29th January 2021
Yesterday this blog set out in detail what could be worked out form public domain sources about the politically controversial AstraZeneca contract for the provision of vaccines to the European Union.
That post was an exercise in detective work, aided greatly by the publication of a redacted version of a contract with another supplier, the terms of which fitted neatly with the details disclosed by the European commissioner and the CEO of AstraZeneca in their public bickering.
In the comments below that post, some commenters were able to glean even more from public sources, including from further examination of the published redacted contract (and many of the commenters at this blog are awesome and experts in their fields).
It was an interesting and indeed fascinating exercise.
But.
It was something which should not have been needed.
For the actual contract should have been in the public domain to begin with.
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There is no good reason why public contracts are not in the public domain.
(By ‘public contracts’ I mean contracts for the supply of goods, services and works – including for major projects – to public authorities.)
There are (supposed) reasons – the cant phrase ‘commercially sensitive’ is often the excuse – but no good reasons.
But there are two good reasons why public contracts should be in the public domain.
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First, the goods, services and works supplied under public contracts are paid for with public money.
And public authorities tend to be reliable payers.
Fortunes can and often are made from lucrative public contracts.
It is not unusual for a valuable public contract to be the security for all sorts of further commercial transactions, so dependable is a public contract as a high-value revenue stream.
A good part of the wealth of the City of London, and of those currently enjoying lockdown life in expensive suburbs, is based not on the hard cut-and-thrust of private sector life but on the soft cushions of public sector contracts.
(And this dependency culture contrasts with the complaints of backbench government supporters about the supposed dependency-culture of free school meals.)
The price of this access to public money should be the burden of transparency.
A private sector company should not have the benefit of these lucrative and low-risk public contracts, and also have the contract shielded from public scrutiny.
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Second, turning from revenue to performance, there is a public interest in publication of how any public contract addresses issues of risk allocation and sanctions for breach.
This is not about prices – as the European commission showed in publication of the redacted vaccine supply contract, it is perfectly possible to publish the substance of how a contract manages risk without publishing (real or imagined) ‘commercially sensitive’ material.
How does the contract deal with foreseeable risks?
How does the contract allocate the burden of risks between the parties?
What happens if a provider is unable to provide the agreed goods, services or works?
This is the meat of any substantial contract – not just the list of what is bought and for what price.
If that is all a contract is then there would be no need for any contract to be more than a page long.
The bulk of a contract, other than for the most simple of transactions, deals with what happens when things do not turn out as agreed – and what can happen next.
And in any public contract what happens next in the event of any non-performance is as much a matter in which the public interest is engaged as in the performance.
But when a contract is – in its entirety – hidden from public view, the public have no knowledge of how that contract allocates risk – or indeed whether the contract allocates risk at all.
This in turn means there will be contracts where the risk of non-performance is loaded entirely on the public authority.
And with such contracts the supplier will not only have the benefit of a lucrative revenue stream but also the benefit of it being legally risk-free.
A public supply contract for cakes, and for the service of eating them.
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Publication of such contracts would not, at a stroke, mean that problems of non-performance or overcharging will go away.
Public procurement has many problems, and non-transparency is only one.
But the ‘commercially sensitive’ cloak of invisibility serves no one other than the public officials and suppliers who are shielded from any meaningful scrutiny.
A public official can sign a bad deal (and then sign amendment after amendment to that deal), and no one will find out because it is all ‘commercially sensitive’.
A supplier can get away with either bad contracts or terms not being enforced against them, again because it would be commercially sensitive’ for the terms of the contract to be published.
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Some of those in public procurement will view the above as harsh – and will protest: how could you be so offensive and so doubtful.
But such displays of (non-commercial) sensitivity are not a good reason for non-disclosure of public contracts.
If all is well, then nothing will be lost with publication of public contracts – and publication will provided public confidence that good contracts are being entered into at fair prices and with effective and enforceable allocations of risk.
And if all is not well, then…well.
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Are there any countries where public contracts are published in full as a matter of course? What is their experience of that?
There are a few countries where the details of public tenders are published, including the prices offered by all bidders and the output of the awarding authority’s bid evaluations.
“A public supply contract for cakes, and for the service of eating them.”
Cakeism in the Johnsonian era?
Hmmm. What about that contract for non-existent ferries from Ramsgate, between HMG and Seaborne Freight? That would make interesting reading!
Are there any countries where public contracts are published as a matter of course? In fact the UK, if you treat the ability to FOI them as tantamount to publication.
As someone who does most of my work under public contract, not only the contracts but our bids are routinely available to be FOI’d. And we have had our bids FOI’d. There do have to be redactions, but not on the scale that we are talking about here.
Those redactions are typically of two kinds. (1) Personal information it would be illegal to publish. (2) Details of the supplier’s internal prices and methodologies which make up the bid, the arithmetic which constructs the published total price, your IP on how to deliver things, which would show your competitors how you do things and at what costs. You really do prejudice competition if you publish that stuff.
But the idea that terms like “best efforts” etc are “commercially confidential” – this is ridiculous. I can’t see how publishing that could possibly prejudice competition between suppliers. When people don’t want to publish that, it is because they think it might smell.
The current FOI process is inadequate, and often smacks of teams of people being employed to make sure as little information is made free as possible. There should be an expectation that public information is released to the public unless there is a good reason (with a short list of such good reasons).
True freedom of information would involve lists of such contracts being published freely and automatically, every month or quarter or year, say, and copies (with minimal necessary redactions) being automatically available on request. The procurement and tendering process should include a requirement to publish the contracts. Online, say, and not at the bottom of the proverbial locked filing cabinet in a disused lavatory with a sign on the door saying “Beware of the Leopard”.
Indeed it is inadequate. My local residents group has spent over two years trying to obtain information from the local council and each layer above the council simply closes up more than the layer below and we have made no progress!
Absolutely right.
I used to be on the public end of public sector contracts – usually as a relatively minor cog – and while most procedures were performed as correctly as the rather heavy rules required, there was always the risk of something going wrong. What became clear over the years, however, was that whenever scrutiny of the contract was impeded on the grounds of ‘commercial confidentiality’ scrutiny was much more important because something probably was going wrong.
It is worth remembering that it is NEVER in the interests of the public sector purchaser to keep the details secret: the more openness the more likelihood of a competitor coming in with a lower offer (or better terms), which must be to the benefit of the public sector and the taxpayer.
I believe it would be awesome if public contracts would be published, I don’t even want to know about the prices.
But take, for example, the definition of “best effort” in yesterday’s post: How much thought, experience and effort went into that clause alone? And look how important it turns out to be, so that was effort well spent.
Wouldn’t it be great if we could build up a database of public contracts, and then simply learn how others dealt with the issues that needed dealing? Right now, most of us are drafting contracts eiher alone or within a limited echo chamber. There’s so much we all could learn from each other; which would in the long run lead to better public contracts. That would help everyone involved, too.
According to the FAZ, the Commission and AstraZeneca agreed on Wednesday to publish the contract. They’ve been doing redactions yesterday, but some time today the contract should be published online.
https://www.faz.net/aktuell/wirtschaft/unternehmen/astra-zeneca-will-mehr-corona-impfstoff-liefern-17169846.html?GEPC=s3
P.S. German-speakers may enjoy the description of AstraZeneca’s legal arguments as „rechtliche Abenteuerlichkeiten“.
I think I agree with you, on balance.
However, there are arguments on the other side.
Some contracts cover areas that are necessarily sensitive. At the most obvious there are contracts with military or security aspects. Others will cover areas which will create political issues – for example if someone has a contract covering the provision of employment advice to people out of work, and the contract (as it should) envisages provision when the number of unemployed greatly increases, any half-competent opposition politician will say “why is the government expecting unemployment to increase?”.
And given that by definition public contracts are in the public interest, never underestimate the ability of much of the informed public to get the wrong end of any stick – for instance, the concept of payments in the future being worth less than payments today is fundamental to anyone delivering anything, but is really hard for almost anyone to grasp. as you can tell by the almost universal tendency of journalists just to add up the total payments. Add on the fact that the risk in the contract will affect the pricing, and therefore a contract backed by a government guarantee should be cheaper than one with a government agency such as an NHS Trust without one, and it gets complicated. Try explaining that NHS bodies can go bust without it turning political! I speak as someone who refused to conclude an arrangement with the Forensic Science Service without a Home Office guarantee, and I was right.
This sort of thing doesn’t much matter in non-public contracts, because the people negotiating them don’t have to explain the contracts to the public. It matters very much in public procurements.
Those are not good arguments.
They may or may not be good arguments. They are arguments that will be made by people who have a vested interest in not increasing the transparency of public contracts.
I’m sure I’m not alone in drawing parallels between the content of this important post with the news yesterday from the Good Law Project of this Government’s attempts to use a ‘public interest’ argument to shut down judicial review of the awarding of certain PPE contracts. This Government apparently has an abundance of reasons for wanting to swerve transparency, which make the pursuit of it not only more challenging but, indisputably, more necessary.
We may all want to close our curtains at night to keep our home lives private, but when it comes to public contracts we, the public, are entitled (and need) to look in.
“A good part of the wealth of the City of London .. is based .. on the soft cushions of public sector contracts.”
What evidence is there to support this claim? The UK’s Debt Management Office and The Bank of England, the two main public offices that deal with The City, are both extremely professional outfits that demand extremely high standards and command extremely competitive pricing from their trading counterparts. They are partly to thank for the fact that the U.K. govt has almost limitless debt liquidity at extremely low funding costs (even negative real yields), much needed at a time like this.
I do, however, completely agree with your primary point that there should be greater transparency of public-private contracts in order to improve competition and minimise fraud. The PPE procurement process has clearly been abused by certain actors, at great expense to the public purse, adding much insult to the highly injurious pandemic.
The UK’s Debt Management Office and The Bank of England are not the only two residents of the City of London.
Companies will often seek to disclose contracts when it suits them, so governments should do the same.
I used to work on public policy around oil and mining. Some governments are now beginning to publish their major contracts with oil companies. But earlier, it was striking how many companies would share their public contracts in SEC filings and the like, for the benefit of their investors.
Oil is admittedly a world of its own — an exploration permit might be the primary asset of a wildcat company. But it does make me wonder if there are areas of public procurement where something similar is going on. That is, procurement contracts being made public in corporate filings somewhere, but not in a way that the general public are likely to find them.
[and I absolutely agree on the general point; government procurement would be greatly improved by contracts being routinely made public]
In the Sheffield street-tree felling debacle, protesters were receiving suspended prison sentences and typically £15K costs each for defying an injunction. During the application for that injunction, Sheffield City Council successfully argued in court that they didn’t need need to produce a copy of the £2 billion 25-year “Streets Ahead” contract, and the judge considered the protesters paranoid for suspecting there was something untoward in the contract to explain the large amount of trees being felled.
Only much later, after much pressure from ICO, was the contact, bit by bit, made public. And Lo! Schedule 2, 6.38 required SCC’s partner to cut down half of Sheffield’s street trees over the 25 years, with a minimum of 200 per year. With no requirement that the fellings were necessary.
So yes, such contacts should be pushed in full (apart from personal info etc) at the outset.
David, I disagree strongly with your assertion that there is ‘no good reason’.
There are lots of good reasons that I can think of, the only question is when they apply and whether they might be used as an excuse for secrecy.
To be clear, I am not talking about government purchases of supplies such as paperclips, computers and so on.
Where there are vital interests, such as supplying nuclear materials to Aldermaston, avionics to the military no one would reasonably expect details of the contracts to be made publicly available.
And, if they were, they would be deliberately obfuscated, with private side agreements.
The same applies to vital infrastructure, public health and, yes, pharmaceutical supplies to the NHS.
Of course, one does not want unnecessary secrecy but the government is never going to publish contracts or even have the full arrangement specified in a contract, secret or not.
So, I disagree with your ‘no good reason’ claim – for me, the only issue is where and when secrecy might apply.
Here is the link to the published contract (with the approval of AZ)
https://ec.europa.eu/commission/presscorner/detail/en/ip_21_302
Reddit is discussing two different versions of the APA that were published on that page. The first was not properly redacted – redactions occurring within the first few lines of a numbered paragraph are still visible as PDF bookmarks.
https://www.reddit.com/r/CoronavirusUK/comments/l7shfk/eu_did_not_redact_their_contract_correctly_the/
It is not obvious that publication and transparency (and not only of price information) results in a better deal for government. It is trite that some markets (particularly those with a relatively small number of bidders) will lend themselves to coordination and full publication will only ease that dynamic. A smart public buyer with a limited number of options in a “winner takes all” kind of market will use the uncertainty of non-public information to extract a better deal than full transparency will allow.
This is why competition authorities worry about information exchange and take a hard line on it – but the impact are very context specific.
You say “The bulk of a contract, other than for the most simple of transactions, deals with what happens when things do not turn out as agreed”, and whilst true, I would also argue that a contract defines the very nature and behaviour of the parties in executing their responsibilities in an agreement.
A well defined contract should never ‘need’ to be used, while a badly framed contract may require many updates, amendments and additions as conflicts arise or performance varies from expectation. You can learn a lot about a relationship from a contract.
A public contract doesn’t just manage risk, it also underpins success, and is perhaps the only way of allowing scrutiny besides a public enquiry.
please comment on the now published AZ contract. Best efforts does not seem as explicit as the other one (BionTech?) but AZ seems to be in the right. Of course we need to see the UK AZ contract to understand how much discretion AZ has in allocating UK production. Reasonable to suppose “not much”.
The EU contract is with
AstraZeneca AB, a party incorporated in Sweden having a business address of KVARNBERGAG 16, 151 85 SÖDERTÄLJE (“AstraZeneca”, the “contractor”).
Usually it would say “and affiliates” but seems like AZ kept this out. The EU might want to keep it out too. That way they have complete control over the contractor as they reside in the EU.
If AB wants to get Vaccine from AZ UK then they will have to order it, be given a manufacturing slot, pay for it on whatever terms are agreed. I am sure the AZ/UK gov contract says UK is “First come first served” using existing capacity, which is entirely reasonable, so AZ AB will have to wait until capacity becomes available. So it’s less than “not much”, it’s “not at all”.
The whole contract is as AZ has described it, and not at all like the EU has described it.