Status quo for electronic procurement under Directive 2014/24/EU
Interview with Petra Ferk, Assistant Professor for public administration at Graduate School of Government and European Studies and a researcher at the Institute for Public-Private Partnership Slovenia. Petra Ferk is the co-author of legal monograph, several articles and national reports dealing with public procurement, services of general (economic) interest (SGEI), public-private partnerships, state aid, energy and environment.
Hello Petra, welcome to the programme.
Thank you, it’s nice to be here.
Our topic for today is electronic procurement, in Directive 2014/24/EU in general, what would you like to talk about in this context?
Well, first I would like to mention that electronic procurement is not something what was completely new in 2014 procurement directive. The 2004 procurement directive had some provisions on electronic procurement, but they were on voluntary basis. In the preamble it was explained that contracting authorities may make use of electronic purchasing techniques providing that such use complies with rules drawn up under the directive and principles of equal treatment, non-discrimination and transparency. So already in 2004 it was recognised that these new techniques exist and it is possibility that contracting authorities use electronic procurement. Some contracting authorities actually did start to use electronic procurement prior to 2014 directive. What changed in 2014 directive it was that electronic procurement was introduced as mandatory. Particlarly important are Article 22 and Article 90 in terms of transposition deadline. And if we look at the text of the procurement directive, the 2014 directive as whole, we can see that approximately one fourth of the directive deals with electronic procurement issues. So this was major step forward.
Also in infrastructure directive the electronic procurement provisions were introduced and those are substantially similar to those in classical sector. Also in concessions directive we can find electronic procurement provisions, however the concessions directives includes electronic procurement provisions on voluntary basis, so it’s not mandatory.
Now, the most important provision, it’s the first paragraph of Article 22. This is actually the paragraph which introduces mandatory electronic procurement and it reads as follows: ‘Member states shall ensure that all communication and information exchanged under this directive, in particular electronic submission are performed using electronic means of communication in accordance with requirements of this article. The tools and devices to be used for communicating via electronic means as well as their technical characteristics shall be non-discriminatory, generally available and interoperable with ICT products in general use and shall not restrict economic operators access to procurement procedure.’ The whole article of Article 22 of the 2014 directive is on two pages; so this issue is really important. But from the content of this article it’s not really clear what is actually that has become mandatory. So we have to go through preamble and Commission’s documents to see what we are talking about and to be able to extract what has become mandatory. And the following phrases are mandatory: e-notification, electronic access to procurement documents and electronic submission. Since electronic notification and electronic access to procurement documents were in one or another way already used prior to 2014 directive, so the really new is electronic submission; this is also why it is underlined in the first paragraph of Article 22 with ‘in particular’ electronic submission.
When the 2014 directive or package was being adopted the clear political signal was given for electronic procurement and Member States, said ‘yes we’ll do it, it’s a good idea’, when Commission proposed mandatory electronic procurement. But then they postponed deadlines, and also, when finally the directive was adopted, there are quite some lengthy transposition deadlines for electronic procurement in Article 90. The general transposition deadline, as we know, for procurement directives was 18th April this year, 2016 and then for electronic procurement longer transposition deadline was foreseen and this is October 18th, 2018, except for those instruments where used of electronic means is mandatory and this is for dynamic purchasing system, electronic auctions, electronic catalogues, for central purchasing bodies and then electronic availability of procurement documents and publication of notices. Although, notwithstanding these provisions, the Member States may also postpone the application of Article 22 for central purchasing bodies till April 2017. When the directive was adopted it was expected that these are long enough transposition deadlines that Member States will be able to transpose this provision in time; now we can see that quite a few Member States did not transpose the directives yet and that those who did transpose the directives didn’t make clear major steps towards introducing also electronic procurement. So in practice we can see although the provisions are very…
Ambitious [laughs], yes, ambitious, in practice there are problems with implementing those provisions.
Let’s talk about the transposition timescales, I find it very interesting that when it comes down to say private business, all of us have been able to use electronic means to make purchases for the last almost 20 years, not 20 years, but almost, and it has been very common for all of us to purchase goods and services online for let’s say 15 years so it’s very interesting, that when it comes down to public procurement, the current directive, although it makes the use of electronic means to deal with the, especially with the submissions which is the most important bit, mandatory, it only does so from 2018 onwards, so effectively it’s almost like public procurement is lagging the private sector for 15 or 20 years in terms of adopting a technology, adopting almost a business strategy in a sense which has been very, very common in the private sector.
Yes, well, I see the main reason for it really in lack of willingness to do it because in technical terms I don’t believe it’s really so difficult to develop these platforms, they might be expensive, but not so expensive that it wouldn’t be possible, you know, to develop them if you have the will. So I think that everybody might be, I don’t know how to say, afraid to open up the markets because on one side, you know, it was meant that electronic procurement and platforms would open market and to enable higher cross border statistics. Although now I see, on the other hand, possibility that this might not be actually the case, because procurement platforms could be or can be developed also in a manner that will make additional barriers for procurement, you know, for the foreign suppliers, if additional tools will not be implemented.
For countries like Slovenia if the Contracting Authorities will not start to be preparing tender documentation in other languages… As one of the biggest barriers I see language really. I think that the other reason why we are in public sector really behind the private one, is maybe also lack of expertise with procurement officials, even to prepare specifications for procuring the company who would develop the platform, because they don’t have this capacity themselves. And on the other side they don’t encourage the markets, that the market would make design, that it would develop the platforms itself, as we can see in some countries. Portugal is always given as a good example, you know. The clear signal was given that electronic procurement will start to be used, so the market developed the platforms. Nobody really knows how many electronic procurement platforms now exist in Europe, it is estimated somewhere about 250, 300 platforms. And I agree with Abby Semple - she says that this is a really good signal, that we have healthy electronic procurement platform market. But, it is happening only in those Member States which were able to give clear signal to the private sector, to the companies, that they will start to use electronic procurement and this is something that what they will encourage. Also, that they will give into this area additional effort - send procurement officials to some additional education and also some other complimentary measures. Because, even if the market develops the platforms and contracting authorities don’t start to use it, they don’t see, why would they do it, you know what I mean…
I think your reference to Portugal is quite interesting and correct, I remember that back in 2008 ’09, or just 2009 when it became mandatory for e-procurement to be used in Portugal, that there was a huge backlash in the country, people saying, no, the market is not ready, suppliers are not ready, the public sector is not ready, no-one is ready, and the thing is seven years onwards everyone was more or less ready, contrary to what you would be expecting from hearing and talking with the industry or listening to the news, but for me what is the biggest message of the experience in Portugal is that actually it made life easier for SMEs and essentially national SMEs probably because something you mentioned and I agree with which is the issue of language. So if all the tenders are done in a local language, and in the Portuguese case well they’re done in Portuguese, if you do things online you’re going to be lowering the transaction costs for everyone in the market, yes but the biggest beneficiaries are going to be the national SMEs because they already have the advantage of speaking the language. So will it lead to more cross-border procurement, I’m not entirely sure. I think that it’s only one of the pieces of the puzzle that needs to change, electronic procurement, so that you can actually increase the share of cross-border procurement in Europe, there’s a lot more that needs to be done in addition to electronic procurement, that’s my take on it. About the current legal framework, what are the main positives that you see on it?
Well I see as the main positive the introduction of mandatory provisions as such, and then I think from there, everything is up to the Member States. It’s really like the initial push which the Commission encouraged with proposal, and then the Member States will have to do it from there. Because electronic procurement, also as you said, you know, by self it will not change much. Other measures will have to be done to achieve what was actually the first objective [laughs], why procurement was introduced at the first place. It was to encourage international trade or to open up the market, to encourage international business.
First mover Member States did well. A lot is really in knowledge of public officials, so this is something what we must not forget. A lack of knowledge and the language barrier, this is something what we have to consider if we talk about further development of the procurement as such. So electronic procurement is only one option. But why did I say that Member States will have to do it themselves? It’s really because we don’t have ,or at the moment I don’t see, any feasible measure what the Commission could do to enforce electronic procurement. Namely as long as we don’t have standards, it will really be difficult to assess if the Procurement Directive provisions on electronic procurement were implemented adequately, and to talk about inadequate transpositions, which might result in infringement procedures. This is really the only tool which Commission has to force Member States to change the current status quo because we see that not a lot of Member States made the step forward. So I believe that the next step which should be done, it’s really to develop the standards. How we will get to that point, to the standards it’s still not clear. My first guess was - because shortly after the adoption of a procurement directive, the directive on e-invoicing was adopted, and it is much more advanced than Procurement Directive on provisions on electronic invoicing and this is mainly due to the reason that electronic invoicing is being used to huge extent in Europe, due to other instruments, it was well developed also already for SEPA, so…
And also it’s being used by the private sector.
Yes, yes, developed by banks, it was really only the solutions that will now be used and made mandatory by public sector in public procurement. So in this directive on e-invoicing the implementation was made in three steps, first adoption of delegated acts, and then second to mandate the relevant European standardisation organisation to draft the standard, and then as the third step the obligation of Member States to ensure that contracting authorities and contracting entities really comply with that standard. I was expecting that this is the same, what will happen in public procurement. But then I talked to some politicians and also researchers which know the situation also well, what is happening, and then they estimated that Commission wouldn’t dare to adopt delegated acts on this issue, so it’s more we expect guidelines would be given at least in the first stage.
Very well, moving on from talking about electronic procurement in general, also e-invoicing in general, could you give us some flavour of what’s happening in Slovenia specifically?
Slovenia implemented the Classical Procurement Directive and also the Utilities Directive. In general we could say that what was a big change, why we have problems now, is that both of these directives were transposed with one act, one law, and that’s huge difference now, and we are dealing with, whole country is dealing now more with this issue, and electronic procurement is not being discussed really. The Ministry said that Central Purchasing Bodies will start to use electronic procurement in 2017, but they didn’t make any major step to start to develop the platform. And the private sector is not being encouraged to start to develop the platform(s), because there is really no signal, that it’s going to be used and it’s going to be encouraged. So nobody really sees the business opportunity.
It will have to be used from April 2018 whatever happens, I mean…
…in a worst case scenario comes April 2018. I think it’s probably arguable that those provisions have direct effect, so it makes life very difficult for Member States if they don’t have electronic procurement platforms in place. So my question is do you think that Slovenia will go down the route of developing a public platform or adopting a platform that’s going to be the public one, or they’re going to be like Portugal has done and open the markets for new providers to come in?
They are aiming to develop public platform, and this is also, why private sector is reluctant to invest into developing the platforms, so…
Yeah, it makes perfect sense.
Yeah, but discussions which they had now on how the new platform would be designed- it doesn’t seem that it would be user-friendly really. Also, what the new, what they did now with official gazette, where the tenders and notices are published, it’s much less user-friendly as it used to be. So this is why everybody really, you know, are just waiting what will happen … But it is not really optimistic to expect, that the new platform would be user-friendly.
Okay, unfortunately I don’t think that is the best way to go forward for a small country but let’s hope that…
It’s not, it’s not, and we are like… Because [laughs] I am one of the founders of Public Private Partnership Institute, we are seriously starting to consider starting to work on a platform ourselves, although this is huge investment for a small group as ours. But we have - because we are advising contracting authorities - we have huge problems with getting the bids. And it’s really difficult to negotiate with only one tenderer, especially now for bigger projects. Due to the crisis the construction sector went down and it’s really difficult to get the bids and we don’t have big value of contracts. So we see electronic platforms as one of the possibilities to bring SMEs from neighbouring countries to Slovenia, because we are too small to attract big companies, which would have the capacity now to tender in other country. So in these terms electronic platforms I think could help. They wouldn’t change statistics, because this would be small amount of contracts but I think in these terms they could help.
Very well and on that positive note I think it’s a good way to finish the programme, so Petra thank you very much for making the time to be interviewed.
Thank you for inviting me, it’s been a pleasure.
You can find me at my blog, Telles.u 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 of Rising Star Engagement Awards which made possible this project, or in this case the second season of the public procurement podcast.