Framework agreements in public procurement
Interview with Dr. Marta Andrecka, Postdoctoral Fellow at the Department of Law at the University of Aarhus, where she is currently working on a project called "Dealing with legal loopholes and uncertainties within EU public procurement law regarding framework agreements" sponsored by the Carlsberg Foundation. Before taking up her present position she carried out her doctoral research in Denmark and Australia and worked at law offices in both Poland and the UK. The topic for today’s talk is framework agreements, a relatively popular way of undertaking public procurement.
Hello Marta, welcome to the programme.
Hi Pedro, thanks for having me.
My pleasure! I would like to start today’s talk by drilling a little bit into your background. So you’ve been a little bit all over the place, you’re now in Denmark, you’ve been in Australia, Poland and UK, how did that happen?
Yeah, that’s definitely true, I’ve got a fair bit of international background, if you could say that. Well it started like usually it does a little bit by different opportunities coming across my way and yeah, I did my Master programme in Poland when I was already dealing with some of the procurement issue in regards to the licenses in commercial air transport and the procurement area was the one that was I working with during the time of my work as a practitioner in Poland and then a great opportunity of doing a PhD in Denmark came along and I dived into that and that took me all the way to Australia when I was comparing particularly the procurement framework for public private partnerships, so the way that they’re doing that in Australia and the way that we’re doing it in Europe and some interesting outcomes came out of that. The current project that I’m doing is again a type of comparative studies, comparative research, which is regarding the framework agreements as you mentioned and I’m looking at the framework agreements, the way that they’re implemented and the problems in practice occur] both in Denmark and in the United Kingdom. Just the beginning of this year I spent several months in Bangor University in Wales where I was mainly focusing on that bit of comparative studies in the UK conducting the interviews with the contracting authorities and central purchasing bodies and finding out more about the issues at large in the UK.
So what are such matters are you using?
Well the way that I wanted to approach this current project and frameworks was to talk really with practitioners and the reason to do that was because a) there is not really that much in the sources to find so we don’t really have at least at the European level, we don’t have much of the case law and actually this is duplicated the same way in the national legal systems in the UK and in Denmark, that there is not really a lot of case law on those issues but at the same time, like you already mentioned, framework agreements became over the last decade very popular and they’re representing more and more of the procurement in member states and there are several issues with them so I thought that I would just speak with the stakeholders in both of those countries, so the method is through conducting semi-structured interviews with the contracting authorities and central purchasing bodies and finding out what problems and what legal uncertainties they’re finding in their day-to-day practice and of course building upon that, I’m applying afterwards the traditional legal research methods.
In your view why are framework agreements important in 2015?
Well I think that one of the reasons is definitely a certain change over the last years in the way that we or the procurement in general is changing, so there is a certain professionalization of the procurement and there is a certain leap as a centralisation of the procurement and framework agreements are definitely the ones that are used to a large extent for aggregative procurement and through the fact how often they are actually using some of the member states, they represent a quite high value in public spendings. So you mentioned the numbers for the UK, if we look at Denmark one third of procurement currently is done through framework agreements.
In terms of spend?
In terms of spend I’m not able to actually give you currently the particular amounts but there’s comparably high number because it’s again aggregated procurement so they represent quite high value.
That’s a lot of money.
That’s a lot of money and what is interesting that on the one hand you’ve got those countries like UK, like Denmark, France and the Netherlands, that use the framework to a large extent and then on the other hand you’ve got countries like Poland that do not do almost any framework agreements due to the fact of worrying of how untransparent in this member state opinion frameworks are and being afraid of being controlled by other national organisations and being in the end of the day judged by doing things in untransparent, uncompetitive manner so there is a certain bias about them that I think is quite interesting.
Have you seen for example the difference between the older member states in the EU, let’s say the ones that joined the EU before 2004 and the more recent ones in terms of how they use framework agreements because you’re mentioning Poland as an example where framework agreements are not used very often but at the same time all the examples you gave of member states using framework agreements, often those were what I would call old school or old style EU member states.
Well yes, definitely I think that there is something in it, there is a certain I find different level of trust towards public authorities in those member states so I think that the ones that represent Poland as being one of the representative of the old Eastern Bloc, there is a certain hesitation that we want to mainly focus to check if the money that we’re spending is spent in the correct manner and obviously the issue of corruption in public sector is being brought up much more often than, for example, in a country like Denmark but at the same time from the latest news you can find out that we have a problem of corruption in public procurement also in Denmark, so a bit of both I guess.
But have you found issues surrounding corruption in framework agreements in Denmark or is it disconnected with framework agreements?
I didn’t particularly look into the issue of corruption. I think that what can be understand in a certain way but I think that it’s more an issue of being untransparent rather than corruptive, is the fact that very often we don’t know what’s happening in framework agreements at the later stage, so quite often the way that the contracts are awarded is probably not in the most openly competitive manner or in the most transparent manner that it could be.
In addition to those problems what else have you found that you were not expecting in terms of practice and solutions that contracting authorities have designed surrounding the framework agreements?
Well it’s actually quite interesting to look at those two countries that I chose to compare, so Denmark and United Kingdom because a lot of elements that follows from practice is quite opposite between them two. So if you look at the UK, majority of stakeholders tend to agree that the multi-provider framework agreements, so the framework agreements with several suppliers are the ones that tend to be used much more often, when on the other hand in Denmark definitely the single provider framework agreements are the one that are preferred and there is also a quite different and at the same time very strong argumentation why each of them is chosen, so when we look at the UK there is definitely a very strong push toward the value for money and receiving the best possible economic outcome from the framework and from that reason there is always mentioned the aspect of mini competition on their framework agreements allows you to do that because you retain a competitive tension to the very last moment and so on and so forth, so this is what every single organisation that I had opportunity to talk to, they would always emphasis that very strongly.
On the other hand if you look at Denmark, the reason why the organisations up here tend to say that the single provider framework agreements are the one that are preferable is to the fact of again, in their opinion, being able to achieve the best offer, best offer understand is you providing a certain exclusivity to that supplier so he was willing to give you the best deal. But also due to the fact of administrative costs, so a cost of having such a framework is cheaper and also the contract management and the contract management element is being brought up very often as the element making it easier to handle actually the framework agreement, so very often we will be dealing with hospitals, we will be dealing with schools and that was very often repeated to me that, well teachers or doctors they’re not specialist in procurement and they don’t want to be dealing with setting up mini competitions or dealing with procurement process, they just want to choose particular, I will say particular goods that they need to. So there is a quite different approach to that, definitely in Denmark we want to get the biggest control over the framework that we have but also we want to simplify the process as much as possible and from that reason maybe again the more centralised frameworks become more and more popular because then you don’t need to deal with the issue of setting up the framework on your own as a contracting authority, you don’t need to use your own money to do so or at the same time your own staff members, you can use the resources I used through the centralising purchasing body, so there is a different argumentation for choosing both of them.
I’ve got a couple of questions, one for each country. Starting with the UK and based on my own experience during qualitative research and using the same methodology as you if I see my structural interviews, one of the things that is important to control when you’re doing this kind of research is that there’s usually a difference between what people tell us that they’re doing and what may be happening in practice. Allow me to explain. If you talk with the people at the top of the organisation, obviously they will always say to you that they’re doing the best job possible and in the case of frameworks they’re using the frameworks this way so that it ensures that, for example, value for money is achieved and they get the best possible deal out of the framework but my experience when I actually analysed framework agreements in themselves and when we start talking with people in other roles inside the organisation, that image of certainty and security about certain outcomes begins to crumble and in other areas, some of my former colleagues at Bangor University which you know very well, a few years ago when they were doing research not on framework agreements but on other topics connected with procurement, what certain people at the top of the organisation would tell them would never match what was happening in practice, so in other words sometimes the person we have access to inside an organisation will almost assume a role of a PR person and say, no-no-no, this is all fantastic but it’s really important for us to be able to see what’s happening in practice underneath what they say so have you done any sort of control to try and figure out if what they say actually matches what’s happening in practice?
Well what I’ve attempted to do with this was... Well first and foremost of course, providing a certain commitment to ensure the confidentiality of any conversations that you have...
...and that hopefully to a certain degree helps the people to speak freely but at the same time I think what is important is again using the semi-structured interview because for every conversation that we have I tended to ask for particular examples and we went through different challenges and I think that I was definitely trying to get out of the conversations not only the pretty picture but actually the aspect that is the most interesting for us when we’re analysing those questions which is what went wrong or where there is certain level of uncertainty. What I also tend to do is, as much as possible through the sources that were available, I’ve always tried to look at the frameworks that were published, in particular organisations to actually look the way that the process is handled and what information is provided and some of the organisations were kind enough to provide me with particular documentations on which I could say straightforward what informations were provided or what guidelines was provided and that also provides me with certain information. But that definitely is an issue what you’re saying and definitely I will agree with that that when I had a chance to speak with the certain leaders so to speak of the procurement in some of the organisations they were much more positive about everything, when I think that you need to have an awareness of the fact that if we’re talking about framework agreements particularly done on big scale we’re talking about a very very big basket of products and we’re talking about description of those products, we’re talking about the particular value of each one of them and there is a certain element of lack of control actually to a certain degree, the control is definitely more difficult task when we’re talking about such a huge projects than when we’re talking about more simple straightforward procurement.
Moving on to Denmark. Have you been able to find out any recognition in Denmark about the downsides of going for single supplier frameworks?
Well definitely the security of supply is the element that is up here challenging and the price that you can reach but up here, I tend to hear that when you put together the cost, the administrative cost and cost of the resources that you would need to invest to actually have a multi-provider framework, even if you potentially could get a better deal to some degree and if you compare that with a single supplier, the single supplier will win so there is a general choice pro single suppliers in majority of cases but at the same time, particularly in sectors where the security of supply is important, so when we’re talking about hospitals, when we’re talking about medicines provided to those hospitals, up there where the security supply is definitely valued very highly, up there they tend to go towards the multi-provider frameworks.
But are they aware of the downsides because the biggest downside in my view is immediately...
It’s competition, completion goes out of the window.
Yes, they are but I think that the argument that is brought up is the simplification of the process and the more straightforwardness of the process and of course up here it’s debatable, very strongly debateable if that’s the choice but at the same time what has been brought up to my attention several times is that when we’re talking about frameworks we definitely need to have in mind that it’s a combination of law, administrative and commercial decisions so that administrative aspect of it actually was quite strongly emphasised to me that the way how we can handle the control over the framework and the management of the framework is extremely important.
So how often do they re-tender the frameworks?
The frameworks tend to be actually shorter and shorter, from what I...
Or what I was managed to established over the least they’re becoming shorter and shorter and I think that that comes from the realisation of how quickly actually things change in these days, particularly this element is brought up to my attention every time that we’re talking about any type of frameworks that in any shape of a form include let’s say products that are connected with some sort of innovation, so let’s say mobile phones is a good example, so every time there is a very quick change that may occur, the stakeholders tend to pinpoint that they don’t want to lock themselves out of the availability of those new solutions for too long, so even if you can argue that obviously you can include certain clauses in the framework agreements that will allow you to upgrade whatever the products are, what happens often particularly in innovation is that you can have four members of your framework agreement that in the moment when you were concluding your framework where the leaders in a particular sector but due to the specifics of the sector let’s say of the innovation it can just happen that in two years’ time when you want a particular delivery to be done, you need to purchase particular products, actually the number six or seven on your list is right now the leader because things change so quickly and it’s not in your framework so that way you’re being left with all outdated products that you can buy or you being left with the framework agreement that you will not use because you will go outside of it or it can be even worse because we got right now a quite strong movement of developing framework agreements that are of a binding power so that you actually are in a situation that you need to use that framework agreement so it can become quite complicated.
That was my next question! As in does everyone in the organisation that sets up the framework agreement already in a certain area of the government, are they under the obligation of using a framework agreement or can they still contract directly if they so prefer?
Well this is something that changes, that is definitely changes, so you can see if we look at Denmark and UK again, in UK I think that it’s still not a standard but it’s again developing more and more and in Denmark they become more and more popular and then on the other hand when you’re looking at Sweden and from the conference that you’ve been also been part of, we managed to find out in Aarhus at the beginning of this year when we were speaking with some of our Swedish colleagues, that actually there is a certain level of interpretation of framework agreements provision, that they have actually a binding power so it’s depending from member states but when we look at Denmark there is particular framework agreements that are binding and the reasoning behind that is again striving for achieving the best value and giving someone this type of exclusivity right that hopefully brings the best prices and so on and so forth. But I wouldn’t say that it’s one or another, it something that keeps developing that we have more and more currently framework agreements that are of a binding power for the organisation to use them but I wouldn’t say that at least currently, to my knowledge, they’re becoming a majority of the policies of the framework agreement.
How long do framework agreements in the UK usually last? The impression I have from talking to people is that they like their framework agreements to last the full four years they are entitled to?
Yes, well that’s also what I’ve managed to see and then there is also a question that’s being brought up quite often about the duration of the contracts being awarded on the basis of framework agreements how much longer they can go for and that’s again a bit of uncertainty there. And I think that when in certain sectors there is a reason for that, for trying to have them for as long as possible and that can be in very simple office supplies purchasing where you find that you don’t really need much of a change so you would want to get away with the administrative burden of concluding subsequent tenders as much as possible. When in others, like I mentioned the innovation, for example, that’s where they were trying to have them shorter but it’s again, it’s coming back to the issue of administration, that if you talk to the people that are conducting the procurements, particularly in smaller contracting authorities, they will try to get rid of the procurement burden for as long as they can.
I find it fascinating that when it comes to framework agreements the administrative burden and the transaction costs involved by the procurement processes are at the forefront of the decision to use the framework agreements but when you’re looking at alternative between using the open or the restrictive procedure, in the UK at least they will go for restrictive procedure which tends to be a lot more time consuming than the open procedure in similar situations.
Well that is true and at the same time the question is, well if you conduct a framework... Because if you look at it from a different perspective, so if you conduct a process of establishing framework agreements that yes, it will be quite time consuming and you invest a fair bit in it but if it’s done correctly then a lot of subsequent cost that would occur later on if you would look on alternatives, so procuring particular purchases every single time goes away, so actually if done right I think that it can be a very efficient procurement tool.
One last question. What improvements should be made to framework agreements and particularly to their legal regulation, if any?
Well I’ve got big issues when it comes to framework agreements and the transparency or lack of transparency with framework agreements particularly at the subsequent purchasing stage, so particularly if we’re talking about framework agreements with several suppliers and we’re talking about a situation in which not all terms are straightforwardly at the beginning of the process established so then you as a contracting authority conclude a mini competition and currently we don’t have much obligations when it comes to how such a mini competition should be concluded and there is very strong, in my opinion, lack of transparency at that stage. What I mean by that is that if you’re a member of the framework agreement and a mini competition is held, well contracting authority does not have an obligation to inform all of the members of the framework agreement that such a mini competition is held but only those ones which are capable of delivering the product. So what it means is that if you’ve been wrongfully categorised as someone who is uncapable of delivering the particular purchases you won’t even have a chance to fight such a wrongful qualification because you just will not know that a mini competition is held. The same happens if you’re outside of the framework agreements, there is no possibility of really seeing into what happens in the framework agreement, so what mini competitions or what contracts are awarded because at the same time you don’t have any obligations to establish or publish the award notice under the framework agreements. So in my view, I think that the change should be done to that respect, that there should be a certain improvement in regards to the transparency, I would see it preferably in the obligation of publishing some sort of contract award notice. Right now we have the opportunity in the form of suggestion in the directive, in the new directive, the provision regarding the quarterly... Quarterly or from sort of cumulative...
...every couple of months. Yeah, quarterly publication of notices of award of a contract under framework agreement, like I’m saying this is not mandatory and I think that there definitely should be some sort of obligation that should be done.
Okay, I think we can finish the conversation with that information. Thank you very much Marta for your time.
Thanks for having 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. As ever I’m grateful for the support of the British Academy Rising Star Engagement Award.