A couple of papers on procurement and discretion

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I am preparing a paper on discretion and competition under the EU public procurement rules for a workshop at Lady Margaret Hall (Oxford) in November. In looking for new ideas and making sure I cover the necessary background, I have been reading recent economics and political science papers on the topic.

After a few reads, I think I am starting to identify an emerging trend of support for both (i) expanded use of discretion and (ii) claims of positive effects of the exercise of that discretion on procurement outcomes. I think both issues are interesting and tricky, and have found the two papers below thought-provoking (even if not entirely convincing). I would recommend reading them if you are interested in this topic.
 

This is a political science paper aimed for a non-academic audience and it maps the discussions behind the choice on whether to promote or constrain discretion by procurement officers. It follows the US discussion and goes back to the arguments developed by Kelman in 1990. However, the paper largely ignores the ensuing discussion in the US where, primarily Schooner (2001, 2004), raised important issues around the oversight of the exercise of discretion. The interested reader would be well advised to incorporate Schooner's insights in the mix.

Gutman also stresses the need to extend procurement regulation and the possibility to exercise discretion to the execution phase. In that, he raises issues that are currently being asked across the EU, in particular concerning oversight of contractual modifications (see here). A reader familiar with these issues will not find much new in Gutman's paper, but it offers a good entry point for newcomers to the issue.

This is an econometrics paper that uses an interesting (and rather large) database of Italian contracts to 'document the causal effect of increasing buyers’ discretion on procurement outcomes'. They design their study around two different procedures for the award of works contracts: 'Works with a value above a given threshold have to be awarded through an open auction. Works below this threshold can be more easily awarded through a restricted auction, where the buyer has some discretion in terms of who (not) to invite to bid.' Or, in other words, they compare situations where the contracting authority is free to engage in a negotiated procedure with situations where a restricted procedure was mandated. In that regard, they consider that the contracting authority has a larger ability to exclude tenderers from the negotiation than from restricted procedures. I am not convinced about this, as the screening for a restricted procedure under the EU rules is rather strict and contracting authorities are not prevented from adopting any controls they would in a choice of negotiating partners. However, even with that in mind, reading the paper is interesting.

Coviello, Guglielmo & Spagnolo claim that 'Our main result is that discretion increases the probability that the same firm wins repeatedly, and it does not deteriorate (and may improve) the procurement outcomes we observe. The effects of discretion persist when we repeat the analysis controlling for the geographical location, corruption, social capital, and judicial efficiency in the region of the public buyers running the auctions'. I think that the first part of their findings is rather important, as they find discretion to entrench incumbents, either as a result of corruption or any other unobservable incumbency or first mover advantages. It is important to stress that this result is not affected by any assumptions or qualified by causality claims, as this is the straightforward result of crunching the numbers.

On the contrary, the claims of causality of discretion over improved procurement outcomes is affected by assumptions and their claims are weaker and depend on counter-explanations for the same results. On that, I am not sure that the authors carried out all controls that would be necessary or possible in terms of the advantages they find (which are small in scale, in any case), as a control by complexity of the project seems a rather clear missing piece in their testing strategy. Therefore, their results need to be taken with a pinch of salt.

As mentioned above, I think that these two papers reflect a broader trend of support for the exercise of discretion in the context of procurement -- in particular during the execution phase -- and emerging evidence (or at least claims to that evidence) that the exercise of such discretion can result in positive effects beyond the procurement phase of the public expenditure cycle. On the whole, this could push for reduced controls on the exercise of that discretion (or a lax approach to it) and a move of the focus on the design and award of the contract towards its execution.

This triggers me to think about the constraints on the exercise of that discretion (during the execution phase, but also in earlier procurement stages) that can be necessary to ensure that only positive results are achieved. Not surprisingly, I think that the key will be in the principle of competition and a pro-competitive orientated application of the proportionality principle. Roughly, that is what I will try to do in my forthcoming paper. I will post it here when ready. In the meantime, comments are most welcome.

EU law-making in the shadow of the CJEU case law: looking at the “trilogue” black box

This blog first appeared in Elgar Blog on 7 December 2016 as part of our promotion of the recently published book Grith Skovgaard Ølykke and Albert Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar, 2016). You can now also read Chapter 1: The EU legislative process. An introduction from a political science perspective free on Elgaronline.

After six decades of economic and legal integration, when the European Union (EU) seeks to adopt new rules or to revise existing ones, it hardly ever operates on a clean slate. EU law-making is not only constrained by the political and economic realities of the time, but also by the pre-existing acquis communautaire of rules and general principles as interpreted by the Court of Justice of the European Union (CJEU). By any account, the CJEU has been a great force in the development of EU law, and its case law has pushed the policy-making agenda in rather clear, if controversial ways. EU law-makers thus operate in the shadow of the CJEU case law. This influences law-makers’ starting points and conditions the final solutions to be politically agreed, which will unavoidably be open to scrutiny (and quashing) by the CJEU.

In that space amongst the shadows of the CJEU case law, EU law-makers interact in an increasingly informal manner. They seek ways of flexibilising the legislative process so as to achieve easier and swifter compromises and overcome the criticism of immobilism, sometimes at the cost of renewed criticism of a democratic deficit that the Lisbon Treaty aimed to do away with. Indeed, even if the ordinary legislative procedure is heavily regulated by the EU Treaties and should channel most of the EU’s law-making, informal EU law-making is on the rise. As recently as July 2016, this led the European Ombudsman to call for more transparency of informal negotiations between the European Commission, European Parliament and the Council of the EU, also known as “trilogues” meetings.

It is no exaggeration to say that such “trilogues” are the black box of EU law-making. Under their current operation, it is possible to observe what comes in—legislative proposals are published by the Commission and initial reports by both Council and Parliament are also published—and what comes out of it—in the form of legislation eventually published in the Official Journal of the European Union. But, even after carrying out significant research efforts, it is impossible to crack what happens within the black box and to trace the origin and reasons behind important amendments to proposed legislation, as well as the way in which the final text is drafted.

This creates potential legal uncertainty in terms of the likely interpretation of the texts, which sometimes deviate from previous case law of the CJEU in unexplained ways. It also makes for difficult political assessments of the balance of interests that went into EU law-making and the weight that competing EU, national and group interests carried in shaping the new or revised rules. It can also significantly diminish the technical quality of the final rules, particularly where the trilogues are structured in sequence or address issues in a piece meal fashion, which prevents a final check for internal consistency and eventually leads to difficult systematic interpretation issues.

The case study of the reform of the EU public procurement rules in the period 2011-2014 clearly evidences these issues. The results of our two year research project, now published as Reformation or Deformation of the EU Public Procurement Rules, show both that the entirety of the legislative process was influenced by the CJEU case law, and that some of the most remarkable modifications of the pre-existing EU public procurement rules came about in an unexplained way at trilogue stage. As Dr Grith Skovgaard Ølykke and I stress in our conclusions,

The informal part of the procedure taking place between the 2011 Proposal and the first reading and adoption of the 2014 Directive prevented a repetition of the lengthy process of adopting the 2004 Directive (four years and a full-fledged ordinary legislative procedure, several amended proposals, conciliation and all). However, the early retreat to the trilogue and, hence, informality, significantly reduced transparency compared to that available in the legislative procedure leading to the adoption of the 2004 Directive, where e.g. the amended proposals contain the Commission’s argumentation for accepting proposed amendments or not.

… this still does not clarify the role and influence of the Commission in the post-Lisbon trilogue … Indeed, as stressed by the [European] Parliament itself, ‘given the Commission’s important and active role during Council working party (and even COREPER) discussions, its status as “honest broker” during trilogue negotiations is sometimes questioned in practice’.

A close analysis of the results of our research project helps gain a better understanding of the influence of the CJEU case law in EU law-making, both shaping it and as a benchmark from which policy-makers sometimes try very hard to deviate. However, the results of the research project also stress the limitations of an analysis of the travaux preparatoires and the negotiations throughout the legislative process when important changes and their reasons cannot be observed because they took place in the trilogue black box.

These insights will be interesting in guiding legal interpretive efforts, both in the area of EU public procurement law and more broadly. They will also be high quality and detailed evidence of the need to reform the way trilogues operate, both from a perspective of ensuring high standards of governance through accountability and transparency as stressed by the European Ombudsman, as well as from the perspective of preserving the value of interpretive aids in the context of an ever increasingly complex acquis communautaire.

Additional Thoughts on Brexit and Public Procurement

I had the pleasure of participating in last night's seminar on Brexit and Public Procurement, which was part of the Brexit Seminar Series 2016/17 organised by the Centre of European Law of King's College London. There was interesting discussion of the WTO GPA, UNCAC and UNCITRAL model law requirements and the possibilities they bring after Brexit, including a rather subtle argument why the UK may retain its condition of party to the WTO GPA on the basis of its final provisions in its Article XXII--which I either did not fully understand, or really do not see working out.

However, there was also a good measure of wishful thinking based on the opportunities that dropping the 'straitjacket of the EU single market approach' to procurement regulation could provide, as well as the possibilities that Brexit would bring in order to mend a system that is broken (with reference to both EU public procurement and State aid law), and which covers up an anti-British bias that can only get worse in the future if the Commission manages to adopt its 'Fortress Europe' strategy. I guess that, after this, my remarks (see presentation below) came in as a minoritarian and pro-EU reaction to these arguments. The rest of this post provides a synthesis of the arguments I made.

In order to counteract some of the arguments being made and, hopefully, to put the issue into broader perspective, I focused my remarks around whether the reform of [British] procurement regulation is feasible or a utopia (which links to my broader ideas on the difficulties of reimagining public procurement regulation). I broke this down in four parts: (1) the unavoidable costs of adopting a distinct 'Very British Model' (borrowing this label from Sarah Hannaford QC); (2) what is likely to happen with the Public Contracts Regulations 2015 immediately after Brexit; (3) what level of coordination between UK (Eng) and EU law should be achieved in the future; and (4) what can and should realistically be done to further reform (UK) public procurement law in the future.

1. On the unavoidable costs of a Very British Model, I guess that the simple insight I was trying to stress was that having diverging regulatory regimes increases the cost of doing business for companies aiming to serve markets where different procurement regimes apply. From the perspective of British companies (particularly SMEs, which PM May seems to be intent on actively supporting), this de facto makes it more difficult for them to export to the EU if they get used to a different domestic regulatory regime.

This can in turn result in a change of supply chains where EU 'importers' acquire the goods (works less well for services) from UK manufacturers and then sells them to the public sector in the rest of the EU, which will require the creation of commercial mark-ups / margins that may well wipe out any financial advantage derived from the taking of the Sterling, as well as any increases in productivity in the future.

Moreover, a Very British Model that significantly deviated from the current EU system would create a significant barrier for cross-border collaboration with other public buyers in the EU (which was mentioned could be particularly relevant in terms of defence procurement, given recent policies to boost EU's military capabilities through a joint defence fund), but also with potential third countries (eg Canada). It would also make negotiations to gain (or retain) membership of the WTO GPA and to subject internationally funded (large infrastructure) projects to the revised Very British System because international partners may need to be convinced that, though different, that new system complied with their requirements. If nothing else, this will be a drain of international and trade negotiators' time and energy.

2. On the likely  immediate future of the Public Contracts Regulations 2015, it is hard to make a forecast. Short of their total repeal and the creation of a massive regulatory vacuum in the control of public expenditure in the UK (which I do not think likely, and certainly hope not to be pursued), the PCR2015 are likely to stay in the books for a while (with or without Great Repeal Bill).

It is possible that the UK Government is tempted to chop bits of them off the statute book. Either suppressing the remedies they create for non-domestic bidders, as suggested by Prof Arrowsmith, and which I consider a daft strategy--for the lack of a better term--because it will not only alienate foreign bidders and international trading partners, but also be easy to circumvent through formal submission of tenders by UK-based entities. Or else shooting holes in the PCR2015 to get rid of parts that may be considered particular examples of bar procurement regulation (say, the use of self-declarations in the form of the ESPD). That would diminish the consistency of the regulatory system and could create undesirable effects.

Overall, as I said before, in the short run, the would be better off by completely keeping the status quo ante Brexit (including remedies for international tenderers and investors) if it wants to preserve its (diplomatic) options of a swift conclusion of procurement-related trade agreements, as well as preventing disruption in investment and infrastructure projects.

3. On the desirable level of coordination between future UK rules and EU public procurement law, including the CJEU case law, I submitted that, regardless of the formal legal obligations to comply with CJEU case law under EEA or other types of agreements, from a normative point of view and at least for as long as the law on the books reads the same way (ie up and until there is a repeal and substitution of the PCR2015), UK law should continue to be substantively coordinated with EU public procurement law.

For two reasons. First, because deviations will create the same additional costs of doing business indicated above (1). And, second, because on the whole (and I am not one to cosy up to the CJEU), I consider that its public procurement case law has been progressive and positive, and helped shape a regulatory system that is massively misunderstood and misconstrued, particularly but not only in the UK (more below).

4. On the productive ways in which [British] public procurement can be reformed in the longer run, I took the seemingly radical view that legal reform should not be the main focus and that there are more pressing issues that can only be sorted out with significant investment (which, of course, triggered the reaction from the floor that 'it ain't gonna happen' in this context and with the massive black hole that Brexit will create in the UK's public finances between now and, at least, 2021). I also stressed that the UK had shown no regulatory creativity whatsoever in the transposition of the 2014 Public procurement package, which indicates that there is a lack of direction and strategy on which to build a significant reform of the current system.

I stressed that most of the complaints against the EU public procurement rules coming from the business community, and particularly SMEs, would equally exist with any regulatory regime that imposed any level of red tape on businesses because that is, quite simply, in the nature of things. Same goes for the criticisms from the public sector. Of course, the existing rules are perfectible (topically, on the need to reform the Remedies Directive), but no system will ever be perfect and there is a level of discomfort with public procurement rules that needs to be accepted as trade off for the anti-corruption and pro-competitive / value for money results they achieve.

Additionally, significant problems of legal certainty and difficulties in the coordination of different sets of procurement rules are exclusively a domestically created issue. For example, the difficult coordination of general procurement rules under the PCR2015 and those applicable to healthcare procurement in the context of NHS England are a UK problem that can, and must, be resolved domestically (see eg here, with a focus on conflicts of interest). 

Moreover, I also stressed that the EU public procurement rules are greatly misunderstood and construed as imposing a tight straitjacket on both procurers and businesses. That is simply not the case, particularly after the revision of the 2014 Public procurement package, which has created enormous spaces for administrative discretion and negotiations--that have in turn triggered the need, more than ever, for a competition-oriented interpretation and implementation of the rules.

My view, and I am happy to expand it, is that properly understood and applied, the current EU rules allow for all the goals I have so far heard businesses and public sector officials indicate they want from a revised [British] public procurement system--except those linked to a protectionist industrial policy, which are economically unwise and undesirable in any case.

The real problem is that an improvement of procurement practice requires three main (and very expensive) changes: (a) a serious investment in technology and the effective roll out of eProcurement; (b) significant investment in human capital and the upgrade of the public sector skill set (particularly in non-legal aspects linked to market intelligence and procurement best practice, along the same lines stressed by the European Court of Auditors in the context of EU institutional procurement); and (c) significant investment in strengthening the public oversight powers of entities such as the National Audit Office and the Office for Budget Responsibility (on the worrying contrary trend, see here) so as to reduce the dependence on (and incentives for) private litigation as the only (meaningful?) check on the way procurement is carried out.

Overcoming this problem requires investment and long-term planning. Two things that seem to go against the very grain of the Brexit process. So, overall, I would not hold my breath. I would more generally not expect any significant change in the way procurement is carried out in the UK in the short to medium term, which in itself can create problems in the longer run.

Musings about the constraints to a reimagination of public procurement regulation

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Overall conclusion

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

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

Some bold thoughts about the (distant?) future of public procurement in the EU

I was invited by the European Commission (DG Internal Market, Industry, Entrepreneurship and SMEs, Unit E4 - Economic Analysis and E-Procurement, @EU_Growth), to participate in a very stimulating brainstorming session on cooperative public procurement, public procurement aggregation and, in particular, Central Purchasing Bodies (CPBs). For yesterday's session, DG Growth assembled an interesting panel of practitioners, institutional representatives and academics, and made sure that very different opinions were represented and properly voiced. DG Growth must be praised for that.

On the substance, the general arguments for and against cooperative procurement strategies (centralisation, aggregation, occasional joint procurement) were discussed in some detail [for background, 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" (2014) University of Leicester School of Law Research Paper No. 14-35] and the representative of the OECD advanced some interesting statistics on OECD Member States' adoption of centralised and cooperative procurement that undeniably present it as a very strong trend in public procurement reform. Not a surprising insight, but the trends that emerge from their questionnaire (hopefully, soon to be published) raise a significant number of questions on how to support and/or regulate this phenomenon.

In my view, this is the point were the discussion got all the most interesting after Joaquim Nunes de Almeida, Director for Public Procurement at DG Growth, asked the experts two seemingly simple questions: 1) Should the existing and growing trend of cooperative/aggregate/centralised procurement be considered as something positive and favoured/supported or not? 2) If so, how can the European Commission do it? 

The majority of experts presented their personal views and were generally very supportive of the general trend of cooperative/aggregated/centralised procurement as a lever to achieve smart/lean procurement and an enhanced strategic use of procurement, and suggested some soft law and cooperative interventions for the Commission to undertake in close cooperation with Member States and the emerging (informal) CPB network. I was more skeptical. Let me give present some of my bold thoughts for the (maybe not so) distant future of public procurement in the EU. They may seem shocking, but I hope there is some value in them.

1. Centralisation is not necessarily here to stay
Centralisation will not be the dominant trend for a very long time and technology will generate a very significant increase of unregulated public procurement by facilitating direct award of very small procurement contracts through (alternative) electronic platforms. Centralisation or cooperative procurement is a result of the increased pressure to achieve savings (as a result of the crisis, and more generally) and is facilitated by the technological opportunities that e-procurement creates. These two levers are bound to be short (or mid) lived and to phase out in the future. 

On the one hand, because the savings that centralised procurement creates cannot grow indefinitely. There are limits to the economies of scale potentially achievable and, in a scenario of very quick expansion of centralised procurement volumes, there will soon be dis-economies of scope and, generally, x-inefficiency within CPBs as organisations that will loose their flexible and dynamic configuration as they grow and become more and more assimilated to 'classic' public sector institutions. 

Moreover, 'individual' contracting authorities will always retain procurement duties and, consequently, it is unavoidable that the organisation of a system with partial centralisation creates duplication of administrative resources, particularly if recourse to CPBs is voluntary for the 'individual' contracting authority. Additionally, the financial models of CPBs will create issues and, unless they operate on a cost and no margin basis, contracting authorities may decide to not resort to CPBs at all in order to save that part of the administrative cost of procurement, particularly if they do not perceive the CPBs as a generator of significant savings (or other advantages) as compared to the conduct of their own e-procurement processes (once they have the technology in place). There will always be delicate issues of political instrumentalisation of CPBs that may make cooperation difficult in day to day issues. And in case CPBs push for the strategic use of procurement (green, social, innovative) in ways that increase costs or risks, 'individual' contracting authorities' interests may not be alligned or best served by CPBs (as agency theory very clearly explains, see CR Yukins, Christopher R., "A Versatile Prism: Assessing Procurement Law Through the Principal-Agent Model" (2010) 40(10) Public Contract Law Journal 63].

In that regard, the mandatory uptake of e-procurement by April 2018 as a result of the implementation of the 2014 Directives will erode, if not suppress, the technological advantage that CPBs now enjoy as first movers. Once all contracting authorities have migrated to e-procurement (and they must do so, unless they completely transfer their procurement activities to CPBs, which does not seem like a plausible scenario because CPBs will never get to manage absolutely all the categories of products and services that contracting authorities need), the advantage of resorting to CPBs will be diminished. Once e-procurement is truly rolled-out, contracting authorities will have all technological tools in place to buy from alternative vendors, such as amazon or ebay, and they may as well do it. 

Once (if) aggregation is not the major consideration, 'individual' contracting authorities will have all incentives to carry out below the thresholds (unregulated) e-procurement and buy electronically all supplies (particularly) and services (possibly) they need. Of course, this will issue potential problems of circumvention of the Directives and the domestic rules that implement them. However, in a scenario of truly rolled-out e-procurement where each 'individual' contracting authority can buy for itself, it is unlikely that schools, hospitals, universities or small and medium sized public organisations will ever reach the value thresholds actually in place by purchasing commoditised goods (and services), which are the ones that CPBs trade in. Hence, the complex system of rules in the 2014 Directives may be come substantially unfit for purpose (or, as a colleague summed it up yesterday, 'obsolete').

2. Private competition will emerge and must be favoured through strict enforcement of competition law over CPBs
It follows from the above that one of the implicit and very significant future difficulties created by the emergence and growth of CPBs and other mechanisms of cooperative/centralised/aggregated procurement is that they are vulnerable to private competition. The system is currently being developed on the basis of an (implicit) legal monopoly granted to CPBs as the only organisations providing aggregation/rationalisation/e-procurement services to the public sector--or, in terms of Directive 2014/24 ancillary purchasing services. This is now legally protected as potentially unassailable under the rules of Art 37 Dir 2014/24, particularly with the protection for direct award of those services contracts to CPBs [art 37(4)], to the exclusion of competition from private suppliers of those services. However, this is not a desirable or even sustainable situation in the future.

Firstly, because the system is hoping for inter-CPB competition, particularly of a cross-border nature, so that CPBs compete to attract 'business' from 'individual' contracting authorities in other Member States (or regions within the same Member State). Secondly because CPBs are also authorised to offer services and goods in the private market (or at least not prohibited from doing so). This will have major implications for competition law enforcement on CPBs [see Sanchez Graells & Herrera Anchustegui, above, and A Sanchez Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 58-60, 255-57 and 347-52] and it is not only desirable, but very likely that DG Competition will have to, at some point, issue guidance on the application of Articles 101 and 102 TFEU to CPBs, without the protection of Article 106(2) TFEU for services of general economic interest (SGEIs) being necessarily available. State aid issues related to the application of Art 107(1) TFEU will also arise.

Second, because private competition is bound to appear (or, more likely, be strengthened), particularly as a result of technological development. Not only because existing online vendors will continue being the natural competition of any e-procurement system (be it run by a CPB, or otherwise). But also at platform level. Any company that can successfully develop a two-sided platform that offers procurement aggregation/rationalisation at a lower cost than CPBs, or that works in a more effective manner, will necessarily find a space in the market and challenge the incumbent position of CPBs (however big they can be at the time). It will be politically indefensible to insist on the use (voluntary or mandatory) of a CPB that is less efficient than alternative market players, particularly if the CPB also competes with them for private business--at which point, the issue would be also legally untenable and would trigger issues of competitive neutrality of the highest order [for background and general discussion, see TK Cheng, I Lianos and DD Sokol (eds), Competition and the State, Global Competition Law and Economics (Stanford, CA, SUP, 2014) and D Sappington and GJ Sidak, "Competition Law for State-Owned Enterprises" (2003) 71(2) Antitrust Law Journal 479-523].

3. The Commission can play an important role by creating training materials
The Commission can have a very important role at this stage, clarifying the limits of the regulatory framework derived from the 2014 Directives and creating useful training tool-kits that can be made available on-line for all contracting authorities in the Member States to acquire the necessary knowledge. They could also create new prizes, or refresh/boost the existing ones, to recognise and disseminate good practices.

Of course, training contrating officers is very difficult due to their sheer numbers, as well as the complexity of the 2014 procurement system. However, it should not (must not) be impossible. If it was impossible, then the deeper problem would be that EU public procurement law would be manifestly unfit for its purpose and a very significant transformation and simplification would be urgently needed (it is and will be more and more necessary, of course, but not desperately urgent; in any case, for criticism of the 2014 rules due to their complexity, see R Caranta, "The changes to the public contract directives and the story they tell about how EU law works", (2015) 52(2) Common Market Law Review 391-459; and S Arrowsmith, "Modernising the European Union’s Public Procurement Regime: a Blueprint for Real Simplicity and Flexibility" (2012) 21 Public Procurement Law Review 71-82).

 * * *

In short, then, my view is that in the long-run, public procurement centralisation/aggregation/cooperative procurement will become a part of the system, but by far not the entirety of the system, and that its relative importance will be diminished in the future by technological and market developments. In my view, the role for the Commission is twofold. DG Growth should focus on training and professionalization of all contracting authorities (and they have some initiatives under consideration) and DG Comp should focus on developing early guidance and a close monitoring system of the activities of CPBs and, more generally, powerful public buyers. Reversely, if centralisation and the market and legal protection of CPBs is embraced and protected, then this will be an instance of (inadvertent?) creation of a legal monopoly (and monoposony, in many markets) that can only result in social loss. I hope that my views, even if possibly extreme or shocking, at least contribute to a debate on centralisation that takes the long view.

The CJEU's maximalism and minimalism in the treatment of experience as a procurement award criterion (C-601/13)

In Ambisig, C-601/13, EU:C:2015:204, the Court of Justice of the EU (CJEU) has been confronted again with the issue of the use of the experience and qualifications (ie academic and professional background) of the staff assigned to performance of the contract as an award criterion under EU public procurement rules (ie the Lianakis distinction of selection and award criteria). The Ambisig Judgment still applies the rules of Directive 2004/18, but the reasoning and principles will remain relevant for the interpretation of Directive 2014/24.

At first reading, and depending on one's view of the strictness of Lianakis, it may seem that Ambisig is fundamentally a repetition of the discussion on the assessment of staff's experience as an award criterion that was recently rehearsed in Spain v Commission (financial support for cuenca hidrográfica del Júcar), C-641/13, EU:C:2014:2264 (not available in English, see my comments here).

However, some close reading may lead to a different (or at least more nuanced) conclusion, given the tone that the CJEU has used in two such close cases. It may be worth reminding that the rhetoric used in Spain v Commission presented Lianakis as follows:

... as is apparent from paragraphs 30-32 of the judgment Lianakis and others (EU:C:2008:40) ... the Court has clearly distinguished award criteria from the selection criteria that are essentially linked to the assessment of the bidders' ability to perform the contract in question, and considered that the criteria relating to the experience, qualifications and means of ensuring proper performance of the contract in question belong to the latter category and, therefore, do not have the character of award criteria (C-641/13, para 36, own translation, emphasis added).

We could call this the maximalist reading/reporting of Lianakis. However, as we shall see below, this is not the position adopted in Ambisig, where the referring Portuguese court was concerned with two aspects that in its view seemed to make it difficult to apply such a maximalist reading of Lianakis: (1) that the contract was for intellectual services (ie training and consulting); and (2) that the 2011 proposal for a new Directive (now Dir 2014/24) "constitute[d] a new factor in relation to the case-law of the Court in this area".

In that regard, it is interesting to see how the CJEU has now adopted a minimalist approach to Lianakis that basically comes to read into the rules of Dir 2004/18 the content of the new rules under art 67(2)(b) Dir 2014/24. In the words of the CJEU in Ambisig
25 ... the case-law highlighted in the judgment in Lianakis and Others (C‑532/06, EU:C:2008:40) concerns the interpretation of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1), which was repealed by Directive 2004/18, and that that judgment does not rule out the possibility that the contracting authority may, in certain circumstances, fix and apply a criterion [enabling evaluation of the teams specifically put forward by the tenderers for the performance of the contract and which takes into consideration the composition of the team and the experience and academic and professional background of the team members] at the stage of awarding the contract.

26 That judgment concerns the staff and experience of the tenderers in general and not, as in present case, the staff and experience of the persons making up a particular team which must actually perform the contract.

27 It should be noted, in relation to the interpretation of Article 53(1)(a) of Directive 2004/18 which is the subject of the referring court’s question, that that directive introduced new elements into the Union legislation on public procurement in relation to Directive 92/50.

28 First of all, Article 53(1)(a) of Directive 2004/18 provides that ‘the tender most economically advantageous’ is to be identified ‘from the point of view of the contracting authority’, thereby giving the contracting authority greater discretion in its decision-making.

29 Secondly, the third paragraph of recital 46 in the preamble to Directive 2004/18 states that, where the contracting authorities choose to award a contract to the most economically advantageous tender, they are to assess the tenders in order to determine which one ‘offers the best value for money’, which tends to reinforce the importance of quality in the award criteria for public contracts.

30 Furthermore, Article 53(1) of Directive 2004/18 does not set out an exhaustive list of the criteria which may be used by the contracting authorities in determining the economically most advantageous tender, and therefore leaves it open to the authorities awarding contracts to select the criteria on which they propose to base their award of the contract. Their choice is nevertheless limited to criteria aimed at identifying the tender which is economically the most advantageous (see, to that effect, Lianakis and Others, C‑532/06, EU:C:2008:40, paragraphs 28 and 29 and the case-law cited). To that end, Article 53(1)(a) of Directive 2004/18 specifically requires that the award criteria be linked to the subject-matter of the contract (see judgment in Commission v Netherlands, C‑368/10, EU:C:2012:284, paragraph 86).

31 The quality of performance of a public contract may depend decisively on the ‘professional merit’ of the people entrusted with its performance, which is made up of their professional experience and background.

32 This is particularly true where the performance of the contract is intellectual in nature and, as in the main proceedings in the present case, concerns training and consultancy services.

33 Where a contract of this nature is to be performed by a team, it is the abilities and experience of its members which are decisive for the evaluation of the professional quality of the team. That quality may be an intrinsic characteristic of the tender and linked to the subject-matter of the contract for the purposes of Article 53(1)(a) of Directive 2004/18.

34 Consequently, that quality may be included as an award criterion in the contract notice or in the relevant tendering specifications
(C-601/13, paras 25 to 34, emphasis added).
This is an interesting exercise of judicial rhetoric, which shows the CJEU's willingness to ensure certain cross-temporal validity of its case law in the area of public procurement, where change is a constant. This is not a bad thing in itself. However, it may be puzzling for observers (it definitely is for me) because I am not sure that many would have expected the CJEU to engage in such an explicit change of hats in the space of about 5 months in the way it reports its own previous case law, particularly in such a controversial and debated area [for very insightful discussion on this type of implications of Lianakis, see S Treumer, "The Distinction between Selection and Award Criteria in EC Public Procurement Law—A Rule without Exception" (2009) 18(3) Public Procurement Law Review 103-111]

In the end, it is worth reminding that one of the justifications for the revision/repeal of Dir 2004/18 by Dir 2014/24 was to address the "Lianakis issue" [see S Arrowsmith, "Modernising the European Union's public procurement regime: a blueprint for real simplicity and flexibility" (2012) 21(3) Public Procurement Law Review 71, 80; and rec (94) dir 2014/24]. To some extent, then, the Ambisig Judgment renders a significant (if relatively hidden) justification for the 2014 generation of EU public procurement rules useless.

This may have implications for the future, where the lack of clarity of the CJEU's case law in certain new/revamped areas of public procurement (let's just mention life-cycle costing or asymmetrical negotiations, for now) may trigger calles for further legislative reform--which should, in my view, be avoided to the extent that they rest on maximalistic interpretations of the CJEU's usually sparse and confusing passages, as we now know that it only (?) takes some adequate prompting for the CJEU to provide minimalistic twists that exclude the need for reforms.

Current Proposals on Exclusion, Qualitative Selection and Shortlisting in EU Public Procurement

I have just uploaded on SSRN a short new paper, which provides some initial thoughts on the new rules on exclusion, qualitative selection and short-listing in the 2011 proposal for a new public sector procurement Directive, as amended by the 30 November 2012 Compromise Text published by the Council. The assessment is based on a comparison with the equivalent rules under current Directive 2004/18/EC, as well as on the implementation difficulties that I envisage.

In the paper, I reach the following conclusions:
As this brief overview of the novelties and changes proposed by the Compromise Text on the rules concerning exclusion, qualitative selection and short-listing has shown, the Commission has presented (and the Council is willing to allow for) reform proposals that aim to generate some simplification and flexibilisation of the current rules. The Compromise Text has also tried to clarify and improve the drafting of the current Directives and to consolidate requirements and avoid duplication where possible.
The search for flexibility and simplification is particularly clear concerning the rules that aim to make exclusion of economic operators a dynamic activity (§2.2), that increase the scope and power for contracting authorities to seek clarifications and source additional information from tenderers (§2.4), that allow for an evaluation of the effectiveness of self-cleaning measures adopted by economic operators that should otherwise be excluded (§3.3), or that allow for a ‘certificate-less’ qualitative selection of candidates, subject to an ex post verification of the self-declarations submitted (§4.5). However, such flexibility does not come without risks and contracting authorities must tread lightly if they want to avoid challenges based on potential abuses of their (increased) administrative discretion. Moreover, the extent and weight of the obligations derived from the principle of good administration are expanding and this needs being duly taken into consideration.
There are also clear indications of a clearer integration of public procurement and competition rules (such as the possibility to exclude bid riggers, §3.2) and of the use of public procurement as a lever to ensure compliance with social, labour and environmental rules, in a classic example of pursuit of secondary (or horizontal) considerations in procurement (§2.3). This shows that, despite the search for simplification, the (asymmetrical) integration of public procurement and other economic and non-economic policies by necessity depicts a more complicated scenario that requires further professionalism and capacity building in the Member States, as well as more cooperation between contracting authorities and other competent authorities, such as national competition or environmental agencies.
All in all, in my view, EU public procurement regulation continues becoming more and more sophisticated (and complicated), the Compromise Text does not solve all problems and creates some new and, consequently, public procurement litigation will continue playing a key role in the clarification of the applicable rules.
 

One more #publicprocurement Judgment in the Evropaïki Dynamiki Saga (T-9/10)

The General Court's Judgment of 21 February 2013 in case T-9/10 Evropaïki Dynamiki v Commission (Microsoft SharePoint) is a new addition to this seemingly never-ending saga of cases where the Greek IT company challenges procurement award decision on the two-fold basis of failure to state reasons and presence of manifest errors of assessment.

This Judgment basically reiterates the position of the EU Courts on the duty to state reasons but, interestingly, includes an obiter paragraph that is not always expressly mentioned in the growing case law in this area of EU public procurement. 

In my opinion, paragraph 26 of this latest Evropaïki Dynamiki Judgment deserves emphasis, as the GC indicates that
It should also be borne in mind that the requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations (see Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 63 and case-law cited, and Case T‑465/04 Evropaïki Dynamiki v Commission, paragraph 49) (emphasis added).
This offers the basis for a far more restricted disclosure of information to unsuccessful candidates and disappointed bidders than usually provided by contracting authorities, and could (should) be used as the basis to rationalise this area of the law--where contracting authorities are indeed under significant pressure to provide excessive information during debriefing and bid protest procedures. 

In fact, in the case at hand,  
the Commission considers that it provided a statement of reasons exceeding that laid down in Article 100(2) of [the Financial Regulation] by informing the applicant of the reasons why its tender had been rejected as well as providing the scores obtained by the tenderers at the award stage, even though the applicant had not passed the selection phase (T-9/10 at para. 24, emphasis added). 
Situations such as this should be avoided, given the negative impacts that excessive transparency can generate in terms of potential collusion and access to confidential information and business secrets of competitors. Therefore, once again, it seems desirable to clarify and rationalise this area of EU public procurement law in the current process of revision of the EU Directives on public procurement.

The Future of European Legal Education -- Comment on Maduro's views

Prof. Miguel Poiares Maduro has published an interesting piece on The Future of European Legal Education, where he identifies some challenges derived from a tension between law as legal practice and law as science and highlights how those challenges can become an opportunity to reform legal education. 

In my view, his critical analysis is mostly accurate and supports his (relatively implicit) claim for a study of law in context, following the 'classic' proposals of Weiler (with whom Maduro has been working closely in related academic projects) and Snyder, who 23 years ago stressed that 
So far European Community law has been conceived mainly as 'black-letter law' [...] it is time to draw upon perspectives from other social sciences and to move in new directions. We must place European Community law in its social, economic and political context. Only in this way can we achieve the deeper and broader understanding—both practical and theoretical—of European Community law [F Snyder, New Directions in European Community Law (Law in Context) 30 (2nd edtn. 1990)].
Some of this certainly not-so-new worries go beyond Europe and are echoed by the work of the American Bar Association's Task Force on the Future of Legal Education, which is also concerned with the challenges that legal education faces as a result of the rapid and substantial changes in the legal profession, legal services, the national and global economy, and markets affecting legal education.

The issue is, therefore, of high currency and of global relevance, and deserves some good thought. In that regard, I think that it is remarkable that one of Maduro's main claims is that
These changes [derived from increased global economic and social integration] are bound to challenge not only the content of the law but also how it needs to be taught. This context of legal pluralism and legal miscegenation requires different hermeneutics and the interaction between legal cultures, which is triggered by the Europeanisation of the law, will confront each national legal culture with many of its unarticulated assumptions. Change in what you study is often the fastest way to break path-dependencies on how you study (p. 456).
While I agree that these global aspects need to be understood and mastered in order to become a well-rounded lawyer (be it in practice, be it in the academy, or anywhere in between), I remain skeptical that such a 'global' or 'delocalised' approach can be adopted from minute one in anyone's legal education.

Not to sound parochial, but I think that law is and will always be a jurisdiction-specific phenomenon (in our case, EU+Member State-specific) and I doubt that you can understand the very complex issues of the global legal reality if you have not first been (solely and thoroughly) trained in the law of one specific jurisdiction. 

This does not mean that legal studies throughout the EU need not be more 'Europeanised' (as, indeed, restricting EU law to a self-standing module is no longer a sensible option), but I think that it raises the issue that before you can engage in highly sophisticated comparative and contextualised legal analysis, you need to have a deep knowledge of a (self-contained) domestic system. As the saying goes, you must learn to walk before you can run.

Therefore, I would agree with Maduro's diagnosis and recommendations for the development of better postgraduate legal education programs, but I think that extending them to initial or basic legal studies may overshoot the mark. Maduro himself hints at this by the end of his contribution (p. 461), which maybe would have required some clearer disclosure in his general criticism to the development of legal theory.


US GAO report on interagency contracting: A mirror for centralised purchasing strategies in the EU?

The US Government Accountability Office (GAO) has just published an interesting report and recommendations for executive action regarding interagency contracting.

In the US, interagency contracting refers to a strategy whereby 'one agency either places an order directly against another agency's contract or uses the contracting services of another agency to obtain supplies or services'. The EU rough equivalent is the use of centralised purchasing strategies and, in particular, the carrying out of cooperative procurement--most often through dedicated central purchasing bodies. 

In view of the importance given to these 'smart procurement' strategies in the revision of the current EU rules (see October 2012 compromise text for a 'state of play' on centralised procurement strategies), learning from the lessons offered by the experience in the US looks like a promising opportunity.

In my view, the relevance of the GAO interagency contracting report relies on its realism and practical approach. Indeed, GAO 'designated the management of interagency contracting as a high risk area in 2005, in part because of the need for stronger internal controls and clear definitions of agency roles and responsibilities'. 

Following a first assessment in 2010 and the implementation of important policy reforms aimed at strengthening the governance and oversight of interagency contracting, GAO now issues a series of additional recommendations that, basically, boil down to giving effect to the 2011 Policy developed by the Office of Federal Procurement Policy (OFPP) and to strengthening the collection and analysis of data on interagency contracting. Some of the most interesting extracts are, in my opinion, the following:
OFPP issued guidance in September 2011 that requires agencies to develop business cases for creating new governmentwide acquisition contracts and multi-agency contracts. The business cases must address three key elements: (1) the scope of the contract vehicle and potential duplication with existing contracts; (2) the value of the new contract vehicle, including expected benefits and costs of establishing a new contract; and (3) the administration and expected interagency use of the contract vehicle.
The guidance also requires senior agency officials to approve the business cases and post them on an OMB website to provide interested federal stakeholders an opportunity to review and provide feedback. Feedback is addressed through various channels, including posting written comments through the website and sending letters or memos to stakeholders. According to OFPP, it also conducts follow-up with sponsoring agencies when significant questions are raised during the interagency vetting process, including questions related to potential value or duplication.
OFPP and GSA have taken a number of steps to address the need for better data on interagency contract vehicles. We previously have reported that a lack of reliable information on interagency contracts hampers agencies’ ability to do market research as well as efforts to manage and leverage them effectively. To promote better and easier access to data on existing interagency contracts, OFPP has worked to improve the Interagency Contract Directory, a searchable online database of indefinite delivery vehicles for interagency use created in 2003. [...] Short-term improvements include enhancing the search function and simplifying the presentation of search results, which should aid market research. Potential long-term enhancements include the ability to access vendor past performance information and upload contract documents, such as statements of work, to the system. OFPP officials also noted that this information will be helpful in providing data on the use of interagency contract vehicles, as the database provides information on the amount of obligations against the contracts, and eventually may provide other information such as a notification when contracts not designated for interagency use are being used in that manner.
In my view, the practical recommendations and the policy objectives set out by the OFPP and now strongly endorsed / recommended by GAO make sense and should be carried to the regulation of centralised procurement bodies/strategies in the forthcoming EU rules, with a particular focus on data collection and analysis (which has been significantly reduced with the proposed suppression of article 84 of the 2011 Commission's proposal and, particularly, of its paragraph 3(1) that mandated special public oversight of central purchasing bodies). 

I think that the more general transatlantic message to carry home in the revision of the current of the EU rules is that, as procurement strategies become more complicated, more planning and more oversight / analysis are required. Maybe not an easy lesson to square with the aim of procurement simplification, but definitely an operative need if we want to avoid creating (or nurturing) a 'regulatory beast' we may be unable to tame.

Impossible dialogue on EU #publicprocurement reform? Council and Parliament follow parallel roads

I may be about to show how naive I am, but I have just astonishingly discovered that the EU Institutions in charge of discussing the European Commission's 2011 Proposal for a new general Directive on public procurement are working in parallel and do not seem to be talking to each other at all.

While the Council has been negotiating intensely and trying to find a compromise and common position for over a year (the most recently publicly available compromise text is dated 2 October 2012), the European Parliament's Committee on the Internal Market and Consumer Protection has been looking at the 2011 Proposal independently and has published a Report that includes several hundred amendments to the original proposal (dated 11 January 2013). So far so good. Everybody seems to be doing its homework.

What is astonishing and a proof of the weak governance mechanisms in the EU Institutions is that the European Parliament's IMCO Committee has not incorporated the changes negotiated between Member States at the Council (which were disclosed, at least, on 24 July 2012 and again in the latest October 2012 compromise text). 

At this point, when the Council and the EU Parliament's representatives meet to discuss the amendments each institution wants to make on the Commission's 2011 Proposal, they will simply be speaking different languages. In some cases, the EU Parliament has proposals that concern articles the Council wants completely eliminated. Reversely, the Council has managed to reach a compromise on articles the Parliament wants to suppress. And all other types of inconsistent proposals can be found in both rather lengthy documents. It is plain to see that a first effort will need to be made to focus the terms of the discussion and work on a single basis text (which seems likely to be the one prepared by the Council, in my opinion). Therefore, waste of time and energies is sadly guaranteed.

In this situation, it is hard to anticipate that the new Directive can be adopted in early 2013 (which would already be a delay on the initial goal of having it published in the OJ by the end of 2012) and that it can be fully effective any time before 2016. Moreover, it is hard to see how such a scattered and uncoordinated legislative process can lead to a consistent and coherent final text--which imperfections can only be magnified at transposition stage, particularly if Member States use any ambiguities to include their preferred policy options.

All in all, I guess I am just puzzled by the fact that two institutions that have to cooperate in the adoption of new legislation can work in such a parallel and disconnected manner. Again, this just probably shows how naive I am. Or maybe it is an indicator that the system does not really work... 


Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law


I have just published on SSRN a new paper on "Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law": http://ssrn.com/abstract=2206502.


The paper updates some of my previous commentary to the competition law implications of the ongoing reforms of EU public procurement rules, particularly in view of the 2 October 2012 revised Compromise Text published by the EU Council: http://register.consilium.europa.eu/pdf/en/12/st14/st14418.en12.pdf 

This is the abstract:
The relationship between public procurement and competition has recently been receiving an increasing amount of attention, both in academic and policy-making circles. It is becoming common ground that public procurement holds a complex and bidirectional relationship with market competition and that, consequently, a tighter link between public procurement and competition law enforcement needs to be established.
This paper explores the recent OECD push for more competition in public procurement and its role as an influential factor in the ongoing reform of EU public procurement rules. Afterwards, it critically assesses three of the main challenges to keeping public procurement precompetitive: (i) the difficult balance in terms of procurement transparency created by the clash between competition and corruption concerns; (ii) the magnification of the undesired (potential) anticompetitive effects of public procurement that centralised procurement may generate, as well as its increasing use as an improper tool of market regulation; and (iii) the possible competitive distortions and the potential advantages resulting from the generalization of eProcurement. The conclusions extract some common patterns derived from the previous analysis and suggest some policy recommendations mainly oriented at boosting oversight and professionalization of procurement.
The paper is due to appear in C Bovis (ed) Research Handbook on European Public Procurement (Elgar Publishing, 2013).