New working paper on EU Public Procurement Policy and the Fourth Industrial Revolution

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I have submitted a paper to the call for papers of the Annual EU Law and Policy Conference ‘EU Law in the era of the Fourth Industrial Revolution’ that will take place in January 2020 (the CfP is still open until 8 September 2019, in case you are interested too).

The theme of the conference invites a reflection on the dual role of the EU as a Regulatory and Industrial ‘State’, so I have put together some thoughts on recent trends in EU procurement policy from that perspective in a new SSRN working paper: ‘EU Public Procurement Policy and the Fourth Industrial Revolution: Pushing and Pulling as One?‘ (6 Aug 2019). The abstract of the paper is as follows:

Innovation in digital technologies is triggering a variety of regulatory and policy responses by the EU. Fostering innovation is at the core of the EU’s industrial strategy and public procurement is becoming one of its main tools. The EU has reactivated its efforts to promote (digital) innovation procurement and is harnessing procurement market access as a trade defence for its innovation industry. The EU is clearly trying to use its buying power as an innovation pull to increase the readiness of the EU’s economy for the fourth industrial revolution. However, this effort is somehow constrained by the Member States’ diverging approaches and levels of engagement.

At the same time, innovative digital technologies hold the promise of a significant impact in the governance and practice of public procurement, and the EU is pushing for digitalisation as a lever to improve public services and to facilitate data analysis experimentation. However, a much-delayed and patchy implementation of eProcurement in most Member States and an inconsistent and timid approach to the regulation of public procurement data stand in the way of a true revolution and can prevent the public sector from leading by example.

In this paper, I reflect on the tensions inherent to this dual use of public procurement as an innovation pull through market power and trade leverage, and as a push for the digitalisation of procurement in the EU, as well as on the tensions between EU and Member State responses.

This is still very much an exploratory draft, so I would welcome comments and feedback, as I plan to revise the paper if it is accepted for the conference.

Procurement sandboxes, mock procurements and some other thoughts on trying to create space for ‘real world’ experimentation

One of the issues discussed at the most recent meeting of the European Commission Stakeholder Expert Group on Public Procurement (SEGPP) concerned the difficult balance between, on the one hand, promoting integrity in procurement, imposing strict record-keeping requirements (in line with Art 84(2) Dir 2014/24) and ensuring procedural soundness and, on the other hand, avoiding stifling discretion and killing procurement innovation by imposing an excessively rigid straitjacket on procurement professionals (ie how to ensure procurement probity without scaring procurement professionals into following a narrow well-trodden tick-boxing path). In the background, the worry was that procurement professionals that tried to do something 'differently' would be under the Damocles sword of litigation and liability--which would prevent most of them from exploring the boundaries of existing regulation, or possibly induce the most daring to do things under the radar and either not document or not share their practices.

In this context, I suggested that it could be interesting to follow the example of UK financial regulation of FinTech and RegTech innovation (of which I only know a bit thanks to the work of my Bristol colleagues Prof Stanton & Dr Powley, see here) and consider the possibility of creating sandbox experimentation programmes at national level (with the oversight and support of the European Commission). These would be pilot initiatives where, following an application for an exemption from standard enforcement procedures (that is, both infringement procedures under Art 258 TFEU and domestic remedies systems), contracting authorities wanting to explore innovative procedural approaches could seek to take ‘challenge worries’ out of the equation and concentrate on experimenting around innovative procurement processes or on trying out approaches that may not necessarily (easily) fit within the existing regulatory constraints.

Let’s say that the proposal was met with scepticism, but (hopefully) noted for future discussion and consideration.

On further reflection, I truly think that this would be an important contribution to the improvement of public procurement practice and, in the long term, an important input for more practice-oriented regulation. It would, first and foremost, avoid ‘innovative’ or ‘risk-seeking’ public authorities the pains of having to take the issue in their own hands and possibly engage in non-compliant (ie illegal) procedures for the sake of commercial or operative considerations. It would also allow participating undertakings to test the limits of the system and to contribute to a more business-friendly regulation of public procurement. Finally, it would provide a useful space for ‘natural’ experimentation and avoid procurement policy-making (and scholarship!) being always based on theoretical constructions, or on ex post facto conceptualisations/justifications. All in all, in such an applied field of public law/public administration/public management activity, the possibility of resorting to ‘real world’ experimentation would be most welcome and, if done well, potentially very productive.

Thus, I think it may be appropriate to spell out my proposal in some more detail and to invite you all, dear readers, to engage in the discussion—which I will do my best to bring to the attention of my colleagues at the SEGPP and the European Commission in future meetings.

A fuller sketch of my proposal for the creation of procurement sandbox programmes

In compliance with a voluntary general framework created by the European Commission, Member States would create their ‘procurement experimentation programmes’, which would include a choice of options amongst the creation of procurement sandboxes, opportunities (and funding) for mock procurement, and other similar alternatives aimed at facilitating procurement innovation (mind, not the procurement of innovation) by limiting the risk of legal challenge and liability due to an open and transparent engagement in ‘real world’ experimentation with ideas for an improvement of procurement practice—and, on the basis of the learning derived from that practice, of procurement regulation too. Ideally, there could be a prize for best procurement innovation and best contribution to innovation by a participating undertaking, as well as clear pathways for researchers to feed ideas and seek support for experimentation and/or use of the data resulting from the programme.

In order to be ‘allowed to play in the procurement sandbox’, contracting authorities would need to provide a clear rationale of the benefits they sought to obtain with the experiment, as well as a clear description of the specific issues with which they thought compliance would be impossible or tricky, their initial plan of how to deal with them, and a method for the assessment, reporting, and dissemination of insights. In view of such application, the European Commission and the competent domestic authority would decide whether to grant authorisation, as well as the scope of the experiment (in terms of value, duration, and conditions for the experiment). Approved ‘sandbox procurement’ would be advertised as such and participating tenderers would explicitly have to provide a waiver of their right to challenge the final decision on the basis of any of the ‘sandboxed’ issues.

For example, if the contracting authority wanted to experiment around modes of delivery of a specific service, then challenges on the basis of the evaluation of delivery services or the award of parallel contracts (or lots) to providers using different delivery alternatives would not be justiciable—while other issues, such as breaches of transparency requirements or the duty to provide reasons for the specific decisions would be open to challenge.

Similarly, if the contracting authority wanted to experiment around documentary requirements, or around the possibility of doing trial runs in parallel with different suppliers as part of an extended negotiation, or if the contracting authority wanted to trial some ‘sophisticated’ information management strategy during an electronic auction, etc – then, interested undertakings would need to ‘be game’ and accept that their participation in the procedure was primarily for the purpose of experimentation, but would not give them enforceable rights. Of course, in order to incentivise participation, sandbox procurement could (and should) be sweetened by the contracting authority through the payment of participation fees.

Sandbox procurement could also be (randomly) conducted in the context of mock procurement trials not leading to the award of an actual contract—provided the tenderers did not know whether there was a contract to be gained at the end of the process or not (in which case, they would receive a compensation for the participation costs)—similarly to the carrying out of medical experiments involving the use of placebo—although in this case the issue would not necessarily be aimed at creating a control group, but rather at allowing for procurement experimentation with limited financial implications (in particular if the experiment went badly).

Needless to say, sandbox procurement would be most appropriate in scenarios involving scalable procurement innovations, and coordination on an EU-wide basis could allow for the replication of experiments in the context of different legal and business settings, as well as a reduction (if not avoidance) of duplication of innovative efforts.

Upon conclusion of the experiment, the contracting authority and the participating tenderers would draw a report that would be publicly accessible and, progressively, contribute towards the creation of a database of procurement experiments. This would allow for cross-dissemination of innovative best practices, as well as provide good insights into procurement improvement, both at policy-making and legislative levels.

I am aware that this is a controversial, and definitely only half-baked proposal, but I think this is one worth discussing and exploring in the future. Please let me know your thoughts.