Procurement as a sandbox, or why public procurement is better than a startup
Updated: Jan 31
A few weeks ago, I took part in an event hosted by the Polish Procurement Law Association, focusing on the green transition. My co-panellists Marta Andhov, Willem Janssen and Michał Kania shed light on the rapidly evolving EU legal and policy context for sustainable procurement, and its specific applications in Poland. I focused on the link to the subject-matter (LtSM) requirement, which, like a good book, seems different to me each time I pick it up. When the 2014 Procurement Directives were adopted, LtSM struck me (and most other commentators) as a limiting principle – a way of ensuring that green and social objectives did not become overly dominant in procurement procedures, distracting from the ‘core’ (presumably economic or competition-focused) aims of public tendering. While the principle was not new (it had emerged from the Concordia case and found its way into the 2004 Procurement Directives), it gained new prominence in 2014, with no fewer than six applications in the Public Sector Directive. Since that time, I have been involved in developing guidance and delivering training on GPP, SRPP and other topics, and have had to find ways to explain the concept to various audiences. Here is my elevator pitch version:
Under the procurement directives, all criteria applied in tenders must be linked to the subject matter of the contract. This means that they cannot concern general corporate policies or practices of bidding companies, but must be specific to the goods, services or works which are being purchased. For example, it is not possible to award more marks to a company because its overall carbon footprint is lower, but it is possible to award more marks to a product with a lower carbon footprint.
While this may limit the scope of sustainability criteria which public bodies can apply in tenders, it also contributes to their rigour and additionality. In the early days of GPP, it was common for companies to submit their general corporate sustainability policies – which often amounted to no more than a set of slogans and pictures of wind turbines or solar panels. Even where these policies contained specific commitments or actions, these were not new, additional activities being undertaken for the purpose of the contract being awarded. At best, such policies might attest to the prior sustainability performance of a company; at worst, they are pure greenwash. The development of common GPP criteria at both the EU and national levels has helped to move things beyond vague policies, by setting clear benchmarks for environmental performance for different products and services. GPP criteria can never be perfect or appropriate for every tender. Producing them is labour-intensive and they go out of date as technology and market conditions evolve. Nonetheless, they play an important role in moving from abstract aspirations to concrete commitments, and in promoting greater harmonisation between public bodies. It is very difficult for the market to adapt and provide green solutions if every public body applies different standards and criteria.
Over time, I’ve become more interested in an indirect effect of GPP/SRPP: its ability to shape broader environmental and social policy. Procurement is often seen as niche application of these policies (albeit an economically significant one), meriting a short paragraph or two in a policy document such as the EU Green Deal. But what if the experience of public bodies in applying GPP/SRPP could actually improve environmental and social policies, by testing the market’s ability to deliver particular outcomes? In some ways, public contracts make a good sandbox. Unlike product legislation, for example, GPP/SRPP criteria can be introduced in a tender without extensive preparation or negative consequences if they miss the mark. While prior market engagement is always a good idea, it often doesn’t happen due to time and resource constraints. In this situation, public bodies often choose to use award criteria, rather than technical specifications, to target environmental and social objectives. They then have the chance to see the market response, award marks accordingly, and make adjustments the next time they tender for the requirement.
Procurement is inherently iterative and responsive to a specific need – two qualities which make it a good laboratory for environmental and social policy. But there are two other qualities of procurement which can make it a bad sandbox: rigid, lengthy procedures and a lack of good data about the outcomes of public contracts (as opposed to the outcomes of public tenders, where data is patchy but improving, not least due to initiatives such as the Open Contracting Data Standard). Some would add: a culture of risk aversion within the public sector.
‘Throw it at the wall and see what sticks’ is not a motto usually associated with public procurement. There are some good reasons for procurement procedures and criteria to be fixed in advance: this contributes to transparency and accountability, limiting opportunities for corruption or the urge to bung taxpayers’ money on the latest untested technology. But where public needs inherently demand innovative solutions – whether to deliver health and social services in a pandemic or to reach Mars, experimental approaches can be justified. (Relatively) flexible procedures such as the innovation partnership, pre-commercial procurement and competitive dialogue have been developed to support innovation procurement. They may require more than the typical startup napkin scribble in terms of documentation, but their potential to deliver socially valuable and sustainable solutions is also higher than your average startup. For example, developing educational technology that actually works for teachers and students or robotics to assist older people to live independently.
If procurement has the potential to identify a coherent need, engage the market, test ideas, and fail or succeed all within a few years, it is pretty efficient compared to your average startup. If we can collect and interrogate meaningful data on both tender and contract outcomes, procurement becomes less of an arcane art understood by few, and more of an open laboratory for public policy. Seemingly restrictive principles such as the link to the subject-matter may help to ensure that we do not lose sight of public procurement’s ‘unique selling point’: it responds to real, well-defined needs and requires the criteria for evaluating tenders to clearly contribute to the identified objectives.
All of this brings me to the UK’s post-Brexit procurement strategy, as set out in the Green Paper. At an event hosted by George Washington University and King’s College London, an all-star line-up of speakers analysed the proposals. Two proposals are of particular relevance to the ideas discussed here: i) the proposal to maintain the link to the subject-matter requirement, but to allow certain exceptions defined in national guidance and ii) the proposal to introduce a single competitive flexible procedure to replace all but the open procedure. Both ideas have the potential to contribute to more effective and efficient procurement, but neither is sufficient in itself to achieve these aims. In fact, they could also have precisely the opposite impact: by making criteria less targeted and procedures more bespoke, requiring procurers and bidders to invest more time and effort in process rather than substance. As always, there is a trade-off between simplicity and flexibility in the rules governing public procurement, and it will take some time to sift the sand to the right consistency.
The fate of the elevator (or lift) pitch remains uncertain in post-Covid times, as anyone who makes it back to the office will probably want to take the stairs to lose the lockdown love handles.