Regulaton & Policy
Albert Sánchez Graells Asks – Will Public Collaborative Procurement Bodies Survive?

Albert Sánchez Graells of Leicester University took a step away from his incredible journey through the new procurement regulations (along with his friend Pedro Telles from Swansea University; see here and here) to participate in a meeting organised by the European Commission. The purpose was to “participate in a very stimulating brainstorming session on cooperative public procurement, public procurement aggregation and, in particular, Central Purchasing Bodies (CPBs)”.  Is collaboration a good thing, and what benefits, challenges and opportunities might it bring?

“DG Growth assembled an interesting panel of practitioners, institutional representatives and academics, and made sure that very different opinions were represented and properly voiced. DG Growth must be praised for that”.

Graells reports that most of the delegates saw more collaboration as a positive. Without knowing the detail, one might imagine the benefits proposed would include greater economies of scale, the ability to develop expert resource, and a more efficient landscape for suppliers to sell into. However, Graells, who I suspect is a contrarian at heart, takes a different line.

He argues that there are some real issues and negatives too. I tend to agree with him, although I think he overplays one aspect, and to my mind, it is a balanced argument. (Indeed, we published our own review of the positives (here) and the negatives (here) of collaborative buying in the public sector). Clearly, some collaboration is very sensible. We would not want to see every small “unit” of public procurement doing all their own procurement. Equally, I am not a big fan of huge national organisations who find it difficult to stay close to the customer.

But Graells introduced a couple of new issues I had not considered previously. Firstly, he suggests that the greater uptake and use of technology will mean more flexibility for individual contracting authorities. If they can use technology to run more procurement exercises and stay below the EU thresholds, it may be attractive to them to do that locally rather than using large central aggregated contracts. Technology will level the playing field between smaller contracting units and large collaborative bodies.

“Centralisation will not be the dominant trend for a very long time and technology will generate a very significant increase of unregulated public procurement by facilitating direct award of very small procurement contracts through (alternative) electronic platforms”.

That is an interesting argument, but I am not totally convinced. Whilst I am not a great believer in economies of scale in the way that many are, in some categories, they do apply. And even if the procurement is at sub-OJEU level, to stay within local regulations and obey the treaty principles means that running a procurement process is not a trivial matter, even with decent software. It may still look more attractive to simply use an existing collaborative arrangement. But I do agree with him directionally – technology will make local buying easier and more attractive, but perhaps not to the point that it actually threatens the existence of collaborative bodies.

But I found his second point even more interesting. As collaborative bodies act in a wider sense and also very much as independent commercial entities (Crown Commercial Services in the UK is a “Trading Fund” for instance), then issues of competition arise. Other private sector organisations who might wish to work in a similar way as collaborative bodies and in effect compete with them will cry “unfair” if they are not allowed to let EU compliant contracts and frameworks to be used by contracting authorities.

“… one of the implicit and very significant future difficulties created by the emergence and growth of CPBs and other mechanisms of cooperative/centralised/aggregated procurement is that they are vulnerable to private competition.”

Graells believes that as CPBs compete more widely with each other cross-border (which the Commission wants to see) and offer services to the private sector, then issues of competition law will arise. At some point, the authorities will have to allow private firms to offer similar collaborative procurement services to contracting authorities. (He also sees technology facilitating this too.)

“It will be politically indefensible to insist on the use (voluntary or mandatory) of a CPB that is less efficient than alternative market players, particularly if the CPB also competes with them for private business–at which point, the issue would be also legally untenable and would trigger issues of competitive neutrality of the highest order.”

An interesting thought – I suspect he may well be correct, although it may take time. Perhaps a topic to debate at forthcoming public procurement events!

Voices (3)

  1. Great post

    Brilliant

    See the G-Cloud Digital Market place for the impact of digital

    And lets get an opinion on the competition law aspects ….

  2. Dan says:

    Hi Peter – on the grounds of private sector competition, this isn’t possible. In order to set up an EU compliant contract, you need to be a ‘contracting authority’ as defined under the Regulations. If you’re not, then anything you do is automatically invalidated.

    The only way for the private sector to establish a compliant contract, then they need to be working under the auspices of a contracting authority – such as Procurement for Housing, who use CEL Ltd to do all the work, but only on behalf of PfH.

    1. Yes, you’re right at the moment but I think Albert’s point is that private firms might start crying “foul” using competition law if the public collaborative bodies get an advantage and act very commercially (i.e competition law might trump public procurement law)!