By Prof Albert Sanchez-Graells, Professor of Economic Law and Co-Director of the Centre for Global Law and Innovation (University of Bristol Law School).
Public procurement is at the forefront of the response to the challenges of COVID-19. Only well-equipped hospitals can save patients’ lives without endangering those of the medical, nursing and support workers in the NHS. Shortages of relatively simple consumables such as personal protection equipment (PPE), but also cleaning and hygiene products, can endanger lives and have devastating effects on the resilience of the healthcare system to (continue to) cope with the pandemic. Shortages of essential equipment such as ventilators can have even more direct nefarious impacts on individual lives.
The importance of public procurement and supply chain management has rarely been so prominently in the public eye and political debate—except, perhaps, in the case of notorious procurement scandals, such as the recent Brexit-related #ferrygate. In this blog post, I reflect on some of the emerging issues in the procurement response to COVID-19 and on the perhaps even bigger challenges that will follow, from a regulatory perspective.
‘Deactivating’ procurement rules
Given the importance of public procurement in the current context, it is perhaps counterintuitive that public procurement regulation vanishes in the face of such challenges. Where unforeseeable and extremely urgent circumstances not attributable to the contracting authority arise, public procurement rules get out of the way to free public buyers up to do all they can to get the required supplies and equipment. This is embedded in the system, probably as a result of the long experience all public administrations have historically had in bending or setting the procurement rules aside when more important (or at least, more urgent) public interests than ensuring probity and economy in the expenditure of public funds arise.
The ‘deactivation’ of procurement rules in the face of extreme emergencies could not have been put more clearly than in the European Commission’s Guidance on using the public procurement framework in the emergency situation related to the COVID-19 crisis (1 April 2020),* which stressed that under such conditions: ‘public buyers may negotiate directly with potential contractor(s) and there are no publication requirements, no time limits, no minimum number of candidates to be consulted, or other procedural requirements. No procedural steps are regulated at EU level. In practice, this means that authorities can act as quickly as is technically/physically feasible – and the procedure may constitute a de facto direct award only subject to physical/technical constraints related to the actual availability and speed of delivery’ (emphasis added).
This bold and clear statement and policy steer at EU level echoes the earlier Guidance published by UK Cabinet Office in its Procurement Policy Note – Responding to COVID-19 (PPN 01/20, 18 March 2020), ** which more sparsely (or perhaps cautiously) stated that ‘in responding to COVID-19, contracting authorities may enter into contracts without competing or advertising the requirement’.
Of course, a complete retreat from public procurement rules is a narrow exemption and it needs to be interpreted and applied as such. Written justification for the use of direct awards, as well as the different steps in the decision-making process leading to the choice of specific contractors and the agreement of specific conditions need to be duly documented and subject to proper record-keeping. Those records will be very relevant for the assessment (and potential challenge) of procurement decisions once the emergency ends, in particular where there are doubts as to the contracting authority’s respect for the boundaries of the extreme emergency procurement exemption.
Both the European Commission’s and the Cabinet Office’s documents provide detailed and actionable guidance to public buyers on how to check that they face extreme urgency in the carrying out of a specific procurement, as well as acceptable alternative commercial approaches to what would have otherwise been a standard procurement procedure. Beyond these basic requirements of good administration, no other public procurement rules remain active in the context of the current extreme emergency.
Proactive international coordination efforts
The deactivation of public procurement regulation does not mean that all procurement mechanisms are set aside. On the contrary, there are specific procurement arrangements that seek to coordinate international responses to public health threats. In particular, the EU’s Joint Procurement Agreement for the procurement of medical countermeasures (JPA) has also gained notoriety in recent weeks. The JPA is a sui generis agreement that allows its signatories to jointly procure the medical countermeasures (that is, not only medication) required to respond to a serious cross-border health threat. As of 30 March 2020, all EU countries, the UK and two EEA countries had signed the JPA, with some very recent COVID-19 related additions to the list of signatories (Sweden, Poland, Norway, Finland and Iceland).
The purpose and operation of the JPA are largely unknown or misunderstood, even by public procurement specialists. Without getting into technicalities, I would stress that the JPA is simply a mechanism of international collaboration that seeks to avoid duplication of procurement procedures at national level and competition between buyers for the sourcing of the supplies that, not only they may all need, but which they may need in different amounts and at different tymes. The JPA is primarily a mechanism of coordination of the procurement procedure and, more importantly, of the execution of the supply contracts through specific case-by-case agreements on how to distribute the quantities procured across participating countries, allowing for a concentration of supplies on those in acute need, as well as donation of quotas. The JPA is also a mechanism that can aggregate buying power and improve the participating countries’ collective bargaining position, although that is highly dependent on the supply-side structure of the relevant markets.
The JPA only transfers to the European Commission an executive role in the design and execution of the procurement procedure, which is carried out under the strict surveillance of and with a range of necessary approvals by a steering committee composed of representatives of the participating countries which is meant to make the most important decisions by common accord or, failing that, qualified majority. However, each of the participating countries is meant to enter into direct legal and economic relationships with the relevant contractors. Moreover, participating countries are not barred from engaging in parallel procurement procedures at national level (although this can be a weakness rather than a strength of the system).
The legal set up of the JPA and, more importantly, the sets of framework agreements and specific contracts which it is meant to generate are yet to be subjected to detailed analysis.*** The COVID-19 crisis and the use of the JPA in responding to it will be a test of this mechanism for international coordination at European level and provide additional practical insights into its operation. At the time of writing, the emerging picture is mixed, with more successes in the joint procurement of ventilators than in the procurement of PPE, although only time will tell. The same can be said of the UK’s decision not to participate in the JPA and rather go it alone in seeking to procure large numbers of ventilators. I would be remiss not to put on the record that I harbour serious doubts as to the drivers for that decision, and some specific contract awards in particular, and that I would like to see a full enquiry into that decision as soon as the UK Parliament is back in session.
Some challenges in reactivating procurement after the COVID-19 crisis
Looking beyond the COVID-19 crisis, I think three further challenges lie ahead.
The first one concerns the reactivation of standard procurement rules, once the conditions of extreme emergency subside. This will not happen overnight, nor in the same way across contracting authorities or across categories of supplies and equipment. It will thus be a challenge for each contracting authority, but also for those with oversight powers, to make a call as to when ‘normal procurement’ must resume. Litigation on these issues is also likely to arise, in particular if the extreme emergency situation lasts for a long time and economic operators need to challenge each opportunity to get public sector contracts shielded from competition under the cover of the extreme urgency exemption.
The second challenge lies in learning from the crisis. Significant thought and research will have to go into understanding what contingency planning (and procurement) needs to be in place to ensure an adequate level of readiness for the next pandemic. It will also be very important to extract lessons from the international coordination efforts (in the EU, but also beyond). Both of these areas of analysis are likely to be very prominent, and they should.
But this should not lead us to forget that there is more learning to be extracted from this situation. An important area for research and analysis concerns the ‘unconventional’ or more commercial approaches to procurement that public buyers are taking once the rules have been deactivated. I will be personally very interested to see to which extent, perhaps with minor tweaks, they can be adopted in ‘normal times’ and under full application of the procurement rules. My working hypothesis is that most of the practices that will emerge from the flexibility created under the current ‘no rules’ scenario can be retained in the future, contrary to the standard claim that procurement rules are unduly rigid and too limiting on the exercise of discretion by public buyers. I look forward to having a chance to test it.
A third possible challenge lies in making sure that the situation of extreme emergency does not morph into one where public procurement is used purely as an economic stimulus mechanism, with the ensuing disregard (or bending) of the rules to achieve specific economic goals. This risk is in two parts. One is about protectionism and the use of procurement for industrial policy purposes, of which there were already very clear signs before the COVID-19 crisis (in Europe and in the UK). The other part concerns the target for the (additional) public expenditure to be channelled through procurement. Here, a lesson from the use of procurement by Spain in the aftermath of the 2008 financial crisis may be a cautionary tale. A significant proportion of additional public expenditure was dedicated to minor works procured by local authorities (notoriously, improving sidewalks and fixing potholes). While that was seen to address a short-term employment problem, it certainly did not do much to improve the country’s infrastructure or to prepare it for future changes in labour markets.
Post COVID-19, every procurement package aimed at restarting the economy needs to avoid that short-termism. In my opinion, the (unavoidable) stimulation of the economy through procurement needs to be oriented towards ground transport infrastructure or digital infrastructure and services projects, have a very clear environmental orientation and contribute to the fight against climate change, as well as be coupled with significant investment in re-skilling and life-long education programmes.
On the whole, while procurement regulation is dormant in the current phase of the COVID-19 crisis, it will have a very significant role to play as it subsides and when it passes. This is perhaps a counter-cyclical understanding of procurement and its role in a crisis, but I think it reflects the oddities of these challenging times of COVID-19.
* For a full analysis of the Commission’s Guidance, see A Sanchez-Graells ‘European Commission’s Guidance on Extreme Emergency Procurement and COVID-19 – Some Thoughts and a Word on the Dyson Contract’ (howtocrackanut.com, 1 Apr 2020).
** For a full analysis of the Cabinet Office Procurement Policy Note, see A Sanchez-Graells ‘Extreme Emergency Procurement and COVID-19 – Re Today’s UK Guidance’ (howtocrackanut.com, 18 Mar 2020).
*** For discussion of related issues, with further references, see A Sanchez-Graells, ‘The Emergence of Trans-EU Collaborative Procurement: A “Living Lab” for European Public Law’ (2020) 29(1) Public Procurement Law Rev 16-41.