2nd February 2021
Like constitutional law and practice, the law and practice of public procurement has recently been exciting.
And this is not a good thing, for also like constitutional law and practice, the law and practice of public procurement should be dull.
But unlike constitutional law and practice – the elements of which like the crown, parliament and the courts are at least well known – the elements of the law and practice of public procurement are not so well known.
Indeed, many commercial and public lawyers can go through their careers and never have to deal with a public procurement issue.
And many commercial companies – all potential government suppliers – will never engage with the public sector.
Public procurement is (usually) a minority interest.
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But.
Public procurement – that is, in general terms, the purchase by public bodies of goods and services and works (that is, major projects) from the private sector – has become rather politically controversial.
And with Brexit, this public prominence is likely to continue.
So it seemed worthwhile to set out to non-lawyers – and other lawyers with no direct connection with public procurement – to set out some basic points about public procurement, from the subjective perspective of someone who has had some experience in public procurement for twenty years.
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The starting point, at least in the United Kingdom, is that central government would in principle be able to lawfully buy anything from anyone at any price and on any terms – but for the law of public procurement.
This is because – and here comes some constitutional law mumbo-jumbo – the crown is regarded as a legal person with full capacity.
And just as you and I are able, as natural persons, to enter into contracts, so is the crown.
Of course, it is not Elizabeth Mountbatten-Windsor who is signing contracts for things from toilet rolls to nuclear submarines as part of some extraordinary Waitrose delivery.
But in principle, the crown is able to enter into any contractual obligations it so wishes.
The agreements are, in turn, usually entered into on the crown’s behalf by government departments – usually in the name of the relevant secretary of the state.
(Here it can get complicated, as many secretaries of state are regarded by the law as ‘corporations sole’ that can hold property and so on.)
And so this means that government departments are, in principle, are able to enter into any contractual obligations they so wish.
Apart from central government, there are many other public bodies with a mix of legal forms – from bodies established by royal charter to corporations set up by statute – and these bodies also can, in (very) general terms, enter into contracts as readily as any natural person.
(There used to be many cases where certain transactions were held to be ‘ultra vires’ the powers of local authorities, but legal changes have meant that this is less likely to be the case now.)
And this is the basis of the law of public procurement in the United Kingdom: that but for the law of public procurement, public bodies can in general lawfully enter into transactions freely.
In this way, the law and practice of public procurement should primarily be seen as like the ropes around Lemuel Gulliver or King Kong – preventing public bodies from doing what they otherwise would do.
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So what are the restraints of public procurement?
In theory, the restraints are of two kinds.
First, there are general principles – at least under the law of the European Union (which has now been adopted as domestic law) and the rules of the World Trade Organisation.
Tenders should be advertised and open to all-comers; selection criteria should be published; public bodies should not discriminate in favour of incumbents and domestic companies; tenderers should be treated equally; procurement exercises should be competitive; there should be transparency; and there should be remedies in the event of unfair treatment.
All very fine and commendable.
And some would say that these principles really should be enough, and that as long as a public body accords with these principles, the public body should be able to be able to procure as it wishes.
Just as, say, an employer can recruit who they wish, as long as they do not discriminate against people with certain characteristics.
But.
The law and practice of public procurement goes further than these general principles – at least for high value procurements.
Much, much further.
This is because, in addition to these general principles, there are detailed procedures prescribed for public authorities to follow.
The theory is that these detailed procedures give practical effect to the general principles, by setting out what can and cannot be done at each of the many stages which a public procurement exercise can be broken down into.
And so behold, for example, the 122 sections and 6 schedules over 133 pages of the Public Contracts Regulations 2015.
Behold also the 178 pages of the European Union directive to which those regulations give effect – with no less than 138 recitals.
So, in practice, public procurement exercises can be long and expensive and complicated and legalistic.
And this, in turn, means that many procurement exercises are dominated by the same few mega-providers with specialist bidding teams – you know which companies, with deliberately bland and meaningless names – that can afford the lost costs of an adverse ratio of losing tenders to winning them.
The laws of public procurement can be seen as a well-intentioned way of opening up the government public procurement market that in fact makes things uncompetitive and inaccessible.
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There are further problems.
Procurement exercises that start with specifications developed by officials can often mean that providers are expected to provide bespoke (and thereby expensive, unrealistic, risky and untried) products and services rather than commercially off-the-shelf products and services.
And suppliers can exploit their relative power at the final stages of a procurement exercise, or after the contract has been entered into, to remove or vary contractual protections for the public body.
Public bodies do not enforce the contractual rights that they do have.
There is also the the issue of the revolving doors between public bodies and purchasers, with many on both sides knowing each other far better than, say, the officials will know those in other parts of the public body.
And so on.
Many problems.
But.
And this is a big but.
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As one politician once said of a certain political system, it is the worst form of government, except for all the others.
And the same can be said of public procurement.
Anyone who has been involved in the world of public procurement is alert to the problems.
And most public procurement officials do the best they can with the tools that they have got.
The problem is that, if it was not for the law of public procurement, with all its faults, the practice of public procurement would be worse than it is.
If there were no detailed processes for high-value procurements, then there would be even more of a chumocracy, more corruption, more political rather than commercial decisions, more incumbent bias.
The striking thing about the law and practice of public procurement in the United Kingdom is not that there are abuses but that, relatively speaking, there are so few.
If the law of public procurement was stripped away, even just to general principles, there would be little in practice to prevent a free-for-all with public cash.
The challenge for those, like me, who are critical of the law and practice of public procurement is to work out a better (or less bad) way.
And that is hard.
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Yet sometimes public procurement exercises do need to be flexible.
The detailed processes sometimes need to be set aside.
The current political controversy over the procurement of vaccines seems to show the merits of the quick decision-making of the United Kingdom over the ponderous and inefficient approach of the European Commission.
If this is the case, then: hurrah!
But for every Bingham there will be many more Hardings.
For every single successful urgent and informal procurement there will be many more botched and extravagant ones.
And this is because there are huge amounts of cash at stake – and public bodies are reliable payers – and where there is such money, there will be corruption and waste.
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All large-scale procurement is not easy.
Large procurement exercises in the private sector can also be highly problematic – it is just that they are less likely to feature in the news.
This, in many ways, is not an especially ‘public sector’ problem.
And we should, generally, be glad that the law and practice of public procurement works as well as it does.
Yet, there are ways it could be better.
As this blog recently averred, there is actually no good reason why the terms of public contracts should be confidential – at least in respect of allocations of risk and sanctions for non-performance.
Public bodies should also be more ready to use the powers and sanctions they do have under agreements – as it is, it is rare for any public body to ‘go legal’ in a way that a private sector company would do in a similar way with a similar value contract.
There are grounds for legitimate concern that many high-value, elaborate, time-consuming and cumbersome procurement exercises seem perfectly tailored for the benefit of the tender departments of a certain type of mega-suppler.
In essence: far more transparency, and more realism about how current law and practices are abused.
(Leaving the European Union may also be an opportunity for the United Kingdom to revisit the complexity of our domestic procurement regime – though this opportunity will no doubt not be used well.)
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What should be exciting in politics is the democratic contest between priorities and policies.
And once a priority has been asserted and a policy adopted, the implementation of that priority and policy should not itself be a political issue.
This is why public procurement should be dull.
(Similarly, it is rarely a good thing when constitutional law, which sets the agreed parameters of political action, becomes the primary focus of sustained political attention, as this means things are not well in the polity.)
But an awareness of the law and practice of public procurement, and not only of its faults but the greater faults which it prevents, should be part of the stock of civic knowledge of every citizen.
Dull things can still be important things.
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The title of this post alludes, of course, to this.
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David – you refer us to the subtitle of Jane Austen’s History as the inspiration for your blog title, but I note you omit the word ‘ignorant’! Rightly in my view: there are limits to the usefulness of self-deprecation.
On the subject of the article itself – do you have any views on the action (re public access to PPE contracts) being taken by The Good Law Project and Crowd Justice, and in the government’s – to me, monstrous – efforts to thwart them?
Yes, I do have views. And they are mixed. But they are not for here.
Could you perhaps expound your views in a future blog? I would be fascinated to know where you stand.
As you can imagine, I second that.
Everything said here is true.
I was on the receiving end of public procurement for many years as a manager in a water company. Although privately owned, my employer was regarded in law as a public body and had to follow the same rules as a publicly owned body. I was also a governor in an NHS Foundation Trust, where I saw much the same issues arising.
One problem was the growth of internal procurement departments. Only these claimed to know their way through the massive complexity of all the rules, so they could fend off suggestions that they were actually delaying procurement and making it more expensive overall.
Another problem with these departments was their illusion that it was necessary to write specification clauses to cover every possible future scenario. By the time that effort had concluded, the whole contract was so complex that no-one actually understood it in its entirety; that it contained plenty of mutually contradictory requirements; and suppliers/contractors simply added in extra costs to cover the risks that they knew must be in there somewhere!
We did get good results, mostly, but I’m sure we paid a lot more overall than we needed to!
Thank you for this comment – and what you say I have heard in essence many times
As a non-lawyer who was nonetheless required to contribute to and even manage or supervise a number of (relatively small-scale) public procurement exercises over many years, I can only support what you say.
From the ‘client’ side – i.e. the department that wanted the service to be procured, the rules generally seemed a huge nuisance. But after encountering some ‘free spirits’ who evaded the rules as far as possible (or further) I came to realise their value, even necessity. When I started working with Eastern European ‘pre-Accession’ countries at the turn of the millennium I was warned that any corruption would not be in the form of ‘brown envelopes’ and the like but – usually – in procurement exercises arranged so that only one company (sometimes very well known giants) could win. So it proved.
Formal public procurement procedures are a nuisance a great deal of the time: but occasionally they are essential and their existence is an indispensable check against not just corruption but also sloppiness and a natural willingness to choose the easiest option (often working with the contractor you know best). I think of it a bit like the ‘Mirror-Signal-Manoeuvre rule in the Highway Code: often pointless but one time it might save a life.
The Cabinet Office has created a specialist procurement department called Crown Commercial Services to do procurement. Many departments are forced to use it when they want to buy anything. Since CCS are increasingly the gatekeeper to various frameworks things are procured under, frameworks being the technique to avoid the full regulation procurement every time, their influence spreads even to quangos who are not forced to use them. Curiously BEIS had the same idea and created its own specialist procurer, offering these services to other departments also, called Shared Business Services. So there are two of them, but they don’t seem to compete, rather it seems to be a carve-up. I suppose the idea was to concentrate procurement skills. Maybe it works well for toilet rolls to nuclear submarines. But in the area I work, policy advice services, it seems to work very badly.
Good procurement requires a detailed understanding of the services you are procuring, and of the supplier market. That is so you can devise sensible criteria that identify a good bid, and actually recognise that if a bid is good against the criteria. And then also to devise a process that takes best advantage of the actual procurement market. Needless to say CCS and SBS do not have such knowledge in any specific policy area they might be procuring advice on. They like to devise bid criteria so that a general procurement person with a tick box chart can apply it. They tend to devise the competitive process having in mind a bureaucrat’s generic idea of what a supplier market might look like, rather than what it actually is for this specific specialist item. And, just as you say, their procurement methods are well-suited to large companies who have specialist procurement departments, and very onerous on the rest of us.
So the result is poor procurement, less competent than when the departments previously did it themselves. But probably much more competent in sticking absolutely to the rules.
A couple of other things we don’t like about them. They charge a commission – not to the department for using their services, but to the winning bidder. It reminds me of the film Brazil where the guy had to pay to have his confession extracted from him, a fee that went up the longer he resisted his torture. You can imagine why they charge us rather than their actual client. And their contracts are very long and detailed and often unsuitable for relationships with SMEs.
I used to work for the predecessor of the CCS, the Office of Government Commerce…
This may not be entirely relevant to your post, but I feel that a little too much praise is being heaped on Bingham.
Yes the Vaccine Task Force, which Bingham chaired, has done a good job. However that is as likely to be down to the make-up of its members than to Bingham’s chair-ship. For example, it appears to contain many people with good and relevant experience, possibly already approached before Bingham was offered the role of chair. This contrasts with the leadership team at “NHS” Test and Trace where there appears to have been very little clinical experience.
Also, some of the speed of our roll-out, has been due to the approach by our regulators and their expertise. This is perhaps partly due to the fact that until recently, as I understand it, many of these people were from the European Medicines Agency before it moved from London to Amsterdam because of Brexit.
Cronyism does not disappear because the person appears to have done a good job and Bingham has at least two questionable conflicts of interest during her chair-ship, which seem to have been swept under the carpet after the Vaccine Task Force’s success.
Having worked in international organisations and international missions attempting to improve the rule of law and address corruption in countries emerging from centralised control, I have to report that the introduction of European best practices for public procurement did not achieve its intended purpose but served as a useful shield for corruption that took place behind the cover of a ostensibly successful public procurement process.
It was a commonly held understanding that political actors who could influence the outcome expected and received 20% of the taxpayer and donor provided funds. These bribes were disbursed in subcontracts let to connected actors after the tender was concluded. On its face, the procurement process appeared to satisfy the law.
Such procurement processes encourage the development of tight corrupt networks – every node of which depends on and must has sufficient trust in each of the others that they will keep their word and their silence – they all become partners in crime in the full legal sense.
Given the obvious and, in some ways, commendable quality of loyalty that the UK prime minster has shown in his past, notably to his old school friend Darius Guppy who wished to physically harm a journalist who had crossed him, it is unsurprising that his manner of government is now being described as a chumocracy.
The problem with such close-knit governing arrangements is that they can develop into a tight corrupt network where one chum can ask another to help find the address of a third party who is being a nuisance to them.
Again, while we can applaud Ms Bingham’s skill, there is a valid issue that she herself was not subject to a public procurement process. Her services were being acquired by the Government and GoodLawProject reports that the Government has admitted that was no open competition in the procurement of those services https://goodlawproject.org/update/jobs-for-mates-jr/
As you imply in your recent blogs, one good judgement call by the PM should not be used as a justification for forsaking a process that widens the pool of talent available to undertake publicly funded service no matter the urgency of the need.
I share your view that the most effective way to manage the problem of inefficiency or risk of corruption or indolence skewing the procurement process would be to require full transparency. Every part of the bid from the invitation to tender, answers to questions raised and all the final tenders as well as the completed evaluation grid for determining the eventual winner should be part of the public records.
Further, a mechanism could be explored for ensuring that the evaluators of public tenders are made part of the public record after the event – such a mechanism would increase the likelihood that evaluators declare and step away from tenders in which they have a conflict of interest.
This may not ultimately address all the issues that you raise in this blogpost but it will make a good start; analysts can then scrutinise the raw data to determine whether the awards of public contracts are disproportionately benefiting the large mega suppliers with odd names and this analysis can better inform the policy makers and the purse-string holders. Separately, disclosure of all tenders and completed evaluation grids will enable smaller players to take part in a fairer competition on the level playing fields that we heard so much of last year.
Are you really suggesting that EU politicians and/or bureaucrats standardly cream off 20% of publicly procured contracts?!
I am as cynical as the next man, and I think your comments on the current UK chumocracy are in fact at the mild end of the spectrum, but I find the idea of a third-world level of corruption in Brussels a bit hard to believe.
I agree. While EU officials are probably not, as a class, more saintly than other individuals you may meet (although they may have more to lose if they are found to have crossed lines too blatantly) the sheer weight of the bureaucracy – if you like the number of hoops that have to be jumped through – tends to reduce the margin available for greasing wheels.
A few (OK, ten) years ago a consultant engineer in Romania published an article remarking on his surprise when, a few years earlier and the junior person in the Ministry concerned, he was given sole responsibility for major EU funded contracts handled by the department, despite them being both visible and valuable. After a while, he wrote, he realised that it was precisely because EU-funded contracts were much harder to milk than those from other funding sources, whether private sector or international so the senior officials relied on those others to supplement their rather low incomes.
One of the flaws I came across before I retired was the mathematical formula favoured by most public bodies – which led to a ‘race to the bottom’. I (and many others) wrote extensively about it but very few embraced the one formula that addresses the race to the bottom syndrome. In addition, in Scotland, ‘price’ only is not permitted, so the lowest price cannot dictate the outcome (albeit that the flawed mathematical formula can be used to achieve ‘price wins it’ – see above). Anyone who wishes to know more has to consider why the Grenfell tragedy happened – corners were cut. For those with a political mind, investigating the H of Cs procurement fiasco some years ago about the windows contract is worth it – the ‘buy British’ policy had to prevail at all costs (Personally, I would have called it the defenestration case given the embarrassing, and very costly, outcome).