#1 - Albert Sanchez-Graells (Leicester University)

How did England, Wales and Northern Ireland transpose Directive 2014/24/EU?

 
 

We are starting the series with a conversation with Dr. Albert Sanchez Graells, Senior Lecturer at the University of Leicester and who undertook his Ph.D at Universidad Autonoma de Madrid. His excellent Ph.D thesis was adapted to the Public Procurement and the EU Competition Rules, published by Hart in 2011 and with a second edition just launched.  It is fair to say that Albert almost singlehandedly put the importance of competition as a procurement principle squarely in the agenda. He blogs daily about procurement at howtocrackanut.blogspot.com.

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Transcript

Thank you for having you on the show. So we’re going to be talking about directives 2014/24. It has been transposed already into the UK or at least to England and Wales and in fact this is the first transposition of the directive. What is your view, in general terms, about the transposition?

Well I think that the UK government, particularly the one with responsibility for English and Welsh procurement was very keen on starting taking advantage of certain provisions or derivations that they negotiated for. My impression is that the reform of the provision of public services and the special regime in Article 74-77, in particular 77 which supports the mutualisation of the NHS or education institutions is probably the main driver for such a big transposition.

What are the advantages and disadvantages that you see so far in this quick transposition?

Well I guess that the main advantage of the quick transposition is that, as I was saying, all contracting authorities can immediately take advantage of the more flexible approach, the negotiations to life-cycle costing when it comes to award of contracts and other advantages, as well as probably pre-empting having to transpose as well certain policies that the European Commission may be willing to develop on the back of the directives and I think that in that way the UK probably is pre-empting in this sort of gold-plating in the transposition there is always a very big political issue in the UK.

When it comes to disadvantages I think that the biggest problem is that obviously there has not been much time to think about what needed to be changed and what the legislator basically did is adapt the whole of the directives as they are without probably strategically thinking about what parts to leave out, what parts to regulate in more detail or also without waiting for some clarification as to what the new requirements exactly mean or imply, so in that regard the disadvantage is that the poor quality of the directives and I think it’s a common understanding that the directives are poorly drafted and sometimes poorly thought through, has been immediately accepted and transposed into English and Welsh procurement rules which probably will have to change in the future just to make them a bit more sensible.

Are you effectively saying that, okay, we’re getting the rules quite quickly, the transposition quite quickly but the trade-off is A, most of the mistakes or the kinks that needed to be ironed out from the directive have not been ironed out and B, we may have to actually have a new transposition or at least have a new set of regulations in the future that solves those small problems?

Yes, I think you’re totally right, I think that the biggest problem, for instance, is when it comes to the new procedures that we have been commenting and think about the innovation partnership or the competitive dialogue, we have very bare minimum rules in the directives as to how this procedure’s going to be conducted by the member states and I think that in that regard there is a gap and I would not like to be in the feet of contracting authority in the UK that tries to implement a competitive dialogue or an innovation partnership solely on the basis of the rules they have right now in the Public Contracts Regulations 2015 because there’s more uncertainty than clarity.

I would think that for the regulations to be actually useful, either you need additional layers of directions or guidelines from the current commercial service or you need effectively a second wave of reform which brings detail to the very generic rules that the transposition has reached so far.

But the fact is the transposition style is fairly similar to the one that was adopted about ten years ago when the UK transposed the directive 2004/18. In fact if you look at the Public Contracts Regulations 2015 and 2006 side-by-side, they pretty much follow the same structure in relationship with the original directives. Contracting authorities were still able to use those Public Contract Regulations over the last ten years so how can we actually argue that more detailed regulations were needed instead of just the copy out approach that was taken?

Well I think that back in 2004 we had the office for Government Contracts and when the new directives were adopted in 2004 and the transposition took place in the UK in 2006, it was very active in providing guidance. The second point which probably is a bit less clear, it may just be my personal opinion but the fact that in the UK, at least in England, the procurement profession is highly regulated and we have institutions like CIPS imparting mandatory training for people taking on procurement roles, they also cover some of those gaps and I think that that triggers all sorts of issues about the difficulty of imposing rules that are not written anywhere but just come from some common training or understanding of the profession. I think also it may result in many situations being sorted out outside of strong legal process or enforcement and this may be linked to the UK culture of litigation but I think that the transposition technique and the limited scope of the rules also have to do with the limited number of procurement challenges that reach the courts, simply because these appointed bidders, they’re not exactly what the contracting authorities have applied beyond what’s on the regulation and the rules and the regulation are sufficiently abstract or lack in detail that probably courts may tend to side with the contracting authorities, so overall I’m not sure whether it’s positive or negative, what I would say is that it’s a very different game from the one we would expect in Latin countries or in civil law based countries, well when it comes to transportation which basically take an approach that is different and they just regulate to the most minute detail and sometimes with strict formalities and so I guess it’s an interesting case of comparative approach to transposition.  

Speaking about the transposition as it is, what do you think are the biggest mistakes that the central government in UK has actually introduced with transposition? 

Well I think that the biggest mistakes come from taking directives as they are and not restricting procedures that they may have wanted to restrict. In terms of procedures I think that just assuming and critically the openness, the negotiations and hoping three procedures that effectively allow for initiations as the competitive procedure with negotiations, the competitive dialogue and innovation partnership is not necessarily advantageous, particularly when at least the innovation partnership is, I would think, optional.

So I think that that multiplies legal uncertainty and it probably gives the false impression that negotiations are free for all, which I’m not sure is the medium term interpretation of the directive, at least when the UK Commission starts talking about what the member states have done. The other thing is think about frameworks and how intensive frameworks have been used in the UK, I think that not having reviewed some of the options within the directive or at least not having set out fully a default framework agreement and the procedure for its award and now the restricted procedure rules, it’s a bit difficult to implement so I think that some of the contracting authorities on the ground will have difficulty trying to decide whether they can carry on doing things as they used to or whether they actually need to implement changes and I don’t think that the regulations will give them lots of guidance and I think that’s a mistake.

Another mistake obviously from my perspective and I know you said we didn’t speak about competition but I cannot avoid it! Not having thought through how to implement Article 18 of the directive, which is now Regulation 18 on general principles and I think that it’s quite foreign to the common law to have general principles, particularly when it comes to public law, without having a policy that backs them up and I think that probably now having adopted this very open-ended and lacking detail regulations can make life difficult in practice so I guess it would just be a transitory period but for a while maybe contracting authorities would refrain from implementing new things, just waiting and seeing how others do it or what they can learn from.

Let me stop you there on the negotiation and frameworks before I go back to the competition. The fact is the UK has always been very pro negotiations employer procurement, if you think about the practice in the country over the last decade of the 20th Century, in the 1990s and also before the creation of Directive 2018 and the competitive dialogue inside it, the UK was using effectively negotiated procedure almost as a standard procedure for PFI contracts.

Mm.

That’s one example, so the country has always been very pro negotiations, I’m not saying that I agree with this, I’m just saying that actually there’s a lot of experience in at least a few contracting authorities in doing public procurement with negotiations. The same thing with frameworks, the UK is actually the country in the EU that has used frameworks more often over the last ten years or so, in fact I was looking at the numbers a few months ago and I think they’ve used it more than a thousand times, which is a lot more than anyone else.

On the issue of frameworks, I think it’s true the UK has probably been leading on the adoption of frameworks but what I struggle to understand is why there’s this such strong preference for frameworks over dynamic purchasing systems and one of the explanations could be that dynamic purchasing systems used to come with the not so nice add-on that they had to tendered through the open procedure but none of this has changed, I would have expected switched or almost an immediate substitution between frameworks and dynamic purchasing systems because it’s true that in the UK value for money, as a domestic issue at least, is always quite highly ranking in the set of goals that contracting authorities need to achieve and I would expect that a dynamic purchasing system that is always open, always allows for the maverick, for the innovator to show up and offer something new or at a better price, would be a much more desirable system so I struggle to see why they didn’t think about this more strategically in trying to push for dynamic purchasing systems further than they have as far as I can see.

Do you think that may happen?

I think it will happen for some reasons but one of the reasons is that if we look at the provision on the catalogues and the auctions, it is true that they work for both frameworks and dynamic purchasing systems but they work much better for dynamic purchasing systems because it makes no sense to have a catalogue that only includes the products of the suppliers you selected three years ago. I think that once you have the technology in place to actually be harvesting information from these catalogues automatically you would like these catalogues to be as broad as possible, also because the cost of putting one more catalogue into the system is relatively low I would expect, so I think that they will soon realise that dynamic purchasing systems maximise the electronic procurement related tools much more than frameworks so I would expect the substitution to take place say in the next three years, once the transition to eProcurement is further consolidated and in fact the rule.  

To go back to your point on negotiations, I think that all the examples you mentioned about negotiations basically are for large scale project.  

Uh huh, I agree.

And I think it’s linked to the fact that for large scale projects in the UK contracting authorities have no problem engaging external consultants and experts, including lawyers and economists and they’re happy to pay those extra fees for the services that come with the PFI or with the bigger projects just because they know that in the long-run, hopefully with the aid of the experts, they will get a better deal than if they were doing things differently. I think that the problem now with negotiations is that now you can negotiate basically for anything and I think we have both discussed this at length, I really like your paper with Luke Butler from last year and it’s very clear that the grounds for resorting to negotiations are way too broad, basically contracting authority would simply say it was not possible to award without negotiating and hence they negotiate which is a circular test and this completely changes the game because it’s not trying to talk one-to-one to big suppliers or big players in the market using knowledge and expertise that we either have or we acquire as contracting authorities, now it’s going to be any contracting authority with or without any knowledge negotiating with any supplier of any size and I think that once the issues of oversight appear and unfortunately at some point they will appear, the negotiated procedure will be demonised and that’s...

I know it’s maybe a gloomy forecast but I think that at some point, as we have seen in many other jurisdictions, there’s going to be some issue of corruption or favouritism into negotiation and this can actually kill the tool for everyone so again I think that precisely protecting the developments that procedures with negotiation have made in the UK it would have been wise to limit them beyond what the directive does and I think that would be perfectly possible because the grounds in Article 26 are basically to resort to a procedure that is exceptional so further reducing them would be in compliance with EU law, in my view.

I would argue that those three procedures, competitive dialogue, competitive procedures negotiation and innovation partnership, those three Ls say that they’re special in nature and not exceptional because they can be used as almost standard procedures for specific grounds but not all the time but you’re making a very good point about negotiations and the excess of negotiations in public procurement.

Going back to the regulations, what do they think is the problem that people are not paying enough attention to? 

If I have to pin one down I would think that the problem people are not paying attention to is that the bad wording of the directive and the badly organised information in the articles or directive have been altered in the regulations and the English and Welsh legislator has basically restructured the content and most of them, they don’t alter the legal content of the provisions but altering the order puts emphasis in different places and I think that the problem of doing that is that if contracting authorities don’t spend the time learning the whole of the regulations they make mistakes just because they apply partial rules because the second half of the rule you should be applying is elsewhere, particularly today thinking about Regulation 42, which I’m starting to read about technical specifications for our comments, I realise that one of the caveats that I love about the technical specifications article directive is that the technical specifications should not be drafted in a way that hinders or distorts competition or excludes any potential provider.

 Correct.

This is something that naturally should appear in number, let’s say about 5 of paragraphs in the transposition but it’s been moved down to 11 so I wonder whether the contracting authority will read all of the 11 actually the 16 paragraphs in the technical specifications provision or whether they will just stop in 9 where it says you can do it by reference to a national standard then full-stop.

The other thing is that it’s not being paid attention to the fact that more negotiations, more complex assessments, particularly when it comes to award criteria that are not the most cost-effective offer but what used to be called the mean but it is now the best price quality ratio that incorporate life-cycle costing, allowing contracting authorities to buy things on the basis of the processes of production of those products, or the processes of delivery of the services, basically it’s making the procurement scenario one in which, if you don’t have strong in-house capabilities you will probably struggle to get good deals from the market because obviously  private suppliers will have a higher incentive to train themselves very well in the regulations and try to sell you something as being legally tight and commercially desirable.

So I think that, to be short, the biggest issue that we’re not paying enough attention to is that there is a significant change in the quality of the training that contracting authorities need and I don’t think that the UK government has put mechanisms in place to train particularly the lower base of contracting authorities that on a day-to-day basis need to carry out procurement and I think that’s where significant losses of efficiency and potentially legal risks can appear just because we don’t put money into changing the system.

I actually think that’s a very very good point because one of the things I’ve noticed over the years regarding public procurement rules is that effectively they exist to avoid really bad procurement, so they exist based on a common, a minimum common denominator that many people most of the time will not have a lot of time, resources or training to understand how to conduct procurement, that’s why we have rules that sometimes are so prescriptive, as we’ve seen here in UK and also in the continent.  

In a sense, until now we could say that we had rules for the 99%, we had rules that allowed 99% of the contracting authorities and procurement officers to do their work on a reasonable enough way. What we’re seeing now, especially with the increasing negotiations and also the increase or the assumption from the law makers in the directive and also here in England and Wales, the assumption that procurers have the capability, have the resources, have the manpower to do good procurement. If you try to design rules based on that starting point you’re going to end up with the universe of rules that is completely different from the ones that we have currently at the moment or the ones that you had until recently so I think we are on a transition period that either we’re able to do that jump of actually having a legal system that is no longer focused on the 99% but is focused instead in allowing a number of contracting authorities, which is a small number, to actually do really good procurement, so we either up-skill a lot of people in the system or we’re going to have a lot of problems over the next ten years.

Yes, I think that in my view the risk is that because this realisation that procurement is becoming more complicated and less accessible requires professionalisation is also dawning on policy makers and decision makers. This is going to trigger and probably be used as a lever for centralisation and I think that centralisation is probably a topic for another day but if the solution to this need to up-skill contracting authorities is not to do that for all of them but to do that for a limited number of them but then absorb the procurement function of others then other issues concerning localism and regionalism, the evolution of decision making powers to the citizens will raise and I think that this will be very important issues both for a potential Labour government but equally for a Tory government when the basic principles of the Public Sector Reform white book of 2011 will no longer be in place because yes, your small community can decide what sort of school you want to have but no, you cannot have the school buy its own staff and maybe what can be procured centrally doesn’t really fit the needs of the school which varies different you want to have. So I think it will have lots of implications far beyond the issue of exclusively deciding who to train or how to train them, so in that regard it’s going to be an interesting issue of public policy broadly speaking to keep an eye on.

What would have you done differently in terms of the transposition? 

Well I think I would have done longer consultations, I would probably have consulted academics particularly and that’s a thing in the UK is not broadly done but I think in other countries there is traditionally, before a consultation goes public or after it’s been public there’s a separate consultation with academics and maybe high ranking public officials involved in day-to-day to try to come up with alternative solutions or streamline the solutions in the draft and then carry out a second or a more focused consultation and I think that’s what I would have done differently because I’m quite amazed that in the UK universities basically holds a very large number of academics regarding public procurement and most of them do it at a level that I would think is probably one of the most advanced in the EU, also because what they publish and what they consider is usually of a comparative perspective so they can also tell the UK government, look, don’t do this because it’s not working in this place or that place.

I would have sought more academic input because I think that the discipline is big enough and mature enough to engage them in the design of the new rules. This is something that for instance in the US is quite common and our, I would say highly regarded professors, Schooler and Yukins in the US are on a day-to-day basis involved in advising the government how to change things and I think that in the UK, even if the transparency is there and the consultations are there, there’s no big incentives for people like us to spend best part of last summer looking at these things and feeding back into the consultation if it’s not tailored to a forum and to a timing that is going to help us do it so I think that probably we have tried to capture more free human capital into the process.

But that allows a bigger window of opportunity for lobbies to exercise or influence because I’m sure that, for example, with the directives there was plenty of consultations.

Yes, that’s true but I think that the problem when you carry out consultations that are natural or just very general, what you do is precisely give an opportunity for those that have a strong interest in participating but then those that maybe would give you a better input of terms of maybe more objective, more detached are not necessarily drawn to the consultation just because they’re busy doing other things so I think that it’s good to probably understand that there’s different levels at which consultations are useful, one is for the general public to know what’s going on and obviously part of the democratic process but then when it comes to the more technical issues you may want to have separate consultations through experts and I think that’s something that is a bit hit and miss as things works right now.

To finish the interview let’s talk a little bit about the comparative approach that you were referring to. How would you tackle the transposition in Spain? Would you go about the same way that it was done here in England and Wales or you do it differently?

Well in Spain the process is very different because in Spain there’s no possibility for transposition to be carried out through what will be the create of a regulation, it has to be through an act of parliament and because Spain is going to have general elections this year then the whole process needs to wait until after the elections just due to the way that parliament is working so that immediately forced to take some more time to think things through.

The other big difference I think is that in Spain the public procurement rules are probably six times or seven times longer than the directives and they have always been so the approach has always been, as I was mentioning at the beginning of the podcast too, find every minute detail that needs to be regulated and regulated in the law, which obviously makes the basic rules much more detailed and prescriptive but at the same time it gives more guidance to the practitioners that need to work with them and reduces a bit the need for training or other issues just because the law aims to give you ready-made solutions, sometimes it works better, sometimes it doesn’t.

What I think is quite problematic in what Spain is planning to do is that the euphoria to incorporate green and social issues in public procurement is probably going to tilt the balance way too far and I’m concerned that public procurement is going to be used as a tool to channel into specific sectors or specific regions, money that is much needed but otherwise could not be conducted so I think that it’s going to be used for a backdoor award of state aid but again you could say that’s just me being a bit sensitive with competition law and its rules but I think that those are two big differences in the way things have been done.  

Thank you very much Albert. It’s time for us to wrap up the podcast so again, thank you very much for taking the time today and talking with me. You can find me at my blog, telles.eu, or on Twitter where I use two handles, @Detig for general discussion and @publicprocure for public procurement related topics.