Rewriting the Public Procurement Playbook: wishful thinking?

Professor Steven Schooner of George Washington University asked a key question in 2011: “what does your government hope to achieve through its government procurement law?”

He described nine common objectives in the context of the US procurement system:

1 - Competition;

2 - Integrity;

3 - Transparency;

4 - Efficiency;

5 - Customer satisfaction;

6 - Best value;

7 - Wealth distribution;

8 - Risk avoidance; and

9 - Uniformity.

Most also feature in international norms in public procurement – including the UN Convention against Corruption, the WTO Agreement on Government Procurement, the EU Directives, and the UNCITRAL Model Law, and so underpin national systems. Even so, it is well-acknowledged that they are sometimes contradictory. A common example is the trade-off between full transparency and open competition (implying all purchasing parameters being set in advance) and the exercise of commercial discretion during the procurement process to get the best results (implying that the precise characteristics of the purchase may change during that process). Professor Schooner noted that his question could be a vexed one, even when limiting goals to the traditional ones of getting what the government needs, at the right time and at the right price.

Departures from full transparency and open competition are designed to reduce disproportionate administrative costs in low-value procurement, to interact with the market in complex procurement, to allow for emergency procurement, etc. Even before the financial crisis in 2007-8, reforms all over the world to reduce administrative burdens and allow for commercial approaches led to a proliferation of procurement tools and techniques. While each model may have a potential benefit, the aggregate effect has been, paradoxically, that procurement officials are overburdened with options and systems are more complex to operate (as Professor Joshua Schwartz, also from GWU, described with reference to the response to Hurricane Katrina). They also tend to be less uniform. Simplicity and uniformity are key tools in the armoury designed to encourage participation in procurement – especially from SMEs, so these are unwelcome developments from the competition perspective, too.

Strategic procurement – using the procurement system to achieve environmental, economic and social policy goals – has acquired near-parity with “traditional” procurement objectives, and is enshrined in the 2014 EU Directive and widely promoted elsewhere. Public demand can trigger innovation in environmental areas and more generally; other strategic objectives include compliance with both mandatory and non-mandatory labour, human rights, anti-slavery and other standards, and to underpin the single market in the EU and free trade commitments.

So we are adding procurement objectives all the time. The EU Directive – presented as a simplification of the regime – also requires compliance with mandatory labour, environmental, etc standards. Policy responses to date include a patchwork of rules and standard contract conditions to ensure compliance. Optional, more demanding, standards may also be encouraged, but can be discriminatory from the perspective of free trade or the single market, can dilute standardisation and can increase complexity. Moreover, allowing procurement officials to choose which policy goals to pursue in individual procurements – clearly, they can’t pursue them all simultaneously – offers new opportunities for favouritism, protectionism and disguised discrimination, not least because judging compliance with technical standards is difficult. E-procurement – often considered as some sort of a magic bullet – allows for varying security, integrity and confidentiality standards with similar negative potential.

Professor Schwartz has also noted that political failure to balance objectives and tackle the inevitable trade-offs has led to constant regulatory change, further undermining simplicity and uniformity. So we need a clear answer to Professor Schooner’s question: what do we want from our procurement system? Efficient and effective procurement – which can be relatively simple, but might be “unfair” to some? A vehicle for social, economic and environmental policies, even if inefficient as a procurement system? If a hybrid, which policies shall we pursue? Which policies work well together, and which conflict? There are no right answers to these questions, but the people that foot the bill – we taxpayers – do deserve some clarity and coherence from the policy-makers.

Author: Caroline Nicholas

Date: December 2016

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