ECJ CLARIFIES COORDINATION BETWEEN TRANSPORT AND GENERAL PROCUREMENT RULES, BUT WILL THIS HELP IN FUTURE? (C-292/15)

In its Judgment of 27 October 2016 in Hörmann Reisen, C-292/15, EU:C:2016:817, the European Court of Justice (ECJ) addressed an issue of growing importance regarding subcontracting arrangements in public procurement, as well as contracting authorities' ability not only to monitor them, but also exclude them.

In Hörmann Reisen, the ECJ was required to assess the compatibility with EU law of a requirement that the main contractor performed a major part of a public passenger transport services itself--or, in other words, a limitation on the acceptable volume of subcontracting for the execution of a given public services contract to 30% of its total value. This was challenged both on the grounds that the limitation itself was illegal and that, in any case, a quantitative restriction of subcontracting was not adequate to ensure that the main contractor performed a major part of the services itself.

It is worth stressing that, as a starting point, the analysis of the ECJ was carried out on the basis of the special procurement rules for the transport sector in Regulation 1370/2007/EC, which Art 4(7) establishes that

Tender documents and public service contracts shall indicate, in a transparent manner, whether, and if so to what extent, subcontracting may be considered. If subcontracting takes place, the operator entrusted with the administration and performance of public passenger transport services in accordance with this Regulation shall be required to perform a major part of the public passenger transport services itself.

As Advocate General Sharpston indicated in her Opinion (C-292/15, EU:C:2016:480), this would seem to cover a straightforward (value) limitation of the subcontractable services. However, the case was complicated by the fact that it was for the provision of bus services, to which Reg 1370/2007 does not entirely apply. Under its Article 5(1),

Public service contracts shall be awarded in accordance with the rules laid down in this Regulation. However, service contracts or public service contracts as defined in Directives 2004/17/EC or 2004/18/EC for public passenger transport services by bus or tram shall be awarded in accordance with the procedures provided for under those Directives where such contracts do not take the form of service concessions contracts as defined in those Directives. Where contracts are to be awarded in accordance with Directives 2004/17/EC or 2004/18/EC, the provisions of paragraphs 2 to 6 of this Article shall not apply.

In short, then, contracts for the provision of bus and tram services that do not constitute services concessions are to be awarded in compliance with the general procurement rules. In the Hörmann Reisen case, due to the fact that the tender took place in 2015, it still had to be carried under Directive 2004/18/EC--but the issues raised by the case are relevant because, since 18 April 2016, these contracts must now be awarded under Directive 2014/24/EU (regardless of domestic transposition or lack thereof). It is also important to stress that, a contrario, concessions for the provision of bus and tram services are solely subjected to the rules of Reg 1370/2007 and explicitly excluded from the scope of application of Directive 2014/23/EU (see Art 10(3) thereof).

The first clarification required from the ECJ in the Hörmann Reisen Judgment concerned whether Art 5(1) Reg 1370/2007 excluded the application of Art 4(7) of the same regulation to the award of bus and tram service contracts due to their subjection to Directive 2004/18. In that regard, the ECJ clearly indicated that

41 ... for the purposes of the award of a contract for public passenger transport services by bus ... solely the provisions of Article 5(2) to (6) of Regulation No 1370/2007 are not to be applied, whereas the other provisions of that regulation remain applicable.

42 ... Article 4(7) of Regulation No 1370/2007 applies in the event of the award of a contract for public passenger transport services by bus coming within the scope of Article 5(1) of that regulation (C-292/15, paras 41-42, emphasis added).

That is important because the approach to subcontracting in Reg 1370/2007 and in the general procurement rules was diametrically opposed. While Reg 1370/2007 aims to restrict or even completely exclude the possibility to subcontract, the scant rules in Art 25 Dir 2004/18 were, if anything, facilitative of subcontracting. It must be borne in mind that the ECJ had itself pushed for such facilitation in Siemens and ARGE Telekom (C-314/01, EU:C:2004:159), where it indicated that the general procurement rules did

... not preclude a prohibition or a restriction on the use of subcontracting for the performance of essential parts of the contract precisely in the case where the contracting authority has not been in a position to verify the technical and economic capacities of the subcontractors when examining the tenders ... (C-314/01, para 45).

It, however, declared that a complete ban on subcontracting would not be compatible with the general EU procurement rules inasmuch as it prevented a service provider from relying on the resources of entities or undertakings with which it is directly or indirectly linked; or, in other words, "[a] tenderer claiming to have at its disposal the technical and economic capacities of third parties on which it intends to rely if the contract is awarded to it may be excluded only if it fails to demonstrate that those capacities are in fact available to it" (C-314/01, para 46). Therefore, the prohibition on subcontracting was limited to a prohibition on post-award (unchecked) subcontracting, but did not allow for the exclusion of service providers on the basis that they would not carry out the entirety of the contract themselves.

In Hörmann Reisen, the ECJ saves the open incompatibility of approaches between Reg 1370/2007 and Dir 2004/18 as follows:

46 ... it should be noted that Directive 2004/18 ... is of general application, whereas Regulation No 1370/2007 applies only to public passenger transport services by rail and road.

47      In so far as both Article 4(7) of that regulation and Article 25 of Directive 2004/18 ... contain rules on subcontracting, the view must be taken that the first provision constitutes a special rule with respect to the rules laid down in the second provision, and, as a lex specialis, takes precedence over the latter (C-292/15, paras 46-47, emphasis added).

This simplified things under Dir 2004/18. However, the relevant question now is whether the same lex specialis derogat generalis approach is desirable or indeed suitable for the coordination of the rules of Reg 1370/2007 with Dir 2014/24, which is required since 18 April 2016. There are a few important points to note concerning the new rules on subcontracting in Dir 2014/24.

Firstly, the ARGE case law concerning the illegality of a prohibition of subcontracting on the basis that it deprived the rules on reliance on third party capacities from effectiveness has now been partially modified in Art 63(2) Dir 2014/24. According to this rule,

In the case of works contracts, service contracts and siting or installation operations in the context of a supply contract, contracting authorities may require that certain critical tasks be performed directly by the tenderer itself or, where the tender is submitted by a group of economic operators as referred to in Article 19(2), by a participant in that group.

This does not deactivate the ARGE case law entirely and the scope of the provision will crucially rest on the future interpretation of what are 'critical tasks', which I consider needs to be subjected to a restrictive interpretation and a strict proportionality analysis. I have criticised this rule elsewhere and for other reasons [A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 315 and ff] but, in terms of coordination between Reg 1370/2007 and Dir 2014/24, Art 63(2) Dir 2014/24 seems to offer the perfect fit for the requirement in Art 4(7) Reg 1370/2007 to be imposed without restrictions. In other words, had the Hörmann Reisen case been subjected to Dir 2014/24, I think the ECJ would have no need whatsoever to create a lex specialis argument, which makes me wonder if this was the best approach overall (at least from a strategic point of view).

Secondly, it should be borne in mind that the limited rules of Art 25 Dir 2004/18 have been significantly expanded in Art 71 Dir 2014/24 on subcontracting, mainly with the purpose of both strengthening the contracting authorities' power to assess subcontracting arrangements where these are allowed and planned to take place, as well as to improve the legal position of subcontractors vis-a-vis the contracting authority (which now could, in specific circumstances, bypass the main contractor in order to ensure compliance with relevant obligations--notably, direct payments). Here, an incompatibility of the additional rules with Art 4(7) Reg 1370/2007 seems difficult to identify.

Thus, in my view, the Hörmann Reisen Judgment needs to be read in a minimalist fashion and construed to simply indicate that the general procurement rules cannot prevent a contracting authority that awards (non-concession) contracts for the provision of bus and tram services from prohibiting subcontracting or, in other words, requiring the transport operator from discharging all contractual obligations directly and in full--that is, they may come to deactivate a strict interpretation of Art 63(2) Dir 2014/24 in the transport sector only. Similarly, the Hörmann Reisen Judgment can be seen to dictate that general procurement rules  cannot alter the way in which a contracting authority in the transport sector that allows for subcontracting imposes restrictions so as to ensure that the operator entrusted with the administration and performance of public passenger transport services performs a major part of the public passenger transport services itself. However, I would not consider it a proper reading to exclude the applicability of the remainder of the rules in Art 71 of Dir 2014/24, notably because they do not seem incompatible with Art 4(7) Reg 1370/2007.

NHS England [On-going] Consultation on management of conflicts of interest

Following the National Audit Office (NAO) 2015 Report on Managing conflicts of interest in NHS clinical commissioning groups, which led to a revision of NHS England's Statutory guidance on managing conflicts of interest for clinical commissioning groups in June 2016, it is interesting to note that the on-going [closes on 31 October] public consultation on the broader issue of Managing conflicts of interest in the NHS includes a section on conflicts of interest in procurement.

The management of conflicts of interest in procurement is an interesting area of growing practical relevance, but also one where the law applicable to the activities of NHS England is increasingly complex and in need of consolidation (see the main findings of a recent research project I carried out at the University of Bristol Law School here). In that context, the adoption of additional guidance seems appropriate, although it should be carefully designed to ensure that it does not conflict with mandatory legal requirements.

The Managing conflicts of interest in the NHS consultation document is interesting in many aspects and puts forward a rather specific and quite polished view of the need to increase the transparency of both the rules and the decisions concerning the management of conflicts of interest across the activities of the public health system in England. However, it also contains some principles and rules which, in my view, could be improved and I hope that they will be revised as a result of the public consultation. With that aim, I have submitted a response to the consultation, which I am happy to share with anyone interested via email (a.sanchez-graells@bristol.ac.uk). I would also encourage anyone with a couple of hours to spare to contribute to the public consultation before it closes on Monday.

I will write again about this once the final recommendations of the Task and Finish Group of experts are published.

things that make me love my job - A little ultimatum game

There are many little things that make me love my job as an academic and (almost) forget about the big pressures it comes with. One of them is the possibility to teach subjects I find interesting and intellectually stimulating, such as Economic Analysis of Law, and to engage with students in interactive seminars. In a recent cycle of such seminars, I got my students (all of them 2nd and 3rd year undergraduates) to play a variant of the ultimatum game. It went as follows.

I told them to pair up and decide who would play first and who would go second. I then explained my version of the game. I (symbolically only) offered them £10 to play with. If they reached an agreement on how to split them, they would (theoretically) keep the money and split it the way they decided. If they disagreed on the split, I would keep the money. When they "played", they had to offer their partner a split of the £10 bill (going anywhere in the range between £0.01 and £10) and the partner could only accept or reject the split. They could not negotiate. In order to try to avoid issues of reciprocation or retaliation, I got them to write down separately and confidentially their offer and asking values.

The overall results of the game were interesting. We had 76 games in total (38 pairs of players) and 58 of those were successful (ie a 76% success rate). Only 18 games (24%) resulted in no agreement on a split of the £10 bill.

It is also interesting to look at the descriptive statistics of the game. Most players opted to offer a £5/£5 split and most of them also expected to be offered a £5/£5 split. This is not an uncommon practical result of the game, but it is certainly not what one would expect from a theoretical perspective.

The game led to very interesting conversations about rationality / irrationality / utility / happiness / fairness / the usefulness of law and economics 1.0 and the promises of law and economics 2.0, and a few other things. In short, a highly rewarding teaching experience. Worth sharing (I hope).

Launch of the Procuring for Growth Balanced Scorecard - Some Initial Thoughts

The UK's Crown Commercial Service and Cabinet Office have launched a new scorecard system to "use its huge purchasing power to help support economic growth" (emphasis added). Ultimately, the UK Government considers that it "can play an important role in supporting economic growth by helping to level the playing field through the way it buys public goods, works and services. It can maximise the economic benefit of what it spends through public procurement, directly through the outcomes of major investments or by playing a catalytic role in the development of supply market capabilities and competitiveness through the way it designs its procurement and requirements" (emphasis added). Quite frankly, and already from the outset, I struggle to understand the reference to levelling the playing field in any terms that do not hint at protectionism of the local industry as a means of promoting (domestic / local) economic growth (which is also a claim open to contention).

In very similar lines, they also indicate that the aim of this policy is "to maximise the value of taxpayers’ money through public procurement in a way that supports economic growth by ensuring that full value for money is taken into account. The Public Contracts Regulations 2015 provide greater clarity on how broader policy considerations, such as social and environmental factors, may be integrated into procurements. Taking account of relevant broader policy considerations will help to ensure value for money is fully considered and reflected in the procurement process where appropriate, contributing to economic growth in the UK" (emphasis added). Thus, there seems to be a rather strong link between the aim of promoting economic growth in the UK and the inclusion of social and environmental considerations. Certainly, smart procurement can contribute to economic growth (for example, by investing in infrastructure that enables the emergence of new economic activity) but this is an issue on decisions of what to invest in / what to buy, rather than decisions on how to buy it / who to buy it from. In my view, the whole policy seems to focus more clearly on the second type of questions, which should raise some flags concerning its compatibility with EU law.

In that regard, a maybe cynical remark is that the policy comes with an excusatio non petita when it stresses that "On 23 June, the EU referendum took place and the people of the United Kingdom voted to leave the European Union. Until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of EU membership remain in force. During this period the Government will continue to negotiate, implement and apply EU legislation". This was not necessary at all. It could be seen as a hint that the Government is trying to already implement "Brexit-aligned policies" (whatever that means) within the (recognised?) constraints of EU law. Two points here. One, if everything in this policy is EU compliant, what is the point of mentioning Brexit? And two, if everything that the policy aims to do is EU compliant, then is there any reason to believe that the Government will change its procurement policy in any meaningful way after Brexit actually takes place?

Regardless of those more general ideas, overall, it seems necessary to assess the new scorecard together with the also very recent CCS Guidance on social and environmental aspects of public procurement (Guidance on S&E aspects, criticised here), and, more generally, in view of the economic analysis of the effects that exercising such buyer power can create. 

Scorecard, Guidance on S&E aspects and EU procurement law

According to the press release, 

The new scorecard system has been designed to help ensure that major government procurements have a positive impact on economic growth, as well as achieving best value for the taxpayer.

The guidance ... introduces a balanced scorecard approach, which government departments should use in designing major works, infrastructure and capital investment procurements where the value is more than £10 million.

The scorecard helps procurers to consider the project requirements and needs, with criteria such as cost balanced against social, economic and environmental considerations.

By using this method, government departments can clearly set out how priority policy themes such as workforce skills development, small business engagement and sustainability may be integrated into their procurement activities.

This underlines to suppliers the overall impact that the department wants to achieve and signals how this will be assessed when considering individual tenders.

Each department should produce a project-specific balanced scorecard to be published with their procurement documentation.

The full scorecard paper provides additional details. It stresses that "A balanced scorecard (BSC) approach is a way of developing a procurement (e.g. the requirements and evaluation criteria) so that more straightforward matters such as cost, are balanced against more complex issues such as social and wider economic considerations" (emphasis added). This may seem to indicate that the BSC is actually a new method that aims to operationalise social and wider economic considerations in a way that makes them compatible with cost-based and legal requirements. 

However, an crucially, the document clearly sets out that "It is important to remember that nothing within the [BSC] guidance ... should be interpreted in a way that overrides or conflicts with departments’ obligations to comply with the PCR 2015, in particular departments’ obligations to determine whether potential requirements would be linked to the subject matter of the contract and proportionate to apply" (emphasis added). 

Thus, obviously, the scorecard cannot be seen to create more space for broader economic, social or environmental considerations than the applicable rules themselves. However, this raises the practical questions (a) why, if the BSC is nothing else than a method that needs to be assessed against regulatory requirements for the inclusion of social, environmental and broader economic considerations, it has been adopted separately from the Guidance on S&E aspects, and (b) to what extent the BSC is actually a useful tool for contracting entities beyond the mere formal aspect of formalising their tender / contract design analysis.

Moreover, the full scorecard paper runs the risk of misrepresenting regulatory requirements in the way that it pushes for the creation of discretionary space for the application of the BSC. Indeed, it stresses that

The EU Directive and the PCRS 2015 make clear that the award of contracts should be on the basis of the most economically advantageous tender (MEAT). The price or cost assessment part of the evaluation of bids must be on a whole life cost basis, and, as set out in the PCRs 2015, the entire cost-effectiveness of the project should be examined, not just the initial price. Cost-effectiveness can include the assessment of the cost of transport, insurance, assembly and disposal as well as costs over the life-cycle of a product, service or works, including: costs of use, such as consumption of energy and other resources, and maintenance costs; and costs associated with environmental impacts, including the cost of emissions (emphasis added).

In my view, this is problematic because Art 67 Dir 2014/24/EU and reg.67 PCR2015 do not actually impose an obligation to assess the price or cost on a "whole life cost basis" but simply allow contracting authorities to do so. This is recognised in technically more accurate terms in a separate piece of Guidance on awarding contracts also published by CCS in October 2016, where it is stated that "When a contracting authority uses cost as an award criterion, it should do so on the basis of a cost effectiveness approach. Life cycle costing (LCC) is an example of this approach, but contracting authorities are free to use other approaches" (emphasis added). 

Indeed, Art 67(2) Dir 2014/24 establishes that "The most economically advantageous tender from the point of view of the contracting authority shall be identified on the basis of the price or cost, using a cost-effectiveness approach, such as life-cycle costing in accordance with Article 68, and may include the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question" (emphasis added).

This requires that cost or price (ie cost-effectiveness) forms part of the award criteria (which is nothing new), and simply opens up the opportunity of adopting a life-cycle method, always provided that is in compliance with Art 68 Dir 2014/24, which in turn establishes that "Where contracting authorities assess the costs using a life-cycle costing approach, they shall indicate in the procurement documents the data to be provided by the tenderers and the method which the contracting authority will use to determine the life-cycle costs on the basis of those data." And additionally requires, amongst other issues, for that method to be "based on objectively verifiable and non-discriminatory criteria. In particular, where it has not been established for repeated or continuous application, it shall not unduly favour or disadvantage certain economic operators" (emphases added).

Therefore, unless contracting authorities have a pre-defined (and pre-published) methodology for the assessment of life-cycle costing (which they generally do not, at least currently), the award of contracts on the basis of "whole life cost" analysis is subjected to the double requirement that it focuses on requirements linked to the subject matter of the contract and is also not such as to unduly favour or disadvantage certain economic operators. In my view, this may be sufficient to disincentivise contracting authorities from aiming to actually award contracts on the basis of "self-made" life-cycle costing methods and the BSC may only be effective if such method was developed by the CCS itself for general use.

Further, it seems difficult to square the fact that, on the one hand, the guidance stresses that the BSC must be tailor-made to each procurement process (which would result in evaluation methods not designed for repeated or continuous application), while in that case the contracting authority must not only develop its own life-cycle costing methodology but also ensure that it does not result in an undue advantage of specific economic operators--which pretty much neutralises the incentive effects that the use of the BSC may be intended to create.

The detail of the BSC is also not helpful in that regard because it does include criteria that are discriminatory, such as "Number of UK jobs created or sustained by new government contracts" in terms of employment impacts; or the assessment of community benefits and legacy, which are more likely to advantage domestic contractors. In my view, contracting authorities will be in a difficult position when trying to translate these general criteria into legally-compliant and useful evaluation criteria that are not discriminatory.

More generally, on (ab)use of public buying power

The second perspective that is worth considering is that of the long-term effects of the Government's attempt to "use its huge purchasing power to help support economic growth". This reopens yet again the discussion on the desirability of the instrumentalisation of public procurement for extraneous policy goals. Suffice it to say here that (a) the inclusion of social, environmental or wider (community) requirements does not come free because it either raises bidders' costs or reduces competition, or both and (b) that the long term effects can be very significant in terms of reduced dynamic competition. This is an issue I have repeatedly raised (see here, for example) and a more structured analysis is available here. 

UK issues guidance on social and environmental aspects of procurement, but it is not very useful

The UK's Crown Commercial Service has issued Guidance on social and environmental aspects of public procurement carried out under the Public Contracts Regulations 2015 (see full commentary here), which transposed Directive 2014/24/EU into UK law. The Guidance on S&E aspects includes an overview of the use of procurement to further environmental and social considerations, stresses key points to consider, offers a list of measures that a contracting authority can implement in order to ensure compliance with environmental and social aspects (although it boils down to making sure that it obtains the right information from the contractor), has a list of FAQs and includes suggested contract clauses in its appendix B.

Overall, though, the Guidance on S&E aspects does not go much beyond the text of the relevant rules and, when it provides specific examples, it does not work out the limits derived from general principles of procurement and, most importantly, the requirement for a link to the subject matter of the contract and the implicit proportionality analysis [on that, see A Semple, 'The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?']. Thus, in my opinion, the Guidance on S&E aspects is bound to not to be of much practical assistance to contracting authorities.

In uncontroversial terms, the Guidance on S&E aspects stresses that the new Directives "have clarified that contracting authorities may consider incorporating social, ethical and environmental aspects into specifications, contract conditions and award criteria. In addition specific rules have been included for handling abnormally low tenders, and on the exclusion of suppliers who have violated certain social, labour and environmental laws." It also stresses the new light touch regime for social and special services (on which it has also published guidance), as well as the possibility to reserve contracts for sheltered workshops as tools for the inclusion of social aspects in procurement. 

It then goes on to list the rules it considers relevant for the design of social or environmentally-oriented public tenders and goes on to discuss the flexibility they create, including all stages of the procurement process. It includes some useful guidance on the context within which checks of compliance with labour standards need to be carried out by indicating that "It is the law of the country where the work or services are taking place that is relevant. If services are provided at a distance, for example call centres, then it is where the call centre is located and the employees’ work that is key rather than the country to which the services are directed. Consequently a tenderer may only be excluded from a tender for non-compliance with labour law if that labour law is the law of the EU Member State in which the employees are working". This is correct and in line with the recent case law of the ECJ in Bundesdruckerei and in RegioPost. However, it does not provide guidance on the next step of practical difficulty, which concerns the ways in which a UK-based contracting authority can (or not) check compliance with, for example, Spanish employment law and labour standards. 

Moreover, in key aspects such as the use of labels, the use of award criteria, the requirements linked to fair trade certification or life cycle costing methodologies, the Guidance on S&E aspects simply summarises the rules in the PCR2015 and Dir 2014/24, and offers very generic or too open-ended examples. 

For example, it indicates that "Fair trade requirements related to the contract subject matter may be included as a contract award criterion, including the requirement to pay a minimum price and price premium to producers, provided they meet the principles [of proportionality, non-discrimination and transparency]". Or that "Award criteria may include environmental and / or social aspects that relate to any respect and any stage of a life-cycle of the requirements as long as they relate to the subject matter of the contract, namely the works, supplies or services provided under the contract. For example, requesting confirmation that the production of an item did not include toxic materials, or services were and are performed using energy efficient machines, resource efficiency and waste minimization".

This limited level of detail in the examples does not provide very effective guidance. Some of these issues could have been addressed at the level of setting technical specifications and the Guidance on S&E aspects does not include any suggestion of how should contracting authorities decide to go down one or the other route. It could, for example, have stressed that the use as technical specifications (particularly if linked to labels) will imply a pass/no pass assessment, whereas the use as award criteria will allow for a more nuanced approach that allows the contracting authority to balance those considerations with other aspects of the offer (and, very clearly, its price). Moreover, both examples given in terms of life-cycle requirements could be challenged on grounds of proportionality and/or lack of specificity. Thus, the Guidance on S&E aspects may end up creating more uncertainties than intended.

The Guidance on S&E aspects is also confusing because it further indicates that contracting authorities "could, for example, include Fair Trade requirements as contract performance conditions where they are linked to the subject matter of the contract. (See [above] for more details on how fair trade, can be taken into account at an earlier stages)". Reading all this together makes one wonder what additional fair trade requirements could be included as contract compliance requirements that were not already either product specifications (either via labels or as self-standing requirements) or award criteria. They would seem to be linked to employment or labour standards during the execution of the contract, but then this is not necessarily consistent with the part of the guidance mentioned above that clearly stresses that an analysis of those issues is dependent on the jurisdiction where the work is being performed. It also does not address whether this is dependent on that jurisdiction being in the EU, a country covered by the WTO GPA, or otherwise. This does not contribute in any meaningful way to reduce the uncertainties in this area.

It is also worth stressing that the Guidance on S&E aspects also contain some controversial issues regarding the inclusion of social considerations in procurement. That is the case of the reference to the additional guidance on Steel procurement in major projects, which I do not necessarily consider as leading to practices 100% compatible with EU law (see also Pedro Telles' criticism here). The stress put in that additional Steel guidance on issues such as transportation costs and effects on employment and health and safety can clearly be interpreted and used as measures equivalent to non-tariff barriers to trade (in steel), which were coincidentally adopted at the time when the British steel industry was under great international pressure due to its loss of competitiveness. The significant drop in the value of the British pound that has followed Brexit may now have made this redundant, but the fact remains that the (soft) Buy British Steel policy created by that additional guidance had clear protectionist elements.

Further, there are "clarifications" that can lead to the creation of the wrong incentives for tenderers. A case in point is the answer to the following question: "Why is it mandatory to reject an abnormally low tender when it has been proved that costs are low because the tenderer has not complied with environmental, social or labour laws (regulation 69(5)), but only optional to decide not to award a contract when it is proved that the tender does not comply with environmental, social and labour laws (regulation 56(2))?". This is actually a legitimate concern and, in my view, indicates that jurisdictions that want to be serious about smart or sustainable procurement should have made the discretionary exclusion ground mandatory for contracting authorities, as Directive 2014/24 permits. What I find puzzling is CCS' answer to this question in the Guidance on S&E aspects, where it indicates that:

These two are similar in that they both breach the requirement to comply with the applicable environmental, social and labour laws, however, the difference lies in the effects of this non-observance: normal pricing in one case and abnormally low in the other (sic). Tenders that are abnormally low because they are not observing environmental, social and labour laws can lead to ‘social dumping’ and therefore they must be rejected. Where the pricing is normal, the risk of ‘social dumping’ is reduced and the contracting authority has the option to award the contract if it considers the non-compliance is tolerable, or if it works with the supplier to ensure compliance going forward (sic). The UK Government’s policy is that contracting authorities must take appropriate measures to ensure compliance throughout the procurement process. Contracting authorities have flexibility to determine those measures on a case-by-case basis. CCS strongly recommends that when contracting authorities are exercising their option whether or not to award a contract to a tenderer that does not comply with environmental, social and labour laws, that the contracting authority takes note of overarching procurement policy and statutory requirements and carefully considers the potential damage to the environment and society before accepting such a contract (footnotes omitted and emphasis added).  

I find at least two aspects of this answer problematic. First, I do not understand the link that CCS creates between non-compliance and 'normal'/abnormal pricing. If the company infringing labour, social or environmental standards has the right information (and transparency in procurement will generally facilitate that), it will be able to engage in limit pricing so as to avoid an investigation of abnormality of its tender while still undercutting compliant companies. By not rejecting tenders that appear to have 'normal' prices where there is evidence of infringement of the relevant rules, the contracting authority is actually encouraging this doubly-damaging behaviour of legal non-compliance and artificial creation of financial margins to cover for the effects of non-compliance (and/or to extract additional rents derived from non-compliance). Thus, this does not seem to me to make any economic sense.

Second, because the contracting authority cannot "work with the supplier to ensure compliance going forward", or at least not in all cases, because this would potentially imply substantive modifications of the tender and the contract, which can fall foul of a number of additional requirements in the PCR2015 and Dir 2014/24/EU, not least the principle of transparency and equal treatment. Overall, then, I think that the Guidance on S&E aspects offers a wrong and dangerous answer to this question and I would rather see it modified to ensure that contracting authorities do not create perverse financial incentives and do not breach basic procurement guarantees, even if they are acting on the good intention of promoting compliance with otherwise breached social, labour and environmental standards.

Finally, it is worth focusing on the suggested contract clauses for social and environmental issues included in Appendix B. There are clauses concerned with sub-contracting, but those create the same shortcomings as the general clauses, so it is worth focusing on the clause  giving the Authority the right to terminate if the Contractor fails to comply with social, environmental or labour law obligations. It has two options:

Option 1 (free-standing) The Authority may terminate this Agreement [with x months’ notice] if the Contractor fails to comply in the performance of the Services with legal obligations in the fields of environmental, social or labour law.

Option 2 (where there is a defined Supplier Termination Event giving the Authority the right to terminate) Add to definition of Supplier Termination Event - (..) a failure by the Supplier to comply in the performance of the Services with legal obligations in the fields of environmental, social or labour law.

NOTE: in either case the consequences of termination must be considered in the light of the other provisions in the contract.

I find these suggested contract clauses of very limited use. First, because they fail to determine which obligations in the fields of environmental, social or labour law are those that can trigger termination, as well as which evidence of infringement will be required. Second, because it is not clear whether the breaches refer to the execution of the specific contract (in which case there is a closer link to the subject matter) or the general activities of the contractor (in which case there could be issues around the proportionality of the requirement, in particular if the "legal obligations in the fields of environmental, social or labour law" are some that could not have been included in the contract as specific contract compliance requirements, for example). And third because there is no attempt to establish links to other necessary mechanisms to give effectiveness to these clauses, such as information obligations or potential certification by third parties.

Overall, I find the Guidance on S&E aspects rather poor and I would think that contracting authorities will be better off by relying on the European Commission's guidance on buying green and buying social which, despite its own shortcomings and need for an updated in the case of social aspects, have a more practical orientation.

Brexit, the limits of law and legal scholarship

Brexit has created a very troubling and destabilising environment for legal researchers in the UK and beyond. This is particularly true for those directly concerned with EU and international law, as well as constitutional and public law, but it is quickly expanding to all other areas of legal scholarship, such as human rights law or jurisprudence. Brexit has created shock waves that will continue to hit legal academia at least for the coming 5 to 10 years, and not only in terms of its focus as a discipline.

This not only jeopardises the development of previous research plans and the completion of on-going research projects, but also exposes the limits of law and legal scholarship in a way that I considered unimaginable before 23 June 2016. But then, most of what Brexit has brought had never crossed my mind or seemed outlandish. The following are just a few thoughts of what really worries me at the moment, not only as an EU lawyer, but more generally as a legal scholar. Of course, I am also an EU citizen living in the UK, which adds one layer of implications for me personally. However, I hope I can disentangle both dimensions.

Hard Brexit as a coup against the rule of law

We have been waiting all summer for the dust of the referendum to settle and to see what the UK Government and the UK Parliament made of the result and how they formulated their strategy going forward. What is starting to emerge, particularly from the Government's approach and its toying with the idea of a hard Brexit, is worryingly taking the shape of a coup against the rule of law. It is also starting to encapsulate xenophobic and racist elements of the Brexit campaign that are now presented as reasonable policy choices within mainstream movements, rather than being denounced as extreme and contrary to the very basic values of British society--unless they are now made to represent what they seemed to stand against until very recently.

There is an absolute disregard for the acquired rights of millions of people and the rhetoric that no basic protection is guaranteed and all individual and collective rights are on the table and prone to be used as bargaining chips simply goes against basic principles of legal certainty, prohibition of retroactive effects of rules that significantly impinge on individual rights, good faith and sincere cooperation duties under EU and international law. And the troubling part is that the mechanisms that would ordinarily protect those rights and these principles--mainly, cases brought before the Court of Justice of the European Union and the European Court of Human Rights--would not only be too slow off the Brexit mark, but also unlikely to provide effective protection against the actions of what is emerging as a bully State (or at least a bully Government) willing to disregard any legal consequences of its ill-thought policies.

Some of this is not strictly speaking a Brexit byproduct, but a result of the added or twin process of departure from European human rights instruments and standards. It is also compounded by the complexities of UK (unwritten) constitutional law and the absence of a domestic constitutional court strictly speaking, which starts to paint a scenario where the UK Government seems to believe that it can shape the future system of protection (or less) of human rights in the UK without any constraint or respect for the status quo. For a country that promoted human rights internationally in the past, this is such a return to the cave that it is hard to believe that this is actually happening. And the UK highest courts seem to be the only ones (potentially) able to bring a torch to the cave and force the Government out of it. Whether they will do it, or at least pass the issue on to Parliament, is everybody's guess.

"The first thing we do, let's kill all the lawyers" ~ William Shakespeare's Henry VI. 

As lawyers and legal scholars, we are now under the double attack and accusation of being both experts and agitators of the public space. What I would have thought were two of the most precious treasures legal academia and legal practice can protect (knowledge and independence of action) seem to have turned against us. We had to endure the Lord Chancellor and Secretary of State for Justice spit in our faces that “people in this country have had enough of experts”. The Prime Minister now also wants to protect the British Army (and Government, ultimately) from "activist left wing human rights lawyers"--but, not necessarily because of their ideology, but because they "harangue and harass" Britain's armed forces.

It is obvious that having a dissenting voice (particularly if it is informed and shouts evidence-based arguments), or contributing to the proper functioning of the system of checks and balances that a State based on the rule of law depends upon, now make you a public enemy. This really worries me because legal academia (and legal practice, but maybe to a lesser extent) will now be pushed towards a dangerous path to potentially becoming a place of fear and suppression of ideas and arguments that run contrary to what is now accepted as the official discourse or the policy of the day. We need to react against this and do it quickly, firmly and with all our intellectual might. If we fail to do this, there should be no need to kill all the lawyers, because we will (or should have) committed intellectual suicide already.

Brexit as Moby Dick

The final aspect that really worries me is that we will now probably be obsessed with Brexit. And to some extent we will have to if we are to discharge our moral and social duty of resisting the coup against the rule of law and against legal academia and practice as their stewards--against legal scholars and jurists as a collective that must contribute to keeping the Government in check under the rule of law. But this is very likely to also become our white whale, a permanent chase in a run with a moving finish line, something that is so much bigger than us and our capacities that eventually exhausts us and makes us drown (or feel we are drowning).

This obsession will also impoverish our legal scholarship beyond Brexit and drain our energy and absorb our time in ways that will make us stop pushing the boundaries of knowledge we were exploring before 23 June 2016. This is, in itself, one of the Brexit tragedies. By creating this black hole of legal problems and this immense pressure on the structures for the creation and dissemination of legal knowledge, Brexit has already put a heavy burden on law and legal scholarship. Like the value of the currency, which has been on free fall and already moved back the equivalent of almost the entire span of my lifetime, this will take very many years to recover, and I worry that it may never reach the level it had before the Great Repeal Bill was announced.

A final thought

I wish I got all of this wrong. If I have, then ignore it. Treat it as the dark thoughts of someone too personally affected by Brexit. But if I haven't, then please see this as a call for action. Join the conversation, so we can collectively think about ways of getting out of this.

Eversheds publishes report on transposition of procurement rules & interesting (guess)timates about procurement litigation in 20 jurisdictions

Led by Tomasz Zalewski, the procurement team at Eversheds has put together the report "Flagging up the big issues. EU procurement reform guide 2016", where they provide short updates / country reports on the process of implementation of the 2014 Public Procurement Package in 19 EU jurisdictions and in Switzerland. This is a very interesting source of information because it not only offers an update on the process of implementation, but also flags up the most relevant issues and difficulties in the transposition process in each jurisdiction, and includes an Eversheds team's guesstimate of the volume of public procurement litigation in each jurisdiction. This data, even if used with great caution, allows for some reflections.

Transposition

On the point of the status of the process for the transposition of the 2014 Public Procurement Package, the Eversheds report confirms that a significant number of EU countries are late in the transposition of the new rules. No surprises here. As mentioned by a Commission representative in a conference last week, only 11 Member States have transposed all the Directives in the 2014 Public Procurement Package so far and, as of last week, there were 58 (potential) infringement proceedings on the table of the European Commission.

More interestingly, the Eversheds report allows us to get some additional detail (see table below) and this comes to show that the information communicated by the Member States to the European Commission on whether they have adopted (partial) transposition measures for Directives 2014/23, 2014/24 and 2014/25 is not necessarily completely reliable.

For example, Spain has notified measures transposing Directive 2014/24, while that transposition has not actually taken place (to any meaningful extent, anyway). Conversely, Ireland has transposed both Directives 2014/24 and 2014/25, but this is not reflected in Eur-lex. Moreover, a number of Member States have formally transposed the 2014 Public Procurement Package or parts of it, but the reform is not in force due to the need to further executive orders, implementing regulations or other types of secondary legislation (this is clearly the case in Belgium and Italy, but to some extent affects a larger number of jurisdictions where the application of the new rules depends, at least in practice, on additional legislation or guidance). 

In my view, this triggers a significant issue on the accuracy and quality of (qualitative) information about the transposition of the 2014 Public Procurement Package (and Directives, more generally) and the European Commission will be well advised to accelerate work on transposition monitoring (for which it recently tendered a consultancy contract).

Litigation

The Eversheds report is also interesting regarding the picture it offers on the volume of litigation in the area of public procurement. Previous information published by the European Commission in its 2011 Evaluation Report on the Impact and Effectiveness of EU Public Procurement Legislation offers a benchmark for comparison. However, given the time lag between the reported data and the seemingly different types of cases encapsulated in each of the reports, the overview does not necessarily help in getting an understanding about litigation trends, either in each of the jurisdictions or in the EU overall. However, major differences between jurisdictions seem clearly identifiable and a stable trend over the last decade or so. This is puzzling but important in the context of the (abandoned) reform of the Remedies Directives, on which the European Commission is expected to issue a final position soon (for background discussion, see here and here).

Overall, the Eversheds report seems to indicate that countries with and without specialised administrative review bodies or specialised administrative courts show a very different volume of public procurement litigation or, at least, that having such review mechanisms makes the litigation visible--as other jurisdictions, such as the UK (Eng & Wales) or Ireland, probably rely on informal dispute resolution mechanisms (and settlements) to a larger extent, which makes an assessment of the actual litigiousness of public procurement difficult to carry out in a comparable manner.

Final Thought

I think that the Eversheds report must be welcome and it would be useful if others could complement the information for the missing EU jurisdictions. Collection of (reliable) evidence is a big hurdle for sensible public procurement reform. This report sheds some light on important aspects and, even if it needs to be considered carefully due to the lack of common methodology and necessarily impressionistic aspects of a document that is not meant to provide legal advice, it must be welcome that a commercial law firm is willing to take this step and share its procurement intelligence with all of us. I for one would welcome others to follow suit.