AI & sustainable procurement: the public sector should first learn what it already owns

ⓒ Christophe Benoit ( Flickr ).

ⓒ Christophe Benoit (Flickr).

[This post was first published at the University of Bristol Law School Blog on 14 October 2019].

While carrying out research on the impact of digital technologies for public procurement governance, I have realised that the deployment of artificial intelligence to promote sustainability through public procurement holds some promise. There are many ways in which machine learning can contribute to enhance procurement sustainability.

For example, new analytics applied to open transport data can significantly improve procurement planning to support more sustainable urban mobility strategies, as well as the emergence of new models for the procurement of mobility as a service (MaaS). Machine learning can also be used to improve the logistics of public sector supply chains, as well as unlock new models of public ownership of eg cars. It can also support public buyers in identifying the green or sustainable public procurement criteria that will deliver the biggest improvements measured against any chosen key performance indicator, such as CO2 footprint, as well as support the development of robust methodologies for life-cycle costing.

However, it is also evident that artificial intelligence can only be effectively deployed where the public sector has an adequate data architecture. While advances in electronic procurement and digital contract registers are capable of generating that data architecture for the future, there is a significant problem concerning the digitalisation of information on the outcomes of past procurement exercises and the current stock of assets owned and used by the public sector. In this blog, I want to raise awareness about this gap in public sector information and to advocate for the public sector to invest in learning what it already owns as a potential major contribution to sustainability in procurement, in particular given the catalyst effect this could have for a more circular procurement economy.

Backward-looking data as a necessary evidence base

It is notorious that the public sector’s management of procurement-related information is lacking. It is difficult enough to have access to information on ‘live’ tender procedures. Accessing information on contract execution and any contractual modifications has been nigh impossible until the very recent implementation of the increased transparency requirements imposed by the EU’s 2014 Public Procurement Package. Moreover, even where that information can be identified, there are significant constraints on the disclosure of competition-sensitive information or business secrets, which can also restrict access. This can be compounded in the case of procurement of assets subject to outsourced maintenance contracts, or in assets procured under mechanisms that do not transfer property to the public sector.

Accessing information on the outcomes of past procurement exercises is thus a major challenge. Where the information is recorded, it is siloed and compartmentalised. And, in any case, this is not public information and it is oftentimes only held by the private firms that supplied the goods or provided the services—with information on public works more likely to be, at least partially, under public sector control. This raises complex issues of business to government (B2G) data sharing, which is only a nascent area of practice and where the guidance provided by the European Commission in 2018 leaves many questions unanswered.

I will not argue here that all that information should be automatically and unrestrictedly publicly disclosed, as that would require some careful considerations of the implications of such disclosures. However, I submit that the public sector should invest in tracing back information on procurement outcomes for all its existing stock of assets (either owned, or used under other contractual forms)—or, at least, in the main categories of buildings and real estate, transport systems and IT and communications hardware. Such database should then be made available to data scientists tasked with seeking all possible ways of optimising the value of that information for the design of sustainable procurement strategies.

In other words, in my opinion, if the public sector is to take procurement sustainability seriously, it should invest in creating a single, centralised database of the durable assets it owns as the necessary evidence base on which to seek to build more sustainable procurement policies. And it should then put that evidence base to good use.

More circular procurement economy based on existing stocks

In my view, some of the main advantages of creating such a database in the short-, medium- and long-term would be as follows.

In the short term, having comprehensive data on existing public sector assets would allow for the deployment of different machine learning solutions to seek, for example, to identify redundant or obsolete assets that could be reassigned or disposed of, or to reassess the efficiency of the existing investments eg in terms of levels of use and potential for increased sharing of assets, or in terms of the energy (in)efficiency derived from their use. It would also allow for a better understanding of potential additional improvements in eg maintenance strategies, as services could be designed having the entirety of the relevant stock into consideration.

In the medium term, this would also provide better insights on the whole life cycle of the assets used by the public sector, including the possibility of deploying machine learning to plan for timely maintenance and replacement, as well as to improve life cycle costing methodologies based on public-sector specific conditions. It would also facilitate the creation of a ‘public sector second-hand market’, where entities with lower levels of performance requirements could acquire assets no longer fit for their original purpose, eg computers previously used in more advanced tasks that still have sufficient capacity could be repurposed for routine administrative tasks. It would also allow for the planning and design of recycling facilities in ways that minimised the carbon footprint of the disposal.

In the long run, in particular post-disposal, the existence of the database of assets could unlock a more circular procurement economy, as the materials of disposed assets could be reused for the building of other assets. In that regard, there seem to be some quick wins to be had in the construction sector, but having access to more and better information would probably also serve as a catalyst for similar approaches in other sectors.

Conclusion

Building a database on existing public sector-used assets as the outcome of earlier procurement exercises is not an easy or cheap task. However, in my view, it would have transformative potential and could generate sustainability gains not only aimed at reducing the carbon footprint of future public expenditure but, more importantly, at correcting or somehow compensating for the current environmental impacts of the way the public sector operates. This could make a major difference in accelerating emissions reductions and should consequently be a matter of sufficient priority for the public sector to engage in this exercise. In my view, it should be a matter of high priority.

A quick, non-comprehensive update on circular economy and public procurement

Circular-Economy.jpg

A friend and I have been discussing sustainability and property regulation for a while. In particular, he has been quizzing me on the potential for public procurement to promote a (more) circular economy for a few years now. We last touched upon this in mid-2015. In a recent email exchange, he asked me to look at what had happened since at EU level. This is what I came up with. I thought I would share it in case someone is interested in a quick, non-comprehensive update on circular economy and public procurement. Here it is. Please feel free to add to this in the comments section!

In June 2017, the European Parliament published a report it had commissioned on 'Green Public Procurement and the EU Action Plan for the Circular Economy'. In October 2017, the Directorate General for the Environment of the European Commission published this brochure of best practices (of which I was rather critical in my blog). There have been additional best practice guides put together by entities receiving EU funding, eg ICLEI or CircularPP.

This is still a weak policy intervention in the form of best practice dissemination (ie even weaker than soft law guidelines), which is supported with some additional initiatives, such as the Circular Europe Network. However, in their own words 'the integration between PP and circular economy is still at its early stage at the EU level.' (Factsheet on Public Procurement and Circular Economy, tab 2.3).

Some countries are taking the use of procurement to push for a more circular economy to reduce the environmental impact of public sector activities more seriously than others, and the construction sector seems to be ahead of others (see eg this recent report). Denmark is perhaps at the forefront of trying to use procurement for a circular economy (see eg this case study), together with the other Nordic countries and The Netherlands (see eg this 2017 report, or the 10 case studies included in the construction sector report above). There is not much going on in the UK at all (I could only find a 2016 4-pager on general aspects of circular economy that mentions procurement in passing).

There are a couple of interesting-looking academic papers: Witjes & Lozano (2016) and Alhola et al (2018), the latter being the same authors of the report on the Nordic countries above.

** Postscript (11/10/2019 11.20am) - Thanks to Dr Lela Mélon for highlighting the March 2019 Report on ‘Accelerating the transition to a circular economy‘ and for pointing out that this is ‘an overarching policy example that omits the amount of private capital needed for a transition to occur at a noteworthy scale (e.g. mentioning the EU public funds to be employed to that effect but omitting the size of the whole funding needed for the transition)‘.

New Book: G Racca & C Yukins (eds) "Integrity and Efficiency in Sustainable Public Contracts" (Brussels, Bruylant, 2014).


The new book on "Integrity and Efficiency in Sustainable Public Contracts. Balancing Corruption Concerns in Public Procurement Internationally" edited by Profs. Racca and Yukins is now available.

As the editors indicate

Ensuring efficiency and integrity throughout the public procurement cycle is essential to a sound allocation of taxpayers’ money. Yet public contracts are plagued by corruption, collusion, favoritism and conflicts of interest. This book addresses these problems from sophisticated, academic, institutional and practical perspectives.
The book’s ambition is to shape the public debate in the procurement community by highlighting how corruption implies violations of fundamental rights and undermines the fiduciary relationship between citizens and public institutions. The analysis underlines how corruption may stem from - and yet be resolved - through the exercise of discretion in the public procurement system. Focusing on the effects of public corruption and private collusion on procurement integrity, the book marks the features of misconduct and suggests needed counter-measures. The work also emphasizes that the pursuit of efficiency and integrity in public contracts must be rooted in professional skills, and in ethical regulations and training for public officers.
The research reflected in these pieces comes from sources around the world, and offers an excellent foundation for further development of these topics. Expanding on prior research, this volume builds on a more active transnational academic cooperation and exchanges of ideas on integrity in public contracts for the benefit of citizens.
This book is intended as both a textbook and an edited collection and it is available as an e-book too. The authors of the chapters are all specialists in their respective fields, and their different geographical and professional perspectives represent a valuable contribution to the scientific literature.
I have contributed a chapter on “Prevention and Deterrence of Bid Rigging: A Look from the New EU Directive on Public Procurement”, which SSRN version is available here.