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.


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).


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.

A strange Scottish case on evaluation of tenders -- Boston Sci. Ltd v Common Service Agency [2016] CSOH 132

I find the recent Scottish case Boston Scientific Limited v The Common Service Agency [2016] CSOH 132 most confusing. This is a case of healthcare-related procurement whereby the Scottish NHS' central purchasing body, the Common Service Agency, was tendering framework contracts for the supply of certain types of medical equipment--for simplicity, pacemakers and implantable defibrillators.

The litigation concerned the applicable award criteria and the ensuing evaluation of the tender submitted by Boston Scientific Limited. Even if the case seems to be decided mainly on procedural grounds (the claimant, or pursuer in Scottish terminology, seemed to have been time-barred in raising a challenge against the published award criteria), it raises substantive issues that, in my view, should have been dealt with differently by the Court.

The tender had been advertised and the relevant invitation to tender (ITT) had published the applicable award criteria. For each of the lots in which the framework agreement was to be divided, the tenders would be assessed against a pass/fail criterion of essential features (ie mandatory technical specifications) and then evaluated on a 60:20:20 split of the maximum score of 100. The offered price would carry a 60% weight, whereas two quality criteria would carry 20% each: (a) the inclusion of certain defined desirable features and (b) the longevity of the devices.

The challenge was based on Boston Scientific's submission that the assessment of the longevity of the pacemakers must have been wrong. In a nutshell, Boston Scientific claimed that their position as market leaders and the existence of independent tests that demonstrated that their devices had a very long individual life led them to the conclusion that 'there must have been a failure to compare like with like because if there had not been such a failure [Boston Scientific] would have had the highest longevity scores' [para 15]. In short, the tenderer was not convinced that its competitors could (truthfully) have offered devices with a superior longevity.

Boston Scientific's submission of improper technical evaluation of the tenders is complicated by two additional factors. First, that tenderers had only been asked to declare (or self-certify) the longevity of their devices without providing any supporting evidence. Second, that the criteria applicable to the evaluation of the longevity component were not all that clear.

Self-certification of verifiable technical characteristics?

On the first issue, the complaint considers that the contracting authority was not allowed to include as award criteria elements based on pure self-declaration and which it intended not to verify. Indeed, the case seems peculiar because the Common Service Agency 'had stated clearly prior to the date for submission of tenders that supporting evidence was not sought.  It had protected itself in a different way by making clear that the framework agreement would include a clawback provision if battery life fell short of the figure submitted in a tender' [para 18].

This seems to me to be a peculiar way of conducting business because the longevity of devices that need to be implanted in the human body seems a rather important technical characteristic (as submitted by Boston Scientific, but dismissed by Lord Tyre in his Opinion, despite the relevance of this issue for the purposes of EU consumer law as discussed here), and the abrogation of the power to check compliance with technical specifications in this regard seems odd, regardless of the inclusion of financial penalties in the contract. The Judgment relies on two English precedents that would support the legality of relying on self-certification of compliance with contractual terms. Most importantly, it ignores the EU precedent in EVN and Wienstrom (C-448/01, EU:C:2003:651), to which one of the English cases refers, though. A reference to EVN paras [50]-[51] would have sufficed to quash the award procedure (I am thankful to Karen Wontner and Erik Plas for having raised this point in private correspondence).

First, Lord Tyre relies on Public Interest Lawyers v Legal Services Commission [2012] EWHC 3277 (Admin), Cranston J at para [64] to justify the acceptability of self-certification. However, in my view, this precedent is inapplicable here. First, because it concerned an on-going requirement to be discharged during the execution of the contract (ie an element closer to a contract performance clause than a technical requirement) but, most importantly, because in the previous paragraph of that speech Cranston J stressed that 

... the principle behind its decision was the need to ensure the equal treatment of tenderers through the objective and uniform application of the criteria in their assessment. The principle applies whether or not the public authority is able to verify the criteria. If it is able but omits to do so, that is as much a breach of the duty as if it sets criteria which cannot be verified. That is because the outcome may be an inequality of treatment of tenderers through the equal treatment of unequals, i.e. the equal treatment of those meeting and those failing to meet the tender requirements. After all, it is trite law that equality of treatment means not only treating like cases alike but unlike cases differently [at 63].

And this led Cranston J [at para 65] to insist on the need for robust verification where the contracting authority relies on self-certification by the tenderers. This is important in the context of the Boston Scientific v Common Service Agency dispute because, this case, 'Although it was accepted that in some cases a contracting authority might have a duty to validate information provided by a tenderer, this was not such a case. The defender did not have the means to verify independently the figures for longevity provided by tenderers' [para 18]. The issue here would have been whether this inability of independent verification (a) covered a complete lack of engagement with existing technical information and (b) was not attributable to the contracting authority itself and its decisions on how to organise the procurement procedure. Generally, one would expect that the entity running framework contracts for medical supplies has (or has access to) necessary technical knowledge in any case. Thus, this point of the case remains obscure and, in my opinion, shows excessive deference to the contracting authority.

Second, Lord Tyre relies on Parker Rhodes Hickmotts Solicitors v Legal Services Commission [2011] EWHC 1323 (Admin), McCombe J at paras [35]-[40], which in turn refers back to Public Interest Lawyers v Legal Services Commission. The difficulty with this second case is that its ratio rests on the construction or interpretation of the tender documentation, rather than an assessment of the requirements of the principle of non-discrimination of tenderers--which was the legal basis for the challenge in Boston Scientific. Importantly, in Parker Rhodes, the relevant part of the Judgment focuses on the fact that the Information for Applicants (IFA) document had not indicated how the contracting authority would proceed to verifying specific aspects of the offers, which the Court considered to cover the possibility of relying on self-certification.

To me, this makes both precedents irrelevant for (if not contradictory to) the assessment of the claims raised by Boston Scientific, which aimed to strike down the procurement process on the basis that the contracting authority had appended a significant weight to a criterion it actually decided not to verify at all. In my view, there are good arguments under the principle of good administration (Art 41 CFR) to demand that contracting authorities only evaluate what they can assess and, even more, that they do not claim not to be in a position to assess technical characteristics of the products they are buying--if nothing else, by reliance on the rules on test reports, certification and other means of proof (now under Art 44 Dir 2014/24/EU). 

Longevity, price, both or none of the above?

Additionally, and focusing on the point of the need to construct or interpret the tender documents as published, the second argument raised by Boston Scientific deserves attention as well because, indeed, the criteria applicable to the evaluation of the longevity component were not all that clear. In that regard, it must be noted that the ITT had established that:

In relation to longevity, the tender receiving the highest total longevity score would receive 20 points.  Each other tender would receive “20‑X points where X = 0.2 x the percentage by which each price in each tender exceeded the lowest price tender achieving the lowest total price score” (Boston Scientific v Common Service Agency, para [5], emphasis added).

This seems odd because the criterion that is aimed at scoring longevity is (or, at least, seems to be) referential to the price of all tenders except that of the tender with (self-certified) longer individual device life. In my view, this is a breach of the general scoring rule included in the ITT, according to which price would carry a weight of 60%. This would not be true except for the tender self-certifying highest longevity, and all other offers' price would be taken into account twice (once for the price component itself, and a second time for the scoring of longevity). This is, simply, technically incorrect and, in my view, should have sufficed to cancel the tender.

However, this does not seem to be the whole story and a mistake must have happened in the preparation of the ITT (there seems to be an obvious explanation if one thinks in terms of copy and paste ...) because, in a debriefing letter, the contracting authority had indicated to Boston Scientific that:

The weighting for Longevity was 20% therefore in each lot the longest longevity submitted received 20 points. The scoring guidance in section 3.3 clearly identifies the points allocated to longevity and how the tender would be scored ... (i.e. if one product had longevity or 100 months (longest) it would score 20 points and if a different product submitted had a longevity of 50 months it would score 10 points)  (Boston Scientific v Common Service Agency, para [10], emphasis added).

Now, this is the natural understanding of a relative scoring for longevity, but it happens not to be the scoring rule disclosed in the ITT, which made reference to relative prices rather than relative longevity. Such a substantial deviation between disclosed scoring rule (even if absurd) and its application seems to run against the basic requirements of the principles of transparency and equal treatment, as recently recast by the Court of Justice of the European Union in TNS Dimarso (for a comment, see here).

In my view, this should also have been taken into account by the Court and, rather than dismissing the challenge, Lord Tyre should have sought to understand better whether the longevity criterion had been assessed as the debriefing letter said, or rather as the ITT established (which could have led to abnormal results ultimately preventing Boston Scientific from making much sense of the scores obtained). Most likely, a divergence between the published scoring rules and the actual evaluation of the tender should have led to a cancellation of the award in any case.

Overall, I think that there are two main problems with the Judgment in Boston Scientific v Common Service Agency, and both of them seem to me to result from a lack of engagement with the case law of the Court of Justice of the European Union by the Scottish court. First, because it is truly abnormal to allow for self-certification of a technical requirement that can be assessed and verified by the contracting authority--at least, by reference to technical documents. Second, because it is also truly remarkable that a contracting authority can evaluate tenders in a way that deviates from the published criteria without the reviewing court picking up on this important aspect (or anomaly) of the process. Ultimately, in my opinion, this is a strange case. But also a very technically deficient Judgment and an incorrect decision.

ECJ confirms that procurement rules do not apply to licences or authorisations (“concessions”) for betting and gambling services (C-225/15)

In its Judgment of 8 September 2016 in Politanò, C-225/15, EU:C:2016:645, the European Court of Justice (ECJ) followed the Opinion of Advocate General Wahl (see here) and confirmed that the 2004 procurement rules were not applicable to a public contest for the award of concessions (ie licences or authorisations) for the provision of betting and gambling services to the public.

The ECJ did not address AG Wahl’s obiter comments concerning the theoretical applicability of the 2014 Concessions Directive to an equivalent case but, in my view, the stress put by the ECJ in the analysis of the essential elements of remuneration and risk transfer in the definition of a (services) concession indicates that the ECJ would have likely ruled against that applicability.

In the Politanò Judgment, the ECJ addressed the question whether Directive 2004/18 was applicable to a call for tenders for the grant of “concessions” in the field of betting and gambling by focusing on the remuneration element that is necessary for the existence of a public contract.

After distinguishing public service contracts from services concessions by reference to the different modalities of remuneration they imply and the different risk structure that underlies those modalities of remuneration (paras 30 to 31), the ECJ focused on the plain and simple fact that ‘in the case in the main proceedings, the service provider receives no remuneration from the contracting authority and bears the entire risk associated with the activity of collecting and transmitting bets’ (para 32, emphasis added).

This led the ECJ to conclude that such “concessions” could not ‘be classified as a public contract for services within the meaning of … Directive 2004/18’ (para 33), which leaves them outside of its scope of application (para 34). The ECJ does not make an equivalent explicit conclusion concerning the classification of those “concessions” for the provision of betting and gambling services as services concessions because those were explicitly excluded from the scope of application of Directive 2004/18 in any case (para 29).

In my view, however, that conclusion would be unavoidable in an equivalent case that took place after the entry into force of Directive 2014/23 because its Art 5(1)(b) defines a services concession in the following terms:

a contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the provision and the management of services other than the execution of works ... to one or more economic operators, the consideration of which consists either solely in the right to exploit the services that are the subject of the contract or in that right together with payment (emphasis added).

Importantly, Art 5(1) in fine of Directive 2014/23 also requires that

The award of a works or services concession shall involve the transfer to the concessionaire of an operating risk in exploiting those works or services encompassing demand or supply risk or both ... (emphasis added).

Taking all of this into account, and on the basis of the same factual finding that in the case of licences or authorisations for the provision of betting and gambling services (typically) ‘the service provider receives no remuneration from the contracting authority and bears the entire risk associated with the activity of collecting and transmitting bets’ and, possibly more importantly, the fact that 'the "service" under analysis [is] not provided on behalf of the contracting authority' (see Opinion of AG Wahl, para 51), the only possible conclusion is that Directive 2014/23 is equally inapplicable to a call for tenders for the grant of “concessions” in the field of betting and gambling.

This simple and unsurprising conclusion is slightly more interesting when taken together with the also recent Judgment in Promoimpresa (see here) because, together, they provide some additional clarity on the limits of application (or rather, outright inapplicability) of public procurement rules to “concessions” in name that are actually regulatory systems of licences or authorisations to carry out specific economic activities, whether they involve the use of public assets (generally, parts of the public domain) or not.


ECJ deviates from AG Sharpston’s Opinion and accepts use of “sure-refund” good conduct guarantees in public procurement litigation (C-439/14 and C-488/14)

In its Judgment of 15 September 2016 in Star Storage, joined cases C-439/14 and C-488/14, EU:C:2016:688, the European Court of Justice (ECJ) has deviated from the Opinion of AG Sharpston (see here) and ruled that, read in the light of Article 47 of the Charter of Fundamental Rights of the European Union, the Remedies Directives must be interpreted as not precluding national legislation that makes the admissibility of any action against an act of the contracting authority subject to the obligation for the applicant to constitute a good conduct guarantee if that guarantee must be refunded to the applicant whatever the outcome of the action.

I find this Judgment seriously troubling for two reasons: (a) it goes against basic intuitions of the effect of financial requirements on access to justice and (b) I do not grasp the purpose of “sure-refund” good conduct guarantees, which seem to be useless procedural hurdles. I develop these points below.

The main legal issue in Star Storage

The legal issue raised by the joined cases decided in Star Storage has been a rather moving target because the underlying Romanian rules have been altered in the period between the referral of the question to the ECJ and its Judgment. The initial question concerned the compatibility with EU law of requirements to furnish a good conduct guarantee in order to challenge procurement decisions under the risk that the guarantee would be executed in case of negative results for the litigant.

The forfeiture of the guarantee was later declared unconstitutional by the Romanian Constitutional Court and, as a result, the only question left for the ECJ to consider revolved around the compatibility of such good conduct guarantees in the scenario where they would be refunded to the challenger of the procurement decision, whatever the outcome of the review process.

So, in short, the ECJ had to consider whether the Remedies Directives and Art 47 CFR excluded the possibility to require the provision of a “sure-refund” good conduct guarantee in order to challenge public procurement decisions under Romanian law (C-439/14, para 38).

After rehearsing its standard case law concerning the Remedies Directives’ objective of ensuring the effectiveness of the substantive EU public procurement rules (paras 41-44) and stressing that the 2007 review of those rules aimed at ensuring ‘full respect for the right to an effective remedy and to a fair hearing, in accordance with the first and second paragraphs of Article 47 of the Charter’ (para 45), the ECJ focuses on the specific assessment of the “sure-refund” good conduct guarantee and follows the analytical framework proposed by AG Sharpston in her Opinion, which started from the position that

the good conduct guarantee … constitutes, as a pre-condition for getting any challenge examined, a limitation on the right to an effective remedy before a tribunal within the meaning of Article 47 of the Charter which, in accordance with Article 52(1) of the Charter can therefore be justified only if it is provided for by law, if it respects the essence of that right and, subject to the principle of proportionality, if it is necessary and genuinely meets objectives of general interest recognised by the EU or the need to protect the rights and freedoms of others (see judgment of 4 May 2016, Pillbox 38, C-477/14, EU:C:2016:324, paragraph 160) (C-439/14, para 49, emphasis added).

In assessing this test, the ECJ considers that the first requirement of explicit legal basis is met (para 50). This does not seem controversial. However, and this is where the ECJ starts to deviate from the analysis of AG Sharpston, the Court also considers that ‘the fact that the good conduct guarantee may reach the substantial amount of EUR 25 000 or EUR 100 000 cannot lead to the conclusion that the obligation to give such a guarantee undermines the fundamental content of the right to an effective remedy since, in any event, that guarantee, cannot be kept by the contracting authority, whatever the outcome of the action’ (C-439/14, para 50, emphasis added).

The ECJ further considers the measure adequate because the aim of the good conduct guarantee is justified by the legislative aim of avoiding the abuse of the remedies system so as to ensure the administrability of the procurement process (paras 52 and 53), and that ‘A financial condition such as the good conduct guarantee … is a measure liable to discourage frivolous challenges and ensure that all individuals have their actions dealt with as rapidly as possible, in the interest of the proper administration of justice, in accordance with Article 47, first and second paragraphs, of the Charter’ and that this is so even if ‘the obligation to provide a good conduct guarantee is a less dissuasive measure in its current version than in its initial version, since it can no longer be automatically and unconditionally kept by the contracting authority in the case that the appeal is rejected or withdrawn, [because] that obligation is still able to achieve the objective of combating frivolous actions pursued by the Romanian legislation’ (C-439/14, paras 54 and 56, emphasis added).

It finally considers the measure proportionate, mainly because ‘The good conduct guarantee of 1% of the value of the public contract, limited in accordance with the type of contract remains modest (see judgment of 6 October 2015, Orizzonte Salute, C-61/14, EU:C:2015:655, paragraph 58), in particular for tenderers which must normally demonstrate a certain financial capacity. That guarantee may, next, and in any event, be constituted in the form of a bank guarantee. Finally, it has to be constituted only for the period between the filing of the application and final judgment’ (C-439/14, para 61, emphasis added).

Issues around access to (administrative) justice

The first aspect in which I find the Star Storage Judgment criticisable concerns the analysis of proportionality. I think that the imposition of financial requirements and costs in order to challenge procurement decisions—including the payment of (non-negligible) courts fees—should be considered more clearly contrary to Art 47 CFR and the Remedies Directives. These rules require the recognition of standing to challenge procurement decisions ‘at least to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement’, and not only to those that can foot the bill of a (bank-issued) financial guarantee or absorb the opportunity cost of having a significant amount of money idle for the duration of the review procedures. Moreover, the assessment of proportionality in the terms carried out by the ECJ in the Star Storage Judgment can be particularly burdensome for SMEs, for whom the effects of a financial requirement proportional to the value of a contract they were not awarded can be clearly disproportionate, or at least imply an excessive risk.

Also, an assessment of proportionality should include a consideration of whether less restrictive measures are available. In the specific setting of aiming to discourage frivolous litigation, it would seem that the creation of a system of court-administered fines would be superior and reduce the ex ante restriction of access to review procedures. Moreover, that system could include provisions allowing the review body or court to ask for financial guarantees as interim measures only where they are necessary to ensure the possibility of the fine having to be paid at the end of the procedure (although I am not sure that this mechanism to avoid bankruptcy proofness is necessary).

It would also be possible to create a domestic discretionary exclusion ground for spurious litigants on the basis that this conduct makes ‘the economic operator … guilty of grave professional misconduct, which renders its integrity questionable’ [Art 57(4)(c) Dir 2014/24]. In my view, the existence of these potential alternatives should have been taken into account and this could have led to a finding that the upfront requirement of good conduct guarantees is in itself disproportionate.

However, this is not the weakest point of the Judgment.

Uselessness of “sure-refund” good conduct guarantees

Rather, in my view, the weakest and most criticisable aspect of the Star Storage Judgment is that it fails to recognise the futility of “sure-refund” good conduct guarantees. As simply and clearly put by AG Sharpston in her Opinion,

such a procedural requirement does not protect contracting authorities adequately from frivolous challenges … the contracting authority has to return the good conduct guarantee to the applicant within five days following the date on which the decision ... or the judgment has become final, even where the applicant manifestly abused his right to access review procedures. The costs which the … regime involves may therefore not be such as to discourage an economic operator from lodging a challenge that pursues an objective other than those for which the review procedures are established — for example, harming a competitor. They may nevertheless prove an obstacle to an economic operator with an arguable claim but limited means (Opinion of AG Sharpston, para 56, emphasis added).

It is surprising that the ECJ diverges from this assessment. In general terms, the ECJ implicitly dismisses it by stressing that ‘although the obligation to provide a good conduct guarantee is a less dissuasive measure in its current version than in its initial version, since it can no longer be automatically and unconditionally kept by the contracting authority in the case that the appeal is rejected or withdrawn, that obligation is still able to achieve the objective of combating frivolous actions pursued by the Romanian legislation’ (C-439/14, para 56). The rationale for this assessment is developed in the following terms:

Mobilising a sum of that amount by bank transfer, like the requirement to take the steps necessary to constitute a bank guarantee and pay the fees relating to it are such as to encourage applicants to carefully consider bringing an action. Furthermore, in so far as it undermines the applicant’s resources or, at least, its ability to obtain credit until that guarantee is refunded, the good conduct guarantee is of such a nature that it encourages applicants to act prudently in the proceedings they bring, consistent with the requirement … that the review procedures … are conducted as rapidly as possible. … it is conceivable that such a financial condition will encourage potential litigants to seriously evaluate their interest in bringing legal proceedings and their chance of winning and thereby dissuade them from bringing claims which are manifestly unfounded or which only seek to delay the award of a contract (C-439/14, para 59).

In my view, the ECJ fails to address AG Sharpston’s concerns. There is indication of the cost of such a financial guarantee, but it is certainly easy to foresee that (especially for large contracts), it may well be a minor amount for resourceful litigants willing to incur that cost in order to obtain some competitive advantage.

On the contrary, it is surprising that the ECJ does not use the exact same reasons detailed in para 59 of the Star Storage Judgment to acknowledge the barrier that the guarantee represents, which it ‘saves’ by indicating that the absolute value of the guarantees remains ‘modest’ (para 61). In my view, it is not possible to have it both ways. Either the requirement is modest and, therefore, unable to provide sufficient deterrence for resourceful litigants, or it is a serious barrier to the exercise of legal actions (whether legitimate, which should overcome the barrier, or illegitimate, which should not) and, consequently, it cannot overcome an analysis of strict proportionality in the terms discussed above.

Overall, once more, I find the judgement of the ECJ lacking commercial and financial realism and I start to wonder whether we will see a reversal of this trend any time soon—which seems unlikely, particularly when the ECJ deviates from the well thought-through proposals of some of its Advocates General, such as Sharpston’s in the Star Storage case.

What does Brexit mean for public procurement? Short remarks on Arrowsmith's White Paper

Prof Arrowsmith has published a White paper on the implications of Brexit for the law on public and utilities procurement, where she briefly considers the alternative models for the future regulation of public procurement in the UK after an exit from the EU. A fuller academic version of the paper is bound to appear in a Brexit special issue of the Public Procurement Law Review. In her White Paper, Arrowsmith provides the skeletal implications that different UK-EU relationships would have in terms of public procurement regulation, most of which point towards a clear need for (broad) continuity of the existing EU-based model.

Along the same lines already drawn by previous commentators (see here), her White Paper stresses the limited scope (and incentive) for a change of regulatory model if the UK is to have full access to the EU single market (under either the 'Norwegian'/EEA model, or the slightly more flexible 'Swiss' approach). She indicates that there is a (theoretical) possibility for the UK to reach a bespoke agreement with the EU that softens the requirements under the current EU Directives, but she also stresses that the stronger indication is that the EU would rather push for a consolidation of existing rules, both because that is the obvious 'off-the-shelf' solution, and due to the different negotiation dynamics between previously unrelated parties (the EU and Switzerland, for these purposes) and between the UK and the EU, which render arguments based on the need to 'learn' about the EU procedures or to reform internal rules to ensure approximation and consistency moot.

She then also assesses two scenarios that, in my view, are only interesting from a theoretical perspective. First, the strict application of the WTO GPA, which leads her to suggest that this option would allow the UK to develop a more flexible procurement regime but, realistically, only in the long run because access to the WTO GPA (of which the UK is not a Member in its own right, but only as part of the EU) would be significantly facilitated by keeping the existing EU-based regulations in place. She also mentions that this option would require the UK to agree on coverage with the EU and all other GPA members, and that 'there ... seems to be no reason why the other GPA parties would want to reopen the existing detailed coverage arrangements with the UK, or vice versa'. She is right to stress that business as usual would be the best way of ensuring quick accession to the GPA by the UK, but the question then arises of what is the advantage of such loose relationship with the EU compared to full access to the single market?--and the simple answer is that, in procurement terms, there is none in the short run and that any long run advantage seriously depends on the way the GPA itself evolves, which is not something we can include in our analysis with any meaningful level of predictability.

Second, and maybe in the only controversial or provocative point of her White Paper, Arrowsmith entertains the idea "that Brexit [c]ould see the UK throw off the shackles of EU procurement law, leaving it free to design its own system", in what she labels "the freedom option", which would derive in case the UK was not able to commit to any trade agreements covering public procurement. Arrowsmith rightly considers this situation unlikely and, as far as I can assess her qualitative comments on its implications, probably undesirable. I think that Arrowsmith's assessment of this situation is however partial because it fails to stress the losses in terms of trade that would derive from such "freedom solution", that I would rather label "the self-destructive, isolationist option".

Beyond the possibility of creating a superior public procurement system, which is by no means guaranteed (as Arrowsmith stresses herself), this solution of "absolute regulatory freedom" would not be viable unless the UK had no intention of keeping a meaningful level of international trade in public procurement markets. This scenario would come together with the possibility for any third country to discriminate against UK producers and exporters in their own procurement, as well as reduced incentives for international suppliers to participate in tenders where their ability to enforce individual rights was more reduced than in other jurisdictions. In general, it does not seem far fetched to consider that there would be less overall competition for contracts tendered by the UK government and, in the end, this would harm the UK taxpayer via higher prices and/or reduced quality of supplies, services and works needed to run public services.

I guess that my broader point is that, in this area of economic regulation, as in any other, arguments based on the possibility to develop a (theoretically) better system from a legal / technical perspective need to be considered together with their economic implications. And, from this perspective, any option that implied limited access to the EU single market and, even more, to the international markets, would impose a very heavy burden on UK's public expenditure. That is why it is important not to isolate technical legal analysis from its broader context in this important debate.

Moreover, and this is not a perspective generally included in Brexit assessments, multilateral investment banks also have a stake in the domestic regulation of public procurement. In case the UK wanted to have any chance of securing international funds for large infrastructure projects (which it may well want to preserve, in order to retain some possibilities of, for instance, EBRD investment in the country), it would still need to have a domestic regulation that complied with standards very close to those of the current EU-based regulatory mechanisms. Otherwise, it could not be out of the question that internationally-funded projects would need to be tendered under special rules in the future, thus not leaving the "freedom option" completely unconstrained.

Similarly, these issues of reduced international competition (with its negative economic effects) and difficulties in continuing to attract procurement-related international investment would arise in case Arrowsmith's proposal for a transition period between Brexit (ie, 2 years after the trigger of Art 50 TEU, which now seems likely to happen in early 2017) and the moment trade agreements were reached, in which she considers that a "sensible and likely interim solution would be to retain the award procedures of the regulations in place, but without provision for enforcement by non-domestic suppliers, pending eventual confirmation, modification/replacement, or total repeal of the regulations, depending on the outcome of trade negotiations and other decisions on how procurement will be regulated after Brexit". In my view, this is a bad idea and the UK would be better off by completely keeping the status quo ante Brexit (including remedies for international tenderers and investors) if it wants to preserve its (diplomatic) options of a swift conclusion of procurement-related trade agreements, as well as preventing disruption in investment and infrastructure projects.

Once again, from a broader perspective and like in most other areas of Brexit-related renegotiation, strategies that not only do not consolidate or grandfather rights, but also seek to (temporarily) restrict rights and guarantees, seem not to be conducive to productive future relationships and there is no reason to believe that such moves would not severely damage the UK's chances of reaching satisfactory agreements for the future. Thus, in my view, Arrowsmith's proposal for a transition period of reduced enforcement rights for non-UK bidders should not be followed.

CJEU ignores commercial reality and sets unjustified contractual boilerplate requirements for contractual modifications (C-549/14)

In its Judgment of 7 September 2016 in Finn Frogne, C-549/14, EU:C:2016:634, the European Court of Justice (ECJ) issued guidance on the requirements (and constraints) derived from the principle of equal treatment in situations where the difficulties in the performance of a contract are such that the contracting authority decides to settle its early termination in a way that implies a material amendment to the initial contract. This case is relevant in the early stages of the new rules on contract modification and termination in Articles 72 and 73 of Directive 2014/24. However, the compatibility between the Finn Frogne Judgment and these new rules raises several questions.

In Finn Frogne, and according to the rather limited facts given in the Judgment, the dispute concerned the contract for the supply of a global communications system common to all emergency response services and for the maintenance of that system for several years, which was awarded after a competitive dialogue. The execution of the contract was subsequently delayed due to difficulties for which neither the contracting authority nor the supplier accepted responsibility (in the terms of the ECJ, both parties disagreed "as to which party was responsible for making it impossible to perform the contract as stipulated", para 10), which eventually led them to enter into a settlement involving the reduction of the contract and each party waiving all other rights arising from the original contract (para 11).

The main point of contention was that the settlement not only included the supply of equipment initially covered by the original contract (a radio communications system), but also the sale of two central server farms which the contractor had itself acquired with a view to leasing them to the contracting authority in performance of the original contract (paras 11 and 19). The settlement was the object of a voluntary ex ante transparency notice and subsequently challenged by a third party.

The legal issue in front of the ECJ was "in essence, whether Article 2 of Directive 2004/18 must be interpreted as meaning that, following the award of a public contract, a material amendment cannot be made to it without a new tendering procedure being initiated, even in the case where the amendment is, objectively, a type of settlement agreement, with both parties agreeing to mutual waivers, designed to bring an end to a dispute with an uncertain outcome, which arose from the difficulties encountered in the performance of that contract" (para 27). Or, in simple terms, whether settling the disputes that had made the commercial relationship between the supplier and the contracting authority non-viable in a way that implied a substantive amendment of the initial contract breached the principle of equal treatment and the obligation of transparency.

In Finn Frogne, the ECJ first took the opportunity to clarify its case law in pressetext (C‑454/06, EU:C:2008:351) and in Wall (C‑91/08, EU:C:2010:182) in the sense of emphasising that a material reduction of the scope of a public contract is equally caught by the restrictions on contract modification as a material extension of the scope of that contract. The reasons for this are as follows:

an amendment of the elements of a contract consisting in a reduction in the scope of that contract’s subject matter may result in it being brought within reach of a greater number of economic operators. Provided that the original scope of the contract meant that only certain undertakings were capable of presenting an application or submitting a tender, any reduction in the scope of that contract may result in that contract being of interest also to smaller economic operators. Moreover, since the minimum levels of ability required for a specific contract must ... be related and proportionate to the subject matter of the contract, a reduction in that contract’s scope is capable of resulting in a proportional reduction of the level of the abilities required of the candidates or tenderers (C-549/14, para 29).

This makes logical sense and is generally linked with the discussion of the division of contracts into lots and how to manage volume-related restrictions of competition for public contracts. However, in the context of a contractual settlement aimed at terminating the commercial relationship between the original (larger) provider and the contracting authority, this would lead to the conclusion that, in a case of breakdown of the commercial relationship implicit in all public contracts, "the principle of equal treatment and the obligation of transparency imply that a contracting authority cannot consider entering into a settlement to resolve the difficulties arising from the performance of a public contract without this automatically giving rise to the obligation to organise a new tendering procedure relating to the terms of that settlement" (para 24), which the referring court considered problematic.

Indeed, in my opinion, taking this position would create situations where the contracting authority is simply in a catch 22 by having to either remain committed to a non-functioning contractual relationship that is not allowing it to perform its public functions to which the contract is instrumental, or having to spend significant funds in the creation of an alternative commercial relationship that may not be the best solution for its needs--particularly if there are economies to be had from preserving part of the original contract or the preparatory actions which the parties had already undertaken in view of its performance.

Regardless of this clear practical difficulty, the ECJ considered that

neither (i) the fact that a material amendment of the terms of a contract results not from the deliberate intention of the contracting authority and the successful tenderer to renegotiate the terms of that contract, but from their intention to reach a settlement in order to resolve objective difficulties encountered in the performance of the contract nor (ii) the objectively unpredictable nature of the performance of certain aspects of the contract can provide justification for the decision to carry out that amendment without respecting the principle of equal treatment from which all operators potentially interested in a public contract must benefit (C-549/14, para 29).

Consequently, it stuck to its previous line of case law in Succhi di Frutta (C‑496/99 P, EU:C:2004:236) whereby any material modification of a public contract requires a new tender (para 38), but placed significant emphasis on the fact that

Although the principle of equal treatment and the obligation of transparency must be guaranteed even in regard to specific public contracts, this does not mean that the particular aspects of those contracts cannot be taken into account. That legal imperative and that practical necessity are reconciled, first, through strict compliance with the conditions of a contract as they were laid down in the contract documents up to the end of the implementation phase of that contract, but also, second, through the possibility of making express provision, in those documents, for the option for the contracting authority to adjust certain conditions, even material ones, of that contract after it has been awarded. By expressly providing for that option and setting the rules for the application thereof in those documents, the contracting authority ensures that all economic operators interested in participating in the procurement procedure are aware of that possibility from the outset and are therefore on an equal footing when formulating their respective tenders (C-549/14, para 37, emphasis added).

Ultimately, the ECJ ruled that

Article 2 of Directive 2004/18 must be interpreted as meaning that, following the award of a public contract, a material amendment cannot be made to that contract without a new tendering procedure being initiated even in the case where that amendment is, objectively, a type of settlement agreement, with both parties agreeing to mutual waivers, designed to bring an end to a dispute the outcome of which is uncertain, which arose from the difficulties encountered in the performance of that contract. The position would be different only if the contract documents provided for the possibility of adjusting certain conditions, even material ones, after the contract had been awarded and fixed the detailed rules for the application of that possibility (C-549/14, para 40, emphasis added).

In my view, the Finn Frogne Judgment must be criticised, at least for two reasons.

First, because it is very difficult to coordinate with the functional approach of Art 72 (and to some extent, 73) of Directive 2014/24 and gives excessive deference to the creation of contractual modification mechanisms. Strictly on the coordination aspect, it is worth stressing that Art 72 seems to be concerned with extensions of the contractual object, but not with its reduction (Art 72(4)(c)), and with qualitative or technical changes that would have allowed other tenderers to participate (Art 72(4)(a)). In the Finn Frogne case, there would have seemed to be more reason to challenge the content of the settlement on the basis that it changed one of those conditions (sale rather than lease of the central server farms) rather than on the change of overall value of the contract. 

Moreover, it is worth stressing that Art 72 also provides significant leeway for the modification of contracts up to 50% of their value (per modification, without a maximum cap) where a diligent contracting authority could not have foreseen the circumstances leading to the need for the contractual modification. Implicitly, the ECJ seems to indicate that every diligent contracting authority needs to foresee the possibility of the commercial relationship breaking down (which may be fair enough), but it also goes on to require a full contractual regulation of how such termination of the contractual relationship needs to unfold.

In that regard, it must be stressed that the requirements for the inclusion of "general" contractual review clauses foreseen in Art 72(1)(a) demands them to be "clear, precise and unequivocal", which may or not be coincidental with the ECJ's requirement for the contractual arrangements to fix "the detailed rules for the application [of] the possibility of adjusting certain conditions"--and which may not be (feasibly) applicable to "termination through settlement" clauses, whereby the parties must necessarily engage in negotiations.

In my view, the ECJ has fallen in the same problematic assumption of the possibility to design "perfect contracts" explicitly and exhaustively regulating all consequences of their (un)foreseeable non-viability or imperfection that also affects the provision in Art 72(1)(a) of Dir 2014/24 [for criticism, see A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 428], but with the aggravating factor of not acknowledging that they may also be totally ineffective in scenarios where the commercial relationship is broken and, consequently, the parties need to settle, mediate, arbitrate or litigate those consequences regardless of the prior inclusion of such contractual clause.

The second reason why the Finn Frogne Judgment needs to be criticised is because it does not make any effort to attempt to distinguish between settlement conditions that remain strictly within the scope of the original contract and, consequently, only entail its partial enforcement (in its own terms) from settlements which include substantive changes in either their scope or the conditions for (partial) performance. While the first imply a consolidation of the effects already (de facto) created by the original contract, the latter seem to indicate the appearance of different needs of the contracting authority and/or different ways of satisfying them by the supplier. And, in my opinion, while the latter may justify the imposition of strict restrictions and (depending on the circumstances and the proportionality of the requirement) a new tender, the former do not seem to warrant such an approach.

These are issues that will necessarily arise again in litigation concerning the termination of contracts under the combined effect of Arts 72 and 73 of Directive 2014/24 and I would hope that the ECJ will adopt a more analytically rigorous approach when that happens because following the path started in Finn Frogne does not make commercial sense.

Some remarks on the House of Commons' Brexit Research Briefing--Procurement Section

The Library of the House of Commons (HoCL) has issued a Research Briefing on the impact of Brexit across policy areas. It is obviously an effort in the right direction of providing research-based input to the ongoing Brexit debate. As such, it should be welcome.

However, a 184-page document cannot deal with the complexities and detail needed to properly assess policy impacts in a substantial way. Having insufficiently detailed information runs the risk of oversimplifying reality and presenting the likely impact of Brexit in a distorted fashion.

In my view, this is clearly the case concerning the HoCL research briefing's focus on public procurement, on which it simply sets out the following:

3.5 Public procurement
Much UK public procurement is regulated by EU rules, which are set out in the core EU Treaties, in EU directives and in UK regulations that implement the directives. These rules are controversial because they are often seen as overly bureaucratic and because they limit the ability of public bodies to ‘buy British’. They do, however, offer UK firms the opportunities to supply the public sectors of other countries, as well as making it easier for the UK public sector to reach a wider range of potential suppliers, potentially increasing value for money in its purchases.
In practice, the extent of direct cross-border public procurement is limited. An estimated 1.3% of the value of larger UK public sector contracts was awarded directly abroad in 2009-2011. Some 0.8% of the value of larger public contracts secured by UK companies was directly from abroad.
Alternatives and withdrawal
At present, the EU rules that apply to public procurement in the UK also apply to other EEA countries, under the EEA agreement. Switzerland is subject to a separate arrangement.
If the UK were to leave the EU and the EEA, it would ultimately need to decide whether it wanted agreements with other countries to mutually open up their public procurement markets. This could be done through individual trade agreements, or the UK could participate as an individual country in the WTO’s General Procurement Agreement (GPA) for certain goods and services. However, this would mean that the UK would have to allow suppliers in other countries to bid for some UK public procurement opportunities, and the WTO route would mean that the UK had to follow certain procedures in its procurement processes – potentially doing away with some of the reduction of burden that could follow from no longer having to apply the EU rules. (p. 39, references omitted)

My trouble with the procurement section of the HoCL research briefing concerns two main points:

1. That it misrepresents the economic importance of cross-border public procurement between the UK and the rest of the EU by suggesting that it only affects between 0.8% and 1.3% of large value procurement contracts.

The HoCL research briefing uses statistics that focus exclusively on direct cross-border award of contracts to SMEs (which is indeed very low), but does not mention indirect cross border effects derived from the establishment of EU suppliers in the UK, and UK suppliers in other EU Member States, who then sell from their respective "domestic" subsidiaries (for instance, Siemens UK would qualify as a domestic supplier for the purposes of direct cross border tenders, while most people would agree that the Siemens group is German for industrial policy purposes).

The data also omits sales through wholesalers/intermediaries, which are also very important, particularly in goods (UK manufacturers, particularly larger ones, may be selling a good part of their exports to foreign public sector buyers through intermediaries established in those countries, which could decide to stop sourcing the goods from UK manufacturers if this created issues in terms of rules of origin/tariffs, etc after Brexit).

The Commission issued data in 2011 that estimated indirect cross-border procurement much closer to 25% in value at EU level (see p. 36 here). There is no segregated data for the UK of which I am aware, but in my view there is the potential for a much deeper economic impact than the HoCL policy brief suggests by only presenting figures in the 0.8-1.3% range. This is misleading, in my opinion.

2. That it misrepresents accession to the WTO government procurement agreement (GPA) as a future alternative, instead of acknowledging that it is the present reality in the UK.

Indeed, the HoCL research briefing presents the WTO GPA as an alternative to the status quo without mentioning that the EU rules already ensure reciprocal treatment under the GPA--or, in other words, that the UK already gives access to its procurement markets to undertakings from GPA signatories and already has access to their markets by virtue of EU membership.

The key point is that a withdrawal from the EU would immediately imply a loss of access to GPA signatories' markets for UK businesses and, thus, a negotiation of single GPA membership by the UK would not provide any advantage to UK businesses but, at best (that is, assuming the UK did not need to make concessions beyond the current EU concessions), it would be a quest to keep the status quo. Dr Clair Gammage discusses this important issue here (although regarding general WTO membership).

Even if there are new talks about its failure, it would also be important to stress that the TTIP contains a very important chapter on extended access to US-EU procurement markets, which would likely not be replicable outside of the EU.

*   *   *

Overall, in my view, this shows that more detailed research and analysis is required than that with which the HoCL has been able to engage to date, and should serve as an indication of the difficulties in meaningfully compiling concise documents that can usefully support policy decisions. Assessing the implications of Brexit in discrete policy areas is, by itself, a daunting task. And assessing the impact of Brexit across the economy and the legal system may just be an impossible goal. MPs would be well advised to keep that in mind and to seek more detailed input on specific areas of concern.

Musings about the constraints to a reimagination of public procurement regulation

I have been thinking for a while on a research project I would call "Reimagining Public Procurement". It may well be too ambitious (even as an abstract endeavour), but I would like to start shaping it so that I can dedicate my future research efforts to its completion. The purpose of this post is to structure some of my own thoughts, as well as to spur some discussion and seek feedback from you, dear reader. 

The broad idea would be to structure the project along three phases or layers of interconnected issues. Briefly, they would be as follows:

First, to identify the main reasons why public procurement rules are criticised and possibly fail to create a practical and administrable system that ensures that the public sector can acquire the goods, services and works it needs in order to carry out its public interest missions in the best possible conditions, while ensuring the probity and efficiency of the expenditure of public funds. 

Second, to identify the main constraints that regulatory reform and policy implementation face in this area, and which imply that, despite significant efforts to enhance public procurement regulation and practice, the resulting improvements are at best marginally incremental and the underlying problems remain fundamentally unaddressed.

Third, to formulate an alternative view for public procurement regulation and practice that has a good chance of overcoming the defects of current rules and avoiding the constraints of past reform processes, so as to achieve a superior system. Needless to say, this alternative view will have to integrate its technological dimension to a much more essential level than previous efforts.

Of the three layers of issues (and while acknowledging that all of them are deeply intertwined), I have been concentrating mostly on the second, and giving some thought to what constraints have affected the reform of public procurement rules in recent years. The regulatory reform experience that I know best is that of the 2011-2014 review of the EU public procurement rules [on which I have co-edited the book Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar, 2016, forthc), with Grith S Ølykke], and this directly informs my thinking. However, I would hope that some of these ideas will resonate beyond the EU.

In a brief (and incomplete) account, I would suggest that the following are some of the main constraints that limit (or prevent) a fundamental reimagination of public procurement regulation and practice:

  1. The assumption that changing the procurement rules changes the underlying practice--or viewing procurement law as a deus ex machina. With this, I mainly refer to the starting position or assumption that good procurement outcomes can be mandated and that they necessarily derive from process-based regulation. Most of the efforts to improve procurement (as an activity) have been focusing on a revision of the regulatory framework in which it takes place, hoping that legal reform would carry better results. This strategy may also have been affected by tendencies of insanity because the same strategy has been adopted over and over despite the fact that it has never actually been proven to deliver the expected results. Professor Schooner has been saying for a long time that procurement (regulation and practice) needs to move its focus from process to outcomes and I could not agree more. Any useful reimagination of procurement regulation needs to respect the premiss that the rules need to be adaptive to the desired outcomes, rather than the opposite assumption that proper outcomes will result from tightly/neatly regulated procedures.
  2. Excessive legocentrism and marginalisation of other types of expertise/input. In short, lawyers have been (almost) exclusively leading public procurement reform and the insights from other groups of professionals/experts tend to be marginalised--or, worst, left to 'public consultations' that rarely inform reform decisions in a meaningful way. A reimagination of public procurement needs to incorporate the insights from a wider range of fields of expertise, clearly including economics, management, political science, as well as healthcare and engineering--for, ultimately, big infrastructure and healthcare systems are two of the largest expenditure items in non-defence markets. I have come to realise that lawyers talk about issues such as technical specifications or award criteria as if they were solid realities. However, they are not; and the feeling of achievement derived from the creation of concepts such as 'functional specifications' or 'technologically-neutral award criteria' (both of which I have used enthusiastically in my research to date) falls apart once they are confronted with the (technical) difficulties of their implementation in practice. Ultimately, then, maybe the constraint is that regulation is based on concepts while practice is based on functions, and a reimagination of public procurement regulation will then have to be function-oriented rather than built around highly abstract concepts or categories.
  3. The assumption that regulatory perfection or completeness is achievable--particularly in a context of multi-layered regulation, multi-layered policy and multi-layered enforcement. This may be an EU-centric constraint, but I would expect these issues to apply in other settings too. The constraint to which I refer here consists in the difficulty of applying a set of complex rules in a way that allows for no margin of tolerance. This constraint has two sources. First, the complexity of procurement rules that are EU-hybrids and, consequently, have two built-in layers: an EU harmonised layer and a domestic layer--which not always interact smoothly, particularly where the EU layer has encapsulated legal irritants (think about self-cleaning, which is a very foreign concept if a number of jurisdictions) or where the domestic layer is somehow insulated from EU pressure by virtue of the split of competences between the EU and Member States. This has over time created pressure on the EU rules to expand, so as to minimise the diversity of approaches in different Member States, while at the same time exacerbated difficulties in the coordination of the enforcement of these EU-hybrids in the broader context of the given Member State public law system. The second source of the constraint derives from the rigidity of the remedies system, which does not have much of a margin of tolerance for substantive but not formal compliance with the EU rules, as well as not much of a margin of tolerance for substantial but not perfect compliance. Overall, the mix of over-prescriptive but incomplete EU-hybrid rules and a strict (and too rigid) remedies system still falls short of regulatory perfection or completeness--which is simply unachievable. This creates several issues, such as the unspoken (or rather unspeakable) high level of non-(absolute) compliance with the EU rules, or the existence of instances where potentially good procurement outcomes are killed in the cross-fire of ensuring regulatory (EU) compliance. Ultimately, then, a reimagination of public procurement regulation should aim to create more room for substantial substantive compliance, and lessen the focus on prescriptiveness and strict enforcement of formality.
  4. Inertia against technological substitution and disruptive technologies and processes. So far, public procurement reform has simply side-stepped a true assessment of how technology can change the procurement function and its oversight. Electronic procurement still remains an ideal based on doing by electronic means things we used to do on paper. However, this probably falls rather short from exploiting all the possibilities created by technology. There are unexplored issues, such as the automation of the procurement of some types of standard goods, or the use of electronic marketplaces similar to the ones readily available in the private sector. And certainly much more provocative and potentially revolutionary options must be out there. However, once more, it can well be that lawyers are not the best placed to assess this potential and adapt procurement regulation in a way that enables technological substitution and the incorporation of disruptive technologies and processes. A reimagination of public procurement should at least complete the assessment of what current technology can do to reduce the burden of procuring goods, services and works and, to the extent that it is possible (law has always lagged behind reality), be open to further technological changes.
  5. Wilful ignorance of the investment required to deliver an effective and efficient procurement system. Procurement regulation has so far developed with no consideration for the costs that the system creates, particularly in terms of the need to invest heavily in human capital. Complex and sophisticated rules are useless without a body of public sector professionals able to apply them and maximise their possibilities. Regulatory reform has not taken into account the difficulties of training large bodies of professionals and task forces that struggle to cope with the speed at which reforms are introduced. A reimagination of public procurement needs to take this constraint into account. It is not sufficient to incorporate claims for more professionalisation or for the State to dedicate more resources to the procurement function. It seems necessary to find ways to really simplify procurement regulation and make it user friendly, particularly for less complex procurement activities. Technology can support this.
  6. Renunciation of the idea that public oversight and public enforcement can protect the public interest--or the reverse assumption that procurement is for the masses. A final constraint derives from the fact that enforcement of public procurement, at least in the EU, has become the primary field of private challenges to procurement decisions. Public enforcement through audit and oversight bodies has significantly deteriorated, to the point that procurement litigation is the only meaningful check on the system in many a jurisdiction. This has impacted the development of procurement regulation in various ways, but it has certainly put pressure on the move from a regulatory framework based on diffuse oversight in the public interest, towards one based on individually judiciable rights and increasing incentives to private litigation. This has also led to the assumption that exposing the entirety of the procurement process to society will bring additional (private) oversight, on the assumption that private citizens have an actual interest in sifting through great volumes of information (but not necessarily big data) in order to keep the public sector in check. The major defeat of the proposal for the creation of national public oversight bodies in the recent reform of the EU rules is a testament to this trend and a worrying warning shot. A reimagination of public procurement needs to relocate procurement oversight squarely in the public sector and create mechanisms that enable oversight bodies to carry out their functions in the public interest and in real time. It also needs to aim to de-judicialise procurement disputes to a large extent, particularly when they are from a technical nature, for which the courts are not the best situated decision-makers.

If these constraints are real, then, a shortlist of some of the main characteristics of a reimagined formulation of public procurement regulation and practice would include for it to be:

  1. Focused on outcomes and their facilitation rather than on procedures.
  2. Built upon functions rather than abstract concepts.
  3. Aimed at ensuring substantial substantive compliance with incomplete rules (or principles) rather than strict and formal adherence to overly prescriptive requirements.
  4. Adapted to existing technologies and adaptive to further technological change.
  5. Simplified and with the objective of minimising professionalisation and training costs.
  6. Overseen and enforced by the public sector itself, while including dispute resolution mechanisms of a technical nature that reduce the pressure on judicial bodies.

I would be very interested to discuss these ideas with you, either in this blog, or at a.sanchez-graells@bristol.ac.uk.

A second look at the CJEU's public procurement activity--and a reflection on its implications in terms of remedies and the effectiveness of eu judicial activity

The Court of Justice of the European Union (CJEU) has now published the final version of its Judicial Activity 2015 Annual Report. The release of these final statistics on the CJEU activity for the past year provides a chance to take a second look at the evolution of procurement cases over a long(ish) time period--statistics are now available for a full decade regarding the General Court (GC) and for the period since 2010 for the Court of Justice (ECJ). A quick look at the the statistics shows a continuation of the trend of increasing backlog in this area (see here), and a closer look reveals how the backlog at the ECJ level has been deteriorating rather quickly in recent years.

There are some limitations of the statistical information that need to be stressed from the outset. First, as with previous editions of the judicial activity report (see previous comments of the 2012 and 2014 reports), having had more information on the status of pending cases would have helped gain a better understanding of the situation, particularly at ECJ level. It is still hard to understand why the GC explicitly reports on pending cases, while the ECJ does not. Second, not all cases are exactly comparable. While the activity at GC level is limited to challenges to procurement procedures carried out by the EU Institutions, the activity of the ECJ includes a mix of preliminary references (the vast majority of new cases) and appeals against GC decisions. In 2015, of the 26 new cases before the ECJ, 22 were preliminary references and 4 were appeals. This makes the assessment of the overall evolution of public procurement activity not very meaningful. Thus, I will rather discuss the evolution at the GC and ECJ level separately.

Evolution of procurement cases at GC level--what are the implications in terms of the effectiveness of remedies for eu institutions' procurement?

The GC has been managing to slightly reduce its backlog of pending cases in the last 5 years and the trend seemed to roughly remain stationary in 2015, when it opened 23 new cases and completed another 22. Provided that no cases are "left at the bottom of the pile", it would thus seem that the GC is in a position to manage and cope with its public procurement docket.

However, this should not be too surprising, given the low pressure that being the review court for all the procurement activities developed by the EU Institutions creates. According to the recent Special Report No 17/2016 of the European Court of Auditors (ECA) on EU institutional procurement (see here), the EU Institutions carried out procurement for a value of €4.2 bn in 2014. According to ECA: "In the 6‑year period from 2009 to 2014 the General Court completed 3,419 cases of which 106 dealt with public procurement by the EU institutions (3.1 %), or on average 17.6 cases per year. The 106 cases relating to public procurement gave rise to a total of 123 decisions: 66 judgments and 57 orders" (p. 44).

The Commission generally estimates that it awards more than 9,000 contracts per year. However, on average, there are less than 20 challenges of those procurement decisions per year. This would roughly indicate that less than 0.25% of procurement decisions of the EU Institutions get challenged before the GC. This is a very low caseload for a court in charge of reviewing procurement activity of a value of €4.2 bn. Searching for valid comparators is difficult because each jurisdiction organises procurement remedies in different ways and there are important cultural and practical factors that can determine very different litigation rates (going from the possible extreme of high litigation in Italy, where around 40% of the cases in the administrative courts are public procurement cases, to the UK, where there is only a handful of public procurement cases every year).

However, one gets the sense that 20 cases per year is a very low litigation rate by taking into consideration that EU Member States with similar or lower estimated procurement expenditure show more intense litigation. For example, based on the Commission's data, Bulgaria has over 1,000 cases per year (estimated procurement covered by the EU rules of €2.83 bn), Latvia has over 200 cases (€3.55 bn), Luxembourg has over 50 cases (€0.56 bn), and the Slovak Republic has over 1,000 cases (€3.98 bn). If we calculate the incidence of litigation by volume of (estimated) expenditure (covered by the EU rules), we would get the (very, very) rough measure of cases by billion Euro of expenditure. Using the information available (which is far from ideal), we can construct the table on the left-handside column.

This information should be taken with immense caution, and none of the specific figures for any of the countries of the list should be used as an indication of the actual intensity of litigation in that jurisdiction. However, I think that his serves to make the broader point that the level of litigation of procurement decisions adopted by the EU Institutions is indeed very low, at least by an order of magnitude.

The implication of this insight in terms of a potential review of the remedies mechanisms available to challenge procurement decisions by the EU Institutions--which has been advocated by ECA and should be strongly supported (see here)--is that the GC (in its current configuration and without a significant expansion of resources) is probably incapable of digesting any relevant increase of procurement litigation to a level in line with the jurisdictions of the Member States, except those with a lower intensity of procurement litigation. 

In my view, thus, it would seem advisable to explore suitable alternatives, such as the creation of a procurement review agency in charge of the oversight of the procurement carried out by the EU Institutions, the submission of the procurement of the EU Institutions to the procurement remedies system of the relevant Member State, or some other similar option--including the possibility of creating a specialised chamber within the General Court, in case the provision of additional resources to this entity was considered preferable than a more substantial reform of the remedies system.

Evolution of procurement cases at ECJ level--will a new wave of preliminary references flood the court and dampen the papers?

The ECJ has been accumulating a significant backlog of procurement cases over the last 5 years (no earlier statistics are available). What seems worrying is that, for the last 3 years, the backlog has been increasing at a pace of approximately 10 cases per year, and the total backlog at the end of 2015 trebled the level in 2010.

In view of the expiry of deadline for the transposition of the 2014 Public Procurement Package in 2016 (and even if a significant number of Member States are delayed), it seems reasonable to expect a new wave of preliminary references for the interpretation of the ever so complex new rules and their coordination with the previous case law in this area of EU economic law. Thus, it would seem reasonable to expect the ECJ to consider strategies to cope not only with the existing backlog, but also with the likely increase in referrals in the period between now and, say, 2020.

Of course, it is difficult to develop a strategy that prioritises public procurement over other areas of judicial activity, and there may be good reasons to consider other types of cases (including within EU economic law, such as tax avoidance cases) equally or more relevant or urgent. However, the advantage of procurement is that, it being a very specialistic and relatively self-contained area, it would not be too difficult to create a task force to deal with procurement cases in a swift manner. This would require an investment in human capital for a temporary period.

The European Commission did this in the wake of the financial crisis in order to deal with the increased volume of State aid cases [for discussion, see A Sanchez-Graells, “Digging itself out of the hole? A critical assessment of the Commission’s attempt to revitalise State aid enforcement after the crisis” (2016) Journal of Antitrust Enforcement, forthcoming]. The possibility of introducing similar flexibility at ECJ level could help boost the effectiveness of EU law (and public procurement law in particular) through a swifter process for the clarification of new rules that, otherwise, may remain in legal limbo for quite some time.

In terms of looking for resource to do so, of course, the elephant in the room is the issue of the cost of language management (as in translation and interpretation) at the CJEU. This is probably heretical, but I think that a reduction of the resource dedicated to language management would be the easiest and quickest way of boosting the ability of the CJEU to deal with a larger docket of legal issues. The Management Report in the 2015 Annual Report makes this overwhelmingly clear. To my mind, the fact that 37.4% of the posts at the CJEU are judicial (including Cabinets, Registries, Research and Documentation, Library, Protocol, Communication and Publications), while 51.0% of the posts are languages positions (including Translation and Interpretation), is troubling. Basically, because this heaviness of language management has the combined effect of: a) draining resource that could be put to a different use and, b) delaying the functioning of the CJEU.

Overall conclusion

It is probably not surprising that a look at the statistical information on judicial activity shows that the CJEU is not prepared for the likely developments in litigation in the area of public procurement law. It may well be overwhelmed by developments at the EU level that triggered a higher intensity of procurement litigation--should the remedies system for EU Institutional procurement be developed along the lines proposed by the European Court of Auditors; and it is most certainly in a bad position to absorb any significant increase in the number of questions referred for a preliminary ruling that results from the Member States application of the 2014 Public Procurement Package in a systematic manner.

In my opinion, the CJEU (and the EU Institutions more generally) should look for creative ways of preparing for these changes. Otherwise, the effectiveness of the EU public procurement rules may be jeopardised and/or significantly delayed, particularly concerning the interpretation of the 2014 Public Procurement Package, which is certainly not without legal controversy.

Does (outsorcing) procurement contribute to public sector productivity? (Dunleavy, 2015)

I have recently read P Dunleavy. "Public Sector Productivity: Puzzles, Conundrums, Dilemmas and Their Solutions", in J Wanna, H-A Lee & S Yates (eds), Managing Under Austerity, Delivering Under Pressure: Performance and Productivity in Public Service (ANU Press, 2015) 25-42. I found Prof Dunleavy's piece highly thought-provoking and would recommend it to anyone interested in the working of the public sector and current outsourcing tendencies, including mutualisation of (spin-off) public services.

Dunleavy offers a very straightforward proposal to start cracking the problem of measuring public sector productivity and reports the findings of a larger study based on relatively simple indicators. Focusing on public procurement, Dunleavy offers some insights that are worth pondering. His paper reports findings concerning the outsourcing of services and the hiring of IT consultants and stresses the following:

So, why does outsourcing not work? It is because government service offices are highly imperfect and they are not going to stop being highly imperfect if two or three contractors are brought in. The markets created are oligopolistic. In Britain we have large problems with our IT sector—62 per cent of the market is dominated by the top contractor, and the top five contractors have 95 per cent of the market. There are usually only two or three tenders for any given contract, and the tenders are very expensive. The idea that more firms can bid is not feasible, because a firm needs to have a large governmental relations unit and a contracting unit just to understand the e-procurement system; this will always be the case. Contract specification works directly against productivity because an organisation needs to specify what it wants the contractor to do. It has to fix a whole service specification and then as needs change, and demand changes, and society changes, it has to go back to the contractor and renegotiate (p. 37).
Public servants also tend to use outsourcing in a very rational way—if we have better business to be attending to and there is something that we really hate doing, we tend to outsource it. This means that nothing changes in that area. The contractor will not want to change—as soon as we outsource it to them, they will want to freeze the technology and keep things exactly the same. This may seem irrational, because at the end of the contract they will have to re-tender, but it is actually cheaper for contractors to work that way (p. 38).
One final note—contestability is a great word, and it may do some good when trying to introduce product diversity, or when attempting to engage different kinds of contractors. The arrival of mutuals might make a difference, but keep in mind that mutuals only have 1/70th of the outsourcing market in the UK, so they are not a serious threat to the big outsourcers yet. On the whole, outsourcing contestability will not grow government productivity (p. 39). 

These are challenges and structural difficulties that do not only concern the UK. And they support a serious strategy to rethink the most productive way of structuring the public sector and deciding which activities to retain in house and which activities to outsource. Dunleavy's general recommendation for the future in that regard is to think about the following:

The question is, can we have genuine demand transfers across suppliers? Can we get genuine supplier succession, genuine competition or contestability? I think we could if we had public sector suppliers who could scale up their services; who could move from one area to another and enlarge. More mixed public/private competition could also improve the situation, and mutuals may help in a small way here (p. 41).

These are all very suggestive ideas, but all of them are based on structural changes in the supply side of the market. I would stress the need for demand side reforms, aimed at improving the way the procurement rules are used, so as to tender shorter-term, adaptive and flexible contracts that avoid lock-in and promote effective supplier competition in more dynamic procurement markets. It would also be worth reconsidering to what extent the creation of markets for some services is too expensive and inefficient, so as not to compensate the transaction costs implied--to that extent, a "rediscovery" of OE Williamson's work on markets and hierarchies (notably, in The Economic Institutions of Capitalism. Firms, Markets, Relational Contracting, NY: Free Press, 1985) and its application to the public sector would certainly be beneficial. Plenty food for thought.

CJEU clarifies scope of application of concessions directive and services directive, and confirms their mutual exclusivity (C-458/14)

In its Judgment of 14 July 2016 in Promoimpresa, C-458/14, EU:C:2016:558, the Court of Justice of the European Union (CJEU) issued a ruling concerned with the interaction between the EU public procurement rules and the Services Directive (Dir 2006/123/EC) In particular, Promoimpresa is concerned with the potential interaction between the EU public procurement and the rules of the Services Directive (Art 12) for the allocation of authorisations to carry out a given economic activity when only a limited number of authorisations is available due to the scarcity of available natural resources or technical capacity.

The case touches upon similar issues as the ongoing litigation on whether the EU procurement rules area applicable to the granting of betting licences (see Politano’, C-225/15, here), which are however excluded from the scope of the Services Directive (Art 2).

Thus, the Promoimpresa Judgment is relevant in the area of services concessions, broadly and loosely understood [on this, for background, see GS Ølykke, 'Is the granting of special and exclusive rights subject to the principles applicable to the award of concessions? Recent developments in case law and their implications for one of the last sanctuaries of protectionism' (2014) 23(1) Public Procurement Law Review 1; and CJ Wolswinkel, 'From public contracts to limited authorisations and vice versa: Exploring the EU Court’s corollary approach on award procedures, Public Procurement Law Review' (2015) 24(5) Public Procurement Law Review 137].

In Promoimpresa, the legal dispute arose from Italian decisions not to renew a pre-existing "concession" (rectius, exclusive right or authorisation) for the occupancy and management of State-owned land, and to subject the award of lakeside "concessions" (idem) to a comparative selection procedure (C-458/14, para 2). Thus, the case concerns 'concessions granted by public authorities of State-owned maritime and lakeside property relating to the exploitation of State land for tourist and leisure-oriented business activities' (para 40). The use of the term "concession" to refer to this type of authorisations could be problematic in theory, as it could give rise to doubts as to the applicability of the Services Directive, the Concessions Directive (Dir 2014/23/EU), or both to their award. Luckily, though, this is an issue of coordination of the scope of application of these legal instruments that both address explicitly.

Recital 57 of the Services Directive states that ‘The provisions of this Directive relating to authorisation schemes should concern cases where the access to or exercise of a service activity by operators requires a decision by a competent authority. This concerns neither decisions by competent authorities to set up a public or private entity for the provision of a particular service nor the conclusion of contracts by competent authorities for the provision of a particular service which is governed by rules on public procurement, since this Directive does not deal with rules on public procurement’ (emphasis added).

From a complementary perspective, Recital 15 of Concessions Directive is also clear in stating that ‘… Certain agreements having as their object the right of an economic operator to exploit certain public domains or resources under private or public law, such as land or any public property, in particular in the maritime, inland ports or airports sector, whereby the State or contracting authority or contracting entity establishes only general conditions for their use without procuring specific works or services, should not qualify as concessions within the meaning of this Directive. This is normally the case with public domain or land lease contracts which generally contain terms concerning entry into possession by the tenant, the use to which the property is to be put, the obligations of the landlord and tenant regarding the maintenance of the property, the duration of the lease and the giving up of possession to the landlord, the rent and the incidental charges to be paid by the tenant’ (emphasis added).

In the Promoimpresa Judgment, in a ruling that should come as no surprise, the CJEU confirmed the mutual exclusivity of the Services Directive and the Concessions Directive in the following terms:

45 ... the provisions of [the Services Directive] relating to authorisation schemes cannot apply to concessions of public services capable, inter alia, of falling within the scope of [the Concessions Directive].
46      ... a services concession is characterised, inter alia, by a situation in which the right to operate a particular service is transferred by the contracting authority to the concessionaire and that the latter enjoys, in the framework of the contract which has been concluded, a certain economic freedom to determine the conditions under which that right is exercised and, in addition, is, to a large extent, exposed to the risks of operating the service (see, to that effect, judgment of 11 June 2009 in Hans & Christophorus Oymanns, C‑300/07, EU:C:2009:358, paragraph 71).
47      However, in the cases in the main proceedings ... the concessions do not concern the provision of a particular service by the contracting entity, but an authorisation to exercise an economic activity on State-owned land. It follows that the concessions at issue in the main proceedings do not fall within the category of service concessions (see, by analogy, judgment of 14 November 2013 in Belgacom, C‑221/12, EU:C:2013:736, paragraphs 26 to 28) (C-458/14, paras 45-47).

To be sure, the wording of some parts of the Promoimpresa Judgment could be clearer--e.g., paragraph [47], where it seems to imply that contracting authorities provide services under a services concession, while the whole point of those concessions is for the concessionaire to provide and manage those services on behalf of, or upon the entrustment of the contracting authority [see definition of services concession in Art 5(1)(b) of the Concessions Directive]. However, the functional criterion of mutual exclusivity of the Services Directive and the Concessions Directive seems now clear enough and it can be welcome that this is now the explicit interpretation of the CJEU, rather than merely indicative considerations in the recitals of both directives.

New paper on the need to review the Remedies Directive

I have uploaded a new paper on SSRN: ‘If it Ain't Broke, Don't Fix It’? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts, to be published in S Torricelli & F Folliot Lalliot (eds), Administrative oversight and judicial protection for public contracts (Larcier, 2017) forthcoming.

As detailed in the abstract: 

EU public procurement law relies on the specific enforcement mechanisms of the Remedies Directive, which sets out EU requirements of administrative oversight and judicial protection for public contracts. Recent developments in the case law of the CJEU and the substantive reform resulting from the 2014 Public Procurement Package may have created gaps in the Remedies Directive, which led the European Commission to publicly consult on its revision in 2015. One year after, the outcome of the consultation has not been published, but such revision now seems to have been shelved. This chapter takes issue with the shelving of the revision process and critically assesses whether the Remedies Directive is still fit for purpose. 

The chapter focuses on selected issues, such as the interplay between the Remedies Directive and the Charter of Fundamental Rights, and with the general administrative law of the Member States. It also assesses the difficulties of applying the Remedies Directive ‘as is’ to some of the new rules of the 2014 Public Procurement Package, which creates uncertainty as to its scope of application, and gives rise to particular challenges for the review of exclusion decisions involving the exercise of discretion. The chapter also raises some issues concerning the difficulties derived from the lack of coordination of different remedies available under the Remedies Directive and briefly considers the need to take the development of ADR mechanisms into account. Overall, the chapter concludes that there are important areas where the Remedies Directive requires a revision, and submits that the European Commission should relaunch the review process as a matter of high priority.

The paper is freely downloadable at http://ssrn.com/abstract=2821828. As always, comments welcome.

CJEU opens door to manipulation of evaluations and fails to provide useful guidance on the use of 'soft quality metrics' in the award of public contracts (C-6/15)

In its Judgment of 14 July 2016 in TNS Dimarso, C-6/15, EU:C:2016:555, the Court of Justice of the European Union (CJEU) issued some important clarifications on the requirements applicable to the disclosure of evaluation methods under the EU public procurement rules. However, it also turned down the opportunity of clarifying what are the limits of the discretion that contracting authorities enjoy when deciding which evaluation methods to use and, more importantly, it failed to address the important and quite specific concerns about the use of 'soft quality metrics' that AG Mengozzi had raised in his Opinion in this case (as discussed here, where background to the case is offered).

The case broadly raised two main legal issues. First, whether in addition to the disclosure of the award criteria and their weighting (as required by Art 53(2) Dir 2004/18 and now Art 67(5) Dir 2014/24), contracting authorities must also disclose in the tender documentation, or at some point prior to the review of the offers, the evaluation methods they plan to use in the assessment of the tenders. Second, whether having disclosed a numerical weighting applicable to the quality and price criteria (50/100 each), the contracting authority was right to assess the quality criterion in accordance with a soft qualitative ‘high — satisfactory — low’ scale, not referred to in the contract documents.

no obligation to disclose (or indeed establish) evaluation rules prior to the review of the tenders

Regarding the first issue, after reiterating its case law on the purpose of the rules on disclosure of award criteria and their weighting, and stressing their relevance in ensuring equality of treatment between tenderers both when they formulate their tenders and when those tenders are being assessed by the contracting authority (para 22), the CJEU adopted a position that I find surprising. The CJEU stressed that

it is possible for a contracting authority to determine, after expiry of the time limit for submitting tenders, weighting factors for the sub-criteria which correspond in essence to the criteria previously brought to the tenderers’ attention, provided that three conditions are met, namely that that subsequent determination, first, does not alter the criteria for the award of the contract set out in the tender specifications or contract notice; secondly, does not contain elements which, if they had been known at the time the tenders were prepared, could have affected their preparation; and, thirdly, was not adopted on the basis of matters likely to give rise to discrimination against one of the tenderers (see judgment of 21 July 2011 in Evropaïki Dynamiki v EMSA, C‑252/10 P, not published, EU:C:2011:512, paragraph 33 and the case-law cited) (C-6/15, para 26). 

However, it did not apply this reasoning by analogy to evaluation methods as could have been expected. On the contrary, the CJEU adopted a very lenient approach and, after confirming that neither the rules in the Directive nor the previous case law referred to an obligation to disclose evaluation methods, it went on to establish that

29 ... an evaluation committee must be able to have some leeway in carrying out its task and, thus, it may, without amending the contract award criteria set out in the tender specifications or the contract notice, structure its own work of examining and analysing the submitted tenders (see judgment of 21 July 2011 in Evropaïki Dynamiki v EMSA, C‑252/10 P, not published, EU:C:2011:512, paragraph 35).
30 That leeway is also justified by practical considerations. The contracting authority must be able to adapt the method of evaluation that it will apply in order to assess and rank the tenders in accordance with the circumstances of the case.
31 In accordance with the principles governing the award of contracts provided for in Article 2 of Directive 2004/18 and in order to avoid any risk of favouritism, the method of evaluation applied by the contracting authority in order to specifically evaluate and rank the tenders cannot, in principle, be determined after the opening of the tenders by the contracting authority. However, in the event that the determination of that method is not possible for demonstrable reasons before the opening of the tenders, as noted by the Belgian Government, the contracting authority cannot be criticised for having established it only after that authority, or its evaluation committee, reviewed the content of the tenders.
32 In any event, pursuant to the principles governing the award of contracts ... the determination by the contracting authority of the method of evaluation after the publication of the contract notice or the tender specifications cannot have the effect of altering the award criteria or their relative weighting (C-6/15, paras 29-32, emphasis added). 

The reasoning of the CJEU raises two surprising issues, in my view. First, the CJEU seems to conflate the need for the contracting authority to establish an evaluation method that is adapted to the particularities of a given tender (which seems correct, para 30) with the need for the contracting authority to be able to do that at any time (which seems incorrect, para 31). Accepting that the contracting authority can design ad hoc evaluation methods for each of the contracts it tenders does not imply that it can leave this important aspect of the evaluation process for a late stage. Logically, it would seem that setting the award criteria, their weighting and establishing the rules according to which they will be evaluated are different aspects of one same decision: how will the tenders be evaluated so that the contracting authority can decide which one is the most economically advantageous?

It does not seem diligent for the contracting authority to set out the award criteria and their weighting without having determined the way these will be applied in the evaluation. It also seems to create unnecessary uncertainty to tenderers. This is very clear in relation to the use of automatic formulae in electronic auctions, which need to be disclosed to the tenderers prior to their use (Art 54(5) Dir 2004/18 and Art 35(6) Dir 2014/24).  There does not seem to be a good reason for these considerations not to apply to the use of evaluation methods and to require that the contracting authority is diligent in setting them up in a timely manner (ie when it is setting out the award criteria and their weighting).

Second, and more surprisingly, the CJEU fails to extend to the evaluation method the most obvious and minimal guarantee to avoid (impossible to prove) discrimination, ie determining the illegality of establishing (evaluation) criteria relevant for the assessment of the tenders after the evaluation committee has reviewed them (para 31). Before anything else, it must be noted that the CJEU accepts that 'the method of evaluation applied by the contracting authority in order to specifically evaluate and rank the tenders cannot, in principle, be determined after the opening of the tenders by the contracting authority'. The reasoning should not have been as a matter of principle, but as a point of absolute requirement.

However, it is not clear why the CJEU concedes that 'in the event that the determination of that method is not possible for demonstrable reasons before the opening of the tenders, as noted by the Belgian Government, the contracting authority cannot be criticised for having established it only after that authority, or its evaluation committee, reviewed the content of the tenders'. There is no indication whatsoever in the Judgment of which reasons may have been adduced by the Belgian Government to try to justify the impossibility of establishing the evaluation method before having reviewed the tenders. This is amazing because it makes it impossible to understand where the threshold of impossibility lies and, more importantly, because there do not seem to be any good reasons to accept that a diligent evaluation committee can be allowed to decide on the evaluation method after it has already seen the content of the tenders. Whether this is done in a presential meeting or remotely, there is no justification for the assessors not to agree on the evaluation rules first (and document them), and then proceed to the evaluation. In my view, the CJEU has neglected the need to ensure the right to good administration and, in particular, the need to ensure the most basic guarantees that tenderers are treated impartially and fairly, and that relevant matters are dealt with in a timely fashion (as required by Article 41(1) Charted of Fundamental Rights).

The final protection that the CJEU tries to (re)establish in the case by stressing that 'the determination by the contracting authority of the method of evaluation after the publication of the contract notice or the tender specifications cannot have the effect of altering the award criteria or their relative weighting' is inane and insufficient because the possibility of establishing and playing with evaluation rules after having seen the content of the tenders leaves way too much scope to coming up with rules that allow for an ex post rationalisation of the choice of a given winning in tender without necessarily violating the pre-disclosed information on the applicable award criteria and weightings. This deserves stern criticism.

the use of 'soft quality metrics' in the evaluation of tenders

Moving on to the second issue concerning the use of 'soft quality metrics', such as the ‘high — satisfactory — low’ scale in the case at issue, in my opinion, the CJEU also carried out a defective analysis. The shortcomings of the analysis derive from the fact that the CJEU uses the answer to this second aspect to try to compensate for the weakness of its answer to the first question. Indeed, the CJEU premises the analysis of the use of the 'soft quality metrics' on the assessment of whether their use altered the applicable award criteria and their relative weighting. The reasoning of the CJEU is as follows:

35 It appears that that procedure did not make it possible to reflect, when ranking the tenderers in order to identify the most economically advantageous tender, differences in the quality of their tenders relative to their price, while taking account of the relative weighting of the award criteria resulting from the indication ‘(50/100)’. In particular, it appears that that procedure was capable of affecting the price criterion by giving it decisive weight relative to the tenders ranked in the [‘high — satisfactory — low’] scale of quality ... It is for the referring court to ascertain whether the relative weighting of each of the award criteria published in the contract notice was in fact complied with by the contracting authority during the evaluation of the tenders.
36 While the contracting authority may use a scale for the evaluation of one of the award criteria without it being published in the call for tenders or the tender specifications, that scale may not, however ... have the effect of altering the relative weighting of the award criteria published in those documents (C-6/15, paras 35-36, emphasis added). 

I find this problematic because it does not address the core problem of using 'soft quality metrics' at all. Should they have been disclosed to tenderers or, more importantly, should they have been published in the tender documentation together with an explanation of why specific weightings could not be established, the use of this scale would be unobjectionable under the TNS Dimarso test, while still allowing for very subjective and difficult to objectively verify comparisons of the tenders. This leaves the question of which evaluation rules are compatible with the two main requirements in the evaluation of tenders--ie that the award rules, not only the award criteria themselves and their weighting, have to '(i) to be linked to the subject matter of the contract (ie, to be ‘relevant’), and (ii) to allow the contracting authority actually to determine which tender is economically the most advantageous (ie, to be ‘enabling’)' [A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 380]. By failing to clarify that 'soft quality metrics' are not enabling and do not provide sufficient objectivity to the evaluation process so as to make sure that the contracting authority does not overstep the limits of its discretion, in my view, the CJEU has left too much space for manipulation in the assessment of tenders.

This is something I had criticised [A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 388], even if in relation to the award criteria (but the arguments apply equally to evaluation rules meant to assess them] considering the following:

Restrictions Derived from the Inclusion of Non-Quantifiable or Subjective Award Criteria, and the Ensuing Need to Objectify Treatment of Qualitative Criteria. Another way in which the selection and weighting of award criteria could give rise to distortions of competition—and, probably, to discrimination amongst tenderers—would be through the introduction of non-quantifiable criteria, or essentially qualitative or subjective criteria that significantly diminished the possibilities of an overall objective appraisal of the tenders or conferred on contracting authorities unrestricted freedom of choice amongst tenderers. In this regard, even if article 67(2)(a) of Directive 2014/24 allows for the taking into consideration of this type of criterion—referring, in general terms, to criteria such as ‘technical merit’ or ‘aesthetic characteristics’—the requirements of relevance and enabling character of the award criteria (see above, this section), as well as the need to avoid conferring on contracting authorities unrestricted freedom of choice and to ensure that the award criteria make provision for an objective assessment of tenderers, should be taken into particular consideration and constrain the decisions adopted by the public buyer.[1]
As regards the requirement of relevance of such qualitative award criteria, it should be stressed that the circumstances under which considerations such as aesthetic characteristics or technical merit will be relevant and material to the subject-matter of the contract are relatively limited (at least if they are unrelated to performance or functional requirements, which are quantifiable and, hence, do not generate significant difficulties). Moreover, it is submitted that they will generally be associated with tenders that should be ruled by the requirements applicable to design contests—which are specifically regulated and set special rules in this respect (see arts 78 to 82 of dir 2014/24),[2] particularly aimed at ensuring the objectivity and independence of the members of the committee entrusted with the evaluation of qualitative or subjective elements of the proposals. Consequently, aesthetic characteristics or technical merit might be assigned very limited relevance in other types of tendering procedures. The substantial irrelevance of such qualitative or non-quantifiable aspects will, then, require only limited consideration in the majority of the cases, if at all.
Moreover, in order to ensure transparency and impartiality, contracting authorities should (as far as possible) set objective or quantifiable proxies to measure primarily subjective or qualitative characteristics of the tenders; or, at least, set up mechanisms (possibly based on the rules regarding design contests) to ensure an impartial appraisal of subjective or qualitative dimensions of the tenders. If such quantification, or ‘proximisation’ or approximation, is possible, the possibilities for discrimination or distortion of competition will be smaller. Consequently, the adoption of this requirement seems desirable whenever its implementation is feasible.
Therefore, a restrictive approach towards the permissibility of the use of these criteria as the basis for the award of contracts—again, in cases other than design contests—seems appropriate. Consequently, this type of consideration should remain as a secondary criterion, or as a rather marginal complement, to objective and easily quantifiable criteria used to determine the award of the contract to the most economically advantageous tender. Along these lines, and attending to the subject-matter of the contract, contracting authorities should give proper weighting to qualitative or subjective criteria (even if ‘quantified’)—which, in our opinion, should be rather limited and marginal in most instances.
To sum up, it is submitted that contracting authorities are bound to ensure the objective and transparent assessment of tenders, particularly by i) avoiding undue recourse to qualitative or non-quantifiable (subjective) award criteria in procedures other than design contests, and ii) assigning them a proper (limited) weighting; and, in general, they are under a duty to exercise self-restraint in their decisions regarding such criteria, particularly when failure to do so could result in their exercise of unrestricted freedom of choice amongst tenderers and/or generate distortions of competition or discrimination of tenderers.
[1] See: S Arrowsmith, The Law of Public and Utilities Procurement. Regulation in the EU and the UK, Vol. 1, 3rd edn (London, Sweet & Maxwell, 2014) 766–71.
[2] See S Arrowsmith, The Law of Public and Utilities Procurement, 2nd edn (London, Sweet & Maxwell, 2005) 829–39;  PA Trepte, Public Procurement in the EU: A Practitioner’s Guide, 2nd edn (Oxford, Oxford University Press, 2007) 232–4; and C Bovis, EC Public Procurement: Case Law and Regulation (Oxford, Oxford University Press, 2006) 248–51.

CJEU rejected AG Wathelet's proposal for vicarious liability for agent's behaviour in competition law: a more stringent test, but how stringent? (C-542/14)

In its Judgment of 21 July 2016 in VM Remonts and Others, C-542/14, EU:C:2016:578, the Court of Justice of the European Union (CJEU) issued an important clarification of the rules applicable to the attribution of (vicarious) liability for infringements of EU competition law, thus expanding its case law on the subjective elements (ie mens rea-like requirements) of the prohibition of anticompetitive behaviour in Art 101(1) TFEU.

In doing so, the CJEU rejected the proposal for stringent vicarious liability formulated by AG Wathelet (see my criticism here) and formulated a more stringent test for the attribution of anticompetitive behaviour of an independent agent. The test formulated by the CJEU raises some interpretative issues, though, and it deserves some comment.

It is worth reminding that the case addressed issues concerning the imputability of anticompetitive practices in which a third party services provider is engaged to the 'client' undertaking that hired those services (ie how to make the 'client' undertaking liable for the anticompetitive behaviour of one of its services providers). 

The case was quite convoluted because it concerned the imputability of a bid rigging offence to a supplying company that engaged a consultant to help it formulate a bid in a tender for a public contract. After the fact, it became apparent that the consultant engaged in collusion with other tenderers in the same bid. The question was, thus, to what extent the bidder should be liable for the collusion that resulted from the allegedly independent activity of the consultant (third party services supplier) and, in any case, what level of proof of anticompetitive intent would be necessary to impose liability on the 'client' undertaking.

In addressing this issue, the CJEU rejected a parallelism between the rules applicable to an undertaking's employees to its agents, and determined that 'where a service provider offers, in return for payment, services on a given market on an independent basis, that provider must be regarded, for the purpose of applying rules aimed at penalising anti-competitive conduct, as a separate undertaking from those to which it provides services and the acts of such a provider cannot automatically be attributed to one of those undertakings' (C-542/14, para 25, emphasis added).

However, the CJEU stressed that this different treatment is based on the independence of market activity of the service provider and, consequently, it would not be justified where the client undertaking exerted significant control over the apparently independent service provider. To that effect, the CJEU determined that

Article 101(1) TFEU must be interpreted as meaning that an undertaking may, in principle, be held liable for a concerted practice on account of the acts of an independent service provider supplying it with services only if one of the following conditions is met:
–  the service provider was in fact acting under the direction or control of the undertaking concerned, or
– that undertaking was aware of the anti-competitive objectives pursued by its competitors and the service provider and intended to contribute to them by its own conduct, or
–  that undertaking could reasonably have foreseen the anti-competitive acts of its competitors and the service provider and was prepared to accept the risk which they entailed
(C-542/14, para 33, emphasis added).

Of particular relevance in the field of public procurement, the CJEU also provided some clarification regarding the unauthorised disclosure of commercially sensitive information by the agent, by stressing that

Whilst it is true that [an undertaking is liable for a competition infringement] when that undertaking intended, through the intermediary of its service provider, to disclose commercially sensitive information to its competitors, or when it expressly or tacitly consented to the provider sharing that commercially sensitive information with them ... the condition is not met when that service provider has, without informing the undertaking using its services, used the undertaking’s commercially sensitive information to complete those competitors’ tenders (C-542/14, para 32, emphasis added).

In my view, the VM Remonts Judgment should be welcome for what it does not do. That is, for its rejection of AG Wathelet's proposal for a reversal of the burden of proof, to the effect that the 'client' undertaking would have been considered liable unless it could adduce sufficiently convincing evidence (i) relating to the fact that the agent (services provider) had acted outside the scope of the functions that had been entrusted to it, (ii) regarding the precautionary measures taken by the ‘client’ undertaking at the time of designation of the agent and during the monitoring of the implementation of the functions in question, and (iii) regarding the ‘client’ undertaking's conduct upon becoming aware of prohibited behaviour--so as to demand a public distancing and positive reporting, under the analogous rules of Dansk Rørindustri and Others v Commission, C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P, EU:C:2005:408.

However, regarding the positive test that it sets for the assessment of whether anti-competitive activity by an agent can be imputed to the client undertaking, the VM Remonts Judgment seems less satisfactory, in particular due to the last condition of the test in its paragraph [33], whereby 'an undertaking may, in principle, be held liable for a concerted practice on account of the acts of an independent service provider supplying it with services ... if  ... that undertaking could reasonably have foreseen the anti-competitive acts of its competitors and the service provider and was prepared to accept the risk which they entailed' (emphasis added).

This seems to be an adaptation of the test developed in Commission v Anic Partecipazioni, C-49/92 P, EU:C:1999:356, paragraph [87], to which the CJEU refers in VM Remonts to stress that 'an undertaking may be held liable for agreements or concerted practices having an anti-competitive object when it intended to contribute by its own conduct to the common objectives pursued by all the participants and was aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or that it could reasonably have foreseen it and was prepared to accept the risk' (C-542/14, para 29, emphasis added).

The adaptation of this test to cases of anticompetitive behaviour by an agent seems problematic because it stretches its last part concerning the acceptance of a risk of occurrence of anticompetitive behaviour by third parties (in that case, co-conspirators). In Anic, the undertaking concerned had been attending meetings with other undertakings that formed part of a cartel. Therefore, the assessment of whether the undertaking could reasonably foresee specific types of anti-competitive conduct by its co-conspirators (formally, third parties) derives from its own participation in meetings--that is, derives from its own observation of the behaviour of other entities that participate in the anti-competitive practice.

This cannot be the case in a scenario such as that presented by VM Remonts, where the client undertaking does not participate in any meetings and where it has no (proven) knowledge of the activity of the agent. In these cases, it would seem that the first two prongs of the VM Remonts test would suffice: ie the client undertaking is liable for the anticompetitive behaviour of the agent if (a) it controls the agent or (b) is aware of the anti-competitive behaviour between the agent and third parties, and aims to contribute to it. Introducing the third condition, according to which the client undertaking can also be liable if (c) it could have reasonably foreseen anticompetitive behaviour between its agent and third parties and was prepared to accept the risk which they entailed, seems to far fetched. 

Whereas in an Anic-like scenario the reasonable prediction of anticompetitive behaviour by co-conspirators derives from information directly acquired in the meetings in which the undertaking participates--that is, can be presumed under logical rules--in a VM Remonts-like scenario, any claim as to the undertaking's duty to foresee anticompetitive behaviour would be pure speculation.

If the client undertaking has no positive knowledge of the anticompetitive behaviour in which the agent [otherwise, the prong (b) of the test would apply], how is it ever going to be possible to determine that it ought to have foreseen it? If this is on the basis of its relationship with the agent, this dangerously reopens the door to a test like the one developed by AG Wathelet or, worse, creates a sort of culpa in eligendo of its agent that is equally troublesome.

If (factual) speculation is to be avoided and the imposition of vicarious liability is rejected by the CJEU in VM Remonts (para 26, although see para 27, which makes it less clear-cut), the only reasonable interpretation of the prong (c) of the test developed in paragraph [33] of VM Remonts is that it can simply never be applied. In which case, one can be forgiven for wondering if the CJEU did not pay sufficient consideration to the adaptation of the Anic test to a situation involving an independent service provider.

ECA's Special Report on access to EU Institutions' procurement: will it give a push to further reform?

On 13 July 2016, the European Court of Auditors published its Special Report No 17/2016 "The EU institutions can do more to facilitate access to their public procurement", where it examines how accessible the EU Institutions make their public contracts. I had the honour and pleasure of being invited to act as an academic expert during the preparation of this report, as well as to participate in a stakeholder meeting where the report was discussed with its main addressees, including the business community and the EU Institutions themselves. However, please note that the following only reflects my personal opinions about the report and any future developments.

To put the relevance of the report and the activities under investigation in perspective, it is worth stressing that the European Court of Auditors estimated the procurement carried out by the EU Institutions in 2014 in €4.2 bn. In particular, it is worth stressing that the European Commission manages just over €3 bn, while the Parliament and the European Central Bank manage €500 mn each, and the Council follows with more limited procurement activities of €171 mn.

These figures are important, particularly because they stress how the European Commission's procurement value exceeded that of some of the smaller Member States in 2014, such as Malta (€0.8 bn), Cyprus (€1.3 bn), Estonia (€2.5 bn) or Latvia (€2.7 bn); and the combined procurement of the EU Institutions also exceeded that carried out by Lithuania (€3.6 bn), and was very close to Bulgaria (€4.8 bn) and Slovenia (€4.9 bn). In my view, this indicates that the effects (positive or negative) of the regulation and development of public procurement by the EU Institutions should attract more attention than it usually does.

The report is generally positive on compliance issues, and it is clear that the European Court of Auditors takes no issue with the way in which the EU Institutions manage their procurement activities from a legal compliance perspective, since it found that 'the management and control arrangements were robust and reduced the risk of errors which could deter businesses from participating and prevent fair treatment'. However, the European Court of Auditors considered that the approach to procurement could be more strategic or market-oriented and, in particular, that EU Institutions could do more to facilitate SME access. 

In order to promote a more commercial approach to procurement, in particular, the European Court of Auditors included the following recommendations:

  1. In order to facilitate the monitoring of the accessibility of their procurement activities, all EU institutions should collect and analyse data both on the initial number of requests to participate and offers received and the number of offers which were taken into account for the final award decision.
  2. For the upcoming 2016 revision of the EU Financial Regulation the Commission should consolidate all relevant provisions into a single rulebook for public procurement. Participation of small and medium‑sized enterprises should be explicitly encouraged.
  3. The EU institutions should proactively use preliminary market consultations wherever appropriate with a view to preparing the procurement and informing economic operators of their procurement plans.
  4. The EU institutions should divide contracts into lots wherever possible to increase participation in their procurement procedures.
  5. The EU institutions should create a common electronic one‑stop shop for their procurement activities allowing economic operators to find all relevant information in a single online location and to interact with the EU institutions through this website.
  6. The Commission should propose a mechanism for a rapid review of complaints from economic operators who consider that they have been unfairly treated. Such a review should take place before economic operators may turn to the EU Ombudsman or to the EU Courts.
  7. To allow effective ex post monitoring of their procurement activities the EU institutions should set up a single public repository of information related to their procurement contracts which could be developed as part of TED eTendering.
  8. The European Anti‑Fraud Office OLAF should produce reports and statistics on the different types of allegations under investigation and the outcome of these investigations.
  9. The EU institutions should use peer reviews for mutual learning and exchange of best practice.

Most of these recommendations are welcome and the European Court of Auditors should be encouraged to put some pressure on the EU Institutions, so that they materialise. There are, however, two recommendations that deserve some additional comments: recommendation 6 on remedies and recommendation 7 on the creation of a single public repository.

Recommendation #6 & EU Institution's resistance to facilitate review and flexible remedies

Given the reduced effectiveness of the informal resolution mechanisms provided by the European Ombudsman, which are significantly curtailed by the strictness of the procurement rules, and the cost and delay of challenging procurement decisions of the EU Institutions before the General Court (to these effects, see paras 76-88 of the report), it should come as no surprise that the European Court of Auditors recommended the creation of 'a mechanism for a rapid review of complaints from economic operators who consider that they have been unfairly treated', and that 'such a review should take place before economic operators may turn to the EU Ombudsman or to the EU Courts'.

What is more surprising, or maybe not, is that both the Council and the Parliament decided to omit this recommendation from their replies to the report, and that the Commission expressly opposed it. Indeed, in its reply to the report, the Commission indicated that

As far as the EU institutions are concerned, the Commission considers that the setting-up of a non-judicial review body, in addition to the already existing review mechanism provided for in the Financial Regulation, is neither needed nor appropriate as it would generate disproportionate costs for the benefits sought.
The Financial Regulation already provides that the unsuccessful tenderers are notified of the grounds and details reasons for their rejection and they may request additional information ... Such requests are subject to a strict deadline: the contracting authority must provide this information as soon as possible and in any case within 15 days of receiving the request.
In addition, whenever an act adversely affecting the rights of the candidates or tenderers is notified to the economic operators in the course of a procurement procedure (e.g. rejection), such notification will refer to the available means of redress (Ombudsman complaint and judicial review).
The Commission considers that the limited number of actions before the General court which dealt with procurement by the Union institutions (17) and the fact that compensation for alleged damages is rarely granted by the Court are strong indicators that the system in place is efficient and fit for purpose. Hence, the setting up of the suggested rapid review is not only not needed but it would also represent a disproportionate measure, not in line with cost-efficiency and not a good use of administrative resources (reply to point 78 of the report, emphasis added).

This is surprising because the European Commission does not seem willing to apply to its own procurement activities the standards of independent review that it promotes for Member States. In my opinion, a domestic system could not avoid a serious investigation on the effectiveness of its procurement remedies system with the argument that there are very few cases and those are unsuccessful, not least because the general principle of EU law that requires effectiveness of remedies ultimately requires that the available remedies do not make it practically impossible to claim the corresponding EU rights, which could be the case here.

When the procurement cases in front of the General Court last on average 35 months (see para 82 of the report) and the cost of litigation at the highest EU level is taken into consideration, one should not be too ready to accept the Commission's submission that the reduced number of such cases indicates the lack of need for more accessible, speedier and more effective review mechanisms. Moreover, the creation of such an alternative mechanism could also contribute to reduce the pressures on the General Court's procurement docket and, in general, facilitate specialisation and more flexibility in the resolution of conflicts.

Thus, the blanket rejection of the recommendation by the Commission seems to require some rethinking, and it would seem advisable to explore suitable alternatives, such as the creation of a procurement review agency, the submission of the procurement of the EU Institutions to the procurement remedies system of the relevant Member State, or some other similar option--including the possibility of creating a specialised chamber within the General Court, although this is an unlikely option for reasons that would take us too far from the discussion.

It is also important to stress that the creation of robust remedies mechanisms in public procurement (and in other areas of EU economic law) is not solely for the benefit of undertakings that partake in those procedures, but in the ultimate benefit of the taxpayer and society at large. In the case of procurement, if potential suppliers do not consider that they have a fair chance of protecting their interests, they will refrain from making investments in the submission of tenders. Such reduction of competition for public contracts carries an important implicit cost. Thus, aiming to save on direct administrative costs may well be self-defeating if this results in much larger shadow or indirect costs. This is not to mean that remedies should be promoted beyond the point necessary to ensure the integrity and probity of the procurement process, or that (generous or disproportionate) damages claims are the best way to ensure those remedies. What seems clear to me is that the issue of public procurement remedies under EU law requires further research and thought, and most certainly legal reform to adapt the existing system to the reforms of the 2014 Public Procurement Package. In that regard, it seems desirable for the Commission to carry on with the (seemingly abandoned) review of the Remedies Directive--and that such would be the ideal occasion to include the issue of remedies in the setting of EU Institutions' procurement in the proper considerations.

Recommendation #7 & risk of excessive procurement transparency

The second recommendation that deserves some comments is number 7, whereby the European Court of Auditors recommended that, in order to 'allow effective ex post monitoring of their procurement activities the EU institutions should set up a single public repository of information related to their procurement contracts'.

This raises, once more, the very tricky issue of the appropriate level of transparency of public procurement procedures and their outcomes, and the undesirable (unforeseen) effects that it can create. There is no doubt that the European Court of Auditors, like any audit body at national or international level, requires this information in order to discharge its functions. However, it is far from clear that there is a positive value in publishing all this information. While making this information public could contribute to some aspects of public governance (such as NGO and press scrutiny of these activities), it is by no means less clear that creating excessive transparency would contribute to anti-competitive strategies and potentially result in the cartelisation of public procurement markets.

In that regard, I would reiterate once more the need for a more nuanced approach to the compilation and publication of this type of information. 
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 more granularity in the levels of information that are made accessible to different stakeholders. The full transparency approach implicit in recommendation 7 of the European Court of Auditors' report, whereby all information is made available to everyone via a public registry or repository, falls very short from the desired balance between 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, the following normative recommendations should be subjected to further discussion in the roll-out of recommendation #7. They are by no means exhaustive and simply aim to specify the sort of nuanced approach to disclosure of public procurement information that is hereby advocated.

  • Public contract registers 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, access to the full register should be made available on a need to know basis. Oversight entities, such as the audit court or the competition authority, 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 public contract registry 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 or specific undertakings.
  • Representative institutions, such as third sector organisations, or academics should have the opportunity of seeking access to the full registry 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 access to the full public registry 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 public contracts registry should regularly publish aggregated statistics by type of procurement procedure, object of contract, or any other items deemed relevant for the purposes of public accountability of public buyers (such as percentages of expenditure in green procurement, etc).
  • The entity in charge of the public contracts registry should develop a system of red flag indicators and monitor them with a view to reporting instances of potential collusion to the relevant competition authority.