1 billion problems in using extremely urgent public procurement to evade accountability?

© Guardian design team

The Guardian has reported that the UK ‘state bodies have awarded at least 177 contracts worth £1.1bn to commercial firms in response to the Covid-19 pandemic. Of those, 115 contracts – with a total value of just over £1bn – were awarded under the fast-track rules bypassing competitive tenders. They include two contracts worth more than £200m, both awarded by Whitehall departments.’

This has raised concerns, such as those voiced by a spokesperson for Transparency International UK, who said ‘“The alarming number of contracts seemingly awarded without any competition risks setting a dangerous precedent which may harm the public interest and reduce confidence,” he said. “When lucrative deals are awarded with no competitive tender and away from public scrutiny, taxpayer money could easily be wasted on overpriced equipment or substandard services.”’

There are two aspects of these concerns. One seems to be the possibility of this ‘deregulated’ procurement constituting a precedent and, implicitly, creating scope for more deregulated procurement once the pandemic is over; while the other aspect relates to the transparency (not) being given to the directly awarded contracts. In my view, while the first aspect is largely unwarranted, the second deserves some serious thought and closer scrutiny. Beyond that, I think the piece highlights a more fundamental issue related to the UK Government’s excessive reliance on consultancy firms to make up for the depleted capacity of its civil service after years of austerity, which is a much more worrying long-term trend. I touch upon these three issues in turn below.

‘Extremely urgent’ procurement as a precedent or a wedge towards more deregulated procurement post-pandemic?

It is clear that the deactivation of public procurement rules to free up public buyers to fulfil the extremely urgent needs arising from the pandemic sits uncomfortably with the standard system of checks and balances usually in place to ensure probity and value for money in the expenditure of public funds. However, the negative governance impacts of deregulated direct procurement are a collateral effect of the need to ensure that the procurement function meets its most basic goal: to make sure the public sector has the material means to discharge its duties in the public interest. It would be unacceptable for procurement rules to get in the way of, in this case, the purchasing of life-saving kit and equipment, as the scale of values implicit in our democratic societies surely ranks higher protecting lives than ensuring probity (where these are incompatible, at least temporarily).

It is also worth stressing that the deactivation of most procurement rules in the face of extreme urgency is not a ‘blank cheque’. This is for clear reasons, embedded in the scape clause of reg.32(2)(c) of the Public Contracts Regulations 2015 (and Art 32(2)(c) of Dir 2014/24/EU, which it transposes). First and foremost, this exemption from standard rules is clearly exceptional and needs to be narrowly construed. It can also only cover procurement that is directly linked to the extremely urgent need, and the scope of the directly awarded contract needs to be proportionate to that need (for very clear interpretive guidance, see the Commission’s COVID-19 procurement notice discussed here).

There is very limited available public information but, on the basis of The Guardian’s piece, at first sight, there does not seem to be a reason for concern regarding the object of the contracts directly awarded (see side graph), as all of them concern what can legitimately be claimed to constitute extremely urgent supplies to tackle the immediate aftermath of the pandemic and the ensuing lockdown. There is thus no indication that the exemption is used beyond its proper scope—though, of course, an analysis of proportionality would require more information.

There can be more questions on the value of the contracts, given that some of them have rather large total values. However, this should be put into perspective by recognising that, for example the contracts for children meals, food boxes or test materials and test services are bound to include millions of units, which will then yield much smaller prices that can reasonably be expected to be roughly at market prices (bearing also in mind the current distortions to the markets’ ability to effectively act as price setting mechanisms).

Take the example of the children’s meals vouchers, on which the piece says: ‘The largest contract, worth up to £234m, was handed by the Department for Education to a French-owned firm, Edenred, to feed more than a million pupils eligible for free school meals. Edenred has since been accused of “woeful” preparation which caused children to go hungry and humiliated parents.’

The additional linked article provides more details: ‘The contract runs for up to three months, indicating that the Department for Education expected the firm – which has fewer than 150 staff – to distribute the £15-a-week vouchers to the 1.3 million children in England eligible for free school meals.’ It is remarkable that 12 weeks’ worth of £15 vouchers for 1.3 million children amounts exactly to £234 million. This raises additional questions on how does the provider obtain its commercial margin and whether children will be receiving vouchers worth even less than the £15/week—which is an incredibly low value of economic support, certainly not in keeping with the general wealth of the UK.

Of course, much more pricing and commercial margin analysis will be required once more information is available — and this should be undertaken by the National Audit Office at the first possible opportunity — but whether these are lucrative deals remains to be seen and, at any rate, the availability of the extreme urgency procurement exemption will not last long.

A related, but separate issue concerns the effective capability and the level of readiness of the companies directly awarded contracts. Here, the reports of the initial problems encountered by Edenred (website collapse, long waits for the delivery of the vouchers and rejection at the supermarket till) are reminiscent of the issues faced in other contracts, such as Deloitte’s strongly criticised role in the coordination of PPE purchases. Differently from the inability of some of the awardees of contracts for ventilators to deliver, which in my view determined the illegality of the direct awards, the limited capability and lack of readiness of the awardees of some of these other contracts may not be an illegality ground, but is still a very worrying dimension, not only of COVID-19 related procurement. I will come back to that in the final part of this blog.

Breach of the transparency requirements associated to extremely urgent procurement

From a public governance perspective, in my opinion, the way in which the UK Government is failing to meet the transparency requirements associated to extremely urgent procurement is much more worrying than the issue of the total value of the contracts, despite the eye watering headline figure of more than £1 billion.

Despite the fact that some information on these contracts must be publicly available—as ‘The Guardian’s research was based on public databases in the UK and the EU, and aided by information gathered by the research organisation Tussell, which said it had noticed a surge in work awarded without competition in recent weeks’—there are serious concerns about the level of transparency given to these contracts and, more importantly, whether it will be possible to engage in meaningful ex post oversight and effective accountability by looking at the documentation supporting the decisions to award these contracts.

Indeed, The Guardian raises that ‘[t]he contracts reviewed … may only constitute a portion of those awarded without a competitive tender for Covid-19 work. The government is declining to release a full list, despite guidelines which state any contract awarded using emergency powers should be published within 30 days.’

On that point, the piece refers to the Cabinet Office Public Procurement Notice 01/20 (on which see here), which is very clear that contracting authorities ‘should ensure [they] keep proper records of decisions and actions on individual contracts, as this could mitigate against the risk of a successful legal challenge. If [they] make a direct award, [they] should publish a contract award notice (regulation 50) within 30 days of awarding the contract.’

This not only applies where ‘new’ direct contracts are awarded, but also where existing contracts are modified to add new services (or supplies) within their scope. This was also explicitly covered in PPN 1/20, which stressed that ‘[c]ontracting authorities should keep a written justification …, including limiting any extension or other modification to what is absolutely necessary to address the unforeseeable circumstance. This justification should demonstrate that [their] decision to extend or modify the particular contract(s) was related to the COVID-19 outbreak with reference to specific facts, eg [their] staff are diverted by procuring urgent requirements to deal with COVID-19 consequences, or [their] staff are off sick so they cannot complete a new procurement exercise. [They] should publish the modification by way of an OJEU notice to say [they] have relied on regulation 72(1)(c).’ The added difficulty here is that there is no set deadline for the publication of this type of notice. However, there are good reasons to require timely publication and it also seems reasonable to expect compliance with a similar timeframe to the 30 days required for new contracts.

The UK Government and all relevant departments are generally and systemically failing to meet these requirements. This is rather clearly the case of, for example, NHSX’s contract modification/s in relation to the UK COVID-19 dashboard (see here), as no contract modification notice has been published in the Tenders Electronic Daily (TED), to the best of my knowledge, at the time of writing. More generally, The Guardian’s piece reports that a spokesperson for the department of health said that 'publication of contract information is being carried out as quickly as possible in line with government transparency guidelines’ (emphasis added).

Despite the seemingly lenient language in PPN 1/20, the fact that these notices are not being published in a timely manner—and within 30 days from award for new contracts—is a breach of the applicable procurement rules and creates legal risks for the UK Government (though, in practical terms, they are likely to be seen as small because the standing and time limits to challenge, and the available remedies are restricted—on which see a forthcoming post in this blog).

In my view, this constitutes a major infringement by the UK Government and the relevant departments by failing to meet the extremely minimum requirements that procurement law imposes in the context of an extremely urgent situation. This is not only worrying in itself, but also as an indication that there may be a risk that the relevant information is not only not being published, but also not being properly documented and subjected to adequate record-keeping.

Just to be clear, there is no discretionality involved in the decision whether to publish the contract award/modification notice and most of its content is also predetermined, although there are complex clauses aimed at protecting commercially sensitive and other confidential information that could be at play. Remarkably, for ‘new’ contracts awarded under the extreme urgency procurement exemption, reg.50 PCR2015 (and Art 50 Dir 2014/24/EU, in relation to Annex V, part D thereof) requires that the contract award notice ‘in the case of negotiated procedure without prior publication, [includes its] justification.’

Relatedly, reg.84 PCR2015 (and Art 84 Dir 2014/24/EU) establishes the obligation to write up and keep an individual procurement report for each direct award, including in particular ‘for negotiated procedures without prior publication, the circumstances referred to in regulation 32 which justify the use of this procedure’ (84(1)(f)), as well as ‘the name of the successful tenderer and the reasons why its tender was selected’ (84(1)(d)) and, not least important, ‘where applicable, conflicts of interests detected and subsequent measures taken’ (84(1)(i)).

These reports, and the associated notices (which will raise public awareness of their existence) will (or, perhaps, ought to) be the basis for effective ex post oversight and effective accountability of the UK Government and its departments. If the current lack of transparency by means of the relevant notices is an indication of a lack of proper documentation and record-keeping, these would be very bad news for any prospects of a meaningful post-crisis public inquiry into the management of these extraordinary amounts of public funds spent through unregulated procurement. And, in my opinion, should lead to an investigation of the reasons for any such lack of documentation under public law (and perhaps, even criminal law) rules, which discussion exceeds this post.

Excessive reliance on consultancy firms, not only under extreme urgency

The final point worth considering is a more fundamental issue related to the UK Government’s excessive reliance on consultancy firms to make up for the depleted capacity of its civil service after years of austerity, which is a much more worrying long-term trend.

The information on the Government’s reaction to COVID-19 that is slowly emerging is starting to paint a picture of rather extreme outsourcing of strategic and fundamental coordination and operational tasks to consultancy firms. There can be several reasons for that but, in my view and on the basis of the longer term trends I have been observing in UK outsourcing practice, there are two that are probably quite determinative of this approach.

First, the UK public sector, including but not only its civil service, has been constantly eroded and reduced to bare bones capacity, which makes it impossible for it to effectively take over such large tasks at short or no notice. This requires the Government to ‘buy capacity’ where available and almost regardless of the true suitability (ie expertise) or level of readiness of that capability, as *some* capability may be better than none. Moreover, the Government is probably buying capacity without even being able to clearly specify what needs to be done, which would put the relevant services contracts on a ‘best effort’ basis, as the engaged consultant would need to both design and implement the necessary solution. In that context, whether the consultant had or not the relevant expertise and capability can be very difficult to assess, not least because most of the outsourced tasks will be unique and not have a clear precedent against which to benchmark the required expertise and experience. In that context, size matters. As also probably does a successful consultant’s ability to package ill-defined goals into politically-digestible soundbites.

Second, and linked to the above, there seems to be very limited ability (or willingness) on the Government’s commercial function to scrutinise and challenge the promises made by outsourcing firms. The problems in the implementation of the outsourced contracts can in part derive from the complexity of the task and the inexistence of previous preparations—which, in fairness, should have been undertaken by the Government (or its pre-appointed contractors), not by those called upon to plug the hole)—but they are also likely to result from the fact that the consultancy firms did not have the necessary expertise or organisation in place and are likely just developing it as they engage in the provision of the services (or, more plainly, winging it). The extent to which this can lead to a satisfactory outcome in the medium to long-term is debatable, as well as who should shoulder the consultants’ learning costs. However, in cases of acute and extremely urgent needs, this is hardly conducive not only to value for money but, more generally, to an acceptable level of stewardship of the public interest.

The lack of sufficient capacity to directly take on strategic coordination and operational tasks, compounded by the limited capacity to scrutinise the promises made by consultancy companies, is a recipe for disaster. And this is a long-term trend that is particularly difficult to revert, as it generates a self-fulfilling prophecy. I do not hold high hopes for change, as previous recent crises (eg Carillion’s demise) have not really led to significant, meaningful change. However, this is something that will require further research and debate post-crisis. Having a proper and comprehensive public inquiry into all this would be an adequate starting point.

Challenges and Opportunities for UK Procurement During and After the Pandemic

On 30 April, I delivered a webinar on “Challenges and Opportunities for UK Procurement During and After the Pandemic” for the LUPC/SUPC Annual Conference. The slides are available via SlideShare and the recording is available via YouTube (below). Feedback most welcome: a.sanchez-graells@bristol.ac.uk.

LUPC/SUPC Conference 2020 30th April - Webinar 1 Challenges and Opportunities for UK Procurement During and After the COVID-19 Crisis Led by: Professor Alber...

Keeping an eye on Brexit while assessing 'COVID-19 pandemic and international trade' -- written evidence

The UK House of Commons’ International Trade Committee has an open inquiry into ‘The COVID-19 pandemic and international trade’, to which I submitted written evidence (available in HMTL and in PDF). In short, the document stresses that the extremely likely negative impact of the COVID-19 pandemic for UK businesses trading internationally and for the parts of the UK’s public sector that rely on trading with international suppliers and contractors in the medium- and long-term can only be compounded by the uncertainty surrounding the on-going negotiations of a future UK-EU trade relationship. The single most effective intervention at this stage would be for the Department for International Trade to lead on the negotiations with the EU for a two-year extension of the transition period in conformity with Article 132 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community.

The executive summary of my submission is as follows:

1. Publicly available UK economic forecasts and surveys are clearly indicating both a very sharp negative economic impact of the COVID-19 crisis during 2020 and longer-term unemployment challenges, as well as a very substantial decline in trade between the UK and third countries.

2. Most medium- and long-term impacts will be dependent on the severity of the economic crisis to follow the pandemic, both in the UK and abroad. However, there should be little doubt that supply chains will be severely disrupted, at least in the medium-term, and in particular if any relevant trading country needs to enter a second or ulterior period of lockdown.

3. Given its close trade ties, the UK is particularly exposed to the continuity of its trade with the European Union (EU), which has last been estimated to represent 45% of all UK exports and 53% of all UK imports. The intensity of these trade ties is likely to mean that, given a breakdown of existing supply chains, alternative arrangements available to UK businesses are likely to remain significantly concentrated in the EU and, likewise, UK businesses could take the position of bankrupt or temporarily unavailable suppliers in EU businesses’ supply chains.

4. Under the current circumstances, the added uncertainty surrounding the on-going negotiations of a future UK-EU trade relationship can only compound the likely negative impact of the COVID-19 pandemic for UK businesses trading internationally and for the UK’s public sector in the medium- and long-term. The uncertainty surrounding the continuity of existing and new supply chain arrangements between the UK and the EU once the transition period ends can have severe chilling effects on UK businesses trading internationally and EU businesses supplying the UK.

5. Any material change to the trading terms between the UK and the EU is bound to have a very large negative impact for the UK economy. Before Brexit, the UK Government had assessed it at a loss of between 6.7 and 9.3% in GDP level in 15 years compared to staying in the EU. Under the current circumstances, the negative economic impact could be even larger.

6. The single most effective intervention at this stage would be for the Department for International Trade to lead on the negotiations with the EU for a two-year extension of the transition period under Article 132 of the Agreement on the withdrawal of the United Kingdom from the European Union and the European Atomic Energy Community. Concerns about the UK’s contribution to the EU budget as a result of an extension of the transition period are unwarranted.

7. Postponing the end of the transition period to 31 December 2022 would create the necessary space not only for the future UK-EU trade relationship to be properly negotiated, but also to avoid adding the pressure of no-deal contingency planning to the already extreme circumstances under which UK businesses trading internationally and the parts of the UK public sector that rely on trading with international suppliers and contractors, are expected to operate post COVID-19.

As mentioned above, my full submission is available in HMTL and in PDF from the Select Committee website.

UK Government (NHSX) modified existing contracts to buy additional data services to react to COVID-19 -- 'The greater includes the lesser' when it comes to extreme urgency procurement?

COVID-19 related procurement is the gift that keeps on giving (at least for procurement professionals and aficionados). Dr Pedro Telles has now found another emerging procurement controversy concerning the modification of pre-existing public contracts to award ‘additional services’ to mine and analyse data to inform the UK Government’s response to the pandemic—as reported by the Guardian (12 Apr 2020) and, in more detail from a procurement perspective, by the Byline Times (22 Apr 2020) . I would expect Pedro to blog about it soon, so keep an eye on telles.eu.

In short—and setting aside the controversy that surrounds the links of the awardees with political figures in the UK and the US, which is nonetheless also rather worrying—the situation is that, in the context of boosting the UK Government’s access to data science analysis as an input to its broader decision-making on pandemic response, NHSX modified a pre-existing contract with Faculty, ‘which had a pre-existing contract with other companies to help build a £250 million artificial intelligence lab for the NHSX.’

This is another procurement exercise where there is very limited public information, so my comments are based on the Byline story taken at face value. Whether entirely accurate or not, I think the story raises an important set of questions on the limits of the extreme urgency exemption from procurement rules and its interaction with the regulation of existing contracts.

The questions that immediately spring to mind are: why would NHSX modify an existing contract, and what are the implications of the contractual expansion? Given the extreme urgency in gaining better insights on the evolution of the COVID-19 pandemic, which seems to me beyond doubt, would it not have been possible (as well as neater and easier to oversee and manage ex post) to directly award a new contract? Are there any particular implications of the choice to modify rather than award a separate contract?

Given the limited public information, all I can do at this stage is speculate. However, I think that some of the unanswered questions below should be added to the already lengthy list that should form the core of a post-crisis public inquiry into COVID-19 related procurement.

Rules on modification and extreme urgency

The modification of the NHSX contract would have been justified on the basis of reg. 72 of the Public Contracts Regulations 2015, which transposes Art. 72 of Directive 2014/24/EU. In particular, the Byline piece refers to reg.72(1)(b) and (c) PCR2015, both of which allow for a contractual modification of up to 50% of the value of the original contract. Both rules simply transpose the equivalent rules of Art 72 Dir 2014/24/EU and need to be interpreted in the same manner.

Awarding additional services in the way that NHSX seems to have done it boggles the mind, mainly because the award of the additional services to mine and analyse COVID-19 related data is unlikely to be covered by either of the two rules—which need to be interpreted restrictively [for details, see A Sanchez-Graells, Public Procurement and the EU Competition Rules (2nd ed, Hart 2015) 429 ff].

Reg. 72(1)(b) PCR2015 allows for a contract to be extended to include additional services that ‘have become necessary and were not included in the initial procurement, where a change of contractor—(i) cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, services or installations procured under the initial procurement, and (ii) would cause significant inconvenience or substantial duplication of costs for the contracting authority’.

To put it simply, reg. 72(1)(b) PCR2015 contains a rule concerning contract modifications for ‘more of the same’ services under the relevant contract. This is also the clear indication based on recital (108) of Directive 2014/24/EU, which states that: ‘Contracting authorities may be faced with situations where additional works, supplies or services become necessary; in such cases a modification of the initial contract without a new procurement procedure may be justified, in particular where the additional deliveries are intended either as a partial replacements or as the extension of existing services, supplies or installations where a change of supplier would oblige the contracting authority to acquire material, works or services having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance.’

Reg. 72(1)(c) PCR2015 allows for a non-competed contractual modification to add services to an existing contract where ‘(i) the need for modification has been brought about by circumstances which a diligent contracting authority could not have foreseen; [and] (ii) the modification does not alter the overall nature of the contract’.

Reg. 72(1)(c) PCR2015 contains a rule that gets close to the general possibility to award contracts without competition (under reg.32(2)(c) PCR2015). However, this possibility is subjected to the important constraint that it cannot be used to procure something different from the object of the original contract. This is also rather clear in recital (109) of Directive 2014/24/EU: ‘Contracting authorities can be faced with external circumstances that they could not foresee when they awarded the contract, in particular when the performance of the contract covers a long period. In this case, a certain degree of flexibility is needed to adapt the contract to those circumstances without a new procurement procedure. The notion of unforeseeable circumstances refers to circumstances that could not have been predicted despite reasonably diligent preparation of the initial award by the contracting authority, taking into account its available means, the nature and characteristics of the specific project, good practice in the field in question and the need to ensure an appropriate relationship between the resources spent in preparing the award and its foreseeable value. However, this cannot apply in cases where a modification results in an alteration of the nature of the overall procurement, for instance by replacing the works, supplies or services to be procured by something different or by fundamentally changing the type of procurement since, in such a situation, a hypothetical influence on the outcome may be assumed’ (emphasis added).

We are thus in a situation where the legality of the contractual modification will crucially depend on the object of the initial contract. However, it seems really difficult to see how what NHSX describes as a bespoke data store and dashboard to monitor the evolution of the COVID-19 pandemic (see eg this blog) can fit within the remit or previous contracts, not least because it is meant to ‘self-destroy’ after the pandemic: ‘When the pandemic abates and the outbreak is contained, we will close the Covid-19 datastore. The Data Processing agreements put in place with the organisations listed above include the steps which need to be taken to cease processing and to either destroy or return data to NHS England and NHS Improvement once the public health emergency situation has ended‘.

It is quite difficult to see how the services provided in the creation of the datastore and the dashboard can be additional (in the sense of interoperable or directly complementary) to what was already contracted (see eg a rather detailed description here, where there is no reference to population-wide dashboards), when the COVID-19 specific solutions will be completely abandoned and thus, arguably not support the functioning of the NHS going forward. It is also quite difficult to see how the services provided are not substantially different from what was covered in the original contracts.

Of course, it could be possible to find some compatibility if the original contracts were not for specific solutions, but rather for activities—but, even then, this seems to be a rather distorted use of the rules on contract modification.

Assuming modification was illegal, should we care?

Of course, the discussion above can seem rather academic. If the UK Government (including NHSX) was allowed to enter into direct awards on the basis of the extreme urgency procurement exemption (as I have argued myself, eg here), what difference would it make if the modifications were illegal?

I think there are a few relevant differences. The first one concerns the need to ensure that the distortions to the normal functioning of the procurement rules that ensue from their deactivation in cases of extreme urgency are contained and, mainly, result in clear and traceable creations of new contractual relationships that allow for ex post control and oversight. The second, more practical one, is that the remedies for breach of the relevant rules are different.

While a breach of reg.32(2)(c) PCR2015 in the context of the pandemic can leave disappointed tenderers and the general public without much of a remedy, other than the possible (but in my view, rather unlikely) payment of damages, a breach of reg.72(1)(b) and/or (c) PCR2015 can have more significant and lasting effects, as the remedies in that case include the potential termination of the original contracts (see reg.73 PCR2015).

Indeed, reg.73(1)(a) establishes that ‘Contracting authorities shall ensure that every public contract which they award contains provisions enabling the contracting authority to terminate the contract where—the contract has been subject to a substantial modification which would have required a new procurement procedure in accordance with regulation 72’.

Now, this opens another potentially tricky statutory interpretation issue, which concerns whether the implicit direct award of the contract for the additional services would have required a new procurement procedure under reg. 72, given that it could have been exempted under reg.32. This creates two possibilities (or perhaps there are some additional ones we could find with more time to think about it).

First, a functional interpretation along the lines of ‘the greater includes the lesser’, so that we could waive the potential termination of the contract even in case of breach of reg.72, given that the award of the implicit contract would not have in casu required a new procurement procedure.

Second, a more formalistic interpretation, under which the cause for termination could not be waived because reg.73 is meant as a safeguard against abuses of reg.72 and, thus, is unavoidably triggered the moment the boundaries of reg.72 are exceeded.

Whether one option is preferable to the other can be debated de lege ferenda. For now, de lege data, I would incline towards the second option, as I think this is the one more in line with the case law of the CJEU to date—in particular, Finn Frogne.

So, in my view, I think we should very much care that the rules on contract modification may have been breached, and this creates a risk of termination of the modified NHSX contracts.

Why would they modify rather than award fresh contracts?

The possibility and risk of termination of the pre-existing contracts must have crossed the minds of the lawyers advising NHSX. I think this cannot be a simple oversight or a massive discounting of the risk of termination. There are likely to be some reasons why the modification of a pre-existing contract was used at the same time as the UK Government was directly awarding rather substantial contracts (eg in the context of the Ventilator Challenge).

Those reasons are difficult to disentangle with the available information, but my hunch is that they relate to the intellectual property clauses in the contracts and the likely possibility for NHSX’s contractors to retain very valuable know-how and other IP-protectable outputs of the COVID-19 data store and dashboard project. If this was the implication of the decision to modify pre-existing contracts with potentially favourable terms IP-related terms, then the modification could have been used as a shield against some of the scrutiny that these contracts were known to be likely to attract.

All in all, I think there are very relevant questions on this legal strategy that NHSX needs to answer in the context of a post-crisis public inquiry.

How does the UK Government's ventilator procurement strategy fit with the Commission's Guidance on COVID-19 procurement?

© FT Montage/Ian Bott.

In one more episode of this series—let’s call it #ventilatorgate already, shall we?—Dr Pedro Telles has quickly highlighted the UK Government’s response to an FT story (and twitter thread) that strongly criticised its approach to the procurement of medical ventilators.

One of the interesting parts of the Government’s (entirely predictable) response is the statement that ‘The Government’s strategy to increase ventilator capacity has always focused on three pillars: first, procuring more devices from existing manufacturers overseas; second, scaling up production of existing ventilator suppliers, and third, working with industry to design and manufacture new devices. It has also involved seeking specialist support in other areas including logistics, component and peripheral procurement, and technical expertise.’

Pedro has rightly stressed that ‘This is fascinating insight into the process. … why did the Government follow a pathway that could not (and [h]as not!) provide the NHS immediately with ventilators? The third leg of the stool is not really an appropriate answer here since they could never be approved quickly enough before going into production.’ He also added that ‘It is also a crucial recognition by the Government that ventilator designing and validating *new* ventilator designs takes years effectively meaning that there is no way the new designs could be validated and put in service in due time to deal with the current pandemic. There is an obvious consequence to this assumption and that is to clear any doubts that the Dyson contract illegal since it does not solve an immediate need.’

I fully agree. Of the three pillars of the UK Government’s strategy, only the first two are in line with the EU and UK procurement rules and, in particular, the extreme urgency procurement exemption. This is clear in the European Commission’s Guidance on using the public procurement framework in the emergency situation related to the COVID-19 crisis [2020] OJ C108I/1 (see here for comments). There is no doubt that, according to existing CJEU case law, ‘if extreme urgency is invoked, the procurement need has to be satisfied without delay. The exception cannot be invoked for the award of contracts that take longer than they would have taken if a transparent, open or restricted, procedure had been used, including accelerated (open or restricted) procedures‘ (Guidance, part 2.3.2, with reference to the Order of the Court of Justice of 20 June 2013 in Consiglio Nazionale degli Ingegneri, C-352/12, EU:C:2013:416, paragraphs 50-52).

Therefore, if the award of contracts under the ‘Ventilator Challenge’ was justified on grounds of extreme urgency, then those direct awards are illegal inasmuch as they concern new models or prototypes without regulatory approval and that would not be in a position to obtain it imminently (which seems to only be the case of the Penlon ventilators, which only required adaptation). If an alternative legal basis was used, the Government should disclose it without delay, as the illegality of the awards triggers serious risks of legal challenge and, potentially, pay-outs in damages. The need for a post-crisis public inquiry into these awards only keeps growing by the day.

I think this analysis is uncontroversial. However, it may perhaps be useful to also point out that this is not an instance of (EU) procurement law getting on the way of the Government’s bold ambitions or innovative approaches—else, this can further fuel the claims already been made by the UK Government that now more than ever there is a need for the UK to rid itself from the constraints of EU law, as well as the PM’s bonfire of procurement rules. This is not a time to allow procurement rules to be made a scapegoat for yet another attempt by the UK Government to use procurement to seek to boost the domestic industry, much as in the case of #ferrygate.

In fact, it should be stressed that the European Commission’s Guidance endorses similar approaches and unconventional commercial strategies to react to the COVID-19 emergency, just not within the narrow confines of the extreme urgency exemption. The Commission’s Guidance stresses that, within the narrow extreme urgency exception and ‘[t]o satisfy their needs, public buyers may have to look for alternative and possibly innovative solutions, which might already be available on the market or could be capable of being deployed at (very) short notice‘ (part 1). This highlights the requirement of the (near) immediacy in the supply to cover for the extremely urgent need—such as the adaptation of existing models.

This is distinguished from non-immediate alternatives and innovations, such as the development of new (to be tested and authorised) models, in relation to which the Guidance indicates that ‘Public buyers are fully empowered under the EU framework to engage with the market and in matchmaking activities. There are various ways to interact with the market to stimulate the supply and for the medium term needs, the application of urgent procedures could prove a more reliable means of getting better value for money and wider access to available supplies. In addition: ... Public buyers may use innovative digital tools ... to trigger a wide interest among economic actors able to propose alternative solutions. For example, they could launch hackathons for new concepts that enable reusing protective masks after cleaning, for ideas on how to protect medical staff effectively, for ways to detect the virus in the environment, etc’ (part 1, emphasis added).

By the UK Government’s own admission, the Ventilator Challenge was a (sort of) hackathon. Indeed, the Government’s response stresses that ‘[n]o one was under any illusions at the time of launching the Challenge that producing new designs for domestic production would be anything other than a significant and exacting test. Ventilators are highly complex medical devices requiring hundreds of individual components. That was precisely the point of issuing a public Challenge. Alongside new devices, the Challenge has pursued scaling up a number of existing, proven ventilators…’

Therefore, the adequate approach would have been to follow urgent procedures (either open or restricted), which would have required the UK Government to advertise the contractual opportunity (for 15, or 15+10 days, respectively). Given that the Ventilator Challenge was launched on 16 March 2020 and that, at the time of the Government response (19 April 2020), no new ventilators had received regulatory approval, there is no evidence that the same (sadly, so far, unproductive) result could not have been achieved by resorting to urgent (but not extremely urgent) procurement procedures.

However, openly advertising the requirements rather than holding a (by invitation only) conference call with UK manufacturers would probably not have satisfied the Government’s more veiled ambition of using this as an industrial policy opportunity. And this seems to have been an important element of the strategy too. And one that, once again, merits very close scrutiny in a public inquiry.

Drilling down on the statutory interpretation of the extreme urgency procurement exemption in the context of COVID-19

Not that we have nothing else to do, but Dr Pedro Telles and yours truly keep busying ourselves with the analysis of the extreme urgency exemption from the EU and UK public procurement rules—that is, the statutory interpretation of Art 32(2)(c) Directive 2014/24/EU and its equivalent reg. 32(2)(c) Public Contracts Regulations 2015 (PCR2015).

To be precise, our ongoing debate concentrates on the safeguard that ‘the circumstances invoked to justify extreme urgency must not in any event be attributable to the contracting authority’ [see Art 32(2)(c) in fine Dir 2014/24/EU; reg.32(4) PCR2015, emphasis added]. The specific point that keeps us arguing with each other concerns the attribution or, relatedly, the imputability to the contracting authority of (political) decisions that can be seen to have aggravated the extremely urgent need for the supplies (in the specific case, of medical ventilators).

We are agreed on almost everything else, including the illegality of a number of contracts directly awarded (presumably) by Cabinet Office due to the fact that the companies or consortia that received them were (and continue to be) unable to immediately deliver ventilators (notably, due to the need for regulatory approval)—see eg Guardian, 14 Apr 2020.

Our disagreement thus concerns the direct award of extremely urgent contracts to suppliers that could immediately deliver ventilators. While I argue that (if any) these were legal awards because the Cabinet Office was covered by the relevant exemption, Pedro challenges this position and would consider the award of all ventilator contracts illegal due to the extemporaneity of the intervention.

To be fair, the question is rather academic, but I still think it is worth pursuing, as it affects the general interpretation of the rules for extreme urgency as it concerns the impact of the prior behaviour of the contracting authority, as well as the viability or less of my proposed distinction between political and operative decisions, which Pedro rejects. So here are some additional thoughts, trying to drill down on this issue.

Who has which burden of proof?

Our positions are diametrically distant. Even from the first premises, it would seem, as Pedro says in his latest post that “Regulation 32(2)c is exceptional in nature … and as such the grounds for use need to be interpreted narrowly. This means that in case of uncertainty/unpredictability as seen in this particular situation, the benefit of the doubt does not support the use of this provision but actually forbids it.” I do not really understand what this is meant to stress. One of the requirements is for there to be ‘events unforeseeable by the contracting authority’ and it is precisely the uncertainty surrounding such unforeseeability that opens up the possibility of resorting to direct awards if the rest of the conditions are met. On that, we seem to continue to disagree too.

As Pedro puts it, in his view, “Regulation 32(2)c creates a positive obligation for the contracting authority to prove that the grounds for extreme urgency are met. I think this is crux of the difference between mine and Albert's view. When Albert states we do not know if the counterfactual of a hypothetical procedure launched in February would have been successful that is *precisely* my point. Had it been done and failed, then the Government would be more than entitled to use a negotiated procedure without prior notice. But crucial element here is that it didn’t.”

I reject the way the disagreement is framed there. I do not challenge that it is for the contracting authority to demonstrate that the grounds for extreme emergency existed: ie unforeseeability of the events by the contracting authority in question; extreme urgency making compliance with general deadlines impossible; and causal link between the unforeseen events and the extreme urgency (as per the European Commission’s guidance of 1 April 2020, see here).

I also reject that recourse to extreme urgency procurement can be made dependent on the previous failure of an alternative procurement approach, as Pedro suggests. Not least, because those are two different grounds for having recourse to direct awards (or rectius, the negotiated procedure without prior publication), both under EU law [cfr Art 32(2)(a) and (c) Dir 2014/24/EU] and UK law [cfr reg.32(2)(a) and (c) PCR2015].

What I argue is that it is for those wanting to challenge the use of the extreme urgency exemption to positively demonstrate that the situation is attributable to the contracting authority, as the contracting authority cannot be put in the position of proving a negative. Here kicks in my argument that “I do not think a negative approach (not unattributable) is satisfactory at all. I think a more stringent approach needs to be taken, to at least require evidence of a positive contribution to worsening the situation by the contracting authority.”

This is the perspective from which I would assess Pedro’s additional arguments and factual statements about the way the Cabinet Office acted in the lead up to the launch of its extreme urgency procurement of ventilators on 16 March 2020.

January to March 2016: uncertain times

Pedro frames the question as “Was the Government (sorry, Cabinet Office) a reasonably diligent contracting authority in the run up to mid-March when it comes down to availability of ventilators?”. He provides links to a number of reports and concludes that they constitute “sufficient evidence that the [UK] Government knew of the need to secure further ventilators on the run up to March 16th and did not act upon it, effectively losing any semblance of protection that could be afforded as 'a diligent contracting authority'.” The difficulties I have with this approach are as follows.

First, there is no evidence that Cabinet Office was inactive all the time up and until 16 March. At least one of the reports Pedro links indicates that ‘the government started talking to manufacturers of ventilators about procuring extra supplies in February. But it was not until March 16, after it was clear supplies could run out, that Johnson launched an appeal to industry to help ramp up production’ (emphasis added). We have very limited information on the evolving analysis of the likely sufficiency of the contractual arrangements already in place, notably by NHS Supply Chain, which has a rather large framework agreement for medical ventilators in place (see for more details the 2018 contract award notice).

This could put the approach in context, as it would be reasonable for the Government to first have been in touch with the contractors within the NHSSC framework agreement to check their maximum delivery capability, and only once this was assessed as insufficient, to go out to market to try and secure the remainder of the expected needs, now extremely urgent. Without more information, it is difficult to assess what happened, but that could be understood (either within or outwith the framework agreement) as direct contacts and (potentially) negotiations of the sort that are allowed under extreme urgency, despite the fact that the contracts ended up being awarded on 16 March. This would still not justify resorting to direct awards to companies or consortia unable to deliver immediately, as discussed above, but it would go a long way to deactivate any claims of procurement passivity between end of January and early March 2020.

Moreover, second, it may be worth stressing that the existence of some benchmarks could be useful in assessing the timeliness of the intervention. Remarkably, the EU itself took a similar time to react and the EU-level effort to procurement ventilators under the Joint Procurement Agreement (JPA) was launched on 17 March, thus contemporaneously to the UK’s awards—see eg Reuters, 3 Apr 2020. The JPA will still take time to result in the effective supply of ventilators so, as of today, it seems difficult to assess whether one approach will be significantly more successful to the other in the long run.

Third, and perhaps more importantly, the modelling of the likely evolution of the pandemic in the UK was all over the place in the period in question (and only more and better data is allowing for more reliable forecasts as it evolves) and there is ongoing controversy (and opacity) on the Government’s chosen strategy and its expected/foreseeable clinical implications. Pedro somewhat agrees, but indicates that this is ultimately no excuse because “*a* demand for extra ventilators was not unpredictable in late January/early February, even for a reasonably diligent contracting authority”. He further concludes that “the Government was aware of the need prior to March 16th and did not act upon it. In my opinion this leads to the consequence of contributing towards the extreme urgency.”

I would argue that this remains largely a weak claim, not least because it comes back to saying that the circumstances under which the extremely urgent direct awards were made were not (completely) unattributable to the contracting authority—or, in other words, that somehow the contracting authority could have done more or done something earlier. But this begs the question how to assess diligence in that context.

When would a diligent contracting authority with a framework agreement (directly or indirectly) in place have acted to secure additional supplies outside of that mechanism? Why roll back the decision to end of Jan 2020 and not earlier, or later? Also, what would have been the big difference between launching a procurement in early February or mid March? This is all largely speculative and would not make for a solid legal test that could withstand the specifics of a given case, much less become of general application.

tentative conclusion

For the time being and in light of the available information, I do not think there is a sufficient basis to say that the UK Government was barred from relying on the extreme emergency procurement exemption, either due to its tardy reaction to the pandemic from a public health perspective, its eminently political (and in my view wrong and short-sighted) decision not to participate in the JPA for ventilators, or the timing of its decision to directly award contracts for ventilators. None of that can be construed as making the ‘circumstances invoked to justify extreme urgency … attributable to the contracting authority’.

That does not mean that (most of) the ventilator contracts were not illegally awarded for other reasons (ie impossibility to immediately fulfil the contract), or that the procurement emergency has been adequately handled. It simply comes to stress the point that, in order to keep statutory interpretation consistent and resilient to the pressures of a given case, it is necessary to disentangle the different requirements justifying direct awards under the extreme urgency exemption.

However, none of this minimises the need for a proper investigation into the whole approach to the procurement of ventilators, which seems bound to emerge as a new #ferrygate. I, for one, look forward to the post-crisis public inquiry that is being demanded—see eg FT, 16 Apr 2020 (paywall).

Some musings on COVID-19 academia & beyond

© Andy Maguire

Like every other sector, higher education is suffering the shock of the COVID-19 pandemic. We are still waiting to see whether the emergency transition to online teaching will work out and whether alternative assessments will deliver fair and appropriate results. This will forever be the ‘COVID-19 academic year’, but we still do not really know what it will end up looking like.

We are also yet to understand the deep implications of the pandemic on the functioning and sustainability of universities and academic communities around the world. The UK is perhaps in a particularly strange and vulnerable position due to the marketisation of its higher education sector, the associated waves of strikes over the last two years, the economic dependence on international student fees (mostly from China) and the global mobility of its top talent.

There will be temptations to go back to ‘normal’ or as close as possible to ‘business as usual’ (perhaps with an intervening sector-wide bailout). I would argue that, in many fronts, this should be resisted. The current shock to the way things were done should make us reflect upon what does not work in academia, what scrambling through the challenges of COVID-19 is teaching us, and what we want for the post COVID-19 academia. I have a few thoughts.

First, COVID-19 and the associated collective disorientation, fear and confusion in its immediate aftermath have created massive tensions in the governance of higher education institutions, with many of them displaying levels of dysfunctionality that will only be fully visible in the medium to long term. These challenges in governance and the vacuum or excesses (and sometimes, both) of decision-making and communications (with staff and students alike) have only been partially mitigated by the commitment and the collegiality of most, starting with those on the most precarious contracts, which are at the frontline of interactions with students. Only this attitude will carry us through this, for the unavoidable truth is that the worse is yet to come and it will be with us for quite some time. The sense of community that (the lucky ones, amongst which I am blessed to be) have been experiencing shows us something about the real meaning of academia. We must build on it.

However, making this commitment sustainable will require a very significant rethinking of the system of values and rewards in academia and, importantly, a levelling up of working conditions and an end to casualisation. ‘Citizenship’ is now the gold standard and the only way of keeping Departments/Schools afloat and, with them, the heavier University structures. This is a time where it may be all too easy for some to hide under the efforts of most. More than ever, keeping tabs with everyone’s contribution, demanding that senior colleagues pull our weight, and recompensing those that go above and beyond will be crucial. Only resilient institutions can get to the other end of this (and the next, and the following) crisis and the institution can only be as resilient as the worse-treated, paid and rewarded of its members.

Second, this crisis has shown how most of our lives are unbalanced from a personal/work life perspective and the fragility of the support structures that allow us to overwork, oftentimes to the point of neglecting our closest and dearest, as well as ourselves. The unavoidable ‘reduction in academic productivity’ that has come with the pandemic — except for some, specially in the fields of knowledge of more direct relevance, of course — should make us reflect on whether we are all doing too much, and also perhaps too little. We should take stock of what is it we think is at the core of our function as academics, as members of a scholar community. We should also take stock of all the things we would ordinarily be doing but cannot do anymore due to time constraints, or other reasons. Perhaps the current prioritisation can tell us how to refocus our efforts and how to reshape our jobs — and perhaps our personal lives — so we have a better balance.

Third, the crisis has grounded (almost) everyone. Yet, academic activity has not stopped and we are all getting used to a volume of online activities we would never have dreamt of. From the perspective of the need for academia to get serious about climate change and transitioning to a truly environmentally sustainable model, this can be one of the silver linings. I know it is unrealistic to expect everyone to join me in my pledge not to fly for work, and I understand that the reasons why that would not be feasible or fair remain. However, I think that now that we have all been forced into the exercise of 'trying it out’, we should collectively adopt a position of restarting as few activities requiring travel (and in particular flights) as possible. To a certain degree, this can also apply to distance learning, as we will very soon have accumulated significant experience in online teaching, which should make us rethink the traditional structure of campus-based degrees (not to abandon them, but to consider a better mix of presential and online activities, as well as broadening our horizons to part-time and distance-learning as potentially more inclusive options).

Finally, but this is less new, the crisis has once again brought into sharp relief the inadequacy of the methods of academic research publication and dissemination. When push comes to shove, peer review procedures can be dispensed with or minimised, publication is carried out in open access and dissemination is maximised as a true attempt at discharging the social responsibility of those with the relevant knowledge, a platform and available resources. It has been heartening to see so many specialists team up and work on the modelling and analysis required to inform public health policies, as well as robust scrutiny of political (in)decisions and other valuable interventions. There is plenty that resonates with what the academic mobilisation around Brexit already showed. This really seems to me to be the day of reckoning for the current model. May the movement to make academic textbooks and then parts of the catalogue backlist freely available online by some publishers serve as evidence that knowledge can no longer be kept behind the crumbling paywalls.

There surely is more to reflect upon and many more changes that are desirable for a post COVID-19 turn of the academy for the better but I would be satisfied to see an increase of the sector’s resilience by securing all its members and aligning the systems of incentives and rewards to what makes us collectively strong and puts us in a position to discharge our social mission sustainably; a rebalance of the personal and the professional in a sector where jobs tend to also be people’s passions (at least for the lucky ones, such as myself); a transition to a net zero emissions academia by 2025 at the latest; and a move to open access, agile and quality-assured publication and active and engaging dissemination of academic research.

More on COVID-19 procurement in the UK and implications for statutory interpretation

The impact of the COVID-19 pandemic on procurement regulation will be deep and long-lasting and will affect both general policy issues, and specific issues of statutory interpretation and regulatory enforcement. I have published some high-level thoughts on the University of Bristol Law School’s blog today. Here, I would like to concentrate on specific issues of interpretation.

Following up on our debate about the interpretation of the extreme emergency procurement exemption under Art 32(2)(c) of Directive 2014/24/EU (and the equivalent reg.32(2)(c) of the Public Contracts Regulations 2015), Dr Pedro Telles has published some ‘Further reflections on the ventilators saga‘. There, he develops in more detail his arguments on the implications of government (in)action and the use of benchmarks to assess it and its implications. Pedro has argued that the UK Government cannot rely on the exemption because its own inaction—including delay in kick-starting procurement and its decision not to participate in the EU’s Joint Procurement Agreement (JPA, on which see here)—make the exemption inapplicable.

The core of our disagreement concerns whether the requirement that ‘The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority‘ (emphasis added) holds in the UK Government’s case. Pedro’s argument is that the extreme urgency in the need for ventilators ‘is the crucial fault with the Government approach, ie the lack of action on ventilators since the end of January/beginning of February.’ Given that the UK Government is (presumed to be) the contracting authority, that prevents them from relying on the exemption. He dismisses my earlier argument that these were political decisions by arguing that ‘the decision(s) are not only political but also technical/administrative due to the practical implications they have on operational matters.‘

As I said before, this is a rather difficult issue of imputability of decisions. Here I sketch how I would approach it, although I am conscious that I would need more time and deep-thinking to come up with some more definitive. These are thus just some tentative ideas.

I would take this issue in abstraction of the specific situation in the UK to attempt a statutory interpretation of the rule. To my mind, the rule is intended as an anti-circumvention provision to stop contracting authorities from setting aside procurement requirements that they should and could have complied with. As in other areas, the intention of the contracting authority is in my view irrelevant (see here), so the analysis should be objective. The objective analysis needs to concern whether a reasonably informed and diligent contracting authority would have been able to avoid the extreme urgency or, in other words, whether the extreme urgency is attributable to the contracting authority’ actions or omissions, and not to external factors or third parties.

I also think that the analysis needs to concentrate on what the contracting authority could have done as a contracting authority, and not in its capacity as a political entity. As I said earlier, I do not think that high level political decisions (however wrong) should deactivate the possibility of recourse to extreme emergency procurement at an operational level. Otherwise, we would risk the tail wagging the dog and procurement rules could become a constraint on legitimate political action. Moreover, I do not think that the political positions (or the time taken to adopt them) can lead to an internalisation of the extreme uncertainty in which some situations evolve, such as the COVID-19 pandemic and our understanding of it—in a way that makes reacting to those circumstances more difficult. The only exception to the general approach here would be where the political decision has as its main object the procurement itself.

Going back to the case, I do not think that the UK Government’s delay in activating ventilator procurement and its decision not to participate in the JPA must necessarily translate into an interpretation that the urgent need for the ventilators was attributable to the contracting authority. The real need for ventilators was as unforeseeable in January as it remains in April. All we can go by is some extremely complicated modelling, on which there are reasonable disagreements amongst experts—although the emergence of more data is creating more certainty and knowledge.

I do not think it suffices to say a Pedro does that ‘it was not unpredictable that PPE and ventilators in excess of current stocks would be needed since at least the end of January and early February‘. That is not the issue. The issue here is whether the volume of need and its timing was predictable (which I would argue it was not) and whether the urgency in the need is attributable to the contracting authority. On the later point, I do not think a negative approach (not unattributable) is satisfactory at all. I think a more stringent approach needs to be taken, to at least require evidence of a positive contribution to worsening the situation by the contracting authority. Again, I do not think there is information to point in that direction in a way that does not imply an ex post facto reassessment of the circumstances under which those decisions were taken.

I guess this raises the additional requirement for the analysis to be contemporaneous to the decision-making, rather than based on facts that emerged later on. In that connection, it should also be acknowledged that the UK Government’s initial reaction was based on a herd immunity strategy that had not factored in the need for critical treatment resulting from the ‘natural spread’ of COVID-19. Once again, as wrong and reprehensible as that approach may be, this was not something related to the core of a procurement decision on whether or when to buy more ventilators, but a much broader and complicated public health decision.

Moreover, we do not know and cannot know if a UK Government’s attempt to directly acquire ventilators would have been more successful in January than later on. We can also not know whether the current contracts (in the UK, but also under the JPA) will be sufficient or not.

Under so many unknowns, it seems inappropriate to me to negate effectiveness to the extreme emergency exemption from the procurement rules. Taken to the extreme, Pedro’s argument would prevent the governments of any other EU/EEA/candidate countries that had/have not signed the JPA and/or participated in it, or that may have activated ventilator procurement later than in the UK, from relying on the possibility for direct awards of that much needed equipment. That cannot be the right outcome.

A separate issue, which should not be conflated here, is that the UK Government decided to award one of those contracts to a supplier that, as of today, is in no position to deliver. In doing so, the UK Government likely infringed the boundaries of the exemption, but not due to the attributability of the circumstances, but due to the inadequacy of the chosen supplier.

****

I am sure Pedro will have more to say about this. So stay tuned.

The EU’s Joint Procurement Agreement: how does it work, and why did the UK not participate? [Procurement pill, with recording]

I thoroughly enjoyed discussing the EU’s Joint Procurement Agreement for the procurement of medical countermeasures (JPA) and its functioning, as well as the UK’s decision not to participate in the JPA for ventilators in the context of the COVID-19 emergency, with students and alumni of the International Master on Public Procurement Management (IMPPM) of Tor Vergata University of Rome. Thanks Gustavo Piga and Annalisa Castelli for the invitation and all participants for the energetic discussion.

The slides and recording of the session are now available (both on slideshare, and as dropbox powerpoint with fully functioning links). You can also watch the zoom recording, either downloading it from dropbox (otherwise you only get a 15’ preview), or in the youtube channel embedded below. NB: As a small correction to the content of the session, please note that during the Q&A I incorrectly stated that the JPA is open to EU, EEA and countries with neighbourhood agreements. That is incorrect, as the JPA is open to EU, EEA and candidate countries. Apologies for my confusion when responding to the question off the cuff.

European Commission's Guidance on Extreme Emergency Procurement and COVID-19 -- some thoughts and a word on the Dyson contract

On 1 April 2020, the European Commission published its Guidance on using the public procurement framework in the emergency situation related to the COVID-19 crisis [2020] OJ C108I/1. In this Guidance, the European Commission explains ‘which options and flexibilities are available under the EU public procurement framework for the purchase of the supplies, services, and works needed to address the crisis‘. For a good critical first stab at the Guidance, see the comments by Dr Pedro Telles in his blog. My take on the guidance—and some of its implications in the UK are different from Pedro’s (see end of post).

The Guidance stresses that the EU public procurement framework ‘allows and encourages public buyers to pursue a multi-stage strategy. First, for their immediate and projected short-term needs, they should fully exploit the flexibilities of the framework. As a complementary tool, they are encouraged to procure jointly and to take advantage of the Commission’s joint procurement initiatives. Procedures with reduced deadlines serve their needs in the medium term, as they are in principle more reliable means of getting better value for money and [ensuring] wider access of companies to the business opportunities and a wider range of available supplies.‘

What I find extremely reassuring and apt is to see the Commission take the same extremely flexible and pragmatic approach already hinted in the earlier guidance issued at domestic level, eg in the UK (see here). Indeed, the Commission Guidance stresses that it ‘focusses especially on procurements in cases of extreme urgency, which enable public buyers to buy within a matter of days, even hours, if necessary. Precisely for a situation such as the current COVID-19 crisis which presents an extreme and unforeseeable urgency, the EU directives do not contain procedural constraints‘ (emphasis added).

The Commission’s Guidance confirms the view that the negotiated procedure without prior publication does not require any specific minimum level of competition between potential contractors — and should thus dispel any stringent approaches by the Member States, such as requiring at least three offers from potential contractors, as well as some negotiation with all of them.

The Guidance could not be clearer in stressing that under ‘Art. 32 of Directive 2014/24/EU (the ‘Directive’), public buyers may negotiate directly with potential contractor(s) and there are no publication requirements, no time limits, no minimum number of candidates to be consulted, or other procedural requirements. No procedural steps are regulated at EU level. In practice, this means that authorities can act as quickly as is technically/physically feasible – and the procedure may constitute a de facto direct award only subject to physical/technical constraints related to the actual availability and speed of delivery‘ (emphasis added).

The Commission also explicitly endorses ‘active buying’ techniques, which should reassure contracting authorities taking abnormal steps to try and secure emergency supplies of PPE, ventilators and any other needed equipment and consumables. The Commission Guidance explicitly mentions that: ‘In order to speed up their procurements public buyers may also consider to: contact potential contractors in and outside the EU by phone, e-mail or in person, hire agents that have better contacts in the markets, send representatives directly to the countries that have the necessary stocks and can ensure immediate delivery, [or] contact potential suppliers to agree to an increase in production or the start or renewal of production.‘ This is certainly welcome and will provide comfort to those taking a more commercial approach than they usually would to market engagement (or scouting).

Further than that, the Commission also endorses the use of urgent procurement to spur market innovation and matchmaking, thus dispelling doubts about the legality (under procurement rules) of even more active interventions in the market whereby the contracting authority is directly involved in structuring the collaboration between potential suppliers (and even potential competitors, although this will require careful competition law assessment), for example through COVID-19 challenges or hackathons.

In that regard, the Guidance is also clear that ‘To satisfy their needs, public buyers may have to look for alternative and possibly innovative solutions, which might already be available on the market or could be capable of being deployed at (very) short notice. Public buyers will have to identify solutions and interact with potential suppliers in order to assess whether these alternatives meet their needs … Public buyers are fully empowered under the EU framework to engage with the market and in matchmaking activities. There are various ways to interact with the market to stimulate the supply and for the medium term needs, the application of urgent procedures could prove a more reliable means of getting better value for money and wider access to available supplies’. 

The Guidelines also stress the relevance of these approaches in terms of boosting the uptake of other strategic considerations so that ‘environmental, innovative and social requirements, including accessibility to any services procured, are integrated in the procurement process’. However, it is unlikely that contracting authorities will be able to concentrate efforts on this, even if they can obtain some of the benefits due to engaging in some ‘unconventional’ procurement approaches, including more digital procurement (and innovation related to 3D printing, for example).

Beyond these general policy and strategic guidelines, which clearly convey the basic message that procurement professionals should do all they can to obtain the urgently required supplies, as well as aim to transition to a more sustainable (and planned, and hopefully less expensive and more innovative) approach in the medium term, the Commission also offers more detailed and technical guidance. Of that, I would stress the specific analysis of the conditions for resorting to the negotiated procedure without publication on grounds of extreme emergency.

It will be recalled that Art 32(2)(c) of Directive 2014/24/EU allows for this ‘insofar as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority’. The Commission’s Guidance offers useful interpretation on the three main requirements: unforeseeability, impossibility of an alternative approach and causal link or direct relation between the extremely urgent need and the scope of the procurement, which implies an element of temporality.

The Commission addresses each of them as follows:

‘Events unforeseeable by the contracting authority in question’

The number of COVID-19 patients requiring medical treatment is rising daily and, in most Member States, is expected to increase further until the peak will be reached.

These events and especially their specific development has to be considered unforeseeable for any contracting authority. The specific needs for hospitals, and other health institutions to provide treatment, personal protection equipment, ventilators, additional beds, and additional intensive care and hospital infrastructure, including all the technical equipment could, certainly, not be foreseen and planned in advance, and thus constitute an unforeseeable event for the contracting authorities.

Extreme urgency making compliance with general deadlines impossible

It cannot be doubted that the immediate needs the hospitals and health institutions (supplies, services and public works) have to be met with all possible speed.

Whether this makes it impossible to respect even the very short deadlines of the accelerated open or restricted procedure (15 and 10 days respectively to submit the offers) will have to be assessed on a case-by-case basis, but it is likely in most cases, at least as regards the significantly increased short-term needs as the infection curve rises.

As clarified in the Court’s jurisprudence, if extreme urgency is invoked, the procurement need has to be satisfied without delay. The exception cannot be invoked for the award of contracts that take longer than they would have taken if a transparent, open or restricted, procedure had been used, including accelerated (open or restricted) procedures.

Causal link between the unforeseen event and the extreme urgency

For the satisfaction of the immediate needs of hospitals and health institutions within a very short timeframe the causal link with the COVID-19 pandemic cannot reasonably be doubted.

Only used in order to cover the gap until more stable solutions can be found

Negotiated procedures without prior publication may offer the possibility to meet immediate needs. They cover the gap until more stable solutions can be found, such as framework contracts for supplies and services, awarded through regular procedures (including accelerated procedures) [emphases added and references omitted].

This is truly good, clear and actionable guidance by the European Commission and it should be most welcome.

A final word on the UK Dyson contract

Those following the daily developments on COVID-19 related procurement in the UK will be aware of the award of a contract to Dyson for the supply of 10,000 ventilators, despite the fact that its prototype still needs to receive regulatory approval and can thus not be immediately put into production or delivered for use in the NHS.

You will find an excellent analysis of the background in several posts by Dr Pedro Telles in his blog (starting 24 March). He has been putting forward the claim that the award of that contract (and, presumably, the rest of contracts for emergency supply of ventilators to the UK Government; although he has been trying to distinguish them) is illegal because the UK Government decided not to participate in the EU’s JPA ahead of the immediate need of the ventilators. We have been discussing this on twitter (see below), so it may be time to bring this discussion to the blog.

My view is that the specific need for ventilators (and PPE, and other supplies needed in this pandemic emergency) is and will remain unforeseeable for quite a while. I do not think that high level political decisions (however wrong) should deactivate the possibility of recourse to extreme emergency procurement at an operational level. I think today’s Commission Guidance supports this view when it stresses that ‘These events and especially their specific development has to be considered unforeseeable for any contracting authority‘.

Pedro disagrees (with the Commission): ‘The Commission argues regarding the lack of foreseeability by the contracting authority that the specific needs for medical equipment and infrastructure (including ventilators) could not be foreseen and planned in advance. On this I do not agree fully with the Commission. It is true that there is a moment when the need could not be foreseen and planned in advance, but if after that moment no action was duly taken (as the UK Government did with the ventilators) then the extreme urgency was actually brought about by the contracting authority.‘

I disagree with Pedro. I think the extreme urgency procurement procedure needs to be the conduit for the first effort to address the pandemic, which will still take a long period. This is not time to engage in new theories about the imputability to the procurement function of rather complicated political calculations (I sense there is a PhD thesis to be written on that, after the dust settles).

However, that does not mean that this is a free for all. The Commission has also clearly indicated that ‘if extreme urgency is invoked, the procurement need has to be satisfied without delay. The exception cannot be invoked for the award of contracts that take longer than they would have taken if a transparent, open or restricted, procedure had been used, including accelerated (open or restricted) procedures‘ (which are 15 and 25 days respectively). That is the reason why I think the award of the contract for 10,000 ventilators to Dyson is very likely illegal (on this overall conclusion, Pedro and I are agreed) and that the UK Parliament (when out of recess, or virtually active) and the National Audit Office need to take a very close look into this award. As I said on twitter, this starts to look very much like #ferrygate.

Extreme emergency procurement and COVID-19 -- re today's UK guidance

The UK Government has issued guidance on using public procurement to respond to the COVID-19 emergency earlier today (see PPN 1/20). This follows other EU countries’ introduction of emergency legislation and guidance on the same topic (see eg Pedro Telles’ discussion of Portugal’s).

If any EU country is yet to issue guidance or legislation, they should not necessarily be expected to do so as, strictly speaking, that should not be necessary because EU law (and, implicitly, most domestic transpositions) already contains the necessary escape valve to allow for the setting aside of most constraints on the contracting authority’s discretion through extensive use of direct awards where extreme urgency makes them indispensable eg to protect human health or orderly social functioning. Domestic emergency legislation may only be necessary where domestic rules impose other constraints (eg budgetary authorisation, legal compliance checks) that also need to be waived or suspended.

From an EU law perspective, it is worth reminding ourselves that Art 32(2)(c) of Directive 2014/24/EU clearly establishes that contracting authorities can resort to the negotiated procedure without prior publication ‘in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority.’ That is, contracting authorities facing extremely urgent needs can carry out either a negotiated procedure with limited competition on the basis of direct approaches to potential contractors, or a direct award of a contract to a specific supplier without any competition.

The UK guidance is particularly relevant to understand the limits of this exception, as the domestic transposition had followed a strict copy-out approach and reg.32(2)(c) of the Public Contracts Regulations 2015 has the same content as Art 32(2)(c) Dir 2014/24. In that regard, the content of PPN 1/20 usefully explains that:

… in responding to COVID-19, contracting authorities may enter into contracts without competing or advertising the requirement so long as they are able to demonstrate the following tests have all been met:

1) There are genuine reasons for extreme urgency, eg:

• you need to respond to the COVID-19 consequences immediately because of public health risks, loss of existing provision at short notice, etc;

• you are reacting to a current situation that is a genuine emergency - not planning for one.

2) The events that have led to the need for extreme urgency were unforeseeable, eg:

• the COVID-19 situation is so novel that the consequences are not something you should have predicted.

3) It is impossible to comply with the usual timescales in the PCRs, eg:

• there is no time to run an accelerated procurement under the open or restricted procedures or competitive procedures with negotiation;

• there is no time to place a call off contract under an existing commercial agreement such as a framework or dynamic purchasing system.

4) The situation is not attributable to the contracting authority, eg:

• you have not done anything to cause or contribute to the need for extreme urgency.

In assessing whether these tests are met, it will be important to remember that the CJEU has not imposed a threshold of absolute impossibility of alternative procurement approaches (in particular if they are evidenced ex post). In that regard, even if the interpretation of the grounds for access to extreme urgency procedures need to be interpreted narrowly and the CJEU has stressed that recourse to direct awards need to be subjected to a strict assessment of whether the contracting authority “acted diligently and whether it could legitimately hold that the conditions [for recourse to this procedure] were in fact satisfied” (Fastweb, C-19/13, EU:C:2014:2194, para 50), which make it clear that this procedure must be understood as exceptional (Fastweb, para 106)—in my opinion, there is little doubt that contracting authorities working to react to the challenges of COVID-19 can broadly rely on this exception for the first wave of reactive measures that require emergency supplies or services, provided only that they make sure that they respect the proportionality of the measures and that they document their decision-making adequately.

In that regard, the UK guidance is once again helpful when it establishes that

Contracting authorities should keep a written justification that satisfies these tests. You should carry out a separate assessment of the tests before undertaking any subsequent or additional procurement to ensure that they are all still met, particularly to ensure that the events are still unforeseeable. For example, as time goes on, what might amount to unforeseeable now, may not do so in future.

You should limit your requirements to only what is absolutely necessary both in terms of what you are procuring and the length of contract.

Delaying or failing to do something in time does not make a situation qualify as extremely urgent, unforeseeable or not attributable to the contracting authority. This is because:

• the PCRs expect a contracting authority to plan its time efficiently so that it is able to use a competitive procedure;

• competitive alternatives (eg. an accelerated open procedure) can be completed quickly;

• case law has held that knowing that something needs to be done means it is foreseeable;

• a contracting authority’s delay or failure to do something is likely to mean that the situation is attributable to the contracting authority.

The guidance strikes an adequate balance when stressing the relevance of the passage of time in terms of unforeseeability of the need, which should make contracting authorities think about phased approaches involving eg extreme urgency direct awards for short-term supplies or services (eg the next three to six months), and urgent procedures for the following period/s. However, in the opposite direction, it could be that the passage of time and the impact of the emergency measures on public contractors trigger the need for further access to extreme urgency procedures due to the possible future breakdown of procurement mechanisms currently in place — eg if suppliers fail to deliver (eg due to lockdown of their premises, supply chain breakdown or any other problems), or demand is such that they cannot fill in the requirements of all contracting authorities placing orders (eg in the context of a framework agreement). This is also covered by the notice, which shows great commercial awareness to the fact that the unforeseeability does not only refer to the public health situation generating the relevant need, but also to the material availability of the requirement.

These are uncertain times and flexibility and adaptability will be crucial in providing the best possible responses to the mounting challenges of the pandemic and the socio-economic implications of the measures being adopted (or not) by national Governments. Luckily, for once, procurement law is not in the way. The only requirement that should currently be on procurement officers’ minds is to keep adequate records of their decisions and apply sanity checks to the acceptable default position to directly award contracts for extremely urgent needs. At least for the next few months.

As we learn more of the virus, observe the effects of the pandemic and, hopefully, start to see the impacts of governmental intervention, there will be time to start to consider the end point at which the extreme urgency procurement genie should be put back in the bottle. For now, I would not worry about that at all.