Initial comments on the UK's Procurement Bill: A lukewarm assessment

Having read the Procurement Bill, its Impact Assessment and the Explanatory Notes, I have some initial comments, which I have tried to articulate in a working paper.

In the paper I offer some initial comments on the Bill and related documents, including: (i) the economic justification in its impact assessment; (ii) some general comments on legislative technique and the quality of the Bill and its Explanatory Notes; (iii) some observations on what may have not been carried over from the Transforming Public Procurement consultation and government response; (iv) a mapping of important aspects of procurement regulation that the Bill does not cover and will thus have to wait for secondary legislation and/or guidance; (v) some general considerations on the unclear impact of different wording for ‘terms of art’, including their interpretation; and (vi) fifty selected issues I have spotted in my first reading of the Bill. I close with some considerations on the difficulty of ensuring a sufficient fix along the legislative process.

In case of interest, the paper can be dowloaded here: https://ssrn.com/abstract=4114141.

More than ever, this is work in progress and I would be grateful for any feedback or discussion: a.sanchez-graells@bristol.ac.uk.

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

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

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

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

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

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

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

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

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

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

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

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

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

What will change after the consultation?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Final thoughts

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

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

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

More UK procurement deregulation proposals, this time for healthcare [catching up with the proposed new provider selection regime for NHS England]

I came back from shared parental leave a couple of weeks ago and have been trying to catch up with the last six months’ worth of developments in the regulation of procurement in the UK and the EU. I do not even dare write down the list of instruments and proposals to consider … It seems that it has been a half year full of procurement news. I hope you have all been keeping well and abreast of so much change!

One of the relatively recent developments is the February 2021 proposal for the replacement of the current rules on the commissioning of healthcare services for the purposes of the English national health service (NHS England) with a new provider selection regime (‘the proposal’). There was a public consultation on the proposal that closed in April, so I am coming late to the party. However, I think there is still some point in jotting down a few critical comments, as the likelihood that the future secondary legislation deviates from the proposal seems minimal.

Background

By way of background, it is worth saying that NHS commissioning is a peculiar procurement activity resulting from the creation of an NHS internal market in the 1990s with the aim of harnessing market incentives and competition-based governance to improve the efficiency of the English healthcare system (see here). NHS commissioning takes place in a largely in-house environment where NHS buyers commission services primarily from NHS suppliers, but also with mixed private participation by both for-profit and third sector providers (for further background, you can watch here). Discussion of the rules on NHS commissioning is always tarnished by the linked controversy on the privatisation of the NHS (for a good explainer, see here).

NHS commissioning is currently subjected to both the Public Procurement Regulations 2015 (PCR2015, aka the UK’s copy-out transposition of Directive 2014/24/EU) and the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013. The proposal seeks to take NHS commissioning out of the scope of application of the PCR2015 — which is possible, given the exclusion of healthcare services from the UK’s schedules of coverage under the WTO GPA, as well as the explicit exclusion of healthcare services from the EU-UK TCA (see Annex 25) — and to repeal the 2013 Regs. NHS Commissioning would then be subjected to a new provider selection regime described (at a high level of generality) in the proposal.

The proposal thus continues with the de-regulatory approach already taken in the 2019 legislative proposals to implement the NHS Long-term Plan, and seeks to dismantle large chunks of the market-based regulation of the NHS internal market, which is a political aspiration of both current UK Government and opposition and, to some extent, is also seen as a Brexit dividend — though I have argued it is not, and that the proposal is undesirable, not least because most of what it seeks to achieve is possible under the current EU-based procurement rules of the PCR2015 (see here). It should be noted that the proposal runs in parallel to the also de-regulatory approach underpinning the December 2020 green paper Transforming Public Procurement [on which see here, here, and here, while we wait for the Government’s response to the public consultation].

Key elements of the proposal

In a nutshell, the proposal seeks to debunk tendering as the sole (or rather, primary, for there are exceptions in reg.32 PCR2015) mechanism for the award of healthcare contracts, and to create three routes to contract award (for a quick overview see e.g. here, or here). This is the first fundamental area of change in the proposal, which would create an ‘NHS-specific’ set of procurement rules. Those ‘new’ routes would be: (route 1) contractual extension/renewal with the incumbent provider; (route 2) NHS commissioner’s non-competitive unilateral determination of the most suitable provider; and (route 3) competitive procurement. Competitive procurement would not necessarily be tightly regulated in detail, but rather subjected to some principles or basic requirements detailed in the proposal (point 5.9), which would require decision-making bodies to:

• have regard to relevant best practice and guidance; for example, HM Treasury’s managing public money guidance

• ensure the process is transparent, open and fair (original emphasis)

• ensure that any provider that has an interest in providing the service is not part of any decision-making process (...)

• formally advertise an opportunity for interested providers to express interest in providing the service

• compare providers against the criteria set out in the regime and any other relevant factors, and according to any hierarchy of importance they decide is necessary – which must be published in advance

• publish their intention to award the contract with a suitable notice period (eg 4–6 weeks unless a shorter period is required due to the urgency of the case).

In choosing across routes and in making decisions within a given route, commissioners would have to ‘ensure that services are arranged in the best interests of patients, taxpayers and the population’, and would have to follow the ‘key criteria’ of: (a) Quality (safety, effectiveness and experience) and innovation; (b) Value; (c) Integration and collaboration; (d) Access, inequalities and choice; and (e) Service sustainability and social value. Each of these criteria are explained in more detail in the proposal’s Annex.

Other than compliance with the above key criteria, the regime would primarily only impose transparency (and standstill) obligations on NHS commissioners (see part 8 of the proposal). This is the second fundamental area of change in the proposal. Notably, ‘Where contracts are being continued or rolled over, or a change in providers is being considered, decision-making bodies must publish their intended approach in advance’ (point 8.2). Specifically, commissioners have a duty to publish their intended decisions ‘with a suitable notice period (eg 4–6 weeks unless a shorter period is required due to the urgency of the case)’ in all cases, save (apparently) in the rollover of contracts to incumbent providers where the type of service means there is no alternative provision (point 5.5.A), or where the alternative provision is already available to patients through other means such as the exercise of patient choice (point 5.5.B).

During that notice (and standstill) period, ‘representations can be made to the decision-making body once it has published its decision. Judicial review would be available for providers that want to challenge the lawfulness of the decision’ (point 8.3). The proposal further establishes that ‘If representations objecting to the process or outcome are received from other providers in that time, the decision-making body must: i. discuss the issue with the providers or their representatives[; and] ii. publish a response to the objections before the award, setting out its decision to either: (a) not to proceed with the contract award as intended and reconsider its process and/or decision; or (b) award the contract as intended and publish reasons for so proceeding as part of the contract award procedure’ (point 8.6). Presumably, the avenue to judicial review challenges open up here — as disappointed providers can reasonably be expected to exhaust the possibility of complaining to the commissioner before launching legal proceedings.

Comments on the ‘three route’ model

Tendering optionality. Under the proposal, competitive tendering would become optional for NHS commissioners: ‘It would be for the decision-making body to decide when a competitive procurement is the most appropriate means to select a provider‘ (point 5.9). Further, in general, there is a strong anti-tendering narrative underpinning the proposal that somewhat comes to make competitive tendering the mechanism of last resort — to be applied only where ‘after considering the key criteria the decision-making body does not identify a single candidate that is the most suitable provider, and/or concludes that the most suitable provider can only be identified by carrying out a competitive procurement‘ (ibid). This seems to leave open the possibility for a commissioner unable to identify a single best candidate to still consider that tendering is not the way to identify it — in which case there could be space for a ‘fourth’, completely unregulated, route to contract award (surely that is not the intention, though!). Additional, clear (and restrictive) criteria supporting a decision not to use competitive tendering seem necessary.

Rolling out contracts. Why create such a regulatory black hole? From a practical perspective, the main problem with route 1 (direct award of a contract extension/renewal) is that it covers two very different sets of circumstances. One where the optionality of tendering is uncontroversial, and one where it can be extremely problematic.

Regarding the first set of circumstances, it should be stressed that two of the grounds for the use of direct contractual extension/renewal with the incumbent provider (route 1) already exclude the need for a tender under the current rules. Where there there is no alternative provision (route 1A), there is no obligation to tender (see reg.32(2)(b)(ii) CR2015). Where the service is to be provided under a patient choice mechanism (ie where specific choice is not exercised by the commissioner), the inclusion of providers in the relevant ‘any qualified provider’ list is not covered by the scope of the procurement rules (reg. 2 PCR2015, incorporating the definition of “procurement” in Art 1(2) Dir 2014/24, as interpreted by the CJEU in Falk Pharma and Tirkkonen). Moreover, the proposal includes specific rules on the management of such lists (points 7.7 and 7.8).

Conversely, route 1C encompasses a set of circumstances that makes the possibility of a direct award quite worrying and potentially very problematic. Indeed, route 1C foresees that ‘If a decision-maker wants to continue with existing arrangements, they may do so where: … C) The incumbent provider/group of providers is judged to be doing a sufficiently good job (ie delivering against the key criteria in this regime) and the service is not changing, so there is no overall value in seeking another provider’ (point 5.5, emphasis added). The test for establishing that a provider is ‘doing a sufficiently good job’ not only seems too open-ended (it may be the informality with which this part of the proposal is drafted), but also defies logic.

If the incumbent’s contract was designed to deliver against the regime’s key criteria (and it should otherwise not be in place, to begin with), compliance with the contract cannot be grounds for its renewal. It should be the other way around: failure to meet the contractual requirements should lead to contract renegotiation or termination. But the mere fact that a contract is being complied with should not generate legal grounds for its (indefinite) extension. Not least because the opportunities for rent-seeking and corruption that this option generates are precisely the reason why public contracts cannot be perpetual and why there have to be external checks on both the commissioner and the provider.

Moreover, given the transparency and standstill obligations controlling the rollout of contracts, it is very likely that any such arrangement will be challenged by potential alternative suppliers (leading to a waste of time, see below). It is hard to see how a system that is premised on the need for potential alternative suppliers to have to actively challenge (and litigate?) contract rollout benefitting the incumbent provider can be considered a ‘decision-making process that makes space for real collaboration to happen; that does not frustrate integration by creating adversarial relationships’ as the proposal claims to intend (point 1.5). It is hard to see how the judicial review of this type of decision could be effected, as the relevant test (the provider is ‘doing a sufficiently good job’) seems to lay squarely within the technical discretion of the commissioner. If that is true (or once that is established in case law), then there may be no point in challenging or litigating contract rollout, which would simply result in a regulatory black hole.

Are there really alternatives to tendering where there is service change or the incumbent needs to be replaced? Where rolling out contracts is not an option, the optionality of tendering can be doubted in practical terms.

The only way to avoid competitive procurement where ‘the decision-making body is changing a service/existing contract considerably; a brand new service is being arranged; the incumbent no longer wants to or is no longer able to provide the services; or the decision-making body wants to use a different provider’, is for ‘the decision-making body [to have] reasonable grounds to believe that one provider/group of providers is the most suitable provider (which may or may not be the incumbent), they may award the contract directly’ (point 5.8). Reaching this reasonable determination requires the commissioner to ‘be satisfied that they can justify that the provider they are proposing to select is the most suitable provider by reference to the criteria set out in the regime and any other relevant factors, and according to any hierarchy of importance the decision-making body decides is necessary' and 'have carefully considered other potential options/providers within the relevant geographical footprint' (ibid).

How exactly this is possible without the information-revelation process of a competitive tendering is quite difficult to fathom. The proposal seems to presume a level of (dynamic, updated) market intelligence on commissioners that seems quite an implausible standard. Further, such an approach is at odds with the proposal’s stated goal of wanting to promote innovation (indeed, one of the key criteria requires ‘Ensuring decision-making bodies seek to innovate and improve services delivered by either existing or new providers, proactively developing services that are fit for the future’). Innovation must necessarily be co-produced (if not market-led) in this context — as recognised in the Annex to the proposal: ‘Decision-making bodies should give due consideration to any particular innovative approaches offered by providers that could help to deliver better outcomes, and avoid assuming that what is currently provided will match current or future need’. Unless commissioners have a crystal ball, this can only be done through proper market engagement and there is no clear reason why that engagement cannot be effectively channelled through competitive procurement.

Moreover, once again, given the transparency and standstill obligations and the likelihood of challenge, is it reasonable to expect any commissioner to engage in such non-competitive unilateral determination with limited information?

No time to waste, or risk aversion? In both routes 1 and 2, there is a presumption that ‘given that the commissioner knows best’, there is no need to subject contract award to competitive tendering. In the slightly more elegant words of the proposal:

‘In practice, the bulk of current NHS services are arranged without competitive processes or tendering (though this approach is sometimes not without legal risk). There is a justifiable reason for this. … in many circumstances the choice of service provider will be constrained by the nature of the service and its interdependencies with other services. Our proposed regime explicitly recognises this reality and makes it clear that such core NHS services can be arranged without NHS decision-making bodies being pushed through valueless bureaucratic exercises’ (para 5.2).

The real reason for the proposed approach is then not to avoid useless competitive tendering — which is not taking place anyway — but to rid NHS commissioners from legal risk. Well, two comments seem warranted here. The first one is that legal risk is not at all reduced in the proposal. Both routes 1C and 2 are riddled with open-ended legal concepts and commissioners willing to rely on them will have to accept legal risks no smaller than those implicit in findings that a service is to be directly awarded to a sole-source provider (which is presumably the legal risk the proposal indirectly refers to).

The second one is that the way this legal risk is to be excluded — ie via transparency and standstill — can generate a significant delay (of 4 to 6 weeks) in the launch of a competitive tendering procedure where the commissioner’s approach is challenged. A competitive tendering procedure that could, by the way, last less than 6 weeks — were it not for the proposal’s double transparency requirement of advertising the contact opportunity and then also imposing a 4-6 week standstill prior to award (which much extends the current standstill obligation under the PCR2015).

Of course, commissioner’s may decide to dismiss challenges, reaffirm their decisions, and carry on. The question then becomes what remedies are available to disappointed providers at the stage of judicial review. If damages enter the picture (and they may), the accumulated disincentive of delay and liability exposure can hardly provide a more comfortable mix than the current rules — or the foreseen cap on damages for procurement litigation under the green paper proposals, for that matter.

There's more than one way to skin a cat. Much like the green paper, the proposal is deceptively simple in the deregulation of route 3 and the subjection of competitive tendering to minimum principle-based requirements. Given the likelihood that route 3 becomes THE route (other than for 1A and 1B awards), it seems too open-ended for the proposal to solely require that commissioners

• have regard to relevant best practice and guidance; for example, HM Treasury’s managing public money guidance

• ensure the process is transparent, open and fair (original emphasis)

• ensure that any provider that has an interest in providing the service is not part of any decision-making process (...)

• formally advertise an opportunity for interested providers to express interest in providing the service

• compare providers against the criteria set out in the regime and any other relevant factors, and according to any hierarchy of importance they decide is necessary – which must be published in advance

Unless the expectation is for a single competitive tendering procedure to be created in secondary legislation — but this is not the obvious implication of the proposal, and would run counter to the approach to eg transposing the rules on the award of social and special services contracts (see reg.76 PCR2015) — each commissioner would be free to create its own procedure. This would in fact subject NHS competitive tendering to the same ‘anti-procedure’ regulation envisaged for the competitive flexible procedure in the green paper. And it would thus open it up to the same criticism, on the basis of the explosion of transaction costs (as well as legal uncertainty) it would create. Allow me a cross-reference to the points made in my response to the green paper’s consultation.

Conclusion

To put it simply, by following the lead of the green paper and seeking to deregulate NHS commissioning, the proposal can generate very negative unwanted effects in terms of the cost, complexity and exposure to challenge and litigation of the system. In my view, it would mainly create an ex ante layer of accountability that (while welcome in principle) would burden commissioners and in most cases result in the tendering of contracts anyway, but subject to under-specified rules. How this can be seen as an improvement over the current situation escapes my imagination.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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