Podcast

#12 - Nat Green (Shaw LLM Fellow at George Washington University)

Ecolabels and environmental considerations in public procurement

Transcript

The interviewee today is Nat Green, a Shaw LLM Fellow at George Washington University in Washington DC. His publications to date focus on the legal and policy implications of large-scale hydropower development, and other renewables in Africa and Asia, in addition to a more recent foray into questions of sustainability in international procurement.

So, this is the first time that we’re interviewing here someone that is coming from outside the EU, and has a completely different perspective on a public procurement legal framework, so it’s great to have you on board. If I can start to get the ball rolling, what do you think are the main differences between the US and the EU at this level of sustainable public procurement? 

In terms of main differences, it’s sort of an interesting question for me, because I’ve really, as you noted, I’ve come from more of an environment and energy law background that’s sort of, it’s really the potential in procurement mechanisms and you know, government contracting mechanisms in general, to help develop certain environmental, or even social safeguards that’s sort of, drawn me to this subject. So it’s actually the similarities that I’ve concentrated on more than anything. In terms of the differences, I do think a lot of it’s political. I think there’s more of a political will in the EU to open up the process to what we call our economic externalities, where we might also call, in much of the literature, market failures. In the US that is, we share many of the same principles, and providing for open competition and, sort of, fair value at pricing, and in-state procurement, but as I said, the political will to provide for a more open interpretation, and incorporation of externalities into the system is, it’s a little bit more difficult to attain I think, which is one of the reasons why I’ve come to focus on the potential in eco-labelling systems. You know, going forward, especially in this, and providing kind of, a shared sustainability network for the two models.

So, what are the similarities then between the US and the EU, in what concerns the use of eco-labels? 

Well, interestingly, there’s certain, what I have come to think of as flexibility mechanisms or models that are built into those systems. The thing with eco-labels, you know, this is essentially something that allows us to harness market forces. One thing that the US and the EU share of course, is a push towards ever greater market liberalisation, and the idea is of course that if you have a third party, usually non-profit, that has a mandate to certify certain practices or services or products, as, you know, having sort of, a lower impact on the environment, it allows consumers to use their purchasing power essentially to help to achieve the goals that lie behind the certification. Right, so the similarities are pretty much found in what I’ve, and many others have called the Or Equal Standard. Well actually, that’s how you use it.

The similarity in the legal approach to eco-labels is actually, we have very similar statutory language. For the US FAR, the Federal Acquisition Regulations in, let’s see, that would be FAR 23.103, we actually, it encapsulates a series of recent executive orders that call for the greater use of eco-labels in government contracting. Actually it calls for very wide spread use, and you know, as I was trying to say earlier, the eco-labels, it’s an attractive way to do it, because like I said, politically it’s very difficult to even establish what sustainability is, and in fact the word sustainability, people shy away from it a little bit now in the environmental law world in the US. You know, here in Washington DC, the Environmental Law Institute, if you go and talk to the scholars there, they’ll tell you how about ten years ago it became a really big idea, and people just got tired of arguing over what the word sustainability even meant. These eco-labels kind of fixed that for you, they make the decision for you.

So, that sort of, jumps us past the political and policy wrangling over many steps and deciding what we mean by sustainability standards. So, the US FAR now provides that government contractors need to use products that are certified under certain labelling schemes, and similarly recent EU directives have called for a great incorporation of eco-labels, and some of these issues have also been incorporated in the GPA, so what really brings them together is the way that they allow the incorporation of eco-labels in such a way that anti-competition regulations are not upset.

There are a few points there for us to unpack a little bit more. I’m fully behind the idea that the word sustainability became pretty much meaningless, because it’s more of an umbrella term, or another term where you can project whatever you want into it, depending on your background, depending on your policy objectives, so on and so forth, and that’s not something that I originally envisioned, you know, or anticipated for that particular word, so I completely agree with your view that it’s preferable to use more precise terminology like eco-labels. Having said that, one of the fears that I have, in what concerns the use of environmental considerations in public procurement, and also social considerations in public procurement, at least here in Europe, is that they can be used in a way that it’s not market friendly. They can be used to actually restrict competition and restrict the market to certain suppliers. 

Right, that’s a concern that I’m aware of, and I actually, I find it really interesting, because from my perspective, the use of eco-labels, it’s an interesting tension, because you know, on the one hand we’re trying to, if we want to start using eco-labels as a way to further policy ideas, and specifically sustainable policy ideas, it has to work as a market instrument. As you say, you know, many have raised the possibility that it could actually become, you know, certain member states in the EU for example, could start favouring certain eco-labels, and that could actually become a barrier to cross border traffic. I know that some… the idea’s been floated so that in future directions, or in future revisions of the GPA, they include competition guidelines that specifically address the use of eco-labels to counter against this. I can’t be sure how successful that would be. Again, from my perspective, as being a US environmental lawyers, and especially, you know, I have a strong interest in climate change issues, I don’t see the eco-label as a permanent fix.

I think that many scholars on the European side have looked at the potential for, sort of, long term systemic change, essentially to procurement culture, in providing more, kind of, sustainability safeguards, but I think they’re very correct in addressing the fact that this would require tiny, incremental steps at every stage of implementation, because you’re changing the driving forces in many ways. You know, you’re having to redefine just basic issues of value. The use of eco-labels, it’s sort of, a low hanging fruit. You could even see it as triage. It’s a way to help to start shifting certain, really commercial standards while other policy are implemented at sort of, a higher level. I guess I see that, sort of, two-stage process as having some potential to alleviate any anti-competitive side effects, if that makes any sense. It’s just a, it’s an idea I’ve come up with.

Well it does to a certain extent. I mean, on the other side of the argument you have the idea that eco-labels themselves may be considered anti-competitive, because effectively you’re giving a monopoly to an external organisation, even a standards setting body, whatever, to define what are the requirements that everyone operating in a certain market will have to comply with, because you’re requiring that eco-label, whatever it is. And if you think about the Max Havelaar case, let’s call it the Dutch coffee case, so it’s easier for the people that are going to listen to this, so if you think about the Dutch coffee case, the crux of the matter was precisely that it was a private standard that was being imposed on the market. And that was deemed to be anti-competitive, and that was seen to be as not compliant with EU law. 

Right, right, and one thing that the court did with that decision, is they made a very small observation, which is that if, you know, if the contractor had simply included ‘or equal’ language in the contract… they included it in an annex to the contract, but that wasn’t clear enough, and I would agree with that, meaning that this private label became by its inclusion in the contracts, became not so much the label itself, but represented a certain standard. Now in terms of, you know, going forward, coming up with a standardised way for contractors to take a given eco-label, and decide exactly what standard it represents, that’s another issue, and I haven’t hit that yet. But that’s the decision the court came to, subsequent your EU directive essentially took that and tried to… said that if a private label is incorporated as a contracting requirement, then it’s to be taken automatically as representing a standard, rather than that label in particular. You know, that’s the stopgap measure in terms of preserving competition. And the US has this too.

Okay.

You know, what I agree with is that it provides an opportunity for harmonisation between EU and US procurement systems specifically dealing with environmental issues. You know, I think that that’s a potentially powerful tool in providing, kind of, a shift in industry standards in quite a few different industries. I’d be interested to see how that worked out.

Okay, so if you dig a little bit deeper into that, how should the US and the EU change their use of eco-labels in public procurement?

Well, as I said, I think the next step is to see how this Or Equal Standard actually works out. You know, as you say, whether or not bodies in the EU and the US can, in a reasonable and cost effective and efficient fashion, take the principles inherent in private eco-labels and apply them as more general standards, that might require a certain growth in institutional capacity. It also will require close attention to its competitive effect vis-à-vis small and medium enterprises. I know less about this in the EU, but in the US of course we… that’s one area where a certain degree of, forgive me, anti-competitive… you know, preference is allowed, and because it’s seen as an important policy issue.

Can you tell us more about that?

Well, off the top of my head, the actual FAR part, small and medium business considerations, or small and medium enterprise considerations are, essentially it’s almost like we have an affirmative action to allow small and medium enterprises to compete on a more equal footing with your larger government contractors. And of course that shifts with the nature of what you’re… of the product. You know, we’re not going to work very hard to make it so that a mom-and-pop business can try to supply military hardware, although there are very small businesses that require less intensive, you know, military hardware that it’s less difficult to create, or make or research. I know that there are very small body armour companies for example, that are contracted to the US government. But you know, beyond that, when it comes to your basic supplies, say your coffee, or you know, services, people shoot for an equal playing field. So, obviously that policy consideration is still linked towards the whole idea of greater competition, so it’s hard to make a direct comparison, I suppose.

 

Moving forward to another topic, revisiting something that we’ve already mentioned, but not in detail, which is externalities. What is your view about the inclusion of externalities in public procurement? Pollution is an obvious example, but what else can you think of? Should we go down that route or not? 

I’m not sure. Like I said, this is actually, fortunately your podcast is about, you know, emerging academics. This for me is a very emerging field. It’s actually a little bit difficult for me to generalise. I love the idea of using procurement and using these kinds of tightly controlled markets to further certain sustainability goals, and I see it as being, kind of, the opposite end of the spectrum from say, the Paris COP21 talks that are happening at this moment. I realise this is sort of, tangential, but just to take a quick observation, is that for the COP21 these talks are… it’s an old, established model for reaching international agreements. When it comes to environmental issues, the great success historically of course is the Montreal Protocol that eliminated… that gradually scaled down and eliminated the use of CFCs in aerosol cans, and had a very positive impact on preserving the Earth’s Ozone Layer.

With greenhouse gases it’s really, really a very different story because you’re dealing with a much greater range of practices and technologies, and they’re much more vital to the way we live our lives. The interesting thing to me about trying to [?? 14.51 attack] any externality, or you know, like I say you could call them market failures, through procurement is that it’s immediate. It can have an immediate and very wide ranging effect, on a wide range of industries. I was fascinated when I found out that Walmart here in the US is one of the largest government procuring providers, or suppliers.

Really?

Yeah, so I mean, think about it that way. Anything that… government procurement takes up enough of their businesses that it wouldn’t be cost effective to just shift part of their business towards requirements to bring them into compliance with government contracts. They’d probably have to do it across the whole range of their business.

That reminds me of something that happened maybe ten years ago, with the Reduction of Hazardous Substances, whatever Directive, which when it came into force and effectively led to a change in how suppliers based anywhere in the world could sell their products here in Europe, their electronics products, what I heard was that effectively there was an externality coming out of that process which led to the whole world benefiting from the changes imposed by the EU, because it became economical for a supplier to run two, effectively two different, let’s say production lines, one for Europe one for the US, or one for Europe and one for the rest of the world.

No, that’s exactly it, and actually on another angle, one of the reasons that I believe, I just, I’m… I’m pretty sure about this. One of the reasons is that the US has very low standards for cosmetics, especially perfumes.

Really?

Yeah, and perfumes can potentially have quite scary chemicals in them. They’re all constructed at this point from petrochemicals, and there are a lot of things that can go inside that are, you know, I mean, from my point of view a little bit unchecked, essentially. And, you know, we really don’t have much of what we call a cautionary principle. We don’t err on the side of caution, we err on the side of, you know, people exploring their options, which you know, has its plusses and its minuses. And the thing with perfumes is that most of them come from Europe.

[Laughs] 

We are piggybacking on your standards.

Okay. 

There are some… anyway, that’s completely tangential, but I find that very interesting, and yeah, at the same time I think, you know, we do allow for a certain amount of anti-competitive legislation where the public interest is really a concern, and hazardous materials is a perfect example. You know, in this case it’s slightly different, because we’re trying to wire externalities into a legal mechanism.

Yeah, yeah, of course.

The whole purpose of which is to uphold a certain level of competition. So I realise this is tricky, I really do, I just wanted to show how it can be done potentially, without breaking too many laws.

Okay.

 Yeah, or any!

 Or any, or any. You know, just change the law, and that’s also, we’d [?? 17.59] to do.

 Well, I don’t think we really do it at this point. I think you’ve got to actually employ eco-label systems for products and sell them pretty much effectively the same way between the US and the EU. I think it would lead to some cases certainly.

Yeah, I think so. Speaking of both jurisdictions, or both legal systems, we have something in the horizon coming fast towards us, or not, the TTIP, the Transatlantic… what does the acronym mean? I never know.

Don’t ask me!

Well, let’s just call it the TTIP, everyone knows the acronym, and no one knows what it means, or at least I don’t, I remember out of the top of my head. Anyway…

Yeah, Transatlantic Trade and Investment Partnership.

That’s it. 

Yep.

So should we consider, or should the negotiators in both sides of the table consider using the TTIP for example, to harmonise eco-labels across both the US and EU?

I think the potential is certainly there that we could. I understand that the TTIP negotiations between the US and the EU are based on the revised GPA. The revised GPA does include provisions for the inclusion of eco-labels, and includes this, you know, again the Or Equal Standard. The Or Equal Standard is simply just that when you write the contract, when you draft the thing, when you say, like, I want, you know, I want my coffee to be Fairtrade certified, you have to say Fairtrade certified, or equal.

Yeah.

Right? So, just to make that explicit. It’s there in the negotiations right now. It’s on the table, so that’s something that I feel could de facto harmonise the use of eco-labels in procurement, because I think that the legal structure internally in both the US and the EU is there to support that.

Okay, so if you think about an example, let’s say that we have an eco-label in Europe, and another one in the US, they’re not exactly identical, although they cover the same area. I mean, the problem with the ‘or equal’ approach, which I mean, it’s very common in Europe in many areas related with procurement, it’s not just with the eco-labels. The problem with that is, where do you draw the line on the equivalent?

I agree, I think that that’s the biggest stumbling block, and I think that honestly I’m not sure yet. I’d love to hear any ideas that anyone out there might have. You know, off the top of my head, that’s something I’ve been keeping as kind of, an open question. I think that in my dream of an ideal future, if eco-labels do become a means of commerce driven dialogue between the US and the EU, I consider it possible that the question, the tension that will inevitably be there regarding exactly as you say, how do we express individual eco-labels, and they are very individual, as given standards, will lead to greater legislative and policy dialogues. You know, I see it as a potential legislation and policy driver. That’s not to say that I think we should… I’m thinking of this as a monkey wrench that we throw into the machinery, you know, not at all. But it’s something that I think has been developing for some time. The EU itself has been putting significant resources into developing a very reliable EU-wide eco-label. I think that policy members, especially in the EU have had this transition, or this possibility of sort of, the basis for a dialogue, in mind for some time, and in the US we’re just beginning.

Eco-labels for us have usually involved on the legal level, have usually involved issues of international trade under the WTO. You know, we have the great tuna-dolphin, and shrimp-turtle cases. Tuna-dolphin at least is still on going, amazingly. And so in terms of using it specifically as a part of government administration, that’s a new idea. It really depends on probably who our next president is, how far we go with it. If it’s a Republican, not so much, if it’s a Democrat, maybe.

Okay, I think that’s a very good way to end the interview. Thank you very much for your time Nat, it was great having you.

I had a very good time, thanks for having me.

Before I close the podcast, I’ve got an announcement to make. You can find information about the Early Career Research Day Conference at the publicprocurementpodcast.eu website. Long story short, if you’re interested in presenting a short paper, please submit an abstract and CV by January 11th. We’re aiming to run the conference, I think on March 4th, which is a Friday, and it’s going to be done in London. We will be selecting ten early career researchers to take part in the conference, and the travel costs will be covered up to a maximum of £300. We will also offer one night accommodation at a known sumptuous hotel in London, so if you’re interested, just drop me a line, or submit an abstract and a CV. You should do so using the contact form available on the publicprocurementpodcast.eu website. Finally, as usual 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. Finally, I’m very grateful for the support of the British Academy Rising Star Engagement Awards, which make not only these podcasts possible, but also the conference.

#11 - Abby Semple (procurement consultant, postgraduate student)

What will public procurement look like in 2025?

Interview with Abby Semple, a Procurement Consultant and postgraduate student at the University of London Birkbeck College, who runs the blog Public Procurement Analysis. She’s also an expert in sustainability in procurement. Earlier this year Abby was one of the first authors out of the gate with A Practical Guide to Public Procurement, a book about the new public procurement directives. There were many topics we could have chosen for our talk today but we settled on one slightly different from usual. Today’s talk is focused on the future of public procurement, more specifically how procurement may look in 2025.

iTunes

Transcript

Hello Abby, thank you for coming to the show.

Thank you. Nice to be here.

We were discussing when we were setting up the interview what topics we could cover and what questions we should go for. One of the first ones you suggested I think is very, very good, if you look ahead for the next ten years or so what would we perceive is going to be the changes to the market in public procurement in Europe? Will there be more or fewer contracts advertised and more or less competition?

Well it’s maybe a bit of a risky topic for me to have proposed because I think most people throughout history who have tried to predict the future have been proven wrong! It’s often interesting to see in which ways they were proven wrong so it’s maybe a little bit dangerous to talk about this but never mind, you know, it’s a Monday morning so may as well get stuck in. In terms of that question of more or fewer contracts, for me the big question is at what level are contracts being advertised? Are we just talking about OJEU advertisements or are we talking about national databases, national websites? And my guess would be that you’re going to have about the same number of contracts advertised in the OJEU but a lot more contracts being advertised on national websites at national level and a lot more potential at least for cross-border competition via those national portals as they sort of gear up. And I don’t know whether they’ll all be following similar standards but at least they’ll become more intelligible, more accessible to bidders outside of the Member States where they’re being advertised.

So you reckon that it’s not going to be a big change above the thresholds and if there’s to be any change at all it’s going to be below thresholds?

Yes, that would be my best guess. Because if you look at what’s advertised in the OJEU at present you see some really interesting trends in terms of which countries are advertising the most contracts and it tends to be the newer accession states who are advertising a lot of contracts and many of those are below threshold contracts. So I think in some cases there’s a little bit of over-anxiety about advertising. In some cases those advertisements might be required because they’re receiving EU funding for a specific project or contract but if you look at some of the older Member States, like Germany for example, Germany advertises a very low number of contracts, and that’s partly because they have a very decentralised procurement system, but I do think you find that as time goes on countries get used to the idea of they don’t actually need to advertise every contract in the OJEU and as procurement potentially becomes a bit more competitive below threshold within a Member State, you see “okay, we’re actually getting adequate competition by advertising at national level”.

In terms of the national advertising of contracts, do you reckon that just by the fact that those contracts are going to be advertised, albeit in a national portal, those contracts will more likely be subject to cross-border interest and more likely may attract actual interest from cross-border economic operators?

Yes I think the potential is there. And again if we’re going to get our crystal balls out we need to think about what are governments going to be buying in 2025? And we’ve certainly seen a move over time, governments to some extent are still buying hard supplies but there’s been a general move towards buying services over the past fifteen, twenty years. And that partly reflects the fact that certain functions of government have been privatised or they’ve been partially privatised or that things are being outsourced through service contacts, whereas previously it might have been a supply contract with the service element being provided in-house by a public authority. So that’s been a trend in quite a few European countries and I think you need look at the nature of the services being advertised.

We sometimes talk about cross-border procurement as if it’s just a question of access, that companies can know about contracting opportunities and then they’ll bid for them but of course they also have to actually be able to deliver those contracts. So if it’s a type of contract like a social care contract where you very much need to have a strong presence on the ground, you need to be able to work with employees in the location where the contract is going to be delivered then I kind of doubt we’re going to see huge amounts of direct cross-border procurement for those type of contracts. On the other hand we see a move towards things like printing, digital services, data services, all of those obviously have huge potential to be outsourced on a cross-border basis so I think we will see more in that sector. So the question of the overall amount of cross-border procurement that we’re going to see depends first of all on what type of contracts are being advertised and then, secondarily I think, on how accessible are those contracts to bidders in other Member States.

I think you’ve touched on a point that is very important which is the one about the kinds of services that are being procured right now or are going to be procured in the future. I mean if you look at the development of digital services in general we see that their importance has been increasing in terms of GDP, in terms of percentage of GDP as time goes on and it’s not going to stop there, so it’s just a question of time to that kind of influence to start to be seen as well in public procurement. So one of the things I think will happen in the near future is that we’re going to have a lot more digital services being acquired and being procured, and by definition those digital services by and large come in at values well below the current threshold levels, so that’s one of the discussions that I’ve been pushing forward over the last couple of years now which is what should we do to the thresholds going forward?

I’ve read some of your work on that and I think it is quite a big point to raise: what is going to happen with digital services and should we be looking at lower thresholds, should we be getting rid of the idea of thresholds? I think again being realistic about what’s going to happen over the next ten years it’s probably unlikely that the thresholds are going to go way down, partly because they’re linked to international agreements that are in place, whether it’s the WTO Government Procurement Agreement or these bilateral trade agreements which are potentially going to come into effect over the next few years, and I think there would probably be a reluctance to lower the thresholds if that’s going to be then passed on to third countries as well. So whether we start to look at a sort of two-tier threshold system where one threshold applies in the European Union and another in respect of third countries, I don’t know whether that’s realistic. But I think beyond the issue of “okay, are these contracts subject to the EU rules? Are they advertised at EU level?” I think there is a more fundamental issue in terms of digital services and in general ICT contracts, are they appropriate for the way public procurement runs, this idea that you can sort of have a competition and define outputs and award a contract and then sort of stick to those outputs. And I think for some of the more straightforward contracts that’s fine but increasingly we find there’s a long list of failed digital services or failed ICT procurements, not only in the UK and Ireland but elsewhere, so I think that is a real challenge for the rules and how we apply the rules to those type of contracts.

I remember having a conversation a few months ago or last year with Frank Brunetta  the Canadian Procurement Ombudsman and he was making a suggestion that actually makes a lot of sense, which is if you think about it the way that procurement is run today it’s based on premises and ideas which were designed to allow for the procurement of goods and works. And that is a very different kind of exercise that perhaps the procurement of services would require?

I think that’s absolutely right and you still see that. Maybe a little bit less so in the 2014 directives compared to their 2004 predecessors but it’s quite clear that they’re written from that point of view, of being able to define an output, of having a pretty good idea of what it is. That said, we have seen the introduction of the Competitive Dialogue and more recently the Competitive Procedure with Negotiation. Competitive Dialogue in particular, as you well know, is designed in particular to be appropriate for those type of contracts but unfortunately we’ve seen a bit of a backlash against it in the UK. There are a lot of countries where it’s never been used at all or used only very rarely which I think is a real shame because it does have the potential, for ICT contracts or complex services, to be the right procedure.

I agree with you. Moving onto the second topic, what kinds of award criteria and procedures do you think will be the most common?

One of the things that I have as a big question mark in my mind, because it’s an area where I’ve done a bit of work recently, is this idea of life-cycle costing. It has always been possible, if you’re using most economically advantageous tender as your award criteria, to apply a life-cycle costing approach. What we see in the most recent European directives is that there’s been an attempt to set more detailed rules around how you do life-cycle costing, what information you can ask for and there’s this concept of data that can be provided “with reasonable effort by a normally diligent operator”, which I think will be an interesting one if it gets litigated, which it probably will at some point in the next ten years. So that’s one question in my mind, are people actually going to use life-cycle costing or are they going to be scared of it by the fact that there are more detailed rules around it and that there is a potential for an operator to challenge the use of life-cycle costing if they don’t like the outcome. I think what we’re seeing across industries is that supply chains are getting more complex, that the level of data that people are looking for is really unprecedented, so it is a challenge and it’s a challenge which some companies are very well aware of and are working hard to address but obviously not all of them.

Do you think that lifecycle costing is going to be used a lot over the next decade?

I think there will be a desire to use it. I think it’s something that people are aware of. I think it makes economic sense as well as environmental sense. So as procurement becomes more professionalised, as it becomes a bit more sophisticated definitely the idea of awarding a contract based on purchase price alone is going to become a bit of anachronism except for maybe some very basic types of supplies or commodities. So I think in general we’ll see more of it but there’s this question of are people going to call it life-cycle costing? Are they just going to say “look, here’s our form of tender and we want you to cost the following eight things” and not refer to it under this idea of life-cycle costing?

In terms of procedures, which ones do you think are going to be the most common?

The open procedure I think will continue to be used. There are people who say the open procedure is too basic, it doesn’t make sense but I think, the open procedure is always going to work well for certain types of requirement. And we know that at the moment it accounts for about three quarters or at least two thirds of procedures advertised in the OJEU.

Except in the UK?

Except in the UK. So the UK and Ireland have always been a bit of an exception to that, there’s been a preference for the restricted procedure. It’s interesting because some of the figures I’ve seen suggest that one of the reasons for that is that, particularly in Ireland,  is that procurement tends to be more competitive, if you’re running an open procedure even for a relatively low value contract you could be getting thirty or forty tenders and some of those will be cross-border tenders because of the fact that we’re running procedures in English and quite a few Europeans now have English as a very strong second language. So there is an experience of receiving more tenders. I think for that reason local authorities, local authority procurement tends to be a bit more competitive than central government procurement, they have said “right well we’re going to use the restricted procedure because we just don’t have the resources to deal with assessing thirty or forty tenders every time we procure a relatively small value requirement”.

I think that that tendency will continue to exist but the thing that’s changed under the new directives is that for the restricted procedure, you have these more extensive publication requirements at the beginning of a restricted procedure. So if you look at Article 53 of the Public Sector Directive it says that you have to have the procurement documents “fully and freely available online from the date of a contract notice”, and it’s a little bit ambiguous as to whether that includes your invitation to tender which formerly would have been a second stage publication, but now it looks like you have to publish it at the outset unless you have a reason for not doing that. So I think perversely that might actually encourage people to go for the open procedure because they’re going to say “well we’re going to have to publish everything at the outset anyway so we may as well just go open procedure”.

I’ve got a comment about Ireland, I understand what you say in terms of the language and it makes a little bit of sense, however I mean tenders here in UK are also in English and the UK is probably one of the member states with the lowest levels of cross-border procurement, are foreign economic operators actually winning tenders in UK?

I think we do have to take the figures on that with a grain of salt.

I know.

I cite them and you and everyone else cites them but I think in general we’re talking about that one study that was published in 2011 on cross-border procurement and while I think it’s very valuable to have that study, even within that we saw there are issues with methodology in terms of sampling, there are issues in terms of the quality of information we’re able to get from OJEU award notices. So I think it’s probably accurate to say there are not huge amounts of direct cross-border procurement happening. When you get into the more complex questions like “What about indirect cross-border procurement? What about use of subcontracting?” I think we definitely do have to take those findings with a grain of salt. That said, it probably is true that in the larger Member States like the United Kingdom you’re always going to have lower levels of cross-border procurement because you simply have a bigger domestic economy and you have a greater chance that economic operators will see it as being worth their while, if they’re serious about tendering for government business, to set up an office in that Member State.

And also it’s more likely that you’re going to have a supplier inside a country that’s going to be competitive enough to win the contract?

Exactly. So it is interesting again, while accepting that we can’t take them as gospel, to look at the findings from that study that you do see patterns. Ireland has pretty high rates of cross-border procurement, partly because there are two countries on the one island, so obviously there are Northern Irish companies bidding for contracts in the Republic and vice versa, that automatically puts the numbers up. But then you see countries that share a language, in Germany and Austria you see slightly higher levels of cross-border procurement between them. So there are all kinds of interesting patterns that give you an insight into where this is happening and perhaps why it’s happening.

Okay. Let’s go on to the third topic, will procurement challenges be more or less frequent?

I think this is one that obviously is of interest to the lawyers but also of interest to contracting authorities because there is at the moment a big discrepancy in the frequency of challenges between Member States. It’s an issue I looked at a little bit in my book, I focused particularly on the UK and Ireland and I think the major thing we have to take into account is the cost of bringing those challenges. And for as long as you have a system which requires bidders to bring a challenge in one of the higher courts that’s going to be extremely expensive, and even though the threat of procurement challenges might always be there, the actual number of challenges which make it through to Court is going to be reasonably low in those jurisdictions. In a way that’s kind of beside the point because the thing about procurement challenges is that a lot of it is hidden, we don’t see the letters that contracting authorities receive, we don’t see how they react to those letters for anything that falls short of court proceedings usually in the United Kingdom and Ireland. Then in other Member States such as for example Sweden where they have a relatively accessible means of challenging contracts, you obviously see much higher numbers, but at the same time I don’t know whether the threat of challenge is really taken as seriously by contacting authorities. That’s maybe something you could talk to Andrea Sundstrand or someone else about, although I think you’ve already interviewed her haven’t you?

Yes.

Because my feeling is when I’m working with a client in the UK or Ireland and they are potentially on the receiving end of a procurement challenge, that’s something they take extremely seriously and often they’ll decide to cancel a procedure and start again simply to avoid having to go through that lengthy process of challenge. And I don’t know whether that really applies to contracting authorities in countries where the remedy system is not as expensive, perhaps not as big of a deal essentially to undergo a procurement challenge.

And to my mind that’s actually a bit of a healthier system to have, to have a system whereby it’s relatively easy for economic operators to bring a challenge but it doesn’t have the huge cost and time implications that a procurement challenge does in the UK or Ireland because, let’s face it people do get things wrong, the remedy system is there to ensure that there is an avenue of redress when things do go wrong so you just want to make sure it’s not abused and that it’s not used as this sort of nuclear threat which I think it is in the UK and Ireland.

Yeah, I think that’s a very good point because I’ve got experience in other jurisdictions namely in Portugal and Spain and the normal thing is for every single tender procedure to actually be challenged.

Right, okay.

So you just take it for granted and if you don’t get a challenge, well that was a good day for you. Whereas here in UK the perception, it’s more a cultural issue as well, which is if you get a challenge that is perceived as being a black mark, you made a mistake as a procurement officer that’s why you got the challenge, whereas in other countries it’s just the normal way of doing things. As for Sweden and Denmark to a certain extent they have remedy systems which allow other avenues for bidders to actually try to interfere with the process in a sense that if they think that something is going wrong or went wrong, so I think it is actually the Swedish Competition Authority who has the power to actually intervene during the procurement procedure. So that changes the dynamic a lot and the fact that you can have different kinds of systems remedy procedures which are different from just going to the course actually probably allows those systems and those procurement frameworks to work better. Another good example is Spain, Spain a few years ago they introduced a new review system or review mechanism whereby you could have access to administrative tribunals, literally independent tribunals are not dependent as they were in the past many, many years ago, the fact that you can have a quick decision taken in a few months with a price that is reasonable actually has improved the way that the procurement market works overall.

That’s interesting. A quick decision and also potentially one by someone who understands procurement…

Exactly.

…because they’re dealing with it every day and, with all due respect to judges in the UK and Ireland most of them are not dealing with procurement challenges with any type of regularity. I mean we see now with the Technology and Construction Court in the UK that there are a couple of judges who have developed that expertise but it is a difficult area I think. And judges are quite upfront about that sometimes, they say “I’ve had to go away and read hundreds of pages about public procurement and I’m still not sure I’m applying the right approach here” and that I think is not an outcome that’s in anyone’s interest. It’s a huge use of resources in order to resolve what sometimes look like pretty stupid claims to be honest, or very minor points about “did this person score this correctly?”. And there’s no implication sometimes that anyone has acted corruptly or that they’ve even really committed a serious breach of the rules, just that there was some kind of basic error that happened but it takes so long and it takes so many resources to resolve that error, and then what is the outcome of that challenge? It doesn’t necessarily mean that the challenger gets the contract, they might get damages if they’re lucky and the authority might have to re-run the procedure. So I think the ratio of costs and resources going into procurement challenges versus what they’re doing to improve outcomes or to remedy problems that have occurred in procedures is the balance, we’ve got it wrong at the moment in the UK and Ireland and I think we would be well advised to look at systems that are in place in other countries. Even potentially the Procurement Ombudsman system that they have in Canada and other countries.

I’m a huge fan of the Procurement Ombudsman system and I think that is one of the best. Unfortunately I don’t see the UK adopting it anytime soon but that’s my take. One final question, Procurement of Innovation, is it the idea of the future and will it always be an idea of the future?

It’s got a bit of both attached to it. I think for good reasons because particularly coming out of the financial crisis in the European Union, there was a need to do more with less, government went through a bit of an existential crisis in a lot of countries, what is our role? Innovation that really works is something that everybody wants and everyone can agree on. What it actually means in practice I think is a bit more difficult and I have been through a couple of innovation procurements recently where it’s extremely different, it’s 180 degrees away from normal procurement where you know what the outcome is. People talk about using functional or performance-based specifications, I mean that’s fine but you still need to be able to evaluate what bidders are proposing to you, you need to be able to structure your contract in a way that creates the right incentives on both sides. So yes, I think there is a capacity being built up to do it but I don’t think you could say anyone is really in the business in Europe of innovation procurement on a regular basis or at least I’m not aware of it. And people often cite examples from the US about the work that NASA or the Department of Defence has done that led to the development of the internet or that the health research networks have done, and it’s interesting on an anecdotal basis but I’m not sure it really translates as a model that can be adopted on a mass scale. So it will be interesting to see what comes out of all the sort of Horizon 2020 funding because there’s a lot of that going round at the moment but I guess I’m a little bit of a sceptic about the ability of the EU funding programmes to create a culture, cultural change. I think they can certainly be influential at the level where people are able to do things they wouldn’t otherwise have been able to do. But if you’re trying to push people into what is quite a profound cultural change, which I think innovation procurement is compared to normal everyday procurement, that takes a lot of time and ongoing incentives rather than just having a one-time access to a European funding stream. There needs to be support at local level, at national level, and there needs to be an understanding of, “What is this? Is it valuable? Is it something that’s going to get us towards our long-term objectives?”

I think we still have time for one quick final question. What would you like to see changing between today and 2025?

Well a lot! But since we only have…

Just one idea?

One idea? I’d like people to be less afraid of the procurement rules. I think there has been an over-legalisation of procurement rules. I think it’s become way too complex. I’d like people to be comfortable that they can procure something, they can get the right results without breaking any laws and if that puts a few of us who are procurement lawyers out of work then so be it. I think it’s more important that when public money is being spent people have the confidence that they can do the right thing and that they’re not going to wind up in court or hurt.

Brilliant. I think that’s a great way to finish the programme, thank you.

Thank you Pedro.

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 grateful for the support of the British Academy Rising Star Engagement Awards. 

#10 Ramona Apostol (Corvers Procurement Services)

How can we improve procurement of innovation?

Interview with Dr. Ramona Apostol, a Senior Procurement Researcher with Covers Procurement Services. She’s also regular guest lecturer at various academic procurement programmes all over the world. Ramona concluded her PhD at Leiden University in 2014 and is an expert in Procurement of Innovation. Finally Ramona is involved in the European Assistance for Innovation Procurement project aiming to support public procurers in implementing more and better innovation procurements of ICT-based solutions across the EU.

iTunes

Transcript

Hello Ramona, thank you for coming to the programme.

Hello Pedro. Thank you for inviting me.

My pleasure. The first question I have for you today is precisely Procurement of Innovation, why do you think it is important or is innovation just a buzzword?

I think Procurement of Innovation is important for two main reasons. Firstly the government is a provider of services to its citizens. To provide the services the government is using technologies and services purchased from private market players. By purchasing these innovations to deliver public services the government can provide better services. Take the example of the so-called thirsty asphalt on the highways in the Netherlands, a country where I can tell you it rains a lot. By replacing ordinary asphalt with innovative asphalt that absorbs several thousands of litre of water per minute, the Dutch Ministry of Infrastructure and Environment improved visibility on highways which led eventually to better traffic flows and less accidents during heavy rains. And this illustrates how Procurement of Innovation delivers immediately and direct benefits.

But Procurement of Innovation is also important in a more indirect way and this is because the government ultimately holds the responsibility for the economic and social welfare of its citizens. To this end the government needs to create the proper framework conditions for a well-functioning economy. It needs for example to improve access to affordable resources to local company in a global context where natural resources are diminishing, where there is an increasing population and rising competition between governments to get access to these resources. So this explains the government’s interest to stimulate the development of innovative alternative sources of, for example, raw materials or energy.

In the same line of thought I think by purchasing innovation the government can provide innovative companies with earlier revenues which allow them to refine their innovative products up to the point when they can compete with incumbent products on the market. In this way through Procurement of Innovation the government can sustain the growth of these companies and it’s common sense that successful local companies mean employment, mean increased tax income for the government, and mean cheaper and more qualitative products.

So this is in simple and general lines the main reasons why Procurement of Innovation is important. And maybe it’s also important to make clear from the beginning that there are two main approaches to Procurement of Innovation and these are called Pre-Commercial Procurement and Procurement of Innovative Solutions. It’s PCP and PPI. Of course your audience will be familiar with these two forms of procurement but it might be useful to still explain what exactly they are and I would start with Pre-Commercial Procurement which is the procurement of R&D services. This is based on an exemption included in the procurement directives for R&D services involving risk share between procurers that get involved in this procurement, it involves competitive development in phases and involves a clear separation between this procurement of R&D services and the procurement of the final product, so the deployment of the commercial volumes of the end product. The European Commission has defined in 2007 guidelines on how to use this exemption and how to implement legally compliant procedure based on this exemption.

On the other side you have Public Procurement of Innovative Solutions, the PPI, which can be complimentary to PCP but can also be conducted individually, not in the continuation of PCP, and it means the purchase of an innovative good or service that has already been developed so the development stage is finalised but these innovative goods or services are not yet available on a large scale commercial basis and they still need some conformance testing before being deployed within the organisation of a public procurer.

That is the theory behind why Procurement of Innovation is important but if you look at the practice and if you look at how contracting authorities are conducting procurement in general, we don’t see many contracting authorities paying a lot of attention to Procurement of Innovation. In your views what are the reasons behind this?

Yes you are right, although I believe that things are starting to change. Indeed about a decade ago policymakers at both national and EU level they realised that procurement budgets were not sufficiently spent on innovation and there is a huge amount of money involved in procurement, we are talking about two trillion euro in the EU per year and this is, means 19% of the GDP. So the European Commission and several European member states have done efforts to change this situation.

They also were aware that it is not easy to bring this kind of change and I would name a couple of reasons why public procurers do not widely conduct innovation procurement. First of all innovation involves risks and procurers, there are in procurement surely penalties related to failure of procurements but often there are no rewards related to a success so there is no direct incentive for a procurer to engage in innovation procurement to take these risks. So this has also to do with a lack of institutional incentives with disconnection between procurement which is first of all an administrative task, it is about buying something that the procuring organisation needs for its functioning and it is disconnected from the more policy goals that the same organisation or the ministry under which this organisation might fall has and what I was talking about earlier, you know, improving the public service and supporting, incentivising companies to become innovative and grow more and generate more economic outputs.

Another important reason that was often indicated by procurers as being a barrier to involvement in innovation procurement is lack of clarity of legal rules and particularly fear of breaching EU state aid rules. And also at least in the form that is envisaged by the European Commission for PCP and PPI, namely the cross-border collaboration between procurers, these kind of PCPs and PPIs are complex in organising, the coordination between procurers from different member states requires increased efforts and they are often time consuming.

Also innovation procurement in order to minimise the risks that are related to it requires a careful preparation which also takes time and requires expertise and capabilities that procurers often do not have in-house and are not willing to take the effort to gain those, and it requires careful definition of their needs, careful definition of the specifications, advanced specifications that would reward innovation proposals, requires market scouting, consultation, and lastly but not least is budget restrictions. Often buying a first batch of innovation will be more costly and particularly in the ICT sector switching from one incumbent technology to a new one will involve high learning and switching costs or procurers as users.

So these are the main reasons that have often been invoked by contracting authorities for not doing innovation procurement more widely and these barriers are in the mind of policymakers today at European and national level.

I think those reasons are very interesting and by and large I agree with them. In my dealings with contracting authorities in multiple member states there’s certainly a cultural fear of making mistakes so it’s much easier for you to avoid risk or try to reduce risk because at the end of the day you are promoted on the basis of not effectively screwing up. So if you’re taking on risk, yes things can go well but they can also go wrong, and if they go wrong someone is going to be out there to blame you for the failure?

Yes. The penalties are more visible than the rewards of…

Of course. That is one of the problems with KPIs or the lack of KPIs for example that can measure those potential benefits. But this brings to mind the old saying that no-one was ever fired for buying stuff from IBM and it’s still true in public procurement to a certain extent which is if you have an established technology, if you have an established incumbent which is solving your problem, okay what is your incentive to effectively going looking for a better solution because that may not exist, certainly it’s going to incur a cost because you need to prepare yourself, you need to use different procedures that take longer and are more expensive to run, so on and so forth. So I understand that sometimes can be really difficult for procurers to actually find a motive to going for innovation?

Yes. Sometimes they have real clear motives to do it, for example the old solution is, becomes costly because of, take the example of water boards in the Netherlands. They had increasing number of sewage water purifying stations and they needed to gather all this data from all these stations and it was done in a very inefficient way with data storage at each location and it was increasingly costly so they needed to go for an innovative solution, for a new solution, but why go for the real innovation element, that’s the tricky part. It really needs support from top management and it needs to a certain extent a culture of innovation within the organisation.

I think that’s a very important point because one of the things that I’ve seen as well is, and this has been discussed also in the literature, which is procurers at the coalface, the people actually doing the procurement, you have way too many people doing those roles and they’re not given the skills or the training necessary to understand how these new ways of procurement work, so by definition they’re going to default for whatever the organisation has been using for the last ten or fifteen years. I think that is very prevalent?

Yes, I agree. It happens currently also bottom-up, you know, there are procurers that see the opportunities that innovation is offering, they have a project in mind, they go and they support the case for that procurement with the top management, they obtain the approval to go on with those projects, but the real change needs to come top down, I agree. And there are only in several member states national initiatives for bringing this change and also at European level there are measures that are being taken to change that.

One of the things I find relevant as well to discuss about Procurement of Innovation is how Procurement of Innovation in a sense marks a completely new direction for rules in public procurement. The way I usually describe this is if we look at procurement rules over the last forty or fifty years they exist to avoid really bad procurement so they are there almost as a safety net. So that’s why in the open procedureyou don’t have a lot of discretion, you’re effectively creating something that is easy to use, more than easy to follow, easy to use for procurers so that they can apply time and time again without having to take too many decisions, too many risks, and without having a lot of discretion?

Yes, you’re right. You’re right. I agree. Innovation procurement requires discretion. That is why actually Pre-Commercial Procurement or procurement of R&D services is exempted from the procurement directives. And this is exactly the reason why because the procurer needs discretion in formulating, in getting in contact with the market, formulating its need, its specification, and potentially changing those specification depending on the course that the development takes, development of the solution. Because of course you cannot predict once you start with a Pre-Commercial Procurement which way or whether the solution might come up during the development, it might become apparent that another course for the innovation solution would be better and more beneficial.

So they need this discretion and this is exactly why PCP is exempted, there are still rules applicable, you still have the treaty fundamental principles that remain applicable, particularly in the case of PCP as envisaged by the European Commission because it’s a cross-border PCP, there is a European dimension to it, there is a cross-border interest related to it, so it still falls within the treaty for the functioning European Union.

Moving on, what can you tell us that you’ve learned over the last ten years with Pre-Commercial Procurement projects and research?

Well of course we learned that this behavioural change is difficult in the absence of political mandate and in the absence of suitable capability creation schemes. The EU from the beginning they have looked at the benefits that the US programme particularly in the field of R&D procurement has brought to the US and they have tried to duplicate those results in the EU but they have realised that they need to take the effort, undertake real efforts to bring this change in European Union.

But we also saw that in ten years since they’ve started these initiatives there has not been the expected progress and in my opinion this is due to couple of reasons. First of all insufficient analysis of the prerequisites for successful implementation and second unclear or difficult legal framework and I’m particularly referring to the EU state aid rules. Thirdly I think they didn’t realise how important it is to target the right actors that are capable of implementing these kind of procurement and not the innovation agencies at national levels that have actually implemented the most advanced schemes in innovation procurement but that are actually used to grant subsidies and not conduct procurement, they are not the end users of the innovation that would be developed through an R&D procurement. So I think these are a couple of the main reasons why the expected results have not been achieved so far.

There is also the side of lack of competence at EU level to legislate on innovation in the innovation area so it’s up to national states to set mandatory targets to legislate on Procurement of Innovation, and the EU has only the competence to coordinate and to support and try to convince member states to go ahead with these kind of policies and with their implementation.

We have also seen in the ten years we’ve kept in mind and actually recently the commission has funded a project to quantify the benefits of Pre-Commercial Procurement, not of innovation procurement in general but specifically of Pre-Commercial Procurement because procurement of R&D is more difficult, it’s more risky but it also promises the most benefit. The project, the smart project has conducted questionnaires, interviews as analysed Pre-Commercial Procurement that they identified in the EU and they found evidence of positive impact. What they didn’t find evidence then they tried to look at the US and show that there is potential for enormous benefits from these kind of procurements. What they showed is that they confirmed that Pre-Commercial Procurement leads to improvement of the quality and efficiency of public services and that conducting a PCP previously to a PPI would reduce risks of failure in the PPI and also in terms of costs often this would be justified, so the cost of conducting a PCP would still be outweighed by the benefits of avoiding failure in a subsequent PPI.

They also realised that Pre-Commercial Procurement facilitates the access of more businesses and they saw that PCPs conducted in collaboration by procurers from different European member states attract, in 75.5% of the cases are won by SMEs and in 81% of these cases the SMEs are small, are under fifty people. But they also realised that Pre-Commercial Procurement it reduces risk of single supplier lock-in so at the end of the PCP you will be sure that you have competition, that you would have a technology that is developed according to the needs of the procurers, that at least two competitors are capable of developing competitive solutions, that you have the choice and you have the competitive pressure on the prices of the solution that the procurer would eventually need to procure. Of course not one of these two solutions that come out of the PCP but projects that have developed in the same time outside the PCP would also be invited to compete.

And yeah, it is also very beneficial that doing a PCP because it increases the possibility to achieve interoperable solutions between procurers from different member states. It saves the costs of adjusting these technologies or adjusting commercial available technologies later to be interoperable or to fit perfectly the needs of the procurers.

Moving on to one of our final questions. You’re also involved in a project called European Assistance for Innovation Procurement, what are you trying to achieve with that project?

As I told you the European policy, EU policymakers have taken steps in incentivising innovation procurement since a while now, so a couple of initiatives have preceded EAFIP and I will shortly give you an overview of those.

In the European Commission in the field of PCP particularly in 2007 they drafted this communication recommending a certain approach to the procurement of R&D services in, fully in line with the legal framework in order at least to take away the legal risks that were seen by procurers. Subsequently in 2009 after listening to procurers and to the barriers involved by them they took additional steps in addressing these barriers and they funded the formation of procurer groups and they funded networking activities. So they thought, at that stage they thought the missing link is procurers funding each other in conducting PCPs but soon that became apparent that was not sufficient so didn’t lead to the emergence of the good practices they expected. As a consequence they went a step further and they thought okay, organisation of cross-border PCPs is complex, is costly, time consuming, we will fund 100% of the organisational costs of these PCPs and as long as they involve at least three procuring authorities from different member states and we will also fund part once the procurement procedure is completed and you go on with the contract, you close the contract with the companies, they would fund also part of those contractual costs.

There are currently fourteen ongoing PCP projects funded by the European Commission. The first one was started in January 2012 and it’s set to be completed in forty-five months so we are still a while from seeing the first result. There are also funding activities for PPIs. These have focused particularly on creation of networks of procurers. There are seven projects funding networking activities for the preparation of the Procurement of Innovation for identifying common needs, for identifying partners to conduct PPIs together, for engaging in dialogues with the market. More recently though they have stepped up these measures also in the field of PPI and they have funded consortium of local and regional procurers, it’s called the Stop and Go Project, that procurers that actually plan to launch together four tenders for Procurement of Innovation solutions.

So EAFIP comes, is in line with these initiatives. What it aims to do is actually to bundle the existing knowledge on how to conduct innovation procurement. We have, Corvers Procurement has been, actually we are conducting this in collaboration with our partner in Brussels, STELLA, and we have been selected because we have knowledge on innovation procurement, we have been experts, independent experts for European Commission, we have been following the European funded, EU funded Pre-Commercial Procurements and Procurements of Innovation for years now and we have a lot of knowledge in-house and we should also bundle the knowledge that comes from all these EU funded procurements and from national level implemented procurements into a toolkit. And that would be conveyed to procurers through twelve events and through a couple of webinars throughout the project’s three years lifetime.

The project started at the beginning of this year and it’s due to, for completion the end of 2017. But creating a toolkit, disseminating, it’s not something really new. What is new that the toolkit is really following each step and it tries to be really practical and doing the state of the art knowledge at each step. It goes into needs identification, then goes into prior [?? 26:08 art] analysis, IPR search, drafting a business case, then you go to market consultation, then you draft your intellectual property rights and confidentiality strategies, you set the link to standardisation and only after that, these are all really early preparatory stages, you go into the drafting of the tender documentation. And this completes the preparatory stage and after that you conduct the procedure is select, actually select the winning companies and during the execution of the contract you also perform monitoring and evaluation of the performance.

When will the toolkit be available?

The toolkit is pending approval for publication from the European Commission. We expect that the latest beginning of next year will be available on the website of the EAFIP and the website is just eafip.eu.

Okay.

And the new feature of this project is the free assistance to contracting authorities who take the initiative to implement innovation procurement without EU funding. So the project aims to identify twelve projects that will be selected for free assistance from the project experts and the project partners. So they will be selected, they can apply until 10th of November but probably the deadline will be extended and there will be flexibility whenever really suitable project will come to the attention of the partner, the consortium. And it will be selected on basis of several criteria such as importance of the targeted solution for solving public problems or the intention to bundle forces with procurement from other member states.

Brilliant. We have to leave it there because we’ve gone over our half an hour, so thank you very much for coming to the show Ramona.

Thank you for inviting me. It was a pleasure.

As usual 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. I’m very grateful as usual as well for the support of the British Academy Rising Star Engagement Awards.

 

#9 - Franco Peirone (University of Piemonte Orientale)

How can we minimise corruption in public procurement? A look into the USA, UK and Italy

 

 

Interview with Dr Franco Peirone, a Postdoctoral researcher at the Department of Business and Enterprise at the University of Piemonte Orientale in Novara, Italy. Franco’s carried out his doctoral research on corruption in public procurement and remains an active researcher in this area. It is no surprise then that the topic of the conversation is corruption in public procurement, in particular the experience in the USA, UK and Italy.

iTunes

Transcript

Thank you very much for accepting, and also thank you for accepting to speak at such a late hour. It’s almost like, as you said, a late night David Letterman Show.

It’s true, but it’s good.

Let’s start with a short introduction about yourself and your PhD research.

I started my PhD research at the University of Turin. Everything hasstarted during the economic crisis in 2011, I was just come back from the Maastricht University where I spent a period within the Erasmus Program, and the focus on Italy was really high, because everybody was scared about Italian historical deficiencies, such as corruption or inefficiencies in the public sector, so I tried to discover what really went wrong in the Italian public sector, and I decided to draw my attention on public contracts and corruption. To this end, I decided to focus on anti-corruption systems and particularly on an anti-corruption system that really works well, as the United States was, and for this reason, I spent a visiting period at the George Washington University under the supervision of great teachers, as Professor Schooner and Professor Yukins, and there I developed some conclusion about corruption, public procurement and public policy.

Once I came back to Italy in 2014, I was able to compare these two anti-corruption systems and focus more on corruption in public procurement. What does it mean? Which kind of frame we can think about it, and which is going to be the next direction of public procurement and anti-corruption tools? My PhD thesis, at the very end, really focused on compliance and ethics programs. They could be considered a broad and flexible anti-corruption tool. It is really interesting that anti-corruption programs, as compliance and ethics programs, moved from one legal system to another one, from the United States they have been spread all around the world and they have been implemented in Italy, in the United Kingdom, in Germany as well as in Japan and in Australia. It’s really interesting also noting that anti-corruption programs have been moved twice; there has been a double legal transposition, for instance, in Italy. From the United States to Italy, and from the private sector also to the public sector. So now we’ve got compliance programs both in public and in private sector in Italy. 

Let’s focus for a minute on those compliance programs. What do they entail? What’s included in them?

Compliance programmes are an interesting topic, because they bridge together criminal law, administrative law and public procurement law. Compliance programs were born in the United States legal framework for avoiding the corporate liability in case of an employee misconduct. The legal assumption at the basis of compliance programs is the criminal law principle of corporate liability. Due to that, if an employee commits a crime, he acts on behalf of the corporation, and if the crime can advantage the corporation itself, also the corporation has to face a trial. Corporations are therefore held accountable for the crimes committed by the employees unless an effective and compliance programs is implemented. To this end, a compliance programs consists in a set of tools such as code of conduct, training programs, auditing, reporting, disciplinary measures, directed to prevent and to repair the employee misconduct such as corruption, for example. By criminal point of view, a criminal law point of view, by adopting an effective and compliance programs, corporations may demonstrate to have used all the force needed to prevent misconducts or crimes such as corruption.

Do you apply the compliance programs before the crime occurs, or after the crime occurs as a means to reduce the impact of the crime?

Well this cuts in both ways. I mean, having a compliance program is both important having ex ante, that is before the crime is committed, because in this way you demonstrate that the crime has been committed by one employee of your corporation, but you have adopted all the needed preventive measures, but you can also adopt after the crime has been committed, so in this way you can demonstrate that you have adopted all the measures needed to repair, such as affronting payment to the victims or collaborating, cooperating with the prosecutors authorities. In this way, you can demonstrate to be a good corporate and obtaining lower fines, or be even absolved during the trial. It is interesting, this approach has been adopted by all the anti-corruption tools, all around the world, and there is no a great matter about which kind of responsibility the corporation is facing with. It’s no matter if it’s called criminal responsibility, rather than administrative responsibility, or something different. What is important is that all the anti-corruption legal tools take corporation as accountable for the crime committed, so all the corporations all around the world need compliance programs to prevent, or to repair, what has been done by its employees.

Okay, but what legal systems will actually demand the compliance programs? Is it just the USA, or do other jurisdictions also demand that?

No, lots of jurisdictions demand that. In Europe, it’s the case of Germany, Italy, United Kingdom, as I already told you. What’s important, and it’s really interesting is that the United States government has gone beyond. Interestingly they adopted compliance programs even in public procurement law, because through compliance programs, the United States government can select which kind of corporations it wants to deal with. The government use compliance programs as a benchmark for corporation reliability in government contracts. This has happened since 2008, the compliance programs have been implemented and required for federal contractors within the general legal framework for federal contracts in the United States. This is called responsibility determination. It’s a way to testify the integrity of the contractor, and for justifying this integrity, the government requires that a contractor has to have compliance programs.

So how is the assessment done? So you say it’s used by the federal government to assess a contractor.

Well, it’s done before getting the award, the Government looks if the corporation has implemented an effective compliance programs. The Federal Acquisition Regulations that are the general legal framework for this kind of government purchasing provides that before the award is done, the compliance program has to have implemented within itself a code of conduct, a training program, and especially such kind of measures that can prevent corrupting activities from the corporation in governmental contracts. So it’s the last stand that the awarding authority does before making the award. So in the United States the perspective is before evaluating the tender and just at the very end evaluating the contractor, because it’s a kind of cost-effective perspective. In this way, they are just going to give the award to really responsible contractors, who have implemented within themselves all the needed measures to prevent corruption.

So why don’t they do that at, let’s say, selection stage, like we have here in Europe?

This is a really interesting topic, and the legal thinkers from Europe and United States really discuss and argue about this. From their perspective, they do at the very end, because it could be perceived as an anti-competitive issue, stating who is a good contractor before and so will limit the competition if they will do this at the very beginning of the award selection, as we do in Europe. Another point could be that, by the United States government point of view, they think that in this way they can select the good contractor at the very end, and so it is really cost-effective because they just can pass to another contractor if the first one has not implemented the compliance program. It’s a really different perspective. I think the United States mood is not really the most objective way to award the contract, but at the very end it really complies with the law and ethics, because these compliance programs are really strict and the Governmental Accountability Office really takes care about integrity from governmental contractors.

That is the view in the US. You said before that the UK, and also Italy, they do have compliance programs. How do they compare with the American one?

Well, the implementation in Italy and in the UK have been really different, and I have chosen these two countries because they are both EU countries, but it’s a good way to show how it’s difficult and different implementing legal tools from a system to another one. Italy has adopted compliance programs in 2001 for regulating its corporate criminal liability, but the Italian implementation of the model has substantially failed, because several reasons. The legal tools for supporting the model, such as the code of conduct for the training programs, have been poorly realized in the Italian framework, and many Italian corporations have just copied the standard compliance and ethics program without adapting them to their specific needs, and last, the list of criminal conducts that the corporations have to avoid is really too extended. As a consequence, corporations cannot really focus on the white-collar crimes to prevent, such as corruption, and so the deterrence effect is really low in Italy. Lastly, the model has not been used by awarding authorities to stimulate governmental contractors’ reliability. They have been totally ineffective in promoting the integrity in public procurement.

So in your view, what should have been changed in the transposition from the USA to Italy?

Well I think what we should do is linking more criminal law, public procurement law and administrative law - this would be really a good step in promoting integrity in public contracts, if each kind of contractor will be proven and tested by its integrity within the supply chain, and with its commitment to integrity.

It’s really notorious that all the Italian corporations really have great problems with managing integrity within themselves, and training its employees to towards ethics and compliance with the law. By a legal point of view, as I say, the Italian model is really complicated because it is referred to such a kind of not-criminal liability of the corporation, because there is, after all, the criminal law principles that a corporation cannot be sanctioned by criminal sanctions, but must be sanctioned otherwise. This really shows that the legal principles can hinder the effectiveness of compliance programs. As I see, otherwise, as we were mentioning, the UK government has implemented the same tool in a really effective way, because they did not stick on with really difficult transposition of such kind of corporate liability. They have just set up a new, completely new criminal law provision that is the “failure to prevent bribery”. If a crime is committed within a corporation, the corporation is sanctioned just for having failed to prevent a crime, such as bribery, within themselves. This has been done within the Bribery Act of 2010 that has been considered the most advanced legal tool in fighting corruption, and the United Kingdom government have done really well, because it has also stimulate the corporation to commit themselves towards integrity, for example promoting the whistleblowing against other corporations or promoting the self-reporting during criminal trial. All this stuff does not exist in Italy, because we move in another, totally different criminal law context, which does not allow this kind of cooperation among corporation and public authorities. The overall approach in Italy is really bureaucratic, it’s really rigid, while in the United Kingdom, as I’ve seen, as I’ve studied, it’s really flexible and proactive, and it really helps to ensure integrity within the public and private relationships.

My question will then be, if that is the case, how can you be sure that the UK model would work in Italy well, when the American one didn’t?

 This is a really good question. Well, I think that the path, which at this point will be operating at the EU level, should be settled while implementing the new EU Directive on public procurement. We know that corruption is a really important point, as everybody has noticed, within the directive, because as we say at Article 57, we see corruption as a ground for exclusion, it could be considered corruption according to the national law of the tenderer, rather than the national law of the awarding authority, rather than the EU directive, the notion of corruption in directives on internal security, or according to EU convention against corruption. So the focus on corruption is really high. As I see, Article 57 could represent a step for all the awarding authorities in all Europe to evaluate corruption. So commitment to integrity for the corporations, no matter what the legal framework is at the basis of the national legal system. By operating at the EU-level the awarding authority, they can decide themselves if the corporation has effectively implemented a compliance program, if they have effectively committed towards integrity.

In your view, what should change at the EU level?

Well at the EU-level I think that it could be and should be improved the function of compliance and ethics program. Article 57 of the new EU directive really provides the possibility for the corporation and for the awardee to adopt the self-cleaning measures, but these self-cleaning measures have just been viewed until right now as a general provision that could be considered as an exception to exclusion, but cannot really push a corporation to act with integrity and complying with the law. I think Article 57 is an interesting starting point, but should be really implemented by the national legal system, giving more broad scope to compliance programs and where it is possible being required to the government a contractor as actually happens within the United States legal system.

Awarding authorities at the EU-level have a real important task right now. Being able to evaluate if a contractor could get the award because it complies with integrity and at the same time not being too much strict in evaluating the corporation if it’s not complying with a traditional scheme of compliance and ethics programs, because we know that these awarding authorities operate at a really low level, so they have not the same human resources or technical capacities to debar a company as happens in the United States legal framework. So it’s a really hard task, but I think the commitment to self-cleaning within the compliance and ethics program is the mood needed to merge together awarding authorities and corporations towards integrity within public procurement.

Do you think that should be then at the contracting authority level or at the member state level, or even at EU level? Because it’s one thing for you to, let’s say, block a company that has been accused of or been found involved in bribery actions as a contracting authority. It’s something different for the company to be sanctioned at the member state level or even at EU level.

Well, as I see, I think that what we can call the responsibility determination, I mean, verify if a contractor is good for getting the award, could be done at the awarding authority level. So each kind of awarding authority could be done for itself. Usually the awarding authority is the authority who knew more about the contractor, so should have the needed discretion for giving an award or not, according to Article 57, to the grounds of exclusion. What shall be instead done at the Member State level, rather than at the EU level, I think should be the debarment or the suspension of the corporation. In this case, a company, the corporation that has been debarred from an awarding authority, from a single Member State state, should be excluded from all the contracts from all the European Union awarding authorities. As I said, this is the same way they have done in the United States legal system. If a company has been debarred, let’s say, at the federal level, the same company cannot get an award at the state level. The debarment is automatic. So, as I see, we have started doing responsible assessment and it should be done at the awarding authority level without prejudice to the corporation, while a serious administrative decision as debarment it should be done at a higher level, maybe from a higher authority which should have extraterritorial jurisdiction, I mean operating in all the European Member States.

Very well. Speaking still on corruption, what should happen to contracts where corruption is found? Public contracts? 

Yes, sure. This is another topic I’ve dealt with during my PhD thesis, and starting from the United States legal system that has been my main reference, it’s really interesting noting that within the United States legal framework, the awarding authority has a really large discretion to terminate the contract if it’s proven that there awardee obtained the same contract due to corruption. There is no need for a criminal conviction for terminating the contract. It’s enough having a decision from the same awarding authority that certifies that the corruption has happened within the award. Nonetheless it is interesting noting that in many cases, especially in the most expensive contracts, even in front of corruption, awarding authorities prefer not to terminate the contract and going along with the original, even if criminal, awardee. This is the notorious case of Boeing, the case is also known as the Darleene Druyun Debacle, wherein a public official has manipulated the score in favour of Boeing and the company got the award. Well even in front of corruption, the needs of the military sector, in this case, the overall interest of the government, always prevail, and so the awarding authority preferred to continue the contract and not to terminate it, and continue with the previous awardee. I would like to underline that this happens also in Italy and also in other European Union Member States. The public interest to fulfil the contract always prevails. This also happens within the Expo case, that is a big case of public procurement corruption in Italy.

Which Expo? The Expo in Milan?

Exactly. Within Expo event in 2015 there was a big corruption scandal about the award of the public works for building the main pavilion, the main infrastructure in Italy, and even if it was possible to terminate the contract since they awardee had corrupted the award commissioned for such kind of public works. The supreme admissive judge in Italy decided the contract was to put on a compulsory administration that means that there is a legal expert coming from the State that managed the award, but the contract had not been terminated because the governmental authorities prefer not, they never want to terminate the contract, and this at the very end penalised the honest contractor because even in front of big corruption, they never get the award.

There are two different things here. One is a public interest in getting the job done, and I suspect that more often than not the contracting authorities don’t really care about the corruption, they just want to get the job done, because at the end of the day, that’s where their interests lie and also that’s where they’re exposed in terms of reputational risk. Whereas the corruption, it’s almost like, okay, so they’re corrupt but they’re still doing the job, so you need the job done. So it’s probably underplayed by the contracting authorities, in the decision makers’ heads, in their own framed set of values.

I absolutely agree with you, exactly.

So how can we change this?

Well, I have similar view to this regard. I mean, what could be done and what should be changed in this way it is preferring to terminate the contract and going on with another award. There are several contractual tools, they are called by Transparency International integrity pacts. Through these paths, adopted within the award, it is possible to provide that if the awardee has corrupted they award commission, and so the overall award has been corrupted. It’s possible to instantly terminate the contract and get the contract to the second economic operator within the award or to the other competing operators.

The thing is, it’s easy to do that if you catch the corruption, or you find the corruption and you’re that certain about it, which is not always easy, but if you do it straight away after you awarded the contract. If you’re six months or a year into the contract, you simply may not have the ability to go back to the second contractor because they may no longer be interested or have the resources to undertake that contract.

I totally agree. I think in this point is you really need better communication between criminal law and procurement law, because as we see in Article 57, for instance, we always need a final judgement about criminal conviction of corruption, and we know, at least in Italy, this really takes a lot of time, providing a final criminal conviction of corruption. What should be done, as it’s done in the United States, it is just relying on an initial decision by the awarding authority that something has gone wrong, something has been corrupted within the award, and so not waiting for the criminal conviction but evaluating if the integrity of the awardee is questionable, this could be done even at the EU level according to Article 57. It provides that a tender may be excluded where its integrity is questionable. I think this could be done also once the contract is awarded, and if the integrity of the awardee is questionable, terminate the contract as it’s possible according to Article 73 of the same directive, and so letting the second economic operator scored get the award.

Again, that still depends on a very quick finding that the tender is questionable and the tender is subject to those problems.

Absolutely, and I think this is far more better than waiting for a criminal conviction. It’s always a the decision that the awarding authority should take timely and should take, of course, with hearings and notice and comments from the awardee. Well the other path is waiting until the contract is done, discovering after that the corruption has been made, and then giving relief to the second economic operator, and this is going not to promote integrity with public procurement, but it is going to be an economical and a financial loss to the awarding authority: also to give relief to the second economic operator. So the damage is doubled at the very end. You have paid a corrupted contractor and then later you have paid an honest contractor because he didn’t get the award that he had deserved, by the way.

Very well. I think we are up to the limit of our time. Thank you very much, Franco.

 Thank you very much, Pedro, it was really interesting and thank you for your time.

 

#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.

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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.

#7 - Mihaly Fazekas (University of Cambridge)

Corruption in public procurement

 

 

Interview with Mihaly Fazekas, research associate at the Department of Sociology of the University of Cambridge. Mihaly is pioneering the use of "big data" in social sciences research settings and is part of two major research projects: ANTICORRP and DIGIWHIST. You can find his personal webpage here.

 

iTunes

Transcript

Let’s start with corruption in public procurement, that is probably your biggest area of interest. How can we measure corruption in public procurement?

Measuring corruption in public procurement is usually a difficult and challenging topic, and a lot of people before, a lot of scholars and policy people tried to measure it and measuring it directly is still pretty much impossible. I don’t think we will get any closer to directly measuring, however, there are two avenues to measure it indirectly. The first one which has received much wider attraction in policy and academia is looking at people’s perceptions or reported experience which is good in many ways, as long as people have experience with that type of corruption, but in public procurement, you can ask companies but they’re unlikely to really reveal if they have been part of a corrupt scheme of not.

The only alternative remaining, and this is what I have done with a couple of colleagues around Europe, is to develop proxies. Proxies are indicators of corruption risk, so basically this means that we can track a range of characteristics of companies, individuals behind companies and contracting entities, also the characteristics of the procurement process, the tendering process itself which are not unknown for being associated with corruption. Now, of course, a lot of the characteristics which we are measuring could be also associated with non-corrupt problems such as low state capacity or simply just, you know, problem with conducting the usually really complex procurement process according to legislation. So it’s really the challenge of finding those indicators, those proxies, which rather indicate corruption than anything else, any other problem. So what we have done, for example, is coming up with a set of red flags highlighting the outcomes of the procurement process which are associated with public procurement corruption and linking these outcomes with the characteristics of the process itself so that the input side of the process to signal corruption together, so kind of measuring the input and the output. Now to give you concrete examples, starting from a conceptual understanding, so we understand corruption in public procurement as a restriction on open competition with the purpose of awarding the contractor, pre-selective bidder, typically the same bidder than they are connected bidder over and over again. These translate into corruption risk outcomes in the procurement process as lack of competition, meaning a single bid submitted or a single bid considered on an otherwise competitive market, say school meals. And the recurrent institutionalised nature of corruption can be captured by the market share of a single company, so if the same company is winning over and over again from the same procuring entity while having no competitors on an otherwise competitive market, we think this is jointly signalling high corruption risk.

Now that is the output side. The input side can be characterised with a lot of red flags known from literature for over a decade now, for example, really short advertisement period or some other reduced lead time, so basically the number of days between publishing a call for tenders and the submission deadline for the tenders. Now if this period is really short, then the likelihood of having one company bidding only drastically increases this and often, in many countries, not in everywhere, but in many countries, this also means that the company will win is the company who has the highest market share anyway. So these input and output relationships together give us some indication of corruption risk.

How can you reach that conclusion?

You cannot reach that conclusion with certainty, but you can reach that, and draw a conclusion with a certain amount of probability. So that’s why it’s a risk measure we are applying and then to continue, basically you build up these relationships and individual indicators for every single tendering procedure, every single contract awarded, and then you put them together in a single score so that we can capture their core occurrence, so when they occurred at the same time, in the same tender. Now tenders vary for a lot of different things, you know, maybe it’s just Christmas period, no one bothers putting in a bid so that’s the same bidder winning the contract. However, if the aggregated information to characterise bidding companies or contracting authorities, so organisations in general, then we find that curious distribution of these red flags, that some organisations have a bidding activity with a lot more red flags than others. So when we take together that an organisation as a whole over a longer period, say a year or two, has a lot of red flags in its contracting activity, then our trust that this indicator is actually indicating corruption is increasing.

That’s any time you don’t get an actual clear-cut conclusion, unless someone says well, I’ve paid a bribe or I’ve received a bribe?

Yes, so we are not interested in bribes, not at all, and the reason is that corruption in public procurement is in its most dangerous form is barely down to bribes. What you find is a complex lab of consultancy firms, subcontracts, offshore accounts, maybe some cash as well to grease the wheels of the administration, but the big fish is playing true, seemingly legal channels. So that’s visible in Brazil in the Petrobras case which is just ballooning and ballooning, but hundreds and probably thousands of other cases all around Europe.

But the Petrobras case, if I may add, it does involve bribes, it does involve money ending up in the pockets of people that were making decisions.

Yes, but the big corrupt trend goes to party foundations and construction companies, bogus consultancy contracts, so that’s where the big money disappears.

That’s our focus. I’m not saying bribery cannot happen and bribery is not important, I’m saying that’s not our focus. Our focus is really this particular understanding of public procurement corruption, so restricted access to public resources with the goal of benefitting the particular company or a particular set of companies.  

How important is transparency in trying to stave off corruption in public procurement?

Transparency in public procurement is crucial for controlling corruption and then, you know, this is just a blanket answer we always say, well transparency is great for controlling corruption. We think it’s great, but you need actors who can act on that transparency and the good thing about public procurement and transparency and corruption is that if you have transparency on a market, and it’s an effective transparency so the actors can actually make use of the information, then typically there are companies and individuals who have the resources to act on that. So as soon as you open up a market by publishing a call for tenders in a centre of registry, then suddenly a lot more companies are bidding. There are examples of this, namely from Indonesia, Bangladesh or India. Their electronic procurement systems have been introduced recently and then you see that there are companies who entered the market. Now it’s not a panacea to corruption, but it does decrease the likelihood of corruption to occur and there are more companies to bid and especially when there are companies who are not local, who are not, by default, linked to local politicians and bureaucrats, bid.

But you’re talking about transparency ex ante, so before the procurement procedure starts, or during the procurement procedure?

During the procurement procedure, a call for tenders.

Yes. My point was on one hand that, but also on the other hand, ex-post transparency, so transparency for the contracts that have been awarded.

Yes, that’s also really crucial and that can add a lot to the fight against corruption if that information is used by audit bodies or similar society, so that’s one of the goals of DIGIWHIST, for example, that we try to make the whole bidding process, including the contract award and contract implementation, more transparent and giving simple tools to citizens and audit bodies to track risks and quickly identify those individuals, organisations and contracts which are at risk. So this is crucial because like it or not, as we stand now after many directives on public procurement and terms of national public procurement legislation, we often don’t know the basics. So if you ask the Minister of Economy in France or Germany or in the UK, they won’t be able to tell you a really simple answer to this question: who is the biggest supplier to the government? For example, in the UK, of the high-value contracts regulated by the EU directive, 43% of those awarded contracts have no contract value, 43%. So if you have such formal transparency but effectively known transparency, then what are we talking about? You have to get the basics right.

I’m on your side on this, but usually the conversation I have with pro-competition academics and also lawyers, is that especially the contract information after the contract is awarded, if it’s made public and if it’s made available, yes, it can be useful anti-corruption measures, but it also facilitates the life of entities…

Cartels.

…cartels and inclusive practices?

Yes, that’s true. There’s a downside of it.

So is there any way that we could try to minimise the downside?

Yes. If you used the information more efficiently then cartels will use that information. Once it’s public, there’s no way to control who’s using that information and it is documented. There is a known fact that it’s easier to maintain cartels, but it’s also easier to spot them. now as it stands now, there is like, maybe two or three competition authorities, excluding the UK’s CMA, who actually make use of procurement, micro-level procurement data systematically to track corruption risk. The South Korean Competition Authority is one of those exceptions and those of us going around the road and saying how great practice this is. Now if we push for transparency and we don’t use it for evaluating risks of collusion or corruption, then in fact, it can be negative overall, it’s true.

Thinking of transparency of awarded contracts, a few years ago, I don’t know if you were aware of this information, in Portugal we made it mandatory not only to use electronic procurement, but also for all contracts that were not subject to contract procedure, so transparent contract procedure, to be registered into a central repository. The compliance for it, as far as I know, is close to 80 to 90% of the contracts that needed to go there, so it’s a very high compliance rate, but what I found fascinating is some, let’s say, entrepreneurial “white anchors”, cross-referenced information from that database, the Public Contracts Database, with the information that is contained in the Companies Register which is also public by definition, and I found out that in some examples, or in some situations, companies that were yet to be incorporated were being awarded contracts and I found that fascinating. All it did was to take the data from the two data sets and combine it and see what it produced. So do we have any examples of using this kind of data that may yield an unexpected result?

Cross-checking and linking public procurement data and any special interest companies to Company Registry is part of what DIGIWHIST is doing in 35 countries, I mean 34 countries plus the European Commission’s own procurement activities. So yes, I mean this [?? 13.36] plan to do this and we are working on this as part of DIGIWHIST, particularly for this reason that often really simple things can emerge. Now I’m not saying that everything is as simple as that, for the very reason that as soon as the information is being used for tracking such risks, then the actors themselves change their practice. They become more sophisticated, but one of the really simple things we have seen is the politically motivated, seemingly politically motivated date of incorporation of companies. So we didn’t look at whether they were incorporated already when they got into a procurement contract, we didn’t see any red flag on that, but we have seen red flags, the winning chances of companies registered in the very first year or just before the new government came into power, was significantly higher than companies registered just a little bit before that. Now, of course, you would expect companies with more experience having higher winning chances, at least in the first few years of their existence, and in addition, we also found that companies registered when the same government was in power the first time, say 13 years ago, then their winning chances increased, but only once the government, the same government, came into power. So this is, you know, practically no economic theory can explain why those particular years made companies so successful. We could only come up with political explanations.

Speaking about the DIGIWHIST project, what are you trying to achieve with it and what’s going to be the outcomes?

First, we tried to set up an infrastructure, both for research and government accountability more broadly. So there is a lot of transparency legislation out there, a lot of data, but it’s either not linked or it’s in a horribly bad format. So what you have seen all around in Europe are individual procurement tenders in like HTML pages but there is no way you can tell everything like vary the data in a really simple way, like biggest winners or the average number of competitors for a particular company. So the first thing what you’re doing is scraping all this data, collecting all this data, cleaning it up, standardising it and republishing public procurement data in 34 countries plus the European Commission. Now then it’s linked to company data on financials, registering information, but also on ownership and also on the managers and boards and directors. Now this data is also linked to the list of political officeholders elected and appointed and finally, we link the data, the public side of the procurement data, to treasury information on contracting authorities, so how much money they receive from the central government, how much deficit they are making and so on and so forth. So really, really try to come up with a complex structured database which can be used for research as well as policing. Now on top of that, this will generate a lot of data, so on top of that, we have to come up with simple summary indicators which lay people, citizens, policymakers, can use in their daily activities.

We will generate a set of transparency indicators including data quality, a set of indicators on corruption risks and also, indicators on quality of public administrations or state capacity. Now this information we hold will be fantastic and all that, but our ambition is really to push for impact and policy change if possible. So what we will do, we put this information, the data and indicators, in a really compelling packaging, say, for example, a mobile app, that you can browse this information, you can directly access the risk scores and if anyone has any intention to blow the whistle, then whistleblowing reports can be attached to tenders. So the idea is that when all our, for whatever national body, receives a whistleblower report, then it has, on the one hand, big data, all the contracts, all the entities, the ownership ties, everything there. It has the risk scores generated by researchers and validated in a rigorous way, plus the usual insider information whistleblower share. So auditors and investigators will not only see what insiders want to share, but also see whether it’s important, whether any chance of going for these cases and whether there are, you know, large enough amounts involved to start an investigation. So this is really the tool which we hope will, on the one hand, revolutionise information in this domain, and also would hopefully allow losers to realise that they are losing out to public procurement corruption and mobilise them and help them form alliances to act, for example, companies who realise that they are losing out by not having access to certain markets.

That is fascinating and very ambitious. My concern with that is how you’re going to get access to the end of line data, especially the contracts, because other than Portugal, and I think Estonia and to a certain extent, parts of the UK right now, I’m not aware that countries inside the EU are collating that data in a streamlined, or at least in a consistent fashion, especially contracts with altered thresholds.

Yes, so we are not directly collecting contracts data. By the way, Slovakia is also…

Yeah that’s true, Slovakia is also in, you’re right.

Yes, so we are not collecting contracts data indirectly. We are collecting announcement data, call for tenders, contract award announcements, contract modification announcements, sometimes in some countries, contract completion announcements. So these are the official published documents which are, in central repositories, like Contractsfinder in the UK or the EU Standardised Electronic Daily.

But that’s precisely my point is that those sources of data are incomplete by nature.

But they’re incomplete in a particular way, right, because it’s regulated what is in there and what’s not there.

No, the point is, for example, let’s say the obligation of posting contract data, it has been EU directives for many, many years and if you look at the number of contract notices that are published on OJEU, so on tenders electronic data, and then you cross-reference it with a lot of information about those procedures, when they’re supposed to reach an end, only around 40% of the procedures, you know, the conclusion of the procedures actually registers on Tender Electronic Daily. So it means that either the procedure never reached to an end, it’s possible, but more often than not, it means that the contracting authority simply did not upload that information. So although you’re collating data that already exists in various different buckets, the underlying problem remains, and I know, for example, in Germany that there’s a huge problem in terms of trying to collate this data due to the way that devolution in Germany occurs and that the responsibility for this data to be collected, for example, does not rest at federal level but yes, at a lender level.

Mmm. So what was this 40%? I didn’t understand your calculation…

So my comment was that a set number of contract notices are published on the Tender Electronic Daily and that only 40% of that original number actually officially reach and end and there’s a contract award notice.

 No, that’s not true…

It is true. 

…it’s a much higher number. I think it’s around, the last time I looked at this was around 70 to 80%. I did have an email exchange with the [?? 21.28] who is creating some of this data and the percentage was definitely higher than 40% and this is a factual question we can clarify later by email, but even the 70% is really high, I agree, and that is due to three things: one is the lack of our capacity to link the contract offer announcements, and if you count, there’s an equal number of contract offer announcements which should have a call for tender but it doesn’t…

Correct, that’s true as well.

 ...so the numbers match up. So our best hope is that they are there, it’s just not linked, so they can be linked with some kind of probabilistic matching which DIGIWHIST will do. The second point is what you mentioned already, that they start the procedure but it never ends because of whatever reason, or the third is that it’s not there even though it should be there. So that’s true, this is think is a real problem, but we don’t actually blame this collating the data and cross-referencing it to, for example, public budgets on the contracting authority level. We don’t know the extent of problems. So, for example, we have done some of this kind of cross-checking in Hungary and it actually varies from year to year. If you look at public procurement as estimated from agency budgets, so spending on investments and material costs, and public procurement is estimated from announcement data, taking into account the threshold effect. So I think the future and one of the goals of DIGIWHIST is to expose these problems because currently, no one is looking at this, no one is saying hey, hey, it’s like millions of years are missing and you know, like shouting around and we should fix this and I think that some people are working on this, but they could use a lot more publicity and a lot more direct exposure of these problems.

Personally I think that the data situation will change once e-procurement becomes mandatory, so that’s data gets collated centrally and automatically.

But that’s only for the above EU threshold contracts.

Correct, however, for example, in Portugal, you have to use e-procurement for all contracts that are subject to a contract notice. So, for example, if you want to use an open procedure below the thresholds you can do it, but you have to do it as an e-procurement exercise. So it varies from country to country, but that is one of the points that I think is going to change it, or it’s going to change the data collection later on.

Yeah.

The other one that may change is in terms of consequences, because it’s very clear for you, as a procurement officer, if you do not put a contract notice out that you should have, it’s very clear what are the consequences for you. So your contract may be annulled, you may be dragged over the coals, you may have problems with your line manager, so on and so forth. If you don’t put the contract award information online, there’s no consequence. Nothing happens to you.

Except for in Slovakia where the contract doesn’t enter into force until it’s published.

And also in Portugal and you see that once you change the incentives, you see that the compliance rate then goes to what I would expect to be the compliance rate also with the obligation to put out the contract notices in the first place.

Mmm, mmm.

Okay, very well. One final question, so you are an early career researcher and as far as I know, you finished your PhD last year, about a year ago, am I correct?

Yes, last February.

And you’re already a scientific coordinator for a very large project, about £3 million or €3 million worth, what is your experience with that? So what kind of advice could you give to an early career researcher that wants to work in that kind of field? 

My honest advice is wait a bit longer and plan it better.

[Laughter]

I mean in general, the problem of research funding, I mean good researchers are not selected on management skills, they’re selected in their career based on ability to write compelling research papers and these are competitive processes. So big grants will lead to disaster unless you know the people really well because managing an organisation in multiple countries, which is often a precondition for your funding, for example, and managing a project which is typically on top of people’s everyday work, is really, really difficult. So I’m lucky because I have worked previously in other projects with most of the people who are part of DIGIWHIST, and I see the enormous advantage of knowing these people, trusting them, knowing their strengths and weaknesses, as well as knowing my own strengths and weaknesses. So unless you trust these people and you know that you can work together with them, even in difficult situations, then just wait. I mean ambition is a great thing, but you save a lot of your nerves and your time.

So effectively you’re saying be careful with whom you get in bed with in terms of projects? 

[Laughter] yes exactly, be really careful and because you are in bed with them for years.

Yeah I agree with you and that’s as much as I’ll say on the record. Thank you very much, Mihály for the interview.

Can I add one more thing if…

Sure, of course.

…I may? So like my new, you sounded a bit critical about the corruption measurement approach.

No, it’s my job to push you back.

Yeah, yeah okay. So just one more addition, so why we think it’s a valid indicator of corruption, a valid proxy of corruption, is that there is this internal logic and the build-up of indicator but there is a lot of external validity tests we have done, and those are the ones which convince people who are really critical. For example, if you aggregate our red flags to the country level, and then you see if, you know, whether Sweden looks better than Romania, so kind of roughly correlate the macro indices with Transparency International’s Corruption Perception Index or the World Bank’s Corruption Index, you get a really good feed around 0.5 and 0.7. That’s the linear correlation co-efficient. So basically, countries which are perceived to be corrupt, they tend to do a lot more of these red flags, for example, but also companies registered in tax havens, they are much more prone to the red flags as our corruption risk methodology defines them. So there is a lot of micro and macro evidence on external validity and this is, I think, one additional point when people, you know, thinking about using these indicators or not.

Okay, very well. Thank you very much for the clarification.

[Laughter] and thank you for pushing me back.

[Laughter] you can find me at my blog telles.eu or on Twitter where I use two handles, @Detic for general discussion and @publicprocure for public procurement related topics. As for Mihály, you can find him on Twitter as well with the handle @mihaly_fazekas. As ever I am very grateful for the support of the British Academy Rising Star Engagement Awards.

 

#6 - Piotr Bogdanowicz (University of Warsaw)

How do we deal with cross-border interest in public procurement? (II)

Interview with Piotr Bogdanowicz, assistant professor in European law at the University of Warsaw. Piotr is also a legal adviser and has authored more than 40 articles on European Union law and public law. As with the previous podcast, the main topic for my conversation with Piotr is once more cross-border interest in public procurement, particularly the complex cross-border interest test created by the Court of Justice in the early 2000s.

Transcript

Piotr, welcome to the PPP.

Good morning, Pedro.

It’s great to have you here, I’m really, really thankful that you were able to make yourself available for the podcast, especially at such an early hour in the day.

My pleasure.

I would like to start this podcast as I did the last one, to talk about cross-border interests in public procurement. So in your view, why do you think that cross-border interests is important in EU public procurement law?

Starting from the beginning in fact, cross-border interest is important in EU law because if we don’t deal with the cross-border interest then we have a so called purely internal situation. So we cannot use, for instance, freedoms of internal market, and as far as EU public procurement law is concerned, the situation is the same - it limits the scope of EU public procurement law and in principle if we deal with a cross-border interest then EU public procurement directives have to be followed. Moreover, all the general principles of EU public procurement law have to be followed as well. And that’s the main problem, because if we apply EU public procurement directive then the situation in principle, in theory is very simple. We follow public procurement directives if some certain thresholds are exceeded. But if we don’t exceed these thresholds then the situation is more interesting because according to the European Court of Justice we should follow EU public procurement rules like non-discrimination, equality or transparency even if in such cases. And that’s the problem of the definition of cross-border interests.

In the last podcast I was talking with Andrea Sundstrand about the same topic, and one of the things that we discussed was that for contracts about the financial threshold of the directives that justified application of the directive, there’s no assessment whatsoever of the cross-border interests of those contracts. You just apply EU law because they have a value over that threshold. The cross-border interest only applies for contracts below the threshold or that have been excluded from the scope of application of the directives. So in theory what you’re saying makes sense and it’s logic, in practice there’s been some concessions to that principle.

Yeah, but the fact that we use, that we follow EU public procurement directives because thresholds are met is based on assumptions that such contracts, might interest the contractors from other Member States. And as you said, is only principles because I can clearly imagine a situation when we deal with the contract, which is above the threshold but still it doesn’t mean that it has to have a certain cross-border interest. And quite the contrary, I clearly can imagine the situation when we deal with the contract, which is below the financial threshold and it has a certain cross-border interest.

This is the question whether thresholds are good factors to decide whether we deal or not with cross-border interests. Of course the Court of Justice in its case law said something about cross-border interest, I mean whether there are some factors to rise the cross-border interests. And they related not only to significant value of the contract but also to the, for instance, place where the work or services are to be carried out or technical characteristics of the market. But still this depends on the case law of the Court of Justice. In  one case the Court can say that, “Due to the fact that the place are to be done somewhere, there is a cross-border interest,” and in the second case the Court can say that, “There is no cross-border interest,” and that’s the problem

I find that fascinating, that defining the application of the legal regime would, for many contracts, the contracts would depend on these almost hypothetical analogies or theoretical scenario that a contractor or authority needs to go through before they launch a procedure. So before they decide if they’re going to actually comply with EU principles, because a contractor has the cross-border interests, they need to reach the conclusion that the contract has cross-border interests, which is almost a catch-22 situation because it’s impossible for you to do without doing it. So how can you be certain that there is cross-border interest if you haven’t advertised the contract and if you have not allowed companies outside your own member state to participate in the procedure?

I do agree with you, that’s the main problem, that in theory everything looks good, so we need to follow some equal treatment, some competition, the more open contracts are the better. In theory the notion of cross-border interests and the case of cross-border interests is ok. But when we deal with it, when we look at practical things that’s the problem, the problems might arise. And for me even more fascinating is that we base our analysis on the case law of the Court of Justice because what you said, it’s absolutely true but from my point of view the problem is not only the fact that the notion of cross-border interests is hypothetical but also that these rules are being created by the Court of Justice. So the main problem is that these rules, why we should deal with cross-border interests, etc., in principle are not written in the secondary law, in directives, but are created by the Court of Justice acting as a political actor. And we deal sometimes with the situation where the judgments that are being delivered on the same day are different, like in the case of Comune di Ancona and Belgacom as far as cross-border interest is concerned. And from my perspective this is even the bigger problem apart from the fact that this is hypothetical notion, hypothetical situation.

Yeah, I agree with you because effectively it’s almost like every time that the Court of Justice produces a decision about cross-border interest it comes up with a slightly different answer to the problem. And I remember when I was doing some investigation on this topic a couple of years ago that instead of seeing any consistency in the approach, what I saw was a very characteristic way to try to solve things. So the Court of Justice will say, “Oh, on this case we think that cross-border interest means this, in another case cross-border interest means something else,” and so on and so forth. So it makes life really difficult for petitioners that want to apply public procurement rules or at least the principles to be sure that they are doing the right thing. Now, moving on to the second question, that is the situation that we have now. If you could improve the tests, what do you think that should be done?

It’s a very good question because, frankly speaking, I think that I don’t know the exact answer, but there are some potential solutions. The one that could be was proposed some time ago by AG Sharpston in her opinion, leaving the decision, how to deal with cross-border interest, to national authorities. So, national authorities should decide whether they for instance cut thresholds to the very minimum, or whether they apply some quantitative test. This of course would be in line with the principle of subsidiarity, but the problem is that it wouldn’t resolve the question of certainty. I can clearly imagine the situation where we deal with a different law in each Member State. So there is other solution, which is, in my opinion, a very radical one, but it’s very interesting and it was proposed as far as I’m concerned by you, to cut thresholds and to cut them to the very minimum. Then, we will open a public procurement market for almost all the procurement cases. In general I do agree with such approach but I have one doubt. This is a solution, which is good for experienced procurement markets and if I look at Polish market I would be very afraid whether some Polish contracting authorities would deal in a good manner with all the public procurement cases. For instance, if we have some thresholds then we can deal below the thresholds with, let’s say, some easier procedures, that is for contractors a good way. And then if we cut thresholds and we have to apply the whole procedure, even if new directives are more flexible (so also domestic law should be more flexible), then I am afraid that a lot of contracts will be finished or that a lot of contractors decide not to start in such procedures cause they don’t want to follow all these rules, which are set in the Directives. This is my only fear as regards this second solution.

It can be said that those contracts now, they need to be tendered anyway, so the contracting authorities also have the capacity issue of having to do it in the best way possible, even if the contracts are not subject to EU law.

Yes, but the rules are in such cases easier, yes. Of course you have to advertise or publicise the contract, you have to deal with some competitive rules and there should be judicial protection. Nonetheless, the rules are not so very specific, and it depends on the contracting authorities, how they deal with the tender, and if they decide to give some flexible solutions they can do it. If we are under directives and under law implementing directives we have to deal precisely in line with them.

It’s very interesting what you say because my experience in other member states is actually that below the thresholds, to a certain extent, what tends to happen is that the practice that the contracting authorities develop above the thresholds just comes down without adaptions, have you seen that happening in Poland?

The below threshold Polish market is rather flexible, so the problem is rather whether we should deal with some more general principles or not because I would say that I can even divide three categories of procurements in Poland. One of them, which is in line with public procurement law and in line with directives. The second, which is in line with principles because it has a cross-border interest and it is clear that it has cross-border interests. And the third one, which is the most interesting, when we are not sure whether we deal with cross-border interests or not. We are sure that we are out of the scope of public procurement directives but we are not sure whether we are out of the scope of general principles. And in such case in general in Poland the approach is rather more flexible than conservative.

Moving on the next topic, you work both in academia and outside academia as a legal adviser, or as a lawyer. What is your experience doing that kind of work, because it’s not very common in the UK, and what are the advantages and the disadvantages that you see on that?

That’s always a challenge, because you have to deal both with expectations of academia and expectation of the clients. As regards advantages, I am dealing with public procurement cases as a lawyer, and I can use it in my academia. For instance, when I am teaching classes I can give the students practical cases, practical information, I can say them that, “In theory the provision says that, but in practice it looks like that.” On the other hand my clients sometimes say that for them also there is a good point that I’m an academic and I know the case law of Court of Justice. For instance, once more, looking at the provisions they can say that, “We have nothing to do with EU law if we are below threshold,” and then I can say them, “No, no, no, no, no, we have to follow some rules because Court of Justice says that such contracts also can have a cross-border interest.” Disadvantage is, as I already mentioned, that in principle I’m a part time academic and a part time lawyer, and always in such cases something can lose in a specific time. And this also, the question I have to answer shortly, which way I should go.

So you think that in the near future you’re going to go one way or the other?

Yes.

Yeah, I can relate to your problems. When I was a lawyer I was trying to do my Masters at the same time, it just didn’t work out, so I couldn’t make it work. I had to make a decision and in the end I made a decision to move to academia. But even to this day I still maintain the very analytical and very practical mind-set that comes with the fact that I was a lawyer for four or five years, which pretty much sets me apart from most of my colleagues. And in your case it’s going to be even more than that because you’ve been a lawyer for longer. So what do you think that you can bring, if you move to academia full time in the future, let’s say that’s the scenario on the table, what are you going to bring from your experience as a lawyer into your academic work?

I think that the most important thing would be focussing on some practical issues. Of course all the theoretical debates are interesting but in my opinion public procurement law is a very interesting academic discipline, and what we are seeing now as regards the case law of the Court of Justice is pretty interesting as we also deal with the issue of, for instance, codification of case law. So these are real important legal theoretical issues. But for me, public procurement law first and foremost is a practical discipline and when we are dealing with some solutions we should focus on practical implications of our research, not only the general discussion on theoretical grounds.

We still have a few minutes and I have a final question for you. What do you think is the next frontier for public procurement? For example, what are we not talking about that we should?

For me something, which can or should be discussed in the future is the Transatlantic Trade and Investment Partnership, TTIP, ie the agreement to be concluded between the United States and the European Union. And it is for us, I mean public procurement lawyers interesting because it relates to public procurement. Public procurement is the area, which is discussed now between the United States and the European Union. And the aims of these agreements are interesting for us because in general the European Union wants to enable EU firms to bid for a larger market, larger share of the products and services, which US public authorities buy. In my opinion behind that is that the European Union would expect that public tendering mearkets in the United States will be as open as the European Union is seeing an EU market, or that the US market will be based on the same transparency, or maybe not the same but similar transparency and non-discrimination rules. And to be perfectly frank I am not so sure whether the US public authorities are prepared for that because of course they, I’m pretty sure that they follow non-discrimination transparency rules and so on. But as we were discussing, transparency and non-discrimination rules are interpreted by the EU institutions and the Court of Justice and the commission in particular in a very expansive way. And in my opinion it’s going to be an interesting catch between the United States and the European Union in this area.

I think that’s a very good way to finish the podcast, thank you very much for your time, Piotr.

 Thank you very much, Pedro.

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 to the British Academy for sponsoring this programme, and I’ll see you next time. 

#5 - Andrea Sundstrand (Stockholm University)

How do we deal with cross-border interest in public procurement? (I)

andreasundstrand

Interview with Dr. Andrea Sundstrand from Stockholm University. In addition to her academic career, Andrea is an expert lawyer in public procurement and has published extensively over the years. One of her most recent projects is the Procurement Law Journal, the first academic journal on the area published in the Nordic countries. Some of the articles are published in English and are available in open access. Her experience with the journal was one of the topics of our discussion in addition to the issue of cross-border interest in public procurement.

iTunes

Transcript

The topic of today is very close to my heart. We will be talking about cross-border interests in public procurement. I think that you have a lot of important and interesting points to raise and I believe that our next half an hour is going to very useful for people trying to understand exactly where the boundaries lie in terms of public procurement today?

Yes, I think so too.

So let’s start with the cross-border interest tests, why do you think it’s important and why should we bring attention to this almost arcane area of EU public procurement law?

Well it’s interesting because the primary law which was actually there from the beginning only regulates dealings between member states, since the EU doesn’t really think that things that only concern one member state is any concern of the EU. So for having EU laws you have to have some kind of cross-border effect and that really doesn’t matter if it’s public procurement or competition law or other kind of regulations, it has to be some kind of interaction between member states for the EU to be interested in regulating those areas. So when they looked at public procurement they said “well maybe we need some more detailed regulations than the ones in the primary law so we’ll adopt directives of public procurement”. And then of course in the directives we have these thresholds and for the longest time everybody thought that “well as long as a procurement is above the thresholds it’s covered by EU law, but when it’s below the thresholds well it’s up to the member states to decide”. And I think what nobody realised until the European Court of Justice said so is that actually some of the procurements below the thresholds could be covered by primary law since they could have an interest, suppliers from other member states. So I think this was a surprise to a lot of, both contracting authorities and suppliers that even smaller contracts actually could be covered by EU law.

By "thresholds" you mean "financial thresholds", am I correct?

Yes. The financial thresholds set, are set out in the directives so it’s like 200,000 Euros for suppliers and services for example.

But that’s a very interesting trade-off, above a certain value those financial thresholds, contracts are deemed to have cross-border interests and as such are regulated by the directives, but if those contracts have a value that is lower than the threshold then you need to apply the cross-border interest test?

Yes. And I think as I said for the longest time people didn’t realise that, they thought so to speak that the thresholds was the cross-border test, that as long as it was below the thresholds they wouldn’t actually have to bother with EU law at all, you could just use national regulations. But now since we have a couple of cases, several now from the EU Court saying that isn’t really the case because even a smaller contract could be of interest to suppliers in other member states. For example if the contracting authority is situated very close to a border or if it’s a contract where it’s normally you would get offers from other countries even though it is a small value, maybe for specific goods that are easily shipped between the member states and so on. So we have a couple of cases saying what we should look at to consider if the contract has the cross-border interests or not.

And what’s your view on that?

Well it doesn’t make it easier of course for contracting authorities to decide what rules to apply. If I take the example from Sweden we have an easier situation than you have in England because in Sweden we have regulated also contracts below the threshold rather rigorously and for example the general principles of EU primary law also apply down to the very first Swedish Crown where you buy something. So for us it’s not that big a difference really but in other countries like in Denmark where they don’t actually have any regulations on public procurement below the thresholds this would be kind of a problem because then you wouldn’t really know what rules apply to these cross-border interest procurements that are below the thresholds.

Speaking of member states as far as I know, well England, Wales and Northern Ireland they’re starting to regulate contracts below the thresholds without explicit referral to the EU primary law. I have also heard recently that Greece in one of its many reforms that it has done recently has also effectively decided to apply the regime of the directives almost from the start in terms of value instead of above the financial thresholds. What do you think is the best option for the member state?

I don’t know. I know that in Sweden we have decided to regulate more or less down to 50,000 Euros and the reason is that we think that it’s important also for below threshold procurement which is in Sweden about 80% of all procurement to be put out to competition because if contracting authorities in the north of Sweden only buy from suppliers in the north of Sweden and vice versa in the south of Sweden, our best and most cost efficient companies wouldn’t be able to grow and win contracts if we limited the market. So even below thresholds as I said it’s about 80% of all procurement, in Sweden we consider that, that’s such a big market and so much money that it’s important to put it out to competition but as long as there’s no cross-border interest this would of course be up to the individual member state to decide. I was actually working with the OECD a couple of years ago and we made a survey to look at all member states and how they have regulated their procurement below the threshold for B services and most of them have actually had put in place some kind of regulations and rules for procurement also below the thresholds and that survey is actually published on their website.

But those countries that actually regulate contracts below the thresholds do not necessarily apply EU primary law, that is to say for example they may advertise a contract in the national website but they are under no obligation of treating potential suppliers equally irrespective of where they’re based as they are above the thresholds, unless of course they actually turn out to the contract?

Well that’s the problem because if there is a contract below the threshold with no cross-border interest the member states are free to choose. They don’t really have to regulate it at all. They can buy from their friends or from their relatives or whatever the member states decide. But if you have a contract below the thresholds with the cross-border interest, primary law actually regulates those contracts and as the European Court of Justice has said for example that means that a contract has to be put out to competition, you have to have a certain contracting document, you have to treat everybody equal and so on because the general principles are applicable to those contracts.

Is it not true that one of the biggest difficulties of using the cross-border interest below the threshold is actually to define in advance and with to degree of certainty and security that a contract will generate cross-border interest?

Absolutely. And that is the whole problem and that was something that the member states thought they had solved I think by putting these thresholds into place, that okay below member states decide, above follow EU law. But now we suddenly have another threshold that we don’t really know when it is, so each contracting authority has to make a decision in advance would this contract be of interest to suppliers from other member states and that is of course a very difficult decision to make. But I guess you have to look at how did the contract attract foreign suppliers the last time we put it out to competition and such things to decide on an individual basis, but of course this is difficult.

Yeah but by default the contracting authorities will do what costs them less or fewer transaction costs so they’re going to say “well if I can get away without advertising this and without trying to ensure that we’re going to have international competition, I’m just going to think that we’re not going to have international competition and for example go directly for a direct award of a contract”. If that happened it’s pretty much impossible in most circumstances for anyone to know that a) a contract was available, was potentially available, and b) that perhaps it could have had cross-border interest?

Yes. And the interesting thing is that if you have a contact with, below the thresholds but with a cross-border interest the member states have to put efficient remedies into place for aggrieved suppliers since this is considered, to be able to participate in such contracts or such competitions are considered to be a right according to the EU law for each member or each individual in the EU. So I can take an example from Sweden, we have not put into place any remedies for service concessions and this is the same thing as contracts below the thresholds because they are both regulated only by primary law so far, and where actually had letters now from the commission saying “why didn’t you do this because this is a right for each individual to participate and be treated fairly in a service concession with a cross-border interest?” And Sweden has answered something like “well we know we haven’t done that, we should have done it but by April of 2016 we’re going to have this new law so with concessions in place”. But the commissions answer to that has been for like six months ago that “well that isn’t enough because you haven’t done it now” and I don’t think Sweden has answered that yet but there’s obviously big risk that we will actually end up in the European Court of Justice for the first time actually, we have managed to stay away from there so far. And that is the same thing with procurements below the thresholds with a cross-border interest, that actually the member states have to, they have to put into place efficient remedies for aggrieved suppliers. So even if it would be difficult to prove in a Court, you still have to have the possibility to go to Court even for those contracts and I think most member states do not have any remedies in place for those contracts.

That’s very interesting because in fact I remember seeing an opinion somewhere that the remedy system for example in England, Wales and Northern Ireland effectively only was applicable for contracts above the thresholds?

Yes. So that would actually be against EU law since you have to have for all…

I agree with you. So it appears that we have a very strange system in place, above certain financial thresholds contracts are subject to the full might of EU regulation, below financial thresholds they may or may not be subject to EU law but only to primary law, a little bit like Schrödinger's cat it appears that the contracts may be or not subject to such regulation. What could be done to improve the situation and make it easier both for contracting authorities and suppliers to understand the system?

Well that’s a good question. I wish I could answer. I really don’t know. I think your answer would be to lower the thresholds and maybe that is mine also because if there is contracts with cross-border interest then of course they should be covered by the directives because that’s the whole idea with the directives to cover those contracts that are of cross-border interest between the member states, to cover those. And if there are contracts falling outside well that is not good because that would be very confusing for contracting authorities to know what rules to apply. But I really don’t know otherwise because I think there will always be contracts not covered, very low value and so on, or at the north of Sweden where the cost to deliver something from abroad would be too high and so on. So you have to have some separation between these two contracts where the member states must be able to choose themselves if they want to regulate or not but exactly how to do that, that’s difficult and I really don’t have any good ideas for now.

Okay. Moving on. You’ve done a lot of research in cross-border interest over the last few years, where are your interests now lying in these days?

Well I am working at the Stockholm University a lot trying to teach public procurement students and actually getting the topic of public procurement up on the agenda for several universities in Sweden. We have been so far behind both Denmark and England who have several universities that specialise in these questions, in Sweden we’re just at the beginning so that’s what I’m doing. And also looking at different things constantly on public procurement and doing articles, writing out articles and different books on public procurement in general. So this is a full-time task since there is so much happening in this area right now.

Okay. So let me rephrase the question, where do you think our focus should be in terms of public procurement in the near future?

Do you mean ours as researchers?

Yes, or where should the rules change or where should be improved in general?

That’s a big question! I think there are a lot of rules that could be improved and I think it’s always difficult when you have twenty-eight member states deciding new rules. So I think in the coming two or three years our focus both as practitioners and as researchers will be just to try to understand the new rules coming and to try to figure out what they actually mean in practice. Because there’s one thing to be in Brussels with twenty-eight member states to decide rules, totally different thing is for the contracting authorities in the north of Sweden actually trying to apply these rules. So I think that will be the focus for the coming years.

So you think that the focus is going to be into training and in improving the skills of public procurers and also people that work with the rules in practice?

Very much practice because now the big legislation package are soon coming into place, the lawyer’s task now will be to try to explain these rules to the practitioners I think.

Okay, very well. I’ve got one final topic that I would like us to cover which is your new Procurement Law Journal?

Yes.

You started it in 2014, it’s in the second year, how is it going?

It’s going very well and I’m so pleased because nobody believed in it, not even the publishers believed in it. But two weeks ago they actually took me out to buy me champagne lunch just to celebrate because now it’s actually we have so many subscribers I don’t have to pay for it myself anymore which is nice. And we have both the Swedish government, Swedish parliament and the Swedish High Administrative Court are subscribers and it has had already by the third issue ever a great impact on public procurement legislation in Sweden and I’m very happy about this. And we have a lot of researchers who wants to write articles so it’s very interesting to see or I’m very happy to see that my feeling that this would be, this would cover something that was missing earlier, I’m very happy to see that that was actually true.

Could you tell us a little bit more about the experience of setting up a journal and running it?

Well actually it’s much more easy than you think. The difficult thing is to get people to write articles and we’ve succeeded pretty well so far. It’s not very difficult, it’s just that it takes a lot of time of course. Each issue we have four articles and I’m also very proud that one of the articles always is written by a student, so a student who has written a very good Master thesis rewrites the thesis into an article and I think that’s good because then you make sure that also young lawyers are interested in public procurement law. Some articles are written in English, I hope to get one from you soon.

I know, I know!

And those articles we publish open access on our webpage which is with the address urt.cc, so you can actually already today go in and read the articles in English. The Swedish articles you would have to subscribe to be able to find on the internet.

Is there any plans to making those Swedish articles available further down the line maybe in English in open access as well or do you think they’re always going to remain behind your subscription service?

I think that’s a matter of cost actually. I wouldn’t mind translating them into English because they are on general EU law also so that will be interesting also for lawyers in other countries but it’s so far a question of funding. So we will have to make sure first that the printing cost because all the people working with this journal we all do it pro-bono so we don’t get paid so our costs are the printing costs and the cost of sending the journal to the subscribers and of course the cost for paying for the website, and those costs we have now covered. If we are going to get more money or have some kind of profit I would firstly thinking about giving maybe scholarships to talented students but maybe now you say it that could be a good idea also if we do have some profit in the future that we could actually translate some of the Swedish articles into English.

That is certainly an area where I could see some value because there’s a lot that each jurisdiction produces in its native language, I mean I’ve seen it all over the place in Portugal, Spain, France, Italy, and certainly Sweden is not going to be different. But there’s not a lot that is being published and disseminated about a specific jurisdiction in English?

Yeah, I know and I agree with you, it’s a shame. I really would like to read articles from Spain, how did they do it there, different issues they are fighting with, maybe we have the same problems in Sweden and we can help each other solve these problems and of course for me it’s a problem then if the articles are in Spanish or Italian which I don’t know. Maybe we could set up a translation service together?

There are a few online already that are quite cheap.

Okay. You have to tip me off?

I will after the show. Very well, last question. What sets your journal apart from the existing ones? I mean there’s already quite a few journals in public procurement?

The first idea was that this journal would focus on the situation for the Nordic and Baltic countries and we’re also in the Board, in the Legal Board we have researchers both from Estonia and Finland and Denmark and hopefully eventually from Norway and Iceland also. So our goal was to focus on the specific problems of the northern countries. Of course it turns out now I read a couple of these articles that these are often problems we have with the legislation in all member states, so that was our main thing. So what makes this journal so special? I think that we are very focused on practical issues so we like to look at how the law actually works in practice, maybe that is something that I hope that we can help so that the researchers can help practitioners how to interpret the rules and thereby how to use the legislation for doing great public procurements.

Could you give us an example of the cross-pollination in the different Nordic states is happening via the journal? I think it’s a great idea that you’re bringing together researchers and practitioners from other jurisdictions and countries but how is that working?

Well it’s working fine. The first thing of course is that we have articles not just from Swedish researchers but also from researchers from Denmark and Estonia, we’re going to have an article from someone from Finland in the next issue and so on, so I’m really happy about that. But also we are, in 2014 we had a first conference with the journal where we invited researchers from all of these countries and hopefully we can have this conference, like a Nordic public procurement conference once every year or once every two years so we can come together and help each other with public procurement issues. So if we have someone doing research in Estonia maybe we can use that research also in Sweden and contribute to Swedish legislation also.

Thank you very much Andrea. It was a pleasure to have you.

Thank you. Pleasure to talk to you.

You can find me at my blog telles.eu or on Twitter where I use two handles, @Detig for general discussion and also @publicprocure for procurement related topics. As ever I’m very grateful to the British Academy and to the British Academy Rising Star Engagement Awards to make possible these podcasts.

 

#4 - Amy Ludlow (Cambridge University)

How do labour law and public procurement intersect with one another?

Interview with Dr. Amy Ludlow, fellow at the Gonville and Caius College in Cambridge and Affiliated Lecturer at the Faculty of Law. Amy undertook her Ph.D at Trinity College in Cambridge and has published extensively in the field of labour law over the last few years. What brings her to the PPP is her recent book Privatising Public Prisons: Labour Law and Public Procurement Process.

iTunes

Transcript

I like to start the show by discussing or putting the spotlight into the interviewee’s big idea for public procurement, so let’s start there, what is your big idea for public procurement?

I think really what I was trying to do with the book was explore competition in public services, but from the perspective of social sustainability and by that I really mean this kind of co-existence of economic and non-economic interests, and co-existence in ways that serve long-term inclusive societal prosperity. So I was interested to explore how we procure public services and how, the ways in which we procure might affect the employment relationships, but more than just terms and conditions of employment, how they might affect employment cultures or practices of staff who are at the frontline delivering those services, and I guess connected to that is how that affects the quality of those services. So I think I was probably trying to probe the ideology of public procurement from a social and empirical perspective, and I did that in the context of a prison so Birmingham Prison.

Let's start there, why did you pick a prison to do your research on and what is your most important finding of that work?

I’ve had a longstanding interest in prisons and we’re blessed here in Cambridge with having a really good Prisons Research Centre at the Institute of Criminology and when I first applied for my PhD I had thought that I would explore the, actually terms and conditions of employment of working prisoners, and, so their labour rights and how we protect those rights, and then I went along and chatted to Alison Liebling who is the Director of the Prisons Research Centre, and she said ‘mmm, that’s interesting but there’s a fascinating world out there in terms of privatisation, have a look at that’, and she had various contacts and it just kind of spiralled from there, and the study started out as being a comparative study of one already privately-managed prison and one public prison, Birmingham, that were both going through the same competition process and I originally intended this to be a kind of comparative exercise to see how privatisation might affect the prisons differently. 

In the end, because of how the competition panned out, Birmingham became the most interesting venue for research because what happened in October 2011 was that it became the first operational public sector prison to be privatised, and the operational bit was really important to me from a Labour Law perspective because that meant that we had a pre-existing workforce that were going to be transferred across to G4S, so the Birmingham competition became a really interesting testing ground for lots of law from a kind of social perspective.

And in terms of findings, what is your biggest highlight?

I think probably I’d say that we’re not smart enough about how we procure public services and to some extent that’s, that’s not revolutionary, there are lots of other people who’ve said...

True.

...but just I think we inadequately recognise the potential and the importance of properly managing the social aspects of procurement processes. Staff matter because they provide the services upon which we all rely and also because they are inherently deserving of respect and value, it’s just a proper, proper thing to do. So I’m arguing really that we ought to be much more socially ambitious in our procurement, we need to use it to pursue things like Living Wage Policies, to promote Trade Unions that represent and empower staff, to increase employment, for example, among vulnerable marginalised groups, maybe sort of the antithesis of what Albert Sánchez Graells might have been arguing for I guess!

I should have had you both on the same podcast...

Yes! Chalk and cheese I think!

Drilling a little bit more into the detail, how hard was it to bring your expertise in labour law in industry relations into specific sector public procurement and more, even more specifically, into the prison settings?

It was tough. I mean it definitely took more time and more investment to do well than I probably could have imagined at the start. So as I said, I’m fortunate in Cambridge that we’ve got this fantastic Prison Research Centre, the Institute of Criminology, and that gave me the opportunity to engage in quite extensive fieldwork before I went into Birmingham, and also just to become really familiar with the sociological and criminological literature to properly understand prison staff and the history of privatisation and competition in the sector and that was really important, particularly because I used what I call quasi ethnographic methods, because I think it’s, I feel a bit vulnerable about this methodologically ‘cos I don’t have a very rigorous social science training, but the fact that I was, I spent more or less a year in Birmingham Prison, with keys and hanging around in a structured way with staff, chatting to them informally, really understanding their world and what this process was doing, and that long-term immersion in a field is quite exposing. 

Prison staff are also very quick-witted which means that they very quickly catch you out, so I think it’s really important, in terms of research and credibility, that I internalised and really tried to understand, as much as possible, their worlds from a non-legal perspective before I went in. Of course, you can do all the preparation in the world and that, different things arise in the field and that’s kind of the joy of doing ethnographic work and fieldwork, that it sounds like a, like a kind of genuine discovery, but it was a long process and required a lot of support from colleagues from other disciplines.

I can relate to your difficulties and challenges because when I did my Ph.D I also used empirical research methods and found it sometimes so alien and so different from what I was expecting.

Absolutely. No, no, no, that’s so true, that’s so true. I’d got these really neat and tidy, you know, when you’re applying for access you say it’s gonna be like this and it’s gonna work out perfectly, and I’m gonna do these clean, 45 minute interviews with fifty staff and it’s just. But actually it takes a huge effort to develop trust and credibility in the field and so it’s got to be this process of slow immersion, I know there’s this whole kind of slow science movement, and I really do believe, believe in it, that you’ve got to invest in that entry into the field and I could never have got the level of access and openness and trust from staff, you know, of all camps, had I done it otherwise. So, yeah, definitely recognise best plans being corrupted or changed by the field!

In your book you talk about, well you use at least a couple of anecdotes to illustrate your difficulties and to illustrate the culture shock that you felt working in that environment. Could you get into a little bit of detail of those?

Yeah, so Birmingham Prison has a reputation for having quite a traditional staff culture and traditional in the sense of some cynicism, some hostility, it’s a very male typically middle-aged sort of staffing profile, I mean that’s to generalise, and I obviously didn’t look or sound like a lot of the staff and so there were some, definitely some important moments where they were kind of gate-keeping moments, where I had to, I don’t know about altering my identity, but definitely I talk about being tolerant of behaviours that I wouldn’t normally tolerate, so stuff like, you know, sexism, language, particularly when describing prisoners, so, that’s quite objectifying language, so calling prisoners ‘bodies’ for example, calling serving the dinner ‘feeding’, and these are quite, I mean they sound probably more shocking to people who are not familiar with prisons than they are, but they’re definitely indicative of a cultural kind of problem.

So I went through some fairly challenging encounters with certain key members of prison staff and once I had established that I could cope with that, they would describe it as banter, and also was genuinely interested in understanding their world, which meant rocking up to the prison at 7 am and leaving at nine o’clock, so doing a full day’s shift with them and talking to them at those points of the days where prisoners are not unlocked and they’re a bit freer and there are a few quotes in the book where prison staff are saying ‘you know, have you not got a home to go to Miss’, kind of thing! ‘Why are you still here, you must be paid a fortune to do this’, and I have to say, you know, actually no, I’m really in it for the love, I’ve been doing this as a PhD student! 

And that, those sorts of just being there and being visible really mattered to staff and just being persistent and inquisitive, occasionally asking some naïve questions, sometimes deliberately naïve questions, and getting them to show you their world, I think was how I eventually did it. But there were some moments when I thought ‘what have I done’, I could be doing doctoral research in Cambridge, reading a book in a library and it would be a hell of a lot safer and easier and less exhausting, but you know, at the end of it what you get is fantastic data, and also this opportunity to develop as a person by exposure to all of these really different encounters and it’s fair to say I’m now completely hooked on prisons. So, you know, they’re just fascinating institutions and institutions about which I feel really passionate in terms of improvement.

So you see yourself continuing to do research in the field, in that specific field?

Yeah, not least because there are so few lawyers in the field so I feel now that I’ve taken all that effort to understand history and staff culture and stuff I’m reluctant to let that slide, so I’m staying active in the field.

Any new projects that we could talk about, that you want to do on the area?

Yeah, so following the book I’ve kept an interest in prisons and since Birmingham there’s been a change in policy that prisons now are benchmarked rather than put out to competition, so private sector costing is being used and applied to public sector prisons, so that’s been a major development since Birmingham that has resulted in significant staffing changes and restructuring, and so I’ve been trying to trace through some of the impacts of that alongside, so after the book, a team, of which I was part, went back to Birmingham and did a three-year longitudinal study to track the prison’s progress and performance, and following that, we’re interested in how institutions, prisons, are altering and are restructuring and what we observed in Birmingham in the three years post-privatisation was kind of a traumatised institution. So we’re trying to follow, follow that narrative in terms of altered staff behaviours, withdrawing from wings and that shaping prisoner experiences. 

And I’ve been involved recently with a study of prisoner suicide rates, so you might know that the suicide rate in prison has gone up in the last few years and there are complex, complex combination of factors for that, but one of the factors I think has to be the various changes to prison staffing and stuff.

But more related I suppose to the human context, I’ve just been asked to join Jeremias Prassl’s British Academy Against Other Rising Star’s grant project in Oxford which is looking at the future of European Labour Law and I’m going to follow up on the public procurement side of things looking at the implementation of the new directive, space for social policy within the new directive, and in terms of how it’s being implemented. So I’m hoping to do a small comparative study looking at implementation within the UK, so I’m very interested in regional variations in Wales and Scotland, but also looking at the Netherlands and tentatively I think Sweden, to look to see how they’re implementing the directive, but also to see how they are using, or pursuing, social policy.

Going back to the book, there’s a couple of pages that I found really interesting and I was not expecting to see that in your view the fact that Birmingham Prison had been transferred to the public, from public sector to the private sector, had an impact on minorities in terms of staff, staff minorities, and also on staff turnover. Could you talk a little bit more about that?

Yeah, so the minorities point was really interesting, what happened in terms of the composition of the Senior Management Team is that a team that had previously been fairly diverse, both in terms of gender and in terms of race, became an all-white, you could call it pale, male and stale, but all-white male team and what was interesting was that, in fact, the quality issues received the most amount of coverage I think in the procurement documentation which I analysed, and the fact then that that very visibly didn’t translate into practice post-transfer was interesting to me, and was indicative, I think, of the fairly general low-profile of social policy within the Birmingham competition that I describe in the book which, you know, I think is for a variety of reasons that I talk about in the book, so the complexity of the rules that meant that the procurement team were just focussed on survival mode, the kind of silo approach to how they do procurement, that procurement was seen as a very specialist function that was really hived off from the rest of the institution, rather than being embedded within it, which meant that sometimes the best people to be involved weren’t involved in the commissioning process. 

But also that one of the purposes at Birmingham of the competition was in fact to break the Trade Union so there’s a problem, there was a problem in Birmingham about the Prison Officer’s Association local branch having too much power and so one of the explicit purposes of the procurement exercise in Birmingham was to break that power. So it’s not surprising then that social policy wasn’t perhaps very high on the agenda in the Birmingham context.

But I think I take particular objection to the use of competition and privatisation for that purpose, and I think it strengthens the kind of moral imperative on commissioners in that context who provide adequate support to staff given that they’re devising a process that aims to strip that support away by virtue of the Trade Union.

So that’s the kind of equality and SMT side of things, and then, yeah, the staff turnover point, lots of staff left and actually lots of staff were encouraged to leave, sometimes by virtue of financial incentives and that, to me, seriously qualifies the starting point under the, so I talk about the transfer of undertakings protection of employment regulations, so then the starting point there is that in principle when you privatise a public service all staff transfer across on the same terms and conditions of employment. So that empirical finding really tends to cast doubt on the level of protection that those regulations offer and I don’t know, it just seems a bit weird to be, because it must be the case that the commissioner knows about the envisaged staffing changes because they signed off the bid, to that to me, strengthens again the moral case for them taking social protection seriously within that context, which is, it’s clear from the book, which is not what I found.

So this kind of really grey area within the GP regulations where actually there’s a considerable discretion left to the incoming employer to restructure and that’s what I found, so staff, old staff leaving with their more expensive contracts of employment to be replaced, or in some cases not replaced, but where they are with staff that are considerably cheaper to employ.

So I think, yeah, all in all I, staff turnover and kind of impact on minorities I kind of used those to question whether there’s adequate attention being paid to the social policy, social protection stuff within the Birmingham competition, and I suppose to question as well the interaction between the Public Procurement Rules and the Transfer of Undertakings Regulations.

True, but I’m still trying to figure out, because obviously I come from a different background, but I am still trying to figure out why the privatisation would necessarily lead to the impact on minorities or turnover, or it was just a mistake in the way that that particular process was conducted.

So, I think in terms of the minorities I absolutely don’t think it’s inevitable, I think it’s a symptom of lack of pro-activity on that social policy front within the procurement context. To safeguard under-represented groups, or minority groups, I think requires an active strategy and there wasn’t a level of consciousness to support that. But in terms of staff turnover, there is an inevitability about it in the prison sector because staff constitute about 80% of a prison’s running costs and we know that one of the objectives of competition and privatisation in the prison sector is to save cost. You can only really save cost in an old prison like Birmingham by cutting staff, and that of course has to be disclosed or certainly intentions around staffing have to be disclosed as part of the bid.

So we’ve got this interesting conflict between tupee which sort of says ‘don’t worry, everybody’s transferring across’ and the procurement side of things where it’s obvious that there’s going to be some restructuring in this context and restructuring in terms of, yeah, loss of a number of staff but also erosion of terms of conditions.

Did you have access to the actual bids and final contract?

Yeah, so obviously you have to work around commercial and confidence, so I had access to a lot of the procurement documents, I had access to the final, the final contract, there’s one part of it that’s in commercial and confidence, which is really just about numbers, about costs, and I’ve spoken to some of the bidders, although obviously they are, they’re concerned about confidentiality as well and protecting intellectual property and stuff, yeah.

One of the things I thought it was pervasive through your book but you, you did not actually spell it out directly, was that perhaps prisons are not the best sector to privatise...

Yes!

...from a Competition Law perspective, so you made argument from a Labour Law, from industrial relations not to do so, and you mention Competition Law across the book but you stop short of saying ‘prisons are natural monopolies’ which is, would be, and was my impression when I read your book, ‘prisons are natural monopolies’, ergo that is a key argument to add in favour of the arguments that you used against privatisation.

Yeah. No, I think that’s absolutely right, I mean I’m not a Competition Lawyer so I’d probably dodge that bullet, but I also think it’s partly reflective of my own desire to engage with this field.  I kind of feel like in this sector I had to meet the policy on its own terms, so I felt like I had to, in a way, accept OK, they’re going to privatise something in this field and so my starting point was less of a concern to say ‘let’s scrap privatisation’, because there’s actually quite a, particularly in the prison sector, there’s lots of critiques of privatisation in the sector on kind of ethical and moral grounds, all sorts of things, constitutional grounds, and I kind of just wanted to explore what happened. 

So I think you’re absolutely right, that that’s a brilliant point that could be made alongside the arguments that I’m making, and I think having now done this study my view has strengthened that this is, certainly if we are going to continue to procure prison services from private sector then we need to do it much better. I’m less persuaded now than I was at the start of the study about the benefits of using privatisation in the sector, although I think if you look historically it is hard to refute the sentiment that private prisons have undoubtedly shaken the sector up.

So there have been increases in the quality of some of the public service publically provided prisons because of contestability. It’s always a bit of a slippery slope that when you start criticising privatisation you also don’t want to be seen as just accepting poor public service provision! So, yeah, it’s kind of that delicate, I can see that privatisation, it’s almost been a necessary evil, but I feel like with Birmingham they took it one step too far and with all of the kind of benefit I think of privatisation was kind of done with Birmingham, and if they wanted to do Birmingham then they needed to be much more intelligent about how they commissioned and rose to that challenge of having an existing workforce.

You mixed legal and also social sciences research methods in the same research piece. What was the value that you gained from doing this kind of research in comparison with more traditional doctrinal approach?

I simply couldn’t have come to the conclusions, or found the things that I found without using empirical methods, without extending beyond law and doctrinal methods. It altered and enriched my thinking in ways that, yeah, they just wouldn’t have appear... I wouldn’t have seen connections, I wouldn’t have approached the field in the way that I approached it, so they were pivotal to the book, to this study.

One final question, if you had a piece of advice to give the next Amy Ludlow which is going to do some sort of cross disciplinary or multidisciplinary research in this area, what would be your piece of advice?

Get lots of research money so that you can stay somewhere other than a Travelodge I think! No, it would be to be brave, to recognise what you know and be confident that other people  are going to be interested in what you know and your perspective, but to also be  humble enough to kind of reach out and say ‘oh that’s interesting, you’re using this word, what do you mean by this’, because there is a risk that we speak in different languages, disciplines speak in different languages, but some of the most interesting things happen when you bring those different languages, different ideas, together in a way that’s quite brave, but that you also recognise when you’re speaking at cross-purposes. 

So I think taking confidence that you as a lawyer have some unique skills and perspectives and insights that other, people from other disciplines will value, but just being humble enough to recognise when you’re at the frontiers of your learning and checking that we’re all singing from the same hymn sheet!

And with that bombshell I think it’s time for us to end!

Thanks!

Thank you very much Amy for giving us half an hour, after many tribulations we managed to actually record this podcast and do something that is very interesting. 

Pleasure.

Amy is on twitter with the handle @ACLudlow. As to me, you can find me at my blog telles.eu or on Twitter where I use the two handles, @Detig for general discussion and @publicprocure for public procurement related topics, ‘til next time.

#3 - Frank Brunetta (Canadian Procurement Ombudsman)

What can we learn from Canada's experience with a Procurement Ombudsman?

Interview with Frank Brunetta, Procurement Ombudsman for Canada. The remit of the Ombudsman is to promote fairness, openness and transparency in federal public procurement. Before joining the office of the procurement ombudsman Frank was Assistant Deputy Minister of the departmental oversight branch, public works and government services in Canada, where his responsibilities included provided independent assurance and oversight on the prudent, probity and transparency of departmental operations.

iTunes

Transcript

I would like to start our interview by discussing the role of the office, namely how it came about and what are the powers that are contained in the Office of the Procurement Ombudsman.

The creation of the office primarily came through a procurement scandal that we’ve referred to as the sponsorship scandal, and this is a procurement issue that was conducted under the former government, the Liberal government where procurement rules were severely breached. The Conservatives seized on that opportunity, the Liberal government fell, the Conservatives came into power with part of their platform being to clean up public procurement, they passed, one of their first tasks after being in power was to pass the Federal Accountability Act, within the Federal Accountability Act there was a provision for the creation of a procurement ombudsman who would in some form oversee public procurement.

As I understand it the original concept was for a procurement auditor and as the bill passed through the two houses of parliament the decision was made to make the office not a procurement auditor but a procurement ombudsman. So primary impetus for creating the office really was a very severe scandal where public funds were misdirected, if you do any research on it you’ll see that there were charges laid, people went to jail for it, etc, so the Conservative government created the office and it was through an amendment to the Department of Public Works and Services Act, so they amended the Act to make provisions for this office and then regulations were generated which essentially give the office four primary mandates, one is to review complaints with respect to the award of a contract for the acquisition of goods below 25,000 Canadian dollars, and services below 100,000 Canadian dollars including taxes.

The second is to review complaints with respect to the administration of a contract, regardless of dollar value, the third element of our mandate is to review the practices of departments for acquiring goods or services to assess their fairness, openness and transparency and make necessary recommendations to improve those practices. This element is a bit of a holdover from the procurement auditor role that I alluded to earlier and then finally the fourth element of our mandate is to ensure that an alternative dispute resolution process is provided if requested and agreed to by both parties to a federal contract. There is a fifth that is contained but has yet to be invoked with the minister or the governing council can ask the Procurement Ombudsman to undertake a review as they see fit, so for example if there’s another procurement scandal I am, or this office is one of the options for them to review how that procurement was conducted. So those are the five elements, but the four primary ones are the ones that I referred to, if you have complaints for the award of a contract between certain dollar thresholds or under certain dollar thresholds, review of complaints on the administration of a contract and that has no dollar thresholds, the procurement practice of departments and I can get into that a little bit, how that’s done, and then ensure the ADR, Alternative Dispute Resolution process is in place. So in terms of the review of government procurement practices, we do a couple of things to determine what areas we might want to review there Pedro, our office operates very much like a complaints office that you’d have in any major corporation, so we have a 1-800 line, we have a website, where suppliers can contact us to tell us about issues that they may be having regarding a department, a particular process or a procurement vehicle. We track those calls and the nature of the calls, we do different types of analysis, we try to determine whether a particular department is a constant source of irritation for suppliers, whether a particular process has been a particular problem, or whether there’s some sort of a pattern that can be established with a particular procurement vehicle. We do that because the regulations require me to have reasonable grounds to undertake a procurement practice review, if I can establish reasonable grounds then I can go into a department or to several departments to review that practice, to see whether there is in fact compliance with the appropriate rules and regulations and to ensure that whatever is being done in terms of procurement is fair, open and transparent. That’s essentially my mandate.

Could you describe a little bit more what economic operators that take part on the contracts that are covered by your mandate, what can they expect from your intervention for a contract that has been awarded.

That’s the first element of my mandate which is reviewing the award of a contract below 25,000 Canadian dollars for goods, and below 100,000 dollars including taxes for services, so if I can give you an example, a supplier may be responding to a request for a proposal by a department, he or she submits a proposal and sometime after that submission is notified by the department that the proposal has not been accepted, typically in Canada departments provide a reason for the proposal not to be accepted. If the supplier is unclear or does not agree with that reason or alternatively if he feels that there’s been some sort of inappropriate approach used to award the contract to the winning bidder, or to exclude his or her bid, they can call my office and the first thing we do, because we are after all an ombudsman’s office, we try to understand the issue, get some sense as to what happened, how it happened and then to be quite honest with you Pedro, and I would say 90% of the times when we explain the process to the supplier the supplier has a better understanding of why the department did what they did, and we were able to... we call it dispose of the matter, what we find Pedro, since the office opened is in the vast majority of cases a supplier will call our office with the intent of complaining but the issue is based on a misunderstanding of how the federal procurement process works. A lot of suppliers believe that doing business with the Canadian government is like doing business amongst themselves, they don’t understand it, certain rules that have to be followed, doing business with the Canadian government isn’t as simple as my father used to when he was a contractor, it was a handshake, some suppliers still believe that’s the case, so when we explain the process a lot of these complaints are dealt with through information exchange.

One thing that I pointed out in one of my annual reports to parliament, I think it was last years was that what I found is that it’s often not the information in itself that is satisfying the supplier, it’s who it is coming from, because in a lot of cases the supplier will have called the department and received a very reasonable explanation from the department, but they don’t accept it, the supplier does not accept it. On the other hand they call our office, we give them essentially the same information but because it’s coming from an independent neutral third party, an office that has no vested interest in the procurement process, they seem to accept it much more openly, and that’s perhaps a point I should have made when it came to my mandate, my office is an independent office, we’re not beholden to any government department, any agency, while I report to the Minister of Public Works, the Minister has no influence and no say in the work that I do, the areas that I review, or how I review them, so we really are independent and arm’s length from the government operation. That seems to be a big bonus and attraction for suppliers, to know that they’re coming to an office that isn’t attached to any government operation.

Do you have any idea about the figures of complaints you get every year or have you gotten since the start of the office?

I'm in the process of preparing my annual report to parliament, so those numbers are pretty fresh. Last year we received 577 contacts, now I have to stress the word contact, because we often get calls that have nothing to do with procurement, so we track every call that we receive, any contact that we receive, last year was 577, and since my appointment four years ago that number has steadily increased, I believe it’s roughly 70% higher, 577 is 70% higher than it was the first year I took office, and a large reason for that is one of my primary objectives when I took office was to ensure that the suppliers knew this office existed, keep in mind that we’ve only been operational since 2008, so one of the big challenges for the office was to promote our services, so the increase, the 70% increase in the four years isn’t because procurement is somehow getting worse, it’s because more suppliers know we exist. Now of the 577 if I can boil it down to how many we actually investigated, so reviewing of complaints as per the first element of our mandate, reviewing complaints for the award of a contract below 25,000 for goods and 100,000 for services, last year we investigated three and that’s a startling contrast given the number of contacts we have, but let me explain to you that we are after all an ombudsman office and our primary objective is to de-escalate issues, I once said to a parliamentary committee that my objective is to do no investigations. I mean that’s ludicrous, but really our objective is to try to deal with things informally, that’s the role of an ombudsman’s office, so when you look at the contrasting numbers of 577 and three investigations, while a lot of those numbers, a lot of the 577 have to do with suppliers simply calling us to find out how things are supposed to work and whether in their particular circumstances it worked the way it should have. I believe that the number is about 170 of the 577 were suppliers calling with what they felt should be a complaint and that was through the process of information exchange, facilitation that my office provides between the supplier and the department, that we were able to de-escalate those numbers and only have to deal with three actual reviews or investigations, so while the mandate sounds like I have pretty strong powers to investigate, I keep in mind that the role of an ombudsman is to deal with things informally, and try to facilitate informal resolution issues and that’s really the principle that dictates our approach as an office.

And regarding any disputes on the administration or performance of the contracts, what is your role on those, what can you provide to the parties?

Well again there are two elements to that nature of complaint, if there is a complaint with respect to the administration of a contract, as I said initially there is no dollar value on the administration, the truth of the matter is most complaints with regards to the administration of a contract are because the holder of the contracts, or supplier who is engaged in a contractual arrangement with a department is having some sort of a disagreement with the department, so in the vast majority of cases we do not investigate that complaint, what we offer is alternative dispute resolution which is the fourth element of my mandate, so a supplier will come in and say, “Well I don’t agree with the way the department is administering this contract, or their interpretation of the terms and conditions of this contract, can you help?” once that request is made the regulations require me, I have no discretion, the regulations require me if that request is made to approach the other party to the contract which is the department, and offer alternative dispute resolution and in these cases we would essentially mediate the dispute. And on that business line or that element of our mandate the office has a sparkling record of 100% of the cases being resolved, what we find and it’s not any different than any other type of alternative dispute resolution, by the time one of the parties of the contract contacts our office, the lines of communications have broken down to the point where the two parties aren’t talking, so our task is, I hate to minimise it, but it’s fairly easy. We get the parties to sit across from a table again, and try to reinvigorate that dialogue, that should never have broken down, once they start talking and they start understanding each other’s position and we orchestrate the session so that it allows both sides to outline their views and their position, what we find without exception of people start to understand the other party’s perspective, and inevitably must be human nature, they try to find a mutually acceptable solution, and once that happens that agreement they arrive at becomes legally binding, so we have them sign a legally binding agreement and that’s how that issue is resolved.

How many ADR cases have you had since 2008?

Well that’s... I mentioned earlier one of the challenges was to ensure that suppliers knew we existed, that seems to be working with an increase of 74%, the ADR continues to be a challenge, we have had 13 cases since 2008 and we have done a considerable amount of outreach advertising, I can’t conclude on why the uptake on that service isn’t what we expected it to be but it could be that a lot of these disputes are being resolved through dialogue without our assistance, we know that in some cases some departments have their own ADR processes, we know that in some cases some departments include litigation clauses in the contracts that preclude a supplier from coming to see us.

Is that legal?

Yeah, the contract... every department has the discretion to include what they feel is appropriate for their operational requirements and their contracts. Now we were successful last year in having the vast majority of departments include clauses in the contracts that make suppliers aware that if there’s a dispute they can come to our office and we have started to see this year a number of suppliers that have contacted us who have become aware of the office through that clause, when I started in the office in 2008 I realised one of the biggest challenges was letting the suppliers know we existed and one of the things that I did last year was to ask department so put that clause in contracts, and in tracking the calls that we get from suppliers, one of the questions that asked is how did you hear about us and we’re starting to see a number of suppliers saying they heard about us through the clause in the contract.

That’s very interesting. Could you give us an idea about what is the cost of running an office like the Procurement Ombudsman?

Okay, depending on our workload and the typical transition that you have with staff, it fluctuates between 25 and 30 staff and we run on a budget of 2.8 million Canadian dollars, so it’s a fairly lean operation, now the Treasury Board submission that created our office has a provision that allows the ombudsman to return to the Treasury for additional resources if the original forecasted number of complaints increases, that threshold hasn’t been crossed yet so we haven’t gone back to the Treasury for additional resources, 2.5 to 2.8 seems to be a good number given the volume that we currently have.

Is that a yearly figure or a monthly figure?

No, that’s an annual.

I have a couple of questions to finish the interview. In the EU last year we introduced new substantive regulations, so the new substantive directives, and I think the process has now started for the review of the remedies directives which will deal with issues such as access to justice, access to the Courts for aggrieved bidders, what could we learn from the Canadian experience?

That’s a very good question Pedro, let me say that, I’m speculating a little bit here but putting it in the Canadian context, I would say that last year alone based on the numbers of contacts that we’ve had at our office, there could have been, and this is a worst case scenario obviously, there could have been 200 additional cases clogging up the Court system, roughly 200 additional procurement cases clogging up the Court system had our office not been there, again worst case scenario, I’m assuming that every complainant that called our office, had it not been for our office the only recourse they would have had is to take the department to Court. Now the reality of it is based on my discussions with suppliers, a lot of them because of our thresholds, or financial thresholds of being 25,000 dollars for goods and 100,000 for services, because those thresholds are where they are a lot of the contacts that we get are from small and medium enterprise, so the reality is a lot of these small businessmen and women could not afford to take the government to Court, so they would have simply walked away from the complaint or the issue and while some people may say, well that’s all well and good, what they don’t realise is with every small and medium enterprise that walks away from a government contract or doing business with the government contract, we contract or shrink the pool of available suppliers, which means less suppliers, you’re running a risk of lower quality and higher prices.

It is in the public interest to ensure that there are as many suppliers bidding on government contracts as possible, the more suppliers, it’s a first year university economics, the bigger the pool of supplier, the better the competition, the lower the price. So I feel our office contributes to that because it keeps... as I said earlier, it keeps small and medium enterprise engaged in public procurement through a redress avenue that explains why things didn’t materialise the way they expected it to, why departments may have done what they did or in some of the cases allows them to have us investigate on their behalf why their bid was rejected, and in some cases at least two of the three that I referred to earlier, investigations I did last year, the supplier was absolutely right that their bid was mishandled and there’s a provision in my regulations that allows me to recommend compensation to that supplier. So what can the UK learn, I think it’s that an office such as mine is a good mechanism for keeping cases out of the Courts, from a political perspective it’s a great way to show that the politicians are listening and providing a venue and avenue for small and medium enterprise to be heard and to allow them to voice complaints and have their issues investigated and ultimately it provides an environment where suppliers, a) aren’t afraid to make a complaint, b) have some incentive to stay in the federal procurement world because they know that if an issue does come up there’s an independent office that they can turn to, and c) as I said earlier, that broader pool really of suppliers, really is a benefit to the public taxpayer.

Very well, thank you very much, just to cap off the interview, looking forwards, your time as Procurement Ombudsman is reaching its end and as far as I know it’s not renewable, so how do you see the role of the procurement ombudsman evolving over the next let’s say five to ten years.

That’s a very good question Pedro, I’m currently in the process of writing a report that I plan on submitting before my departure, there are a few areas I think the office could, I can’t say improve, but where we could have more of an impact for suppliers, there are areas in the regulations for example, whether it’s through design or oversight, there’s an area in the regulation that allows me to request documents from departments, so when I lodge an investigation or a review the regulations allow me to request documents, it has no teeth, there’s no provision for the department to supply those, it’s not mandatory, I can request but the regulations don’t say it’s mandatory, so there are regulatory changes that I think I have a responsibility to highlight for the next ombudsman and the government. In terms of where the office needs to evolve, I think the ADR aspect of our mandate is grossly underutilised and as I said earlier it’s a mystery to me why that is, it’s a free service and from the numbers we have, the track record we have it makes a world of difference in resolving disputes that in some cases have been going on for months, so if the office needs to evolve to really embrace the ombudsman, the role, I think it’s through the ADR process, so I think those are the two areas that I think some evolution is required.

Thank you very much for this half an hour.

You’re very welcome Pedro.

You can find me at my blog telles.eu or on Twitter where I use two handles, @Detig for general discussion and also @publicprocure for public procurement related topics. I will see you soon, thank you.

 

Links

Office of the Procurement Ombudsman

 

#2 - Claire Methven O'Brien (Danish Institute of Human Rights)

How can public procurement ensure that Human Rights are complied with?

Dr. Claire Methven O’Brien from the Danish Institute for Human Rights is the second interviewee of the PPP. Claire is an expert in human rights law, particularly human rights and business. Claire has a long experience both across Europe, and in developing countries, dealing with multi-national enterprises, governmental and human rights bodies, and civil society. She is also a Research Fellow at the University of Groningen Department of International Law and a member of the International Law Association Working Group on Business and Human Rights.

The topic of our talk today was the intersection of human rights and public procurement and how the first should influence the second. Links for papers/research discussed in the podcast available after the transcript.

 

iTunes

Transcript

It’s great to have you here with us today and I would like to start the conversation by getting you to talk about your big idea or argument in a nutshell.

Thank you. Well human rights are of course a big idea, you might say the big idea of the 20th century and what we have seen over the course of the 20th century and…21st is the gradual extension of the application of human rights, not just to the state but now also increasingly with a view to securing the accountability of non-state actors and in particular the private sector to human rights standards. Of course globalisation and the rise of multinational enterprises, and increasing liberalisation, which has made that possible, have brought with it changes in the nature of production and the way in which production affects human individuals and communities.

Unfortunately, a lot of the time those impacts have not all been positive, and what has been very well publicised in recent decades are negative environmental effects of multinational activity but also negative impacts on labour conditions, working conditions, particularly in developing countries, in a variety of ways. The United Nations have sought for quite a number of years to generate standards which would be able to express the application of human rights norms to the private sector. Eventually in 2011, the [UN] Human Rights Council endorsed a set of Guiding Principles on Business and Human Rights which affirm that states have got a responsibility to regulate the private sector in order that negative impacts on human rights are avoided, that private companies themselves have got a responsibility to respect human rights, and that also thereby, whoever’s a victim of human rights impacts or abuses perpetrated by or associated with businesses have a right to mediation and remedy for those.

And a part of those Guiding Principles focuses on public procurement. Guiding Principles 5 and 6, in particular, highlight the need for the state, as part of its general duty of protecting and promoting human rights, to make sure that, in relation to the delivery of public services by the private sector human rights are protected, and also in any commercial transactions that the state engages in. And this obviously entails the extension to the private sector [with whom the government contracts], to ensure that human rights are also protected…[which] you could expect… in line with the general push towards ensuring that private companies in their global supply chains ensure that human rights are protected.

So we can see if you like that the time appears to have come for public procurement laws and regulations - which have historically often been perceived, and sometimes in practice have also been applied, to restrict the state’s possibilities for introducing terms which are designed to protect human rights, we’ve seen that you know in terms of the general issue of sustainability in public procurement and also initiatives around fairer trade - the time has come for that interpretation of public procurement law to be scrutinised to a much greater extent than has been true previously, and to be aligned now with the requirements of human rights norms, [as]…fundamental norms which ought to define the rule of law for any state…[and which in] many countries are also part of the constitutional order.

I would start with the end, as you said correctly, in many states human rights are a part of the constitutional order but a part of the constitutional order up to a certain extent. Now the interesting point, as you mentioned literally at the start, is that there has been a gradual expansion and extension of the concept of human rights over the last 50 or 70 years and one of the queries I have is how can we match for example the importance or relevance, let’s say, of the first generation kind of human rights, right to life, right to privacy, rights to private property and so on, which more recently the evolutions of the concept of human rights because I mean public procurement law has nothing to say that you cannot respect human life for example in terms of, or the conception as a human right, but what is now sometimes conceived as human rights on a more modern or contemporaneous interpretation those ideas.

I suppose in answer to that I would say that there is less and less support within human rights law and human rights circles for the view according to which you can distinguish “waves” or “generations” of human rights which have different weight, which have a different place in the normative order…[H]istorically, according to peoples’ political preferences, civil and political or economic and social rights were emphasised, and there are still jurisdictions in which distinctions are made between those and they are given effect to in different ways through constitutional law.

On the other hand, in newer constitutions you can see, and in some countries with older constitutions in different ways, you can see the significance of that distinction between civil, political, economic, social and of course including labour rights in the economic and social, that distinction beginning to be dissolved.  And, you know, you can look towards for instance, I mean not to digress too much, but you can see in the area of human rights impact assessment which is a discipline being increasingly applied to evaluate laws and policies at the regional level in the EU, in national jurisdictions, those kinds of exercises will include economic and social along with civil and political rights.  

In the area of human rights based budgeting or participatory budgeting exercises… to focus in on those, will be all human rights and certainly in the jurisprudence of bodies at the UN and… the general output of the UN human rights system you will see, increasingly, less distinction between those categories that you’ve mentioned, so that it’s a more holistic approach that is being applied and adopted by I think most bodies today so it becomes harder to maintain in the public procurement context that as, you know, a distinction.

I think that is the crux of the problem, when you say that there is a more modern holistic approach to the interpretation of the, or the concept of should constitute human rights and that we should not distinguish between different kinds of human rights or waves the fact is, the examples that you’ve given other than the ones that are received directly in the constitutions, for example, in the European Charter of Human Rights, all those other human rights are based in soft law. So the example that you use at the start, for example, of the guiding principles that were put out by the Human Rights Council of the UN they constitute an example of soft law.

That’s correct but that’s another binary, the hard and soft law distinction, of course is a binary one which quite a lot of scholars, political scientists, have questioned the utility of, in understanding what actually has the effect of producing changes in society. The Guiding Principles [on Business and Human Rights], albeit technically a soft law standard, have been remarkable, in a short space of time, in what they have achieved, in terms of triggering action at the international level but also at the national level.  

So the European Commission, in its 2011 Communication on Corporate Social Responsibility called on EU Member States to develop national action plans on business and human rights with reference to the UN Guiding Principles [on Business and Human Rights], and subsequently already a number of Member States have produced national action plans on business and human rights, all of which, I should say, [of those] that have been published mention public procurement and the need at the national level to either undertake reviews of the extent to which existing measures ensure respect for human rights in the course of public contracting or similar measures.

At the international level, the OECD has aligned its Guidelines for Multinational Enterprises with the UN Guiding Principles [on Business and Human Rights] so that the OECD Guidelines now include reference to human rights and when, at the national level again, National Contact Points under the OECD Guidelines receive complaints about the conduct of businesses based in the OECD abroad, again those National Contact Points are now called on to determine those complaints or to facilitate the mediation of those kinds of complaints with reference to the UN Guiding Principles essentially.  Just in terms of the practices that we see evolving and emerging amongst public authorities and central government, you can see that notwithstanding their status as a soft law standard, the Guiding Principles have actually had a lot of significant effects already.

Going back to the fact that EU Commission put out a CSR policy or communication document in 2011 and some member states have created national action plans, again we are in the realm of soft law. It is not a decision by the European Commission, nor a Regulation, or a Directive and certainly not a part of the Treaties, so again, this is an idea that tries to help to nudge member states in a certain direction but the litmus test here is that if Member States do not comply with that communication, nothing will happen to them.

Well, I completely agree with you on that, the litmus test is of course whether at national level, or indeed at the regional of the EU, the policy commitments made to human rights are internalised, through the adoption of specific laws on whatever subject which are aligned to the ambitions and commitments contained in human right standards.  And in that respect, certainly the recent procurement Directives have been disappointing. While the Commission maintains that the new Directives provide ample scope to allow public authorities in the EU to undertake procurement practice which does comply with the [UN] Guiding Principles, my assessment is that, in technical terms, the changes that have been made are narrow, they’re narrow in as much as they refer actually only to Core Labour Standards… so the rights protected by the ILO’s Core Labour Standards, forced labour, child labour, discrimination and some trade union rights, but in practical terms the [European] Commission has not done anything to suggest they’re going to follow through in promoting awareness of the commitments of the EU to the Guiding Principles and to ensuring respect for human rights… in procurement, in relation to the transposition of the Directives or really in any way, [such as] undertaking activities to support public authorities within EU member states to understand what the significance of human rights might be in the procurement context.

And there’s a lot of things that the Commission or public authorities, procurement authorities at the national level, can do to help purchasing authorities begin to get on the human rights train if you like or to begin that journey, because none of us on the human rights side who’ve been looking at public procurement would say that it’s a simple or straightforward matter to advance human rights in procurement while also, at the same time, respecting the other legal obligations on public authorities flowing from public procurement law and in other areas. It’s not going to be easy because, as I said at the beginning, historically there has been a both real and perceived conflict between public authorities obligations to ensure that they take action to ensure that procurement respects human rights, that companies they contract with respect human rights while meeting their other obligations.

Could you provide us an example of how member states and contracting authorities should work together to develop more human rights friendly or human rights compliance policies in procurement.

Maybe I can start by illustrating a couple [of examples], since we haven’t touched on it already, just some of the human rights issues that are arising in the context of public procurement in case [your listeners] are not familiar with those.  Just to give a few examples, focusing on the more egregious examples, these are in fact some cases… taken from a report by the International Corporate Accountability Round Table, ICAR, on public procurement and human rights called ‘Turning a Blind Eye, Respecting Human Rights in Government Purchasing’, which of course is [available to listeners] on the internet:

The insignia, for instance, of US military services were found in the rubble of a factory fire that recently killed workers in Bangladesh. The Danish government has also been reported to order military uniforms from an Export Processing Zone, in fact also in Bangladesh, where trade unions are prohibited. Plastic gloves, procured by the public…healthcare sector in Denmark have also been documented to contain rubber from plantations which rely on forced labour, and a US government contractor transported Nepalese construction workers from their home country into Iraq, which was at that time a combat zone, and while on route their convey was attacked by insurgents who executed them and posted their deaths on the internet.  

So you can see…just in relation to procurement of goods, there is quite a wide range of serious human rights abuses that can be associated with procurement. And also in the area of public services, particularly I have familiarity with the UK, there have been various reports produced by the National Human Rights Institutions in the UK, by the Parliamentary Human Rights Committee, and of course by NGOs, on the lack of respect for human rights and dignity in the private delivery of health and social care for the elderly or other people, persons with disabilities or other people who need personalised care.

So in that context there’s all kinds of ways in which elderly, vulnerable people who are dependent on the state taking due action to look after them and ensure their human rights are respected have actually been totally let down and either…the framework terms of contracts, or the monitoring provided for, or indeed the price paid for those kinds of services has been inadequate to ensure that an appropriate standard of care is delivered.

This final example is more of an issue not with the procurement processing itself but the actual outcome, the actual service that is being procured that does not respect the human rights of the users or beneficiaries.

It’s not always clear cut that that’s the case, and in fact the Scottish Human Rights Commission collaborated in recent years with the Scottish government in relation to the review of the whole contracting process in relation to those kinds of services that we’ve just been discussing, to look at in what ways the process of commissioning of care can be changed in order that human rights are integrated right from the beginning of that process. So we don’t want to be in a position where we’re trying to close the door after the horse has bolted, it’s really a question of ensuring right “from the get go”, from the design of the terms of tenders, of framework contracts, that human rights are being adequately considered.

Similarly in Northern Ireland, the Human Rights Commission there is working…with public procurement authorities to look at those kinds of issues.

To go back to your earlier question, how can we really start to work together to address the problems that have been identified, there are some very encouraging examples of collaboration and mutual support between public procurement authorities and bodies with human rights expertise, and those are things that we certainly hope to build on in the Public Procurement and Human Rights Learning Laboratory that we… aim to launch later this year, that would involve ourselves as National Human Rights Institutions, a number of us, but also public procurement authorities from a number of different countries in the Scandinavian region and perhaps in the UK and elsewhere. The aim of that laboratory will be to work together to map out in what ways public procurement law and human rights law can be mutually supportive, in what ways they perhaps are perceived to conflict and then, within the room for manoeuvre that the legal framework permits, to identify what more can be done at each of the different stages of the procurement process to effectively integrate consideration of human rights.

Going back to your example, I think you’ve touched on something that is important which is it’s important to consider what happens at every stage of the procurement procedure or the procurement process and that includes also the performance and monitoring contract performance has been one of the biggest problems in public procurement for many, many years. Usually what tends to happen is you have a team that is responsible to get the contract together and you may have the best team in the world and they may design the best contract for you but then when it comes through to be implemented it’s passed onto someone else and it’s usually at the implementation stage that the problems arise irrespectively of the quality of the actual original contract so I wouldn’t be surprised if actually the easiest fruits to pick, the low hanging fruit, would be actually be at the performance level because that is very much allowed where procurement needs to improve its game, it’s no longer the question of, only of the procedure it’s much more so the question of the actual contract performance.

Yes, and I think I’m not in a position now to make, you know, an evaluation of the relative contribution that monitoring might make as compared with interventions at earlier stages in the procurement process. I am sure there is a lot in what you say and certainly from my experience of working with the private sector in supply chain management, monitoring is usually an area which requires greater resources than have previously been devoted to it.

I fully agree with you.

And resources, you know, are really the key issue here. Of course it’s easy to make commitments to ethical or human rights standards as a purchaser, and it’s relatively easy to pass those on through a contract to your suppliers, and it’s relatively easy and cost free to do those things. But it does cost money, either to yourself or to the supplier to take steps to ensure that the delivery of the contract is audited and monitored, and that is a significant obstacle for most companies, as it will be for public purchasers, you know finding the resources to pay for that monitoring operation will not an easy thing to do. So there again I think, well there’s possibly scope for the public sector to learn from some of the collaborative endeavours of the private sector in relation to supply chain audit and monitoring, the sharing of audit reports and platforms which have been developed to allow them to share information. Of course then you have the risk in some cases of running into anti-competitive practices, which again goes to show the potential for contradictions that exists in relation to measures to support human rights and what public procurement and fair competition require.

Well the time is almost up and I would like to finish it off with two good questions, what are you going to try to achieve with the Learning Laboratory project that you were talking about?

Our aim with the Learning Laboratory project is to generate knowledge essentially for public procurement agencies and other public purchasers on what their room for manoeuvre is in terms of taking greater steps to incorporate respect for human rights in the procurement process and to disseminate that knowledge in the form of notes on good practice, case notes on experiences of pilot projects that have been run by our participants and to disseminate that as widely as possible. So we really hope it will be the beginning of a much longer and wider conversation amongst public procurement agencies and of course human rights stakeholders on what creative and innovative steps can be taken to combat some of the challenges and contradictions we’ve been discussing.

Final question, if anyone wants to get in touch with you, where should they head?

They can reach me by email on COB @ humanrights dot dk and we’ll be very happy to hear from any agencies that would be interested in taking part in the lab.

Okay, brilliant, thank you very much Claire.

Thank you Pedro.

You can find me at my blog, telles.eu or on Twitter where I use two handles, one at @Detig for general discussion and also @publicprocure for public procurement related topics. Thank you very much and see you next time.

Links

Claire's essential services paper on SSRN:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2591898

Claire's paper on corporate responsibility to respect human rights on SSRN:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2591226

Northern Ireland Human Rights Commission PP HR report:

http://www.nihrc.org/uploads/publications/NIHRC_Public_Procurement_and_Human_Rights.pdf

Northern Ireland Human Rights Commission report on Nursing Homes:

http://www.nihrc.org/documents/research-and-investigations/older-people/in-defence-of-dignity-investigation-report-March-2012.pdf

ICAR report on US PP and human rights:

http://icar.ngo/wp-content/uploads/2014/09/Procurement-Report-FINAL.pdf

Scottish Government guidance on procurement of care and support services:

http://cdn.basw.co.uk/upload/basw_85955-5.pdf