameworks unless better value for money for identical products can be documented. GPC data should be used to inform the creation and management of procurement frameworks and other commercial vehicles.

More Nuanced Procurement Transparency to Protect Competition: Has the Court of Justice Hit the Brakes on Open Procurement Data in Antea Polska (C-54/21)?

** This comment was first published as an Op-Ed for EU Law Live on 8 December 2022 (see formatted version). I am reposting it here in case of broader interest. **

In Antea Polska (C-54/21), the Court of Justice provided further clarification of the duties incumbent on contracting authorities to protect the confidentiality of different types of information disclosed by economic operators during tender procedures for the award of public contracts. Managing access to such information is challenging. On the one hand, some of the information will have commercial value and be sensitive from a market competition perspective, or for other reasons. On the other hand, disappointed tenderers can only scrutinise and challenge procurement decisions reliant on that information if they can access it as part of the duty to give reasons incumbent on the contracting authority. There is thus a clash of private interests that the public buyer needs to mediate as the holder of the information.

However, in recent times, procurement transparency has also gained a governance dimension that far exceeds the narrow confines of the tender procedures and related disputes. Open contracting approaches have focused on procurement transparency as a public governance tool, emphasising the public interest in the availability of such information. This creates two overlapping tracks for discussions on procurement transparency and its limitations: a track concerning private interests, and a track concerning the public interest. In this Op-Ed, I examine the judgment of Court of Justice in Antea Polska from both perspectives. I first consider the implications of the judgment for the public interest track, ie the open data context. I then focus on the specifics of the judgment in the private interest track, ie the narrower regulation of access to remedies in procurement. I conclude with some broader reflections on the need to develop the institutional mechanisms and guidance required by the nuanced approach to procurement transparency demanded by the Court of Justice, which is where both tracks converge.

Procurement Transparency and Public Interest

In the aftermath of the covid-19 pandemic, procurement transparency became a mainstream topic. Irregularities and corruption in the extremely urgent direct award of contracts could only be identified where information was made public, sometimes after extensive litigation to force disclosure. And the evidence that slowly emerged was concerning. The improper allocation of public funds through awards not subjected to most (or any) of the usual checks and balances renewed concerns about corruption and maladministration in procurement. This brought the spotlight back on proactive procurement transparency as a governance tool and sparked new interest in open data approaches. These would generate access to (until then) confidential procurement information without the need for an explicit request by the interested party.

A path towards ‘open by default’ procurement data has been plotted in the Open Data Directive, the Data Governance Act, and the new rules on Procurement eForms. Combined, these measures impose minimum open data requirements and allow for further ‘permissioned’ openness, including the granting of access to information subject to the rights of others—eg on grounds of commercial confidentiality, the protection of intellectual property (IP) or personal data (see here for discussion). In line with broader data strategies (notably, the 2020 Data Strategy), EU digital law seems to gear procurement towards encouraging ‘maximum transparency’—which would thus be expected to become the new norm soon (although I have my doubts, see here).

However, such ‘maximum transparency’ approach does not fit well the informational economics of procurement. Procurement is at its core an information or data-intensive exercise, as public buyers use tenders and negotiations to extract private information from willing economic operators to identify the contractor that can best satisfy the relevant needs. Subjecting the private information revealed in procurement procedures to maximum (or full) transparency would thus be problematic, as the risk of disclosure could have chilling and anticompetitive effects. This has long been established in principle in EU procurement law—and more generally in freedom of information law—although the limits to (on-demand and proactive) procurement transparency remain disputed and have generated wide variation across EU jurisdictions (for extensive discussion, see the contributions to Halonen, Caranta & Sanchez-Graells, Transparency in EU Procurements (2019)).

The Court’s Take

The Court of Justice’s case law has progressively made a dent on ‘maximum transparency’ approaches to confidential procurement information. Following its earlier Judgment in Klaipėdos regiono atliekų tvarkymo centras (C-927/19), the Court of Justice has now provided additional clarification on the limits to disclosure of information submitted by tenderers in public procurement procedures in its Judgment in Antea Polska. From the open data perspective, the Court’s approach to the protection of public interests in the opacity of confidential information are relevant.

Firstly, the Court of Justice has clearly endorsed limitations to procurement transparency justified by the informational economics of procurement. The Court has been clear that ‘the principal objective of the EU rules on public procurement is to ensure undistorted competition, and that, in order to achieve that objective, it is important that the contracting authorities do not release information relating to public procurement procedures which could be used to distort competition, whether in an ongoing procurement procedure or in subsequent procedures. Since public procurement procedures are founded on a relationship of trust between the contracting authorities and participating economic operators, those operators must be able to communicate any relevant information to the contracting authorities in such a procedure, without fear that the authorities will communicate to third parties items of information whose disclosure could be damaging to those operators’; Antea Polska (C-54/21, para 49). Without perhaps explicitly saying it, the Court has established the protection of competition and the fostering of trust in procurement procedures as elements inherently placed within the broader public interest in the proper functioning of public procurement mechanisms.

Second, the Court has recognised that ‘it is permissible for each Member State to strike a balance between the confidentiality [of procurement information] and the rules of national law pursuing other legitimate interests, including that … of ensuring “access to information”, in order to ensure the greatest possible transparency in public procurement procedures’; Antea Polska (C-54/21, para 57). However, in that regard, the exercise of such discretion cannot impinge on the effectiveness of the EU procurement rules seeking to align practice with the informational economics of procurement (ie to protect competition and the trust required to facilitate the revelation of private information, as above) to the extent that they also protect public interests (or private interests with a clear impact on the broader public interest, as above). Consequently, the Court stressed that ‘[n]ational legislation which requires publicising of any information which has been communicated to the contracting authority by all tenderers, including the successful tenderer, with the sole exception of information covered by the [narrowly defined] concept of trade secrets [in the Trade Secrets Directive], is liable to prevent the contracting authority … from deciding not to disclose certain information pursuant to interests or objectives [such as the protection of competition or commercial interests, but also the preservation of law enforcement procedures or the public interest], where that information does not fall within that concept of a trade secret’; Antea Polska (C-54/21, para 62).

In my view, the Court is clear that a ‘maximum transparency’ approach is not permissible and has stressed the duties incumbent on contracting authorities to protect public and private interests opposed to transparency. This is very much in line with the nuanced approach it has taken in another notable recent Judgment concerning open beneficial ownership data: Luxembourg Business Registers (C‑37/20 and C‑601/20) (see here for discussion). In Antea Polska, the Court has emphasised the need for case-by-case analysis of the competing interests in the confidentiality or disclosure of certain information.

This could have a significant impact on open data initiatives. First, it comes to severely limit ‘open by default’ approaches. Second, if contracting authorities find themselves unable to engage with nuanced analysis of the implications of information disclosure, they may easily ‘clam up’ and perpetuate (or resort back to) generally opaque approaches to procurement disclosure. Developing adequate institutional mechanisms and guidance will thus be paramount (as below).

Procurement Transparency and Private Interest

In its more detailed analysis of the specific information that contracting authorities need to preserve in order to align their practice with the informational economics of procurement (ie to promote trust and to protect market competition), the Court’s views in Antea Polska are also interesting but more problematic. The starting point is that the contracting authority cannot simply take an economic operator’s claim that a specific piece of information has commercial value or is protected by IP rights and must thus be kept confidential (Antea Polska, C-54/21, para 65), as that could generate excessive opacity and impinge of the procedural rights of competing tenderers. Moving beyond this blanket approach requires case-by-case analysis.

Concerning information over which confidentiality is claimed on the basis of its commercial value, the Court has stressed that ‘[t]he disclosure of information sent to the contracting authority in the context of a public procurement procedure cannot be refused if that information, although relevant to the procurement procedure in question, has no commercial value in the wider context of the activities of those economic operators’; Antea Polska (C-54/21, para 78). This requires the contracting authority to be able to assess the commercial value of the information. In the case, the dispute concerned whether the names of employees and subcontractors of the winning tenderer should be disclosed or not. The Court found that ‘in so far as it is plausible that the tenderer and the experts or subcontractors proposed by it have created a synergy with commercial value, it cannot be ruled out that access to the name-specific data relating to those commitments must be refused on the basis of the prohibition on disclosure’; Antea Polska (C-54/21, para 79). This points to the emergence of a sort of rebuttable presumption of commercial value that will be in practice very difficult to overcome by a contracting authority seeking to disclose information—either motu proprio, or on the request of a disappointed tenderer.

Concerning information over which confidentiality is claimed on the basis that it is protected by an IP right, in particular by copyright, the Court stressed that it is unlikely that copyright protection will apply to ‘technical or methodological solutions’ of procurement relevance (Antea Polska, C-54/21, para 82). Furthermore, ‘irrespective of whether they constitute or contain elements protected by an intellectual property right, the design of the projects planned to be carried out under the public contract and the description of the manner of performance of the relevant works or services may … have a commercial value which would be unduly undermined if that design and that description were disclosed as they stand. Their publication may, in such a case, be liable to distort competition, in particular by reducing the ability of the economic operator concerned to distinguish itself using the same design and description in future public procurement procedures’; Antea Polska (C-54/21, para 83). Again, this points to the emergence of a rebuttable presumption of commercial value and anticompetitive potential that will also be very difficult to rebut in practice.

The Court has also stressed that keeping this type of information confidential does not entirely bar disclosure. To discharge their duty to give reasons and facilitate access to remedies by disappointed tenderers, contracting authorities are under an obligation to disclose, to the extent possible, the ‘essential content’ of the protected information; Antea Polska (C-54/21, paras 80 and 84). Determining such essential content and ensuring that the relevant underlying (competing) rights are adequately protected will also pose a challenge to contracting authorities.

In sum, the Court has stressed that preserving competing interests related to the disclosure of confidential information in procurement requires the contracting authority to ‘assess whether that information has a commercial value outside the scope of the public contract in question, where its disclosure might undermine legitimate commercial concerns or fair competition. The contracting authority may, moreover, refuse to grant access to that information where, even though it does not have such commercial value, its disclosure would impede law enforcement or would be contrary to the public interest. A contracting authority must, where full access to information is refused, grant that tenderer access to the essential content of that information, so that observance of the right to an effective remedy is ensured’; Antea Polska (C-54/21, para 85). Once again, developing adequate institutional mechanisms and guidance will thus be paramount (as below).

Investing in the Way Forward

As I have argued elsewhere, and the Antea Polska Judgment has made abundantly clear, under EU procurement (and digital) law, it is simply not possible to create a system that makes all procurement data open. Conversely, the Judgment also makes clear that it is not possible to operate a system that keeps all procurement data confidential (Antea Polska, C-54/21, para 68).

Procurement data governance therefore requires the careful management of a system of multi-tiered access to different types of information at different times, by different stakeholders and under different conditions. This will require investing in data and analysis capabilities by public buyers, which can no longer treat the regulation of confidentiality in procurement as an afterthought or secondary consideration. In the data economy, public buyers need to create the required institutional mechanisms to discharge their growing data governance obligations.

Moreover, and crucially, creating adequate data governance approaches requires the development of useful guidance by the European Commission and national competition authorities, as well as procurement oversight bodies. The Court of Justice’s growing case law points to the potential emergence of (difficult to challenge) rebuttable presumptions of justified confidentiality that could easily result in high levels of procurement opacity. To promote a better balance of the competing public and private interests, a more nuanced approach needs to be supported by actionable guidance. This will be very important across all EU jurisdictions, as it is not only jurisdictions that had embraced ‘maximum transparency’ that now need to correct course—but also those that continue to lag in the disclosure of procurement information. Ensuring a level playing field in procurement data governance depends on the harmonisation of currently widely diverging practices. Procurement digitalisation thus offers an opportunity that needs to be pursued.

More detail on the UK's procurement transparency ambitions -- some comments and criticisms

© GraceOda / Flickr.

On 30 June 2022, the UK Government’s Cabinet Office published the policy paper ‘Transforming Public Procurement - our transparency ambition’ (the ‘ambitions paper’, or the ‘paper’). The paper builds on the Green Paper and the Government’s response to its public consultation, and outlines ‘proposals to dramatically improve transparency of UK public contracts and spending’. The ambitions paper provides a vision well beyond the scant (almost null) detail in the Procurement Bill (clause 88), which is attracting a number of proposed amendments to try to enshrine in law the basic elements now spelled out in the paper.

In this post, I reflect on the need to amend the Procurement Bill to bind (successive) UK Governments to the current transparency aspirations. I also comment on other aspects of the paper, including persistent issues with the lack of granularity in planned access to procurement data, which I already raised in relation to the Green Paper (see here, Q27 and Q29, and here).

A necessary amendment of the Procurement Bill

The additional level of detail in the paper is welcome and helpful in understanding how the UK plans to operationalise its procurement transparency ambitions. However, a first point to make is that the publication of the ambitions paper should in no way deactivate concerns on the insufficiency of the Procurement Bill to ensure that a significant change in the way procurement information is captured and disseminated in the UK is achieved. In particular, the wording of clause 88(1) has to change.

It is nowhere close to good enough to simply have a weak enabling clause in legislation, stating that ‘An appropriate authority may by regulations make provision requiring certain information to be shared in a particular way, including through a specified online system’. The obvious first shortcoming is that the authority may do so, which also means it may not do so. The second is that the indication of a specified online system as a possible particular way of sharing information seems to take us back quite a few years. If not online (and if not as open data), how would a transparency aspiration be commensurate to the UK’s commitment to e.g. the open contracting data standard?.

Given the high level of aspiration in the paper, a more solid legal grounding is required. My proposal, which builds on discussions with the open contracting community, as well as the amendment already tabled by Baroness Hayman of Ullock, would be to amend clause 88(1) of the Procurement Bill, so it reads:

'An appropriate authority shall by regulations make provision requiring certain information to be shared through a specified online system. Such online system shall, at a minimum, establish and operate a freely accessible, machine-readable and licence-free digital register for all public procurement notices under this Act, wherein all information will be regularly updated in accordance with the time limits for the publication notices set out in the Act.'

Comments on the aspirations paper

Once the general commitment to having single digital register is strengthened, we can move on to consider the detail of what (and how) should be published in the register, what should be kept for restricted use, and what further transparency-related interventions can build upon it—e.g. the creation of a dashboard with useful data analytics, or the interconnection of the register with other sources of e.g. relevant anti-corruption information (for discussion, see here). There are some indications of what the UK aspires to do, but also some lack of clarity in the paper, and some clear risks of undesirable knock-on effects from the maximalist approach to procurement transparency it embraces.

Vision

The aspirations paper indeed starts from a maximalist position, indicating that the vision is ‘to create a fully transparent public procurement system’. However, there are two clear limitations to that approach.

First, the proposal itself includes a proportionate approach to transparency requirements: ‘we want to ensure that we are only asking for the most detailed information - contract documents, performance markings etc - from the largest contracts, in order to maintain transparency without bogging procurement teams down in unnecessary bureaucracy for low-value contracts’. This immediately means that a potentially large volume of (local) procurement will not be subjected to (some aspects) of the new transparency regime. Moreover, as the Procurement Bill stands, there would also be significant exclusions from important transparency obligations e.g. in relation to light touch contracts (see here, section 7, issues #21 on performance-related KPIS and non-performance notices, and #23 on modification notices). That already falls short of generating a ‘fully transparent’ procurement system, precisely in relation to the award of contracts where the risk of capture can be high.

Second, the publication of procurement information remains subjected to the general exclusions and carve-outs resulting from i.a. the Freedom of Information Act 2000 (FOIA). Interestingly, the ambitions paper does not refer to it at all, despite the Green Paper having made clear that, in the absence of FOIA reform (which is not sought), ‘only data which would be required to be made available under FOIA … would be publishable’ (at 167). Regardless of the paper’s silence on the issue, FOIA will continue to play a significant role in establishing which level of detail is disclosed, in particular in relation to disclosure of information not captured as a matter of mandatory disclosure in the relevant (award) notices, and perhaps even in relation to that.

The importance of preserving commercial confidentiality in the procurement setting is clear, and was also a clear focus of concern in the Green Paper consultation, leading e.g. to the Cabinet Office dropping its initial ambition of publishing tenders received in procurement procedures. As the Government’s response stressed: ‘We have considered the potential impact of public disclosure of information, such as (but not limited to) tenders. The feedback we received from stakeholders was that publishing tenders at this stage could prejudice future competitions that may run if the initial one is aborted and re-run for any reason, as bids will have been disclosed to the competition. As a result, we will not require disclosure of tenders submitted in a procurement’ (at 221).

Therefore, the system will not (and should not be) fully transparent. What is more useful is to see what the vision wants to enable in relation to procurement data and related analytics and insights. The vision indicates that the UK Government would like for everyone ‘to be able to view, search and understand what the UK public sector wants to buy, how much it is spending, and with whom’. This is a more realistic aspiration that does not necessarily entail total transparency and, given some safeguards and a more granular approach to the disclosure of differing levels of detail in the information (see here and discussion below), it should be welcome. Ultimately, the Government wants the future platform to help people understand:

1. current and future procurement opportunities created in the UK public sector; including pipelines of future work. [This should open up opportunities within the public sector to small businesses, driving down prices, increasing innovation and improving the business landscape across the country];

2. how much money the public sector spends on purchasing essential goods and services. [This should] allow taxpayers to see how much is being spent through procurement on and in their local area, who it is spent with and how it is delivering on local priorities. [Moreover, this should show] which routes to market are available to contracting authorities, and how much has been spent through each of those. [This should] give contracting authorities the data they need to collaborate better, drive value for money and identify cost savings in their procurements, so they can monitor for signs of waste and inefficiency;

3. which contracts finished on time and on budget–and which did not. [This means providing more detail across] the true lifecycle of government contracts, including how much the final amount spent on a contract differs from its original intended value, or how often contracts have been extended;

4. which companies have been excluded from winning future work due to fraud, corruption or persistent poor performance; [and]

5. who is really benefiting from public money - not just the companies winning contracts but the ownership of those companies

This list (which regroups the longer and slightly repetitive list in the paper, as well as aggregate the purpose for the disclosure of specific information) points to three categories. First, a category where the information is purely notice-based (categories 1, 4). Second, a category where the related insights should be easily derived from the information included mandatory notices (categories 2 and 3). Third, a category (mainly 5) that concerns non-procurement information and will require either (a) embedding disclosure obligations in the procurement life-cycle (thus raising the red tape and participation costs), or (b) interconnection with non-procurement databases.

The first category is relatively unproblematic, although there is an inherent tension between the disclosure of planned procurement opportunities and the facilitation of collusive practices (more details below).

The second category probably points at the need of considering the extent to which data dashboards should differentiate between different users, including the level of detail (and timeliness) of the information published in each of them (also discussed below).

The third category points at the need to consider issues of design and interoperability of the platform, as it would be preferable for it to be susceptible of plugging into other databases. Moreover, there are other (anti-corruption) functionalities that could be enabled, such as cross-checks against databases of political donations to identify potentially problematic relationships between procurement awardees and political donors. In relation to this category, and to anti-corruption efforts more generally, the ambitions paper is not particularly ambitious. However, the creation of a solid procurement data architecture on the basis of OCDS could facilitate those extensions in the future.

The future platform

The ambitions paper indicates that the Government seeks to operationalise the new transparency regime through two main elements (as the ‘tell us once’ supplier register is a parallel and distinct intervention):

• The introduction of a number of new procurement ‘notices’, covering the entire procurement lifecycle from planning through to contract expiry

• A digital platform which will display all of this information publicly, with API access to data published to the Open Contracting Data Standard (OCDS). Once we have completed the core notice development, over time we also plan to build a number of useful registers, and explore integrating commercial data analysis tools

What this means is that the future platform will initially simply bring into one place what is currently published across a scattered landscape of transparency tools (see section 3.1 in the paper). That is an improvement, but the more significant change will only come when register and dashboard insights get developed. Importantly, however, the design of these registers and dashboards need to be very carefully considered and linked back to the intended (and likely) use by different audiences. However, the ambitions paper does not seem to consider this need and rather seeks to establish a system accessible to any type of data user on an undifferentiated form (see section 4.4).

Research has shown that most of the gains from procurement transparency concern ex ante disclosure of information [M Bauhr et al, ‘Lights on the shadows of public procurement: Transparency as an antidote to corruption’ (2020) 33(3) Governance 495-523]. Conversely, the publication of ex post information is particularly risky in relation to e.g. anticompetitive practices, as well as corruption, and can generate limited benefits as it is unlikely that there will be a sustained level of engagement with that information by most stakeholders with a theoretical motivation to engage in procurement oversight [N Köbis, C Starke and I Rahwan, ‘The promise and perils of using artificial intelligence to fight corruption’ (2022) 4 Nature Machine Intelligence 418-424].

In that regard, it is particularly problematic that the aspirations paper seems to indicate that the UK Government would be publishing (in real time, for everyone to see) information such as: ‘Analysis of bid and win rates, analysis of supplier & bidder beneficial ownership patterns, general market trends analysis’. This should concern regulators such as the Competition and Markets Authority, as well as the Serious Fraud Office. While the latter should absolutely have access to that information and market intelligence, its public disclosure (in detail, with no time lag) could be counterproductive and help, rather than hinder, corrupt and collusive practices. In that regard, it is of paramount importance that those authorities (and others, such as the National Audit Office) are involved in the design of the system—which is not entirely clear from the ‘user-centric’ approach embraced in the aspirations paper (see section 4.1).

A multi-layered level of transparency

In relation to these risks and issues, it is necessary to reiterate a call for a more nuanced and discriminating approach than the one that transpires from the aspirations paper. As stressed in the response to the Green Paper consultation (here Q29), while it can but be endorsed that the platform needs to be created, and the data automatically fed into it in accordance with OCDS and other technical interoperability requirements, a key feature of the new system should be its multi-layered level of access/transparency.

Analysis carried elsewhere (see here) supports a nuanced approach to the level of transparency created by public contract registries similar to the envisaged central digital platform, which needs to fall short of the full transparency paradigm in which it seems to have been conceived. As a functional criterion, only the information that is necessary to ensure proper oversight and the effectiveness of anti-corruption measures should be disclosed, whereas the information that can be most damaging for competition should be withheld.

Generally, what is needed is granularity in the levels of information that are made accessible to different stakeholders. A full transparency approach whereby all information was made available to everyone would fall very short from the desired balance between the transparency and competition goals of public procurement. A system based on enabling or targeted transparency, whereby each stakeholder gets access to the information it needs for a specific purpose, is clearly preferable.

In more specific terms, it is submitted that:

• The content of the central digital platform should not be fully available to the public. Access to the full registry should be restricted to public sector officials under a strong duty of confidentiality protected by appropriate sanctions in cases of illegitimate disclosure.

• Even within the public sector, full access to the central digital platform should be made available on a need-to-know basis. Oversight entities, such as the National Audit Office, the Serious Fraud Office, or the Competition and Markets Authority, as well as the new public procurement review unit (PPRU) should have full access. However, other entities or specific civil servants should only access the information they require to carry out their functions.

• Limited versions of the central digital platform that are made accessible to the public should aggregate information by contracting authority and avoid disclosing any particulars that could be traced back to specific tenders, specific contracts, or specific undertakings.

• Representative institutions, such as third sector organisations, journalists or academics should have the opportunity of seeking full access to the central digital platform on a case-by-case basis where they can justify a legitimate or research-related interest. In case of access, ethical approval shall be obtained, anonymization of data attempted, and specific confidentiality requirements duly imposed.

• Delayed full access to the central digital platform could also be allowed for, provided there are sufficient safeguards to ensure that historic information does not remain relevant for the purposes of protecting market competition, business secrets and commercial interests.

• Tenderers should have access to their own records, even if they are not publicly-available, so as to enable them to check their accuracy. This is particularly relevant if public contract registries are used for the purposes of assessing past performance under the new rules.

• Big data should be published on an anonymised basis, so that general trends can be analysed without enabling ‘reverse engineering’ of information that can be traced to specific bidders.

• The entity in charge of the central digital platform should regularly publish aggregated statistics by type of procurement procedure, object of contract, or any other items deemed relevant for the purposes of the public accountability of public buyers (such as percentages of expenditure in green procurement, etc).

• The entity in charge of the central digital platform should develop a system of red flag indicators and monitor them with a view to reporting instances of legal non-compliance to the relevant oversight entity, or potential collusion to the competition authority. In that regard, the earlier attempts (eg through the abandoned ‘Screening for Cartels’ tool) should be carefully analysed to avoid replicating past errors.

Public procurement and [AI] source code transparency, a (downstream) competition issue (re C-796/18)

© Diverse Stock Photos/Flickr.

Two years ago, in its Judgment of 28 May 2020 in case C-796/18, Informatikgesellschaft für Software-Entwicklung, EU:C:2020:395 (the ‘ISE case’), the Court of Justice of the European Union (CJEU) answered a preliminary ruling that can have very significant impacts in the artificial intelligence (AI) space, despite it being concerned with ‘old school’ software. More generally, the ISE case set the requirements to ensure that a contracting authority does not artificially distort competition for public contracts concerning (downstream) software services generally, and I argue AI services in particular.

The case risks going unnoticed because it concerned a relatively under-discussed form of self-organisation by the public administration that is exempted from the procurement rules (i.e. public-public cooperation; on that dimension of the case, see W Janssen, ‘Article 12’ in R Caranta and A Sanchez-Graells, European Public Procurement. Commentary on Directive 2014/24/EU (EE 2021) 12.57 and ff). It is thus worth revisiting the case and considering how it squares with regulatory developments concerning the procurement of AI, such as the development of standard clauses under the auspices of the European Commission.

The relevant part of the ISE case

In the ISE case, one of the issues at stake concerned whether a contracting authority would be putting an economic operator (i.e. the software developer) in a position of advantage vis-à-vis its competitors by accepting the transfer of software free of charge from another contracting authority, conditional on undertaking to further develop that software and to share (also free of charge) those developments of the software with the entity from which it had received it.

The argument would be that by simply accepting the software, the receiving contracting authority would be advantaging the software publisher because ‘in practice, the contracts for the adaptation, maintenance and development of the base software are reserved exclusively for the software publisher since its development requires not only the source code for the software but also other knowledge relating to the development of the source code’ (C-796/18, para 73).

This is an important issue because it primarily concerns how to deal with incumbency (and IP) advantages in software-related procurement. The CJEU, in the context of the exemption for public-public cooperation regulated in Article 12 of Directive 2014/24/EU, established that

in order to ensure compliance with the principles of public procurement set out in Article 18 of Directive 2014/24 … first [the collaborating contracting authorities must] have the source code for the … software, second, that, in the event that they organise a public procurement procedure for the maintenance, adaptation or development of that software, those contracting authorities communicate that source code to potential candidates and tenderers and, third, that access to that source code is in itself a sufficient guarantee that economic operators interested in the award of the contract in question are treated in a transparent manner, equally and without discrimination (para 75).

Functionally, in my opinion, there is no reason to limit that three-pronged test to the specific context of public-public cooperation and, in my view, the CJEU position is generalisable as the relevant test to ensure that there is no artificial narrowing of competition in the tendering of software contracts due to incumbency advantage.

Implications of the ISE case

What this means is that, functionally, contracting authorities are under an obligation to ensure that they have access and dissemination rights over the source code, at the very least for the purposes of re-tendering the contract, or tendering ancillary contracts. More generally, they also need to have a sufficient understanding of the software — or technical documentation enabling that knowledge — so that they can share it with potential tenderers and in that manner ensure that competition is not artificially distorted.

All of this is of high relevance and importance in the context of emerging practices of AI procurement. The debates around AI transparency are in large part driven by issues of commercial opacity/protection of business secrets, in particular of the source code, which both makes it difficult to justify the deployment of the AI in the public sector (for, let’s call them, due process and governance reasons demanding explainability) and also to manage its procurement and its propagation within the public sector (e.g. as a result of initiatives such as ‘buy once, use many times’ or collaborative and joint approaches to the procurement of AI, which are seen as strategically significant).

While there is a movement towards requiring source code transparency (e.g. but not necessarily by using open source solutions), this is not at all mainstreamed in policy-making. For example, the pilot UK algorithmic transparency standard does not mention source code. Short of future rules demanding source code transparency, which seem unlikely (see e.g. the approach in the proposed EU AI Act, Art 70), this issue will remain one for contractual regulation and negotiations. And contracts are likely to follow the approach of the general rules.

For example, in the proposal for standard contractual clauses for the procurement of AI by public organisations being developed under the auspices of the European Commission and on the basis of the experience of the City of Amsterdam, access to source code is presented as an optional contractual requirement on transparency (Art 6):

<optional> Without prejudice to Article 4, the obligations referred to in article 6.2 and article 6.3 [on assistance to explain an AI-generated decision] include the source code of the AI System, the technical specifications used in developing the AI System, the Data Sets, technical information on how the Data Sets used in developing the AI System were obtained and edited, information on the method of development used and the development process undertaken, substantiation of the choice for a particular model and its parameters, and information on the performance of the AI System.

For the reasons above, I would argue that a clause such as that one is not at all voluntary, but a basic requirement in the procurement of AI if the contracting authority is to be able to legally discharge its obligations under EU public procurement law going forward. And given the uncertainty on the future development, integration or replacement of AI solutions at the time of procuring them, this seems an unavoidable issue in all cases of AI procurement.

Let’s see if the CJEU is confronted with a similar issue, or the need to ascertain the value of access to data as ‘pecuniary interest’ (which I think, on the basis of a different part of the ISE case, is clearly to be answered in the positive) any time soon.

UK Procurement Bill, general principles and additivity -- why there is no such risk

© hehaden / Flickr.

Those following the commentary on the UK Procurement Bill will have noticed the discussions concerning the absence of a clause on the general principles of procurement [see e.g. K McGaughey, ‘Losing your principles – some early thoughts on the Procurement Bill’ (13 May 2022) http://shorturl.at/tFJP2]. In fact, there is already a proposed amendment by Baroness Hayman seeking to introduce the principles as initially envisaged in the green paper, which risks losing the additions that resulted from the public consultation. However, it is not certain that the amendment will make it to the final version of the future Act. One of the reasons behind resisting the inclusion of general principles seems to be a concern by legislative drafters that it would generate additivity — which I understand as the risk of creating self-standing obligations beyond those explicitly imposed by the specific provisions of the primary (and future secondary) legislation.

In my view, the inclusion of general principles cannot generate such a risk of additivity, as the role and function of those principles is to act as interpretive guides for the provisions in the legislation. They can hardly be seen as gap fillers or generators of self-standing obligations. Conversely, the absence of such general principles can be problematic, not only for creating a vacuum of interpretive guidance, but also for seemingly signalling a deviation from global standards.

Below are the reasons why I think the general principles of procurement, and in particular those of transparency and competition, should be included in an amended Bill before it completes its Parliamentary procedure.

General principles as global standards

Transparency and competition are crucial and intertwined general principles and/or goals in every procurement legislative framework. However, both are missing in the Procurement Bill, which thus lags international standards and best practice.

The fundamental importance of transparency and competition is recognised at the higher level of international legislation, starting with the United Nations Convention Against Corruption (UNCAC), which Article 9(1) explicitly requires signatory States (including the UK) to ‘take the necessary steps to establish appropriate systems of procurement, based on transparency, competition and objective criteria in decision-making, that are effective, inter alia, in preventing corruption’.

The same applies to the World Trade Organisation Government Procurement Agreement (WTO GPA), which explicitly links to UNCAC and translates its requirements into Art IV(4), which binds its parties (including the UK) to ensure that ‘A procuring entity shall conduct covered procurement in a transparent and impartial manner that: a) is consistent with this Agreement, using methods such as open tendering, selective tendering and limited tendering; b) avoids conflicts of interest; and c) prevents corrupt practices’.

There should thus be no question that the UK is bound under international law to ensure that its procurement is based on principles of transparency, competition and objectivity.

The UNCITRAL Model Law on public procurement also places transparency as a general goal amongst the overarching objectives of any domestic legislation enacting it. The preamble clearly sets out that the enacting State: ‘considers it desirable to regulate procurement so as to promote the objectives of: … (c) Promoting competition among suppliers and contractors for the supply of the subject matter of the procurement; … [and] (f) Achieving transparency in the procedures relating to procurement.’ Even if the Procurement Bill is not enacting the UNCITRAL Model Law, it can reasonably be expected to meet the best practices it highlights, not least because this is a benchmark that will be used to assess the quality of the UK procurement legislation post-reform.

Inclusion of the principle of transparency in the Bill

The intended inclusion of a principle/goal of transparency was clear in the Transforming Public Procurement Green Paper of December 2020 (para 27), and there was no indication of a change of position in the government’s response to the public consultation in December 2021 (para 33). Moreover, the response clarified that ‘The transparency principle previously proposed will set a minimum standard in terms of the quality and accessibility of information where there is a publication obligation elsewhere in the Bill’ (para 35).

The inclusion of an explicit principle of transparency was thus not meant to (or arguably capable of) generating additional self-standing obligations, but simply to establish an interpretive guideline in line with international obligations and best practice benchmarks. If there are concerns that the principle can in itself generate additivity over and above the specific transparency obligations in the Bill, it should be stressed that the existence of an explicit principle of transparency in the Public Contracts Regulations 2015 (reg.18(1)) has not led to an expansion of the transparency duties under the current regime. To the contrary, where such expansion has arguably taken place, it has been on the basis of common law doctrines (see e.g. R (Good Law Project & Others) v Secretary of State for Health and Social Care [2021] EWHC 346 (Admin) [at 132 ff]). 

Moreover, there are safeguards in the Bill preventing a maximalist interpretation of transparency requirements. Clause 85 (General exemptions from duties to publish or disclose information) affords the government the possibility to withhold information for specific purposes. This would thus ensure that there is no risk of additivity from the inclusion of a general principle dictating that data should be made transparent.

The inclusion of the principle of transparency has been supported by the entire spectrum of academic commentators, including those of a pro-deregulation persuasion (e.g. S Arrowsmith ‘Transforming Public Procurement Law after Brexit: Early Reflections on the Government’s Green Paper’ (Dec 2020) at 4). I have also stressed how, in the absence of a reform of e.g. the Freedom of Information Act 2000, the inclusion of a transparency principle will not generate meaningful practical changes to the existing disclosure obligations (e.g. A Sanchez-Graells, ‘The UK’s Green Paper on Post-Brexit Public Procurement Reform: Transformation or Overcomplication?’ (Jan 2021) at 6).

Inclusion of the principle of competition in the Bill

The principle of competition was not included in the Transforming Public Procurement Green Paper of December 2020. However, following submissions by the Competition and Markets Authority and commentators such as myself (see here for details), the government’s response to the public consultation of December 2021 indicated in no ambiguous terms that ‘We will introduce an additional objective of promoting the importance of open and fair competition that will draw together a number of different threads in the Green Paper that encourage competitive procurement’ (para 39).

The inclusion of an explicit principle of competition was thus also not meant to (or arguably capable of) generating additional self-standing obligations, but simply to establish an interpretive guideline in line with international obligations and best practice benchmarks. Similarly to the analysis above in relation to the principle of transparency, the existence of a principle of competition (or a narrower prohibition on the artificial narrowing of competition, as others interpret it) can hardly be seen as capable of generating self-standing obligations (for discussion, see A Sanchez-Graells, ‘Initial comments on the UK’s Procurement Bill: A lukewarm assessment’ (May 2022) 7).

Even where recent UK case law has derived obligations from general principles (R (Good Law Project and EveryDoctor) v Secretary of State for Health and Social Care [2022] EWHC 46 (TCC)), the obligations did not derive from the principle of competition, or the other principles (especially equal treatment) themselves, but from an essentialisation of the general requirements of procurement leading to the identification of ‘an irreducible minimum standard of objective fairness that applies to such procurements, even in the absence of open competition’ (at para 334, see my criticism here). As above, this does not point out to an additivity risk resulting from the general principle of competition, but rather from broader judicial considerations of the proper way in which procurement needs to be conducted.

It is worth reiterating that the importance of the inclusion of the principle of competition in the Bill was underlined by the Competition and Markets Authority, in particular in relation to its interaction with the principle of transparency: ‘Transparency can play a vital role in effective public procurement by dispelling perceptions of favouritism and maintaining trust in the procurement process – which in turn encourages competitors to contest the market. However, higher levels of transparency can also make collusion between bidders easier to sustain ... The CMA considers it essential that public procurement officials are aware of the link between collusion and transparency and report any suspicious activity by suppliers to the CMA. … The CMA proposes that … the new regulatory framework for public procurement should include a further principle of ‘effective competition’: Effective competition - procurement should promote healthy, competitive markets, which in turn drive better value for money and reduce the risk of illegal bid-rigging cartel.’ (at paras 3.2 and 3.3).

The inclusion of the principle of transparency thus needs to be twinned to the introduction of the principle of competition (for discussion of the interaction between the triad of overarching principles of competition, transparency, and integrity, see Steve Schooner, ‘Desiderata: Objectives for a System of Government Contract Law‘ (March 2002) 3 ff).

Implications and final thoughts 

Given the UK’s international commitments and the universal recognition of the importance of enshrining the general principles of transparency and competition in procurement legislation, their absence in the Procurement Bill can:

1. generate doubts as to the intended transparency and pro-competition orientation of the system—which could be used e.g. in the context of the WTO GPA by trading partners seeking to raise issues with the UK’s position in the agreement; as well as

2. push for a pro-competition and/or transparency-regarding interpretation of other general goals included in the Bill and, in particular, the ones in clause 11(1)(a) of ‘delivering value for money’, clause 11(1)(c) of ‘sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions’, and clause 11(1)(d) of ‘acting, and being seen to act, with integrity’. Such interpretation could, coupled with common law doctrines and other precedent (as above), generate additional (self-standing) obligations in a way that the more generic principles of transparency and competition may not. And, even if they did, there would be no risk of additivity compared to the original text of the Bill.

There is thus no clear advantage to the omission of the principles, whereas their explicit inclusion would facilitate alignment of the Procurement Bill with the international standards and regulatory benchmarks it will be assessed against. The explicit inclusion of the principles of transparency and competition is thus the preferable regulatory approach.

In my view, the easiest way of ensuring the introduction of both principles would be to alter the amendment proposed by Baroness Hayman as follows (with bold indicating changes or additions):

After Clause 10

BARONESS HAYMAN OF ULLOCK

Insert the following new Clause

“Procurement principles

(1) In carrying out a procurement, a contracting authority must pursue the following principles—

(a) [omit]
(b) value for money, by having regard to the optimal whole-life blend of economy, efficiency and effectiveness that achieves the intended outcome of the business case,
(c) transparency, by acting openly to underpin accountability for public money, anti-corruption and the effectiveness of procurements,
(d) integrity, by providing good management, preventing misconduct, and control in order to prevent fraud and corruption,
(e) equal treatment of suppliers, by ensuring that decision-making is impartial and without conflict of interest,
(f) non-discrimination, by ensuring that decision-making is not discriminatory, and
(g) effective competition, by ensuring that procurement does not artificially narrow competition for a specific contract, promotes healthy, competitive markets, and reduces the risk of illegal bid-rigging cartels.”

As there is no good reason why a contracting authority should not be able to act in accordance with those principles, I would advocate for a deletion of the second paragraph of the amendment as proposed.

What's in a consultation? -- comments on the UK Government's Transforming Public Procurement response

On 6 December 2021, almost a year after launching the public consultation on Transforming Public Procurement in the UK post-Brexit, the Cabinet Office published its long-awaited Government response (the response). This now moves the process of reform of the UK procurement rulebook to the pre-legislative stage, with a Procurement Bill expected to be introduced in Parliament in the relatively near future and changes entering into force not earlier than 2023 — and, in any case, with a planned six months’ notice of “go-live”, once the legislation has been concluded.

The response has been published a few months later than initially expected (due to the high level of interest it attracted, see below) and legislation is likely to be introduced to Parliament with a significant delay as well. The legislative reform process is unlikely to generate practical results much earlier than 2024. This can only be an indication (if any was needed) of the complexity and the difficulty of significantly changing the procurement rulebook, which the consultation and now the response largely gloss over. For comparison, it is worth recalling that the process of reform of the EU procurement rules spanned a period of roughly three years (2011-2014), which the UK’s reform (despite not requiring complex inter-governmental and inter-institutional discussions and negotiations, or does it?) is unlikely to beat by much.

The response is meant to reflect on the 629 (unpublished) submissions to the public consultation and, in itself, the way the analysis of the responses has been carried out deserves some comment. The content of the response, perhaps less so, as it largely leaves the proposals unchanged and is thus liable to the same criticisms the original proposals attracted (in addition to my own comments here, here and here, see eg those of Pedro Telles, or the Local Government Association).

Consultation process: all submissions are equal, or are they?

Shortly after the response was published, it became apparent that the Cabinet Office had dealt with the feedback it received in the same ‘consultation by numbers’ approach that has characterised recent consultations on the reform of other aspects of UK procurement regulation, such as the rules applicable to the commissioning of healthcare services for the English National Health Service (NHS, see comment here) that seek to implement the NHS Long-Term Plan. This is not unique to the UK and, in fact, EU-level consultations on procurement reform broadly followed the same method.

Under this approach, the response provides limited or no engagement with specific submissions or arguments, and simply discloses statistical information on the level of support for each of the different parts of the consultation (as per the government’s own coding of the responses, that is). As the response makes explicit, ‘Throughout this document ‘[clear] majority’ means more than [70%] 50% of respondents, ‘about half’ means 50% ± a few percentage points, ‘some’ means 30-50%, ‘a few’ means 10-30% and ‘a small number’ means less than 10%’ (page 10, fn 1).

This is far from unproblematic, given the diversity of backgrounds and positions of those making submissions to the public consultation. While this was half-jokingly but well encapsulated by Peter Smith on twitter (see image), it is a serious flaw in the approach to public consultations for two reasons. The first and rather obvious is that not all submissions should carry the same weight because the institution or person making the submission and their expertise (own agenda, etc) matter, especially in fields of technical regulation where there is limited scope for canvassing general support for policy direction and the consultation is rather focused on complex legislative changes. While such a ‘referendum-like’ approach to public consultation may suit yes/no policy questions (eg should the UK de-legalise a specific substance?), it can hardly work for more complex proposals. If nothing else, the limited suitability of the approach is implicitly recognised in the response and its frequent indication that a significant number of submissions stressed the need for much more detail on the proposals before passing judgement on them.

The second problem is that such a bunching of responses and presentation of proposals as being supported by the majority can make the relevance of the changes introduced in view of the ‘minority’ opinion of respondents difficult to understand, as well as hide the origin of those changes. This is important from the perspective of accountability in the policy formulation process, but also more prosaically in terms of crediting good ideas and suggestions where credit is due.

Taking Q1 on principles of procurement as an example, the response indicates that ‘a clear majority of respondents (92% of the 477 responses to this question) were in favour of the principles [of public procurement: the public good, value for money, transparency, integrity, fair treatment of suppliers and non-discrimination]’ (at [28]). The rest of the summary of submissions indicates some concerns with the removal of proportionality (20%), and some issues around labelling of the principle of ‘fair treatment’, or how they can be implemented in practice. There is no reference to calls for maintaining the principle of competition, which were quite forcefully made by the Competition and Markets Authority (CMA), or myself if I can say so.

Given that the criticism of an absence of a competition principle is not reflected in the summary of submissions, it is probably difficult to understand (for anyone not having made that point themselves, or having read the very few submissions that are publicly available) why, in the response — seemingly out of the blue — the government indicates that ‘We will introduce an additional objective of promoting the importance of open and fair competition that will draw together a number of different threads in the Green Paper that encourage competitive procurement’ (at [39]). It is also unclear whether this will be narrowly understood as an anti-collusion goal/principle seeking to focus contracting authorities’ attention in the reduction of the risk of illegal bid-rigging cartels, as proposed by the CMA (at [3.3]), or a broader goal/principle in line with my own proposals (at pp 11-12) (or someone else’s).

Of course, it would be difficult and tedious (and probably not very useful) to provide a comprehensive discussion of all submissions received, but the response should be expected to provide much better reasons for changes on the initial proposals, as well as some traceability of the origin of those counter-proposals. In their absence, it is difficult to assess whether the changes are properly justified, or rather reflect some sort of ‘mob rule’ (where a ‘majority’ supported the change) or, conversely, an instance of regulatory capture by a special interest (where a change is untraceable, but likely to have originated from a (super)minority, or perhaps a single or limited number of submissions).

In any case, the response makes it clear that there are limited changes resulting from the public consultation process and that the Procurement Bill will be largely based on the initial consultation proposals. The rest of this post highlights some of the (few) notable changes.

What will change after the consultation?

It would take long to stress what has not changed in the Cabinet Office’s approach to procurement reform after the public consultation, but a couple of unchanged elements of the overall strategy merit some highlight.

The first one is the continuation of the claim that the process will simplify the procurement regulatory framework, while it is clear that this is not a true simplification exercise, but rather one of legislative offloading that will complicate enforcement. This is, in my view, obvious in the response’s proposed next steps, which include the ‘plan to produce a detailed and comprehensive package of published resources (statutory and non-statutory guidance on the key elements of the regulatory framework, templates, model procedures and case studies)’ (at [24]). Post-reform, procurement practitioners will have to fully understand not only the new legislation (primary and secondary), but also the entirety of that ‘comprehensive package’ and the interaction between the different documents. This is not a scenario I would be looking forward to if I hoped for a simpler rulebook post-reform.

The second one is the continued lack of commitment of funding for the training programme (and additional recruitment?) required to deliver the gains expected of the reform. The response continues to indicate that ‘subject to future funding decisions, we intend to roll out a programme of learning and development to meet the varying needs of stakeholders’ (at [24]). This perpetuates the uncertainty on whether the rollout of the new regulatory package will be properly supported and it is difficult to understand why the commitment to fully fund this transformation programme has not yet been made (not even at a political level, unless I missed something). Given the state of UK finances in the foreseeable future, this is a major implementation risk that should have required a different approach.

Moving on to the changes in the original proposals, the following is a non-exhaustive list of the primary changes and some short comments relating to a few of them.

• The response announces the introduction of a distinction between objectives and principles of procurement, ‘so that the obligations on contracting authorities are clearer’ (at [34]). Further, some ‘other concepts set out in the Green Paper will be established as statutory “objectives”, ensuring that they will influence decision-making in the procurement process. With some limited exceptions these objectives will apply throughout the procurement lifecycle (at [38]).
  Quite how this will provide clarity is anybody’s guess, or at least it escapes me (and it has since 2009, as I already struggled with distinguishing between a goal and a principle of competition in my PhD thesis…).
  It is also not clear which will be the statutory objectives, but it seems that ‘public good’ (framed as maximising ‘public benefit’), ‘value for money’ and ‘integrity’ will be statutory objectives (at [40]). This would leave the principles of transparency, fair treatment of suppliers and non-discrimination as the only procurement principles (stricto sensu) and would, in the end, solely imply a repeal of the principle of proportionality (or, rather, its relabelling as ‘fair treatment’), largely neutralised (confusingly) by an atomisation of proportionality requirements throughout the new regulations (at [42], eg in relation to award criteria at [128]). It is hard to see much of a (substantive) change compared to the current regulation of procurement principles in reg.18 PCR2015. Plus ça change …

• Introduction of ‘an additional objective of promoting the importance of open and fair competition’ (at [39]). This is a welcome development, but the devil will be in the detail (see above).

• Revision of the proposal for the creation of a new Procurement Review Unit (PRU) (at [46]), supported by a non-statutory panel of subject-matter experts (at [49], and see also [61-3]), tasked with delivering the same service as the Public Procurement Review Service (at [47]) but with a main focus on ‘on addressing systemic or institutional breaches of the procurement regulations’ (at [48]). Legislation will provide the PRU with new powers (at [52]). PRU will be able to issue mandatory recommendations to address legal compliance (at [53-4]), but not in relation to specific procurement decisions (at [53], ie it will not act as a review body). PRU will also be able to issue statutory guidance if it identifies common patterns of non-compliance (at [56]).

• The response maintains the goal of creating a single rulebook combining the existing four sets of regulations, but there will be exceptions for utilities (see also [78-85]), defence & security procurement (see also [87-91]), and a completely separate regime for healthcare services commissioning (at [69-72]). There will also be some specific rules concerning concessions (at [86]).
  The extent to which there will be a single rulebook other than in name will depend on the scope and number of such special rules, but I have my doubts that there will be much of a practical change other than (harmless) duplication of (mostly identical) provisions across the existing sets of regulations.

• The response proposes to abandon the regulation of a new regime of ‘crisis procurement’ and to instead ‘include a limited tendering ground, in the form of a new power for a Minister of the Crown (via statutory instrument) to “declare when action is necessary to protect life” and allow contracting authorities to procure within specific parameters without having to meet all the tests of the current extreme urgency ground’. This would be based on Article III of the WTO Agreement on Government Procurement (GPA) and only be used extremely rarely and subject to parliamentary scrutiny (at [102]).

• Re-introduction, with some (unspecified) modifications of the light-touch regime for social and special services, including the possibility to exempt from competition those services where service user choice is important (at [118-121]).
  Here, the response seems to fail to recognise that user-choice systems are not covered by the PCR2015 (as interpreted in line with CJEU case law such as Falk Pharma and Tirkkonen).

• Creation of a new exclusions framework going beyond the more limited original proposals (at [151-8]), including abandoning the proposal to include Deferred Prosecution Agreements (DPAs) as discretionary exclusion grounds (at [161-165]).
  Much detail is still to be published in the draft Procurement Bill and secondary legislation, guidance, etc, but the retention of the distinction between mandatory and discretionary exclusion grounds, as well as the classification of some of them (eg ‘risk to national security’ being a discretionary ground) raise quite a few questions. If a complete overhaul of the system is planned, would it not be better to have a single category of exclusion grounds and a clear set of requirements for their disapplication (eg due to self-cleaning, or in the public interest)? Here, it seems that UK policymakers have been unable to break away of the EU legislative design, even in an area where there are clear practical problems in the EU Directives.

• The response proposes to retain the creation of a DPS+ mechanism, but relabelling it as Dynamic Market, which will be available not only for common purchases, but for all types of procurement (at 198-203]).

• The response proposes some limited changes to the transparency requirements included in the original consultation (at [220-8]), including: not requiring disclosure of tenders submitted in a procurement (at [221], a good development); introducing a value threshold of £2 million for the requirement to publish redacted contract documents (at [222], which however means that large parts of eg services procurement could remain below the threshold. Should transparency thresholds relative to coverage thresholds be considered instead?); introducing a restricted disclosure of evaluation documents implying ‘sharing with all participants certain redacted evaluation documents (on the winning bid only) and sending the unsuccessful bidders their own documents privately’ (at [223], also a welcome development, but one that makes the changes regarding debriefing letters rather unclear, see [263-6]); and changes to some of the proposed transparency notices, in particular concerning beneficial ownership (at [224]).

• The response abandons the process of independent contracting authority review proposed in addition to the review system (at [241-2]).

• The proposal abandons the possibility of using an existing tribunal to deal with low value claims and issues relating to ongoing competitions (at 246-7]).
  This is perhaps one of the most regrettable changes in the response, as the creation of a review tribunal (not in the terms of the original proposal, but still) is very much needed, especially in a context of more regulatory complexity and increased discretion.

• Significant changes in remedies, including abandoning specific proposals on pre-contractual remedies (at [249}), and abandoning the cap on the level of damages available to aggrieved bidders (at [254-5]), as well as the proposal to cap profits on contract extensions where the incumbent supplier challenges a new contract award (at [294-5]). However, the proposed new test concerning lifting of automatic suspensions remains on the table (at [251-2]).

• Increased scope for the (de)regulation of contract modifications, including specific rules for the modification of complex contracts (at [281]), flexibility for uncapped modifications in utilities contracts (at [282]), and minimisation of constraints in the modification of defence & security contracts (at 283]).

Final thoughts

In my view, the outcome of the consultation is mostly unsatisfactory in its limited effect on the initial proposals (other than some very high level issues regarding the principles of the system), its introduction of further sources of complexity through an increased number of exceptions (eg for utilities and defence), but also for social and special services, and its abandonment of the few procedural and remedy-related innovations (ie the creation of a new tribunal) that could have made a practical difference.

Linked to the criticism of the way in which the consultation was carried out (above), it seems like a significant number of these changes could be the result of regulatory capture by specific groups (utilities, MOD, third sector providers of care services) and the reasons for abandoning proposed changes are not always very clear.

All in all, however, the post-consultation Transforming Public Procurement agenda remains largely intact and, as above, liable of the same criticism already raised in relation to the original proposals. Not much more can be said until a Procurement Bill is made public and, then, it will be interesting to see to which extent it can survive the legislative process without suffering a Frankenstein-like deformation in the hands of special interest groups and other agents with specific agendas. The seeming ease with which some interest-specific changes have cropped up after the consultation does not, in my view, bode well for the new UK procurement rulebook.

Recording of webinar on 'Digitalization and AI decision-making in administrative law proceedings'

The Centre for Global Law and Innovation of the University of Bristol Law School and the Faculty of Law at Universidade Católica Portuguesa co-organised an online workshop to discuss emerging issues in digitalization and AI decision-making in administrative law proceedings. I had the great pleasure of chairing it and I think quite a few important issues for further discussion and research were identified. The speakers kindly agreed to share a recording of the session (available here), of which details follow:

Digitalization and AI decision-making in administrative law proceedings

This is a hot area of legal and policy development that has seen an acceleration in the context of the covid-19 pandemic. Emerging research finds points of friction in the simple transposition of administrative law and existing procedures to the AI context, as well as challenges and shortcomings in the judicial review of decisions supported (or delegated) to an AI.

While more and more attention is paid to the use of AI by the public sector, key regulatory proposals such as the European Commission’s Proposal for an Artificial Intelligence Act would largely leave this area to (self)regulation via codes of practice, with the exception of public assistance benefits and services. Self-regulation is also largely the approach taken by the UK in its Guide to using artificial intelligence in the public sector, and the UK courts seem reluctant to engage with the technology underpinning automated decision-making. It is thus arguable that a regulatory gap is increasingly visible and that new solutions and regulatory approaches are required.

The panellists in this workshop covered a range of topics concerning transparency, data protection, automation of decision-making, and judicial review. The panel included (in order of participation):

• Dr Marta Vaz Canavarro Portocarrero de Carvalho, Assistant Professor at the Faculty of Law of Universidade Católica Portuguesa, specialising in administrative law, and member of the Centro de Arbitragem Administrativa (Portuguese Administrative Law Arbitration Centre).

• Dr Filipa Calvão, President of the Comissão Nacional de Proteção de Dados (Portuguese Data Protection Authority) since 2012, and Associate Professor at the Faculty of Law of Universidade Católica Portuguesa.

• Dr Pedro Cerqueira Gomes, Assistant Professor at Universidade Católica Portuguesa and Lawyer at Cerqueira Gomes & Associados, RL, specialising in administrative law and public procurement, and author of EU Public Procurement and Innovation - the innovation partnership procedure and harmonization challenges (Edward Elgar 2021).

• Mr Kit Fotheringham, Teaching Associate and postgraduate research student at the University of Bristol Law School. His doctoral thesis is on administrative law, specifically relating to the use of algorithms, machine learning and other artificial intelligence technologies by public bodies in automated decision-making procedures.

Where does the proposed EU AI Act place procurement?

Thinking about some of the issues raised in the earlier post ‘Can the robot procure for you?,’ I have now taken a close look at the European Commission’s Proposal for an Artificial Intelligence Act (AIA) to see how it approaches the use of AI in procurement procedures. It may (not) come as a surprise that the AI Act takes an extremely light-touch approach to the regulation of AI uses in procurement and simply subjects them to (yet to be developed) voluntary codes of conduct. I will detail my analysis of why this is the case in this post, as well as some reasons why I do not find it satisfactory.

Before getting to the details, it is worth stressing that this is reflective of a broader feature of the AIA: its heavy private sector orientation. When it comes to AI uses by the public sector, other than prohibiting some massive surveillance by the State (both for law enforcement and to generate a system of social scoring) and classifying as high-risk the most obvious AI uses by the law enforcement and judicial authorities (all of which are important, of course), the AIA remains silent on the use of AI in most administrative procedures, with the only exception of those concerning social benefits.

This approach could be generally justified by the limits to EU competence and, in particular, those derived from the principle of administrative self-organisation of the Member States. However, given the very broad approach taken by the Commission on the interpretation and use of Article 114 TFEU (which is the legal basis for the AIA, more below), this is not entirely consistent. It could rather be that the specific uses of AI by the public sector covered in the proposal reflect the increasingly well-known problematic uses of (biased) AI solutions in narrow aspects of public sector activity, rather than a broader reflection on the (still unknown, or still unimplemented) uses that could be problematic.

While the AIA is ‘future-proofed’ by including criteria for the inclusion of further use cases in its ‘high-risk’ category (which determines the bulk of compliance obligations), it is difficult to see how those criteria are suited to a significant expansion of the regulatory constraints to AI uses by the public sector, including in procurement. Therefore, as a broader point, I submit that the proposed AIA needs some revision to make it more suited to the potential deployment of AI by the public sector. To reflect on that, I am co-organising a webinar on ’Digitalization and AI decision-making in administrative law proceedings’, which will take place on 15 Nov 2021, 1pm UK (save the date, registration and more details here). All welcome.

Background on the AIA

Summarising the AIA is both difficult and has already been done (see eg this quick explainer of the Centre for Data Innovation, and for an accessible overview of the rationale and regulatory architecture of the AIA, this master class by Prof Christiane Wendehorst). So, I will just highlight here a few issues linked to the analysis of procurement’s position within its regulatory framework.

The AIA seeks to establish a proportionate approach to the regulation of AI deployment and use. While its primary concern is with the consolidation of the EU Single Digital Market and the avoidance of regulatory barriers to the circulation of AI solutions, its preamble also points to the need to ensure the effectiveness of EU values and, crucially, the fundamental rights in the Charter of Fundamental Rights of the EU.

Importantly for the purposes of our discussion, recital (28) AIA stresses that ‘The extent of the adverse impact caused by the AI system on the fundamental rights protected by the Charter is of particular relevance when classifying an AI system as high-risk. Those rights include ... right to an effective remedy and to a fair trial [Art 47 Charter] … [and] right to good administration {Art 41 Charter]’.

The AIA seeks to create such a proportionate approach to the regulation of AI by establishing four categories of AI uses: prohibited, high-risk, limited risk requiring transparency measures, and minimal risk. The two categories that carry regulatory constraints or compliance obligations are those concerning high-risk (Arts 8-15 AIA), and limited risk requiring transparency measures (Art 52 AIA, which also applies to some high-risk AI). Minimal risk AI uses are left unregulated, although the AIA (Art 69) seeks to promote the development of codes of conduct intended to foster voluntary compliance with the requirements applicable to high-risk AI systems.

Procurement within the AIA

Procurement AI practices could not be classified as prohibited uses (Art 5 AIA), except in the difficult to imagine circumstances in which they deployed subliminal techniques. It is also difficult to see how they could fall under the regime applicable to uses requiring special transparency (Art 52) because it only applies to AI systems intended to interact with natural persons, which must be ‘designed and developed in such a way that natural persons are informed that they are interacting with an AI system, unless this is obvious from the circumstances and the context of use.’ It would not be difficult for public buyers using external-facing AI solutions (eg chatbots seeking to guide tenderers through their e-submissions) to make it clear that the tenderers are interacting with an AI solution. And, even if not, the transparency obligations are rather minimal.

So, the crux of the issue rests on whether procurement-related AI uses could be classified as high-risk. This is regulated in Art 6 AIA, which cross-refers to Annex III AIA. The Annex contains a numerus clausus of high-risk AI uses, which is however susceptible of amendment under the conditions specified in Art 7 AIA. Art 6/Annex III do not contain any procurement-related AI uses. The only type of AI use linked to administrative procedures concerns ‘AI systems intended to be used by public authorities or on behalf of public authorities to evaluate the eligibility of natural persons for public assistance benefits and services, as well as to grant, reduce, revoke, or reclaim such benefits and services’ (Annex III(5)(a) AIA).

Clearly, then, procurement-related AI uses are currently left to the default category of those with minimal risk and, thus, subjected only to voluntary self-regulation via codes of conduct.

Could this change in the future?

Art 7 AIA establishes the following two cumulative criteria: (a) the AI systems are intended to be used in any of the areas listed in points 1 to 8 of Annex III; and (b) the AI systems pose a risk of harm to the health and safety, or a risk of adverse impact on fundamental rights, that is, in respect of its severity and probability of occurrence, equivalent to or greater than the risk of harm or of adverse impact posed by the high-risk AI systems already referred to in Annex III.

The first hurdle in getting procurement-related AI uses included in Annex III in the future is formal and concerns the interpretation of the categories listed therein. There are only two potential options: nesting them under uses related to ‘Access to and enjoyment of essential private services and public services and benefits’, or uses related to ‘Administration of justice and democratic processes’. It could (theoretically) be possible to squeeze them in one of them (perhaps the latter easier than the former), but this is by no means straightforward and, given the existing AI uses in each of the two categories, I would personally be disinclined to engage in such broad interpretation.

Even if that hurdle was cleared, the second hurdle is also challenging. Art 7(2) AIA establishes the criteria to assess that an AI use poses a sufficient ‘risk of adverse impact on fundamental rights’. Of those criteria, there are three that in my view would make it very difficult to classify procurement-related AI uses as high-risk. Those criteria require the European Commission to consider:

(c) the extent to which the use of an AI system has already caused … adverse impact on the fundamental rights or has given rise to significant concerns in relation to the materialisation of such … adverse impact, as demonstrated by reports or documented allegations submitted to national competent authorities;

(d) the potential extent of such harm or such adverse impact, in particular in terms of its intensity and its ability to affect a plurality of persons;

(e) the extent to which potentially harmed or adversely impacted persons are dependent on the outcome produced with an AI system, in particular because for practical or legal reasons it is not reasonably possible to opt-out from that outcome;

(g) the extent to which the outcome produced with an AI system is easily reversible …;

Meeting these criteria would require for the relevant AI systems to basically be making independent or fully automated decisions (eg on award of contract, or exclusion of tenderers), so that their decisions would be seen to affect the effectiveness of Art 41 and 47 Charter rights; as well as a (practical) understanding that those decisions cannot be easily reversed. Otherwise, the regulatory threshold is so high that most likely procurement-related AI uses (screening, recommender systems, support to human decision-making (eg automated evaluation of tenders), etc) are unlikely to be considered to pose a sufficient ‘risk of adverse impact on fundamental rights’.

Could Member States go further?

As mentioned above, one of the potential explanations for the almost absolute silence on the use of AI in administrative procedures in the AIA could be that the Commission considers that this aspect of AI regulation belongs to each of the Member States. If that was true, then Member States could further than the code of conduct self-regulatory approach resulting from the AIA regulatory architecture. An easy approach would be to eg legally mandate compliance with the AIA obligations for high-risk AI systems.

However, given the internal market justification of the AIA, to be honest, I have my doubts that such a regulatory intervention would withstand challenges on the basis of general EU internal market law.

The thrust of the AIA competential justification (under Art 114 TFEU, see point 2.1 of the Explanatory memorandum) is that

The primary objective of this proposal is to ensure the proper functioning of the internal market by setting harmonised rules in particular on the development, placing on the Union market and the use of products and services making use of AI technologies or provided as stand-alone AI systems. Some Member States are already considering national rules to ensure that AI is safe and is developed and used in compliance with fundamental rights obligations. This will likely lead to two main problems: i) a fragmentation of the internal market on essential elements regarding in particular the requirements for the AI products and services, their marketing, their use, the liability and the supervision by public authorities, and ii) the substantial diminishment of legal certainty for both providers and users of AI systems on how existing and new rules will apply to those systems in the Union.

All of those issues would arise if each Member State adopted its own rules constraining the use of AI for administrative procedures not covered by the AIA (either related to procurement or not), so the challenge to that decentralised approach on grounds of internal market law by eg providers of procurement-related AI solutions capable of deployment in all Member States but burdened with uneven regulatory requirements seems quite straightforward (if controversial), especially given the high level of homogeneity in public procurement regulation resulting from the 2014 Public Procurement Package. Not to mention the possibility of challenging those domestic obligation on grounds that they go further than the AIA in breach of Art 16 Charter (freedom to conduct a business), even if this could face some issues resulting from the interpretation of Art 51 thereof.

Repositioning procurement (and other aspects of administrative law) in the AIA

In my view, there is a case to be made for the repositioning of procurement-related AI uses within the AIA, and its logic can apply to other areas of administrative law/activity with similar market effects.

The key issue is that the development of AI solutions to support decision-making in the public sector not only concerns the rights of those directly involved or affected by those decisions, but also society at large. In the case of procurement, eg the development of biased procurement evaluation or procurement recommender systems can have negative social effects via its effects on the market (eg on value for money, to mention the most obvious) that are difficult to identify in single tender procurement decisions.

Moreover, it seems that the public administration is well-placed to comply with the requirements of the AIA for high-risk AI systems as a matter of routine procedure, and the arguments on the need to take a proportionate approach to the regulation of AI so as not to stifle innovation lose steam and barely have any punch when it comes to imposing them on the public sector user. Further, to a large extent, the AIA requirements seem to me mostly aligned with the requirements for running a proper (and challenge proof) eProcurement system, and they would also facilitate compliance with duties of good administration when specific decisions are challenged.

Therefore, on balance, I see no good reason not to expand the list in Annex III AIA to include the use of AI systems in all administrative procedures, and in particular in public procurement and in other regulatory sectors where ex post interventions to correct market distortions resulting from biased AI implementations can simply be practically impossible. I submit that this should be done before its adoption.

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

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!

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].

Interesting paper on effects of open procurement data on outcomes: Duguay, Rauter & Samuels (2019)

A recently published working paper has assessed the impact of increased availability of procurement data on competition for public contracts and on procurement outcomes in the EU context: R Duguay, T Rauter & D Samuels, ‘The Impact of Open Data on Public Procurement’ (November 22, 2019).

Duguay, Rauter & Samuels concentrate on the increased availability of TED data in a (more) user-friendly format in July 2015 (when the data started being available for a bulk download on CSV format) to assess the effects that easier access to procurement data has on the functioning of procurement markets and on procurement outcomes. The paper is very interesting and their results are quite striking.

However, it is important to stress the important caveat that their analysis is still based on TED data and, thus, potentially affected by the quality shortcomings of that data. As mentioned in other occasions, the TED database has problems because it is constructed as a result of the self-declaration of data by the contracting authorities of the Member States, which makes its content very inhomogeneous and difficult to analyse, including significant problems of under-inclusiveness, definitional fuzziness and the lack of filtering of errors—as recognised, repeatedly, in the methodology underpinning the SMSPP itself (see here and here).

With that in mind, however, it is interesting to look closely at their findings.

A seemingly striking insight derived from the paper is that ‘the new European government contracting provisions have anti-competitive effects‘ (at 17). This is in the context of an analysis of the ‘likelihood that government agencies allocate public contracts through an open procedure‘ and should thus not be surprising, given the flexibilisation in the use of procedures involving negotiations. However, even with this regulatory effect, the authors find that more open data triggers more use of open procedures, in particular in EU countries with weaker institutional frameworks (at 18-19, and see below). This could be symptomatic of the fact that more complexity in procurement subjected to higher levels of transparency pushes for a risk-averse approach to procurement compliance. The same would be supported by their finding of higher levels of award of contracts on the basis of price-only award criteria (at 25, and see below).

This tension between procurement complexity and transparency is generally strongly evidenced in the paper.

On the one hand, and in line with claims of the pro-competitive nature of more openness in procurement data (note, not of more openness or transparency of contract opportunities), the authors find that

• the likelihood of competitive bidding increases sharply for TED contracts around July 2015 and that this increase persists through the end of our sample period [ie to the end of 2018] (at 18);

• open procurement data leads government officials to implement more competitive bidding processes [ie open procedures], and that this increase in competitive bidding is driven by countries that do not have the institutions to effectively monitor public officials (at 19);

• the number of bids increases sharply for TED contracts soon after the open data initiative, and this increase persists throughout our sample period (at 20);

• public officials are 8.7 percentage points more likely to award government contracts to new vendors after the open data initiative (at 21);

• contract values fall by approximately 8% ... after the open data initiative (at 23).

On the other hand, and also in line with theoretical expectations of a degradation of procurement decisions subjected to higher levels of transparency (and the fact that this transparency does not concern contract opportunities, but more general open procurement data), the authors also find that

• [the results] are inconsistent with the idea that easier access to procurement data fosters cross-border competition throughout the European Union … open procurement data fosters local competition among vendors by reducing barriers to entry but does not promote cross-border competition across the European single market (at 22);

• after the open data initiative, the likelihood of a contract modification increases by 2.9 percentage points for contracts above TED publication thresholds (at 24);

• after the open data initiative, public officials are 38% ... more likely to award contracts above TED publication thresholds exclusively based on price (at 25);

• the performance ... is significantly worse if price was the only award criterion in the allocation decision (at 26);

• the increase in modifications is driven by contracts awarded to new government suppliers, consistent with information asymmetries contributing to the observed deterioration in contract performance. Moreover, this evidence suggests that procurement relationships before the open data initiative were not necessarily corrupt or otherwise inefficient (at 26);

• the decline in contract performance is stronger for complex procurements, consistent with project complexity exacerbating the potential allocative distortions of open procurement data (at 27).

Their overall conclusion is that

Comparing government contracts above and below EU publication thresholds, we find that increasing the public accessibility of procurement data raises the likelihood of having competitive bidding processes, increases the number of bids per contract, and facilitates market entry by new vendors. After the open data initiative, procurement prices decrease and EU government agencies are more likely to award contracts to the lowest bidder. However, the increased competition comes at the expense of lower contract performance, particularly if suppliers are new, procurement projects are complex, and contracts are awarded solely based on price.

Overall, our results suggest that open data on procurement awards facilitates competition and lowers ex-ante procurement prices, but does not necessarily increase allocative efficiency in government contracting (at 27-28, emphases added).

I find these results striking and difficult to assess from the perspective of evidence-based policy-making. There are two issues of particular concern/interest to me.

One, the finding that more availability of data does not generate more cross-border procurement, and that the push for more competitive (ie open) procedures is mostly appreciable in countries with weaker institutional frameworks. This could support the position that institutional robustness is an alternative to data transparency, which would significantly alter the prioritisation of systemic procurement reforms and take the sides of systems that favour strong institutional oversight in a context of relative opacity.

Second, that transparency exacerbates problems at execution phase, in particular in complex projects and/or projects with new suppliers. This would take the wind out of the sails of reform and policy-making approaches concentrating on perceived or apparent competition for the contract at award stage, and rather force a refocus on an analysis of procurement outcomes at the end of the relevant project. This would also side with approaches that would advocate for more robust institutional approaches to contract design and performance management, rather than relying on transparency to correct contract execution problems.

The mixed results of the paper are also interesting in the context of the long-term effect of more open procurement data on competition, as well as on cartelisation and bid rigging risks, which are not assessed in the paper.

On the round, I think that the paper offers some interesting evidence to back up that there is a need to reconsider the level of transparency given to procurement data. I do not think this should stop the development of an improved procurement data architecture in the EU. To the contrary. I think this should reignite and prioritise discussions concerning the level of disclosure or public access to that information (ie its openness), which cannot be simply assumed to be positive in what, in my view, is currently an excessively simplistic approach in leading policy-making and think tank proposals. For more (but not new) discussion, see here and here.

Public consultation on procurement planning by the Spanish Competition Authority now open (until 20/12)

The Spanish Competition Authority (Comisión Nacional de los Mercados y la Competencia, CNMC) is in the process of revising its 2011 Guide on public procurement and competition to reflect recent developments and the change of regulatory framework derived from the transposition of the 2014 EU Public Procurement Package [for a critical assessment of the original guide, in Spanish, see A Sanchez-Graells, ‘Una Visión Crítica de la 'Guía Sobre Contratación Pública y Competencia' Publicada por la CNC’ (2011) 21 Gaceta Jurídica de la Unión Europea y de la Competencia 15-31].

The CNMC plans to update their guidance in steps, and has started the process by focusing on procurement planning. In order to gather input into the formulation of guidance on procurement planning from a competition perspective, the CNMC has published a short preliminary working paper (in Spanish), is holding a public conference on 3 December (in which I am honoured to participate), and has also opened a public consultation (closes 20 Dec 2019).

Even thought, unfortunately, this is a process mainly conducted in Spanish, I am sure the CNMC would welcome any contributions on best procurement planning practices and on the impact of planning on competition via email: dp.ayudaseinformesnormativos@cnmc.es (subject: “Consulta pública Planificación de la contratación pública", indicating whether your contribution can be published or should remain confidential). In case of interest, below is my own contribution to the public consultation (in Spanish).

Procurement governance and complex technologies: a promising future?

Thanks to the UK’s Procurement Lawyers’ Association (PLA) and in particular Totis Kotsonis, on Wednesday 6 March 2019, I will have the opportunity to present some of my initial thoughts on the potential impact of complex technologies on procurement governance.

In the presentation, I will aim to critically assess the impacts that complex technologies such as blockchain (or smart contracts), artificial intelligence (including big data) and the internet of things could have for public procurement governance and oversight. Taking the main risks of maladministration of the procurement function (corruption, discrimination and inefficiency) on which procurement law is based as the analytical point of departure, the talk will explore the potential improvements of governance that different complex technologies could bring, as well as any new governance risks that they could also generate.

The slides I will use are at the end of this post. Unfortunately, the hyperlinks do not work, so please email me if you are interested in a fully-accessible presentation format (a.sanchez-graells@bristol.ac.uk).

The event is open to non-PLA members. So if you are in London and fancy joining the conversation, please register following the instructions in the PLA’s event page.

Procurement governance and complex technologies: a promising future? from Albert Sanchez Graells

Two recent cases on transparency & access to documents in EU Institutional procurement (I) (T-136/15)

Two recent General Court judgments have addressed different aspects of transparency duties and access to documents requirements in EU Institutional procurement [for discussion, see A Sanchez-Graells, 'Transparency in Procurement by the EU Institutions' (2017)].

The first Judgment of 14 December 2017 in Evropaïki Dynamiki v Parliament (T-136/15, EU:T:2017:915) concerns access to procurement documents under Regulation 1049/2001. The other Judgment of 14 December 2017, and also involving European Dynamics Luxembourg and Evropaïki Dynamiki v Parliament (T-164/15, EU:T:2017:906, not available in English), addresses issues concerning the duty to provide reasons under the applicable (2012) version of the EU Financial Regulation. 

This post discusses T-136/15, and a follow-up post will discuss T-164/15.

Access to procurement documents under Regulation 1049/2001--
a blow to the almighty presumed protection of business secrets?

As a starting point, it is worth reminding that the Court of Justice (ECJ) has recognised that the protection of business secrets is a general principle applicable in the context of public procurement [Judgment of 14 February 2008, Varec, C-450/06, EU:C:2008:91, paragraph 49; see also Opinion of AG Kokott of 23 September 2010 in Stichting Natuur en Milieu and Others, C-266/09, EU:C:2010:546, paragraph 77], and that the General Court (GC) has accepted that there is general presumption of confidentiality in respect of the bids submitted by tenderers in a public procurement procedure in the event that a request for access is made by another tenderer, in particular on account of the economic and technical information contained in those bids [Judgment of 29 January 2013, Cosepuri v EFSA, T-339/10 and T-532/10, EU:T:2013:38, paragraphs 95 and 101; and Judgment of 21 September 2016, Secolux v Commission, T-363/14, EU:T:2016:521, paragraphs 47 and 49]. However, in this case, the disappointed bidder (European Dynamics) did not seek access to the tenders submitted by its competitors, but to 'all available information concerning all the requests for quotation which were issued by the [Parliament] for all lots' (T-136/15, para 2). This created an opportunity for the GC to reassess the extent of the presumption against the disclosure of documents containing potential business secrets, as the documents did not originate from the bidders, but rather from the contracting authority. The case does not provide much detail, but it seems that the requests for quotations may have been different between themselves, and that European Dynamics wanted to ascertain whether they represented a proper split of the contract into lots.

With this in mind, and given the width of the general presumption against disclosure of documents on the basis of business secrets, it should come as no surprise that, when European Dynamics asked the European Parliament to provide all requests for quotations--and in addition to other arguments for the rejection of such request, including workload implications, public security, personal data and procedural decision-making issues--the Parliament sought to ground its rejection of access on the fact that 'the documents requested contain information of an economic and technical nature, the presentation of which could reveal the Parliament’s profile as a buyer in the market. In addition, the requests for quotation could contain information on the particular skills of the suppliers selected for each lot as well as details of their commercial strategy and alliances or links with third parties. The protection of commercial interests, namely those of the economic actors involved and of the Parliament, also justified, in the view of the Parliament, refusing all access to the documents requested' (T-136/15, para 16). The Parliament also pressed the additional point that 'the ... exceptions to the right of access... were to be regarded as applying to all ... documents by virtue of a general presumption, in accordance with the line of reasoning developed by the Court of Justice in its judgment of 29 June 2010, Commission v Technische Glaswerke Ilmenau (C‑139/07 P, EU:C:2010:376)' (T-136/15, para 19). Also unsurprisingly, European Dynamics challenged that decision.

In its assessment of this specific aspect of the dispute, the GC found that:

(1) Parliament was generally entitled to rely on presumptions of applicability of the grounds for non-disclosure, as 'the Court of Justice has acknowledged that it is open to the institutions to base their decisions, as regards how granting access might specifically and actually undermine the interest protected by an exception under Article 4 of Regulation No 1049/2001, on general presumptions which apply to certain categories of documents, as considerations of a generally similar kind are likely to apply to requests for disclosure relating to documents of the same nature (judgments of 1 July 2008, Sweden and Turco v Council, C‑39/05 P and C‑52/05 P, EU:C:2008:374, paragraph 50; of 29 June 2010, Commission v Technische Glaswerke Ilmenau, C‑139/07 P, EU:C:2010:376, paragraph 54; of 21 September 2010, Sweden and Others v API and Commission, C‑514/07 P, C‑528/07 P and C‑532/07 P, EU:C:2010:541, paragraph 74, and of 27 February 2014, Commission v EnBW, C‑365/12 P, EU:C:2014:112, paragraph 65)' (T-136/15, para 47, emphasis added). But the possibility of relying on such presumptions required that 'documents of the same category ... contain the same kind of information. ... only if an exception to the right of access manifestly covers the content of those documents in its entirety ... the institution may avoid undertaking a specific, individual examination of those documents (see, to that effect, judgment of 9 September 2011, LPN v Commission, T‑29/08, EU:T:2011:448, paragraph 114)' (T-136/15, para 48). Thus, a detailed assessment of the applicability of the grounds to the specific type of document was necessary.

(2) Reliance on such a presumption was not justified on grounds relating to (i) protection of public security, (ii) privacy or (iii) the protection of Parliament's decision-making process because not all documents covered by the request for access could be presumed to include information relevant to those issues (see T-136/15, paras 50-60). This left the legality Parliament's rejection of access to documentation dependent on the GC's view on the exclusion from disclosure based on the first indent of Article 4(2) Reg 1049/2001, according to which '[t]he institutions shall refuse access to a document where disclosure would undermine the protection of: ... commercial interests of a natural or legal person, including intellectual property'.

(3) When assessing the applicability of a general presumption of exemption in line with the first indent of Art 4(2) Reg 1049/2001, the GC stressed the different nature of documents covered by European Dynamics' request. Its arguments (even if lengthy) require some close analysis:

as regards requests for quotations, a general presumption that commercial interests would be undermined cannot be based ... on the case-law ... relating to the bids of tenderers ...

... in order to attain the objective of the rules on EU public procurement, which is based on undistorted competition, it is important that the contracting authorities do not release information relating to public contract award procedures which could be used to distort competition, whether in an ongoing procurement procedure or in subsequent procedures ...

... it is recognised in the case-law that the economic and technical information in the tenderers’ bids is such as to justify refusal by the institution concerned to grant access to the bid of the successful tenderer. That is the case in particular where such bids contain details of the specific skills of the tenderers and contribute to the individual nature and appeal of the tenderers’ bids ...

 Having regard to the nature and purpose of a request for quotation drawn up by the contracting authority in performance of a framework contract, it cannot be presumed that such a document contains economic and technical information on the contractor or details its specific skill. On the contrary, its request for quotation, which comes from the contracting authority and not from its contractors, includes as a general rule a description of the tasks which the contracting authority wishes to have carried out under the framework contract which it has signed with the contractor. In principle, it is only in response to that request for quotation that the contractor will provide details on the services which it considers it can provide to the contracting authority, the profile of the experts which it can make available and the cost of its services.

Furthermore, the Parliament cannot argue that the disclosure of the requests for quotation will undermine its own interests, in that disclosure could reveal its ‘purchasing profile’ on the market. In fact, even if disclosure of the relationship between the tasks to be performed and the number of working days necessary to complete them could enable the tenderers, in future public procurement procedures, to unveil the Parliament’s costing technique, the fact that tenderers could know the prices quoted in the past for a corresponding service seems more likely to lead to a situation of genuine competition than to a situation where competition would be distorted (sic) ...

... having regard to the nature of a request for quotation drawn up by the contracting authority in performance of a framework agreement and the objective pursued by the [procurement rules], the Parliament was not entitled to rely on a general presumption that the interests protected by the first indent of Article 4(2) of Regulation No 1049/2001 would be undermined to avoid a specific, individual examination of the documents requested.

A request for quotation includes, in principle, a description of the tasks which the contracting authority wishes to have carried out under the framework contract which it has signed with the contracting party, but also more general information concerning, in particular, the practical management and monitoring of projects, the persons responsible, or the format of the reports to be provided on a regular basis. Thus, it is not established that the disclosure of all the information contained in the documents requested would undermine the commercial interests of the Parliament or of third parties.

... the Parliament could not rely on the exception to the right of access set out in the first indent of Article 4(2) of Regulation No 1049/2001 relating to the protection of commercial interests to refuse to carry out a specific, individual examination of the documents requested and to disclose them (T-136/15, paras 63, 68-72, and 74-75, references omitted and emphases added).

Despite excluding the possibility for the Parliament to rely on the presumptions, the GC recognised the validity of the rejection of the request to access the documents on the grounds that complying with it would have generated an excessive workload for the Parliament (see T-136/15, paras 78-103). Therefore, the documents were not disclosed. However, in my view, the approach to the applicability of the presumption of confidentiality to requests for quotations within framework agreements undertaken by the GC in its Evropaïki Dynamiki v Parliament Judgment (T-136/15) is faulty.

Critical comments

Indeed, there are two issues that require particular criticism because, in my view, the GC improperly assessed them.

First,  the GC seems to misinterpret the extent to which a request for quotations within the context of a framework agreement is likely to contain commercially-sensitive information, and errs on the side of presuming excessive neutrality or homogeneity in those requests. In my view, thus, the GC gets it wrong when it considers that '[i]n principle,it is only in response to [a] request for quotation that the contractor will provide details on the services which it considers it can provide to the contracting authority, the profile of the experts which it can make available and the cost of its services' (T-136/15, para 70). This is a reasoning that implicitly establishes the wrong functional equivalence between a call for tenders prior to the award of a public contract (including framework agreements) and a request for quotations within the context of a framework agreement. Given that the award decision (based on the previous tender) would already have established details of the services covered by the concluded framework, the GC gets the general principle backwards in ignoring that each of the requests for quotation would have been different and based on the peculiarities of each contractor's prior offer--otherwise, why would Parliament have issued over 1,000 (different) requests for quotation, and why would European Dynamics be interested in having access to them?

Indeed, given that award of the framework agreement (or, to be more precise, the placing of a contractor in a specific position in the cascade mechanism within the framework, as in the case at hand) results from the previous tender successfully submitted by the interested economic operator--and that, consequently, not all contractors included in the framework agreement would have been included under homogeneous conditions--in my view, the requests for quotations are more likely than not to include details of the previous tender that can be easily 'reverse-engineered' by their competitors. Thus, the protection given by the presumption of confidentiality to the original tender needs to carry through to requests for (more specific) quotations on its basis, so as to avoid such risk of leakage of commercially-relevant information. By taking a different approach, the GC has created a potential negative erosion of the presumption of protection of commercially-sensitive information in the context of EU Institutional procurement where framework agreements are involved. In my view, this is undesirable and the GC's position should be challenged.

Second, the GC's complementary position that 'the fact that tenderers could know the prices quoted in the past for a corresponding service seems more likely to lead to a situation of genuine competition than to a situation where competition would be distorted' (T-136/15, para 71) makes no economic sense, in my opinion. Given that what is presented as information on "past pricing" would, in the case at hand, have concerned "contemporaneous pricing", and that it would be disclosed within such a closed competitive setting as a framework agreement, economic theory predicts anticompetitive effects and a heightened risk of collusion [for discussion, generally, see K-M Halonen, 'Disclosure Rules in EU Public Procurement: Balancing between Competition and Transparency’ (2016) 16(4) Journal of Public Procurement 528; A Sanchez-Graells, ‘The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives’ (2013) Univ. of Leicester School of Law Research Paper No. 13-11]. By failing to take that risk into account, and starting to consolidate a jurisprudential position that revelation of past pricing information is pro-competitive, the GC is following the wrong functional approach. This, too, I would like to see challenged and changed.

reasons for the deduction of points at tender evaluation must be fully disclosed to their last detail: AG MENGOZZI ON DUTY TO MOTIVATE PROCUREMENT DECISIONS (C-376/16 P)

Image: Sébastien Thibault.

AG Mengozzi has put pressure on the Court of Justice (ECJ) to continue pushing for excessive transparency in the context of procurement litigation. On this occasion, the AG has invited the ECJ to establish an extremely stringent requirement for the disclosure of detailed comparisons of the evaluation reports to the level of award sub-criteria, without assessing the extent to which the contracting authority can have legitimate reasons to withhold parts of the evaluation.

In my view, this approach would create significant imbalances between the duty to provide reasons to disappointed tenderers and the duty to preserve competition for public contracts and sufficient protection of business and commercial information, which is problematic [for discussion, see K-M Halonen, 'Disclosure Rules in EU Public Procurement: Balancing between Competition and Transparency’ (2016) 16(4) Journal of Public Procurement 528; A Sanchez-Graells, ‘The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives’ (2013) Univ. of Leicester School of Law Research Paper No. 13-11]. Therefore, I argue that the ECJ should deviate from the Opinion of AG Mengozzi in its final Judgment in this case.

It is worth noting that the case is subjected to a previous version of the procurement rules in the EU Financial Regulation, but the ECJ's Judgment will be more generally relevant, both in the context of the current Financial Regulation controlling EU Institutional procurement and, more generally, for procurement controlled by the rules in the 2014 EU Public Procurement Package.

The AG Opinion

In his Opinion of 28 September 2017 in case EUIPO v European Dynamics Luxembourg and Others, C-376/16 P, EU:C:2017:729, AG Mengozzi has once more attempted a delineation of the obligation to state reasons for a decision to reject a tender and, in particular, "with regard to the correlation between the specific negative assessments set out in the evaluation report and the deductions of net points made by the contracting authority" (para 19). Or, in other words, AG Mengozzi has indicated the way in which the case law of the Court of Justice (ECJ) on the duty to provide justifications in the context of procurement debriefing applies to the reasons for the deduction of points on the basis of negative judgements of the evaluation committee [for general discussion of this obligation, see A Sanchez-Graells, “Transparency in Procurement by the EU Institutions”, in K-M Halonen, R Caranta & A Sanchez-Graells (eds), Disclosure Rules within Public Procurement Procedures and During Contract Period, vol 9 EPL Series (Edward Elgar, forthc.)].

This point of law was raised by EUIPO against the previous finding of the General Court (GC) that, despite the fact that contracting authorities are not required to provide unsuccessful tenderers with a detailed summary of how each aspect of their tenders was taken into account for its evaluation, however,

when the contracting authority makes specific assessments as to the manner in which the tender in question fulfils or otherwise [award] criteria and sub-criteria, which are clearly relevant to the overall score of the tender, the duty to state reasons necessarily includes the need to explain how, in particular, negative assessments gave rise to the deduction of points (Judgment of 27 April 2016 in European Dynamics Luxembourg and Others v EUIPO, T-556/11, EU:T:2016:248, para 250).

In the specific case, the GC considered it particularly important because the evaluation method included relative measures, so that "any deduction of net points in respect of certain sub-criteria automatically resulted, under the formula applied by the contracting authority, in the increase in the number of gross points to be allocated to the successful tenderers’ tenders in respect of their technical quality" (AGO C-376/16 P, para 24 & T-556/11, para 251).

The circumstances of the case where such that EUIPO disclosed the overall score for each of the three technical or qualitative criteria used in tender evaluation, but not the detailed breakdown for each of the award sub-criteria taken into consideration by the evaluation committee. In those circumstances, the GC found that "it was impossible, both for [the disappointed tenderer] and for the Court, to understand the calculation or precise breakdown of the points deducted for each sub-criterion, or even for each of the sub-points, and that it was therefore also not possible to verify whether and to what extent those deductions actually corresponded to the negative assessments made in the evaluation report and, accordingly, whether they were justified or not, or, at the very least, sufficiently plausible" (AGO C-376/16 P, para 26 & T-556/11, para 252).

EUIPO opposed that finding, and the more general point of law made by the GC, on the basis that neither the applicable rules, nor the case law of the CJEU required the debriefing information provided to a disappointed tenderer to include a demonstration of "which negative comment led to which deduction of points for each specific sub-criterion or sub-point" (AGO C-376/16 P, para 28 - for details of the reasons, see paras 29-31).

Thus, the main point of contention concerns the limits of the duty to disclose details of the evaluation process and report. Or, as AG Mengozzi put it, the question is "in essence, whether the [GC] was right in holding that the decision to reject the tender did not satisfy the requirements to state reasons stemming from [the applicable rules], as interpreted by the case-law, or whether the [GC] applied an overly strict test compared with the aforementioned provisions and the relevant case-law of the [ECJ]" (AGO, C-376/16 P, para 32). 

After a short restatement of the ECJ case law on the limits of the obligation to provide reasons and disclose relevant parts of the evaluation report, and despite stressing that "the contracting authority [is not] under an obligation to provide an unsuccessful tenderer, upon written request from it, with a full copy of the evaluation report" (AGO, C-376/16 P, para 36), in short, AG Mengozzi has invited the ECJ to establish that the right disclosure standard is one where

(i) the extracts of the evaluation reports disclosed by the [contracting authority] [make] it possible to deduce the number of points obtained by the appellant in question in comparison with the successful tenderer, broken down each time for each sub-criterion, and the weight of each sub-criterion in the overall evaluation, and (ii), the comments of the evaluation committee which [are] disclosed [explain], for each award criterion, on the basis of which sub-criteria the [contracting authority] had found the tender of the successful tenderer or that of the appellant in question to be the best (AGO C-376/16 P, para 47, emphases in the original).

AG Mengozzi suggests that this would have already been implicitly established in the Judgment of 4 October 2012 in Evropaïki Dynamiki v Commission, C-629/11 P, EU:C:2012:617, para 11, where the circumstances of the case reflected this level of disclosure.

Criticism

In my view, this is not an adequate test.

First of all, I struggle to see where the boundary lies between having to disclose the evaluation report in full and having to provide an absolutely broken down comparative assessment of the evaluation of the disappointed tenderers' tender and that of the preferred tenderer. To be fair, the previous case law is riddled with such tensions and it is difficult to establish clear boundaries on the obligation to disclose information contained in the evaluation report. However, in my view, the step taken by AG Mengozzi (and previously by the GC) comes to nullify the general (minimum) safeguard that contracting authorities are not required to disclose the evaluation report in full.

Secondly, I am not sure that in the assessment of these issues enough consideration is given to the fact that the relevant rules allow contracting authorities not to disclose certain details where disclosure would hinder application of the law, would be contrary to the public interest or would harm the legitimate business interests of public or private undertakings or could distort fair competition between those undertakings. In my view, there is a clear case to be made for restricting the level of disclosure of the points given to competing tenderers to a level of generality (eg award criteria rather than sub-award criteria) that strikes a balance between allowing for the review of the procurement decision while preserving competing interests. If the case law of the ECJ develop in the direction suggested by AG Mengozzi, it will be almost impossible for contracting authorities to protect legitimate interests in the context of procurement, and this will have chilling effects on participation.

Third, such a test would potentially make sense in terms of disclosure between the contracting authority and the review body or court, but not in relation to the disappointed tenderer. It would make much more sense to allow for disclosure limited to the level of award criteria at debriefing stage and, only in case the disappointed tenderer is not satisfied and launches an administrative or judicial review, for that information to be released to the review body of court, with stringent rules on access to that confidential information (for example, along the lines of the guidelines recently adopted in England). In the absence of this differential access to sensitive information, the adoption of the test proposed by AG Mengozzi is excessive and creates structural risks for abuse and competitive distortions--which makes it an undesirable test.

On the whole, I think that this Opinion and the previous decision by the GC show that the logic and operation of the rules on disclosure of information in the context of procurement litigation require a careful reassessment. In a case such as this one, where the record shows that EUIPO made significant efforts to disclose information to the disappointed tenderer, while still (maybe implicitly) aiming to protect sensitive information, the imposition of higher levels of disclosure obligations seems to me excessive. Once more, this militates in favour of the regulation of specific procedural steps to assess issues of confidentiality and, in particular, the need to create some asymmetrically opaque review mechanisms that allow for proper scrutiny of procurement decisions in a way that does not jeopardise competition in the market or anyone's legitimate business and commercial interests.

CJEU backs automatic exclusion of tenderers that had relied on no longer qualified third parties (C-223/16)

In its Judgment of 14 September 2017 in Casertana Construzioni, C-223/16, EU:C:2017:685, the Court of Justice of the European Union (CJEU) has confirmed the legality of the automatic exclusion of an economic operator that had relied on the capacities of an auxiliary undertaking, where the latter lost the required qualifications after the submission of the tender. The CJEU has ruled that the relevant provisions of Directive 2004/18/EC (Arts 47(2) and 48(3)) did not preclude such automatic exclusion, and that they did not require offering the concerned tenderer the possibility to replace the now not-qualifying auxiliary undertaking.

In doing so, the CJEU has followed the Opinion of Advocate General Wahl (criticised here), and created a precedent that is at odds with the new rules in Directive 2014/24/EU (Art 63) and that raises new interpretive difficulties. This post will first rehearse the main reasons why AG Wahl's and now the CJEU's approach is criticisable. It will then look into the interpretive difficulties that can carry through to the interpretation of Article 63 of Directive 2014/24/EU.

Not necessarily a proportionate or pro-competitive approach

In a nutshell, the reasons given by the CJEU to accept the automatic exclusion of a tenderer that relied on the capacities of an auxiliary undertaking that disappear once the offer has been submitted are the same as those of AG Wahl, and are summarised by the CJEU as follows:

as the Advocate General observed ..., the possibility afforded, unpredictably, exclusively to a consortium of undertakings to replace a third-party undertaking which belongs to that consortium and has lost a qualification that is required in order not to be excluded would amount to a substantial change of the tender and the very identity of the consortium. Indeed, such a change of the tender would compel the contracting authority to carry out new checks whilst at the same time granting a competitive advantage to that consortium which might attempt to optimise its tender in order to deal better with its competitors’ tenders in the procurement procedure at issue.

Such a situation would be contrary to the principle of equal treatment which requires that tenderers be afforded equality of opportunity when formulating their bids and which implies that the bids of all tenderers must be subject to the same conditions, and would amount to a distortion of healthy and effective competition between undertakings participating in a public procurement procedure (C-223/16, paras 39-40, emphasis added).

This encapsulates three reasons: (i) discrimination because one consortium is given the opportunity and other tenderers are not, (ii) discrimination because the beneficiary consortium can substantially alter the terms of its tender, and (iii) additional work for the contracting authority. In my opinion, the first reason is spurious because the opportunity to substitute would only arise where a consortium is affected by the loss of qualification of one of its auxiliary undertakings and, barring a case where two or more competing consortia found themselves in that predicament, there is no discrimination for allowing substitutions on a need basis.

The second reason is equally unpersuasive, in particular because it conflates the strict issue of substitution of the member of a consortium with the separate problem of changes to the content of the tender. As I said in relation to AG Wahl's Opinion, provided that the way in which the contracting authority allowed for the substitution between third entities on which capacity the tenderer relied did not confer a competitive advantage to the tenderer, there can be good reasons to allow it. For example, if the application of the qualitative selection criteria did not involve a ranking, but was rather on a pass / no pass basis, and where the terms of the tender were not altered at all because the new entity simply stepped into the shoes of the no longer capable entity, there seems to be limited scope to consider that the tenderer derives a competitive advantage (for more details, see here). Thus, rather than excluding the possibility altogether, the CJEU could have imposed conditions to establish what is an acceptable substitution of auxiliary undertakings and what is not.

Finally, the point on additional checks being required from the contracting authority is relevant. However, rather than considering it a sufficient reason to prevent the substitution, a proportionality assessment would have seemed more appropriate. Given that the exclusion narrows down competition for the contract, the contracting authority should be able to demonstrate that there are sufficient administrative difficulties to justify proceeding this way.

Thus, in outline, I would have preferred that the CJEU departed from AG Wahl's Opinion and declared that the general principles of EU procurement law, and in particular the principle of proportionality coupled with the principle of competition, oppose the automatic exclusion of tenderers that have relied on the capacities of third parties that later lose them, unless the contracting authority can demonstrate that allowing for the substitution of the third party would either infringe the principles of equal treatment, non-discrimination and the obligation of transparency (eg in a situation where the qualitative selection criteria were not assessed on a pass/no pass basis), or would create a disproportionate administrative burden or delay in the conclusion of the procurement procedure. This could create closer functional compatibility in the case law on reliance on third parties and on subcontracting, which I think are currently at risk of imposing functionally incompatible interpretations of the relevant EU public procurement rules.

In my view, my preferred interpretation is encapsulated in Article 63(1) of Directive 2014/24/EU, in particular as read in the light of the principle of competition in Article 18(1) thereof [see A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Hart, 2015) 315-318]. However, the Casertana Judgment may raise some questions around that approach, which requires some closer analysis.

New doubts concerning Article 63(1) of Directive 2014/24/EU

In the Casertana Construzioni Judgment, the CJEU follows its previous approach in Partner Apelski Dariusz (paras 82-94, see here) and the Opinion of AG Wahl and rejects both (i) the application of Article 63(1) of Directive 2014/24/EU to the case ratione temporis (which is uncontroversial, as the tender took place in 2013) and (ii) the possibility of interpreting the rules of Directive 2004/18/EC in light of Article 63(1) of Directive 2014/24/EU. Casertana reiterates the finding in Partner that Article 63(1) of Directive 2014/24/EU introduces 'substantial amendments as regards the right of an economic operator to rely on the capacities of other entities in the context of public contracts' (C-223/16, para 26) and is therefore not suitable as an interpretive tool in relation to Directive 2004/18/EC because the latter is not affected by 'problems of interpretation' (C-223/16, para 28). However, the case is not limited to ignore Article 63(1), but rather seems to consolidate a strict interpretation of this provision. Additionally, given the divergence between Article 63(1) of Directive 2014/24/EU and the Casertana Judgment, the latter creates a potential difficulty concerning the cut-off point at which the possibility to replace non-qualified third parties ends.

Seemingly too restrictive (implicit) interpretation of Article 63(1) of Directive 2014/24/EU

Both the Partner and Casertana cases stress that the new rules foresee that "Article 63(1) of Directive 2014/24 now provides that economic operators may ‘only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required’ ... and that ‘the contracting authority shall require that the economic operator replaces an entity which does not meet a relevant selection criterion, or in respect of which there are compulsory grounds for exclusion’" (C-223/16, para 25). The second part of this statement has been discussed above (and could have been reconciled with the pre-2014 rules by operation of the principle of proportionality). The first part of the statement is problematic. 

Indeed, this incipient consolidation of the rules in Article 63(1) could trigger difficulties because, according to its literal wording, the restriction of reliance on third parties where they will perform the work or services for which the capacities are required solely concern "criteria relating to the educational and professional qualifications as set out in point (f) of Annex XII Part II [ie the educational and professional qualifications of the service provider or contractor or those of the undertaking’s managerial staff, provided that they are not evaluated as an award criterion], or to the relevant professional experience" -- or, in other words, economic operators are allowed to rely on financial, economic and other types of professional qualifications of third parties even if those parties will not directly carry out the works. This comes to allow for consultancy and technical support contracts to back up the tenders of economic operators that may not have all those resources in-house and is generally pro-competitive. By adopting a blanket approach to the requirement of direct involvement in the execution of the contract beyond the limited remit established in Article 63(1) of Directive 2014/24/EU, a broad reading of the Casertana and Partner cases could deactivate large parts of the flexibility for the formation of consortia that are inherent to the system.

In the specific case of Casertana, all we know is that 

Casertana participated in the call for tenders within the framework of an ad hoc tendering consortium under formation, as lead company, and declared that it relied, as regards the qualifications required by [the applicable Italian rules], on those of two auxiliary undertakings, one being Consorzio Stabile GAP. 

In the course of the procedure and after the end of the stage of admission to the call for tenders, that auxiliary undertaking [is Consorzio Stabile GAP] lost qualification for the required category of services, thus becoming qualified for a lower category of services only (C-223/16, paras 11-12).

Put simply, it is not known why Consorzio Stabile GAP saw its qualification reduced for a lower category of services. If the reasons were not linked to the educational and professional qualifications of its managerial staff or the relevant professional experience of the undertaking, then an acritical application of the decision of the CJEU to the case would imply an unnecessary (and illegal) restriction of the flexibility foreseen in Article 63(1) of Directive 2014/24/EU.

Unresolved timing issues -- when does Article 63(1) of Directive 2014/24/EU stop applying?

In Casertana, the CJEU simply indicated that there is no requirement to give the tenderer an opportunity to substitute auxiliary undertakings that have lost the required qualifications after the tender has been submitted because that would amount to allowing for a substantial change of the tender (see above). It also indicated that tenderers could not claim force majeure (or, more generally, the unpredictability of the loss of qualification by the auxiliary undertaking) to gain such an opportunity to substitute them because, although the procurement rules enable "a tenderer to rely on the capacities of one or more third party entities in addition to its own capacities in order to fulfil the criteria set by a contracting authority, that tenderer remains responsible, in its capacity as the lead undertaking in a consortium of undertakings, for the compliance of those undertakings with the obligations and conditions for participation in the call for tenders laid down by the contracting authority in the documents relating to the procurement procedure at issue" (C-223/16, para 41). A question arises on how to interpret these two issues in situations where Article 63(1) of Directive 2014/24/EU is applicable.

Taking the second aspect first, it seems clear that under Article 63(1) of Directive 2014/24/EU, the responsibility for ensuring compliance with the selection criteria included in the call for tenders is shared between the lead undertaking and the contracting authority. In that regard, it is worth emphasising that the provision foresees that

The contracting authority shall ...verify whether the entities on whose capacity the economic operator intends to rely fulfil the relevant selection criteria and whether there are grounds for exclusion ... The contracting authority shall require that the economic operator replaces an entity which does not meet a relevant selection criterion, or in respect of which there are compulsory grounds for exclusion. The contracting authority may require or may be required by the Member State to require that the economic operator substitutes an entity in respect of which there are non-compulsory grounds for exclusion.

Given this wording, and in case the contracting authority issues a favourable opinion on the qualifications held by a given auxiliary undertaking (or fails to check them, as was the case in Casertana, where the loss of qualification was only raised in the context of a counter-claim against Casertana's challenge to the award of the contract to a different consortium), issues will arise concerning legitimate expectations, in particular concerning the ability to replace no loner qualifying third parties at any point of the procurement process, all the way through to award (including any litigation concerning findings of loss of compliance with selection criteria at tender evaluation stage). However, this would be in stark contrast with the first aspect of the Casertana Judgment, which considers a substitution of auxiliary undertaking an impermissible tender modification. Therefore, the question will arise whether Article 63(1) is applicable throughout the procurement procedure, or only up to the point of submission of tenders.

In my view, the answer to the question cannot be all-or-nothing (as has been the case in AG Wahl's Opinion and in the Judgment), but rather require an analysis of the terms of the substitution (if the new auxiliary undertaking simply assumes all obligations of the previous undertaking in the exact same conditions, where is the advantage?), as well as a proportionality assessment of any new verification work required from the contracting authority as a result of the substitution (in the Casertana case, the issue revolved around qualifications administered by a third party [ie a Certification Body], so it would have seemed rather easy to substitute auxiliary undertakings without requiring much from the contracting authority). Failing that, there is a risk of limiting Article 63(1) to a one-shot remedial opportunity restricted to the contracting authority's first assessment of the tenderer's (and its auxiliary's) compliance with exclusion and qualitative selection rules. Even if this would be an improvement over the 2004 system (in particular as interpreted in Casertana), it would fall short from the flexibility that can be derived from a broader and more dynamic reading of Article 63(1) of Directive 2014/24/EU.

Interesting guidance on confidentiality of commercial secrets in procurement litigation issued by the TCC

In July 2017, the Technology and Construction Court (a sub-division of the Queen's Bench Division, part of the High Court of Justice for England and Wales) adopted new guidance on procedures for public procurement litigation (see Appendix H to the Technology and Construction Court Guide; the TCC guidance).

The TCC guidance includes two interesting sets of recommendations. One concerns an invitation to exhaust the possibilities for alternative dispute resolution before proceeding to full-fledged litigation (see paras [4] to [8]). The other concerns the disclosure of confidential information between the parties of the dispute (see paras [27] to [48]).

The latter is an issue that raises difficult problems for the protection of business secrets, and I find the TCC guidance interesting in the balance it tries to achieve between ensuring that disappointed tenderers gain access to the information they need to support their claims, and the broader considerations surrounding the need to ensure adequate protection of business secrets in order not to deter participation in public tenders (which is a tricky issue facing all EU jurisdictions, including the rules applicable to procurement carried out by the EU Institutions, and on which we are concentrating in the on-going research of the EPLG).

As the TCC guidance puts it, indeed, "[c]onfidentiality is not a bar to disclosure. However, the need to protect confidential information needs to be balanced by the basic principle of open justice", at para [27]. The TCC guidance aims to achieve such balance through practical approaches and general criteria for the balancing of interests. The approaches adopted by the TCC have been praised for being less restrictive than some of the decisions previously adopted in the context of procurement litigation in England and Wales (Kotsonis & Williams). 

In my view, beyond the effects it can have in litigation in England and Wales, the TCC guidance can be useful as a benchmark for the treatment of confidential information in other jurisdictions -- provided that the practical solutions that derive from the peculiarities of the British legal culture are adapted to domestic idiosyncrasies.

In particular, there are three aspects that I would identify as best practice susceptible of replication or adaptation in other legal contexts:

1. Promotion of the use of redacted versions of documentation rather than absolute bans on the disclosure of materials, as the use of redacted documents enables documents to be more widely disclosable (see paras [32]-[33]), and thus avoids decisions on confidentiality being taken on an 'all-or-nothing' basis for each of the documents. The guidance also indicates the best way of preparing and submitting to the court redacted versions of documents containing confidential information in a manner that allows for scrutiny and a speedy narrowing down of any discrepancies between the parties on the need to redact any specific bits of information.

2. Creation of one- or two-tier confidentiality rings. TCC guidance defines confidentiality rings as comprising persons to whom documents containing confidential information may be disclosed on the basis of their undertakings to preserve confidentiality, at para [34]. Importantly, the guidance indicates both that the party's external legal advisors will need to be included in the confidentiality ring (para [37]) and that the inclusion of personnel of the parties, including their in-house lawyers, will need to be assessed on the basis of relevant factors likely to include "that party’s right to pursue its claim, the principle of open justice, the confidential nature of the document and the need to avoid distortions of competition and/or the creation of unfair advantages in the market (including any retender) as a result of disclosure" (para [39], emphasis added). In reaching a decision about a specific individual, account needs to be taken of "his/her role and responsibilities within the organisation; the extent of the risk that competition will be distorted as a result of disclosure to them; the extent to which that risk can be avoided or controlled by restrictions on the terms of disclosure; and the impact that any proposed restrictions would have on that individual (for example by prohibiting them from participating in a re-tender or future tenders for a period of time)" (para [40], emphasis added). Similar reasoning would apply to other specialist advisors (such as accountants or other experts) (see para [43]).

Interestingly, the TCC guidance clarifies that employee representatives may need to be "admitted to a confidentiality ring on different terms from external representative" (para [41]), this giving rise to two-tier confidentiality rings--which administration can take different forms: ie, either court administered, with the judicial body establishing the conditions of access by different categories of representatives of the parties, or by delegating the management of the access to the confidentiality ring to the external advisors of the parties, who would then act as gatekeepers of the confidential information (para [42]). This second possibility may be foreign to practice and legal culture in other jurisdictions, but the first (court-administered) possibility for a two-tier confidentiality ring seems quite promising to me.

3. Establishment of (enforceable) undertakings to prevent unauthorised uses of the information gained as part of a confidentiality ring. TCC guidance establishes that access to confidential information will only be allowed where the members of confidentiality rings provide undertakings that "will preclude the use of the relevant material other than for the purposes of the proceedings and prevent disclosure outside the ring" (para [44]). More importantly, the TCC guidance explicitly contemplates the possibility for additional undertakings to be necessary "where there are concerns that disclosure could have an impact on competition and/or any subsequent procurement", and that such additional measures can include: "(1) Preventing employee representatives from holding copies of documents at their place of work and requiring them to inspect the material at a defined location (such as the offices of their external lawyers) ; (2) Limiting the involvement of a recipient of a document in any re-procurement of the contract which is the subject of the litigation; (3) Limiting the role which a recipient can play in competitions for other similar contracts for a fixed period of time in a defined geographic area; and/or (4) Preventing the recipient from advising on or having any involvement in certain matters, again for a fixed period of time" (para [45], emphasis added).

Of course, the monitoring of such undertakings will be complex and there can be very difficult evidentiary issues linked to claims of undue subsequent use of confidential information gained in the context of previous procurement litigation. On that issue, the TCC guidance establishes a strict proportionality test, whereby "[w]hilst the Court will give weight to the need to protect competition in the market, the more onerous the proposed restriction is, the more clearly it will need to be justified" (para [46]). In my view, this will play both ways. On the one hand, high risks of competition distortions will be able to justify the imposition of heavy restrictions on future activity of the employee concerned. On the other, an in reverse reasoning, the Court will have to ensure that future restrictions are not disproportionate to the value of the information and the position of the employee within its organisation.

However, there is a third implication that may bear spelling out, which is that some risks of future distortions of competition will be so high, that no acceptable restrictive measure can be designed--in which case I would argue against the inclusion of the relevant person in the confidentiality ring (eg I would not grant the CFO of a company access to the detailed financial schedule of any of its competitors).

* * * * 

Overall, I think that the TCC guidance will be useful and it will be interesting to see to what extent the practical roll-out of these recommendations provide an even more detailed case study that can serve as benchmark in other jurisdictions seeking to regulate the disclosure of confidential information in the context of public procurement litigation.