framework agreements

#32 - Pedro Telles (Swansea University)

What do low value contracts, framework agreements and Brexit have in common?

Interview with Pedro Telles about low value contracts, framework agreements and what impact Brexit may have on public procurement in the near future. Pedro is a Senior Lecturer in Law at Swansea University and was previously a Lecturer in Law and Public Procurement Law Specialist at Bangor University's Institute for Competition and Procurement Studies. This is the final episode of the PPP (and a double length one) with the interview conducted by Albert Sanchez-Graells from the University of Bristol.

Transcript

Thank you very much Albert for accepting the request to be the host for the podcast because it’s the last one and I wanted to finish in a slightly different note than usual, so I thought it would be interesting to actually put myself at the end of the microphone and be on the hot seat talking about procurement instead of making the questions, and putting the head on the other people.

 

Yes, I’m sure that you feel very uncomfortable now in that chair?

Actually, I do [both laugh].

 

So Pedro, I think you have lots of things about low value contracts, this is something you’ve been writing about for the last what, four or five years, so what are your thoughts on that now, how do you see it coming in the future?

Yeah, that’s true, I’ve been thinking about low value contracts, i.e., contracts which are valid below the new financial thresholds for the last five years I think, and over the years I became very surprised with the way they were treated and actually their importance in the overall picture of public procurement regulation. I would say that firstly it’s important to talk about them today in 2017 because the thresholds that now determine the size of the internal market for purposes of public procurement are going to be revised by 2019, or at least it’s expected that the commission will look into them in 2019. And it can go either way, they can go up or they can come down. They have been very stable for the last 20 years, mostly changing just because of exchange rate fluctuations between the euro and the special drawing rights of the IMF, but come 2019 we may have a more significant change in terms of what are the contracts that are covered by EU rules via the thresholds. Now the current system is perfectly arbitrary, it’s set without any specific reasons, so that the threshold values that we know and have been using for the last 20 years or so, there’s no actual substantive reason for them to have the value that they have. And in consequence is that above the thresholds you apply the full might of EU rules and below the threshold you apply essentially national rules with exception of the contracts which are considered to have the certain cross bordered interest, which I’ll mention in a second. Now one of the interesting consequences of this arbitrary distinction is that in reality only around 17 or 18% of public procurement expenditure is actually covered by EU rules. So only the tip of the iceberg is actually subject to directive 2014 24, and the other directives as well. Which has led me to question a little bit the logic of the system, which is why would we focus the most important rules in just a small subset of contracts? As time has went on and I looked into a little bit more detail with what’s happening with the contracts below the thresholds, I was even more surprised with the way that they’re treated, and going back to the topic about the certain cross border interest test that was created by the Court of Justice first, with the Telaustria case may be 15 or 16 years ago, and has been upheld with variations ever since, effectively this means that for the contracts below the thresholds they will only be subject to the EU principles, if the contract itself has or is able to attract an interest from an economic operator based in another member state.

The Court has been fluctuating a lot between what is certain cross border interest, what is not certain cross border interest, and effectively this means to me that the Court has probably painted itself into a corner. In the sense that they are enabled to clearly provide a set of rules, or guiding principles that can be consistently applicable to any given situation. And the reason for that being that by subjecting the application of the rules to whomever comes to the contract or is actually interested in contract, we are subjecting the rules of the contract, or the procedure to a condition that is uncertain at the beginning. And that for me it’s a critical mistake and it’s a critical error from the legal system because you’re not providing any sort of legal certainty, for the public procurer they start the procedure, they don’t know at that moment in time if they’re going to be covered or subject to your rules in this case, the principles from the treaty, so equal treatment, non-discrimination, transparency, or depending on who actually comes up to the contract, if they’re going to be subject only to the national rules, whatever they may be.

 

But Pedro, if I can push you on that, because it’s very clear conceptually, but then at the same time every system has some sort of requirement for transparency and competition and proportionality, so what is in the principles that makes people so happy about them?

I suspect that it’s probably the fact that it means that in one way or another there’ll be subject to EU law and they would prefer to be subject only to the national law, whatever that may be, I know that in many member states there is a fully fledged legal regulation for those contracts, whereas for example here in the UK there isn’t, I mean if you look at the Public Contracts Regulations, as we did with our commentary, there is some regulation but it is very light touch and very modest in a sense. So I suspect that the problem people have is exactly being subject to those principles that are coming from EU law and not from national law. And obviously applying principles, it’s always prone to a significant degree of uncertainty in terms of what actually is included and contained within that principle. Whereas if you have national rules which may contain the same or similar principles, the national rules would be… one would hope, a little bit more detailed and prescriptive. So I think there’s a degree of legal uncertainty, but the biggest criticism that I have for the role of the Court of Justice in all this process is that it has effectively created the perfect "Schrodinger’s cat" of public procurement in a sense, that any given contract below thresholds may or may not at any given moment in time be subject to EU rules, i.e., the principles, or subject only to national rules, depending on the actual economic operators that turn up to the contract, or to the procedure.

 

Yeah, or even that could have turn up.

Or even that could, exactly, so it’s even more complex than that. So I’m really not happy with the solution that the Court of Justice has reached and I think that it is time that the Court actually looked at it with a fresh pair of eyes and reconsidered its approach. Now looking also at where the thresholds came from originally, I wrote a paper about that a couple of years ago and I was very surprised by again not finding any particular justification for the thresholds, and if I may use an analogy on this, let’s imagine that what we take now for granted, at least for now, free movement of people, or free movement of goods or services, they apply to all situations, without any question, without any reservation, and they’ve been in the treaty since 1957. What I think is the original scene in procurement is that we don’t have a similar approach or the treaty’s do not take a similar approach in 1950s and it was only in the ‘60s via the original directives that procurement was subject to positive rules and not only negative rules. Now when those positive rules came in they came in and allowed the member states to try and negotiate a degree of protectionism, for the national markets, and we can see that in the ‘70s in the way that the original thresholds were introduced, and you can clearly see that in the ‘80s when the threshold for works which was one million ECUs at the time I think, was increased to five million on the run-up to the negotiations for the Tokyo round, or the Tokyo agreement of the GPA, where works were the included as part of the GPA, and were included precisely at that level.

So as we’d accepted from the beginning that all public contracts would be subject to free movement and subject to this possibility of any economic operator participating without any discrimination, without any question, I think that the procurement landscape would be very different and we would not have thresholds at all. Now the other level of my criticism regarding the thresholds is that at least what they are today, we effectively we’ve got an internal market that is determined by external commitments, i.e., by the commitments that the union has accepted within the GPA. So the thresholds that we have today, that they’re in the directive from 2014 and they were updated afterwards, they are the exact same thresholds that the union has accepted within the GPA. Now the GPA as an agreement, or has a group of bilateral agreements effectively, implies that we are determining the size of our internal market, not by internal pressure or by internal drivers of the union, but by our ability to negotiate with our external trading partners. And that for me doesn’t make a lot of sense, effectively what we’re saying is that the internal markets, it’s not just us inside the union that decide what is internal market, it’s our ability to compromise with our trading partners that is going to determine the internal market. Again I don’t think that makes a lot of sense, I think that the union should be more ambitious and should accept that lower value contracts today also are part of the internal market and one of the reasons I think about this is if you look at our improvements in productivity have crept up over the last two or three decades, they have made it possible to actually… economic operators in other member states to compete for more and more contracts with the lower value, and I suspect that one of the areas where this is going to be more visible quite quickly, it’s going to be with contracts that have a digital nature, they are digital by default and digital only. So services, contracts that can be delivered over the internet, whatever they may be, whatever the actual object, for me, from my perspective today they are cross border, or they are bound to generate certain cross border interests for sure, because the opportunity and transaction costs of actually bidding for those contracts and delivering those contracts is much lower than it was to sell physical goods 20 or 30 or 40 years ago. So I think that if I could accept in the ‘70s that the member states would use the argument of opportunity costs, or transaction costs to block the application of EU rules to traditional goods and services and also works, today I think it’s less likely that that argument holds, but certainly it does not hold for digital contracts.

 

I think it’s very interesting, I think in terms of the relationship between the GPA and the directives, and particularly here in the UK this is something that people are starting to look at in lots of detail, because of Brexit and we may talk about this later, but how do you see the convergence, because if we push EU rules to extend corporates down, would it be all the way down to any value, or would we end up with a triple layer regulation where we would be looking at the really high value contracts, we will be GPA plus full EU rules, and then a sort of weaker EU regime for lower contracts, and then still as more domestic threshold, how would you see the final map once rethinking takes place?

Well as you’ve mentioned a few minutes ago that already happens to a certain extent with many member states, so Portugal, Spain, Czech Republic, Slovakia, Finland, Poland, those are the ones I know, they already regulate contracts below thresholds, and there is I suspect in most cases a very light touch regulation for really small value contracts and that varies from country-to-country, but the vast majority let’s say from 10,000 euros or 15,000 euros up to the value of the thresholds, they’re subject to rules that are similar to the ones that are already contained in the directives, albeit slightly, one would hope at least slightly lighter. So that multiple layering of regimes already exists, what this would do if you lower the thresholds for let’s say 10% of what they are now, is that we would have a lot more harmonisation of procurement rules across Europe in terms of the coverage of contracts and coverage of procurement spends, that is out there. So whatever option we prefer, we always going to end up with multiple layers of regulation, so it’s just a question of defining where the boundary for each one of those is going to be?

 

Yeah, I think that’s right, I mean there is also an element of interaction that probably will bring us to the next topic, but also the more aggregation of demand there is, and the more that use is made of framework agreements and dynamic purchasing systems, then the more span of reallocated towards larger contractual mechanisms that then would be covered by the euros as well, so I think it’s right to say if you want to have a sort of homogenous spread of spend covered by EU rules, we need to move the threshold lower so that those member states that are behind in adopting these frameworks and [?? 14.19] still get more spend covered by EU rules. Otherwise finding of the ones that are more advanced in the procurement are the ones that are also more subjected to EU rules, than the other way around.

Yes, no I think you’re absolutely right, and it’s another point that is interesting to mention here in terms of currency fluctuations and in terms of value, which is the exchange rates that then determine which are the thresholds for each member state, that does not have the euro as an official currency, or is set every three years as it is for the euro denominated currencies, or the euro denominated countries, but it doesn’t take into account fluctuations doing those two years, so you may have for example a contract which in euros was covered, and I’m thinking about the UK of course, a contract that two years ago would be covered both in the Eurozone and also in the UK, that because of sharp fluctuations in the value of sterling it should no longer be covered because it’s much lower, or it’s much higher than it needs to be. So that is another problem of using money in value as a proxy, for a potential interest of a contract for an internal market, so I suspect that going forwards, I think you’re right, that if we don’t change the threshold values we’re going to end up with a system whereby you’ve got some contracting authorities, in some member states which would have most of their procurement expenditure covered with the directives, and most contract authorities in most member states, not… and that’s what’s already happening to a certain extent because as I’ve said only 17% or so of the procurement spend is actually covered by EU rules.

 

So yeah, I think you have plenty to write about this in the next couple of years as well.

I do, I do, I haven’t finished it off yet [laughs].

 

But then at the same time you’re starting a project, right, because I think you’re seeking funding for work on frameworks, so that’s the other area of interest that you have at the moment?

Yeah, yeah.

 

So what are your thoughts about frameworks, dynamic purchasing systems and all these crazy things?

The first thing that comes to mind when I look at framework agreements is that they are a product of their time, a little bit like the thresholds, they are a product of the ‘90s and catalogue purchasing as it was designed in the ‘80s and the ‘90s. So it’s now 2017, and when we moved from a buying process that is very time consuming because we’re buying each unit or each time you’re launching a complete new procedure, to moving to an aggregate, a system of aggregated demand like the one for framework agreements, we’re moving into effectively the paradigm of the ‘80s and the ‘90s which was what framework agreements are, whereby you have a catalogue and certain participants are selected to be part of that catalogue and supply goods and services to the contracting authorities. Now the more I look into this, the more I’m worried about the implications, so on the one hand there’s no denial that it allows for savings to be found and it allows for the reduction of the transaction costs over certain given period of time, I agree with that, I don’t have a problem with that. My questions about framework agreements is, okay, has anyone actually looked at the possibility that they foreclose the markets, because especially in those framework agreements that are mandatory for certain contracting authorities to use, then only the suppliers that actually make it in are the ones that are going to be able to supply a certain demand for any given period of time, and in fact in most cases contracting authorities prefer to have lone framework agreements.

Then if you actually look at the way the framework agreements operate, I don’t think that we can actually say that the contracts themselves are subject to EU law, we can say that the selection for the framework, yes, but from then onwards it’s pretty much anything goes, because framework agreements tend to be a black box, no-one pretty much knows what’s happening inside them, how the money’s being spent, how the contracts are being selected, it’s just as if it’s not relevant anymore. So we move from a system where every single contract is important enough as long as it has certain value, to be covered by EU rules and national rules, to a system that we’re going to select a few participants, and then contracting authority does pretty much whatever it wants.

 

But I think that sceptics would say, well but then once they are inside the game, then the participants are going to monitor each other and the contracting authority, so provided you have some sort of private remedy that they can exercise, to challenge the mini competitions of the calls within the framework, then we’re fine, why would that not be sufficient, what would be your reaction to that line of argument?

My reaction would be I think two-fold. The first one is, well if you don’t know what’s happening inside you don’t know how the money’s being spent. So even if you’re inside the framework, if all the money is being steered towards one of your competitors for whatever reason, you don’t know if that is happening, you don’t know necessarily if that is happening. So there’s not necessarily any accountability inside a framework agreement. So that is the first problem, then because effectively contracting authorities at this moment in time have free reign to design the framework agreements, how they operate on a day-to-day basis as they see fit, it’s very hard for an economic operator that is inside to actually complain. On certain jurisdictions, for example the UK, complaints by suppliers are perceived to be a black mark against the contracting authority and suppliers are very careful in the way that they express their complaints, so if you’re already inside a framework agreement, what incentives would you actually have to blow the whistle and where would you actually blow the whistle, I mean if you consider that framework agreements are purely private contracts, are not subject to public procurement rules at least, it becomes very uncertain how would you go about and try to challenge any decision, because technically the period where the framework agreement was subject to EU law or to procurement rules has already passed. And that’s another thing it doesn’t make much sense to me, because with the traditional procurement procedure, you look at the ones that are covered by EU rules, EU rules apply from the beginning to the end of the procedure until the contract is awarded. With framework agreements it would seem that the application of the rules pretty much ends once the framework is established, and it’s not clearly extended all the way down to the contracts being awarded. So there’s a lot of uncertainty in terms of, again uncertainty in terms of what is the legal framework that to be applicable to those contracts.

Then as you said, it is possible for the competitors that are inside the framework sometimes to know what’s happening, and that leads to another problem which is an issue of competition law, because it facilitates or it creates the condition to facilitate collusion between the participants inside a framework agreement. So at the same time whereas as I’m in favour of transparency, usually inside framework agreements I am very very aware of the risks of too much information being disclosed within the actual framework agreement, which would help bidders to coordinate their practices. And then on the long run, there is something that has not been explored well in terms of framework agreements, which is they may lead to reduced supplier diversity in the long run. Why do I say this? Because if only a limited number of suppliers makes it to the framework agreement, by definition they’re going to be the best ones in the sense of their financial, of their experience, their financial figures, so turnover, the experience, all those selection requirements, and obviously the price of not being in the framework is so high that they probably are going to try to go as low as possible, even at the dumping level, to make sure that they get themselves into the framework agreement. So by definition this makes the life very difficult for small suppliers and younger suppliers in a market to make it to a framework agreement. While it is possible to design framework agreements that are more open than this, for the most part the ones I’ve seen are very much designed to reduce competition, probably too much, and that may lead in my view as more money gets spent for them, that may lead to reduced supplier diversity on the long run. So those would be probably the biggest issues I have with framework agreements. Now most of them actually do not apply to dynamic purchasing systems, with the dynamic purchasing system you can join and leave the system at any given time, as a supplier, it’s probably a lot more transparent because it’s always open so you always know more or less what’s happening, in terms of design it can be probably made as resource intensive or not as the framework agreement.

However, if you look at the number of framework agreements, versus the number of dynamic purchasing systems, there’s no doubt whatsoever that framework agreements are much more popular today than dynamic purchasing systems, but why is that, why is the market sticking with framework agreements, it’s because they are older, they’ve been used more often, people are more comfortable with them in terms of contracting authorities, what advantages do they see, to prefer to use framework agreements over dynamic purchasing systems.

 

There is a movement I think in the UK, to try to transition from the framework agreements to the dynamic purchasing systems. And it was never clear to me why dynamic purchasing systems didn’t work that first time around, and I think it, the main argument is oh we had to run an open procedures, so we didn’t want to do that, whereas now that we have a negotiated procedure, restricted procedure, sorry, we can organise dynamic purchasing systems more easily, but I don’t understand that because it’s open-ended by nature, so it will always be open forever. So how do you see that?

Well maybe an issue of misconception, I mean especially here in UK we have to understand that there’s been over many years a distrust on the open procedure, and for a long time actually the restricted procedure was more popular than the open procedure and the UK was the only member state where this was happening. And for me the explanation is that the restricted procedure allows the contracting authority to reduce the number of bids that they’re going to be looking at, and allows it to introduce only the best bidders actually make it to the bidding stage, so it gives them control, for whatever reason. I mean in other countries that doesn’t happen, but here it’s clearly an issue in my view of control and control over the market. Now probably people did not understand that or they did understand that the framework agreement allows them to reach the same conclusion because only a set number of participants is going to usually make it to the framework agreement so effectively you can use the framework agreement as you would use the restricted procedure, so it’s an evolution and that sense of the procedure. Whereas the dynamic purchasing system, because it requires the open procedure, even though even with restricted procedure it’s open as you said, for everything, it’s open-ended, so participants would have to be checked as time goes on.

I suspect people just thought that well it means that we’ll have to deal with the number of bids, a number of tenders and we don’t want that, so we want to manage our workload and we want to make sure that only the best end up. As time goes on I hope this changes and I hope that practitioners and public procurement officials, not only in the UK but also elsewhere, understand that perhaps that they will be better served with something that is open ended, like the dynamic purchasing system, instead of the more closed nature of the framework agreement. I simply don’t know if there is enough take-up, bearing in mind that dynamic purchasing systems is what 15 years old already, I don’t know if there’s already enough take-up to actually reach a critical mass, that would allow public procurement officials to feel comfortable with it and start using it more often, what’s your view?

 

I think it’s an interesting point, I think that the issue will come up every time a framework expires and the contracting authority needs to decide whether to tender a new framework, or migrate to a dynamic purchasing system and I think you’re right, it’s a cultural issue and I think that the, probably the policy design should be maybe nudging authorities to go for a dynamic purchasing systems as a default, unless they can find some very good reason to stick to a framework agreement, and my personal view is that competition authorities should be doing a lot more in this area, to a public sector, so not only in terms of cartels which you have stressed very rightly, but also trying to educate the public sector in becoming more open in the way they dynamically purchase from the market. But I guess this is going to be a discussion again for a long time, but I think any empirical work in this area is going to be much much deserved, so I hope you do move forward with some of your current proposals.

Well that’s certainly what I’m trying to do, I’m trying to actually look into framework agreements and dynamic purchasing systems in multiple member states, and think about why are they not being used more, the dynamic purchasing systems on the one hand, and why do some member states actually use framework agreements so much, I mean UK is one example, Denmark is another example, and then you have other countries that don’t use them almost at all, and why is that, why is there this huge discrepancy in terms of practice, and I think that the cultural issue is going to be one that is going to be that the forefront, but also even thinking about framework agreements, I think that it will be possible to design framework agreements that are less damaging to competing interests, or competing principles in public procurement, so for example if we reduce the length of the framework, if we increase the number of participants, those are two things that can be easily done, if the contracting authority is willing to try them, and they will at least minimise parts of the downsides of the framework agreements in terms of the impact that they may have on the market, and especially with the SMEs. So if you know that these framework agreement will last only for one year, well if you did not make it you may have an opportunity to make it in the following year. The problem with I see, as I see framework agreements in the UK, now is that they tend to last for four years and the underlying contracts may last for longer. So there’s another problem that we haven’t discussed with framework agreements, is that while the framework agreement itself may last for four years, the underlying contracts may keep on going.

 

Yeah, that’s the beauty of the lack of definition of active…

Correct.

 

You can keep on creating holes everywhere.

So I think this… framework agreements, and this whole area of centralisation of procurement as more and more money is spent via this demand aggregation tools, I suspect that we need to pay a lot of attention to them and we need to be very much on the ball in terms of looking out, they’re being used in practice and what are the trade-offs, because all these procedures and tools imply trade-offs, and I don’t think that the market and certainly the European Commission as key policymakers in this, I don’t think they’re really aware of the trade-offs that are being implied by the framework agreements over dynamic purchasing systems.

 

Yeah, I would agree, and I think you have plenty of work to do, but I think we have been speaking for this while about your old interests, about value of contracts and thresholds, then your new developing interests about framework agreements and dynamic purchasing systems, and then I guess we need to talk about things that don’t necessarily, are of your interest, but are on your table, everybody that does procurement in the UK, Brexit is not something we want to deal with, but hey we have to.

Yeah, we have to.

 

I don’t know, I mean we have spoken some times about Brexit but I don’t think we have thought together about how things are going to change or not change and why should they change, so I’m very curious to hear about what you have to say about Brexit and procurement generally, about how you think the UK is moving forward?

Right, Brexit and procurement, so I think we wrote about this, what, six months ago on our blogs, there’s a couple of entries about this.

 

Yeah, it feels like hundreds of years ago because this is…

Yeah, we haven’t revisited that recently. So Brexit and public procurement, the first point is why should anything change in terms of rules, there’s so much knowledge based on the current rules, there’s so many systems that have been built around the current rules, why should we change them, that’s the first question. Related with the first question is, if you look at where the government, all the governments in the past could have regulated procurement, usually the governments have been very loathed to actually use those powers of regulation, so for the first time in 2015 we’ve got some regulation for contracts building thresholds, but that is very light touch, it’s very detached in a sense, so if that is any indication it would mean that the government is probably enabled in my view to come up with a set of rules that is much better than the current ones. If you think about it, people don’t know this but we know the story or the issue behind this, many of the changes introduced in the current directive were actually pushed very hard by the British government, this may come as a surprise but there is a lot in the directive that came first and foremost from UK, obviously with the support from other member states, but the UK was leading the charge to introduce those changes. So it’s not as if all that is on the directives and in consequence, in the public contracts regulations, both the ones that you commented on and the utilities, it’s not as if there’s much there that is purely continental in a sense, it’s actually there’s a lot that comes from the UK. So those are the first two questions I would ask. So why should the branding change when so many of the rules are actually designed or influenced by the UK, and in the areas that the government could have regulated and can regulate it has not actually exercises that right. So those are the first two questions. So then we move onto the real complicated matters, which is whatever the government wants to do, it will depend first and foremost on what trade agreement it ends up having with the European Union. So if the trade agreement involves procurement, then I suspect there’s not much scope for the rules to change because if you look at Norway and if you look at Switzerland, that is the situation with them as well, so I suspect not much will change in that area. What may change is for example, and it depends where the country heads in terms of actual political direction, but we may have, as we have in Scotland and Wales today, a more clear steer for, or a more clear steer based on a certain industrial policy. We’ve been that to a certain extent with the attempts of the government to force procurers to buy British steel, I mean even in the Cameron government and now with Theresa May so we may see more of that happening, even though, and respectively of the agreement that the country ends up having with EU. And then finally the final layer of uncertainty, or legal uncertainty that may shape, or it’s going to shape how procurement is regulated after departure from the union, is the GPA commitments, is the UK part of the GPA, well at this moment in time it’s not, will it be able to inherit the schedules of the EU, maybe, will it have to negotiate with some session, probably. And if it does does it have an interest in actually committing to anything that is different from what it has now, even though the current system was negotiated by the EU on its behalf. So that will shape as well how the UK procurement framework is going to look in the future.

 

I think it’s interesting because there’s all these different dimensions in which things may change, so the industrial policy I think is the one that probably is going to put more pressure on the system, and then the negotiations of the GPA level, but I think that the biggest issue, and it keeps playing with my head, is why should anything change really, I mean I know what to be… what I think, and there’s something we actually have discussed, but the transposition was so minimal, that we actually lost all of the opportunities to reform the system…

Yeah.

 

…just two years ago. And I am still not clear as to whether it was in anticipation of a major reform down the line, or just because there are no clear ideas of what to do with the system that if you look at it, actually right now it’s pretty flexible, I mean the negotiation is pretty straightforward, you can introduce lots of sustainability and other requirements through your technical requirements and other things, do you think this has been sort of, everything has been held and waiting for big change to happen after Brexit, or are we just thinking about a change that may actually not get there?

I don’t think the government was holding up any changes from the 2015 regulations, I mean they spent a lot of political capital in getting the directive to be what it is, so obviously I mean bearing in mind as well, in the way that the government sets out transposition should occur, it was always going to be a very minimal transposition, but it didn’t have to be this minimal. The government opted to be very Spartan in the way that it transposed the directive into the national law, and I suspect that in addition to the stated policy, I suspect that one of the main reasons was that it was the only way they could get it out of the door before the elections in 2015. If you think about it is, it is pretty much the only reason one can conceive for the transposition of the main directive to be rushed and to be available and made available in February 2015, whereas for example the utilities one came much later, and the transposition had so many typos and errors that we already had amendments in 2016 to correct all those typos. So I don’t think that there is any actual desire to introduce a debrief form of the procurement rules. Over the years, and certainly I mean I have been in UK for ten years now, dealing with procurement, and something that has always surprised me is when anything goes wrong with any given procurement, people blame the rules and people blame the rules and in consequence they are blaming the European Union and saying, oh no, we cannot do this because of the god damn directives, or we have to do it this way because of the directives, and I was lawyer, I was a practitioner, it’s not that simple. There was already a lot of flexibility in Directives 2004 18, and there is certainly a lot of flexibility on this one, so if you’re not exercising that flexibility it’s not because you can’t, it’s because you’re not able to, for whatever reason. And you’re right when you say that for example it’s so much easier today to use negotiated forms of procedures than it was just two years ago, so what else do you want to do, I mean the only thing that I can come up with is not that was said in contracts at all, that will be probably the preferred option of…

 

Yeah, but that’s wrong in the UK [laughs].

Yeah, I know, I know, but that’s why we have got the rules, right, to avoid that. But I suspect that would be the preferred option for public procurement officials, which is I want to hire who I want to hire, whatever the way I want to hire.

 

On that note [laughs], how do you think it’s going to unfold now with this Brexit commitment requirements we discussed in our blogs yesterday, or two days ago, do you think that in this time in-between now and Brexit, they will keep on testing the waters, to see what they can do, or do you think that some point things need to stabilise or…?

For future reference, I mean these are two blog posts that we’ve written about, a cultural fit clause in a contract to be tendered by the Department of International Trade, which read something along the lines that we will want the contractor to choose to be committed to make a success out of Brexit. Now there’s two levels of that discussion Albert, I think the first level is in terms of the actual application of the existing rules in a day-to-day basis, on the one hand I hope it doesn’t change much, because if it changes it means that people are being very strategic in the way they approach procurement, that is effectively a possibility, that may happen. And the more strategic people are the more likely it is that they will just ignore the rules or at least the bits that clearly come from EU law, and the reason I say this is because over the last few months I became more and more convinced that as the UK works towards Brexit, the effect of the Court of Justice, of any action before the Court of Justice, or most remedies available, it’s going to become lower and lower, so it’s going to become weaker and weaker and people are going to start to become more embolden in the terms of, okay, if my colleagues over there have been able to tender this contract with these kind of clauses which are for whatever reason they’re illegal, why can’t I do the same, why can’t I push the boundary a little bit further. So I suspect that we’re going to see that happening unfortunately going forward. And to such an extent, if you think about before the transposition of Directive 2014 24, how Scotland and Wales were looking at community benefits, I would argue that many of those ideas would not fit within the rules as they were conceived in the 2004 directive. Do they fit today in the 2014 one, maybe, I mean we can discuss those, but I suspect that the most entrepreneur minds in a sense will continue to push the boundaries and try to see what they can get away with, because the risk of being caught is getting lower by the day, and even if they’re caught they can always play for time, and say okay, so if you want to challenge this, this decision for being illegal, go for it and take it all the way to the Court of Justice and by the time it reaches the Court of Justice we’re going to be out of the EU, so it’s not going to have a jurisdiction over the topic. That’s definitely a risk, I hope I’m wrong, but I think I’m going to see that more and more happening, not only in procurement unfortunately, but also in other areas as well. And as someone who is benefiting from free movement, of people at this moment in time, that makes me a little bit uneasy.

 

Yeah, I think you’re right, and I completely share your uneasiness. I think the last issue that maybe is interesting picking your brains on before we conclude is, you have been interviewing loads of early career researchers, people doing interesting research in this area for the last couple of years, and one thing you keep moaning about is methodology and how [both laugh] legal methods are not as straight as they could be and what do you want to say about this, get it off your chest.

Yeah, okay, so I’m going to make two comments on that, so the first one is it was great that I was able to interview so many people from so many different walks of life that are super smart, and are doing amazing research, related to procurement. I mean when I started this I could not anticipate the breadth of research that was being done by early career researchers on procurement, so it was great to see all that being done. So I’m incredibly grateful to the British Academy for actually giving me that opportunity, and obviously creating the obligation of me on delivering on that commitment. And the consequence of talking with so many people that are doing interesting stuff in procurement, from different sciences, different areas, different backgrounds, is I came to the conclusion of something that have been on the back of my mind for a long time, which is for the most part in law in terms of research methods we’re stuck in the dark ages, my wife she is, she’s a social scientist and she works in a medical school so she deals a lot with qualitative research methods, and we have intense arguments and discussions about research and research methods and I’m always in the losing side of it, I mean because I can’t really defend what effectively in a sense in law are essentially logical detections to such an extent, but a lot of inferred opinions and legal opinions from people that are looking at law and giving their opinion.

when I look at legal interpretations we usually evaluate the, for being right or wrong, depending on how the Courts end up applying them, which means that if you’re more persuasive than your opponent and people have a different view, you are more likely to actually be right. But that doesn’t mean that we are actually correct, and there’s an absurd I would say lack of good quality empirical research in law. Now over the years, there’s been an increase, and it’s important to mention that, an increase in the use of social sciences research methods to look into legal questions, and I use those for example in my PhD so I was looking at the law in action, how it was being actually applied in real life and what were the problems that people were having in real life. So it was a step forward in comparison with just, you know, traditional argumentation or traditional black letter analysis. But what I think is missing in law, and certainly in Europe, it’s happening a little bit in US, but it’s happening in Europe, is an ability and an interest and a commitment to do quantitative research studies in law, this is different from let’s say law and economics, because mixing law and economics means that you may think both research methods and research questions, so you’re looking at the research question, trying to see it yes with the quantitative research method, but trying to see it, the legal implications and the economic implications. If you look at the economics, they’ve made that jump maybe 50 years ago, if you look at political science they made that jump to quantitative research methods, what 30 years ago, 40 years ago, a long time ago. If you look at law we’re still in the bloodletting [laughs] age or type of research.

We certainly lack the ability to, most of us to do consistent high quality quantitative research using good empirical research methods. I suspect that the reason for this, and the real explanation for this is most of us, me included, do not have a quantitative background, i.e., we dropped maths in high school when we were 15 or 16, and that effectively makes us blind to that whole area of research and to those oldest methods that could help us actually look into legal questions from a legal perspective, not a legal economics perspective, but even from a legal perspective and reach conclusions using those methods. So I think I will finally have to take the plunge on that one and instead of just whining and complaining and moaning about it, actually try to do something about it, so that is certainly something that I will be jumping off a cliff pretty soon, I hope and suspect, what’s your view?

 

I think you’re right, and I think particularly in the way things are going with more interdisciplinary research and funding, really nudging people to try to go beyond their own discipline, we need to start doing more quantitative analysis and it’s going to be challenging to determine what can be done, what cannot be done, there’s also going to be lots of issues now around sort of automisation or artificial intelligence and how that can be applied to law, but I think that’s another area where definitely there’s lots of stuff to do in the future and, you know, as you say we need to just get out of the conference zone and go back to high school, if it’s about math or starting getting trained on coding, which are very different challenges and skills we need to develop, but that’s the future.

But I mean those problems were already faced by the other disciplines, they’ve gone through that, they’ve gone through their walk, to try to figure out and get out of the dark ages of research methods, so they’ve done that, so we can do that in law as well. Now there is one thing I would like to comment about, you’re right about the increasing pressure for interdisciplinary research and that is important because it gives us and everyone else a different perspective and a different view and frameset to interpret questions. But I still think, and will argue, that there is space as there is in economics and political science, to use research methods from those sciences, or imported from those sciences, to answer legal questions, which is slightly different from interdisciplinary research, and with this I don’t want to minimise the importance of interdisciplinary research and I think it’s very important and it’s key that more and more people are willing to work at the boundaries of their own disciplines, but for what concerns law, I think there’s space as well for legal research to be done by quantitative and empirical research methods.

 

You might be right, yes, but again another thing that is going to keep you busy for the future now [both laugh].

So is a life of an academic.

 

So it is. I mean you promised your audience a longer than regular podcast, I think they are now on the two and a half helpings of it, is there something else you would like to discuss or would you just want to draw this to a close?

I think we can draw this to a close, I was just wanted to thank some people before we finish, so first of all I would like to thank you for being the first guest of the podcast, and the last host of the current series, I don’t know if there’s going to be a third series or not, if there is going to a third series it’s going to be a probably a different format in terms of interviewing people from other areas and not just early career researchers, but at this moment in time I don’t think it’s going to happen any time soon, it may happen maybe next year, so big thank you for you Albert for both challenges at the beginning and at the end. Then a big thank you to all my other guests and interviewees that gave their time, gave their knowledge as well and were willing to be part of this project. And finally a big heartfelt thank you to the British Academy which has been absolutely incredible in the level of support that they’ve given me over the last two years. They’ve been very good in terms of the financial support, but also the ability to understand certain changes in circumstances, as life sometimes changes, and that’s why that has happened to me in the last year or so. So I’m very grateful for them, for the support, all the support that I’ve been given from the British Academy and the British Academy research officers  involved and particularly with the podcasts, so that’s pretty much it, it’s just a big heartfelt thank you.

 

And the same goes to you and I think that all of the public procurement community really appreciates the fantastic content that you have created over these three years, I think I speak with them just to encourage you to find a way of doing a third series some time, about something similar because this has been great fun and very enlightening to hear and to read and I think that there’s a lot of exchange of ideas and new networks coming off of this, so that’s very good work.

That’s very true, thank you very much, and just one final note to cap it up, I was incredibly surprised by the take-up of the podcast, there was a lot more people interested on these topics than I anticipated at the beginning, a lot more, so thank you for the audience, thank you to the audience as well for turning up every month or so to listen to the podcast. So that was the last Public Procurement Podcast episode for season two, you can find me at my blog, telles.eu or on twitter where I use two handles, @Detig for general discussion, and @publicprocurement for public procurement related topics, as ever I’m incredibly grateful for the support of the British Academy Rising Star Engagement Award, which made possible this project. If you like the show it will be really helpful if you can rate it on iTunes helping others finding it where it’s going to be staying for the foreseeable future. Until next time, maybe next year.

#13 - Ama Eyo (Bangor University)

Electronic procurement and dynamic purchasing systems

Interview with Dr. Ama Eyo, Lecturer in Law at Bangor University and Director of the LL.M in Public Procurement Law and Strategy.  Ama has done extensive research on electronic auctions in public procurement and has now turned her attention to dynamic purchasing systems.

iTunes

Transcript

Let’s start with a small introduction to talk about e-procurement. How do you think e-procurement is going to change in the near future?

E-procurements over the last couple of years, we’ve seen significantly how the attention has turned towards modernising the way procurement processes and procedures are undertaken, as well as in terms of the whole lifecycle of the procurement process end to end, ensuring that e-technology, the advantages that come from it, are deployed within the public sector. Almost in the similar way as the advanced processes we have in the private sector. So looking forward to the next couple of years, what I envision that is likely to happen is more public sector world is going on board with this new appetite, I mean when we look at regimes, such as the former Eastern Europe, they are picking up pace and there are a lot of electronic procurement activities going on there. Then from April next year, with a mandatory e-procurement that’s going to come into force, hopefully, we would likely see more traditional procurement practices giving way to less paper-based transactions and more digitalisation, so that’s something we should be looking forward to.    

It’s not only in Eastern Europe, I mean, Portugal has been using e-procurement as the default way of organising procurement procedures since 2009 I think?

Yes, I mean, the advantage of regimes such as Portugal is that they’re given the kind of learning experiences that the younger generation of EU member countries can look forward to. Practical lessons is to some of the success stories as well as share in some of their faulty experiences in order that those experiences are not repeated in the new regimes, because one of the things that we need to be very conscious about is that the deployment of e-procurement does not, on its own, solve the bad procurement practices, it is an enabler, so we still need to make sure that there’s appropriate training and there’s appropriate specialisations in relevant areas.

How do you think that dynamic purchasing systems are going to fit in in a world where procurement needs to be done online by e-procurement tools?

Dynamic purchasing systems, as we all know, is a procedure which is available for contracts, for works, services and goods, and mainly commonly used with requirements available on the market. Its main distinguishing factor is the fact that as a procurement tool, it is to be used on a completely electronic platform. So for organisations who would be using this tool, it’s possibly the first step towards an end-to-end electronic process engagement that they would be involved in. It could be used potentially as a means of them gaining practice and experience with electronic procurement technologies.

But why would people start with the dynamic purchasing systems if they need to do electronic procurement, why not just adapt existing procedures and do them online?

I think one of the advantages of the dynamic purchasing system is the fact that throughout its lifetime, it’s going to be open and is going to provide access to a pool of contractors. So potentially, what this means is that if you are engaging in a procurement where you want to keep afresh, or you want to keep your options open regarding potential suppliers that may likely become appropriate for that market, this is a tool that could potentially enable you take advantage of that option, because unlike some other practices, I mean, it’s not going to be the solution for all contracts, we all know that, it’s not even being used or touted as such, but it is for commonly required purchases where potentially the contracting authority wants to dispense with a need of going through the whole full tendering processes at each specific time, but then have a platform of potential suppliers, so it gives it that flexibility to bring in new supply base, while at the same time encouraging other good procurement practices if deployed effectively.

True. If my memory serves me well, DPS, dynamic purchasing systems, were introduced in 2004, in the directive 2004-18, am I correct or wrong?

Yes, they were.

So, with over a decade of potential experience in the use of this procedure, why are dynamic purchasing systems not being used more often?

Potentially I think one of the main drawbacks of the old regime on the 2004 directive was some of the requirements in the way dynamic purchasing systems were organised. For example, one of the requirements was that indicated tenders had to be submitted on every opportunity, and also the fact that a lot of systems were not set up at that moment, infrastructure was not ready. At the moment, we do have on the shelf tools that contractor authorities can buy into, that its experience has been gained over the years generally with e-procurements and then the new framework has also, in some ways, enabled the system in a better manner, in such a way that what needs to be done at the outset, it’s to clarify the qualification information of the suppliers and that are admitted onto the framework, with less requirements upfront at that stage.

One of the things I’ve heard on the grapevine about dynamic purchasing systems and why they’re not used as often as they could be, particularly as an alternative to framework agreements is that they imply an increase in transaction costs over the lifetime of the system

Yes. In reality, you will have that drawback still coming in, but again, the decision as to what procedure a contracting authority would elect, it’s based on a number of reasons. Some may be in-house, strategic reasons, and those kind of decisions may be what influence the uptake or maybe they decline. If we look back to things like electronic auctions, for example, we know that when they first started out, because of the government funding, there was support, that was given to support the uptake, a lot of contracting authorities used them, but it’s almost like it’s now on a decline, but again this is something that each contracting authority has to make on the case-by-case basis as to whether this is suitable for them. There are resource implications that have to be looked into. Would a contracting authority prefer to have a standard contract established for a period of years, and dispense with the need to go out to the market every so often, or is it the market’s such there might be benefits in opening up the supply base and inviting new suppliers who could help refresh what is available and out there. So it’s a consideration that needs to be made on a case-by-case basis. Obviously a lot of contracting authorities are treading with care to make sure that they only use it and not create additional burdens on themselves.

True. But one of the things I’ve heard, or one of the things I personally consider to be underlying the reason why framework agreements are more popular than dynamic purchasing systems is that on a framework agreement, you have a higher degree of control, it’s almost the system of set it and forget, you do a selection stage or framework award stage at the beginning, and then the framework is set and is not going to change for its duration, whereas with the dynamic purchasing system, it implies a need and an interest of the contracting authority to be up-to-date with what’s out there in the market and to accept new suppliers into the system.

And that totally aligns with what I’ve just been saying, that it’s a strategic decision that would need to be made by the contracting authority as to what is the imperative for going for dynamic purchasing system. We recognise the fact that it’s one of the advantages of the current regime, is the fact there’s a number of flexible procedures out there for each contracting authorities to choose from, the directive does not mandate as to what must be used on each occasion but each contracting authority takes into consideration what it wants to procure and it’s enabling environment in terms of any national framework that may regulate or implement the directive in future, and that would be the rational for whether it would opt for this or not. Obviously, what we are likely to see in the future is that, for contracting authorities who have not had the experience of monitoring this or using it, the other additional burdens of, and the loss of control which you have mentioned could potentially deter them, but again, what we are seeing in some sectors, especially from local councils here in the United Kingdom, for passenger transport services, is that they seem to find this suitable for that kind of requirement, whether it is the financial agenda or imperative, or whether it is the fact that they want to get, to refresh their market that’s making them go for this, I do not have the evidence to say, but we can see that it’s picking up pace, I mean I’ve been monitoring the use recently, and it’s picking up pace at a much faster rate than before, but only time will tell whether it’s something that is sustainable or whether it’s something that’s likely to die out once the initial inertia is off.

Do you have any numbers?

I couldn’t quantify them but I mean, if you look at current notices, there are about 24 out there.

Which is still a very small number nonetheless.

Yes it is a small number and they seem to be limited to certain sectors. Again, it might be just that somebody’s waiting for someone to use it and then learn from that experience, who knows?

What sectors are those?

The councils are using it, like I mentioned, for, recently home to school or college transportation. With those few examples of set-up or selection by the HMRC, there’s also business and management consultancy related services being set up using this approach, the dynamic purchasing services. Again, you can see that the imperative for this is almost that they don’t want to lock out potential suppliers in the market by using a framework, but then they’re also keeping in case that requirement is not actually used by the end of the day, so it lends itself to that flexibility, and that could be one of the reasons why certain contracting authorities would go for it and others may not go for it, but only time will tell whether the use would gain more acceptance.

Are we seeing a focus on certain contracting authorities or certain sectors?

My research has shown that a number of councils tend to use it, but more towards the Social Services kind of requirements, yes. There’s a couple of community-based interventions that are being procured by this procedure, well, by these routes to market, let me put it that way. Again, you would say that it would potentially be maybe sectors that were under the excluded services regime that are thinking that, ‘OK, we could use this as a way to see what is out there, we know and how to operate things more easily.’

In terms of the advantages that dynamic purchasing systems bring over other procurement procedures and techniques, which ones would you highlight?

I think for me, the most important one would be the wider choice of potential suppliers that are out there, giving the duration of the system, because unlike possibly the framework that you were set up for four years and the suppliers are locked out, this gives you that ability to refresh the pull of suppliers who can participate in that opportunity. Then also, potentially, if in future you have new requirements that can be put in within the current advertisement without breaking the rules on modification or new contracts, that could also be catered for in a more flexible way, so those are some of the key benefits of the DPS.

And on the other side, what drawbacks will you have?

I think, like I mentioned, like you mentioned, the loss of control is there, and obviously if it’s not money taught properly, it could end up in disastrous consequences. I would chip in here with a practical scenario of what happened in one of the cases where this system was used to set up passenger home to school transport system by council. Unfortunately, the nature of the system was such that it meant that vulnerable members of the society were kind of affected by the constant change in the service provider. Essentially, what happened was that the council forgot to exclude the transportation of students with autistic needs from their requirements, and some of the parents complained that it was very difficult for their kids when a different taxi company or transport service turned up to pick up their kids to school. So these is some of the things that need to be looked at, what are the requirement, what are the needs of the stakeholders for the requirements, and how can that be carved out in such a way that while trying to get the imperative of value for money, which seems to be what is driving it amongst some councils, we don’t lose the stakeholders’ needs and concerns in the process.

But that is true for any procurement procedure, I mean, what you’ve just described could have happened as well with the framework agreement.

Yes it could, but you have a longer system of control, but the way this was was that this particular council had a situation where for, it was unable, it actually intended establishing a contract with some transport service providers, but it was unable to do that. The loss of continuity had more effect than if there was a longer term contract in place.

How do you think we could increase the use of dynamic purchasing systems in the near future?

I think one of the good things that we could do, or one of, it’s probably sharing of experiences. In my conversations with some of the councils, one of the drawbacks is that traditionally, people kept doing things the way they’ve always done them, without thinking about how innovative, I mean, nowadays we talk about innovative procurement. Yes, innovative procurement can be, you know, going the long-haul, but maybe, if a rethinking the way we were accessing the market, maybe rethinking is there a possibility for DPS, would it be suitable, that can be one of the ways to improve its, increase its use. Also sharing the lessons, the poor lessons that have been realised from practice so that other councils don’t make those similar mistakes. Personally, my first encounter with DPS was a while back, it was in 2010, and this was before it became really popular, I mean it’s not that popular in the UK but as popular as it is now, I was actually shocked initially when the option was presented on the table as one of the possible routes to market, but reflecting on it and reflecting on the lessons that we learn from that exercise, I can see some of its benefits, this was, we used it to get training associates for teacher qualification training, and it was used to actually revitalise some of the pool of trainers that we had on the contracts with the organisation that I walked with at the time, so I can see some of the benefits, but again, we need to think about how do we deploy it in a way that brings effective realisation for consumers of these services, as well as the contracting authorities.

Just to finish it off, in dynamic purchasing systems, are you including it in the materials of the LLM procurement law and strategy?

Yes, it is part of the module that our students are to, our students take, and one of the things that we’ve done is actually for them to learn how one of the local councils here in Wales, Cardiff Council, has used it practically for Social Care Services as well as the home to school transport, as well as the practical lessons and drawbacks that they can pick from these experiences.

To conclude the interview, I would like to move the discussion into the LLM. So you started, or we started the LLM back in 2011, it’s now 2015 or 2016, in the last five years, what has changed in the field of predicament and in the way that we teach procurement subjects to students?

OK, great, thanks for that question. Uniquely, one of our imperatives in introducing the LLM was to provide a pool of training to experienced and inexperienced procurement staff. Over the years, we noticed that public procurement was taught at the Masters level, the postgraduate level, so one of the things that you’ll be pleased to note is that in order to enable some of the younger participants in our community to graduate from university with some knowledge of procurement, so we’ve got a module, we’ve actually got two modules at the undergraduate module. This is a significant change in that they are being equipped with legal education, albeit from the procurement and the strategic aspects of engaging in public sector contracts, and some of them have gone out to tender which has served them well either in private or the public sector. In terms of the distribution of offerings that we have on the module, the unique aspect of our programme is that we see that, well you cannot do procurement without the knowledge of legal principles. However, legal principles can only take you so far, you also need to have an awareness of some of the strategic imperatives that drive the organisation when engaging in procurement activities, and this is why we feel that there is a need to align both aspects. So in our offerings we combine those kind of issues, so the students look at not only the law but also the corporate strategies, as well as national and international imperatives.

Thank you very much Ama, I think that’s a great way to finish the podcast.

Thank you for having me and do have a good day.

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 am very grateful for the support of the British Academy Rising Star Engagement Awards which made possible this project, which includes both the podcast and also the conference.

 

 

#8 - Marta Andrecka (Aarhus University)

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.

iTunes

ranscript

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...

Of course.

 ...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...

Yeah.

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...

Interesting.  

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...

Yes, quarterly.

...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.