Wish list for 2017: My Top 10 priorities for the European Commission’s future activity in public procurement

Now that 2016 is drawing to a close, and after having engaged in a large number of discussions and exchanges of views with academics and practitioners at a number of conferences, workshops and expert meetings during the year, I have sat down to write my wish list of where I would like the European Commission to concentrate its future activity in the area of public procurement. Some of these suggestions could also serve to set agendas at national level. although my preference would be for centralised action at EU level.

These suggestions only represent my personal views, and in particular do not bind the European Commission’s Stakeholder Expert Group in Public Procurement of which I am but a member. However, some of the suggestions are supported by other members of the group in their individual capacity, and these are issues which I will push for in the activities of the group in 2017.

My wish list of top 10 priorities for future action is as follows:

1. Ensure full and adequate transposition of the 2014 Public Procurement Package, and provide guidance on the direct effect of the substantive rules to support contracting authorities in Member States where transposition is being delayed. At the time of writing, 14 Member States have fully or partially failed to transpose the new Directives (see here, and take into account that Finland adopted transposition measures on 13 December 2016). The correctness and completeness of the transposition in the remaining Member States also triggers some questions. Working towards speedy and proper transposition across all EU Member States is of utmost importance in order to ensure that the intended benefits of the 2014 reform are unlocked. It is also relevant to ensure that the direct effect of the 2014 Public Procurement Package is ensured in the absence of transposition to domestic law.

2. Reform the Remedies Directives to coordinate them with the new rules in the substantive instruments comprising the 2014 Public Procurement Package.[1] In particular, further clarification needs to be provided on the remedies applicable to call-offs within framework agreements and dynamic purchasing systems, as well as for contract modification and contract termination disputes.

3. Provide additional guidance on the development of inter partes procedures where contracting authorities aim to take decisions that would imply the impossibility for undertakings and tenderers to participate or continue participating in tenders for public contracts. This is particularly relevant in relation to exclusion rules and the management of conflicts of interest, and could use the existing rules on the assessment of apparently abnormally low tenders as a blueprint.

4. Develop effective policies concerning procurement information. This should include provision of guidance on reporting obligations under Articles 84 and 85 of Directive 2014/24/EU, as well as developing the policy on public contract registries announced as part of the 2015 strategy ‘Upgrading the Single Market: more opportunities for people and business’ in a way that ensures an appropriate balance between transparency of procurement processes and the associated expenditure of public funds with the protection of commercial and competition-sensitive information.[2] This should be done in light of the transposition of Directive 2016/943/EU on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.

5. Provide guidance on the interpretation of Article 12 of Directive 2014/24/EU and the interaction between the in-house and the public-public cooperation exemptions it consolidates. This should be done through a thorough revision of the 2011 Commission Staff Working Paper concerning the application of EU public procurement law to relations between contracting authorities. This guidance should also extend to Article 17 of Directive 2014/23/EU and to the related rules in Articles 28 to 30 of Directive 2014/25/EU.

6. Provide additional guidance on centralised and collaborative procurement, including an assessment of the competition risks and potential negative impacts of centralised and collaborative public procurement, and develop recommendations for the effective oversight of centralised and collaborative purchasing by both national competition authorities and audit/controlling authorities. This should include providing more transparency on the European Commission’s work with the CPBs Public Procurement Network, as well as on the status of the actions plan(s) underpinning the strategic goal of facilitating aggregation of demand.[3]

7. Provide guidance on the interpretation of Articles 72 and 73 of Directive 2014/24/EU concerning contractual modification and termination. In particular, provide guidance on the use of umbrella modification clauses and the interaction between different grounds of justification for contract modifications, as well as on the effects of contractual termination that are required in case of mandatory termination due to breaches of EU law. This should be coordinated with the reform of the Remedies Directive (above 2) in order to ensure consistency of legal effects derived from contractual ineffectiveness and contractual termination.

8. Provide additional guidance on the interaction between public procurement and State aid rules, and ensure the consistent application of the recent 2016 Commission Notice on the notion of State aid as referred to in Article 107(1) TFUE with public procurement enforcement. This particularly concerns the substantive tests applicable to the identification of cross-border interest/effects.[4] This also concerns additional guidance on the substantive standards applicable to the assessment of aid for SGEI and NESGI, where the interaction between the ECJ’s Judgments in Altmark (C-280/00, EU:C:2003:415), Spezzino (C-113/13, EU:C:2014:2440) / CASTA (C-50/14, EU:C:2016:56), and Zweckverband Tierkörperbeseitigung (C-446/14 P, EU:C:2016:97) is rather unclear.

9. Continue to support the transition towards eProcurement and the development of open access, free to use technical solutions and standards. The work of the Commission should concentrate on ensuring that technological barriers do not arise from the transition to eProcurement and that interoperability is ensured in both the short and the long run.[5] Work in this area could also include creating pilot experiments with public sector virtual markets on the basis of dynamic purchasing systems and electronic catalogues, which could be run entirely electronically.

10. Significantly reform the Internal Market Scoreboard for Public Procurement, so as to avoid embedding undesirable policy pushes, such as the unjustified push for aggregation of more than 10% of public sector procurement expenditure. Carefully assess the desirability and utility of similar ongoing projects in the Public Procurement Action Plan—such as “Developing an index for rating Contracting Authorities according to their performance ("Trip advisor")—and seriously consider abandoning them to concentrate on more useful initiatives.

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[1] See A Sanchez-Graells, “‘If It Ain't Broke, Don't Fix It'? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts”, in S Torricelli & F Folliot Lalliot (eds), Administrative oversight and judicial protection for public contracts (Larcier, 2017) forthcoming. Available at https://ssrn.com/abstract=2821828.

[2] See A Sanchez-Graells, “Centralised Procurement Registers and their Transparency Implications”, Discussion Non-Paper for the European Commission Stakeholder Expert Group on Public Procurement, 19 September 2015. Available at http://www.howtocrackanut.com/blog/2015/09/why-are-public-contracts-registers.html.

[3] As briefly described in “Public buyers save money with cooperative procurement”, 1 December 2016, http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.cfm?item_id=9013.

[4] See A Sanchez-Graells, “Commission Notice on Notion of State Aid shows Contradictions with EU Public Procurement Rules, in Particular Concerning Aid and Contracts for Local SGEI”, 20 May 2016, http://www.howtocrackanut.com/blog/2016/5/20/commission-notice-on-notion-of-state-aid-shows-contradictions-with-eu-public-procurement-rules

[5] See P Ferk, “E-Procurement between EU Objectives and the Implementation Procedures in the Member States—Article 22(1) of the 2014 Directive”, in GS Ølykke & A Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar, 2016) 101-124.

Some recent indicators of public procurement in the EU

The European Commission has published some indicators on the evolution of public procurement in the EU up to December 2014 (most recent available data). There are two sets of indicators worth having a look at.

Public Procurement Performance

First, the Commission (DG Grow) has published indicators on public procurement performance in the Member States, which provide a comparative view of the countries' adherence to 'good procurement' as measured by 6 simplified indicators. Or, in other words, indicators aimed to measure 'the extent to which purchasers obtain good value for money'.  The creation of a single 'quick-look' indicator seems appealing. However, some attention to the way in which the indicator is calculated may raise issues as to its usefulness.

Source: European Commission.

In that regard, it is worth mentioning that the Commission has created 6 discrete indicators: [1] One Bidder; [2] No Calls for Bids; [3] Aggregation; [4] Award Criteria; [5] Decision Speed; and [6] Reporting Quality (details available here). Interestingly, in order to construct the 'Overall Performance' indicator (used in the map above), the Commission uses a 'weighted average of all the performance indicators. Triple weight is given to most important indicators: One Bidder and No Calls for Bids.' Given this methodology, the Commission is careful to indicate that

Like all indicators, however, these indicators simplify reality. They are affected by country-specific factors such as the composition of procurement, the structure of the economies concerned, and the relationships between different tendering options, none of which are taken into account. Also, some aspects of public procurement are omitted entirely or covered only indirectly - for instance corruption, administrative burden and professionalism. Thus, although the Scoreboard provides very useful information, it gives only a partial view of EU countries' public procurement performance.

In my opinion, this is a valuable first step towards developing performance indicators in public procurement. However, the 'qualitative policy judg[e]ment on what is good practice' behind some of the criteria is questionable. For instance, the rationale behind criterion [3] Aggregation is that 'Buying in bulk often leads to better prices and also offers an opportunity to exchange know-how. While not every type of purchase can benefit from aggregation, excessively low aggregation levels mean that an opportunity is probably being missed. Aggregation measures the proportion of procedures with more than one public buyer.'

This is by no means clear, given the difficulty in assessing the net economic effects of procurement aggregation [see A Sanchez-Graells and I Herrera Anchustegui, 'Impact of Public Procurement Aggregation on Competition: Risks, Rationale and Justification for the Rules in Directive 2014/24', in R Fernandez & P Valcarcel (eds), Centralizacion de compras publicas (Madrid, Civitas, 2016) 129-163]. Moreover, the reasons that led the Commission to give a positive value of the indicator when Member States aggregate 10% or more of their procurement expenditure seems completely arbitrary.

Ultimately, the use of such indicator may push Member States towards excessive aggregation of demand (particularly through procurement centralisation, see discussion on the UK CCS' strategy below), which seems to be a policy drive of the European Commission that may well create excessive difficulties [particularly when cross-border collaboration is involved, as discussed in A Sanchez-Graells, 'Collaborative Cross-Border Procurement in the EU: Future or Utopia?'].

Therefore, great care needs to be exercised to avoid creating indicators that may trigger specific policy options with doubtful beneficial net effects.

evolution of public procurement markets

Second, the Commission has also published raw indicators of the volume of procurement subjected to the EU rules in 2014. This serves to provide a broad overview of the evolution of EU public procurement markets in recent years. 

There are two results I find interesting. At a general level, the 'estimate of total general government public procurement expenditure (TGGPPE), excluding utilities and defence, was 1,931.5 billion euros in 2014, 2.7 % higher than in 2013, continuing the increased trend of recent years'. However, there are great national disparities that still reflect the effects of the economic crisis, with 'countries like Spain, Italy or Cyprus ... with their TGGPPE the minimum in the last four years'.

And, at a country level, I find it remarkable that, overall, the UK publishes larger contracts than the EU average (see graph below). This issue is linked to the discussion on aggregation above because, '[t]he concentration of procurement in large notices is outstanding in the UK, particularly in the procurement of services, where the UK alone accounts for 84 % of the total value procured at EU level in awards of more than 100 million euros' (emphasis added).

Source: European Commission. Graph represents the distribution of contract award notices in logarithmic scale in million Euros. The dashed-blue line represents EU distribution. 

Source: European Commission. Graph represents the distribution of contract award notices in logarithmic scale in million Euros. The dashed-blue line represents EU distribution. 

Qualitatively, it is worth stressing that this is, at least in large part, the immediate result of the enormous framework agreements for services contracts tendered by the Crown Commercial Service (CCS) in recent years. However, this strategy has led to significant operative problems and the CCS is moving away from such large service frameworks, in favour of alternative procurement strategies

Also from a qualitative perspective, analysing this data would require to access details on whether these contracts are adequately split into lots, eg so as to ensure SME access to procurement markets in the UK. If not, this could be an indicator that UK markets are relatively more geared towards large suppliers than in the rest of the EU, which would be a worrying situation and definitely not in line with declared policy goals.

Therefore, once more, care needs to be exercised in the extrapolation of any policy implications derived from such high-level quantitative indicators.