Public Procurement Regulation in (a) Crisis?: Global Lessons from the COVID-19 Pandemic 9781509943036, 9781509943067, 9781509943050

Table of contents :
Preface
Contents
List of Contributors
PART 1: INTRODUCTION
1. Public Procurement Regulation in (a) Crisis? General Introduction
I. The COVID-19 Pandemic and the Challenges for Public Procurement
II. Objectives and Scope of the Book
III. Outline and Approach
PART 2: PUBLIC PROCUREMENT REGULATION IN EMERGENCIES: INTERNATIONAL AND GENERAL PERSPECTIVES
2. The Approach to Emergency Procurement in the UNCITRAL Model Law: A Critical Appraisal in Light of the COVID-19 Pandemic
I. Introduction
II. Introduction to the Model Law
III. Competitive Tendering with a Public Solicitation
IV. Advance Mechanisms (Framework Agreements, Supplier Lists, etc)
V. Exceptional Methods for Urgency: Competitive Negotiations and Single-Source Procurement
VI. Modifications to Existing Contracts to Procure New Requirements
VII. Conclusions
3. Recommendations for Urgent Procurement in the EU Directives and GPA: COVID-19 and Beyond
I. Introduction
II. The EU
III. The GPA
IV. Conclusions
4. Regulating Single-Source Procurement in Emergency Situations in Light of the COVID-19 Pandemic: Issues in Policy and Practice
I. Introduction
II. Procurement
III. Pricing and Contract Management
IV. Conclusions
5. The Challenges of Constructing a Supplier Review System for Urgent Procurement: An Analysis in the Context of the UNCITRAL Framework
I. Introduction
II. Supplier Review under the Uncitral Model Law
III. The Specific Case of Urgent Procurement
IV. Conclusions
6. The EU's Joint Procurement Agreement in Light of Covid-19: Learning the Correct Lessons from the Pandemic and Identifying Actions for Improvement
I. General Introduction
II. Introduction: Background of the JPA
III. JPA Framework
IV. Complementary Mechanisms: rescEU, the Emergency Support Instrument and Clearing House of Medical Equipment
V. Reflections: Lessons Learned and Recommendations
VI. In Lieu of Conclusion
PART 3: RELATED REGULATORY PERSPECTIVES
7. Competition Policy in Relation to Public Procurement: An Essential Element of the Policy Framework for Addressing COVID-19
I. Introduction
II. Changing Market Conditions and the Role of Competition Agencies vis-à-vis Public Procurement
III. Specific Adaptations of Relevant Jurisdictions' Competition Policies in Response to the Crisis
IV. Long-Run Challenges for Competition Authorities Flowing from the Broader Policy Environment
V. The Pandemic as a Catalyst for Reform
VI. Conclusion
8. The Trade and Government Procurement Policy Nexus: Before and After the COVID-19 Pandemic
I. Introduction
II. The Trade and Procurement Policy Nexus before the Pandemic
III. The Trade Policy Response to the Pandemic
IV. Emergent Policy Trends Affecting the Trade and Government Procurement Nexus
V. Concluding Remarks: What is Really Going on Here?
9. The Rise of Resilience in Addressing COVID-19 Procurement Challenges and the Impact of International Trade-related Instruments on Countries' Freedom of Action
I. Introduction
II. Export Controls
III. Favouring Domestic Supply Markets
IV. Concluding Remarks
PART 4: DEVELOPMENT PERSPECTIVES ON PROCUREMENT IN THE PANDEMIC
10. Legal Aspects of the Procurement and Distribution of Critical COVID-19 Supplies by International Organisations: UNOPS
I. General Introduction
II. UNOPS: History and Legal Status
III. Legal, Regulatory and Policy Framework for UNOPS Procurement
IV. Description of Programme and Legal Procurement Issues
V. Coordination within the UN System and vis-a-vis Suppliers
VI. Recommendations
11. Procurement and Distribution of Critical COVID-19 Supplies by International Organisations: The World Bank
I. Introduction
II. The Mandate of the World Bank
III. The World Bank's Response to the Pandemic
IV. The Global Procurement Challenge Posed by the COVID-19 Pandemic
V. Evolution of the World Bank's Procurement Guidelines, Policy and Regulations
VI. Emergency Procurement Procedures in the World Bank's Pre-2016 Procurement Guidelines
VII. The 2016 Procurement Reform: A Flexible Procurement Policy Framework for Responding to Emergencies
VIII. Alternative Procurement Arrangements
IX. Hands-on Expanded Implementation Support and Bank-Facilitated Procurement
X. Procurement Policy Questions raised by BFP
XI. Operational Adjustments to World Bank Procurement to Accommodate Market Disruptions
XII. Lessons Learned and Future Impact on World Bank Procurement
12. Procurement and Distribution of Critical COVID-19 Supplies: The Experience of USAID
I. General Introduction
II. The Regulatory Framework
III. Description of the Programmes in Place and Issues that Arise
IV. Monitoring and Oversight Measures to Manage Fraud Risks in Procurement
V. Use of Procurement for Industrial or Social Objectives
VI. The Pandemic as a Catalyst for Procurement Reforms
VII. Reflections
13. The Procurement of a COVID-19 Vaccine in Developing Countries: Lessons from the 2009 H1N1 Pandemic
I. Introduction
II. The Importance of a COVID-19 Vaccine and International Efforts
III. Vaccine Procurement During 2009 H1N1
IV. COVID-19 Vaccine Nationalism and Procurement
V. Reflections
PART 5: EMERGENCY PROCUREMENT AND RESPONSES TO COVID-19: COUNTRY STUDIES
14. Emergency Procurement and Responses to COVID-19: The Case of Italy
I. General Introduction
II. Introduction to the Regulatory Framework
III. Reforms and Requirements of Procurement During COVID-19
IV. Modification and Execution of Contracts to Adapt to the Pandemic
V. Conclusions
15. Emergency Procurement and Regulatory Responses to COVID-19: The Case of the United Kingdom
I. General Introduction
II. Introduction to the Regulatory Framework
III. Procurement of New Requirements
IV. Modification of Contracts to Adapt them to the Pandemic
V. Security of Supply and Supplier Fraud
VI. Use of Procurement for Industrial or Social Objectives, Including Building Resilience
VII. The Pandemic as a Catalyst for Procurement Reforms
VIII. Reflections
16. Emergency Procurement and Responses to COVID-19: The Case of the US
I. General Introduction
II. Introduction to the US Procurement System and Regulatory Framework
III. Procurement of New Requirements
IV. Modification of Contracts to Respond to the Pandemic (Contract Administration)
V. Supply Chain Risks Peculiar to Public Procurement
VI. Security of Supply and Contractor Fraud
VII. Industrial and Social Objectives, Including Use of Procurement to Advance the Trump Administration's 'Buy American' Agenda
VIII. Reflections
17. Emergency Procurement and Responses to COVID-19: The Case of Brazil
I. General Introduction
II. Introduction to the Regulatory Framework
III. Procurement of New Requirements
IV. Modification of Contracts to Adapt to their Performance to the Pandemic
V. Security of Supply and Supplier Fraud
VI. Use of Procurement for Industrial or Social Objectives
VII. The Pandemic as a Catalyst for Procurement Reforms
VIII. Reflections
18. Emergency Procurement and Responses to COVID-19: The Case of
I. General Introduction
II. Introduction to the Regulatory Framework
III. Procurement of New Requirements, Including the New Emergency Procurement Law
IV. Security of Supply and Contractor Fraud
V. Use of Procurement for Industrial or Social Objectives
VI. Reflections
19. Emergency Procurement and Responses to COVID-19: The Case of India
I. General Introduction
II. Introduction to the Regulatory Framework
III. Procurement of New Requirements
IV. Modification of Contracts to Adapt to the Pandemic
V. Security of Supply and Supplier Fraud
VI. Use of Procurement for Industrial or Social Objectives
VII. The Pandemic as a Catalyst for Procurement Reforms
VIII. Reflections
20. Emergency Procurement and Responses to COVID-19: The Case of Singapore
I. General Introduction
II. Introduction to the Regulatory Framework
III. Procurement of New Requirements
IV. Modification of Contracts to Adapt to the Pandemic
V. Security of Supply and Contractor Fraud
VI. Use of Procurement for Industrial or Social Objectives
VII. The Pandemic as a Catalyst for Procurement Reforms
VIII. Reflections
21. Emergency Procurement and Responses to COVID-19: The Case of China
I. General Introduction
II. Introduction to the Regulatory Framework
III. Current Provisions on Emergency Procurement of New Requirements
IV. Modification of Contract Award Procedures and Existing Contracts to Adapt to the Pandemic
V. Security of Supply and Contractor Fraud
VI. Use of Procurement for Industrial or Social Objectives ('Horizontal' or 'Collateral' Policies)
VII. The Pandemic as a Catalyst for Procurement Reform
VIII. Reflections
22. Emergency Procurement and Responses to COVID-19 in Africa: The Contrasting Cases of South Africa and Nigeria
I. General Introduction
II. Procuring for COVID-19 in South Africa
III. Procuring for COVID-19 in Nigeria
IV. Reflections
PART 6: BEYOND THE PANDEMIC
23. Emergency Procurement: The Role of Big Open Data
I. Introduction
II. Transparency, Big Data and Public Procurement Outcomes
III. The COVID-19 Challenge and Changes to Transparency Regimes
IV. The Covid-19 Challenge and Weaknesses of Data Systems
V. Lessons
24. The Experiences and Lessons of the Covid-19 Pandemic: Public Procurement Regulation in (a) Crisis?
I. Exploring the Experiences and Lessons of the Pandemic
II. Application of Traditional Regulatory Frameworks to Emergency Situations
III. Regulatory Responses to Address the Pandemic
IV. Current Frameworks: Reflection and Evaluation
V. Building Resilience
VI. Modifications to Existing Contracts to Adapt them to Emergencies
VII. The Development Aid Perspective
VIII. Public Procurement Reform: Impact and Lessons from the Pandemic
IX. Public Procurement Regulation in (a) Crisis?

Citation preview

PUBLIC PROCUREMENT REGULATION IN (A) CRISIS? This timely book provides the first systematic analysis of global public procurement regulation and policy during and beyond the COVID-19 pandemic. Through both thematic chapters and national case studies, this book: • explores the adequacy of traditional legal frameworks for emergency procurement; • examines how governments and international organisations have responded specifically to the pandemic; and • considers how the experience of the pandemic and the political impetus for reform might be leveraged to improve public procurement more broadly. Public procurement has been critical in delivering vital frontline public services both in the health sector and elsewhere, with procurement of ventilators, protective equipment and new hospitals all hitting the headlines. At the same time, procurers have faced the challenge of adjusting existing contracts to a new reality where, for example, some contracted services can no longer operate. Further, efficient and effective procurement will be essential, and not a luxury, in the economic recovery. With case studies on China, India, Italy, Singapore, the UK and the USA alongside those from Africa and Latin America, the book brings together leading academics and practitioners from across the world to examine these issues, providing an essential resource for policy makers, legislators, international organisations and academics.

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Public Procurement Regulation in (a) Crisis? Global Lessons from the COVID-19 Pandemic

Edited by

Sue Arrowsmith Luke RA Butler Annamaria La Chimia and

Christopher Yukins

HART PUBLISHING Bloomsbury Publishing Plc Kemp House, Chawley Park, Cumnor Hill, Oxford, OX2 9PH, UK 1385 Broadway, New York, NY 10018, USA 29 Earlsfort Terrace, Dublin 2, Ireland HART PUBLISHING, the Hart/Stag logo, BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published in Great Britain 2021 Copyright © The editors and contributors severally 2021 The editors and contributors have asserted their right under the Copyright, Designs and Patents Act 1988 to be identified as Authors of this work. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/ open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2021. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication data Names: Arrowsmith, Sue, 1962– editor.  |  Butler, Luke R. A., editor.  |  La Chimia, Annamaria, editor.  |  Yukins, Christopher R., editor. Title: Public procurement regulation in (a) crisis? : global lessons from the COVID-19 pandemic / edited by Sue Arrowsmith, Luke Butler, Annamaria La Chimia and Christopher Yukins. Description: Oxford ; New York: Hart, 2021.  |  Includes bibliographical references and index. Identifiers: LCCN 2021042192 (print)  |  LCCN 2021042193 (ebook)  |  ISBN 9781509943036 (hardback)  |  ISBN 9781509943074 (paperback)  |  ISBN 9781509943050 (pdf)  |  ISBN 9781509943043 (Epub) Subjects: LCSH: Government purchasing—Law and legislation. lcsh  |  Covid-19 (Disease)—Law and legislation.  |  COVID-19 Pandemic, 2020—Economic aspects. Classification: LCC K884 .P835 2021 (print)  |  LCC K884 (ebook)  |  DDC 346.02/3—dc23/eng/20211004 LC record available at https://lccn.loc.gov/2021042192 LC ebook record available at https://lccn.loc.gov/2021042193 ISBN: HB: 978-1-50994-303-6 ePDF: 978-1-50994-305-0 ePub: 978-1-50994-304-3 Typeset by Compuscript Ltd, Shannon Printed and bound in Great Britain

To find out more about our authors and books visit www.hartpublishing.co.uk. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters.

PREFACE As we note in our Introduction to this book, the COVID-19 pandemic is the ­defining event of the post-World War era, with millions losing their lives or loved ones and many millions more suffering ill-health and damage to their livelihoods and economic prospects. This book was conceived near the start of the pandemic in the summer of 2020, and as we write this preface sadly the pandemic seems still very far from over. The book’s objectives are to explore, in the light of the experience of the pandemic, how traditional international and domestic regulatory frameworks address emergency procurement and how actors have responded globally from a regulatory perspective in using, adapting, disapplying, and reforming these existing frameworks; to identify recommendations for future responses, including from common issues and experiences; and to consider the impact and lessons for public procurement reform more generally. This is, of course, a formative assessment at a particular point in time, cognisant of the limitations of available information and the fact that there are many investigations and academic studies still to be initiated or completed. Chapters are generally up to date, including for legal developments, as at 31 March 2021, with the exception of chapter 14 on Italy, which is up to date to 31 December 2020. In a few cases it has also been possible to include some important later developments, including reference to some key judicial decisions in chapter 15 on the United Kingdom. We are extremely grateful for the assistance and support provided by Roberta Bassi at Hart Publishing from conception through to completion of this project, as well as for the excellent work by all her colleagues, in particular Rosie Mearns and Linda Staniford, that have facilitated the rapid completion of this project. We would also like to express our heartfelt thanks to Rebecca Cox and Georgia Shelford, research assistants at the University of Nottingham, for their invaluable assistance with technical work for the book. Luke Butler, Sue Arrowsmith and Annamaria La Chimia are grateful to the Arts and Humanities Research Council for their generous support under grant AH/V012657/1 which enabled completion of some of the chapters. We would like to give special thanks to our families for their support in enabling us to complete the project in extraordinary circumstances. In particular, Luke Butler would like to dedicate his contribution to his son, Tobias, who was born at the onset of the pandemic. Sue Arrowsmith, Luke Butler, Annamaria La Chimia and Christopher Yukins 13 September 2021

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CONTENTS Preface����������������������������������������������������������������������������������������������������������������������������v List of Contributors��������������������������������������������������������������������������������������������������� xxi PART 1 INTRODUCTION 1. Public Procurement Regulation in (a) Crisis? General Introduction�������������������3 Sue Arrowsmith, Luke RA Butler and Annamaria La Chimia I. The COVID-19 Pandemic and the Challenges for Public Procurement���������������������������������������������������������������������������������������������������3 II. Objectives and Scope of the Book���������������������������������������������������������������6 III. Outline and Approach���������������������������������������������������������������������������������10 PART 2 PUBLIC PROCUREMENT REGULATION IN EMERGENCIES: INTERNATIONAL AND GENERAL PERSPECTIVES 2. The Approach to Emergency Procurement in the UNCITRAL Model Law: A Critical Appraisal in Light of the COVID-19 Pandemic��������������������������������21 Sue Arrowsmith I. Introduction�������������������������������������������������������������������������������������������������21 II. Introduction to the Model Law������������������������������������������������������������������23 III. Competitive Tendering with a Public Solicitation����������������������������������27 IV. Advance Mechanisms (Framework Agreements, Supplier Lists, etc)������� 27 A. Introduction�����������������������������������������������������������������������������������������27 B. The Rules on Framework Agreements����������������������������������������������30 C. Supplier Lists����������������������������������������������������������������������������������������34 V. Exceptional Methods for Urgency: Competitive Negotiations and Single-Source Procurement����������������������������������������������������������������36 A. Competitive Negotiations�������������������������������������������������������������������36 i. General�����������������������������������������������������������������������������������������36 ii. Grounds for Use: General Urgency Ground���������������������������37 iii. Grounds for Use: A Catastrophic Event����������������������������������41 iv. The Rules on Conducting Competitive Negotiations������������45

viii  Contents B. Single-Source Procurement��������������������������������������������������������������49 C. Controls Over the Decision to Use Competitive Negotiations or Single-Source Procurement ���������������������������������54 VI. Modifications to Existing Contracts to Procure New Requirements�������������������������������������������������������������������������������������59 II. Conclusions�������������������������������������������������������������������������������������������������60 V 3. Recommendations for Urgent Procurement in the EU Directives and GPA: COVID-19 and Beyond���������������������������������������������������������������������������������������63 Sue Arrowsmith I. Introduction������������������������������������������������������������������������������������������������63 II. The EU���������������������������������������������������������������������������������������������������������64 A. Introduction to the EU Regulatory Framework����������������������������64 B. Competitive Tendering with a Public Solicitation, Including Accelerated Procedures for Urgency�����������������������������65 C. Advance Mechanisms: Framework Agreements, Dynamic Purchasing Systems and Qualification Systems�����������������������������68 i. Framework Agreements and Dynamic Purchasing Systems��������������������������������������������������������������������������������������68 ii. Qualification Systems (Supplier Lists)�����������������������������������71 D. Contract Modifications and New Awards to Existing Partners�����������������������������������������������������������������������������������������������73 E. Use of the Negotiated Procedure without Prior Publication based on Extreme Urgency���������������������������������������������������������������75 i. Introduction������������������������������������������������������������������������������75 ii. Grounds for Use: General Urgency���������������������������������������77 iii. Grounds for Use: Situations of Crisis������������������������������������87 iv. Grounds for Use: Emergency Approaches under TFEU Derogations�������������������������������������������������������������������������������88 v. Grounds for Use: Other Grounds������������������������������������������89 vi. Grounds for Use: Controls Over the Decision to Use the Negotiated Procedure without a Call for Competition�������90 vii. Conduct of the Procedure�������������������������������������������������������92 III. The GPA�������������������������������������������������������������������������������������������������������96 A. Introduction to the GPA Regulatory Framework��������������������������96 B. Award Procedures and Modifications���������������������������������������������97 IV. Conclusions�����������������������������������������������������������������������������������������������102 4. Regulating Single-Source Procurement in Emergency Situations in Light of the COVID-19 Pandemic: Issues in Policy and Practice����������������107 Luke RA Butler I. Introduction����������������������������������������������������������������������������������������������107 II. Procurement����������������������������������������������������������������������������������������������110 A. Alternative Market-Led Methods��������������������������������������������������110

Contents  ix B. Means of Selecting Suppliers and Assessing Offers���������������������114 i. Methods and Means of Direct Solicitation����������������������������114 a. Supplier Lists for Use by Individual Procuring Entities��������������������������������������������������������������������������������115 b. Central Solicitation�����������������������������������������������������������116 ii. Criteria for Choosing the Winner������������������������������������������119 iii. Negotiations�������������������������������������������������������������������������������124 C. Publication and Justification of Reasons for Single-Source Procurement���������������������������������������������������������������������������������������126 i. Notices����������������������������������������������������������������������������������������126 ii. Justification��������������������������������������������������������������������������������128 D. External Approvals����������������������������������������������������������������������������133 E. Single-Source Procurement Information Capture and Disclosure�����������������������������������������������������������������������������������135 III. Pricing and Contract Management���������������������������������������������������������140 A. Risk Allocation in Contracts Awarded at the Onset of an Emergency��������������������������������������������������������������������������������141 B. Determination of Costs and Profits on Contracts�������������������������144 i. Types of Event Giving Rise to Relief and Recovery��������������144 ii. Which Costs are Allowable�����������������������������������������������������146 iii. Profit�������������������������������������������������������������������������������������������148 C. Open Book Contract Management�������������������������������������������������149 IV. Conclusions������������������������������������������������������������������������������������������������151 5. The Challenges of Constructing a Supplier Review System for Urgent Procurement: An Analysis in the Context of the UNCITRAL Framework�����155 Caroline Nicholas and Sue Arrowsmith I. Introduction�����������������������������������������������������������������������������������������������155 II. Supplier Review under the UNCITRAL Model Law ���������������������������156 A. Background and Guiding Principles�����������������������������������������������156 B. The Standstill Requirement��������������������������������������������������������������158 C. Standing and Scope of Review���������������������������������������������������������158 D. Forum and Procedure�����������������������������������������������������������������������159 E. Effectiveness of Remedies�����������������������������������������������������������������161 F. Concluded Contracts������������������������������������������������������������������������162 III. The Specific Case of Urgent Procurement����������������������������������������������165 A. Introduction���������������������������������������������������������������������������������������165 B. Limited Standing�������������������������������������������������������������������������������165 C. Exemption from Ex Ante Notice Requirements����������������������������166 D. Impact of Urgent Public Interest Considerations on Standstill, Suspension and Corrective Action��������������������������167 E. Absence of Consequences of Non-Compliance with Ex Ante Notice and Standstill Requirements���������������������������������168 F. The Rules on Concluded Contracts������������������������������������������������168

x  Contents G. The Time Limit for Bringing Proceedings�������������������������������������170 H. The Time for Completing Challenge Proceedings������������������������170 I. Factors Deterring Challenge������������������������������������������������������������170 J. Urgency and Call-offs from Framework Agreements������������������171 IV. Conclusions������������������������������������������������������������������������������������������������171 6. The EU’s Joint Procurement Agreement in Light of COVID-19: Learning the Correct Lessons from the Pandemic and Identifying Actions for Improvement�����������������������������������������������������������������������������������������������������������175 Aris Georgopoulos I. General Introduction��������������������������������������������������������������������������������175 II. Introduction: Background of the JPA�����������������������������������������������������176 III. JPA Framework������������������������������������������������������������������������������������������178 A. Nature, Membership and General Principles��������������������������������178 B. Structure and Organisation��������������������������������������������������������������180 C. JPA Decision-Making Arrangements���������������������������������������������182 D. Key Features���������������������������������������������������������������������������������������184 E. JPA and COVID-19���������������������������������������������������������������������������185 IV. Complementary Mechanisms: rescEU, the Emergency Support Instrument and Clearing House of Medical Equipment����������������������187 A. rescEU Stockpile��������������������������������������������������������������������������������188 B. The Emergency Support Instrument����������������������������������������������189 C. The Clearing House for Medical Equipment���������������������������������190 V. Reflections: Lessons Learned and Recommendations��������������������������191 A. Wider Lessons������������������������������������������������������������������������������������191 B. Specific Lessons���������������������������������������������������������������������������������191 C. Recommendations�����������������������������������������������������������������������������193 VI. In Lieu of Conclusion��������������������������������������������������������������������������������194 PART 3 RELATED REGULATORY PERSPECTIVES 7. Competition Policy in Relation to Public Procurement: An Essential Element of the Policy Framework for Addressing COVID-19��������������������������199 Robert D Anderson, William E Kovacic and Antonella Salgueiro I. Introduction�����������������������������������������������������������������������������������������������199 II. Changing Market Conditions and the Role of Competition Agencies vis-à-vis Public Procurement��������������������������������������������������201 III. Specific Adaptations of Relevant Jurisdictions’ Competition Policies in Response to the Crisis������������������������������������������������������������203 A. Toleration, in Some Cases, of Appropriately Limited Horizontal Cooperation Agreements���������������������������������������������204

Contents  xi B. Merger Review and COVID-19: Expedited Review Procedures, Failing Firm Defence and Post-Clearance Challenges�����������������206 C. Unilateral Conduct: Excessive Prices and Price-Gouging Concerns���������������������������������������������������������������������������������������������209 D. State Aids to Industry: The Relevance of EU Competition Rules to Mitigate Possible Adverse Consequences of Government Measures to Alleviate the Economic Crisis������������211 E. The Opening of New Channels of Communication with Affected Businesses and Other Stakeholders���������������������������������213 IV. Long-Run Challenges for Competition Authorities Flowing from the Broader Policy Environment����������������������������������������������������214 A. Governments’ Increasing Emphasis on the Role of Industrial Policy����������������������������������������������������������������������������214 B. Realising Synergies with International Trade Policy��������������������216 V. The Pandemic as a Catalyst for Reform��������������������������������������������������217 VI. Conclusion��������������������������������������������������������������������������������������������������218 8. The Trade and Government Procurement Policy Nexus: Before and After the COVID-19 Pandemic������������������������������������������������������������������219 Simon J Evenett I. Introduction�����������������������������������������������������������������������������������������������219 II. The Trade and Procurement Policy Nexus before the Pandemic��������220 III. The Trade Policy Response to the Pandemic�����������������������������������������222 IV. Emergent Policy Trends Affecting the Trade and Government Procurement Nexus�����������������������������������������������������������������������������������225 V. Concluding Remarks: What is Really Going on Here?�������������������������229 9. The Rise of Resilience in Addressing COVID-19 Procurement Challenges and the Impact of International Trade-related Instruments on Countries’ Freedom of Action����������������������������������������������������������������������������������������������233 Peter Trepte I. Introduction�����������������������������������������������������������������������������������������������233 II. Export Controls������������������������������������������������������������������������������������������234 A. Treaty on the Functioning of the European Union�����������������������235 B. The World Trade Organization��������������������������������������������������������236 III. Favouring Domestic Supply Markets������������������������������������������������������240 A. The European Union�������������������������������������������������������������������������241 B. The Government Procurement Agreement�����������������������������������244 i. Scope and Coverage�������������������������������������������������������������������244 ii. The WTO and the GPA�������������������������������������������������������������246 IV. Concluding Remarks���������������������������������������������������������������������������������248

xii  Contents PART 4 DEVELOPMENT PERSPECTIVES ON PROCUREMENT IN THE PANDEMIC 10. Legal Aspects of the Procurement and Distribution of Critical COVID-19 Supplies by International Organisations: UNOPS�����������������������253 Benedetta Audia and Ary Bobrow I. General Introduction�����������������������������������������������������������������������������253 II. UNOPS: History and Legal Status�������������������������������������������������������253 III. Legal, Regulatory and Policy Framework for UNOPS Procurement�������������������������������������������������������������������������������������������255 A. Regulatory Framework�����������������������������������������������������������������255 B. Emergency Procedures�����������������������������������������������������������������256 IV. Description of Programme and Legal Procurement Issues��������������257 A. Programme Issues�������������������������������������������������������������������������257 B. Legal Issues�������������������������������������������������������������������������������������263 V. Coordination within the UN System and vis-a-vis Suppliers����������264 VI. Recommendations���������������������������������������������������������������������������������268 11. Procurement and Distribution of Critical COVID-19 Supplies by International Organisations: The World Bank�������������������������������������������271 Shaun Moss I. Introduction�������������������������������������������������������������������������������������������271 II. The Mandate of the World Bank����������������������������������������������������������273 III. The World Bank’s Response to the Pandemic������������������������������������273 IV. The Global Procurement Challenge Posed by the COVID-19 Pandemic�������������������������������������������������������������������������������������������������275 V. Evolution of the World Bank’s Procurement Guidelines, Policy and Regulations��������������������������������������������������������������������������276 VI. Emergency Procurement Procedures in the World Bank’s Pre-2016 Procurement Guidelines������������������������������������������������������277 VII. The 2016 Procurement Reform: A Flexible Procurement Policy Framework for Responding to Emergencies��������������������������278 VIII. Alternative Procurement Arrangements��������������������������������������������279 IX. Hands-on Expanded Implementation Support and Bank-Facilitated Procurement�������������������������������������������������������������280 X. Procurement Policy Questions raised by BFP�����������������������������������284 XI. Operational Adjustments to World Bank Procurement to Accommodate Market Disruptions������������������������������������������������285 A. Use of Incoterms����������������������������������������������������������������������������285 B. Governing Contract Law and Dispute Resolution Clauses in BFP Contracts�������������������������������������������������������������286 C. Payment Terms������������������������������������������������������������������������������287

Contents  xiii D. Payment Methods���������������������������������������������������������������������������287 E. Application of Force Majeure Clauses������������������������������������������288 XII. Lessons Learned and Future Impact on World Bank Procurement���������������������������������������������������������������������������������������������288 12. Procurement and Distribution of Critical COVID-19 Supplies: The Experience of USAID��������������������������������������������������������������������������������291 Jun Jin and Mary McLaughlin I. General Introduction������������������������������������������������������������������������������291 II. The Regulatory Framework��������������������������������������������������������������������293 A. Legal, Regulatory and Policy Framework for USAID Procurement������������������������������������������������������������������������������������293 B. Emergency Procurement Authorities������������������������������������������294 III. Description of the Programmes in Place and Issues that Arise��������295 A. USAID’s COVID-19 Strategy��������������������������������������������������������295 B. Use of Procurement to Supply Needed Goods and Services�����297 C. Existence and Use of Recurring Purchasing Methods through Framework Agreements��������������������������������������������������299 D. Use of Regular or Accelerated Tendering Procedures����������������300 E. Use of Multilateral Partners to Support COVID-19 Response������������������������������������������������������������������������������������������302 IV. Monitoring and Oversight Measures to Manage Fraud Risks in Procurement����������������������������������������������������������������������������������������303 V. Use of Procurement for Industrial or Social Objectives���������������������304 A. Personal Protective Equipment�����������������������������������������������������304 B. Ventilators����������������������������������������������������������������������������������������306 VI. The Pandemic as a Catalyst for Procurement Reforms����������������������307 A. Using Procurement Policy to Increase Domestic Manufacturing Capacity of Critical Medical Supplies and Provide Business Opportunities for US Providers��������������307 B. Incorporating ‘Flexibility’ to Respond to Changed Circumstances���������������������������������������������������������������������������������308 VII. Reflections������������������������������������������������������������������������������������������������309 13. The Procurement of a COVID-19 Vaccine in Developing Countries: Lessons from the 2009 H1N1 Pandemic������������������������������������������������������������ 311 Mark Eccleston-Turner and Harry Upton I. Introduction���������������������������������������������������������������������������������������������311 II. The Importance of a COVID-19 Vaccine and International Efforts���� 312 A. The ACT Accelerator and the COVAX Facility��������������������������313 B. The Inclusive Vaccines Alliance����������������������������������������������������316 C. The European Commission�����������������������������������������������������������317 D. A Summary of COVID Vaccine Procurement����������������������������317

xiv  Contents III. Vaccine Procurement During 2009 H1N1��������������������������������������������318 A. Procurement During 2009 H1N1 – General Observations��������318 B. Use of Advanced Purchase Agreements in Pandemic Influenza Vaccine Procurement�����������������������������������������������������319 C. The WHO Vaccine Deployment Initiative������������������������������������321 D. Developing Country Prerequisites and the VDI: A Barrier to Successful Procurement?������������������������������������������������������������323 E. 2009 H1N1 Vaccine Procurement Summary�������������������������������324 IV. COVID-19 Vaccine Nationalism and Procurement����������������������������325 V. Reflections��������������������������������������������������������������������������������������������������326 PART 5 EMERGENCY PROCUREMENT AND RESPONSES TO COVID-19: COUNTRY STUDIES 14. Emergency Procurement and Responses to COVID-19: The Case of Italy�����331 Gian Luigi Albano and Annamaria La Chimia I. General Introduction�������������������������������������������������������������������������������331 II. Introduction to the Regulatory Framework������������������������������������������332 III. Reforms and Requirements of Procurement During COVID-19������334 A. The General Emergency Procedures under the Italian Civil Code�����������������������������������������������������������������������������������������334 B. Emergency Procedures During the First Phase: Lockdown�������336 C. Emergency Procedures Post-lockdown: The Need for a Simpler System������������������������������������������������������������������������������341 D. Price-Gouging����������������������������������������������������������������������������������348 IV. Modification and Execution of Contracts to Adapt to the Pandemic����������������������������������������������������������������������������������������������������350 V. Conclusions�����������������������������������������������������������������������������������������������353 15. Emergency Procurement and Regulatory Responses to COVID-19: The Case of the United Kingdom���������������������������������������������������������������������355 Sue Arrowsmith and Luke RA Butler I. General Introduction�������������������������������������������������������������������������������355 II. Introduction to the Regulatory Framework������������������������������������������358 III. Procurement of New Requirements�������������������������������������������������������360 A. General����������������������������������������������������������������������������������������������360 B. Advance Planning and Advance Mechanisms�����������������������������362 C. Regular Competitive Methods, Including Accelerated Procedures�����������������������������������������������������������������������������������������365 D. Procedures with a Direct Solicitation: The Negotiated Procedure without Prior Publication��������������������������������������������365 i. Introduction�������������������������������������������������������������������������������365 ii. Grounds for Using Direct Solicitations����������������������������������366

Contents  xv

IV. V. VI. VII. VIII.

iii. Controls Over Direct Solicitations��������������������������������������369 iv. Conducting the Procedure���������������������������������������������������372 E. Modification of Existing Contracts to Obtain New Requirements������������������������������������������������������������������������378 F. Information Transparency�����������������������������������������������������������380 G. Challenges and Remedies������������������������������������������������������������382 Modification of Contracts to Adapt them to the Pandemic������������384 Security of Supply and Supplier Fraud������������������������������������������������386 Use of Procurement for Industrial or Social Objectives, Including Building Resilience��������������������������������������������������������������387 The Pandemic as a Catalyst for Procurement Reforms��������������������389 Reflections����������������������������������������������������������������������������������������������389

16. Emergency Procurement and Responses to COVID-19: The Case of the US������������������������������������������������������������������������������������������������������������393 Christopher R Yukins I. General Introduction����������������������������������������������������������������������������393 II. Introduction to the US Procurement System and Regulatory Framework����������������������������������������������������������������������������������������������394 III. Procurement of New Requirements����������������������������������������������������397 A. Emergency Procurement Provisions������������������������������������������397 B. Ensuring Security of Supply under the Defence Production Act������������������������������������������������������������������������������400 IV. Modification of Contracts to Respond to the Pandemic (Contract Administration)�������������������������������������������������������������������401 V. Supply Chain Risks Peculiar to Public Procurement������������������������403 VI. Security of Supply and Contractor Fraud�������������������������������������������409 VII. Industrial and Social Objectives, Including Use of Procurement to Advance the Trump Administration’s ‘Buy American’ Agenda����������������������������������������������������������������������������������������������������410 VIII. Reflections����������������������������������������������������������������������������������������������412 17. Emergency Procurement and Responses to COVID-19: The Case of Brazil�������������������������������������������������������������������������������������������������������������415 Marçal Justen Filho and Cesar Pereira I. General Introduction����������������������������������������������������������������������������415 II. Introduction to the Regulatory Framework���������������������������������������417 III. Procurement of New Requirements����������������������������������������������������421 A. The Enactment of Special Legislation in Law 13.979���������������421 B. The Special Provisions on Direct Awards����������������������������������422 C. Waiver of Preliminary Studies and More Flexible Rules on Specifications and Price Estimates����������������������������������������425 D. Waiver of Qualification Requirements and Flexibility in Debarment Policy���������������������������������������������������������������������426 E. Reverse Auctions���������������������������������������������������������������������������426

xvi  Contents

IV. V. VI. VII. VIII.

F. Framework Agreements���������������������������������������������������������������427 G. Used Goods������������������������������������������������������������������������������������429 H. Modification of Contracts Concluded under Law 13.979�������430 I. Transparency���������������������������������������������������������������������������������430 J. Foreseeability of Accountability Initiatives��������������������������������430 K. Challenges or Protests������������������������������������������������������������������431 L. Antitrust Issues������������������������������������������������������������������������������431 M. Modification of Pre-pandemic Contracts for Pandemic-related Purchases��������������������������������������������������������432 Modification of Contracts to Adapt to their Performance to the Pandemic�������������������������������������������������������������������������������������433 Security of Supply and Supplier Fraud������������������������������������������������436 Use of Procurement for Industrial or Social Objectives�������������������437 The Pandemic as a Catalyst for Procurement Reforms��������������������438 Reflections����������������������������������������������������������������������������������������������439

18. Emergency Procurement and Responses to COVID-19: The Case of Colombia�������������������������������������������������������������������������������������������������������441 Sebastián Barreto Cifuentes I. General Introduction����������������������������������������������������������������������������441 II. Introduction to the Regulatory Framework���������������������������������������442 III. Procurement of New Requirements, Including the New Emergency Procurement Law��������������������������������������������������������������444 A. Urgent Procurement under Ordinary Public Procurement Law��������������������������������������������������������������������������445 B. The New Rules Addressing the COVID-19 Pandemic�������������446 i. Use of Electronic Means for Procurement Procedures and Other Administrative Measures����������������������������������446 ii. The Mandatory and Recommended Use of Framework Agreements����������������������������������������������������������������������������447 iii. Direct Contracting and Department Store Buying�����������448 iv. Ordinary Modifications Rules and Expanded Grounds for Modifications��������������������������������������������������448 v. The Creation of a Legal Regime Governed by Private Law�����������������������������������������������������������������������������451 C. Export Controls and Distribution Priority��������������������������������452 D. Joint Procurement�������������������������������������������������������������������������453 E. Supplier Remedies�������������������������������������������������������������������������453 IV. Security of Supply and Contractor Fraud�������������������������������������������454 V. Use of Procurement for Industrial or Social Objectives�������������������455 VI. Reflections����������������������������������������������������������������������������������������������455

Contents  xvii 19. Emergency Procurement and Responses to COVID-19: The Case of India��������������������������������������������������������������������������������������������������������������459 Sandeep Verma I. General Introduction����������������������������������������������������������������������������459 II. Introduction to the Regulatory Framework���������������������������������������461 III. Procurement of New Requirements����������������������������������������������������466 A. Standardisation and Centralised Procurement�������������������������466 B. Suspension of Procurement Laws�����������������������������������������������469 C. Simplified and Accelerated Procurement Procedures��������������471 D. Special Budgetary and Financing Allocations���������������������������473 E. Temporary Acquisition of Private Facilities������������������������������474 F. Export Controls on Medical Supplies and Equipment������������475 IV. Modification of Contracts to Adapt to the Pandemic�����������������������477 V. Security of Supply and Supplier Fraud������������������������������������������������479 VI. Use of Procurement for Industrial or Social Objectives�������������������481 VII. The Pandemic as a Catalyst for Procurement Reforms��������������������482 VIII. Reflections����������������������������������������������������������������������������������������������484 20. Emergency Procurement and Responses to COVID-19: The Case of Singapore�������������������������������������������������������������������������������������������������������485 Henry Gao

I. II. III. IV. V.

General Introduction����������������������������������������������������������������������������485 Introduction to the Regulatory Framework���������������������������������������486 Procurement of New Requirements����������������������������������������������������489 Modification of Contracts to Adapt to the Pandemic�����������������������492 Security of Supply and Contractor Fraud�������������������������������������������495 A. Security of Supply�������������������������������������������������������������������������495 B. Contractor Fraud��������������������������������������������������������������������������498 VI. Use of Procurement for Industrial or Social Objectives�������������������499 VII. The Pandemic as a Catalyst for Procurement Reforms��������������������500 III. Reflections����������������������������������������������������������������������������������������������501 V 21. Emergency Procurement and Responses to COVID-19: The Case of China�������������������������������������������������������������������������������������������������������������503 Ping Wang and Ke Ren I. General Introduction����������������������������������������������������������������������������503 II. Introduction to the Regulatory Framework���������������������������������������505 III. Current Provisions on Emergency Procurement of New Requirements�����������������������������������������������������������������������������������������507 A. Emergency Procurement Exclusion in the Tendering Law and Government Procurement Law�������������������������������������������508

xviii  Contents

IV. V. VI. VII. VIII.

B. Meeting Emergency Needs under Laws and Regulations on Handling of Emergencies and Infectious Disease Control��������������������������������������������������������������������������������������������510 i. Emergency Response Law����������������������������������������������������511 ii. State Council Regulation on the Handling of Public Health Emergencies��������������������������������������������������������������512 iii. Law on the Prevention and Treatment of Infectious Diseases����������������������������������������������������������������������������������512 iv. National Public Emergency General Response Plan and National Response Plan for Public Health Emergencies���������������������������������������������������������������������������513 C. Ministry of Finance Secretariat Notice on Facilitating Procurement Related to COVID-19 Prevention and Control������������������������������������������������������������������������������������513 D. Local Measures on Emergency Procurement����������������������������515 i. Gansu Province: Interim Measure on Administration of Emergency Government Procurement 2010����������������515 ii. Shandong Province: Interim Measure on the Administration of Emergency Government Procurement 2009, Repealed in 2018���������������������������������517 iii. Sub-Provincial Level Rules���������������������������������������������������517 E. Logistical Support Related to COVID-19����������������������������������518 F. Modification of Existing Contracts to Meet New Requirements���������������������������������������������������������������������������������518 Modification of Contract Award Procedures and Existing Contracts to Adapt to the Pandemic���������������������������������������������������519 Security of Supply and Contractor Fraud�������������������������������������������520 Use of Procurement for Industrial or Social Objectives (‘Horizontal’ or ‘Collateral’ Policies)���������������������������������������������������521 The Pandemic as a Catalyst for Procurement Reform����������������������521 Reflections����������������������������������������������������������������������������������������������523

22. Emergency Procurement and Responses to COVID-19 in Africa: The Contrasting Cases of South Africa and Nigeria����������������������������������������525 Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh I. General Introduction����������������������������������������������������������������������������525 II. Procuring for COVID-19 in South Africa�����������������������������������������527 A. Introduction to the Regulatory Framework in South Africa�����������������������������������������������������������������������������������527 B. Procurement of New Requirements�������������������������������������������528 i. Frameworks����������������������������������������������������������������������������529 ii. Emergency Procurement Rules and Centralisation����������530

Contents  xix iii. Expansion of Existing Contracts�������������������������������������������533 iv. Remedies�����������������������������������������������������������������������������������534 C. Modification of Contracts to Adapt to the Pandemic�����������������535 D. Security of Supply and Contractor Fraud�������������������������������������536 i. Protecting Domestic Supply���������������������������������������������������536 ii. Contractor Fraud���������������������������������������������������������������������536 E. Use of Procurement for Industrial or Social Objectives��������������537 F. The Pandemic as a Catalyst for Procurement Reforms���������������538 III. Procuring for COVID-19 in Nigeria������������������������������������������������������540 A. Introduction to the Regulatory Framework in Nigeria���������������540 B. Procurement of New Requirements�����������������������������������������������541 i. Foreign and Corporate Involvement in the Pandemic�������542 ii. Procurement for the Pandemic under Local Laws��������������543 iii. Remedies�����������������������������������������������������������������������������������548 C. Modification of Contracts to Adapt to the Pandemic�����������������551 D. Security of Supply and Contractor Fraud�������������������������������������551 i. Promoting and Protecting Domestic Supply������������������������551 ii. Contractor Fraud���������������������������������������������������������������������552 E. Use of Procurement for Industrial or Social Objectives��������������553 F. The Pandemic as a Catalyst for Procurement Reforms���������������553 IV. Reflections��������������������������������������������������������������������������������������������������554 PART 6 BEYOND THE PANDEMIC 23. Emergency Procurement: The Role of Big Open Data�������������������������������������559 Mihaly Fazekas and Alfredo Hernández Sánchez I. Introduction�����������������������������������������������������������������������������������������������559 II. Transparency, Big Data and Public Procurement Outcomes��������������561 III. The COVID-19 Challenge and Changes to Transparency Regimes������������������������������������������������������������������������������������������������������565 IV. The COVID-19 Challenge and Weaknesses of Data Systems�������������570 V. Lessons�������������������������������������������������������������������������������������������������������573 24. The Experiences and Lessons of the COVID-19 Pandemic: Public Procurement Regulation in (a) Crisis?�������������������������������������������������������������575 Sue Arrowsmith and Luke RA Butler I. Exploring the Experiences and Lessons of the Pandemic�������������������575 II. Application of Traditional Regulatory Frameworks to Emergency Situations����������������������������������������������������������������������������������������������������576 III. Regulatory Responses to Address the Pandemic����������������������������������583

xx  Contents IV. Current Frameworks: Reflection and Evaluation������������������������������590 A. General Observations�������������������������������������������������������������������590 B. Specific Issues��������������������������������������������������������������������������������592 i. Advance Planning��������������������������������������������������������������592 ii. Specific Grounds for Direct Solicitation Methods in Times of Crisis���������������������������������������������������������������593 iii. Use of (Direct) Competitive Approaches for Urgency��������������������������������������������������������������������������594 iv. Supplier Lists�����������������������������������������������������������������������595 v. Shortened Procedures and Other Adaptations���������������596 vi. Contract Modifications to Obtain New Urgent Requirements����������������������������������������������������������������������596 vii. Information Transparency������������������������������������������������597 viii. Other Issues for Single-source Procurement������������������599 ix. Remedies�����������������������������������������������������������������������������600 x. Cooperative Arrangements�����������������������������������������������600 V. Building Resilience��������������������������������������������������������������������������������600 VI. Modifications to Existing Contracts to Adapt them to Emergencies���������������������������������������������������������������������������������������603 VII. The Development Aid Perspective������������������������������������������������������604 VIII. Public Procurement Reform: Impact and Lessons from the Pandemic������������������������������������������������������������������������������������������608 IX. Public Procurement Regulation in (a) Crisis?�����������������������������������614

LIST OF CONTRIBUTORS Gian Luigi Albano is Head of Research and Development at the Italian central purchasing Authority, Consip SpA. Robert D Anderson is Honorary Professor of Law, University of Nottingham. Sue Arrowsmith QC (Hon) is Professor Emerita, University of Nottingham. Bedetta Audia is the Corporate Legal Advisor and Head of the Corporate and Institutional Law Practice at the United Nations Office for Project Services (UNOPS). She is also an Adjunct Professor at George Washington University and Fordham Law School. Benedetta also serves as the Chair of the United Nations Fiduciary Management and Oversight Group. Sebastian Barreto-Cifuentes is Assistant Professor at the Department of Administrative Law, Faculty of Law, of the Universidad Externado de Colombia. Ary Bobrow is a consultant, Senior Project and Programme Management Advisor at UNOPS. Luke RA Butler is Associate Professor in Law, University of Nottingham. Dr Mark Eccleston-Turner is a Senior Lecturer in Global Health Law at King’s College London. Simon J Evenett is Professor of International Trade & Economic Development at the University of St Gallen, Switzerland, and Founder of the St Gallen Endowment for Prosperity Through Trade, the institutional home of both the Global Trade Alert and the Digital Policy Alert. Mihály Fazekas is Assistant Professor, Central European University and Scientific Director of the Government Transparency Institute. Marçal Justen Filho is Founder and Partner at Justen, Pereira, Oliveira and Talamini (Brasilia, Brazil) and former Professor at Universidade Federal do Paraná. Henry Gao is Professor at the School of Law, Singapore Management University. Aris Georgopoulos is Assistant Professor in European and Public Law at the School of Law, University of Nottingham. Jun Jin is the Deputy General Counsel in the USAID Office of the General Counsel.

xxii List of Contributors William Kovacic is Global Competition Professor of Law and Policy, George Washington University Law School, and Visiting Professor, King’s College London. Annamaria La Chimia is Professor of Law and Development and Director Public Procurement Research Group, University of Nottingham, and Research Fellow at Stellenbosch University. Mary McLaughlin is the Assistant General Counsel for Global Health in the USAID Office of the General Counsel. Shaun Moss is an international procurement consultant who advises governments and multilateral development banks on legal, policy and operational issues in public procurement. His current clients include the Inter-American Development Bank, Caribbean Development Bank, the United Nations, as well as the governments of Guyana, Dominica and the OECS. Caroline Nicholas is Senior Legal Officer and Head, Technical Assistance Section, International Trade Law Division, United Nations Office of Legal Affairs (UNCITRAL Secretariat). Cesar Pereira is Partner at Justen, Pereira, Oliveira and Talamini (Sao Paulo, Brazil). He is the chairman of CIArb Brazil Branch. Geo Quinot is Professor of Law and Director of the African Procurement Law Unit, Faculty of Law, Stellenbosch University, South Africa. Ke Ren is a Researcher, Government Procurement Research Centre, University of Economics and Law, School of Finance and Taxation; Legal Affairs Director, Hubei Provincial Rural Credit Cooperatives Association. Antonella Salgueiro is International Trade Consultant and Secretary-General, International Chamber of Commerce-Paraguay Committee. Alfredo Hernández Sánchez is Teaching Fellow at the Institut Barcelona d’Estudis Internacionals. Peter Trepte is a barrister and Senior Fellow in Public Procurement Law at the School of Law, University of Nottingham. Kingsley Tochi Udeh is a Senior Lecturer, Faculty of Law, Baze University, Nigeria; Visiting Senior Lecturer, University of Nigeria; Research Fellow, African Procurement Law Unit, Stellenbosch University, South Africa; Special Adviser on Education to the Governor of Enugu State, Nigeria; and Consulting Partner, TK Udeh and Associates (Legal Practitioners and Consultants), Abuja, Nigeria. Mr Harry Upton is a PhD researcher at the University of Keele. Sandeep Verma is Chairman & Managing Director, Rajasthan State Road Transport Corporation, Jaipur, India.

List of Contributors   xxiii Ping Wang is Assistant Professor in Law at the School of Law, University of Nottingham. Sope Williams-Elegbe is Professor and Head of the Department of Mercantile Law, Stellenbosch University, South Africa; and Deputy Director, African Procurement Law Unit. Christopher Yukins is Lynn David Research Professor in Government Procurement Law & Co-Director, Government Procurement Law Program, The George Washington University Law School.

xxiv

part 1 Introduction

2

1 Public Procurement Regulation in (a) Crisis? General Introduction SUE ARROWSMITH, LUKE RA BUTLER AND ANNAMARIA LA CHIMIA

I.  The COVID-19 Pandemic and the Challenges for Public Procurement The COVID-19 pandemic is the defining event of the post-World War era. By 31 March 2021, at least 2.82 million people had died,1 probably a huge underestimate due to under-reporting, and still increasing. On 30 January 2020, the World Health Organization (WHO) declared a public health emergency of international concern and, on 11 March, a pandemic. By 4 April 2020, it had reported over one million confirmed cases, a ten-fold increase in less than a month.2 Quick to respond were Singapore, South Korea and Hong Kong, developing mass testing and contact tracing3 with others such as the US notably slower;4 New Zealand and Australia successfully protected their populations and economies by restricting travel.5 Some developing countries also imposed strict lockdowns rapidly, saving lives in the absence of other resources to fight the pandemic.6 Initial responses in Europe varied: for example, Sweden imposed few restrictions aiming at ‘herd immunity’,7 Spain, France and the UK

1 Key data are available at atourworldindata.org/coronavirus-data. 2 A timeline of events is available at www.who.int/emergencies/diseases/novel-coronavirus-2019/ interactive-timeline and information on responses at www.bsg.ox.ac.uk/research/research-projects/ covid-19-government-response-tracker. 3 BY A1 and S-Y Tang, ‘Lessons From COVID-19 Responses in East Asia: Institutional Infrastructure and Enduring Policy Instruments’ (2020) 50 The American Review of Public Administration 2020 790. 4 HD Xu and R Basu, ‘How the United States Flunked the COVID-19 Test: Some Observations and Several Lessons’ (2020) 50 The American Review of Public Administration 568. 5 T Jamieson, ‘“Go Hard, Go Early”: Preliminary Lessons From New Zealand’s Response to COVID-19’ (2020) 50 The American Review of Public Administration 598. 6 P Brien, ‘Coronavirus in developing countries: Mapping national policy responses’ (Insight, 29 June 2020), available at commonslibrary.parliament.uk/coronavirus-in-developing-countries. 7 M Claeson and S Hanson, ‘COVID-19 and the Swedish enigma’ The Lancet (22 December 2020).

4  Sue Arrowsmith, Luke RA Butler and Annamaria La Chimia were slow to lock down, with variable test and tracing capability;8 whereas Germany implemented effective early testing and quarantine measures and experienced low mortality early on.9 Further waves involved further successive measures. Mass vaccination programmes were quickly mobilised in some countries, however, with demonstrable success, including Israel and the UK.10 However, whilst as early as September 2020 it was questioned whether the pandemic had peaked including in countries with massive populations like India,11 infection rates resurged in India in April and May 2021.12 As of that time the world was carefully monitoring highly transmissible strains.13 Many countries have faced major challenges. Health and social care systems were unprepared with public services overstretched to breaking point, revealing, in some cases, damage from years of austerity. In both developed and developing countries, massive increases in national borrowing have affected gross domestic product.14 Serious questions have been asked about the ability of the nation state to ensure effective public services, and the capacity of international organisations to assist, in emergencies. Developing countries have faced potential problems with donor countries’ assistance being threatened by their own internal economic problems or desire to use aid to promote their own national interests, the latter being well known as potentially undermining aid effectiveness. In this context, multilateral organisations such as the World Bank and the United Nations Office for Project Services (UNOPS) became pivotal in accelerating developing countries’ responses. One major issue has been the acquisition of goods, services and works needed for the pandemic. Most obviously, the pandemic initially created urgent needs for protective personal equipment (PPE), ventilators and other medical devices and drugs in massive quantities, and provided forewarning of the need for test and tracing capability. Other urgent needs arose from the way the pandemic fundamentally altered existing everyday activity – for example, for new IT equipment for homeworking, services to monitor unused buildings or for direct food assistance

8 S Lovett, ‘The UK is going along the same lines’: France and Spain spark concern of second wave as Britain watches on’ The Independent (9 September 2020), available at www.independent.co.uk/news/ world/europe/coronavirus-cases-france-spain-covid-19-latest-uk. 9 H Wieler, U Rexroth, and R Gottschalk, ‘Emerging COVID-19 success story: Germany’s push to maintain progress’ (20 March 2021), available at ourworldindata.org/covid-exemplar-germany. 10 E Leshem and A Wilder-Smith, ‘COVID-19 vaccine impact in Israel and a way out of the pandemic’ (5 May 2021). Practice in the UK is discussed in more detail in ch 15. 11 Examined in detail in ch 19. 12 ‘India coronavirus: Experts say sharp rise in Covid-19 cases “alarming”’ (BBC News, 22 March 2021), available at www.bbc.co.uk/news/world-asia-india-56480474. 13 Including: Kent / B.1.1.7 – Alpha; South Africa / B.1.351 – Beta; Brazil / P.1 – Gamma; India / B.1.617.2 – Delta; US / B.1.427 / B.1.429 – Epsilon; Brazil / P.2 – Zeta; B.1.525 – Eta; Philippines / P.3 – Theta; US / B.1.526 – Iota; and India / B.1.617.1 – Kappa. 14 Office for National Statistics, ‘International comparisons of GDP during the coronavirus (COVID-19) pandemic’ (1 February 2021), available at www.ons.gov.uk/economy/grossdomesticproductgdp/ articles/internationalcomparisonsofgdpduringthecoronaviruscovid19pandemic/2021-02-01.

Public Procurement Regulation in (a) Crisis? General Introduction  5 to address threats to food security through higher prices linked to supply chain disruptions or labour and remittances shortages.15 Thirdly, the pandemic accelerated vaccine development, with developed countries taking the early advantage. Although there were some preparations through, for example, stockpiling, a huge effort was needed both to operationalise existing arrangements and to create new ones, all in a very challenging environment. A particular element of challenge, especially in the early phases, was speed, which itself created problems for the usual safeguards to ensure value for money, integrity and accountability in procurement. This has required a difficult balance of interests. The global nature of the crisis also made it uniquely challenging. Unlike regional environmental disasters or conflicts, the pandemic created urgent demand for virtually every country. As a result, a buyer’s competition ensued for limited global resources, particularly PPE and ventilators in the early phases. Opportunistic suppliers could charge extremely high prices. There were additional risks in having to deal with unknown suppliers, trying to identify suppliers, and making advance payments to guarantee security of supply. Even if reliable sources could be found, lead-in times for manufacture and delivery were problematic. All this was especially problematic for poorer or smaller countries less able to compete. The challenge was exacerbated by the disruption that illness and health restrictions caused for both governmental capacity and the supply chain. This global competition created problems between and within countries. States (including the EU on behalf of its Member States) authorised various export restrictions on PPE, raw materials, items needed for vaccine production and, more recently, vaccines themselves. Within countries under federal systems, there was competition between federal and state governments regarding who has power to buy and provide. Even in unitary states, competition within local government may have necessitated centralisation of procurement at central government level. The need for coordination and centralisation was also experienced within international organisations such as the World Bank and UNOPS. There was not only competition but even attempts to commandeer and interfere with contracts that affect others’ acquisition efforts.16 The pandemic, then, has presented a significant challenge for acquisition systems, not only in obtaining what is required to meet urgent needs, but also to do so in a way that does not involve excessive waste, and which addresses concerns such as integrity and accountability to stakeholders. While, as discussed later, governments have used to some extent the full panoply of acquisition mechanisms, ranging from wide-scale state direction of resources in China to almost total reliance on procurement in commercial markets, it is the latter approach that has largely predominated even in the pandemic’s exceptional circumstances. 15 See World Bank, ‘Food security and Covid-19 Policy brief ’, available at www.worldbank.org/en/ topic/agriculture/brief/food-security-and-covid-19. 16 As reviewed in ch 24, section III.

6  Sue Arrowsmith, Luke RA Butler and Annamaria La Chimia This approach itself presents challenges, however, since such public procurement is generally governed by detailed regulatory frameworks that seek to achieve procurement objectives in a very different way from the private sector, through public tendering rules that are legally enforceable.17 Further, national and subnational frameworks are now often adopted within a framework of binding Treaty obligations. International organisations are subject to similar constraints, including those linked to the fiduciary and accountability obligations of both donor and recipient of aid. If these frameworks are not suitable for exceptional emergencies they can potentially obstruct timely acquisition of critical requirements, with significant implications for life and health and public services generally, and can generate cost and integrity risks and mistrust, with implications beyond public procurement. It is this specific area of pandemic-related activity, namely the application and operation of regulatory frameworks for public procurement, that is the subject of this book.

II.  Objectives and Scope of the Book In broad terms, the book’s objective is to explore, in the light of the experience of the pandemic, the application, operation and adequacy of current regulatory frameworks for urgent public procurement, including for exceptional ‘crisis’ situations, and to consider any wider lessons from this experience. In this respect we have several more specific objectives. The first is to elucidate how traditional frameworks, both domestic and international, currently address emergency procurement and the policy considerations that underlie regulatory rules and choices. What are the exact interests involved in buying in emergencies and what are the trade-offs that might be needed between these interests? And how are these reflected in specific rules such as requirements to use public tendering, conditions for special ‘urgent’ procurement methods, the procedural rules and controls of these methods, and the rules of supplier review mechanisms? We will see that all of this cannot be reduced to a simple binary choice between speed and transparency or anything of that kind, but is much more complex and nuanced. As well as considering purchasing during an emergency itself, we also look at legal issues that affect future responses and building of national resilience, particularly the impact of international trade rules. The book’s second objective is to consider how domestic and international actors have responded globally to the pandemic from a regulatory perspective, first in their actual use of the current regulatory frameworks and, secondly, in adapting, reforming or even casting aside these frameworks to ensure an effective response.

17 ch

2, section II.

Public Procurement Regulation in (a) Crisis? General Introduction  7 The third objective is to assess the current urgency frameworks from a general perspective and to highlight any areas of general interest. For example, are there approaches adopted in some systems, including changes introduced for the pandemic, that others might find helpful for future urgent procurement? Are any points overlooked in current approaches? Are there useful potential clarifications? Can current rules be adjusted to improve certain outcomes – such as speed or accountability – without (or with minimal) trade-offs? Fourthly, we consider the impact and lessons of the pandemic for public procurement reform more broadly. Has the stiff test of regulatory frameworks provided by the pandemic been a catalyst for, or informed or expedited, broader changes in public procurement regulation? And does it offer any lessons for future regulatory policy in public procurement? For many developing countries, bilateral and multilateral donors play an important role and this dimension is given specific attention, looking at donors’ responses, including in dealing with the regulatory and monitoring constraints normally imposed on aid-funded procurement; assessing those donor responses; and considering any lessons for delivering future development assistance. A few words are needed on our subject’s boundaries, which are important for a meaningful analysis of core regulatory problems. First, the study focuses on regulation of public procurement through general rules; it is not a study of the overall operation and performance of public procurement systems in the pandemic. As chapter 2 discusses, the most important domestic rules typically comprise enforceable hard law, and the book is thus concerned mainly with legal rules. However, that approach is not universal – the Indian federal jurisdiction, for example, still regulates predominantly through soft law – and ‘regulation’ is used with a broad meaning to encompass that, also. We consider that such regulatory frameworks can play only a limited role in achieving public procurement objectives; a sound regulatory framework is just a starting point for this, not the primary tool. Successful procurement depends on many (often related) factors, including culture, ethics, professionalism, commercial skills, training and resources. Even the best regulatory framework cannot guarantee success and in certain circumstances, such as where there is systemic corruption, may have very limited impact.18 However, a sound regulatory framework can contribute to success and a poor one can be a significant barrier to it, for example, by unreasonably stifling discretionary judgments or creating delay. Our concern is whether current regulatory frameworks offer this suitable starting point, recognising that alone they certainly cannot solve the problems of procuring in a crisis. A second point is that we use the term ‘public procurement’ to refer to government acquisition through the free market, in which both the decision to do business and the terms of business are set by agreement. This corresponds with the area typically covered by domestic legislation labelled as, or

18 ch

2, section 2.

8  Sue Arrowsmith, Luke RA Butler and Annamaria La Chimia entitled, ‘public procurement’ law (and by the UNCITRAL Model Law on Public Procurement 201119). It is also the area addressed by international trade agreements20 from the perspective of securing the proper operation of government markets. However, not all governmental needs are met this way. For example, socialist economies may not use market mechanisms at all in allocating resources while even in market economies certain products or services, such as electricity, may be required to be supplied to government (and others) at set prices. It is also common in wartime to override market mechanisms to ensure critical goods and services are both available to government (and the private sector), in some cases on set terms, and appropriately distributed. The extreme nature of the pandemic, including global shortages, has, as in wartime, given rise to some regulatory interventions. These have included, sometimes in combination: (a) requisitioning from the private sector; (b) directing private sector production, including for requisition or other acquisition by government; (c) directing use of available goods and services, both within government – where not done by agreement between government bodies (including aid ­agencies) – and as between government and private sector users; and (4) developing additional (public or private) capacities. In general, since procurement laws and international agreements assume, and are concerned with, market competition, they are not relevant when needs are not met through the market; thus China adopted its first national-level Western-style procurement laws,21 only from the late 1990s, while in market economies non-market acquisitions are generally addressed not in public procurement laws but by other sets of rules.22 We are not concerned to assess and examine these matters, but have indicated their existence where they are important, as part of the context of public procurement laws, as in China, where wide-scale state direction of resources limited the potential role of procurement law in the pandemic.23 The book also does not deal specifically with national vaccine procurement. This is a specialist area of innovative procurement, requiring product development and unusual risks; it is quite different from most pandemic and other emergency procurement, which involves unusual circumstances rather than unusual subject matter. In addition, timescales for development, procurement and delivery of vaccines were also expected to be too long for meaningful consideration (although, in retrospect, this happened very quickly). However, even at the start of the pandemic it was apparent that procurement of vaccines raised important 19 ibid. 20 Including the EU and WTO systems discussed in ch 3. 21 ch 21, section II. 22 The Model Law and its Guide to Enactment do not address the line between market and other acquisitions in detail: Art 1 merely provides that the Model Law applies to all ‘public procurement’, defined in Art 2(j) as ‘the acquisition of goods, construction or services by a procuring entity’. It is clear, however, that requisition or directed production for supply on fixed terms are not contemplated, given the content of the Model Law is directed at choosing a supplier, and setting terms, by agreement. 23 ch 21 passim.

Public Procurement Regulation in (a) Crisis? General Introduction  9 questions from an international perspective and was already giving rise to international collaboration. This led us to include chapters relevant for these perspectives, including the EU’s joint procurement agreement and associated initiatives, which might have been expected to be more rapid than national initiatives, and is, further, also a rare example of multilateral procurement cooperation during the pandemic; and experience of procuring vaccines in developing countries for other diseases that could hold lessons for multilateral COVID-19 purchases. Finally, the analysis of the pandemic itself is, inevitably, a very early one and also a limited one. So far as timing is concerned, the book was planned in mid-2020 and draws on experiences of the pandemic’s first year or so. This encompasses, of course, the initial period of uncertainty and urgency, which is most relevant for the book’s focus on regulation in crises and other urgent situations. However, much remains to be investigated regarding the actual outcomes and other aspects of procurement even during this early period, since only now are many audits taking place and legal complaints working their way through the courts. Further, the pandemic and its consequences continue more than a year later to throw up new challenges and needs, as the scenario in India during April and May 2021 shows, with further rapid spread of the disease and apparent shortages of hospital capacity and supplies such as oxygen.24 However, the regulatory responses of the main period of urgency and its immediate aftermath are public knowledge and there is sufficient known experience and information to inform, and make a worthwhile contribution to, any legal doctrinal analysis of urgent and, particularly, crisis frameworks. As more empirical information becomes available, including from currently ongoing projects,25 that will, of course, help test and develop this book’s analysis. As regards the limited nature of the analysis, it is clear that not every specific issue relevant to our book’s research questions can be considered in depth. The book focuses on those issues that were considered of broadest interest from a regulatory perspective and which were particularly relevant in the early days of the pandemic. We have highlighted at various points issues that are worthy of more in-depth study, including some of which have emerged as the pandemic has progressed, ranging from narrow questions such as the impact of national constitutional rules on centralised or cooperative procurement approaches in times of global shortage26 to broader emerging issues such as the potential impact on procurement frameworks of public procurement’s role in economic recovery.27 Hopefully, our own study will inspire further research on these and many other interesting public procurement issues thrown up by the pandemic. 24 ‘Covid-19 in India: Cases, deaths and oxygen supply’ (BBC News, 29 April 2021), available at www.bbc.co.uk/news/world-asia-india-56891016. 25 eg the study Optimising Outcomes from Procurement and Partnering for Covid-19 and Beyond: Lessons from the Crisis of UK local government procurement practice by the Universities of Cardiff, Northumbria, Oxford, and Stirling: see gtr.ukri.org/projects?ref=ES%2FV015842%2F1. 26 ch 24, section III. 27 ch 24, section VI.

10  Sue Arrowsmith, Luke RA Butler and Annamaria La Chimia

III.  Outline and Approach The book is divided into six parts and approaches the above research questions as follows. First, following this general introduction (which forms Part 1), Part 2 contains several chapters that consider regulation of urgent procurement from certain perspectives of global relevance. In that regard, in chapters two and three, Arrowsmith examines the regulation of award procedures for urgent procurement in what are arguably the three most influential international frameworks namely the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Public Procurement 2011,28 which provides a template for domestic regulation, and the European Union (EU) public procurement Directives29 and WTO’s Agreement on Government Procurement (GPA),30 which are trade regimes. Many countries’ systems are now subject to, or substantially influenced by, one of these, or similar, frameworks including nearly all countries studied in Part 5 of this book. Thus Italy is subject to both the EU Directive and GPA, the UK to the GPA and (until recently) the EU Directives, and Singapore and the US Federal Government (as well as many of its States) to the GPA, while China and Nigeria are influenced by the Model Law. Brazil, Colombia and South Africa have seen no significant direct influence from these instruments, but Brazil recently applied to join the GPA. The wide and growing application of all three international frameworks means that they are all important in their own right in any global study of regulation of urgent procurement and the Model Law, which itself draws on numerous national systems, also provides a useful lens through which to examine domestic regulatory approaches, including those of the case-study countries. Pursuant to the first and third research questions above, chapters two and three explain and assess methods for urgent procurement in the three instruments including, specifically, crisis procurement on which there is little English language literature. They establish a conceptual framework for identifying and analysing the doctrinal questions – such as the meaning of urgency and ‘foreseeability’ of events – which are often similar across three frameworks, and analyse these questions using a doctrinal law-in-context approach,31 including identifying carefully the specific policy considerations arising with each question. The analysis draws extensively on the pandemic’s practical

28 United Nations Commission on International Trade Law, UNCITRAL Model Law on Public Procurement 2011 (2014). 29 Focusing on Directive 2014/24/EU, which regulates most major contracts: Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC OJ L94/65. 30 Revised Agreement on Government Procurement and WTO-related legal instruments, as amended on 30 March 2012. 31 Modified as appropriate in considering the Model Law as it is not a binding legal instrument but a model for one.

Public Procurement Regulation in (a) Crisis? General Introduction  11 and regulatory experiences, in particular from the jurisdictions studied in Part V, and also considers how these international instruments might learn from each other. As regards the second research question of regulatory responses, in contrast with the experience of individual jurisdictions – including those studied in Part V, where we have seen significant responses in terms of new laws or proposals – responses so far have, unsurprisingly, been confined to limited guidance; but the analysis aims, of course, to inform any future reforms. These chapters conclude that, at least if interpreted and applied appropriately, all three instruments to a large extent offer sound frameworks for procuring major contracts both for regular urgency and for exceptional crises. They also make several specific recommendations, but these are not, in general, major, nor conform to any overall grand theme. Rather, what is needed, it is suggested, is a targeted and nuanced approach through a series of tweaks, often in different directions – some in favour of greater speed and flexibility and some to enhance competition and transparency – to complex instruments which seem in general fit for their purpose. If there are any overall themes they are, first, that a better balance of interests might be achieved by a slight shift towards speed and flexibility in procedure accompanied by more information transparency (as opposed to transparency through rigid regulation of discretion); and, secondly, that widespread crises situations do warrant slightly different rules from more regular urgent situations, which needs more explicit and/or wider recognition. Chapter 4, by Butler, examines single-source procurement in the pandemic from a regulatory perspective in accordance with the second and third objectives above, exploring several practical and policy issues in conducting single-sourcing and complying with legal requirements. Key aspects include use of single-source procurement when depending on the market to lead the procurement response in emergencies; the means of selecting suppliers; complying with requirements to justify using single-source methods; the special challenges of obtaining and disclosing information on single-source contracts; and issues of pricing – important given the susceptibility of single-source contracts to risks of high prices, especially in emergencies. This chapters both supports some of the findings in chapters 2 and 3 concerning tweaks to the international frameworks and identifies further areas of legal and practical uncertainty requiring targeted interventions through national and/or international measures. Ultimately, the pandemic has demonstrated that whilst single-source procurement is often treated as the exception, it was very much the norm in the pandemic and going forward requires greater priority in analysing public procurement frameworks. Chapter five, by Nicholas and Arrowsmith, explores supplier review, addressing this, as with domestic award procedures in chapter 2, through the lens of the UNCITRAL Model Law. The chapter’s main conclusions are that the Model Law’s review system is in general an effective and balanced one, although it might benefit from some development, in particular on concluded contracts; but that, while it has some role in the context of urgency, particularly to prevent abuse of urgency tools when there is no genuine urgency, its role is inevitably limited in genuine

12  Sue Arrowsmith, Luke RA Butler and Annamaria La Chimia emergency situations, both because its disruptive effect makes effective remedies difficult and because of other disincentives to supplier challenge. Thus other enforcement avenues need careful attention. In chapter 6, Georgopoulos explores the EU Joint Procurement Agreement (JPA), one of few examples of formal multilateral cooperation in public procurement responses to COVID-19. Again, in accordance with the second objective, the chapter explores the JPA’s principles, governing rules and outcomes, as well as complementary EU mechanisms. The chapter argues that the JPA offers an alternative paradigm to national isolation, of pooling and sharing, but that its structure and decision-making may be ill-suited for rapid action and allowing independent Member State procurement has also undermined its effectiveness (although, notwithstanding a first unsuccessful procurement, it has demonstrated some flexibility for emergencies through shortened processes). The chapter suggests, however, that expanding EU competence to address crises is not necessary, but improved EU-Member State coordination is desirable, including through greater focus on the redistributive potential of joint mechanisms (eg in coordinating allocation of surplus) and further digitalisation. Of course, procurement regulation does not operate in a vacuum; effective public procurement is supported by regulatory frameworks in related fields. Part 3 thus looks at the regulatory issues thrown up by the pandemic for some of these closely related fields, providing important context for studying public procurement frameworks themselves. In chapter 7, the first chapter in Part 3, Anderson, Kovacic and Salgueiro, examine competition policy, which plays an important role in ensuring healthy competition in public as well as private markets, facilitating success of public procurement procedures. Drawing on several systems, the chapter explains and reflects upon the regulatory responses of this area in the pandemic and its impact on public markets. The authors conclude that often these responses have been positive, showing desirable flexibility, improved communication with stakeholders and enhanced cooperation with other authorities, including procurement authorities. Like the chapters in Part 2, however, chapter 7 identifies areas in which the pandemic has tested the legal framework and found it wanting to a degree, and reflects on what beneficial adjustments might be retained in the longer term, both for future emergencies and – reflecting the final research question for this book – from a broader perspective. Part 3’s other two chapters address the connection between, on the one hand, trade policy and, on the other hand, key assumptions underlying public procurement regulation, particularly that public procurement goals are generally best achieved by competitive tendering and that opening tenders to trade enhances both value for money and, through diversity in sourcing, security of supply. The test to this market-based approach resulting from global surges in demand in the pandemic raises questions of how trade policy can best balance the benefits of competitive markets and open trade with security of supply for times of crisis. In chapter 8 Evenett highlights the supply risks where such surges occur and the

Public Procurement Regulation in (a) Crisis? General Introduction  13 reasons for those risks. Among other things, it presents important data on how governments responded to secure their own critical supplies, including through export restrictions and various – often trade-restrictive – policies to stimulate diversity of supply and expand domestic capacity. He also highlights the risks of purportedly temporary crisis responses being maintained and abused to obtain a competitive advantage. The chapter concludes that governments need to consider this area seriously, but also notes the difficulty in developing solutions. The chapter suggests that some incentives to develop spare capacity, along with more transparency over the existence of this capacity and the ability to increase it at short notice, would assist, and would discourage governments from interfering with trade; and that international guidelines would help. Chapter 9, by Trepte, complements this by analysing precisely how current trade rules govern two of the key measures referred to in chapter 8 that governments might impose to shore up supply chain resilience for essential products, namely export controls and public procurement preferences. How do the current legal rules balance the potential conflicts between open trade and supply chain resilience? As with chapter 3, the chapter examines the issues by reference to the WTO as the main global trade regime and the EU as an illustration of an important regional system. The chapter indicates that even the scope for temporary emergency measures is unclear, and the possibility of measures for longer-term capacity-building highly questionable. Prompted by the US’s initial attempt unilaterally to withdraw products from GPA coverage, the chapter calls for explicitly agreed approaches, possibly drawing inspiration from the Agreement on Import Licensing Procedures to manage temporary restrictions fairly. Part 4 deals with international responses in the field of development aid. Its first three chapters illustrate how donors have responded to some key issues and problems, by considering the responses of three major – inevitably selective – donor agencies. Specifically, chapters 10 and 11 are dedicated to two multilateral donors, the United Nations Office for Project Services (UNOPS) and the World Bank, chosen as they are at the frontline in facilitating developing countries’ access to essential medical goods and services, while chapter 12 considers the United States Agency for International Development (USAID), the largest bilateral aid donor in the health sector. These chapters examine the type of assistance provided, procurement instruments used and problems encountered. To answer our research question, the chapters looked at how these donors adapted their regulatory frameworks and institutional structures to respond effectively and how problems have been overcome. Like domestic governments, aid agencies had to be agile, adapting and changing their usual planning, approval and implementation processes. Although the chapters show that these donors’ procurement regulatory frameworks have been sufficiently flexible to adapt to the emergency, its global impact has affected donors’ capacity and, in the case of bilateral donors, also willingness to assist. At the multilateral level, chapter 10 by Audia and Bobrow emphasises the important coordinating role within UN agencies played by UNOPS, revealing that suppliers themselves seek coordination, and also internal obstacles to

14  Sue Arrowsmith, Luke RA Butler and Annamaria La Chimia such coordination, such as staffing issues and financial rules. Moss in chapter 11 shows that the World Bank has had to rethink its structure to ensure operations could be initiated for multiple levels and countries, overcoming the Bank’s original regional structure. The chapter also demonstrates that the Bank was able to use its new procurement framework, making good use of new procedures such as the Alternative Procurement Arrangements allowing reliance on rules and procedures of other organisations. However, the extent to which recipient countries have taken full advantage of the Bank’s emergency programmes was disappointing, raising questions on how to promote these programmes better and enhance capacity to improve uptake. Chapter 12 on USAID, by Jin and McLaughlin, illustrates how the extent and effectiveness of bilateral responses can be conditioned by domestic events; in the US decisions on what to purchase with development aid remained linked domestic considerations and the desire to benefit the national economy. While President Biden’s election gave new impetus to multilateralism and new resources were invested to support developing countries, the close links between aid and donors’ national political events highlights again the fragility of aid and of its governance system. The final chapter in Part 4, chapter 13 by Eccleston-Turner and Upton, addresses vaccine procurement, examining obstacles to developing countries in accessing the vaccine and international initiatives to help overcome these. This chapter shows that these obstacles include procurement arrangements, as well as more widely discussed problems; in particular, limited financial resources affect developing countries’ capacity both to conclude Advance Purchasing Agreements with pharmaceutical companies and to adhere to terms imposed by international institutions for participating in multilateral programmes aimed at global vaccine access. Part 5 provides case studies on regulation in specific domestic jurisdictions. Each chapter addresses all or some of the book’s research questions in relation to each jurisdiction; contributes information for analysing the international frameworks; and informs analysis of the book’s broader research questions. A common structure and focus ensures that the issues addressed are properly comparable and can inform the broader analysis. Jurisdictions were chosen to present between them a variety of characteristics that may affect procurement regulation in general and responses to the pandemic specifically. The aim was to capture a wide range of regulatory rules, responses and considerations, although not representative of countries in general and not capable of supporting empirical generalisations. Thus the selected countries cover different parts of the world, with two from Europe (Italy and the UK), three from the Americas (the US, Brazil and Colombia), three from different parts of Asia (India, Singapore and China) and two from Africa (Nigeria and South Africa), although there are gaps, eg with the Middle East and Central Asia, where at the time of planning it was considered too difficult to ensure that sufficient information could be obtained and analysed in the planned timescale. There is also diversity of legal traditions, covering the common law (the UK, US, India, Nigeria, and Singapore),

Public Procurement Regulation in (a) Crisis? General Introduction  15 the Latin American tradition (Brazil), civil law (Italy and Colombia) and socialist tradition (China), as well as South Africa with its ‘mixed’ tradition. The choice also includes countries that regulate still to a significant degree – although increasingly less so – on a soft rather than hard law basis (India, South Africa and the UK) – as well as those with a more established hard law approach. Finally, the case studies cover countries in diverse stages of development, including both developing and developed countries, and – with China, India, Brazil and South Africa – four of the ‘BRIC’ economies. They were also chosen to cover some countries subject to international frameworks but also regimes as yet unaffected by either significant trade obligations or by the Model Law, as outlined above. Finally, it was sought to include countries with varying experiences of the pandemic, with most having had significant infection and death rates but others – in particular China and Singapore – purportedly with lower rates, having got an early grip on the spread of the pandemic. As anticipated, these chapters offer a diverse range of experiences and approaches, each telling a different story and each with something to contribute to the general conclusions of the volume. While it is important to consider the experience of each in its overall context, certain themes emerge that are addressed in the conclusions, as reviewed in Part 6 of the book. Drawing on all the chapters above, Part 6, the final part, looks beyond the COVID-19 pandemic to consider the future regulation of procurement in crises and other emergency situations, including what lessons can be learned from the pandemic. First, chapter 23, by Fazekas and Hernández Sánchez, draws on the pandemic’s experience to highlight some key challenges facing initiatives to improve the capture and analysis of public procurement data, which is of overarching and fundamental importance to the themes explored in this book. Lack of data and inadequate data systems limit the effective analysis of public procurement information, which is essential for assessing commercial and other (eg social) outcomes and levels of integrity, and for accountability and public trust. Data and data systems can also serve important regulatory functions. They can support the verification and enforcement dimension of transparency in a regulatory system, including through legal challenge; and can, on the other hand, assist in compliance with information disclosure obligations. They can help supplement or even reconfigure legal frameworks, by shifting the focus from specific requirements on notices, records and reporting requirements which create compliance burdens and legal risk, towards open data sources and architectures covering all procurement phases (although that is not to say they do not create new legal issues). They can also create, we believe, a level of information transparency that justifies less prescriptive regulation of discretion in public procurement. The chapter argues for the improvement of procurement data systems, improved methods for analysing data, and improved data literacy within the procurement community. Finally, in chapter 24, Arrowsmith and Butler, draw out some observations and conclusions of a general nature in response to the research questions posed by the book.

16  Sue Arrowsmith, Luke RA Butler and Annamaria La Chimia In this regard, the chapter first provides an overall picture of how traditional regulatory frameworks address emergency procurement and the policy considerations that underlie these approaches. It then reviews the regulatory responses of the pandemic. In this respect the chapter highlights, as we observed at the start of this chapter, that – with the notable exception of China – these responses overwhelmingly took the form of reliance on market mechanisms and, with some exceptions for aid-funded procurement, meant that the traditional domestic regulatory frameworks came into play. In terms of domestic responses, the chapter suggests that these can be classified into four main types (albeit shades on a spectrum), with more than one response found within some countries for different types of procurement or different time periods: these were the ‘exclusion’ response, where pandemic-related procurement was excluded from the regular procurement law altogether and traditional regulatory norms did not play any significant governing role; the ‘parallel regime’ response, where a distinct and separate legal framework was established for procurement in the pandemic; the ‘adaptation’ response, where the regular framework was used but with adaptations; and the ‘no change’ response, where countries simply relied on the regular procurement framework in the pandemic. On the other hand, it is observed that, not surprisingly given their nature, no changes were made to the UNCITRAL Model Law or to the EU and GPA trade frameworks and also that guidance issued (by the EU) was of very limited utility. The chapter also reflects on current regulatory approaches at both international and national level, highlighting, in particular, issues for future consideration, both of a general nature and relating to specific rules or policies. The first include the value of adopting permanent, rather than ad hoc, rules for emergencies; the importance of a nuanced approach that takes full account of, for example, different dimensions of transparency rather than treating this is one general concept; and the danger that highly rigid emergency regulation may backfire if it proves to be unworkable, leading to a rule-based approach being jettisoned for an ad hoc system in a major emergency. Against this background, the chapter then outlines a number of specific points that regulators may want to consider. These include the case for special ‘crisis’ provisions that, for a widespread emergency, dispense with the usual conditions governing direct solicitations on urgency grounds; the value of framework agreements and supplier lists to facilitate advance planning in emergencies; the need to give consideration to requiring or encouraging a competitive approach when it is necessary to resort to direct solicitations; the value of expedited tendering procedures – albeit that these are mainly useful in the context of advance procurement mechanisms and have a limited value for one-off tendering for major contracts in an emergency; the benefits of a flexible approach to contract modifications as preferable in many cases to new awards, but also the need to control these in a manner consistent with the approach to new awards by direct solicitation; the limited value of supplier remedies and need to consider alternatives; the need for closer attention to regulating pricing and other issues in single-source procurement; and – of major importance, as already noted

Public Procurement Regulation in (a) Crisis? General Introduction  17 above – the significant role that information transparency can play to counterbalance the inherent lack of transparency in the direct solicitation procedures that are inevitable in an emergency. As the chapter highlights, the various international and country case studies in the book provide various useful models for implementing many of these approaches. The chapter, further, reviews the particular problem of security for critical supplies and, more broadly conceived, ‘resilience’, including ‘buy national’ and other discriminatory policies, noting the potential for disrupting supply chains and also the potential to compromise the work of domestic donor agencies. Drawing on chapters 8 and 9, in particular, it notes both the legal uncertainty under international trade agreements surrounding resilience building measures and the practical difficulties of coming up with alternative strategies, which seem mainly to reside in prospects for various forms of international cooperation. In other sections that review the book’s findings in specific areas, the chapter suggests that the neglected area of contract administration requires more attention and research from a regulatory perspective; and also considers how the book’s themes are reflected in the procurement experiences of development aid, as explored in section V of the book, finding a number of parallels with the experience of individual countries but also a number of specific themes and problems. In this respect, an examination of key organisations such as the World Bank and UNOPS reveals that existing procurement frameworks, already geared, to some extent, for responding in emergencies, have been effectively deployed and shown appropriate flexibility. However, it is suggested that increasing intervention by such organisations raises interesting issues about their role beyond acting as facilitators between developing countries and suppliers, such as creating conflicts of interest where they not only oversee but also participate in procurements, as well as wider policy questions about whether their proper role should be more direct in future to achieve better outcomes for developing countries. The chapter also reflects on how increasing coordination of approaches on the demand side in this context can achieve not only better prices but also more equitable outcomes for developing countries. As regards the pandemic’s impact, while it is clearly too early to make an overall assessment, this final chapter explains that a clear impact can already be discerned, especially in countries that had commenced reform programmes prior to the pandemic but also more broadly; this has occurred both as a result of the experience of emergency procurement in the pandemic, either by maintaining measures introduced for pandemic-related purchases or as a result of lessons learned in the pandemic, and because of a desire to improve procurement in the light of its role in economic recovery. It is suggested that perhaps the most significant longer-term impact of the emergency procurement experience may be the very welcome one of improved information transparency, accelerating an existing trend; but, on the other hand, the role of procurement in both building resilience and in economic recovery presents a danger of unwarranted protectionism. As regards lessons for broader regulatory reform, the chapter highlights the importance both of building on what has been done in the pandemic to improve

18  Sue Arrowsmith, Luke RA Butler and Annamaria La Chimia procurement, and of leveraging any momentum for further reform that the pandemic has created. It is suggested that, building on what has already been done in the pandemic in some systems, of particular importance not just for emergency procurement but for procurement more generally, are the need for study and regulation of single-source procurement and the further development of information transparency in the light of technological developments. It finally suggests that the pandemic has highlighted a particular need for reform in systems that have proved too cumbersome to cope with a significant emergency, leading to disapplication of the regular regime in the pandemic, and that, as alluded to above, enhanced information transparency can support the loosening of constraints on discretion and certain other procedural rules in existing systems. Finally, this concluding chapter addresses the question in the book’s title, considering whether the book’s analysis suggests that public procurement regulation is itself in crisis. It is concluded that it is not. While there may have been many public procurement problems during the pandemic, typical regulatory frameworks, including the international models that underpin many national systems, appear largely fit for the (limited) role that they can play in achieving effective public procurement, which depends on much broader considerations.

part 2 Public Procurement Regulation in Emergencies: International and General Perspectives

20

2 The Approach to Emergency Procurement in the UNCITRAL Model Law: A Critical Appraisal in Light of the COVID-19 Pandemic SUE ARROWSMITH

I. Introduction International public procurement frameworks now have a substantial influence on national regulatory systems, either because of legal obligations to apply those frameworks – in particular, under trade agreements – or because of their influence in practice.1 Nearly all the countries studied in this book are subject to, or influenced by, such frameworks to a degree. This chapter and the next consider what are arguably the three most influential international frameworks, namely the United Nations Commission for International Trade Law (UNCITRAL) Model Law on Public Procurement 20112 (‘the Model Law’), examined in this chapter, and the European Union (EU) and World Trade Organization (WTO), considered in chapter 3. The objective is to assess, in the light of the COVID-19 pandemic, the way these frameworks address urgent procurement, including in the context of widespread emergencies, but not limited to that context, since crisis events such as the pandemic also raise, and shed light on, wider issues relating to urgent procurement. These chapters also serve as background for understanding some of the country case studies in Part 5 of this book. In turn, those case studies, which offer

1 S Arrowsmith, J Linarelli and D Wallace Jr, Regulating Public Procurement: National and International Perspectives (Kluwer Law International, 2000); A Georgopoulos, B Hoekman and PC Mavroidis (eds), The Internationalization of Government Procurement Regulation (OUP, 2017). 2 United Nations Commission on International Trade Law, UNCITRAL Model Law on Public Procurement 2011, available at uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/ en/2011-model-law-on-public-procurement-e.pdf.

22  Sue Arrowsmith experience of operating the international frameworks, illustrate and inform the analysis of the latter. Both because the EU and WTO lay down detailed rules only for major contracts3 and because of limited space, the analysis focuses on rules governing larger contracts.4 All three international frameworks focus on contract awards and give only limited attention to planning and execution, and this chapter and chapter 3 likewise focus on the former, although covering regulation of contract modifications to the extent relevant to the ability to obtain urgent new requirements.5 Enforcement through supplier review is addressed separately in chapter five. All three international frameworks start from the assumptions, first, that public procurement requires regulation to help secure procurement objectives and, secondly, that this regulation takes the form in domestic law of hard law enforceable by suppliers.6 This chapter thus assesses the Model Law from that standpoint. While widely accepted and implemented, such assumptions are not universal, especially in common law jurisdictions, such as England and Wales, considered in chapter 15, and India, examined in chapter 19; but, as we will see, even the latter jurisdictions adopt regulatory rules of a ‘soft’ nature in the sense of being, in general, neither legally binding nor enforceable by suppliers. In this context, the Model Law can still be a useful guide, albeit bearing in mind that the hard or soft nature of the norms will be a factor in deciding their content. Of course, whatever the nature of the rules, a sound regulatory framework can only provide a starting point for effective procurement and, indeed, in certain circumstances, such as where there is systemic corruption, may have limited impact, as discussed in section II below. We thus assess only whether the international frameworks appear to offer this suitable starting point for their own contexts, recognising that alone they cannot solve the problems of procuring in a pandemic or other emergency. The chapter concludes that, in general, the Model Law does offer a sound framework for procuring major contracts in the context of both widespread crises and other urgent situations, balancing appropriately the different interests involved including, notably, speed and flexibility against transparency and competition. However, the chapter makes several recommendations. As also with the ­recommendations on the EU and GPA in chapter 3, these are not one-­directional, calling generally either for more transparency and competition, on the one hand, or more speed and flexibility, on the other, nor do they involve any radical change.

3 Those of interest to cross-border trade: see ch 3, sections 2.A and 3.A. 4 Here rules on valuing arrangements and on thresholds for applying different procurement methods (not examined here) are important context: see eg Model Law, Art 12. 5 Contract management issues relating to other matters, such as difficulties with contract performance in the pandemic, are not included. 6 ‘Supplier’ refers here to a party that is, or may be, interested in contracts or already has a contract. Different legal systems use different terminology in this respect, with ‘supplier’ sometimes having a narrower meaning, eg for parties interested in only supply contracts (as in the EU: see ch 3 n 5). The Model Law itself uses the more unwieldy ‘supplier or contractor’ (Art 2(t), defining these as ‘any potential party or any party to the procurement proceedings with the procuring entity’).

The Approach to Emergency Procurement in the UNCITRAL Model Law  23 Rather, what is proposed is a series of tweaks in different directions to a complex and inter-related system of rules to enhance its overall effectiveness in the light of recent experiences.

II.  Introduction to the Model Law The Model Law offers a template for countries introducing or reforming public procurement laws,7 for states to use and adapt as they think fit; it is not a legally binding instrument although aid donors may encourage or require its use.8 UNCITRAL promotes trade primarily not through the content of laws but by seeking standardisation, on the basis that standardisation itself facilitates trade. The procurement Model Law and supplementary regulations9 seek to provide a comprehensive regulatory system for achieving national procurement goals, such as value for money and integrity,10 with the underlying aim that many countries will use it;11 and in its current and previous (1994) versions12 the Model Law has influenced more than 40 (primarily developing) countries,13 including three covered in this book – Nigeria, China and (in some of its jurisdictions) India. The Model Law not surprisingly follows the dominant model for regulating public procurement in market economies of a transactional approach that relies on transparency and competitive procedures to achieve procurement goals, contrasting with the relational model dominant in the private sector involving developing ongoing commercial relationships.14 The differences can perhaps be explained by

7 S Arrowsmith, ‘Public Procurement: an Appraisal of the UNCITRAL Model Law as a Global Standard’ (2004) 53 International & Comparative Law Quarterly 17; C Nicholas, ‘The 2011 UNCITRAL Model Law on Public Procurement’ (2012) 21 Public Procurement Law Review NA111. 8 See the list of user organisations at uncitral.un.org/en/texts/procurement/modellaw/public_ procurement/status. 9 Model Law, Art 4; and see UNCITRAL, ‘Guidance on procurement regulations to be promulgated in accordance with article 4 of the UNCITRAL Model Law on Public Procurement’, available at uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/guidance-on-procurementregulations-e.pdf. 10 P Trepte, Regulating Procurement: Understanding the Ends and Means of Public Procurement Regulation (OUP, 2004); S Schooner, ‘Desiderata: Objectives for a System of Government Contract Law’ (2002) 11 Public Procurement Law Review 103; S Arrowsmith, ‘Public Procurement: Basic Concepts and the Coverage of Public Procurement Rules’ in S Arrowsmith (ed), Public Procurement Regulation: An Introduction (EU Asia Inter University Network for Teaching and Research in Public Procurement Regulation, 2011) ch 1, available at www.nottingham.ac.uk/pprg/documentsarchive/asialinkmaterials/ publicprocurementregulationintroduction.pdf. 11 S Arrowsmith, ‘Public Procurement: an Appraisal’ (2004). 12 Model Law on Procurement of Goods, Construction and Services 1994, referred to hereafter as the 1994 Model Law. 13 Taking account of overlap in the lists for the 1994 and 2011 Model Laws, 42 are listed on the UNCITRAL website as at 29 October 2020: uncitral.un.org/en/texts/procurement/modellaw/public_ procurement/status. 14 D Parker and K Hartley, ‘The Economics of Partnership Sourcing versus Adversarial Competition: a critique’ (1997) 3 European Journal of Purchasing and Supply Management 115.

24  Sue Arrowsmith different institutional environments, such as a higher level of corruption15 in the public sector, and different policy emphasis, with the public sector giving more emphasis to integrity, accountability and equal treatment as independent objectives rather than merely a means to commercial value. ‘Transparency’ refers broadly to openness, but has various specific meanings and functions in legal (and policy) discourse according to context.16 In the field of procurement regulation, when used in the sense of a tool to support procurement goals (as opposed to an interest in its own right, which can be called ‘accountability’17), it can be seen at its broadest to have four dimensions, as identified by Arrowsmith, Linarelli and Wallace,18 all reflected strongly in the Model Law – although transparency is also used in narrower senses, such as to refer to information transparency only (which covers some but not all aspects below). The first is publicity for contract opportunities embodied in the Model Law’s public solicitation requirements.19 From the perspective of domestic goals the benefits of this include allowing the best suppliers to identify the opportunity; supporting monitoring (including to limit abuse of discretion); and supporting equal treatment and accountability. A second dimension is publicity for rules, both general (legislation, case law, etc) and those specific to each procedure (evaluation criteria, for example).20 This serves, again, to monitor the exercise of discretion and thus limit abuse, and also to ensure all relevant criteria are considered,21 contributing to sound decision-making and supporting again equal treatment and accountability. It also has benefits separate from the role of transparency in controlling discretion, in particular by providing information needed to submit good offers. A third important dimension is rule-based decision-making that limits discretion. Again, this has benefits separate from transparency (such as improving decisions by sharing experience),22 but from a transparency perspective is a sine qua non of monitoring; publicity cannot ensure monitoring where substantive requirements are imprecise – for example, to award contracts to the ‘best tender’. Fourth and finally, transparency demands verification of compliance, through ex ante and ex post information obligations, and enforcement. The benefits of transparency measures must, however, be balanced against other considerations, notably financial cost, potential to delay delivery, and the 15 See eg, Organisation for Economic Co-operation and Development (OECD), ‘2014 OECD Survey on Managing Conflict of Interest in the Executive Branch and Whistleblower Protection’ (2014), available at www.oecd.org/gov/ethics/2014-survey-managing-conflict-of-interest.pdf. 16 AWGJ Buijze, ‘Transparency: The Swiss Knife of EU Law’ (2015) 26 European Review of Public Law 1123. 17 Arrowsmith, ‘Public Procurement: Basic Concepts’ (2011). 18 Arrowsmith, Linarelli and Wallace Jr, Regulating Public Procurement (2000) 74–75. 19 Model Law, Art 33(1) (open tendering) and eg Art 35(1). 20 Model Law, Art 5 (publication of legislation etc); Art 11(5) (evaluation material). 21 L Arroyo Jiménez and DU Fernández-Bermejo, ‘The allocation of limited public rights: an analytical and constitutional approach’ in P Adriaanse, F van Ommeren, W den Ouden and J Wolswinkel (eds), Scarcity and the State I: The Allocation of Limited Rights by the Administration (Intersentia, 2016) 37. 22 KC Davis, Discretionary Justice: A Preliminary Inquiry (Louisiana State University Press, 1969).

The Approach to Emergency Procurement in the UNCITRAL Model Law  25 possibility that limiting discretion (for example, on negotiations) may potentially prejudice value – for example, where there is no danger of abuse and negotiations might have achieved a better price or better-adapted service.23 Finding the optimal balance – which depends on national circumstances such as commercial skills and prevalence of corruption – is perhaps the overriding concern of public procurement regulation24 and, not surprisingly, has been an overriding concern of regulatory policy in the COVID-19 pandemic. This problem clearly demands special attention in the context of an emergency, most notably because of the need for rapid delivery and, in the COVID-19 pandemic, disruption to supply chains and shortages. As we will see, the Model Law gives specific attention to this problem, providing not only for special approaches to respond during the emergency itself, but also mechanisms – framework agreements – that can be set up in advance for meeting of emergency needs in competitive manner, minimising the potential for conflict between transparency and other concerns. Transparency mechanisms are also, of course, only part of the picture. In particular, they assume a ‘principled principal’ and a need simply to control rogue agents (procurement officers), and thus are less useful where the principals, such as politicians and senior civil servants,25 are corrupt; here transparency rules may have very limited impact on corruption but damage other interests, such as speed and value. Further, both where corruption is systemic and where it is purely opportunistic, because of the temptation to be seen to respond to scandals, given their political impact26 there is arguably a tendency to afford transparency undue weight, given both its limits for addressing abuses and the limited importance of corruption itself in some systems.27 While such dilemmas often result in a ‘pendulum’ approach to reform,28 certainly in recent years some systems have moved away from detailed procedural 23 P Bajari and S Tadelis, ‘Incentives and award procedures: competitive tendering versus negotiations in procurement’ in N Dimitri, G Piga and G Spagnolo (eds), Handbook of Procurement (CUP, 2006). 24 S Kelman, Procurement and Public Management: The Fear of Discretion and the Quality of Government Performance (AEI Press, 1990); S Schooner, ‘Fear of Oversight: the Fundamental Failure of Businesslike Government’ (2001) 50 American University Law Review 627; S Arrowsmith, ‘The EC procurement directives, national procurement policies and better governance: the case for a new approach’ (2002) 27 European Law Review 3; JI Schwartz, ‘Regulation and Deregulation in Public Procurement Law Reform in the United States’ in G Piga and K Thai (eds), Advancing Public Procurement: Practices, Innovation and Knowledge-sharing (PRAcademics Press, 2007) 175. 25 P Trepte, ‘Corruption and Procurement: Recalibrating the Sights’ in A La Chimia and P Trepte (eds), Public Procurement and Aid Effectiveness: a Roadmap under Construction (Hart Publishing, 2019) 137. 26 See, eg, J Branstetter, ‘Darleen Druyun: An Evolving Case Study in Corruption, Power, and Procurement’ (2005) 34 Public Contract Law Journal 443; and more generally, J Schwartz, ‘Procurement in times of crisis: lessons from US government procurement in three episodes of “Crisis” in the twenty-first century’ in S Arrowsmith and RD Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (CUP, 2011) 803. 27 eg O Bandiera, A Prat and T Valletti, ‘Active and Passive Waste in Government Spending: Evidence from a Policy Experiment’ (2009) 99 American Economic Review 1278. 28 J Pegnato, ‘Assessing Federal Procurement Reform: has the Pendulum Stopped Swinging?’ (2003) 3 Journal of Public Procurement 145; Schwartz, ‘Regulation and Deregulation’ (2007).

26  Sue Arrowsmith rules, including the third dimension of transparency of limits on discretion; this is seen in, for example, recent World Bank reforms,29 enhanced flexibility (including wider use of negotiations) in the 2004 and 2014 EU procurement directives,30 Brazil’s creation of a special procurement regime for the 2012 Rio Olympics and 2014 FIFA World Cup31 and Italy’s vacillating reform measures.32 As our country studies show,33 the pandemic’s special demands have generated further changes in this direction in some countries (such as in Italy and Brazil), sometimes with potential for wider application both in emergencies and more broadly, by highlighting the cumbersome nature of existing systems. At the same time, however, the pandemic has also highlighted information transparency gaps and the value of improving information transparency, indicating some room for improving this aspect of the Model Law, as discussed below. The above need for balance, and the varying contexts for applying international procurement standards, must be kept in mind in assessing the Model Law and other international frameworks. Finally by way of introduction, as chapter 1 highlighted, public procurement law generally covers acquisitions in a market and when, in crises, other approaches such as requisitioning are used they are generally addressed through different sets of rules. Questions may arise, however, as to the boundaries of relevant rules, such as the application of procurement laws to ‘public–public’ arrangements (including with state companies), the scope and operation of cooperative powers and prerogatives, such as centralised procurement through framework agreements, and constitutional division of powers. The Model Law does not deal explicitly with these issues, other than to recognise and highlight the possibility of joint purchasing both within and between jurisdictions on its Guide to Enactment.34 In general, this seems appropriate since suitable rules are often country-specific35 and in some cases affected by constitutional provisions. However, it seems feasible for the Model Law – or at least its Guide to Enactment – to provide limited guidance on the subject of public–public arrangements, highlighting the considerations involved. Bearing all this in mind, we can now consider how the Model Law deals with those acquisitions that fall within its scope.

29 P Trepte, ‘All change at the World Bank? The new procurement framework’ (2016) 25 Public Procurement Law Review 121. 30 See eg, J Davey, ‘Procedures involving negotiation in the new Public Procurement Directive: key reforms to the grounds for use and the procedural rules’ (2014) 23 Public Procurement Law Review 103. 31 See ch 17, section II. 32 See ch 14, section II. 33 And see ch 24. 34 See the definition of procuring entity in Art 2 of the Model Law and UNCITRAL, ‘Guide to Enactment of the UNCITRAL Model Law on Public Procurement’ (2011) 10–11, available at https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/guide-enactmentmodel-law-public-procurement-e.pdf. 35 As recognised in the context of joint purchasing in the Guide to Enactment (ibid) 11.

The Approach to Emergency Procurement in the UNCITRAL Model Law  27

III.  Competitive Tendering with a Public Solicitation Under the Model Law the primary means for achieving procurement goals is formal and transparent competitive tendering, at least for major contracts (with enacting states setting thresholds for less formal methods).36 Thus Art 28(1) provides that open tendering (with a possibility of pre-qualification37) is the default method, with other methods (including for complex procurement) permitted only in defined circumstances.38 Open tendering may, however, be difficult in emergency situations: it may not secure what is required in time and, indeed, in cases of supply shortages may not do so at all: suppliers may have no need to engage in competitive procedures to win business and the purchasers who are most nimble in identifying, and negotiating with, suppliers, have the advantage, as with many medical supplies and equipment in the COVID-19 pandemic. Procurement laws, and the Model Law, thus include alternatives to open tendering for emergencies. Assuming competitive tendering is the appropriate starting point, the main issue to consider is the adequacy of these alternatives to: (a) allow entities to conclude contracts in time or at all; (b) control the process to ensure that endgoals are met, including, crucially, actual on-time delivery, the best possible terms (price, quality, etc), and integrity; and (c) ensure an appropriate balance between these and other goals, such as minimising procedural costs. There are two key strands to the Model Law’s approach here. First, it provides for advance mechanisms for emergency procurement that are both competitive and potentially open to all (framework agreements), considered in section IV. Secondly, where less open and competitive methods are essential the Model Law provides for these in the form of, in particular, competitive negotiations and also – for very exceptional cases only – single-source procurement. These two methods are examined in section V.

IV.  Advance Mechanisms (Framework Agreements, Supplier Lists, etc) A. Introduction Setting up advance purchasing arrangements for possible emergencies through open tendering (or another method with a public solicitation) helps both to maintain transparency and competition for urgent procurement and secure rapid and

36 Methods envisaged for low-value procurement, in conditions set out in Art 29(1)(b) and (c) of the Model Law respectively are restricted tendering and request for quotations. 37 Model Law, Art 18. 38 Model Law, Art 28(2).

28  Sue Arrowsmith reliable delivery and better security of supply, often in a manner that is better for the latter purposes than direct solicitation, and which is also less risky and/or wasteful than stockpiling for uncertain needs. This helps minimise conflicts between objectives such as, on the one hand, speed and, on the other, value or integrity (which may be prejudiced by limiting competition or transparency) – thus avoiding the need to balance these different objectives or place some of them at risk. Of course, the extent to which it is possible or worthwhile to establish arrangements with a view specifically to various pandemic or other emergency needs depends on factors such as likelihood of the event, significance of the interests involved, how far the timing, nature and consequences of the event can be predicted (relevant to predicting what will be needed) and how well the objective of secure supply and speedy delivery can be realised in practice. As Schwartz highlights,39 certain events, including severe weather events and terrorist attacks, while their timing and exact nature is unpredictable, generate common needs, such as for water, food, emergency shelter, rescue services and body bags; the specific needs of a pandemic, however, have less overlap and are perhaps less predictable, also. As the Guide to Enactment highlights, the cost of setting up advance arrangements needs to be balanced against their value.40 As the Model Law emphasises, strategic choices here, like many other aspects of good procurement, are not determined or guided in detail by the legal framework, but are a matter for national authorities in detailed implementing measures or guidance and for the skills of procurement personnel.41 Experience of previous emergencies suggests that governments have not always made sufficient use tools available in their legal framework by actually setting up advance arrangements, even for relatively predictable emergencies, as Schwartz analysed in the context of Hurricane Katrina in the US in 2005.42 This raises the question of whether the law could play a further role in encouraging planning. As discussed below, Art 28(2) of the Model Law requires maximising competition to the extent possible when choosing procurement methods, which it might be argued precludes using methods such as competitive negotiations in cases in which planning has been inadequate. However, it is submitted that this provision is to be applied by judging the choice of method at the time that method is chosen. This is because for urgent procurement outside a catastrophe context a backwards looking exercise – should there have been better planning? – is explicitly catered for in other conditions for using competitive negotiations in Art 30(4)(a), which allows competitive negotiations only when the circumstances were neither

39 J Schwartz, ‘Katrina’s lessons for ongoing US procurement reform efforts’ (2006) 15 Public Procurement Law Review 362, 363. 40 UNCITRAL (n 34) 260–261. 41 See eg, UNCITRAL (n 34) 257 and 260, emphasising the importance of capacity issues for framework agreements. 42 Schwartz, ‘Katrina’s lessons’ (2006).

The Approach to Emergency Procurement in the UNCITRAL Model Law  29 foreseeable nor the result of dilatory conduct, whereas with a catastrophe these issues are deliberately disregarded. Planning for emergencies is something on which UNCITRAL provides advice, and to which states need to pay attention (in the context of Hurricane Katrina, Schwartz has suggested that the solution lies in development of the acquisition workforce43), but which is not embodied in a model obligation. Even if the arrangements were not set up with emergencies in mind, it may be possible in an emergency to draw quickly on existing advance arrangements covering relevant goods, works or services. In some countries a response to the COVID-19 pandemic was to adapt existing arrangements to improve the procurement response. Thus in South Africa existing centrally placed framework contracts (imposing obligations on both sides) for personal protective equipment (PPE) and sanitiser were adapted in two ways: first, they were opened up to all entities, waiving the normal requirement for the existing parties’ consent; and secondly, the National Treasury introduced administrative controls over supply, such as by limiting entities’ orders to two weeks’ supply.44 This made supplies available at pre-pandemic competitive prices to a wider range of entities and also facilitated a certain control over internal distribution of items subject to shortages. Brazil also adopted rules allowing public entities to use framework agreements already established by others more extensively than was allowed under pre-existing general rules.45 It is suggested below that the Model Law rules might be tweaked to facilitate this use of closed frameworks in emergencies. While existing arrangements can be useful for both immediate and ongoing needs, new arrangements may also be an effective means to meet unfolding needs. This was seen, for example, in Colombia where arrangements were established after the onset of the COVID-19 pandemic both to meet medical needs and to purchase foodstuffs for distribution,46 and in South Africa where quotations were solicited centrally for certain products not already covered by frameworks, and made available to all procuring entities.47 Colombia’s experience also highlights how the pandemic might be a catalyst for broader change, including by promoting use of advance purchasing arrangements. There the pandemic gave impetus to the introduction of new legal tools, which led to the creation of open framework-type arrangements, as well as an obligation for sub-central entities to give preference to purchasing from centrally procured frameworks, although it is too early to know whether these will indeed be retained as a permanent tool.48



43 ibid. 44 ch

22, section II.B.i. 17, section III.F. 46 ch 18, section VI. 47 ch 22, section II.B.i. 48 ch 18, section III.B. 45 ch

30  Sue Arrowsmith

B.  The Rules on Framework Agreements The Model Law provides for certain advance arrangements49 designed specifically for urgent purchasing50 as well as for repeat purchasing more generally. These it calls ‘framework agreements’. It provides for two distinct types, referred to as ‘closed’ and ‘open’. Both involve procurement in two stages – a first stage in which potential suppliers are identified and a second stage in which a supplier is chosen for a particular requirement – but are otherwise quite different. Briefly put, in terms of the spectrum of possible advance arrangements, closed frameworks lie close to ordinary procurement contracts (with key terms set when the framework is concluded) and – although justified by their benefits, including for urgency – present some risks to transparency and competition;51 while open frameworks are merely a list of interested suppliers, and an extremely transparent and competitive type of arrangement since under the open framework concept all those suppliers must be invited to tender. To avoid confusion it needs highlighting that the Model Law’s framework agreement concept covers not only arrangements that fall within the concept of framework agreements in EU law52 – which correspond broadly with the Model Law’s closed framework53 – but also those the EU refers to as dynamic purchasing systems,54 which correspond broadly with the Model Law’s open framework agreement.55 All framework agreements under the Model Law are ‘open’ in an important sense that the default position is that any interested supplier may tender: closed frameworks must in general be awarded and operated through open tendering (the usual procurement methods applying56) and open frameworks must be awarded by a special equivalent method with open tendering-type rules.57 (The ‘closed’ element in a closed framework is that a limited number are placed on the framework after competition, with initial participation being open.) This provides to a large extent for the transparency and competition provided by open tendering. However, because part of the process has already been conducted when

49 GL Albano and C Nicholas, The Law and Economics of Framework Agreements: Designing Flexible Solutions for Public Procurement (CUP, 2016) 114–21; S Arrowsmith and C Nicholas, ‘Regulating framework agreements under the UNCITRAL Model Law on Procurement’ in S Arrowsmith (ed), Reform of the UNCITRAL Model Law on Procurement: Public Procurement Regulation for the 21st Century (Thomson Reuters/West, 2009). 50 See eg, UNCITRAL (n 34) 254–55. 51 S Arrowsmith, ‘Framework Purchasing and Qualification Lists under the European Procurement Directives Part 1’ (1999) 8 Public Procurement Law Review 115, 122–26. 52 ch 3, section II.C.I. 53 See, in particular, Model Law, Arts 58–59 and 62–63. A significant difference from the EU concept is that the Model Law envisages closed frameworks without any pricing or (as stated in UNCITRAL (n 34) p 289) or with prices subject to upward revision. 54 ch 3, section II.C.I. 55 Model Law, Arts 60–61 and 62–63. 56 Model Law, Art 58(1). 57 Model Law, Arts 60–61.

The Approach to Emergency Procurement in the UNCITRAL Model Law  31 a need arises, the purchase can be made rapidly at that point, while the existing close contact – or even, in some cases, legal commitment to supply – provided by the arrangement can enhance security of supply. The Model Law provides for both types to be available both for needs ‘expected’ to arise on an ‘indefinite or repeated basis’ (Art 32(1)(a)) and where ‘By virtue of the nature of the subject matter of the procurement, the need for that subject matter may arise on an urgent basis during a given period of time’ (Art 32(1)(b)).58 These sets of circumstances overlap and both can clearly apply in relation to a pandemic. The Guide to Enactment specifically highlights the value of frameworks in this context59 and more generally their value for security of supply,60 including to secure medicines without the excessively high prices and poor quality that may result from single-source procurement in urgent situations.61 While the Guide indicates that framework agreements are generally considered to create risks beyond an ‘ordinary procurement’,62 including closing off markets63 and collusion,64 thus requiring controls over this choice,65 in the urgency context, risks may be greater without a framework arrangement given that the alternatives are likely not to be ordinary open tendering procedures but, instead, the exceptional methods of competitive negotiations or single-source procurement. The first type of framework agreement – a closed framework – involves identifying a single supplier or a number of suppliers after completing all or a large part of a regular procurement process (with open tendering as the default66) that includes evaluating tenders, usually including price,67 and then placing orders with those suppliers when the needs arises. Where there is more than one supplier on the framework, work must be placed either based on the tenders submitted for admission to the framework, using the usual award criteria (lowest price or most advantageous bid68) or following a ‘second-stage’ tender inviting all capable suppliers69 (approaches that can be combined in a single framework70). The time to submit second-stage tenders must be ‘sufficient’ to prepare and present submissions but ‘taking into account the reasonable needs’ of the procuring entity 58 On controls see Model Law, Art 32(2) (requirement to record the ‘reasons and circumstances’ for choosing a framework and UNCITRAL (n 34) 270. 59 UNCITRAL (n 34) 268. 60 ibid. 61 ibid 254. 62 ibid 268–69. 63 Model Law, Art 59(1)(a) on duration of agreements. 64 UNCITRAL (n 34) 259; P Arden, ‘Legal regulation of multi-provider framework agreements and the potential for bid rigging: a perspective from the UK local government construction sector’ (2013) 22 Public Procurement Law Review 165. 65 UNCITRAL (n 34) 268–69. 66 Model Law, Art 58(1). 67 On price see n 53. 68 As assumed in Model Law, Art 59(1)(e). 69 Model Law, Art 62(4). 70 Model Law, Art 59(1)(d) requires transparency over circumstances for using second-stage competitions.

32  Sue Arrowsmith which ‘may in limited circumstances prevail over the other considerations, for example, in cases of extreme urgency following catastrophic events’.71 It may be appropriate to make more than one award at the same time for the same subject matter for reasons of security of supply or to obtain scarce supplies, and it might be useful to clarify this possibility. (Although not concerned specifically with framework agreements, it is interesting that one major legal change made by the State Government of India in the pandemic was to a rule that previously prohibited contracts with different suppliers for the same subject matter.72). Closed frameworks thus facilitate procurement that is very rapid but also follows a thorough assessment of reliability and – since terms have been competitively established – promotes value for money (although prices tendered to go on the framework are, of course, likely to be affected by the uncertainty of demand).73 Orders can be placed without delay when based on original tenders and with only a short delay for second-stage competition. An entity can thus establish closed frameworks for subject matter needed in a pandemic, for example, such as PPE or cleaning services. A second-stage competition allows, among other things, for suppliers to adapt their offers, including for urgency. Here, the Model Law explicitly permits variations in weighting of award criteria from the first stage and, by implication, between different orders, within a pre-established and predisclosed range,74 allowing consideration of delivery speed at the moment of need as a factor balanced against others, such as price. This does not, of course, preclude also including specific minimum delivery times for certain quantities. The value of this type of framework in emergencies is illustrated by the fact they were used for more than a third of initial pandemic-related purchasing (both medical and other) by the UK Government.75 While such arrangements can help ensure reliability of suppliers, the extent to which they offer security of supply depends on market conditions and on how far the arrangements impose legal obligations on suppliers to supply. Such agreements may be binding, contractually or otherwise, on one party, both or neither. Even without an obligation to supply, security of supply is often reasonably assured through frameworks with more than one supplier, such that if one is not willing or able to supply others may be called on. However, where shortages are possible, the framework may need to oblige suppliers to deliver at least certain quantities. The Model Law contemplates frameworks involving upward price revisions in second-stage tenders,76 and without careful control this approach can render 71 UNCITRAL (n 34) 292–93. 72 ch 19, section III.C. 73 Model Law, Art 59(1)(c) generally requires the frameworks to set out estimates when timing, frequency and quantities are not precise but the Guide to Enactment (n 34) at 278, acknowledges that where emergencies are contemplated there should be a statement that accurate estimates are not possible. 74 Model Law, Art 59(1)(d)(iii). 75 Up to 31 July 2020; see ch 15. 76 UNCITRAL (n 34) 289.

The Approach to Emergency Procurement in the UNCITRAL Model Law  33 initial tenders meaningless, closing the market to other suppliers in an arbitrary way (and the Guide suggests that regulations or guidance are needed on this77). However, upward revisions might, exceptionally, be justified as preferable to new award procedures in limited cases, one of which is where the framework suppliers are permitted to revise prices upwards to reflect new conditions, such as greater costs in a pandemic. It is, however, preferable to deal with such situations through objective price revision clauses if possible. The Model Law requires the solicitation for a closed framework to give the name and address of the procuring entity78 but, unlike the provisions on open frameworks (where details of both are required79), does not specify whether this refers to both the entity administering the framework and other user entities. As a general rule, the transparency principle makes it desirable to identify clearly in the solicitation itself all entities that will use the framework, although not all countries require this. (For example, in Brazil the general procurement law allows new procuring entities to join by agreement of the parties,80 a possibility that we mentioned was expanded further in the pandemic.) However, in the same way that a catastrophe or other urgency can justify less competitive and transparent methods than normally apply, it seems justifiable to waive this requirement in urgent cases, as use of an existing framework is relatively competitive and transparent, certainly – and, as just noted above, this has happened in the current pandemic as an ad hoc response (in South Africa and Brazil). It could be useful for the Model Law to provide explicitly for use of competitively awarded frameworks by entities not originally advertised as users (or party to the framework) in cases of catastrophe or urgency that would otherwise justify competitive negotiations and/or single-source procurement. Procurement methods other than open tendering can be used for framework agreements when the relevant grounds for those methods apply, so that framework agreements can potentially be established by competitive negotiations (or even the single-source method) in urgent cases. For example, for an immediate need for medical equipment not anticipated before a pandemic materialises an entity could set up a framework agreement through competitive negotiations with several reliable suppliers. However, the conditions for using competitive negotiations (as discussed in section V.A below) generally limit the framework’s duration to what is needed to complete an open competition (for a new framework or otherwise) for the ongoing needs. The second type of framework is the online81 ‘open framework agreement’ (similar to the EU’s dynamic purchasing system concept82). An open framework 77 ibid. 78 Model Law, Art 58(2) and, eg, Art 33(1). 79 Model Law, Art 60(3), although this seems less important with in an open framework as with a permanent solicitation it should be possible to add new entities. 80 ch 17, section III.F. 81 Required by Model Law, Art 60(1). 82 ch 3, section II.C.i.

34  Sue Arrowsmith is open in that it must be openly advertised in the same way as an open tendering procedure83 but it is also open – and in this way very different to a closed framework – in that suppliers can apply at any time to go on the system84 (which also must be advertised permanently or at least annually85) and that in general any qualified supplier must be admitted86 and hence have a chance to tender for orders. (While limitation was accepted in 2011 as an option for capacity reasons for exceptional cases,87 the Guide indicated that this was likely to become obsolete shortly with technological developments.88). Such open framework agreements can again provide a rapid, but still open and transparent, source of supply for emergencies. They are particularly suitable for standardised procurement, given the obligation to invite and assess tenders from all qualified suppliers. (For more complex needs it may be quicker to limit tenders to a few suppliers whose status and tenders have already been evaluated under a closed framework.) The time limits for tendering are the general rules in Art 14(2) of the Model Law that also apply to closed frameworks, requiring ‘sufficient’ time, but can be very short, as little as a day or a few hours,89 even in the absence of urgency. It may be possible to admit new suppliers within the urgency timescales; states provide their own time period for admission,90 which the Guide suggests should generally be ‘short’91 and might be expedited for urgent cases, particularly where there are supply shortages. As with closed frameworks it would be useful to provide for use of these arrangements in emergency cases by entities not party to the original framework (especially since this can be publicised prior to new orders being placed and new suppliers can join at any time). Open frameworks are, however, less suitable than closed frameworks (made binding on suppliers) for ensuring security of supply, since suppliers with better options for selling elsewhere may decline to tender.92

C.  Supplier Lists The Model Law makes no provision for supplier lists, in the sense of lists of interested or qualified suppliers from which procuring entities can identify potential tenderers or contracting partners, other than providing for open frameworks

83 Model Law, Art 60(2)–(3). 84 Model Law, Art 60(4). 85 Art 61(2); and the Guide to Enactment (n 34) 263, recommends permanent on line invitations. 86 Model Law, Art 60(6). 87 Model Law, Art 60(7). 88 UNCITRAL (n 34) 286. 89 As stated in UNCITRAL (n 34) 292. 90 Model Law, Art 60(5). 91 UNCITRAL (n 34) 285. 92 An obligation to tender is not feasible since it is clearly not realistic to monitor the good faith of tenders submitted.

The Approach to Emergency Procurement in the UNCITRAL Model Law  35 (which are, effectively, (mandatory) lists of suppliers to be invited to compete). Lists can be of two types: mandatory, on which suppliers must register to be eligible for certain procurements, and optional, on which suppliers may choose to register to indicate their interest and/or have their qualifications assessed. Lists are sometimes used also as the sole method to publicise procurements, as in the EU utilities sector93 and as permitted for sub-central Government entities under the GPA.94 Other than open frameworks, the Model Law does not allow mandatory lists;95 nor may public solicitation requirements be met by advertising a list. There is also no provision for, or guidance on, optional lists. The latter are not prohibited and can thus be maintained to identify suppliers for direct solicitations – for example, for competitive negotiations and single-source procurement, as discussed in section V.A.iv below. However, in the absence of treatment in the Model Law there are no template provisions or guidance for using optional lists in a t­ransparent way – for example, requirements for advertising, continuous access, short time periods for evaluating applications and reasons for decisions. As the author has argued elsewhere,96 this is a gap. The Guide to Enactment97 suggests that lists are not provided for because the provisions on frameworks allow the benefits of lists without risks to transparency and competition. However, framework agreements clearly do not provide for all the relevant benefits – for example, access to interested and qualified suppliers for rapid competitive or single-source negotiations; or the possibility of assessing capabilities of suppliers of critical products outside the timeframe of specific award procedures where framework agreements are not appropriate, such as for non-standard products or services for which advance pricing is difficult and the nature of emergency needs unpredictable.98 Failing to provide for lists in certain respects reduces rather than enhances transparency and competition. Thus when using competitive negotiations or single-source procurement in the emergency context, selecting suppliers from lists to which there is (regulated) transparent and open access is often preferable to selection in other ways. The Model Law could encourage both use of lists in this context and their open and transparent operation, to enhance the outcome of procurements involving direct solicitation.

93 ch 3, section II.C.2. 94 ch 3, section III.B. 95 Art 9(4) of the Model Law prohibits entities from imposing any qualification ‘criterion, requirement or procedure’ other than those in Art 6, which does not refer to registration on a list. 96 Arrowsmith (n 7) 33–36; S Arrowsmith and C Nicholas, ‘The UNCITRAL Model Law on Procurement of Goods, Construction and Services: Past, Present and Future’ in S Arrowsmith (ed) Reform of the UNCITRAL Model Law on Procurement: Public Procurement Regulation for the 21st Century (Thomson Reuters/West, 2009) 60–70. 97 UNCITRAL (n 34) 254. For the history see Arrowsmith and Nicholas (ibid) 68–70. 98 In fact there is a fine line between a closed framework without a price (but where price is an important award criterion for call-offs) and a simple mandatory list, the latter being a more competitive approach since the number of potential suppliers has not been reduced.

36  Sue Arrowsmith

V.  Exceptional Methods for Urgency: Competitive Negotiations and Single-Source Procurement A.  Competitive Negotiations i. General As well as providing for framework agreements, the Model Law includes two main procurement methods that expressly contemplate urgency, namely competitive negotiations and single-source procurement. Competitive negotiations involves competition but is much less transparent in all four transparency dimensions than other competitive methods for major contracts, such that the Guide to Enactment considers it closer to single-source procurement than to other methods.99 Indeed, almost its sole function in the Model Law now – although not in earlier versions100 – is as a more competitive alternative to single-source procurement.101 It does not require a public solicitation but involves merely a flexible and expedited negotiation process with directly chosen suppliers. As elaborated below, the Model Law has now made this method the dominant urgency method,102 relegating single-source procurement to the exceptional circumstances of catastrophic events, and the procedural rules of competitive negotiations must be assessed from that perspective. This approach to urgency – with no public solicitation but requiring competing offers where possible – is seen also in some of our case-study countries, although none goes as far as the Model Law in clearly making this the only procedure for major urgent procurement absent a catastrophe. Thus competitive negotiations for emergencies are included in the Government Procurement Law of China, which was influenced by the 1994 Model Law, although the method’s importance in China is unclear because of the lack of clarity over its relationship with both the single-source method and a general derogation from the Law for urgency.103 A competitive approach for major procurements even when urgency justifies exemption from a public solicitation is also the general rule in Italy, although with possibility to depart from competition in exceptional cases.104 Perhaps surprisingly, a competitive negotiations-type method is not, on the other hand, provided by law in Nigeria for urgency, although Nigeria makes significant use of the Model Law,105 nor in Colombia.106 As chapter 3 explains, the EU and GPA systems do 99 eg UNCITRAL (n 34) 182 and 214. 100 Under the 1994 Model Law this method was available, in particular, when it was not feasible to formulate specifications. 101 It is otherwise only permitted for reasons of essential security interests: Art 30(4)(c). 102 UNCITRAL (n 34) 216, states, for example, that it is ‘the preferred alternative to single-source procurement in situations of urgency owing to a catastrophic event’. 103 ch 21, section III.A. 104 ch 14, section II.A. 105 ch 22, section III.B. 106 ch 18, section III.A.

The Approach to Emergency Procurement in the UNCITRAL Model Law  37 not provide for such a method explicitly and separately, although a competitive approach can be adopted within the methods of negotiated procedure without prior publication (EU) and limited tendering (GPA), either by law or in practice, and the approach of covered countries varies. For example, while, as just noted, a competitive approach to urgent cases is generally required by law in Italy, in the UK and Singapore entities’ choice on whether to use competition where no public solicitation is required is not legally constrained,107 although the UK has recently proposed measures to encourage competition in urgent cases, albeit not by recognising a separate method or involving a legal obligation to prefer a competitive approach.108 In general, as we discuss below, such a method can be a useful alternative to single-source procurement, as there will be many cases in which competition is possible, but there is no time for public solicitation and formal tendering; and this approach might be more widely used if more explicitly recognised as a separate method. The Model Law provides for this method on two grounds in emergencies: first, where there is extreme urgency (‘general urgency ground’) and – subject to less stringent conditions – where there is urgency owing to a catastrophic event.

ii.  Grounds for Use: General Urgency Ground The competitive negotiations method is available, first, where, under Model Law Art 30(4)(a): There is an urgent need for the subject matter of the procurement, and engaging in open-tendering proceedings or any other competitive method of procurement, because of the time involved in using those methods, would therefore be impractical, provided that the circumstances giving rise to the urgency were neither foreseeable by the procuring entity nor the result of dilatory conduct on its part.

Prior to 2011 the Model Law also provided for single-source procurement – as well as competitive negotiations – on general urgency grounds.109 However, it was concluded when adopting the 2011 Model Law that a competitive approach (whether through framework agreements, competitive negotiations or some other competitive method) is generally possible in urgent cases. It can be seen that this method is only ever permitted when it is ‘impractical’ to use other competitive methods. Further, Art 28(2) requires entities to select the method to accommodate the circumstances and, crucially, to ‘seek to maximize competition to the extent practicable’;110 thus there is a presumption in favour of the most competitive practical method. Thus the Model Law establishes a hierarchy



107 chs

15, section III.D and 20, section III. 15, section III.D.iv. 109 1994 Model Law, Art 22(1)(b). 110 UNCITRAL (n 34) 166 suggests that this refers to both choice of and conduct of procedures. 108 ch

38  Sue Arrowsmith below open tendering, in which competitive negotiations sits just above singlesource procurement, at least for higher-value procurements. Two initial, related, questions are, first, what constitutes urgency, and, secondly, what delay (and thus impact on the public interest), if any, to address urgency is an acceptable trade-off for a more competitive and transparent method. These questions appear to require consideration of the type, extent, imminence and likelihood of harm. It can be expected that (subject to timing of the need) states will treat certain circumstances as always urgent, such as an extensive threat to life or health; thus clearly urgency methods would be available for, for example, pandemic needs such as drugs, medical equipment, PPE and hospital buildings where stocks are insufficient. As to whether there are any types or degrees of harm that can never give rise to urgency, states may perhaps determine that differently according to their circumstances, including the weight given to transparency in the light of the extent of corruption or the values of the system, for example. Thus one state might consider that IT equipment needed by staff working at home on entertainment services (for example, through a state broadcasting entity) could never be urgent, as such a public service is not of an urgent nature, while others may take a different view. The second point is the extent of acceptable delay in meeting needs, as the price of more competitive and transparent procurement can be dealt with as an aspect of urgency or as an element of what is ‘practical’. The latter approach involves the same issues as in considering whether there are a priori limits on the concept of urgent needs, but through a balancing exercise on the facts, rather than ruling out certain situations from the scope of urgency altogether. Thus, a contract for IT connected with public entertainment could be considered urgent, but it could then be concluded that it is practical to use open tendering to acquire it since the delay would not be disproportionate given the nature of the interest affected. The Model Law, not being a legal instrument with a specific ‘correct’ interpretation, provides a framework that states can adapt to their own circumstances in this and other respects, using case law, guidance or explicit legislative provisions. Whether use of another method is ‘practical’ also depends, of course on, the details of that method, both those relating directly to time limits, such as time for tendering and whether there is a derogation from standstill requirements for urgency (which the Model Law allows on a case-by-case basis)111 and others. The more lengthy and complex the procedures the greater the potential for use of nontransparent urgency methods, highlighting that making ‘regular’ procurement methods less rigid can sometimes promote, rather than detract from, transparency overall, by facilitating their wider use. On time limits for tendering, the Model Law does not generally specify minima, but merely requires adequate time. For example, Art 14(2) provides generally that

111 Model

Law, Art 22(3).

The Approach to Emergency Procurement in the UNCITRAL Model Law  39 there should be ‘sufficient time’ to prepare and present submissions ‘taking into account the reasonable needs of the procuring entity’ which, as the Guide notes, can include the need for urgent acquisition.112 Thus where a state itself leaves the timescales flexible, an entity needs to consider whether it is more ‘suitable’, including more competitive, to use another competitive method with short time limits. It is, however, common for states to set exact minimum timescales (the EU and GPA systems both do this113) and the Guide suggests this.114 Such minimum periods could themselves, of course, identify urgency as one situation justifying departure from regular time periods, thus still prioritising formal tendering for urgency where feasible, as with the EU and GPA rules, which offer ‘accelerated’ versions of formal tendering.115 Apart from timescales, other regular tendering rules, especially those that are more country-specific and so not covered explicitly in the Model Law’s basic framework – for examples, those relating to institutional arrangements or socio-economic policies – may also usefully have in-built exceptions for urgent circumstances as, for example, in the US where the general rules allow entities to dispense with certain requirements in urgent cases.116 Interestingly, shortened forms of regular tendering have also been adopted as a specific response to the COVID-19 pandemic – for example, in Nigeria, where shortened bid periods, as well as other measures such as simplification of public advertising requirements, have been adopted under pre-existing regulations allowing the Bureau of Public Procurement to issue special rules for disasters (including pandemics);117 in Brazil, which adopted a special and considerably simplified procurement regime for pandemic-related competitive tendering;118 and in Italy, which adopted a range of simplification measures, including shorter timescales.119 This approach, reflects, in the last two cases, at least, the cumbersome nature of regular tendering rules, raising questions about the need for broader reform, as chapters 17 and 14 discuss. The time needed for formal tendering is also effectively shortened where states extend use of electronic means, as done in the pandemic with the objective of limiting personal contact as in, for example, Colombia.120 One further issue here is the scope of a contract that can be concluded by competitive negotiations, in particular whether it may extend to needs that could be procured in time using other methods but for which the contract terms would be less advantageous, for example because of lack of aggregation. This does not



112 See

eg, UNCITRAL (n 34) 246. 3, sections II.B and III.B. 114 UNCITRAL (n 34) 92. 115 ch 3, sections II.B and III.B. 116 ch 16, section III.A. 117 ch 22, section III.B. 118 ch.17, section III. 119 ch 14, section III passim. 120 ch 18, section III.B. 113 ch

40  Sue Arrowsmith seem to fit naturally with the wording of Art 30(4)(b) since there cannot be said to be an urgent need for the entire purchase, but only for imminent requirements, and judgments about this kind of matter are not easy to make or challenge. However, if a contract beyond immediate needs is necessary to secure future supply in times of shortage an extended procurement seems justified. Article 30(4)(a) subjects the general urgency ground also to conditions that circumstances giving rise to urgency were not foreseeable or the result of dilatory conduct – conditions that we will see in section V.A.iii below do not apply in the exceptional case of a catastrophe. Such conditions can both encourage good planning and prevent entities from delaying action deliberately to abuse use of exceptional methods. The foreseeability condition means that an entity is expected to plan for circumstances that it ought to anticipate in time to use other methods. This will bar use of competitive negotiations, in particular, where the entity identifies a need that requires a procurement but fails to act – for example, by failing to renew or retender in time a contract for drugs needed on an ongoing basis or failing to seek internal approvals in time to use open tendering. Where there is no such identified need, and thus no clear-cut administrative failure, applying the condition is more difficult, however, and here consideration of unusual events such as the COVID-19 pandemic can shed some light on how it might be approached. The possibility of some kind of pandemic can certainly be foreseen in the sense of being a known risk, but this alone seems insufficient to designate it as foreseeable given the underlying policies of encouraging planning and preventing abuse; from that perspective it is appropriate to apply the condition in the light of the reasonableness of making preparations. Thus factors such as the likelihood of the event, and thus relevant needs, and the precision with which exact needs can be predicted, seem relevant, as well as the importance of the needs, making it reasonable to address them even in the absence of certainty. The same applies in considering whether circumstances relating to the evolution of a pandemic are foreseeable. For example, while in a broad sense it is predictable that students in residence at public universities might be subject to local lockdowns necessitating a food delivery service, this does not necessarily make this foreseeable for present purposes, given the difficulty of predicting if, where and when such situations will occur. Further, dealing with future risks of this kind involves a significant element of governmental policy in allocating scarce resources, which seems ill-suited to close judicial scrutiny; there needs to be some caution over applying procurement law to overturn such policy decisions through a judgment that award procedures should have been launched to cover such future events. Obviously the intensity of intervention may differ according to countries’ circumstances, but the considerations above indicate that the COVID-19 pandemic and certain events in the aftermath may well be treated as unforeseeable and/or that a policy carve-out will be applied in review proceedings. Of course, the specific ‘catastrophe’ ground to which the foreseeability condition does not apply will cover many pandemic-related situations but perhaps not all, and these points may

The Approach to Emergency Procurement in the UNCITRAL Model Law  41 also be important for jurisdictions – such as the EU – that do not include a catastrophic events-type provision.121 It seems that rarely can an entity be considered ‘dilatory’ but also not to have foreseen the circumstances giving rise to urgency, but this is possible. Thus an entity might have delayed in procuring ventilators needed for a particular budgetary period so that its supplies are short even without regard to a pandemic; thus even if the pandemic itself is considered unforeseeable, the circumstances of urgency might be considered to result from dilatory conduct. A final point is that these conditions refer to the foresight and conduct of the procuring entity itself, apparently indicating that this method can be used even in the face of delay by other public entities, for example in giving approvals. In view, in particular, of the policy of encouraging sound planning, enacting states might want to implement and clarify a broader approach that precludes using competitive negotiations for any public sector delays directly related to the procurement process.

iii.  Grounds for Use: A Catastrophic Event The second urgency-related ground for competitive negotiations applies where, under Art 30(4)(b): Owing to a catastrophic event, there is an urgent need for the subject matter of the procurement, making it impractical to use open-tendering proceedings or any other competitive method of procurement because of the time involved in using those methods.

The fact that urgency is owing to a catastrophic event has two main consequences: first, that flexible methods are allowed without the conditions that the circumstances must have been neither foreseeable nor the result of dilatory conduct, and, second, that single-source procurement, as well as competitive negotiations, is possible. Both these consequences must be borne in mind when interpreting Art 30(4)(b). The first point means that competitive negotiations can be used without considering for each procurement whether the catastrophic event or its immediate consequences should have been foreseen and planned for – for example, by using open tendering to stockpile medical equipment in case of a pandemic. There are numerous, related, policy concerns that justify this approach. First, dispensing at a general level with some of the usual conditions reflects the reality that to a large extent planning is not feasible: events themselves might not be predictable with sufficient precision for this and there also will often be no reasonable opportunity to plan for needs in the aftermath because resources have been focused constantly on immediate needs. Secondly, and importantly,



121 See

ch 3, section II.E.iii and below.

42  Sue Arrowsmith the need to make judgments about appropriate procurement methods, along with fear of errors and/or of disruption from challenges, may deter swift and decisive action. Thirdly, applying governing conditions for every procurement may impose an excessive administrative burden, including through requirements to justify these explicitly in a period in which available resources are better employed dealing directly with the event. The uncertainty over how conditions apply exacerbates these problems. The above points are related in that if the usual conditions are, given the general circumstances, likely to be met – the first point – there is less justification for tolerating the disadvantages that result from applying them case-by-case. It is also relevant that such events are not engineered deliberately to avoid competition, although risk of abuse of the operation of exceptional methods remains. Finally, relying on general urgency rules for unusual events risks diluting governing conditions and other controls, such as information transparency, applicable in cases of ‘regular’ urgency – the ‘hard’ case that makes bad law. Important questions that still do arise in applying the catastrophe provision, however, apart from the existence of urgency already considered above are, first, whether a catastrophic event exists; secondly, whether the procurement has sufficient connection with the event; and, thirdly, whether a more competitive approach was practical. As to the first, an event will generally be ‘catastrophic’ if it has actual impact in the form of harm that is very serious and widespread; events often covered will include pandemics, natural disasters, such as floods or hurricanes, terrorist attacks, or significant explosions or the collapse of structures. However, there is obviously uncertainty around, in particular, extent of impact. While, at one extreme, an event, such as the COVID-19 pandemic, that overwhelms governmental capacity, distracting significantly from other activity, is clearly catastrophic, at the other end of the scale it is unclear what is sufficient, and whether scale is judged by reference to the responsible level of government and/or geographic concentration: for example, an event may be catastrophic in its impact on a local community and municipal capacity to cope but of limited broader significance. The Guide to Enactment provides little discussion of the concept, beyond indicating that it covers ‘natural disasters’.122 A pandemic is presumably covered when it has hit a country and resulted in widespread illness and death. However, a state enacting the Model Law using the exact wording of Art 30(4)(b) will encounter some problems and uncertainties. These include, first, whether the mere threat of arrival (locally or globally) of a pandemic is covered, and whether action to prevent an event from becoming a catastrophe can be justified. While neither scenario falls within the literal wording, it seems appropriate to extend the provision to such cases. Many national provisions, such as those in Nigeria and (in the area of defence procurement) the EU, cover such cases.123

122 UNCITRAL 123 chs

(n 34) 134. 22, section III.B and 3, section II.E.iii respectively.

The Approach to Emergency Procurement in the UNCITRAL Model Law  43 Another question is when urgency can be considered as ‘owing to’ the catastrophic event. Not all urgency resulting in some way from such an event can be considered as ‘owing to’ it; the urgency must be sufficiently proximate that policy considerations justify both competitive negotiations without the usual conditions and use of single-source procurement. The Guide to Enactment envisages that the ‘catastrophic event’ ground may apply not only in the immediate aftermath of a catastrophe for very immediate needs such as (in the context of a natural disaster) for ‘clean water, emergency food and shelter or immediate medical needs’ (when it may indeed be used to justify single-source procurement) but also for later needs, such as semi-permanent shelters.124 By contrast, if nine months after the COVID-19 pandemic hit, a university had additional IT needs because of an unexpectedly high number of students requiring remote learning, the needs might not sufficiently proximate to the pandemic, even when the pandemic was the reason for both the additional numbers (for example, because of limited job opportunities) and remote teaching approach; the general urgency ground (with its additional conditions) must thus then be invoked if competitive negotiations are to be used. Finally, Art 28(2) still applies; thus before using competition negotiations it is still necessary to consider whether open tendering or some other method with a public solicitation might be used. It seems also to follow from this, as the Guide points out, that ‘If there is an urgent need for one item of equipment and an anticipated need for several more of the same type, competitive negotiations can be used only for the item needed immediately’.125 Thus in a pandemic the catastrophic event ground can be used to purchase medical supplies for the period it takes to conduct open tendering and obtain delivery under the subsequent contract, but an open tender must be organised for other needs as soon as reasonably possible. The need to determine in individual cases the existence of a catastrophic event and to apply tests of proximity and use of other methods raises, to a greater or lesser degree, the same issues that arise in applying other conditions – deterrence or disruption to rapid action, administrative burdens and potential distortion of regular urgency rules – that has caused the Model Law to dispense with those conditions for catastrophic events. The regulatory response of our case-study countries to COVID-19 illustrates how, in the context of such crises, countries do in fact dispense with all or some of the usual conditions for using exceptional procurement methods, in a similar manner to the Model Law. Thus the national Governments of Colombia, Brazil, South Africa, China, Italy and Nigeria all adopted or applied extensive exceptional approaches which dispensed with all or some of the usual conditions for urgent procurement methods, with only Singapore and the UK,126 and to a large extent the US (where the main impact for procurement of a general declaration of



124 UNCITRAL

(n 34) 221–22. (n 34) 215. 126 chs 15, section III and 20, section III. 125 UNCITRAL

44  Sue Arrowsmith emergency was to raise thresholds for ‘simplified’ purchases127), relying on ‘regular’ urgency rules; and the UK has also proposed a change to add such specific ‘crisis’ rules for future events.128 This has been done either by providing in advance – specifically or through provision for emergency rule-making – for regular conditions to be disapplied, or by adopting special rules ad hoc. Often special provisions have been time-limited, although of varied duration. Thus in Colombia129 specific procurement Decrees (as of March 31 2021 scheduled to last until 31 May 2021) were authorised following a Presidential Declaration of Emergency providing, among other things, for single-source awards based on urgency for all purchases addressing the pandemic, and dispensing altogether with public procurement law for procuring medical equipment and PPE in international markets. In Brazil130 special procurement measures, the substance of which again remained in effect still in March 2021, were applied initially under special legislation of February 2020 (that in its original version even pre-dated by a few weeks a national Declaration of public catastrophe) and included, for example, a provision deeming that, for procurement addressing the public health emergency, certain conditions for using direct awards for reasons of urgency are met, including the existence of an emergency, need for prompt action and existence of a risk to safety. Similarly, in South Africa131 conditions for urgent procurement methods (including single-source procurement), including showing that competitive bids were impractical, were deemed by National Treasury instruction to apply automatically for purchases required to respond to the pandemic; but here the special measures expired on 1 September 2020. Italy also adopted a series of measures that included relaxing certain conditions for using methods without a public solicitation for categories of pandemic-related procurement, some of which applied still for procurements launched up to the end of December 2020.132 In India133 operation of procurement laws was largely suspended altogether in some states, particularly for specific entities with important pandemic responsibilities. In China134 also, even against a background in which the market-based procurement system played only a limited role, the Government invoked on a general basis an exemption from procurement law applicable for projects involving a natural disaster where tendering is not suitable; this limited obligations for pandemic procurement to certain requirements relating to record-keeping and monitoring, even though the regular procurement law does have specific provisions for emergency methods (single-source and competitive negotiation-type methods) on a case-by-case basis.

127 ch

16, section III.A. ch 15, section III.D.ii. 129 ch 18, section III.B. 130 ch 17, section III, in particular section III.B. 131 ch 22, section II.B.ii. 132 ch 14, section III passim. 133 ch 19, section III.B. 134 ch 21, section III.A. 128 See

The Approach to Emergency Procurement in the UNCITRAL Model Law  45 As we can see, many of these measures depended on a central declaration of crisis. In this respect it seems useful to provide in the Model Law, or at least the Guide, specifically for a rapid and legally binding declaration by a central authority that a catastrophe or threatened catastrophe exists, whether tied to an existing constitutional arrangement for such declarations or specific to procurement. (Any provision in the Model Law or Guide clearly needs to take into account different national structures.) Unlike judgements on other conditions for using emergency methods, such as whether tendering is impractical, this is not an issue specific to particular procurements that might warrant a case-by-case assessment. Such declarations should be time-limited, even if potentially renewable. The question might arise as to whether there should be an optional Model Law provision, or at least guidance, allowing emergency methods in case of a declared catastrophe even without the Model Law’s current conditions, namely urgency owing to the catastrophe and the impracticality of other methods. Any such provision would need to operate for a short time and include controls, such as regular review of the expiry time, encouragement to competition even if not legally required, and ex post review and the potential of an explicit provision to help ensure that, where such an approach is adopted, it is properly controlled is a further argument in its favour. Such a change would, however, involve potential costs, in terms of a possible loss of competition and transparency in specific procurements, and risk of abuse. Whether this provides the best balance of costs and benefits depends on all the circumstances, including the quality of existing procurement rules (recognising that the Model Law does not deal with every aspect of the system); certainly the need for dispensation from regular rules has been driven in some jurisdictions, such as Brazil, Italy and some Indian states, by the cumbersome nature of those rules, as the relevant chapters discuss.135 It may, however, be unwise to encourage such an approach, at least in any system with a reasonably expeditious procurement system, without clear evidence of its value. More information may become available to judge the value of different approaches once pandemic-related audits are complete. We can finally note that, even though the approach of dispensing with some of the regular urgency conditions at a general level has been applied in Italy, neither the EU and GPA systems (which apply to Italy) provide explicitly for this for civil procurement in a catastrophe. The extent to which such an approach is permitted under these systems is considered further in chapter 3, where it is suggested that this is, in fact, possible to some degree.136

iv.  The Rules on Conducting Competitive Negotiations While much less transparent and competitive than open tendering and the other main methods for major procurement, competitive negotiations at least offers

135 See 136 ch

respectively ch 17, section VIII; ch 14, section V; ch 19, section III.B. 3, section II.E.ii.

46  Sue Arrowsmith more competition and transparency than single-source procurement. In our context the relevant procedural rules, contained mainly in Art 51, aim to balance urgency with other considerations. Of course, with flexible methods particularly, as the Guide to Enactment emphasises, rules play only a limited role and factors such as the ‘institutional framework, measures of good governance, high standards of administration and highly-skilled procurement personnel’ and ex post audit are crucial.137 A major feature of the method is that no public solicitation is required, limiting delay, but merely negotiations with ‘a sufficient number of [suppliers] to ensure effective competition’.138 In its general guidance on direct solicitations the Guide indicates five suppliers as being generally an appropriate number to avoid collusion and abuse.139 However, urgency could justify a lower number, and it also seems relevant that negotiations are generally less open to collusion than formal tendering. The Model Law does not provide criteria for choosing participants, not even a requirement for a non-discriminatory approach (which applies to direct solicitations in restricted tendering).140 The Guide points, however, to its general guidance on choosing participants for direct solicitations.141 This refers, among other things, to rotation and random methods;142 but these seem relevant only in limited cases and where there is an identifiable ‘pool’ of suppliers, such as those on a supplier list. Lists are useful particularly where they provide relevant information, such as on past performance, to help select without delay. The fact that there might be unequal information on different suppliers, whether on a list or otherwise, resulting in preference for known suppliers, should not raise concerns of discrimination in the urgency context, and nor should the fact that proximity or language of suppliers may facilitate a rapid response; here urgency provides an objective justification for the relevant treatment.143 Thus a measure such as that adopted in Gansu province in China specifically favouring past suppliers with good records for emergency procurements, described in chapter 21,144 seems unobjectionable. Immediate availability to respond when contacted – first-come, first-served145 – also seems justifiable. It is perhaps to avoid potential legal debate about such matters that the obligation to use non-discriminatory criteria is (justifiably) omitted, since uncertainty can inhibit prompt action.

137 UNCITRAL (n 34) 186. 138 Model Law, Art 34(3). 139 UNCITRAL (n 34) 165. 140 Model Law, Art 34(1)(b). 141 UNCITRAL (n 34) 217. 142 UNCITRAL (n 34) 165. 143 Definitions of equal treatment generally allow differences in treatment that are objectively justified. See eg, ch 3 on EU law. 144 ch 21, section III.D. 145 Also suggested as a method in UNCITRAL (n 34) 169.

The Approach to Emergency Procurement in the UNCITRAL Model Law  47 The Model Law also includes no requirements for advance disclosure of criteria,146 nor any specific requirement to include in the record information on how participants were chosen. Given the difficulty of laying down positive rules on invitations to cover the many different circumstances of urgent events and the difficulty even of a nondiscrimination rule, not suggesting specific selection criteria seems a sound approach. However, a wholly unconstrained process raises the usual risks of unfettered discretion and some changes seem useful to mitigate these. First, some reasons for selection, such as personal or political gain, clearly should be considered unlawful; and persons with conflicts of interest should be prohibited from being involved in selection. Such rules will often exist under general administrative law, but could perhaps be made explicit or referred to in the Guide. Secondly, as explained, supplier lists can provide information to enhance both the quality and transparency of selection decisions, especially where the lists themselves are operated in a transparent and competitive manner. We suggested earlier that the Model Law should introduce explicit rules on lists, improving their use, inter alia, to identify and choose invitees for direct solicitations. Thirdly, as chapter 4 suggests147 for single-source procurement, national policies can usefully identify the types of criteria likely to be relevant in emergencies and general principles for assessment, including the need for proportionality (it may not be possible to conduct extensive assessments of foreign supply chains, for example); and this is relevnt also for competitive negotiations. This is something the UNCITRAL Guide to Enactment could further address. Finally, it would be useful to require procuring entities to articulate in the record any reasons and process behind their selection – for example, how the suppliers or potential pool were identified and what considerations influenced any choice (for example, known track record or response time to inquiries) – and to make this available immediately on request, or even proactively. This not only facilitates oversight and legal challenge, ensuring public trust, but helps ensure that decisions are made after proper consideration, improving their quality. Article 25 on records should be amended to include this explicitly and the obligation highlighted (like certain others) in Art 51. While Art 25(1)(w) listing information to be included does provide a ‘catch-all’ provision of ‘Other information required to be included in the record in accordance with the provisions of this Law or the procurement regulations’, which aims to ensure that all ‘significant’ decisions are recorded,148 that seems intended only for country-specific information (for example, local social policies); information of general relevance, as with the reasoning 146 UNCITRAL (n 34) 169, suggests that this is required in relation to restricted tendering as implicit on a non-discrimination requirement, but the Model Law does not actually state this and anyway this reasoning is not applicable to competitive negotiations. 147 ch 4, section II.B.ii. 148 UNCITRAL (n 34) 122.

48  Sue Arrowsmith behind supplier selection, should be listed specifically in Art 25. The importance of proper records of these decisions is illustrated by the UK’s experience in the COVID-19 pandemic where their absence for some contracts contributed to loss of public trust and suspicions of wrongdoing, and where inconsistency in approach to potential suppliers of PPE for single-source contracts might perhaps have been avoided by more careful articulation of the policy.149 As for the conduct of negotiations, the Model Law does not set a formal structure but merely requires equal treatment in providing information (Art 52(2)) and requires the process to conclude with best and final offers on all aspects of proposals (Art 51(3)), to provide an audit trail.150 There is no requirement for a single set of terms – bidders can use their own151 – nor even for offers to the same deadline or in writing, although the Guide suggests this.152 The Guide emphasises that in urgent situations negotiations might be of very short duration.153 The entity must select the offer that best meets its needs (Art 51(5)). It is not clear whether the Model Law’s usual rules on evaluation criteria apply, including advance formulation of the criteria and their disclosure.154 Arguably how appropriate this is depends on the degree of urgency and, as with selecting suppliers to negotiate, probably should not be required; indeed, imposing a formal approach might backfire by pushing entities towards single-sourcing. An enacting state might wish to clarify this point. As with selecting suppliers to negotiate, however, reasons for decisions are an important control, and here are required: the record must include the price and a summary of the other principal terms and conditions of each submission155 and a summary of the evaluation.156 However, while anyone may access certain parts of the record including, as explained later, the reasons for the choice of method, only participants can access the parts on evaluation.157 This can be criticised; there is a strong argument for allowing the whole of the record to be open to public scrutiny, at least for completed procedures. While the Guide158 suggests that the reason for different levels of access is to balance transparency and facilitation of challenge against confidentiality concerns this does not

149 ch 4 and ch 15, section III.D.4. 150 UNCITRAL (n 34) 219. 151 ibid. 152 ibid. 153 UNCITRAL (n 34) 218. 154 UNCITRAL (n 34) 218, states that ch 1 and ch 2 of the Model Law apply to competitive negotiations, which seems correct. This would include Art 11 on evaluation criteria. However, while Art 49(3) on request for proposals with dialogue states ‘The successful offer shall be the offer that best meets the needs … in accordance with the criteria and procedure for evaluating the proposals set out in the request for proposals’, Art 51(5) on competitive negotiations refers merely to ‘the offer that best meets the needs …’, perhaps indicating that other aspects of the evaluation rules do not apply. 155 Model Law, Art 25(1)(s). 156 Model Law, Art 25(1)(t). 157 Model Law, Art 25(3). 158 UNCITRAL (n 34) 123.

The Approach to Emergency Procurement in the UNCITRAL Model Law  49 provide a sound reason for withholding bid information from the public since confidentiality is most relevant for competitor access. With increasing acceptance of open government and proactive disclosure of procurement information159 there is no justification for retaining this limit. Indeed, the whole record should be made public without request, subject to narrowly defined limits to protect confidentiality and other interests. In the same way that the 2011 revisions provided for more stringent supplier review, as set out in chapter five, in the light of increasing acceptance of this approach globally, so the time now seems right for a broader approach to information transparency. Article 51(4) prohibits negotiations with respect to best and final offers. While this is in line with other Model Law methods that use the best and final offer approach,160 this formality is surprising given that in 2011 competitive negotiations were effectively confined to urgent procurement and procurement affected by security issues: in urgent cases negotiations might be useful to speed up resolution of problems, such as misunderstandings or errors in offers – which are also more likely to arise in rapid negotiations – even if negotiating improvements or amendments is prohibited. Given that this provision precedes Art 51(5), which then provides for selection of the best offer, it may not be intended to preclude at least discussion to resolve issues with the chosen bidder, and it might be useful to clarify this. Overall, the procedural rules of competitive negotiations are flexible, allowing a rapid process to respond to urgency. However, the rules are perhaps a little too strict in the blanket prohibition on negotiations after submission of offers and – if applicable – in imposing strict rules on formulating and disclosing evaluation criteria, perhaps a legacy of the much broader availability of competitive negotiations in the pre-2011 Model Law and less suitable for a method that is now mainly for urgent procurement. Unduly strict procedural requirements might backfire, leading to the use of single-source procurement rather than competitive negotiations with less competition and transparency. On the other hand, the requirements for ex ante justification of, and publication of reasons for, decisions are arguably insufficient to counterbalance the procedural flexibility.

B.  Single-Source Procurement The single-source method in the sense of a process in which a procuring entity negotiates with just one supplier is obviously the least competitive of all methods (although the competitive market may be referenced, in particular to inform pricing) and the least transparent, the latter not least because of the absence of competitors monitoring the process, making it particularly open to abuse.



159 ch

23.

160 Model

Law, Art 49(1); and see UNCITRAL (n 34) 219.

50  Sue Arrowsmith Assuming the competitive tendering model as the best one for achieving public procurement objectives, this method presents the most risk to those objectives, although the nature and degree of risk may vary considerably between jurisdictions. Its use is therefore very restricted in most jurisdictions. Not surprisingly, however, urgency is one reason for which its use is often allowed. This is reflected in the Model Law. However, one feature of the revised 2011 Model Law is that the scope of single-source procurement specifically for urgency is very narrow: it has been limited only to catastrophic events. Prior to 2011, the Model Law included a general urgency ground parallel to that discussed above for competitive negotiations.161 However, this was removed in 2011, the rationale being that some competition is always feasible and desirable in other urgent situations, whether through framework agreements, competitive negotiations (for major procurement) or (for smaller procurements) other competitive methods, such as request for quotations and restricted tendering. The catastrophic events ground for single-source procurement largely mirrors that for competitive negotiations. Thus Art 30(5)(b) allows the single-source method where ‘Owing to a catastrophic event, there is an extremely urgent need for the subject matter of the procurement, and engaging in any other method of procurement would be impractical because of the time involved in using those methods’; and the conditions in Art 28(2), including the obligation to maximise competition, also apply. By virtue of both the reference to other methods in Art 30(5)(b) and the Art 28(2(d) condition the ‘hierarchy of methods’ approach applies and competitive negotiations must thus considered for major procurement before resorting to single-source procurement. In the same way as competitive negotiations may generally be used only for needs arising while open tendering takes place, so single-source procurement can only generally be used for needs arising before competitive negotiations can be completed.162 The main difference in the grounds is that for single-source procurement under Art 30(5)(1)(b) the need must be ‘extremely urgent’ rather than just urgent. As well as reinforcing the emphasis on the immediacy of needs such that single-source procurement cannot be used when there is time for other methods, as the Guide to Enactment emphasises,163 this concept might also be interpreted as ruling out single-source procurement for certain types of needs – for example, to revert to a previous illustration, the purchase of IT equipment for public entertainment – or as allowing it only to protect certain narrow types of interests, such as life and health. The Guide’s examples of when single-sourcing may be appropriate all refer to needs in the immediate aftermath of a catastrophe and which affect life and health, such as for clean water, emergency food and shelter or immediate medical needs,164 suggesting that procurement for semi-permanent shelter might be done competitively.

161 1994

Model Law, Art 22(1)(b). (n 34) 222. 163 ibid 221–22. 164 UNCITRAL (n 34) 135 and 221–22. 162 UNCITRAL

The Approach to Emergency Procurement in the UNCITRAL Model Law  51 One potential issue in a crisis is the possibility for using the single-source method to secure delivery in the face of market shortages when, to secure essential needs, a procuring entity may need to contract immediately with any reliable supplier that has the subject matter available. The ‘catastrophic event’ ground seems to allow for this where there is an ‘extremely urgent’ need as, for example, with PPE or breathing equipment at the start of the COVID-19 pandemic: while whether use of other methods is ‘practical’ normally turns on whether using those methods would entail undue delay, the reason other methods are impractical could also be because they present a risk of losing a supply altogether. Where the catastrophic event ground does not apply, this situation might be addressed by invoking another ground for using the single-source method, applicable when, under Art 30(5)(a): The subject matter of the procurement is available only from a particular [supplier], or a particular [supplier] has exclusive rights in respect of the subject matter of the procurement, such that no reasonable alternative or substitute exists, and the use of any other procurement method would therefore not be possible.

This might cover market shortages at a specific time, not merely absence of competition in the market as a whole, although perhaps not drafted with the former scenario in mind. This could enable a procuring entity to obtain supplies in the face of competition from other public purchasers or from the private sector, including (although not limited to) cases of urgency. Of course, from the perspective of either a specific state or from a broader perspective, shortages are better addressed through a more holistic approach, with cooperation both in procurement and beyond, to develop supply and facilitate equitable distribution, both within and between jurisdictions. Some issues relating to this are the subject of chapters six, nine and 13. In practice, the regulatory frameworks of our case study countries have made single-source procurement very widely available in the COVID-19 pandemic. In discussing competitive negotiations in section V.A.iii above, we referred to the fact that Colombia, Brazil, South Africa, China, Italy and Nigeria all adopted or applied extensive exceptional approaches specifically for the pandemic, which generally extended to allowing use of single-source procurement with no or very limited conditions (often removing conditions that apply to its use for ‘regular’ urgent procurement); while the UK and Singapore both allowed use of the singlesource approach albeit in accordance (at least in theory) with the usual conditions governing use of direct solicitations for urgency, within their general direct solicitation methods, without any legal preference for competition. While data165 show wide use of procedures without a public solicitation, public data on how many procedures were conducted consulting only a single source, on the other hand, are limited where there is no separate competitive negotiations-type method, since



165 See,

in particular, ch 23, and also the data in chs 14 and 15.

52  Sue Arrowsmith often the data do not separate competitive and non-competitive approaches used within a direct solicitation method, such as the EU’s negotiated procedure without prior publication as used in the UK,166 or Singapore’s limited tendering method. Chapter 4 further discusses these important difficulties.167 It is clear that singlesource procurement was very extensively used in acquiring PPE and other medical supplies in the pandemic,168 however, although there the context of single-source procurement was unusual in that it was often not a question of choosing between suppliers but simply of identifying and using all reliable and available sources.169 The pandemic has, not surprisingly, then, thrown up some allegations of poor practice, poor value and failed procurements in single-source procurement, and abuse to favour certain suppliers.170 As already indicated above in discussing what conditions should be maintained for use of emergency methods, there is no easy solution to how the regulatory framework can provide the optimum balance of interests in the very difficult situation of a catastrophe and certainly the optimum degree of procedural flexibility will vary between jurisdictions. However, it does seem clear that measures to enhance information transparency, as discussed in section III.C below, are important to provide a counterweight to any flexibility given. Leaving aside emergencies, the main question arising is whether the Model Law’s approach of precluding single-source procurement altogether is appropriate. While a competitive approach is indeed possible in many urgent situations, and some countries – Italy being one example among our case studies171 – provide for a strong preference for some kind of competitive process, none of our case study countries go so far as totally precluding single-source procurement for urgency outside the catastrophe context. As chapter 3 explains, both the EU Directives and GPA allow it,172 and even countries that regulate procurement heavily, such as China, Nigeria, Brazil and Colombia,173 and which (as in the first of those two countries) use the Model Law,174 have not adopted the very restrictive approach of the 2011 Model Law. Similarly, the UK and Singapore175 limit constraints to those imposed by the applicable trade regimes, thus allowing entities a free choice between competitive and single-source approaches for general urgency (although, as noted, the UK has recently proposed reforms to encourage, but not require, a competitive approach176). 166 eg the aggregate data on that method in ch 15 do not reveal this. 167 Section II.E. 168 See eg, ch 4. 169 See, for example, the detailed account of the UK’s experience in chs 4 and 15. 170 See eg ch 15, section III passim; ch 18, section III.B; ch 17, section V; ch 22, section II.D.ii and section III.D.ii. 171 ch 14, section III.A. 172 ch 3, sections II.E.vii and III.B. 173 chs 21, section III, 22, section III.B, 17, section III.B and 18, section III.A. 174 Although these systems were adopted based on the 1994 Model Law which did allow wider use of single-source procurement for urgency. 175 chs 15, section III.D.iv and 20, section III.A. 176 ch 15, section III.D.iv.

The Approach to Emergency Procurement in the UNCITRAL Model Law  53 Clearly situations arise in which certain major work is urgently required – for example, shoring up an unsafe structure – with no time for competitive negotiations and for which it is not feasible to set up advance mechanisms (for example, because that type of work is very rarely needed). Prohibiting single-source procurement in these cases is perhaps motivated by a judgement that risk of abuse in other cases outweigh the benefits of flexibility. It is questionable, however, whether the Model Law provides the right balance of interests here for all states. A better approach, it is suggested, would be to include provision for single-source procurement for all ‘extreme’ urgency as an option for those states that wish to follow that approach. On the conduct of this method, Art 52 merely requires177 entities to solicit a proposal or price quotation from a single supplier and requires negotiations with the supplier ‘unless negotiations are not feasible in the circumstances of the procurement concerned’. The Guide178 suggests that where feasible and necessary the entity should request market data or cost clarifications to avoid unreasonable prices. Chapter 4 of this book179 addresses some practical issues on conducting negotiations, including whether to require a formal bid against a requirement; whether to require formal submission of a price prior to commencing negotiations; whether to compare price against other offers; and what should be entailed by a request for market data, determination of the reasonableness of a price, and cost clarifications. The most contentious issue in practice with single-source procurement with importance not just for ensuring timely and acceptable delivery and other elements of value for money, but also for integrity, is how to select the supplier with whom to negotiate. However, as with competitive negotiations, as discussed in section V.A.iv above, the Model Law does not provide guidance. We suggested there that detailed rules on permitted criteria are not appropriate but that expressly prohibiting certain abusive criteria, addressing supplier lists (a useful selection tool for direct solicitations) and highlighting better the need to articulate reasons in the record, as well as making reasons available immediately, would be helpful, and this applies also to single-source procurement. As indicated in V.A.iv above in relation to competitive negotiations, the Guide to Enactment could discuss identifing the types of criteria and principles of assessment likely to be relevant in emergencies. It can also be noted that the wording of Art 52, referring to ‘solicitation’ of proposals, perhaps assumes the traditional demand-led model of public procurement, the paradigm of which is competitive tendering; but unsolicited proposals can potentially play a role in emergencies, as chapter 4 discusses.180 Article 52 does not preclude this, however, since a proposal could be solicited from a supplier following an approach by that supplier.

177 Model

Law, Art 34(4). (n 34) 225. 179 ch 4, section II.B.iv. 180 ch 4, section II.A. 178 UNCITRAL

54  Sue Arrowsmith We consider below the controls over the initial decision to use the exceptional emergency methods. However, controls to assess the outcome are also important especially in procurements lacking any element of competition. As chapter 4 discusses,181 information requirements in records and reports could perhaps be better tailored to facilitate assessments of whether the procurement process contributed to achieving value for money.

C.  Controls Over the Decision to Use Competitive Negotiations or Single-Source Procurement Given the inherently limited transparency in any direct solicitation method, controls over the decision to use competitive negotiations or single-source procurement to support verification and enforcement are clearly important. (Controls over the conduct of these methods were considered in sections V.A.iv and V.B above.) This is significant mainly where the choice of method is left to entities on a case-by-case basis subject to specified conditions, as under the Model Law. However, even when emergency methods are authorised for broad classes of cases, as in the COVID-19 pandemic – which we suggested in section V.A.iii above may be in part to avoid the very problems arising from mechanisms to verify governing conditions in widespread emergencies – controls are still relevant to ensure that the procurement falls within the remaining limits of any authorising provision (which in our country case studies involved, at the least, a requirement that the procurement be one for addressing the pandemic). The Model Law refers to four main types of controls considered below: (a) hierarchical approval; (b) advance notices of direct solicitations – providing a degree of ex ante information; (c) record-keeping; and (d) award notices, offering ex post transparency. In general, ex ante measures – in particular, (and obviously) interventions such as approvals and standstill provisions to allow for scrutiny and enforcement – present particular difficulties in urgent cases, especially widespread emergencies involving an extraordinary strain on resources. Not surprisingly such requirements have thus been suspended or reduced in some countries for the pandemic, as elaborated below. On the other hand, there are many examples of the pandemic acting as a spur to improved information transparency, allowing monitoring of all aspects of the procedure, including its conduct and outcomes as well as its use, providing a counterbalance to the inherent lack of transparency and other problems with direct solicitation methods – for example, in our case studies in Brazil, Nigeria, some provinces in China, and South Africa,182 with the last requiring publication of full details of all COVID-19-related contracts, rather than just the limited information normally required.

181 ch

4, section II.C.ii. chs 17, 21 and ch 22 and the references to Lithuania and Paraguay in ch 23.

182 See

The Approach to Emergency Procurement in the UNCITRAL Model Law  55 First, then, use of certain procurement methods is sometimes subject to higher approval not only internally but also by some organ independent of the procuring entity, such as a Public Procurement Office or Finance Ministry. Approvals can both help prevent abuse and ensure sound legal and commercial decisions through intervention at a stage that allows correction with limited disruption. They can also enhance consistency in decision-making and assist capacity-building through the process of justification and feedback. The 1994 Model Law thus provided for hierarchical approvals as an option (although not expectation) for all methods other than open tendering, including competitive negotiations and single-source procurement on catastrophe and other urgency grounds.183 However, the 2011 Model Law now includes hierarchical approvals only for request for proposals with dialogue and for single-source procurement for promoting socio-economic benefits,184 the reasoning of the UNCITRAL Working Group being that approvals are detrimental to capacitybuilding by limiting opportunities for real decision-making and that their use was decreasing.185 However, the Guide to Enactment still includes advice on operating approvals,186 including preference for approval by a panel rather than individual to prevent abuse, and the need for transparency and speed. This may reflect a certain ambivalence over removing the provisions, and in practice states frequently still provide for approvals, even when implementing the 2011 Model Law.187 The merit of external approvals in urgent cases depends, however, on whether they operate sufficiently swiftly, perhaps more feasible for competitive negotiations than for the ‘extreme’ urgency of single-source procurement. In Nigeria, with a law based broadly on the 1994 Model Law, approvals are generally required from the Bureau of Public Procurement but do not apply where urgency is relied on, being replaced by ex post review by the Bureau, and accordingly have not been required in the pandemic.188 In China, under the Government Procurement Law based in part on the 1994 Model Law, approval requirements for single-sourcing do apply to urgent cases in general; however, they were not significant for the pandemic since, apart from limited use being made anyway of market-based procurement, a complete emergency derogation from the Law was invoked.189 Other countries, such as Brazil and Colombia,190 like Nigeria, also provide for ex post but no ex ante external review.

183 1994 Model Law, Art 19(2) and Art 22(1). 184 Model Law Art 30(2) and Art 30(5)(e). 185 UNCITRAL (n 34) 22–23. 186 ibid. 187 C Nicholas, ‘Experiences and challenges in using the UNCITRAL Model Law on Public Procurement 2011’ (Public Procurement: Global Revolution VII conference, University of Nottingham, 15–16 June 2015) 4–7 (on file with author). 188 ch 22. 189 ch 21. 190 chs 17 and 18.

56  Sue Arrowsmith Prior external approval of all emergency awards in a catastrophe seems unrealistic, even if confined to the limited issue of whether the procurement was related to the catastrophe, let alone when applied to other conditions such as practicality of other methods. However, an efficiently operated approval seem desirable in principle for general urgency cases and even in a catastrophe for certain awards, such as the largest ones, although what exactly is feasible and appropriate depends on country context. Thus it would be useful to restore a hierarchical approval provision to the Model Law at least as an option, supplemented by guidance, to encourage enacting states to consider the issue, including in an emergency context. Including provision for ex post review of use of these methods as in Nigeria, when the emergency nature of the situation justifies exemption from any usual ex ante approvals, would also be useful. Approvals are further discussed in chapter 4.191 A second type of control, which currently plays a only limited role in the emergency context under the Model Law, however, is an advance notice of direct solicitations. The Model Law’s starting point is an obligation under Art 34(5) to publish a notice (sometimes called an ex ante notice) giving information on, in particular, the method, subject matter, main terms and timescales of a procurement,192 prior to any direct solicitations made, including in competitive negotiations193 and single-source procurement.194 This facilitates scrutiny and challenge at an early stage195 and may also draw the procuring entity’s attention to additional suppliers for the current or future procurements196 (although suppliers have no legal right to be considered as they do with public solicitations). However, the obligation to publish an ex ante notices does not apply when the catastrophe or general urgency grounds are invoked.197 This prioritises speed over other value for money elements and other objectives, such as integrity, that are served by the notice – and even over the risk that abuse in the choice of method might itself prejudice delivery, for example, because of a corrupt award to an incompetent supplier. The costs of preparing and approving notices seem generally small in comparison with benefits. Further, a notice need not cause delay, especially under a rule nuanced to require publication merely as soon as possible, while potential disruption through challenge can be dealt with at the remedies stage, as chapter five discusses, thus at least preserving other monitoring functions of the notice. The position is at odds with the Guide to Enactment’s emphasis on the function of ex ante notices of preventing abuse of competitive negotiations, since the urgency



191 ch

4, section II.D. Law, Art 34(5). 193 Model Law, Art 34(5) and Art 51(1). 194 Model Law, Art 34(5) and Art 52. 195 Emphasised in UNCITRAL (n 34) eg 140, 164 and 217. 196 For this reason UNCITRAL (n 34) 161, suggests monitoring responses. 197 Model Law, Art 34(6). 192 Model

The Approach to Emergency Procurement in the UNCITRAL Model Law  57 exemption means the notice has almost no room to operate with competitive negotiations.198 A better balance might be achieved by requiring ex ante notices at least for general urgency, with publication in a catastrophe (where resources may be stretched) required merely as soon as possible. This would take account of different conditions in different states, including in electronic publication systems. Colombia requires ex ante notices for urgent needs using the emergency method (single-source) which, to the extent practicable, requires a list of contracts to be concluded, and this continued to be applied during the pandemic.199 Italy now also requires such notices200 and the UK proposes to introduce them, including for urgent cases but with a specifically nuanced approach to remedies in such cases.201 The information that the Model Law requires in ex ante notices also seems insufficient to facilitate challenge; and while the procurement record itself must contain more information on the reasons for the choice, as discussed below, this cannot be accessed until the procurement is complete. Arguably such information should either also be included in the notice or be made accessible when the notice is published (avoiding encumbering the notice, which is the reason the Guide to Enactment gives for not requiring this information there).202 On the other hand, requiring such detail might create undue delay because entities perceive the need for close internal review of wording to avoid legal challenges. In catastrophes, however, this burden is limited since the conditions governing use of direct solicitations are themselves limited, as discussed in section V.A.III. Thirdly, for all methods other than open tendering, Art 28(3) requires the procuring entity to include in the procurement record (required under Art 25) ‘a statement of the reasons and circumstances upon which it relied to justify the use of that method’.203 As well as providing transparency to safeguard against abuse204 or error and help ensure public trust, requiring visible justification in this way can enhance the quality (by requiring reflection) and monitoring of the commercial choices made. The reference to ‘reasons’ and ‘circumstances’ indicates that quite full reasoning is needed for each element. This seems to cover both general considerations (such as the nature of any catastrophe and the absence of sufficient time for other methods), and the factual situation and consequent need for the particular method, such as what interests would be prejudiced by delay from using a method (for example, that ventilators are needed for a hospital and that without using

198 Being relevant only for confidential procurement where, as the UNCITRAL (n 34) points out (131), publication might anyway be withheld on security grounds under Art 24. 199 ch 18. 200 ch 14. 201 ch 15. 202 UNCITRAL (n 34) 169. 203 Repeated in Model Law, Art 25(1)(e). 204 As emphasised in UNCITRAL (n 34) 218 and 122.

58  Sue Arrowsmith competitive negotiations or single-source procurement there may be an insufficient number available to meet estimated demand at a certain point in time). As already mentioned, the record is available only after completing the procedure (Art 25(3)), however, and we suggested in the section above that it should be made available earlier. Finally, Art 23 requires publication of an award notice ‘promptly’ after concluding the contract, giving information on the winner and price (Art 23(1)). This is quite limited information, which is characteristic of the traditional approach to information transparency of requiring publication only of specified information at specified times. The information required is also more limited than the EU Public Contracts Directive and GPA require; those instruments require also reference to the procurement method used and, where direct solicitation was involved, the circumstances justifying this.205 The Model Law does, as we have just seen, require ex ante notices of direct solicitations which may render such information in the award notice less necessary; however, even if that is the case for direct solicitations generally, this information is needed in award notices when there is an urgency-based exemption from ex ante notices. However, the use of electronic communications now facilitates much wider availability of information and, even maintaining the traditional piecemeal approach to information transparency, arguably much more extensive information should be made public on the justification for using different methods as well as the conduct of award procedures, by providing the full procurement record and contract where electronic tools allow this in the state concerned. Where they do not, publication of at least the justification for choice of method seems desirable, at least when there has been no ex ante notice. Further, while some systems still allow long periods for publication (30 and 72 days respectively in the EU Public Contracts Directive and GPA),206 others have much shorter periods: thus in Colombia contracts must be published electronically within three days of conclusion, even in emergencies. Where electronic systems are available, at least, it is difficult to justify such long time periods – although these might be needed in a crisis with significant strain on resources, especially where redactions are needed or information systems not fully geared up for such a situation, as with the UK’s pandemic experience.207 Again, a fully open contracting approach could facilitate more extensive and timely publication. How information on the justification for direct solicitations might be provided in a manner that gives sufficient detail and is also efficient in practice is considered further in chapter 4.208



205 ch

3, sections II.E.vi and III.B. 3, sections II.E.vi and III.B. 207 ch 15, section III.F. 208 ch 4, section II.C.2. 206 ch

The Approach to Emergency Procurement in the UNCITRAL Model Law  59

VI.  Modifications to Existing Contracts to Procure New Requirements As the OECD has highlighted in relation to the COVID-19 pandemic, using existing arrangements is generally preferable in emergencies to launching new single-source procedures.209 This is often not only more rapid but also helps ensure reliability, as the supplier has been assessed already. Apply existing contract terms can also help secure value for money (although this may not be possible where extensions require bilateral agreement). Framework agreements are a pre-planned application of this approach, but similar benefits can also often be obtained by ad hoc modifications to contracts that do not explicitly envisage further purchases. Control of modifications is a complex subject, important not just for meeting new needs in emergencies but also for adapting contracts to new circumstances (a subject discussed in Part 5). It is addressed in varying ways in different jurisdictions, often with both public and private law elements, the former more extensive in Civil Law than Common Law systems. Extensions can address urgent needs but, like single-source awards, present risks to value for money and of abuse to favour a specific supplier. Public interests also need to be balanced against the interests both of the current contracting partner – with an interest in, for example, fair compensation for extra work – and of other suppliers who may be prejudiced by extensions to current arrangements. As we will see in Part 5 of the book, modifications to existing contracts have been one way to meet pandemic-related needs. Rules that regulate modifications to prevent the tendering system from being undermined are often flexible, thus enabling entities to address urgent situations. Examples are the rules of the EU allowing certain modifications of up to 50 per cent of contract value to address unforeseeable situations210 and of South Africa, where extensions are not limited by law where given prior approval from the Treasury (and may also be made below certain limits without such approval).211 Parallel to the responses in the pandemic to tendering rules, the usual rules on modifications were also sometimes relaxed. For example, in Colombia, legislation removed altogether existing value limits for modifications for acquisitions related to ‘better management and mitigation of the emergency’212 while South Africa, for pandemic-related procurement of goods and non-construction services, initially removed the above approval requirement, although it reinstated it shortly afterwards but with higher limits and ultimately

209 OECD, ‘Public procurement and infrastructure governance: Initial policy responses to the coronavirus (Covid-19) crisis’ (30 July 2020), available at www.oecd.org/coronavirus/policy-responses/ public-procurement-and-infrastructure-governance-initial-policy-responses-to-the-coronaviruscovid-19-crisis-c0ab0a96. 210 ch 3, section II.D. 211 ch 22, section II.B.3. 212 ch 18, section III.B.

60  Sue Arrowsmith repealed the changes, considering the risks too great given the scope for varying agreed prices.213 The Model Law does not purport to address contract performance or implementation; thus it does not deal with modifications, providing no guidance – for emergency situations or otherwise – on how the balance of interests reflected in its tendering rules may be preserved from threats arising at the implementation stage. This is a difficult subject to address given the close connection with contract law and this is probably one reason why the Model Law has not dealt with this subject (nor also with the impact of tendering violations on concluded contracts, discussed in chapter five214). Given the current blank canvas, close consideration of how or whether this might be done is beyond the scope of this chapter. However, two observations are pertinent. One is that it seems possible for UNCITRAL to address this without touching on contractual aspects, by including rules limiting agreed (that is, bilateral as opposed to unilateral) amendments to prevent the tendering rules being undermined but leaving states to deal with other aspects of modifications, as the EU rules have done.215 The second is that – as with tendering rules – consideration of urgent situations should be built into modification rules to avoid the need for suspending or changing these rules in an ad hoc way to address emergencies. In this regard, there is a need to integrate the rules on single-source awards and contract extensions, which are closely related, and to ensure that there is consistency of controls – for example, as regards ex ante notices and justifications (although, as we discuss further in the context of the EU in chapter 3, more substantive flexibility can perhaps be justified for extensions than for single-source awards216).

VII. Conclusions This chapter’s assessment of the Model Law as a template for urgent procurement assumes a public sector procurement model of transparency and competition and also the traditional piecemeal approach to information transparency under that model, rather than an open contracting approach; while UNCITRAL can have a role in encouraging open contracting it seems too early for the Model Law itself to provide for it. Any assessment must also take into account the needs of a variety of jurisdictions. We also need to bear in mind that a model of this kind cannot offer any ‘solution’ to the problem of procuring in the face of global shortages. Finally, the role in the overall framework of the remedies system, addressed in chapter five, must not be forgotten.



213 ch

22, section II.B.3. 5, section II.F. 215 See ch 5, section II.F. 216 ch 3, section II.D. 214 ch

The Approach to Emergency Procurement in the UNCITRAL Model Law  61 Against this background, it is submitted that the Model Law largely offers a sound framework for regulating major procurements in an emergency. First, since 2011 it has provided for framework agreements, which are particularly useful for securing both speed and transparency and competition. These were used by many countries to some degree, and sometimes extended, in the COVID-19 pandemic, and it is to be hoped that the pandemic will give impetus to their creation for future urgent needs. The Model Law also provides two specific methods for major emergency procurement, competitive negotiations and single-source procurement (‘emergency methods’). The former offers a useful approach that countries might have used more widely in the pandemic in preference to single-sourcing had this method been recognised explicitly in their legislation. While the procedural requirements of this method are quite limited, this seems a justified and balanced approach, especially since this ‘light’ approach facilitates its use; adding more procedural burdens might push procuring entities towards single-source procurement instead or (where that is not available) cause delay. However, drawing on, among other things, other international models and country experiences in the pandemic, this chapter makes several recommendations. These are not one-directional: some propose more flexibility to facilitate more rapid responses, although possibly at some limited cost to transparency and competition; others enhance transparency, with no or limited costs; while yet others can enhance both speed and transparency and competition. First, the chapter suggested tweaking rules on framework agreements to facilitate their use in urgent cases, on grounds parallel to those justifying use of emergency methods, by entities not originally party to the framework, even if not normally permitted, an approach that proved valuable in several countries in the pandemic. While from one perspective this might seem to reduce transparency, in fact it may have the opposite effect, reflecting the point above that leveraging current arrangements is often better than the alternatives. Secondly, the chapter proposed certain adjustments to the grounds for emergency methods. The first group of these would enhance flexibility and/or certainty in serious emergencies, by extending the ‘catastrophic event’ ground to a threatened as well as actual catastrophe (the COVID-19 pandemic illustrating the need for this); and by introducing a system of declarations of catastrophe, invoked by many countries in the pandemic to provide certainty in using emergency methods. The chapter also mooted an optional provision, or at least guidance, deeming certain conditions for using the catastrophe provision to be met for a specified and timelimited period, which was a common approach during the pandemic (although it is probably too early to assess the costs and benefits of that approach). In addition, the chapter suggested that provision for general urgency is too limited in the 2011 Model Law and that a provision should be restored, at least on an optional basis, for use of single-source procurement for extreme urgency outside the catastrophe context. A third subject for consideration is controls over use of emergency ­methods. These are an essential counterbalance to the inherently limited transparency and competition of the methods themselves, and could be enhanced to improve

62  Sue Arrowsmith verification and enforcement. Here it was suggested that restoring a hierarchical approval provision as an option for states would be helpful to encourage them to address this issue, including whether approval is advisable for certain major contracts even in an emergency, and also that provision should be made for ex post review when urgency precludes any usual ex ante approvals. Secondly, the chapter proposed extending the ex ante notice requirement for direct solicitations to urgent procurement, with publication in a catastrophe required merely as soon as possible, however; and, related to this, that reasons stated in the record for using emergency methods should be available electronically at the time of this notice, to the extent practicable in the light of use of electronic means in the state concerned. Finally, it was suggested that, again where electronic tools makes this feasible, more (and more rapid) information should be published as a matter of course, post-award, including – if not published earlier – the reasons for using emergency methods. On conduct of emergency methods, we suggested that, to further facilitate its use in preference to single-sourcing, even more flexibility than at present might be warranted for competitive negotiations, both by removing a blanket prohibition on post-offer negotiations and by clarifying that strict rules on formulating and disclosing of evaluation criteria do not apply, sufficient control being provided by articulating in the record the approach used. This should be counterbalanced, however, by proactive public disclosure of this part of the record. For both the emergency methods improvements were also suggested to the process of selecting participants, which is almost wholly unregulated. Thus, while, as explained, specifying substantive criteria is inappropriate, it may be useful to make explicit that decisions based on personal or political considerations are prohibited and provide guidance on the types of criteria that are appropriate. Further, entities should be required to articulate ex post in the record any reasons and process behind their choice of criteria and again to make this part of the record available immediately, on request, or even proactively. In addition, provisions, or at least guidance, to encourage use of (transparently operated) supplier lists in identifying and selecting suppliers could enhance both speed and reliability of suppliers where framework agreements are not appropriate, such as for non-standard products or services for which advance pricing is difficult and the exact nature of emergency needs unpredictable. Finally, we suggested briefly that rules on contract modifications are needed to prevent the rules on award procedures being undermined, a major gap in the Model Law which it seems possible to fill without touching unduly on the contractual aspects that are difficult to address in this kind of international model. These proposed revisions are not major in the overall context of the Model Law, and stem in part from the fact that the rules on public information dimensions of transparency are not sufficiently adapted to development of electronic means; thus they are perhaps matters to look at in future reforms, rather than demanding immediate attention. Overall, the Model Law provides a sound template for the emergency context and, taken with the additional points proposed, offers a valuable source of reference for any state now taking stock of the suitability of its procurement system to respond to emergencies.

3 Recommendations for Urgent Procurement in the EU Directives and GPA: COVID-19 and Beyond SUE ARROWSMITH

I. Introduction This chapter assesses the rules on urgent procurement of the influential European Union (EU) procurement Directives and Agreement on Government Procurement (GPA) of the World Trade Organization (WTO). It addresses urgent procurement in its broadest sense, covering both crisis events and other urgent situations, in the light of the questions thrown up by the COVID-19 pandemic. The chapter concludes that these international frameworks are reasonably suitable for balancing the interests involved in urgent procurement. However, the chapter also highlights some important areas for development. While some early analysis anticipates the debate on the pandemic’s lessons as being broadly between treating procurement rules as an obstacle that need removing to allow better procurement and promoting more regulation to prevent ‘bad’ procurement,1 our analysis advocates a nuanced approach. Thus, like chapter 2 on the UNCITRAL Model Law, it makes recommendations in both directions. It also suggests there is a need to acknowledge the special circumstances of crisis events both to deal appropriately with crisis situations and to prevent the ‘regular’ urgency provisions from being watered down. More specifically, the chapter’s key recommendations for the EU include, on the one hand, introducing broader exceptions to public tendering for crisis situations and allowing national rules to designate categories of procurement as urgent at the expense of a case-by-case approach and, on the other hand, enhanced information transparency, including mandatory ex ante notices, open contracting and an expansive interpretation of justification provisions, which will not create an 1 A Sanchez-Graells, ‘Procurement and Commissioning during COVID-19: reflections and (early) lessons’ (October 2020), section 2.5, available at papers.ssrn.com/sol3/papers.cfm?abstract_id=3709746.

64  Sue Arrowsmith undue burden in cases of crisis if accompanied by the other proposed reforms. The chapter also recommends some changes – such as allowing additional entities to use existing framework agreements in emergencies and reduced timescales for call-offs from dynamic purchasing systems – that will enhance both flexibility and competition and transparency, and are suitable for both crisis and non-crisis situations. For the GPA we suggest similarly nuanced reforms, although less extensive, reflecting, on the one hand, the GPA’s existing greater flexibility and, on the other hand, its more diverse application which entails a more cautious approach to additional burdens. At the risk of over-simplification, the main themes of our proposed reforms are a slight shift towards flexibility in procedure accompanied by a significant shift towards greater information transparency, together with recognition that widespread emergencies do warrant bespoke regulatory provisions.

II.  The EU A.  Introduction to the EU Regulatory Framework The EU regulates major procurements (those considered of most interest to cross-border trade)2 through Directives, mainly to open markets to trade.3 The Directives apply to all 27 Member States as well as influencing some other ­countries (particularly through trade agreements) and underpin the law of two of our case studies, Italy and the United Kingdom (UK). This chapter focuses on the Public Contracts Directive 2014/24/EU4 (‘the Public Contracts Directive’ or ‘the Directive’), which regulates most major public contracts. The Directives require implementation through domestic hard law enforceable by suppliers5 (as discussed in chapter five). They do not, however, fully harmonise procurement law, and Member States may adopt further rules. Some states, such as Italy, have traditionally regulated procurement by detailed, hard law and – as chapter 14 illustrates – maintain numerous hard law rules supplementing the Directives. A different approach is that of the UK, which traditionally regulated entities’ discretion only to a limited extent and, even where it did so, did this 2 This chapter does not consider contracts below the Directives’ thresholds. 3 See further S Arrowsmith, ‘The Purpose of the EU Public Procurement Directives: Ends, Means, and the Implications for National Regulatory Space for Commercial and Horizontal Procurement Policies’ (2011–12) 14 Cambridge Yearbook of European Legal Studies 1; P Kunzlik, ‘Neoliberalism and the European Public Procurement Regime’ (2012–13) 15 Cambridge Yearbook of European Legal Studies 283. 4 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC, OJ 2014 No L94/65. 5 As in other chapters, ‘supplier’ refers here to a party that is, or may be, interested in procurement contracts (of any type) or already has a contract (broadly equivalent to ‘economic operator’ as defined in Public Contracts Directive, Art 2(1)(10)).

Recommendations for Urgent Procurement in the EU Directives and GPA  65 mainly through soft law. The UK still continues that tradition so far as possible, so that there is limited hard law on procurement beyond the Directives, which themselves are largely just copied into national law. As chapters 14 and 15 explain, these different approaches are illustrated by these countries’ emergency procurement rules, with the UK offering entities the full flexibility of the Directive while Italy regulates emergency procurement in much more detail. Hard law is generally difficult to amend, particularly in the EU with its 27 Member States. As the country studies in Part 5 of this book show, however, many countries amended their procurement laws rapidly in the COVID-19 pandemic, often under special emergency provisions. At EU level, on the other hand, no amendments were made, or were feasible, and the European Commission merely published – on 1 April 2020, long after most of our case-study countries had amended their laws – brief guidance to ‘explain’ the rules, concluding that they provided ‘all necessary flexibility’.6 The UK did not amend its law – which already provided the full flexibility of EU law itself – but Italy not only curtailed some of its ‘additional’ national rules, such as on guarantees and advance payments, to enhance flexibility but also legislated over how EU rules were to operate, including deeming the existence of conditions for using emergency procedures in certain cases.7 The Italian response raises interesting questions over both whether EU law offers sufficient flexibility and over the division of regulatory space between the EU, national regulators and individual procuring entities, which we examine in section II.E.ii below.

B.  Competitive Tendering with a Public Solicitation, Including Accelerated Procedures for Urgency The Public Contracts Directive generally requires contracts to be awarded by one of two methods with a public solicitation, the open procedure (open tendering without pre-qualification) or restricted procedure, a procedure that is ‘open’ in that there is a public solicitation and all interested parties must be considered but which allows for pre-qualification and also allows a shortlisting process before invitations are issued.8 The Directive also includes more flexible methods with public solicitation (competitive procedure with negotiation, competitive dialogue and innovation partnership) for specific cases.9 Exceptional methods for urgency are recognised through the negotiated procedure without prior publication, discussed in section II.E below. However, as with the urgency methods of the UNCITRAL Model Law on Public Procurement 2011, 6 European Commission Guidance on using the public procurement framework in the emergency situation related to the COVID-19 crisis [2020] OJ C108I/1, para 1. 7 ch 14, section III. 8 Public Contracts Directive, Arts 27, 28 and 65. 9 Public Contracts Directive, Arts 26, 29, 30 and 31.

66  Sue Arrowsmith discussed in chapter 2, these apply only when it is not possible to use other methods and here a key factor is the nature of those other methods. Here, EU law is interesting in providing for ‘accelerated procedures’ where urgency renders the normal minimum timescales ‘impracticable’: for an open procedure the entity need allow only 15 days for tenders (Art 27(3) and for a restricted procedure and competitive procedure with negotiation 15 days to respond to the notice and 10 for tenders (Art 28(6) and Art 29(1)) plus, in all cases, the normal 10-day standstill before award.10 The Directive further requires that in fixing time limits for tenders entities take account of all circumstances, in particular, the complexities of the contract and time required for drawing up tenders.11 While, unlike in the Model Law, there is no specific reference to the ‘needs’ of the entity that could include urgent delivery, clearly the reference to ‘all’ the circumstances covers this. As Kotsonis highlights12 procedures cannot, however, be completed within the above number of days because of time needed for, for example, preparation and evaluation. (In Case C-318/94, Germany argued in relation to a dredging contract that experience showed that 14 days was needed to process applications, five days to view the site and 28 days to process tenders, totalling 72 days – although Advocate-General Elmer concluded that Germany had not proved that the 55 days available was insufficient.13) Clearly this limits the value of accelerated tendering in serious emergencies. Unsurprisingly, use of accelerated procedures in the COVID-19 pandemic for medical and emergency products14 was negligible, accounting for just 66 out of 575,724 procedures for such products during 2020.15 However, the shorter time periods may still facilitate public tendering in some contexts. For use of accelerated procedures, the Directive merely requires ‘urgency’ that renders the usual timescales ‘impracticable’; conditions governing use of procedures without prior publication on urgency grounds (discussed in section II.E), such as unforeseeability, do not apply, as recital 46 confirms. The strict interpretation governing the grounds for using the negotiated procedure (see section II.E) also seems inapplicable, since timescales are a detail of public tendering, not a derogation from it. The definition of ‘urgency’ here raises similar issues to those discussed in chapter 2 in relation to the Model Law and to those relevant in defining ‘extreme urgency’ for the EU procedure without prior publication (see section II.E), requiring consideration of the nature, extent and likelihood of harm from any delay.

10 Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts, OJ (1989) No L395/33 (‘Remedies Directive’), Art 2(3). 11 Public Contracts Directive, Art 47(1); and see also Arts 47(2)–(3). 12 T Kotsonis, ‘EU procurement legislation in the time of Covid-19: fit for purpose?’ (2020) 29 Public Procurement Law Review 199, 200. 13 Opinion of 8 February 1996, Commission v Germany, Case C-318/94, ECLI:EU:C:1996:41, at [30]. 14 Items covered by Common Procurement Vocabulary (CPV) codes 45215142, 33631600, 33191000, 33192120, 33157000, 39330000, 35113400, 33157110, 33157400, 33694000, 33141420, 33195110, 33670000, 18143000, 18424300. 15 Data from the EU’s Official Journal, from research undertaken for ch 23 and further reported there (where accelerated procedures are not, however identified, given their low numbers).

Recommendations for Urgent Procurement in the EU Directives and GPA  67 Consistently with the discussion in section II.E below, it is submitted that any type of harm may give rise to ‘urgency’, but that the extent and risk of harm are ­important. Internal deadlines unrelated to objective circumstances are not relevant, even when leading to sanctions and imposed as a result of popular pressure;16 thus hitting an announced target for distributing furlough payments, for example, could not alone justify an accelerated procedure. Conversely there is a subjective element to urgency as well as an objective threshold to meet, in that delay may indicate lack of urgency17 on the basis – it is submitted – that it may evidence a policy decision of the procuring that the matter is of limited importance. In line with the approach discussed in chapter 2,18 determining whether standard timescales are ‘impracticable’ will, it is suggested, involve balancing the exact need with the impact of the extra delay from standard timescales, including19 in the context of the overall timescale for the project. If a Member State provides generally for longer timescales than the minimum, it cannot use accelerated procedures if it would be practical to conduct a procedure using the Directive’s minimum, which needs to be considered when designing national timescales. It arguably follows from this that if other national provisions – for example, on evaluation – make complying with the Directive’s standard timescales impracticable, accelerated timescales are only available if national requirements are proportionate. This throws into sharp relief the need to avoid red tape that hinders efficient procurement in normal times but is intolerable in an emergency. Another issue is whether an entity must launch a standard-length procedure while awaiting any confirmations, such as funding approval, to avoid needing an accelerated procedure. In this context, in Case C-107/92 the ECJ concluded that the entity should not have waited for expected funding approval before commencing a standard-length procedure,20 but in Case C-318/94 stated in a different context that objections by an approving authority can be foreseen,21 which might suggest that waiting would be reasonable, to avoid wasting resources on a potentially redundant procedure. The appropriate approach, it is submitted, which is not inconsistent with this jurisprudence given the different facts, is to consider what is reasonable in each case, balancing the interests of competition and transparency against the need to avoid wasting resources, the likelihood of approval being one factor. Recital 80 to the Directive suggests that introduction of accelerated open procedures in 2014 means that procedures without prior publication are now needed only in ‘exceptional’ situations’, such as where ‘natural catastrophes require 16 Judgment of 2 June 2005, Commission v Greece, Case C-394/02, EU:C:2005:336, para 42 (in the context of a procedure without prior publication). 17 In Judgment of 2 June 2005, Commission v Greece, Case C-394/02, EU:C:2005:336, para 44. Judgment of 15 October 2009, Commission v Germany, Case C-275/08, EU:C:2009:362, para 71. 18 ch 2, section V.A.ii. 19 Order of 27 September 1988, Commission v Italy, Case 194/88 R, EU:C:1988:462, para 17. 20 Case C-107/92, Commission v Spain; and see also Advocate-General Geelhoed in Case C-126/03 ECLI:EU:C:2004:391 at [39] of the Opinion. 21 Judgment of 28 March 1996, Commission v Germany, Case C-318/94, EU:C: 1996:149, para 18.

68  Sue Arrowsmith immediate action’. While a parallel might be seen with the Model Law’s competitive negotiations method, which is also a rapid competitive method intended to reduce reliance on single sourcing, the position is actually very different because in the EU public solicitation is required. In reality, the recital seems misleading. Nevertheless, accelerated procedure will sometimes facilitate formal tendering when entities might otherwise use procedures without prior publication. Accelerated procedures are relevant when procedures without prior publication are unavailable because governing conditions are not met, such as where the procuring entity has delayed (see section II.E). By definition, this involves unacceptable delay in meeting extremely urgent needs. In practice, if the entity prioritises the urgent needs above legal compliance, these conflicting interests will be balanced through the remedies system where, as chapter five highlights, EU rules seek to ensure some sanctions even if the procurement itself is allowed to proceed.22 ‘Reasons for use’ of an accelerated process must be stated in any contract notice,23 providing public visibility, and ‘duly substantiated’,24 clarifying the need for explanation and documentation in the records required by Art 84 of the Directive. As with other justifications for departing from tendering, discussed in section II.E, the detail required is unclear but, as there, it is submitted that the importance of information transparency and the ease of this in the electronic age require an expansive interpretation. Considering whether Member States must make accelerated procedures available is beyond the scope of this chapter. It is important to note, however, that since a procedure without publication cannot be used when an entity could have conducted an accelerated procedure regardless of whether national law provides for such procedures (see section II.E) clearly it is desirable to allow them, as both the UK and Italy do.25

C.  Advance Mechanisms: Framework Agreements, Dynamic Purchasing Systems and Qualification Systems i.  Framework Agreements and Dynamic Purchasing Systems Chapter 2 explained that the UNCITRAL Model Law provides for two types of advance arrangements that can help with urgent purchasing, labelled ‘closed’ and ‘open’ framework agreements.26 The Directive – which in its earlier form substantially influenced the Model Law’s approach – similarly provides for, first,



22 See,

in particular, ch 5, section II.F. Contracts Directive, Annex V Part C, point 12. 24 Public Contacts Directive, Art 27(3) and Art 28(6). 25 ch 14, section III.A; ch 15, section III.C. 26 ch 2, section IV. 23 Public

Recommendations for Urgent Procurement in the EU Directives and GPA  69 a mechanism that it calls a framework agreement, corresponding closely with the Model Law’s ‘closed’ framework concept; and, secondly, the ‘dynamic purchasing system’, which equates substantially to the Model Law’s ‘open’ framework agreement. For historical reasons27 framework agreements – a concept used henceforth in this chapter in the EU sense, unless otherwise indicated – have been much more important in practice than dynamic purchasing systems but, since certain obstacles to their use were removed in 2014, the importance of the latter has grown (across the EU from 199 notices in 2014 to 522 in 2018 as of 10 November 2018).28 Nevertheless, framework agreements remain much more significant, and their potential importance for maintaining transparent and competitive procurement in a crisis is illustrated by the fact more than a third of initial (to 31 July 2020) pandemic-related purchasing by the UK Government was through (competitively awarded) frameworks, with the rest mainly through the procedure without prior publication.29 Their importance is enhanced by strict rules on valuation and aggregation that operate to bring multiple small purchases, including of different entities, above the Directives’ thresholds when undertaken through framework agreements.30 Framework agreements are available for all types of procurement and without conditions, and thus can be set up specifically for future urgency or simply used when urgent purchases are required – although subject to any limits stated in the agreement on issues such as call-offs without a second-stage competition (mini-tender), time limits for mini-tenders, or use of urgent delivery as an award criterion, which makes advance planning for urgency desirable. As under the Model Law, they are tendered using regular procurement methods (Art 33(1)) and orders then placed (in frameworks with multiple suppliers) based either solely on the tenders submitted for admission to the framework or after a mini-tender inviting all capable suppliers (Art 33(4)). Both approaches may be used in the same framework (Art 33(4)(b)); thus a framework can provide for call-offs without a mini-tender for urgency even if a mini-tender is otherwise used. (Notably, almost all of the pandemic-related call-offs referred to above in the UK were without a mini-tender.) Even mini-tenders can provide a very rapid process, however, since there is no minimum tendering period, but merely a requirement for the period to be ‘sufficiently long’ to take account of various factors (Art 33(5)(b)); and there is no notification and standstill requirement.31 Unlike the Model Law, the Directive does not specifically refer to varying the weighting of award criteria but, as the author has previously argued,32 variation from the first stage and between call-offs 27 See S Arrowsmith, The Law of Public and Utilities Procurement, 3rd edn, vol 2 (Sweet & Maxwell, 2018) 19-99-19-101. 28 Data from searches of the Official Journal of the European Union. 29 ch 15, section III.A. 30 For detail see S Arrowsmith, The Law of Public and Utilities Procurement, 3rd edn, vol 1 (Sweet & Maxwell, 2014) 11-18-11-19. 31 Remedies Directive, Art 2b(c). 32 eg Arrowsmith, The Law of Public and Utilities Procurement vol 1 (2014) 11-78-11-79.

70  Sue Arrowsmith appears permissible within narrow limits, enabling delivery speed to be prioritised for urgent call-offs. Awards above the Directive’s thresholds by mini-tender (although not those without a mini-tender) are at risk of ineffectiveness without a voluntary notification and standstill being applied;33 but in urgent cases this at least raises the possibility of proceeding rapidly, with urgency being considered at the remedies stage where the award is unlawful (where there is a possibility of replacing the usual ineffectiveness requirements with other sanctions for public interest reasons).34 As chapter 2 explained, multiple-supplier frameworks can be useful for security of supply as well as speed, especially if an obligation to supply any orders (perhaps up to a certain amount) is placed on suppliers (in practice relevant only for orders without a mini-tender, which can succeed only if suppliers are willing to tender). Security of supply is facilitated by the fact that the procuring entity can use any ‘objective’ criteria to place to direct orders (Art 33(4)(a)) allowing splitting of work between framework suppliers even when all do not offer equally advantageous terms. The Directive states explicitly (Art 33(2)) that frameworks can only be used by entities ‘clearly identified’ in the public solicitation, precluding extension to other entities even in emergencies and with the agreement of the suppliers (although user entities need not actually agree to use the framework agreement at the time of its award and conclusion,35 giving some flexibility). As with the Model Law, provision for use of existing frameworks by additional entities in emergencies might, however, be useful36 as preferable to procedures without prior publication. In this regard, extension of quantities is already permitted in accordance with flexible rules on modifications discussed in section II.D below. A final point which is a general one but potentially important for widespread emergencies raising issues of public trust, as with the COVID-19 pandemic, is that, as the present author has long emphasised,37 the rules do not provide for sufficient information transparency for call-offs, particularly those without a minitender, which have no visibility (no notification and standstill, as noted, and no requirement for award notices), and also, as noted above, no potential ineffectiveness. So long as the piecemeal approach to information transparency continues, this needs specific review. Dynamic purchasing systems (DPS), similar to the Model Law’s open framework agreement concept, must be publicly and continuously advertised and open 33 Remedies Directive, Art 2b(c) and Art 2d(1)(c). 34 Remedies Directive, Art 2(d)(3) and Art 2e. 35 Public Contracts Directive, Art 33(2); Judgment of 19 December 2018, Autorita Garante della Concurrenza e del Mercato – Antitrust and Coopservice Soc. coop. arl v Azienda Socio-Sanitaria Territoriale della Vallecamonica – Sebino (ASST), Case C-216/17, EU:C:2018:1034. 36 ch 2, section IV.B. 37 S Arrowsmith, ‘Methods for purchasing on-going requirements: the system of framework agreements and dynamic purchasing systems under the EC Directives and UK procurement regulations’ in S Arrowsmith (ed), Public Procurement Regulation in the 21st Century: Reform of the UNCITRAL Model Law on Procurement (West, 2009) ch 3.

Recommendations for Urgent Procurement in the EU Directives and GPA  71 continuously to all qualified suppliers, and all those registered must be permitted to tender for each order.38 Their use is, however, limited to ‘commonly used purchases the characteristics of which, as generally available on the market, meet the requirements of the contracting authorities’ (Art 34(1)). This is not logical for a market opening instrument; if DPS can usefully be used more widely (as, for example, in more complex markets with small supplier numbers) it is appropriate to encourage this, including to reduce the need for procedures without prior publication in urgent situations. DPS require a minimum of only 10 days for tenders (Art 34(2)(b)) and subcentral entities can reduce this further by agreement with participants (Art 28(4)). However, there is no general provision to allow the 10-day period to be reduced for urgency. The previous Directive 2004/24/EU did not specify any minimum period and, as with framework agreements, generally permitting a shorter time period for urgent cases could surely provide a better balance of interests, potentially reducing use of procedures without publication (although in practice entities can use DPS with shorter periods when operating procedures without prior publication, to which no timescales apply). A more radical approach that the author has proposed more broadly, and which would be of particular value in urgent cases, would be to allow suppliers to adjust their offers at any time and for procuring entities to access those offers without specifically inviting tenders for call-offs.39 Again, notification and standstill obligations do not apply to call-offs. However, a reasonable degree of verification and enforcement is still provided for through the same rules as apply to above-threshold mini-tenders under framework agreements40 (outlined above), and through an obligation to publish award notices. The latter be grouped41 to limit the administrative burden, which is useful in urgent situations.

ii.  Qualification Systems (Supplier Lists) Chapter 2 outlined the value of different types of supplier lists.42 Here the position under the Public Contracts Directive is the same as under the Model Law in that participation in procurement cannot normally be limited solely to suppliers who are registered when the procurement is launched43 (DPS being an exception). However, the Utilities Directive, subject to extensive safeguards, allows for such mandatory lists, which it refers to as ‘qualification systems’.44 A notice of the list 38 See Public Contracts Directive, Art 34 for all details. 39 eg S Arrowsmith, ‘Reimagining public procurement law after Brexit: seven core principles for reform and their practical implementation Part 2’, Working Paper (2020) section 5.3.3.3, available at ssrn.com/abstract=3672421. 40 See Arrowsmith, The Law of Public and Utilities Procurement vol 2 (2018) 28-288-28-291. 41 Public Contracts Directive, Art 50(3). 42 ch 2, section IV.C. 43 Judgment of 17 November 1993, Commission v Spain, Case C-71/92, EU:C:1993:890. 44 See generally Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC, OJ 2014 No L94/243 (‘Utilities Directive’), Art 77.

72  Sue Arrowsmith may also be used to call for competition (Art 44(4)(b)), meaning that no further public solicitation is required for procurements covered by the list, and that participation can (indeed must) be limited to those on the list (Art 77(5)). Among many advantages, qualification systems provide an excellent mechanism for rapidly identifying and selecting suppliers and awarding contracts in urgent cases, as with DPS, which, as explained, are simply a particularly competitive type of supplier list; the distinction is that a different balance of interests is provided by allowing the procuring entity to invite only a limited number of qualified suppliers, rather than all of them as with a DPS. The effective minimum time for tendering is 10 days, and even this can be shortened by agreement.45 While involving some compromise to transparency and, in particular, competition, especially since suppliers may not bother to register without the prospect of a specific advertised contract, this mechanism does offer significant advantages for procurements in which it is not practical to invite all potential suppliers, including when this would cause delay. This is particularly relevant for procurements requiring discussion, as with software development or PPE in the pandemic. This is not the place for detailed consideration of the arguments for allowing use of qualification systems more generally (which the author favours), but even if that is not generally accepted consideration could be given to allowing their wider use specifically for preparing for emergencies. This would be especially useful if – as the author has argued applies under the present Utilities Directive46 – entities can limit admission to a smaller number of suppliers than meet minimum competence levels (effectively a process of reduction of numbers through a list) to facilitate partnerships that could, for example, involve joint investment in research and development or a commitment to switch production if needed. This provides an intermediate tool between a simple supplier list and a framework agreement for when it is not possible to formulate terms sufficiently to establish a framework agreement. However, such an approach might not be attractive to suppliers if limited to emergency procurements. The GPA also imposes some constraints, since EU procedures for GPA-covered contracts must be operated in a GPA-compliant manner. Thus while the GPA does allow all entities to limit participation to those on a list47 it does not allow central/federal authorities to use a notice of a list to call for competition;48 these authorities must publish a notice advertising each individual procurement,49 giving time to respond,50 including to obtain registration, and thus limiting the value of such lists for urgent procurement. These provisions also cast doubt on the



45 Utilities

Directive, Art 46(2) and 47(2). (n 27) 17-236-17-237. 47 GPA, Arts XI.7 and IX.11. 48 GPA, Art IX.12. 49 GPA, Art VII.1. 50 GPA, Art IX.11. 46 Arrowsmith

Recommendations for Urgent Procurement in the EU Directives and GPA  73 possibility of using DPSs, as discussed in section III below, where it is suggested that this issue requires reconsideration under the GPA. Where qualification systems exist in the sense of the Directive they can, of course, used be in practice to identify suppliers for procedures without publication, bringing some transparency to that process, and are especially useful where they provide information on past performance.

D.  Contract Modifications and New Awards to Existing Partners As chapter 2 noted, extending existing contracts or concluding new, similar, arrangements with existing contracting partners is often the best option in terms of speed, reliability and value in an emergency. The Directive specifically addresses these situations. On modifications, it allows these in principle but limits their scope to reduce the risk of modifications being used to undermine the tendering rules (although unlike many national laws the Directive, in view of its limited objectives, does not deal with protection of the supplier – for example against unilateral changes). Additionally, the Directive explicitly allows certain new work to be awarded to a contracting partner by way of derogation from the usual tendering rules. Placing work with an existing supplier to meet urgent needs may be permitted within these rules. Contract amendments and extensions were used in the UK, for example, for around six per cent of the most immediate pandemic-related procurement (March–July 2020).51 Through modifications, as well as work covered by clear, precise and unconditional review clauses52 the Directive generally53 permits procurement of: (a) further needs of up to 10 per cent of contract value for supplies and service and 15 per cent for works, where the extra work by itself is below the Directive’s thresholds54 (‘small changes’ provision); and (b) other needs which would not have affected the award if included in the original contract and do not amount to a ‘considerable’ extension.55 These provisions can be used, for example, to buy additional items, such as PPE, of the same type on the same terms. In addition, for needs brought about by circumstances which a diligent contracting authority could not foresee56 repeated modifications are allowed,57 each of up to 50 per cent of the contact value. This effectively allows significant extensions to deal with unforeseeable urgency. 51 ch 15, section III.A. 52 Public Contracts Directive, Art 72(1)(a); and see also Art 72(1)(b), applying in certain cases where issues of inter-operability or inter-changeability apply. 53 Where the overall nature of the contract is not changed: Public Contracts Directive, Arts 72(2) and 72(1)(c)(ii). 54 Public Contracts Directive, Art 72(2). 55 Public Contracts Directive, Art 72(1)(e) and Art 72(4). 56 Public Contracts Directive, Art 72(1)(c). 57 Provided not aimed at circumventing the Directive.

74  Sue Arrowsmith It is unclear how far the conditions for using this last provision parallel those of the extreme urgency ground for the negotiated procedure without prior publication. However, it is submitted that the modification provision is broader. For example, that provision seems to be concerned with what was foreseeable – and thus should have been provided for – when the contract was made, so that dilatory conduct when the emergency arises does not preclude its use. There is also no requirement for ‘extreme urgency’ but merely a ‘need’, and no requirement to prefer new award procedures above this option. It is possible at a stretch to interpret the provision exactly in line with the extreme urgency ground for new awards, in particular by interpreting ‘need’ to embrace the same governing conditions, or based on proportionality. However, it is logical to permit a more flexible approach with existing suppliers for reasons of urgency (as well as allowing flexibility to deal with other types of adjustments, such as adapting contract terms to new circumstances, for which this provision is also designed): extensions in unanticipated circumstances to contracts already awarded (usually competitively) are less likely to involve abuse to favour national suppliers, and detract from competition to a much lesser extent than wholly new contracts, particularly if terms are controlled by the proportionality principle, as suggested below. As regards contract terms, in general extensions that do not maintain the ‘economic balance’ of the contract, such as where higher prices are provided for, are prohibited as substantial modifications, even if their material scope is otherwise non-substantial.58 The Directive’s explicit wording does not, however, apply this limit to the small changes or unforeseeable circumstances provisions. However, any changes to terms that significantly favour the supplier are probably precluded by the proportionality principle, which limits changes to the economic balance to those justified by the circumstances.59 There are also possibilities for placing work specifically with existing suppliers through a new procedure without prior publication. This applies under Art 32(3)(b) for up to three years’ additional deliveries of supplies as a partial replacement or extension of existing supplies or installations to avoid acquiring supplies with different technical characteristics resulting in incompatibility or disproportionate technical difficulties in operation and maintenance; and under Art 32(5) for repeat works and services within three years of the contract where flagged up in advance – a condition making this of limited relevance for emergencies unless bringing the work forward might assist. As section II.F below elaborates, new awards – to an existing supplier or otherwise – using the negotiated procedure without prior publication require justification of reasons in an award notice and record and it is logical, in principle, to apply the same information transparency to work awarded through major contract extensions. This has been done to an extent by requiring a modification



58 Public

Contracts Directive, Art 72(4)(b). (n 30) 6-297 and 6-300.

59 Arrowsmith

Recommendations for Urgent Procurement in the EU Directives and GPA  75 notice for modifications made for unforeseeable circumstances,60 which includes a description of the procurement before and after modification, any price increase, and a ‘description of the circumstances’ making modification necessary.61 In the context of urgency, as with award notices for new contracts awarded without prior publication as discussed in section II.F, it is unclear whether all elements of the relevant legal test (existence of need, unforeseeabilty, etc) must be covered, and what level of detail is required. However, given the common objectives, it is submitted that the information required parallels that in an award notice even though the language – ‘circumstances’ rather than ‘justification’ – differs. Obligations relating to reports for new contracts do not, on the other hand, appear to apply to modifications.62 From this perspective, treating some extensions as permitted modifications and others as new contracts is somewhat arbitrary. An open contracting regime spanning all procurement phases would not only provide a more comprehensive approach but also encourage consistency across phases. Section II.F suggests introducing a mandatory ex ante public notice for all directly solicited new contracts and that, also, seems appropriate for modifications. Finally, it is logical also to apply not only the same controls but also the same protections for modifications as for new contracts. For the latter entities may publish a Voluntary Ex ante (VEAT) Notice followed by a 10-day standstill before award, providing an opportunity for challenge, to avoid any post-contract sanctions regime – including ineffectiveness.63 It is not clear that this applies to modifications since the rules refer to ‘contracts’. Given the purpose of the mechanism it is submitted that ‘contract’ must be construed broadly to cover all allocation of new work above the thresholds; but explicit legislation on this is desirable.

E.  Use of the Negotiated Procedure without Prior Publication based on Extreme Urgency i. Introduction As with other systems, the Directive, not surprisingly, provides a very flexible procedure for urgent situations, called the negotiated procedure without prior publication. Like other EU procurement methods, this can encompass more than one approach and gives scope for national methods equating both to the Model Law’s competitive negotiations method and to its single-source method,64 among others. 60 Public Contracts Directive, Art 72(1) (also applying to modifications under Art 72(1)(b)). 61 Public Contracts Directive, Annex VG. 62 The heading to Art 84 on the report is ‘Individual reports on procedures for the award of contracts’ [emphasis added], there is no reference to modifications in the compulsory list of information, and Art 84(2) requiring (apparently contemporaneous) documentation refers simply to ‘to the progress of all procurement procedures’ and gives examples only of decisions in the award phase. 63 Remedies Directive, Art 2d(4). 64 ch 2, section V.

76  Sue Arrowsmith Several grounds for using this negotiated procedure without prior publication, set out in Art 32, are relevant for urgency, the most important being a specific ‘extreme urgency’ ground in Art 32(2)(c). This is similar to the Model Law’s general urgency ground for using competitive negotiations. However, under the Directive this ground gives access not just to competition by direct solicitation but also to single-source procurement, which the Model Law allows only for catastrophic events. To that extent, the Directive give more flexibility in dealing with urgency in general. On the other hand, the Directive arguably provides less flexibility than the Model Law for crises, because of restrictive conditions around this general ground combined with the absence of an explicit provision to dispense with them in cases of catastrophe, such as is found in the Model Law.65 There is limited jurisprudence on Art 32 and the Commission’s April 2020 guidance is extremely limited, leaving considerable uncertainty. This is compounded by a principle of interpretation that, as a derogation from general rules, Art 32 must be strictly interpreted.66 The EU’s approach to interpreting derogations of prima facie prioritising the open markets over other national interests seems questionable – and the WTO notably adopts a more balanced approach to comparable issues (see section III) – but even with the strict interpretation principle, it is submitted that the impact of each particular interpretation must be assessed after looking at the extent and risk of damage to the internal market, on the one hand, and other national interests on the other, and to favour EU interests only in cases of doubt or, at least, where there is no disproportionate damage to other interests. In addition, the burden of proof that Art 32 grounds apply is on the party invoking them.67 While this merely requires putting forward evidence for the other party to refute, such evidence must be quite detailed.68 The governing conditions for Art 32, designed to deter abuse, mean that in some cases extremely urgent needs cannot be met without a delay for public tendering, and a procuring entity then faces a dilemma. If it decides to act quickly and risk a legal violation, the way in which the conflicting interests involved are resolved will depend on the approach of the remedies system, an issue discussed in chapter five. In practice, the negotiated procedure without prior publication has been ­extensively used in the pandemic accounting, for example, for well over half of the value of pandemic-related procurement of the UK Government up to 31 July 202069 and across the EU being used for well over half of medical and emergency supplies in 2020.70 65 ch 2, section V.A.iii. 66 eg judgment of 10 March 1987, Commission v Italy, Case 199/85, EU:C:1987:115 para 14; judgment of 17 November 1993, Commission v Spain, Case C-71/92, EU:C:1993:890, para 36. 67 eg judgment of 10 March 1987, Commission v Italy, Case 199/85, EU:C:1987:115 para 14; judgment of 17 November 1993, Commission v Spain, Case C-71/92, EU:C:1993:890, para 16. 68 Judgment of 14 September 2004, Commission v Italy, Case C-385/02, EU:C:2004:522, para 22. 69 See ch 15, section III.A. 70 See ch 23, section III.

Recommendations for Urgent Procurement in the EU Directives and GPA  77

ii.  Grounds for Use: General Urgency Article 32(2)(c) allows use of this method: [I]n so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority.

This involves several conditions similar to those of the Model Law’s general urgency ground.71 While the Model Law’s conditions can be viewed as focused on both incentivising sound planning and preventing abuse,72 including for corrupt purposes, in the light of the Directive’s main goal of opening markets, the primary focus of the conditions in Art 32(2)(c) can be seen as preventing national favouritism, deliberate or otherwise, to ensure competition73 (although such conditions in Member States may have other, ‘national’, aims). (a) Extreme urgency: This method is, first, available, only for ‘extreme urgency’ (rather than simply ‘urgency’ as for accelerated procedures). This, it is submitted, requires consideration of the type, extent, imminence and risk of harm. As to type of harm, potential impact on health and safety or property may suffice.74 Thus in Case C-328/92, Advocate General Lenz stated that purchasing medicines immediately required in a pharmacy is covered.75 Any suggestion that interests covered are limited to those protected by explicit derogations from TFEU free movement rules (such as life and health)76 should, however, be rejected (especially if the Treaty derogations separately allow emergency procurement to protect these interests without the Art 32(2)(b) conditions, as discussed in section II.E.iv). This is supported by Advocate Elmer in Case C-318/94, who concluded that avoiding 3,500 job losses (economic interests) could suffice.77 On the other hand, he indicated that enabling firms to fulfil contractual commitments (here, by delivering a ship on time) would not per se suffice as not in keeping with an exception applying

71 ch 2, section V.A.ii. 72 ch 2, section V.A.ii. 73 Opinion of 29 April 2004, Commission v Italy, Case C-385/02, EU:C:2004:276, para 30. 74 Opinion of 12 May 1993, Commission v Spain, Case C-107/92, EU:C:1993:180, para 7. 75 Opinion of 8 March 1994, Commission v Spain, Case C-328/92, EU:C:1994:88, para 42. And see also Opinion of 2 June 2005, Commission v Italy, Case C-525/03, EU:C:2005:343, para 61 stating that ‘widespread outbreaks of forest fires may be reasons of extreme urgency giving rise to a need for the acquisition of firefighting services and equipment if they are not already sufficiently available’. 76 TFEU, Arts 36, 52 and 62. 77 Opinion of 8 February 1996, Commission v Germany, Case C-318/94, EU:C: 1996:41, para 19.

78  Sue Arrowsmith only when strictly necessary.78 As for other interests, extreme urgency was invoked in Case C-24/9179 concerning construction of a university building to avoid overcrowding, and Case C-275/08,80 in relation to replacing software for registering motor vehicles to avoid technical problems leading to outages; but the ECJ did not clearly address the ‘type of harm’ issue in either case. It is submitted, in fact, that any legitimate public interest that is significant in extent is potentially covered and that whether it is ‘extreme’ is determined solely by extent of harm – more relevant for economic interests than life, for example; its imminence; and its likelihood. As for imminence and likelihood of harm, it is submitted that these factors do not preclude extreme urgency being invoked to justify immediate procurements undertaken to safeguard future needs in times of shortage (or projected shortage), as with PPE and ventilators at the start of the COVID-19 pandemic. It is suggested, also, that Member States enjoy a margin of discretion in policy decisions dealing with risk, including to avoid a risk that has just come to light – for example, to stockpile material to deal with a new virus of unknown impact or to undertake work to avoid the possible collapse of a bridge. Where objective circumstances have just created or revealed a risk, where that risk exceeds a certain threshold as to make action plausible, and where a Member State acts immediately so as to be indicative of a good faith, the balance of interests tilts heavily towards allowing use of the urgency procedure, including because the low possibility for abuse to create an opportunity to favour national firms. The governing conditions discussed below are, it is submitted, the main tool against abuse. Thus the objective risk/harm threshold should not be unreasonably high, even given the p ­ rinciple of strict interpretation, as argued in section II.E i. The factor of likelihood of harm was raised from this perspective in Case C-107/92,81 in which the Commission contested Italy’s reliance on extreme urgency for constructing an avalanche barrier, since the last avalanche had been in 1975. The ECJ did not need to consider this in view of the entity’s dilatory conduct (relevant to the attributability condition, discussed later below) – illustrating the role of the governing conditions. Had a procedure been launched immediately the risk came to light, however, it is submitted that use of the urgency procedure might have been justified. As already explained at II.B above, self-imposed deadlines are, however, irrelevant whereas, conversely, delay can indicate absence of urgency as well as being relevant to the attributability condition.



78 Opinion

of 8 February 1996, Commission v Germany, Case C-318/94, EU:C: 1996:41, para 18. of 18 March 1992, Commission v Spain, Case C-24/91, EU:C:1992:134. 80 Judgment of 15 October 2009, Commission v Germany, Case C-275/08, EU:C:2009:362. 81 Judgment of 2 August 1993, Commission v Spain, Case C-107/92, EU:C:1993:344. 79 Judgment

Recommendations for Urgent Procurement in the EU Directives and GPA  79 (b) Relationship with other procurement methods: As indicated, Art 32(2(c) can also be used only when ‘the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with’. This requires, as case law confirms, that it is not possible to use accelerated procedures82 (and this will be so whether or not national law provides for accelerated procedures).83 The wording is not as clear as it could be in referring simply to ‘time limits’ since those procedures involve stages, such as evaluation, that do not have specific time limits; but its clear meaning is that the negotiated procedure can be used when it is not possible to conduct procedures taking account of the relevant time limits, and indeed Advocate General Elmer in Case C-318/94 explicitly approached this question by considering the overall time needed.84 Both the Model Law85 and GPA86 are more clearly worded in this respect. As also discussed in the context of use of accelerated procedures (discussed in section II.B) the relevant time limits are the minima in the Directive itself, not national law, even though the wording is not as explicit on this as with accelerated procedures, referring only to ‘the time limits’ rather than to the Directives directly. This interpretation is consistent with the approach to accelerated procedures, supported by the strict interpretation principle, and sound policy. Further, again as with use of accelerated procedures,87 other proportionate national rules must be taken into account. As also discussed in relation to accelerated procedures, whether an entity must launch a regular procedure in advance of relevant approvals, to avoid using an ‘urgency’ method, should depend on the facts of each case.88 If an accelerated open procedure is unsuitable – for example, because the entity might be overwhelmed by unsuitable suppliers – it is submitted that the relevant time limits for judging availability of the urgency method without prior publication are those of the accelerated restricted or competitive negotiation procedure since an entity cannot be expected to use an unsuitable procedure. In these circumstances there may be time for a competitive process within the procedure without prior publication, although we suggest below that this is optional (see section II.E.vi). Reliance on Art 32(2)(b) is not possible if existing framework agreements or DPSs can be used. As with the Model Law,89 the question might arise as to whether failure to establish such mechanisms for emergencies might also 82 eg judgment of 18 March 1992, Commission v Spain, Case C-24/91, EU:C:1992:134; judgment of 2 August 1993, Commission v Spain, Case C-107/92, EU:C:1993:344. 83 See section II.B. 84 Opinion of 8 February 1996, Commission v Germany, Case C-318/94, EU:C: 1996:41, para 30. 85 ch 2, section V.A.ii. 86 GPA Art XIII.1(d). 87 See section II.B. 88 See section II.B. 89 ch 2, section IV.A.

80  Sue Arrowsmith preclude such reliance. It is submitted that in fact consideration of whether the urgency could have been avoided by advance planning is a matter only for other conditions included explicitly for this purpose, as discussed below, and that whether other procedures could be used is to be judged when the procurement commences, so that it is not necessary to consider whether the entity should have put advance mechanisms in place. Further, the condition of unforeseeability, it is suggested, will not generally operate to require such advance planning because of the margin of commercial discretion involved, as discussed below. Presumably an entity ‘can’ always use other procurement methods when those methods allow the subject matter to be obtained in time to avoid any risk of harm. In other cases, the impact of any delay from using other methods arguably is relevant in determining whether other procedures ‘can’ be used such that even when there is ‘extreme urgency’ a further short delay might be warranted to allow use of methods with a public solicitation. However, the way in which different interests are balanced through this condition does not seem to have been addressed by the ECJ, other than (as section II.B noted) to indicate that delay will be assessed in the context of overall timescales for the work. As with all urgency methods, the further in time from the onset of a crisis event, the less likely is this method without publication to be available, since there will have been time to plan for other methods. However, in the COVID-19 pandemic, uncertainty over its spread and the periodic lockdowns in Europe, plus overall pressure on public resources, means that planning and launching procedures for longer terms needs may have been difficult, although possibly mitigated by setting up framework agreements after the pandemic started. Again, however, it is submitted that whether the time limits for other methods can be complied with is to be judged when the procurement commences, with delay being examined just under the specific ‘attributability’ condition, as discussed later below. As explained in section II.B above, Recital 80 suggests that the accelerated open procedure means that a procedure without publication is needed only in ‘exceptional’ situations’ such as where ‘natural catastrophes require immediate action’. This obviously envisages use of Art 32 in circumstances such as the COVID-19 pandemic and, as we noted above, the negotiated procedure without prior publication has indeed been very extensively invoked,90 and accelerated procedures barely used in procuring medical and emergency goods. However, section II.B suggested that in view of the overall length of time for accelerated procedures, the Art 32 procedure is in fact likely also to be needed for many non-crisis situations, also. (c) ‘In so far as strictly necessary’: The requirement to use the extreme urgency ground only ‘in so far as strictly necessary’ means that it may be applied



90 Section

II.B.

Recommendations for Urgent Procurement in the EU Directives and GPA  81 only to the extent needed before there is time to organise another (including accelerated) procedure, as the Commission’s guidance on COVID-19 emphasises.91 Such a rule could also be deduced from the requirement for extreme urgency,92 but is further clarified through this provision. This may require some nuance, however. A first issue is whether a contract can include subject matter that could be procured in time by other methods but for which terms will be more advantageous (for example, because of higher volumes or continuity of supply93) if included in the emergency contract. The present author has previously suggested94 that the rules on ‘mixed contracts’95 allow this. However, these rules are not wholly clear and several considerations might lead the ECJ to a different view, namely the principle of strict interpretation, the absence of any general right to use a procedure without publication simply because it is advantageous,96 the fact that advantage is difficult to assess and the fact that this situation creates more risk of improper use than one arising specifically from urgent circumstances. On the other hand, when a contract beyond immediate needs is necessary to secure current supply – for example, because suppliers will not contract for a limited quantity – or to secure future supply in a time of shortage, an extended procurement clearly may – depending the nature and likelihood of the need – fall within Art 32(2)(c). (d) ‘Brought about by events unforeseeable by the contracting authority’: As chapter 2 discussed, this kind of condition implies a need to plan for using other methods where a procuring entity is, or should have been, aware of an event that might give rise to urgency;97 and case law confirms that the Directive requires such planning.98 The granting of necessary approvals cannot be assumed when planning.99 However, as chapter 2 discussed, where there is no definitive immediate need, but merely a situation of risk, and thus no clear-cut administrative failure in not launching public tendering procedures, conditions of this kind should be applied in the light of the reasonableness of preparations, including the likelihood of needs arising, the precision with which they can be predicted and their importance.100 The Directive, it is submitted, is no exception, even with the principle of strict interpretation, since requiring a procurement for every conceivable future need would be 91 Commission guidance (n 6) para 234. 92 As was suggested is implied by ‘urgency’ under the Model Law: see ch 2, section V.A.ii. 93 As held permissible in the UK: ch 15, section III.D.ii. 94 Supported by Kotsonis, ‘EU procurement legislation in the time of Covid-19’ (2020) 203, who similarly favours this view while accepting that it might not be adopted. 95 Arrowsmith (n 30) 10-04. 96 But only in the specific case in Art 32(3)(d) – although this could provide some analogy for extending urgent contracts for similar reasons. 97 ch 2, section V.A.ii. 98 Order of 27 September 1988, Commission v Italy, Case 194/88 R, EU:C:1988:462; judgment of 28 March 1996, Commission v Germany, Case C-318/94, EU:C:1996:149, para 18. 99 Judgment of 28 March 1996, Commission v Germany, Case C-318/94, EU:C: 1996:149, para 18. 100 ch 2, section V.A.ii.

82  Sue Arrowsmith absurd, and the balance of interests thus tilts heavily towards flexibility. This approach was supported Advocate General Jacobs in Case C-525/03, stating that while forest fires may be foreseeable,101 exceptional fires due to exceptional weather conditions by definition are not foreseeable.102 The test should, it is submitted, respect public policy decisions in allocating resources to address risk; thus the fact that some governments might act later than others, deciding that the risk does not justify the costs of early action, must be given weight. The jurisprudence does not seem inconsistent with this. This issue potentially arose in Case C-194/88R, Commission v Italy. In that case the ECJ concluded that there was a prima facie case to suspend a procurement of works relating to an incinerator, despite ‘serious risks to health and the environment’103 from using temporary facilities, as the need for works had been recognised years earlier when new technical requirements were issued, when the procurement was apparently launched only because an imminent threat materialised. However, as the case concerned interim measures, the Court did not explore the circumstances and if the procurement had been delayed deliberately to devote resources to more imminent needs arguably the urgency might not have been considered foreseeable. The point might also have been explored is C-385/02, Commission v Italy concerning flood control works. The ECJ simply briefly concluded that urgency could not be relied on when some contracts had already been awarded years ago and ‘it had been anticipated from the start that the works would be carried out in lots as and when funding became available’.104 Without examining the elements of the derogation, the Court just stated: ‘Those matters do not establish any extreme urgency. On the contrary, they arise out of the arrangements put into place by the contracting authority’.105 However, this analysis is simplistic. Resource allocation is a policy matter, and if a risk has materialised or increased because of new events, or new information indicates greater risk – for example, discovery of a new virus increasing a risk of pandemic or a survey providing better information on a flood risk – the appropriate consideration is the knowledge or constructive knowledge of the events or information. This view finds support from Advocate General Gulmann in Case C-107/92, who stated: ‘A scientific report whose conclusions are new and unforeseeable as compared with the previous state of knowledge could in my view constitute grounds for and justify a derogation’.106 101 Opinion of 2 June 2005, Commission v Italy, Case C-525/03, EU:C:2005:343, para 67. The ECJ considered the proceedings inadmissible. 102 Opinion of 12 May 1993, Commission v Spain, Case C-107/92, EU:C:1993:180, para 68. 103 Order of 27 September 1988, Commission v Italy, Case 194/88 R, EU:C:1988:462, para 16. 104 Judgment of 14 September 2004, Commission v Italy, Case C-385/02, EU:C:2004:522, para 27. 105 Judgment of 14 September 2004, Commission v Italy, Case C-385/02, EU:C:2004:522, para 28. 106 Opinion of 12 May 1993, Commission v Spain, Case C-107/92, EU:C:1993:180, para 12 (although he considered that the report referred to in this case had not played the role claimed (at para 13)). There is a hint that this might have been the situation in Case C-385/02 (see para 29 of Opinion of 29 April 2004, Commission v Italy, Case C-385/02, EU:C:2004:276) and arguably the facts should have been fully explored.

Recommendations for Urgent Procurement in the EU Directives and GPA  83 Other cases in which the foreseeability condition has not been met concerned situations in which the procuring entity had decided to act but failed to do so107 or in which it was clear that imminent action was needed to solve the problem in time.108 Taking all this into account, the initial COVID-19 pandemic can probably be regarded as unforeseeable – the conclusion of the Commission guidance, which hints at some of the above factors although without specific analysis: The number of COVID-19 patients requiring medical treatment is rising daily and, in most Member States, is expected to increase further until the peak will be reached. These events and especially their specific development has to be considered unforeseeable for any contracting authority. The specific needs for hospitals, and other health institutions to provide treatment, personal protection equipment, ventilators, additional beds, and additional intensive care and hospital infrastructure, including all the technical equipment could, certainly, not be foreseen and planned in advance, and thus constitute an unforeseeable event for the contracting authorities.109 [emphasis added].

Kotsonis also suggests that when lives are at risk ‘foreseeability’ should be interpreted less strictly.110 However, it is submitted that severity of harm is not relevant: Treaty derogations and introduction of a crisis provision, as recommended in section II.E.iii below, offer a more targeted and less artificial approach. The foreseeability referred to, as in the Model Law, is that of the procuring entity. Thus if some other part of Government failed to foresee and plan – for example, by releasing funds – this is relevant only in that entities must take possible delays into account in their own planning.111 A further issue is the position if an entity did plan for an event and thus, by definition, foresaw it, but negligently implemented that plan, such as by failing to maintain planned stockpiles. The policy of precluding abuse may indicate that here the ‘unforeseeability’ condition is not met. (e) Circumstances invoked to justify extreme urgency not attributable to the contracting authority (‘attributability condition’): By virtue of this condition – which the Commission guidance does not discuss – delay in launching a procurement after the need for that procurement is recognised precludes using the extreme urgency provision112 even if the event giving rise to urgency was unforeseeable. However, in applying this condition it seems necessary to 107 eg Opinion of 12 May 1993, Commission v Spain, Case C-107/92, EU:C:1993:180, paras 12–13; judgment of 14 September 2004, Commission v Italy, Case C-385/02, EU:C:2004:522, paras 27–28. 108 Judgment of 18 March 1992, Commission v Spain, Case C-24/91, EU:C:1992:134; see, in particular Opinion of 6 February 1992, Commission v Spain, Case C-24/91, ECLI:EU:C:1992:59. 109 Commission guidance (n 6) para 2.3.1; and also Kotsonis (n 12) 201. 110 Kotsonis (n 12) 202. 111 Judgment of 28 March 1996, Commission v Germany, Case C-318/94, EU:C: 1996:149, para 18. 112 Judgment of 15 October 2009, Commission v Germany, Case C-275/08, EU:C:2009:362, para 27.

84  Sue Arrowsmith take into account the uncertainties involved in exceptional events such as the COVID-19 pandemic rather than judging based on hindsight. As Kotsonis suggests,113 the imperative of using resources on other urgent tasks in a very unusual situation also needs to be taken into account and, it is submitted, a margin of discretion recognised for governments in allocating limited resources. Again, the wording indicates that action by another public body that contributes to urgency – such as a delay in introducing a pandemic lockdown or a delay to relevant approvals – is irrelevant. Earlier versions of the Directive arguably took a different approach, referring to whether circumstances were attributable to ‘the contracting authorities’, in the plural; and Advocate General Elmer in Case C-318/94 suggested that the requirement’s purpose was to confine the derogating provision to events beyond the scope of influence of a Member State’s administrative authorities.114 The ECJ could adopt this approach even under current wording, drawing on general concepts such as Member State responsibility before the courts for their authorities’ actions. However, the balance of interests seems strongly in favour of a different interpretation, since a situation is less open to abuse when another authority is involved. Whichever interpretation is adopted, again a margin of policy-making discretion, including in allocating resources to address risk, must surely be recognised. Thus, deliberately delaying a lockdown for policy reasons (even if misguided) cannot be considered as contributing to the urgency (a different approach is unlikely to affect the procuring entity’s procurement behaviour); nor generally can a deliberate decision to delay a response because the nature, magnitude and likelihood of risk are considered to render the situation a low priority, as discussed earlier in the context of Case C-385/02. (f) The case-by-case approach: Chapter 2 explained that some countries – including, in the EU, Italy – have adopted general measures either ‘deeming’ the existence of certain conditions for using urgency procedures or removing or suspending such conditions.115 In Brazil issues of constitutionality have been raised over aspects of this116 and some legal questions – although from a different perspective – also require discussion under EU law. Clearly Member States may not disregard the Directive’s governing conditions – but may they adopt general measures elaborating the application of those conditions, such as by stating that certain pandemic-related procurement falls within Art 32(2)(b) for a specified time? Such rule-making can help avoid the uncertainty and potential for challenge of case-by-case by 113 Kotsonis (n 12) 203. 114 Opinion of 8 February 1996, Commission v Germany, Case C-318/94, EU:C: 1996:41, para 26, considering Directive 71/305/EEC concerning the coordination of procedures for the award of public works contracts [1971] OJ L185/5, Art 5(3)(c). 115 ch 2, section V.A.iii. 116 ch 17, section III.B.

Recommendations for Urgent Procurement in the EU Directives and GPA  85 assessments by procuring entities, as well as limiting potentially unmanageable reporting obligations (particularly if – as proposed here – such obligations are expansively interpreted), thus avoiding resources being diverted from the emergency. While the Directives and case law often emphasise legal certainty, in some areas the ECJ has – without, in the author’s view, any logical reason – prohibited rule-making; thus in Forposta,117 the ECJ concluded that the Directive precludes rule-making on what conduct constitutes ‘grave professional misconduct’ for the discretionary exclusion in Art 57(4), requiring that the gravity of conduct be assessed on a case-by-case basis.118 However, while the proportionality principle must apply, there are strong arguments for allowing a degree of national rule-making. A separate question is whether the Directive requires conditions to be assessed by procuring entities themselves, in which case national legislation – as in Italy – is precluded, although entities themselves might still be permitted to make rules regulating their own discretion (for example, where a hospital issues internal rules for its own PPE procurement). The Directive’s impact on division of regulatory space between Member States and their entities cannot be explored fully here. However, we can note that, while both legislator and courts have recognised some possibility of national regulation of entity discretion,119 some judgments have vested power directly with procuring entities, as in ECJ rulings that assessing whether misconduct is ‘grave’ falls solely to the entity applying the exclusion because of the importance of trust between that entity and its suppliers,120 precluding a centralised approach121 despite its considerable advantages (which were not considered by the Court).122 These questions were both relevant in Case C-525/03. In that case the Commission contested Italian legislation providing for use of the negotiated procedure without prior publication for procurement related to fighting forest fires, based on a declaration of emergency made because of the threat of exceptional fires posed by predicted weather conditions. The ECJ declared the action admissible as the legislation had expired at the relevant time.

117 Judgment of 13 December 2012, Forposta SA v Poczta Polska S, Case C-465/11, EU:C:2012:801. 118 And see also, eg, Judgment of 28 February 2018, MA.T.I. SUD v Società Centostazioni, Joined Cases C‑523/16 and C‑536/16, EU:C:2018:122. 119 Judgment of 2 May 2019, Lavorgna Srl v Comune di Montelanico, Comune di Supino, Comune di Sgurgola, Comune di Trivigliano, Case C-309/18, EU:C:2019:350. 120 Judgment of 19 June 2019, Meca Srl v Naples, Case C-41/18, EU:C:2019:507; judgment of 3 October 2019, Delta Antrepriză de Construcţii şi Montaj 93 SA v Compania Naţională de Administrare a Infrastructurii Rutiere SA, Case C-267/18, EU:C:2019:826. 121 Other than, somewhat inconsistently, to the self-cleaning defence: judgment of 11 June 2020, Vert Marine SAS v Premier ministre, Ministre de l’Économie et des Finance, Case C-472/19, EU:C:2020:468, a decision in the context of the Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts OJ 2014 No L94/1 (‘Concessions Directive’), confirming the statement to this effect in recital 71. 122 See S Arrowsmith, ‘Constructing rules on exclusions (debarment) under a post-Brexit regime on public procurement: a preliminary analysis’, Working Paper, available at ssrn.com/abstract=3659909.

86  Sue Arrowsmith However, Advocate General Jacobs clearly accepted the possibility of national legislation authorising categories of procurements over a period of time under the extreme urgency provisions123 and, indeed, this was not in principle disputed by the Commission. Both questions were also potentially at issue in the earlier case C-328/92, Commission v Spain. In that case the ECJ rejected Spain’s argument that legislation allowing – indeed requiring – certain pharmaceutical products to use a single-source process was justified by the fact that there is sometimes an urgent need for these products. The Court stated that, while an urgent need might arise, ‘freedom to prescribe pharmaceutical products cannot justify a priori systematic recourse to the single-tender procedure for all supplies of pharmaceutical products and specialities to hospitals’ and that even if urgency existed in a particular case ‘in order to rely on the derogation … all the conditions it lays down must be satisfied cumulatively’.124 The Court also stated, in the context of the separate derogation based on only one supplier being able to supply the subject matter,125 that this could not justify ‘general and indiscriminate’ derogation.126 It is submitted, however, that this judgment clearly does not indicate either that general rules can never be laid down or that national legislation is not possible. The legislation in question was extremely broad and not targeted even at specific derogations let alone specific factual circumstances, and clearly would not have met a proportionality test, so that the possibility of legislation of the kind adopted in the COVID-19 pandemic was never considered or discussed. As for other indications, recital 50 states in relation to Art 32(2)(b), allowing procedures without publication where only one supplier can supply the subject matter, that ‘Where the situation of exclusivity is due to technical reasons, they should be rigorously defined and justified on a case-by-case basis’. This might point by analogy to a need for a case-by-case approach for all grounds; but, conversely, by referring only to this ground could indicate that a case-by-case assessment is not needed in other cases. As for the Commission’s Guidance, this states: ‘Each contracting authority will have to evaluate whether the conditions for using [the] “negotiated procedure without prior publication” are met. It will have to justify its choice of such a procedure in an individual report’ under Art 84(1)(f),127 thus suggesting that governing conditions must be assessed both by the procuring entity itself and on a case-by-case basis. In the author’s view it is simplistic and lacking in balance to construe the derogations as precluding all rule-making concerning these conditions.

123 Opinion

of 2 June 2005, Commission v Italy, Case C-525/03, EU:C:2005:343, para 83. of 3 May 1994, Commission v Spain, Case C-328/92, EU:C:1994:178, para 18. 125 Now a ground for the negotiated procedure in Public Contracts Directive, Art 32(2)(b). 126 Judgment of 3 May 1994, Commission v Spain, Case C-328/92, EU:C:1994:178, para 17. 127 Commission guidance (n 6) para 2.3. 124 Judgment

Recommendations for Urgent Procurement in the EU Directives and GPA  87 A  proper interpretation requires weighing the considerable advantages of this, particularly in widespread emergencies, and the need to avoid ­seriously hampering the derogation’s objectives, against the undeniable value of a case-by-case approach to control abuse. On this basis it is submitted that general rules are possible, as is supported by Advocate-General Jacobs in Case C-525/03, subject to a proportionality requirement. Thus, general measures authorising, without prior publication, purchase of PPE and/or other medical supplies (such as drugs or ventilators) for a period of weeks at the start of the pandemic seem acceptable and, it is submitted, may be adopted at any level, since it is outside the Directive’s objective and, indeed, EU competence to regulate the level of national rule-making.

iii.  Grounds for Use: Situations of Crisis While Art 32(2)(c) is the Public Contracts Directive’s only ground for procedures without publication that refers specifically to urgency, the Defence and Security Directive additionally allows such procedures when accelerated procedures ‘are incompatible with the urgency resulting from a crisis’.128 Article 1(10) of that Directive defines a crisis as a situation in which a harmful event has occurred, or is impending which clearly exceeds the dimensions of harmful events in everyday life and which substantially endangers or restricts the life and health of people, or has a substantial impact on property values, or requires measures in order to supply the population with necessities.

This is specifically deemed to include armed conflict and wars and recital 54 indicates that it may also apply in the (illustrative) contexts of peace-keeping operations abroad and a terrorist attack at home. No further conditions apply. This has similarities with the Model Law’s emergency methods ground of a ‘catastrophic event’, which chapter 2 explained129 also dispenses with many of the usual governing conditions. As explained there, that ground is justified by similar considerations that justify allowing Member State legislation that ‘deems’ that certain conditions in Art 32(2)(c) are met, as just outlined in section II.E.ii above. These considerations include avoiding uncertainty and its consequent deterrence to prompt action and possible disruption from challenge, and limiting administrative reporting burdens (since reports can then refer mainly just to the crisis). It provides for a more appropriate balance of interests where there has been dilatory conduct in a crisis, given that in extreme situations this will often arise from

128 Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC, OJ 2009 No L216/76, Art 28(1)(c). 129 ch 2, section V.A.iii.

88  Sue Arrowsmith pressure on resources rather than deliberate abuse. It can also help ensure that the rigours of the rules designed for ‘regular’ urgency are not diluted by the need to deal with exceptional cases – for example, making possible an expansive interpretation of justification requirements such as is proposed in section II.E.iv below. As the author has previously argued,130 there is no reason to confine this ‘crisis’ ground to defence and, as chapter 15 explains,131 the UK Government proposes to expand it, although also introducing new safeguards, including a requirement for a formal declaration of crisis and (to be applied to all exceptional methods) mandatory advance notice. For these reasons, this ground should be extended to the EU’s Public Contracts Directive. This would, it is submitted, be compatible with GPA procedures, as discussed in section III below. Requiring a central declaration of crisis would also be useful, along with enhanced information transparency, including a mandatory advance notice, as discussed in section II.E.v below. It would also be useful to clarify the provision’s limits, including whether any declaration of crisis could excuse a case-by-case assessment of feasibility of accelerated procedures – useful to avoid detracting considerably from legal certainty; whether purchases are limited to those necessary to address the crisis, which seems an appropriate limit; and whether purchases can only be concerned with the interests explicitly mentioned (life and health, etc).

iv.  Grounds for Use: Emergency Approaches under TFEU Derogations A question that remains unclear is whether the grounds of derogation from tendering in Art 32 of the Public Contracts Directive are exhaustive or whether further derogation is possible relying on derogations from the TFEU free movement rules in Arts 36, 52 and 62. Recital 41 to the Directive states: Nothing in this Directive should prevent the imposition or enforcement of measures necessary to protect public policy, public morality, public security, health, human and animal life, the preservation of plant life or other environmental measures, in particular with a view to sustainable development, provided that those measures are in conformity with the TFEU.

This wording dates from 2004132 and reflects the language of TFEU, Art 36 (derogating from TFEU, Art 30 on free movement of goods), echoing earlier recitals that refer directly to the possibility of relying on the TFEU derogations.133 130 Arrowsmith, ‘Reimagining public procurement law’ (2020) section 5.3.2.2. 131 ch 15, section III.D.ii. 132 Directive 2004/18, recital 6. 133 Directive 89/440/EEC of 18 July 1989 amending Directive 71/305/EEC concerning coordination of procedures for the award of public works contracts [1989] OJ L210/1, recital 4; Directive 92/50/ EEC relating to the coordination of procedures for the award of public works contracts, [1992] OJ L209/1 recital 15.

Recommendations for Urgent Procurement in the EU Directives and GPA  89 However, it is questionable whether TFEU derogations can in general justify procurement-specific measures otherwise ruled out by the Directive; arguably the above recital merely confirms that the Directive does not affect application to public contracts of general measures, such as general environmental regulations. In any case, it seems that the Directive does not allow derogations permitting use of the negotiated procedure without prior publication other than on grounds explicitly listed: the precision of the Art 32 grounds, statements in the jurisprudence that these are ‘exhaustive’ and cannot be added to134 – albeit arguments based on the Treaty derogations were not specifically raised – and now Art 26(6) stating that ‘Member States shall not allow the application of that procedure in any other cases than those referred to in Article 32’ all indicate that the Directive fully harmonises national rules in this respect. The ECJ does not refer to such a possibility, including in Case C-194/88R, Commission v Italy, where the Court suspended a contract relating to waste treatment despite ‘serious risks for public health and the environment’135 because the Directive’s urgency ground appeared not to apply, apparently assuming there was no other ‘health’ basis for derogation. The Commission’s pandemic guidance also does not mention any further derogations. In fact, allowing derogation from tendering on this basis would, it is submitted, offer a better balance of interests for a crisis than Art 32 alone, and perhaps even for one-off health emergencies, and the possibility cannot fully be ruled out. Addition of a new crisis ground, however, as proposed in section V.E.iv above, would address this point in a more appropriate way.

v.  Grounds for Use: Other Grounds While clearly the extreme urgency ground of Art 32(2)(c) publication is of primary importance in our context, other grounds for using the negotiated procedure without prior publication are also relevant. Thus Art 32(2)(b) allows this procedure where the subject matter ‘can be supplied only by a particular economic operator’, for certain artistic reasons, because ‘competition is absent for technical reasons’ or for reasons relating to protection of exclusive rights.136 Possibly this provision can be used, even when the conditions for the extreme urgency ground are not met, where, as in the COVID-19 pandemic, shortages require buyers to snap up all available sources to meet their needs. While, unlike Art 30(5)(a) of the Model Law,137 the provision does not refer generally to availability from only one supplier but to three specific reasons for lack of availability, an absence of competition for ‘technical’ reasons should be interpreted to refer to current availability of suppliers

134 See, in particular, judgment of 13 January 2005, Commission v Spain, Case C-84/03, EU:C:2005:14, paras 47–48. 135 Order of 27 September 1988, Commission v Italy, Case 194/88 R, EU:C:1988:462, para 16. 136 Provided, in the last two cases, there is no reasonable alternative or substitute and absence of competition does not result from artificially narrowing the procurement’s parameters. 137 ch 2, section V.B.

90  Sue Arrowsmith for a competitive process rather than to availability in the market in general, given that the derogation is a derogation from the obligation to use a competitive process. Article 32(3)(d) also allows a procedure without publication to procure supplies or services on particularly advantageous terms from suppliers winding up their business or becoming insolvent or similar, which might be relevant in the pandemic.

vi.  Grounds for Use: Controls Over the Decision to Use the Negotiated Procedure without a Call for Competition Like the Model Law, the Directive imposes controls over the decision to use procedures without publication, to support the verification and enforcement dimension of transparency. In times of crisis this dimension can be particularly important, including to maintain public trust, but at the same time such controls – including those requiring detailed justification of decisions – can potentially impose significant administrative burdens and divert resources from addressing the crisis. This, we suggested, is one reason for states to deem urgency conditions or to provide special crisis grounds for exceptional procedures shorn of such conditions. We suggested above that both are appropriate responses, leading to the conclusion that EU law should be interpreted to allow the former possibility and should also introduce a general ‘crisis’ ground into Art 32.138 This can then facilitate an expansive approach to interpreting controls for one-off urgency – which we will see are currently unclear – avoiding temptation to water them down to avoid an undue burden in crisis situations. What, then, are the Directive’s specific controls? A first point is that, while chapter 2 proposed restoring a hierarchical approval provision in the Model Law as an optional control over emergency procurement methods,139 that is not appropriate for the Directive, given the Directive’s limited objectives, its legally binding character and the difficulty of formulating any such control (even if desirable in principle) as an obligation, given Member States’ varying administrative structures. A second point is that in terms of information transparency, the Directive adopts the prevalent piecemeal approach, requiring disclosure of specified items of information to specified persons at specified points, sometimes on request, rather than a fully open approach. One potential control in this regard is an ex ante notice requirement for direct solicitations, as generally required by the Model Law, which among other benefits, facilitates challenge to the choice of method. While the Model Law makes an exception to this requirement for catastrophe or extreme urgency, chapter 2 suggested that ex ante notices are warranted even in urgent cases, although possibly limited to publication simply as soon as practicable in the context of a catastrophe.140

138 Section

II.e.iii and Iv. 2, section V.C. 140 ch 2, section V.C. 139 ch

Recommendations for Urgent Procurement in the EU Directives and GPA  91 Although abusive choice of direct solicitations to favour specific suppliers is one of the biggest risk areas in procurement and an EU concern from, in particular, the perspective of national favouritism, the Directive does not require ex ante notices. Instead, it addresses this problem through stringent sanctions, usually ineffectiveness, if violations occur, as chapter five discusses141 but, as section II.D explained, allows entities to publish a VEAT Notice, followed by a 10-day standstill, to avoid these sanctions. A better balance of interests would arguably be achieved by following the Model Law’s solution of mandatory ex ante notices. Although the EU’s postcontract sanctions regime – which has no parallel under the Model Law – does at least offer post-contractual redress, pre-contract solutions seem preferable. Interestingly, Italy has introduced such ex ante notices;142 and the UK has proposed them, including for urgent cases, possibly prompted by the COVID-19 pandemic experience.143 As with the Model Law, a nuanced approach may be needed for urgency but – as suggested for that context144 – for ‘regular’ urgency an ex ante notice requirement is not disproportionate; and this is even less so in developed countries with mandatory e-procurement, as under the Directive. However, as proposed for the Model law also, publication merely as soon as practicable may be more appropriate for a crisis. Mandatory ex ante notices need to include sufficient information to facilitate challenge yet not impose an undue burden. Current VEAT notices must include the entity’s name and contact details, proposed awardee and object of the contract, plus ‘a justification of the decision … to award the contract without prior publication of a contract notice’.145 Fastweb elaborated the latter as requiring a rigorous approach, now adopted in the UK, for example,146 stating that the justification ‘must disclose clearly and unequivocally the reasons that moved the contracting authority to consider it legitimate to award the contract without prior publication of a contract notice, so that interested persons are able to decide with full knowledge of the relevant facts whether they consider it appropriate to bring an action before the review body and so that the review body is able to undertake an effective review’.147 Although not wholly clear, this might require reference to all relevant elements (in the case of extreme urgency unforeseeability, reasons other procedures cannot be used in time, etc) reflecting the information which, it is suggested below, must be documented and included in the record under Art 84(1) of the Directive. Whatever the position with VEAT notices, however, all this information should be required in any mandatory notice, especially if a specific ‘crisis’ provision 141 ch 5, section II.F. 142 ch 14, section III.C. 143 ch 15, section III.G. 144 ch 2, section V.C. 145 Remedies Directive, Art 3a. 146 See ch 15, section III.D.3. 147 Judgment of 11 September 2014, Ministero dell’Interno v Fastweb, Case C-19/13, ECLI:EU:C:2014:2194, para 48.

92  Sue Arrowsmith is introduced, as recommended above, which removes many of the conditions that might otherwise require justification. Chapter 2 explained that the Model Law also requires in the record ‘a statement of the reasons and circumstances’ relied on to use an exceptional procedure and similarly the Directive’s Art 84(1) requires entities to make a report of each award procedure that includes ‘the circumstances referred to in Article 32 which justify the use of ’ the negotiated procedure without prior publication. In addition, Art 84(2) requires entities to document procedures as they proceed ‘by keeping sufficient documentation to justify decisions taken in all stages of the procurement procedure’, to be retained for three years after award (Art 84(3)), although the only explicit right of access is for the European Commission, on request (Art 84(2)). It is again unclear what detail is needed and how it compares with the ‘justification’ in a VEAT notice. However, to provide an audit trail a reasonable degree of explanation of all the elements of the urgency ground again seems necessary. However, to avoid unmanageable burdens, this again needs to be counterbalanced by adding a ‘crisis’ ground to Art 32. Finally, the Directive requires a contract award notice within 30 days of the contract (Art 50(1) and Annex VD). This must include ‘justification’148 for using the procedure without publication, going beyond the Model Law in this respect.149 The wording, ‘justification’, is the same as for VEAT notices, but again the exact information required, including how far it is the same as the information in the record, is unclear. Since one function of the award notice is to enable challenge (indicated by the fact that publication of the award notice reduces the time period for obtaining the ineffectiveness remedy),150 and there is also no right of access to the information in the record, arguably a reasonable degree of detail, paralleling that in both VEAT notices and the record, must be included. This argument is reinforced by the fact that modification notices, which fulfil the same function, require a statement of the ‘circumstances’ – the same language found in Art 84(1) on reports. The discrepancies of language among these various ­provisions is unfortunate. As chapter 15 explains, in the pressure of the pandemic the UK struggled with its administrative systems to publish these award notices. An approach of disclosure by default would, of course, require and facilitate much more extensive – and (as in Colombia, for example151) timely – release of full information.

vii.  Conduct of the Procedure When a procedure without publication is based on grounds of only one possible supplier or the need to contract with an existing contracting partner, the

148 Public

Contracts Directive Annex VD, point 7. 2, section V.C. 150 Remedies Directive, Art 2f(1)(a). 151 ch 18, section III.A. 149 ch

Recommendations for Urgent Procurement in the EU Directives and GPA  93 contracting partner is by definition predetermined. However, when urgency is invoked, a rapid competition may still be feasible, such as that envisaged by the Model Law’s competitive negotiations method; indeed, as chapter 2 explained, the Model Law requires such a competition other than where there is a catastrophic event,152 tilting the balance of interests more towards transparency and competition than speedy delivery. It is clear that Member States may impose stricter obligations than the Directive including – to the extent that competition is not required – to require competition.153 However, other than some of the information transparency provisions already discussed in section V.E.vi above, it is unclear what the Directive itself does require, as explained below. Our case studies show very different approaches to implementation (although likely to be explained as much by different national traditions as by different interpretations of the Directive). Thus, in Italy, this method generally requires where ‘possible’, including in urgent cases, a competitive procedure following principles of transparency, competition and rotation, with several suppliers where there are sufficient on the market, with a single-source approach allowed for contracts covered by the Directive only in exceptional cases,154 although a complex series of legal modifications were made for the COVID-19 pandemic.155 The UK, on the other hand, leaves the procedure to procuring entities on a case-by-case basis in accordance with its traditional copy-out approach and no specific legislation was adopted in the pandemic. However, proposals for post-Brexit reform include promoting competition within a single direct solicitation method, perhaps reflecting public concern over some pandemic-related contracts.156 Reflecting the traditional approach, the proposal is to do this, however, through soft law exhorting competition, with hard law supporting this merely by requiring a record of reasons where only one supplier is consulted,157 rather than through a legal obligation for competition (as under the Model Law’s general urgency ground158) or a requirement for competition wherever possible (as generally applies in Italy and also under the Model Law’s catastrophe ground159). As to what the Directive actually requires, originally the only obligations in urgent cases were those on technical specifications and the Directives made this clear;160 but after the negotiated procedure was introduced as a formal method

152 ch 2, section V.A.i. 153 In fact, there is no obligation to make the method available at all: Public Contracts Directive, Art 26(6). 154 ch 14, section III.A. 155 ch 14, sections III.B and C. 156 ch 15, section III.D.iv. 157 ch 15, section III.D.iv. 158 ch 2, section V.A.i. 159 ch 2, section V.A.iii. 160 Directive 77/62 of 21 December 1976 coordinating procedures for the award of public supply contracts [1977] OJ L13/1, Arts 4(3) and 6(1)(d); Directive 71/305, Art 9.

94  Sue Arrowsmith in the late 1980s161 and new obligations gradually added to the Directives, less thought appears to have been given to exactly which obligations apply in direct solicitation procedures. Some explicit rules, including on minimum time limits, are specific to particular procedures and clearly do not apply, but others are not. Many rules in Title II Chapter III (covering selection, exclusion and award) seem not to apply,162 although this is not stated, being relevant only for formal, advertised competition. However, others, such as on mandatory exclusions and technical specifications seem appropriate and some – such as on award notices, as discussed earlier – apply explicitly. Further, Title I Chapter II rules covering, inter alia, general principles, confidentiality, conflicts of interest and communications also seem appropriate and are not specifically excluded. In addition, as the author has discussed elsewhere,163 judicial development of general principles also raises the spectre of a possible implicit obligation of uncertain content to act in a competitive and transparent manner where possible, as well as obligations if the procuring entity does choose to hold a competition (for example, to require equal treatment of any tenders received). The Commission guidance on the pandemic164 states on this issue: [P]ublic buyers may negotiate directly with potential contractor(s) and there are no publication requirements, no time limits, no minimum number of candidates to be consulted, or other procedural requirements. No procedural steps are regulated at EU level. In practice, this means that authorities can act as quickly as is technically/physically feasible – and the procedure may constitute a de facto direct award only subject to physical/technical constraints related to the actual availability and speed of delivery.

This implies that most of the explicit rules in Title II Chapters I and III do not generally apply, but does not necessarily rule out the general rules in Title I, Chapter II, which might not be considered ‘procedural’ requirements. Having emphasised this flexibility, however, the Commission then seems to require negotiations with more than one supplier where possible, stating: A ‘negotiated procedure without publication’ allows contracting authorities to negotiate directly with potential contractors; a direct award to a preselected economic operator remains the exception, applicable if only one undertaking is able to deliver within the technical and time constraints imposed by the extreme urgency.165

Whether this is intended, however, as a legal interpretation or simply as strategic advice is not clear, although the word ‘applicable’ might suggest the former. It is submitted that the principle of legal certainty strongly suggests that obligations apply only when the Directive’s wording clearly indicates this, as with the 161 In Directive 89/440 and Directive 88/295/EEC of 22 March 1988 amending Directive 77/62/EEC relating to the coordination of procedures on the award of public supply contracts and repealing certain provisions of Directive 80/767/EEC [1988] OJ L127/1. 162 eg Art 65(1) on reducing participants does not mention this method. 163 Arrowsmith (n 30) 10–56. 164 Commission guidance (n 6) section 1. 165 Commission guidance (n 6) section 2.3.

Recommendations for Urgent Procurement in the EU Directives and GPA  95 information transparency provisions, and that there is no general obligation for competition. This argument is reinforced by the fact that what process is suitable will depend on the facts of the emergency, national context (such as existence of supplier lists) and market. Even if a competition requirement is justified for general urgency under the Model Law (which chapter 2 suggested is not in fact the case166) it is not appropriate to interpret the Directive as requiring this since the procedural steps are not specified and there is no ‘crisis’ or ‘catastrophe’ provision for exceptional cases, as there is in the Model Law. This position finds support in the ECJ’s decision in Case C-515/18.167 This concerned Regulation 1370/2007/EC168 on franchises for certain passenger transport services. This instrument, like the Directive, generally mandates a public solicitation but allows exceptions. Similar to the Model Law but unlike the Directive, however, where the exceptions apply an advance notice of the intended award must be published. In Case C-515/18, the ECJ concluded that where exceptions apply, even when several suppliers express an interest following the advance notice, the equal treatment and transparency principles do not require either a public solicitation or comparison of offers; this would ignore the Regulation’s distinction between procedures with and without public solicitation.169 This judgment, in particular the last point, supports by analogy the view that the Directive’s negotiated procedure without prior publication also does not require comparison of offers, especially since the exceptions are even narrower under the Directive than the Regulation and thus even less suitable for a general competitive approach – although not all the ECJ’s points (such as on legislative history)170 apply to the Directive. A final point on procedure, made in chapter 2 and equally applicable here, is that equal treatment does not automatically preclude methods that tend to favour national suppliers – such as recourse to past suppliers with good performance – which are often objectively justified171 in urgent situations. How procurement might be conducted and regulated at national level in the context of this procedure is considered further in chapter 2, by reference to the Model Law,172 and in chapter 4. As chapter 2 discussed, articulating and recording reasons for decisions is important in conducting procedures as well as in choosing the procurement 166 ch 2, section V.B. 167 Judgment of 24 October 2019, Autorità Garante della Concorrenza e del Mercato v Regione Autonoma della Sardegna, Case C-515/18, EU:C:2019:893; and see also Kotsonis (n 12). 168 Regulation 1370/2007/EC of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 [2007] OJ L315/01. 169 Judgment of 24 October 2019, Autorità Garante della Concorrenza e del Mercato v Regione Autonoma della Sardegna, Case C-515/18, EU:C:2019:893, para 30. 170 Judgment of 24 October 2019, Autorità Garante della Concorrenza e del Mercato v Regione Autonoma della Sardegna, Case C-515/18, EU:C:2019:893, paras 34–35. 171 For the purposes of equal treatment as defined in Judgment of 3 March 2005, Fabricom SA v Belgian State, C-21/03, EU:C:2005:127. 172 ch 2, section V.A.4.

96  Sue Arrowsmith method, and even more so in the context of direct solicitation procedures. However, Art 84(1) of the Directive listing items to be reported pays little attention to the conduct of these procedures. It would be useful to add specific items on this, in particular on how suppliers were chosen. The report must at least, however, address ‘conflicts of interests detected and subsequent measures taken’ (Art 84(1)(i)), which are important in this context. Further, Art 84(2) requires entities to justify decisions at all stages of the process and retain the documentation for three years; and the provision refers specifically to documentation ‘on communications with economic operators and internal deliberations, preparation of the procurement documents, dialogue or negotiation if any, selection and award of the contract’. Thus, the Directive requires justification of how and why suppliers were chosen to participate or receive an award, and what negotiations were conducted and how, even if, as with other provisions the level of detail required is uncertain. The record is not public and public award notices do not require any information on the conduct of this procedure other than certain information about any ‘tenders’ received.173 However, the impact of the record requirements may be greater than they appear as many national laws give access to information. This position does, however, illustrate again the limitations of an approach that does not provide for transparency by default. Finally, as regards the information rights of suppliers themselves, no notification and standstill obligation applies. However, it seems that, as required by the GPA, Art 55(1)–(2) of the Directive – requiring entities to inform participants of the award and provide reasons for decisions on request – applies, since relevant definitions of ‘candidate’ and ‘tenderer’174 cover such suppliers. Member States need to address potential disruption from challenge at the remedies level, as discussed in chapter five.

III.  The GPA A.  Introduction to the GPA Regulatory Framework The GPA175 is a plurilateral WTO agreement which, like the EU Directives, regulates major contracts (those above defined thresholds176) mainly (and originally) to open them to trade, although also incorporating some broader integrity objectives. It currently applies to 48 WTO members, including the EU, but its

173 Public Contracts Directive Annex VD point 11. 174 Public Contracts Directive, Art 2(11) and 2(10). 175 See generally S Arrowsmith and RD Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (CUP/WTO, 2011). 176 Which vary between parties as determined by the reciprocity-based negotiations.

Recommendations for Urgent Procurement in the EU Directives and GPA  97 importance goes beyond this as it provides a template for many other trade agreements. In contrast with the Directives, coverage differs for each party, determined by reciprocity-based negotiations, but for health-related needs – relevant in the Covid-19 pandemic and in many other widespread emergencies – there is significant coverage.177 Like the Directives, the GPA operates primarily by prohibiting discrimination and imposing transparent procedures and remedies. However, reflecting a shallower degree of integration and greater diversity between the parties it is both less restrictive and less detailed – in both its explicit rules and their development through disputes – leaving a broader area, with fuzzier boundaries, for national regulation. Like EU Directives it has prompted hard law regulation in states which, like the UK, previously had solely a soft law approach, such as Singapore. As with the Directive, national implementation varies considerably. Thus in Singapore, procurement law largely just copies out GPA rules,178 echoing the UK’s approach to the EU Directive, while in the US, with a history of detailed hard law ‘though the GPA’s national treatment obligations are honoured in the main by the federal government … the GPA has done little to reshape procurement laws at the state or federal levels’.179 These divergent approaches mean that the GPA’s actual and potential impact on emergency procurement varies considerably. Given the similarity of both the rules and language of the GPA and EU procedural Directives, much of the policy discussion on the EU is relevant for the GPA, although, of course, ECJ case law does not apply. The following therefore merely highlights key similarities and differences.

B.  Award Procedures and Modifications As with the Model Law and EU Public Contracts Directive public tendering procedures – called open tendering and selective tendering – are the default methods and, like the Directive, the GPA offers shortened versions of these procedures for urgent situations, applying where compliance with the usual time limits is ‘impracticable’. Here the GPA permits states to allow just 10 days for requests to participate180 and 10 days for tenders.181 The GPA has no requirement for a standstill period and thus allows a rapid approach even in comparison with the EU.

177 On these points see further RD Anderson and AC Müller, ‘Keeping markets open while ensuring due flexibility for governments in a time of economic and public health crisis: the role of the WTO Agreement on Government Procurement (GPA)’ (2020) 29 Public Procurement Law Review 189. 178 ch 20, section II. 179 ch 16, section II. 180 GPA, Art XI.2. 181 GPA, Art XI.4.

98  Sue Arrowsmith The GPA also permits advance purchasing mechanisms for addressing urgency. While framework agreements in the EU sense are not explicitly mentioned, these are possible182 since they can be operated under the GPA’s general tendering rules, using pre-stated award criteria first to choose the framework suppliers and later to make call-offs. It even seems possible to operate approaches not allowed under the Directive, such as placing call-offs with bidders in order of ranking who agree to match the best bid where higher ranked bidders have rejected the work, since negotiation is permitted to establish terms.183 However, in the absence of detailed rules, many questions – such as adherence of new users, relevant in the COVID-19 pandemic – remain open. As mentioned, the GPA also generally allows a notices of supplier lists (‘multiuse lists’) to serve as a solicitation184 and allows entities to require registration on a list as a condition of participation,185 subject – as with the EU’s qualification systems – to open and regular advertising,186 continuous access187 and other safeguards. Thus lists may be used to make urgent purchases, including using selective tendering with expedited timescales. However, some points create difficulty and uncertainty for urgent cases. First, if an unregistered supplier requests to participate and supplies all relevant documents within GPA timescales, then Art IX.11 requires the procuring entity to examine the request, and it may not exclude the supplier because of insufficient time to do this unless ‘in exceptional cases, due to the complexity of the procurement, the entity is not able to complete the examination of the request’ within the time for tendering. This exception does not cover urgency, only complexity; thus the procedure might need to be delayed to accommodate an unregistered supplier, creating an obstacle to using lists to speed up the process. Secondly, central/federal authorities (Annex I) entities (unlike other entities) may not use the list as the sole means for soliciting tenders188 but must publish a notice for each procurement,189 per se limiting the value of lists for urgent procurement and also raising a real possibility of unregistered suppliers applying, thus creating further delay. One possible effect of these rules, alluded to earlier, may be to preclude mechanisms like the EU’s DPS, despite DPSs being both totally open and transparent and very useful for rapid procurement; the delay from both requiring a new notice for every call-off and possibly needing to register new suppliers makes such a system largely unfeasible and certainly so for urgent procurement.

182 RD Anderson and S Arrowsmith, ‘The WTO Regime on Government Procurement: Past Present and Future’ in Anderson and Arrowsmith (eds), The WTO Regime on Government Procurement: Challenge and Reform (CUP/WTO, 2011) 53–57. 183 GPA, Art XII.1(a). 184 GPA, Art IX.12. 185 See GPA, Arts XI.7 and IX.11. 186 GPA, Art IX.7 and 9. 187 GPA, Art IX.10. 188 GPA, Art IX.12. 189 GPA, Art VII.1.

Recommendations for Urgent Procurement in the EU Directives and GPA  99 The above points potentially run counter to the optimum balance of interests in urgent situations, since they mean that the limited tendering method may be more often needed. Arguably a DPS-type mechanism might be brought within the GPA by virtue of the rather curious approach to procurement methods. Art IV.4 states: A procuring entity shall conduct covered procurement in a transparent and impartial manner that: is consistent with this Agreement, using methods such as open tendering, selective tendering and limited tendering;

This apparently leaves room for approaches not within the three named methods. It is unclear how this is intended to work, given that the detailed GPA rules often refer specifically to these methods; and it is not clear whether a DPS can be considered to be ‘consistent’ with the Agreement when it does not fit the specific rules on multi-use lists. However, the GPA’s approach here appears designed to catch innovative approaches that are within the spirit, if not all the details, of the rules and it is submitted that a DPS falls within this approach. Even if this is the case, however, greater certainty is desirable. It is thus suggested both that GPA, Art IX.11 should be amended to allow an exception for urgency, as well as complexity; and, secondly, that the GPA should be amended to ensure certainty over use of use DPS-type open arrangements by Annex I entities. Derogation from public tendering, through a method called limited tendering, is also permitted, inter alia ‘insofar as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the procuring entity, the goods or services could not be obtained in time using open tendering or selective tendering’ (Art XIII.1d). This parallels the Directive’s approach rather than that of the Model Law, allowing single-source procurement even without a catastrophe. A panel in the Trondheim dispute indicated that derogations from regular tendering must be narrowly interpreted (and that the burden of proving their application is on the party invoking them).190 However, the strict interpretation principle has not been explicitly endorsed by the WTO’s Appellate Body in analogous cases191 and, it is submitted, should not be applied to the GPA, paving the way even more clearly for applying under the GPA some of the flexibilities proposed in section II above for the Directive. The conditions are drafted in almost identical terms to those of the Directive, other than there being no explicit reference to urgency not being attributed to the 190 ‘Norway – Procurement of Toll Collection Equipment for the City of Trondheim’ (panel report adopted 13 May 1992, BISD 40S/319) para 4.5. 191 The Appellate Body eg ‘United States – Standards for Reformulated and Conventional Gasoline’ (Panel and Appellate Body Reports Adopted 20 May 1996) (WT/DS2/9) has not specifically applied this principle. On the approach taken see generally F Fontanelli, ‘Necessity Killed the GATT – Art XX GATT and the Misleading Rhetoric about “Weighing and Balancing”’ (2012/13) 5 European Journal of Legal Studies 36.

100  Sue Arrowsmith procuring entity. However, such a condition – precluding limited tendering where the entity has delayed – appears implicit anyway in the GPA requirement that the goods or services ‘could not’ have been bought in time using public tendering. Article XIII.1 also requires that entities do not ‘use this provision for the purpose of avoiding competition among suppliers’. This appears to mean that derogations can only be used to promote the interests that they seek to protect (in cases of urgency, to achieve rapid procurement).192 While more flexible than the Model Law, and like the Directive, in allowing single source procurement for urgency in general, the GPA – again like the Directive – does not, on the other hand, include an explicit derogation for crises, which we have argued there are strong reasons to treat differently from other urgent situations by dispensing with some of the governing conditions for using direct solicitations. However, GPA, Art III.2 states that the GPA shall not ‘be construed to prevent any Party from imposing or enforcing measures’ that are (inter alia) necessary to protect public morals, order or safety, human, animal or plant life or health or intellectual property. As this author has argued previously, the better interpretation of this provision is that the Art XIII grounds for limited tendering, although otherwise exhaustive, do not rule out limited tendering to protect interests listed in Art III(2).193 This is potentially important for situations such as the COVID-19 pandemic to allow procurement free of some of the Art XIII conditions. However, the necessity requirement may require a competitive approach in principle,194 in contrast with the fully flexible approach of limited tendering (see below). However, it is submitted that single-source procurement may be assumed to be permitted in a crisis based on the reasons elaborated in chapter 2.195 In terms of information transparency, the GPA, like the EU, adopts the piecemeal rather than ‘transparency by default’ approach. As with the Directive, and in contrast with the Model Law, there is no requirement for an ex ante notice of limited tendering. However, there is an obligation to prepare a report in writing, which includes justification for using limited tendering (Art XIII.2) and which must be maintained for three years (Art XVI.3); an obligation to publish an award notice (within 72 days) referring to the justification; and obligations to provide information to participants on request (Art XVI.1). More specifically, the report requires a statement indicating the ‘circumstances and conditions described in [Art XIII.1] that justified using limited tendering’ (Art XIII.2) and the award notice ‘a description of the circumstances’ justifying this (Art XVI.2f) – wording similar to, but not identical with, parallel provisions in the Directive. As with the Directive, the purpose of these provisions in facilitating monitoring and challenge strongly indicates that more is required than simple 192 S Arrowsmith, Government Procurement in the WTO (Kluwer Law International: 2003) 282–83. 193 ibid 147–48. See also Anderson and AC Müller, ‘Keeping markets open’ (2020) 194–95, who consider that this derogation may be relied on to dispense with GPA rules. 194 Arrowsmith, Government Procurement in the WTO (2003) 145. 195 ch 2, section VA iii.

Recommendations for Urgent Procurement in the EU Directives and GPA  101 reference to the ground relied on, especially in the context of widespread electronic communications. This is also supported by Art XIII.2’s reference to circumstances and conditions, indicating that explanation of how the facts fit the conditions is needed, and by the wording of Art XVI.2f, indicating need for a ‘description’ of those circumstances. However, how much detail is needed on the elements of the test in Art XIII.1d would benefit from clarification. As in the Directive, there is no public right of access to the report, justifying an expansive interpretation of the requirements in the public award notice. There is also no requirement to justify all decisions in documentation comparable with that in Art 84(2) of the Directive, but merely to an obligation to retain the report and any documentation that exists. This means there is little transparency required in the conduct of the procedure. A stricter obligation along the lines of the Directive seems warranted, perhaps with temporary derogations for parties with limited electronic means. Like the Directive’s procedure without prior publication, limited tendering may involve either a competitive approach or single-source procurement: it is defined in Art Ih as ‘a procurement method whereby the procuring entity contacts a supplier or suppliers of its choice’. The US argued in Trondheim, which concerned use of limited tendering for research and development,196 that an obligation exists to consider ‘known and eager’ competitors and even to undertake pre-market solicitation; but the panel did not consider the point. There are, it is submitted, no such obligations; the obligation not to use this method to avoid competition refers to the decision to use this method, not the ‘manner’ of its use, which is addressed in a separate part of the proviso (see below) and such an obligation would entail significant legal uncertainty197 – particularly problematic in urgent cases. This does not, of course, preclude GPA parties from imposing such obligations on their own entities. On conduct of the procedure, the GPA, unlike the Directive, is clear: Art XIII.1 specifies that entities ‘may choose not to apply’ specified Articles, including those on time-periods, qualification, selection and award,198 while the remaining obligations – including on information transparency, as outlined earlier – do apply. On modifications to contracts Art XV.7 simply provides a skeletal obligation not to not use options, cancel a procurement or modify awarded in a manner that circumvents other GPA obligations, an obligation that might see future development in order to impose more precise controls.199

196 See now GPA, Art XIII.1f. 197 And see the discussion in Arrowsmith (n 192) 297–98. 198 Articles VII to IX (on public solicitation, conditions of participation and qualification, including multi-use lists), Art X.7–11 (provision of and amendments to tender documentation), Art XI (time scales), Art XII (dealing with negotiations in open and selective tendering), Art XIV (electronic auctions) and Art XV (award criteria and the award phase). 199 Art X.11 contains more detail on modifications prior to award which may provide some analogy here.

102  Sue Arrowsmith

IV. Conclusions This chapter aimed to assess the suitability of the EU and GPA frameworks for dealing with urgent procurement. Such an assessment requires detailed analysis of a complex and inter-related set of rules covering both tools of procurement and controls over their use, and these conclusions reflect the complexity of the topic. Overall, recognising that the perfect is the enemy of the good as trade-offs are inevitable, and that there is regulatory space for national systems to adopt different approaches to suit their circumstances, the analysis suggests that these instruments to a large extent provide both for sufficient speed and flexibility to deal with urgency and for adequate controls. This is particularly so if the rules are suitably interpreted, and we have suggested a number of interpretations to this end. However, we have also proposed some specific legal changes. These are needed, it is suggested, both to the rules governing ‘regular’ urgency and, under EU law, to deal with the special situation of crises which has been thrown into sharp relief by the COVID-19 pandemic. Turning first to the EU Public Contracts Directive, and leaving aside for the present the problem of major emergencies, we have seen that the Directive’s tools generally provide sufficiently for rapid procurement. This is especially so if they are interpreted in an appropriate way. In this respect, the principle of strict interpretation of the negotiated procedure without prior publication seems potentially inimical to a proper balance of interests. However, we argued that even under this principle each issue of interpretation must be examined carefully in the light of the specific interests involved, and that the principle tilts the balance against use of the procedure only in cases of doubt or, at least, where there is no disproportionate damage to national interests, resulting in adequate flexibility for most situations. On this basis we suggested – to give just a few examples – that all types of interests may potentially give rise to urgency that is ‘extreme’; that the conditions for using the procedure afford a margin of discretion for governmental policy-making, including in allocating resources to deal with risk (such as what stockpiles to keep); and that – using the COVID-19 experience as a test – foreseeability of events is to be determined in a nuanced manner in the light of the reasonableness of preparations, the precision with which needs can be predicted and their importance. We also suggested that the procedural requirements of this method are flexible and do not require competition. We also proposed relevant interpretations of the Directive’s other tools, such as the rule on modifying contracts for unforeseeable events, which we suggested allows broader scope for addressing urgency than the extreme urgency ground for new awards. While some – although by no means all – of the proposals on procedural rules tilted towards flexibility, those on information transparency, on the other hand, favoured an expansive interpretation, as a valuable approach to resolving the tensions inherent in urgent procurement even under the Directive’s current piecemeal approach to information. Thus the obligations to justify use of the negotiated

Recommendations for Urgent Procurement in the EU Directives and GPA  103 procedure without prior publication, including in award notices, and to record information on decisions made in choosing suppliers to participate and receive awards, should be interpreted to require quite detailed justification, as should the justification requirements for modification notices. While, with these appropriate interpretations, the EU framework already seems largely suitable for many urgent cases we have also, however, identified some improvements requiring legislation. Here we recommended, first, several changes that would both confer flexibility and, by so doing, reduce recourse to procedures without publication. These include allowing additional entities to use existing framework agreements in emergencies; extending DPSs beyond standardised products and services; and reducing, for urgent cases, the usual 10-day time for tendering under DPSs, or even changing the nature of this instrument to allow ‘permanent’ tenders that would not require tendering for call-offs. A more radical reform with similar ‘dual’ effects in the urgency context would be to allow generally for use of qualification systems under the Public Contracts Directive, facilitating use of these lists with procedures involving limited suppliers and also the potential for partnership-style approaches that could, for example, facilitate joint investment in finding solutions for potential emergencies or production switches. However, this would not be without problems given its impact beyond urgent cases and also GPA constraints. Finally, the Directive should clarify whether the grounds for procedures without publication in Art 32 of the Directive are exhaustive or whether TFEU derogations can apply; and should indicate in a list – in the manner done in the GPA – exactly which procedural obligations apply to this method, and that it does not require a competition. Alongside any such changes this there is also a strong case for extending obligations on information transparency, as well as adopting expansive interpretations of existing rules. Thus we suggested here the introduction of a mandatory ex ante notice (including justification) for all new awards, as well as an obligation for a notice to both stakeholders and the public (albeit possibly in aggregated form in the latter case) of all call-offs under framework agreements. First and foremost, however, the time may now be right for the EU to move altogether from the ‘piecemeal’ approach to information rights to a full open contracting approach, ensuring that information available is comprehensive and accessible, and in the process removing various anomalies identified in this chapter’s analysis, such as different treatment of new awards and modifications. Of course, this would require significant political will, investment and time to agree and implement across the EU. However, the COVID-19 pandemic has brought into sharp focus both the need for, and difficulties of, effective procurement, on the one hand, and the importance of public confidence, on the other, as well as – as a consequence – encouraging (in some countries) transparency of information as a response. This may create some political impetus that makes this the right to time to place this on the EU’s own agenda. This does not, of course, address issues around the nature and quality of information, and here we suggested that – whether or not an open contracting

104  Sue Arrowsmith approach is applied – there is a need to both streamline and clarify the level of detail required in justifications and record-keeping for modifications – to which internal-record keeping obligations do not clearly apply – accelerated procedures, and procedures without prior publication. This will ensure that there is a clear audit trail of reasoning and eliminate various anomalies in language and treatment that we identified, especially between modifications and new awards. The above conclusions are relevant for urgent cases in general, but what of the unusual circumstances of emergencies such as the COVID-19 pandemic? We have already noted some respects in which that event provides insight into the urgency rules more generally highlighting, for example, the need for a nuanced interpretation of foreseeability and the need to respect national policy decisions on allocating resources to different risks, as well as issues such as the absence of ex ante notices for direct solicitation procedures and the limited and/or uncertain nature of various procedural and transparency obligations concerning the conduct of those procedures. We also suggested that the pandemic highlights the case for, and may provide impetus for, wide information transparency obligations – something of major potential significance beyond the context of urgent procurement. Our analysis has also, however, highlighted some areas for interpretation and/or reform relating specifically to such ‘crisis’ events. The COVID-19 pandemic has shone a spotlight on the special challenges of widespread crises, including a potentially heavy reporting and justification burden that can detract from the ability to actually address the crisis and significant legal uncertainties in the urgency rules that could also deter action. Looking closely at the different interests involved in this context, it was argued that overall a better balance of those interests than is found in the current Directive would be achieved through a nuanced approach. It was proposed that this should, first, entail a new general ‘crisis’ ground for procedures without publication in Art 32, based on the crisis provision in the defence and security rules, that does not include all the governing conditions of the general urgency ground and which would help address the aforementioned problems; but that this should be counterbalanced by enhanced information transparency, as just proposed above, and be subject also to a formal declaration of crisis. We also argued – although this point would be less significant if a bespoke ‘crisis’ provision were introduced – that, subject to the proportionality principle – national authorities are permitted to adopt general measures elaborating the availability of the procedure without prior publication, precluding the need for case-by-case assessments of any governing conditions that might apply, again mitigating uncertainty and the reporting burden. Such special measures for crisis situations would also have the benefit of removing the temptation to water down the general urgency rules – including the interpretation of justifications – in order to cater adequately for crises. Moving to the GPA, we noted that this is more flexible and balanced than the EU rules in certain respects – for example, in allowing shorter accelerated procedures – and the chapter’s main recommendations were for a number of tweaks to the procedures. Thus we proposed some changes to the rules on multi-use lists to

Recommendations for Urgent Procurement in the EU Directives and GPA  105 enhance their utility for central/federal government in urgent cases, by allowing exceptions for urgency to the current requirements to publish a notice for each procurement and to assess those responding within the timeframe of the procurement. Of significance more broadly as well as for urgent cases, those requirements also cast doubt on the possibility of central entities using arrangements like the EU’s dynamic purchasing systems, something that needs to be addressed. These particular changes would, like many proposed for the Directive, add flexibility but at the same time promote transparency and competition by reducing use of procedures without prior publication. As regards limited tendering, this is probably available for ‘crisis’ situations without undue conditions by virtue of the general derogation in Art III(2), but improved clarity through the addition of a specific crisis ground could still be useful. (The position on which GPA procedural rules apply is, on the other hand, already admirably clear.) However, as with the Directive, we suggested a focus on enhanced information transparency. While the GPA follows the same ‘piecemeal’ approach of the Directive, it is perhaps too early for the GPA to require a fully open approach (although the WTO can certainly encourage that) and it might be more useful to focus on bolstering individual information and justification requirements. Encouraging an expansive approach in practice to the rather unclear justification requirements for limited tendering in the award notice and report, and consideration of an obligation to document all decisions along the lines of that in the Directive, might pay dividends, perhaps with some temporary derogations. Any focus on identifying general themes from the analysis perhaps risks oversimplifying a complex area: in relation both to procedures and controls some of the proposals aim at speed and flexibility, some at reducing flexibility or at tighter control, while others have an impact from both perspectives, notably by providing more flexibility with the highly regulated tools in a way that reduces the need to rely on the less competitive and transparent procurement methods. Overall, however, if key themes are to be extracted from the chapter they are twofold. The first is that there is an argument for a little more flexibility in procedures, but at the same time for a more expansive approach to information obligations. The second is that widespread emergencies do warrant slightly different rules from regular cases of urgency. The test provided for the international trade rules on procurement by COVID-19 indicates more a need for fine-tuning than a change of direction, resisting the temptation for over-regulation of the ‘discretion’ element of transparency that could hamper emergency responses, especially in situations of crises, while using the opportunity provided by electronic communications to improve the verification and enforcement dimension.

106

4 Regulating Single-Source Procurement in Emergency Situations in Light of the COVID-19 Pandemic: Issues in Policy and Practice LUKE RA BUTLER*

I. Introduction ‘Single-source’ can be used as a legal concept to refer to a formal procurement method as under the UNCITRAL Model Law on Public Procurement 2011 (‘Model Law’),1 which does not require a public solicitation (although it may involve an ex ante notice of its use).2 The procuring entity may engage with just one supplier but the rules may also allow engagement with more than one, without specifying a formal process. Some systems provide also for distinct methods without public solicitation but with a form of competition, as with the Model Law’s competitive negotiations method. Others provide only for a single method without public solicitation avoiding the term ‘single-source’, even if commonly operated with just one supplier, as with the EU’s negotiated procedure without prior publication3 under the EU Public Sector Directive4 and limited tendering procedure5 under the World Trade Organization Government Procurement Agreement (GPA).6 The latter was * The research for this chapter was conducted within the remit of AHRC Grant AH/V012657/1. The author is grateful to the Co-Investigator, Sue Arrowsmith QC (Hon), for detailed comments and discussions on earlier versions and to the Open Contracting Partnership, a partner under the grant, for providing various reports. 1 United Nations Commission on International Trade Law, UNCITRAL Model Law on Public Procurement 2011 (2014). 2 ch 2, section V.C. 3 ch 3, section II.E.vi. 4 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC OJ L94/65. 5 ch 3, section III.B. 6 Revised Agreement on Government Procurement and WTO related legal instruments, as amended on 30 March 2012.

108  Luke RA Butler changed from ‘single tender’ to ‘limited tendering’ to clarify that negotiations with more than one supplier or even a formal competition are possible. ‘Single-source’ can also refer to a practical procurement process with only one supplier, eg when a formal (legal) single-source method is applied, when just one supplier is addressed within the above EU and GPA methods, or where procurement is carried out under a total or partial exclusion from procurement laws, eg for security reasons. The related concept of a ‘direct award’ is sometimes equated with single-source, in either sense above, but also to any method or award (including competitive) without a public solicitation, while ‘direct solicitation’ simply refers to any process without a public solicitation. This chapter refers to ‘single-source’ as principally concerning the scenario in which a procuring entity negotiates with one supplier corresponding to the possibilities under the Model Law’s single-source method. Were use of the Model Law competitive negotiations method increased, the scope for single-source could be reduced.7 However, as the country case studies indicate and chapter 2 reviews, the possibility of single-source procurement has been specifically extended in many countries (eg Columbia, Brazil, China, Italy, Nigeria and South Africa) under exceptional approaches to procurement for the COVID-19 pandemic with no or limited conditions or simply permitted ostensibly in accordance with usual conditions governing use for urgency (eg Singapore and UK). Unsurprisingly, many countries have reported an exponential increase in its use, in particular, for healthcare and other needs.8 Many factors impact single-source procurement in emergencies including: the type of emergency, eg a local environmental disaster versus urgent operational requirements in a war or pandemic; the extent of urgency, eg immediate healthcare versus longer-term infrastructure for recovery; and type of requirements, eg offthe-shelf medical goods such as personal protective equipment (PPE) versus design and implementation of testing and tracing. In the pandemic, for PPE, a competitive process was generally not possible given the need to source masks to a basic specification from any available supplier and offers were time-limited. Test and trace might admit a single-source or competitive process given the need remains urgent but a lesser priority than PPE and presents more complex technological and logistical challenges. Both scenarios may be contrasted with requirements such as IT equipment for homeworking where a single-source award is made but a competitive process should generally be possible. In conducting single-source procurement, the trade-offs between speed and other considerations, including transparency, competition and, where regulatory constraints apply, even risks around legal compliance, require acute time-critical judgments. As chapters two and three discussed, the international frameworks contain few rules on single-source procurement; resort to it may be controlled principally for



7 ch 8 ch

2, section V.A. 23, section III.

Regulating Single-Source Procurement in Emergency Situations  109 trade reasons; however, it may then largely be left to domestic regulation to deal with what are predominantly direct commercial negotiations between a procuring entity and supplier. Therefore, it is often treated by international legal frameworks as exceptional in legal terms which can be difficult to reconcile with its prevalence in practice. This may impact the effectiveness of regulation. The flexibility and discretion afforded by limited rules tends not to be counterbalanced by robust policy guidance on the exercise of discretion. Moreover, in the EU at least, the decision to use single-source procurement tends to be subject to a strict interpretation principle.9 These issues are exacerbated in emergencies. This chapter does not examine the general effectiveness of single-source regulation; rather, it focuses on certain practical issues in emergencies which, in turn, however, raise broader issues. Section II examines aspects of procurement including: the choice between alternative procurement routes in the specific case where the market leads the response to the emergency (section II.A); selecting suppliers and offers (section II.B); notices, records and reports, including justifications (section II.C); approvals (section II.D); and access to information (section II.E). Section III is concerned with pricing (sections III.A and III.B) and related contract management (section III.C), since single-source contracts are particularly susceptible to high prices and additional performance risks. Section IV concludes. It is argued, consistent with the findings in chapters two and three, that the issues that have arisen as a matter of policy and practice support the need for reform of existing international frameworks which could improve regulation of single-source procurement. However, there is likely to continue to be areas of legal and practical uncertainty which require further targeted interventions either through additional legal requirements (under national law and/or the international legal frameworks) and, more likely, policy guidance. The analysis focuses primarily on single-source based on urgency, acknowledging other grounds may be invoked in emergencies. It draws mainly on the pandemic, but future research should revisit other emergencies. Further not all important issues are considered (eg, exclusion (debarment) for corruption, which raises many cultural and structural issues beyond the regulatory focus of this book). It draws on illustrative but necessarily representative examples of practice mainly in the country case studies, in particular, the UK, as the jurisdiction most familiar to the author, providing simply a useful starting point for future comparative analysis. Finally, this chapter reinforces chapter 2’s observation that a sound regulatory framework can only provide a starting point for effective procurement.10 The pandemic has exposed that many countries do not have robust emergency procurement strategies. Improvements to procurement rules can only support and not dictate those strategies.



9 ch

10 ch

3, section II.E. 2, section I.

110  Luke RA Butler

II. Procurement A.  Alternative Market-Led Methods The nature, scale and unforeseeability of an emergency may mean that procuring entities cannot devise their requirements or require considerable market input to do so; or suppliers may contact them unsolicited to propose goods or services not even contemplated. Procuring entities then face the initial challenge of choosing a procurement method that can facilitate market interaction, whether through a call to the market to respond to unrefined requirements or in responding to unsolicited offers, and which provides for quick selection with low risk of challenge. As chapter 2 indicated, existing methods under international frameworks are based on the traditional public sector demand-led model, in particular, competitive tendering.11 These do not easily facilitate market input let alone market-led procurement, including methods that permit more dialogue with suppliers, eg the request for proposals with dialogue under the Model Law and competitive dialogue and innovation partnership under the EU Public Contracts Directive.12 This may also explain, in part, why research and development (R&D) is subject to limited coverage (as under the Public Contracts Directive)13 or a ground for limited tendering (as under the GPA)14 with the expectation that production contracts are separately competed. This raises the issue of how existing methods involving single-source have ­operated during the pandemic where it has been necessary for the market to lead. It is arguable that these have faced legal and practical challenges calling into question their effectiveness; that there are other market responsive methods not extensively subject to other prohibitive limitations; and that legal frameworks might consider better accommodating market-led procurement by incorporating certain methods and/or improving policy guidance on their use. An example is the UK Rapid Manufacture Ventilator Systems programme (‘Ventilator Challenge’). The Government issued a ‘call to arms’ for new or modified ventilators. This was described in a National Audit Office (NAO) report as ‘not a traditional competition on ‘most economically advantageous tender’ grounds.15 Rather, the Government set a basic specification and then continuously assessed multiple options provided by suppliers against specifications that were also repeatedly revised. Suppliers were eliminated if specifications could not be met or were

11 ch 2, section V.B. 12 Arts 30 and 31. The same could arguably be said for design contests under Art 32(4). 13 Art 14. 14 GPA, Art XIII(1)(f). 15 National Audit Office, ‘Report by the Comptroller and Auditor General, Cabinet Office and Department of Health & Social Care, Investigation into how government increased the number of ventilators available to the NHS in response to COVID-19’ HC 731 Session 2019–21 (30 September 2020) 36.

Regulating Single-Source Procurement in Emergency Situations  111 not needed. This seemed to allow a more iterative process for refining requirements to determine which suppliers were viable before awarding supply contracts. However, contracts were, in fact, then awarded without competition based on whether a supplier met specifications.16 There was no direct competition, although, as section III.B.iii discusses, offers were subject to pricing controls.17 As section II.B and chapter 15 will discuss, UK legal challenges to pandemicrelated procurement have exposed legal uncertainty regarding the extent to which single-source awards may violate general principles of EU law where, as also with ventilators, a procuring entity issues a general call to arms, receives many responses, applies criteria to select suppliers and then enters contracts without comparing offers on the same terms. Further, in the Ventilator Challenge, the Cabinet Office indemnified suppliers against legal actions for breaches of competition and procurement law, clearly acknowledging legal risks.18 This suggests that even the most flexible methods may be susceptible to significant legal risks in responding to the practical challenge of relying extensively on the market in an emergency. Another relevant existing method is unsolicited proposals.19 For example, in the US, a single-source award was made following an unsolicited proposal to identify best practices for blood pressure monitoring given the association between COVID-19, hypertension and potentially higher ‘excess death’ rates for ethnic minorities.20 The international legal frameworks do not expressly provide for unsolicited proposals but, as chapter 2 indicates, the Model Law single-source method might allow this.21 Their potential has been recommended within the EU, although it has not been made clear how Member States could use these within the framework of EU law.22 In most countries, unsolicited proposals are not permitted given the preference for competition.23 The tendency is to authorise use mainly

16 ‘United Kingdom-Liverpool: Gas-therapy and respiratory devices’ 2020/S 100-243206, Contract award notice, Results of the procurement procedure, Supplies, available at ted.europa.eu/ udl?uri=TED:NOTICE:243206-2020:TEXT:EN:HTML. 17 NAO, ‘Report by the Comptroller and Auditor General’ (30 September 2020) 36. 18 ibid, 20. 19 The US Federal Acquisition Regulation (FAR) 15.603(c), for example, defines an unsolicited proposal as a written proposal for a new or innovative idea that is submitted to an agency on the initiative of the offeror for the purpose of obtaining a contract. It must be independently originated; therefore, it can be a response to a publicised general statement of agency needs but not an advance proposal for a known agency requirement that can be acquired by competitive methods. 20 Details are available at www.federalregister.gov/documents/2020/11/02/2020-24150/awardsunsolicited-proposal-catalog-of-federal-domestic-assistance-cfda-number-93137-and-93129. See also an award to provide information to mitigate the spread of COVID-19 in a culturally sensitive way: www.federalregister.gov/documents/2020/08/13/2020-17516/awards-unsolicited-proposalfor-the-health-communication-initiative-program. 21 ch 2, section V.B. 22 European Commission, ‘Public Procurement for Research and Innovation Expert Group Report, Developing procurement practices favourable to R&D and innovation’ (September 2005) 7 and 28. 23 A Chew, ‘Use of unsolicited proposals for new projects – the approaches in Australia’ (2015) 10 European Procurement & Public Private Partnership Law Review 29–34.

112  Luke RA Butler for large capital projects.24 Similarly, in the pandemic, research has recommended their use for infrastructure development to aid economic recovery25 and to meet future healthcare requirements.26 However, there is also evidence of their encouragement in the early phases, eg in Australia and the US.27 Queensland, in particular, mandated unsolicited proposals as part of its COVID-19 procurement policy. This first encourages suppliers previously unknown to the Government to register on a portal or lodge a request to join Standing Offer Arrangements; only where this was not possible could procuring entities consider contracting directly through unsolicited proposals.28 It is beyond this chapter’s scope to examine the obstacles to, and opportunities for, using unsolicited proposals, but there are several considerations to acknowledge.29 These include: reluctance to make unsolicited proposals without an indication of likely uptake (whereas there is more assurance in a formal competition); unwillingness to exchange commercially sensitive information without safeguards; and risks of obtaining R&D contracts but production being subject to competition with no guarantee of success. In emergencies, unsolicited proposals through a formal process are unlikely, especially when they are subject to detailed legal and process requirements and it is possible to secure contracts through other routes more quickly and subject to less regulation. The US, for example, prescribes procedural rules ranging from permitted contact with agency personnel through to factors for consideration in evaluation.30 24 R Cunha Marques, ‘Empirical Evidence of Unsolicited Proposals in PPP Arrangements: A Comparison of Brazil, Korea and the USA’ (2018) 20 Journal of Comparative Policy Analysis: Research and Practice 435. 25 In the Ukraine, see I Zapatrina, ‘Ukraine – Unsolicited Proposals: New Realities in COVID Times’ (2020) 15 European Procurement & Public Private Partnership Law Review 255. In Australia see P Alexander, K Kelleher and T Bleby, ‘The case for market-led proposals as part of Australia’s COVID-19 recovery’, Allens Linklaters (13 May 2020), available at www.allens.com.au/insights-news/ insights/2020/05/case-for-market-led-covid19. 26 D Baxter, ‘Pragmatic Procurements (Solicitations) of Emergency Healthcare Unsolicited Proposals During the COVID-19 Pandemic’ Public Spend Forum (4 July 2020), available at www.publicspendforum.net/blogs/david-baxter/2020/04/07/pragmatic-procurements-solicitations-ofemergency-healthcare-unsolicited-proposals-during-the-covid-19-pandemic. 27 AB Krachman, ‘Using Unsolicited Federal Contract Proposals for Sole Source COVID-19 Related Contract Awards’, Government Contracts Navigator (27 March 2020), available at governmentcontractsnavigator.com/2020/03/27/using-unsolicited-federal-contract-proposals-forsole-source-covid-19-related-contract-awards; Small Business Office Acquisition Policies & Legislation Support Branch Office of Acquisition Management Federal Emergency Management Agency Department of Homeland Security, ‘Doing Business with FEMA’, 8–9, available at www.fema.gov/ business-industry/doing-business; and for USAID, information is available online at www.usaid.gov/ work-usaid/get-grant-or-contract/unsolicited-proposals. 28 Queensland Government, ‘Procuring during the COVID-19 emergency’ (undated), available at www.hpw.qld.gov.au/__data/assets/pdf_file/0018/11790/emergency-procurement-covid-19.pdf and Procurement Advisory Notice 8/2020, ‘For buyers – Unsolicited proposals to supply to Queensland Government’ (7 April 2020). 29 The author is grateful to Joshua B Duvall Esq, Managing Partner at Matross Edwards LLC for useful discussions on the practicalities of identifying alternative routes to procurement during the pandemic. 30 US FAR 15.606 et seq.

Regulating Single-Source Procurement in Emergency Situations  113 It is also not certain that procuring entities have developed clear processes for use in emergencies under unsolicited proposal policies. The Australian policy specifies that conditions for accepting unsolicited proposals include: that appropriate vetting measures have been undertaken; engagement is driven by an urgent need and the emergency categorisation allows for flexibility to undertake an alternative process; and the decision is made by the delegated authority, including an appropriate risk assessment of the procurement activities, adheres to any agency emergency procurement policies and procedures and is documented.31 However, it is not clear what these conditions entail. There are no references to other important conditions such as safeguarding commercial information and no indicative processes, eg timescales for assessing proposals.32 These might be prescribed elsewhere but if not publicly visible may be susceptible to challenge. An alternative in the US is ‘other transactions agreements’.33 Initially authorised under the 2016 National Defense Authorization Act, under this method competitive procedures are used to award an initial ‘other transaction’ for a prototype followed by a sole-source follow-on production contract to scale up mass delivery. This is subject to limitations, namely that the follow-on contract must be provided for in the initial agreement and prototyping must be done before issuing follow-on production. This method lowers barriers to entry for non-traditional government contractors because it is subject to reduced legal regulation such as the US Federal Acquisition Regulation and cost accounting standards, in theory, do not apply, thereby reducing acquisition lead times. Whilst reduced regulation may increase access and flexibility, this also creates inevitable risks of reduced accountability and transparency.34 In response to the pandemic, a Memorandum was issued temporarily broadening approval authority for other transactions and removing advance notice to Congress with notification as soon as practicable after their commencement.35 Other transactions are becoming used more frequently including in response to the pandemic.36 However, whilst this method is subject

31 Procurement Advisory Notice 8/2020, ‘For buyers – Unsolicited proposals to supply to Queensland Government’ (7 April 2020) 1. 32 For instance, the policy states that this approach is supported by Clause 1.2 of the Queensland Procurement Policy. Clause 1.2 simply states that ‘Agencies will identify the procurement strategy and method (open, limited or selective) most appropriate for delivering the best procurement outcome. This will be based on an assessment of complexity, scope, opportunities and risks associated with procurement objectives, as well as the level of competition in the supply market’. Queensland Procurement Policy 2021, 3. 33 NE Castellano, ‘“Other Transactions” Are Government Contracts, And Why It Matters’ (2019) 48 Public Contract Law Journal 485. 34 Government Accountability Office Report to Congressional Committees, ‘Defense Acquisitions: DOD’s Use of Other Transactions for Prototype Projects Has Increased’, GAO-20-84 (22 November 2019) 2. 35 Under Secretary of Defense, Memorandum, ‘Delegation of Authority for Use of Other Transactions for Prototype Projects Under Title 10’, United States Code, section 2371 b, 5 April 2020. 36 As of June 11, 2020, the US Department of Defense reported obligating US $235 million for production and prototype other transactions, including COVID-19 related trials and research. The US Department of Health and Human Services (HHS) reported obligating about US $47.7 million on

114  Luke RA Butler to general guidance,37 a 2020 Government Accountability Office Report has found that US Department of Health and Human Services officials stated that no guidance has been issued for COVID-19 projects.38 In light of such examples, regulatory systems should revisit the responsiveness of existing methods to market-led initiatives, in particular, in emergencies where single-source features and how this could be better facilitated. If subject to minimal legal regulation, this must also be counterbalanced by more effective policies which clearly articulate the circumstances in which they might be used, processes for award, as well safeguards regarding information disclosure.

B.  Means of Selecting Suppliers and Assessing Offers Another critical issue in emergencies is how to identify suppliers, determine their suitability, conduct negotiations and choose an offer. As chapters two and three discussed,39 the international legal frameworks prescribe few procedural rules, but some general legal obligations often are appropriate and do apply, eg on communications. Further, there has been limited guidance at international and national level on the precise extent of legal obligations and general processes to follow.

i.  Methods and Means of Direct Solicitation It is necessary to emphasise at the outset that single-source procurement in emergencies need not entail using unknown suppliers. As chapter 3 discussed, even if public solicitation is not possible, procuring entities may contact suppliers on existing lists, which will not generally infringe equal treatment principles as this is objectively justified in emergencies.40 Selection from such lists may not follow typical formal processes, but does mitigate potential risks and criticisms of suppliers being selected with no prior determination of suitability. As section II.A indicates, suppliers may also contact procuring entities offering unsolicited proposals and this can also be characterised as direct solicitation. Further, for reasons explained below, there may be a deliberate strategy to solicit directly from unknown sources via other means. In extremely urgent cases where systematic market searches are not possible, the most informal means may be used such as telephone calls or emails based on one other transaction. See Government Accountability Office Report to Congressional Committees, ‘COVID-19 CONTRACTING, Observations on Federal Contracting in Response to the Pandemic’, July 2020, GAO-20-632, 23. 37 US Department of Defense, ‘Other Transactions Guide’ Office of the Under Secretary of Defense for Acquisition and Sustainment (November 2018), Version 1.0, available at www.dau.edu/guidebooks/ Shared%20Documents/Other%20Transactions%20(OT)%20Guide.pdf. 38 Government Accountability Office, ‘COVID-19 CONTRACTING’ (2020) 23. 39 ch 2, section V.B and ch 3, sections II.E.vii and III.B. 40 ch 3, section II.E.vii.

Regulating Single-Source Procurement in Emergency Situations  115 known contacts or speculation. However, even then, such means could be used to contact more than just one supplier. As chapter 15 discusses,41 in a UK judicial review of a communication services contract awarded during the pandemic involving a determination of apparent bias,42 it was identified that there was no reason why other suppliers could not have been consulted on a possible contract brief at short notice by telephone, rather than just the supplier awarded the singlesource contract.43 This section discusses just some approaches to solicitation in the pandemic. a.  Supplier Lists for Use by Individual Procuring Entities There does not appear to be much data on using supplier lists for direct solicitations. An Open Contracting Partnership (OCP) report found that in the 12 countries studied, listing in a supplier registry before the pandemic increased chances of obtaining a contract.44 The OCP has highlighted the importance of up-to-date and simplified supplier registration to establish clear communication channels with market participants.45 As indicated in certain country chapters (eg South Africa), one strategy was to open up centralised mechanisms such as framework agreements to all procuring entities. The UK provides another example of using centralised supplier catalogues. Thus in May 2020, the National Procurement Service in Wales published information on its website encouraging procuring entities to use both the national contract portal (Sell to Wales) to identify advertised contract opportunities for PPE and other requirements and the UK central Government Crown Commercial Services (CCS) catalogue of suppliers which enabled procuring entities to search for goods and services offered by region.46 CCS expressly encouraged procuring entities to call on existing frameworks first with the supplier catalogue simply filling gaps where these were unable to meet needs. The procuring entity could then either contact CCS for assistance or the supplier directly. This was accompanied by a disclaimer that because CCS was acting quickly, it had not completed any assurance of suppliers and any procurement would need to comply with EU law. 41 ch 15, section III.D.iv. 42 R (on the application of the Good Law Project) v Minister for the Cabinet Office [2021] EWHC 1569 (TCC). 43 In this case, at [162] the suggestion that there was no time to brief another agency was considered unpersuasive by the court. The Government used a guide it produced for another supplier already undertaking other work to brief the chosen supplier at short notice by telephone, which indicated that other suppliers could have been briefed in a similar manner. 44 The countries studied were Argentina (Buenos Aires), Columbia, Ecuador, Georgia, Guatemala, Kenya, Lithuania, Nepal, Nigeria, Paraguay, Philippines and Uruguay. Open Contracting Partnership, ‘Lessons from the pandemic, Findings and recommendations for better emergency procurement’ (2020) 4. 45 Open Contracting Partnership, ‘Lessons from the pandemic’ (2020) 10. 46 Information is available online at gov.wales/provision-of-personal-protection-equipment.

116  Luke RA Butler This illustrates some of the possible difficulties when using centralised mechanisms to identify suppliers which, in the UK, probably resulted in many single-source awards. As the procuring entity remains legally responsible, there is little central guidance on how to award contracts once suppliers are identified. As central assistance is offered but also with a disclaimer, this appears to acknowledge that such solicitation methods involve risk. It is also unclear to what extent procuring entities formally recorded and published recourse to such methods. This raises wider questions about how responsibility is allocated between central and local government when procuring during emergencies. b.  Central Solicitation In global emergencies, it may be necessary to extend solicitation to the widest possible pool. National lists are likely to identify only known specialist suppliers and be geographically limited. By contrast, in the pandemic, the global demand for PPE meant procuring entities had to source as widely as possible. In turn, this led to increasing refinement and centralisation of solicitation approaches. In the early phases, there are examples of dedicated forms requesting information from potential PPE suppliers to obtain a provisional view on the suitability of offers.47 As demand increased, suppliers were referred to regional and national portals to register to indicate what they could offer. Requested information included products available, price, quantity, technical certificates (including evidence); and business details for vetting. The UK, for example, established a Coronavirus Support from Business Scheme.48 Inevitably, this creates practical problems. The most significant is the difficulty of knowing whether all responses are actually processed. If not, viable offers could be missed, potentially raising issues of unequal treatment. The UK, again, provides a useful example to illustrate other issues that may arise in filtering thousands of offers received through multiple channels. The Government has described its approach as ‘open source’ whilst international media has accused it of creating a ‘secretive “VIP lane”’ fuelling claims of cronyism.49 To explain, at central government level, an inbox was created for referrals by politicians (across all parties) in respect of suppliers who could offer or locate PPE. 24,000 PPE offers were received from 16,000 suppliers. Therefore, a cross-government PPE team established a

47 See the US Government of the District of Columbia information form. Information is available at dcgov.seamlessdocs.com/f/dccovid19supplies. 48 This is now closed, although the Government is still accepting offers of tests, test consumables and testing facilities, eg new types of test, throat swabs, and laboratory capacity. Information on the initial support scheme is available at www.gov.uk/coronavirus-support-from-business. 49 J Bradley, S Gebrekidan and A McCann, ‘Waste, Negligence and Cronyism: Inside Britain’s Pandemic Spending’, New York Times, 17 December 2020, available at www.gov.uk/government/ news/response-to-article-published-by-the-new-york-times-on-uk-government-procurement. The Cabinet Office response dated 23 December 2020 is available at www.gov.uk/government/news/ response-to-article-published-by-the-new-york-times-on-uk-government-procurement.

Regulating Single-Source Procurement in Emergency Situations  117 ‘high-priority lane’ to assess and process the most credible leads, eg from large established companies. This was in addition to a ‘normal lane’ established to assess and process PPE offers. An eight-stage process was applied to assess and process offers, and both lanes used this same process. Whilst not entirely clear, it appears that there was a provisional assessment and verification by the team and, after initial approval, offers were passed to buying teams who prioritised offers based on urgency of need, quantity offered, value for money (using existing price benchmarks), certainty of supply and lead times. Where appropriate, further financial checks were conducted prior to contracts being concluded.50 Approximately one in ten suppliers in the high-priority lane (47 of 493) obtained contracts compared to less than one in a hundred in the ordinary lane (104 of 14,892).51 It is apparent from inquiries and a legal challenge that there are legal and practical risks in using this type of ‘open source’ approach. A first point is that where the process is governed just by general principles, there may be significant legal uncertainty over what processes are permitted. As chapter 15 discusses, in an application for permission for judicial review of PPE awards in the UK, it was considered arguable that under the EU negotiated procedure without prior publication, Art 18 of the EU Public Contracts Directive and EU Treaty principles apply, such as equal treatment, transparency and proportionality.52 It was accepted, in principle, that this would also be the case where the ‘background’ to the procedure’s use is an open invitation to offer to supply PPE (via referrals and other means), but then a filtering process resulting in singlesource awards; thus it is arguable that the whole process should be subject to transparent criteria, even though the award itself is single-source.53 In a renewed application, permission has also been granted on grounds of irrationality on the basis inter alia that there were no stated criteria for referrals, and sources of referrals were not always identified and/or justified.54 Of course, legal obligations determined in hindsight could not necessarily be foreseen at the onset of the pandemic, demonstrating some of the challenges of planning emergency procurement in conditions of legal uncertainty. As section II indicated, simply indemnifying parties against procurement law and other risks is unlikely to be considered a principled way to plan. As chapter 15 discusses,55 50 Government Legal Department, ‘Response to letters before action Re: Claim No. CO/2144/2020 The Queen on the application of (1) The Good Law Project (2) EveryDoctor Limited v Secretary of State for Health and Social Care and Crisp Websites Limited (trading as Pestfix)’, 1 July 2020 at [29], available at goodlawproject.org/wp-content/uploads/2020/07/PestfixGLD4-1.pdf. 51 NAO (n 15) 9. 52 See R (On the application of The Good Law Project and Everydoctor Limited) v Secretary of State for Health and Social Care [2020] EWHC 3609 (TCC) at [23]. 53 Notification of the Judge’s decision on the application for permission to apply for judicial review (CPR 54.11, 54.12) at [5]. Information is available at drive.google.com/file/d/1vGHuL-jwug XUXS96hX2EwbL5nFhiRFhp/view. 54 R (On the application of The Good Law Project and Everydoctor Limited) v Secretary of State for Health and Social Care [2020] EWHC 3609 (TCC) at [63]. 55 ch 15, section D.II.

118  Luke RA Butler introducing special crisis grounds for urgent procurement could mitigate legal risk exposure and decision-making being judged in hindsight, and contribute to improving planning. A second point is the need to devise and apply objective selection criteria. This includes not only conventional criteria assessing qualifications, technical and financial competence, etc, but also criteria which may be used in emergency processes, eg to determine which suppliers to refer on to procuring entities where they invite leads from multiple sources and which offers following on from those leads to prioritise for assessment. As section II.B.ii will discuss, in the UK, permission for judicial review has been granted on grounds that an award was irrational because of no stated criteria for referrals to the priority lane and no sufficient financial or technical verification.56 A Public Accounts Committee (PAC) report found that it was unclear why it was assumed that leads by politicians were more credible than those from healthcare organisations with existing supplier relationships, that referrals were based on judgements by politicians’ and who were not necessarily in a position to vouch for the credibility of the lead, and that there were ‘no written rules’ to support those deciding which leads to put forward.57 An NAO investigation into COVID-19 procurement also found that sources of referrals to the high-priority lane were not always recorded and one supplier was added in error.58 Ultimately, the Government also accepted that the ‘high-priority’ lane leads were handled better despite the same process applying to both lanes.59 A third point is how to effectively manage potential conflicts of interest. In the above example, there was a risk where politicians made referrals which could be viewed as personal recommendations and where officials from multiple government departments were involved in the same procurement process. The NAO procurement report highlighted the importance of complying with the Public Contracts Directive, Art 24, which requires appropriate measures to prevent, identify and remedy conflicts of interest.60 Further, as chapter 15 discusses,61 this issue has become even more acute following a recent legal challenge to the award of a communication services contract where there was a finding of apparent bias given perceived risk arising from a personal and professional connection between the decision-maker and supplier, and where there were no objective criteria for their selection.62 The UK has now made various policy changes and recommendations to address conflicts of interests in light of this experience. 56 R (on the application of The Good Law Project) v Secretary of State For Health And Social Care [2020] EWHC 3609 (‘Pestfix’) at [66]. 57 House of Commons Public Accounts Committee, ‘COVID-19: Government procurement and supply of Personal Protective Equipment, Forty-Second Report of Session 2019–21 Report, together with formal minutes relating to the report’ (4 February 2021) HC 928, published on 10 February 2021, 7. 58 NAO (n 15) 9. 59 ibid. 60 NAO (n 15) 31. 61 ch 15, section III.D.iv. 62 R (on the application of the Good Law Project) v Minister for the Cabinet Office [2021] EWHC 1569 (TCC).

Regulating Single-Source Procurement in Emergency Situations  119 A final point concerns the adequacy of documentation processes to ensure an effective audit trail. The NAO procurement report referred to the need for procuring entities to comply with Art 84 of the Public Contracts Directive in respect of keeping records and reports, having identified various instances where information was not recorded.63 Article 84 requires procuring entities to document progress of all procedures on matters including inter alia selection and award. That said, it also only provides for reporting of the results of qualitative selection and reduction of numbers pursuant to certain provisions (Arts 65 and 66) which do not expressly refer to the negotiated procedure without prior publication. Further, it only refers to reporting of the circumstances justifying use of this procedure. Therefore, there is some uncertainty about how general record-keeping and reporting requirements apply in respect of single-source awards, in particular, in emergencies. What is clear is that there appears to be insufficient disclosure. A UK review into certain communications contracts awarded during the pandemic recommended that where a contract is to be awarded to a specific supplier without any competition, this should be escalated to a higher level for approval and subject to ‘additional disclosure’, although it is not indicated what this would require.64 As chapter 1565 discusses, recommendations have been made to address conflicts of interest which take account of obligations under Art 84. Consistent with chapter 2 and 3’s recommendations, the international legal frameworks may not require a procuring entity to prescribe any criteria or process, except perhaps to ensure that persons with conflicts of interest are not involved in selection. However, national systems should articulate and document clearer processes and criteria for determining participants and choosing between them. The record should also be available for disclosure of this information, even only if in summary or redacted form. This would improve the quality of decisionmaking and accountability and may also reduce challenges to the legality (at least transparency) of such processes.

ii.  Criteria for Choosing the Winner The UNCITRAL Model Law leaves the process of selecting participants almost wholly unregulated66 and the GPA and EU Public Contracts Directive also allow broad discretion for states relating to determining participants, even for public tendering.67 Chapter 2 suggested (in respect of competitive negotiations, but which 63 NAO (n 15) 31. 64 Boardman Report on Cabinet Office Communications Procurement, 8 December 2020, 6, Recommendation 25. This also sets out a proposed process at 16, Fig 1: Process for escalation when a recommendation is made for a specific supplier, and a full competition is not possible. This is available at assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/982161/ Boardman-Review-of-Cabinet-Office-COVID-19-Communications-Procurement-final-report.pdf. 65 ch 15, section III.D.iv. 66 ch 2, section VI. 67 See eg Art 58 of the Directive (but it is unclear how far its usual rules even apply to single-source procurement).

120  Luke RA Butler should also be the case in respect of single-source) that it is a sound approach not to prescribe specific selection criteria in legislation but that other controls should be introduced.68 Similarly, the international legal frameworks do not prescribe strict rules on formulation and advance disclosure of criteria for choosing between participating suppliers in direct solicitations. Chapter 2 recommended that this should not be the case; sufficient control may be provided by articulating in the record the approach used, counterbalanced by proactive public disclosure of this part of the record.69 Various practical considerations arise in devising criteria for emergencies. Where time is of the essence, the ability to secure vital equipment may prioritise assessment of the validity of the offer above the offeror or confine selection to assessment of essential factors such as capability to supply. The focus might be less on assessing which supplier has better capability to perform in relative terms and simply whether the available supplier is capable of performing. It may also take time to standardise selection processes to respond to an emergency.70 Further, since there is only one or a limited number of suppliers, qualification and selection criteria are unlikely to be as instrumental as in competitive procurement where they are sometimes a tool for reducing numbers of participants. Concerning the type of criteria that might be used, much will depend on the nature of the emergency and type of good or service required. For globally sourced PPE, geographical security of supply may be especially important71 whereas technical competence may be more important when designing and delivering test and trace capability. One aspect that has been the subject of research in the pandemic is past performance. The OCP report found that 30 per cent or more of PPE suppliers in Columbia were ‘multipurpose’.72 Up to half of contracts were awarded to companies with no prior government contract experience.73 On this basis, it has been suggested that this creates greater risks to supply.74 However, it might be questioned to what extent prior experience is generally useful as a criterion in an emergency. Even existing suppliers are unlikely to have had relevant experience in contracting in emergencies, especially a pandemic. 68 ch 2, section V.A. 69 ch 2, section VI. 70 For example, the UK Government awarded contracts to 71 suppliers (total value £1.5 billion) before processes were standardised. NAO, ‘Report by the Comptroller and Auditor General, Cabinet Office, Investigation into government procurement during the COVID-19 pandemic’ HC 959 Session 2019–2021 (26 November 2020) 9. 71 For reference to EU case law supporting such a security of supply interest, see chapter 9, section III. 72 OCP, ‘Lessons from the pandemic’ (2020) 15, which found that this share increased to 38% when considering only contracts awarded using the direct contracting procurement method. Based on the findings of a report by the Anti Corruption Institute, ‘Design and measurement of a corruption risk index from a supplier perspective in the context of COVID-19 emergency’, Working Paper, August 2020. 73 The OCP report (n 44) 6 also found that, in Georgia, 50% of the total value of emergency contracts were awarded to companies that had already been registered on a public registry before the pandemic (ie were existing suppliers) but had no prior public procurement experience. 74 ibid 15.

Regulating Single-Source Procurement in Emergency Situations  121 Further, to take the need for PPE as an example, a large company may have no prior PPE manufacturing experience but could easily repurpose its capability to produce PPE on a bigger scale than a small company who specialises in PPE. Prior manufacturing experience may also be less relevant if the contract involves the services of an agent to source and/or broker PPE sales in foreign countries including where access to relevant export licences may be a key factor. As chapter 1575 indicates, in an application for judicial review, it was argued that it was irrational to award a contract to a company who supplied PPE for use in pest control because it had no manufacturing capacity, as further evidenced by receipt of large pre-payments up to 75 per cent of the price to undertake sourcing.76 The court concluded it was not irrational to award a contract to a company offering to source PPE with experience simply because it had no manufacturing capability (and could produce test certificates for goods to be supplied). The UK Government also argued more generally in pre-hearing correspondence that it would have been ‘perverse’ to narrow down the field by imposing ‘artificial pre-qualification requirements such as minimum turnover requirement or necessary prior experience’ because of the need to maximise the number of offers and that ‘to impose restrictions of the kind suggested would further have entailed substantial procurement law risks’, although it is unclear specifically what are those risks.77 There are also other controls to safeguard against performance risks eg providing that a supplier may be excluded from future procurement for poor performance78 and contractual terms which withhold payment of the balance until delivery. By contrast, past performance might be more relevant for test and trace capability reliant on proven experience of running large facilities, IT systems and logistics. Of course, such assessment would only be possible in countries where healthcare systems had developed such capacity over years before the pandemic, but obviously less so where that capability needed to be developed to respond specifically to the pandemic.79 Another practical issue concerns the extent to which procuring entities should be able to disapply certain standard criteria for eligibility. As indicated in chapter  1680 for the US and chapter 1781 for Brazil, legislation may permit

75 ch 15, section V. 76 R (on the application of Secretary of State for Health and Social Care) v PESTFIX, Notification of the Judge’s decision on the application for permission to apply for judicial review (CPR 54.11, 54.12) at [8]. 77 Government Legal Department, ‘Response to letters before action’ (1 July 2020) at [27]. 78 This was identified as a possibility in ‘United Kingdom-Belfast: Advertising management services’ 2020/S 061-146829, available at ted.europa.eu/udl?uri=TED:NOTICE:146829-2020:TEXT:EN:HTML. 79 In the UK, the NAO reported that the Government’s own internal review of test and trace approaches in 15 other countries identified that most already had pre-existing capacity (with none making use of outsourcing) whereas the UK needed to use the private sector to develop and roll-out capacity. NAO, ‘Report by the Comptroller and Auditor General Department of Health & Social Care The government’s approach to test and trace in England – interim report’ HC 1070 session 2019–2021 (11 December 2020) 20, Fig 1. 80 ch 16, section III.A. 81 ch 17, section B.D.

122  Luke RA Butler procuring entities to waive enforcement of certain qualification requirements in emergencies. Of particular concern are legal and policy requirements on horizontal and socio-economic considerations which can extend to detailed assessments of supply chains. In the UK, the PAC reported that the Government had not fully investigated organisations supplying ventilator parts and reminded it of the need to comply with the procurement regulations in carrying out due diligence to avoid the risk of funding organisations involved in bribery and corruption or modern slavery.82 However, all of these examples also seem to base their assessment of the emergency response by reference to how conventional criteria and processes should be applied in normal times. Further, it is questionable whether it would be realistic to undertake detailed checks of foreign supply chains in emergencies. The focus of recommendations and policy reform ought to be on identifying which sorts of criteria should be deemed essential and proportionate and which processes should apply in time-critical emergencies and not, as the PAC ­recommended,83 to set out how due diligence procedures will, in future, minimise the risk of contributing to modern slavery. Consistent with recommendations in chapters two and three, the international legal frameworks should not further prescribe qualification and selection criteria. Rather, national and/or individual procuring entity policies should more clearly articulate guidance on the types of criteria that could be useful in different types of emergency as well as principles and processes for assessment which are practically feasible. For instance, it seems insufficient to simply recommend that suppliers should be selected using ‘evidenced-based criteria’, even accepting that much will depend on the individual procurement; this indicates nothing other than the fact that criteria should be objective to prevent discrimination and unequal treatment.84 This chapter does not put forward specific proposals but, for example, whilst ‘technical and professional ability’ could focus too much on past experience and reliability might be susceptible to subjective assessment (especially where a supplier is known), capacity and security of supply related criteria may be more objective, in particular, in the limited instances where there is a relative assessment of suppliers in an emergency. These might focus more on ability to deal with surges in demand, expedite validation for use of certified products by regulatory medicines agencies or obtain licences for import/export, etc. Similarly, any requirements included in the contract based on these criteria would also need to be expressed objectively, eg in time limits and quantities where possible to

82 House of Commons Public Accounts Committee, ‘Covid-19: Supply of ventilators’ Twenty-Seventh Report of Session 2019–21 Report, together with formal minutes relating to the report HC 685 (25 November 2020) 12. 83 ibid, 6. 84 See eg Cabinet Office, ‘Procurement Policy Note – Procurement in an Emergency Information’ Note PPN 01/21 February 2021, 4, which states that selecting suppliers using ‘evidence based criteria’ can be beneficial in speeding up the procurement process while ensuring the supplier is well placed to meet the requirement and may mitigate the risk of any perception of favourable treatment.

Regulating Single-Source Procurement in Emergency Situations  123 avoid discrimination and unequal treatment. Basic guidance of this kind is already provided in the context of defence procurement.85 Further, the Model Law does not expressly require in the record ex post articulation of the process and criteria by which suppliers were chosen and, as chapter 2 argues, should be amended to do this, with such information being available immediately on request or even proactively.86 Further, as chapter 3 recommends, such information – already required in the record – should be published, preferably through a systematic open contracting approach.87 The UK’s experience in the pandemic illustrates the importance of this: the NAO procurement report found some gaps in the documentation to support key procurement decisions such as why some suppliers with low due diligence ratings were awarded contracts,88 and permission has been given for judicial review of a PPE award on grounds of irrationality on the basis of legitimate questions regarding the information provided by potential suppliers and financial checks.89 Improvements such as those recommended above might have lessened suspicions of wrongdoing and loss of public trust and deterred challenges. Concerning award criteria, again, the type will vary. For PPE and ventilators, in the UK, it appears that basic decisive criteria were, at least, price and technical suitability. More complex equipment and services, eg test and trace, will have necessitated more and detailed criteria. For PPE, the extent of demand generally increased prices significantly with reduced supply, limiting the utility of price. In the UK ventilator challenge, the process was slightly more complex as key criteria such as the target number of ventilators and regulatory standards evolved over time.90 As indicated in section II.A, offers meeting the specification received contracts without comparison of price against quality in relation to other offers, with the reasonableness of price individually determined. This leaves the question of how price can be assessed. In respect of PPE, the UK NAO procurement report found that prices were assessed against those obtained within the previous two weeks, with separate approval required for offers not within 25 per cent of an average considered for possible approval.91 There are few

85 Directive 2009/81/EC on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC OJ L 216/76 contains references to security of supply throughout (eg Art 23). For general national guidance on security of supply, see UK Ministry of Defence, Guidance DSPCR ch 13, ‘Security of Supply’ (updated 31 December 2013), available at www.gov.uk/government/publications/ the-european-union-defence-and-security-public-contracts-regulations-dspcr-2011/dspcr-chapter-13security-of-supply. 86 ch 2, section VI. 87 ch 3, section IV. 88 NAO, ‘Report by the Comptroller and Auditor General’ (26 November 2020) 10. 89 R (On the application of The Good Law Project and Everydoctor Limited) v Secretary of State for Health and Social Care [2020] EWHC 3609 (TCC) at [62]. 90 NAO (n 15) 35. 91 NAO (n 70) 9.

124  Luke RA Butler details about how the average was determined, why the permitted variation was 25 per cent, how pricing verifications were conducted, and whether offers outside the range were rejected as too high despite shortages. As section III.B.iii discusses, ventilator prices were assessed on the basis of proposed cost and profit and referred for cost analysis. Again, a UK application for permission for judicial review of a PPE award has accepted that there are potential grounds for irrationality because there are legitimate questions as to the basis of inter alia the criteria regarding pricing, volume and testing and technical and quality checks.92 Consistent with recommendations in respect of qualification and selection criteria, it may be unnecessary to legislate criteria, but policies should give a clearer steer as to the types of criteria and general principles that should be applied in emergencies; and regulatory frameworks ensure that criteria and processes are articulated, recorded and disclosed ex post.

iii. Negotiations As chapters two and three indicate, the international frameworks contain no rules on conducting negotiations.93 Article 52 of the Model Law merely requires soliciting a proposal or price quotation from a single supplier, and engaging negotiations unless not feasible in the circumstances.94 Its Guide to Enactment justifies the absence of rules by the absence of a risk to fair and equitable treatment with just one supplier and the fact that this is simply a contract negotiation outside the Model Law’s general scope,95 but it is not clear why the existence of just one supplier obviates the need for rules altogether. GPA, Art XII allows its rules on negotiation not to be applied to limited tendering, and the EU’s Public Contracts Directive contains no specific rules on negotiations under the negotiated procedure without prior publication. Certain practical issues arise in conducting negotiations. One issue is that it is unclear when negotiations are not feasible, and it would be useful for the Model Law’s Guide to Enactment to advise on this given the importance of negotiations to ensure price discipline. Another is how many suppliers to invite to negotiate outside a structured competition. The Model Law refers to just one. As chapter 3 discusses, the GPA and, arguably, EU Directives leave this to national authorities and different Member States adopt different approaches, although arguments have been made (which chapter 3 rejects) that the EU requires a 92 R (On the application of The Good Law Project and Everydoctor Limited) v Secretary of State for Health and Social Care [2020] EWHC 3609 (TCC) at [62]. 93 ch 2, section V.B and ch 3, section II.E.vii. 94 See also Art 34(4). By contrast, Art 46(2) (request for quotations) provides that each supplier or contractor is permitted to give only one price quotation and is not permitted to change its quotation. No negotiations shall take place between the procuring entity and a supplier or contractor with respect to a quotation presented by it. 95 UNCITRAL, ‘Guide to Enactment of the UNCITRAL Model Law on Public Procurement’ (28 June 2012) 224–25.

Regulating Single-Source Procurement in Emergency Situations  125 competitive approach where feasible.96 Further, there is uncertainty over appropriate negotiating processes, eg whether a single or limited number of suppliers should tender against the requirement before negotiation, how negotiations will be conducted and whether there will be some comparison between offers made in parallel. Finally, there is uncertainty over other controls, eg on price. Arguably regulatory frameworks could prescribe some basic legal rules, or at least guidance, on conducting negotiations. For instance, as the Model Law Guide states, negotiations are generally required in single-sourcing (except for extreme urgency) to obtain market data or cost clarifications to avoid unreasonable prices.97 Of course, even in emergencies, market data and cost clarifications may be obtainable and necessary. Thus there could be legal or administrative requirements: to obtain market data where possible even in an emergency to inform a price negotiation and indicate what a request should entail; to ensure, where possible, that a price is submitted prior to issuing an invitation to negotiate;98 to require an assessment of the reasonableness of the price (not just cost but also profit, for which there are established regulatory principles); to ensure that this assessment is recorded and, if necessary, disclosed; and on what is permitted in terms of cost clarifications.99 In any event, the emphasis should be on ensuring that, as far as possible, there is a clear basis for negotiation on price and that, ex post the pricing determination is verifiable. Such approaches are possible in emergencies. For example, in the UK ventilator challenge, the Ministry of Defence’s Cost Assurance and Analysis Service was consulted to compare the proposed price against those on defence contracts,100 probably because the Ministry of Defence is exclusively subject to the Single Source Contract Regulations (SSCR),101 which apply controls such as application of a pricing formula to certain single-source defence contracts. Further, Ministry of Defence policy has indicated that application of these regulations (eg on allowable costs) should be considered prior to issuing an invitation to negotiate.102 96 ch 3, section II.E.vii. 97 UNCITRAL, Guide to Enactment’ (28 June 2012) 225. 98 It is recognised that, in extreme urgency, the supplier may have already given a prior indication of price which helps form the basis for the procuring entity’s decision whether to enter into negotiations. However, the more advance notice given of a proposed price before negotiations, the more informed a procuring entity can be when negotiating on price. Again, however, it must be recognised that, in extreme urgency, the supplier may offer a price on a ‘take it or leave it’ basis. 99 There is a risk of parties, in particular, suppliers using such clarifications to leverage higher prices or other concessions which could further delay procurement in time-critical situations. 100 NAO (n 15) 40. 101 The Single Source Contract Regulations 2014, 2014/3337. 102 In the UK, the Ministry of Defence provides in its policy on single-source procurement (under the EU negotiated procedure without prior publication of a contract notice) that the commercial officer must consider applying the Single Source Contract Regulations 2015 (SSCR) prior to issuing the Invitation to Negotiate. Whilst the SSCR apply to defence contracts only, the Ministry of Defence formally (at least) also applies the policy to contracts under the Public Contracts Regulations 2015 (implementing the EU public sector Directive). See Ministry of Defence, ‘Public Contracts Regulations 2015’ Version 1.5 (1 March 2021) ch 4, para.47. Source: ‘The Commercial Toolkit’, available at aof.uwh.diif.r.mil.uk or www.gov.uk/guidance/knowledge-in-defence-kid.

126  Luke RA Butler Whilst detailed legal requirements are likely to be inappropriate in emergencies, basic price-related controls on negotiation could improve decision-making and reduce risks of challenges alleging unclear criteria.

C.  Publication and Justification of Reasons for Single-Source Procurement Another important practical issue is justification of the reasons for using singlesource procurement. As chapters two and three explained, requirements under the international legal frameworks include pre-solicitation notices to identify potential suppliers or to facilitate challenge (the Model Law); award notices which provide another opportunity to challenge as well as transparency important for public trust; and records and reports on the process which often include requirements for justifying decisions.103 In emergencies, there is a danger of such requirements being subordinated to the primary objective of urgently securing goods and services; but, as chapters two and three highlighted, they constitute important controls which could be enhanced in preference to more extensive regulation of the process itself. A balance must be struck to ensure that they are effective but not too burdensome. This section explores some of the practical issues arising in seeking to achieve this.

i. Notices Chapter 2 explained that the Model Law, but not the GPA and EU Directives, as well as several of our case study countries, require a notice prior to direct solicitation;104 but the Model Law exempts cases where the catastrophe or general urgency grounds are used.105 Chapters two and three recommended such notices for emergencies, at least to the extent practicable, under the Model Law and Directives.106 The Directives currently provide just for a voluntary ex ante transparency (VEAT) notice of intention to award followed by a 10-day standstill period before award to enable challenge and allowing procuring entities to avoid post-contract ineffectiveness.107 There does not yet appear to be systematic EU-wide data on use of VEATs for pandemic-related contracts, although there are examples.108 A VEAT safeguards 103 ch 2, V.C and ch 3, II.E.vii and III.B. 104 ch 2, II.E.vi. 105 Art 34(6) and Art 30(5)(b). 106 ch 2, V.C and chapter 3, E.vi. 107 EU Remedies Directive, Art 2d(4). 108 eg on 7 April 2020 ‘United Kingdom-Cardiff: IT services: consulting, software development, Internet and support’ 2020/S 069-165835 Voluntary ex ante transparency notice Services, available at ted.europa.eu/udl?uri=TED:NOTICE:165835-2020:TEXT:EN:HTML; and on 21/12/2020 see ‘Welfare Units for Newton Nursery’ Reference No DEC402654, available at www.publiccontractsscotland.gov. uk/search/show/search_view.aspx?ID=DEC402654.

Regulating Single-Source Procurement in Emergency Situations  127 against post-contract sanctions but also alerts suppliers who might challenge, and thus there may be an incentive to publish a VEAT only if there is a real risk of post-contract sanctions. Further, in emergencies a 10-day standstill delays timecritical procurements.109 As discussed below, risks may be exacerbated by legal uncertainty over the reasons for using single-source methods which the VEAT must refer to. In an emergency, the balance of risk may thus be against publication. As chapter 15 explains, the UK proposes replacing the VEAT notice with a mandatory ex ante notice and 10-day standstill period for direct solicitations, although the standstill will not apply when crisis or extreme urgency grounds are invoked and the usual automatic suspension will not apply in these urgent cases where the ex ante notice requirement is complied with,110 thus seeking both to guarantee and incentivise publication of such notices. The notice will require procuring entities to demonstrate ‘clearly their justification for using the limited tendering procedure’.111 What may be required by justifications is discussed below. Concerning contract award notices, chapter 2 explained that, under the Model Law these do not require reference to circumstances justifying direct solicitation, which it was suggested is all the more needed for urgent procurement because of its exclusion from the ex ante notice requirement;112 but the EU Directives and GPA do require this.113 As chapters two and three explained, time periods for publication vary greatly in practice.114 During the pandemic, several issues were identified regarding contract award notices. As section II.E discusses, there were also problems over publication of contracts which raise distinct but related issues as both can contain redacted information. In the UK, for example, notices were published late or indicating retrospective contract start dates after work had commenced.115 As chapter 15 discusses, a legal challenge resulted in a declaration of non-compliance for failure to publish many award notices on time116 and revealed important practical challenges,117 which might also be experienced in other countries. In the UK these 109 See eg ‘United Kingdom-Belfast: Computer equipment and supplies’ 2020/S 068-162882, Contract award notice, Results of the procurement procedure Supplies where the procuring entity stated in this apparent single-source award: ‘Due to the value of the requirement and to mitigate any risk of challenge [it] would in normal circumstances recommend publishing a VEAT notice, however given the extreme urgency and link to public health risks the timescales for a VEAT would be prohibitive’. Available at ted. europa.eu/udl?uri=TED:NOTICE:162882-2020:TEXT:EN:HTML. 110 ch 15, section G. 111 ch 15, section D.iii. 112 ch 2, section V.C. 113 ch 3 sections II.E.vi and III.B. 114 ch 2, section V.C. 115 NAO (n 70) 10. A Public Accounts Committee inquiry found that the Cabinet Office was unable to tell it how many contracts had been awarded retrospectively and accepted that there had been a lack of transparency over the contracts: House of Commons Public Accounts Committee, ‘COVID-19: Government procurement and supply of Personal Protective Equipment’ (10 February 2021)12. 116 In accordance with reg 50(1) which gives effect to the Public Contracts Directive. Between 90 and 99% of required notices had been published at the point of litigation: R (On the application of the Good Law Project Limited and others v Secretary of State for Health and Social Care [2021] EWHC 346 (Admin) at [59]. 117 ibid, at [35].

128  Luke RA Butler included the fact that under the EU notification system notices cannot be withdrawn or amended once published, a new notice being required, thereby requiring a full ‘mini audit’ procedure before publishing contract award notices to ensure accuracy;118 that some contracts were negotiated on the department’s behalf by other departments creating uncertainty about who was responsible for publication and completion of notices; and problems accessing other departments’ IT systems.119 Of course, similar practical difficulties might apply to ex ante notices. Chapter 2 suggested that where electronic systems are available, at least, it is difficult to justify long time periods for publication, although longer periods might be needed in a crisis involving a significant strain on resources and IT systems, as UK experience shows.120 Further clarification in law or guidance on the type and level of information required in notices could also reduce risk aversion resulting from legal uncertainty, with lawyers being tasked to approve notices that may prevent or complicate publication. This issue can now be considered.

ii. Justification What kind of justification should be provided in any ex ante notices or available records at the time of a direct solicitation? Such justification could create an obstacle to rapid procurement if close internal review of the wording (eg by lawyers) is considered necessary in anticipating legal challenges, but this needs to be balanced against the need for focused and useful justifications for stakeholders. Current justification requirements, such as in the EU’s VEAT notices (see below) or modification notices,121 as well as in ex post notices,122 are not always clear. It is useful to examine existing practice. Concerning the type of information that may support a justification, the US has a developed practice in this regard. The Federal Acquisition Regulation provides detailed Justification & Approval (J&A) requirements including a broad range of information for so-called ‘other than full and open competition’.123 This includes: a demonstration that the contractor’s unique qualifications or nature of the acquisition requires use of the method; a description of efforts made to ensure that offers are solicited from as many potential sources as is practicable; a determination that the anticipated cost will be fair and reasonable; a description of market research conducted; and results or a statement of the reason market research was not conducted. This can also include any other supporting facts with an illustrative list which include: an explanation of why technical data packages, specifications, etc suitable for full and open competition have not been developed or are not available; a list of sources, if any that

118 ibid,

at [54]. at [53]. 120 ch 2, section V.C. 121 ch 3, sections II.D and E.V.i. 122 ch 3, section II.E.V.i. 123 FAR 6.303-2. 119 ibid,

Regulating Single-Source Procurement in Emergency Situations  129 expressed interest in writing; and a statement of actions, if any, the agency may take to remove or overcome barriers to subsequent acquisition. Some departments issue specific J&A guidance which is often otherwise lacking in much policy documentation in other countries.124 From the pandemic, there are examples of US procuring entities providing detailed narrative even in emergency procurements such as a description of market testing done within a locality125 which is objectively far more detailed than presented in EU notices. This cultural difference may also be further evidenced by the simple fact that, historically, there has not been enough space in the electronic form for VEAT notices to provide detailed reasons relative to the ‘high bar’ set for justification by the courts, as discussed below.126 By contrast, the international legal frameworks do not explicitly prescribe or provide an illustrative list of the types of information which may be included in notices specifically in respect of single-source procurement. For example, as recalled from chapter 3,127 a VEAT notice must contain inter alia a ‘description of the object of the contract’, a ‘justification’ of the decision to award without prior publication, and where appropriate, any other information which the procuring entity considers it useful to include. If procuring entities are already required to keep documentation to justify decisions taken at all stages, including prescribed information, it is not a significant step to require focused information in notices. Another issue concerns the standard of proof applicable to verification that the justification is defensible. In the EU, for example, there is relevant, although limited, case law illustrating some of the practical difficulties faced, in particular, where there is legal uncertainty as to the standard of judicial scrutiny. As chapter 3 indicated, the leading case is Fastweb,128 concerning grounds of technical reasons and exclusive rights for single-source rather than urgency.129 The AdvocateGeneral indicated that procuring entities must have ‘acted in good faith’ and with ‘due diligence’ when concluding the contract and courts must consider whether the reasons given ‘are or were legitimate’;130 examine the reasons which could ‘reasonably and honestly’ have led the entity to believe it was entitled to use the procedure; and distinguish between a ‘mistake committed in good faith’ and an ‘intentional infringement’.131 The court confirmed that the justification must 124 See eg the Guides, templates and checklists provided by US agencies. Information available at acqnotes.com/acqnote/tasks/sole-soure-justification-and-approval. See, in particular, extensive guidance provided by the US Department of Defense, available at www.acq.osd.mil/dpap/ccap/cc/jcchb/ html/Topical/sole_source.html. 125 See eg Sole Source JA-20P0072-Cloth Face Masks, information available at govtribe.com/file/ government-file/sole-source-ja-20p0072-cloth-face-masks-dot-pdf-1; and Sole Source JA-ITSS, information available at govtribe.com/file/government-file/far-part13-5-sole-source-ja-itss-redacteddot-pdf. 126 P Henty, Case Comment: Faraday Development v West Berkshire Council [2018] EWCA Civ 2352 (2019) 2 Public Procurement Law Review 75. 127 ch 3, section II.E.6. 128 Case C-19/13 Ministero dell’Interno v Fastweb SpA [2014] ECLI:EU: C:2014:2194. 129 ch 3, II.E.6. 130 Opinion of Advocate-General Bot EU:C:2014:266 at para 80. 131 ibid, [85].

130  Luke RA Butler disclose ‘clearly and unequivocally’ the reasons.132 The UK case of Faraday,133 which considered these requirements domestically, indicates that they must be strictly applied, eg requiring a complete rather than merely formal justification, a precise description of the object of the contract, and clarity in the justification.134 In addition to uncertainty as to the type of information sufficient for a justification (which, as indicated, in the absence of any legal or policy prescription is left primarily for determination by procuring entities and national courts), there is little guidance on how an entity can show good faith and due diligence. In response to Fastweb, it had been suggested that if the supplier relies on technical reasons/exclusive rights, the authority might be expected to make market enquiries and possibly consult an independent expert to verify that no other supplier could perform, raising further questions about the extent of enquiries and who should be consulted.135 And what if the authority is advised – by an expert or legal adviser136 – that there is a plausible argument (but not certainty) that using the procedure is permitted? Quite apart from the extent of obligations in relatively urgent cases, there are practical problems of ensuring that independent consultations can evidence diligence137 (the fact of consultation alone may be insufficient) without processes becoming too legalistic, and problems may also arise from legal advice being privileged and so not disclosable. As section II.D discusses, approvals processes might be designed in other ways to help reinforce justifications without becoming legalistic approvals exercises. Before the pandemic, research on VEAT notices in three countries (2–10 per cent of which were for urgency) identified generally unclear justifications.138 In the UK, many notices explained that urgency was present but not how urgency occurred (with some attributing urgency to political decisions and funding).139 The research suggested that Fastweb could either improve the clarity and comprehensiveness of reasons or discourage notices as more risky given the strict requirements. Whilst there is no systematic analysis of pandemic VEAT notices,

132 Judgment at [48]. 133 Faraday Development Ltd v West Berkshire Council [2016] EWHC 2166 (Admin). 134 It was stated that this means that: (a) more than a mere formal justification is required – the justification must be complete; (b) this does not mean that it must be elaborated at great length but must provide a clear and unequivocal explanation of the reasons for the award without prior publication; (c) that the justification should provide enough by way of relevant objective detail about the contract to enable a third party to make a properly informed decision whether to challenge: Faraday at [87]–[89]. 135 A Brown, ‘Case Comment: When will publication of a voluntary ex ante transparency notice provide protection against the remedy of contract ineffectiveness? Case C-19/13 Ministero dell’Interno v Fastweb’ (2015) 24 Public Procurement Law Review NA10, 15. 136 ibid. 137 On issues of proof see, for example, Judgment of 18 May 1995, Commission v Italy, Case C-57/94, EU:C:1995:150, paras 27–29; Judgment of 5 October 2000, Commission v France, Case C-337/98, EU:C:2000:543, in particular, Opinion of AJ Jacobs, EU:C:2000:156, paras 65–68. 138 L La Cour, A Milhøj and G Skovgaard Ølykke, ‘Transparency Notices in the EU Public Procurement Regime: An Empirical Study of the Use of Transparency Notices in Denmark, Sweden and the United Kingdom’ (2015) 24(5) Public Procurement Law Review 164, 186. 139 ibid.

Regulating Single-Source Procurement in Emergency Situations  131 the author’s review of Tenders Electronic Daily for 1 March to 1 December 2020 suggests that justifications continue to be relatively brief: for example, one states in broad terms that a single-source award is necessary because award to a new supplier could involve a new set-up with employees working in close proximity together to move items potentially contrary to government guidelines restricting movement of people; and that an accelerated competition would not be possible.140 Related to justification in notices is the issue of documenting the justification in records and reports. Requirements on this have arguably been insufficiently robust to ensure sufficient controls during the pandemic. For example, the UK NAO procurement report found examples where departments failed to document fully the consideration and management of risks, such as the justification for emergency procurement and choice of suppliers and how potential conflicts of interest had been managed and reiterated the importance of the EU Directive’s reporting requirement.141 Further, it found a lack of documentation to support the justification (although it is unclear as to whether this was in a VEAT, contract award notice or generally), observing that, in one case, the procurement strategy stated that other suppliers may be able to provide the service and it accepted the risk of a legal challenge.142 It is recalled from chapter 3 that Art 84 of the Public Contracts Directive requires documentation of the progress of all procedures, with sufficient documentation to justify decisions at all stages (including negotiation, if any) and a written report containing at least the circumstances (referred to in Art 32) justifying using the negotiated procedure without prior publication.143 However, it is not clear what specific information must be documented in single-source procurements,144 nor what detail is needed in the report, nor how it compares with the ‘justification’ in VEAT notices.145 Article XIII(2) GPA specifically requires for limited tendering a written report indicating the circumstances and conditions described in the prescribed grounds for use that justified limited tendering. Arguably more clarity and, where necessary, differentiation is needed of the sorts and level of information required in a notice, a record and a report. As indicated, open contracting could enable greater unification or coordination and access to information to enhance the quality and transparency of justifications at different stages.

140 Based on an ‘advanced search’. This comprised a search of ‘all notices’ of procedure by: ‘negotiated procedure without a call for competition’; ‘contract award without prior publication’; notice type ‘voluntary ex ante transparency notice’; text: ‘COVID-19’; ‘urgency’; ‘negotiated’ ‘procedure’; ‘without’ for text results containing ‘COVID-19’ and ‘urgency’, and ‘negotiated procedure without’ with a search return of 12 results. However, this should not be treated as a systematic search. 141 NAO (n 70) 31. 142 ibid, 33. 143 ch 3, section II.E.vi. 144 ch 3, sections II.B and C above. 145 ch 3 section II.E.vi.

132  Luke RA Butler In light of the above, justifications would arguably be better to focus less on identifying facts demonstrating urgency or that other legal conditions, eg that accelerated competitive procedures could not be used, and more on explanation to substantiate why (beyond the fact of urgency) and how single-source is being used to achieve the intended aims. This would justify the choice of method in terms of process and outcome from a commercial and public interest perspective. Of course, this may depend to some extent on the perceived function of a notice. The EU legislator may consider a VEAT notice, for example, as providing transparency and facilitating challenge. Conversely, a procuring entity may consider its function being to safeguard against the risk of supplier challenge. Whilst the legislator may not have intended it, the focus has become on minimal disclosure and considerations of evidence and proof for purposes of challenge rather than on providing information on the commercial and other public-interest factors supporting the decision, which are of concern to taxpayers and auditors in assuring value for money and public trust. Given the EU’s principal goal of opening markets and its limited harmonization,146 it is unsurprising that it does not focus on detailed value-for-money justification. By contrast, these may be more relevant for notices under the UNCITRAL Model Law. Justification requirements may also reasonably vary depending on whether the emergency is one-off or ongoing, where initial justifications might need to be reviewed. Before the pandemic, it was observed in the US that even with detailed legal requirements, too many justifications make vague, unsupported assertions – potentially a legal compliance exercise rather than a good business case.147 Perhaps one way to encourage better justifications would be to improve policy guidance to fill the gap left by uncertain legal rules; this also respects the different aims and objectives of international legal frameworks, specifically the EU and GPA, which focus on open markets. Moreover, publication requirements reinforced by remedies reforms can incentivise procuring entities to treat justification requirements more seriously, as intended in the UK proposals identified above. This is important not only to minimise risks of legal challenge but also improve commercial decision-making and, on audit, evidence attempts to achieve value for money and ensure public trust. More generally, this also requires a cultural shift towards open publication of information. However, any reforms need to ensure proportionality, especially in emergencies; here it may not be possible to provide extensive information, at least in advance, but it could be provided ex post through clearly documented records and reports which are proactively disclosed.

146 The same considerations may apply in respect of designing approvals processes which augment justification as approval processes may very much depend on the organisation of each national administration. Approvals are discussed in section II.E below. 147 S Turley, ‘Alone Again – Naturally? How to Properly Justify Sole Source Awards’ (National Contract Management Association, 1 March 2019), available at www.ncmahq.org/news/magazine-details/ alone-again-naturally-how-to-properly-justify-sole-source-awards.

Regulating Single-Source Procurement in Emergency Situations  133

D.  External Approvals Single-source procurement is often subject to more (substantial) formal approvals than competitive methods. As chapter 2 notes, approvals can help prevent abuse, ensure sound commercial decisions and contribute to legal compliance, eg by augmenting justifications.148 An example of an internal approval process prescribed by legislation is a US J&A document generally required before commencing ­negotiations,149 but within a reasonable time after award where this would otherwise be unreasonable in urgent cases. Different approvals can be provided at different levels within a federal agency depending on contract value, from contract officer certification for low value through to the senior procurement executive. At the state level, the nature and level of approvals varies within and between states. In 2015 recommendations were made to centralise approvals in addition to providing standard templates for justifications and clearer guidance on how to evidence that requirements are met.150 During emergencies, it may be possible to require certain additional approvals, eg higher-level internal authorisation (minister rather than procurement director) for single-source151 and other decisions, such as on price where this is abnormally high.152 Concerning external approvals, the pandemic has increased focus on central government approval, no doubt influenced, in part, by the need to centralise certain key decisions, eg determining whether there is a state of emergency justifying single-source. The Model Law now only requires approval for single-source in promoting socio-economic benefits.153 Chapter 2 argued it would be useful to include a hierarchical approval provision as an option for states, supplemented by guidance in emergencies albeit potentially more feasible for competitive negotiations than for single-source given the need for a swift response.154 Chapter 3 explained that the EU and GPA frameworks – rightly, it is suggested there, given their limited objectives and varying national administrations – do not address them at all.155 As further recalled,156 ex ante and ex post approvals are used for single-source in urgent cases in some of the country 148 ch 2, section V.C. 149 FAR 6.3. 150 National Association of State Procurement Officials, Non-Competitive / Sole Source Procurement: Seven Questions Briefing Paper (January 2015), 2, available at www.naspo.org/SoleSourceProcurement/ 7-Question_Sole_Source_Procurement_briefing_paper-1-13-15.pdf. 151 For example, in the UK, it has been recommended that awards made without competition in emergencies should be subject to more robust approvals, including escalation to the Permanent Secretary. See Boardman Report on Cabinet Office Communications Procurement, 6, Recommendation 25, 16, recommending approval beyond the budget holder and commercial director to the Permanent Secretary. 152 For example, in the UK, central government policy on COVID-19 instructed procuring entities to obtain approval by a commercial director where prices for PPE were abnormally high. Cabinet Office, ‘Procurement Policy Note – Responding to COVID-19’ Information Note PPN 01/20 March 2020, 4. 153 Arts 30(2) and 30(5)(e). See ch 2, section V.C. 154 ch 2, section V.C. 155 ch 3, section II.E.vi. 156 ch 2, section V.C.

134  Luke RA Butler case studies but were not extensively applied in the pandemic. As chapter 2 discussed, it would be useful to include in the Model Law provision on ex post review of the use of exceptional methods for urgency (as in Nigeria, discussed in chapter 22) when the nature of the situation justifies exemption from any usual ex ante approvals.157 Ex ante approvals, in particular in emergencies, raise several policy and practical issues. First, it is necessary to be clear whether they will cover just legal conditions for use of the relevant procurement method or also commercial justification for use and/or outcomes, eg in terms of value for money. A useful case study highlighting potential problems in defining scope is Georgia where there is a legal requirement for approval from the State Procurement Agency (SPA) before making a singlesource award for certain types of emergency procurement (with the possibility of requesting approval after award where prior approval would result in delay causing significant harm).158 The SPA assesses the conditions for use (eg urgency and foreseeability), including justification for the award.159 Research has observed that the SPA reviews of pandemic-related ‘direct award’ contracts ‘mainly’ involve assessing the existence of an emergency and not the proportionality of the required quantity/amount, suggested price or supplier-related information160 – even though, as discussed below, the information which procuring entities must provide does appear to extend to some matters relating to commercial decision-making, and the procuring entity must comply with legal requirements on ‘efficiency’ and rational spending.161 There seems to be a lack of clarity here in the intended scope of the approval exercise. A related issue is the nature and extent of evidence adduced to obtain approval, which should logically depend on the approval’s scope. In Georgia, the procuring entity, which bears the burden of proof of its choice of a direct award, must submit a questionnaire including information on why this procedure was selected, measures taken to prevent the emergency, the quantity/amount necessary to address it and an approximate price, allowing ‘quite a broad spectrum of details’.162 Whilst not an ‘explicit’ obligation, some entities have (but most have not) submitted information giving a comparison of prices, also.163 However, the research notes that it is not clear why and how a supplier was selected, the proportionality of the price relative to others and the supplier’s experience164 – and suggests additional questions to cover this,165 implying that approval should cover such commercial outcomes. 157 ibid. 158 N Baratashvili, ‘Direct Emergency Contract Awards in Georgia during the COVID-19 pandemic’ 5 (on file with the author). The author is grateful to the Open Contracting Partnership for providing this independently commissioned research report in compiling this chapter. 159 ibid, 12–13. 160 ibid. 161 ibid, 14. 162 ibid, 12. 163 ibid. 164 ibid. 165 ibid, 18.

Regulating Single-Source Procurement in Emergency Situations  135 Certainly a broader assessment beyond strict conditions for use to cover compliance with any ‘commercial’ obligations (such as to act efficiently) or, irrespective of that, to cover commercial outcomes, may further augment the quality of the justification as section II.C.ii discusses, and is worth considering, although including such matters has implications for the timing of approvals. Concerning timing, there is also the practical issue of when approval must be sought and given. It could be sought as soon as the decision is made to use it, at the end of the award process, or ex post after contract conclusion. Any rules on timing will be critical in an emergency. As indicated by our case studies, in China,166 there is a need for prior ex ante approval for single-source procurement which may be unfeasible in an emergency and could even lead to exclusion of a procurement from rules altogether and, in Nigeria,167 ex post review is permitted in an emergency rather than prior approval. Related to the scope issue considered above, if confined to approval for use, this could potentially be done earlier than if it also involves approval of commercial outcomes. Of course, this can also be linked to the structure of remedies systems, as proposed in the UK where a standstill period and automatic suspension could be disapplied in emergencies under current proposals for reform.168 It is also necessary to consider the level at which approvals should be set, not least given that procuring entities may be closer to procurement decisions at the local level whereas central approval authorities have a national picture of events as well as the relationship, if any, between procurement approval and any separate spending approval (as chapter 15 discusses regarding the UK).169 Consistent with the suggestions in section II.D, approvals must ensure proportionality to enable procuring entities to respond quickly.

E.  Single-Source Procurement Information Capture and Disclosure Information capture and disclosure will inevitably be an issue during emergencies. Information will either deliberately or inadvertently not be kept or disclosed in notices, records and reports. This is likely to be more acute for single-source contracts simply because competition involves more open processes. Further, a higher proportion of single-source contracts (relative to competitive contracts) are likely to be high value and high-tech awarded within a limited market of suppliers.170 Therefore, the potential consequences of disclosure of unauthorised information to competitors are greater, possibly even market exit in extreme cases.

166 ch 21, section III.A. 167 ch 22, section III.B. 168 ch 15, section D.iii. 169 ch 15, section D.iii. 170 It is perhaps unsurprising that procuring entities often rely on exclusive rights or technical reasons for single-source because suppliers maintain close control over intellectual property.

136  Luke RA Butler As chapter 2171 indicates, the pandemic has spurred improved information transparency, going as far as publication of all contracts, thereby providing a counterbalance to the inherent lack of transparency of direct solicitations. Transparency can be improved by reforms to legal requirements on notices, records and reports. Further, chapters two and three argue that more ‘open contracting’ via electronic systems could provide more systematic data and disclosure. This, in turns, reflects an increasing shift towards transparency by default rather than request, as chapter 23 discusses. One prominent international example is the Open Contracting Data Standard (OCDS) developed by the OCP, which enables disclosure of data and documents at all stages of contracting by defining a common data model. It was created to support organisations to allow deeper analysis of data by a wide range of users, ie not simply suppliers looking to challenge.172 However, the OCP has reported that for seven out of 12 countries173 it examined, data on pandemic-related contracts was not, or only partially, disclosed and data quality was generally poor.174 This has also been confirmed in certain country case studies, eg Nigeria and South Africa, in the latter leading to further transparency reforms.175 It is beyond this chapter’s scope to examine the many pre-existing weaknesses and other factors that may explain data issues, some of which are considered in chapter 23, or how data systems could be developed and better regulated. It is nevertheless suggested that there has been very little, if any, specific focus on information in single-source contracts as a priority, despite their inherent lack of transparency. Further, as chapter 23 discusses, the receipt of unusual offers in an emergency may mean not only insufficient time for open tendering but also a need for speedy and accurate data inter alia for conducting checks and verifications.176 In other words, single-source may be an area where access to and disclosure of information is operationally most important, in particular, in emergencies. It is possible to identify just some issues that have arisen in conducting research during the pandemic.177 Different uses of terms such as ‘single-source’ or ‘direct award’ have implications for capturing accurate information. Open contracting systems may not have the required data fields to identify under which legal bases single-source procurement is undertaken, eg under general emergency legislation, specific emergency procurement legislation, or exceptions in ordinary procurement legislation. 171 ch 2, section V.C. 172 Version 1.0 of the standard was developed for the OCP by the World Wide Web Foundation, through a project supported by the Omidyar Network and the World Bank. Information is available at www.open-contracting.org/data-standard. 173 Argentina, Columbia, Ecuador, Georgia, Guatemala, Kenya, Lithuania, Nepal, Nigeria, Paraguay, Philippines, Uruguay. 174 OCP (n 44) 4, 5 and 7. 175 ch 22, section II.F in respect of South Africa and section III.D in respect of Nigeria. 176 ch 23, section III. 177 The author is grateful to Camila Salazar, Lead Data Analyst at the Open Contracting Partnership for discussions on these issues.

Regulating Single-Source Procurement in Emergency Situations  137 Further, differentiating between competitive as distinct from non-competitive procurement can be difficult especially in countries with multiple legal bases for each. Taking the US as an example of a country with a developed database on federal spend (but which has not implemented the OCDS), the Federal Procurement Data System-Next Generation (FPDS-NG) identified that, at one phase in the pandemic, 53 per cent of contracts were ‘non-competitive’, with ‘non-competitive’ being subject to multiple sub-categories.178 There is also a risk of coding errors. One reported US incident involved a contract (itself for a COVID-19 database) incorrectly labelled as ‘sole-source’ then subsequently corrected as competitive but with few details explaining the discrepancy or competition.179 In addition, where a ‘direct award’ method is recorded, it is often not clear whether it involved some form of competition or negotiations with a single supplier.180 This is vital information because the perception is often that ‘direct awards’ do not involve any competition. It is also important for monitoring legal compliance where there is some kind of obligation to use, or presumption in favour of, competition.181 There is also the issue of obtaining meaningful data on specifics such as how offers are solicited, which types of exclusion, selection and award criteria are used and information on pricing. As chapter 23 discusses, an added complication, in particular for pricing in emergencies, is the absence of wider contextual supply chain and healthcare data necessary to assess the quality of procurement decisions and outcomes.182 Moreover, such systems also tend to provide little qualitative ‘narrative’ information necessary to assess justifications for choice of method and processes for award. While this chapter does not consider the possibility of developing ‘modules’ within open contracting systems better tailored to single-source contract information, it is worth acknowledging that dedicated platforms for capturing single-source information do exist and can be adapted for emergencies. In the US, the Washington State Department of Enterprise Services Personal Services Contracts Database was modified to create a specific Sole Source Contracts 178 Non-competitive contracts included contracts and orders coded in FPDS-NG as ‘not competed’, ‘not available for competition’ and ‘not competed under simplified acquisition procedures’, as well as orders coded as an exception to ‘subject to fair opportunity’, including ‘urgency’, ‘only one source’, ‘minimum guarantee’, ‘follow-on action following competitive initial action’, ‘other statutory ­authority’ and ‘sole source’. Government Accountability Office Report to Congressional Committees (n 36) 15. 179 SG Stolberg, ‘Government Says Contract for Covid-19 Database Was Competitively Bid’, New York Times (17 July 2020), available at www.nytimes.com/2020/07/17/us/politics/coronavirus-databasetrump.html. 180 See eg ch 15, section D.iv where, in the UK even audit bodies do not appear to have investigated the extent of competition, or at least, consultation of other suppliers where a single-source award has been made. 181 ch 2, section V.A.i. 182 ch 23, section V.

138  Luke RA Butler Database, automating many tasks associated with filing sole source and emergency contracts.183 Further, the UK Single Source Regulations Office (SSRO) has created a Defence Contract Analysis and Reporting System (DefCARS) to capture pricing information supplied by contractors to comply with statutory reporting requirements under the UK SSCR,184 although this only applies to defence contracts, is not designed to capture all information about processes, does not involve disclosure of the contract itself, and is only available for use by the Ministry of Defence and SSRO. Information capture is one aspect; information disclosure is another. A complex issue is how to reconcile open contracting with existing national legal restrictions on disclosure. Freedom of information legislation may seek to balance disclosure to ensure transparency against the procuring entity and supplier’s interests in ensuring confidentiality and protection of commercial interests. Thus, even if there is disclosure, contracts may have to be redacted.185 Again, the UK illustrates the potential issues. As section II.B discussed, in a UK judicial review of a PPE award holding that there was a failure to publish contracts as required by law and domestic policy,186 the Government explained that one of the most time-consuming and difficult aspects, was redacting contracts; 80 per cent (39 of 49) of a contract sample had redacted information and this caused significant difficulties in an emergency situation in which huge numbers of new staff, some without the relevant training, were drafted in.187 As chapter 15 outlines, the Government has recently proposed implementing the OCDS and to ensure transparency by default for all contracts, but with redactions permitted in line with Freedom of Information Act exemptions.188 The Government acknowledges that disclosure decisions can be complex, resulting in authorities disclosing less than they should, but that guidance will be issued on what may be redacted,189 which includes profit margin and overheads, financial models, bid documents revealing

183 Washington State Department of Enterprise Services, Sole Source Contracts Database, available at des.wa.gov/services/contracting-purchasing/policies-training/sole-source-contracts-database. 184 Information is available at www.gov.uk/guidance/contract-and-supplier-reporting-defcars-andassociated-guidance. 185 For a useful discussion of this issue in the context of public procurement with respect to the Freedom of Information Act 2000 in the UK, see S Arrowsmith, The Law of Public and Utilities Procurement: Regulation in the EU and UK, 3rd edn, Vol I (Sweet & Maxwell, 2014) 13-78-13-93. 186 Namely, Publication of Central Government Tenders and Contracts: Central Government Transparency Guidance Note (November 2017) and Procurement Policy Note Update to Transparency Principles (PPN 01/17, February 2017), which require publication of the provisions of any contract with a value over £10,000. 187 R (On the application of the Good Law Project Limited and others v Secretary of State for Health and Social Care [2021] EWHC 346 (Admin) at [53], [57] and [145]. 188 Cabinet Office, ‘Transforming public procurement’ Green Paper, CP 353 (December 2020) 50. See further, S Arrowsmith, ‘Reimagining public procurement law after Brexit: seven core principles for reform and their practical implementation’ (10 January 2020) 17, available at: https://papers.ssrn.com/ sol3/papers.cfm?abstract_id=3523172, indicating that more experience and research may be useful to feed into the development of non-disclosure policies. 189 ibid, 51.

Regulating Single-Source Procurement in Emergency Situations  139 intellectual property or innovative or unique technical solutions/methodologies.190 Conversely, as chapter 15 indicates,191 current UK Freedom of Information Act 2000 public procurement guidance generally suggests that ‘contract negotiation information’ such as costing mechanisms should not be released, but that price breakdown and payment terms might be released under a commercial interests exemption; further ‘contract delivery information’ should involve disclosure of pricing information.192 Early tribunal rulings suggest that basic pricing information. eg price per patient, may be required to be released early but not detailed information, eg detailed pricing structures including costings; in other words, the limit of disclosure is where it would reveal how the price is determined.193 It is beyond this chapter’s scope to examine the complex issue of which sorts of pricing information should be disclosable and accessible in both contexts. However, as indicated in section III.A (and tribunal findings may support), information on contract type (eg fixed/firm) could at the very least be disclosed as could the fact of (rather than the specifics of calculation of) any profit-based incentives. Of course, this refers to public disclosure; what information can be disclosed and accessible and how, may well depend and differ depending on the user. A regime exclusively for use by a government department or regulator with no or limited public disclosure is different to one for use by the public. A further factor is the purpose of access and disclosure. For example, under the UK SSCR, detailed pricing information on cost mechanisms, overheads and profits must be reported, but the regime only focuses on controlling prices on awarded contracts and does not expressly cover bid-related documentation. Further, even then, there is a prohibition on unauthorised disclosure within government which could lead to a criminal offence. The UK’s approach can be contrasted with that in some other countries, including in Latin America, where contracts are generally published as ‘public information’. In Columbia, contracts are legally required to be published with no redactions.194 This may reflect, in part, cultural factors in countries where suspicion about corruption requires not only publication by default, but even the need to obtain an act authorising non-publication. Given that some controls will, however, inevitably be necessary even in those countries, how different systems regulate the balance of interests, including withholding disclosure and redaction merits further research. Ultimately, therefore, whilst it is easy to call for publication of all single-source contracts in theory, this is a complex undertaking for open contracting systems to address. 190 Cabinet Office, ‘Transforming public procurement’ (December 2020) 51. See further, Arrowsmith, Public and Utilities Procurement (2014) 13-84-13-91. 191 ch 15, section F. 192 OGC, Freedom of Information (Civil Procurement) Policy and Guidance. 193 For a discussion of these decisions, see Arrowsmith (n 185) 13-86-13996. 194 Act 1712 (Transparency and right to public information Act), Art 9-e. See also the procedure for requesting information where this is not provided (Act 1437 2011). The author is grateful to Sebastian Barreto-Cifuentes for useful discussions.

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III.  Pricing and Contract Management In an emergency, the reality is that higher-than-typical market prices must be paid to secure vital requirements. This requires careful regulatory controls in legislation and/or policy. For example, during the pandemic, global demand for PPE outstripped supply such that prices were susceptible to gouging. Pricing controls might include national Treasury maximum price restrictions as in South Africa,195 debarment from future procurement if prices are excessive as in China,196 or referral to national audit bodies who focus on cost issues as indicated in Columbia.197 As chapter 7 discusses, pricing practices may also be subject to other regulation where these result in competition law and state aid violations.198 Pricing risk may be compounded for single-source emergency awards because prices are not subject to market discipline through open competition. There may be no price comparison against other offers. It may be difficult to benchmark prices against market data in normal conditions, and while prices might be benchmarked against those under other emergency contracts, if these are also high, further controls may be necessary. An emergency can also affect allocation of the risk of losses and costs for uncertain events. For new contracts awarded during an emergency, this may involve forecasting future price risks which may reduce as the emergency recedes. Pre-existing contracts (whether originally awarded competitively or single-source) may also need modification on a non-competitive basis to accommodate the emergency. Changes to price may or may not be covered by existing price revision clauses and are also susceptible to the legal risk of constituting unlawful modifications.199 In addition, it will be necessary to determine which costs are recoverable and profit payable where a price has been affected by an emergency. As well as pricing issues, there may be less incentive to perform and/or more incentive to increase prices if there is no threat of future competition, especially where government policies require or encourage procuring entities to take on more risk during emergencies, eg through advance and interim payments, relieving contractual obligations, and not enforcing claims for damages or termination. This raises the issue of which mechanisms may be used to monitor payments and price increases during performance. As chapters two and three indicate, the international legal frameworks do not expressly regulate commercial considerations in respect of pricing and contract management.200 This is so not least because these are principally concerned with 195 ch 22, section II.B.i. 196 ch 21, section III.D. 197 ch 18, section III.A. 198 ch, section III.C. 199 ch 2, section IV.B and VI. 200 Although the EU Directives, and to a much lesser extent the GPA, do contain limited rules that prevent the tendering process being undermined, such as where prices are raised to provide a better deal for a supplier; these, in theory, impose some constraints on revisions that might undermine commercial value.

Regulating Single-Source Procurement in Emergency Situations  141 opening markets rather than regulating (eg through pricing controls and transparency requirements) to ensure value for money or other national aims and objectives. As chapters two and three indicate, the EU and, to a lesser extent, the GPA place some limitations on contract modifications which could provide more favourable prices and commercial conditions. However, in line with the objectives of the international frameworks, these reflect competition and transparencyrelated considerations, which may limit the ability to modify to realise value in other ways.201 In addition, as chapter 2 indicates,202 more generally contract performance and implementation is a complex area and international legal frameworks such as UNCITRAL may not address it given the possible interface with the private law of contract. At the national level, pricing and contract management may be governed by regulation on public procurement and contract administration or both (as in the US) as well as under public law and/or contract law, and, in particular, terms of ­individual contracts. This chapter cannot examine all pricing and contract management issues, but merely illustrates some from the pandemic to highlight the need for more focus on these aspects in mainstream discourses on public procurement regulation. It is notable that some post-pandemic audits have focused more on procurement processes than the mechanics of pricing within an overall framework of contract planning and management.

A.  Risk Allocation in Contracts Awarded at the Onset of an Emergency There has been limited academic consideration of legal issues regarding who bears the risk in public contracts in emergencies.203 In some countries legislation prescribes different contract types for procuring entities to choose in allocating risk between parties or these may be used by convention.204 For example, the UK SSCR (applicable to certain defence contracts only) prescribes six ‘regulated pricing methods’ including firm/fixed, target cost and cost-plus.205 US law prescribes similar types.206

201 K Smith, ‘A Risk Worth Taking? Practical Application of the Law on Contract Modifications in the Context of PPP Accommodation Projects’ (2019) 28 Public Procurement Law Review 16. 202 ch 2, section VI. 203 S Schooner and E Siuda-Pfeffer, ‘Post-Katrina Reconstruction Liability: Exposing the Inferior Risk’ (2006) 43 Harvard Journal on Legislation 287. 204 On US contract types, see J Cibinic Jr , RC Nash Jr , and CR Yukins, Formation of Government Contracts, 4th edn (Wolters Kluwer, 2011) ch 9; and see also C Turpin, Government Procurement and Contracts (Longman, 1989) ch 6. 205 Although these methods are not actually ‘regulated’ in the sense that their choice and operation is regulated. 206 US FAR Part 16.

142  Luke RA Butler With a firm/fixed price contract the price is based on costs estimated at the point of contract conclusion and if actual costs are higher than estimated, the supplier’s profit correspondingly reduces. Under a cost-plus contract, the supplier is paid for actual costs incurred plus an agreed profit; thus the procuring entity bears greater price risk than under a firm/fixed contract. Cost-plus may be used for many reasons. From a supplier perspective, it may only be willing to undertake a particular type of contract if there is a guarantee of maximum profit. From a procuring entity perspective, it may be the only way to acquire complex goods, works or services. Further, as it bears most risk on price, in theory, the supplier will have less authority to demand respecification. In some countries, at least, costplus contracts have increasingly been discouraged because they reduce incentives to control costs.207 Other contracting techniques exist under which the procuring entity assumes risk, eg contracts on which work can be commenced before finalising all terms and conditions (called ‘undefinitized contract actions’ in the US.)208 There is limited data on allocation of risk in public contracts concluded in the pandemic, and further research would be valuable. Such data can help determine whether there was effective contract planning and, ultimately, value for money. An issue that is difficult to verify is what pricing types were used and why. Many factors affect this decision. One is the type of requirement. Procuring entities needed to procure basic equipment in which the primary risk was security of quick supply not price risk over time, perhaps making firm/fixed price arrangements suitable. The possibility of reallocating risk of cost increases under pre-existing fixed price contracts to deal with the pandemic may be another factor favouring fixed-price approaches.209 For procurement reliant on a supplier for longer (eg a complex service) in an emergency, cost-plus might be more suitable. It has been recommended that more cost-plus emergency response contracts should be used to protect suppliers from unanticipated shocks by clearly outlining circumstances under which government buyers will subsidise additional costs to ensure ­delivery; these are said to provide more incentive to attract bidders, bolster economic 207 Some of the most extreme variants, eg a ‘cost plus percentage of cost’ contract are legally prohibited in the US, eg US FAR Part 16.102. In the UK, see ‘Review of Single Source Pricing Regulations, An independent report by Lord Currie of Marylebone’ (October 2011) 28: ‘The MOD now does very little cost-plus work (at least in name), with a policy preference for firm and fixed price contracts’. 208 Again, the Government Accountability Office has observed that UCAs can pose risks to the Government, such as when contractors lack incentives to control costs before all contract terms and conditions are defined. During the pandemic, the US DOD encouraged their use and the Air Force issued guidance waiving price ceilings on UCAs for the pandemic. As of 11 June 2020, DOD reported about US $850 million, or about 28%, of its obligations on UCAs for goods and services like alternate care facilities to treat COVID-19 patients and N95 respirator production. HHS, GAO, ‘COVID19 CONTRACTING, Observations on Federal Contracting in Response to the Pandemic’, Accessible Version (July 2020) 22. 209 The US Department of Defence issued a Memorandum stating that whilst contractors under fixedprice contracts generally bear the risk of cost increases, including those due to COVID-19, contracting officers were granted discretion to modify contracts to make changes to contract prices. This was in accordance with FAR 52.243-1. See Office of the Under Secretary of Defense, ‘Guidance for Assessment of Other COVID-19 Related Impacts and Costs’ (2 July 2020), available at www.acq.osd.mil/dpap/ policy/policyvault/Guidance_for_Assessment_of_Other_COVID19_Related_Impacts_and_ Costs.pdf.

Regulating Single-Source Procurement in Emergency Situations  143 security for the supplier, and incentivise exceptional and accelerated delivery of critical response services by providing bonuses for efficient delivery, according to predefined metrics.210 According to US FPDS-NG data, federal agencies spent US $13.8 billion (78 per cent of all contract obligations) on fixed-price contracts.211 US $8.8 billion (64 per cent) of those obligations were on contracts identified as not competed.212 By contrast, US $3 billion (17 per cent of contract obligations) was spent on cost-reimbursement contracts.213 However, unlike for fixed-cost contracts, most cost-reimbursable contracts were competed.214 Therefore, it might be surmised that procuring entities have borne less risk than might be expected because a greater proportion of contracts have been fixed price and most cost-plus contracts were competed. Practice in other countries is more anecdotal. The UK Confederation of British Industry has stated that its members reported that cost-plus contracts afforded procuring entities and suppliers greater flexibility, in particular, in ensuring cash flow; but the extent of use is unknown.215 It is also possible to envisage ways, admittedly limited, to improve transparency of pricing information to better understand risk allocation in emergencies. The international frameworks could conceivably expand notification, records and reporting requirements, generally confined to a simple statement of ‘contract price’,216 to also require identification of contract type (eg firm/cost-plus), etc, given that other information on contract terms is already required in some cases. More generally, greater focus of national audits on pricing might be helpful, especially where individual procuring entities may continue to have reduced contract management and oversight resources. The US Government Accountability Office has already indicated plans to conduct additional reviews addressing contract types and techniques used in the pandemic.217 Of course, once procuring entities have reached the stage in an emergency where future projections are possible eg for 6–12 months following mass vaccination, removal of lockdowns and signs of recovery, planning risk allocation may be easier. In some industries (eg construction), UK law firms, for example, issued early warnings in May 2020 about the risk of including provisions addressing pandemic risks in newly awarded contracts (eg permissible variations and extensions, price adjustments), as potentially giving carte blanche to tenuous or

210 T Davis, E Fung and A Kilroy, ‘Emergency Procurement: Lessons Learned from Covid-19’ (Development Gateway, August 2020). 211 GAO, ‘COVID19 CONTRACTING’ (July 2020) 17. 212 ibid,18. 213 ibid. 214 GAO (n 208) 18 and 19, Fig 8. 215 Confederation of British Industry, ‘Public-private partnerships: Lessons from COVID-19’ (September 2020), available at www.cbi.org.uk/media/5623/public-private-partnership-lessons-fromcovid-19.pdf. It is unclear whether these were contracts where the pricing models were modified on existing contracts or new contracts were awarded using cost-plus pricing models. 216 Model Law, Art 25; Art 84 EU Directives. 217 GAO (n 208) 22.

144  Luke RA Butler unquantifiable claims arising from generic matters such as economic downturn, supplier insolvencies and labour shortages, effectively turning fixed-price contracts into cost-plus by the back door if terms are drafted too broadly.218 Good practice to consider may include: strategic payment of provisional sums; pricing for risks in the contract sum but offering savings on an open book basis for specific items if the position does not turn out to be as bad as predicted; or negotiating bespoke mechanisms for significant increases in labour and materials costs (perhaps above a stated percentage threshold) to be shared.219 Again, the actual deployment of such strategies and their effectiveness during emergencies merits further research.

B.  Determination of Costs and Profits on Contracts Another significant practical area is recoverability of costs and profits. For preexisting contracts, one issue is whether the emergency is the kind of event which might permit relief, for example, from certain losses under force majeure or change of law clauses. Another issue is which types of additional costs are recoverable, eg whether ‘cost risk’, that is, known/unknowns or contingencies that may arise in future are allowable or costs incurred to continue service delivery, eg installing new sanitation equipment to comply with new public health social-distancing measures. In addition, determination of profit on cost will be an issue in certain contracts, eg a supplier awarded a contract to respond to the emergency may assume additional risks and expect a higher profit. Further, if there is no competition comparing offers based on price, a procuring entity may require an alternative reference point for establishing a profit mark-up on costs. Cost makes up most of contract price, and thus cost-related issues are this section’s primary focus.

i.  Types of Event Giving Rise to Relief and Recovery For existing contracts affected by an emergency, legislation in some countries prescribes contract clauses which permit relief and recovery on defined grounds including force majeure.220 As chapter 16 indicates,221 US law provides that under

218 L Edwards and L Reeve, ‘Negotiating Construction Contracts in a COVID-19 landscape’ (Ashfords, 1 May 2020), available at www.ashfords.co.uk/news-and-media/general/negotiating-constructioncontracts-in-a-covid-19-landscape. 219 ibid. 220 In the context of a pandemic, a useful definition is provided by the UK (albeit that, as discussed in ch 15, section IV, the UK has determined that the pandemic should not generally be considered to be a force majeure event. Force majeure is a contractual term which may, (depending on the specific terms of the contact) allow one or both of the parties, when a specified event or events occurs beyond their control: to terminate the contract; or to be excused from performance of the contract, in whole or in part; or to be entitled to suspend performance for the period the event is continuing or to claim an extension of time for performance. 221 section III.IV.

Regulating Single-Source Procurement in Emergency Situations  145 a fixed-price contract, ‘epidemics’ and ‘quarantine restrictions’ constitute force majeure bases for excused performance where non-performance might otherwise legitimate termination.222 There is similar provision for excusable delay for cost reimbursement contracts.223 In these circumstances, a Request for Equitable Adjustment can be submitted to help recover increased costs under a Changes Clause.224 Further, it is possible to recover costs due to action ordered by the Government, eg a contractual order to suspend, stop or delay work.225 However, there is a risk that the Government may argue that these were ‘sovereign acts’ of public and general applicability preventing any liability for a contractor’s additional costs.226 In countries where legislation does not expressly regulate cost recovery, these issues will be governed by national or procuring entity policy or individual contract terms. While in India,227 the Government declared the pandemic a force majeure event to trigger contract clauses, as explained, UK central Government policy228 was that it was not to be generally treated as such; instead entities were encouraged to support suppliers to ensure service continuity through additional payments to ‘at risk’ suppliers and other forms of contractual relief.229 Individual contracts may also contain terms determining recoverability of losses pursuant to certain events, such as ‘change in/of law’ clauses. These can raise a host of issues such as how their legal and practical effects differ from those of force majeure (as has been the issue in India230), whether a change in government policy is covered and, if the clause can be invoked, how risk is allocated for resulting losses suffered.231 These are likely to be matters of contractual interpretation to be determined on the individual facts. It may therefore be difficult to distil general principles which could guide procuring entities and suppliers in contract design. However, the experiences of a number of countries and recent case law suggest that national policies could give clearer guidance on the general effect of such clauses in emergencies and contracts must be more carefully drafted to better define and allocate risk in respect of recovery for losses and additional costs. 222 FAR 52.249-8 – Default (fixed price supply contracts). 223 FAR 52.249-14 – Cost reimbursement and time and material contracts. 224 FAR 52.243-2. 225 FAR 52.212-4(c), (l) – Commercial Item Contract Changes and Termination; FAR 52.242-14 – Suspension of Work; FAR 52.242-15 – Stop-Work Order; FAR 52.242-17 – Government Delay of Work; FAR 52.243-1 – Changes – Fixed Price; FAR 52.249-2 – Termination for Convenience of the Government (Fixed-Price); FAR 52.249-6 – Termination (Cost-Reimbursement); FAR 52.243-6 – Change Order Accounting. 226 See Horowitz v. United States, 267 US 458, 461 (1925) (the ‘United States when sued as a contractor cannot be held liable for an obstruction to the performance of the particular contract resulting from its public and general acts as a sovereign’). 227 ch 19, section IV. 228 ch 15, section IV. 229 Further, contracts and standard contract conditions in particular industries (eg defence) may not treat pandemics as a force majeure event entitling recovery of costs. 230 ch 19, section IV. 231 ch 15, section IV.

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ii.  Which Costs are Allowable In some countries, legislation also prescribes rules and/or principles on how to assess whether a cost is recoverable. For instance, US law provides that costs are allowable if they comply with requirements of ‘reasonableness’ and ‘allocability’.232 Similarly, the UK SSCR permit recovery of ‘allowable costs’ with various adjustments to the profit rate (eg an incentive adjustment to reward good performance).233 Costs must be appropriate, attributable to the contract and reasonable in the circumstances; and the UK SSRO has issued detailed statutory guidance on principles for assessment and categories of allowable costs.234 Canada and Australia have adopted similar principles.235 Legal tests on allowability of costs may be difficult to apply in emergencies, however. For example, in assessing the ‘reasonableness’ of a cost, what is reasonable during a pandemic might not be considered reasonable with the benefit of hindsight at the point of audit years later. Contemporary records may assist in verifying the cost, but only if these were kept. Similarly, the UK SSRO published an update to its statutory guidance on allowable costs to address costs affected by the pandemic which also suggests potential issues. Pre-pandemic guidance indicates that a cost that ‘enables the performance of a contract’ includes not only standard costs incurred in delivering the contract but also those necessary to sustain an ‘essential or desirable capability’ to deliver the contract.236 The latter may indirectly enable performance, but the timing of expenditure on those costs and their outcomes may make attribution to the contract less easily demonstrable. Such costs might include general costs of a business. However, it is unclear, whether such costs might also include preventative maintenance of buildings or equipment, eg to be ‘pandemic-proof ’. The SSRO COVID-19 guidance does not provide any examples. In all countries there is likely to be difficulty showing the causal relationship between the emergency, the cost claimed and its effect on performance. 232 FAR Part 31, 31.201-2. 233 During the pandemic, UK COVID-19 procurement policy specifically identified the SSCR as providing a ‘default’ means of assuring value for money on urgent contracts because they allow costs to be effectively assured after contract award. See Cabinet Office, Defence Procurement Policy Note 01/20 ‘Responding to COVID-19 – Defence Update to CO PPN 01/20’, Information Note DPPN 01/20 (March 2020). See generally, LRA Butler, ‘Defence Procurement Policy Note 01/20 Responding to COVID-19 – Defence Update to CO PPN 01/30; Defence Procurement Policy Note 02/20 Responding to COVID-19 – Defence Update to CO PPN 02/20; and COVID-19 Defence Furlough and Interim Payment Policy Note’ (2020) 5 Public Procurement Law Review NA216. 234 UK Government policy on open book contract management (a technique discussed below) has extended these principles to competitive contracts for facilities management, business process outsourcing, IT, etc. 235 In Canada, see ‘The Supply Manual – Version 2021-1’, effective date 2021-05-20, ch 10, available at buyandsell.gc.ca/policy-and-guidelines/supply-manual/section/10. In Australia, see Department of Defence, ‘CASG Cost Principles’ V2.0 (9 October 2017), available at www1.defence.gov.au/sites/ default/files/2020-06/casg_cost_principles.pdf; and CASG Profit Principles, V1.0 (9 October 2017), available at www1.defence.gov.au/sites/default/files/2020-06/casg_profit_principles.pdf. 236 Single Source Regulations Office, ‘Allowable Costs guidance’, Version 5 (16 March 2020), applies from 1 April 2020, paras.3.8 and 3.9.

Regulating Single-Source Procurement in Emergency Situations  147 A related issue is proof. In the US, for example, the Truthful Cost or Pricing Data Statute and implementing Regulations require suppliers to provide complete and accurate cost and pricing data.237 This requires all information that a contract negotiator would consider prudent to determining the price. It has been observed that the pandemic will impact suppliers’ ability to provide sufficiently accurate data to determine future prices for the purposes of negotiation and, therefore, full disclosure should be made of all facts relevant to liquidity, preservations and costsaving plans that the contractor is taking during the pandemic and which would tend to reduce the cost or price negotiation to prevent defective pricing claims under US law.238 Another issue concerns how to assess the recoverability of standard costs based on annual rates. For example, indirect costs are often claimed on a rates basis, ie a notional standard rate determined and agreed annually for certain costs such as labour. As the pandemic may have affected (and most likely increased) rates for at least one or two years, there are likely to be problems in setting annual rates which are appropriately adjusted to accommodate the pandemic on some form of return to normality. In the US, law firms have suggested that any forward-pricing rate agreements should be terminated, advising that it would be unwise for a procuring entity to price this year and next year’s work on old assumptions when negotiating current contracts.239 A final issue concerns which types of newly incurred costs should be recoverable, especially where, as indicated, these may be attributable to the emergency but not necessarily contract performance and which suppliers might ordinarily be expected to bear. Unsurprisingly, the main costs identified during the pandemic have been staff costs, eg for absences, leave and replacements.240 As chapter 16 indicates,241 in the US, legislation has been introduced to allow procuring entities to modify contracts to reimburse a contractor (for paid leave) to keep its employees or subcontractors in a ready state where the contractor cannot perform work on an approved site due to facility closures or other restrictions and cannot work remotely.242 Further, law firms have also identified issues regarding recovery for loss of income compensating for loss of footfall, eg on car parks which generate revenue through fines and retail outlets in hospitals; standing costs, eg a leisure centre not being used but which continues to have maintenance and security costs; and ‘ramp up’ or remobilisation costs, eg additional costs incurred to ensure that 237 10 USC s 2306a; 41 USC s 35. 238 ibid. 239 SM Masiello, JG Martinez, and PR Seckman, ‘Government Contracting During the COVID-19: Key Considerations for Negotiating New Government Contracts Amidst the Global Pandemic’ (Dentons, 6 April 2020), available at www.dentons.com/en/insights/alerts/2020/april/3/governmentcontracting-during-the-covid-19. 240 For example, additional costs incurred in providing services where a supplier has to rely on more temporary agency staff (because of permanent staff sickness due to COVID-19 above normal/expected levels). 241 ch 16, section IV. 242 Coronavirus Aid, Relief, and Economic Security Act, s 3610.

148  Luke RA Butler a service can be restarted in a health and safety compliant way to observe social distancing.243 Going forward, national policy guidance on recoverability of costs in emergencies could probably be improved. For example, this author has observed in respect of the UK SSRO guidance on costs affected by the pandemic that it simply reiterates in very general terms how aspects of its existing guidance might be more relevant in the pandemic.244 It does not offer specific guidance on which costs may be affected and how the principles on recovery should be applied, even acknowledging that it is for contracting parties to identify their costs and ensure compliance. Further, as section II.B.iii indicates, at the very least, legal and policy frameworks could encourage observance of pricing controls on cost allowability in negotiations on single-source contracts. Possibly in future, individual contracts will be drafted with specific provisions designed to better allocate risk and recovery of costs for emergencies.

iii. Profit Profit is an important element of the price as a mark-up on costs. A particular issue in single-source contracts concerns how prices are determined where there is no comparison of offers. To take the UK as an example of contrasting approaches depending on the type of requirement procured, as section II.B.ii outlined, for centrally procured PPE, prices exceeding 25 per cent of an average required a special approval. Conversely, for ventilators, the NAO reported that there was no competition on price. On the largest contract, a mark-up of 15 per cent on eligible direct costs was permitted245 based on an analysis of suppliers’ current operating profit and including a two per cent increment because of the ‘novelty’ of the situation.246 Advice was sought from the Ministry of Defence Cost Assurance and Analysis Service which, as indicated, has single-source pricing expertise. The mark-up was considered relatively high but reasonable in the circumstances. By comparison, defence single-source contracts where there is limited financial risk to the contractor are normally let with an 8–10 per cent mark-up.247 243 B Brittan, ‘Contract Management in the wake of Covid-19’ webinar (9 July 2020), available at www.bevanbrittan.com/insights/events/events/on-demand-0709-contract-management-webinarcontract-management-in-the-wake-of-covid-19. 244 LRA Butler, ‘Pricing Contracts Affected by COVID-19: Single Source Regulations Office Note on Single Source Defence Contracts’ (2020) 6, NA265-NA280. 245 This did not include ‘pass through’ costs from another firm within the project consortium or a third party that applied a margin within its price. This seems to be very similar to the Profit on Cost Once principle under the SSCR designed to prevent double recovery by a contractor who relies on a subcontractor within the same group and also includes a profit mark up: profit can only be claimed once. This is another example of how complex pricing determinations can become where, in an emergency, the make-up of the contractor can involve diverse consortia with complex related supply chains. 246 NAO (n 15) 40. 247 ibid.

Regulating Single-Source Procurement in Emergency Situations  149 This comparison raises further questions about pricing methodologies. For PPE procurement, as prices up to and exceeding 25 per cent of a ‘normal’ price were paid, it remains unclear what made up either the cost or profit on this premium. Further, for the ventilator contracts, it is not known why the price was considered reasonable. There appears to be emphasis on a comparison with defence contracts. However, comparison can be difficult in emergencies. For example, some pricing formulae require a historical comparison with performance of comparable companies in certain industries to determine the average cost of production and capital employed, to calculate the amount by which profit should be adjusted.248 Aside from the appropriateness of any comparison of profits on contracts in other industries, information in years affected by the pandemic will not necessarily be representative of ‘normal’ or expected capital intensity. Again, these points reinforce the view that how pricing is regulated, in particular in emergencies, should be the subject of more intensive focus in audits and research.

C.  Open Book Contract Management In normal times, the experience of many countries has been that contract management is not assigned the same priority and resource as the procurement process in terms of advance planning and monitoring price and performance against the contract terms. Of course, in emergencies, this may be further subordinated to the immediate priority of responding to the emergency with the consequences dealt with later at the point of audit. In the pandemic, many countries made attempts to safeguard against performance risks. This included advance or interim payments, with the attendant risk of non-delivery after receipt of payment, as well prompt payments to secure supply. The risks were counterbalanced by controls such as contract clauses requiring clawback payments for non-delivery and, where very high prices were paid, contractual mechanisms to secure pricing reductions through the contract’s life.249 However, more collaborative approaches were also necessary to maintain or develop trust with suppliers. A prime example is so-called ‘open book’ accounting or contract management. Open book is designed to improve understanding of the drivers of supplier costs (including overheads) and planned return (profit) on cost of production and

248 Single Source Regulations Office, ‘Single source baseline profit rate, capital servicing rates and funding adjustment methodology’ (March 2019), available at assets.publishing.service.gov.uk/ government/uploads/system/uploads/attachment_data/file/919715/Single_source_baseline_profit_ rate__capital_servicing_rates_and_funding_adjustment_methodologyA.pdf. 249 Cabinet Office, ‘Procurement Policy Note – Responding to COVID-19 Information Note’ PPN 01/20 (March 2020) 4.

150  Luke RA Butler capital in pricing contracts through requiring reporting, access to cost data, and benchmarking which can assist in future contract negotiations.250 It has also been identified as a useful tool to combat public sector fraud.251 Suppliers may naturally be reluctant to disclose such data given the potential to lead to price reductions more often than increases, and risk of disclosure to competitors. However, in the pandemic this appears to have been treated as a quid pro quo for large payments to contractors, and it is generally accepted in non-emergencies on long-term contracts involving trusted partnerships. There are clear examples of such practices. Thus UK central government policy instructed that suppliers make available data including from ledgers, cash-flow forecasts, balance sheets, and profit and loss accounts, as required and requested.252 Further, in the UK ventilator challenge, the NAO reported that the Government worked on an open-book basis with participants, for example, by auditing claims for costs incurred at the point participants submitted them. This, in turn, enabled the verification of and challenge to suppliers’ costs as discussed above. Further, the PAC recommended that such practices could be applied to future programmes.253 Another illustration comes from Peru, where fixed-price contracts were negotiated to cost-plus contracts in the pandemic to enable more flexibility in cost recovery and financial risks assumed as well as an imposed cost cap.254 The ‘open book nature’ of a cost plus fee contract in terms of being required to share information to determine price provides additional transparency.255 However, it must be acknowledged that before the pandemic studies reported that open book contract clauses are rarely used.256 Further, government pandemic policies contain few details of how open book can be made contractually enforceable.257 There is evidence that it has been difficult to comply with open book requirements during the pandemic even when legally statutorily required and involving civil penalties

250 NAO, ‘Cross Government, Open-book accounting and supply chain assurance’ (29 June 2015) HC 91-I, available at www.nao.org.uk/wp-content/uploads/2015/07/Open-book-accounting.pdf. 251 Ministry of Housing, Communities & Local Government, ‘Review into the risks of fraud and corruption in local government procurement A commitment from the UK Anti-Corruption Strategy 2017–2022’ (June 2020), available at https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/890748/Fraud_and_corruption_risks_in_local_government_ procurement_FINAL.pdf. 252 Cabinet Office, ‘Procurement Policy Note – Supplier relief due to COVID-19’ Action Note PPN 02/20 (March 2020) 4. 253 NAO (n 15) 41. 254 E Cárdenas, ‘Cost plus fee contracts in the era of COVID-19’ (DLA Piper, 30 November 2020), available at www.dlapiper.com/en/uk/insights/publications/2020/11/pgi-issue-4/cost-plus-fee-contracts. 255 ibid. 256 Ministry of Housing, Communities & Local Government, ‘Review into the risks of fraud and corruption’ (June 2020) 38, observing: ‘Of the [86] survey respondents, the majority reported including provisions for open book accounting in contracts with suppliers in some cases (14% stated that these were included in general) and in respect of the inclusion of the “right to audit” clause in contracts, 35% stated that these were included and a further 40% that these were sometimes included’. 257 LRA Butler, ‘Procurement Policy Note – Recovery and Transition from COVID-19, Action Note PPN 04/20’ (2020) 5 Public Procurement Law Review, NA229.

Regulating Single-Source Procurement in Emergency Situations  151 for non-compliance.258 Moreover, if suppliers were reluctant to disclose sensitive commercial information before the pandemic, they may be even more reluctant to do so where pricing or supply chain data could reveal pandemic-related insolvency risks. This chapter cannot fully explore how such techniques could be improved through policy and regulation. However, the pandemic has at least indicated that techniques that were slowly gaining traction were incorporated as a policy response to an emergency. Challenges arise as in respect of open contracting regarding the balance of incentives and interests in disclosure and safeguards but also considerable opportunities if policies can be developed by consensus. This may require more coordinated thinking on the relationship between open contracting in the procurement process and open book in contract management.

IV. Conclusions Single-source is a necessary procurement method in emergencies. This chapter has examined just some aspects of its operation, drawing on experience during the pandemic. As indicated, modest reforms to the skeletal provisions in international legal frameworks may be helpful, as chapters two and three discussed, and there are also many remaining areas of legal and practical uncertainty which could be addressed through targeted guidance and intervention at both international and national levels. At the outset, it was suggested that there are certain key practical and legal choices to be made about the selection of procurement method. These are complicated where significant reliance on the market is necessary. The international frameworks provide methods which are not well designed to respond to changes in buyer-supplier dynamics in emergencies even if, in theory, they can be applied to accommodate them. As a result, it was suggested that international legal frameworks and national systems should revisit the extent to which existing or new methods may facilitate market-led approaches in emergencies. The pandemic has also illustrated the challenges of directly soliciting offers from suppliers in emergencies. An open ‘call to arms’ creates not only practical problems of filtering thousands of responses but also legal risks over the criteria and processes for assigning priority, selection and award, in terms of ensuring transparency and equal treatment. It may not be necessary to reform international regulatory frameworks to prescribe in more detail the application of selection and award criteria in single-source procurement, although rules addressing some

258 For example, it has been observed by the SSRO that not all reporting requirements under the SSCR were complied with before COVID-19. Further, the MOD and SSRO have recognised that there may be limitations on the ability of suppliers to comply with reporting requirements in light of COVID-19. Presumably, this will result in incomplete or late reporting and risks non-reporting.

152  Luke RA Butler issues in negotiations would be helpful, in particular, on pricing and required information in records and reports. Rather, policy guidance could more clearly articulate general principles and considerations in devising and applying such criteria and conducting single-source procurement processes end-to-end. This should be accompanied by more proactive disclosure of procurement documentation containing that information. Concerning publication of notices, including justification requirements, the practical difficulties of ensuring publication must be acknowledged, although time limits for publication could be reduced with improvements in electronic capture and publication of information. As discussed in chapter 2, it is possible to increase use of ex ante notices for direct solicitations including improved information in records and reports accompanied by proactive disclosure. As indicated, this would require a clearer policy steer and guidance on the types of information and standard of proof that should be provided in justifications and, to the extent possible, less focus on notice requirements being treated by procuring entities as legal compliance exercises and more as positive business cases to justify recourse to the method. Relatedly, the pandemic raises the possibility for improved use of central ex ante and internal approvals to authorise procurement in emergencies and/or augment justifications for single-source procurement. It is clear that there could be more emphasis on ex ante rather than ex post controls, aided by greater access to, and disclosure of, single-source procurement information, in particular, by electronic means. A more general aspect that must be addressed concerns capturing and disclosing single-source information. There are certain practical considerations, eg ensuring granularity of data capable of identifying the extent of no competition and how selection and award processes have been conducted under relevant legal bases, as well as ensuring that existing data platforms are responsive in emergencies. Another fundamental issue is to determine how to design regimes which accommodate different users, eg where disclosure is to a department or regulator to the public generally. This, in turn, is relevant to what sorts of information should be disclosed or not based on a careful balance of interests within frameworks that increasingly advocate transparency by default via open contract data standards. Practical problems of implementation may also be significant when redactions are involved. At the very least, this chapter has highlighted single-source procurement for priority consideration in designing such systems. Finally, pricing during the pandemic confirms that regulation of pricing and contract management should be the subject of closer analysis. Whilst not expressly covered by international legal frameworks, some countries legislate to regulate pricing, in particular, in respect of single-source contracts. The pandemic focuses attention on how contract types are selected to allocate pricing risk, how costs and profit should be determined when pricing during emergencies, and how transparency of pricing can be improved through certain contract management techniques such as open book. Inquiries have primarily focused on failures of procurement

Regulating Single-Source Procurement in Emergency Situations  153 processes with assumed impacts on value for money and insufficiently on the mechanics of pricing. More generally, the pandemic is a salient reminder that, whilst often treated as a formal legal exception, in reality, single-source procurement is a routine feature of practice. It deserves more attention than it has so far received in mainstream public procurement regulation discourses. Several chapters in this book encourage further debate on how to improve the effectiveness of single-source procurement regulation and as well as raising wider issues relevant public procurement regulation as a whole.

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5 The Challenges of Constructing a Supplier Review System for Urgent Procurement: An Analysis in the Context of the UNCITRAL Framework CAROLINE NICHOLAS* AND SUE ARROWSMITH

I. Introduction A mechanism for suppliers to enforce procurement rules is considered an essential feature of a modern public procurement system and part of the ‘verification and enforcement’ dimension of transparency referred to in chapter 2. The Guide to Enactment (Guide) of the UNCITRAL Model Law on Public Procurement 2011 (Model Law) explains that such a mechanism leverages suppliers’ natural interest in monitoring compliance with its objectives and rules, and can help foster confidence and deter violations.1 Article 9(1)(d) of the United Nations Convention against Corruption (UNCAC) requires procurement systems to include an effective domestic review system; this is emphasised by the OECD;2 and such a system is required by all the international models considered in chapters two and three, namely the WTO’s Government Procurement Agreement (GPA),3 EU4 and the Model Law. * A member of UN Secretariat staff. The opinions expressed in this chapter are personal and are not to be viewed as representing official views of the United Nations. 1 Guide to Enactment, Chapter VIII Challenge Proceedings, Introduction, paras 1–2. On this role see X Zhang, ‘Supplier review as a mechanism for securing compliance with public procurement rules: a critical perspective’ (2007) 16 Public Procurement Law Review 325. 2 OECD Principles for Integrity in Public Procurement (2009), available at www.oecd.org/gov/ ethics/48994520.pdf. 3 Revised Agreement on Government Procurement, World Trade Organization, 2012, available at www.wto.org/english/docs_e/legal_e/rev-gpr-94_01_e.pdf, Art XVIII. 4 For most major public sector civil procurement contained in Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts [1989] OJ 1989 L395/33 (‘the Remedies Directive’). Major amendments were made by Directive 2007/66/EC

156  Caroline Nicholas and Sue Arrowsmith Providing effective review for suppliers5 in situations of urgency, or alleged urgency, clearly presents a particular challenge in balancing the need for review and the need for speedy procurement. This chapter considers to what extent and how a review system can best be constructed in that situation through a critique of the Model Law’s provisions, which focus on pre-contractual remedies. Our analysis will draw on equivalent EU provisions: these also cover the post-contract stage and so provide a useful supplement. We conclude that the Model Law overall provides an effective and balanced system of review, although we make recommendations to enhance the system, and for expanding guidance on concluded contracts, both generally and relating to urgent procurement specifically. We also conclude that in genuinely urgent procurement – even when the procuring entity is at fault in creating the urgency – there is an inherently limited role for a supplier review system, however well designed, because of the inevitable disruption that effective remedies can cause and because of disincentives to supplier challenge. From this perspective, supplier review is primarily relevant for preventing wrongful use of urgency provisions, ie use when there is no real urgency, although even here, incentives to challenge are limited. States therefore need to give careful attention to other means of enforcing the rules in urgent procurement, such as allowing review applications by other stakeholders and using oversight tools such as audits and investigations. We first examine the system of remedies under the Model Law (section II); then consider specific issues relating to urgent procurement (section III); and finally highlight our main conclusions (section IV).

II.  Supplier Review under the UNCITRAL Model Law A.  Background and Guiding Principles6 Chapter 2 provides general background on the Model Law, its nature as an international model intended for all types of countries, and its substantive provisions addressing urgent procurement (which chapter 2 examined in detail). Reflecting its overall scope as a framework law,7 the Model Law allows considerable flexibility of the European Parliament and the Council of 11 December 2007 amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts [2007] OJ L335/31. 5 As in other chapters, ‘supplier’ refers here to any party that is, or may be, interested in contracts or already has a contract. The Model Law itself uses the phrase ‘supplier or contractor’ for this (Art 2(t)), defining these as ‘any potential party or any party to the procurement proceedings with the procuring entity’. 6 And on constructing review systems in general in accordance with such principles see DI Gordon, ‘Constructing a Bid Protest System: The Choices that Every Procurement Challenge System Must Make’ (2006) 35 Public Contract Law Journal 427. 7 ‘The Model Law as a “framework” law: elements of a procurement system’ Part I, Guide to Enactment, paras 58–59.

The Challenges of Constructing a Supplier Review System  157 in supplier review, and accommodates the wide variety of national approaches to legal oversight of administrative acts.8 While Chapter VIII covers the main aspects of supplier review (such as standing, time limits, suspension and remedies), the Guide notes that these are intended to be supplemented by further rules.9 The overriding guiding principle is to strike the ‘appropriate balance between, on the one hand, the need to preserve the interests of suppliers and contractors and the integrity of the procurement process and, on the other hand, the need to limit disruption of the procurement process’.10 The approach reflects the increased acceptance of supplier review since the 1994 iteration of the UNCITRAL Model Law (‘1994 Model Law’) was adopted. At that time, a key consideration was the sensitivity of disruption,11 and the supplier review provisions were both optional for enacting States12 and limited in scope – for example, providing that remedies could take the form of recommendations rather than binding decisions.13 Nonetheless, disruption remains recognised as an important consideration, particularly in urgent procurement. A second guiding principle is timeliness, also particularly important in urgent procurement. As the Guide notes, ‘speedy remedies that can be granted without significant time and cost are features … highly desirable in a procurement challenge mechanism’,14 for the obvious reason that they limit potential (and potentially unnecessary) disruption to procurement. Timeliness is reflected throughout the Model Law’s provisions, which include a simple, potentially swift application for reconsideration before the procuring entity, and in time limits both for filing applications and for conduct of the review itself. Transparency, the third guiding principle, is reflected in requirements for the independent review body to publish a notice of the complaint and to send information to interested parties (including other participating suppliers) (Art 67(5)); complainant rights to request a public hearing (Art 68); and requirements for decisions to be reasoned (Art 67(11)), included in the record (Art 67(11)) and published (Art 52(2)). Article 67(8) requires the procurement record required under Art 25 (see Chapter II) to be provided promptly to the review body. Inclusivity, the fourth principle, gives all suppliers participating in the procedure and any governmental authority potentially affected the right to participate without being joined as complainant or respondent (Art 68(1)). Effectiveness, the fifth guiding principle, requires the possibility of intervention without delay; the powers to suspend or cancel procedures, to prevent contracts

8 Guide to Enactment, Chapter VIII Challenge Proceedings, Introduction, para 6. 9 ibid. 10 ibid, para 18. 11 Report of the Working Group on the New International Economic Order on its 13th session (New York, 15–26 July 1991), document A/CN.9/356, paras 165–67, 172–74. 12 1994 Model Law, footnote to Chapter VI. 13 1994 Model Law, footnote to Art 54(3). 14 Guide to Enactment, Chapter VIII Challenge Proceedings, Introduction, para 11.

158  Caroline Nicholas and Sue Arrowsmith entering into force during the dispute, and to implement other interim measures, such as financial sanctions for non-compliance; the availability of corrective remedies; damages if intervention is no longer possible; and the ability to proceed swiftly with actions in the review, with time limits generally measured in days and weeks.15 The Model Law’s approach to implementing these principles focuses on correcting violations and on completing review procedures before important actions need to be undone (notably the contract’s entry into force). Financial recompense is a secondary remedy. We can now turn to the implementation of these principles in the Model Law.

B.  The Standstill Requirement A supporting requirement in Art 22 (ie, not part of Chapter VIII) is for a ‘standstill’, a period between notifying participants of the outcome and concluding the contract. It is designed to enable challenges before a contract enters into force. Exceptions from standstill apply to awards below a threshold (decided by the enacting State), awards without a second-stage competition under framework agreements and – crucial in the urgency context – where the procuring entity determines that ‘urgent public interest considerations’ require the procurement to proceed without a standstill, a determination that must be reasoned in the procurement record (Art 22(3)).

C.  Standing and Scope of Review Article 64 grants the right to review to ‘suppliers and contractors’, defined in Art 2 as all potential parties to the procurement proceedings, who have, or assert that they (may) have, suffered loss or damage. It effectively excludes the public and civil society, who are unlikely to sustain loss or damage. The objective is to prevent speculative and tactical applications, reflecting issues of balance,16 but one impact is to constrain review in urgent procurement, as discussed later in section III.B. Article 64(1) allows the challenge of any act or decision of a procuring entity in the procurement process, without exception. This is an important change from the 1994 Model Law, which exempted several decisions17 including the choice of procurement method.18 The 1994 exception was criticised as involving

15 ibid, para 8. 16 Report of Working Group I (Procurement) on the work of its fourteenth session (Vienna, 8–12 September 2008), document A/CN.9/664, paras 23–25, available at uncitral.un.org/en/working_ groups/1/procurement. 17 1994 Model Law, Art 52(2). 18 1994 Model Law, Art 52(2)(a).

The Challenges of Constructing a Supplier Review System  159 a misconception that such a challenge would necessarily involve the commercial merits of the choice (which would not be appropriate), whereas it can in fact be limited to reviewing a possibly abusive motive or a manifest error.19 Removing this exception plugs an important gap, since abusively invoking urgency to use competitive negotiations or single source procurement is a significant threat to procurement objectives.

D.  Forum and Procedure20 UNCITRAL recognised that wide variations in national legal systems meant that the Model Law should not impose a structure on the review mechanism.21 Article 64(2) therefore allows suppliers to exercise their right to review through one or more of three approaches, determined by the enacting State, provided that at least one review stage is independent of the procuring entity. The first stage is an application for reconsideration to the procuring entity itself, under Art 66. In allowing the procuring entity to correct errors, reconsideration encourages disputes to be resolved early, by the entity that possesses the relevant facts, at low cost and with minimal disruption. Suppliers’ reluctance to use a legal procedure for fear of jeopardising future business, or because of perceived judicial corruption, demonstrate a value in reconsideration. Although intended as a swift and simple procedure, reconsideration is a formal process with time limits (see below) and procedural safeguards, such as provision of written reasons for the eventual decision (Art 66(8)), and so is different from an informal debriefing. Reconsideration is available only before the challenged contract (or framework agreement)22 comes into force, reflecting that the procuring entity is generally unable to rescind or terminate a concluded contract (and consistent with the general exclusion of post-contract processes from the Model Law).23 Also consistent with the approach of the Model Law on preventing conflicts of interest in the procuring entity, the reconsideration is preferably undertaken by, or involves, individuals other than those making the original decision. In addition to being an optional approach, the Model Law provides – unlike the 1994 version – that its use must be optional for suppliers; it cannot be made a pre-condition of independent review. The approach is understandable, especially

19 See further Arrowsmith, ‘Public Procurement: an Appraisal of the UNCITRAL Model Law as a Global Standard’ (2004) 53 International and Comparative Law Quarterly 42. 20 See generally X Zhang, ‘Forum for Review by Suppliers in Public Procurement: an Analysis and Assessment of the Models in International Instruments’ (2009) 18 Public Procurement Law Review 201. 21 Report of the United Nations Commission on International Trade Law, forty-fourth session, paras 142–43, supra. 22 Generally we will refer just to contracts in considering concluded agreements, but often the same considerations apply equally to framework agreements. 23 See Part I of the Guide to Enactment, ‘Implementing the principles of the Model Law to all phases of the procurement cycle: procurement planning and contract management’, para 82ff.

160  Caroline Nicholas and Sue Arrowsmith in a system in which requests for reconsideration are not seriously treated or even ignored, and thus serve merely to delay. While some States raised with UNCITRAL that reconsideration could be made a compulsory first step, the optional approach prevailed,24 although UNCITRAL emphasised the benefits and importance of an effective reconsideration system.25 Subsequent practice and the experience of the pandemic have led commentators to suggest that, with appropriate safeguards such as automatic suspensory effect to ensure that access to an independent remedy is not prejudiced,26 this issue could be revisited. Implementing the principle of timeliness, applications related to the terms of solicitation and to pre-qualification or pre-selection must be submitted before any tender deadline (Art 66(2)(a)), and those related to other acts or decisions (principally, award decisions) during the standstill period or prior to the entry of the procurement contract (Art 66(2)(a)). The process itself is designed to be swift, with the procuring entity required under Art 66(3)(a) to decide within just three days both whether to entertain or dismiss the application (dismissal being permitted if the entity considers the application is manifestly without merit, or was submitted late or by a party without standing) and whether to suspend the procurement pending a decision. The enacting State itself sets the deadline for decisions on the merits (Art 66(6)), and is encouraged to keep the period short. Although the Model Law does not provide expressly for this, special time limits could be set for cases of urgency. As the procuring entity will be in possession of the facts, reconsideration may, if seriously addressed, offer the most effective route to correcting decisions in urgent cases – something that guidance on the Model Law could highlight. Effectiveness in this context also requires the entity to have power to overturn, correct, vary or uphold any of its decisions or actions (as provided for in Art 66(5)). The second approach involves review by an authority – administrative or quasijudicial – independent of the procuring entity,27 under Art 67. Compared with court proceedings, this approach can offer time and costs savings through short timescales and procedures adapted to public procurement; and through specialist expertise, also critical given the complexity of procedural rules.28 As with reconsideration, challenges to solicitation or pre-qualification or pre-selection must be submitted before any submission deadline (Art 67(2)(a)) and challenges to other decisions, including the award, are available only during the standstill period (Art 67(2)(b)(i)), other than in the case of applications raising ‘significant public interest considerations’ (Art 67(2)(c)). Where no standstill was applied, the possibility to challenge is available during a prescribed period set by the enacting State 24 See, for example, a discussion of parallel versus hierarchical approaches in paras 142–43 of the Report of the United Nations Commission on International Trade Law, forty-fourth session (27 June–8 July 2011) (A/66/17). 25 Report of Working Group I (Procurement) on the work of its nineteenth session, paras 71, 73. 26 As under EU law: see Remedies Directive, Art 1(5). 27 On independence see, for example, Guide to Enactment, Chapter VIII Challenge Proceedings, Introduction, paras 24–27. 28 ibid, para 15.

The Challenges of Constructing a Supplier Review System  161 (Art 67(2)(b)(ii)), based on when the challenger knew or should have known of the relevant circumstances. Such challenges can be made after the procurement contract has come into force, although the Model Law indicates that there should be a maximum cut-off after this point, irrespective of the challenger’s awareness (Art 67(2)(b)(ii) and Art 67(2)(c)). There is, however, no extension for public interest-based review of challenges of decisions made prior to the submission deadline. In light of the pandemic experience, and given the importance of decisions on choice of procurement method in urgent procurement, we suggest that this point could be reconsidered. Even for public interest challenges, however, the time periods are expressed in working days, indicating that they are not designed to address allegations of abuse that may come to light months or years later. When drafting the provisions, UNCITRAL noted that ‘in this context the deadlines set out in [the draft] might not be appropriate’, and that ‘these issues were very important, but that the solution to them (such as the annulment of a contract) might be found in branches of the law other than the procurement legislation’.29 As with reconsideration applications, within three days of receipt the review body must decide whether to entertain or dismiss the application (Art 67(7)), and on suspension. Again, the enacting State sets the deadline for decisions on the merits (Art 67(10)). Such a deadline is a key feature of effectiveness in the procurement context, and is not found in the EU and GPA provisions. The third alternative is application to a competent court (Art 64(2)). The Model Law does not provide procedures for court proceedings, deferring to applicable national law. While not addressing the costs or benefits of an independent review body as compared with a court-based review mechanism per se, advantages of time, cost and specialist expertise, noted above, were raised in UNCITRAL discussions30 and reflected in the Guide.31 The Guide highlights that UNCAC requires an appeal.32 As an independent review body under the Model Law does not have an appeal competence, the review mechanism must provide for appeals to the court.

E.  Effectiveness of Remedies Key provisions directed at effective pre-contractual relief include those on effect of a challenge, suspension and final remedies. On the first, Art 65(1) prohibits any step to bring a contract into force while a challenge or appeal remains pending (and also for a short period – set by the enacting State – after a final decision, to allow for an appeal). However, the procuring

29 Report

of Working Group I (Procurement) on the work of its fourteenth session, para 38. para 24. 31 Guide to Enactment, Introduction to Chapter VIII, para 11. 32 ibid, para 3. 30 ibid,

162  Caroline Nicholas and Sue Arrowsmith entity can apply, and an independent review body can decide, to overturn this prohibition for ‘urgent public interest considerations’ (Art 65(3)). This concept is not defined, but the Guide refers to ‘natural disasters, emergencies, and situations where disproportionate harm might otherwise be caused to the procuring entity or other interested parties’.33 There is also the possibility of suspending all actions in the procurement procedure, a broader notion than the Art 65(1) prohibition. In requests for reconsideration, the procuring entity has a (reviewable) discretion over suspension of the procurement procedure (Art 66(3)(a)). The independent review body has the same discretion, save in two situations in which suspension is mandatory: first, where the challenge is received prior to the deadline for submission (as this may be a challenge to the choice of method, solicitation terms or exclusion of a supplier); and, secondly, where a challenge is received after the submission deadline but no standstill was applied (here, a suspension may prevent a potentially abusive award) (Art 67(3)). The independent review body can also suspend performance of a contract already in force. In all cases, however, the review body may decline suspension because of ‘urgent public interest considerations’ (Art 67(3)). The primary objective of the remedies is to correct violations.34 Without the availability of corrective relief, suppliers may lack an incentive to challenge, limiting the system’s effectiveness. Article 66 applications require the procuring entity to reconsider, and perhaps overturn or amend, its decisions. Remedies available to the independent review body, listed in Art 67(9), focus on undoing or redoing unlawful decisions; they include requiring a procuring entity to retake a decision in a compliant manner (Art 67(9)(b)) and directly revising the entity’s decision (Art 67(9)(d)). Some remedies, including direct revision of decisions, are presented as optional, respecting the different approaches to administrative acts within national systems.35 Remedies are also discretionary for the review body, Art 67(9) stating that it shall take ‘one or more of the following actions, as appropriate’. Financial compensation is also available (Art 67(9)(i)). While States may limit these to submission and/or challenge costs, the Guide notes that damages for lost profits may, for example, facilitate an effective remedy if contracts cannot be overturned.36

F.  Concluded Contracts Dealing with concluded contracts that were awarded in violation of public procurement rules is an issue of particular sensitivity and difficulty given the 33 Guide to Enactment, commentary to article 67, para 15. 34 ibid, para 27. 35 eg ibid, paras 24–25. 36 249–50. See also Guide to Enactment, commentary to article 67, para 28, Report of Working Group I (Procurement) on the work of its fifteenth session, para 262(e) and (f); and Report of Working Group I (Procurement) on the work of its eighteenth session, para 69(j).

The Challenges of Constructing a Supplier Review System  163 potential disruption to public projects and impact for the other contracting party.37 However, treating them as sacrosanct may render impossible an effective remedy in some cases and may fail to prevent deliberate abuses. When discussing the 1994 Model Law, UNCITRAL initially took a very cautious stance: although possible annulment of large, fraudulently awarded contracts was contemplated, the prevailing view was that annulment was particularly disruptive of the procurement process and generally not in the public interest and should therefore not be provided for in the Model Law. Instances in which annulment was appropriate would be dealt with adequately by the applicable contract or criminal law.38

Views when discussing the draft 2011 Model Law were more mixed, however.39 Eventually, it was decided that an unrestricted possibility to annul contracts would be included, but as an option, not requirement, for enacting States.40 This decision was taken against the background of the strong new provisions facilitating precontractual remedies, limiting the need to overturn contracts, including standstill and suspension rules; and time limits both to facilitate challenges before the contract is concluded and to complete challenge proceedings so that suspension is reasonable (see section II.D above). From a transparency perspective, as chapter 2 explained, particular concerns from direct solicitation are addressed by a requirement for an ex ante notice of direct solicitation procedures (Art 34(5)), unless these procedures are based on the grounds of urgency or a catastrophic event (Art 30(4)(a)–(b) and Art 30(5)(c)). Nevertheless, cases may still arise in which a contract might be concluded, and even performed, before the challenge is heard, thus preventing most corrective remedies. This arises, notably, in contracts in which no standstill obligation was applied, including because of ‘urgent public interest considerations’; where the standstill was simply not observed; when derogations, including ‘urgent public interest considerations’, resulted in the Art 65(1) prohibition being lifted and the procurement proceedings not suspended; and for direct solicitations such as on grounds of urgency or catastrophe, especially where the requirement to publish an ex ante notice did not apply or was not observed. In these cases, the lack of corrective action is compounded by the fact that proof of loss for compensatory damages will often be impossible, even if such damages are available in principle. Thus, the issue of overturning contracts remains highly relevant, including in urgent cases as elaborated in section III.F below. Explanations in the Guide41 address the

37 See, for example, S Arrowsmith, ‘The Impact of Public Law on the Private Law of Contract’ in R Halson (ed), Exploring the Boundaries of Contract (Dartmouth, 1996) 3–17. 38 Report of the Working Group on the New International Economic Order on its 13th session, supra, paras 161 and 174. 39 See Report of Working Group I (Procurement) on the work of its eighteenth session, para 69(h), and Report of Working Group I (Procurement) on the work of its nineteenth session, para 38. 40 Model Law, Art 67(9)(c) and (f). 41 Report of Working Group I (Procurement) on the work of its fourteenth session, paras 49–55.

164  Caroline Nicholas and Sue Arrowsmith importance of corrective action but do not discuss the policy considerations in allowing, or not, a concluded contract to be overturned, in what circumstances overturning may be appropriate, or how to address the consequences.42 An interesting approach is provided by EU law.43 It offers a relevant analogy since, as with the Model Law, the overwhelming focus is on securing effective pre-contractual challenge, including through standstill and automatic suspension obligations. However, to address the problem of contracts being concluded without a meaningful opportunity for challenge, the EU introduced special provisions for major contracts44 covering the two main situations of concern, namely violation of requirements for a public solicitation at all and (for competitive procedures) where challenge is rendered impossible by failure to comply with standstill or automatic suspension requirements. In these cases, by way of exception to the general rule that Member States may fully preserve their contracts once concluded,45 the contract must be declared ineffective if (successfully) challenged.46 Mindful of the potential adverse effect, however, careful qualifications and safeguards are provided. Thus ineffectiveness only applies for violating standstill and automatic suspension rules when the violation has both deprived the challenger of the opportunity for pre-contractual remedies and is combined with some other infringement (such as incorrect application of stated award criteria) prejudicing the challenger’s chance of winning.47 Procuring entities acting reasonably and in good faith48 may protect a directly solicited contract from ineffectiveness by voluntarily publishing a notice (a Voluntary Ex Ante Transparency Notice (VEAT), noting that there is no mandatory requirement for such a notice in EU law) and applying a standstill. Ineffectiveness may always be refused for overriding reasons of public interest,49 and may be limited to prospective ineffectiveness50 (with the detailed consequences for contracting parties left to Member States). The system is also supplemented with requirements for financial sanctions and/or shortening of contracts not declared ineffective (including for public interest reasons) either at all or retrospectively.51 42 This approach reflects the scope of the Model Law and UNCITRAL’s work in public procurement as a whole: concluded contracts are not addressed. See, also, Report of Working Group I (Procurement) on the work of its eighteenth session, para 68. 43 For full detail see S Arrowsmith, The Law of Public and Utilities Procurement: Regulation in the EU and UK, 3rd edn, vol 2 (Sweet & Maxwell, 2018), paras 22-160-22-221 (covering both EU law and UK implementation); M-J Clifton, ‘Ineffectiveness – The New Deterrent: Will the New Remedies Directive Ensure Greater Compliance with the Substantive Procurement Rules in the Classical Sectors?’ (2009) 18 Public Procurement Law Review 165; J. Golding and P. Henty, ‘The New Remedies Directive of the EC: Standstill and Ineffectiveness’ (2008) 17 Public Procurement Law Review 146. 44 Those covered by the EU’s procurement Directives, as to which see ch 3. 45 Remedies Directive, Art 2(7). 46 Remedies Directive, Art 2d(1)(a) and (d). 47 Remedies Directive, Art 2d(1)(b). 48 Remedies Directive, Art 2d(4); Case C-19/13, Ministero dell’Interno v Fastweb SpA¸ ECLI:EU:C:2014:2194, at [50] of the judgment (reasonableness requirement). 49 Remedies Directive, Art 2d(3). 50 Remedies Directive, Art 2d(2). 51 Remedies Directive, Art 2d(2) and (3), and Art 2e.

The Challenges of Constructing a Supplier Review System  165 These  provisions provide incentives for compliance with important rules and a useful tool, in shortening contracts, for balancing competing interests on the facts of each case. States may also choose to cut off the ineffectiveness remedy altogether after six months, regardless of anyone’s knowledge of the violation.52 This approach could respond to some issues in the practical examples noted above and, as will be discussed in section III.F, could provide some inspiration for additional guidance from UNCITRAL.

III.  The Specific Case of Urgent Procurement A. Introduction The above analysis demonstrates that the Model Law’s system facilitates effective supplier review for most circumstances. It allows for swift review of all decisions; implements the guiding principles of balance, and timely and effective remedies; and is supported by transparency and practical tools to enable the factual position to be assessed. We will now examine some of the gaps and challenges that have emerged in practice, particularly in the context of use of the Model law’s provisions allowing recourse to competitive negotiations or single source method for urgent procurement, as discussed in chapter 2. We will refer to two different scenarios leading to use of these methods for urgency, albeit that these represent shades on a spectrum rather than distinct cases: one, where there is a genuine urgency, or urgency is arguable (even if not all conditions are met); and the other in which no genuine urgency exists. Our examination below suggests that tweaking the Model Law’s approach in both scenarios, but particularly in the second, would enhance the system. However, we also suggest that the role of supplier review is inevitably limited, particularly in cases of genuine urgency, and that the main lesson is the importance of verification and enforcement mechanisms other than supplier review in such cases.

B.  Limited Standing A first point is that only suppliers have standing to seek review. Although they may have a natural interest in ensuring legal compliance, they may choose not to act – reflecting their assessment of time and costs, and of a positive outcome from their own perspective. Factors likely to deter action include: where an effective remedy is unlikely on the facts; the uncertain outcome as discretionary decisions are involved; where the violations do not cause loss to specific suppliers

52 Remedies

Directive, Art 2f(1)(b).

166  Caroline Nicholas and Sue Arrowsmith (such as general failure to comply with information transparency requirements, as seen in some countries, including the UK, in the COVID-19 pandemic53); the low value of contracts; unaffordability of challenge, particularly relevant for smaller suppliers and in court proceedings; and concern about risking future relationships.54 The first two factors, both common in urgent procurement, are considered further in section III.I below. We conclude that there is scope to improve outcomes, albeit limited, through extending standing to other stakeholders, including civil society organisations and possibly individual citizens, where significant public interest issues are involved. The value of broader standing was seen during the COVID-19 pandemic in the UK, where a public interest organisation obtained a declaration of non-compliance with information transparency obligations (publication of award notices and redacted contracts) for a large number of contracts, under a standing doctrine that takes into account facts that include the public interest and the lack of incentive of suppliers themselves to litigate;55 and in Brazil, where citizens’ actions in the pandemic have addressed, among other things, compliance with City-level transparency requirements.56 It is beyond the scope of this chapter to discuss this complex area in detail, but UNCITRAL could offer additional guidance to States drawing on lessons from experience and their application to urgent public procurement. Practical issues are significant, including include identifying who should have standing even without loss or damage; the possibility of special time limits, especially when no corrective action is sought; and whether to allow urgent applications to prevent additional or ongoing damage. As public interest litigation could be frequent, long and complex, potentially overwhelming a review body and displacing supplier review, an alternative forum might be considered, together with measures to avoiding overlapping claims among forums.

C.  Exemption from Ex Ante Notice Requirements A second point to highlight is that the exemption from ex ante notices, mentioned in section II.F, applies to direct solicitations on urgency or catastrophe grounds. As chapter 2 noted, this prioritises speed over value for money and other objectives, such as integrity (and performance if the result is awards to incompetent suppliers). Chapter 2 suggested that a more effective balance of interests might be obtained by requiring this notice where general urgency grounds are invoked (with publication in a catastrophe required merely ‘as soon as possible’), and that

53 See ch 15. 54 See further D Pachnou, ‘Bidders’ Use of Mechanisms to Enforce EC Procurement Law’ (2005) 14 Public Procurement Law Review 256; S Arrowsmith and R Craven, ‘Public procurement and access to justice: a legal and empirical study of the UK system’ (2016) 25 Public Procurement Law Review 227. 55 See ch 15. 56 See ch 17.

The Challenges of Constructing a Supplier Review System  167 full information on reasons should be included in the notice or available at the time through a link to the procurement record. Publication of ex ante notices alone, particularly without any standstill requirement, will not necessarily enable challenge before the contract is concluded or even – perhaps inevitably in cases of real urgency – facilitate effective corrective remedies. However, it may allow action in some cases, especially since an independent review body can review the procuring entity’s own suspension decision. Moreover, it can provide important real-time visibility to assist other accountability and enforcement mechanisms.

D.  Impact of Urgent Public Interest Considerations on Standstill, Suspension and Corrective Action A third point is that ‘urgent public interest considerations’ justify deviations from the Model Law’s usual requirements, such as the standstill. They may also overlap with the transparency exemptions based on grounds of urgency or catastrophe, discussed immediately above. Together with the practical difficulties in discovering abuse of direct solicitation procedures (particularly in obtaining sufficient and timely information to complain), it will be difficult for suppliers to discover and challenge, in a timely manner, decisions in conducting these procedures. Chapter 2 suggested that a very short standstill period might alleviate the problem and could sometimes be appropriate, even when competitive negotiations are used for reasons of urgency. Additionally, under Art 65(3), ‘urgent public interest considerations’ can also justify lifting the prohibition on taking steps to bring the contract into force and a refusal to suspend the procurement proceedings. The procuring entity’s or independent review body’s decisions here will depend, among other things, on the time taken to complete challenge proceedings (whose duration affects the impact of suspension on the public interest). In urgent cases, where the very point of not implementing a suspension is to progress the contract, contracts may therefore come into force before any hearing. In the context of urgency in a pandemic or other emergency affecting life, health or other significant public interests, the length of a suspension (and the legal system’s treatment of concluded contracts) are not necessarily the only barriers to corrective action. Correcting the most serious violations, such as unjustified use or deliberate abuse of emergency methods, will often involve further delay after the review proceedings, especially if a new procurement procedure is ordered or necessary as a result. We mentioned that the final remedies under Art 67(9) are discretionary for the independent review body. In some cases, with suspension followed by a rapid hearing, a corrective remedy may be given without undue disruption. However, in cases of genuine urgency, it will often be appropriate to refuse corrective remedies that would cause delay. Full correction is only feasible in urgent cases, therefore, when it is reasonable both to suspend the procurement and to contemplate delay until the procuring entity has re-run the award procedure; or

168  Caroline Nicholas and Sue Arrowsmith where the review body can order immediate correction at the final hearing such as by awarding a contract to a different party. In practice, discretion in granting standstill, suspension and final remedies is likely to be important in cases involving genuine urgency where the conditions are not met for using competitive negotiations on grounds of urgency (Art 30(4)(a)) or competitive negotiations or single-source procurement because of a catastrophe (Art 30(4)(a) and Art 30(5)(c)). Examples include where other methods would still have been practical or, in the case of general urgency in Art 30(4)(a), the urgency was foreseeable or the result of the procuring entity’s dilatory conduct. Balancing the different public interests involved will often suggest that the procurement should go ahead. This reality leaves little incentive for suppliers to challenge failure to meet the relevant conditions. A different scenario, as we mentioned, is unlawful use of these methods when there is no genuine urgency, which may or may not result from corrupt motives, and may well involve improperly invoking the ‘urgency’ derogations from the standstill and suspension requirements. While the independent review body could overturn these actions, the above practical obstacles may equally apply, and an order may not be feasible before the contract enters into force. Here, the legal system’s treatment of concluded contracts is significant: where contracts cannot be overturned at all despite the absence of genuine urgency, there would then be no effective remedy. This point is discussed further in section F below.

E.  Absence of Consequences of Non-Compliance with Ex Ante Notice and Standstill Requirements A further problem, often coupled with deliberate abuse of urgency provisions, is noncompliance with requirements to facilitate pre-contract challenge, including misusing ‘urgency’ derogations from the standstill and suspension requirements. The same could apply with any requirement that might be introduced (as suggested above) for an ex ante notice in urgent cases (which, as we have seen, is currently not required). These factors may well mean either that no challenge, or at least no independent review, is feasible before the contract enters into force. In this case, a State’s approach to concluded contracts will again be critical, since it is only through a remedy to overturn unlawfully concluded contracts that abuse of the urgency provisions, including wrongfully invoking urgency derogations to prevent a precontract challenge, can be addressed.

F.  The Rules on Concluded Contracts This brings us, then, to concluded contracts and the issue of whether more detailed treatment of this issue by UNCITRAL might help to enhance the effectiveness of the review system in urgent procurement.

The Challenges of Constructing a Supplier Review System  169 In light of our earlier analysis, the potential in the scenario of genuine emergency appears limited. As explained in section II.D above, the key barrier to effective remedies here is simply the impact of delay, either before the case is heard or, through corrective remedies thereafter, rather than treatment of concluded contracts per se (although this treatment may present an additional barrier). We saw that the EU’s provisions of greater scope, however, can disapply ineffectiveness for overriding reasons of public interest, thus preventing disruption to urgent procurements addressed at health and safety emergencies.57 The EU’s approach reflects the fact that corrective remedies are widely, and properly, often considered inappropriate in such cases. However, the EU system does offer potential solutions for urgent cases: shortening contracts to redress the violation but without disruption is a case in point, even if the value of financial sanctions on procuring entities is disputed. The Model Law could adopt this approach: Art 67(9)(j) allows the independent review body to ‘[t]ake such alternative action as is appropriate in the circumstances’, though the scope is not discussed in the Guide. Including guidance on shortening contracts through this provision, especially for States that permit overturning concluded contracts (under Art 67(9)(c) and (f)), could offer a less disruptive alternative in urgent procurement.58 While a challenge to the conduct of a competitive negotiations procedure might result in a benefit for an aggrieved supplier, challenges to wrongful use of urgency methods – for example, on the grounds that urgency was due to dilatory conduct – are unlikely to do so. There may therefore be little incentive for challenge by suppliers. Conferring a right of challenge on civil society, as discussed in section III.A, may therefore enhance the value of allowing concluded contracts to be overturned. In the scenario where there is no genuine urgency, on the other hand, more detailed rules on concluded contracts could be more significant. Rules preventing the overturn of concluded contracts may be a crucial barrier to an effective remedy, particularly in the cases of deliberate abuse designed to frustrate precontract challenge, as discussed, and, for example, where urgency is wrongly invoked in order to favour a particular supplier. EU law, like the Model Law, has in general been reluctant to address post-contract issues, but the above approach to address the most significant problems and prevent abuse, which at the same time leaves detailed contractual consequences to the national level, may provide a useful example. Again, given the lack of incentives for supplier challenge in many such cases, conferring standing on civil society would assist. A final point is that violations of applicable ex ante notice obligations59 should be subject to the same remedies as failure to observe standstill and suspension 57 Only in exceptional cases with disproportionate consequences can economic considerations justify refusing ineffectiveness, however. 58 The Guide was intended as a living document that might be supplemented and updated periodically: see paras 185–86 of the Report of the United Nations Commission on International Trade Law, forty-fourth session (27 June – 8 July 2011) (A/66/17). 59 To recap, such obligations do not exist under EU law.

170  Caroline Nicholas and Sue Arrowsmith requirements, as part of UNCITRAL’s system to secure effective pre-contract remedies. However, in cases of genuine urgency, public interest considerations are likely to require the contract to proceed, limiting effective remedies. In addition, where there is no urgency there will also be no grounds for using the urgency methods, which (as in the EU) should provide sufficient grounds to overturn the contract.

G.  The Time Limit for Bringing Proceedings We suggested earlier that extended time limits for challenge for public interest reasons should generally apply to pre-solicitation, as well as post-solicitation, challenges. In consequence, there would be a longer period to challenge wrongful use of competitive negotiations or single source procurement on urgency or catastrophe grounds, or deliberate abuse in conducting these methods. This could facilitate challenges by suppliers and public interest challenges, as discussed in section III.A above, particularly if combined with the ability to address concluded contracts.

H.  The Time for Completing Challenge Proceedings We have already mentioned that including a specific (nationally established) time limit for completing challenge proceedings is a crucial element of the Model Law’s system, and that the speed of proceedings is significant for suspension decisions. In this respect, it may be useful to allow States the option of an expedited time period for urgent challenges, even though its use may be limited in practice (as even very rapid hearings may not enable a corrective remedy), irrespective of the theoretical possibility of overturning concluded contracts. As also mentioned in section II.D, procuring entity reconsideration may offer the main avenue for completing challenges sufficiently swiftly to provide a corrective remedy, highlighting that States should give serious consideration to implementing, and making effective, such a mechanism. Additional guidance from UNCITRAL could usefully highlight this point.

I.  Factors Deterring Challenge As chapter 2 explained, procuring entities have considerable discretion in invoking urgency grounds for using competitive negotiations and single-source procurement. Consequently, and as it may be difficult to show a violation unless there is blatant abuse, suppliers may be reluctant to seek review for wrongful reliance on these grounds even if the full facts are available. Further, since there is no right

The Challenges of Constructing a Supplier Review System  171 for any particular supplier to participate in such procedures,60 there will be little incentive for a supplier to challenge decisions on whom to invite. As already noted, it is also unlikely that a supplier who has not participated will be able to prove loss beyond legal costs, even if the system allows for such loss. Finally, the fact that the rules on urgent procurement limit the size of the contract to that justified by the urgency61 also limits the incentive for some challenges, although one may exist if the excess would be procured through open competition.

J.  Urgency and Call-offs from Framework Agreements As chapter 2 discussed, and as other chapters in this book illustrate, existing framework agreements can play an important role in addressing urgency. The rapid nature of call-offs means that a standstill should generally apply even in urgent procurement, but in situations such as very immediate PPE needs in a pandemic, disapplying the standstill may be appropriate. In review of such cases, a review body might also appropriately reject a suspension or decline to award a corrective remedy. The Model Law does not require a standstill period for call-offs in closed frameworks without second-stage competition, the Guide suggesting that this is because the conditions for award are pre-determined.62 No ex ante monitoring to catch possible abuse or manifest error therefore takes place. Consistent with the Model Law’s general approach, and as a standstill is just as necessary as for call-offs with second-stage competition, implementing a standstill here would be beneficial. However, where any call-off falls below the minimum value threshold, information will be provided solely through award notices or access to the record, as chapter 2 discussed. In practice, redress for wrongful use of, or operation of, framework agreements in urgent cases often faces similar obstacles to an effective remedy as other cases of urgent procurement.

IV. Conclusions Drawing together the threads of our analysis, it indicates, first, that the Model Law provides a template for review that, by facilitating pre-contractual review in combination with rapid review proceedings, offers supplier remedies that are generally both effective and in accordance with the principle of balance. However, the analysis also identifies some possible scope for development. Most significantly, it might be helpful to expand provisions on concluded contracts, as the EU



60 Article

34 of the Model Law. to Enactment, Part II, commentary on single-source procurement (para 3). 62 The exemption is in Art 22(3)(a). See Guide to Enactment, Part II, commentary on article 22, para 14.

61 Guide

172  Caroline Nicholas and Sue Arrowsmith does through the concept of ineffectiveness for the main problematic situations, namely failure to advertise and/or failure to adhere to the rules that secure precontractual challenge. Any reforms in this direction should also follow a balanced approach through appropriate limitations and safeguards (as the EU approach does). A similar approach in the Model Law would, of course, need to fit its unique context, and so allow the approach to be optional for States, deferring to national systems on the consequences of affected contracts. It should also treat violations of the ex ante notice obligation for direct solicitations in the same way as standstill and suspension violations. A ‘public interest’ extension to time limits for presolicitation, as well as post-solicitation, challenges would also be helpful. We also suggested that balance in the system would be enhanced by enhancing transparency requirements and guidance, as proposed in chapter 2, such as on the need for detailed justifications for direct solicitations. Allowing contemporaneous access to the procurement record, enabled by the continuing expansion of information technology in public procurement, would also expand the possibility of effective remedies. We have also made recommendations to enhance the operation of remedies in the specific context of urgent procurement: in particular, expedited time limits for independent review bodies to examine challenges in urgent procurements; highlighting the value of procuring entity reconsideration as the main option for effective redress in genuinely urgent cases. As chapter 2 suggests, the ex ante notice obligation should apply to the use of competitive negotiations on the ground of general urgency (and, here, the recommendations take account of the context in not requiring a standstill). In cases of catastrophe, the need for balance is also reflected in the suggestion for publication of the notice only as soon as possible. In the context of urgency-based procurement, however, we concluded that in most cases it is difficult to construct a system of truly effective supplier redress, or one that can incentivise suppliers to enforce the rules in the public interest. However, we consider that the above additions add genuine value, if in limited circumstances. In relation to effective redress we distinguished between genuinely urgent procurement (even if that urgency is the procuring entity’s fault) and cases in which there is no urgency in fact. In the first scenario, the role of supplier review seems inherently limited since, however carefully the system is designed, effective remedies are generally not possible without disproportionate disruption to urgent projects. While this is always a question of degree, reflecting the exact nature of the urgency, the length of challenge procedures and different national values, in genuinely urgent procurement it will commonly be inappropriate to hold up procurements through standstill, suspension and correction relief. Permitting the overturn of concluded contracts will also have only limited impact, though permitting unlawfully concluded contracts to be shortened (where this is possible without excessive disruption) would be useful. In reality, it is difficult to enforce the Model Law’s provisions seeking to incentivise planning and to prohibit procuring entities from taking advantage of their own delay to rely on urgency. However, allowing the review body to shorten

The Challenges of Constructing a Supplier Review System  173 unlawfully concluded contracts as noted above, and encouraging specific, expedited time limits for completing independent review could be helpful, as could requiring ex ante notices even for urgent cases. However, perhaps the main prospect for effective review here, although not easily achieved, is swift and effective procuring entity reconsideration. In the second scenario, where urgency is invoked – abusively or otherwise – to use direct solicitations when no actual urgency exists, supplier review has a greater potential role. An independent review body can prevent the contract entering into force, or if – as is likely – it has been concluded, either suspend its execution or – if this remedy is available – overturn it. Explaining that the Model Law’s provisions can permit the independent review body to shorten the contract could help States provide an effective remedy for failing to publish a required public solicitation, and for violating any applicable requirements for an ex ante notice, standstill or suspension. In addition, our recommendations for a ‘public interest’ extension to time limits for pre-solicitation challenges, and for an extended ex ante notice requirement, could facilitate challenges to abusive use of urgency methods. That said, however, we explained that in both scenarios, suppliers will often lack incentives to challenge wrongful use of competitive negotiations or singlesource procurement. While participants in competitive negotiations may have a greater incentive to challenge improper conduct of the procedure, the difficulty of challenging discretionary decisions and the fact that any remedy can provide, at best, an opportunity to participate in a procedure further limits the incentive in practice. For this reason, we suggested expanding standing to other stakeholders, although detailed consideration of this issue is beyond the scope of this chapter. If such an approach is considered, the enhancements to review proposed above could again be useful, perhaps even more so than in the context of supplier challenge. However, we recognised that this is a complex issue involving practical difficulties that States need to address carefully. Furthermore, there is a risk that the expanded competence could lead to a flood of cases that overwhelm the independent review system and/or displace supplier review. Given the difficulty of constructing an effective system of supplier review in cases of urgency, perhaps the main lesson from this analysis is the need to pay attention to additional accountability and enforcement mechanisms, such as ex post audits and investigations, to public information that facilitates not just legal challenge but also broad accountability, and to sanctions for wrongdoing. In the context of the COVID-19 pandemic it is still too early to assess the overall role played by these mechanisms, many of which operate ex post, although certainly they have played the primary role in some countries.63 The Guide to Enactment itself discusses the importance of these functions, but detailed discussion of them goes beyond the scope of this chapter.

63 Such as the UK, discussed in ch 15, although it needs to be noted that use of supplier review is limited there in comparison with some countries.

174

6 The EU’s Joint Procurement Agreement in Light of COVID-19: Learning the Correct Lessons from the Pandemic and Identifying Actions for Improvement ARIS GEORGOPOULOS*

I.  General Introduction The rapid spread of COVID-19, in Italy initially, exerted an impossible pressure on the EU and its Member States. Criticism of the speed of the EU’s response to the pandemic,1 especially with regard to Italy, and signs of a lack of coordination accentuated by an initial ‘selfish’ stance by some Member States,2 created an early impression of inaction that reflected negatively on the EU. However, after what seemed like a slow start, the EU implemented the frameworks at its disposal for a coordinated response. A key one of these was the framework for joint procurement of medical countermeasures3 established by the Joint Procurement Agreement (JPA).4 This had been created in the aftermath of the H1N1 virus to enhance * The author thanks Sue Arrowsmith, Petros Mavroidis and Vassilis Tzevelekos for their extremely useful comments. The usual disclaimer applies. 1 ‘Italy criticises EU for being slow to help over coronavirus epidemic’, The Guardian, 11 March 2020, available at: www.theguardian.com/world/2020/mar/11/italy-criticises-eu-being-slow-helpcoronavirus-epidemic. 2 ‘Coronavirus: European Solidarity side lined as French interests take priority’, The Irish Times, 30  March  2020,  available at: www.irishtimes.com/news/world/europe/coronavirus-europeansolidarity-sidelined-as-french-interests-take-priority-1.4216184. 3 The term ‘medical countermeasures’ includes pharmaceutical and non-pharmaceutical products such as personal protective equipment (PPE), medical equipment, laboratory equipment, vaccinations, testing kits as well as other material connected to a public health response. 4 On the JPA framework see also A Sanchez-Graells, ‘Procurement in the Time of COVID-19’ (2020) 71 Northern Ireland Legal Quarterly 81; L Folliot Lalliot and C Yukins, ‘COVID-19: Lessons Learned in Public Procurement. Time for a New Normal?’ (2020) Concurrences 46; E McEvoy and D Ferri, ‘The Role of the Joint Procurement Agreement during the COVID-19 Pandemic: Assessing its Usefulness and Discussing its Potential to Support a Health Union’ (2020) 11 European Journal of Risk Regulation 1; and S Smith, ‘COVID-19 And the EU Joint Procurement Agreement on Medical Countermeasures’ (2020) 29 Public Procurement Law Review NA124.

176  Aris Georgopoulos preparedness against pandemics, which had highlighted weaknesses in Member States’ ability to procure vaccines and medicines for a pandemic. This chapter aims first to place at an appropriate level the threshold of expectations for judging the EU’s early actions, bearing in mind its competences in the field of health; second, to examine the performance of the JPA framework and of the related and complementary mechanisms, namely the rescEU stockpile of medical countermeasures, the EU’s Emergency Support Instrument and the Clearing House of Medical Equipment during COVID-19; and, third, to identify the correct lessons and make recommendations for improving the robustness and responsiveness of these mechanisms against future challenges. The chapter finds that the JPA framework’s operation in this context proved difficult because of its complex structure, but that improvement can be achieved within the existing EU competence framework. It also suggests that it is important to identify (or create) within the current EU competence framework complementary mechanisms to function as efficiency multipliers to improve the procurement and distribution of critical supplies; and that these mechanisms must involve the use of big data and data technology to create a coordinated, transparent information network to help buyers acquire a clear, up-to-date picture of market conditions. Finally, it suggests that introducing an exclusivity conditionality in the JPA system, preventing participating Member States from conducting parallel procurements, should be examined carefully as it may undermine rather than enhance the JPA framework. Sections II and III examine the joint procurement framework and take stock of its performance during the pandemic.5 Section IV analyses the complementary initiatives referred to above. Section V reflects on the lessons from the pandemic and provides recommendations.

II.  Introduction: Background of the JPA Healthcare provision, especially its structure, organisation, financing and delivery within the EU, is a matter of national competence. National healthcare systems are organised on different models, varying from universal healthcare systems financed by general taxation (the Beveridge model) to social security systems financed by contributions to health funds (the Bismarck model), with a number of variations in between (mixed models).6 However, the EU shares competence with the Member States, subject to the principles of subsidiarity and proportionality,7 for addressing common safety

5 Based on data available as of October 2020. 6 See E Mossialos, G Permanand, R Baeten and T Hervey (eds), Health Systems Governance in Europe: The Role of European Union Law and Policy (CUP, 2010). 7 TEU, Art 5(3) and Protocol (No 2).

The EU’s Joint Procurement Agreement in Light of COVID-19  177 concerns in public health matters8 and can adopt actions to support, coordinate and supplement Member States’ actions in this area.9 This constitutes the wider context of competences which JPA inhabits, and explains the JPA’s structure, limits and limitations. Specifically, the JPA’s legal basis originates in Art 168 TFEU, which enables the EU to take complementary measures in order to improve public health and also to combat serious cross-border threats to health.10 The same provision also encourages cooperation amongst Member States for streamlining and better coordinating their national health services, especially in the context of cross-border threats.11 In other words, coordination in this area may take the form of action by the Member States (Art 168(2) TFEU) or by the EU (Art 168(5) TFEU). The JPA’s origins can be traced back to the Council Conclusions of 13 September 201012 which invited the Member States and the Commission to work together on joint procurement for medicinal products. Furthermore, the Council Conclusions invited the Commission to revise the EU’s Pandemic Preparedness Plan13 on the basis of the A(H1N1) experience and to develop a joint procurement mechanism for vaccines and other antiviral medication. Subsequently the European Parliament and the Council adopted Decision No 1082/2013/EU on serious cross-border threats to health (hereinafter ‘the Decision’)14 which provides for the joint procurement mechanism (Art 5) and identifies as its main utility the gaining of advantageous prices, order flexibility and a more equitable access to vaccines for the participating states especially in the context of limited global production capacities (Recital 13). The JPA is an instrument adopted on the basis of Art 168(5) TFEU. This classification as an EU implementing budgetary instrument is possible because of Art 5 of the Decision which stipulates the general parameters of the Joint procurement mechanism using the procurement regulatory framework of EU institutions and agencies.15 According to Art 5(3) of the Decision, the JPA determines the practical

8 TFEU, Art 4(2)(k). 9 TFEU, Art 6(a). 10 TFEU, Art 168(1) and (5). 11 TFEU, Art 168(2). 12 Council of the European Union, ‘Council Conclusions on the Lessons Learned from the A/H1N1 pandemic – Health Security in the European Union’, 3032nd General Affairs Council meeting, Brussels, 13 September 2010. 13 Commission, ‘Communication from the Commission on pandemic influenza preparedness and response planning in the European Community’ COM(2005) 607 final. 14 Decision No 1082/2013/EU of the European Parliament and of the Council of 22 October 2013 on serious cross-border threats to health and repealing Decision No 2119/93/EC [2013] OJ L 293/1. 15 Article 5 of the Decision refers to Art 104(1) of Regulation (EU, Euratom) No 966/2012 of the European Parliament and the of the Council of October 25 2012 on the financial rules applicable to the general budget of the Union and to Art 133 of the Commission Delegated Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application of Regulation No 966/2012; now replaced by Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 13/01/2013, (EU) No 1303/2013. (EU) No 1304/2013, (EU) No 1309/2013,

178  Aris Georgopoulos arrangements regarding decision-making, choice of procedure, tender evaluation and contract award. As explained below, the classification of the JPA as an EU implementing budgetary instrument16 affects its nature and, more importantly, the applicable law and jurisdiction for the settlement of disputes that arise from the latter.

III.  JPA Framework The JPA was approved by Commission Decision C(2014) 2258 final17 (hereinafter the ‘Commission Decision’), signed in June 2014. It contains the rules and principles that govern the JPA’s organisation and decision-making process. The following sections present and analyse the JPA’s nature, membership and general principles (section A), its structure/organisation (section B), decision-making arrangements (section C) and key features (section D).

A.  Nature, Membership and General Principles The JPA itself is not considered to be an international treaty in the sense of the Vienna Convention on the Law of the Treaties.18 It is instead an EU Law instrument,19 more specifically an implementing budgetary measure of the Decision, thus associated with the executive functions of the Commission as per Art 17 TEU. Moreover, the CJEU has exclusive jurisdiction to resolve any disputes arising from the Agreement between the contracting parties.20 JPA membership is open, at any time,21 to EU Member States, European Free Trade Association (EFTA) states and EU candidate countries subject to the conclusion of specific agreements.22 By March 2021, 37 countries had signed the JPA. This includes the 27 EU Member States, the UK,23 three EFTA/EEA states,24 (EU) No 1316/2013, (EU, Euratom) No 966/2012 [2018] OJ L 193/1, (the so-called ‘Omnibus’ Regulation, especially Art 164(1) and Art 165). 16 Commission, ‘Explanatory Note on the Joint Procurement Mechanism’ December, 2015, 8, available  at  ec.europa.eu/health/sites/health/files/preparedness_response/docs/jpa_explanatory_ en.pdf and Commission, ‘Considerations on the Legal Basis and the Legal Nature of the Joint Procurement Agreement’ (explanatory note), 2, available at ec.europa.eu/health/sites/health/files/ preparedness_response/docs/jpa_legal_nature_en.pdf. 17 Commission, ‘Commission Decision on approval of the Joint Procurement Agreement to Procure Medical Countermeasures pursuant to Decision 1082/2013/EU’ C(2014) 2258 final (hereinafter the ‘Commission Decision’). The JPA is contained in Annex 1 of the Commission Decision. 18 Vienna Convention on the Law of the Treaties, of 23 May 1969, 115 UNTS 331; 8 ILM 679. 19 JPA, Art 42(1) and (3). 20 JPA, Art 41. 21 JPA, Arts 48 and 49. 22 JPA, Art 49. 23 The UK was among the first signatories of the Agreement on 20 June 2014 (then as an EU Member State). 24 Iceland, Liechtenstein and Norway.

The EU’s Joint Procurement Agreement in Light of COVID-19  179 four Union candidate countries25 and two potential Union candidates.26 Accession and withdrawal remain open, however, joining states cannot participate in ongoing procurements.27 The general principles – which derive from Art 5 of the Decision – of the JPA are inclusiveness, flexibility, solidarity and non-discrimination. Inclusiveness28 is not a surprising feature given the nature and aims of the initiative (tackling cross-border threats to public health). The principle is manifested at two levels: first, in the possibility to join the JPA as a whole; and secondly with regard to the freedom to participate in specific joint procurement processes. Inclusiveness is often accompanied by principle of flexibility. The principle of flexibility aims to enhance the efficiency of the JPA. It often complements inclusiveness to create a workable balance in a system of (currently) 37 contracting parties. Flexibility manifests itself in a number of ways: the freedom to join the general JPA framework; to leave at any time;29 and to choose whether to join specific procurement programmes. It is also evident in the decision-making arrangements which foresee the adoption of proposals either by unanimity, qualified majority, simple majority or the absence of qualified majority against the proposal.30 Finally, it is apparent in the right of contracting parties to procure medical countermeasures independently even when such supplies form part of a JPA procurement.31 The principle of solidarity is also enshrined in the JPA. Solidarity is a core value and fundamental principle common in the constitutional traditions of Member States,32 found in many provisions of the EU Treaties33 and explicitly mentioned in the Schuman Declaration.34 Solidarity as an EU principle can be distinguished in horizontal (solidarity among Member States) and vertical (solidarity between EU, Member State and

25 Albania, Montenegro, North Macedonia and Serbia. 26 Bosnia and Herzegovina and Kosovo. The relevant EU documents state that Kosovo’s designation is without prejudice to position on status and is in line with UNSCR 1244/1999 and with the ICJ Opinion on the Kosovo declaration of independence. 27 JPA, Art 49(3). 28 JPA, Art 5(2)(a) Decision, Art 49. 29 The withdrawing contracting party has to compensate any damages that arise from its contractual obligations of contracts covered by the JPA. If the contracting party withdraws before the publication of the call for tender it will occur no financial consequences. JPA, Art 48(1) and (2). 30 JPA, Art 7(3). 31 JPA, Art 1(5). 32 On the principle of solidarity, V Federico, C Lahusen (eds), Solidarity as a Public Virtue? Law and Public Policies in the European Union (Verlagsgesellschaft, 2018). 33 For example, TEU, Arts 2 and 3 (core values), TEU, Arts 21, 24 and 31 (External Action and Common Foreign and Security Policy), TFEU, Arts 67 and 80 (border checks, asylum, immigration), TFEU, Art 122 (economic and monetary policy), TFEU, Art 194 (energy), TFEU, Art 222 (solidarity clause; in the case of the pandemic), TFEU, Art 222(1)(b) referring to man-made or natural disasters is of direct relevance), Protocol (28) (economic, social and territorial cohesion). 34 ‘Europe will not be made at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity.’ [emphasis added], Schuman Declaration, 9 May 1950, Paris.

180  Aris Georgopoulos citizens) forms.35 The JPA aims at facilitating equitable access to medical countermeasures.36 Moreover, it provides for mechanisms to reallocate reserved quantities of medical countermeasures under a framework contract37 in a manner agreed between the parties of the same contract. This requirement should be revisited in light of the COVID-19 experience to further enhance the principle of solidarity. However, the JPA already allows the donation of procured medical countermeasures to other contracting parties or non-contracting Member States, or indeed third countries and international organisations.38 Moreover, the Decision provides in Art 11(4) that in case of a serious crossborder threat to health that has an overwhelming effect on national response capacities, the affected Member States may seek assistance from other Member States through the Union Civil Protection Mechanism.39 Thus it can be argued that the JPA constitutes a manifestation of both horizontal and vertical solidarity. The principle of non-discrimination is also enshrined in the JPA and is connected with the duty to respect: the integrity of the internal market; and the ability of non-participating Member States to comply with their public health obligations. More specifically JPA procurements must not affect the internal market and the competitive conditions therein (eg by favouring specific suppliers). Furthermore, Member States who do not participate in a specific joint procurement should not bear any direct financial burden connected with the latter or otherwise be put in a disadvantageous position regarding the pursuit of protection and improvement of human health.40 This is also a manifestation of the principle of solidarity.

B.  Structure and Organisation The JPA is organised around two types of steering committees that function at distinct levels. These steering committees are the Joint Procurement Agreement Steering Committee (hereinafter ‘Joint Committee’) and the Specific Procurement Procedure Steering Committee (hereinafter ‘Steering Committee’), presented below. Another key actor is the Commission, which participates with a representative in the Joint Committee, and also provides the Chair and secretariat of the 35 On horizontal and of vertical solidarity see E di Napoli and D Russo ‘Solidarity in the European Union in Times of Crisis: Towards “European Solidarity” in V Federico and C Lahusen (eds) Solidarity as a Public Virtue? Law and Public Policies in the European Union (Verlagsgesellschaft, 2018). 36 Commission Decision, recital 4. 37 JPA, Art 28. 38 Art 31 JPA. 39 The Decision refers to the Community Civil Protection Mechanism established by Council Decision 2007/779/EC establishing a Community Civil Protection Mechanism [2007] OJ L 314/9. The latter was repealed by Decision No 1313/2013 of the European Parliament and of the Council on a Union Civil protection Mechanism [2013] OJ L 347/924. This is also a specific manifestation of the general solidarity clause of TFEU, Art 222, especially Art 222(1)(b). 40 Art 5(2)(b), (c) and (d) of the Decision.

The EU’s Joint Procurement Agreement in Light of COVID-19  181 various Steering Committees.41 More importantly, the Commission performs a number of actions on behalf of the contracting parties, including conducting a joint procurement, awarding contracts or framework contracts,42 managing framework contracts, signing off non-substantial modifications of such contracts43 and acting as the contracting parties’ sole legal representative in legal proceedings that arise in framework contracts.44 This is the executive structure up to the award of the specific contracts or framework contracts. The post-award phases, namely the conclusion, signing of the contract and the contract management phase are dealt by the contracting parties45 of the specific procurement.46 The applicable law for procurement contracts arising from a JPA procurement is to be determined by the parties to the specific procurement contract.47 Similarly, the jurisdiction is also designated in the relevant contract clauses. Finally, legal proceedings brought by or against a contracting party are dealt by the relevant contracting party, not the Commission.48 The Joint Committee ensures the proper functioning of the whole JPA framework. Its tasks include: adoption of internal rules of procedure, amendment of the framework, planning and sequencing of specific procurements (but not their implementation), identification and agreement of the medical countermeasures that can be procured and tentative approval of specifications for specific procurements. The JPA is also the forum for dispute resolution between contracting parties and deals with matters related to legal proceedings when all contracting parties are concerned.49 The Joint Committee is composed of one representative of each of the contracting parties and the Commission. The Steering Committee carries out a specific procurement (one for every joint procurement). It decides the technical specifications of the specific joint procurement, determines the criteria for allocating supplies among the parties and deals with legal proceedings related to framework contracts. It is composed of one representative from every contracting party that participates in the specific procurement including one from the Commission. The JPA’s structure has similarities with other fora of European procurement collaboration in the fields of defence and security50 and shares many of their

41 JPA, Art 6(4). Currently within DG SANTE. 42 JPA, Art 4(2)(a). 43 JPA, Art 4(2)(b). 44 JPA, Art 4(3) and (4). 45 JPA, Art 4(2) last sentence and Art 27. 46 In cases of urgency the Steering Committee can authorise the Commission to sign the contract on behalf of the contracting parties (JPA, Art 22(5)). 47 JPA, Art 4(2). 48 JPA, Art 4(3) and (4). 49 JPA, Art 5. 50 See for example the European Defence Agency (EDA) or OCCAR (Organisation Conjoint de Coopération en Matière d’Armement). For an analysis see A Georgopoulos, ‘The New European Defence Agency: Major Development or Fig Leaf?’ (2005) 14 Public Procurement Law Review 103; B Heuninckx, The Law of Collaborative Defence Procurement in the European Union (CUP, 2016).

182  Aris Georgopoulos principles. However, a key difference is that whereas the latter are purely intergovernmental, the JPA is placed under the auspices of the European Commission and therefore also exhibits some supranational characteristics.

C.  JPA Decision-Making Arrangements The design of the JPA’s decision-making process resembles that of the c­ omitology procedure,51 followed by the Commission when entrusted with implementing powers52 under EU Law. A brief look at the decision-making process is necessary to contextualise the JPA’s performance during the pandemic. Generally, decision-making in collaborative procurement involving innovative material/services is notoriously complex, because it has to take into account the participating states’ preferences. In the case of joint procurement of off-the-shelf supplies, the process may appear, prima facie, simpler. The JPA’s drafters intended to minimise the risk of deadlocks and indecision, since they were aware that JPA procurements might have to be implemented swiftly. The decisions of the various JPA Steering Committees are divided into two categories: opinions and approvals.53 Opinions are non-binding decisions of the Steering Committees that the Commission may follow. For example, Steering Committee opinions are sought by the Commission with regard to starting legal proceedings in the context of a framework contract. On the other hand, approvals are binding decisions. For example, Steering Committee approvals are required for the choice of procurement procedure, the adoption of technical specifications, the contract award and the criteria for allocating supplies among the contracting parties. Although ideally opinions and approvals are taken by consensus, the latter might prove difficult. In such cases the JPA establishes a voting process that on the one hand is inclusive and fair, and on the other remains outcome orientated and efficient. The voting process for opinions is simpler, given their non-binding nature, and based on simple majority. Each party has one vote, and a simple majority is attained when more than 50 per cent of the steering committee’s present or represented members support the proposal. Where a simple majority is not forthcoming, the 51 For the comitology procedure and its evolution see K Lenaerts and A Verhoeven ‘Towards a Legal Framework for Executive Decision-making in the EU? The Contribution of the new Comitology Decision’ (2000) 37 Common Market Law Review 645; K Lenaerts and M Desomer, ‘Towards a Hierarchy of Legal Acts in the European Union? Simplification of Legal Instruments and Procedures (2005) 11 European Law Journal 744; P Craig, ‘Delegated Acts, Implementing Acts and the New Comitology Regulation’ (2011) 36 European Law Journal 671. 52 As opposed to law-making powers. 53 Opinions, correspond by and large to the advisory procedure of comitology, whereas approvals correspond to the examination procedure.

The EU’s Joint Procurement Agreement in Light of COVID-19  183 Commission could still proceed with the tabled proposal taking into account the views expressed as far as possible.54 The decision-making process for approvals is more complex. It is here that a balance between inclusiveness and efficiency is attempted. The process begins with a proposal being tabled, usually by the Commission, before the Steering Committee. There are three potential voting rounds before a decision is reached, with the process designed to minimise the possibility of a deadlock, especially once the decision to proceed with the joint procurement has been made. When there is no consensus, proposals are approved by a qualified majority. This means a majority of 55 per cent (or more) of the present or represented contracting parties corresponding to at least 65 per cent of the total supplies covered by the JPA.55 If a qualified majority cannot be reached, a second vote follows requiring a simple majority among the steering committee present or represented members whose procurement commitments correspond to more than 50 per cent of the actual56 cost of the covered medical supplies.57 If there is no simple majority in the second vote, the JPA foresees a third vote at a subsequent meeting. If in the third round there is no simple majority, the proposal is deemed approved if there is no qualified majority against it.58 It is at this third round where the JPA’s intention to strike a balance between inclusiveness and efficiency is manifested most notably. The existence of the three stages demonstrates a willingness to exhaust the possibility for an inclusive outcome (accepting a compromise on timescales) whereas the third stage emphasises efficiency (decreasing the possibility of deadlock). Contracting parties are free to leave the procurement process if not satisfied with the outcome of this third round. This is easier before the call for tender, but withdrawal is also possible before award if the call for tender provides that in such an event suppliers are not entitled to compensation.59 The availability of this option enhances the balance of inclusiveness and efficiency because it invites proposal drafters, usually the Commission, to be careful, and not be carried away by the flexibility of the third voting round, especially when the party contemplating withdrawal represents a substantial portion of the needs which make joint procurement feasible.60

54 JPA, Art 7(2), first sub-para. 55 In the case of approvals connected only with Steering Committees, the qualified majority is defined as 55% of the Steering Committee members, representing Steering Committee contracting parties comprising at least 65% of the total cost (or estimated cost) of the supplies covered by the specific procurement process (JPA, Art 7(2), fourth sub-para). 56 In cases where the actual amount is not known, then the estimate is used as point of reference. 57 JPA, Art 7(3), first sub-para. 58 ibid. 59 JPA, Art 24(4) and (5) in conjunction with the Omnibus Regulation, Art 171 (corresponding to the content of the old Financial Regulation 966/2012, Art 114, now repealed by the Omnibus Regulation). 60 Commission, ‘Explanatory Note: Decision Process in the Steering Committees Managing the Joint Procurement Mechanism’ sanco.ddg1.c3(2014)243104, para 3.

184  Aris Georgopoulos Moreover, the way in which the qualified majority is calculated is noteworthy. Unlike the EU legislative process, the reference point is not the population size,61 but the volume of the procurement commitment, which seems fairer here. However, this configuration raises the obvious question of whether it is fit for purpose in cases of urgency. The JPA drafters sought to keep the inclusiveness–efficiency balance by including an accelerated decision-making process in urgent cases: a meeting takes place via telephone or web-conferencing and the three voting rounds take place consecutively during the same meeting.62

D.  Key Features The JPA’s classification as an EU implementing budgetary instrument means that it follows the so-called Omnibus Regulation63 as the applicable regulatory procurement framework. This was adopted in 2018 and is largely in tune with the EU procurement directives, outlined in chapter 3. A joint procurement can be launched if at least five contracting parties, including the Commission, vote in favour and notify their decision to the Joint Committee Chair.64 Similarly, a joint procurement may be abandoned collectively by the participating contracting parties, before the award or even signing of the contract.65 As already noted, Art 1(5) JPA allows contracting parties to procure medical countermeasures outside the JPA mechanism even when they participate in a specific joint procurement for the same supplies. This feature seems to be an acknowledgement of the current division of competences between the EU and Member States in the field of healthcare; whereas Member States remain responsible for the provision of healthcare within their territories, the EU and Member States share competence to address cross-border threats to health. Moreover, even if it were legally possible to attach an exclusivity commitment to the JPA system for participating Member States, this might be considered disproportionate and would render the proposition of joining the JPA less attractive. With this in mind, the JPA drafters tried to reduce the temptation for ­contracting parties to procure independently, when they participate in an ongoing joint procurement, by introducing flexibility in the system of allocation between contracting parties of the jointly procured supplies. The allocation is based on certain criteria regarding the quantities and frequency of delivery of the procured supplies to the contracting parties, in accordance with the decision-making procedure of Art 7 JPA analysed above. However, the procedure allows for a time-limited

61 TEU,

Art 16 and TFEU, Art 238. Art 7(5). 63 Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (n 13). 64 JPA, Art 13. 65 As per JPA, Art 24(1) in conjunction with the Omnibus Regulation, Art 171. 62 JPA,

The EU’s Joint Procurement Agreement in Light of COVID-19  185 derogation, in cases where a contracting party faces urgent needs or problems regarding the delivery of the relevant supplies.66 Such derogation requires the presentation of a well-founded case by the affected contracting party and is subject to the approval the Steering Committee (common accord). Nevertheless, in the case of a framework contract one or more contracting parties can derogate on a bilateral basis – for a limited period – from the allocation criteria without Steering Committee approval.67 This possibility constitutes a manifestation of the principles of flexibility and solidarity and reveals the intention to mitigate the risk of parallel independent procurements by contracting parties, and is useful where a health crisis affects contracting parties differently or at different times. Nevertheless, in a situation where all contracting parties have increased needs, clearly this function alone may not be enough to mitigate the risk of buyer competition.68

E.  JPA and COVID-19 Action at EU level using the JPA mechanism started soon after it became clear that the pandemic had reached Europe. Five joint procurement processes were launched for the purchasing of personal protective equipment (PPE), laboratory equipment and intensive care unit (ICU) medicines and ventilators. The first was launched on 28 February 202069 for PPE with two lots (lot no 1 for eye protection and lot no 2 for surgical masks-respirators class 2 and 3) with the participation of 19 countries in lot 1 and 20 countries in lot 2.70 The negotiated procedure without prior publication was used due to extreme urgency.71 This was consistent with the spirit and tone of the Communication/Guidance that the EU Commission72 issued on 1 April 2020, regarding the use of the procurement framework during the pandemic. Arguably this earlier experience of the Commission as coordinator of the Joint procurement for PPE informed the drafting of its guidance to national procuring entities, which generally seems rather flexible. The award criteria were: quality, with a weighting of 50 per cent (specifically 35 per cent speed of delivery, 7.5 per cent quality of reusable equipment and 66 JPA, Art 7(2). 67 JPA, Art 3(3). 68 For the relevant experience in Italy during COVID-19 see GL Albano, ‘Homo Homini Lupus: On the Consequences of Buyers’ Miscoordination in Emergency Procurement for the COVID-19 Crisis in Italy’ (2020) 29 Public Procurement Law Review 213. 69 Commission, Press release, ‘Coronavirus: Commission bid to ensure supply of personal protective equipment for the EU proves successful’, IP/20/523 of 24 March 2020. 70 All EU Member States apart from Bulgaria, Denmark, Finland, France, Italy (who opted out from lot 1 but opted in lot 2), Lithuania, Poland and Portugal. 71 Omnibus Regulation 2018/1046, Art 164 (1)(d) and Annex I, Chapter 1, section 2, point 11.1(c). 72 Commission, ‘Guidance from the Commission for using the public procurement framework in the emergency situation related to the COVID-19 crisis’ COM(2020) 108 I/01.

186  Aris Georgopoulos 7.5 per cent languages of usage instructions); and price with a weighting of 50 per cent. Apparently, the Commission invited a number of selected companies, which had been identified though market analysis.73 The aim was to infuse the negotiated procedure without prior notice with some degree of competition. On 12 March a contract award notice in Tenders Electronic Daily74 (TED) announced that this first Joint procurement failed because ‘no tenders or requests to participate were received or all were rejected’.75 This provided a very useful lesson regarding the utility of the negotiated procedure without prior notice if the latter is not supported by a proper analysis of the market at the time of the crisis – as opposed to relying on historical data regarding the identity of the main suppliers in a given market. Moreover, as will be explained below, the Commission decided to relax the conformity assessment rules of certification requirements76 (as of 13 March 2020) to increase the pool of potential suppliers. This joint procurement was relaunched, successfully, on 17 March with most of the contracts concluded in April 2020. According to the Commission,77 Member States could order gloves from the first PPE procurement since the beginning of April, up to eight million coveralls from the beginning of May78 and from the second procurement they could order up to 37 million FFP2 masks, 26 million FFP3 and 301 medical/surgical masks, 20 million goggles and 12 million face shields from the beginning of April.79 Moreover, participating countries could order up to 110,000 ventilators from the middle of April 202080 and from May 2020 were able to order laboratory equipment from 30 different lots. Contracting parties can also procure more than EUR 3.3 billion of critical supplies over a year. Finally, a joint procurement for ICU medicines was launched in June 2020.81 All joint procurements used the negotiated procedure without prior notice. According to the Commission, between the middle of April and the end of August 2020, only six contracting parties had placed orders for approximately seven million PPE units.82 Limited orders had been placed also for ventilators 73 ‘COVID-19 Procurement Actions’ MedTech Europe, 25 May 2020, available at: www.medtecheurope.org/wp-content/uploads/2020/03/COVID-19-Procurement-Actions_20052025.pdf. 74 Tenders Electronic Daily (TED) Contract Award Notice 2020/S 051-119976 of 12 March 2020. 75 ibid, Section V. 76 Commission Recommendation (EU) 2020/403 on conformity assessment and market surveillance procedures within the context of COVID-19 threat [2020] OJ L 79 I/1. 77 Written answer given by the EU Commission (of 26 August 2020) to the Question E-003776/20 of Moritz Körner MEP (26 June 2020). 78 Tenders Electronic Daily (TED) Contract Award Notice 2020/S 100-238631 of 13 May 2020. The contract for gloves was concluded on 8 April 2020 and the one for coveralls on 8 May 2020. 79 ibid. The contracts for googles, face shields were concluded on 2 April 2020 and the contracts for masks on 2 and 9 April 2020; see also written answer given by the EU Commission (of 26 August 2020) to Question E-003776/20. 80 ibid. 81 See Written answer given by the EU Commission (of 26 August 2020) above. 82 These numbers correspond to the reported, by the EU Commission, state of play of the joint procurement orders until 26 August 2020.

The EU’s Joint Procurement Agreement in Light of COVID-19  187 and laboratory equipment. More specifically, according to the Commission’s reporting,83 the Netherlands ordered two million FFP3 masks on 30 June 2020 with delivery due to begin in the end of July; Bulgaria ordered 55 ventilators on 28 May delivered by 31 July; Austria ordered 500,000 FFP2 masks on 25 May and their delivery started on 15 June; Estonia ordered 450,000 FFP2 masks on 18 May; Latvia ordered 25,000 goggles and 100,000 surgical masks on 7 May with their delivery due to start on 8 June; Belgium ordered 2.6 million FFP2 masks on 28 April; and Luxembourg ordered one million gloves on 15 April. It is noteworthy that from the 110,000 ventilators, only 57,000 were CE certified.84 This was possible due to the relaxation, pursuant to the relevant EU Commission Recommendation,85 of the conformity assessment, market surveillance procedures and certification requirements (affixing the CE marking) in order to deal with the sudden increase in demand and avoid shortages. Otherwise, strict adherence to the certification requirements and formalities would have made the meeting of supply needs impossible. Instead, the Recommendation focused on mitigating the risk of accepting suboptimal goods by authorising, for a limited period, goods which meet the adequate level of health and safety and adhere to the essential requirements in accordance with EU Rules,86 even though the relevant conformity assessment procedures were not finalised.87

IV.  Complementary Mechanisms: rescEU, the Emergency Support Instrument and Clearing House of Medical Equipment As explained above, the JPA, despite its prima facie cumbersome, top-down structure, managed to provide a relatively quick response to the pandemic, given the circumstances. Putting the glitches of the first joint procurement attempt aside, one may argue that the JPA efforts were comparable or sometimes better, in terms of efficiency, than the independent procurement efforts/responses of Member States. Notwithstanding this, it also became clear that some of the JPA’s perceived advantages, for instance purchasing economies of scale, were of secondary importance in the context of COVID-19. Under these circumstances, buying quickly is far more important than saving on unit prices through bulk-buying. However, even if purchases are made quickly, another daunting task that affects the efficiency of the outcome remains: the distribution of these supplies to the

83 See

n 80.

84 ibid. 85 See

n 79. Regulation (EU) 2016/425, Directive 93/42/EEC and Regulation (EU) 2017/745. 87 See n 79. 86 See

188  Aris Georgopoulos end users that desperately need them. This task is further complicated by the fact the pandemic had sudden and asynchronous surges and downturns in different geographic locations. In response to this challenge, the EU adopted two complementary initiatives for increasing the responsiveness and efficiency of the whole system. These initiatives are the rescEU stockpile mechanism, the Emergency Support Instrument (ESI) and the Clearing House of Medical Equipment. These mechanisms can work as efficiency multipliers which together with the JPA can create a more responsive system to abrupt changes in the demand-supply equilibrium.

A.  rescEU Stockpile On 19 March 2020, the Commission created a strategic rescEU stockpile88 of critical medical equipment such as PPE, masks, ventilators, vaccines and laboratory equipment in an attempt to create a reserve which could be used at times of crisis and help Member States respond to shortages quickly and in a targeted way. The starting budget was EUR 50 million. The rescEU mechanism is part of the EU’s Civil Protection Mechanism,89 which aims to strengthen cooperation among Member States in the area of civil protection, and already includes reserve of assets like firefighting airplanes and helicopters. The distribution of supplies is managed by the Emergency Response Coordination Centre (ERCC). Member States are not only the end users, but also key actors responsible for the initiative’s success by volunteering to host the stockpile and being responsible for procurement. According to the Commission’s initial account, interested Member States could apply for a grant which could finance 90 per cent of the stockpile cost with the relevant Member States providing the remaining 10 per cent.90 However, as the economic consequences of the pandemic became evident, and as a result of the emergency support mechanism’s activation,91 the rescEU stockpile budget increased to EUR 380 million, with the EU financing at 100 per cent of the stockpile cost.92 So far nine Member States93 have volunteered to be hosts, providing an adequate geographical reach for the medical stockpiles, and optimising distribution. 88 Commission, Implementing Decision 2020/414 amending Implementing Decision 2019/570 as regards medical stockpiling rescEU capacities (notified under document C(2020) 1827), [2020] OJ LI 82/1 of 19 March 2020. 89 Decision No 1313/2013 of the European Parliament and of the Council on a Union Civil protection Mechanism [2013] OJ L 347/924. 90 See also Commission, Press release ‘COVID-19: Commission creates first ever rescEU stockpile of medical equipment’, IP/20/476 of 19 March 2020. 91 In accordance with Art 2 of Council Regulation (EU) 2016/369 of 15 March 2016, on the provision of emergency support within the Union [2016] OJ L 70/1. See discussion in section IV.B. 92 Commission, Factsheet ‘EU medical and health support’ 19 June 2020. 93 Belgium, Denmark, Germany, Greece, Hungary, Netherlands, Romania, Slovenia and Sweden. See Commission press release IP/21/45 of 11 January 2021.

The EU’s Joint Procurement Agreement in Light of COVID-19  189 This infusion of the initiative with bottom-up elements (Member States, procurers and hosts) arguably adds to the initiative’s potential for enhancing efficiency and responsiveness. As of February 2021, the rescEU medical reserve has delivered 1.3 million units of FFP2 and FFP3 protective facemasks, and several hundred thousand pairs of gloves, gowns and other critical supplies to various Member States and EU candidate countries.94 In addition, the European Council of July 2020 agreed95 to increase the spend for Civil Protection to EUR 3 billion over the years 2021–27 (the health component amounting to EUR 1.7 billion). The mechanism is a manifestation of both the principle of efficiency and of solidarity.

B.  The Emergency Support Instrument The second efficiency multiplier is the Emergency Support Instrument (ESI). This was introduced as the financial arm of the Joint European Roadmap for lifting the COVID-19 containment measures.96 It aims at assisting Member States to deal with the challenges of the pandemic in a coordinated and targeted way. ESI was activated by the Council97 on 14 April 2020, after an EU Commission proposal, with retroactive effect from 1 February 2020; it will remain activated until 31 January 2022.98 This retroactivity enabled the increase in the EU’s financial contribution to the rescEU stockpile from 90 per cent to 100 per cent discussed above.99 The EU has contributed EUR 2.7 billion to the ESI’s budget, but the latter is open to additional contributions from Member States and other donors. Although the Commission manages this budget and is responsible for deciding the actions to be financed, it works together with EU institutions, Member States, national authorities and other stakeholders to identify appropriate actions. The ESI supports emergency procurement and enables the conclusion of advanced purchase agreements using flexible procedures. These are carried out by the Commission on behalf of Member States and in effect provide an alternative route to what essentially is a joint procurement but in derogation from strict

94 Croatia, Italy, Lithuania, Montenegro, North Macedonia, Serbia and Spain, available at https:// ec.europa.eu/info/live-work-travel-eu/coronavirus-response/crisis-management-and-solidarity_en. 95 EU Council Conclusions 10/20 of 21 July 2020. 96 Commission Communication ‘A Joint European Roadmap for lifting COVID-19 containment measures’. 97 Council Regulation (EU) 2020/521 of 14 April 2020, activating the emergency support under Regulation (EU) 2016/369 and amending its provisions taking into account the COVID-19 outbreak [2020] OJ L 117/3. 98 Regulation 2020/521, Art 1. 99 Art 5(1), Regulation 2016/369 (as amended by Regulation 2020/521) in combination with Art 5(4), Regulation 2016/369.

190  Aris Georgopoulos adherence to the JPA framework.100 The applicable framework for these procurements remains the Omnibus Regulation.101 In particular, Art 4(5) of Regulation 2016/369 (as amended by Regulation 2020/521) stipulates that: Emergency support … may be granted in any of the following forms: (a) joint procurement with Member States as referred to in Article 165(2) of Regulation (EU, Euratom) 2018/1046 whereby Member States may acquire, rent or lease fully the capacities jointly procured; (b) procurement by the Commission on behalf of Member States based on an agreement between the Commission and Member States; (c) procurement by the Commission, as wholesaler, by buying, stocking and reselling or donating supplies and services, including rentals, to Member States or partner organisations selected by the Commission.

In addition, Art 4(7) stipulates that ‘In the event of procurement procedures as referred to in points (b) and (c) of paragraph 5, the Commission shall follow the rules set out in Regulation (EU, Euratom) 2018/1046 for its own procurement.’ For example, at the time the writing (April 2021), the EU Commission had concluded advanced purchase agreements with six pharmaceutical companies (AstraZeneca,102 Sanofi-GSK,103 Janssen Pharmaceutica NV of the Johnson & Johnson Group,104 CureVac,105 BioNTech/Pfizer106 and Moderna107) representing a portfolio of more than 2.6 billion doses.108 Clearly ESI enshrines the very essence of the principle of solidarity109 and has the potential to function as a complementary tool that can increase overall efficiency.

C.  The Clearing House for Medical Equipment Another important complementary mechanism is the Clearing House for medical equipment.110 This functions as a platform for sharing demand and 100 Regulation 2020/521, Recital 20 where it is stipulated that ‘EEA States that are signatories to the Joint Procurement Agreement to procure medical countermeasures may agree that their participation in EU-managed procurements of medical countermeasures will be subject as relevant to the rules and conditions set out in this Regulation. As those derogations are introduced as a consequence of the current COVID‐19 crisis, they should be temporary’. See also Regulation 2020/521, Art 4(5). 101 Regulation 2016/369, Art 4(5)(a) and (7) (as amended by Regulation 2020/521). 102 400 million doses. 103 300 million doses. 104 400 million doses. 105 405 million doses. 106 600 million doses. 107 460 million doses. 108 Written answer given by the EU Commission (on 15 April 2021) to the Question E-007019/2020 of Peter Kofod MEP (21 December 2020). 109 Recitals 1, 5, 6, 8 and 12 Regulation 2016/369 and Regulation 2020/521, recital 3. 110 ec.europa.eu/info/live-work-travel-eu/coronavirus-response/emergency-support-instrument/ covid-19-clearing-house-medical-equipment_en.

The EU’s Joint Procurement Agreement in Light of COVID-19  191 supply information among states, allowing identification of evolving demand and supply patterns, and facilitating dialogue with industry. It is organised in six clusters: personal protective equipment; ventilators; other medical supplies; test materials; ICU therapeutics and vaccines. It also includes a demand-supply ‘matchmaking platform’ on which Member States present their supply needs to which industry can respond. This tool enhances transparency of information in markets with new entrants, unknown to existing buyers.

V.  Reflections: Lessons Learned and Recommendations The preceding analysis shows that the JPA was devised more as a preparedness mechanism against future outbreaks and not as a response mechanism to ongoing pandemics of the magnitude of COVID-19. That said, lessons from the pandemic’s early phases can inform and improve not only EU coordination in the later waves, but also the EU’s leadership role in advocating a more transparent and collaborative global response.111 We consider below the wider lessons (beyond the EU), the specific lessons regarding the JPA’s operation and make some recommendations.

A.  Wider Lessons Perhaps one of the most important contributions is that in testing times when political instincts and pressures may veer towards national isolation, instruments such as the JPA, rescEU stockpile and ESI put forward an alternative paradigm, that of pooling and sharing, cooperation, and solidarity, useful not only for the EU, but also its neighbourhood. Of course, the paradigm is not always easily transferable globally, being informed by the experience and institutional capacity of the wider EU integration process, but in tackling a pandemic which turned the ‘global village’ figure of speech into a reality, the JPA’s experience has a wider moral resonance.

B.  Specific Lessons First, global shortages meant that one of the main advantages of joint purchasing112 advertised by the JPA,113 namely economies of scale and risk-sharing, became 111 See Ottawa Group Communication: ‘COVID-19 Transparency of trade-related measures’ of 24 July 2020, available at trade.ec.europa.eu/doclib/docs/2020/july/tradoc_158904.pdf. For the EU’s contribution to COVAX see also Commission press release IP/21/690 of 19 February 2021. 112 See for example recital 73 of Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing of Directive 2004/18/EC [2014] OJ L 94/65 (Public Sector Directive). For an analysis of the cross-border collaborative procurement framework

192  Aris Georgopoulos secondary. Market conditions led to a shift of emphasis from price to timely delivery. Member States and procuring entities then had to decide between the JPA and alternatives for achieving timely delivery. After analysing the JPA’s structure and decision-making design, a first impression that the latter is ill-suited for rapid action would be understandable. This explains perhaps the initial reaction of some Member States not to engage with the JPA procurements at the start of the pandemic, highlighting the dilemma between two the competing paradigms of buyer competition and buyer cooperation. Second, and related to the above, is the JPA’s feature that allows contracting parties to conduct independently procurements for supplies already covered by a JPA procurement in which they participate. Prima facie this feature appears problematic especially in the context of a seller’s market (supply shortages): it allows participating Member States to engage in parallel/competing processes that might undermine the joint procurement by accentuating buyer competition for the same scarce supplies; they might also use information acquired from the JPA for their own competing procurement or engage in delaying tactics at the JPA to improve the chances of their independent procurement. However, it is necessary to remember the competence landscape of healthcare provision in the EU to understand the limitations of the JPA system. Member States remain responsible for healthcare provision for their citizens whereas the EU can only offer complementary assistance. Furthermore, even if it were legally possible to require states participating in the JPA to relinquish the ability to procure critical supplies independently this would potentially destabilise the JPA framework by raising the stakes of JPA participation significantly. It would entail a considerable trade-off (of freedom of action) which might deter Member States from joining the JPA or lead them to abandon JPA procurements more readily. The JPA’s success depends on solidarity and trust, and if these elements exist the mere ability to conduct parallel procurement should not be problematic. The third reflection refers to the procurement process flexibility as a factor that Member States consider when they choose between buyer cooperation and buyer competition. It is evident that flexibility, both in terms of speed and level of discretion, is important in emergency procurement. The EU joint procurement framework adapted fairly quickly to the new environment and demonstrated a

of the Public Sector Directive see A Sanchez-Graells, ‘The Emergence of Trans-EU Collaborative Procurement: A “Living Lab” for EU Public Law’ (2020) 29 Public Procurement Law Review 16; A Sanchez-Graells, ‘Is Joint Cross-Border Public Procurement Legally Feasible or Simply Commercially Tolerated’ (2017) 12 European Procurement & Public Private Partnership Law Review 97; G Racca, ‘Joint Procurement Challenges in the Implementation of the new Directives’ in F Lichére, R Caranta and S Treumer (eds), Modernising Public Procurement: The New Directive (DJØF Publishing, 2014) 225–54; C Risvig Hamer, ‘Regular Purchases and Aggregated Procurement: The Changes in the New public Procurement Directive regarding Framework Agreements, Dynamic Purchasing Systems and Central Purchasing Bodies’ [2014] 23 Public Procurement Law Review 201. 113 Recital 13 Decision.

The EU’s Joint Procurement Agreement in Light of COVID-19  193 degree of flexibility as it already included the possibility for shortening the process in urgent cases.114 In this regard the failure of the first joint procurement shows that even when the public procurement rules allow for a significant degree of flexibility – in this case, through the negotiated procedure without prior notice – this alone cannot guarantee the desired outcomes, especially in markets that witness abrupt spikes in demand with corresponding shortages in supply. Although not all the details surrounding the first unsuccessful joint procurement are publicly known, it is known that more than one supplier was invited following a preliminary market analysis, that 12 days after its launch the procurement failed because ‘no tenders or requests to participate were received or all were rejected’, and that the relaunch, days after the first failure was announced, was successful. It is fair to assume that there was a discrepancy between the mapping from the preliminary market analysis and the actual market situation at the time of the joint procurement, although it remains unclear whether this was due to the fast-changing market conditions or blind spots in the market analysis. We also know that subsequent procurements were successful, maybe due to the relaxation of the assessment of the certification requirements among other factors, which was decided when the real market situation was revealed. In any case procurement flexibility alone is not a panacea that guarantees efficient outcomes. This point has wider relevance not just for joint procurement. This is also supported by the experience of the extensive use of the negotiated procedure without prior notice at national level during the pandemic, analysed in other chapters of this book.115 However, such cases can have a positive contribution to procurement by revealing the deficiencies in procurement professional capabilities, deficiencies that may be difficult to detect in the context of more structured procedures. In addition, they can highlight the vulnerabilities and limits of the of the just-in-time business model and existing solutions for supplier selection. More significantly, the first unsuccessful joint procurement highlights the importance of the buyer’s ability to have access to a real-time’ image of the market environment. Here, there is an opportunity to improve the system by developing new technological solutions which could harness the power of big data and artificial intelligence to produce something that comes closer to what could be described as a real-time image of the market.

C. Recommendations The history of EU integration has seen many crises lead to expansion of EU competences. Should the COVID-19 crisis lead to an expansion of EU competences



114 JPA, 115 See

Art 7(5). eg chs 4, 14 and 15.

194  Aris Georgopoulos in the area of public health? Assuming that the objective is the creation of more resilient response capabilities, this would be justified if this objective cannot be attained within the existing framework. It is submitted, however, that based on the experience of the pandemic, such expansion is not necessary. Instead, the solution lies in improving coordination between the EU and its Member States, optimising current supportive mechanisms and creating new ones within the existing competence framework. This is clear a lesson from the fine-tuned activation of other complementary mechanisms explored in this chapter. Accordingly, a key recommendation is to focus on identifying or devising efficiency multipliers for improving outcomes in terms of timely procurement and distribution of critical supplies during periods of abrupt changes in the demandsupply equilibrium. An example would be the coordination of supply surpluses procured under the JPA and independently by Member States in order to transfer these surpluses in areas with urgent needs. Another efficiency multiplier would be the ‘digital automatisation’ of instruments like the matchmaking platform of the clearing house of medical equipment. Emerging technologies like artificial intelligence and machine learning could support the creation of a coordinated network characterised by greater transparency of information that would help buyers acquire an almost real-time mapping of the existing market conditions. The final recommendation is for caution. Discussion on improving the operation of the JPA framework will trigger the discussion of a potential exclusivity requirement preventing Member States participating in a JPA procurement from procuring the same supplies in parallel. Although there are good reasons to promote measures to deter buyer competition when there are demand spikes, introducing an exclusivity obligation may raise the stakes too high in terms of reduced freedom of action and then deter Member States from participating in JPA procurement. An impulsive introduction of an exclusivity obligation may become an ‘own goal’ that ultimately undermines the JPA mechanism.

VI.  In Lieu of Conclusion The analysis in this chapter has identified a number of important lessons for the discussions on reform of the JPA and the other EU response mechanisms. However, examination of the performance of the JPA framework in isolation would be inappropriate and might lead to the wrong conclusions; its performance should be examined in the wider context of procurement performance, during the pandemic, including at national level. Such a perspective is essential for the correct lessons to be drawn. A final thought: the JPA mechanism has an important didactic contribution linked with the initial tenets of the Schuman Declaration, namely the contribution of gradual achievements of de facto solidarity to the incremental building

The EU’s Joint Procurement Agreement in Light of COVID-19  195 of Europe. The JPA and other complementary response mechanisms analysed here show that the direction of cooperation and coordination between states (within the EU, but also globally) and not seclusion is the correct approach for dealing with a pandemic of this order; or, if preferred, it is a reminder that in our interconnected world the prisoner’s dilemma scenario presented to us by COVID-19 has only one optimum solution, given the counterfactuals: united we stand, divided we fall.

196

part 3 Related Regulatory Perspectives

198

7 Competition Policy in Relation to Public Procurement: An Essential Element of the Policy Framework for Addressing COVID-19 ROBERT D ANDERSON, WILLIAM E KOVACIC AND ANTONELLA SALGUEIRO*

I. Introduction The COVID-19 pandemic and associated economic downturn are c­hallenging contemporary policy paradigms across the board, including with respect to government procurement, trade and industrial policy. Competition policy – the enforcement of laws regulating anti-competitive practices of firms and related policy advocacy – is undergoing a parallel process of challenge, assessment and, in some respects, adaptation. Competition policy has a complementary relationship with procurement policy in ensuring healthy rivalry in public procurement markets, and thereby in promoting good outcomes for governments and citizens. For example, effective anti-cartel enforcement helps ensure that competitive tendering is not thwarted through bid-rigging and related practices; merger control can affect the number of suppliers operating in relevant markets; and competition advocacy that reduces barriers to participation can strengthen market rivalry.1 Thus, adjustments to * Helpful comments from Sue Arrowsmith are gratefully acknowledged. The views expressed should not be attributed to any organisations with which the authors are affiliated. 1 See generally, RD Anderson and WE Kovacic, ‘Competition Policy and International Trade Liberalisation: Essential Complements to Ensure Good Performance in Public Procurement Markets’ (2009) 2 Public Procurement Law Review 67; RD Anderson, WE Kovacic and AC Müller, ‘Promoting Competition and Deterring Corruption in Public Procurement Markets: Synergies with Trade Liberalisation’ (2017) 26 Public Procurement Law Review 77; and RD Anderson, A Jones and WE Kovacic, ‘Preventing Corruption, Supplier Collusion and the Corrosion of Civic Trust: A Procompetitive Program to Improve the Effectiveness and Legitimacy of Public Procurement’ (2019) 26 George Mason Law Review 1233.

200  Robert D Anderson, William E Kovacic and Antonella Salgueiro competition policy and its application in the pandemic may well have repercussions for government procurement outcomes. Adaptations of competition policy, in response to the pandemic, parallel adjustments that have taken place in public procurement policy.2 Competition authorities have shown a willingness to expedite review of some business restructurings and potentially to allow, at least temporarily, cooperation or coordination between competitors that might otherwise be proscribed, to ensure the adequacy and security of the supply of required goods and services. They have also signalled their intention to actively monitor market conditions and to address, where appropriate, price-gouging concerns.3 These developments reflect an understandable perception that extraordinary threats sometimes necessitate extraordinary measures. Such actions, can, however, have adverse consequences for competition, economic welfare and trust in government. Appropriately tailored transparency and accountability requirements that help prevent corruption and maintain confidence in public administration have continuing relevance even in times of crisis.4 Indeed, procurement during crises is notoriously prone to waste, inadequate oversight as well as outright fraud and abuse.5 Similarly, the sound application of competition policy during the pandemic remains important to prevent anti-competitive abuses, although careful adaptation of such policy may, over time, be warranted.6 This chapter summarises and reflects upon competition policy adjustments that have been implemented in various jurisdictions and on how these have impacted public procurement during the pandemic. It focuses chiefly on developments in the European Union (EU), the United States (US) and the BRICS economies (Brazil, Russia, India, China and South Africa). This is in the light not only of the relative size and global influence of those jurisdictions, but also the impact of the pandemic on their populations and economies. The chapter continues by considering the question of whether some of the measures taken might usefully be retained over the longer term. The remainder of the chapter is organised as follows. Section II outlines pertinent changes in market conditions flowing from the pandemic and their implications for the role of competition policy generally. Section III looks at specific adaptations that various authorities have made with respect to discrete 2 See discussed, passim, in this book; and eg RD Anderson and AC Müller, ‘Keeping Markets Open While Ensuring Due Flexibility for Governments in a Time of Economic and Public Health Crisis: the Role of the WTO Agreement on Government Procurement (GPA)’ (2020) 29 Public Procurement Law Review 189. 3 See, for details and supporting references, sections II and III, below. 4 See Anderson and Müller, ‘Keeping Markets Open’ (2020). 5 See for a thoughtful discussion, J Schwartz, ‘Procurement in times of crisis: lessons from US government procurement in three episodes of “crisis” in the twenty-first century’, in S Arrowsmith and RD Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (CUP/ WTO, 2011). 6 See F Jenny, ‘Economic Resilience, Globalisation and Market Governance: Facing the Covid-19 Test’ (2020) Concurrences 64.

Competition Policy in Relation to Public Procurement  201 elements of competition policy in particular jurisdictions. Section IV discusses longer-run challenges that competition authorities face in light of the evolving role of industrial policy in major economies and current threats to the international trading system. Section V summarises our findings with respect to aspects of the competition agencies’ responses to the pandemic that point toward potentially desirable long-term reforms. Section VI provides concluding remarks.

II.  Changing Market Conditions and the Role of Competition Agencies vis-à-vis Public Procurement The first wave of the COVID-19 pandemic set off a race against time to equip cities and hospitals with necessary infrastructure including beds, intensive care capacity, ventilators and medicines.7 Procurement authorities faced challenges in procuring goods, services and works under particularly difficult circumstances, including confinement measures and border closures that severely disrupted supply and distribution chains.8 Often, they found that only a few suppliers – if any – were able to deliver the required products.9 In this context, governments awarded a significant number of COVID-related contracts without competitive tendering, within shortened time periods and/or without regard to regular publication requirements.10 In response to the resulting increased bargaining power of suppliers, public buyers sought to exercise countervailing power by launching, for instance, joint procurement arrangements to ensure competition and achieve economies of scale.11 Such arrangements have been implemented at the level of individual states, for example, by centralising COVID-related procurement in a single agency or a limited number of agencies.12 They have also involved multiple jurisdictions. The European Joint Procurement arrangement, examined in chapter five, is an important example of the latter.13

7 See for pertinent details and analysis, the articles published in the recent special issue of the Public Procurement Law Review devoted to public procurement and COVID-19, at 29 Public Procurement Law Review 159. See, also OECD, ‘Stocktaking report on immediate public procurement and infrastructure responses to COVID-19’ (24 June 2020), available at www.oecd.org/coronavirus/policy-responses/ stocktaking-report-on-immediate-public-procurement-and-­infrastructure-responses-to-covid-19248d0646. 8 OECD, ‘COVID-19: Competition and emergency procurement’ (2020), available at www.oecd. org/competition/COVID-19-competition-and-emergency-procurement.pdf. 9 See A Sanchez-Graells, ‘Procurement in the Time of COVID-19’ (2020) 71 Northern Ireland Legal Quarterly, Preliminary text, available at ssrn.com/abstract=3570154. 10 See for a more detailed discussion on single sourcing amid the emergency context, ch 4, and pertinent country studies in pt 5 of this book. 11 See Sanchez-Graells, ‘Procurement in the Time of COVID-19’ (2020) 85. 12 See eg ch 18 outlining mandatory use of centralised framework agreements in Colombia. 13 See ch 5 of this book; Sanchez-Graells (n 8) 85.

202  Robert D Anderson, William E Kovacic and Antonella Salgueiro In this context, competition agencies have had to show appropriate flexibility regarding supplier coordination arrangements while remaining vigilant to ensure that these do not operate as disguised cartels that raise the costs of emergency procurements and, potentially, erode the credibility and efficacy of governments in responding to the crisis.14 Similarly, efforts have been made to facilitate necessary business restructurings in response to the pandemic, while remaining vigilant against possible anti-competitive effects. Vigilance has similarly been maintained with respect to exclusionary or exploitative abuses of a dominant position that may restrict supply and raise prices unnecessarily.15 Competition agencies have also engaged in advocacy activities aimed at helping procuring entities identify and mitigate risks posed by emergency direct contracting or other procurement methods that can limit competition.16 The pandemic has spurred a proliferation of national17 and international rules, guidelines and best practice recommendations on emergency and COVID-19 related procurement;18 these include addressing matters related to limited supplier competition. These initiatives can potentially provide a modicum of clarity in a rapidly changing environment, although some have attracted criticism for lacking specificity.19 Competition authorities can help to ensure that such advice is pertinent and administrable, and takes due account of potential competitionrestricting effects. As we discuss below, in the longer term, there is a risk that state interventions and public policy responses to the pandemic will undermine efficient competition law enforcement, for example, through actions taken to (artificially) maintain a large number of firms in order to kick-start the economy and to exclude foreign competitors.20 Separately, the pandemic has directly encumbered efforts of competition enforcers to investigate and pursue cases. Isolation requirements have forced agencies to close offices and employees to work from their homes, complicating the performance of routine tasks. Against this background, competition agencies have sought to prioritise necessary enforcement actions and policy advocacy. In the short term, for many agencies, anti-competitive practices associated with public procurement in the time of the pandemic have become an important focus.21 One prominent example in the US is the Procurement Collusion Strike Force (PCSF), a coordinated 14 Anderson, Jones and Kovacic, ‘Preventing Corruption, Supplier Collusion and the Corrosion of Civic Trust’ (2019). 15 Jenny, ‘Economic Resilience, Globalisation and Market Governance’ (2020). 16 OECD, COVID-19 (2020). 17 On adaptations to national rules see section V and the summary in ch 24. 18 See, eg, OECD (n 8). 19 See ch 3 of this book; Sanchez-Graells (n 9). 20 Jenny (n 6). See also sections IV.A and IV.B below. 21 See United States Department of Justice, ‘Assistant Attorney General Makan Delrahim Presents Procurement Collusion Strike Force to the International Competition Community’ (DOJ, 16 June 2020), available at www.justice.gov/opa/pr/assistant-attorney-general-makan-delrahim-presentsprocurement-collusion-strike-force.

Competition Policy in Relation to Public Procurement  203 national response launched by the Department of Justice (DOJ) in November 2019 to combat antitrust violations and related schemes in government procurement. Subsequently, the PCSF developed ‘pandemic-focused training to address the heightened collusion risks in light of exigent procurement by government agencies’ and has collaborated with the DOJ’s COVID-19 Hoarding and Price-Gouging Task Force by referring substantive COVID-related tips.22 Similar initiatives are underway in other jurisdictions.23 Of critical importance, throughout, is that competition authorities explain clearly how they will apply competition law enforcement principles during the crisis, in order to provide firms with reliable guidance about what is allowed and what is forbidden in the current circumstances.24 Related developments and specific measures are discussed in the next section of this chapter.

III.  Specific Adaptations of Relevant Jurisdictions’ Competition Policies in Response to the Crisis COVID-19 represents an unprecedented global challenge, and governments have taken extraordinary steps to contain the virus, minimise the expected economic fall-out, and adapt to a new status quo.25 Recognising the special demands of the situation, competition authorities have adjusted enforcement policies in important ways. These measures can certainly impact on the operation and performance of public procurement markets. The discussion below considers measures taken with regard to horizontal coordination agreements, expedited merger review procedures, the investigation of excessive pricing allegations, and the regulation of state-aids in the EU.26 It also considers efforts that have been made by relevant

22 The United States Department of Justice, ‘Justice department’s procurement collusion strike force caps off successful inaugural year by adding eleven new national partners’ (DOJ, 12 November 2020), available at www.justice.gov/atr/blog/justice-department-s-procurement-collusion-strike-forcecaps-successful-inaugural-year. 23 The UK’s Competition and Markets Authority has introduced a dedicated task force to advise the Government on measures to ensure that markets continue to function during the pandemic. See Competition and Markets Authority, ‘CMA COVID-19 Taskforce’ (20 March 2020), available at www.gov.uk/government/publications/covid-19-cma-taskforce/cma-covid-19-taskforce; related initiatives in the EU and South Africa are discussed below, see section III.C. 24 See also F Jenny, Introduction to a set of articles published in ‘Competition Law and Health Crisis’ (2020) 2 Concurrences, available at www.concurrences.com/en/review/issues/no-2-2020/ontopic/competition-law-and-health-crisis-en. 25 See ch 1 of this book. 26 For a useful and, in some respects, parallel discussion, see Jenny, ‘Competition Law and Health Crisis’ (2020). Another useful survey of developments, focusing on Canada, may be found in A Banicevic and J Bodrug, ‘COVID-19 in Canada: Competitor Collaborations, Pricing, Mergers, and Foreign Investment During (and After) the Pandemic’ (The Antitrust Source, August 2020), available  at  www.americanbar.org/content/dam/aba/publishing/antitrust_source/2020/august-2020/ aug20_banicevic_8_18f.pdf.

204  Robert D Anderson, William E Kovacic and Antonella Salgueiro authorities to establish new communication channels with affected businesses and other stakeholders.

A.  Toleration, in Some Cases, of Appropriately Limited Horizontal Cooperation Agreements In the short term, surging demand and the disruption of value chains have caused shortages of supply and distribution across different industries. Firms have found, at least in some cases, that either their level of production is insufficient or that COVID-related measures have impeded distribution. In such circumstances, a degree of coordination between firms that normally compete with each other might be necessary to respond to public health-related needs. This necessarily implicates competition policy, which ordinarily views such arrangements with scepticism and, as such, relevant authorities need to be mindful of the need for flexibility, while remaining vigilant to address competition-suppressing effects. The competition agencies of the EU, US, Canada and other jurisdictions have attempted to do exactly that.27 Some have engaged with companies to help them assess the legality of proposed cooperation plans and to create adequate safeguards against long-term anti-competitive effects.28 Collaborative activities that the agencies have ‘greenlighted’ have mainly involved the supply of medicines and medical equipment for treating COVID patients.29 Cooperation may also need to extend to research and development (R&D), the sharing of technical know-how and joint purchasing arrangements among healthcare providers.30 In this context, the European Competition Network (ECN) has said that its authorities will not actively intervene against ‘necessary and temporary’ measures taken to avoid supply shortages.31 In related initiatives, the US DOJ and Federal Trade Commission (FTC) have issued a joint statement expressing that joint efforts, limited in duration and necessary to assist patients, consumers and communities affected by COVID-19 and its aftermath, may be a necessary response to provide products or services that

27 See Organisation for Economic Cooperation and Development, ‘Co-operation between competitors in the time of COVID-19’ (26 May 2020), available at www.oecd.org/daf/competition/ Co-operation-between-competitors-in-the-time-of-COVID-19.pdf; see also, Banicevic and Bodrug, ‘COVID-19’ (2020). 28 G De Stefano, ‘Covid-19 and EU Competition Law: Bring the Informal Guidance On’ (2020) 11 Journal of European Competition Law & Practice 121. 29 See, eg, the comfort letter granted by the European Commission to Medicines for Europe, COMP/OG – D(2020/044003), available at www.ec.europa.eu/competition/antitrust/medicines_for_ europe_comfort_letter.pdf. 30 ibid. 31 European Competition Network, ‘Antitrust: Joint statement by the European Competition Network (ECN) on application of competition law during the Corona crisis’ (23 March 2020), available at www.ec.europa.eu/competition/ecn/202003_joint-statement_ecn_corona-crisis.pdf.

Competition Policy in Relation to Public Procurement  205 might not be available otherwise.32 Other competition agencies, for instance in Chile, Japan, Mexico and Hong Kong, have made announcements on cooperation between competitors during the pandemic.33 Hong Kong has identified possible cooperation agreements that might be cleared in specific circumstances, namely, joint buying, joint production agreements, sales-related ventures and information exchanges that do not include ‘competitively sensitive information’.34 However, the possibility of collusive conduct should not be brushed aside. A principal underlying concern is the small pool of potential suppliers in markets for many products needed in the pandemic as few firms are able to deliver on time or because protectionist measures exclude foreign competitors.35 To address such concerns, some jurisdictions are now using data on market structure as well as information collected in the course of bidding processes (on tenders and bidders) to devise and run electronic tests to screen for warning signs or ‘red flags’ that warrant further investigation.36 With respect to possible long-term reforms suggested by measures adopted during the crisis, the evident willingness, at least in some cases, of competition authorities to countenance inter-firm cooperation agreements that normally would not be deemed acceptable, raises anew the question of whether competition authorities should be more open to the concept of efficient horizontal cooperation (ie cooperation among firms in a market, for example to rationalise supply).37 While economic theory provides qualified rationales for allowing such cooperation in particular cases,38 the competition community has traditionally responded cautiously, emphasising that even if cooperation could be efficient in a limited number of cases, these are likely to be highly exceptional; that by opening the door to their consideration, abusive conduct (outright price-fixing) may also be encouraged; and consumers will be better served, in general, by clear rules that limit the scope for such conduct.39 Indeed, competition authorities (rightly, in our view) remain mindful, even in the context of the pandemic, of the risks associated with horizontal 32 See Department of Justice and Federal Trade Commission, ‘Joint Statement regarding COVID-19’ (March 2020), available at www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19. 33 OECD, ‘Co-operation between competitors in the time of COVID’ (2020). 34 Hong Kong Competition Commission, ‘Statement by the Competition Comm’n regarding the COVID-19 outbreak’, (27 March 2020), available at www.compcomm.hk/en/about/public_notices/ files/20200327_Statement_by_CC_regarding_the_COVID19_outbreak_Eng.pdf. 35 See ch 4, and pertinent country studies in pt 5 of this book. 36 F Andrei and M Busu, ‘Detecting Cartels through Analytical Methods’ (2014) Romanian Competition Journal 24. An important workshop on cartel screening was held by the OECD in January 2018; see www.oecd.org/daf/competition/workshop-on-cartel-screening-in-the-digital-era.htm. 37 See, eg R Schmalansee, ‘Agreements between Competitors’ in TM Jorde and DJ Teece (eds), Antitrust, Innovation and Competitiveness (OUP, 1992) ch 5. 38 ibid. 39 This is the thinking underlying, eg, the OECD Council’s Recommendation concerning Effective Action against Hard Core Cartels, probably the most widely accepted and supported international instrument in the competition policy field. See OECD, ‘Recommendation concerning Effective Action against Hard Core Cartels’ OECD/LEGAL/0452 [2019], available at legalinstruments.oecd.org/en/ instruments/OECD-LEGAL-0452.

206  Robert D Anderson, William E Kovacic and Antonella Salgueiro cooperation arrangements,40 especially in markets with a known track record of anti-competitive practices.41 To mitigate such risks, agencies have implemented safeguards to maintain competition in the long term. First, agencies have emphasised that competition rules remain fully in force. Though some agreements might be tolerated, no conduct is immunised from antitrust scrutiny.42 Second, guidelines have been established, including the possibility of issuing letters that provide some measure of assurance.43 Third, collaboration agreements greenlighted during the COVID pandemic typically incorporate a date by which authorisation for the cooperation either terminates or undergoes additional review by the competition authority.44

B.  Merger Review and COVID-19: Expedited Review Procedures, Failing Firm Defence and Post-Clearance Challenges Lockdown measures taken during the first phase of the pandemic, many resulting in the partial shutdown of multiple industrial sectors, have delivered a major economic shock to nations across the globe. As one response, firms have looked to mergers not only to survive but also to respond adequately to market demands and government policies. Companies have also established joint ventures to ensure delivery capability, including for public procurement solicitations.45 To facilitate such arrangements, jurisdictions have allowed some flexibilities.46 For instance, companies have been encouraged to submit merger notifications electronically, through dedicated e-filing systems,47 provided that when normal

40 See, for example, the DOJ and FTC joint statement (2020). 41 L Alexander, ‘Designing an Effective Pandemic Response that Minimizes Lasting Harm to Competition’ (American Antitrust Institute, 17 April 2020), available at www.antitrustinstitute.org/ work-product/designing-an-effective-pandemic-response-that-minimizes-lasting-harm-to-competition. 42 See, for example, in the US, the DOJ Joint Statement regarding COVID-19 (n 32). Similarly, in the EU, for a related statement, see the European Competition Network’s, ‘Antitrust’ (2020). 43 See, for example, ‘comfort letters’ issued by the European Commission concerning a specific cooperation project aimed at avoiding situations of shortages of critical hospital medicines. Press release, ‘Antitrust: Commission provides guidance on allowing limited cooperation among businesses, especially for critical hospital medicines during the coronavirus outbreak’ (8 April 2020), available at www. ec.europa.eu/commission/presscorner/detail/en/ip_20_618. 44 Alexander, ‘Designing an Effective Pandemic Response’ (2020). 45 AR Puente, ‘COVID-19: New, fast-track merger review procedure introduced in Ecuador’ (Kluwer Competition Law Blog, 25 April 2020), available at www.competitionlawblog.kluwer competitionlaw.com/2020/04/25/covid-19-new-fast-track-merger-review-procedure-introducedin-ecuador/?doing_wp_cron=1590180358.9529719352722167968750. 46 See European Commission, ‘Special measures due to Coronavirus/Covid-19’ (2020), available at www.ec.europa.eu/competition/mergers/information_en.html. 47 For example, the DG COMP, the FTC and the DOJ introduced temporary electronic filing systems. DG COMP encouraged all submissions in digital format. Argentina’s competition authority created an email address for merger filings where dealing occurred during the lockdown.

Competition Policy in Relation to Public Procurement  207 agency operations resume, all filing parties may have to supplement their electronic filings by submitting hard copies.48 The US antitrust authorities have also said that they will seek to expeditiously process joint venture filings relevant to the pandemic under the National Cooperative Research and Production Act.49 Likewise, the EU has put in place a number of measures to ensure business continuity and the implementation of the EU Merger Regulation.50 Though it recommended firms to consider the timing of the notifications as it faced difficulties in collecting information from the notifying parties and third parties, the EU’s DG Competition nevertheless continued reviewing cases in which parties could show compelling reasons to proceed with a merger notification, without delay. In China, the State Administration for Market Regulation (SAMR) established a channel for expediting review of mergers in key sectors involved in fighting COVID-19 as well as other sectors (eg tourism) that the pandemic had damaged severely.51 In South Africa, the Competition Commission of South Africa (CCSA) requested parties to defer new merger filings. Nonetheless, it has accepted new filings but under deadline extensions of 60 business days for intermediate mergers and 120 business days for large mergers.52 In Brazil, the Administrative Council for Economic Defence (CADE) reported that there has been no major decrease in the agency’s productivity during the pandemic, nor changes in legal deadlines relating to merger reviews, with the exception of a suspension of procedural deadline for gun-jumping proceedings.53 On 10 June 2020, Brazil’s President enacted a law that establishes that associative agreements, consortia or joint ventures that are necessary to combat or mitigate the consequences of the pandemic in effect between 20 March and 20 October 2020, or through the duration of the emergency situation, are not subject to pre-merger control.54 Notwithstanding, notification is encouraged. A further important consideration relating to the restructuring of relevant markets – including government procurement markets – concerns the application

48 FTC, ‘Changes in Bureau procedure during Covid-19 coronavirus pandemic’ (16 March 2020), available at www.ftc.gov/news-events/blogs/competition-matters/2020/03/changes-bureau-procedureduring-covid-19-coronavirus?utm_source=govdelivery. 49 See Department of Justice, ‘The Justice Department and the Federal Trade Commission Announce Expedited Antitrust Procedure and Guidance for Coronavirus Public Health Efforts’ (24 March 2020), available at www.justice.gov/opa/pr/justice-department-and-federal-trade-commissionannounce-expedited-antitrust-procedure-and. 50 See the European Commission, ‘Special measures due to Coronavirus/Covid-19’ (2020). 51 J Jiang, F Jiang, E Xu and D Liu, ‘China: SAMR Optimizes Antitrust Enforcement To Mitigate Pandemic’ (Mondaq, July 2021), available at www.mondaq.com/china/government-measures/950582/ samr-optimizes-antitrust-enforcement-to-mitigate-pandemic. 52 See ‘Impact of COVID-19 on global merger control reviews’ (Latham and Watkins LLP, May 2021), available at www.lw.com/thoughtLeadership/lw-impact-of-COVID-19-global-merger-control. 53 CADE, ‘Data regarding Cade’s performance with respect to mergers and acquisitions indicate the agency has been more productive in 2020’ (4 June 2020), available at en.cade.gov.br/ data-regarding-cades-performance-with-respect-to-mergers-and-acquisitions-indicate-the-agencyhas-been-more-productive-in-2020. 54 Law 14.010 of 10 June 2020 (Brazil).

208  Robert D Anderson, William E Kovacic and Antonella Salgueiro of the ‘failing firm’ defence in merger regulation. In broad terms, the failing firm defence is available where a firm: (a) is considered to be unable to meet its financial obligations in the near future, including through relevant bankruptcy legislation; and (b) has made good-faith efforts to elicit alternative offers that are less restrictive of competition.55 Such acquisitions may be considered preferable to mass insolvencies or bail-outs and/or subsidies granted by hard-pressed national governments.56 Still, parties seeking to avail themselves of such a defence must typically provide compelling data and evidence, particularly regarding counterfactuals that offer the possibility of fewer anti-competitive effects.57 In exceptional circumstances, the pandemic and the related economic crisis may even trigger reconsideration of consummated mergers which the antitrust agencies did not initially challenge.58 In the US, recent commentary has suggested that unduly permissive merger enforcement involving medical equipment and healthcare services, including the failure of the FTC in 2012 to block a merger in the ventilator industry, encouraged consolidation that has impeded efforts to respond to the COVID pandemic.59 Clearly, this could impact directly on public procurement processes and outcomes. Commenting on the ventilator case, FTC Commissioner Rebecca Slaughter observed that, where an antitrust agency gets new information that shows its original decision to stand down was misguided, the agency should revisit the transaction and seek remedies to restore competition.60 Overall, the adjustments that have been made to merger control in response to the pandemic appear to be relatively minor in scope, and unlikely to trigger longterm reforms. It is possible, however, that the experience may give rise to a more

55 See, for authoritative discussion, A Jones, B Sufrin and N Dunne, ‘Mergers’ in A Jones, B Sufrin and N Dunne (eds), Jones and Sufrin’s EU Competition Law, Text, Cases and Materials, 7th edn (OUP, 2019). Specific requirements for such a defence or exemption vary cross jurisdictions. 56 T Macrae, ‘Economic Nationalism and Merger Control: Impact of COVID-19’ (CPI – Competition Policy International, 19 May 2020), available at competitionlawblog.kluwercompetitionlaw.com/ 2020/03/20/eu-merger-control-and-implications-from-the-effects-of-the-coronavirus-crisis. 57 In the US, see, the Horizontal Merger Guidelines s 11; also, In the Matter of Otto Bock HealthCare North America, No 9378 (2019), available at www.ftc.gov/enforcement/cases-proceedings/171-0231/ otto-bock-healthcarefreedom-innovations: ‘the analysis must account for the commercially reasonable options that firms in today’s markets can pursue when facing a liquidity shortfall’. For the EU, see G Bushnell, ‘EU Merger Control and Implications from the Effects of the Coronavirus Crisis’ (Kluwer Competition Law Blog, 20 March 2020), available at www.competitionlawblog.kluwercompetitionlaw. com/2020/03/20/eu-merger-control-and-implications-from-the-effects-of-the-coronavirus-crisis. 58 Federal Trade Commission, ‘Introductory Guide I: What is the Premerger Notification Program’ (2009) 13 (describing operation of the merger review system established by the Hart-Scott-Rodino Antitrust Improvements Act of 1976). 59 T Wu, ‘A Corporate Merger Cost America Ventilators’ The New York Times (13 April 2020), available at www.nytimes.com/2020/04/12/opinion/ventilators-coronavirus.html. 60 SJ Cernak, ‘Unwinding Investigated Consummated Mergers – Inconsistent with Merger Policy Since 1976’ (Kluwer AntitrustConnect Blog, 14 May 2020), available at www.antitrustconnect.com/ 2020/05/14/unwinding-investigated-consummated-mergers-inconsistent-with-merger-policysince-1976/?doing_wp_cron=1590262283.1697669029235839843750#_ftn14.

Competition Policy in Relation to Public Procurement  209 nuanced approach to the assessment of mergers in some markets, emphasising the dynamic aspects of competition.61

C.  Unilateral Conduct: Excessive Prices and Price-Gouging Concerns A core mission of competition policy is to deter improper practices that enable dominant firms to injure consumers by raising prices or reducing quality. Government procurement markets, including those for goods and services to overcome the pandemic, provide fertile ground for such abuses. Multiple jurisdictions have launched related enquiries and actions grounded on competition law, consumer protection statutes or legislation dealing specifically with price-gouging. Though such price fluctuations sometimes reflect demand surges and variations in production costs, governments have employed various means to ensure that firms do not exploit conditions of scarcity and harm consumers.62 A key policy question is whether unilateral price increases should, in fact, be treated as an illegal conduct and in what circumstances significant, abrupt price increases to consumers improperly distort competition. A related difficulty is to establish the existence of seller market power given that, under the prevailing circumstances, relevant markets for antitrust analysis may be difficult to define. Several other considerations may be relevant to assessing the wisdom of competition policy intervention, in particular cases. Trade restrictions and COVID-related isolation measures (for example, confinement and lockdowns) may increase input costs, disrupting supply chains and causing sudden price spikes. Higher prices might also stem from efforts by suppliers to expand capacity at short notice. An excessively strict enforcement approach that overlooks these and other legitimate explanations for price increases may be counterproductive as sellers may refrain from entering the market out of a fear of being accused of opportunism. In view of such considerations, competition agencies typically evaluate excessive pricing allegations cautiously and use other means, short of law enforcement, to reinforce market competition and protect consumers. For example, agencies may issue warnings about the legal risks associated with charging excessive prices amid the pandemic context or create hotlines or dedicated email accounts to receive reports related to possible cases. The mere possibility of intervention

61 See Jenny (n 6). 62 For instance, by establishing price caps (France) or freezing prices for a determined price period (Spain). See, for useful elaboration, the World Bank, ‘Safeguarding Healthy Competition during COVID-19: Competition Policy Options for Emergency Situations’ (2020), available at pubdocs. worldbank.org/en/497031588957886202/SafeguardingHealthyCompetitionDuringCOVID19.pdf.

210  Robert D Anderson, William E Kovacic and Antonella Salgueiro may positively impact the price of procured healthcare and sanitising goods by deterring suppliers from overcharging public sector entities.63 In some jurisdictions, such as the EU, competition law bans excessive pricing by dominant firms.64 By contrast, no comparable offence exists in US federal antitrust law, although approximately 34 states have adopted laws that forbid price-gouging.65 As COVID cases grew exponentially, regulators in many jurisdictions used competition law enforcement to address complaints in relation to the pricing of necessities such as hand sanitiser, face masks and other equipment to protect against the spread of the virus.66 Recent experience across jurisdictions reveals a variety of competition agency policy responses. A joint statement issued by the European Competition Network on the application of competition law during the COVID crisis recognises that ‘it is of utmost importance to ensure that products considered essential to protect the health of consumers in the current situation (eg face masks and sanitising gel) remain available at competitive prices’.67 Several national authorities have opened investigations or established task forces, including in France, Spain, the UK and Italy.68 As COVID cases grew exponentially in the US, the Government issued an Executive Order that uses authority granted under the Defense Production Act to ban price-gouging and the hoarding of vital medical equipment and supplies.69 In addition, the US DOJ, the Federal Bureau of Investigation (FBI) and other federal agencies have issued warnings about price-gouging.70 Similarly, the Turkish Competition Authority warned that it was monitoring ‘opportunistic’ price increases and promised to impose the highest fines allowed by the Turkish Competition Law on all firms engaged in anti-competitive practices during the pandemic.71 Lastly, the Competition Commission of South Africa

63 See, South African Government News Agency, ‘Commission to deal with suppliers who inflate prices’ (20 March 2020), available at www.sanews.gov.za/south-africa/commission-dealsuppliers-who-inflate-prices. 64 For example, in the EU, see Case 27/76 United Brands v Commission [1978] ECR 207; Case 78/70 Deutsche Grammophon Gesellschaft mbH v Metro-SB-Großmärkte GmbH & Co KG [1971] ECR. In the US, excessive prices are not a matter for competition enforcement at the federal level. However, many states have laws that prohibit price gouging. 65 The application of these measures typically is triggered by the declaration of a state of emergency. A comprehensive list of state laws on price-gouging is available at www.ncsl.org/research/financialservices-and-commerce/price-gouging-state-statutes.aspx. 66 See the statement from the European Competition Network (n 31). 67 ibid. 68 On this issue in Italy and France see ch 14, section III.C. Also, see OECD, ‘Exploitative pricing in the time of COVID-19’ (26 May 2020), available at www.oecd.orgcompetition/Exploitative-pricing-inthe-time-of-COVID-19.pdf. 69 Executive Office of the President Donald J Trump, Executive Order on Preventing Hoarding of Health and Medical Resources to Respond to the Spread of COVID-19 (13910, Washington DC, 23 March 2020), available at www.federalregister.gov/documents/2020/03/26/2020-06478/ preventing-hoarding-of-health-and-medical-resources-to-respond-to-the-spread-of-covid-19. 70 See DOJ and FTC joint statement (n 32). 71 OECD, ‘Exploitative pricing in the time of COVID-19’ (2020).

Competition Policy in Relation to Public Procurement  211 reported investigating more than 300 complaints against retailers and suppliers for over-charging essential commodities.72 As suggested above, in addressing such cases, competition authorities must reconcile two competing considerations. On the one hand, consumers and government buyers need a shield against exploitative pricing abuses related to products in short supply. At the same time, sellers should have freedom to respond quickly to changing market conditions. This requires competition agencies to adopt a measured, nuanced approach that takes due account of the market context and avoids reducing the availability of essential goods in the short term. It is worth remarking that the topic of unilateral conduct or single-firm abuses of a dominant position is currently receiving increased attention in various jurisdictions around the world, even independently of the pandemic. The EU has led the field, with its ongoing series of high-profile investigations of alleged abusive conduct in digital markets. Even in the US, in which the enforcement of antitrust law in relation to single-firm monopolistic abuses has undergone a long period of restraint relative to the EU, a revival of sorts may be coming, as evidenced, for example, by the Google case initiated recently by the Department of Justice73 and the even more recent lawsuit filed against Facebook for illegal monopolisation.74 In this context, the heightened urgency apparently being given to the prevention of price gouging and other single-firm abuses in the context of the pandemic may be part of a more general (and welcome) trend.

D.  State Aids to Industry: The Relevance of EU Competition Rules to Mitigate Possible Adverse Consequences of Government Measures to Alleviate the Economic Crisis State aids to industry in the form of grants, subsidies, bank guarantees or other means may distort competition and the efficient operation of markets. Although antitrust law in most jurisdictions does not regulate such aids, they receive close attention under EU competition policy.75 In the EU regime, aid based on objective criteria and applicable to an industry, as a whole, normally will not raise

72 ibid. 73 See Department of Justice, ‘Justice Department Sues Monopolist Google For Violating Antitrust Laws’ (20 October 2020), available at www.justice.gov/opa/pr/justice-department-suesmonopolist-google-violating-antitrust-laws. 74 Federal Trade Commission, ‘FTC Sues Facebook for Illegal Monopolization’ (9 December 2020), available at www.ftc.gov/news-events/press-releases/2020/12/ftc-sues-facebook-illegal-monopolization. 75 See, Consolidated version of the Treaty on the Functioning of the European Union (TFEU) [2016] OJ C202/1, Arts 107–09; and, for related discussion, RD Anderson and A Heimler, ‘What has Competition Done for Europe? An Inter-Disciplinary Answer’ (2007) 62 Aussenwirtschaft (the Swiss Review of International Economic Relations) 419, available at www.papers.ssrn.com/sol3/papers. cfm?abstract_id=1081563.

212  Robert D Anderson, William E Kovacic and Antonella Salgueiro issues from a competitive neutrality perspective.76 In contrast, support for specific firms may trigger intervention to ensure that it does not give them a competitive advantage over other enterprises.77 The EU state aid regime is anchored by the principles of non-discrimination and transparency and, ordinarily, governments must notify aid and receive clearance in advance. Notwithstanding, amidst the pandemic, the regular application of EU state aid rules has attracted particular attention. Massive amounts of state aid – tax deductions or deferments, and subsidies – may indeed be necessary to ensure the survival of industries and facilitate recovery.78 Considering the experience from the global financial crisis that began in 2008, the European Commission (EC) announced early on its intention to ‘use the full flexibility foreseen under state aid rules to tackle this unprecedented situation’.79 To mitigate major economic shocks to the European economy, the EU is ready to take exceptional measures by allowing support to certain firms, sectors or industries that state aid rules otherwise might prohibit.80 In March 2020, the Commission adopted a Temporary Framework for State Aid measures81 that allows states to grant a variety of state aid that would have been otherwise incompatible with EU rules.82 The Commission has also highlighted the possibilities that Member States have under the EU rules to ensure liquidity and access to financing for undertakings, especially SMEs that face a sudden shortage during the pandemic.83 The Temporary Framework applies only to companies whose distress began after 31 December 2019 and covers only aid granted no later than 31 December 2020. The Commission amended the Temporary Framework in April, May, June and October 2020, expanding its permissible measures and clarifying related issues.84 76 See Jones, Sufrin and Dunne, ‘Mergers’ (2019); also R Whish and D Bailey, Competition Law, 10th edn (OUP, 2015). 77 Jones, Sufrin and Dunne (n 55). Related points are discussed in the OECD publication, ‘OECD competition policy responses to COVID-19’ (2020), available at read.oecd-ilibrary.org/ view/?ref=130_130807-eqxgniyo7u&title=OECD-competition-policy-responses-to-COVID-19&_ ga=2.24723571.816662100.1621972290-1130674937.1604932366. 78 Jenny (n 24). 79 M Vestager, ‘Statement by Executive Vice-President Margrethe Vestager on a draft proposal for a State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak’ (European Commission, Brussels, 17 March 2020), available at www.ec.europa.eu/commission/ presscorner/detail/en/statement_20_479. 80 European Commission, ‘Communication from the Commission to the European Parliament, the European Council, the Council, the European Central Bank, the European Investment Bank and the Eurogroup – Coordinated economic response to the COVID-19 Outbreak’ (COM(2020) 112, Brussels, 13 March 2020), available at ec.europa.eu/info/sites/info/files/communicationcoordinated-economic-response-covid19-march-2020_en.pdf. 81 European Commission’s Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak’ OJ C 91I (20 March 2020) 1–9. 82 See Vestager, ‘Statement on a draft proposal for a State aid Temporary Framework’ (2020). 83 See ibid. 84 For detailed information on the Temporary Framework and its amendments, see ‘State aid rules and coronavirus’ (European Commission, 2020), available at www.ec.europa.eu/competition/state_ aid/what_is_new/covid_19.html.

Competition Policy in Relation to Public Procurement  213 For instance, an amendment added new types of allowable aid and expanded categories originally recognised in the initial Framework. Other amendments set out criteria indicating when Member States can provide recapitalisations and subordinated debt to distressed firms, while protecting a level playing field in the EU. Overall, the Commission aims to cooperate closely with the Member States to fast-track approvals swiftly following clear and complete notification of the intended measures.85 It will be important, in this context, to maintain as much as possible the pro-competitive discipline and transparency imposed by EU state aid rules in normal circumstances. The attention being given to the EU state aid regime in the context of the pandemic comes at a time when such aids are generally receiving increasing attention in the global economy. The need for new global disciplines, perhaps modelled, to an extent, on the EU regime, has been mooted, for example in the context of issues concerning US–China trade.86 The focus on state aid in the context of the pandemic may, in this sense, have the salutary effect of helping to increase awareness of the issue generally.

E.  The Opening of New Channels of Communication with Affected Businesses and Other Stakeholders As a further response to the pandemic, in a number of jurisdictions, competition agencies have opened new channels for dialogue with the business community. For instance, firms can now email requests for informal guidance to dedicated mailboxes of enforcers in the EU, UK, US and Canada.87 The EC adopted a Temporary Framework Communication which, besides setting out the main criteria to assess pandemic-related cooperation arrangements, foresees the possibility of providing companies with ‘comfort letters’, on specific cooperation projects falling within the Framework’s scope.88 Similarly, in the US, businesses can now use an expedited procedure to obtain DOJ Business Review Letters or FTC Staff Advisory Opinions regarding the legality of proposed COVID-19 public health projects.89 The expedited procedure dramatically accelerates the timetable the agencies ordinarily follow for similar instruments when advising firms about proposed commercial arrangements.90

85 European Commission, ‘Communication from the Commission’ (2020). 86 See RD Anderson, WE Kovacic, AC Müller, A Salgueiro and N Sporysheva, ‘Competition Policy and The Global Economy: Current Developments and Issues for Reflection’ (2020) 88 George Washington Law Review 101. 87 De Stefano, ‘Covid-19 and EU Competition Law’ (2020). 88 European Commission, ‘Antitrust rules and coronavirus’ (2020), available at www.ec.europa.eu/ competition/antitrust/coronavirus.html. 89 DOJ, The Justice Department and the Federal Trade Commission (2020). 90 ibid.

214  Robert D Anderson, William E Kovacic and Antonella Salgueiro By opening such channels with firms, enforcers are seeking to provide the legal comfort that suppliers require to solve market failures in the short run, while also maintaining awareness of lines that should not be crossed. These and other COVIDinspired modifications to agency practice represent an opportunity for long-term engagement between authorities and businesses as well as a potential path for the evolution of competition policy and enforcement. The recent experiments may provide agencies with insights relevant to other impending challenges, such as the steady rise of the digital economy,91 the overarching challenge of managing global climate change or future exogenous shocks to the global economy.92

IV.  Long-Run Challenges for Competition Authorities Flowing from the Broader Policy Environment The pandemic and related economic crisis also pose longer-run challenges for competition policy and its role vis-à-vis public procurement. An important set of challenges relates to possible developments in the broader government policy environment with respect to industrial policy and its cousin, international trade policy. As discussed below, these challenges implicate the responsibilities of competition agencies as law enforcement bodies, sources of policy analysis and advice and advocates before other government bodies.

A.  Governments’ Increasing Emphasis on the Role of Industrial Policy The ongoing pandemic and related economic downturn are triggering a renewed focus by governments on the role of industrial policy. This seems very likely to have consequences that spill over into the domain of competition law and policy. For example, in the first phase of the pandemic, government measures such as confinement and border closure disrupted international supply chains, particularly affecting countries which heavily depend on these.93 Unfortunately, in some economies, constituencies keen on protectionist measures may seize the current crisis as a perfect opportunity to gain acceptance for measures – such as offsets, set-asides or price preferences for domestic suppliers – that not only 91 This issue was discussed at the Eighth United Nations Conference on Competition and Consumer Protection held on 19–23 October 2020; see www.unctad.org/meeting/eighth-united-nationsconference-competition-and-consumer-protection; for related information, see ‘Countries focus on protecting consumers amid and after COVID-19’ (15 October 2020), available at www.unctad.org/ news/countries-focus-protecting-consumers-amid-and-after-covid-19; and, for additional commentary, Jenny (n 67). 92 Jenny (n 6). 93 See ch 8 of this volume.

Competition Policy in Relation to Public Procurement  215 affect competition in markets but also impact on international trade and public procurement regimes.94 One example is the Ukraine, which joined the World Trade Organization Agreement on Government Procurement (GPA) in 2016 (see, for related background, chapter 2 of this volume). A Bill currently before Ukraine’s Parliament would establish new local content requirements in government procurement.95 If adopted, this measure could potentially raise issues of consistency with Ukraine’s international commitments.96 In the US, the goal of achieving increased ‘resilience’ through ‘onshoring’ of production increasingly commands bipartisan support. This goal was embraced in the Executive Order on Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States issued by the Trump administration in August 2020. The Order called for the deletion of US commitments regarding the procuring of essential medicines and related products under the GPA and mandates other measures to encourage the production of medicines and personal protective equipment in the US.97 Subsequently, the Trump administration tabled in the WTO Committee on Government Procurement, a formal proposal to withdraw coverage of related products by the US under the GPA. That proposal was, however, withdrawn by the Biden administration early in its tenure.98 The goal of using public procurement policy to leverage domestic manufacturing was, nonetheless, also manifested in the Biden Plan to Ensure the Future Is ‘Made in All of America’ By All of America’s Workers that President Joe Biden released during his 2020 Presidential election campaign.99 Importantly, however, the Biden plan explicitly emphasised that the incoming administration intends to work with US trade partners in implementing related measures.100 Competition authorities need to keep a close eye on any related initiative which carries significant potential to limit competition in relevant product

94 See, generally, the country studies in pt 5 of this volume; see also Jenny (n 6). 95 See, Draft Law on Amendments to the Law of Ukraine ‘On Public Procurement’ to Create Preconditions for Sustainable Development and Modernization of Domestic Industry, available at w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=69275. News item iportal.rada.gov.ua/en/news/ News/207774.html. 96 See, ‘Opinion of the Committee on Integration of Ukraine with the European Union’, available at w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=69275. See also, for related commentary, Committee on Ukraine’s Integration into the European Union, available at comeuroint.rada.gov. ua/en/print/73178.html. 97 Executive Office of the President Donald J Trump ‘Executive Order No 13944 on Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States’ (Washington DC, 6 August 2020), available at www.whitehouse.gov/presidential-actions/executiveorder-ensuring-essential-medicines-medical-countermeasures-critical-inputs-made-united-states. 98 See, J Heilman Grier, ‘Biden Team Pulls Proposed GPA Modification to Remove Medicines’ (Perspectives on Trade, 20 April 2021), available at https://trade.djaghe.com/?p=6962. 99 See ‘The Biden Plan to Ensure the Future Is “Made in All of America” By All of America’s Workers’ (2020), available at www.joebiden.com/made-in-america. 100 See, for astute and dispassionate analysis, J Heilman Grier ‘Biden’s Buy American Plan’ (Perspectives on Trade, 14 July 2020), available at www.trade.djaghe.com/?p=6487.

216  Robert D Anderson, William E Kovacic and Antonella Salgueiro markets. Overall, post-COVID industrial policy should aim to keep markets open, preserve competitive neutrality, and ensure that government interventions and support are transparent, temporary and proportionate to relevant market failures.101 Through their analytical and advocacy functions, competition agencies can be an important voice in making the case for such approaches and for appropriate restraint.

B.  Realising Synergies with International Trade Policy Competition authorities need to be equally mindful of both the harmful impact of national market closing on competition and the benefits of participating in related market opening initiatives.102 The GPA is an important bulwark of open public procurement markets internationally, having much in common with the objectives and modalities of competition policy. Increasingly, it serves as both a distillation of best practices in public procurement internationally and a guide for related reforms.103 As observed by Anderson, Kovacic and Mueller, the GPA promotes competition in at least four distinct ways. First, its national treatment obligations (Art IV(1) and (2)) increase both the number and the diversity of potential competitors for individual procurements, thereby addressing key underlying conditions that are known to facilitate supplier collusion. Second, its transparency provisions ensure that the information necessary to participate in particular procurements and to prepare responsive tenders is not shared only with a procuring entity’s preferred suppliers (see, in particular, Arts VI, VII and IX). This, too, helps broaden the set of potential suppliers, thereby strengthening competition. Third, the Agreement promotes ‘open’ approaches to procurement design and discourages practices such as the ‘wiring’ of technical specifications to favour particular brands or suppliers. Fourth, the GPA requires that all parties to the Agreement put in place national bid protest or remedy systems through which suppliers can challenge questionable contract awards or other decisions by national procurement authorities (see Art XVIII on ‘domestic review procedures’). Such systems enhance

101 OECD, ‘COVID-19: Managing operational challenges and enforcement risks for competition authorities’ (2020), available at www.oecd.org/competition/COVID-19-managing-operational-challengesand-enforcement-risks-for-competition-authorities.pdf. 102 RD Anderson and WE Kovacic, ‘Competition Policy and International Trade Liberalisation: Essential Complements to Ensure Good Performance in Public Procurement Markets’ (2009) 28 Public Procurement Law Review 67. 103 See, for background, RD Anderson and N Sporysheva, ‘The Revised WTO Agreement on Government Procurement: Evolving Global Footprint, Economic Impact and Policy Significance’ (2019) 28 Public Procurement Law Review 71; and more generally, S Arrowsmith and RD Anderson (eds), The WTO Regime on Government Procurement: challenge and reform (CUP/WTO, 2011); and on the GPA and the pandemic ch 3 of this book.

Competition Policy in Relation to Public Procurement  217 supplier confidence that contracts will ultimately be awarded on the basis of product quality and competitive pricing, rather than patronage or cronyism – thereby encouraging participation from a broader range of potential suppliers.104 The GPA, as a plurilateral agreement, besides opening markets in the public procurement sector, also promotes modern and efficient approaches to public procurement. A significant range of the goods and services that are being, or may be procured, by governments in response to the COVID-19 crisis are covered by the GPA’s rules and requirements, subject to relevant flexibilities that are built into the Agreement.105 These commitments and flexibilities illustrate both the Agreement’s usefulness as a tool for maintaining open, transparent and competitive markets and the clear fact that it will not stand in the way of sound measures by governments that are necessary to respond to a health crisis.106 More broadly, the world knows from experience that serious economic downturns are regularly followed by efforts to close national markets to foreign competition. These often have the impact of prolonging the downturn and impeding recovery. This happened in the context of the Great Depression of the 1930s, needlessly deepening and prolonging the impact of the crisis107 and following the Great Recession of 2008–09.108 It must be acknowledged that competition authorities have limited resources and are only one possible voice bearing on such issues. They need to deploy their resources strategically. Still, we believe that their capacity and reputation for objective analysis and advice can be an important bulwark in countering the forces of protectionism which so often impede growth and are intrinsically restrictive of competition.

V.  The Pandemic as a Catalyst for Reform As outlined in this chapter, in the field of competition policy, as in public procurement, the COVID-19 pandemic has occasioned a broad set of measures and adaptations aimed at addressing short-run exigencies and ensuring that existing

104 Derived from RD Anderson, WE Kovacic and AC Müller, ‘Promoting Competition and Deterring Corruption in Public Procurement Markets: Synergies with Trade Liberalisation’ (2017) 26 Public Procurement Law Review 77. 105 The General Exception in Art III 2 of the GPA for measures necessary for the protection of human life and health provides an important ‘safety valve’ ensuring that the GPA parties retain broad residual powers to take the exceptional measures that are necessary in the context of the pandemic. The Agreement also contains more nuanced and tailored provisions that arguably provide all the flexibility that governments need for procurements within a crisis context, while still maintaining desirable transparency and post-procurement accountability. See Anderson and Müller (n 2) and ch 3 of this book. 106 See Anderson and Müller (n 2). 107 See DA Irwin, Trade Policy Disaster: Lessons from the 1930s (MIT Press, 2012). 108 See SJ Evenett, ‘Protectionism, state discrimination, and international business since the onset of the Global Financial Crisis’ (2019) 2 Journal of International Business Policy 9.

218  Robert D Anderson, William E Kovacic and Antonella Salgueiro rules do not stand in the way of emergency responses and recovery. These include: (a) the toleration, at least in some cases, of appropriately limited horizontal cooperation agreements; (b) expedited procedures for the review of mergers, together with increased attention, in some jurisdictions, to the failing firm defence; (c) increased attention, in diverse jurisdictions, to price gouging and other singlefirm abuses; (d) the treatment of state aids to industry in the EU; and (e) the strengthening of communications channels with affected business communities and other stakeholders. Developments in each of these areas can potentially serve as a catalyst for long-term reforms, though it remains to be seen how far this will be the case. In our view, of equal significance are the pressures on existing competition policy frameworks that may result from the evolving government policy environment, notably the expected increased emphasis on the role of industrial policy and the need to seek increased synergies with trade policy as described in section IV. Competition advocates need to keep a clear eye on efforts that are currently under way to limit access to domestic markets by foreign competitors, in the (mistaken, we believe) belief that this will promote resilience. In our view, the world will be better served by approaches that maintain open markets and diversity of supply possibilities.

VI. Conclusion The COVID-19 crisis has served as a major stress test and shone an unflattering light on weaknesses in the status quo for government policy generally. Inadequate mechanisms to coordinate responses across distinct but related policy domains and inadequate systems for communicating swiftly and clearly to consumers and businesses desperately demand further guidance. Concerning competition policy per se, the crisis has also highlighted the need for flexible approaches to the enforcement of existing rules. At the same time, the crisis has, in many respects, shown competition agencies and other public institutions at their best – adaptive, creative, objective and courageous. Competition agencies, in particular, have clearly shown their readiness to be flexible, to implement new communication tools and to strengthen cooperation with procurement and other relevant authorities. When the scourge finally abates, there will be an opportunity for competition and other public authorities to reflect on their recent experience. This process of reflection could have three focal points: to collect lessons to be applied in responding to future crises; to identify innovative operational techniques, adopted as crisis measures, that can serve policy makers in ‘normal’ times; and to identify needed improvements in agencies’ mandates, organisation and staffing. With careful reflection, the policy-making community can retain what is good, fix what is not and do better in the future in both good and bad times.

8 The Trade and Government Procurement Policy Nexus: Before and After the COVID-19 Pandemic SIMON J EVENETT*

I. Introduction Since being declared a pandemic by the World Health Organization (WHO) on 11 March 2020, COVID-19 has spread to every continent. There has been an attendant surge in demand for medical goods, medical equipment and medicines. That public sector organisations are responsible for sourcing these essential items implicates government procurement policy. That patterns of international specialisation imply that sourcing can come from abroad implicates trade policy. The COVID-19 pandemic amounts to nothing less than a major stress test for the extant trade and government policy nexus. How well did current institutional arrangements and practices fare? If the statements of senior policymakers in the major trading powers are to be believed, the curt answer is: not well at all. Should policymakers’ words translate into deeds then there could be implications for national procurement policies, for the conduct of unilateral trade policy, and for the negotiation and possible renegotiation of relevant provisions in regional trade agreements and for the plurilateral Agreement on Government Procurement (GPA) at the World Trade Organization (WTO). Now over a year into the pandemic, the purpose of this chapter is to reflect on the implications of this stress test for the trade and government procurement nexus. Drawing on data collected on government policy response and on the

* The author thanks Professor Sue Arrowsmith and Robert Anderson for comments on an earlier version of this chapter.

220  Simon J Evenett recent analyses of others, this chapter will ask whether current arrangements and practices are fit for purpose. If not, why not? Do any deficiencies reflect lacunae, blind spots, or implicit assumptions that turned out to be false? Do any failings reflect the fact that the extant nexus was not designed to cope with pandemics in the first place? It is not claimed that these observations are the final word – after all, at the time of writing (May 2021) the pandemic is far from over. Several thoroughly tested vaccines have been approved but global distribution of vaccines remains patchy. This chapter proceeds as follows. Section II describes the organising logic of the trade and procurement policy nexus before the pandemic hit. As will become evident, this logic had three important consequences which were to come to light once the pandemic resulted in a surge in demand for medical kit. Section III describes the initial trade policy responses as governments scrambled to source medical kit and the consequences for the international supply chains implicated. The backlash against those supply chains that followed and its consequences for the trade and government procurement nexus is discussed in section IV. Section V draws out three root causes that must be faced if a more effective trade and ­government procurement nexus is to be designed.

II.  The Trade and Procurement Policy Nexus before the Pandemic This section describes the organising logic and consequences of the inter-­ relationship between trade and government procurement policies before the COVID-19 pandemic. Although it refers to a nexus this does not mean to imply that there is a global accord or understanding concerning the relationship between these two policies. Nor it is implied that the better practices that follow have been implemented everywhere. Rather, the goal is to describe how this nexus was intended to work and then to highlight three facets of that nexus that were ultimately cast in a poor light as the pandemic unfolded. The starting point is the assumption, as discussed in chapter 2, that value for money in public procurement is best achieved through competitive tendering processes. For those goods and services where cross-border supply is technically feasible, suppliers based abroad are a potentially valuable source of competition. It follows that public purchasing policies and practices should be adopted that encourage bids from suitably qualified foreign firms. In turn this has implications for the transparency of public procurement procedures (including the publication of tender announcements in international languages, such as English) and for due process rights of bidders, as again was discussed in chapter 2. It also implies

The Trade and Government Procurement Policy Nexus  221 eschewing price preferences, bans on sourcing from any group of technically qualified bidders, and other forms of discrimination.1 Trade policy can be aligned with this logic as well. Governments can commit not to charge import tariffs on goods sold to public bodies. They could also refuse to undertake anti-dumping and countervailing duty investigations against foreign bidders for state contracts. Regional trade agreements can be signed that reduce or eliminate discrimination against foreign bidders, locking in what trade diplomats refer to as ‘market access’ to public procurement systems.2 The range of public bodies covered by those market access ‘disciplines’ can be negotiated as well. On this logic, greater coverage of public bodies in trade accords is better. Similar initiatives have been undertaken by the members of the plurilateral GPA.3 At this point in the argument three considerations that are implicit in, or that arise from, the organising logic described immediately above should be emphasised. The first observation is that it is only the public sector practices of the importing jurisdiction that mattered. When sourcing occurs from abroad no consideration was given in the argument above to the government policies of the nations where firms export from. To the extent that international trade agreements included provisions on government procurement, the ‘problem’ being tackled was the behaviour of the importing nation’s government, not the policies of exporting nations. The second observation is that, according to this organising logic, one advantage of sourcing from abroad is that it is risk-reducing. Cross-border sourcing 1 The international dimension to public procurement processes is handily described and assessed in the contributions to A Georgopoulous, B Hoekman and P Mavroidis (eds), The Internationalization of Government Procurement Regulation (OUP, 2018). A factual overview of the size of national public procurement markets and the means that governments deploy to favour locally based firms can be found in J Goudron and J Messent, ‘How Government Procurement Measures Can Affect Trade’ (2019) 53 Journal of World Trade 679. 2 For an overview of government procurement provisions in regional trade agreements see R Anderson, A Müller, K Osei-Lah, J de Leon and P Pelletier, ‘Government procurement provisions in regional trade agreements: a stepping stone to GPA Accession?’ in S Arrowsmith and R Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (CUP, 2011). For a finding that after competition policy provisions, among other behind-the-border policies it is the government procurement provisions of regional trade agreements that have the largest positive effect on the level of bilateral trade, see K Hayakawa, F Kimura and K Nabeshima, ‘Nonconventional Provisions in Regional Trade Agreements: Do They Enhance International Trade?’ (2014) 17 Journal of Applied Economics 113. 3 For a timely account of the flexibilities available to members of the GPA, a subject also discussed in ch 3 of the present volume, see R Anderson and A Müller, ‘Keeping Markets Open While ensuring Due Flexibility for Governments in a Time of Economic and Public Health Crisis: The Role of the WTO Agreement on Government Procurement (GPA)’ (2020) 29 Public Procurement Law Review 189. For assessments of the working of the GPA before the pandemic see R Anderson and N Sporysheva, ‘The Revised WTO Agreement on Government Procurement: Evolving Global Footprint, Economic Impact and Policy Significance’ (2019) 28 Public Procurement Law Review 71; B Hoekman, ‘Reducing Home Bias in Public Procurement: Trade Agreements and Good Governance’ (2018) 24 Global Governance 249; and B Taş, K Dawar, P Holmes and S Togan, ‘Does the WTO Government Procurement Agreement Deliver What It Promises?’ (2018) 18 World Trade Review 609.

222  Simon J Evenett is seen as particularly valuable if there is a sharp, unexpected reduction in the capacity of domestic or locally based firms to supply goods to public bodies. From the perspective of any one government, the option to source from abroad was seen as a plus. The consequences of other governments having the same option was either overlooked or known but regarded as unimportant. The third observation is that, to the extent that the emphasis on value for money results in intense price-based competition bidding, firms have strong incentives to keep costs as low as possible. Private sector firms designed and executed supply chains based on so-called ‘just-in-time’ principles in response to these incentives. Those supply chains typically involve constituent firms holding few inventories of parts, components, and final produced goods as well as maintaining as little redundant production capacity as possible. The goal here is not to denounce this organising logic – the author has based policy recommendations on this logic many times in the past and is yet to be persuaded by an alternative logic.4 Instead, as is argued in the next section, the pandemic has rudely called into question the validity of the three observations outlined immediately above.

III.  The Trade Policy Response to the Pandemic In many nations, governments are directly responsible for the supply of public health services. In those nations where private sector provision of healthcare is the norm, the state is still seen as having overall responsibility for public health. In both cases, the rapid spread of a coronavirus through populations with the resulting increased demands on national health systems rapidly became a first-order public policy matter. In turn this puts pressure on state bodies to source medical kit. In the case of COVID-19, as argued by the Director-General of the WHO as early as March 2020, ‘We can’t stop COVID-19 without protecting health workers’.5 This imperative is in addition to taking steps to curb the spread of COVID-19 among the population. Both implied a surge in demand for personal protective equipment (PPE) as well as for the medical goods and equipment needed to treat persons hospitalised with COVID-19. PPE, medical goods, and medical equipment differ in the complexity of the associated manufacturing processes. Some items, such as medical ventilators, are produced in elaborate supply chains spanning multiple countries. What all this 4 G Deltas and S Evenett, ‘Quantitative Estimates of the Effects of Preference Policies.’ In B Hoekman and P Mavroidis (eds), Law and Policy in Public Purchasing: The WTO Agreement on Government Procurement (University of Michigan Press, 1997) and S Evenett and B Hoekman, ‘Government procurement: market access, transparency, and multilateral trade rules’ (2005) 21 European Journal of Political Economy 163. 5 World Health Organization (WHO) ‘Shortage of personal protective equipment endangering health workers worldwide’, 3 March 2020.

The Trade and Government Procurement Policy Nexus  223 medical equipment had in common is that it could be potentially sourced from abroad. Faced with a huge surge in demand for medical kit, governments sought to expand domestic production.6 Once convinced that this would not suffice, two further steps were taken by some governments that harmed trading partners. The first was to engage in bidding wars for what medical kit was available on international markets. This may have resulted in governments realising that what domestic production was available could be ‘lost’ abroad and, as a result, limits on exports were put in place. As documented in the joint European University Institute, Global Trade Alert, and World Bank trade policy monitoring initiative on essential goods,7 governments resorted to various policy interventions that directly or indirectly limited exports of medical goods and medicines, namely: outright export bans; export control policies, including export authorisation policies; export quotas; nonautomatic export licensing requirements; state requisition policies that de facto frustrate exports; state exhortation to local producers not to export; and requirements that local producers reserve a minimum percentage or amount of their production for the local market. China8 and France9 requisitioned certain medical goods produced within their borders. Other countries, such as Indonesia, began with ministers imploring local firms not to export face masks, etc and then followed up with a formal export ban.10 As Figure 8.1 shows, the total number of new export controls in force peaked at 145 in April 2020. Moreover, from January 2020 to April 2021 some 81 customs territories imposed a total of 248 export controls on medicines and medical goods. By and large, the export bans proliferated from the Far East westwards as COVID-19 spread. What is also telling is that the governments of some G20 members – Australia, Canada, and Japan – did not impose formal restrictions on producers within their borders from shipping to buyers abroad. Therefore, imposition of such restrictions was a deliberate public policy choice. There was nothing inevitable about the imposition of these export controls. 6 See, for example, ch 15 (United Kingdom). 7 See further: www.globaltradealert.org/reports/54. In the interests of transparency, note that the current author was involved in the design and implementation of this joint initiative. The International Trade Centre (ITC), the World Customs Organization (WCO), and World Trade Organization (WTO) also monitored government resort to trade restrictions and trade reforms since the onset of the pandemic. The joint initiative’s findings were chosen because, in so far as the essential goods sectors of food, medical goods, medical equipment, and medicines are concerned, its coverage is by the largest. 8 For details of the relevant State Council decision see www.nhc.gov.cn/xcs/s3574/202002/ d8f0567e45c5488bb9ecf23312038bf2.shtml. 9 For details see The French Government Gazette, Decree n 2020-190 of 3 March 2020, published on 4 March 2020, available at www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000041679951& categorieLien=id and The French Government Gazette, Decree n 2020-147 of 13 March 2020, published on 14 March 2020, available at www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000041721 820&categorieLien=id. 10 See the statements by an Indonesian government minister reported at www.thejakartapost.com/ news/2020/03/05/dont-export-masks-minister-pleads-amid-coronavirus-panic-buying.html.

224  Simon J Evenett Figure 8.1  Imposition and phase-out of trade policy in the medical goods and medicines sectors, January 2020 to April 2021

Moreover, existing multilateral trade disciplines did not preclude the resort to such controls.11 For that matter, few regional trade agreements contain provisions curbing the use of export controls either. Consequently, no government was at risk of losing a WTO dispute settlement proceeding on account of their decisions to restrict exports of medical goods, medical equipment and medicines. Even if the WTO’s Appellate Body was still functioning, arguably by the time any case was fully litigated the medical emergency could be over. The consequences of these export restrictions for firms operating cross-border supply chains to manufacture medical goods and equipment soon became apparent.12 A chorus of criticism from leading international business associations and senior corporate executives followed. It was far from evident that senior officials acted with much understanding of how cross-border supply chains work, the consequences of their export controls, and the potential for retaliation by other governments. However, it would be inaccurate to recount only the disruption to pre-pandemic cross-border sourcing patterns. As Figure 8.1 makes clear, in the early months of 11 J Pauwelyn, ‘Export restrictions in times of pandemic: Options and limits under international trade agreements’ in R Baldwin and S Evenett (eds), COVID-19 and Trade Policy: Why Turning Inward Won’t Work (CEPR Press, 2020). 12 See the cases studies presented in M Forini, B Hoekman and A Yildirim, ‘COVID-19: Expanding access to essential supplies in a value chain world’ in R Baldwin and S Evenett (eds), COVID-19 and Trade Policy: Why Turning Inward Won’t Work (CEPR Press, 2020).

The Trade and Government Procurement Policy Nexus  225 the pandemic just under 200 reforms that eased the importation of medical goods and medicines had been implemented. Measures to facilitate trade were taken as well. Taxing the importation of soap makes little sense when populations are being urged to wash their hands frequently. Using the most fine-grained international trade data available globally for 2019 (the latest year for which the United Nations COMTRADE database is currently available), it has been calculated13 that these trade reforms covered US $165.2 billion of trade in medical goods and medicines. In contrast, the export controls mentioned earlier implicated $134.6 billion of cross-border commerce.14 Another important consideration is that many governments announced that their trade measures relating to medical goods and medicines would be temporary. If this were the case and the measures were very short-lived, then some might be tempted to conclude that these were exceptional circumstances with little or no longer-term implications for the design and execution of national public procurement regimes and for international trade agreements. Unfortunately, on the basis of the information currently available, no such sanguine conclusion is merited. Figure 8.1 plots the number of export controls and import reforms in this sector that have been in force each month since the beginning of the calendar year 2020. It also plots, based on announced revocation dates, the number of trade measures that are expected to be in force from each month through to the end of 2021. On currently available information around 46 per cent of the export curbs imposed since the start of the pandemic will not have been removed by the end of 2021. Meanwhile, approximately 53 per cent of the import reforms implemented to date are expected to remain in force during 2021. Therefore, a permanent change in the policy towards cross-border flows of medical goods and medicines cannot be ruled out. This may lead some to rethink the desirable trade and government procurement nexus in at least these sectors. There are good reasons to believe that other public policies implicating the cross-border supply of medical goods and medicines are in the works, and these will now be considered.

IV.  Emergent Policy Trends Affecting the Trade and Government Procurement Nexus As the author has documented at length elsewhere, if their public statements are anything to go by, senior policymakers in many major trading powers have 13 S Evenett, M Fiorini, J Fritz, B Hoekman, P Lukaszuk, N Rocha, M Ruta, F Santi and A Shingal, ‘Trade Policy Responses to the COVID-19 pandemic crisis: Evidence from a New Dataset’ (2020) EUI Working Paper RSCAS 2020/78. 14 Readers are cautioned that, to the extent the pattern of cross-border demand for medical goods and medicines differed in 2020 from 2019, then these estimates (based on observed 2019 trade flows) may be misleading. These statistics are reported here because they follow an accepted methodology for trade coverage calculations and they represent the best information currently available.

226  Simon J Evenett concluded that cross-border supply chains failed during the early phase of the pandemic.15 Criticism has even come from policymakers whose governments did not disrupt supply chains with export restrictions on medical goods and medicines, such as Japan. For example, then prime minister, Shinzo Abe, is reported announcing the following shift in Japanese government policy: [F]or those products with high added value and for which we are highly dependent on a single country, we intend to relocate the production bases to Japan. Regarding products that do not fall into this category, we aim to avoid relying on a single country and diversify production bases across a number of countries, including those of the Association of Southeast Asian Nations [Asean].16

Earlier, on 7 April 2020, as part of a stimulus package, the Japanese Government announced the creation of a ¥220 billion (approximately US $2 billion) fund to entice firms to move factories out of China.17 Subsequently, in July 2020 Japan revealed that 87 firms had successfully applied for US $653 million of financial support to do so. Another 30 companies will receive financial support to shift production to the ASEAN region. In October 2020, the Japanese Government announced that 146 more firms would receive subsidies to repatriate production from China.18 Two charges have been made by these critics of cross-border supply chains.19 The first is that before the pandemic, sourcing of medical goods and medicines had become too dependent on China. That dependence, it can be argued, was exposed when China cut off exports of key medical kit during the first quarter of 2020. The second is that the dependence on China gives the Government in Beijing too much potential leverage during times of crisis by threatening to cut off or limit supplies of much needed medicines and medical goods. The author’s statement of these objections in no way constitutes an endorsement.20 The policy recommendation that follows from this critical assessment by certain high-profile officials is to reconfigure cross-border supply chains. At a minimum this would involve encouraging greater diversification in sourcing patterns and could involve outright supply chain repatriation. Commercial policy

15 S Evenett, ‘Chinese Whispers: COVID-19, Global Supply Chains in Essential Goods, and Public Policy’ (2020) 3 Journal of International Business Policy 408. 16 Prime Minister Abe was quoted making these remarks in D Arase, ‘The coronavirus has complicated China-Japan relations. How will this benefit Asean?’ South China Morning Post (12 August 2020), available at www.scmp.com/week-asia/opinion/article/3096911/coronavirus-has-complicatedchina-japan-relations-how-will. 17 For more details about this Japanese initiative, see www.globaltradealert.org/intervention/79328. 18 For the list of beneficiary companies and other information, see www.meti.go.jp/english/ press/2020/pdf/1120_001a.pdf. 19 For a detailed account see Evenett, ‘Chinese Whispers’ (2020). 20 To the contrary, the wide body of evidence previously marshalled by the author shows that the performance of cross-border supply chains has been traduced. See Evenett (n 15).

The Trade and Government Procurement Policy Nexus  227 and government procurement policy could be implicated if policymakers follow through on this rethink of the merits of cross-border supply chains. To date, four types of policy initiative have been undertaken, each of which implicates the trade and government procurement policy nexus. The first is to award subsidies to firms to shift production out of China. Mention has already been made of Japan’s initiatives in this regard. Media reports suggest that Korea21 and Taiwan22 have also attempted to lure firms to repatriate production, albeit with mixed success. The second type of policy intervention witnessed to date is to offer state largesse to locally based firms to expand production capacity at home. As the author has previously documented,23 the Governments of Brazil,24 Canada,25 India,26 Italy,27 Japan,28 Korea,29 Russia,30 and the US31 have provided state aid to producers of medical supplies and medicines in the first eight months of 2020. If sustained, this could amount to a new phase of import substitution, but with the twist that instead of discouraging imports by imposing tariffs, governments pay firms to displace imports with local production. The third and fourth types of policy intervention directly implicate public procurement policies. 21 More information about the success of Korea’s initiatives in this regard can be found in ‘South Korea struggles to lure factories home from China’ The Financial Times (8 September 2020), available at www.ft.com/content/9e6fe3e3-7121-4f35-80d5-013bdda3bf3dwww.ft.com/content/9e6fe3e37121-4f35-80d5-013bdda3bf3d. 22 For some information about the Taiwanese scheme to shift production of semiconductor chips amongst other products, see D Woo, ‘Taiwan Dangles $335 Million to Woo Foreign Chipmakers’ Bloomberg (3 June 2020), available at www.bloomberg.com/news/articles/2020-06-03/ taiwan-is-said-to-dangle-335-million-to-woo-foreign-chipmakers. 23 Evenett (n 15). 24 For more details see www.globaltradealert.org/intervention/79270. 25 See the following ‘investments’ by Canada’s Strategic Innovation Fund: www.canada.ca/en/ innovation-science-economic-development/news/2020/08/government-of-canada-announces-majorsteps-in-treating-and-preventing-covid-19-through-vaccines-and-therapies.html, and www.canada.ca/ en/innovation-science-economic-development/news/2020/05/minister-bains-announces-investmentin-antibody-discovery-technology-to-help-treat-covid-19.html. Although framed in terms of supporting companies working on medical research, the official announcements also refer to investments in manufacturing capacity. 26 For more details see www.globaltradealert.org/intervention/78924, www.globaltradealert.org/ intervention/79006, www.globaltradealert.org/intervention/78923, and www.globaltradealert.org/ intervention/79005. 27 For more details see www.globaltradealert.org/intervention/79764 and www.globaltradealert.org/ intervention/79762. 28 For more details see www.globaltradealert.org/intervention/79598. 29 Consistent news reports indicate that in May 2020 the Korean Government set aside 1.2 trillion won (approximately US $980 million) to develop that nation’s medical equipment sector; see https:// en.yna.co.kr/view/AEN20200513001100320. 30 For more details see www.globaltradealert.org/intervention/79860. 31 See www.defense.gov/Explore/News/Article/Article/2319332/acquisition-enterprise-capabilitiesto-continue-post-pandemic as well as the creation of a Strategic Active Pharmaceutical Ingredients Reserve. Information about the latter can be found at www.globaltradealert.org/intervention/79588.

228  Simon J Evenett As for the third, under the European Union’s Civil Protection Mechanism, in March 2020 the European Commission announced the creation of a joint stockpile which: [E]nables the swift delivery of medical equipment such as ventilators, personal protective equipment, vaccines and therapeutics and laboratory supplies. The stockpile, currently hosted by 6 EU Member States (Denmark, Germany, Greece, Hungary, Romania and Sweden), allows the EU to react to health crises more quickly.32

Public sourcing decisions for this stockpile fall under the EU’s Joint Procurement Agreement, the governing legislation for which was last updated in 2013.33 This initiative is discussed in detail by Georgopoulos in chapter 6. The fourth class of policy initiative relates to the implementation of existing public procurement law. As part of an Executive Order on Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States, issued on 6 August 2020, President Trump issued the following instruction: I am therefore directing each executive department and agency involved in the procurement of Essential Medicines, Medical Countermeasures, and Critical Inputs (agency) to consider a variety of actions to increase their domestic procurement of Essential Medicines, Medical Countermeasures, and Critical Inputs, and to identify vulnerabilities in our Nation’s supply chains for these products. Under this order, agencies will have the necessary flexibility to increase their domestic procurement in appropriate and responsible ways, while protecting our Nation’s service members, veterans, and their families from increases in drug prices and without interfering with our Nation’s ability to respond to the spread of COVID-19.34

While this indicates the likely direction of change of US public procurement policy, in fact the Russian Federation35 and Saudi Arabia36 have already implemented measures that direct government spending towards locally produced medicines and medical goods. Each of these four types of policy intervention represents a departure from the organising logic of the pre-pandemic trade and government procurement nexus described earlier. Clearly, the fourth type of intervention, which involves discriminating in favour of local bidders or outright reservation of public contracts for local firms, goes sharply against the logic of eliciting bids from abroad. Building a stockpile need not involve discrimination, although it could. Repatriating production or subsidy-induced import substitution need not deny foreign firms the right to bid, but the associated payment of state largesse will likely put foreign bidders at a disadvantage. 32 Quoted from ec.europa.eu/echo/what/civil-protection/resceu_en. 33 Decision No 1082/2013/EU, the legal text of which is available at ec.europa.eu/health/sites/health/ files/preparedness_response/docs/decision_serious_crossborder_threats_22102013_en.pdf. 34 www.whitehouse.gov/presidential-actions/executive-order-ensuring-essential-medicines-medicalcountermeasures-critical-inputs-made-united-states. 35 See www.globaltradealert.org/intervention/79582 and www.globaltradealert.org/intervention/ 79590. 36 www.globaltradealert.org/intervention/80980.

The Trade and Government Procurement Policy Nexus  229 Of course, it could be argued that these developments only apply in the medical goods and medicines sectors and, therefore, that the core of the prepandemic trade and government procurement nexus will prevail. However, there are two counterarguments. First, to the extent that commercial and public procurement policies are recast towards ‘essential goods’, then the range of goods deemed essential may expand over time. Indeed, locally based firms seeking favouritism from the state have an incentive to argue that their sector is ‘essential’, and will no doubt use any emergency or crisis that arises to advance their case. Second, to the extent that these four policy initiatives are seen as integral parts of a wave of new industrial policies or are caught up in intensified geopolitical rivalry, then officials responsible for implementing national procurement policies may have a seat at the relevant decision-making table, but they are unlikely to have the greatest clout. Under these circumstances procurement policy could become the tail which is waved by the dog of industrial policy or geopolitical strategy.37 In short, there is no guarantee that the four departures from the logic of a level playing field identified above must be confined to medical goods and medicines.

V.  Concluding Remarks: What is Really Going on Here? This chapter has argued that the onset of the COVID-19 pandemic has revealed gaps in both our thinking about the extant trade and government procurement nexus and in design of the international trade agreements. The latter were designed to circumscribe the behaviour of the governments of importing nations, not to limit the power of exporting governments to disrupt cross-border supply. Arguably, this approach overlooked some risks that could be created by crossborder sourcing, especially when many governments simultaneously scramble to purchase much-needed goods and national firms are willing to drop local buyers in favour of foreign customers with deeper pockets. Moreover, as a result of pressures to keep costs down and possibly to satisfy shareholders by returning capital, companies operating supply chains retained little spare production capacity. Consequently, such firms were unable to ramp up production quickly enough to meet societal needs, resulting in government officials who knew little about how production was organised within and across borders taking reflexive and often draconian measures. To chart a better way forward, it is worth reflecting on the following question: what is really going on here? At the core of the matter are three factors: (1) the simultaneous surge in demand for medical goods and medicines in many nations; 37 This argument should not be overplayed as in many nations public procurement law and policy has had to accommodate, for better or for worse, other societal imperatives. At a minimum, the domain where the logic of open international competitive bidding pursuing value for money objectives in public procurement policy will narrow.

230  Simon J Evenett (2) a lack of compelling information about the sources of supply; and (3) the availability of tools for governments to disrupt cross-border sourcing and supply chains. Each factor is discussed in turn below, although it is important to remember that these three elements interact with one another. With respect to the first factor, in any redesign of the trade and government procurement nexus the fact that demand can surge simultaneously in many nations for some ‘essential’ item needs to be given serious consideration. The argument that trade is a valuable safety valve when an individual nation faces a localised surge in demand or an idiosyncratic fall in local supply assumes that there are foreign suppliers that can ramp up production to meet the nation in question’s needs. When demand increases in many countries simultaneously and firms are operating with little unused production capacity, the situation is very different. Indeed, this is a recipe for governments indulging in bidding wars scooping up supply where it is available. In such bidding wars those governments with deeper pockets are likely to prevail, an outcome that could have serious adverse consequences for nations with lower incomes. Here open borders can be seen as a vulnerability, increasing the risk that there is little local supply available to meet surging local demand. This is a difficult problem to which, at present, there are few appealing solutions. Some argue that governments should create stockpiles of ‘essential goods’. In addition to being costly, governments would have to forecast needs accurately, not just the types of goods to stockpile, but the amounts as well. There is a serious risk here of making mistakes akin to generals fighting the last war – the last pandemic or other emergency defines the list of goods stockpiled, whereas the next emergency is of a different nature. Another response is to provide firms with incentives to maintain more spare capacity, but this raises the question of which firms to support and how much spare capacity. In addition, there is surely a risk that such incentives are misused to gain competitive advantage over foreign rivals. In sum, there may be solutions to the problem of ensuring sufficient supply during simultaneous demand surges but, unless carefully designed, they may erode rather than reinforce the principle of open, international competition on the merits. With respect to the second factor, a paradox arises. For decades, analysts have advocated transparent government procurement systems that encourage vigorous competition from bidders in pursuit of value for money objectives. Transparency was seen an important part of this package, including because it elicits a greater number of bids for state contracts. Surely the initial phase of the COVID-19 pandemic has shown that, when facing dire circumstances the lack of transparency about the private sector’s capacity to supply essential medical goods, medical equipment and medicines – in particular, about those firms operating cross-border supply chains – led some

The Trade and Government Procurement Policy Nexus  231 governments to (implicitly or explicitly) renounce key tenets of the pre-existing trade and government procurement policy nexus. We have learnt, therefore, that support for that nexus was conditioned in part on a form of transparency little discussed in trade policy circles and government procurement circles, namely, the transparency of the private sector. Following this diagnosis, what is the next best move? If correct, the logic outlined above would point to a two-part response. First, supporters of open internationally competitive procurement systems would do well to encourage leading private sector firms and business associations to demonstrate any capacity to respond to demand surges. Such confidence building measures might discourage policymakers from disrupting supply chains with export restrictions (the third factor mentioned above). Second, a package of policies must be identified that enables the private sector to scale up production quickly to meet simultaneous surges in national demand for essential goods without opening the back door to crude industrial policy objectives and a modern variant of import substitution. Ideally, international guidelines should be developed and governments encouraged to follow them so that any state largesse does not become a source of commercial policy tension with trading partners.

232

9 The Rise of Resilience in Addressing COVID-19 Procurement Challenges and the Impact of International Trade-related Instruments on Countries’ Freedom of Action PETER TREPTE

I. Introduction The chaos apparent in procurement markets following COVID-19 has thrown into sharp relief the vulnerabilities of countries reliant on international supply chains during emergencies. The level of any stocks maintained for emergencies is predicated on the understanding that additional product will become available at relatively short notice from international markets.1 Faced with unprecedented demand for personal protective equipment (PPE) (and other supplies2), most countries experienced massive shortages and were unable to source from those international markets. Not only did demand arise more or less simultaneously with

1 In the UK, for example, realisation that the existing stockpiles of PPE would soon run out arose as soon as the end of March 2020: see the National Audit Office (NAO), Report on ‘The supply of personal protective equipment (PPE) during the COVID-19 pandemic’ (20 November 2020) 9, available at www. nao.org.uk/wp-content/uploads/2020/11/The-supply-of-personal-protective-equipment-PPE-duringthe-COVID-19-pandemic.pdf. The US’s national strategic stockpile of PPE was similarly depleted by March 2020: see the Government Accountability Office’s (GAO) report to Congress in respect of the Defense Production Act of November 2020, 1, available at www.gao.gov/products/GAO-21-108. 2 This chapter focuses on PPE which, as the initial urgent requirement, has been the subject of most information, commentary and reporting. There is no doubt, as explained in the NAO and GAO Reports referred to in n 1, that similar considerations apply to numerous types of medical supplies and medicines and this has already become apparent at the time of writing: see, eg, the EU’s imposition of export transparency and authorisation requirements on vaccines: EU, Commission Implementing Regulation (EU) 2021/111 making the exportation of certain products subject to the production of an export authorisation (29 January 2021), available at eur-lex.europa.eu/legal-content/EN/TXT/?uri= CELEX%3A32021R0111.

234  Peter Trepte more purchasers pursuing the same sources of supply, but those same sources were actually shrinking. China, the world’s leading PPE manufacturer,3 fell victim to the pandemic, causing its workers to become subject to confinement measures and its ability (had that been its intention) to supply growing international demand was consequently limited. In these circumstances, it became not so much a question of sourcing product at the best price, but of identifying any product at all. The immediate procurement response, as the country chapters show, was to rely on emergency provisions in national laws to increase speed and flexibility of procurement but, given the inability of markets to respond, that approach alone was not sufficient. Countries soon began adopting other measures aimed not at improving their ability to access international markets, but at protecting what domestic supply base existed through restricting exports, favouring procurement from national suppliers, and strengthening the national supply base.4 Membership of international trading agreements such as the EU and World Trade Organization (WTO) may well constrain countries’ freedom of action, however. As discussed further in chapter 3, deviating from open and non-discriminatory tendering will require justification as will hindering access to public markets through other potential measures identified above. This chapter investigates the extent to which countries seeking to impose measures designed to shore up national ‘resilience’ are free to do so given their membership of international trade and procurement systems. It will focus on the WTO, including the Agreement on Government Procurement (GPA), as the prime international system and on the EU as a regional system. Many other systems will reflect similar considerations.5 It does not cover subsidies and state aid, although these are clearly relevant.

II.  Export Controls International trade instruments are primarily designed to combat restrictions on imports6 and not with national measures which prevent their own bidders from seeking to supply markets abroad, eg the various temporary export bans or restrictions, product requisitions and imposition of export authorisations or licensing on a range of medical supplies put in place by some 100 countries.7 The procurement impact is to limit supply of restricted products on international markets and deprive countries of potential foreign suppliers and choice (in terms of quality and price). 3 See, for example, NAO, ‘The supply of personal protective equipment’ (2020) 5. 4 Ch 8 of this volume. 5 For example, MERCOSUR in Latin America, UEMOA or COMESA in Africa as well as the various trade agreements between the EU and other countries or regions, eg with Canada or with SADC. 6 J Pauwelyn, ‘Export Restrictions in Times of Pandemic: Options and Limits Under International Trade Agreements’ (2020) 54 Journal of World Trade, 727, 727–28. 7 See, for example, the list of measures affecting trade compiled by the WTO, ‘COVID-19: Measures affecting trade in goods’, available at www.wto.org/english/tratop_e/covid19_e/trade_related_goods_ measure_e.htm.

The Rise of Resilience in Addressing COVID-19 Procurement Challenges  235 Even if the procurement-specific instruments do not address export restrictions, their overarching Treaties or agreements, do so explicitly.

A.  Treaty on the Functioning of the European Union Article  35 of the Treaty on the Functioning of the European Union (TFEU)8 prohibits quantitative restrictions on exports and all measures having equivalent effect between Member States.9 This covers measures: prohibiting exports to ensure domestic supply in the event of shortages;10 to obtain an export authorisation;11 and is likely to cover most of the measures identified above. If these are not quantitative restrictions but measures having equivalent effect,12 it would be necessary to consider their effect on trade between Member States. Unlike import restrictions under TFEU, Art 34 which applies to measures capable of ‘hindering’ trade, however indirectly,13 and thus not necessarily discriminatory, the Art  35 case law suggests that export measures are caught only when they are discriminatory, when they have the object or effect of restricting patterns of export trade ‘at the expense of the production or of the trade of other member states’ (Groenveld).14 In Groenveld itself, the measure in question did not draw a distinction between goods intended for the national market or for export and was thus not unlawful. Even where export measures fall within the Art 35 prohibition, they may nonetheless (as with Art 34) be justified under TFEU, Art 36, discussed under section III.A, below. Export measures affecting non-Member States15 fall under the Union’s exclusive competence on its common commercial policy,16 articulated by way 8 Treaty on the functioning of the European Union (the current iteration of the original Treaty of Rome), one of the core treaties (eur-lex.europa.eu/collection/eu-law/treaties/treaties-force.html), which ‘organises the functioning of the Union and determines the areas of, delimitation of, and arrangements for exercising its competences’ (TFEU, Art 1). 9 Export measures affecting third countries fall within the competence of the European institutions as part of the Common Commercial Policy (CCP) under TFEU, Art 207; see below. 10 Judgment of the Court of 16 March 1977, Commission v France, Case 68–76, EU:C:1977:48. 11 Judgment of 23 May 1996, The Queen v Ministry of Agriculture, Fisheries and Food, ex parte: Hedley Lomas (Ireland) Ltd, Case C-5/94, EU:C:1996:205. 12 Which are broadly defined: see case 68-76 (n 10) [16]: ‘the imposition of any special export formality constitutes an obstacle to trade by the delay which it involves and the dissuasive effect that it has upon exporters’. This is the case, even if the measures are merely a formality: Judgment of the Court of 15 December 1971, Joined cases 51 to 54–71, International Fruit Company NV and others v Produktschap voor groenten en fruit EU:C:1971:128. 13 Judgment of the Court of 11 July 1974, Procureur du Roi v Benoît and Gustave Dassonville, Case 8–74, EU:C:1974:82. See section III.A below. 14 Judgment of 8 November 1979, P.B. Groenveld BV v Produktschap voor Vee en Vlees, Case 15/79, EU:C:1979:253. 15 Until the end of the transition period, the UK remains a Member State of the EU. EU, ‘Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community’ (OJ 2019 C384I/1, 12 November 2019) Art  127(3), available at eur-lex.europa.eu/legal-content/EN/TXT/?qid=1580206007232&uri=CELEX %3A12019W/TXT%2802%29. 16 See n 9.

236  Peter Trepte of Regulation.17 Whilst exports to third countries must remain unrestricted, Regulation 2015/47918 permits exceptions under its provisions to, inter alia, ‘prevent a critical situation from arising owing to a shortage of essential products, or to remedy such a situation’19 and is without prejudice to Member States’ rights to adopt quantitative restrictions on exports on grounds of, inter alia, protection of health and life.20 In its response to the pandemic, the European Commission adopted temporary implementing Regulations making the exportation of certain PPE products subject to export authorisation,21 implemented by Member States. In addition, several Member States22 introduced further export bans, notification requirements for exports and power to requisition goods. These, of course, would be permitted if they otherwise comply with Art 36.

B.  The World Trade Organization The General Agreement on Tariffs and Trade (GATT 1994),23 Art XI:1 similarly prohibits quantitative restrictions by its members imposed by way of ‘quotas, import or export licences or other measures’.24 Notwithstanding earlier decisions suggesting that the Article is breached regardless of any actual effect on trade,25 more recent decisions appear to require a ‘limiting effect’ on the quantity of product exported.26 This ‘need not be demonstrated by quantifying the effects of the measure at issue’;27 rather, they ‘can be demonstrated through the design, architecture, and revealing structure of the measure at issue considered in its relevant context’.28 There was no limiting effect in the imposition of import formalities.29 Export measures which require reporting or allow for automatic authorisations without 17 Reg 2015/479 on common rules for exports (OJ 2015 L83/34). 18 ibid. 19 ibid, Art 6(1)(a). 20 ibid, Art 10. 21 Reg 2020/402 (OJ 2020 L77I/1), as amended by Reg 2020/426 (OJ 2020 L84I/1) and Reg 2020/568 (OJ 2020 L129/7). 22 Belgium, Bulgaria, Czech Republic, Estonia, France, Greece, Hungary, Latvia, the Netherlands, Spain and the UK: see WTO list (n 7). 23 WTO, The General Agreement on Tariffs and Trade (GATT 1994), available at www.wto.org/ english/docs_e/legal_e/06-gatt_e.htm. 24 The reference to measures indicates that the restrictions do not need to be legally binding: WTO, GATT Panel, ‘Japan – Trade in Semi-Conductors’ (adopted 4 May 1988) paras 104–09, available at www.wto.org/english/tratop_e/dispu_e/gatt_e/87semcdr.pdf. 25 WTO, EEC, ‘Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-feed Proteins’ (adopted on 25 January 1990) para 150, available at www.wto.org/english/ tratop_e/dispu_e/gatt_e/88oilsds.pdf. 26 WTO, ‘China – Measures related to the Exportation of Various Raw Materials’ (30 January 2012) paras 319–20, available at trade.ec.europa.eu/doclib/docs/2012/february/tradoc_149029.01.30%20AB_ Report_DS394-DS395-DS398.pdf. 27 There may be no need to provide evidence in the fall of exports of specified PPE products. 28 WTO, ‘Argentina – Measures Affecting the Importation of Goods’ (AB-2014-9, 15 January 2015) para 5.217, available at www.wto.org/english/tratop_e/dispu_e/438_444_445abr_e.pdf. 29 ibid, para 5.243.

The Rise of Resilience in Addressing COVID-19 Procurement Challenges  237 condition may well, therefore, be compatible with Art XI:1 where there is no actual limiting effect on exports, although the implications must be considered.30 Crucially, the Art XI:1 prohibition does not extend (ie, it is not an ­exemption31) to ‘Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of … other products essential to the exporting contracting party’.32 In the only decision on Art XI:2(a) to date, the Appellate Body found that ‘temporary’ implies a ‘limited’ time, intended to ‘bridge a passing need’;33 that an ‘essential product’ is one that is ‘absolutely indispensable or necessary’;34 and that a ‘critical shortage’ refers to ‘those deficiencies in quantity that are crucial, that amount to a situation of decisive importance, or that reach a vitally important or decisive stage, or a turning point’.35 It is arguable that these conditions were met at the outset of the pandemic where there was an immediate time-limited need to maintain sufficient PPE quantities, in country. However, the argument becomes less convincing where export controls might be used complementarily to safeguard domestic industry preferences (onshoring), especially given potential alternative sources of supply. Even if permitted under Art XI:2(a),36 any export restrictions would still need to respect the MFN principle.37 A restriction may be applied only where ‘the exportation of the like product to all third countries is similarly prohibited or restricted’,38 thus requiring members to use restrictions in a way that distorts trade the least.39 Article XIII:2 requires members to restrict trade on the basis of the pattern of trade which the members might be expected to enjoy in the absence of such restrictions. This may be important in the pandemic given suspicion that many countries, implicitly at least, may have been targeting certain markets (eg China) through export restrictions or other retaliation.40

30 WTO, ‘Colombia – Measures Relating to the Importation of Textiles, Apparel and Footwear’ (27 November 2015) para 7.192 (appeal pending), available at stage.worldtradelaw.gvpi.net/reports/ wtopanelsfull/colombia-textiles(panel)(full).pdf.download. 31 WTO, ‘China – Raw Materials’ (2012) para 334. It would thus be for a challenger to prove that, notwithstanding Art XI:2(a), the restriction falls within the prohibition of Art XI:1: see Pauwelyn, ‘Export Restrictions in Times of Pandemic’ (2020) 735, which offers an extensive commentary on the application of GATT to export restrictions in the context of the pandemic. 32 GATT, Art XI:2(a). 33 WTO (n 26) para 323. 34 ibid, para 326. 35 ibid, para 324. 36 Pauwelyn (n 6) 736 states that the notifications to the WTO are based mostly on either Art XI:2(a) or XX(b) or both. 37 GATT, Art I:1. 38 GATT, Art XIII:1. 39 GATT, Art XIII.2(d) also foresees the possibility of a restricting member reaching agreement on the allocation of import quotas with other members having a substantial interest in supplying the products. Article XIII:5 extends the principles of all the provisions of Art XIII to export restrictions so that the possibility of agreement in respect of export restrictions could also, in principle, apply. 40 See, for example, the EU’s transparency mechanism (n 2), which gives EU countries powers to deny authorisation for vaccine exports beyond the EU if the manufacturer has not honoured existing contracts with the EU: EU, ‘Commission Implementing Regulation (EU) 2021/111 making the

238  Peter Trepte Where Art XI:2(a) does not apply, members could also seek to justify export restrictions on the more general exceptions permitted to GATT obligations under Art XX,41 in particular, for measures ‘necessary to protect human … life or health’ provided that such measures are ‘not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries … or a disguised restriction on international trade’.42 Very few restrictions have actually been permitted under Art XX; it seems that it has been accepted only once out of some 44 attempts.43 One of the sticking points is the requirement to prove44 the ‘necessity’ of the restriction. Whilst the test allows members the freedom to design their goals for the purpose of protecting human life or health45 unilaterally,46 the requirement that the measures should be necessary has been applied rigorously, if inconsistently,47 in the jurisprudence. Early cases established that measures inconsistent with other GATT provisions could not be justified as ‘necessary’ if an alternative measure was reasonably available.48 Having clarified that ‘necessity’ does not mean ‘indispensable’,49 the Appellate Body decided that necessity could include the extent to which a measure contributes to realising the end pursued and that the greater the contribution, the more easily it might be considered to be ‘necessary’.50 If so, the measure must still exportation of certain products subject to the production of an export authorisation’ (2021). The controls apply differently to different countries with many being exempt. 41 This is also relevant to the discussion in section III.B.ii below. 42 GATT, Art XX(b). 43 WTO, ‘European Communities – Measures Affecting Asbestos and Products Containing Asbestos’ (11 April 2001), available at docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/ DS/135-12.pdf&Open=True. 44 The member invoking Art XX in defence of any challenge bears the burden of proof: Panel Report, ‘Canada – Foreign Investment Review Act’ (7 February 1984), available at www.wto.org/english/ tratop_e/dispu_e/gatt_e/82fira.pdf, para 5.20. 45 WTO, ‘European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries’ (1 December 2003) para 7.210, available at trade.ec.europa.eu/doclib/docs/2003/december/ tradoc_115057.pdf. 46 WTO, ‘United States – Standards for Reformulated and Conventional Gasoline’ (29 January 1996) para 6.22, available at docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=Q:/WT/DS/2R. pdf&Open=True, where it noted that it was not the necessity of the policy goal that was to be examined, but whether or not it was necessary to adopt the measures being challenged. 47 See F Fontanelli, ‘Necessity killed the GATT – Art XX GATT and the Misleading Rhetoric about Weighing and Balancing’ (2013) 5 European Journal of Legal Studies 36. 48 WTO, ‘United States – Section  337 of the Tariff Act of 1930’ (adopted 7 November 1989) para 5.26, available at www.wto.org/english/tratop_e/dispu_e/gatt_e/87tar337.pdf. This was decided under the exception contained in Art XX(d) but, as expressed by the Panel in para 74 of its Report in respect of Thailand – Cigarettes (7 November 1990), available at www.wto.org/english/tratop_e/dispu_e/ gatt_e/90cigart.pdf, it could ‘see no reason why under Article XX the meaning of the term “necessary” under paragraph (d) should not be the same as in paragraph (b)’. 49 WTO, ‘Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef ’ (AB-2000-8, 11  December 2000) para 161, available at www.wto.org/english/tratop_e/dispu_e/cases_e/ds161_e. htm. See also WTO, ‘Colombia – Measures Relating to the Importation of Textiles, Apparel and Footwear’ (AB-2016-1, 7 June 2016) paras 5.71–5.74, available at docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/DS/461ABR.pdf&Open=True. 50 ‘Korea’ (ibid) paras 163–64. See, also, WTO, ‘Brazil – Measures Affecting Imports of Retreaded Tyres’ (AB-2007-4, 3 December 2007) para 156, available at docs.wto.org/dol2fe/Pages/SS/directdoc. aspx?filename=Q:/WT/DS/332ABR.pdf&Open=True.

The Rise of Resilience in Addressing COVID-19 Procurement Challenges  239 be compared with alternatives, which may be less trade-restrictive and achieve the objective pursued. It has been suggested51 that this later ‘weighing and balancing’ approach simply provides a filtering mechanism, infrequently, if ever, applied, and that the earlier test, based on ‘least trade restrictive’, continues to be relevant. Measures within Art XX(b) need not be temporary (as in Art XI:2(a)), but temporary export measures adopted in the pandemic could arguably have been justified under this Article. If such measures are used to support a broader economic development agenda of benefitting domestic supply, it is far less likely that they would pass the tests described above, especially in view of the likely existence of less restrictive alternative measures such as increasing stocks or diversifying sources of supply to protect health. Article XX will also prevent any targeted measure designed to discriminate between countries which is, in effect, a disguised restriction on trade. Article XX(j) provides another potential justification for measures ‘essential to the acquisition or distribution of products in general or local short supply’ provided they are consistent with the principle that all members are entitled to an equitable share of the international supply of such products52 and that the measures are discontinued as soon as the conditions giving rise to them have ceased to exist, so that, like Art XI:2(a), the measures may only be temporary. It is important to note that it applies to ‘shortages’ as opposed to ‘critical shortages’, the terms used in Art XI:2(a), and thus benefits from a more generous interpretation.53 In the same Report, ‘essential’ was defined as ‘absolutely indispensable or necessary’54 (emphasis added), a definition allowing the Appellate Body in India – Solar Cells55 to engage in the (preliminary) weighing and balancing exercise now associated with the test before undertaking a comparison between the challenged measure and any reasonably available alternatives. Crucially, this included an assessment of the extent to which the measure contributed to the interest to be protected, namely acquisition or distribution of products in general or local short supply. Whilst the Appellate Body agreed with India’s argument that an increase in domestic manufacturing capacity may increase the total quantity of available supply of a product (thereby potentially addressing local shortage), it did not agree56 that insufficient domestic manufacturing capacity could lead to a shortage of supply justifying, in that case, local content rules for the benefit of Indian industry. The assessment of a shortage had to take account of product availability from both domestic and foreign/international sources.57 It would be difficult, therefore, 51 Fontanelli, ‘Necessity killed the GATT’ (2013) 39. 52 Again suggesting that any measures would need to apply equally to other members and could not disadvantage one or more over others. 53 WTO (n 26) para 325. 54 ibid, para 326. 55 WTO, ‘India – Certain Measures Relating to Solar Cells and Solar Modules’ (AB-2016-3, 16 September 2016) para 5.63, available at docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/ WT/DS/456ABR.pdf&Open=True. 56 ibid, para 5.74. 57 ibid, para 5.69.

240  Peter Trepte to apply this exception58 to the pandemic because there are likely to be alternative sources of supply now that the immediate supply crisis appears to be over,59 bearing in mind that this provision can be used only for immediate shortages.

III.  Favouring Domestic Supply Markets Other complementary measures have been designed not to prevent exports but to favour domestic production: an increase in the domestic supply base coupled with protection for that supply base through export controls mostly through buy-national requirements and practices discriminating in favour of national manufacturers or reserving contracts to domestic suppliers. The US provides a clear example where the president, by way of Executive Order,60 directed all executive departments and agencies involved in the procurement of ‘essential medicines’ to increase their domestic procurement and limit competition to those produced in the US. The UK has apparently taken a less clear, not to say disingenuous, approach. Notwithstanding the suggestion61 that onshoring supply chains ‘is not being proposed’ as part of the Government’s rather covert Project Defend, a strategy designed, it would seem, for reducing dependence on individual countries for critical supplies,62 the NAO Report on PPE63 notes the increase in UK manufacturing of PPE during the period investigated and refers to the Report of the Department of Health and Social Care64 which provides the historical background and sets out its future plans. This explains that, pre-COVID, less than one per cent of PPE was manufactured in the UK, but that UK based supply was anticipated to meet 70 per cent of forecasted demand in December 2020 for all 58 And it does not appear to have been relied upon to date: see n 39. 59 Pauwelyn (n 6) 767, points out that a further Panel Report, currently under appeal, stated that Art XX(j) covers products ‘that are presently in short supply’ implying that it does not apply to predicted shortages: WTO, ‘European Union and its Member States – Certain Measures Relating to the Energy Sector’ (10 August 2018) para 7.1348, available at docs.wto.org/dol2fe/Pages/SS/directdoc. aspx?filename=q:/WT/DS/476R.pdf&Open=True. 60 President DJ Trump, Executive Order 13944 – Combating Public Health Emergencies and Strengthening National Security by Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States (6 August 2020), available at www.presidency.ucsb. edu/documents/executive-order-13944-combating-public-health-emergencies-and-strengtheningnational. 61 Evidence given to the cross-party International Trade Committee in Parliament, ‘The COVID-19 pandemic and international trade’ (Parliament.uk, 29 July 2020), available at publications.parliament. uk/pa/cm5801/cmselect/cmintrade/286/28607.htm. 62 J Basquill, ‘Project Defend: UK trade committee warns against supply chain onshoring’ (Global Trade Review, 29 July 2020), available at www.gtreview.com/news/europe/project-defenduk-trade-committee-warns-against-supply-chain-onshoring. 63 NAO (n 1) para. 2.14. 64 UK Department of Health and Social Care, ‘Personal Protective Equipment (PPE) Strategy – Stabilise and build resilience’ (28 September 2020), available at assets.publishing.service.gov.uk/ government/uploads/system/uploads/attachment_data/file/921787/PPE_strategy_v4.5_FINAL.pdf.

The Rise of Resilience in Addressing COVID-19 Procurement Challenges  241 PPE categories excluding gloves. Whilst future plans are based on diversification, it will also consider ways of sustaining this high level of UK PPE manufacture. For a government policy suggested to not be based on onshoring, an increase in onshore manufacturing capacity from one per cent to 70  per  cent over a nine-month period, were this to be the case, would be impressive. WHO data65 indicates that many countries are ramping up domestic production, which is also an initiative supported by the European Commission.66

A.  The European Union Although public procurement is not explicitly regulated by the TFEU, procuring entities are subject to ‘the principles of the [TFEU], and in particular the free movement of goods … as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency’.67 In addition, as discussed in chapter 3, the EU public procurement Directives ensure that those principles are given practical effect.68 Whilst the tendency is to turn to the flexibilities of the directives whenever public procurement is at issue,69 the Treaty provisions and principles are equally important. Even if these flexibilities are exhausted under the Directives, it may arguably be possible to impose or enforce additional measures necessary to protect public security or public health where these are compliant with Art 36.70 This may become pivotal where the Directives’ procedural rules would otherwise prevent any reservation of procurement to a national supplier and a broader Treaty-based derogation from the directives is needed to effect this objective. Article 34 TFEU prohibits quantitative restrictions on imports and all measures having equivalent effect (eg ‘buy national’ requirements) between Member States. Under Art 28(2) TFEU, these provisions apply both to products originating in Member States and products coming from third countries in free circulation in Member States.71 Article 34 applies both to distinctly applicable measures which 65 See Covid-19 Health System Response Monitor: ‘Cross-Country Analysis: What strategies are countries using to finds new personal protective equipment (PPE)?’ (21 April 2020), available at analysis.covid19healthsystem.org/index.php/2020/04/21/what-strategies-are-countries-using-to-findnew-personal-protective-equipment-ppe. 66 See ‘Coronavirus response in relation to personal protective equipment, Personal Protective Equipment’, available at ec.europa.eu/growth/sectors/mechanical-engineering/personal-protectiveequipment_en. 67 See, for example, Directive 2014/24 (OJEU 2104 L95/65) (Public Contracts Directive) which applies essentially to public authorities, recital 1. 68 For a history of the various Directives applicable to procurement see: S Arrowsmith, The Law of Public and Utilities Procurement (Sweet & Maxwell, 2014) 156ff. 69 The flexibility offered to procuring entities in the course of the pandemic by the procedural rules of the directives are discussed extensively in ch 3. 70 See, eg, Public Contracts Directive recital 41. For a more detailed analysis, see ch 3, section II.E.iv. 71 Under TFEU Art 29, products coming from third countries are considered to be in free circulation in Member States if the import formalities have been complied with and any customs duties or charges having equivalent effect which are payable have been levied in that Member State.

242  Peter Trepte are clearly intended to discriminate against foreign goods (such as local content clauses) as well as to indistinctly applicable measures which apply equally to local and foreign goods but which, nevertheless, discriminate indirectly against foreign goods in that their effect is to make market access more difficult for imported products than local ones.72 The definition encompasses ‘all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade’73 and do not, as a result, require actual discrimination. The reference to ‘trading rules’ in Dassonville covers both legally binding and non-legally binding measures74 taken by Member States and their emanations75 and to administrative requirements and practices which exhibit a degree of consistency and generality,76 although case law has suggested that even the isolated actions of a single procuring entity may amount to a measure caught by Article 34.77 Buy-national measures and practices are likely to be caught by Art 34, either because they directly restrict imports or because they seek to favour domestic industry and have a similar effect. Exceptions are, however, permitted from both Arts 34 and 35 (discussed in section II.A) on the basis of Art 36 when ‘justified on grounds of … public policy or public security; the protection of health and life of humans, … Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States’ The protection of health and the life of humans ranks first among the interests protected by Art 36.78 It is not enough that the procurement simply involves public health;79 the measure must not only meet the threat to the interest to be protected, but must 72 Judgment of 22 September 1988, Commission v Ireland, Case 45/87, EU:C:1988:435. 73 Case 8/74 Procureur du Roi v Benoît and Gustave Dassonville (n 13); Judgment of 13 March 2001, PreussenElektra AG v Schhleswag AG, Case C-379/98, EU:C:2001:160. 74 Judgment of 24 November 1982, Commission v Ireland, Case 249/81, EU:C:1982:402. 75 It applies to all public authorities of a Member State whether central authorities, the authorities of a federal state or other territorial authorities: Judgment of 25 July 1991, Aragonesa de Publicidad Exterior SA and Publivía SAE v Departamento de Sanidad y Seguridad Social de la Generalitat de Cataluña, Joined cases C-1/90 and C-176/90. EU:C:1991:327. It may also be invoked against private sector entities controlled by the state: case 249/81, Commission of the European Communities v Ireland (n 74), comparable to the ‘bodies governed by public law’ of the procurement directives: see, for example, EU Directive 2014/24 (n 67) Art  2(1)(4); as well as against a professional body on which national legislation has conferred powers in respect of regulating the placing of goods on the market where they are capable of affecting trade between Member States: Judgment of 18 May 1989, The Queen v Royal Pharmaceutical Society of Great Britain, ex parte Association of Pharmaceutical Importers and others, Joined cases 266 and 267/87, EU:C:1989:205. 76 Judgment of 9 May 1985, Commission v French Republic, Case 21/84, EU:C:1985:184. 77 Judgment of the Court of 14 June 2007, Medipac-Kazantzidis AE v Venizeleio-Pananeio (PESY KRITIS), Case C-6/05, ECLI:EU:C:2007:337. This is not, however, conclusive: see Arrowsmith, The Law of Public and Utilities Procurement (2014) 240–42. 78 Judgment of 20 May 1976, Adriaan de Peijper, Managing Director of Centrafarm BV, Case 104–75, EU:C:1976:67, para 15. It is for the Member States to decide what degree of protection they intend to assure, but it is perhaps no coincidence, however, that de Peijper is also one of the cases in which the Court of Justice clearly established the principle of proportionality, indicating that the state’s discretion is not totally unfettered in making that decision. 79 Judgment of 5 December 1989, Commission v Italy, Case C-3/88, EU:C:1989:606, a case which arose in the context of TFEU Arts 49 and 56, but which also raised issues arising under Art 34, para 24.

The Rise of Resilience in Addressing COVID-19 Procurement Challenges  243 be shown to address a serious and real risk to health.80 It is not at all clear that purchasing only from the national supply base would remove the threat to public health posed by COVID-19. The UK’s explicit policy in this regard is based on diversification, not onshoring, suggesting that, where domestic purchasing is used, the policy may be driven as much by economic interests. Measures designed to promote domestic industry will often bring economic advantages to the state, but economic interests alone cannot justify derogation.81 However, a measure to restrict purchases to national production has been permitted to secure the supply of strategic products82 even where this was achieved through economic means. In Campus Oil, importers of petroleum products were required to purchase oil from the only Irish refinery based on the need for ensuring security of supply of oil for Ireland. The court found that the products were of fundamental importance for the country’s existence83 and that, once justification corresponding to the needs of public security has been established, the fact that the rules could also achieve other objectives of an economic nature does not exclude the application of article 36.84 Similarly, in a health-related case85 regarding a national practice of refusing import licences, an Art 36 derogation would apply if protection of health and life requires a reliable supply of drugs for essential medical purposes to be safeguarded and that this could only be achieved by way of an exclusive supply established in favour of national production.86 These arguments appear to be stronger than health-related arguments justifying Art 36 derogations, in the event of measures found to be contrary to Art  34 or Art  35. It is thus conceivable that a security argument could be erected to justify the encouragement of domestic production, although this may be hampered by the seemingly stricter GPA rules (section II.B above) to which the EU is also subject, since the protective measures would extend to GPA countries outside the EU. In any event, derogations will further be permitted under Art 36 only where they are proportionate and limited to what is necessary. In de Peijper,87 where the Court of Justice appeared to give the state ample room in setting its health protection priorities,88 it denied the Art 36 justification on grounds that other, less

80 Judgment of 5 February 2004, Commission v Italy, Case C-270/02, EU:C:2004:78. 81 Judgment of 28 April 1998, Nicolas Decker v Caisse de maladie des employés privés, Case C-120/95, EU:C:1998:167. It may be that some economic objectives, not wholly protectionist in nature, may be acceptable: S Arrowsmith, ‘Rethinking the Approach to Economic Justifications under the EU’s Free Movement Rules’ (2015) 68 Current Legal Problems 307. 82 Judgment of 10 July 1984, Campus Oil Limited and others v Minister for Industry and Energy and others, Case 72/83, EU:C:1984:256. 83 ibid [34]. 84 ibid [36]. 85 Judgment of 28 March 1995, The Queen v Secretary of State for Home Department, ex parte Evans Medical Ltd and Macfarlan Smith Ltd, Case C-324/93, EU:C:1995:84. 86 ibid [39]. 87 Case 104-75 de Peijper (n 78) [16]–[17]. 88 ibid [15].

244  Peter Trepte restrictive, measures could have achieved the same objective.89 As a result, given that health and life could be protected by allowing imports from anywhere (part of the UK’s stated diversification policy, for example), it is arguable that the types of measures envisaged would not be justified under Art 36.

B.  The Government Procurement Agreement i.  Scope and Coverage Excluded from the GATT,90 coverage of procurement by the GPA91 was vigorously negotiated by the contracting parties92 as has since been the case under the 2012 revision.93 Unlike EU Directives which apply to all defined procuring entities and to all products,94 the GPA applies only to ‘covered’ procurements defined in parties’ annexes based on contract value, identity of the listed procuring entity, type of goods or services procured (as listed or excluded) and the origin of goods or services (only from GPA countries). Central government entities95 that carry out health or crisis-related procurements appear to be covered extensively,96 and the range of goods relevant to COVID-19 would include PPE.97 One of the most dramatic interventions during this period was President Trump’s initiative to remove certain products from the US’s existing Annex  1 under an Executive Order98 which, inter alia, required (a) the Federal Drugs Administration (FDA) to identify a list of essential medicines, medical countermeasures, and their critical inputs (‘essential medicines’) (which it did in October 202099); and (b) the United States Trade Representative (USTR), within 89 The Court found that the evidence required for the medicinal products at issue could be obtained not only through the formal documents stipulated in the challenged legislation, but also through an obligation on the manufacturer to provide the evidence directly or by way of cooperation between the authorities of the Member States. 90 GATT, Art III:8(a). 91 WTO, Agreement on Government Procurement, available at www.wto.org/english/docs_e/ legal_e/rev-gpr-94_01_e.pdf. 92 P Trepte, Regulating Procurement: understanding the ends and means of public procurement regulation (OUP, 2004) 368–76. 93 R Anderson and K Osei-Lah, ‘The coverage negotiations under the Agreement on Government Procurement: context, mandate, process and prospects’ in S Arrowsmith and R Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (CUP, 2011) ch 6. 94 EU Directive 2014/24 (n 67) Arts 1(2) and 2(1). 95 In the case of the US, of concern in this section, the federal Department of Health and Human Services is covered as well as a few (but by no means a majority) of state health departments (subcentral entities). 96 See the detailed analysis of coverage in R Anderson and AC Müller, ‘Keeping markets open while ensuring due flexibility for governments in a time of economic and public health crisis: the role of the WTO Agreement on Government Procurement (GPA)’ (2020) 29 Public Procurement Law Review 189, 196. 97 ibid, 192. 98 President DJ Trump, Executive Order 13944 (n 60). 99 SM Hahn, ‘FDA Publishes List of Essential Medicines, Medical Countermeasures, Critical Inputs Required by Executive Order’ (FDA, 30 October 2020), available at www.fda.gov/news-events/ press-announcements/fda-publishes-list-essential-medicines-medical-countermeasures-criticalinputs-required-executive.

The Rise of Resilience in Addressing COVID-19 Procurement Challenges  245 30 days of the publication of such list, to take all appropriate action to modify US federal procurement product coverage under the GPA100 to exclude identified medicines.101 The USTR completed this on 27 November 2020102 under the GPA’s provisions for modification of coverage.103 The list contains 227 essential medicines as well as 96 devices. The proposed removal is permanent and, arguably, more than is necessary to meet the stated objective of responding to public health emergencies. Under Art XIX GPA, a party seeking to modify its annexes must provide information on the likely consequences for mutually agreed coverage.104 A number of objections were made within the required period105 mainly based on the lack of data provided, something which the Biden administration originally sought to remedy, thus suggesting that the withdrawal proposal remained the policy of the US.106 This would normally have led to consultations taking account of the level of compensatory adjustments that might be offered for modifications, with a view to maintaining a balance of rights and obligations and a comparable level of mutually agreed coverage.107 If consultations were to prove unsuccessful, objecting parties would be able to invoke GPA arbitration procedures, as several did, or otherwise lose the opportunity to withdraw substantially equivalent coverage.108 Such a process could have led to further amendments to the parties’ annexes in terms of coverage and reciprocal coverage arrangements, leading to an even more convoluted statement of product coverage. This might appear unnecessarily complicating where it is a response to a temporary pandemic and which may not require permanent changes to coverage. Modifications would be more understandable as part of a longer-term plan to shore up national resilience, but raises the question of whether such situations could not be better addressed in a more appropriate way.

100 And all relevant Free Trade Agreements. 101 Given the method of securing coverage through negotiation under the GPA, coverage can be renegotiated; this is not an option in the EU since coverage is secured by way of general definition. 102 See the list of documents (restricted access) received by the Committee, available at docs.wto. org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Language=ENGLISH&SourcePage=FE_B_009&Conte xt=Script&DataSource=Cat&Query=%40Symbol%3dGPA%2f*+AND+%40Title%3dcommunication *&DisplayContext=popup&rwndrnd=0.7899312319139173&languageUIChanged=true. See, further, JH Grier, ‘U.S. Proposes Removal of Essential Medicines from GPA: Revised’ (Perspectives on Trade, 3 December 2020), available at trade.djaghe.com/?p=6742. This article also notes that the USTR has had to make a separate notification under the 1994 GPA since the latter agreement remains in effect as Switzerland has yet to implement the revised agreement. 103 WTO, ‘Revised Agreement on Government Procurement’ (GPA 2012), available at www.wto.org/ english/docs_e/legal_e/rev-gpr-94_01_e.htm Art XIX: Modifications and Rectifications to Coverage. 104 ibid, Art XIX:1(b). 105 ibid, Art XIX:2. This would have been 11 January 2021, in this case and it is clear, although public access to the objections is restricted, that there were at least 15 objections notified by that date (n 102). 106 See JH Grier, ‘Biden Team Supports US Proposal to Withdraw Medicines from GPA’ (Perspectives on Trade, 16 February 2021), available at trade.djaghe.com/?p=6861. 107 GPA 2012, Art XIX:3(b). 108 ibid, Art XIX:7(b)(ii).

246  Peter Trepte President Biden, who took office in January 2021, issued a further Executive Order strengthening buy American provisions109 which, together with his initial apparent support for the proposed product withdrawal from the GPA, suggested that increased procurement nationalism was the persisting trajectory. However, at the time of going to press, the Biden administration withdrew the Order seeking to modify its product coverage under the GPA.110 The immediate threat has thus been averted but the withdrawal filing states that, whilst the US continues to review its policy and looks to find solutions with other GPA parties, it does not rule out any future modifications.111 Despite appearances, the American Hospital Association suggests112 that only around 200 out of a total of around 6,000 US hospitals are federal, implying that relevant coverage in the US may be rather limited. In 2019, federal government accounted for only 29 per cent of healthcare spending,113 suggesting further that only a small portion of total spending on medical equipment and supplies is attributable to the federal sector and thus covered by the GPA. This brings into question the likely effect of proposed modification initiated by Trump on global markets, although the proposed modification may have better been seen as part of the broader strategy of resilience promoted by the Executive Order which also required an increase in domestic procurement and maximisation of domestic production.114 Yukins explains115 that, normally, most US healthcare is provided through a private healthcare system but the surge in demand shifted much responsibility to the public sector. If these figures are an accurate reflection, then there may have been little economic impact in withdrawing the proposed modification in any event.

ii.  The WTO and the GPA General import restrictions imposed by WTO members would be treated in the same way as export restrictions, discussed in section II.B. Where, however, they are implemented indirectly through procurement, they may fall within the GPA where

109 President JR Biden Jr, Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers (Washington DC, 25 January 2021), available at www.whitehouse. gov/briefing-room/presidential-actions/2021/01/25/executive-order-on-ensuring-the-future-ismade-in-all-of-america-by-all-of-americas-workers. 110 See the list of documents (n 102) for 16 April 2021. 111 JH Grier, ‘Biden Team Pulls Proposed GPA Modification to Remove Medicines’ (Perspectives on Trade, 20 April 2021), available at trade.djaghe.com/?p=6962. 112 American Hospital Association, ‘Fast Facts on U.S. Hospitals, 2021’, available at www.aha.org/ statistics/fast-facts-us-hospitals. 113 Figures from the Centers for Medicare & Medicaid Services, part of the Department of Health and Human Service, ‘National Health Expenditures 2019 Highlights’, available at www.cms.gov/files/ document/highlights.pdf. Data has now been provided in the Biden administration’s subsequent GPAS submission (n 108). 114 President DJ Trump (n 60). 115 ch 16, section V.

The Rise of Resilience in Addressing COVID-19 Procurement Challenges  247 that applies (section B.i, above). The GPA sets out procedural requirements to be followed, the negotiators of the original 1979 GPA having realised that it would not be possible simply to impose the general GATT non-discrimination principles and obligations, but recognising that procedural conformity was a necessary step to the achievement of non-discriminatory access to procurement markets.116 The GPA procedures broadly reflect the EU Directives117 and also permit flexibilities to address emergencies such as the pandemic.118 The GATT principles of non-discrimination are explicitly incorporated into the GPA and require, in respect of covered procurement,119 that parties treat products, services and suppliers of any member no less favourably than that extended to (a) domestic products, services and suppliers (national treatment) and (b) to products, services and suppliers of any other party (MFN).120 Thus, the types of measure121 under consideration which have the effect of restricting imports of foreign products through procurement, eg reserving contracts to national suppliers, buy-national policies122 or tender requirements favouring national suppliers,123 may potentially violate either the non-discrimination principles or GPA-specific Articles. Procuring entities need to comply with the principles when exercising any of the GPA flexibilities, such as reducing time limits for tender submission in cases of urgency124 or using the limited tendering procedure in cases of extreme urgency.125 Article XIII:1(d), in particular, exempts procuring entities from complying with specified procedural requirements, but does not absolve compliance with Art IV:1 (non-discrimination) and is explicitly subject to the condition that it is used in a manner that does not discriminate against suppliers of any other party or protect domestic suppliers.126 There is, as with the GATT itself, a more general exception which allows parties to take measures ‘necessary to protect human … life or health’ provided that such measures are ‘not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Parties … or a disguised restriction on

116 P Trepte, ‘The Agreement on Government Procurement’ in PFJ Macrory, AE Appleton and MG Plummer (eds), The World Trade Organization: Legal, Economic and Political Aspects (Springer, 2005) 1123, 1126. 117 As a member of the GPA, EU procurement legislation and that of its Member States, must be compatible with the provisions of the GPA. 118 For a full discussion of these, see ch 3. 119 Lines of demarcation are set out in Art IV:7: the principle set out in Art IV:1 applies only to measures governing covered procurement. 120 WTO, Agreement on Government Procurement (GPA) (1994), Art IV:1, available at www.wto.org/ english/docs_e/legal_e/gpr-94_01_e.htm. 121 ‘Measures’ need not generally be legally binding (n 24) so may include policy directions by the government to buy from national suppliers or to buy national products. 122 See, eg, the US actions proposed under EO 13944 (n 60). 123 For example, by prescribing technical requirements that refer to goods of a specific origin or that are provided by a specific producer or supplier, a practice prohibited by GPA 2012, Art X:4. 124 GPA 2012, Art XI:4. 125 GPA 2012, Art XIII:1(d). 126 GPA 2012, Art XIII:1.

248  Peter Trepte international trade’.127 Though not addressed in any panel or Appellate Body report to date, it is drafted identically to GATT, Art XX(b) and is likely, as a result, to be similarly interpreted. It is, therefore, not a foregone conclusion that this exception provides a means to avoid the application of the GPA in PPE procurement, for example (see section II.B above). It is not inconceivable that the US originally took the view that it would be easier to remove PPE and related supplies from the GPA’s scope altogether than to attempt, in anything but the short term, to rely on the exception provided by GPA, Art III:2.

IV.  Concluding Remarks The rules considered above probably give some flexibility to respond urgently by imposing import or export restrictions for protection of health. However, once this critical period is over, they are likely to provide obstacles to further measures designed to strengthen domestic production capacity. Preferring national suppliers or products is likely to violate TFEU, Art  34 and either GATT, Art XI:1 or GPA, Art IV:1. Imposing export restrictions (to protect national production) is likely to violate TFEU, Art 35 and GATT, Art XI:1. It is far from clear that either type of measure could benefit from justification under TFEU, Art 36 and GATT, Arts XI:2(a) or XX, or GPA, Art XIII:1(d). The US’s approach of seeking removal of coverage from its GPA commitments may have avoided relying on unwieldy GPA exceptions, but this would have served also to complicate the GPA’s already convoluted coverage mechanism and in a piecemeal fashion, especially if parties were to respond in kind, through compensatory adjustments to their own annexes potentially rendering the annexes unworkable. This would, of course, also be limited to GPA members, leaving other WTO members out of any agreed redistribution, potentially affecting trade restrictions not falling within the scope of procurement under the GPA. Alhough the immediate threat of unilateral modification is no longer present, the possibility that the US may re-open this avenue (were, for example, no solution to be found with other GPA parties) remains as is the possibility of other GPA parties following suit. Amending the GATT or the GPA may be unrealistic given that they already contain exceptions that should, but arguably do not, provide room for members to address the pandemic. It may thus be preferable to find a more practical and legally elegant solution, eg a discrete agreement between WTO members to address the pandemic more systematically. Inspiration could be taken from the Agreement on Import Licensing Procedures (AILP),128 one of the multilateral129 Uruguay Round 127 GPA 2012, Art III:2. 128 WTO, ‘Agreement on Import Licensing Procedures’, available at www.wto.org/english/docs_e/ legal_e/23-lic_e.htm. 129 And, therefore, unlike the GPA, applicable to all WTO members.

The Rise of Resilience in Addressing COVID-19 Procurement Challenges  249 agreements, which adds procedural discipline to the GATT’s substantive provisions, notably Arts XI (prohibiting quantitative restrictions) and XIII (requiring a fair distribution of permitted restrictions), discussed in section II.B above. The AILP does not change the underlying GATT obligations, but regulates the systems applied. A similar agreement could provide guidance on the application of Art XI to import and export restrictions in the event of global crises and Art XIII to the allocation of restrictions in a non-discriminatory way, whilst respecting fair patterns of expected trade.

250

part 4 Development Perspectives on Procurement in the Pandemic

252

10 Legal Aspects of the Procurement and Distribution of Critical COVID-19 Supplies by International Organisations: UNOPS BENEDETTA AUDIA AND ARY BOBROW*

I.  General Introduction The United Nations (UN) is mandated to work with national governments to address global threats such as the COVID-19 pandemic. Various arms of the UN mobilised billions of dollars to provide both technical and operational inputs into the crisis response. This chapter examines the operational and legal aspects related to the procurement and distribution of critical COVID-19 supplies with a specific focus on the United Nations Office for Project Services’ (UNOPS) response and coordination among UN system organisations.

II.  UNOPS: History and Legal Status UNOPS was constituted in 1973 as a unit within the United Nations Development Programme (UNDP) and was, at that time, referred to as the Office for Project Services (OPS). In 1994, in the context of the restructuring of the UN economic and social sectors, the Secretary-General proposed the separation of UNDP and OPS to eliminate ‘the conflict inherent in UNDP exercising coordination responsibility in relation to the operational activities of the system while retaining, through OPS, its own implementation capability’.1

* The views presented in this chapter are personal and do not represent the official views of the UN and/or UNOPS. The authors’ contribution to this publication should not be viewed as an endorsement of the views of the other co-authors. 1 See the Report by the Secretary-General, DP/1994/52, dated 6 June 1994.

254  Benedetta Audia and Ary Bobrow Article 22 of the Charter of the United Nations (UN Charter) authorises the General Assembly to ‘establish such subsidiary organs as it deems necessary for the performance of its functions’. Accordingly, in response to the Secretary-General’s proposal to separate OPS from UNDP and on the recommendation of the UNDP Executive Board,2 the General Assembly designated UNOPS as a subsidiary organ of the General Assembly.3 Other subsidiary organs established by the General Assembly include UNDP, the United Nations Population Fund (UNFPA) and the United Nations Children’s Fund (UNICEF). As a subsidiary organ of the General Assembly and an integral part of the UN, UNOPS enjoys the legal status and capacity of the UN itself, as provided for in Art 104 of the UN Charter, and UNOPS is entitled to the privileges and immunities provided for in Art 105 of the UN Charter. The legal status and privileges and immunities of the UN, which UNOPS enjoys, are elaborated in the 1946 Convention on the Privileges and Immunities of the United Nations (General Convention) and serve to ensure that the UN may operate in its Member States without financial or legal impediments. Notably, the UN possesses juridical personality and has the capacity to contract, to acquire and dispose of moveable and immoveable property. The UN is exempt from the payment of direct taxes as well as custom duties. There are no prohibitions or restrictions on imports and exports of articles imported or exported by the UN for official use. Even if the UN waived its privileges and immunities in respect of its assets, no courts or administrative bodies of Member States would have the ability to employ measures of execution against such property, funds and assets, such as foreclosure, expropriation, levy, condemnation, confiscation, or any other form of interference. For instance, the UN could never grant an enforceable security interest to a supplier in any of the UN properties or assets. UNOPS’ mission is to help people build better lives and countries achieve peace and sustainable development. As an implementation arm of the UN system whose mandate focuses on procurement, infrastructure and project management, UNOPS supports partners across the globe to meet their needs. Its funding sources include governments, inter-governmental organisations, international financial institutions (IFIs), private sector organisations, non-governmental organisations (NGOs), foundations and associations. When carrying out procurement activities, UNOPS follows two alternative approaches: one where the entire procurement process is run by UNOPS, including contract award and monitoring of contractors’ performance; and the other where UNOPS undertakes the procurement process without signing a contract with the selected supplier. Under this approach, usually followed in Latin America, it is the Government that ends up engaging the supplier recommended by UNOPS and is responsible to oversee the supplier’s performance.



2 UNDP

Executive Board decision 94/12 of 9 June 1994. Assembly decision 48/501, 19 September 1994.

3 General

Critical COVID-19 Supplies by International Organisations: UNOPS  255 UNOPS has a unique business model as the only UN system organisation that is entirely self-financed; no assessed contributions are made to UNOPS.4 Examples of projects implemented by UNOPS include the construction of schools, bridges, hospitals in conflict and post-conflict areas. UNOPS also acts as an advisor to several government entities and provides transactional services (typically procurement and human resources) to entities within the UN system.

III.  Legal, Regulatory and Policy Framework for UNOPS Procurement A.  Regulatory Framework As UNOPS holds fiduciary responsibility and accountability over large amounts of funds provided by a wide range of funding sources, its aim is to use them in the most efficient, effective, transparent and accountable manner in accordance with the public procurement principles of best value for money,5 fairness, integrity and transparency, effective competition and the best interest of UNOPS and its partners.6 At UNOPS, open international or national/regional competition is the default method of competition to ensure that all potential suppliers are provided with adequate and timely notification of UNOPS requirements and equal access and fair opportunity to compete for contracts for required goods, services or works. National/regional tenders are only conducted in specific instances, eg where goods sourced locally have a positive sustainability impact, or where it is beneficial to obtain the goods locally from a total cost perspective. In any event, national/ regional competition can only be used if there are enough suppliers of the goods/ services/works in the area to ensure competition. Limited competition may only be used if the contract value is below US $50,000, the subject matter of the tender cannot be advertised and UNOPS’ funding source has agreed to such limitation in the project agreement. There are four methods available to solicit an offer from a supplier: shopping; request for quotation (RFQ); invitation to bid (ITB); and request for proposal (RFP). The first two are considered informal methods and the latter two formal methods of solicitation. Unlike the World Bank and other IFIs, UNOPS rarely enters into negotiations with potential suppliers prior to contract award, except

4 Assessed contributions are mandatory contributions due from Member States by virtue of their membership. 5 Best value for money is defined as the trade-off between price and performance that provides the greatest overall benefit under the specified selection criteria. 6 The UNOPS procurement manual is available at https://content.unops.org/service-Line-Documents/ Procurement/UNOPS-Procurement-Manual-2019_EN.pdf.

256  Benedetta Audia and Ary Bobrow where there is a need to ensure that the offer presented by the selected supplier is in line with UNOPS requirements. In any event, any interaction with the selected supplier prior to contract award is highly monitored by the organisation, which requires, inter alia, that at least two UNOPS personnel be involved and the results of the negotiation be recorded in a note to the file. Under no circumstances are negotiations with other bidders allowed. To ensure appropriate segregation of duties, all procurement activities are subject to review by a procurement reviewer, a contracts and property committee and a procurement authority. There are several ‘layers’ of review and approval depending on the contract value and method of solicitation. Following contract award and signature, advance payments (payments made prior to receipt of goods or performance of any contractual service or works) are made on an exceptional basis and may be approved provided that financial guarantees are obtained. Examples of specific activities that may justify an advance payment are mobilisation and start-up costs. The types of contractual instruments issued by UNOPS range from purchase orders to works, goods and services contracts. Long-term agreements (LTAs) are issued to ensure that defined goods or services may be obtained for a definite period of time at prescribed prices or pricing models. LTAs are widely used within the UN system as the aggregation of volume may result in cost savings, reduced transaction costs and delivery lead times. Once an LTA has been established, a UN system organisation may ‘piggyback’ on the existing LTA and place purchase orders with the vendor without establishing a separate agreement.

B.  Emergency Procedures Pursuant to section  15.4.1 of UNOPS Procurement Manual, emergencies are defined as urgent situations in which there is clear evidence that an event or a series of events have occurred which imminently threatens human life/lives or livelihoods, and where the event or a series of events produce disruption in the life of a community on an exceptional scale. Emergency procurement procedures (EPP) allow UNOPS to use simplified processes to facilitate rapid response during an emergency situation without compromising compliance with UNOPS procurement principles. In UNOPS, situations that allow the use of EPP are limited to only those defined under section 15.4 of the Procurement Manual. Any use of EPP is subject to the prior approval of the Executive Chief Procurement Officer (ECPO). All other situations of importance and urgency must be dealt with through the application of regular procurement procedures. Under EPP, an RFQ may be used for solicitation of offers regardless of the value of the procurement and is considered a formal method of solicitation. There are no specific requirements determining whether competition should be national or international, but it is recommended that three or more quotations be obtained. No absolute deadline or specific template is required (except for works procurement), but suppliers are given a realistic deadline to respond to the request, which

Critical COVID-19 Supplies by International Organisations: UNOPS  257 must contain enough information to enable suppliers to give an informative quote, meaning all requirements must be communicated clearly and in the same manner to all economic operators contacted along with the method of evaluation. RFQs can be placed orally for goods and services, but the quotes from the suppliers should preferably be in writing. If required, suppliers may quote their offer orally, and confirm price and terms in writing prior to award of contract. It is important to note that, under EPP, additional suppliers may be added at any stage of the process and local suppliers may be given preference, due to logistics consideration as well as time constraints. Split orders are permissible and an additional order can be placed with the supplier offering the second lowest price in cases where the full quantity requested cannot be provided by one supplier. With respect to evaluations, although the applicable methodology is the lowest priced, most technically acceptable, and no exact evaluation criteria must be determined in the RFQ, procurement officials still have an obligation to present all suppliers with the same information regarding UNOPS requirements, delivery dates, and any other factors to be assessed during evaluation and selection. The evaluation team has the right, for reasons of expediency and subject to equal treatment of bidders, to decide not to ask bidders for missing historical documents. Performance security is not a requirement under EPP. The review and oversight process is simplified as EPP submissions are reviewed by the Chair of the Headquarters Contracts and Property Committee without a panel.

IV.  Description of Programme and Legal Procurement Issues A.  Programme Issues UNOPS is closely involved in supporting governments around the world respond to the unprecedented crisis caused by COVID-19 in line with WHO’s Strategic Preparedness and Response Plan, the Global Humanitarian Response Plan and the Socio-Economic Framework of the UN focused on efforts across Asia, Africa, Latin America, the Caribbean, the Middle East and Europe. As of March 2021, UNOPS is supporting over 60 partners, from national governments, to IFIs, UN system organisations and NGOs. Thus far, the organisation has concluded engagements for US $626 million of procurement and US $282 million for infrastructure and other services. UNOPS has also worked with partners to reallocate an estimated US $61million from existing projects towards COVID-19 response efforts.7 7 UNOPS project data is available at data.unops.org. Specific examples of UNOPS’ COVID-19 response are available at www.unops.org/news-and-stories/news/covid-19-stay-up-to-date-with-thelatest-on-unops-support-to-response-efforts.

258  Benedetta Audia and Ary Bobrow In responding to the crisis, UNOPS has established over 100 COVID-19 related LTAs across a global supply base, enabling rapid call-off orders by UNOPS teams around the world and its partners via an online shopping platform called UN Web Buy Plus. Organisations that have access to the system may directly purchase common goods such as vehicles, generators and technical equipment such as COVID-19 supplies or mobile laboratories under a set of LTAs continually maintained and updated by UNOPS. In Argentina, UNOPS worked closely with the government to establish 11 fully equipped emergency modular hospital units in four provinces, providing 798 beds. The effort was announced by the Government on 18 March 2019 and inaugurated on 5 May 2019. The Government provided the funds, requirements, site foundations, secured utilities and permissions, while UNOPS tailored specifications to ensure competitive and effective tendering and ran the processes for the modular units and their installation. In Serbia, thanks to a contribution from the European Commission (EC) across several projects and programmes, UNOPS secured 800,000 face masks, 25,000  COVID-19 tests, 100 shipping containers for use in expanded triage capacity, 100 stationary oxygen concentrators and 100 intensive care monitors. Additionally, in support of the Government and the EU, UNOPS is managing €1 million in grants to 24 public healthcare institutions and an additional €1 million in advisory and support to national institutions responsible for COVID-19 related procurement. In East Africa, with €53 million from the EC, UNOPS has partnered with the Intergovernmental Authority on Development (IGAD) to mitigate the health and socio-economic impact of COVID-19 in Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan and Uganda. UNOPS is managing projects aimed at supporting migrants, refugees, internally displaced persons and cross-border communities (working with national governments and specialised agencies of the  UN) and is specifically carrying out procurement of €17 million worth of medical supplies and equipment such as ambulances, mobile laboratories and personal protective equipment. In Myanmar, with around US $52 million in funds (both new and reallocated from existing projects), UNOPS is managing social protection payments, procurement of emergency supplies and equipment, construction and equipment of 33 health centres, securing diagnostic kits and automated extractors, laboratory freezers, viral transport medium tubes, equipment for sample preparation and reagents. UNOPS plays several critical roles in areas where it can contribute to the UN framework for the immediate socio-economic response to COVID-19. The most urgent area of focus was related to increasing the resilience of supply chains through micro, small and medium enterprise support and strong supplier sustainability programmes. UNOPS aimed not only at expanding the local supply chains, but also working with governments via rapid procurement efficiency assessments and technical assistance. The second area of focus was strengthening

Critical COVID-19 Supplies by International Organisations: UNOPS  259 economies and livelihoods through infrastructure. This included working on COVID-19-specific infrastructure such as triage and isolation wards, but also using infrastructure to expand national transportation networks, ports and other public service facilities. UNOPS structural model is a common one in the UN system, with country offices carrying out most of the procurement work (both national and international) and headquarters performing quality checks at several critical points throughout the process. In most cases, this model has proven itself successful in balancing quality, transparency and speed while pursuing value for money. Unfortunately, as the need to respond to the pandemic increased and government and donor demands for UNOPS’ services rose, the weaknesses of this approach became clear. First, decentralised offices did not have local technical expertise to evaluate the highly technical medical specifications being provided by partners or build upon high-level specifications arriving daily. Second, the organisation wanted to ensure that it was able to rapidly scale up operations and transition into new markets. Third, there were very few LTAs in place that could be drawn upon for COVID-19-specific supplies. Fourth, the complexity of the market, with its untested suppliers, manufacturing shutdowns, demands of advanced payment, export restrictions and transport disruptions, required significant expertise that was best handled by the most senior teams within the organisation. Finally, as each office, in an attempt to better understand the market, initiated supplier identification exercises creating an overwhelming number of requests for a limited number of manufacturers and distributors further inflating demand. To address these issues and ensure a timely response, UNOPS formed a Global Task Force (GTF) with a specific focus on developing a centralised procurement approach and coordinating the efforts across the organisation.8 Given the unique nature of UNOPS as a wholly self-financed entity, the organisation typically sets broad, long-term strategic areas of focus, builds capacity within these areas and acts as an enabler for the partner’s programmatic objectives. However, in this case, given the limited timeframe and the large number of partner requests, there was a need to prioritise efforts of the limited capacity already available in the areas of medical procurement. UNOPS focused its efforts as follows:9 1. Prioritising for impact, UNOPS decided to focus on equipment that had the largest life-saving potential. For example, PPE, diagnostic kits, other medical supplies and equipment (vehicles, incinerators, power-generation equipment), treatment facilities (new construction, conversion of non-medical facilities for treatment) and supporting existing health infrastructure with access control, screening and isolation. 8 Both authors were members of this internal UNOPS team. 9 As response efforts are still ongoing at the time of writing, a full evaluation was not undertaken by the organisation, but this section provides some indication of the activities carried out and some of the questions that remain.

260  Benedetta Audia and Ary Bobrow The prioritised focus on certain technical specifications and associated tenders helped UNOPS optimise discussions with partners and accelerate implementation support. While UNOPS focused its efforts on these priority areas, this approach did not exclude specific requests made by partners for items like ventilators. Many offices still felt that they could support these requests and successfully pursued these items. However, could UNOPS’ impact have been greater had these resources been more focused on priority items? This is open for debate and is directly linked to the organisational mandate of supporting partner initiatives. 2. In order to enable rapid and reliable procurement of essential COVID-19 supplies, UNOPS’ Executive Chief Procurement Officer approved the use of EPP. 3. Working to consolidate demand and establish LTAs so as to reduce the number of processes was critical to the response. As stated above, the LTAs are aimed at minimising multiple requests to suppliers from different offices, achieving greater economies of scale, stabilising or establishing relationships with suppliers so as to reduce potential quality issues, and understand manufacturing capabilities and in-stock supplies. Unlike the typical LTAs established by UNOPS, the approach was to establish agreements with multiple suppliers across the globe so as to optimise for speed, cost and quality based on the final destination of the goods. For example, LTAs were established with German, Chinese and American suppliers for the same goods. While prices of the items varied, when speed of delivery and cost to final destination (typically air freight) were taken into account, different suppliers were used in each situation. With the exception of a few items like vehicles, power generation, and mobile laboratories, as of March 2020, UNOPS had few of the essential treatment items under LTA. However, once mobilised, things began to move quickly. By the end of March, there were two LTAs in place for COVID-19-specific supplies and by the end of June 2020 there were 58. 4. The procurement strategy emphasised an expanding market. In addition to existing relationships with medical companies, UNOPS started using the database of the UN Global Marketplace (which UNOPS administers). A supplier survey was issued to over 283,000 suppliers who had previously registered with the UN, in Russian, French, Arabic, Chinese, Japanese, Korean, Spanish and English, seeking to identify both essential and ancillary items for the COVID-19 response. The survey was a critical element in identifying manufacturers that had converted production to support the response and identify local and regional distributors with available stocks. UNOPS issued two supplier surveys. The first was undertaken with a specific focus on Chinese suppliers with limited or no knowledge of English. This was rapidly issued in early March 2020 and then followed by the larger survey a month later. The responses were quite extensive, with over 8,000 received within the first three days, detailing stock, production capacity,

Critical COVID-19 Supplies by International Organisations: UNOPS  261 factory locations, nearest ports and detailing any export restrictions. As of September 2020, there were 11,033 respondents. This information helped develop informed procurement strategies with national governments. For example, in Kosovo, the Government and the EU were very interested in an approach that enabled them to secure many supplies within the country as well as regionally, therefore keeping the resources close to home and the delivery times short. 5. Initially, the high demand for products and the changing logistical and transportation conditions resulted in a highly volatile market situation, making it challenging for suppliers to provide UNOPS with firm commitments relating to delivery time and prices. Furthermore, the massive increase of demand for goods and services increased the number of financial risks as well as opportunities for fraudulent activities given the higher number of suppliers with no track record in the market. Given UNOPS’ initial difficulties carrying out the necessary background checks on such a high number of new ‘market players’ and the need to confirm orders immediately to ensure stock availability, one of the first LTAs put in place by UNOPS was for inspection services. The approach was to have on the ground inspectors available to validate quality and claims of production capacity. This has been one of the most heavily used LTAs throughout the crisis. 6. When UNOPS is engaged by governments, donors or other organisations to provide services, negotiations often look similar to a commercial engagement. There are discussions of overheads, direct costs and service levels. Where this gets complicated is when national governments or donors treat the engagement as a competitive exercise. This is complicated for a few reasons. One, UNOPS is seeking to avoid competition with the private sector and will participate in open tenders only on an exceptional basis. UNOPS’ role is to fill the gap that is often left between public sector capacity and private sector willingness to engage. Two, UN system organisations are not-forprofit and follow the same public sector best practice procurement process as governments and donors. Therefore, treating a UN system organisation as a distributor or consolidator of goods adds an extra layer of bureaucracy and complexity without demonstrating significant benefit. The issue comes to the fore when looking at how this works in practice. In April 2020, government partners and IFIs around the world sent the same list of urgently needed COVID-19 supplies to various UN system organisations and asked for specific pricing and timeframes on delivery. In some circumstances, this small and informal element of competition can be productive in pushing entities to reduce operational costs and seek out greater competition among suppliers. However, in the case of COVID-19, it was significantly complicated by the fact that the supply markets were in such disarray. Quotes were changing rapidly and not typically valid for more than 24 hours, stocks and availability were changing by the hour and logistical arrangements were compromised. This meant that any quotes provided

262  Benedetta Audia and Ary Bobrow by UN system organisations would be inherently inaccurate when the time came to complete the actual procurement process. The effect of such requests was to create delays, unrealistic expectations and balloon demand while having no real positive impact on cost or speed. Given these circumstances, UNOPS adopted a strategy that discouraged issuing such quotes and instead focused on a ‘partnering’ procurement approach. Instead of providing quotes on speed and costs, UNOPS offered expertise in the development of technical specifications, knowledge of the market when it came to designing lots, engagement with national government teams as part of evaluations and strategy of engaging national, regional and new vendors. 7. One of the most critical components of UNOPS’ response was the COVID-19 Procurement Intelligence Hub. This rapidly developed dashboard helped the organisation consolidate demand, provide centralised technical specifications, share a catalogue of LTAs and endorsed bidders, share information on planned, active and completed procurement cases, and share results from the supplier survey. The tool acted as a critical knowledge sharing platform and included in-built training on how to most effectively use it. During the early stages of the response, various UNOPS countries and regions were attempting to implement similar systems, but were not as successful given the limited resources and scales available. UNOPS quickly included the COVID-19-related supplies and contracts into the UN Web Buy Plus system as a means of both internal and external coordination. 8. To mitigate suppliers’ concerns about UNOPS’ ability to pay, UNOPS structured a ‘pre-payment depository’ solution. In brief, UNOPS opened a depository account to hold funds dedicated to the purchase of PPE and one of its banks provided a signed letter certifying that funds in the account would be used in the bidding process. UNOPS would then instruct the bank to transfer funds to the supplier upon inspection and delivery of the goods. 9. While many of the technical specifications came directly from WHO, there were a variety of additional supplies being regularly requested by national governments. As stated above, the lack of technical, specialised expertise at the country level created a number of issues. Since many of the requested resources were either arriving without specifications or were over- specified/ branded, it was critical that each case be reviewed by technical specialists with strong market knowledge to avoid failed processes. To overcome these challenges, in May 2020, UNOPS’ Executive Chief Procurement Officer modified the conditions of the blanket EPP authorisation to request that all COVID medical processes have a UNOPS qualified and technical specialist involved in the development of specifications and throughout the evaluation process. 10. An additional crisis procedure that aimed at reducing the time it took to engage the organisation was quickly approved by the Executive Director. This approach allowed UNOPS to conduct accelerated reviews of new engagements, initiate procurement processes prior to finalising the legal agreements

Critical COVID-19 Supplies by International Organisations: UNOPS  263 and fast tracking the process of advance financing of such projects. This enabled the organisation to initiate work on engagements in mere days of a request.

B.  Legal Issues UNOPS took a proactive approach in assessing the implications of COVID-19 in relation to all contracts and agreements concluded by the organisation. As in most commercial contracts, the definition of force majeure contained in Art 12.3 of the UN General Conditions of Contract for the Provision of Services includes any unforeseeable and irresistible act of nature, any act of war (whether declared or not), invasion, revolution, insurrection, terrorism, or any other acts of a similar nature or force, provided that such acts arise from causes beyond the control and without the fault or negligence of the Contractor.

In a nutshell, ‘force majeure’ is used to describe a situation that is (a) beyond the control of the parties; (b) that the parties could not reasonably prepare for; and (c) that prevents one or both parties from performing all or parts of its obligations under the contract. That said, the mere occurrence of a force majeure event like a pandemic is often insufficient to excuse a party’s performance of an obligation; rather, the pandemic must somehow prevent, make impossible, make impracticable, or delay the party’s performance. To put it differently, the force majeure event must be the cause of the party’s inability to perform. Further, if the force majeure event affects some, but not all of the party’s obligations, the unaffected obligations remain in effect. Whether or not COVID-19 is a force majeure event certainly depends on the particular circumstances of that case. The outbreak of a disease is generally ‘beyond the control’ of the parties to the contract. That said, it is important to look at whether the contractor could have taken reasonable steps to prevent the circumstances that are preventing it from performing the contract and to ask whether the circumstances are actually preventing the contractor from performing, or whether the circumstances are simply making performance harder or more costly. Additionally, there may be parts of its contract performance that can still be completed, and from which it would not be excused. For instance, if Contractor X is required to perform services in multiple countries, but one of the countries is impacted by the force majeure event, the contractor may be excused from its obligations for the one country, but not for its contractual obligations in the remaining ones. In addition to determining whether a triggering event has occurred, Art 12.1 includes an express provision requiring the affected Party [to] give notice and full particulars in writing to the other Party, of such occurrence or cause if the affected Party is thereby rendered unable, wholly or in part, to perform its obligations and meet its responsibilities under the Contract.

264  Benedetta Audia and Ary Bobrow The affected Party shall also notify the other Party of any other changes in condition or the occurrence of any event which interferes or threatens to interfere with its performance of the Contract. Not more than fifteen (15) days following the provision of such notice of force majeure or other changes in condition or occurrence, the affected Party shall also submit a statement to the other Party of estimated expenditures that will likely be incurred for the duration of the change in condition or the event of force majeure. On receipt of the notice or notices required hereunder, the Party not affected by the occurrence of a cause constituting force majeure shall take such action as it reasonably considers to be appropriate or necessary in the circumstances, including the granting to the affected Party of a reasonable extension of time in which to perform any obligations under the Contract. Finally, article  12.2 also provides [UNOPS] with the right to suspend or terminate the contract by providing seven (7) days notice instead of thirty (30).

In light of the above, UNOPS offices around the world were advised to take particular care when reviewing notices of force majeure to ensure that the notice correctly identified a qualifying event and was given in accordance with the relevant clause and any applicable time constraints. This is particularly relevant as the acceptance of a wrongful notice can amount to anticipatory breach (ie an action that shows one party’s intention to fail to fulfill its contractual obligations to another party). Finally, in addition to determining their rights under the force majeure provision, contractors seeking to avoid performance of a contractual obligation have also relied on other doctrines such as impossibility, impracticability and frustration of purpose. In order to minimise the length of time during which contractors and grantees are caught in an ‘operational limbo’, UNOPS looks into all avenues for alternative performance. As such, if a party can perform its obligation by taking reasonable steps to mitigate the effect of the event, for instance by an alternative method of performance, then it is advised to take those steps. Whenever possible, contract amendments are made to facilitate operational modifications such as scaling down operations, reducing personnel, deferring specific activities and adjusting locations depending on current circumstances. When no other remedy is available, termination under force majeure remains an option as it provides the opportunity to redesign project requirements based on current local conditions and eliminates the need to constantly assess the situation and adjust the contract based on the changing environment.

V.  Coordination within the UN System and vis-a-vis Suppliers By the middle of March 2020, various UN organisations with mandates from public health to children, from development to reproductive health to operational support, were involved in responding to the COVID-19 crisis. Suppliers were overwhelmed with requests, governments of developing countries were starting

Critical COVID-19 Supplies by International Organisations: UNOPS  265 to panic as they saw wealthier countries struggling to secure basic supplies and putting in place export restrictions. Even Italy and Denmark were asking for help from the UN in securing PPE, diagnostic tests and medical equipment such as ventilators.10 As requests poured into various UN system organisations, they initiated procurement efforts in line with their processes and structures. As many UN organisations run procurement in a decentralised manner, this meant that supplier surveys and requests for information were pouring out of offices around the world to the same set of manufacturers and consolidators, leaving them overwhelmed. In a plea for coordination from one of the largest medical equipment manufacturers in the world, the UN was given the example of a new hospital under construction in Central Asia. The hospital was planned to have 5,000 beds. The Government, in an attempt to cast the largest possible net, requested assistance in getting the hospital equipped from multiple international financial institutions, bilateral partners, UN system organisations and directly from suppliers. These partners then in turn reached out to suppliers, or even each other, in an attempt to secure the needed supplies. Within a few days, one supplier this author spoke with had received what appeared to be the same request (with various levels of detail) so many times they were not sure if the demand in the country was for 5,000 or 30,000 beds. This was driving up prices, creating a proliferation of requests on stock, capacity, pricing, logistics and regulation and overwhelming suppliers’ ability to plan and respond. This was only a part of the confusion that was feeding into overblown demand.11 What was needed on the demand side was clarity with funding partners and governments that the UN was coordinating and would have access to a single stream of goods. On the supply side, the organisations needed a single point of contact for suppliers and freight forwarders for all entities with regularly updated and published information on supplier pricing, stock, manufacturing capacity, supply chain and regulation constraints. The organisations needed to work directly with national regulatory bodies to support and manage the review and acceptance of standardised equipment (many large suppliers are unwilling to provide goods to nations who have not formally cleared their products for use). Additionally, the organisations needed to manage quality by deploying technical experts to the largest manufacturers for independent monitoring to reduce the risk of fraud and quality failures. While several major suppliers approached the UN Secretary General’s Office directly to request that UN organisations coordinate, the agencies themselves 10 Based on internal requests received by UNOPS Global Task Force in late March and early April of 2020. 11 Due to the decentralised nature of the UN organisations, similar requests would arrive from a local office, the regional office and headquarters amplified again by multiple different organisations each with their own decentralised units.

266  Benedetta Audia and Ary Bobrow recognised the same need and started taking steps accordingly.12 UNICEF proposed a joint tendering approach also known as ‘consortium of buyers’. The idea was that tenders would be issued on behalf of a group of UN system organisations based on consolidated demand and that the work on the process would be carried out jointly and contracts issued directly from individual agencies. Shortly thereafter, the WHO and WFP came forward with a proposal for a COVID-19 supply chain system to request and receive supplies.13 This approach built on the work started with UNICEF and included consortium purchasing for diagnostics and clinical management in addition to the one already in place for PPE. The governance structure, named the Supply Chain Task Force (SCTF), was established at a senior level, co-chaired by the WHO and WFP, and it included both UN organisations as well as NGOs. The aim of the SCTF was to establish a global strategy for finding and securing needed equipment and supplies, bring together the collective capabilities of both public and private actors to meet actual needs, and ensure their effective distribution. Notwithstanding the establishment of joint consortia, each UN organisation carried out parallel procurement processes and hundreds of millions of dollars were awarded as a result of separate procurement exercises carried out under Emergency Procurement Procedures. By the end of June, when the crisis was raging through the Americas and spreading to tens of thousands of people a day in Asia and Africa, most UN system organisations placed a small number of orders for equipment and supplies using their own coordination mechanisms.14 To understand the origins of this situation we need to understand how the organisations of the UN are financed, how they coordinate outside of a crisis, and how various member governments and funding institutions engage with them. UN coordination is regularly encouraged and supported by agencies and various executive boards composed of Member States. Indeed, there are many structures and bodies solely focused on coordination such as the UN System Chief Executives Board for Coordination, the High-Level Committee on Programmes, the United Nations Development Coordination Office, the High-Level Committee on Management, and the United Nations Sustainable Development Group. The Resident Coordinator system and a large number of working groups, committees and task forces are also established for this purpose. Within the UN system, several entities act as implementing partners, either primarily in the case of UNOPS, or periodically in the case of organisations such as UNDP, IOM and UNICEF. When a sister UN agency seeks the services of an implementing partner it is in the form of a UN-to-UN legal agreement that 12 As related to the author by one of the top five largest medical device manufacturers in the world on condition of anonymity. 13 www.who.int/docs/default-source/coronaviruse/covid-19-supply-chain-system-requesting-andreceiving-supplies.pdf?sfvrsn=cd25bbbc_6&download=true. 14 For instance, the purchase of N95 masks as part of the consortium started on 14 April and was not completed until 19 June. In the the same period, UNOPS issued contracts for LTAs to 56 different suppliers. See www.ungm.org/Public/Notice/106842 and www.ungm.org/Public/ContractAward/115000.

Critical COVID-19 Supplies by International Organisations: UNOPS  267 spells out the services to be provided and resources and fees to be exchanged. Outside of these agreements, each agency still participates and coordinates with the UN system through the above-mentioned interagency working groups and committees. In addition, in an effort to facilitate active collaboration across UN system organisations and reduce transaction costs, the Secretary General requested all entities to operate according to the principle of mutual recognition. This principle allows a UN entity to use or rely on another entity’s policies, procedures, system contracts and related operational mechanisms for the implementation of activities without further evaluation, checks or approvals being required. Notwithstanding the above, many, if not most, of these efforts are stymied by the organisational architecture and financial incentives that are core to the various entities’ existence. Historically, most UN system organisations were funded via their core or regular budgets while other funding comprised a small portion of their operations. However, this is no longer the case as donor countries increase their earmarked contributions in a way that essentially creates a mulilateral cover for bilateral initiatives. For example, in 2019 the core budget of UNDP represented only 13 per cent of its operations.15 Non-core funds have become so critical to the organisations’ survival that many UN organisations are using core funding to subsidise earmarked initiatives16 and are continually tempted to stretch their mandates in order to secure them. While impacts and mandates are still fundamental to any UN organisation, these are difficult to measure and manage while the pressure to fund annual budgets (maintaining offices and retaining staff) remains constant. Increasingly, UN organisations measure their success by looking at the health of their bottom line and their ability to continue providing services. While balancing the budget is not inherently a bad thing, it does result in performance targets of personnel being directly linked to the amount of projects secured and the amount of money spent. This in turn drives competition among agencies to secure engagements. For example, if Government X is pledging US $100 million for the purchase and distribution of PPE across South-East Asia, those funds could go to UNICEF, UNDP, UNFPA, WHO or UNOPS, and that is without stretching mandates. It is common for donor partners to regularly request quotes from all of these entities (as described above), even though the selection of these entities is not bound to traditional public procurement procedures. So how does this competitive structure play out in a time of crisis and affect the coordination of the agencies on something as critical as procurement? When in March 2020 a consortium approach was presented as a way to collaborate, a push was also made to consolidate all national demands via the Resident Coordinator system through a single tool. The idea to have governments enter in

15 www.undp.org/content/undp/en/home/funding.html,

5.

16 www.globalpolicy.org/images/pdfs/images/pdfs/GermanDevelopmentInstitute.pdf.

268  Benedetta Audia and Ary Bobrow their demand, via bottom-up requests from Ministries of Health and top-down modeling from WHO was a good one. This consolidated demand would then be fed into the procurement consortiums to create economies of scale. If there were shortfalls, a ‘control tower’ would be established that helped to allocate the resources where they were most needed. That being said, the mechanism did not address the issue of overheads which must be charged to cover each UN organisation’s costs. This same understanding of the competition between agencies can help us to understand why each of the UN organisations maintained their own parallel tracks of COVID-19 procurement. If all comparative advantage was taken away, the resources would all accrue to UN organisations involved in the demand regardless of their ability to deliver. In theory, each organisation has core competencies and can draw on each other to maximise benefit. However, in practice, the competitive advantages, mandates and even best interests of governments are pushed aside due to those incentives. Whilst several funding sources and IFIs could use their leverage to encourage compliance with the mutual recognition principles, many of them request quotes for the same equipment from different UN system organisations as if they were suppliers and manufactures. Some would argue that a certain amount of competition between agencies is helpful in that it keeps overheads in check, processes streamlined and payrolls from bloating. This is indeed a reasonable argument for the behaviour we see among donors. That being said, it may be time to reconsider how this competition impacts outcomes during a crisis and consider mechanisms that can be triggered to allow the most effective use of UN procurement capacity. For UNOPS, as a service provider to the UN, member governments and IFIs, an unstructured approach to coordination without a normative mandate means that it could be systematically excluded from supporting in an emergency context despite having potentially more effective or economical solutions. In the authors’ opinion, a coordinated approach to procurement that creates a level playing field among UN entities is in the best interest of communities in need as well as Member States.

VI. Recommendations This crisis has shown that there is a need to mandate the use of a single procurement portal across the entire UN system. As orders could be placed directly by each UN system organisation, the system would capture real and forecasted demand, manage vendor information (stock, production capacity, distributors) and publish in-process tenders as well as awarded (and expired) contracts. Having a predefined pricing structure would allow organisations carrying out the work to receive overheads in line with the orders placed, ensuring that efforts are duly compensated. Such a system would need to be carefully structured to ensure that

Critical COVID-19 Supplies by International Organisations: UNOPS  269 incentives and benefits are fairly managed: it would require strong political leadership from the Secretary General’s Office and the governing boards of the various UN organisations. Such a system could be designed to incentivise UN organisations to publish the most cost-effective tenders so as to attract others to use their processes and secure additional resources rather than carry out parallel efforts. It would also give governments sufficient confidence to know that the best combination of quality and price is being obtained regardless of which UN entity they work with. Notwithstanding the acceptance of the mutual recognition principle by a number of UN organisations, unless and until the issue of incentives is properly addressed, very little progress will be made in the area of joint UN procurement. If we can effectively ensure that costs are recovered in line with the work done and all UN organisations have access to the best possible terms with suppliers, administrative overheads across the UN system would certainly decrease. The incentives would be for organisations to reduce their fees and put in place other value-adding processes (such as strong technical capacity and project management) to ensure the best possible outcome for the people served by the UN.

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11 Procurement and Distribution of Critical COVID-19 Supplies by International Organisations: The World Bank SHAUN MOSS

I. Introduction The purpose of this chapter is to examine how the World Bank has applied and adapted its current Procurement Regulations to enable the organisation and its borrowing member countries (which number over 150) to respond quickly and effectively to meet the urgent procurement needs occasioned by the onset of the COVID-19 global health pandemic. It will review the mandate of the World Bank and the role it plays in supporting its developing member countries’ efforts to respond to the pandemic, as well as the different types of procurement activities the Bank has financed to assist developing countries in responding to the crisis. The Bank’s current regulatory framework for procurement includes the Procurement Guidelines whose origins stretch back to the early 1960s, but which have evolved and been updated several times since then. They remain in effect for projects prepared before 1 July 2016, many of which are still being implemented.1 In response to growing concerns about the rigid, outdated nature of its Procurement Guidelines, the Bank launched a comprehensive review of its procurement framework in 2012, which resulted in the adoption of a new 1 The World Bank, ‘Guidelines: procurement of goods, works and non-consulting services under IBRD loans and IDA credits and grants by World Bank borrowers’ (Washington DC, January 2011), available at http://documents.worldbank.org/curated/en/634571468152711050/Guideline s-procurement-of-goods-works-and-non-consulting-services-under-IBRD-loans-and-IDA-creditsand-grants-by-World-Bank-borrowers.

272  Shaun Moss Procurement Policy2 and Procurement Regulations, which came into effect in July 2016.3 While this chapter will review the different types of procurement flexibility built into the two sets of rules, its main focus will be on the Procurement Policy and Procurement Regulations. This emphasis is justified by the fact that the Policy and Regulations were specifically designed to equip the Bank and its developing member countries with the flexibility necessary to deliver development more effectively. They also authorise the Bank to play a more procurement proactive role in helping countries to conduct procurement in emergency situations, such as the current global health emergency. Given that COVID-19 is the gravest test which the Bank’s new procurement framework has faced since its introduction in 2016, the chapter will look specifically at how effectively it has performed in response to this emergency. Given the scale of the World Bank’s development activities, it is involved in financing the many different types of goods, works and services that developing countries need in order to respond to the pandemic. These include everything from complex medical equipment, pharmaceuticals, test kits and personal protective equipment (PPE) to civil works to upgrade hospitals to treat the high numbers of patients requiring medical care. The Bank is involved in the fight against COVID-19 in countries as diverse as middle-income countries, such as India and Brazil, to some of the poorest, most fragile countries in the world, including Yemen, Haiti and Afghanistan. The chapter will show that, although its procurement framework is unchanged since the onset of the emergency in early 2020, the Bank has been innovative in harnessing the more flexible approaches designed into its 2016 Procurement Policy and Regulations to help developing countries respond to COVID-19. The Bank has extended the Hands-on Expanded Implementation Support (HEIS) modality, to change its procurement posture from the mostly passive, no-objection-based role to adopt a more interventionist stance, which sees the Bank’s procurement staff act directly to negotiate deals for COVID-19 inputs on behalf of the Bank’s client countries. By so doing, the Bank has made headway in helping its developing country clients to overcome some of the most perplexing procurement challenges caused by the pandemic, including a drastically altered balance of power in purchaser-seller relations and severe market dysfunctions, including global shortages of supplies, rapidly escalating prices, ever-lengthening delivery lead times and severely disrupted global supply chains.

2 The World Bank, ‘Bank Policy: Procurement in Investment Project Financing and Other Operational Matters’ (OPSVP5.05-POL.144, July 2016), available at wbnpf.procurementinet.org/sites/ default/files/uploads/documents/Procurement_Policy_Final_Definitive.pdf. 3 The World Bank, The World Bank Procurement Regulations for IPF Borrowers: Procurement in Investment Project Financing. Goods Works, Non-Consulting and Consulting Services (Washington DC, July 2016, Revised November 2017 and August 2018), available at himachalservices.nic.in/ hpridc/7.%20World%20Bank%20Procurement%20Regulations%20for%20IPF%20Borrowers.pdf.

Critical COVID-19 Supplies by International Organisations: The World Bank  273

II.  The Mandate of the World Bank Founded in 1944, the two Bretton Woods Institutions, the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF), shared the aims of helping to rebuild the postwar global economy and promote international economic cooperation. The IBRD, later renamed the World Bank Group, initially focused on extending low-cost loans to finance the rebuilding programmes of countries devastated by World War II. Over time, its focus shifted from reconstruction to development, with an emphasis on infrastructure. Over the intervening seven decades, the Bank has grown into the world’s largest multilateral development institution and a vital source of financial and technical assistance to more than 150 developing countries. To offer perspective on the World Bank’s expansion over this time, the Bank made four loans totalling US $497 million in 1947, compared to 302 loans totalling US $60 billion in 2015. In the year ending 30 June 2020, the International Development Association (IDA), the part of the World Bank Group that supports the world’s poorest countries, had total commitments of US $30.48 billion, of which 26 per cent was in the form of grants. The World Bank has set two goals to be achieved by 2030: to end extreme poverty by decreasing the percentage of people living on less than US $1.90 a day to no more than three per cent of the global population; and to promote shared prosperity by fostering the income growth of the bottom 40 per cent of the population in every country.

III.  The World Bank’s Response to the Pandemic The Bank’s response to the pandemic began in early February 2020, when it established a dedicated Fast Track Facility (FTF) to provide US $160 billion in financing over 15 months, tailored to support countries in strengthening their emergency response and healthcare systems and in addressing the health, economic and social shocks brought on by the pandemic. This financing includes over US $50 billion from IDA on grant or concessional terms. Several of the projects supported by this financing are designed to emphasise social protection to get cash to people quickly through cash transfer programmes, poverty alleviation measures, and policybased budget support financing to governments whose public finances have been hard hit by the economic impact of the pandemic. On 2 April 2020, the Board of Executive Directors of the Bank approved the first set of 25 COVID-19 emergency response projects, amounting to US $1.9 billion and targeted at the most vulnerable developing countries. These projects include US $1 billion in emergency financing to India to improve screening, contact tracing and laboratory diagnostics, to procure PPE and set up

274  Shaun Moss isolation wards;4 US $100 million in IDA financing to Afghanistan for detection, surveillance, and laboratory systems, as well as to strengthen essential health care delivery and intensive care;5 a US $20 million IDA grant to Haiti to minimise COVID-19 transmission through testing for early detection and rapid response to contain outbreaks;6 and a US $26.9 million IDA grant to Yemen to limit the spread and mitigate risks associated with COVID-19, which, exceptionally, is implemented by the World Health Organization (WHO), given the current weakness of the Government’s capacity.7 While most World Bank projects are implemented by the recipient country’s government, in exceptional circumstances, such as where a country has no functioning government or where a country’s government has particularly weak capacity, the Bank may agree that a UN agency implements the project on behalf of the country, as is the case with Yemen. Since approving this first series of projects in April, the Bank has scaled up its COVID-19 operations to finance projects in over 110 countries, which are home to 70 per cent of the world’s population. Given that the Bank normally takes a year to prepare each new investment project, the fact that its staff managed to prepare, appraise and negotiate 25 projects of such high value and complexity in under two months is, in itself, evidence of change in the institution’s behaviour, spurred by the pandemic. This acceleration of the preparation of new projects has inevitably led to certain tasks which would normally be completed before a project can be presented to the Bank’s board for approval being pushed downstream to later in the project cycle. One step thus treated is the preparation of the Project Procurement Strategy for Development – the procurement strategy for the project – which, in COVID-19 projects is delayed to the project implementation stage. Consequently, procurement strategies for COVID-19 projects are often being worked out while the project is already under way. Given the speed with which market conditions for the supply of COVID-19-related goods are changing, this may be an advantage, as, in such a volatile supply market, procurement strategies have to be dynamic in order to take advantage of fast-emerging market opportunities and respond to unforeseen challenges. In addition to its public-sector financing, the World Bank Group’s private-sector arm, the International Finance Corporation (IFC) has deployed US $8 billion in 4 The World Bank, ‘US$ 1.0 Billion from World Bank to Protect India’s Poorest from COVID-19’ (Washington DC, May 2020), available at www.worldbank.org/en/news/press-release/2020/05/13/ world-bank-covid-coronavirus-india-protect-poor. 5 The World Bank, Afghanistan: ‘COVID-19 Emergency Response and Health Systems Preparedness Project’ (2 April 2020), available at www.worldbank.org/en/news/loans-credits/2020/04/02/afghanistancovid-19-emergency-response-and-health-systems-preparedness-project. 6 The World Bank, ‘World Bank Approves US$20 Million Grant to Support Covid-19 Response in Haiti’ (2 April 2020), available at www.worldbank.org/en/news/press-release/2020/04/01/world-ban k-approves-us20-million-grant-to-support-covid-19-response-in-haiti. 7 The World Bank, ‘New US$26.9 Million Grant for Yemen to Fund Emergency Response Activities Related to Coronavirus Outbreak’ (Washington DC, 2 April 2020), available at www.worldbank.org/en/ news/press-release/2020/04/02/new-us269-million-grant-for-yemen-to-fund-emergency-responseactivities-related-to-coronavirus-covid-19-outbreak.

Critical COVID-19 Supplies by International Organisations: The World Bank  275 fast-track financing, with some 300 private-sector companies requesting support.8 This funding is important to micro, small and medium-sized enterprises, which are especially vulnerable to global shocks. The IFC’s financing flows to banking institutions so they can continue to offer trade financing, working-capital support and medium-term financing to private companies impacted by the pandemic; it is also helping firms in economic sectors directly affected by the pandemic, such as tourism and manufacturing, to continue to pay their bills and employees. Further, the Multilateral Investment Guarantee Agency (MIGA), another member institution of the World Bank Group, has launched a US $6.5 billion facility to support private-sector investors and lenders in their purchases of medical equipment, providing working capital for small and medium enterprises, and supporting governments’ short-term funding needs.9

IV.  The Global Procurement Challenge Posed by the COVID-19 Pandemic The Bank is an institution with long experience of responding to emergencies. Indeed, it maintains a practice dedicated to disaster risk management (DRM), whose funding has increased from US $3.5 billion in 2013 to US $4.6 billion in 2020.10 However, from the Indian Ocean tsunami of 2004 to the Pakistan earthquake of 2005 and annual Caribbean hurricanes, the emergencies to which the Bank is accustomed to responding have hitherto been national or, at most, regional in nature; this fact is reflected in the Bank’s organisational model which sees most of its DRM staff located in regional units, focused on one of the Bank’s six geographic regions. Similarly, the majority of the Bank’s procurement staff are organised by geography. The COVID-19 pandemic, by contrast, is a global emergency whose sudden onset and rapid escalation have placed unprecedented strain on global supply chains. Demand for supplies that all countries need to respond to the crisis (ventilators, test kits, PPE, pharmaceuticals, reagents, among others) has skyrocketed, far exceeding global supply capacity, leading to insecurity of supply and distortions in global supply chains. These forces have left developing countries scrambling to compete with the world’s richest nations to secure scarce supplies in a market where prices are rapidly escalating, delivery lead times are lengthening and the

8 IFC, ‘IFC Increases COVID-19 Response to US$8.0 Billion to Sustain Private Sector Companies and Livelihoods in Developing Countrie’s (Washington DC, 17 March 2020), available at pressroom.ifc. org/all/pages/PressDetail.aspx?ID=24905. 9 MIGA, ‘MIGA’s US$6.5 Billion Fast Track Facility to Help Investors and Lenders Tackle COVID-19’ (Washington DC, 7 April 2020), available at www.miga.org/press-release/migas-65-billionfast-track-facility-help-investors-lenders-tackle-covid-19. 10 ‘Disaster Risk Management’ (The World Bank, 14 April 2020), available at www.worldbank.org/en/ topic/disasterriskmanagement/overview.

276  Shaun Moss risks of contract non-performance, price gouging, fraud and corruption are all greatly elevated. These distortions have been further exacerbated by the introduction by many countries of border closures and export restrictions, which have made it difficult for suppliers to export or for transshipments to proceed. In these chaotic market conditions, there is a risk that multiple donor organisations and the developing countries which they assist will end up competing with each other for scarce supplies and, thereby, damaging each other’s interests.

V.  Evolution of the World Bank’s Procurement Guidelines, Policy and Regulations Throughout its first several decades of operation, the practice of procurement in Bank-funded projects, even before the development of formal procedures, emphasised open competitive bidding as the default method of procurement which the Bank required its client countries to apply. This approach safeguarded the Bank from entanglement in its client countries’ domestic industrial development policies, ‘at a time when most governments favored their own industries or negotiated directly with firms they had handpicked’.11 The Bank launched international competitive bidding (ICB) in 1951 as, ‘the normal procedure to be followed’;12 subsequently, the Bank issued its first formal procurement rules in 1961, though these were intended as internal guidance to the Bank’s staff to help them ensure that the Bank met the fiduciary obligations stated in its Articles of Agreement to make arrangements to ensure that the proceeds of any loan are used only for the purpose for which the loan was granted, with due attention to considerations of economy and efficiency and without regard to political or other non-economic influences or considerations.13

The Bank’s board approved the first formal instructions on the use of these procurement rules in 1964. Throughout the 1970s and 1980s, the development of the Bank’s Procurement Guidelines was characterised by greater prescription and standardisation, culminating in the mandatory use, imposed from 1993, of Standard Bidding Documents which enforced a bid evaluation methodology requiring the award of contracts based on the lowest evaluated cost.14 This approach has often been criticised, including that the Bank’s conservative approach has failed to keep 11 The World Bank, ‘The World Bank’s Procurement Policies and Procedures: Policy Review Initiating Discussion Paper’ (World Bank Board Paper No 68446, 29 March 2012), available at documents1. worldbank.org/curated/en/413861468182330960/pdf/684460BR0AC20101200Discussion0Paper.pdf. 12 ibid. 13 The World Bank, International Bank for Reconstruction and Development Articles of Agreement, Art III, s 5(b) (Washington DC, 27 June 2012), available at pubdocs.worldbank.org/ en/722361541184234501/IBRDArticlesOfAgreement-English.pdf. 14 The World Bank, Guidelines (20111) para 2.59.

Critical COVID-19 Supplies by International Organisations: The World Bank  277 pace with other emerging bodies of procurement rules, which provide governments with greater opportunities to achieve better value.15

VI.  Emergency Procurement Procedures in the World Bank’s Pre-2016 Procurement Guidelines Even before the 2016 reform of its procurement framework, earlier versions of the Bank’s Procurement Guidelines contained a range, albeit more limited, of procurement procedures designed to respond to emergencies.16 Principal among these procedures is direct contracting, that is, contracting directly with one supplier without competition. This procurement method encompasses sole sourcing, which occurs when ‘the required equipment is proprietary and obtainable only from one source’;17 but also covers the more discretionary single sourcing, which happens when there are multiple potential vendors but the purchaser chooses to contract directly with only one of them, which may be used ‘in exceptional cases, such as, … in response to natural disasters and emergency situations declared by the Borrower and recognized by the Bank’.18 Other emergency procurement methods include the use of specialised procurement agents or construction managers to conduct procurement or manage works on behalf of the government. Framework Agreements may also be used for procuring small-value contracts for works under emergency operations. For those Bank-financed projects currently under implementation which remain subject to the pre-2016 Procurement Guidelines, Direct Contracting is now being widely used to enable countries to respond promptly to the COVID-19 emergency. For example, it was used on single-sourcing grounds by the Government of Saint Lucia in the award to a local construction contractor, Skelly Construction Company Ltd, of a contract worth XCD 3,308,387.36 (US $1,225,32 9) for the establishment of a respiratory facility at the Victoria Hospital to treat COVID-19 patients, funded under the Contingent and Emergency Response Component (CERC) of the Bank’s US $68 million Disaster Vulnerability Reduction Project.19 A CERC component is an operational device which allows a country quickly to redirect funds within a loan from planned project activities 15 See E Debevoise and C Yukins, ‘Assessing the World Bank’s Proposed Revision of its Procurement Guidelines’ (2010) 52 The Government Contractor 180, available at papers.ssrn.com/sol3/papers. cfm?abstract_id=1616763. 16 See S Moss ‘Supporting Developing Countries in Responding to the Challenge of the COVID-19 Pandemic: The Operation of the World Bank’s Procurement Function’ (2020) 4 Public Procurement Law Review 180. 17 The World Bank (n 1) para 3.7(c). 18 ibid, para 3.7(e). 19 See contract award notice, Publication of the Award of Contract: Disaster Vulnerability Reduction Project of Saint Lucia (7 May 2020), available at www.govt.lc/media.govt.lc/www/resources/publications/ publication-of-the-award-of-contract1.pdf.

278  Shaun Moss to finance emergency-response requirements which may not be directly related to the activities for which the loan was originally extended. A CERC component can be triggered when a government declares an emergency, in accordance with its applicable national law and that emergency is recognised by the Bank. In the wake of the COVID-19 health emergency, the Bank accepted the WHO’s declaration of 11 March 2020 that COVID-19 was a global pandemic, thus facilitating the Bank’s recognition of national emergencies declared by member countries. In Suriname, for example, the Government triggered the CERC component of the Saramacca Canal System Rehabilitation Project, a US $35 million project designed to finance infrastructure works to reduce the risk of flooding. This allowed the Government to reallocate US $412,000 to procure essential medical supplies, which the Ministry of Health used to procure all the existing stocks of PPE held by commercial vendors in the country by direct selection and quickly distribute them to hospitals designated to handle COVID-19 cases.20 In such cases, where funds that have been earmarked for specific investments under an ongoing project are redirected to finance emergency-related supplies under a CERC component, the Bank often tops up the loan by allocating additional financing to finance the investments that were originally planned.

VII.  The 2016 Procurement Reform: A Flexible Procurement Policy Framework for Responding to Emergencies The Procurement Policy and Procurement Regulations adopted by the Bank on 7 November 2015, which came into effect on 1 July 2016, introduced several innovations to facilitate the Bank’s adoption of a more proactive approach to supporting countries facing emergencies and which are now being heavily employed in the Bank’s response to the pandemic. Principal among these is a differentiation between policy, which is approved by the Bank’s board, and Regulations, which are adopted by management. Previously, the Bank’s Procurement Guidelines were approved by its board, so any change or exception to those Guidelines required an approval or waiver by the board. This requirement acted as a brake on innovation and limited the Bank’s ability to respond flexibly to situations requiring rapid procurement responses, including emergencies, that did not fit with the normal rubric of its procurement rules. The 2016 reform saw the board adopt a concise Procurement Policy which expresses a vision statement that ‘procurement … supports Borrowers to achieve value for

20 The World Bank, ‘World Bank support COVID-19 Medical Response in Suriname’ (Washington DC, 5 May 2020), available at www.worldbank.org/en/news/press-release/2020/05/05/ world-bank-supports-covid-19-medical-response-in-suriname.

Critical COVID-19 Supplies by International Organisations: The World Bank  279 money with integrity in delivering sustainable development’.21 The first verb in this vision statement – ‘supports’ – heralds a sea change in the Bank’s posture on procurement, from one that was primarily passive, based on reviewing procurement transactions conducted by countries for compliance with its Guidelines, to an altogether more proactive stance. Hereby, the Bank directly supports countries in conducting procurement so as to assist them to fulfil the development objectives of the project. The 2016 Procurement Policy laid out seven Core Procurement Principles: value for money, economy, integrity, fitness for purpose, efficiency, transparency and fairness.22 It also introduced new measures, including alternative procurement arrangements (APAs) and hands-on expanded implementations (HEIS), which are now proving invaluable tools that the Bank and its member countries are using as indispensable components of their response to the COVID-19 health emergency.

VIII.  Alternative Procurement Arrangements APAs were introduced in the 2016 Procurement Policy.23 They replaced the Bank’s earlier unsuccessful pilot at using country system for procurement, launched in 2008 and closed in 2011, which foundered on the need for a strict test of equivalence or close alignment between the country’s procurement laws and the Bank’s Procurement Guidelines.24 By contrast, under the 2016 Procurement Policy, where the Bank wishes to accept a set of procurement rules other than its own Regulations, it now assesses those rules for consistency with its Core Procurement Principles, rather than applying the stricter test of equivalence. APAs provide that, at the Borrower’s request, the Bank may agree to (a) rely on and apply the procurement rules and procedures of another multilateral or bilateral agency or organization, and may agree to such a party taking a leading role in providing the implementation support and monitoring of project procurement activities; and (b) rely on and apply the procurement rules and procedures of an agency or entity of the Borrower.25

An example of the use of APAs for COVID-19 response is the Bank’s Yemen COVID-19 Response Project, a grant of US $26.9 million which forms part of a larger US $1.72 billion IDA programme in Yemen, implemented through a partnership between the World Bank and the WHO. The project is designed to strengthen Yemen’s fragile systems for public health preparedness, including the detection, containment, diagnosis and treatment of COVID-19. Some US $23.4 million is 21 The World Bank, Bank Policy: Procurement in Investment Project Financing (2016) s III A. 22 ibid, s III C. 23 ibid, s III F. 24 C Pallas and J Wood, ‘The World Bank’s Use of Country Systems for Procurement: A Good Idea Gone Bad?’ (2009) 27 Development Policy Review 215. 25 The World Bank (n 2) s III.F.

280  Shaun Moss financing the procurement of medical supplies, equipment, training and implementation expenses, as well as the upgrading of health facilities. The WHO is both the recipient of the grant and the implementing agency for the project, which it is implementing the project through local health authorities. Given that, due to the volatile security situation in the country, the Bank cannot undertake in-country supervision of its own projects, UN agencies provide on-the-ground implementation services for the project. The APA provisions of the 2016 Procurement Policy allow the Bank to accept that WHO applies its own procurement procedures to procure the required goods, works and services, based on a positive list of items agreed with the Bank. The WHO also undertakes the quantification of requirements, taking into account the country’s needs as the pandemic evolves, identification of procurable items, development of specifications, identification of the laboratories and health facilities to be equipped with medical equipment and in-country storage and distribution of the goods to their final destinations.26

IX.  Hands-on Expanded Implementation Support and Bank-Facilitated Procurement As part of its vision of supporting countries in conducting procurement, the Bank introduced in its 2016 reforms a new tool called Hands-on Expanded Implementation Support (HEIS), which may be used if the Bank determines the country to be, ‘in urgent need of assistance because of a natural or man-made disaster or conflict or experience capacity constraints because of fragility or specific vulnerabilities (including small states)’.27 The provisions on HEIS make it clear that the Bank is to determine the scope of the support on a case-by-case basis, that, ‘such support does not result in the Bank’s executing procurement on behalf of the Borrower, and project execution remains the Borrower’s responsibility.28 Under a HEIS arrangement, the Bank’s procurement staff may undertake the following activities in support of the country: (a) draft procurement documents; (b) identify strengths and weaknesses in bids and proposals; (c) observe dialogue and negotiations with bidders; and (d) draft procurement reports and award documentation. Following the onset of the COVID-19 pandemic, it became apparent that developing countries would likely be disproportionately negatively affected by the pandemic because of the weakness of their public health systems and that, as a result, the health emergency directly threatened the Bank’s goal of reducing 26 The World Bank, ‘Project Appraisal Document: Yemen COVID-19 Response Project’ (PAD3842, 2 April 2020) s V(B) paras 38–42, available at documents1.worldbank.org/curated/en/10657158 6194037855/pdf/Yemen-Emergency-COVID-19-Project.pdf. 27 The World Bank, The World Bank Procurement Regulations for IPF Borrowers (2018) s III para 3.10. 28 ibid.

Critical COVID-19 Supplies by International Organisations: The World Bank  281 global poverty. To support countries in addressing the supply dimensions of that threat, the Bank augmented its HEIS approach to enable it to act more directly in assisting countries to procure COVID-19 supplies from heavily disrupted global supply markets. Under BFP, the Bank facilitates direct contracting between its client countries and multiple manufacturers and suppliers in order to expedite sourcing and contracting and ensure that countries can access the supplies they need to protect their citizens’ health. Mindful that the current geographic organisation of its procurement and health sector teams might not be best suited to counteract the global nature of the pandemic, the Bank established a centralised BFP task force to collect, manage and disseminate information on sources of supply, negotiate directly with suppliers and draft contracts to be presented to its client countries for their consideration. Through BFP, the Bank is consolidating demand across dozens of countries, approaching multiple manufacturers and suppliers of hard-to-source items, such as PPE and medical equipment, and negotiating with those manufacturers a standard set of terms and conditions of contract, including product specifications, prices, delivery times and warranty terms, then offering those contracts to all countries participating in the BFP arrangement. It has launched a comprehensive market research effort which provides countries with real-time information, on available sources of supply of all the required categories of medical equipment and supplies, including identification of reputable suppliers, available quantities, product specifications, prices and delivery lead times. Rather than designing bespoke deals that fit the specific needs of each country, the Bank has been forced to offer BFP deals to its member countries on a ‘take it or leave it’ basis, due to a number of factors. The first is that COVID-19 has tilted the balance of power in buyer-seller relationships decisively in favour of the seller. Given that quantities of most urgently needed items are in desperately short supply and that, where suppliers are able to supply, they typically make supplies available to potential buyers for a very short time, there is no time for the Bank to negotiate multiple, bespoke deals to fit the disparate needs of dozens of countries. As a result, in order to accelerate procurement, the Bank has had to streamline the contract negotiation process by standardising the terms and conditions it agrees with each supplier, then offering those deals to all its client on the same terms and conditions. There is no time for each country to negotiate its own terms and conditions of sale with each supplier and, indeed, were they to attempt to do so, such an effort would likely fail, as suppliers have no incentive to negotiate when they can sell to other clients at ever-higher prices. The main advantage of BFP to the supplier is that it can sell high volumes of items to multiple countries, having negotiated a single set of terms and conditions with the Bank. Once a country accepts a BFP offer of supplies, it remains responsible for entering into the resulting contract and for contract management, including arranging the necessary logistics, either with the supplier or independently of the supply contract, to ensure the goods are shipped promptly and securely to the purchaser’s country. Given that developing countries are often disadvantaged in accessing

282  Shaun Moss global logistics arrangements, the Bank is assisting countries to outsource logistics to specialised logistics companies. While the Bank is adopting a more interventionist role in procurement than it normally plays, the Bank’s role remains one of facilitation; the governance arrangements applicable to the Bank’s relationship with its member countries remain unchanged. In this regard, the provisions of section III of the Procurement Regulations, which define the roles and responsibilities of the Bank and its borrowers, apply to BFP just as they apply to procurement under regular investment operations. These provide that: The governance of procurement in IPF operations shall be managed through clear and transparent lines of accountability, and the clear definition of the roles and responsibilities of each party. The Borrower is responsible for carrying out procurement activities financed by the Bank in accordance with these Procurement Regulations. To ensure that Bank funds are used only for the purposes for which the financing was granted, the Bank carries out its procurement functions, including implementation support, monitoring and procurement oversight, under a risk-based approach.29

At no time does the Bank become a party to the contract or assume any of the implementation responsibilities of the country. In summary, BFP offers both benefits and risks from the perspective of the Bank. The key benefit is that it enables the Bank to leverage its comparative advantage as a convener and AAA-rated financial institution to facilitate countries’ access to supplies at competitive prices without the Bank’s usurping the country’s role as purchaser and without acting as a procurement agent on behalf of the country. BFP also affords the Bank an opportunity to aggregate demand across multiple projects, countries and financiers and, by so doing, to achieve greater surety of supply and better contract terms and conditions than any country would be able to obtain were it to act alone. The main risks to the Bank are reputational in nature. By assuming a more proactive role in identifying suppliers and facilitating direct contracting between them and its borrowers, the Bank risks creating a perception that it is acting beyond the limits of its role as a financier. Risks to the Bank also arise from issues of transparency and equity surrounding how decisions are made regarding which countries get access to which deals and issues surrounding the quality, timeliness of delivery and general contractual performance of suppliers to the programme, who, after all, have been identified by the Bank. Where, for example, critically required supplies procured under BFP were to arrive to the procuring country later than the contracted delivery date or were delivered supplies found to be faulty, it would not be surprising for the country to believe that the Bank might bear some responsibility for such outcomes, even though the Bank bears no contractual liability, as it not a party to the contract.



29 The

World Bank (n 3) s III, paras 3.1–3.4.

Critical COVID-19 Supplies by International Organisations: The World Bank  283 As of March 2021, 53 Bank member countries had signed 98 contracts with a total value of US $136,236,051 under BFP, with contracts worth a further US $14,029,497 under consideration by countries. Of contracts placed, 43  per  cent by value are for PPE, mainly sourced from China; the remaining 57 per cent are for medical equipment, with contracts having been awarded to a range of US, European, Japanese and other manufacturers. See Table 11.1 for a list of the top ten PPE and medical equipment items, by quantity, procured under BFP. Table 11.1  Top 10 items by category procured under BFP Medical equipment Item

PPE items

Quantity

Item

Quantity

Pulse oximeter

4,065

Gloves, examination

40,207,058

Ventilators

1,671

Mask, N95

12,801,300

Defibrillator

692

Mask, healthcare worker

8,326,400

Patient monitor

883

Mask, patient

6,807,635

367

Gowns

3,665,325

Gloves, surgical

2,209,300

Vital signs monitor Oxygen concentrator

1,486

Laryngoscopes

245

Coveralls

550,600

Analyzer, hematology

216

Goggles

395,954

Beds

523

Face shield

323,700

Electrocardiograph

189

Hand sanitiser

Subtotal

10,337

Subtotal

27,770 75,315,042

Since launching its BFP initiative in March 2020 until the end of October 2020, the Bank presented contract offers totalling approximately US $1 billion in value to its borrowing member countries. As the value of contracts awarded totals US $119 million, it is apparent that the Bank’s member countries have not availed themselves of the BFP programme at a rate that was first anticipated by the Bank, given the perceived urgency of many countries’ needs for COVID-19-related supplies. Although no empirical research has yet been undertaken into why the rate of uptake of BFP offers has been relatively low, a number of possible causes present themselves. Principal among them is the newness of BFP and the resultant lack of familiarity among countries as to how to avail of it. Secondly, the fast turnaround times that the Bank gives countries to decide to accept or reject each offer – which are, in turn, imposed on the Bank by suppliers’ unwillingness to hold their prices firm for more than a few days in such a volatile market – are inconsistent with the cumbersome decision-making processes that characterise developing country governments. At the height of the supply crisis, the Bank observed that each day of delay in placing an order resulted in two weeks being added to delivery lead times, such was the fast-deteriorating situation of ever-lengthening delivery times.

284  Shaun Moss Even the most advanced countries are seldom able to make major procurement decisions in a day or two, while those in low-capacity developing countries may take weeks to make such decisions and may be required to go through cumbersome approvals processes. It is not difficult, therefore, to observe the mismatch between, on the one hand, the expectations of suppliers for rapid decision-making on the part of potential purchasers and, on the other, the protracted decisionmaking processes that sometimes prevail in developing countries.

X.  Procurement Policy Questions raised by BFP Regarding how BFP fits within the Bank’s Procurement Regulations, all contracts are awarded by Direct Selection, with facilitation by the Bank. As per the Regulations, Direct Selection encompasses both sole source and single source applications: ‘This selection method may be appropriate when there is only one suitable firm or there is justification to use a preferred firm’.30 The wording of the provision on the use of Direct Selection as a single-source method clearly requires that the purchaser record a justification as to why one firm is preferred over others. However, in making multiple BFP contract offers simultaneously available to countries and thereby giving each country freedom to choose among them, it may be argued that the Bank is operating BFP in a manner inconsistent with the provisions of paragraph 6.8 of its Regulations. It may be argued further that the condition for use of Direct Selection contained in paragraph 6.9 of the Regulations, that is when, ‘the case is exceptional, for example, in response to Emergency Situations’ does not obviate the requirement for the purchaser to record such a justification. A further issue arising from BFP is that the Bank’s policy on procurement in emergency situations provides that contracts awarded in such situations are usually not subject to prior review;31 as a result, the Bank will have to, after the award of all BFP contracts, subject a sample of these contracts to post-review, which is typically conducted by the Bank’s procurement staff. It is unlikely, given the direct role that the Bank plays in facilitating the award of such contracts, in identifying the vendors whose goods are offered to its client countries, in negotiating the terms and conditions of all BFP contracts directly with the vendors and in preparing the contract documents themselves, that the Bank, in conducting post-review, would ever acknowledge a violation of its Procurement Regulations resulting from the Bank’s own actions.

30 The World Bank (n 3) s VI, para 6.8. 31 The World Bank, ‘Bank Guidance: Procurement in Situations of Urgent Need of Assistance or Capacity Constraints’ (OPS5.05-GUID.165, issued 22 July 2016) s III F, table 2, available at wbnpf. procurementinet.org/sites/all/themes/npf/misc/documents/Bank-Guidance-Procurement-in-Situationsof-Urgent-Need.pdf.

Critical COVID-19 Supplies by International Organisations: The World Bank  285 The provisions on non-compliance are contained in the Governance section of the Procurement Regulations, which require that: If the Bank determines that the Borrower has not complied with the procurement requirements set out in the Legal Agreement, the Bank may, in addition to exercising the legal remedies set out in the Legal Agreement, take other appropriate actions, including declaring misprocurement.32

It can be argued, therefore, that the Bank, by involving itself so directly in the conduct of procurement processes, albeit while not usurping the responsibility of the country for making procurement decisions, has placed itself in a situation of an organisational conflict of interest, which Gordon defines as, ‘where an entity plays two or more roles that are, in some sense, at odds with one another’.33 It is difficult to foresee a situation in which the Bank would impose a sanction on a country for a violation of the Procurement Regulations, in respect of a contract that had been awarded under BFP. Were it to do so, the impact of such a decision would be deeply damaging to the Bank’s relationship with that country.

XI.  Operational Adjustments to World Bank Procurement to Accommodate Market Disruptions The Bank has had to adapt several of its standard terms and conditions of contract to reflect the shift in the balance of power from purchaser to seller. The following are some of the most significant adaptations.

A.  Use of Incoterms The Incoterm applicable to BFP contracts is further evidence of the shift in the balance of power from the buyer to the seller by comparison with the Bank’s prepandemic procurement practices. Under the Bank’s Procurement Regulations and Standard Procurement Documents (SPDs), whose use is mandatory for international competitive procurement processes, the applicable Incoterm is stipulated by the purchaser in the bidding documents. The Bank’s SPD for Goods provides that the evaluation of bids for the supply of goods shall be based on a comparison of bids on the basis of CIP prices (Carriage and Insurance Paid to named place of destination in the purchaser’s country) for goods to be imported and EXW (Ex-Works) prices, plus the cost of inland transportation and insurance within

32 The World Bank (n 3) para 3.24. 33 D Gordon, ‘Organizational Conflicts of Interest: A Growing Integrity Challenge’ (2005) The George Washington Law School Public Law and Theory Working Paper No 127, 603, available at ssrn. com/abstract=665274.

286  Shaun Moss the purchaser’s country to the place of destination, for goods manufactured in the borrower’s country and contracts should be signed on the basis of the same Incoterm.34 However, in Bank-facilitated contracts for the export of PPE from China, the Bank has accepted the FCA (Free Carrier) Incoterm, which is much less onerous on the seller than CIP, as it transfers risk and responsibility from the seller to the purchaser in several important respects. Under FCA, the seller arranges pre-carriage from the seller’s manufacturing plant to an intermediate point, which can be a terminal, transport hub or freight forwarder’s warehouse, usually in the seller’s country. Delivery of the goods and transfer of risk from the seller to the purchaser occurs when the vehicle arrives at this intermediate place. The buyer then assumes all risks and costs after the goods have been delivered at the named point. BPF contracts for the sale of PPE from Chinese manufacturers to Bank client countries worldwide have been signed on the basis of FCA to the World Food Programme (WFP) warehouse in Guangzhou, China, from where it is the responsibility of the purchaser to arrange the carriage of the goods to its home country. In many cases, the purchaser has engaged WFP to arrange shipment of the goods by airfreight to an airport in the purchaser’s country; in other cases, the purchasing government sends one of its own cargo aircraft to collect the goods from China and transport them to their final destination, as Argentina did in April 2020 for 13 tons of PPE it procured under a Bank-facilitated contract.35 It is apparent that the use of FCA is imposed by the seller, as, under normal market conditions, the purchaser would have the power to require the application of CIP, which places more responsibility and risk on the seller and is significantly less onerous for the purchaser. The use of FCA does not affect the decision on the choice of seller to whom the contract is awarded: all such contracts under the BFP approach are awarded by Direct Selection, so there is no comparison of competing bids. Nevertheless, the imposition by the seller of FCA, which the Bank would not normally accept, is illustrative of the current market dynamic which enables sellers to dictate contract terms.

B.  Governing Contract Law and Dispute Resolution Clauses in BFP Contracts As BFP contracts are negotiated directly between the Bank and multiple suppliers before being presented to countries for their consideration, suppliers have no way of knowing, at the time of negotiating the contract with the Bank, with which countries they will eventually sign contracts. While the Bank usually offers suppliers a 34 World Bank SPD, Request for Bids for Goods, Section I, Art 35.2. 35 ‘Aerolineas Argentinas flight returns from China with COVID-19 Medical Supplies’ Buenos Aires Times (19 April 2020), available at www.batimes.com.ar/news/argentina/aerolineas-argentinas-flightreturns-from-china-with-covid-19-medical-supplies.phtml.

Critical COVID-19 Supplies by International Organisations: The World Bank  287 draft form of contract stipulating the Bank’s standard contractual provision that the contract will be governed by the law of the purchaser’s country, suppliers are given the option to request an alternative governing law under a neutral jurisdiction. Giving the seller this option may allay his concerns about the risks involved in entering into a contract on an expedited time frame under an unfamiliar legal regime. Eliminating this element of uncertainty regarding contract governance and interpretation reduces the legal risk to the supplier, thus making it easier for the supplier to offer his keenest prices, resulting in a more attractive offer to the purchaser. The practice to date has been that most suppliers agree to use the governing law of a neutral country, such as Singapore, Switzerland, Germany or England and Wales. In a minority of contracts, particularly those for the supply of goods, such as PPE, where the supplier holds the majority of the leverage in the contract negotiation process, the Bank has agreed to the application of the domestic law of the supplier’s country. However, this may increase uncertainty for the purchaser, thereby increasing the likelihood of the purchasing country declining the offer.

C.  Payment Terms Standard payment terms in international sale of goods contracts financed by the Bank are 10 per cent of the contract price paid as an advance payment, secured by an irrevocable bank guarantee; 80 per cent upon delivery and 10 per cent upon acceptance of the goods by the purchaser following their delivery in the purchaser’s country. However, under prevailing market conditions, such payment terms, which are designed to safeguard the purchaser’s interests, are untenable, as sellers are using their increased market power to insist on payment terms that are more favourable to them. The Bank has agreed to finance contracts providing for a secured advance payment of up to 40 per cent, payable upon placement of the order, with the outstanding 60 per cent due upon successful completion of preshipment inspection of the goods.

D.  Payment Methods Payments to suppliers under BFP contracts are invariably made by direct payment by the Bank to the supplier, charged against the country’s project account held by the Bank. The surety and speed of payment directly from the Bank constitutes a powerful incentive for suppliers to offer their goods for sale to Bank member countries and to keep prices within a reasonable range, albeit that offered prices are generally valid for a short period of time – typically seven calendar days – and the purchasing country only has this limited time to consider the offer. Even where the Bank makes payments directly to suppliers, it does so only after authorisation by the country.

288  Shaun Moss

E.  Application of Force Majeure Clauses All the Bank’s standard forms of contract, whose use by member countries is mandatory for contracts that are subject to international competition, contain a force majeure clause. In the context of COVID-19, examples of where force majeure may make performance of a contractor’s obligations inadvisable, commercially impracticable, illegal, or impossible include disruption in a supply chain where a supplier can find no viable alternative means of transporting the goods to the purchaser’s country or where COVID-19-related travel restrictions prevent a contractor’s foreign labour from entering the employer’s country. One incidence that has precipitated the application of force majeure in a civil works contract, in the context of COVID-19, involves the construction of sections of a bridge superstructure that has been halted because disruptions to shipping prevented steel exports being shipped from India and, as result, the employer and contractor agreed to the completion date of the bridge being delayed.

XII.  Lessons Learned and Future Impact on World Bank Procurement It is perhaps too early to draw definitive conclusions from the Bank’s efforts to respond to the supply challenges which COVID-19 poses. Regarding how the flexibilities introduced by the Bank’s 2016 procurement reform have improved the Bank’s ability to handle such an emergency, the introduction of HEIS has undoubtedly empowered the Bank’s procurement staff to adopt a more proactive stance in helping countries to conduct procurement under such trying market conditions; BFP would not have been possible without HEIS, of which it is an extension. Where supplies of goods were available in-country during the early days of the emergency, immediate measures taken by the Bank to enable countries to procure such supplies quickly, by agreeing to the use of Direct Selection, have demonstrably been effective, as in the Suriname example cited above. In mobilising offers of goods and medical equipment totalling more than US $1 billion in its first eight months of operation, one might reasonably conclude that the BFP initiative has been effective as an attempt to increase the ability of developing countries to source such supplies in spite of the unprecedented disruptions in global supply markets. Yet, with just 11 per cent by value of those offers having been converted into contracts signed, BFP’s contribution to the improvement of health outcomes of countries must be viewed as disappointing. The reasons for the low uptake, some of which are posited above, need to be better understood if the impact of the Bank’s efforts is to be improved in the future.

Critical COVID-19 Supplies by International Organisations: The World Bank  289 Given the impact of the changes to the application of its Procurement Policy and Regulations that the Bank has made in response to COVID-19, it is likely that this more interventionist stance will be mainstreamed into the Bank’s modus operandi and become part of how developing countries expect the Bank to support them in all future incidences of emergency or supply chain disruption. Equally, the Bank’s decision to adopt a centralised organisational model to deliver its procurement response to COVID-19, apparently viewing its decentralised, regionally disaggregated organisation as ill-suited to meet the challenges of a global emergency, may herald further changes to the organisation of the Bank’s procurement function when facing other global challenges, such as climate change. Regarding the degree of flexibility designed into its Procurement Policy and Regulations, it seems that the Bank has gone as far as it can for now. The next major change that would most dramatically improve the Bank’s ability to respond quickly to such global emergencies is one which its current governance arrangements do not allow it to take. Had the Bank’s procurement staff been authorised, in the implementation of the BFP programme, to procure critically needed supplies either as a procurement agent acting for and on behalf of its developing member countries or acting as a purchaser in its own right and then on-selling, presumably without a mark-up, to its member countries, the Bank would have been in a far stronger position to make timely market interventions and thereby secure the faster supply of materials and equipment to its client countries. As noted above, at the peak of the market disruptions, each day of delay in awarding a contract added two weeks to the delivery time of the goods. Under such conditions, for as long as the Bank is no more than an interlocutor between seller and buyer, reliant on the buyer’s own, often cumbersome, decision-making processes before committing to the award of a contract, the Bank is severely limited in what it can do to speed up procurement. The next challenge for Bank management will be to find a way to enable the Bank’s procurement staff to intervene more directly in the contract award process, so that the Bank can make a more substantive contribution to the challenge of delivering essential supplies and materials to those developing countries where they are so urgently needed.

290

12 Procurement and Distribution of Critical COVID-19 Supplies: The Experience of USAID JUN JIN* AND MARY McLAUGHLIN

I.  General Introduction As the largest bilateral donor of global health assistance in the world,1 the US Government has played a vital international role in combating infectious diseases. It invests more than US $10 billion in official development assistance in global health each year, with a significant portion of that funding dedicated to combating HIV/AIDS, malaria, tuberculosis, and other infectious diseases, including pandemic threats such as Ebola, Zika and now COVID-19.2 As a global leader in the fight against infectious disease threats and the Global Health Security Agenda,3 the US, typically working through its lead development agency, the US Agency for International Development (USAID), often serves at the forefront of any international pandemic response. Working within the interagency apparatus, USAID has led the US Government’s international COVID-19 response, pledging more than US $1.335 billion in support across more than 120 countries in 20204 and US $2 billion of a planned US $4 billion contribution to Gavi, the Vaccine Alliance, to support

* Any views expressed in this chapter are solely those of the authors in their private capacity and are not intended to represent the views of the US Government. 1 See Kaiser Family Foundation, ‘Breaking Down the US Global Health Budget by Program Area’ 1 (12 March 2020), available at www.kff.org/global-health-policy/fact-sheet/breaking-downthe-u-s-global-health-budget-by-program-area. 2 ibid. 3 See, eg, United States Agency for International Development, ‘Global Health Security’, available at www.usaid.gov/global-health/health-areas/global-health-security. 4 USAID, ‘USAID: COVID-19 Global Response – Fact Sheet #9 FY20’ 1 (9 September 2020), available at www.usaid.gov/sites/default/files/documents/09.09.20_-_USAID_COVID-19_Global_ Response_Fact_Sheet_9.pdf.

292  Jun Jin and Mary McLaughlin international vaccine efforts in early 2021.5 In March 2021, the US Congress appropriated an additional US $8.675 billion to the State Department and USAID for international COVID-19 activities. With its regular and emergency funding appropriated from the US Congress, USAID has provided assistance to address both the primary and secondary effects of the pandemic in countries around the world. At the same time, the COVID-19 pandemic has ravaged the US. As of 1 May 2021, it had reported more COVID-19 cases than any other country in the world, with more than 32 million Americans infected and more than 500,000 deaths.6 As a result, while the US has continued to demonstrate commitment to an international response, conditions within the country have demanded extensive domestic attention. This dynamic has, not surprisingly, impacted the US international response, driving changes to procurement policy and shaping the nature of the assistance provided. USAID’s pandemic response has involved the provision of funding through various means, including contracts, grants and agreements with multilateral institutions. Unless otherwise noted, this chapter refers to all such mechanisms as ‘procurements’. Due to the emergency nature of pandemic threats, the agency may exercise a number of authorities to streamline its ability to move quickly to address rapidly changing conditions and save lives. For its COVID-19 response, the agency has programmed a significant amount of its funding through assistance to multilateral entities and non-governmental organisations. USAID has also committed significant funding through contract vehicles, particularly for the procurement of ventilators from US manufacturers. At the same time, the agency has largely refrained from procuring certain other critical medical commodities in the early months of the crisis, such as personal protective equipment (PPE), due to sometimes desperate domestic need for these items. Domestic political considerations and events have significantly affected USAID’s international COVID-19 response. The inauguration of President Biden in January 2021, in particular, has ushered in a renewed commitment to multilateral engagement that will expand the partner base for the agency and its influence with other donors. At the same time, the agency’s activities continue to reflect a tension between a robust international response and a desire to strengthen US domestic production capacity and availability of medical commodities for US consumption. This chapter explores these dynamics while outlining how USAID has demonstrated flexibility to move swiftly to address a burgeoning global pandemic while accommodating evolving procurement policies and political considerations.

5 USAID, ‘USAID to provide initial $2 billion to propel global access to COVID-19 vaccines’ (19 February 2021), available at www.usaid.gov/news-information/press-releases/feb-19-2021-usai d-provide-initial-2-billion-propel-global-access-covid-19. 6 For current statistics, see, eg, coronavirus.jhu.edu.

Critical COVID-19 Supplies: The Experience of USAID  293

II.  The Regulatory Framework A.  Legal, Regulatory and Policy Framework for USAID Procurement Established in 1961, USAID is the primary foreign assistance agency of the US Government and operates in approximately 100 developing countries. Section  635(b) of the Foreign Assistance Act of 1961 (FAA) provides broad authority to the US President to ‘make loans, advances, and grants to, make and perform agreements and contracts with, or enter into other transactions with, any individual, corporation, or other body of persons, friendly government or government agency’.7 Such authority is delegated from the President to the Secretary of State to the USAID Administrator.8 USAID obligates most of its programming budget through procurement, grant, and other financing instruments, which serve as the primary mechanisms by which USAID accomplishes its programmatic objectives.9 As with other US government agencies, USAID’s contracts and grants are governed by federal regulations. For-profit and non-profit organisations, many of which have substantial experience working with USAID, receive the majority of these awards. For the US Government’s 2020 fiscal year,10 USAID obligated US $21.4 billion through contract and grant vehicles.11 Of that amount, 29 per cent flowed through contracts and 71 per cent flowed through grants. For contracts, USAID generally follows the same procurement rules that govern other US government agencies. For most US government agencies, the Federal Acquisition Regulation (FAR), 48 CFR Chapter 1, sets forth the various requirements applicable to procurement. Such requirements originate in statute, executive orders, or policy. The most significant statute that governs US government procurement is the Competition in Contracting Act (41 USC § 3301), which requires full and open competition for the procurement of goods and services. Most agencies have also promulgated agency-specific supplements to the FAR issued in accordance with external rulemaking requirements in the Administrative Procedures Act, such as the USAID Acquisition Regulation (AIDAR), 48 CFR 7 § 635 of the Foreign Assistance Act, 22 USC § 2395(b). 8 See Executive Order 12163 and State Department Delegation of Authority 293-1. 9 See USAID, ‘Bureau for Management Office of Acquisition and Assistance Fiscal Year 2020 Progress Report’ (19 February 2021), available at www.usaid.gov/sites/default/files/documents/2020ProgressReport-03-01-2021.pdf. 10 The US Government’s fiscal year runs from 1 October to 30 September. 11 For the purpose of this chapter, ‘contracts’ refer to binding agreements for purposes of obtaining a good or service to meet a USAID-specified requirement, whereas ‘grants’ refer to both grants and cooperative agreements executed by USAID to provide funding to an organization in support of its own programme to effectuate a public benefit. See the Federal Grant and Cooperative Agreement Act of 1977, codified at 31 USC § 6301, et seq for more information on the distinction between contracts, grants, and cooperative agreements.

294  Jun Jin and Mary McLaughlin Chapter 7, as well as internal agency policies, procedures, and guidance directed at agency officials to carry out the procurement function, such as Chapter 302 of the USAID Automated Directives System (ADS). As it relates to domestic preferencing rules for foreign aid procurements authorised under the FAA, USAID and its contractors and recipients (via subcontracts) may purchase goods and services from providers incorporated or legally organised in the US, the recipient country, and non-advanced developing countries, as measured based upon the World Bank’s per capita income statistics.12 USAID and its partners may only procure goods and services from providers from advanced developing or developed countries after approval of a waiver from a USAID senior official. For grants, USAID generally follows the same rules that apply to other US agencies, including the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2 CFR Part  200. USAID also has agency-specific external regulations applicable to grants at 2 CFR Part 700 as well as internal policy, procedures, and guidance in ADS Chapter 303 and other relevant chapters. USAID relies upon the general authority in Section 635(b) of the FAA to enter into agreements and other transactions with multilateral organisations, such as the United Nations Children’s Fund (UNICEF), and Gavi, the Vaccine Alliance, to fulfill the agency’s mandate. Such agreements do not constitute contracts or grants. Therefore, the terms and conditions incorporated into such agreements flow from legal or policy requirements generally applicable to foreign assistance funds, rather than from laws and regulations governing contracts and grants.

B.  Emergency Procurement Authorities Part 6 of the FAR provides specific authorities that US government agencies can invoke to award contracts on an other than full and open competition basis. FAR 6.302-2 authorises agencies to award contracts non-competitively upon a finding of ‘an unusual and compelling urgency’ and where ‘Delay in award of a contract would result in serious injury, financial or other, to the Government.’ FAR 6.302-7 permits agencies to award non-competitive contracts if the head of an agency (non-delegable) determines that it is ‘not in the public interest’ to compete the contract. In addition to the US government-wide authority in § FAR Part 6, USAID and other agencies possess additional legal authority under 40 USC § 113 to noncompetitively award contracts ‘with respect to any program conducted … for

12 See § 604(a) of the FAA, 22 USC § 2354 and Title 22, Code of Federal Regulations, § 228.12. For a more detailed discussion about USAID’s domestic preferencing requirements, see Public Procurement and Aid Effectiveness (Hart Publishing, 2019) ch 14, 313-43.

Critical COVID-19 Supplies: The Experience of USAID  295 foreign aid, relief, or rehabilitation’.13 Despite that broad authority, 40 USC § 113 also states that USAID shall ‘to the maximum extent practicable, consistent with the purposes of the program and the effective, efficient conduct of agency business, coordinate its operations with the requirements of this subtitle and with policies and regulations prescribed under this subtitle’.14 Therefore, despite the legal authority to award contracts without competition, USAID only does so on an exceptional, as-needed basis as it can procure most of its goods and services under full and open competition. For grants and cooperative agreements, no specific law or regulation explicitly requires full and open competition (referred to as ‘unrestricted eligibility’).15 However, as a matter of policy, ADS Chapter 303 requires unrestricted eligibility except in certain instances, such as disaster relief or other instances approved by the USAID Administrator (typically in response to a natural or manmade disaster). USAID possesses full discretion to direct funding to multilateral organisations without competition. In response to a pandemic, representatives of USAID and multilateral organisations such as UNICEF, the World Health Organization (WHO), and the World Food Programme may engage in discussions that would quickly result in a funding agreement. This ability to execute agreements without competition allows USAID to collaborate with multilateral organisations that possess comparative advantage through their global reach, presence on the ground, and ability to harness and coordinate resources from across the donor community.

III.  Description of the Programmes in Place and Issues that Arise A.  USAID’s COVID-19 Strategy The US Government’s international COVID-19 strategy evolved following the change in presidential leadership in January 2021. While USAID support to combat the COVID-19 pandemic began in early 2020, it is clear that its 2021 activities under President Biden will reflect a stronger commitment to multilateral engagement than those undertaken during President Trump’s administration in 2020. 13 40 USC § 111 provides that the words ‘this subtitle’ are deemed to refer also to 41 USC § 3301 and §§ 3303-3304, among others. Those Title 41 sections set out the requirements for full and open competition, competition after exclusion of sources, and other than full and open competition. The sections noted above, as read together, provide the legal authority for USAID to award contracts on other than a full and open competitive basis when competition would otherwise impair foreign aid programmes. 14 Part 706 of the AIDAR provides specific details on invoking the ‘foreign impairment’ rule. 15 ADS 303.6.5.

296  Jun Jin and Mary McLaughlin USAID’s initial COVID-19 strategy reflected the rapidly expanding nature of the pandemic threat in the early months of 2020. On 7 February 2020, the State Department announced a US $100 million commitment of existing funds to combat the threat in affected and at-risk countries.16 Recognising the scale of the growing pandemic and the domestic threat, in March 2020, the US Congress passed legislation appropriating several trillion dollars focused largely on domestic stimulus but including more than US $1.3 billion for USAID’s international response.17 In April 2020, USAID, together with the State Department, publicly announced their strategic vision for responding to the COVID-19 pandemic overseas, seeking to:18 • protect American citizens and the US government community overseas, facilitate the continuation of US government work overseas, and communicate effectively; • prevent, prepare for, respond to, and bolster health institutions to address the COVID-19 pandemic and the possible re-emergence of the disease; • prevent, prepare for, and respond to COVID-19 in existing complex emergency settings, and address the potential humanitarian consequences of the pandemic; and • prepare for, mitigate, and address second-order economic, security, stabilisation and governance impacts of COVID-19. The results of the November 2020 US presidential election have impacted USAID’s COVID-19 strategy. The Biden administration has demonstrated a stronger commitment to an international response and the role of multilateral institutions in it. In December 2020, the US Congress appropriated additional funding for USAID, including US $4 billion for a US contribution to Gavi to support international vaccines, US $2 billion of which USAID contributed to Gavi in early 2021.19 In January 2021, the Biden administration released its National Strategy for the COVID-19 Response and Pandemic Preparedness. The plan’s international strategy, among other things, seeks to restore the US relationship with multilateral partners and US leadership in the international response as well as surge the international public health and humanitarian response.20 In  March 2021, 16 USAID, ‘The United States announces assistance to combat the novel coronavirus,’ (7 February 2020). 17 See the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (PL 116-23); see also the Coronavirus Aid, Relief, and Economic Security Act (PL 116-36). 18 USAID, ‘COVID-19 Global Response Fact Sheet #1, FISCAL YEAR (FY) 2020’ 2 (21 April 2020), available at www.usaid.gov/sites/default/files/documents/352986/04.21.20-USAID-COVID-19-Glob al-Response-Fact-Sheet-1.pdf. 19 Consolidated Appropriations Act, 2021, Division K – Department of State, Foreign Operations, and Related Programs Appropriations Act, 2021, Title IX – Emergency Funding and Other Matters (PL 116-260). 20 ‘National Strategy for the COVID-19 Response and Pandemic Preparedness’ 106 (January 2021).

Critical COVID-19 Supplies: The Experience of USAID  297 the US Congress appropriated an additional US $8.675 billion to the State Department and USAID for international COVID-19 activities, ­dwarfing the 2020 resources.21

B.  Use of Procurement to Supply Needed Goods and Services To understand how USAID has used procurement in its COVID-19 response, it is important to outline the agency’s general practices for programme implementation. USAID does very little direct procurement, typically working instead through contractors, non-governmental organizations (NGOs), and multilateral entities, which may procure needed goods and services with USAID funding. Implementing partners range from large US-based contractors and NGOs to smaller local partners and include non-profits, private sector entities, universities, government ministries, and faith-based and community organisations. USAID utilises a variety of mechanisms to programme funding, including contracts, grants and agreements with multilaterals. To work with the agency’s vast array of partners, USAID operating units around the world issue awards. This decentralised procurement process results in large global projects managed by USAID staff in Washington, DC headquarters as well as thousands of typically smaller awards issued by USAID country offices (called ‘missions’) around the world. These varied approaches facilitate USAID’s ability to flexibly use global programming while tailoring projects for specific countries, depending on need. Consistent with these general trends, USAID has worked through a variety of implementing partners and mechanisms to support a broad range of activities to respond to the pandemic. For example, USAID reported using 220 awards across 41 countries to programme US $558 million for the humanitarian assistance component of its response in 2020.22 Agency activities have varied, including commodity and equipment procurement, training and technical assistance, across a broad range of development sectors.23 Consistent with the agency’s strategy, much of USAID’s early effort focused on global health and humanitarian assistance to address the immediate needs of affected and at-risk countries and vulnerable populations. Activities also focused on the potentially devastating second order impacts of the pandemic, affecting sectors such as economic growth, education and governance. It is too early to assess how USAID will utilise the significant additional resources appropriated by the US Congress in 2021. 21 American Rescue Plan Act of 2021, TItle X – Committee on Foreign Relations, Section 10003 – Global Response (PL 117-2). 22 ‘USAID, ‘Fact Sheet #9’ (2020) 1 (n 4). 23 USAID has published extensive project-specific information by region in fact sheets available at www.usaid.gov/coronavirus/fact-sheets.

298  Jun Jin and Mary McLaughlin It is worth focusing on several activities in particular because they highlight the impact of US domestic considerations on USAID’s international response as well as a trend towards increasing multilateral engagement. These activities relate to ventilators, personal protective equipment (PPE) and vaccines. Ventilators: In 2020, USAID worked in coordination with the US National Security Council and interagency partners to finance the procurement of ventilators for developing countries.24 Relying on a Washington-based global health supply chain contract (discussed in the next section), USAID obligated more than US $200 million to procure more than 8,000 ventilators, largely produced in the US, and donated them to nearly 40 countries as of 2 November 2020.25 As discussed in section V, USAID’s procurement reflected a broader US government plan to bolster domestic production of ventilators. PPE: USAID has also financed activities relating to PPE, to varying degrees. In the early days of the pandemic, USAID supported the provision of PPE to a number of countries in Asia.26 As described in section V, however, USAID eventually restricted the use of its funding for PPE procurement in 2020 due to shortages in the US, a policy that remained in place until late April 2021.27 Despite the procurement restrictions, USAID has funded partners to support local production of commodities, such as PPE, to address COVID-19. USAID guidance restricting PPE procurement explicitly permitted the use of funds to support the local production of, and regulatory approval and quality assurances for, PPE.28 Such projects both increase the supply of available PPE and promote economic growth locally in a challenging environment.29 Vaccines: USAID support for international vaccines has shifted with the presidential changeover in January 2021. In September 2020, reports surfaced that the US Government had declined to participate in an international vaccine effort, the 24 USAID, ‘Fact Sheet #9’ (2020) (n 4). 25 USAID, ‘Saving Lives with Ventilators’ 1, available at www.usaid.gov/sites/default/files/documents/ Ventilator_Fact_Sheet_11.02.2020.pdf; USAID, ‘Update: State Department: The United States Continues to Lead the Global Response to COVID-19’ (18 June 2020), available at www.usaid.gov/news-information/ coronavirus/fact-sheets/jun-18-2020-update-united-states-continues-lead-global-response-covid-19. 26 On 2 March 2020, USAID reported that, in coordination with the White House Coronavirus Task Force and WHO, it had responded to country requests for PPE from the agency’s emergency international PPE stockpile. See USAID, ‘Statement by USAID Administrator Mark Green on the Commitment of $37 Million in Assistance to Respond to Novel Coronavirus COVID-19’ (2 March 2020), available at www.usaid.gov/news-information/press-releases/mar-2-2020-administrator-green37-million-assistance-novel-coronavirus-covid-19. Throughout February and March 2020, USAID announced it had provided PPE to certain countries. 27 USAID, ‘Answers to Frequently Asked Questions (FAQs) on Personal Protective Equipment (PPE)/Covered Materials’, 30 April 2021, available at www.usaid.gov/sites/default/files/documents/ FAQs_on_PPE_Procurement_30Apr2021.pdf. 28 USAID, ‘Answers to Frequently Asked Questions (FAQs) on Personal Protective Equipment (PPE)/Covered Materials’, 24 November 2020’, available at www.usaid.gov/sites/default/files/documents/Updated_PPE_FAQs-November_24_2020.pdf. 29 See eg, USAID, ‘USAID Linkages Small and Medium Enterprises (LINKSME) Project Facilitates Additional Export of Medical Personal Protective Equipment (PPE) from Vietnam to the United States’ (1 May 2020), available at www.usaid.gov/vietnam/program-updates/may-2020-usaid-linkages-smalland-medium-enterprises-linksme-project-facilitates-ppe.

Critical COVID-19 Supplies: The Experience of USAID  299 Vaccines Global Access Facility known as COVAX.30 Led by Gavi, the Coalition for Epidemic Preparedness Innovations (CEPI), and WHO, COVAX seeks to fund research, development and manufacture of vaccines on behalf of participating countries, ensuring equitable access to vaccines regardless of a country’s wealth.31 On 8 December 2020, President Trump issued an Executive Order that directed the US Government to prioritise the provision of vaccines domestically before supporting international vaccine efforts.32 Pursuant to the order, once domestic needs are met, USAID will work with other US agencies to facilitate international access to vaccines. Upon taking office in January 2021, however, President Biden shifted course on COVAX, committing to support the international effort.33 With funding appropriated by the US Congress, USAID announced that it intended to provide an initial US $2 billion of a planned US $4 billion contribution to Gavi to support COVAX in February 2021.34

C.  Existence and Use of Recurring Purchasing Methods through Framework Agreements USAID regularly utilises framework agreements (referred to in the US as indefinite delivery, indefinite quantity or IDIQ contracts) to procure certain types of goods and services that might serve to benefit a region or globally.35 As mentioned above, one may characterise USAID’s procurement model as ‘indirect’ in the sense that USAID typically enters into a large contract with an organisation (often a for-profit company) or a joint venture made up of several companies that will have privity of contract with USAID. If a US government agency chooses to utilize an IDIQ contract, it can either enter into multiple-award IDIQ contracts with several ‘holders’ of the contract or a single-award IDIQ contract with only one holder. Once an agency selects the holders of IDIQ contracts through a competitive process, the holder(s) then have a ‘base contract’ with the agency with only a minimum guaranteed amount for the holder.36 Once an agency’s requirements are relatively well-known, it may then proceed to issue task orders, which serve as the main contract vehicle through which most of the funding flows. For years, USAID’s largest contract has provided global health commodities and supply chain support to country programmes around the world. In 2014, 30 See Washington Post, ‘US says it won’t join WHO-linked effort to develop, distribute coronavirus vaccine’ (1 September 2020), available at www.washingtonpost.com/world/coronavirus-vaccinetrump/2020/09/01/b44b42be-e965-11ea-bf44-0d31c85838a5_story.html. 31 See Gavi, the Vaccine Alliance, ‘COVAX explained’ (3 September 2020), available at www.gavi.org/ vaccineswork/covax-explained. 32 Executive Order 13962, Section 4. 33 ‘National Strategy for the COVID-19 Response and Pandemic Preparedness’ (2021) 111. 34 ‘USAID to provide initial $2 billion to propel global access to COVID-19 vaccines’ (2021) (n 5). 35 41 USC § 4103 authorises US government agencies such as USAID to enter into IDIQ contracts (also referred to as delivery or task order contracts). 36 FAR 16.504(a)(2).

300  Jun Jin and Mary McLaughlin USAID issued a solicitation for a follow-on single-award IDIQ contract, merging both of its previous supply chain contracts into one large mechanism.37 The  agency awarded the new contract, referred to as the Global Health Supply Chain Program – Procurement and Supply Management (GHSC-PSM) project, in April 2015 to Chemonics International, Inc following a full and open competition. After several unsuccessful bid protests, the project launched in 2016. With a contract ceiling of US $9.5 billion, the contractor addresses supply chain needs across all technical areas, including HIV/AIDS, malaria, family planning and reproductive health, maternal and child health, and emerging pandemic threats such as Ebola, Zika and COVID-19.38 In addition to purchasing and delivering health commodities, the contractor provides health system technical assistance to strengthen national supply chain systems and engages stakeholders around the world to foster global collaboration in global health supply chains. USAID has utilised the GHSC-PSM contract to provide critical goods and services during the COVID-19 pandemic.39 As noted above, USAID has invested more than US $200 million in procuring and delivering ventilators through the contract. The contract has also provided a range of other pharmaceuticals and medical equipment and supplies. In addition, GHSC-PSM has taken a number of steps to assist countries in ensuring stable supply chains for global health commodities, both COVID-related commodities as well as other goods potentially affected by disrupted global supply chains. This has included the development of tools, guidelines, and recommendations and provision of other technical assistance.

D.  Use of Regular or Accelerated Tendering Procedures USAID’s response to the COVID-19 pandemic reflects the agency’s general programmatic realities. In the early days of the pandemic, the agency had at the ready hundreds of existing awards through which it could potentially programme funding urgently. Depending on the existing scope and financial commitment of these mechanisms, the agency could, in some cases, programme funding without amending awards to do so. In other cases, the agency needed to modify existing awards or enter into new awards to address the pandemic. This would require the exercise of special authorities for both acquisition and assistance awards.40 37 In May 2018, USAID’s then Senior Deputy Assistant Administrator testified before Congress on the GHSC-PSM contract, including the history of the agency’s global health supply chain programme. This testimony is available at www.usaid.gov/news-information/congressional-testimony/may-172018-sdaa-global-health-irene-koek-supply-chain. 38 For more information, see www.ghsupplychain.org. 39 The GHSC-PSM contract provides regular updates on its work to support USAID’s COVID-19 response, available at www.ghsupplychain.org/COVID-19-Updates. 40 As noted in section II above, USAID is not required to compete awards to multilateral organisations, and as a result did not need special authorities to enter into or modify existing awards with such entities.

Critical COVID-19 Supplies: The Experience of USAID  301 On 27 March 2020, the USAID Administrator approved an Expedited Procedures Package (EPP) for Responding to Outbreaks of Contagious Infectious Diseases.41 For contracts, the Administrator relied on authority contained in AIDAR Section 706.302-70(b)(3)(iii) to determine that it was necessary to provide exceptions to competition in the award and modification of contracts in support of USAID’s response to certain outbreaks to avoid impairment of US foreign assistance and foreign policy objectives.42 For grants, the EPP includes a similar blanket determination permitted under USAID’s ADS 303 authority to restrict eligibility for an approved class of awards.43 In addition to streamlining competition requirements, the EPP also facilitates the ability of USAID and its partners to procure necessary goods and services from almost any country in the world. As noted in section II above, USAID’s general source nationality regulations permit procurement from the US, the recipient country, and developing countries other than advanced developing countries, but excluding any country that is a prohibited source.44 In practice, this means that a partner could not use USAID funds to procure goods and services from advanced or advanced developing countries without a waiver. Through the EPP, the USAID administrator approved a blanket waiver to permit outbreak-related procurement of goods and services from any country except those restricted for foreign policy reasons or under sanctions imposed by the US and/or the UN. It is worth noting that although USAID could generally rely on this ‘source and nationality’ waiver for COVID-related procurements, other policies restricted its use for certain goods, as described further in section V. The EPP provided USAID and its partners with increased flexibility to address the pandemic, while also minimising administrative burdens due to its blanket waiver of certain requirements. For contracts, USAID requires that agency operating units relying on the EPP for non-competitive actions publicly post the Justification and Approval for the action.45 There is no similar requirement for grants. Based on the publicly available information for contracts as of 1 May 2021, the agency has used the EPP more than two dozen times for a wide range of COVID-19 activities.46 Activities targeted various sectors affected by COVID-19, including global health, education, economic growth, governance and agriculture. Most of the actions extended existing contracts by approximately one year with ceiling increases typically less than US $5 million but as high as US $50 million.

41 USAID, ‘Expedited Procedures Package (EPP) for Responding to Outbreaks of Contagious Infectious Diseases’, available at www.usaid.gov/work-usaid/resources-for-partners/covid-19-guidanceimplementing-partners/expedited-procedures-package-epp. 42 ibid, Tab 1. 43 ibid, Tab 2. 44 See § 604(a) of the Foreign Assistance Act, 22 USC § 2354 and 22 CFR 228.03. 45 USAID, ‘Guidance for Use of the Authorities under Expedited Procedures Packages (EPPs) – a Mandatory Reference for ADS Chapters 302, 303, and 309,’ Section II (b) at 3, available at www.usaid. gov/sites/default/files/documents/1868/302mbo.pdf. 46 Information on specific uses of the EPP for procurement actions is available at sam.gov.

302  Jun Jin and Mary McLaughlin In  some cases, the agency also utilised the EPP to expand a contract’s scope to permit COVID-related activities. In a few cases, the agency relied on the EPP to award sole source contracts with similar dollar values.

E.  Use of Multilateral Partners to Support COVID-19 Response USAID has a long history of providing funding to multilateral organisations to support its international activities. Project-specific grants and general contributions to such organisations typically result in the downstream procurement of goods and services. Where a multilateral organisation uses USAID funding for such activities, it typically does so in accordance with the organisation’s own procurement policies and procedures, pursuant to the standard terms and conditions of USAID agreements with multilateral organisations.47 USAID’s relationship with multilateral organisations shifted dramatically from 2020 to 2021. Under the Trump administration, USAID relied on certain multilateral organisations to support specific COVID-19-related projects. This included grants to the World Food Programme, UNICEF, the United Nations Development Programme, the International Office of Migration, and the International Federation of Red Cross and Red Crescent Societies.48 At the same time, President Trump shifted away from a longstanding partnership with the WHO, ordering the US Government’s withdrawal from the WHO despite its critical role in the global pandemic fight. In early 2020, USAID had provided resources to the WHO to help affected and at-risk countries address the threat of COVID-19 through activities such as testing, contact tracing and training of healthcare providers.49 USAID had also worked with WHO to provide PPE to certain countries in need of the commodities.50 However, on 15 April 2020, President Trump announced a hold on further US funding to WHO,51 and on 6 July 2020, the US formally notified the WHO of its intention to withdraw from the organisation due to its assessment that WHO failed to adopt crucial reforms, including a demonstration of independence from China.52 Consistent with these policy decisions, USAID ceased providing almost all funding to WHO, with exceptions that were subsequently granted for

47 USAID, ‘Standard Provisions for Cost-Type Agreements with Public International Organization (PIOs) – a Mandatory Reference for ADS Chapter 308’, M.10 Financial Management, Procurement, and Evaluation (April 2011), available at www.usaid.gov/ads/policy/300/308mab. 48 USAID provides information about grants to these and other partners on its COVID-19 website, available at www.usaid.gov/coronavirus/fact-sheets. 49 USAID, ‘Statement by USAID Administrator Mark Green’ (2020). 50 USAID, ‘Fact Sheet #1’ (2020) 3. 51 White House, ‘President Donald J. Trump Is Demanding Accountability from the World Health Organization’ (15 April 2020), available at www.whitehouse.gov/briefings-statements/president-donaldj-trump-demanding-accountability-world-health-organization. 52 See Congressional Research Service, ‘US Withdrawal from the World Health Organization: Process and Implication’ (21 October 2020), available at fas.org/sgp/crs/row/R46575.pdf.

Critical COVID-19 Supplies: The Experience of USAID  303 select polio eradication and humanitarian assistance activities.53 As noted above, the Trump administration also declined to support COVAX, an international effort led by multilateral institutions such as WHO, Gavi and CEPI. The Biden administration has expressly committed to stronger engagement with multilateral organisations as part of its COVID-19 strategy. In January 2021, President Biden specifically called for re-engagement with the WHO and support for COVAX,54 and as noted above, USAID committed to provide US $2 billion to Gavi in February 2021, reflecting this commitment. While it is not yet known how much additional funding USAID will provide multilateral institutions to support COVID-19 activities, it is already apparent that the agency will work more closely with multilateral partners to address the pandemic.

IV.  Monitoring and Oversight Measures to Manage Fraud Risks in Procurement Procuring goods and services for use in the developing world entails risks for fraud that are well documented. Long-term sustainable development requires working with local suppliers as prime contractors or subcontractors; however, in some cases, such partners are not accustomed to the rigorous audit and oversight demands that flow from becoming a recipient of US government funding. This leads to both performance and integrity risks to the US Government. Even in a normal operating environment, fraud risks are relatively high for developmentfinanced projects. These risks are even greater during a global pandemic where travel restrictions make it difficult for USAID staff, third-party monitors, and auditors and investigators from USAID’s Office of the Inspector General (OIG) to visit project sites in the normal course of business to ensure proper monitoring and oversight. The US Congress appropriated funding to ensure oversight over the US COVID-19 response. This includes US $1 million specifically for the USAID OIG to conduct oversight over USAID’s COVID-19 supplemental funds.55 In addition, Congress provided US $20 million to the Government Accountability Office (GAO), the supreme audit institution of the US Government, to perform audits and investigations and conduct regular monitoring and oversight of all agencies receiving COVID funding, including USAID.56 Both the OIG and the GAO have commenced their reviews of various aspects of USAID’s COVID-19 response.57 USAID has taken proactive steps to ensure continued oversight over its funding despite the pandemic’s challenges. For example, the agency has issued guidance 53 ibid. 54 ‘National Strategy’ (n 20) 109-11. 55 Coronavirus Aid, Relief, and Economic Security Act (n 17). 56 ibid, Title IX. 57 See www.gao.gov/reports/GAO-20-625/ and oig.usaid.gov/sites/default/files/2020-10/COVID-19 %20Information%20Brief%2009.21.20.pdf.

304  Jun Jin and Mary McLaughlin and best practices for USAID staff and implementing partners to make the best use of evolving and new practices to track performance and conduct compliance.58 Such guidance includes using mobile phone technology to obtain data from beneficiaries, civil society representatives, or third-party monitors on the ground, geospatial monitoring on an indicator basis, and use of satellite imagery to verify work performed or results achieved. There is not yet evidence of significant procurement fraud or abuse relating to USAID’s COVID-19 response.59 However, allegations and investigations of fraud, waste and abuse under procurement typically arise many months into project implementation. Given the early stage of the response, it is too soon to tell whether issues may arise despite USAID’s efforts.

V.  Use of Procurement for Industrial or Social Objectives USAID’s COVID-19 response provides a unique example of how procurement can often serve collateral and competing objectives. Two well-publicised instances demonstrate the sometimes political nature of aid and how governments can use procurement as a vehicle to accomplish public policy goals distinct from attaining best value for goods and services – perhaps the most universally agreed-upon primary function of public procurement. The first instance reflects the impact of COVID-19 in the US. Several months into the global pandemic, the US emerged as the country with the largest number of confirmed cases, a dynamic evolving at the same time that USAID received its appropriation to assist developing countries respond to COVID-19. The potential public perception and actual concern that the US Government would use taxpayer funds to procure PPE for the benefit of developing countries at the expense of US citizens led the government to take steps to minimise the risk of such occurrence. The second instance, USAID’s ventilator procurements, evokes both longstanding debates on domestic preferencing requirements and the use of aid to support domestic economic actors as a priority over funding other known health interventions. Both instances are explored further below.

A.  Personal Protective Equipment As outlined above, following the emergence of COVID-19 in early 2020, USAID’s Administrator approved a ‘source and nationality waiver’ that authorised 58 www.usaid.gov/sites/default/files/documents/15396/USAID_Remote_Monitoring_Guide_-_ May_2020.pdf. 59 As of October 2020, the only publicly acknowledged investigation relating to USAID’s COVID response dealt with the theft in Florida of US $3 million worth of ventilators destined for El Salvador. The ventilators were recovered. However, no allegations of contractor impropriety have surfaced.

Critical COVID-19 Supplies: The Experience of USAID  305 COVID-related procurements on an untied basis (ie, without regard to the supplier’s place of incorporation).60 With the waiver, implementing partners no longer had to devote time and resources to determine the eligibility of vendors by nationality to ensure compliance with more restrictive procurement rules and risk a subsequent determination of a cost disallowance. Despite the flexibility authorised under the March 2020 waiver, the worsening domestic COVID-19 situation began to influence USAID and other US government agency policies on procurement. Around this time, US domestic demand for PPE, ventilators and medicines threatened to overtake available supply. News reports highlighted the plight of US healthcare workers forced to reuse PPE or engage in other unadvisable practices due to shortages of these commodities. Recognising the growing domestic threat, President Trump took several steps to improve the supply of these items in the US. Such steps included delegating to the Secretary of the Department of Health and Human Services (HHS) the authority to take steps to ‘prevent hoarding of health and medical resources’ to respond to the spread of COVID-19 domestically,61 designating certain items as ‘scarce’, including N95 facemasks and other filtering facepiece respirators, ventilators, medical gowns, medical gloves, disinfecting devices and products, and pharmaceuticals with hydroxychloroquine,62 and instructing certain agencies to take necessary steps to allocate for domestic use various types of scarce materials required by healthcare providers in the US.63 The Federal Emergency Management Agency (FEMA) subsequently issued a regulation, effective 10 April 2020 and revised 10 August 2020 and 31 December 2020, that banned the exportation of certain PPE from the US, including certain types of respirators, surgical masks and gloves.64 Due to shortages in the US and steps by the US Government to meet domestic PPE demand during this period, USAID worked with the interagency to align its PPE procurement guidance with the developing domestic policy. In late April 2020, USAID placed a temporary pause on PPE procurement by its contractors and grant recipients.65 On 7 May 2020, USAID issued guidance authorising financing of projects to support the local production of medical and non-medical grade PPE.66 On 8 June 2020, USAID issued revised guidance and incorporated a special 60 USAID, ‘Expedited Procedures Package (EPP)’ (n 41) Tab 3. 61 See www.federalregister.gov/documents/2020/03/26/2020-06478/preventing-hoarding-of-healthand-medical-resources-to-respond-to-the-spread-of-covid-19. 50 USC § 4512 (a part of the Defense Production Act) prohibits the hoarding of certain scarce materials essential to the national defense. 62 See www.govinfo.gov/content/pkg/FR-2020-03-30/pdf/2020-06641.pdf. 63 See https://it.usembassy.gov/memorandum-on-allocating-certain-scarce-or-threatened-health-andmedical-resources-to-domestic-use/. 64 See www.federalregister.gov/documents/2020/12/31/2020-29060/prioritization-and-allocation-ofcertain-scarce-and-critical-health-and-medical-resources-for. 65 See USAID OIG, ‘Office of the Inspector General’s COVID-19 Information Brief ’ 8–9 (21 September 2020), available at oig.usaid.gov/sites/default/files/2020-10/COVID-19%20Information %20Brief%2009.21.20.pdf. 66 See ibid, 8.

306  Jun Jin and Mary McLaughlin provision into existing and new contracts and grants to prohibit the procurement of certain types of PPE, tracking the FEMA export ban list.67 The restriction included several exceptions, permitting USAID implementing partners to purchase PPE for use by their employees or in furtherance of program implementation, including for the protection of beneficiaries, as long as such PPE is manufactured locally or regionally and is not reasonably expected to be otherwise exported to the US to meet domestic needs to respond to the COVID-19 pandemic.68 In late April 2021, USAID rescinded its 2020 PPE guidance, and as a result, there are no longer any specific policy restrictions on PPE procurement using USAID funds.

B. Ventilators In March and April 2020, President Trump invoked legal authority in the Defense Production Act (50 USC §§ 4501 et seq) to instruct certain US manufacturers to produce PPE and ventilators to assist with the domestic response based on projected demand outstripping current supply in the US Government’s stockpile.69 In an unexpected turn of events, after several months of reports of increased hospitalisations and concerns about the ventilator shortage, the rapid increase in production of ventilators, due in large part to the President’s issuance of Defense Production Act orders, led to the ventilator supply significantly exceeding domestic need. In April 2020, President Trump announced his intention to offer excess ventilators to a number of countries, including in the developing world, to assist them in addressing their own COVID-19 burden.70 Soon thereafter, HHS, FEMA and the National Security Council identified manufacturers and countries and instructed USAID to procure ventilators in accordance with the interagency arrangement.71 As noted previously, USAID utilised its existing GHSC-PSM contract to arrange for the procurement and delivery of more than 8,000 ventilators, mostly manufactured in the US, to nearly 40 countries.72 67 See ‘USAID Guidance on PPE’ (8 June 2020), available at www.usaid.gov/sites/default/files/ documents/1868/USAID_Guidance_on_PPE_-_June_2020_WRS.pdf. USAID updated an associated Frequently Asked Questions document on 24 November 2020 to capture some additional revisions related to the PPE procurement policy guidance. 68 See www.usaid.gov/sites/default/files/documents/Updated_USAID_Guidance_on_PPE_Covered_ Material_-_August_26_2020.pdf. 69 See www.whitehouse.gov/briefings-statements/statement-president-regarding-defense-productionact-2 (‘Today, I have issued an order under the Defense Production Act to more fully ensure that domestic manufacturers can produce ventilators needed to save American lives.’) 70 See White House Press Briefing at www.whitehouse.gov/briefings-statements/remarks-presidenttrump-members-coronavirus-task-force-press-briefing-2. 71 See oig.usaid.gov/sites/default/files/2020-10/COVID-19%20Information%20Brief%2009.21.20.pdf and oig.usaid.gov/sites/default/files/2021-02/4-936-21-002-P_0.pdf. 72 Of this total number of ventilators, USAID furnished 200 units to the North Atlantic Treaty Organization for its stockpile to assist allies (www.nspa.nato.int/news/2020/covid19-response-unitedstates-delivers-ventilators-for-nato-stockpile), 200 units to Russia (ru.usembassy.gov/delivery-of-u-sventilators-to-russia) and 100 units to Italy.

Critical COVID-19 Supplies: The Experience of USAID  307 The ventilator programme serves as an interesting example of the use of procurement in foreign aid to accomplish several purposes at once. The first ostensible purpose is to support developing countries to respond to health needs: providing ventilators as in-kind grant aid demonstrated the US Government’s willingness and ability to mobilise its vast resources and serve as a manifestation of the ‘traditional humanitarian ideals of the American people’.73 The second purpose is economic and political: the ventilator programme provided business opportunities for domestic manufacturers to sell to the US Government and create jobs. The third purpose is health and national security: the COVID-19 experience laid bare the challenges in maintaining a Strategic National Stockpile of essential medical supplies and the desire to build domestic manufacturing capabilities to reduce reliance on foreign suppliers.74

VI.  The Pandemic as a Catalyst for Procurement Reforms A.  Using Procurement Policy to Increase Domestic Manufacturing Capacity of Critical Medical Supplies and Provide Business Opportunities for US Providers In spring 2020, news reports surfaced about a possible presidential memorandum that would require the procurement of central medical supplies from the US for foreign assistance activities in response to COVID-19.75 Although language exists in legislation regarding preferences for pharmaceuticals made in the US, USAID procurement rules do not include an express ‘buy American’ requirement. In order to create the needed flexibility for USAID to comply with any possible future direction to buy only US-made supplies in furtherance of its COVID-19 response, USAID revised its source and nationality rule.76 While President Trump did not issue a foreign assistance procurement directive for COVID-19, on 6 August 2020, he issued the Executive Order on Ensuring Essential Medicines, Medical Countermeasures, and Critical Inputs Are Made in the United States.77 This order applies to all US government agencies and is not limited to foreign assistance or COVID-19-related goods. The document 73 § 101 of the FAA, 22 USC § 2151. 74 See GAO Report 20-701 titled ‘COVID-19: Federal Efforts Could Be Strengthened by Timely and Concerted Actions’, available at www.gao.gov/reports/GAO-20-701 (21 September 2020) for a description of actions and recommendations for the US government to strengthen the domestic medical supply chain. 75 See www.politico.com/news/2020/04/07/trump-administration-weighs-lifting-coronavirus-aidfreeze-174112. 76 See Temporary Final Rule at 85 FR 67443, issued on 23 October 2020. This Temporary Rule expired on 30 April 2020. 77 Executive Order No 13944.

308  Jun Jin and Mary McLaughlin and an earlier ‘Buy American and Hire American’ Executive Order issued on 18 April 2017 serve as examples of the collateral objectives of public procurement, as highlighted in the previous section.78 The 6 August 2020 order discusses the need to safeguard sufficient medical supplies for the US Government during a pandemic as well as mobilise a strong ‘Public Health Industrial Base’, including through the use of public procurement, to develop domestic supply chains ‘capable of meeting national security requirements for responding to threats arising from CBRN [chemical, biological, radiological, and nuclear] threats and public health emergencies, including emerging infectious diseases such as COVID-19’.79 The order further instructs agencies to rely upon limited competition authorities to accomplish the intended purposes and requires the US Trade Representative to exclude identified essential and critical medical items from coverage under any free-trade agreements relating to procurement, such as the WTO’s Government Procurement Agreement.80 During his first days in office, President Biden issued an Executive Order on a Sustainable Public Health Supply Chain (21 January 2021) and another titled ‘Ensuring the Future Is Made in All of America by All of America’s Workers’ (25 January 2021), the latter of which also revoked the 18 April 2017 Buy American and Hire American Executive Order.81 President Biden also struck the themes of economic populism and health security in his Interim National Security Strategy issued on 3 March 2021, committing to placing an imperative on investments to ‘strengthen national competitiveness, produce good-paying jobs’, and ensuring ‘critical stockpiles and ensure that supply chains for pharmaceuticals, medical equipment, and other critical materials required during a crisis are not overly reliant on overseas networks prone to disruption’.82 While it is too early to determine what impact President Biden’s new Executive Orders and policies will have on USAID procurement, it does appear that his administration places similar importance on domestic procurement as did his predecessor. As a result, USAID’s COVID-19 response will likely continue to be impacted by domestic political and economic considerations and US governmentwide procurement reform efforts.

B.  Incorporating ‘Flexibility’ to Respond to Changed Circumstances In 2018, Administrator Mark Green announced USAID’s Effective Partnering and Procurement Reform (EPPR) initiative, launched as part of USAID’s 78 Executive Order No 13788, Section 2. 79 Executive Order No 13944, Section 1. 80 Executive Order No 13944, Section 2. 81 Executive Order Nos 14001 and 14005. As of the date of this writing, Executive Order No 13944 remains in effect. 82 Interim National Security Strategy (3 March 2021), available at www.whitehouse.gov/wp-content/ uploads/2021/03/NSC-1v2.pdf.

Critical COVID-19 Supplies: The Experience of USAID  309 Transformation. Among other goals, EPPR sought to identify steps to permit USAID to nimbly react to changing circumstances on the ground. To that end, USAID has issued guidance to encourage contracting and agreement officers to include language in contracts and grants that provides for enhanced flexibility to redirect implementing partners to respond to changed circumstances.83 This kind of ‘shock responsive’ or ‘adaptive mechanism’ seeks to build operational and programmatic flexibility into an initial agreement to position the agency to quickly respond to immediate needs due to circumstances that arise after initial award. The agency can utilise this tool to leverage its large number of implementing partners that are often prepositioned in-country and possess familiarity with local environments and an ability to absorb new activities to adapt to unanticipated circumstances, such as a global pandemic. On 6 May 2020, USAID issued a memorandum to encourage contracting and agreement officers to demonstrate flexibility in administering existing agreements impacted by the COVID-19 pandemic, including to revise work plans based on changed circumstances and extend periods of contract performance.84 Invoking such flexibility will vary depending upon the type of agreement mechanism and raises legitimate legal questions, including whether a contracting officer can or should enter into a contract that provides for unrestrained flexibility and lack of contract definitisation that could lead to potential abuse. At the same time, the widespread effect of COVID-19 on agency programmes around the world highlights the continuing need to explore the benefits and costs of adopting flexible procurement approaches to reduce bureaucratic hurdles and allow development partners such as USAID to respond nimbly to the next crisis.

VII. Reflections The story of USAID’s response to COVID-19 is still being written. As of May 2021, the pandemic continues to devastate many countries around the world, including the US. That said, the stark and swift policy changes resulting from President Biden’s actions have already begun to shape the US domestic and international response to the pandemic, including the issuance of his National Strategy for the COVID-19 Response and Pandemic Preparedness in January 2021. Although it is too early to assess fully the direction of the new administration’s priorities for foreign assistance, several trends have already emerged. First, the Biden administration is committed to an even more robust international response to the pandemic. Building on the US $1.3 billion committed during 2020, USAID has already more than doubled its COVID-19 funding, with its US $2 billion of a planned US $4 billion commitment to Gavi in February 2021. Additional resources 83 See USAID, ‘Shock Responsive Programming Guidance’ (August 2017), available at usaidlearninglab.org/sites/default/files/resource/files/shock_responsive_programming_guidance_compliant.pdf. 84 See usaid.gov/sites/default/files/documents/1868/Encouraging_Flexibility_in_Acquisition_ Instruments.pdf.

310  Jun Jin and Mary McLaughlin appropriated by the US Congress in March 2021 will further bolster a significantly expanded USAID response to the global pandemic. Second, the Biden administration has already taken significant steps to re-engage with multilateral institutions such as the WHO. This commitment to multilateralism will strengthen USAID’s relationship with critical international partners in the fight against COVID-19. At the same time, it is also clear that President Biden remains committed to prioritising domestic production and supply of critical medical commodities, which will likely continue to affect USAID’s pandemic response. Ultimately, given the sheer size and scope of the COVID-19 effect on developing countries and development sectors, it is likely that the pandemic will continue to significantly impact USAID procurement policy and programming for years to come.85

85 See World Bank, ‘COVID-19 to Add as Many as 150 Million Extreme Poor by 2021’ (7 October 2020), available at www.worldbank.org/en/news/press-release/2020/10/07/covid-19-to-add-as-manyas-150-million-extreme-poor-by-2021.

13 The Procurement of a COVID-19 Vaccine in Developing Countries: Lessons from the 2009 H1N1 Pandemic MARK ECCLESTON-TURNER* AND HARRY UPTON

I. Introduction A vaccine is key to the COVID-19 global response strategy. However, it is not yet clear how any COVID-19 vaccine will or ought to be distributed, despite significant issues of fairness, equity and justice. Vaccines present very specific challenges for procurement, particularly in developing countries. Firstly, the vaccine market is dominated by a small number of manufacturers operating in a small number of largely developed countries; there is no generic competition. Typically, an appropriate cold-chain infrastructure is required to safely store and transport the vaccine.1 An appropriate certification process for licensing biologics efficacy and safety, as well as ongoing pharmacovigilance monitoring is also required. Such advanced infrastructure, knowledge and technical ability is beyond the capacity of many developing states,2 even if they are experienced in direct procurement or manufacturing of drugs (as opposed to vaccines). As a result, developing

* This research was supported by a grant from the Arts and Humanities Research Council on ‘Assessing the viability of access and benefit-sharing models of equitable distribution of vaccines in international law’. 1 ‘The “cold chain” is a term used to describe the cold temperature conditions in which certain products need to be kept during storage and distribution … Maintaining the cold chain ensures that vaccines are transported and stored according to the manufacturer’s recommended temperature range … [a failure to store vaccines at the correct temperature] … causes deterioration of vaccines and may give rise to a loss of potency and an increase in reactogenicity’: Department of Health, Storage, distribution and disposal of vaccines (‘The Green Book’) (HM Government, June 2013) 33, available at www.gov.uk/ government/uploads/system/uploads/attachment_data/file/223753/ Green_Book_Chapter_3_v3_0W. 2 A Hinman, ‘Perspectives on sustainable vaccine introduction’ (2013) 31 Vaccine C8; a systematic review of states immunisation infrastructure broken down by ‘Service Delivery’, ‘Health Workforce’ Vaccine And Technology’ and ‘Financing And Sustainability’ is provided in T Hyde et al, ‘The impact of new vaccine introduction on immunization and health systems: A review of the published literature’ (2012) 30 Vaccine 6347.

312  Mark Eccleston-Turner and Harry Upton countries may not have access to a COVID-19 vaccine without assistance from the multilateral system. It is likely that such a framework for vaccine distribution for COVID-19 will be developed through the World Health Assembly (WHA), the meeting of Member States of the World Health Organization (WHO), with calls from governments already for this to happen. At the time of writing, there are preliminary discussions around the role of the WHO in procuring and distributing vaccine to developing countries. This is not unusual; in order to address the scarcity of 2009 H1N1 vaccines available for procurement by developing countries, the WHO established the Vaccine Deployment Initiative (VDI), which sought to facilitate the deployment of H1N1 vaccines.3 This chapter will explore how the VDI operated and consider if it provides a successful model on which to model the procurement and distribution of COVID-19 vaccines. We will see that the VDI is not a viable model for a COVID-19 vaccine distribution framework and it does not adequately overcome the unique challenges of pandemic vaccine procurement.

II.  The Importance of a COVID-19 Vaccine and International Efforts A safe, effective vaccine is needed to bring about an end to the pandemic. It is vital that the global community cooperates to develop a vaccine as quickly as possible and that all countries commit to making a vaccine readily available to all countries around the world, regardless of their ability to pay. The importance of an effective, accessible vaccine has been noted by both WHO and the United Nations General Assembly, with the WHO adopting the slogan ‘no-one is safe until everyone is safe’4 and the World Health Assembly describing extensive immunisation against COVID-19 as ‘a global public good for health’.5 Achieving equitable and timely distribution of a COVID-19 vaccine will require significant investment, not just in research and development, but also in global manufacturing and production capacity. Given the urgency with which a vaccine is needed, governments and other international organisations have offered unprecedented levels of funding, with the WHO having received pledges totalling US $11 billion to bring about an end to the pandemic.6 In addition to funding, there are initiatives such as the Access to COVID-19 Tools (ACT) Accelerator, 3 WHO, ‘Main Operational Lessons Learnt from the WHO Pandemic Influenza A (H1N1) Vaccine Deployment Initiative: Report of a WHO Meeting Held in Geneva, Switzerland, 13–15 December 2010’ (Geneva, 2011), available at apps.who.int/iris/bitstream/10665/44711/1/9789241564342_eng.pdf. 4 WHO, ‘The Access to COVID-19 Tools (ACT) Accelerator’ (Geneva, 2020), available at www.who. int/initiatives/act-accelerator. 5 World Health Assembly, Resolution WHA73.1 ‘COVID-19 response’ (A73/VR/2, 19 May 2020), available at apps.who.int/gb/ebwha/pdf_files/WHA73/A73_R1-en.pdf. 6 WHO, ‘ACT-Accelerator Investment Case’ (Geneva, 2020), available at unitaid.org/assets/actconsolidated-investment-case-at-26-june-2020-vf.pdf.

The Procurement of a COVID-19 Vaccine in Developing Countries  313 which aims to foster international cooperation to speed up development and ­facilitate global, equitable distribution of a vaccine for COVID-19.

A.  The ACT Accelerator and the COVAX Facility The ACT Accelerator is an initiative which aims to ‘speed up an end to the pandemic by supporting the development and equitable distribution of tests, treatments and vaccines for COVID-19’.7 In essence, the ACT Accelerator is attempting to use procurement (or the promise of future procurement) to incentivise innovation and development of COVID-related products. It brings together a number of international organisations,8 with the goal of facilitating international cooperation to finance research and development and ramping up global vaccine manufacturing capacity. Its focus is split into four pillars: diagnostics; therapeutics; vaccines; and the health systems connector.9 The ACT Accelerator requires US $31.3 billion in funding, of which US $17.1 billion is required immediately.10 The vaccines pillar, convened by the Coalition for Epidemic Preparedness Innovations (CEPI), Gavi, the Vaccine Alliance, and the WHO, requires the most substantial investment.11 As of June 2021, the vaccines pillar has raised US $9.5 billion, but faces a funding gap of US $2.2 billion throughout 2021.12 Of this funding, US $2.4 billion will be invested in research and development, US $7 billion on market preparation, and US $8.7 billion will be used for procurement and delivery of COVID-19 vaccines to participating countries.13 It is this procurement and delivery aspect of the vaccine pillar with which we are focused in this chapter. Within the vaccines pillar is the COVID-19 Vaccine Global Access Facility (COVAX), which aims to ensure timely, equitable access to vaccines in all participating countries. The Facility expects to deliver up to two billion doses of vaccine by the end of 2021, which it aims to achieve with large-scale investment in development and manufacturing.14 This will involve a mixture of push mechanisms, such as direct investment in production facilities, and pull mechanisms, predominantly in the form of contingent commitments to purchase substantial volumes of vaccine from manufacturers.15 Including the US $2 billion needed to secure doses for developing countries via the Gavi COVAX Advance Market Commitment, it is 7 WHO, ‘The Access to COVID-19 Tools (ACT) Accelerator’ (2020). 8 Notably: The Bill and Melinda Gates Foundation, CEPI, FIND, Gavi, The Global Fund, Unitaid, Wellcome, and the World Bank. 9 WHO, ‘ACT-Accelerator Investment Case’ (2020). 10 ibid. 11 ibid. 12 WHO, ‘Access to COVID-19 Tools Funding Commitment Tracker’, available at www.who.int/ publications/m/item/access-to-covid-19-tools-tracker. 13 ibid. 14 Gavi, ‘What Is the COVAX Pillar, Why Do We Need It and How Will It Work?’ (Geneva, 26 June 2020), available at www.gavi.org/vaccineswork/gavi-ceo-dr-seth-berkley-explains-covax-pillar. 15 ibid.

314  Mark Eccleston-Turner and Harry Upton estimated that US $5.5 billion is required to fund Advanced Purchase Agreements with manufacturers.16 In theory, this investment will incentivise manufacturers to invest in scaling up manufacturing capacity and enable them to produce doses ‘at risk’, or before trials confirming efficacy are concluded, thereby speeding up the development and manufacturing process. For developed, self-financing countries already considering bilateral Advanced Purchase Agreements17 with manufacturers, the Facility may be used as an insurance policy to cover the risk that the vaccine candidates invested in by the country turn out to be unsuccessful.18 The COVAX Facility has the largest portfolio of COVID-19 vaccine candidates in the world because it is able to invest in more candidates than any country could afford alone.19 Joining the COVAX Facility therefore represents an opportunity for developed countries to diversify their own portfolios, further mitigating the risk of investing in candidates which may never receive regulatory approval. Self-financing governments who wish to participate in the COVAX Facility are asked for a binding commitment to procure a sufficient number of doses through the Facility to immunise 20 per cent of their population.20 To reach its goal of distributing two billion doses of vaccine by the end of 2021, Gavi estimates that high income (HIC) and upper-middle income countries (UMIC) will need to commit to procuring approximately 950 million doses through the COVAX Facility.21 In doing this, HIC and UMIC countries will be guaranteed sufficient doses to immunise 20  per  cent of their populations, simultaneously providing funding which will contribute to vaccine procurement for developing countries. Procurement of vaccines for developing countries will be secured by the Gavi COVAX Advance Market Commitment (AMC), a large-scale advance purchase commitment to procure vaccines specifically for developing countries, which aims to procure a sufficient number of vaccines to immunise health workers and at-risk individuals in Gavi-supported countries.22 If successful, AstraZeneca have agreed to supply 300 million doses of their AZD1222 vaccine candidate following a US $750 million pledge as part of the Gavi COVAX AMC.23 Although AstraZeneca

16 Gavi, ‘COVAX, The ACT-Accelerator Vaccines Pillar’ (Geneva, 2020), available at www.gavi.org/ sites/default/files/document/2020/COVAX-Pillar-backgrounder_3.pdf. 17 For more information on what APAs are, and how they work in vaccine procurement see section III.B below. 18 R Hatchett, ‘COVAX: Ensuring Fair Allocation of a COVID-19 Vaccine – CEPI’ (The Coalition for Epidemic Preparedness Innovations, London, 26 June 2020), available at cepi.net/news_cepi/ covax-ensuring-fair-allocation-of-a-covid-19-vaccine. 19 Gavi, ‘What Is the COVAX Pillar?’ (2020). 20 Gavi, ‘The Covax Facility: Global Procurement for COVID-19 Vaccines’ (Geneva, 2020), available at www.gavi.org/sites/default/files/covid/The-COVAX-Facility_backgrounder-3.pdf. 21 Gavi (n 14). 22 Gavi, ‘Gavi Launches Innovative Financing Mechanism for Access to COVID-19 Vaccines’ (Geneva, 4 June 2020), available at www.gavi.org/news/media-room/gavi-launches-innovativefinancing-mechanism-access-covid-19-vaccines. 23 Editorial, ‘Global Governance for COVID-19 Vaccines’ (2020) 395 Lancet 1883.

The Procurement of a COVID-19 Vaccine in Developing Countries  315 have agreed to supply 300 million doses at cost price, it is not yet clear what the price will be and therefore whether or not it will be genuinely affordable. Once doses are available, they will be allocated between self-funded countries, which have paid for their doses through the COVAX Facility, and developing countries participating in the initiative, which otherwise would not have been able to afford to pay for the vaccine.24 The self-financing countries (those which will have paid for their 20 per cent coverage) will receive doses at the same rate, until their 20 per cent allocation is reached.25 An equal allocation will be distributed amongst participating developing countries based on the WHO’s global allocation framework, which will be set up to prioritise healthcare workers and at-risk groups.26 The global allocation framework aims, so far as possible, to distribute doses amongst countries at the same rate.27 Whilst distributing doses at the same rate would ensure a degree of equity, this strategy fails to account for whether or not countries, particularly developing countries in the funded group, have the necessary infrastructure in place to receive and utilise doses of vaccine.28 Countries looking to procure vaccine through the COVAX Facility above 20 per cent population coverage will have the opportunity to do so, subject to guidance by the WHO.29 If successful, the COVAX Facility is intended to supply one billion doses of COVID-19 vaccine to developing countries before the end of 2021, providing the Facility is suitably financed, and the Facility has invested in a vaccine candidate which is licenced as safe and effective. However, the WHO’s global allocation framework for COVID-19 vaccines is yet to be finalised, and it is not clear whether or not Member States will abide by it, or whether it will be modified to such an extent that it is unable to deliver equitable allocation in the manner envisioned by the COVAX Facility. Indeed, as the below case study on 2009 H1N1 attests, there are good reasons to fear that self-funded countries will not cooperate with multilateral efforts on vaccine procurement, particularly in the early stages of vaccine availability. The Access to COVID-19 Tools Accelerator is the most significant attempt to unite the global community to bring an end to the pandemic. Within this, the COVAX Facility seeks to ensure equitable access to a vaccine for COVID-19 by pooling international resources in order to stimulate investment in manufacturing capacity and ultimately procure and distribute the vaccine to all countries around the world. However, to achieve this goal, the COVAX Facility requires substantial 24 Gavi (n 14). 25 Gavi, ‘COVAX’ (2020). 26 Gavi (n 14). 27 WHO, ‘Allocation Mechanism for COVAX Facility Vaccines’ (12 November 2020), available at www.who.int/publications/m/item/allocation-mechanism-for-covax-facility-vaccines-explainer. 28 M Eccleston-Turner and H Upton, ‘International Collaboration to Ensure Equitable Access to Vaccines for COVID-19: The ACT-Accelerator and the COVAX Facility’ (2021) 99 Milbank Quarterly (early view). 29 Gavi (n 17).

316  Mark Eccleston-Turner and Harry Upton funding, far beyond the value of the already significant pledges it has received to date. Even if it succeeds in reaching the funding goals set for itself, the COVAX Facility still has important issues to address, such as whether the WHO’s global allocation framework will be adequate and, if it is, whether it will be abided by. Furthermore, its goal of distributing two billion doses before the end of 2021 is reliant on a vaccine candidate gaining regulatory approval, sufficient investment in manufacturing capabilities, and the ability of the Facility, in particular of Gavi, to secure a sufficient number of doses to meet the immunisation targets. None of which are guaranteed, or even necessarily feasible.

B.  The Inclusive Vaccines Alliance Another notable international collaboration is the Inclusive Vaccines Alliance (IVA), formed between France, Germany, Italy and the Netherlands. The IVA formed to negotiate Advanced Purchase Agreements with vaccine manufacturers and pharmaceutical companies, with the aim of securing an accessible, affordable vaccine for COVID-19 on behalf of European Union (EU) countries.30 If possible, the IVA is aiming to have vaccines manufactured within Europe,31 thereby reducing the risk of EU Member States being denied early access to them because of export restrictions in other territories. Members of the IVA have stated they created the Alliance as ‘Working together puts the countries in a better position to achieve fast results in their discussions with key stakeholders from the pharmaceutical industry when it comes to promising vaccine initiatives’.32 Such a strategy allows for portfolio diversification from the European Commission, whereby IVA countries could secure vaccine through their own collaborative procurement processes. Whilst countries within the IVA will take charge of negotiating agreements with pharmaceutical companies, any deal struck by the IVA will come with an open invitation to all Member States of the EU.33 An agreement has already been reached with AstraZeneca to supply an initial 300 million doses of its COVID-19 vaccine candidate at cost price, with an option to procure a further 100 million doses at a later date, again at cost price.34 All EU Member States will be offered 30 Dutch Ministry of General Affairs, ‘France, Germany, Italy and the Netherlands Working Together to Find a Vaccine for Countries in Europe and beyond’ (The Hague, 3 June 2020), available at www. government.nl/latest/news/2020/06/03/france-germany-italy-and-the-netherlands-working-togetherto-find-a-vaccine-for-countries-in-europe-and-beyond. 31 ibid. 32 ibid 33 ibid. It is reported that the UK was offered the opportunity to join the EU joint procurement initiatives for COVID-19-related products, despite Brexit, though this was not taken up by the Government: J Miller and C Cookson, ‘US Spends $2bn to Secure Covid-19 Vaccine’ Financial Times (22 July 2020), available at www.ft.com/content/b6367f3c-567f-42d9-af4b-3a931b9f6acc. 34 Dutch Ministry of Health, Welfare and Sport, ‘Contract for Possible Coronavirus Vaccine for Europe’ (The Hague, 13 June 2020), available at www.government.nl/latest/news/2020/06/13/contractfor-possible-coronavirus-vaccine-for-europe.

The Procurement of a COVID-19 Vaccine in Developing Countries  317 the opportunity to sign up to this deal alongside members of the IVA, with doses to be distributed based on the population of each country.35 In addition to securing access to affordable vaccines for EU Member States, the IVA is also working to make a portion of procured vaccine available to low-income countries outside of the EU, including some in Africa, but it is not yet clear whether this will be possible.36

C.  The European Commission Following the formation of the IVA, the European Commission announced its plans  to secure access to COVID-19 vaccines for EU Member States. The Commission’s strategy rests on two key pillars: (a) securing production of a vaccine within the EU by utilising advance Purchase Agreements (APAs) with vaccine manufacturers, funding for which will be drawn from the €2.7 billion Emergency Support Instrument; and (ii) adapting the current regulatory framework to accelerate the development and licensing of a vaccine.37 In broad terms, the EU Commission and the IVA have the same goal, and the IVA immediately expressed its intention to involve the Commission in its negotiations.38 However, it is not clear how the two initiatives will operate alongside each other and, despite assurances from the Commission that the two are ‘not incompatible’,39 questions remain as to whether two separate initiatives will ultimately help or hinder the ability of EU Member States to negotiate with vaccine manufacturers, especially in light of the limited manufacturing capacity for a COVID-19 vaccine, particularly in the early stages of production.

D.  A Summary of COVID Vaccine Procurement The international community recognises the pressing need for an effective COVID-19 vaccine and the need for that vaccine to be distributed equitably around the world. The most significant international collaboration aimed at ensuring equitable access to vaccines is the ACT-Accelerator or, more specifically, the COVAX Facility within it. However, the COVAX Facility does not stand alone, as other alliances have formed to secure access to vaccines in different territories. Whilst some of the other groups have expressed their intention to share 35 ibid. 36 Dutch Ministry of General Affairs, ‘France, Germany, Italy and the Netherlands Working Together’ (2020). 37 European Commission, ‘Coronavirus: Commission Unveils EU Vaccines Strategy’ (Brussels, 17 June 2020), available at ec.europa.eu/commission/presscorner/detail/en/ip_20_1103. 38 Dutch Ministry of General Affairs (n 30). 39 J Deutsch, ‘Vaccine Alliance Casts Shadow over Commission’s New Strategy’ POLITICO (16 June 2020), available at www.politico.eu/article/vaccine-alliance-casts-shadow-over-commissions-new-strategy.

318  Mark Eccleston-Turner and Harry Upton vaccines with developing countries, for most, like the IVA, global equitable access to COVID-19 vaccines is not their primary concern. Discussed briefly above is the conflict between the IVA and European Commission, but perhaps of more concern to the question of global equitable access is the potential conflict between these alliances and the COVAX Facility. If a vaccine candidate is successful, supply will be scarce, and it follows that each of these initiatives are unlikely to be able to achieve their procurement targets at once. If, for example, the IVA can secure the most lucrative APAs and are given priority access to vaccines, this will surely be at the expense of the COVAX Facility. In that case, global equitable access to vaccines for COVID-19 will suffer because the IVA is primarily concerned with securing vaccines for EU Member States, rather than with securing access for everyone. Demand for a COVID-19 vaccine will likely be unprecedented, which makes successful procurement a challenge, particularly in developing states. The closest experience the international community has to learn lessons from would be the procurement of vaccines during the 2009 H1N1 pandemic. As section III below outlines, despite the rhetoric around solidarity, and fair and equitable access to vaccines during the 2009 H1N1 pandemic, developing states face significant barriers when attempting to procure vaccine for their population.

III.  Vaccine Procurement During 2009 H1N1 The WHO declared H1N1 a pandemic in June 2009, following outbreaks of an influenza-like illness in Mexico and the US earlier that year. Due to the speed with which 2009 H1N1 was spreading,40 global utilisation of a vaccine was seen as the solution to ending the pandemic, much like a COVID-19 vaccine today. As such, global demand for vaccines was high and countries around the world sought to secure access to vaccines to protect their populations. With global production being ‘substantially less’ than anticipated,41 competition for access to vaccines produced early on in the pandemic was fierce. Whilst developed, resource-rich countries were able to self-procure vaccines directly from manufacturers, developing countries with comparatively fewer resources were predominantly reliant on vaccine donations from the WHO to immunise their populations.

A.  Procurement During 2009 H1N1 – General Observations Throughout the pandemic, a total of 59.4 per cent of vaccines were self-procured, ie procured by countries individually and through their own procurement 40 D Fidler, ‘Negotiating Equitable Access to Influenza Vaccines: Global Health Diplomacy and the Controversies Surrounding Avian Influenza H5N1 and Pandemic Influenza H1N1’ (2010) 7 PLoS Medicine. 41 WHO (n 3).

The Procurement of a COVID-19 Vaccine in Developing Countries  319 mechanisms, with the figures for the Americas region (79 per cent) and Europe (98.8 per cent) standing significantly higher than the African region (6.5 per cent) and the South-East Asia region (8.7  per  cent).42 The benefits of self-procuring vaccines during the H1N1 pandemic were significant; countries that were able to self-procure H1N1 vaccines received their first doses at least four months before states which were reliant on donations.43 A further advantage for some developed countries was the ability to procure vaccines from manufacturers based within their own territories.44 Countries able to do this restricted exports of H1N1 vaccines until domestic demand was fulfilled, ensuring early access to vaccines for their own populations. For example, Australia prevented CSL from exporting vaccines to the US until domestic need was met, and Canada awarded its contract to a Canadian company because of concerns that other countries would restrict exports of vaccines during the early stages of the pandemic.45 However, whilst self-procurement offers several advantages to the countries able to utilise it, the knowledge and resources required to implement a self-procurement strategy meant it was not a viable option for the majority of developing states. In addition to having the financial resources to pay for vaccines, self-procurement requires an appropriate process for vaccine licensing and safety, sufficient cold-chain infrastructure and detailed technical knowledge of medicine and law.46 These technical and financial requirements serve as substantial barriers to self-procurement for developing countries.47 Furthermore, developing countries did not have the option to restrict exports of vaccine produced within their territories, because the overwhelming majority of vaccine production was based in developed countries.

B.  Use of Advanced Purchase Agreements in Pandemic Influenza Vaccine Procurement Of the developed countries able to self-procure vaccines, a significant number made use of APAs to secure access to vaccines during the early stages of availability. APAs enable countries to reserve a predetermined number of doses, effectively

42 WHO, ‘Global Survey on National Vaccine Deployment and Vaccination Plans for Pandemic A(H1N1) 2009 Vaccine’, available at www.who.int/influenza_vaccines_plan/resources/deployment/en. 43 J Partridge and MP Kieny, ‘Global Production of Seasonal and Pandemic (H1N1) Influenza Vaccines in 2009–2010 and Comparison with Previous Estimates and Global Action Plan Targets’ (2010) 28 Vaccine 4709; M Eccleston-Turner, ‘Vaccine Procurement during an Influenza Pandemic and the Role of Advance Purchase Agreements: Lessons from 2009-H1N1’ (2016) 11 Global Public Health 322. 44 Eccleston-Turner, ibid. 45 Fidler, ‘Negotiating Equitable Access to Influenza Vaccines’ (2010). 46 Eccleston-Turner, ‘Vaccine Procurement during an Influenza Pandemic’ (2016). 47 Hyde et al, ‘The Impact of New Vaccine Introduction on Immunization and Health Systems’ (2012).

320  Mark Eccleston-Turner and Harry Upton guaranteeing priority access to vaccines once they become available and ensuring that the contracting country has access to doses as soon as possible. These contracts between governments and vaccine manufacturers are maintained via a regular ‘pandemic preparedness fee’ to reserve a certain quantity of vaccine before it is produced.48 The contract lays dormant until triggered by a predetermined event, typically the announcement of a pandemic or action by the contracting country, at which point it ‘activates’ and becomes binding.49 Many APAs held by developed countries were triggered during the H1N1 pandemic which secured priority access to vaccines for those countries50 and simultaneously made procurement in developing countries more difficult. Typically, APAs require the payment of a ‘pandemic preparedness fee’ whereby the purchasing countries pay a yearly fee to maintain the contract, though the financial cost of this is not public information, and is thought to vary from country to country,51 representing a highly flexible way to procure pandemic vaccines.52 Use of APAs during the 2009 H1N1 pandemic was widespread, with 20 out of the 53 developed states utilising some form of APA with vaccine manufacturers.53 So extensive was the use of APAs that a WHO survey of 15 pandemic influenza vaccine manufacturers revealed that 14 of those manufacturers were unable to commit to setting aside 10 per cent of real-time vaccine production for purchase by UN agencies because of their pre-existing commitments to fulfil APAs with developed countries.54 Further, whilst the WHO now encourages the use of APAs by developing countries in order to mitigate against the sort of access issues seen in 2009 H1N1,55 paying to maintain a contract for vaccines which may never be needed may not represent a viable option for developing countries with limited healthcare budgets.56 Indeed, there were no developing countries with APAs in place for the H1N1 pandemic.

48 Eccleston-Turner (n 43). 49 M Kremer and R Glennerster, Strong Medicine: Creating Incentives for Pharmaceutical Research on Neglected Diseases (Princeton University Press, 2004). 50 Eccleston-Turner (n 43). 51 Eccleston-Turner (n 43). 52 For example, the UK entered into a number of APAs in 2007 for the supply of vaccines to protect against pandemic influenza if a pandemic were to occur in the future; these contracts were not activated until May 2009. The APAs that the UK had in place before the 2009 H1N1 pandemic allowed the Government to purchase between 30 million and 132 million doses. The minimum number of vaccines procured via an APA appears to have some degree of flexibility. When it became apparent that the 2009 H1N1 pandemic was not as severe as anticipated, a number of states with APAs in place attempted to reduce the quantity of vaccine guaranteed by their APA. Of the 11 that attempted to reduce their allocation, all but two were allowed to do so by the manufacturer. See Eccleston-Turner (n 43). 53 Eccleston-Turner (n 43). 54 N Collin and X de Radiguès, ‘Vaccine Production Capacity for Seasonal and Pandemic (H1N1) 2009 Influenza’ (2009) 27 Vaccine 5184. 55 WHO, ‘Strengthening Response to Pandemics and Other Public-Health Emergencies’ (Geneva, 2011), available at www.who.int/ihr/publications/RC_report/en. 56 Eccleston-Turner (n 43).

The Procurement of a COVID-19 Vaccine in Developing Countries  321 Faced with these issues, and the potential for significant inequity of access to H1N1 vaccines between developed and developing countries, the WHO expressed concerns that lower and middle-income countries (LMICs) were likely to be severely impacted by the pandemic and called for the international community to provide assistance to help mitigate this impact.57 This was followed in September 2009 by a joint report of the UN Secretary-General and the WHO Director-General, identifying the two most urgent categories of support needed to mitigate the impact of the pandemic on LMICs, namely: (a) meeting urgent demand for essential medicines and vaccines to protect healthcare workers and key service personnel; and (b) meeting the urgent need to strengthen the readiness of least-developed countries to handle the effects of the pandemic.58

C.  The WHO Vaccine Deployment Initiative To address the scarcity of 2009 H1N1 vaccines available for procurement by developing countries, the WHO established the Vaccine Deployment Initiative (VDI). The VDI sought to facilitate the deployment of H1N1 vaccines in the 96 countries which WHO identified as lacking access,59 ultimately providing vaccines to 77 of these countries.60 The WHO acquired vaccines for the VDI through donations from vaccine manufacturers and Member States, receiving pledges totalling 200 million doses.61 The US offered to share 10 per cent of their vaccine supplies on a ‘rolling basis’,62 though this did not occur, and the US, like all donors to the VDI, only fulfilled their commitments once domestic demand was satisfied.63 However, following further negotiations, the final quantity committed for deployment via the VDI was 122.5 million doses, almost 80 million less than originally pledged.64 Whilst the number of doses committed was sufficient to achieve 10 per cent population coverage in countries which requested the vaccine,65 the actual coverage in recipient countries varied widely, with some receiving significantly less than this goal.66 In total, the VDI oversaw the deployment of 78 million doses of 2009 H1N1 vaccine in developing countries, accounting for just over 10  per  cent of H1N1 57 WHO (n 3). 58 WHO, ‘Urgent Support for Developing Countries’ Responses to the H1N1 Influenza Pandemic’ (Geneva, October 2009), available at reliefweb.int/report/world/urgent-support-developing-countriesresponses-h1n1-influenza-pandemic. 59 ibid. 60 WHO (n 3). 61 ibid. 62 ibid. 63 Eccleston-Turner (n 43). 64 ibid. 65 WHO, Evolution of a Pandemic: A(H1N1) 2009 (2nd edn, 2013). 66 WHO (n 3) annex 4.

322  Mark Eccleston-Turner and Harry Upton vaccines procured internationally during the pandemic,67 but falling significantly short of the 300 million doses the WHO initially expected to deliver.68 Developing countries relying on donations via the VDI received their first doses significantly later than states which were able to self-procure; the first doses of VDI-supplied vaccine arrived in developing countries in January 2010,69 four months after developed countries received their first doses.70 Furthermore, the WHO acknowledged that the majority of deliveries to countries in the African region arrived after the peak of the pandemic had passed.71 Therefore, there was a significant delay between vaccines being available to developed countries, and the VDI delivering vaccines to developing countries, indicating the lack of equity in vaccine distribution during the 2009 pandemic. The delay in vaccines reaching developing countries via the VDI can be attributed to several factors. Typically for pandemic strains of influenza an individual requires two doses of the vaccine to provide immunity,72 and during the early stages of 2009 H1N1 it was expected that two doses would be needed; however, it later became apparent that a one-dose regime would be sufficient to immunise adult populations.73 Only then did donor countries begin shipping vaccine to the WHO.74 However, whilst the WHO were shifting towards the opinion that a one-dose regime would be sufficient as early as September 2009,75 the results of major studies on the efficacy of a one-dose regime were not made available until 17 December 2009.76 This meant that, although self-procuring states began to receive doses of H1N1 vaccine in October 2009, the first doses for deployment via the VDI were not made available to the WHO until December 2009.77 This demonstrates that, despite relatively early commitments from WHO Member States to share H1N1 vaccines with developing countries, donors were only willing to begin shipping vaccines once they were satisfied that they would be able to meet their own immunisation targets. Had the H1N1 pandemic necessitated a two-dose regime, or if it had been as severe as initially feared,78 developed countries would

67 ibid. 68 WHO, ‘Pandemic Influenza Vaccines: Current Status’ (Geneva, 24 September 2009), available at www.who.int/csr/disease/swineflu/notes/pandemic_influenza_vaccines_20090924/en. 69 WHO (n 3). 70 Partridge and Kieny, ‘Global Production of Seasonal and Pandemic (H1N1) Influenza Vaccines’ (2010). 71 WHO (n 3). 72 AS Fauci, ‘Seasonal and Pandemic Influenza Preparedness: Science and Countermeasures’ (2006) 194 Suppl 2 The Journal of Infectious Diseases S73. 73 Eccleston-Turner (n 43). 74 This change significantly affected demand for H1N1 vaccine because it effectively halved the amount of doses that countries required, thereby freeing up significant quantities of vaccine for donation via the VDI. 75 WHO (n 3); S Nebehay, ‘H1N1 Vaccine Production Far Less than Forecast: WHO’ Reuters (Geneva, 18 September 2009), available at www.reuters.com/article/us-flu-who-idUSTRE58H1N120090918. 76 Eccleston-Turner (n 43). 77 WHO (n 3). 78 ibid.

The Procurement of a COVID-19 Vaccine in Developing Countries  323 almost certainly have been even more reluctant to begin shipping doses to developing countries.

D.  Developing Country Prerequisites and the VDI: A Barrier to Successful Procurement? In order to receive vaccines from the VDI, countries were required to satisfy three prerequisites: (a) a letter of intention, indicating that a country wished to received vaccine from WHO; (b) a letter of agreement, entailing legal agreement on matters such as liability waivers for donated vaccine; and (c) a comprehensive national deployment plan, detailing how the country was to utilise donated vaccine to immunise their populations.79 The first prerequisite posed little difficulty, with a total of 97 countries expressing interest in receiving vaccines and signing a letter of intention.80 However, prerequisites (b) and (c) were more onerous and contributed to significant delays in deployment of vaccine to developing countries. Prerequisite (b), the letter of agreement, required recipient countries to confirm that they were aware of, and prepared to accept, the legal conditions associated with vaccine donation.81 The letter of agreement required recipient countries to agree to indemnify vaccine manufacturers from any adverse effects arising from use of pandemic H1N1 vaccine, but the agreement was complex, and many countries struggled to adequately implement the necessary measures.82 Indemnification was required as the ‘insurance industry refused to insure the product risk related to H1N1 vaccine, as this risk could not be quantified and therefore became uninsurable’; in developing countries ‘the full risk was covered by the governments that purchased pandemic vaccines’.83 Reaching agreement on legal issues was source of some difficulty, with donor countries noting that it often required extensive periods of negotiation, both internationally and directly with beneficiary states.84 Countries experienced difficulty in completing prerequisite (b) for multiple reasons, but the complicated administrative process associated with completing the letter of agreement, coupled with a lack of clarity regarding the roles and responsibilities of various secretariat teams at all levels of the WHO, delayed completion of this step of the process.85 A total of 87 countries completed this stage of the process.86 79 ibid. 80 WHO (n 58). 81 WHO (n 3). 82 ibid. 83 European Commission, ‘Workshop on the Joint Procurement of Vaccines’ (Luxemburg, 2015) 21, available at ec.europa.eu/health/sites/health/files/preparedness_response/docs/ev_20150429_ co22_en.pdf. 84 WHO (n 3). 85 ibid. 86 WHO, ‘Pandemic Influenza Vaccines’ (2009).

324  Mark Eccleston-Turner and Harry Upton The final prerequisite (c) was to have in place a comprehensive national deployment plan, enabling the WHO to send the initially scarce quantities of vaccine to states which were able to utilise it quickly. This proved to be the most difficult prerequisite to meet, primarily due to a lack of vaccine utilisation infrastructure in developing countries, an issue which required a ‘significant amount of time and resources’ to resolve.87 A total of 82 national deployment plans were finalised with the WHO,88 but the policy of prioritising countries that already had deployment plans in place penalised those which lacked the capacity to prepare appropriate plans in a relatively short timeframe.89 The time it took developing countries to satisfy the prerequisites of the VDI undoubtedly delayed the delivery of vaccines through the initiative. However, even once the prerequisites had been met, a number of countries faced further delays before receiving their doses. The average time between a country expressing interest in receiving the vaccine and the vaccine being deployed in that country was 164 days, but, in the African region, this number rose to 261 days.90 Whilst this delay is due in part to difficulty in meeting the prerequisites, it was noted by donor countries that a lack of cold-chain infrastructure in beneficiary countries also contributed to further delays to delivery.91 The first COVID-19 vaccines to receive approval all require cold-chain infrastructure, and both the Pfizer and Modern mRNA-based vaccines need to be kept at significantly lower temperatures than more traditional vaccines. This is likely to be a substantial barrier to efficient procurement and deployment for many countries in the African region and beyond.

E.  2009 H1N1 Vaccine Procurement Summary The 2009 H1N1 pandemic demonstrated the disparity in viable pandemic vaccine procurement options between developed and developing countries. Developed countries with greater financial power and technical knowledge dominated access to H1N1 vaccines earlier on in the pandemic by purchasing supply early on and reserving significant quantities using APAs. The domination of early supply by developed countries meant that developing countries with comparatively fewer resources had to rely on donated H1N1 vaccines to immunise their populations. To this end, the WHO’s Vaccine Deployment Initiative sought to promote equitable access to H1N1 vaccines by coordinating and facilitating the response of the international community. The initiative was successful in securing significant pledges both of vaccines and financial assistance, as well as deploying some

87 ibid.

88 WHO 89 WHO 90 ibid. 91 ibid.

(n 65). (n 3).

The Procurement of a COVID-19 Vaccine in Developing Countries  325 78  million doses of vaccine to developing countries. However, countries which were left to rely on the initiative to secure access to H1N1 vaccines received their first doses significantly later than countries which self-procured vaccines directly from manufacturers. Had the H1N1 pandemic been as severe as first anticipated, or if immunisation had required a two-dose regime rather than a single-dose, it is likely that this delay would have been even more significant, as countries with early access to vaccines may have been slower to release doses for donation to developing countries.

IV.  COVID-19 Vaccine Nationalism and Procurement It is clear that there is an attempt at the international level to avoid or minimise the key vaccine procurement problems which were seen during the 2009 H1N1 pandemic. The COVAX Facility is one such example of this, as it seeks to operate as a pooled procurement mechanism available to developing and developed states. In addition, there have been Resolutions passed at the United Nations General Assembly and the World Health Assembly which proclaim immunisation against COVID-19 to be a ‘public good’ that ought to be accessible to all people, regardless of economic barriers. However, very little detail in how this could or would be achieved was included in any of these Resolutions, nor were Member States willing to commit themselves to achieving equitable access to these ‘public goods’ through the Resolutions. Despite these lofty goals, we are beginning to see vaccine nationalism in the context of a COVID-19 vaccine. The US has agreed a deal worth almost US $2 billion to secure access to 100 million doses of Pfizer and BioNTech’s mRNA vaccine candidate, which joins their earlier agreement with AstraZeneca for 100  million doses of the Oxford University candidate.92 The UK has also secured APAs with AstraZeneca (100 million doses) and Pfizer-BioNTech (30 million doses), as well as an agreement with Valneva for an initial 60 million doses.93 Further, the Inclusive Vaccines Alliance has agreed a deal with AstraZeneca to secure 300 million doses, with the option to purchase a further 100 million.94 As with procurement during 2009 H1N1, in the event of a COVID-19 vaccine being licenced there is likely to be scarcity again, especially in early days of vaccine manufacturing. This is likely to reinforce the vaccine nationalism we saw above, whereby developed countries with Advanced Purchase Agreements in place are likely to hoard the vaccine for their own populations. While efforts such as the 92 Miller and Cookson, ‘US Spends $2bn to Secure Covid-19 Vaccine’ (2020). 93 UK Government, ‘Millions Could Be Vaccinated against COVID-19 as UK Secures Strong Portfolio of Promising Vaccines’ (GOV.UK, 20 July 2020), available at www.gov.uk/government/news/millionscould-be-vaccinated-against-covid-19-as-uk-secures-strong-portfolio-of-promising-vaccines. 94 Dutch Ministry of Health, Welfare and Sport, ‘Contract for Possible Coronavirus Vaccine for Europe’ (2020).

326  Mark Eccleston-Turner and Harry Upton COVAX Advanced Purchase Agreements are attempted to minimise the possibility of this occurring, it is noteworthy that vaccine manufacturing capacity is geographically limited to a small number of countries, most of them with highly developed economies. It is possible that, given the severity of COVID-19, these countries could use a range of legal tools to prevent vaccine procured through the COVAX facility from leaving their territory, until domestic demand has been fulfilled. Such measures could include the compulsory requisition of vaccines by countries that host COVID-19 vaccine manufacturing facilities. While this is a significant intervention by a government, we have already seen such actions in the context of PPE during the COVID-19 pandemic,95 and concerns have been raised that such actions could occur during a future influenza pandemic, regardless of agreements such as the WHO Pandemic Influenza Preparedness Framework.96 Moreover, there are a number of other regulatory measures which could prevent, delay, or obfuscate vaccines being exported from producing countries including government indemnification of vaccine manufacturers for failure to meet contractual obligations, export control measures,97 and other parallel regulatory measures that can delay or prevent the export of influenza vaccines during a pandemic.

V. Reflections Successfully developing a vaccine for COVID-19, manufacturing it at scale and deploying it to all countries around the world is key to the global pandemic response. If a vaccine candidate is successful, initial supply will be scarce. This was the case during the 2009 H1N1 pandemic, during which procurement was dominated by developed countries which were able to utilise APAs to effectively reserve the majority of doses produced early in the pandemic. This left developing countries reliant on donations from countries with excess vaccine, resulting in developing countries receiving doses significantly later on in the pandemic and in much smaller volumes. The risk that developing countries will be denied access to vaccines persists in the current pandemic. The COVAX Facility aims to address this by committing to substantial advance market commitments on behalf of developing countries, with the goal of deploying two billion doses before the end of 2021. However, the 95 Z Tidman, ‘Coronavirus: Czech Republic Seizes More than 100,000 Face Masks Sent by China to Help Italy Tackle Spread’ The Independent (22 March 2020), available at www.independent.co.uk/news/ world/europe/coronavirus-face-masks-china-italy-czech-republic-latest-a9416711.html. 96 MF Rourke, ‘Access by Design, Benefits if Convenient: A Closer Look at the Pandemic Influenza Preparedness Framework’s Standard Material Transfer Agreements’ (2019) 97 The Milbank Quarterly 91; M Eccleston-Turner, A Phelan and R Katz, ‘Preparing for the Next Pandemic – The WHO’s Global Influenza Strategy’ (2019) 381 The New England Journal of Medicine 2192. 97 During the COVID-19 pandemic the UK has placed dexamethasone – a potential treatment for COVID-19 – on its list of medicines that cannot be exported from the UK or hoarded; see www.gov. uk/government/publications/medicines-that-cannot-be-parallel-exported-from-the-uk.

The Procurement of a COVID-19 Vaccine in Developing Countries  327 rise of vaccine nationalism and the existence of significant APAs between developed countries and vaccine manufacturers suggests that equitable access will be restricted. Added to this is the possibility that developed countries will restrict exports of vaccines until domestic demand is fulfilled, thereby preventing the COVAX Facility from distributing vaccines to developing countries.

328

part 5 Emergency Procurement and Responses to COVID-19: Country Studies

330

14 Emergency Procurement and Responses to COVID-19: The Case of Italy GIAN LUIGI ALBANO AND ANNAMARIA LA CHIMIA*

I.  General Introduction Italy was the first European country hit by the pandemic and one of the world’s worst affected countries, with a death toll of 27,967 in the first two months.1 The pandemic will have serious costs for the country, with the economy and GDP having plummeted by almost eight per cent and unemployment forecasted to have reached nine per cent at the end of 2020, wiping out four years of gradual improvement.2 During both the initial outbreak and the subsequent ripartenza (recovery) phases, procurement has played a key role and has been central to governmental measures. The authors have already given a first account of the procurement measures taken in February and March 2020.3 However, a lot has changed since then. A special commission was set up to manage and coordinate all such procurement and a series of legislative reforms were implemented, both to face the pandemic and to ‘restart’ the economy – notably, the measures referred to as Cura Italia4

* The authors are grateful to M Remoli for research assistance. The views expressed in this chapter are those of the authors only. 1 Figures updated on 30 April 2020, retrieved from ‘COVID-19: Situazione in Italia’ (Open Data), available at opendatadpc.maps.arcgis.com/apps/opsdashboard/index.html#/b0c68bce2cce478eaac82 fe38d4138b1. 2 See OECD, ‘OECD Employment Outlook 2020 – Worker Security and the COVID-19 Crisis: How Does Italy Compare?’ (2020), available atread.oecd-ilibrary.org/view/?ref=134_134917obkmtu87m1&title=Employment-Outlook-Italy-EN. Before COVID-19, unemployment in Italy was still well above its pre-2008 level. In January 2021, the Italian National Institute of Statistics (ISTAT) released a GDP forecast of −8.9% with respect to 2019, very much in line with the OECD figures. See www.istat.it/en/archivio/254252 and www.istat.it/en/archivio/253024. 3 GL Albano, ‘Homo Homini Lupus: On the Consequences of Buyers’ Miscoordination in Emergency Procurement for the COVID-19 Crisis in Italy’ (2020) 29 Public Procurement Law Review 213 and A La Chimia, ‘Procuring for COVID-19: Housebound Reflections on a Procurement Earthquake’ (2020) 29 Public Procurement Law Review 161 and La Chimia (with Fiorentino) below n 7. 4 Decree Law (DL) 17 March 2020, No 18 (Italy).

332  Gian Luigi Albano and Annamaria La Chimia (Cure Italy), rilancio5 (relaunch) and semplificazioni6 (simplification). As explained below, the vast majority of these measures derogate temporarily from the general Italian Public Contracts Code7 (‘the Code’, adopted by Legislative Decree 50/2016), enabling rapid procurement. The pandemic has also reignited the debate regarding the necessity of permanent reforms to the regulatory framework and structures. During the initial phase of the pandemic, derogation from ordinary ­procurement rules was mainly aimed at ensuring that goods, such as medical equipment and personal protective equipment (PPE), could be acquired quickly in the difficult international situation of global competition and export restrictions. During the second phase, the initial post-lockdown recovery phase, procurement again occupied centre stage in the political and legislative discourse, on the one hand, as a means to sustain the economy and provide leverage for sustainable growth,8 but on the other hand, because its slow speed and bureaucratic processes were an obstacle to recovery. This led to the issuing of emergency reforms aimed at legal simplification (hence, the Simplification Decree) to speed up post-lockdown recovery. However, somewhat ironically, the Government was, at that time, yet to publish a recovery plan, which would have incorporated the details relating to the spending of the funding from the EU Recovery Fund.9 This chapter provides a critical analysis of the Italian legal framework for public procurement during the outbreak of the pandemic and its immediate aftermath. We will analyse the most significant reforms adopted to promote a more agile response to the pandemic and restart the economy, as well as comment on the Italian Anti-Corruption Authority (ANAC) data relating to early procurement activity. We suggest that a first analysis indicates that some of the reforms were neither necessary, nor useful, to face the pandemic and unduly risked compromising competition and transparency.

II.  Introduction to the Regulatory Framework Public procurement in Italy is regulated by the Public Contracts Code, enacted by Legislative Decree No 50 of 18 April 2016 to implement the EU Procurement 5 DL 19 May 2020, No 34 (the Relaunch Decree) (Italy). Converted into law, with amendments, as Law (L) 17 July 2020, No 77. 6 DL 16 July 2020, No 76. Converted into law, with amendments, as L 11 September 2020, No 120. 7 Legislative Decree (DLgs) 18 April 2016, No 50 implementing Dirs 2014/23/EU, 2014/24/EU and 2014/25/EU published on GU n. 91 of 19 April 2016. See L Fiorentino and A La Chimia, ‘Introduzione’ and ‘conclusioni’ both in L Fiorentino and A La Chimia (eds), Il Procurement delle pubbliche amministrazioni: tra innovazione e sostenibilità (il Mulino, 2021). 8 Two of the six targets for the ripartenza in the ‘Piano Colao’ are focused on procurement reforms: see E Amaturo et al, ‘Iniziative per il rilancio “Italia 2020–2022”. Rapporto per il Presidente del Consiglio dei Ministri’ (June 2020), available at www.governo.it/sites/new.governo.it/files/comitato_ rapporto.pdf. 9 As to which, see EU Council, ‘Special European Council, 17–21 July 2020’, available at www.consilium.europa.eu/en/meetings/european-council/2020/07/17-21.

Emergency Procurement: Italy  333 Directives 2014/23,10 2014/2411 and 2014/25.12 Italy also used this implementation process as an opportunity to make other substantial reforms.13 Italy has adopted rules that are at times stricter and more cumbersome than those in the Directives, despite an explicit ban to that effect under Art 1(1)(a) of the Legge Delega (Enabling Act, under which Parliament delegates the power to transpose the Directives to the Government). This approach has been criticised in Italy and is one of the most contested points of the Italian procurement framework. As will be discussed in this section, one recommendation of the Government’s task force for devising a post-COVID economic strategy is a revision of the Code to embrace a ‘copy-out’ approach to the Directives, thus simplifying the Italian procurement framework.14 Since its adoption in 2016, the Code has also been subject to other significant criticism as well as to many reforms. While it is outside the scope of this chapter to examine in detail the need for wider reform and the merit of pre-COVID-19 reforms, it is important to note that the many attempts at reform of the Code and discussions about this, both before and after its adoption, are a sign of the inability of the Italian legal framework to meet the demands of a fast evolving procurement market and of a somewhat chaotic approach to procurement reform which, it has been argued, lacks consistency and a clear long-term vision, being prompted instead by short-term goals.15 This chapter will argue that this chaotic and hasty approach to reforms has also been characteristic of the COVID-19 era. Calls for reform have not diminished because of, or during, the pandemic. Indeed, in the aftermath of the first lockdown, when Italy moved from the first emergency phase to the recovery phase, the Government included in its ‘restart and recovery’ programme a plan to simplify the legal framework for procurement. This resulted in Decree No 76 of 16 July 2020, ‘urgent measures for simplification and digital innovation’ (known as the Decree Semplificazioni, or the Simplification Decree), converted, with changes, to law on 11 September 2020 as Law No 120/2020. As elaborated in the next section, the new law significantly changed the procurement legal framework. Although most are temporary derogations, as will be explained in section III.B below, their significance is such that even these temporary provisions may have an impact for a long time to come.16 10 Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts OJ 2014 No L94/1 (Concessions Directive). 11 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC, OJ 2014 No L94/65 (Public Contracts Directive). 12 Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC, OJ 2014 No L94/243 (Utilities Directive). 13 On the reform objectives see Art 1(d) of the Legge Delega (Enabling Act). 14 Amaturo et al, ‘Iniziative per il rilancio “Italia 2020–2022”’ (2020). 15 S Cassese, ‘Le riforme vanno fatte con progetti seri e strategie affidabili’ Il Riformista (21 September 2020), available at www.ilriformista.it/le-riforme-vanno-fatte-con-progetti-seri-e-strategie-affidabili-159791. 16 See further Fiorentino and La Chimia, Il Procurement delle pubbliche amministrazioni (2021); ANCE, ‘Decreto Semplificazioni: il Dossier con le novità per il settore dei lavori publici’ (Lavori Pubblici, 29 September 2020), available at www.lavoripubblici.it/news/2020/09/LAVORI-PUBBLICI/24305/ Decreto-Semplificazioni-Da-ANCE-il-Dossier-con-le-novit-per-il-settore-dei-lavori-pubblici. This will be further discussed in section III.2 below.

334  Gian Luigi Albano and Annamaria La Chimia The following section outlines the main changes made to respond to the pandemic, looking first at the measures enacted to address the medical emergency in the first few months and then at the post-lockdown measures aimed at restarting the economy.

III.  Reforms and Requirements of Procurement During COVID-19 A.  The General Emergency Procedures under the Italian Civil Code Articles 63 and 163 provide the main general procedures for emergency situations under the Italian Public Contracts Code. Article 63 concerns the procedure called procedura negoziata senza bando (negotiated procedure without prior publication). This procedure applies in general to contracts of any value; that is, both above and below the thresholds of the EU Directives. This is the same name as the method that the English version of the Public Contracts Directive 2014/24 calls the negotiated procedure without prior publication. The first five paragraphs of Art 63 of the Italian Code mirror Art 32 of the Public Contracts Directive, meaning that this procedure can be used in situations of urgency, following the same grounds and conditions as Art 32 of the Directive. The provision must only be applied when strictly necessary, under conditions of ‘extreme’ urgency, with that urgency having been caused by an unforeseeable event, which was not attributable to the procuring entity and where other methods, such as accelerated open or restricted procedures, would not be possible.17 In Italy, the provision governs the use of the Art 63 procedure for contracts both above and below the Directive’s threshold and it is the main emergency procurement method in Italy (although, as explained below, for some contracts below the threshold certain other procedures may also be available as an alternative). As chapter 3 explains, the negotiated procedure without prior publication under the EU Directives allows Member States to use a single-source approach in the specified cases in which it applies, including in cases of emergency where certain conditions are met. However, in contrast to the Directive’s procedure, the final paragraph 6 in Art 63 of the Italian Code further requires Italian public authorities to consult, ‘whenever possible’, at ‘least five economic operators, if present on the market’. Contracting authorities are also required to act following the principles of transparency, competition and rotation (Art 63.6). Therefore, in the form that it takes in Italy this method while (as under the Directive) not requiring a public solicitation, requires, where ‘possible’, a competitive procedure rather than a single source approach. The procedure must use the usual award

17 These

conditions are discussed in detail in ch 3.

Emergency Procurement: Italy  335 criteria in Art 95 of the Code.18 By requiring, in most emergency cases, use of a competitive approach under the above provisions of Art 63, the Italian Code limits substantially the use of a single-source approach for contracts above thresholds. The single-source approach is permitted under Art 63, but only in very specific cases, such as where there is only one supplier able to supply the goods for artistic or intellectual property reasons (Art 63(2)) or where, due to the technical characteristics of the goods, the limited timeline (due to extreme urgency) does not allow for consultation with five or more suppliers.19 The Code and the case law have emphasised the exceptionality of this single-source approach so that the possibility to purchase through a single source when using this method has been substantially limited, and ANAC has also recently clarified that a single-source approach can be adopted only in these very specific circumstances.20 The second procedure, procedura in caso di somma urgenza (procedure in case of extreme urgency) under Art 163, applies in cases of extreme urgency. It allows for a single-source approach but, unlike the negotiated procedure with a call for competition under Art 63, it applies only to relatively low-value contracts and only to the extent that it is necessary to address the cause of emergency to avoid damage to people and goods, within strict time limits from when the emergency occurs. This includes, under paragraphs 6 and 7, emergency cases under the competence of the Protezione Civile (Department of Civil Protection) and authorises the Protezione Civile, which is responsible for responding to emergencies (under Arts 4 and 5 of Law 225 of 199221), to procure under the rules set out, which include ordering immediate execution of works, necessary to addressing an emergency, by directly entrusting their execution to one or more suppliers. However, there are strict limits for using such emergency procedures, including a general maximum threshold of €200,000 (Art 163(1)) for works contracts. Only in exceptional cases and to the extent strictly necessary can use of this procedure above the set thresholds be authorised, and even then only when the value of the contract does not exceed the EU Directives’ thresholds and strict timescales. For contracts below EU procurement thresholds, the ordinary rules of Art 36 of the Code, providing for the affidamenti diretti method, in some cases offers more 18 Article 95, requiring use of the lowest price or the best quality-price ratio. In certain cases, such as social services, the latter basis is compulsory. 19 It is also possible to use Art 63 for renewing existing contracts, if serious damage to the administration would be caused if the contract was not renewed. In this case, the possibility to renew the contract also needs to have been expressly foreseen in the original award and it must have been taken into account when setting the value of the contract (Art 63(5)). 20 ANAC, ‘Ricognizione delle disposizzioni acceleratorie e di semplificazione’ (Rome, 22 April 2020), available at www.anticorruzione.it/portal/rest/jcr/repository/collaboration/Digital%20Assets/anacdocs/Attivita/Pubblicazioni/RapportiStudi/DOCUMENTO%20Disposizioni%20Acceleratorie%20 per%20S_A_FINALE%20REV.pdf; ANAC, ‘Linee guida n. 8: Ricorso a procedure negoziate senza previa pubblicazione di un bando nel caso di forniture e servizi ritenuti infungibili’ (Rome, 10 October 2017), available at www.anticorruzione.it/portal/rest/jcr/repository/collaboration/Digital%20Assets/ anacdocs/Attivita/Atti/determinazioni/2017/Linea%20guida8_Determina950.pdf. 21 Legge n. 225 del 24 febbraio 1992: istituzione del Servizio Nazionale della Protezione Civile, 24 febbraio 1992, Gazzetta Ufficiale n. 64 del 17 marzo 1992.

336  Gian Luigi Albano and Annamaria La Chimia favourable procedures than the emergency methods. For example, this method may be used for any purchases below €40,000;22 for works of a value above this, but below €150,000, when three quotes where available are required; and for supplies and service contracts between €40,000 and the EU procurement thresholds, when five quotes, if available, are required. Suppliers are to be identified on the basis of market analysis or supplier lists, respecting the principles of rotation of invitations. As we will see below, these thresholds have also been increased by the recent Simplification Decree, related to the pandemic. As permitted by the EU Directives (discussed in chapter 3), the Code also allows, in urgent cases, for accelerated procedures to speed up timeframes in regular tendering procedures.23

B.  Emergency Procedures During the First Phase: Lockdown On 31 January 2020, Italy declared a state of emergency24 and on 3 February 2020, emergency provisions gave special dispensations to the Department of Civil Protec­­ tion. Article 3 of Order 630/2020 gave this body and all its executive agencies the power to use fast-track procedures to purchase medical supplies to address the emergency. These included the negotiated procedure without prior publication under Art 63 and the procedure in case of extreme urgency under Art 163, deeming that the existence of an emergency, which is a requirement for the use of these procedures, exists along also with all the relevant conditions that govern the use of the urgency provision (such as, with Art 63, the absence of an unforeseeable event or urgency not being attributable to the conduct of the procuring entity).25 As one of us has argued elsewhere, this was necessary to ensure certainty on the option to use the emergency procedures, and ultimately guarantee that the required goods would be purchased quickly.26 The extent to which it is lawful, under EU law, to adopt this approach of deeming the extreme urgency procedure to be available for certain classes of purchases and for this to be done by national legislation, rather than leaving the urgency and relevant conditions to be decided by each procuring entity, on a case by case basis, is examined in chapter 3. In addition to being able to use methods provided by Arts 63 and 163, various obligations which would otherwise have been applicable, were disapplied, such as those linked to planning

22 See TAR Molise s 1, of 14 September 2018, No 533. 23 See Art 60(3) (open procedures) and Art 61 (restricted procedures) of the Code. 24 Presidency of the Council of Ministers, ‘Dichiarazione dello stato di emergenza in conseguenza del rischio sanitario connesso all’insorgenza di patologie derivanti da agenti virali trasmissibili’ (Declaration of a state of emergency in response to the health risk associated with disease deriving from transmissible viral agents) (31 January 2020), available at www.gazzettaufficiale.it/eli/id/2020/02/01/20A00737/sg; DL 2 March 2020, No 9, Art 34. See also, Order 3 February 2020, No 630, especially Art 3 and Order 25 February 2020 n 639 and. See also Art 34 of DL 2 March 2020, No 9. 25 Order 3 February 2020, No 630, Art 3. 26 See Fiorentino and La Chimia (n 7) 27.

Emergency Procurement: Italy  337 under Art 21 of the Code and the obligations to use electronic communications under Arts 40 and 52. On 2 March 2020, Consip – the national Italian Central Purchasing body which has conducted procurement in the health sector since 2001 – was entrusted with executive purchasing powers for COVID-19 on behalf of the Department of Civil Protection.27 As Albano has explained elsewhere,28 Consip awarded the first COVID-19 framework contracts following a competitive process under Art 63 using the procedura negoziata senza bando. Consip invited a significant number of suppliers and the high number who participated (15 on one occasion) resulted in awards at prices which were, remarkably, in line with prevailing market prices recorded before the declaration of emergency. However, the market changed rapidly as the virus hit other countries. As chapter 8 explains, once the World Health Organization (WHO) declared the existence of a pandemic and buyers around the world began to compete for limited supplies, many countries implemented export restrictions on products such as masks and PPE, requiring rapid action with significant regulatory trade-offs for public buyers to obtain the necessary supplies. Italy was one of the countries in which this led to substantial deregulation, with the adoption in March 2020 of Decree No 9 of 202029 and the Cura Italia (Cure Italy) Decree No 18 of 2020.30 These Decrees confirmed and continued the powers of the Department of Civil Protection and its soggetti attuatori (executive agencies),31 in procuring medical supplies and other goods or services needed to manage the health emergency (see Art 34(1) DL N 9/20 and Art 5bis introduced by Law No 27 of 24 April 202032), allowing these bodies (including through Consip) to purchase PPE and other needed medical supplies in derogation from the Public Contracts Code33 until the end of the state of emergency.34 In addition, the possibility was introduced for the Department of Civil Protection, its executive agencies and the Commissioner to make upfront payment of the full contract price in derogation from the Code, as well as to derogate from state accounting and public finance principles that previously prevented this.35 27 Decreed by the Head of Civic Protection No 666 of 2 March 2020. 28 GL Albano, ‘Homo Homini Lupus’ (2020). 29 DL 9/2020. 30 DL 17 March 2020, No 18. Entered into force on 17 March 2020 and converted into law as L 24 April 2020, No 27. 31 The Cure Italy Decree later extended these powers to the Extraordinary Commissioner, as noted below. 32 Article 34 is titled ‘Disposizioni finalizzate a facilitare l’acquisizione di dispositivi di protezione e medicali’ (Provisions aimed at facilitating the acquisition of protective and medical equipment). 33 Art 34 and Art 5 bis allow, until the end of the state of emergency, the Department of Civil Protection, the executive agencies and the Commissioner to acquire PPE as well as to arrange advance payments for the entire supply, in derogation of the rules in the Code; DL 18 April 2016, No 50. 34 Similar emergency powers were attributed to local authorities under Order 25 March 2020, No 655. See Presidenza del Consiglio dei Ministri Dipartimento Della Protezione Civile, ‘Ulteriori interventi urgenti di protezione civile in relazione all’emergenza relativa al rischio sanitario connesso all’insorgenza di patologie derivanti da agenti virali trasmissibili’. 35 Aricle 34(1) DL N 9/20.

338  Gian Luigi Albano and Annamaria La Chimia Further, for all relevant Italian entities (that is, not just the above bodies) the Cure Italy Decree extended the negotiated procedure without prior publication under Art 63 of the Code to purchases linked to strengthening the systems of support for the internationalisation of Italian companies abroad (Art 72) and for smart working for public bodies (Art 75). In addition, while still requiring respect for the principles of transparency, competition and rotation when using the Art 63 negotiated procedure without prior publication, the Cure Italy Decree provides, in some cases, special rules for this method, for example, reducing the number of invited suppliers to four for smart working under Art 75 (with at least one an innovative start-up). Further, for work linked to the management of prisons and work necessary to repair damage caused by prison protests in March 2020, linked to COVID-19, Art 86 allows works contracts undertaken by any procuring entities by 31 December 2020 with a value below the EU procurement thresholds to be carried out using the procedure in Art 163 of the Code – allowing works to be directly entrusted to one or two suppliers – even if above the usual (low) thresholds for using the Art 163 urgency method. Finally, special rules for procurement of IT equipment for schools in Art 120 has allowed schools to use Consip’s purchasing platform. Other derogations relate to the documentation necessary to prove the conditions for admission to tendering, aimed at ensuring easier and faster access to tenders. To identify COVID-19-related acquisitions, ANAC collected information about 2,265 awards from 1 March to 30 April 2020 from the Information System for Monitoring Public Tenders (SIMOG – the Italian acronym). These covered almost €5.8 billion (US $6.9 billion36) in contracts awarded by 194 healthcare entities operating under emergency circumstances,37 classified into three categories of masks, PPE excluding masks and sanitation products. ANAC’s final report does not indicate whether the tracked values refer to the contract values, the award values or the estimated value before award. Even where competition is absent, the procuring entity may sometimes save on the estimated price through negotiations and in a negotiated procedure without prior publication there is generally some degree of competition, leading to some awards at lower than the estimated value.38 On this basis, it appears that the ANAC data refers to estimated values: in Table 2.9 of the Report by ANAC (at 30) the value of Consip’s acquisitions appears to be approximately €660 million (US $783,420,000), much higher than the value of Consip’s actual published award data at around €240 million (US $284,880,000) (implying an overestimate of the actual resources used for emergency acquisitions

36 All values in this chapter are converted to US $ at the exchange rates shown by the Federal Reserve as per Board of Governors of the Federal Reserve System, ‘Foreign Exchange Rates – H.10’, available at www.federalreserve.gov/releases/h10/hist/default.htm. 37 For the raw data see ‘Allegato 1 – Affidamenti – Riepilogo generale – Campione selezionato’, available on the same page of the main report (see ibid). 38 www.consip.it/bandi-di-gara/covid-19.

Emergency Procurement: Italy  339 during the March–April 2020 period). In the absence of any more precise data, in this chapter we will consider the estimated contract values as the value of purchases. Table 14.1, published by ANAC, reports the types of procurement methods used by 194 contracting authorities in the healthcare sector, which operated during the March–April 2020 period.39 The data shows that despite procurement authorities being allowed to use a single-source method (under the derogation from the Code provided for the pandemic for the health sector under Order 630/2020 and in the Cure Italy Decree, as set out above), around 78 per cent by value of all acquisitions were carried out through this (unusually competitive) negotiated procedure without prior publication, while single-source accounted for a rather limited share of the value of emergency purchases. This shows that the system was able, at least initially, to operate with an element of competition. Table 14.1  Number (absolute and relative) and value in € and US $ (absolute and relative) of acquisitions according to the procurement method, March–April 2020

Type of procedure

Number – relative weight Number (per cent)

Value € (US $)

Value – relative weight (per cent)

Average value € (US $)

Direct award (not specified whether involves consultation with more than one supplier)

1,141

23.5

826,068,266 (980,543,000)

15.1

723,986 (859,000)

Negotiated procedure without prior publication (under Art 63 of the Code)

3,010

61.9

4,244,027,563 (5,037,661,000)

77.8

1,179,764 (1,400,000)

Restricted procedure

12

0.2

66,898,509 (79,409,000)

1.2

5,574,876 (6,617,000)

Dynamic purchasing system

13

0.3

3,263,425 (3,874,000)

0.1

248,956 (296,000) (continued)

39 ANAC, ‘Covid-19: Indagine conoscitiva sugli affidamenti connessi all’epidemia. Quasi 6 mld di spesa fra marzo e aprile 2020. Anac avvierà attività di vigilanza verso affidamenti caratterizzati da maggiori criticità’ (21 August 2020), available at www.anticorruzione.it/portal/public/classic/ Comunicazione/News/_news?id=0dff53f80a77804274dd5948c37232a1.

340  Gian Luigi Albano and Annamaria La Chimia Table 1  (Continued)

Type of procedure

Number – relative weight Number (per cent)

Value € (US $)

Value – relative weight (per cent)

Average value € (US $)

Call-off contract – framework agreement without reopening of competition

477

9.8

100,166,326 (118,897,000)

1.8

209,992 (249,000)

Call-off contract – framework agreement with reopening of competition

4

0.1

59,606 (70,000)

0.0

14,902 (18,000)

14

0.3

4,392,586 (5,393,000)

0.1

313,756 (372,000)

Other

Under the Cure Italy Decree, the legislator also appointed a Special Commissioner for the COVID-19 emergency (Art 122), who essentially became responsible for coordinating and conducting all emergency purchasing until the end of the state of emergency (which so far has been renewed repeatedly). The Commissioner is entrusted with extensive powers to address the medical emergency in accordance with the rules (as set out above).40 Article 122 of the Decree also provides that the Commissioner implements and supervises any intervention useful to deal with the health emergency, organising, acquiring and supporting the production of all goods useful for containing and counteracting the emergency itself, or necessary in relation to the measures adopted to counteract it. The Commissioner is exempt from the control of the Corte dei Conti (accounting court). However, the Commissioner does remain under a duty to report and account for financial expenditures and will only be culpable for malicious acts – important since administrative action is often said to come to a standstill because of civil servants’ fear of attracting accusations of negligence. Law No 120/2020 extended these powers to additionally cover the purchasing necessary to refurbish schools, in order to make them COVID-safe. Despite the existence of a Civic Protection Department in charge of emergencies it is often the case in Italy that when an emergency occurs – whether national, regional or local emergency, and whether a natural or man-made disaster or event (essentially whenever something needs to be done quickly, as with certain sporting events) – a Special Commissioner is appointed to deal with it. For example, a Special



40 DL

18/2020, Art 122(2).

Emergency Procurement: Italy  341 Commissioner was appointed for the reconstruction of the Genova Bridge which collapsed in 2018;41 after the Aquila earthquake in 2009 and the one in 2016;42 and for the Cycling World Cup in 2008.43 One individual, Guido Bertolaso, has been appointed to the role on 14 occasions, on two of these occasions for multiple years, and for the COVID-19 emergency he was appointed Special Commissioner by multiple regions. Disappointingly, but perhaps not surprisingly since the myth of the ‘strong man’ still fascinates many Italians,44 it is often a man being appointed to the role. ANAC figures show that during March–April 2020 the procurement procedures started by the Commissioner for the COVID-19 emergency (it is unclear how many have been concluded) were more than double in value terms the procedures started by Consip and by the Civil Protection Authority (expenditure of €2.04 billion (US $2.42 billion) compared with €0.66 billion (US $0.78 billion) by Consip and €0.33 billion (US $0.39 billion) by the Civil Protection Authority.45 The aggregation of purchases was mostly achieved by relying on the procurement of these three entities.

C.  Emergency Procedures Post-lockdown: The Need for a Simpler System Two months after the Cure Italy Decree, the Government adopted the Law Decree No 34 of 19 May 2020, Decreto Rilancio46 (the Relaunch Decree). This was converted, with amendments, into Law No 77 of 17 July 2020. The new law replaces the previous emergency measures and extends the ‘state of emergency’ so that the extraordinary emergency powers of the Commissioner, and of the Department of Civil Protection and its executive agencies continue. As mentioned above and argued elsewhere, in this phase procurement is perceived both as a leverage for economic development and as an obstacle necessitating urgent reform47 – a perspective adopted also by the team of Government experts tasked with the post-COVID recovery plan and pushed by the Government through press conferences and interviews.48 41 www.commissario.ricostruzione.genova.it/notizia/commissario-straordinario-la-ricostruzione. 42 sisma2016.gov.it. 43 www.sporteconomy.it/ciclismo-bertolaso-continua-a-girare-per-i-mondiali-di-varese-2008. 44 According to a recent study by Censis, one in two people in Italy wants a ‘strong man’ in power: www.agi.it/cronaca/censis_politica_uomo_forte_democrazia-6689183/news/2019-12-06. 45 Again, this data does not refer to the conclusion of contracts, as data on this could not be obtained. It has been reported that from March 2020, when the Special Commission was established, to July 2020 we have no data on conclusion of contracts for 83% of tenders: F Fubini, ‘Covid, bandi per 9,6 miliardi Su metà delle forniture il nodo della trasparenza’ Corriere della Sera (25 August 2020), available at gssi.telpress.it/news/2020/08/25/2020082502757610717.PDF. 46 Law Decree No 34 of 19 May 2020 ‘Misure urgenti in materia di salute, sostegno al lavoro e all’economia, nonché di politiche sociali connesse all’emergenza epidemiologica da COVID-19’. 47 Fiorentino and La Chimia (n 7). 48 Amaturo et al (n 8).

342  Gian Luigi Albano and Annamaria La Chimia The need to simplify and accelerate administrative procedures emerges clearly with the Relaunch Decree. Article 264 contains measures aimed at ‘the utmost simplification, acceleration of the administrative procedures and removal of bureaucratic obstacles to the lives of citizens and of industries in relation to the COVID-19 emergency’.49 These measures include provisions for facilitating permissions necessary for COVID-19 safety works and measures aimed at reducing requests by public authorities for documents from citizens and industries that are already accessible. This need for simplification was reinforced by the Simplification Decree, Decree Law No 76 of July 202050 and converted, with amendments, to Law No 120 of 11 September 2020.51 Title I of this Decree, ‘simplification in relation to public contracts’ (authors translation), contains rules derogating from, modifying and integrating those of the Public Contracts Code,52 but with the derogating measures applying only to procedures initiated by 31 December 2021. The main function of these new procurement rules was to simplify the Code to overcome bureaucratic obstacles and speed up the procurement processes. This is a motif often advanced by governments in Italy, where the slow pace at which the administrative machine functions is an easy political target.53 However, as the literature highlights, the above new measures are ‘short-term and ill-defined fixes’ unable to address the structural and systematic problems of the Italian procurement system.54 In particular, the many laws and urgent measures enacted during the pandemic have not introduced any effective norms able to improve the system and might even have negative longer-term consequences.55 A particular concern is the focus on restricting competition as a means to a faster and simpler process which, as will now be elaborated, has been done by, firstly, increasing the thresholds for single-source awards; secondly, extending use of the (usually, in Italy, competitive) negotiated procedure without prior publication for contracts below the EU Directives’ thresholds and reducing the number of suppliers required to be invited;56 and, thirdly, shortening timeframes for the ordinary procedures and setting strict time limits for their completion, along with damages liability for non-compliance. 49 ‘Liberalizzazione e semplificazione dei procedimenti amministrativi in relazione all’emergenza COVID-19’ (authors’ translation). 50 DL 16 July 2020, No 76: ‘urgent measures for simplification and digital innovation’ (authors’ translation of ‘Misure urgenti per la semplificazione e l’innovazione digitale’). 51 Law 120/2020 entered into force on 15 September 2020. 52 See M Lipari, ‘La proposta di modifica del rito appalti: complicazioni e decodificazioni senza utilità?’ (l’Amministrativista, 3 July 2020), available at lamministrativista.it/articoli/focus/la-propostadi-modifica-del-rito-appalti-complicazioni-e-decodificazioni-senza-utilit. 53 A Sandulli, ‘Tutti gli ostacoli della politica alle riforme amministrative’ (Luiss Open, 11 August 2020), available at open.luiss.it/2020/08/11/tutti-gli-ostacoli-della-politica-alle-riforme-amministrative. 54 See Cassese, ‘Le riforme’ (2020) and Fiorentino, ‘Preface’ and ‘Introduction’ (with La Chimia) in Fiorentino and La Chimia (n 7). 55 Fiorentino ‘Preface’ in Fiorentino and La Chimia (n 7); Cassese (n 15). 56 See Law 120/2020, Art 1 (procedures for contracts below the EU thresholds) and Art 2 (contracts above EU thresholds).

Emergency Procurement: Italy  343 In this regard, Law 120/2020 distinguishes between procedures for contracts below the thresholds in the EU Directives for procurement (Art 1) and procedures for contracts above these EU procurement thresholds (Art 2). For contracts above EU procurement thresholds, Art 2, confirms the ­possibility of using the accelerated procedures in urgent cases, with the same timescales for these as in the Directive (as discussed in chapter 3). It also confirms the existing possibility of using the negotiated procedure without prior publication under Art 63 of the Code when ‘for urgent reasons linked to the COVID-19 emergency the entity cannot purchase even with the’ accelerated procedure timeframes (Art 2(3); authors’ translation). This is a mere confirmation of the position in the Code, and all the usual conditions for justifying use of Art 63 in urgent cases apply. In addition, however, alongside the transparency controls required by the Public Contacts Directive, such as publication of award notices, the new Simplification Decree has now also introduced obligation for procuring entities to publish information giving notice, on its website, of the start of the procedure. In addition, and very importantly, under Art 2.4 for some sectors deemed particularly sensitive in addressing the pandemic, such as those related to the construction sector in the fields of education, health, justice and transport, and for all purchases linked to them, for above threshold contracts entities can derogate from any provisions of the Code except for those linked to penal law, anti-mafia laws, the principles linked to the EU procurement directives and Art 30 (principles of competition, transparency, non-discrimination), Art 34 (on environmental sustainability) and Art 42 (conflicts of interest). This provision applies to all entities operating in the sectors, as listed above. The Article does not make any explicit reference to the procedures to be used when purchasing, but provides a blanket exception to the Code within the limits highlighted above. Arguably, the reference in the Article to the principles of competition, transparency and nondiscrimination as well as to the obligations derived from the Directives, implies that some form of competition is always required. While entities would be able to use the Code’s most flexible procedures, such as the negotiated procedure without prior publication of Art 63, arguably the obligation to consult a minimum of five suppliers if available on the market and whenever possible still applies. It is unlikely that wide use of the single-source procedure would be permitted as it would be incompatible with the above principles as interpreted by the Italian courts and guidance of ANAC published in the pandemic.57 A further new requirement is that procedures above the EU procurement thresholds must generally be completed within six months.58 As for below-threshold contracts, the new rules for these conveyed in Art 1 of Law 120/2020 are very complex.

57 The strict limits to the use of the single source have been confirmed recently by Emilia-Romagna’s Regional Administrative Court (TAR), D 18 March 2020, No 41. 58 Law 120/2020, Art 2.

344  Gian Luigi Albano and Annamaria La Chimia A first, and very important, point of novelty is that the new Law introduces strict time limits for completing the procedure,59 of two months for procedures under Art 1(2)(a) – the affidamenti diretti procedure – and four months for procedures under Art 1(2)(b), governing the negotiated procedure without publication, with the contract concluded speedily after award. Paragraphs 2 and 3 then lay down rules for conducting the procedure, which vary according to the type of contract and the contract value. These, first, temporarily increase thresholds for the use of the affidamenti diretti method under Art 36 of the Code from €40,000 (US $49,000) to €75,000 (US $92,000) for services and supplies and €150, 000 (US $183,500) for works,60 thus expanding use of this method. Under the ordinary rules of Art 36 of the Code, there is no obligation to consult more than one supplier and this continues under the new thresholds. Article 1(2)(b) provides for awarding services and goods contracts between €75, 000 and the EU Directives’ thresholds by negotiated procedure without prior publication under Art 63, inviting at least five suppliers as a general rule. Under the Code’s ordinary rules such contracts above €40,000 and up to the EU procurement thresholds can be awarded by affidamenti diretti under Art 36. This change is surprising as to some extent it makes awards more complex, by increasing the number of suppliers from three to five (although, arguably, fewer than five might often suffice under the rather vague norm of Art 63) and applying the negotiated procedure without prior publication under Art 63, which is a more structured and formal procedure than the consultation of affidamenti diretti under Art 36. For works, the ordinary rules of Art 36 provide for awards up to €150,000 by the affidamenti diretti method with consultation with three suppliers, and from €150,000 to €1 million by the negotiated procedure without prior publication under Art 63 with a different minimum number of invited suppliers depending on thresholds; and the open procedure for awards above €1 million and below the EU procurement thresholds (Art 60). The new rules lower the minimum number of suppliers for the negotiated procedure for works61 and allow that procedure rather than the open procedure for works contracts worth between €1 million and the EU procurement thresholds. Article 1 also allows for the use of ordinary procedures with possible reduction of the timescales for tenders by half, to 17.5 days for open procedures (15 in the cases of electronic tenders) and to 15 days for the restricted procedure. In addition, Art 1(4) and (5) also includes some more specific rules to simplify procedures

59 Applicable unless the procedure has been interrupted by judicial proceedings, as per Law 120/2020, Art 1(1). 60 See Law 120/2020, Arts 1–2. 61 For contracts between €150,000 and 350,000 from 5–10 suppliers and for contracts between €350,000 and €1 million from 10–15; while, for contracts of value between €1 million and €5.35 million (the EU thresholds) – for which the open procedure applies under the ordinary rules – the number is 15.

Emergency Procurement: Italy  345 for below-threshold contracts, including dispensing with bid guarantees, unless necessary and justified by the nature of the procedure, when they may be half the normal amount (Art 1(4)). For all procedures for both above- and below-threshold contracts, invitees must be selected through market investigations or on the basis of supplier lists. The ordinary principles of transparency, competition and rotation also continue to apply (as referenced by Art 1(3)), as does the ‘rotation principle’, precluding always inviting the same suppliers, and a new rule also requires consideration of geographical distribution of companies62 (although ANAC has warned that the latter may have a discriminatory effect63). As was previously also the case, an award notice is still generally required for both above- and below-threshold contracts that includes the name of invitees. However, the new Law removes this requirement for contracts below €40,000 – a change which, it is submitted, is an unnecessary curb on transparency. As noted above, the derogations apply to award procedures initiated by 31 December 2021. Here the Law states that any programmatic act in place by the 31 December 2021 suffices, meaning that even procedures not advertised by then may be covered, thus, risking ‘cutting any causal link with the emergency.’64 It is hard to assess the extent to which transparency and competition are weakened in practice when using negotiated procedures without prior publication (in the Italian, competitive, form) rather than, in particular, the ordinary procedures, notably open and restricted procedures. For example, if suppliers are already qualified in an electronic marketplace, such as the MePA (the Italian Public Administration’s e-marketplace managed by Consip on behalf of the Italian Ministry of Economy and Finance), negotiation is likely with almost all suppliers that might have participated in an open procedure; as was in fact the case with the two main negotiated procedures without prior publication for ventilators and PPE carried out by Consip on behalf of the Italian Department for Civil Protection.65 Thus, in some circumstances such as a market in which only a few long-term firms are active, well-managed negotiated procedures may replicate the level of participation in open procedures. As argued elsewhere,66

62 The Code, Art 36; and see ANAC, ‘Linee Guida n. 4 – Procedure per l’affidamento dei contratti pubblici di importo inferiore alle soglie di rilevanza comunitaria, indagini di mercato e formazione e gestione degli elenchi di operatori economici’ (2018), available at www.anticorruzione.it/portal/public/ classic/Attivitadocumentazione/ContrattiPubblici/LineeGuida/_lineeGuida4. 63 See ANAC, ‘Esame e commento degli articoli del decreto-legge 16 luglio 2020, n. 76, “Misure urgenti per la semplificazione e l’innovazione digitale» in tema di contratti pubblici, trasparenza e anticorruzione”’ (Rome, 4 August 2020), available at www.anticorruzione.it/portal/rest/jcr/repository/collaboration/Digital per cent20Assets/anacdocs/Attivita/Pubblicazioni/RapportiStudi/ContrattiPubblici/Anac.DL76.2020.pdf. 64 See ‘Decreto Semplificazioni: Da ANCE il Dossier con le novità per il settore dei lavori pubblici’ (Lavori Pubblici, 29 September 2020), available at www.lavoripubblici.it/news/2020/09/ LAVORI-PUBBLICI/24305/Decreto-Semplificazioni-Da-ANCE-il-Dossier-con-le-novit-per-ilsettore-dei-lavori-pubblici. This will be discussed further in section III below. 65 See more on these procedures at Albano (n 3). 66 See Albano (n 3).

346  Gian Luigi Albano and Annamaria La Chimia a stable market structure coupled with thorough intelligence is likely to make even a negotiated procedure very competitive. Market intelligence is prompter and more effective when potential suppliers are already operating, or at least registered, on an e-marketplace. In other cases, existing suppliers with a contract may find themselves in a more favourable position than potential entrants, as potential invitees in emergency cases. More rapid procedures are also envisaged for suppliers to prove that they meet qualification requirements (see Art 4). On award criteria, the rules remain essentially the same as before, namely there is a free choice between the ‘least cost’ and what the Italian Code (using the concept of MEAT as in the pre-2014 EU Directives67) refers to as the ‘most economically advantageous tender based on the best quality-price ratio’ (MEAT) criterion, which permits non-price criteria. The only exception is a requirement to always use MEAT for labour-intensive services. As already mentioned, the new Law introduced temporarily for contracts both above and below the thresholds strict time limits for completion of either six, four or two months depending on the method used. Related to this, a further important innovation of the Law is that it also provides (Art 2(2)) that failure to award the contract within these times (unless interrupted by judicial authority) may lead to the financial liability of the Responsabile Unico del Procedimento (RUP, the official responsible for the procurement) for damage to the state68 and, where the delay is attributable to the supplier, to the exclusion of the supplier. The Law also requires that contracts be signed within 60 days from award – a permanent change to the Code, which previously seemed to suggest merely a preference for this. Again, this is on pain of potential financial liability for the RUP or, where the supplier is at fault, rescission of the award. Such short timeframes – and the liability for the RUP – are problematic because they might lead the RUP to choose the fastest procedures, even when it would not be the most appropriate course of action. In practice, this may encourage officials to choose the most rapid procedure even when it would not be necessary to do so and/or to adopt a less complex procurement design to simplify the evaluation in order avoid liability (for example, this might lead to the adoption of the lowest price rather than MEAT as an evaluation criteria because it is less complex and hence faster than MEAT). The central objectives of the above provisions are to simplify and ­accelerate the process. However, they are also problematic as this is mainly undertaken

67 The current Directives, eg Public Contracts Directive, Art 67(2), use this concept to cover both price or cost only criteria as well as other criteria. 68 Law 120/2020, Art 2(2) specifies that these timeframes do not apply if the procedure has been interrupted by the judicial authority. See Fiorentino and La Chimia (n 7).

Emergency Procurement: Italy  347 by eliminating or reducing competition for a relatively long time period and by attributing ‘fault’ to the RUP, exacerbating the perception of the Italian public that procurement is slow because procurement officials do not work quickly enough. Such solutions are, it is submitted – and in accordance with the doctrine already criticising such provisions – unable to truly simplify procurement.69 First, use of single-source approaches and lowering the number of participants, combined with the liability of the RUP for not complying with the time limits, might create a situation where competition is unreasonably restricted. Faced with potential liability for late completion, the RUP may exercise its discretion to favour the speediest, rather than the optimum, procurement design. For example, they may limit or omit evaluation criteria that require lengthy discussions by the award committees (such as sustainability-related criteria) or bundle contracts to reduce the number of lots and hence the number of tenders, rather than design lots based on the nature of the subject matter and of the relevant market. Further, the strict timeframe may make it more likely that ordinary procedures will not be chosen above exceptional ones. At the same time, though, as abuses of singlesource acquisitions were spotted during the first wave of the pandemic, anecdotal evidence suggests some reluctance to use this approach due to the perceived risk of investigation. Therefore, on 6 December 2020, it was reported that the Lombardy Governor’s lawyers wrote to the Milan criminal court explaining that the regional Central Purchasing Body’s officials would seek explicit authorisation to use a single-source solution to acquire influenza vaccine, fearing investigation at a later stage.70 Contrary to the European Commission’s proposed approach of using­ incentives – carrots – to increase the efficiency of procurement officials,71 the Italian legislator has chosen the ‘stick’ of financial liability to speed up the process. This seems even more problematic given the failure to make any substantial and structural improvement to the procurement rules and system, including basic reforms that could accelerate the process – for example, addressing interoperability of databases and information on eligibility held by different public institutions or completing digitalisation of procurement processes which, in many cases, remain an electronic version of a paper-based procedure.

69 See, Lipari, ‘La proposta di modifica del rito appalti’ (2020); Sandulli, ‘Tutti gli ostacoli della ­politica’ (2020); Cassese (n 15); Fiorentino and La Chimia (n 7). 70 L Ferrarella, ‘Vaccini contro influenza, Fontana scrive ai pm: difficoltà nel reperirli, i miei dirigenti temono le inchieste’ Corriere della Sera (Milan, 5 December 2020), available at milano. corriere.it/notizie/cronaca/20_dicembre_05/fontana-scrive-pmdifficolta-vaccinii-miei-dirigentitemonoinchieste-4d96ccda-365b-11eb-ab19-bbfa6037f17b.shtml. 71 European Commission, ‘Commission Recommendation (EU) 2017/1805 of 3 October 2017 on the professionalisation of public procurement – Building an architecture for the professionalisation of public procurement’ (October 2017), available at eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX per cent3A32017H1805.

348  Gian Luigi Albano and Annamaria La Chimia

D. Price-Gouging Procurement of masks (mainly surgical masks, FFP2 and FFP3) was one of the thorniest issues worldwide from March to May 2020 and price-gouging – abnormally high prices charged to public buyers – for these products, as well as others, has been under the spotlight. The underlying concern is that even under abnormal circumstances it is, in principle, possible to determine the ‘market price’ of a specific item (for example, FFP2 masks) so that a transaction price much higher that the ‘market price’ is deemed to be considered a fraud against public buyers, especially when the latter are operating under stressful conditions to safeguard public health.72 In respect to the procurement of masks, many factors have, in combination, given rise to sudden price spikes and volatility over short time periods: global supply chain disruptions, factory shutdowns, intermediaries withholding stocks and lack of buyer coordination are merely the most tangible of these. Because most production sites, particularly in China, were shut down when the pandemic first hit Europe and the Americas a few weeks later, thousands, if not hundreds of thousands, of public buyers were competing for masks which had already been produced. How did Italian buyers perform in purchasing masks in the most crucial period of the lockdown? ANAC has gathered a handful of observations on the procurement procedures of masks. Since surgical, FFP2 and FFP3 masks are very different items, we focus here on FFP2 masks. Merging different sets of raw data provided by ANAC, Table 14.2 illustrates the main economic dimensions of 28 acquisitions on a weekly basis, covering the number of purchased masks overall (quantities), weighted price and variance of prices within the same time interval. Figure 14.1 plots weighted average prices and variance in weeks for which data were available. Since there was no available data for the week 15–21 March, we have repeated the same exercise on a 10-day time interval basis in order to ‘draw’ a short-term trend of prices and dispersion (as demonstrated by Table 14.3 and Figure 14.2). Table 14.2  Main indicators of FFP2 masks per week

Variance

Weighted average price € (US $)

1–7 March

1.962

4.13 (4.90)

120,500

4

8–14 March

4.906

4.26 (5.06)

7,858,137

9

15–21 March

–

–

–

–

22–28 March

0.834

2.81 (3.34)

2,222,500

7

29 March–4 April

0.259

3.09 (3.67)

363,560

8

Week



72 This

issue is discussed further in ch 8, section III.C.

Quantities

# Observations

Emergency Procurement: Italy  349 Figure 14.1    6 5 4 3 2 1 0

FFP2: Variance/Weight Av. – Week

1–7 Mar

8–14 Mar

15–21 Mar Variance

22–28 Mar

29 Mar–4 Apr

Weight. Av. (€)

Table 14.3  Main indicators of FFP2 mask – 10-day period 10-day time interval

Variance

Weighted average € (US $)

1–10 March

3.213

5.34 (6.34)

160,500

5

11–20 March

2.761

4.23 (5.02)

7,818,137

8

21–31 March

0.815

2.81 (3.34)

2,232,500

8

1–10 April

0.228

3.09 (3.677)

353,560

7

Quantities

# Observations

Figure 14.2  Variance and weighted average of FFP2 masks prices – 10-day period FFP2: Variance/Weight. Av. – ten-day interval

6 4 2 0

1–10 Mar

11–20 Mar Variance

21–31 Mar

1–10 Apr

Weight. Av. (€)

As the number of observations is too low for a proper statistical analysis, it is necessary to limit the analysis to some qualitative observations. First, throughout the 40-day period of observations the (weighted) purchasing price declines alongside price dispersion. Second, quantities seem to play a small role in determining both the purchasing prices and price dispersion. For example, purchased quantities were higher from 11–20 March than 1–10 April, yet the weighted purchasing price was much lower in the second period with an almost negligible price dispersion. All things being equal, buying 100,000 masks rather than 1,000 raises the buyer’s bargaining power, leading to a lower purchasing price in the former case. This simple economic force does not seem to have been at work in those acquisitions of FFP2 masks. It is arguable that average prices and price dispersion may have

350  Gian Luigi Albano and Annamaria La Chimia been crucially determined by the supply side, which is outside the scope of this study. However, towards the end of March some factories in China had reopened, meaning that expectations of a quick flow of masks might have played a major role in driving ‘market’ price(s) down. Were purchasing prices too high? In spite of the difficulty of a ­benchmarking exercise, it is worth considering the situation of France, as a neighbouring country. In a report submitted to France’s National Assembly on 3 June 2020 by the National Assembly’s President, Richard Ferrand, it appears that French public authorities paid an average price of €1.56 (US $1.85) for FFP2 masks during the period March–May 2020, almost 50 per cent lower than the lowest average price recorded in Italy by ANAC in the same period.73 The price difference is striking. Was this due to purchases being carried out in France very early before international demand skyrocketed? Was it due to different procurement solutions, such as even more centralisation in France than in Italy? Evidence is scant, so it is wise to avoid looking for a single, clear-cut explanation. These figures may confirm only a sensible conjecture, namely that under stressful supply chain conditions with lack of coordination among public buyers, extending analysis of prices beyond national boundaries would be likely to highlight even higher price volatility.

IV.  Modification and Execution of Contracts to Adapt to the Pandemic The COVID-19 emergency has affected the execution of existing contracts, including making performance impossible, delaying performance or making it more expensive (for example, because of new safety obligations). Italy’s emergency rules during the pandemic have also dealt with these post-contract aspects. For example, Art 91 of the Cure Italy Decree provided for the exclusion of fines for contractors whose performance has been delayed by COVID-19 and also foresaw advance payments for urgent deliveries. Under Italian Law, the execution, suspension and resolution of public contracts is regulated under both the Public Contracts Code and the Civil Code and, in some specific cases, the Penal Code (for example, Art 340 of the Penal Code relates to elements linked to the interruption of a public service), as well as by norms on nullity of administrative acts, namely Law No 241 of 1990.74 Hence, with unforeseen and unforeseeable events such as COVID-19 the most relevant norms of the Civil Code for suppliers to claim termination of a contract are those in Art 1463, allowing termination of contracts for supervening 73 National Assembly (France), ‘Rapport information depose en application de l’article 145 du Règlement’(3 June 2020) 99, available at www.assemblee-nationale.fr/dyn/15/rapports/covid19/ l15b3053_rapport-information.pdf. 74 For detail of this complex topic in general see MA Sandulli and R De Nictolis (eds), Trattato sui contratti pubblici, vol IV (Giuffrè, 2019).

Emergency Procurement: Italy  351 impossibility to perform and Art 1467 for excessive supervening onerousness.75 The former allows termination for impossibilita’ sopravvenuta (impossibility of performance for reasons beyond the supplier’s control). As Falco and Usai note, such impossibility shall be supervening (ie arising after the parties entered into the agreement); objective (ie independent of the subjective circumstances of the debtor); beyond the control of the debtor (ie not dependent on his conduct); and final (ie the performance is not possible by any means).76

The contract can be terminated for eccessiva onerosità sopravvenuta (excessive supervening onerousness) under Art 1467, if performance has become excessively onerous due to extraordinary and unforeseeable events which were not anticipated when the contract was concluded (for example, because of new legislative measures) and, according to the doctrine, this could apply in the context of COVID-19.77 It is established jurisprudence that expenses linked to carrying out works and services under public contracts (for example, setting up a building site) are borne by the contractor and included in the price (Art 16 of Presidential Decree No 1063 of 1962 and the Italian Court of Cassation, section 1, No 10165 of 18 May 2016). However, when unforeseeable onerous costs occur, under certain circumstances, termination of a public contract is possible. For this, there must be an imbalance between the obligations of the parties which was not foreseen when the contract was concluded and the excessive onerousness must be connected to extraordinary events, whose extraordinary character needs to have an objective nature (determined by measurable elements such as frequency, size and intensity).78 It has been said that this is possible where the events causes a cost increase of more than 10 per cent of the total agreed price.79 In addition to the Civil Code norms, contracting authorities can, in light of the public interest they pursue, avail themselves of special rules in the Code (in particular, Arts 107 and 108). This Code foresees additional grounds of termination or suspension80 and, in some specific cases, provides quicker and more

75 Other options for terminating the contract include situations where one part does not perform (Art 1453 ff Civil Code and Art 1662 Civil Code). 76 The Civil Code under Art 1463 explicitly states that the party that can no longer perform, may not claim performance and must return any performance received. See F Falco, R Usai and C Arcidiacono, ‘Italy – COVID-19 & Contractual Obligations under Italian law’ (31 March 2020), available at dwfgroup.com/en/news-and-insights/insights/2020/3/covid-19-contractual-obligationsunder-italian-law#:~:text=Among%20them%2C%20for%20agreements%20with,the%20party%20 who%20owes%20. 77 ibid. 78 Puglia’s Regional Administrative Court (TAR), s II, 30 May 2010, No 1865. 79 In other cases, modification by way of a price increase of a maximum of 10% of the price can be sought under Art 106 of the Code, implying continuation of the contract (Court of Milan, s VII, 8 April 2020 No 2319) (provided that the contract’s nature is not changed) or under Art 1467 of the Civil Code which allows termination under certain conditions. 80 Summarised by M Salina, ‘Risoluzione del contratto’ l’Amministrativista (23 March 2020), available at lamministrativista.it/bussola/risoluzione-del-contratto, who correctly argues that the application of Civil Code norms to public contracts is long-established.

352  Gian Luigi Albano and Annamaria La Chimia efficient ways to suspend or terminate unilaterally81 without applying for judicial review, through the azioni caducatorie unilaterali (unilateral action) – for example, termination when the contractor no longer meets the participation requirements (Art 108). Further, contracting authorities also have a right, as per Art 108, that under certain specific circumstances – for example, the other party’s negligence – to state a time by which that party must perform, and if it does not comply they are able to terminate the contract. The deadline must normally be no less than 10 days, but may be less in cases of extreme urgency, such as the COVID-19 pandemic. During the COVID-19 pandemic, the Converting Simplification Decree and Conversion Law 120/2020 has also provided some special rules on contract execution. These include Art 4 and Art 4 bis on conclusion of public contracts and aspects of the judicial review process. They provide, for example, for concluding public contracts within 60 days of award (as noted above) and for resolving disputes (under Art 4) and include special rules for cleaning services in the health sector, allowing termination or revocation of the award when the costs exceed 20 per cent of the contract price (under Art 4 bis). Article 5 on suspension of existing public works contracts and Art 6 foresee the institution of a collegio consultivo tecnico (technical advisory board), which contracting authorities must set up for above-threshold works contracts and which considers, among other things, contract execution disputes. The vast majority of these new measures are temporary derogations from the Public Contracts Code, applying to public contracts until 31 December 2021. The most relevant of these, is Art 5, which seeks to ensure that public contracts are carried out purely in the public interest. Paragraph 1 foresees suspending execution only for the time necessary to overcome the event causing the suspension and only for reasons linked to penal law, serious reasons of public order, serious technical reasons and serious reasons of public interest. Paragraphs 2–5 detail the steps to be taken by contracting authorities in such cases. Noteworthy is paragraph 4, which provides that if the contract cannot be continued, the authority can proclaim immediate termination (without the usual waiting time under Art 108 of the Public Contracts Code). The authority can then proceed with steps to continue execution with a different supplier, including single-sourcing the contract to another supplier, delegating execution to a special commissioner or running another tender. Such procedures can be also applied in cases of delay in execution when these do not justify suspension under paragraph 1. Special procedures are also foreseen for cleaning and laundry services linked to the health sector in relation to the termination of contracts and cancellation of awards when the contract has not yet been signed and the original cost of such services has increased above 20 per cent of the original price (the reason for such increase in costs needs to be linked to the emergency measures, see in detail Art 4-bis of L n 120/2020). 81 MA Sandulli and M Sinisi, ‘Risoluzione del contratto e autotutela pubblicistica’ in MA Sandulli and R De Nictolis (eds), Trattato sui contratti pubblici, vol IV (Giuffrè, 2019).

Emergency Procurement: Italy  353 In contracts with continuous, periodic or deferred performance, where the performance of one party has become excessively burdensome due to extraordinary and unforeseeable events, the party may request termination, with the effects stated in Art 1458 of the Civil Code. Termination cannot be requested if the supervening burden falls within the normal scope of the contract. However, termination can be avoided by the other party offering to amend the terms of the contract in a fair manner. For cleaning services in the health sector, the special rules in Art 4 bis of the Simplification Decree apply.

V. Conclusions This chapter has discussed the procurement measures put in place in Italy during the pandemic. As seen above, a first set of measures aimed at addressing the emergency during the lockdown have enabled procurement officials to derogate from the Public Contracts Code’s ordinary procedures by cutting the procedural timelines, reducing and at times eliminating, supplier competition. Most notably, emergency powers were attributed to the Civil Protection-related agencies and to the Special Commissioner. The Commissioner, in particular, quickly became a prominent figure, procuring the bulk of medical purchases needed for the pandemic. Absolute and extensive powers to derogate from the Code were attributed to the Commissioner in a quest to face the emergency and overcome the burdensome provisions of the Code. As explored above, Italian law is, to a significant degree, stricter than EU law when it comes to emergencies; for example, the use of single-source procurement is significantly restricted for contracts above the EU procurement thresholds. The practice of appointing an Extraordinary Commissioner to manage emergencies is common in Italy. As explained above, a similar approach was adopted in other occasions, for example, when the Morandi Bridge, in Genoa, collapsed. However, it is questionable whether such systematic and extensive recurse to derogatory powers – whether or not attributed to a special ad hoc Commissioner – to overcome structural deficiencies within the Italian (or any other) procurement system is incompatible with EU law. Furthermore, the use of such derogatory powers should be limited by duration, to maintain a direct causal link to the emergency. As previously explained, many exceptions implemented during the pandemic – often very vaguely formulated – have been protracted and so risk losing any direct causal link with the cause of the emergency. Lastly, any preparatory act put in place for a tender before 31 December 2021 will qualify for the tender to benefit from the exceptions in the Simplification Decree. The long duration in which the casual link between the emergency and the exceptional approach has been loosened might lead to a serious breach of EU law. By May 2020, when the first wave of infections appeared to have been contained, a new set of complex reforms were put in place aimed at facilitating a restart of

354  Gian Luigi Albano and Annamaria La Chimia the economy and addressing the economic downturn caused by the pandemic. The exceptional powers of the Extraordinary Commissioner were extended until the end of the emergency period and various other norms were introduced to facilitate the use of procurement as a means of economic development. During this second phase, procurement was perceived as both a means to foster development and help the economy as well as an obstacle to such a process, because of its bureaucratic and cumbersome nature (a problem common to the whole Italian administrative structure). The reforms in this second phase are once again aimed at speeding up the procurement process and this has been undertaken by reducing competition and shortening the timeline of the procedures; for example, the number of suppliers invited to tender was reduced for contracts below the EU procurement thresholds. Importantly, in this second phase, the peremptory timeframe for completing the procurement and concluding the contract was already established which, if breached, might lead to the financial liability of the RUP. Many in the literature have criticised such a punitive approach towards the RUP as it might lead to solutions that are not in line with the objective and spirit of the Code.82 For example, the need to complete the procedure within the predetermined short timeframes might lead the RUP to using the lowest price, rather than the more complex – and time-consuming – MEAT criteria compromising the pursuit of social and environmental objectives,83 or might lead the RUP to choose the least competitive procedures even when that would not be absolutely necessary. Additionally, such a punitive approach might be detrimental to capacity building and professionalisation, making the procurement profession very unattractive. This, in the end, risks being the greatest threat to the many forwardlooking proposals focused on ‘full digitalisation of the country’ and ‘transition to a green economy’ drawn in the ‘Piano Colao’ and in later white papers published more recently by the Italian Government.84 To use procurement to relaunch the economy post COVID-19 and to ‘restart’, Italy, like any other country, will need first-class human capital in addition to modern physical infrastructure.

82 For all see A Coiante, ‘Le principali novità del decreto semplificazioni in materia di Contratti pubblici’, L’amministrativista (20 July 2020). 83 See, eg, the Piano Colao (n 8). 84 See, eg, Committee of European Affairs, ‘Linee guida per la definizione del piano nazionale per la ripresa e la resilienza’ (15 September 2020), available at www.politicheeuropee.gov.it/media/5377/ linee-essenziali-pnrr-italia.pdf and Department for European Policies, ‘Linee guida per la definizione del Piano nazionale di represa e resilienza’ (16 September 2020), available at www.politicheeuropee.gov. it/it/comunicazione/notizie/linee-guida-pnrr.

15 Emergency Procurement and Regulatory Responses to COVID-19: The Case of the United Kingdom SUE ARROWSMITH AND LUKE RA BUTLER*

I.  General Introduction The United Kingdom (UK) was badly hit by COVID-19, partly from delay in imposing successive lockdowns (with the first coming only on 23 March 2020).1 Thus, as of March 24 2021, it had the highest number of confirmed deaths per capita globally,2 with particular problems in the care sector,3 as well as a 9.9 per cent decline in GDP in 2020.4 However, a successful vaccination programme meant 28.7 million people out of around 67 million had received a first dose of a two-dose programme by 22 March 2021,5 one year from the first lockdown, the joint third-highest rate per capita globally,6 and as of 8 April 2021 daily deaths had dropped by 92 per cent from the peak and continued to fall thereafter.7 This chapter provides a critical analysis of the legal framework for the UK’s emergency public procurement in the light of the pandemic, focusing on the

* This chapter’s research was conducted under AHRC Grant AH/V012657/1. 1 For detail see J Calvert and G Arbuthnot, Failures of State: The Inside Story of Britain’s Battle with Coronavirus (HarperCollins, 2021). 2 ourworldindata.org/covid-deaths. 3 Calvert and Arbuthnot, Failures of State (2021) passim. 4 Office of National Statistics, ‘Coronavirus and the impact on output in the UK economy: December 2020’ (12 February 2021), available at www.ons.gov.uk/economy/grossdomesticproductgdp/articles/coronavirusandtheimpactonoutputintheukeconomy/december2020#:~:text=6.-,The%20 UK%20economy%20during%20the%20coronavirus%20(COVID%2D19)%20pandemic,declined%20 by%209.9%25%20in%202020.&text=GDP%20measured%20by%20the%20output,growth%20of%20 1.4%25%20in%202019. 5 Covid: EU talks to boost jab supplies, and vaccine passports for pub goers? BBC News (25 March 2021), available at www.bbc.co.uk/news/uk-56518447. 6 ourworldindata.org/covid-vaccinations. 7 BBC, ‘Covid: Deaths in England and Wales fall 92% since January peak’ (8 April 2021), available at www.bbc.co.uk/news/amp/uk-56682716.

356  Sue Arrowsmith and Luke RA Butler Westminster jurisdiction, which covers procuring entities in England (covering about 85 per cent of the UK’s population) and a few other entities.8 The main rules in the devolved jurisdictions have until now also been substantially the same as under the Westminster framework. Greater divergence is both legally possible and plausible after Brexit, however, although the administrations propose to seek a common approach wherever appropriate.9 There had by June 2021 been numerous investigations of central Government activity in the pandemic’s initial phase. Those with substantial references to procurement included four National Audit Office (NAO) reports on ventilators10 (September 2020); procurement generally, including processes and risk management11 (‘the general NAO report’; November 2020); PPE, excluding matters examined in the general report12 (‘the NAO PPE report’, November 2020); and test and trace13 (December 2020); plus four Public Accounts Committee (PAC) reports, covering ventilator supply14 (November 2020); PPE15 (February 2021); test, track and trace16 (March 2021); and planning for a vaccine17 (April 2021). The Cabinet Office also reported on an independent review – the Boardman Review18 (December 2020) – examining several controversial direct solicitations of communications services contracts by the Cabinet Office, following a fact-finding exercise for defending a legal challenge,19 and this contains wider recommendations, which

8 On the devolved jurisdictions, see S Arrowsmith, The Law of Public and Utilities Procurement: Regulation in the EU and UK, 3rd edn, vol 1 (Sweet & Maxwell, 2014) 2-04–2-07. 9 Cabinet Office, Public Procurement Common Framework: Provisional Framework Agreement CP 415, 23 March 2021. 10 NAO, ‘Report by the Comptroller and Auditor General, Investigation into how government increased the number of ventilators available to the NHS in response to COVID-19’ HC 731 Session 2019–2021 (30 September 2020). 11 NAO, ‘Report by the Comptroller and Auditor General, Investigation into government procurement during the COVID-19 pandemic’ HC 959 Session 2019–2021 (26 November 2020). 12 NAO, ‘Report by the Comptroller and Auditor General, The supply of personal protective equipment (PPE) during the COVID-19 pandemic’ HC 961 Session 2019–2021 25 November 2020. 13 NAO,’ Report by the Comptroller and Auditor General, The government’s approach to test and trace in England – interim report’ HC 1070 Session 2019–2021 11 December 2020. 14 House of Commons Public Accounts Committee, ‘Covid-19: Supply of ventilators Twenty-Seventh Report of Session 2019–21 Report, together with formal minutes relating to the report’, HC 685 (16 November 2020). 15 House of Commons Public Accounts Committee, ‘COVID-19: Government procurement and supply of Personal Protective Equipment’ Forty-Second Report of Session 2019–21 Report, together with formal minutes relating to the report HC 928 (4 February 2021). 16 House of Commons Public Accounts Committee, ‘COVID-19: Test, track and trace (part 1)’ FortySeventh Report of Session 2019–21 Report, together with formal minutes relating to the report HC 932 (4 March 2021). 17 House of Commons Public Accounts Committee, ‘COVID-19: Planning for a vaccine Part 1 FortyThird Report of Session 2019–21 Report, together with formal minutes relating to the report’, HC 930 (10 February 2021). 18 Cabinet Office, ‘Boardman Report on Cabinet Office Communications Procurement’ (8 December 2020), available at www.gov.uk/government/publications/findings-of-the-boardman-review (‘Boardman Review’). 19 The Queen on the application of the Good Law Project v Minister for the Cabinet Office [2021] EWHC 1569 (TCC) (‘Public First’).

Emergency Procurement: The United Kingdom  357 the Government will implement.20 The PAC also recommended that the Cabinet Office and Department of Health and Social Care publish by July 2021 their own lessons from PPE procurement.21 The Government’s pandemic procurement has attracted much bad press. Many difficulties, including in sourcing PPE in the first half of 2020, appear in large part attributable to poor political planning and resource allocation (see section III.A), rather than poor procurement processes, let alone regulatory deficiencies. As elaborated below, press reports22 and legal challenges23 also highlighted several awards to politically connected businesses, sometimes involving inadequate documentation, and in the Public First case the court found apparent (although not actual) bias in awarding a Cabinet Office contract, as section III.D.iv discusses. Other problems included supplies not fit for purpose,24 consultancy contracts awarded retrospectively25 and allegations of large profits.26 As this chapter also discusses, the Government also failed to publish award notices and contracts in a timely manner.27 However, the court28 bluntly rejected the argument that this was due to more than technical and administrative constraints; and the NAO general and PPE reports found no evidence of wrongdoing, although expressed concern that the Government could not give assurances over appropriate risk mitigation or commercial practice with a few awards because of absent documentation.29 Further, the NAO described the documentation failures as ‘gaps’, with existing controls generally being applied overall, even across the six most controversial PPE contracts scrutinised precisely because they had attracted media attention.30

20 Statement by Sarah Harrison, Cabinet Office Chief Operating Officer, 8 December 2020, available at www.gov.uk/government/publications/findings-of-the-boardman-review. 21 House of Commons Public Accounts Committee, ‘Personal Protective Equipment’ (2021) 7. 22 J Bradley, S Gebrekidan and A McCann, ‘Waste, Negligence and Cronyism: Inside Britain’s Pandemic Spending’, New York Times (17 December 2020), available at www.gov.uk/government/news/ response-to-article-published-by-the-new-york-times-on-uk-government-procurement. The Cabinet Office response dated 23 December 2020 is available at www.gov.uk/government/news/response-toarticle-published-by-the-new-york-times-on-uk-government-procurement; BBC News, ‘Timeline: Covid contracts and accusations of “chumocracy”’ (20 April 2021), available at www.bbc.co.uk/ news/uk-56319927; and G Monbiot, ‘When secret coronavirus contracts are awarded without competition, it’s deadly serious’, Opinion Politics (15 July 2020), available at www.theguardian.com/ commentisfree/2020/jul/15/coronavirus-contracts-government-transparency-pandemic. 23 Good Law Project Ltd v Secretary of State for Health and Social Care [2021] EWHC 346 (Admin); and The Queen on the application of The Good Law Project v Secretary of State For Health And Social Care [2020] EWHC 3609 (‘Pestfix’) (permission for judicial review proceedings, currently ongoing). 24 House of Commons Public Accounts Committee (n 15) 9-10 (referring to 0.4% received at that time not meeting safety standards and 1.3% not being suitable for the intended purpose but possibly capable of being repurposed). 25 General NAO Report (n 11) para.3.21. 26 P Kemp, ‘Go-between paid £21m in taxpayer funds for NHS PPE’ (17 November 2020), available at www.bbc.co.uk/news/uk-54974373. 27 Section III.D.iii. 28 Good Law Project Ltd v Secretary of State for Health and Social Care [2021] EWHC 346 (Admin) (‘Good Law Project publication case’). 29 NAO (n 11) 11. 30 ibid, para.3.20.

358  Sue Arrowsmith and Luke RA Butler Concerning outcomes, once resources were devoted to PPE, £8 billion of contracts were placed rapidly by July 2020,31 with a failure rate for the special crossgovernment PPE team of only 0.5 per cent by contract volume32 in an extremely challenging market. The considerable focus on a few controversial contracts and administrative difficulties and the absence of evidence of deliberate wrongdoing despite extensive investigation tends to indicate, we conclude, a system in which the regulatory frameworks and accountability mechanisms function effectively to prevent problems and to identify them where – inevitably – they occur. However, public trust has certainly been damaged by the handling of some contracts, in particular through appearance of bias, and this has contributed to, and in turn exacerbated, an environment in which the Government had already forfeited much public trust in handling the pandemic.33 From a regulatory perspective, perhaps the pandemic’s main lesson is thus the importance of information transparency, not merely for actual procurement outcomes, but to retain trust. In terms of the regulatory framework itself, the pandemic has usefully focused attention on the neglected area of direct solicitations (procedures without any public solicitation of tenders) within the UK’s already ongoing project to reform procurement law, leading to proposals that, we conclude, will improve regulation of direct solicitations in general, as well as specifically for emergencies. The pandemic has also highlighted the limited role of regulation in procurement performance, with perhaps the main lesson for future major emergencies being the importance of planning and resilient supply chains. These points are elaborated below.

II.  Introduction to the Regulatory Framework As chapter 2 explained, many countries have a long tradition of enforceable hard law public procurement regulation. However, the UK does not; while, like other countries, relying on transparency and competitive tendering, the UK has traditionally acted through soft law issued for central government34 and standing orders adopted by individual local authorities which were initially not legally enforceable35 by suppliers.36

31 ibid, para 2.6. 32 ibid, para 3.19. 33 Calvert and Arbuthnot (n 1) passim. 34 C Turpin, Government Procurement and Contracts (Longman, 1989). 35 Local authorities are required to adopt standing orders to regulate certain types of procurement, which are legally binding and enforceable but, until relatively recently, were not considered enforceable by aggrieved suppliers (R v Hereford Corporation Ex p Harrower [1970] 1 WLR 1424). On the current position see S Arrowsmith, The Law of Public and Utilities Procurement: Regulation in the EU and UK, 3rd edn, vol 1 (Sweet & Maxwell, 2014) 2-128–2-129. 36 As in other chapters, ‘supplier’ refers here to a party that is, or may be, interested in procurement contracts (of any type) or already has a contract.

Emergency Procurement: The United Kingdom  359 EU membership, however, led to a significant change in both regulation and culture, requiring transposition of the EU Directives (discussed in chapter 3) into enforceable domestic hard law, culminating in England, Wales and Northern Ireland37 in the four current sets of regulations, corresponding to the four main Directives.38 Directive 2014/24/EU (‘the Directive’), covering most major contracts and the focus of chapter 3, was transposed in the Public Contracts Regulations 2015 (PCRs), on which the present chapter is focused. As chapter 3 explained, the Directives are concerned almost wholly with opening markets, leaving Member States to address other (national) objectives, such as value. While some Member States, such as Italy,39 have extensive additional national rules, the UK regulations largely simply copy out the Directives, reflecting – and continuing to the extent possible within the EU framework – the UK’s soft law approach. There are also, however, a few other pieces of domestic legislation40 as well as a few additional obligations (on transparency and supplier selection) in the PCRs (Part 4). The UK left the EU on 31 January 2020 (‘Brexit’), but was subject to a transition period of applying EU rules until 31 December 2020, and thus retained the above regulations with merely technical adjustments. The same framework has also been retained since, with just a few amendments,41 notably to implement a new national publication system, FindATender, to replace the EU’s Official Journal. Thus the Public Contracts Directive provided the main legal framework for pandemicrelated procurement. This chapter addresses only issues specific to its application in the UK. Brexit has not given the UK a free hand, however, as it remains subject to other trade obligations, particularly under the World Trade Organization’s Government Procurement Agreement (GPA) and the EU-UK Trade and Cooperation Agreement.42 The current – EU-based – regulations could be retained as a way of complying with these. However, in 2019 the Government launched a reform programme to simplify the rules and provide more commercial flexibility in the light of reduced constraints after Brexit, as well as to improve the rules in areas unrelated to Brexit, taking advantage of the political momentum for reform that Brexit generated. A Green Paper of December 2020, ‘Transforming Public

37 Scotland has always had separate but substantially similar implementing regulations. 38 The Public Contracts Regulations 2015, 2015/102; The Utilities Contracts Regulations 2016, 2016/274; The Defence and Security Public Contracts Regulations 2011, 2011/1848; and The Concession Contracts Regulations 2016, 2016/273. 39 Ch 14, section II. 40 eg the Public Services (Social Value) Act 2012. 41 Public Procurement (Amendment etc) (EU Exit) Regulations 2020, 2020/1319. 42 Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the European Atomic Energy Community for Cooperation on the Safe and Peaceful Uses of Nuclear Energy and the conclusion, by the European Commission, on behalf of the European Atomic Energy Community, of the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part; currently provisionally applied and implemented in the UK by the European Union Future Relationship Act 2020.

360  Sue Arrowsmith and Luke RA Butler Procurement’ (‘the Green Paper’), sets out the Government’s proposals.43 By that time there had been opportunity to reflect on the pandemic experience and, while the Green Paper does not address its lessons directly, it acknowledges that the pandemic has ‘underlined the need for an effective regulatory regime for public procurement’.44 The extensive use of direct solicitation during the pandemic and related press has focused attention on these procedures, and it is thus unsurprising that the Green Paper proposes several legal changes to these, as discussed below. The Green Paper also emphasises the need for the public procurement system to be in good shape to play its part in the post-pandemic economic recovery in the light of extensive spending plans to that end.45

III.  Procurement of New Requirements A. General Pandemic-related procurement has been conducted through market m ­ echanisms. Pre-existing emergency legislation such as the Civil Contingencies Act 2004 authorises emergency regulations, including for requisitioning property,46 but a conscious decision was made to use primary legislation (the prior Public Health (Control of Disease Act) 1984 and the Coronavirus Act 2020) to address the public health response.47 None of these were used to authorise requisitioning or new emergency procurement provisions, and the authors are not aware of any formal requisitioning,48 or of acquisition terms being set other than by agreement. Further, the UK did not formally ban PPE exports although it complied with the EU’s Regulation 2020/40249 subjecting certain exports to authorisation.50

43 Cabinet Office, ‘Transforming public procurement’ Green Paper CP 353 (15 December 2020) (‘Green Paper’). 44 ibid, para 21. 45 ibid, 5 (Ministerial Foreword). 46 Section 22(3)(b). 47 House of Commons Public Administration and Constitutional Affairs Committee, ‘Parliamentary Scrutiny of the Government’s handling of Covid-19’ Fourth Report of Session 2019–21 (8 September 2020) para 34. 48 Although this was requested by petition. Information is available at petition.parliament.uk/ petitions/302610. 49 Commission Implementing Regulation (EU) 2020/402 of 14 March 2020 making the exportation of certain products subject to the production of an export authorisation OJ L 77 I/1. 50 On implementation see Explanatory Memorandum on the European Commission Implementing Regulation (EU) 2020/402 of 14 March 2020 making the exportation of certain products subject to the production of an export authorisation, Submitted by Department of Health and Social Care on 23 April 2020, europeanmemoranda.cabinetoffice.gov.uk/files/2020/04/200423_Explanatory_ Memorandum_re_exportation_of_certain_products_subject_to_the_production_of_an_export_ authorisation_ref_CELEX_32020R0402-EN-TXT_(1).pdf.

Emergency Procurement: The United Kingdom  361 According to the NAO general report,51 up to 31 July 2020 the Government awarded around 600 pandemic-related contracts valued at about £18 billion. PPE accounted for about 68 per cent by value (80 per cent by number),52 with ‘test and trace’ – the effectiveness of which was criticised by the PAC – accounting for about £3 billion and 138 contracts53 (with a £37 billion longer-term budget).54 The other leading categories were accommodation and food, IT and telecommunications, professional services, logistics and transport and ventilation,55 each accounting for a quarter or less than the test and trace spend in that period. The Department of Health and Social Care and its related national bodies procured 90 per cent of these contracts by value.56 This represented not only an increase in the value of awards, it can be surmised, of well over 2,000 per cent – for example, the value of contracts awarded in 2019–20 was less than seven per cent of the value of pandemic-related awards up to 31 July 202057 – but was undertaken in the most challenging possible environment of global shortages, requiring a team of more than 400, including hundreds brought in from other departments plus external experts, without access to the same IT systems.58 As mentioned, most of this procurement is governed by the PCRs 2015. In March 2020, the Government issued a Public Procurement Policy Note (PPN), ‘Responding to COVID19’59 (‘the 2020 general PPN’) to ‘remind’ all covered entities of these rules. This set out briefly (prior to the European Commission’s own even briefer guidance of 1 April 202060) options for urgent procurement, and emphasised the limits on, and need for, explicit justification for direct solicitations, but gave no detailed legal or strategic guidance. In February 2021, the Government published a new version61 (‘the 2021 general PPN’), adding points raised by the various audits and investigations and the Green Paper; in particular, it addresses certain risks arising when using direct solicitations (highlighted by the NAO as a gap in earlier guidance), including risks to commercial value and from conflicts of interest, as well as use of competition in direct solicitations, which is the subject of proposals in the Green Paper and Boardman Review recommendations, as section II.D.vii discusses. 51 NAO, ‘Report by the Comptroller and Auditor General, Investigation into government procurement’ (2020) para 2.2. 52 NAO (n 11) para 2.6. The figure of £12.3 billion for PPE was estimated slightly differently as £12.5 billion in NAO (n 12) para 16. 53 NAO (n 11) para 2.6 and Figs 4 and 5. 54 House of Commons Public Accounts Committee, COVID-19: Test, track and trace (part 1) (10 March 2021). 55 Respectively in £ 0.7, 0.49, 0.36, 0.29 and 0.24 billion: NAO (n 11) para 2.6 and Fig 5. 56 NAO (n 11) para 2.3. 57 ibid. 58 Good Law Project publication case (n 28) at [52]–[53]. On this see issue, see further ch 4, section II.C.i; section D.iii below. 59 Cabinet Office, ‘Procurement Policy Note – Responding to COVID-19’, PPN 01/20 (March 2020). 60 European Commission Guidance on using the public procurement framework in the emergency situation related to the COVID-19 crisis [2020] OJ C108I/1 (‘Commission guidance’). 61 Cabinet Office, ‘Procurement Policy Note 01/21: Procurement in an Emergency’ (February 2021).

362  Sue Arrowsmith and Luke RA Butler As regards methods and mechanisms used, the general NAO report records that new contracts (including call-offs from existing framework agreements) accounted for 94 per cent of arrangements by number and modifications to existing contracts for six per cent (about 3.7 per cent by value).62 Of £17.3 billion in new contracts, most (£10.49 billion) was through ‘direct award to supplier without competition’ (58 per cent of this by value to new suppliers) and £6.8 billion calledoff from framework agreements (£6.6 billion without mini-competition and £0.14 billion with competition), with only £0.05 billion awarded by ‘competitive tendering’.63 Thus there was extensive resort to direct solicitation for the most immediate pandemic-related awards, throwing a spotlight on the adequacy of the regulatory framework for these awards.

B.  Advance Planning and Advance Mechanisms Stockpiling goods obtained by public tendering can both provide security of supply and secure other procurement objectives although, as chapter 2 highlighted, its value depends on factors such as the degree of precision with which needs and events can be predicted. After 2001, the UK devoted significant resources to emergency planning and identified a pandemic as the number one non-malicious threat, but apparently, mainly as a result of austerity and Brexit, clearly identified needs, including for training and maintaining stockpiles (including of PPE), were seriously neglected.64 In 2020, NHS England and NHS Improvement assured the Health and Social Care Committee that the stockpile would be sufficient to manage the pandemic,65 but this was not the case and information and distribution arrangements also functioned poorly.66 The Government had also concluded in advance framework-type contracts for emergencies, but apparently some failed as suppliers faced pandemic-related logistics problems or sought higher prices elsewhere.67 This, combined with limited resilience, international shortages, the UK’s late response (even gifting some stockpiled items to China in February 2021),68 failing to fully engage with domestic suppliers in January and February 2020,69 and long delivery times for newly sourced items, resulted in PPE shortages for

62 NAO (n 11) para 2.2 (£0.66 billion as opposed to £17.3 billion of new contracts). 63 NAO (n 11) para 2.5. The direct awards without competition figure covers all awards without public solicitation, including under the negotiated procedure without prior publication and for excluded contracts. National Audit Office Letter of 14 May 2021 pursuant to an information request (retained on file). 64 Calvert and Arbuthnot (n 1) 87–97; NAO ‘Report by the Comptroller and Auditor General, The supply of personal protective equipment (PPE)’ (25 November 2020) paras 1.8–1.19. 65 House of Commons Public Accounts Committee (n 15) 6. 66 See generally NAO (n 12) Part 2. 67 Calvert and Arbuthnot (n 1) 66–67. 68 ibid, 122–23. 69 ibid, 100–01.

Emergency Procurement: The United Kingdom  363 frontline health staff and the care sector (which obtained only about 80 per cent and 10 per cent respectively of their needs up to July 202070). After new direct solicitations, framework agreements proved the most important mechanism, accounting for £6.8 billion of £17.3 billion of new procurement, demonstrating their value for urgency. As at June 2020, there were no detailed reports on use, but the general NAO report indicated that they included many established for cross-government use by the Crown Commercial Service (CCS).71 At departmental level, NHS Trusts were advised to cease individually procuring PPE, ventilators and other high-demand products in favour of national-level procurement to reduce buyer competition, except where Trusts were working with ‘new, local or small suppliers’ in a way that did not conflict with national procurement.72 As chapter 3 mentioned, EU-based aggregation rules73 ensure that tendering rules for major contracts apply even for small purchases by different authorities when conducted through common framework agreements. Further, as chapter 4 explained,74 individual entities were encouraged to use the CCS supplier catalogue with an offer by CCS to assist but with individual entities responsible for legal compliance. NAO reports do not refer specifically, on the other hand, to dynamic purchasing systems (DPSs), which, despite their merits, are little-used for historical reasons,75 and responses to the NAO census on which its report was based found ‘very few’ mentions (although it did not ask about them specifically).76 The 2020 general PPN and 2021 general PPN also specifically mention the rule that a framework agreement or DPS can only be used by entities identified when the framework was set up77 – a rule that, being derived from EU law, could not be waived, as done in some countries.78 A legal point of interest arising in the context of framework agreements and DPS was the Boardman review’s concern over use of sub-contractors to award work to parties nominated by government.79 Arrowsmith has argued previously that, although not explicit, the PCRs prohibit this, only allowing intervention to ensure that permitted qualification criteria (such as adequate technical capacity)

70 House of Commons Public Accounts Committee (n 15) 8. 71 NAO (n 11) para 1.8. 72 K Hignett, ‘Government bans trusts from major PPE deals to stop them competing for scarce equipment’, HSJ (2 May 2020), available at www.hsj.co.uk/coronavirus/government-bans-trusts-frommajor-ppe-deals-to-stop-them-competing-for-scarce-equipment/7027554.article. 73 Transposed in PCR, reg 6. 74 ch 4, section II.B.i.i. 75 A Eyo, ‘Evidence on use of dynamic purchasing systems in the United Kingdom’ (2017) 26 Public Procurement Law Review 237. 76 National Audit Office Letter of 14 May 2021 pursuant to an information request (retained on file). 77 In the call for competition or, where a Prior Information Notice (a general notice of a number of contracts) is used as a call, in the invitation to responding suppliers: PCR, reg 33(5). See 2020 PPN, 5; 2021 PPN, 4. 78 See the summary in chapter 2, section IV. 79 Boardman Review (n 18) paras 13–14.

364  Sue Arrowsmith and Luke RA Butler are met.80 Boardman recommended that the CCS should ensure that entities understand this81 and it was addressed in the 2021 general PPN.82 Boardman also expressed concern over slow processes with these tools, including the Research Marketplace DPS,83 and recommended close attention to these tools in reforming the legal framework. This seems related to points made in the context of the Public First case that call-offs from a DPS would take six to eight weeks for complex requirements and two for very simple requirements.84 It is unclear, however, if the Boardman review identified specifics of the legal framework here (none were mentioned) or was concerned solely with the commercial processes. In fact, as Arrowsmith has elaborated elsewhere,85 the Green Paper is unclear as to the Government’s intentions with these tools, making assessing potential impact on urgent procurement impossible. What the Green Paper does clearly propose, at least, is that framework agreements will be retained86 and thus available for urgent needs as now. It also proposes applying the DPS concept – which calls in its new form a ‘DPS+’ – to all products and services, rather than just standardised subject matter. This would provide a useful additional tool for urgency for non-standardised purchases, potentially reducing reliance on direct solicitations – a reform useful also for the EU Directive.87 Since the Green Paper states that the DPS+ will replace qualification systems,88 it may envisage also that the DPS+ will not require all registered suppliers to be invited (as presently required) but allow entities to invite just some (effectively operating like a utilities qualification system). If so, the DPS+ will provide more flexibility for urgency, including allowing a rapid competition between some registered supplies without further solicitation and also possibly by building up long-term relationships.89 However, the GPA imposes significant constraints around this possibility for central government, requiring a new solicitation for each procurement and sufficient time to register for new suppliers without allowance for emergencies – a rule which chapter 3 suggested should be amended.90 It is also not clear whether the Government indeed intends such a flexible approach.91

80 Arrowsmith (n 8) 12-193–12-196. 81 Boardman Review (n 18) para 14. 82 2021 general PPN, 5. 83 Boardman Review (n 18) para 11. 84 Public First at [102]–[106]. 85 S Arrowsmith, ‘Transforming public procurement law after Brexit: early reflections on the Government’s Green Paper’ (2021) 16–20, available at papers.ssrn.com/sol3/papers. cfm?abstract_id=3749359. 86 Cabinet Office, ‘Transforming public procurement’ (15 December 2020) paras 148–55. 87 ch 3, section II.C.i. 88 Green Paper (n 43) para 146. See further Arrowsmith, ‘Transforming public procurement law after Brexit’ (2021) 19–20. 89 ch 3, section II.C.ii. 90 ch 3, section II.C.ii. 91 Arrowsmith (n 85) 19–20.

Emergency Procurement: The United Kingdom  365 The Green Paper also does not address time limits for call-offs under DPSs. In line with chapter 3,92 it is suggested these should be very flexible for urgency rather than the current 10-day minimum, at least giving scope for very rapid small and/or simple procurements. Of even more potential significance, however,93 eliminating delay altogether for some cases, would be a ‘truly’ dynamic (open) purchasing system, allowing suppliers to submit and amend offers continuously and for procuring entities to make call-offs without further tenders. The Green Paper does not discuss this, but it would be a missed opportunity not to consider it. A final point on advance planning is that the PAC made some specific recommendations on resilience in critical supply chains, considered in section VI below.

C.  Regular Competitive Methods, Including Accelerated Procedures The possibility for using accelerated competitive tendering (in open or restricted procedure or competitive procedure with negotiation) was – as in the European Commission guidance94 –highlighted also by the Cabinet Office for the pandemic; and the 2020 general PPN included a specific sample template advising on wording the justification for this approach that is required in the call for competition.95 Chapter 3 explained, however, that accelerated procedures take considerably longer than the sum of the minimum response and tendering periods given other elements of procedures, and the High Court recognised this in the Public First case.96 They have been little-used in the pandemic for procurement of medical supplies; and the NAO census found ‘very few instances’ (although it did ask specifically about these).97

D.  Procedures with a Direct Solicitation: The Negotiated Procedure without Prior Publication i. Introduction The Public Contracts Directive has a single direct solicitation method, the negotiated procedure without prior publication,98 which the PCRs simply copy out.99 92 ch 3, section II.C.i. 93 ibid. 94 European Commission Guidance on using the public procurement framework in the emergency situation [2020] para 1. 95 2020 general PPN, 6. 96 Public First at [91] citing Salt International v Scottish Ministers [2015] CSIH 85 at [46]. 97 NAO Letter of 14 May 2021 pursuant to an information request (retained on file). 98 ch 3, section II.E. 99 In particular, in PCR, reg 32.

366  Sue Arrowsmith and Luke RA Butler As in other countries, direct solicitations were extensive in the pandemic, accounting for more than £10 billion of £17.3 billion of central government’s pandemic-related procurement from January to July 2020 (see section I). It is not, therefore, surprising that the Green Paper gives direct solicitation some attention. In general, the Green Paper proposes simplification of procedures and in line with this proposes retaining just one direct solicitation method, rather than (as under the UNCITRAL Model Law on Public Procurement 2011) both a competitive and single-source method.100 However, while the grounds for direct solicitation and the current ‘light’ approach to procedure are retained, several proposed changes, as elaborated below, reflect issues highlighted in the pandemic. This greater regulatory attention to direct solicitations is welcome. The proposals, it is submitted, offer a more suitable approach than current reliance solely on the Directive’s skeletal provisions, yet without excessive burdens. The Green Paper also proposes renaming the method ‘limited tendering’, in line with GPA terminology. This does not reflect substantive changes, but may help nudge mindsets away from perceiving direct solicitation simply as a singlesource method, when in fact some competition is often feasible, as section III.D.iv discusses.

ii.  Grounds for Using Direct Solicitations In accordance with the ‘copy-out’ approach, the PCRs provide for the negotiated procedure without prior publication ‘insofar as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedures or competitive procedures with negotiation cannot be complied with’ (reg 32(2)(c)). The 2020 general PPN highlights the possibility for using this method in the pandemic, but also stresses the need to comply with the substantive conditions for use,101 which chapter 3 discussed in detail.102 The guidance indicates that this method cannot be used when the authority has delayed (under the attributability condition103) and gives a steer that consequences of the pandemic might be considered unforeseeable because of its novel nature104 (as chapter 3 suggested105). Otherwise, however, it offers almost nothing on interpreting the conditions or giving a practical steer on concrete situations in which this method might be used. One of the Boardman Review recommendations was the need for more guidance (although not necessarily in the public domain106) both on what constitutes



100 See

ch 2, section V. PPN, 3–4. 102 ch 3, section II.E.ii. 103 2020 PPN, 4. 104 2020 PPN, 4, point 2. 105 ch 3, section II.E.ii. 106 Boardman Review (n 18) Part II para 8. 101 2020

Emergency Procurement: The United Kingdom  367 extreme urgency and the practical application of this method, as well as on how to record decisions and obtain legal advice. Various issues relating to use of the method were raised in judicial review proceedings in the PestFix and Public First cases. PestFix involved a challenge to PPE awards to three firms in April and May 2020. Arguments were made concerning the need to prepare for a pandemic even prior to 2020 by building stocks; when during 2020 PPE needs should have been sufficiently predictable to be met through public solicitation procedures; and whether urgency was attributable to the authorities delaying in meeting these needs. However, permission to bring proceedings over allegations that the reg 32(2)(c) conditions were not met and/or that proportionality was breached by contracts of greater scope than necessary, was refused in both an initial107 and renewed108 application. The court in the latter concluded briefly that this global pandemic was unforeseeable, emphasising the unpredictability of both future needs and of the market in the pandemic’s first few months.109 Public First concerned a single-source award for focus groups and communications support, needed immediately at the start of March 2020 to ensure effective messaging including to influence public behaviour in the pandemic. The Good Law Project, a public interest organisation, challenged the award alleging, among other things, that there was no extreme urgency, that the work could have been placed using accelerated procedures including through a DPS, and that the contract’s length – six months – exceeded what was strictly necessary under reg 32 and violated proportionality principles. However, the court rejected these arguments on the facts noting, for example, as already mentioned, that a call-off under a DPS could take several weeks, and again emphasising the unfolding and uncertain nature of the scenario (and hence of relevant needs) as justifying a sixmonth contract.110 (On the other hand, the court found there was an appearance of bias in the way the contract was awarded and declared it unlawful for that reason, as explained later.111) Both scenarios illustrate why a special crisis ground for urgent procurement is needed, as discussed below, including to avoid effective action being deterred by concerns over how specific procurement decisions made in difficult circumstances under extreme pressure might be judged with hindsight. An interesting legal point covered in Public First, which chapter 3 discussed,112 is that the court stated that ‘Regulation 32(2)(c) does not limit the duration of any contract falling within its ambit to the shortest period of time required to conduct

107 R (on the application of Secretary of State for Health and Social Care) v PESTFIX, Notification of the Judge’s decision on the application for permission to apply for judicial review (CPR 54.11, 54.12). 108 The Queen on the application of The Good Law Project v Secretary of State For Health And Social Care [2020] EWHC 3609 (‘Pestfix’) (permission for judicial review proceedings, currently ongoing). 109 Pestfix at [47]–[55]. 110 Public First at [115]–[117]. 111 Section III.D.vii. 112 On this see ch 3, section II.E.ii.

368  Sue Arrowsmith and Luke RA Butler a competitive procurement exercise’, concluding that the need for c­ontinuity in service provision, at least until a proper handover was feasible, justified a ­six-month duration.113 This supports by analogy the argument that obtaining better prices from aggregation might also do so. In this respect, the Boardman Review had earlier suggested specifically that ‘Although these procedures must be used for what is absolutely necessary, the budget holder should take account of what is necessary to achieve value for money (for example, a slightly longer contract duration)’,114 although the review did not refer to the legal issue and the 2021 general PPN continued to refer to contracts being limited to what is ‘absolutely necessary’.115 Regulation 32(2)(c) discussed above is presently the only ground for a direct solicitation directed explicitly at urgency. However, chapter 2 explained that some national systems and the UNCITRAL Model Law and EU Defence and Security Directive also provide separately for direct solicitation for widespread emergencies under less stringent conditions.116 This can potentially be justified by reasons of legal certainty, to allow for rapid and effective action, to limit reporting burdens and to secure a better balance of interests in such emergencies. Arrowsmith has previously argued for including such a provision in the UK’s post-Brexit regime,117 and the Boardman Review also subsequently recommended this.118 With the adverse publicity surrounding direct solicitations in the pandemic, the Government might have been tempted to shy away from even fully justified flexibility. However, it has not done so, but proposed introducing such a ‘crisis’ provision.119 At the same time, however, it has learnt lessons from the pandemic over the risks of flexibility, counterbalancing this proposal with other reforms to promote competition and transparency, as described below, potentially providing a new emergency procurement regime that is overall more precisely tuned. The proposed new ground is modelled to some extent on the Defence and Security Directive’s crisis provision discussed in chapter 3:120 reflecting the wording of that provision, it is to apply when there is ‘an event which clearly exceeds the dimensions of harmful events in everyday life and which substantially endangers or restricts the life or health of people’, where the measures are required to protect public morals, order or safety or to protect human, animal or plant life or health121 (so it would not apply, for example, to purchase equipment for

113 Public First at [115]–[117]. 114 Boardman Review (n 18) Part II, para 10. 115 2021 PPN, 8. 116 ch 2, section V.A.iii. 117 S Arrowsmith, ‘Reimagining public procurement law after Brexit: seven core principles for reform and their practical implementation’ Part 2 (2020) Working Paper, para 5.3.2.2, available at ssrn.com/ abstract=3672421. Ch 3 of this book also recommends this approach for all the EU Directives. 118 Boardman Review (n 18) Part 2, para 9. 119 Green Paper (n 43) paras 78–82. 120 ch 3, section II.E.iii. 121 Green Paper (n 43) para 79.

Emergency Procurement: The United Kingdom  369 public entertainment online in a lockdown). It will apply only when the Minister for the Cabinet Office declares a crisis122 – the kind of central declaration that chapter 2 suggests should generally be a condition for such a provision (and should ideally also be time limited and regularly reviewed).123 The Green Paper explicitly limits it ‘to contracts awarded to deal with the immediate requirement posed by the crisis’, but it appears that other conditions of the general urgency ground – extreme urgency, unforeseeability, non-attributability and impossibility of using other methods – will not apply. It is submitted that this is compatible with the GPA, even though the GPA includes no explicit ‘crisis’ provision, under the health derogation in Art III.2.124 While the GPA may as a general rule require a competitive approach where possible when relying on this derogation, this may not apply to widespread crises.

iii.  Controls Over Direct Solicitations As with the substantive conditions, the legal controls over using direct solicitations repeat those of the Directive. As chapter 3 outlined, the main obligations are: first, in Art 84(1), to draw up a report that includes the circumstances referred to in Art 32 justifying the choice of method (PCR, reg 84(1)(f), referring to reg 32); secondly, in Art 84(2)–(3), to document procedures as they proceed sufficiently to justify decisions, and retain the documentation for three years (PCR, reg 84(7)–(9)); and to publish award notices within 30 days, again including a ‘justification’ for the method chosen (PCR, reg 50). While the Directive and PCRs do not give stakeholders generally, or even suppliers, access to the record, in domestic law anyone can access public sector information under the Freedom of Information Act 2000, the exceptions to which, for commercial confidentiality and other interests, have been narrowly interpreted.125 Chapter 3 explained that the detail of the justification required by these provisions is unclear, as are the justification requirements for a Voluntary Ex ante Transparency (VEAT) Notice (see below), which uses the same wording, ‘justification’, as award notices126 and for modification notices (see section  III.E below), which refer to ‘circumstances’.127 Chapter 3 suggested that the Directive requires explanation of all elements of the urgency ground in both the records and (to allow challenge) the award notice, but the exact position is uncertain. In the UK there has been case law only on VEAT notices, where the Court of Appeal indicated in Faraday that quite considerable detail is required



122 ibid,

para 80. 2, section V.A.iii. 124 See ch 3, section III.B. 125 Arrowsmith (n 8) 13-84–13-101. See also ch 4, section II.E. 126 PCR, reg 50(2) and Public Contracts Directive Annex VD, point 7. 127 PCR, reg 72(3)–(4) and Public Contracts Directive Annex VG, point 6. 123 ch

370  Sue Arrowsmith and Luke RA Butler (sufficient for assessing the possibility of challenge);128 but Faraday concerned a very different situation of a development agreement allegedly excluded altogether from reg 32, and thus does not provide context-specific guidance for urgency. The 2020 general PPN suggests that written justification (presumably under reg 84 obligations) must satisfy all elements of the urgency test, namely the reasons for extreme urgency (such as the ‘need to respond to the COVID-19 consequences immediately because of public health risks’), unforeseeability, impossibility of other procedures, and attributability, but does not indicate what further detail might be needed, nor what award notices require. Chapter 4 suggests that an illustrative list in guidance (not legislation) of particularised justifications would be useful, to include clear explanations of how solicitation was undertaken and pricing determinations (not just the price).129 Open contracting systems could simplify the capture of such information. As section I noted and chapter 4 discusses further,130 the UK struggled to comply with its transparency obligations in the pandemic; problems included the enormous increase in contracts, IT access issues, the need to focus resources on new procurements and the difficulty in recruiting new staff without diverting resources to training. The NAO found that at the time of investigation the Department for Health and Social Care had published award notices for only 89 per cent of 871 pandemic-related contracts, taking on average 92 days to publish, well over the required 30 days.131 Litigation on this by the Good Law Project resulted in a legal declaration of non-compliance (the non-compliance not having been disputed).132 However, Chamberlain J rejected an argument that the Secretary of State for Health had ‘made and approved a conscious decision to de-prioritise compliance’, evidence showing that staff had been reminded and chased to comply and had not known of some obligations; thus the court refused declarations that the Secretary of State had ‘systematically’ failed to comply, instead merely declaring the number and percentage of contracts subject to default.133 While fully integrated IT systems can reduce difficulties, administrative perfection cannot reasonably be assumed, and this and the other genuine difficulties experienced illustrate the value of a special crisis provision, especially if transparency obligations are expansively interpreted. Requiring careful justification of conditions in cases of ‘one-off ’ urgency, while relaxing the conditions altogether in exceptional circumstances of widespread urgency in which conditions are likely to be met anyway and resources are needed elsewhere, provides a more balanced approach.

128 Faraday Development Ltd, R (on the application of) v West Berkshire Council [2018] EWCA Civ 2532. 129 ch 4, section III.A. 130 ch 4, section II.B.i.ii. 131 Further information on the extent and nature of default on transparency obligations can be found, in particular, in Good Law Project publication case. 132 ibid. 133 Good Law Project publication case at [155].

Emergency Procurement: The United Kingdom  371 The Green Paper suggests enhancing transparency over use of direct solicitations in general, which will benefit urgent situations, including crises, without unreasonable burdens, through ex ante notices ‘whenever the decision is made to award a contract under the limited tendering procedure’, which will ‘require contracting authorities to demonstrate clearly their justification for using’ limited tendering. Chapter 4 examines issues that might arise in providing this ‘clear ­justification’.134 Such ex ante notices are generally required under the UNCITRAL Model Law,135 although (in contrast with the UK proposal) not for urgent cases, but not by the EU or GPA, although the EU provides for VEAT notices followed by a standstill before award that protects a contract against ineffectiveness136 (transposed in domestic law in PCR, reg 99(3)–(4)). However, as with the proposals to promote competition in direct solicitations, discussed later below, these proposals come with nuances for legal challenges. Publication alone will not be unduly burdensome in a crisis, but risk of disruption, and consequent fear of effective action, from the risk of challenge could be. For this reason, it is proposed to exclude contracts awarded based on crisis or extreme urgency provisions from a proposed 10-day minimum standstill requirement following the notice137 and from automatic suspension of concluding any contract that normally applies following challenge to award or post-award decisions138 (see section III.G on remedies). While they, appropriately, limit the value of advance notices for urgent cases from the challenge perspective, nevertheless such notices still provide some prospect of challenge and some public accountability at an early stage. The above PCR provisions reflect the Directive’s piecemeal approach to information transparency but are, however, supplemented with certain domestic requirements on access to, and proactive publication of, information; and the Green Paper now proposes a step-change by a move to transparency by default. This proposal, examined further in section III.F, is particularly important for direct solicitations given the lack of transparency and of opportunities for monitoring and enforcement inherent in the procedure itself, and provides a very important further counterbalance to the proposed enhanced flexibility for crises. However, it addresses only accessibility of information that exists, not the extent of justification requirements, which it would be useful to clarify with practical examples in guidance, as chapter 4 discusses.139 As chapters 2, 3 and 4 discuss from different perspectives, hierarchical ­approvals provides a further control over choice of procurement methods found in some national regulatory frameworks and addressed in the Model Law, but



134 ch

4, section II.C.ii. 2, section V.C. 136 ch 5, section II.F. 137 Green Paper (n 43), para 215. 138 PCR, reg 95. 139 See ch 4, section II.C.ii. 135 ch

372  Sue Arrowsmith and Luke RA Butler not generally appropriate for trade agreements and not found in the EU and GPA.140 A system of external approvals operates for key UK contracts alongside approval requirements within procuring entities themselves. These primarily take the form of central government department spending control approvals rather than approvals of the grounds for and conduct of procurement processes. During the pandemic, centrally received PPE offers were subject to general spending controls.141 Further, for all procurements of £10 million plus (including COVID-19 related), the Cabinet Office examined how and why the goods or services would be procured from a ‘commercial perspective’ before giving spending approval.142 However, the latter examination did not apply to PPE because of the need for speed and seniority of staff involved; instead, PPE contracts above £5 million required approval by a clearance board established by the Department of Health and Social Care and Cabinet Office in May 2020, with the largest and most controversial reviewed by a committee chaired by a minister.143

iv.  Conducting the Procedure Chapter 3 explained that the Directive does not regulate the structure of direct solicitations, and, following the copy-out approach, neither do the PCRs 2015. Thus procuring entities, subject to the Regulations’ general principles and any applicable guidance, will structure the process. Chapter 3 argued that the Directive’s general principles do not constrain the decision on whether or not to have some competition in urgent cases, nor indicate how to identify and select suppliers; but that the exact position is uncertain.144 The 2020 general PPN provided no legal or strategic guidance (although it refers to the need to address value for money and ensure relevant pricing approvals). However, the conduct of direct solicitation methods is being given greater attention following the pandemic experience, both in the legislative reform and in pandemic-related case law. Chapter 4 identified the ‘ventilator challenge’ as something that received much attention, including by the NAO, involving Government’s reliance on the market to define requirements with evolving specifications followed by direct solicitations; however, these awards were not legally challenged.145 Rather, the pandemic controversies mainly centred around awards of certain PPE and Cabinet Office communications contracts to suppliers with political connections. With PPE, having come late to a sellers’ market, the Government scrambled to assess 140 ch 2, section V.C; ch 3, section II.E.vi. 141 See NAO (n 11) 25, para 3.6, reporting that many COVID-19 procurements were sufficiently large to require the Treasury Approvals Point (TAP) process rather than just spending review. 142 The Cabinet Office stated that at 31 October 2020 there had been 63 of these ‘deep dives’ and review if the commercial methodology and value of £14 billion of spend, with 187 conditions attached to approvals and followed up: NAO (n 11) 26, para.3.7. 143 NAO (n 11) 26, para.3.8. 144 ch 3, section E.iv. 145 ch 4, section II.A.

Emergency Procurement: The United Kingdom  373 and negotiate with thousands of suppliers, many unknown and/or new to the market, an unusual situation illustrating the difficulty of standardising emergency processes.146 The procedure adopted, examined extensively in chapter 4, included giving priority to leads through politicians under a ‘VIP lane’, aiming to address the most credible leads first but attracting accusations of cronyism and failure to include other leads.147 Other ‘one-off ’ controversial contracts – as with the Public First contract – were single-source, although there are examples of a competitive approach with direct solicitation procedures;148 the NAO did not, however, seek data on how often more than one supplier was consulted.149 Allegations of cronyism were further fuelled by NAO findings of failures to document and record some processes and decisions, as outlined below, and late publication of award notices and contracts, although (as we saw above) this was not a deliberate policy. One outcome of this controversy was a challenge by the Good Law Project to some PPE contracts awarded through the priority lane in PestFix. Permission to contest use of the urgency ground was refused on an initial and renewed application, as discussed above, but the case allowed to proceed based on, first, alleged breaches of legal principles of transparency, equal treatment and proportionality under PCR, reg 18 (which transpose principles of EU law);150 these, the claimant contended, require a fair and transparent process and potentially a competitive approach where feasible. Chapter 3 discussed the significance of these EU principles for conducting direct solicitation procedures.151 PestFix may bring greater clarity on this. However, it is to be hoped that for reasons of legal certainty they will be interpreted in a minimalist way as chapter 3 suggested,152 with no obligation of competition and general principles imposing merely limited negative requirements, such as not to act for personal reasons, and perhaps a requirement to demonstrate that the process was fair and transparent, without any specific obligations for a competition. Public First, while not addressing whether more than one supplier must be consulted where feasible, considered the absence of such consultation to be a factor contributing to the court’s conclusion that there was no ‘fair and impartial’

146 See generally NAO (n 12). 147 See ch 4, section II.B.i.ii. 148 J Josephs, ‘Government to pay £2m to settle coronavirus testing case’ BBC News (8 October 2020), available at www.bbc.co.uk/news/business-54455666#:~:text=The%20UK%20has%20agreed%20to, testing%20at%20its%20Lighthouse%20labs.&text=It%20sued%20the%20government%20 over,was%20%22unfair%20and%20unlawful%22. 149 NAO, Letter of 14 May 2021 pursuant to an information request (retained on file). 150 R (on the application of Secretary of State for Health and Social Care) v PESTFIX, Notification of the Judge’s decision on the application for permission to apply for judicial review (CPR 54.11, 54.12) at [5]. Reference to reg 18 was added in the amended grounds of claim: R (On the application of The Good Law Project and Everydoctor Limited) v Secretary of State for Health and Social Care [2020] EWHC 3609 (TCC) at [23]. 151 ch 3, section II.E.vii. 152 ibid.

374  Sue Arrowsmith and Luke RA Butler process needed to prevent a finding of appearance of bias even for a contract for very immediate needs, noting no reason was shown why other suppliers, also, could not have been consulted on the contract brief at short notice by telephone as Public First had been.153 This point is discussed later in this section in addressing bias and conflicts of interest. Conceivably the court’s views in Public First as to the kind of process necessary to negate an appearance of bias might be expanded to a broader obligation to demonstrate a fair and transparent process whenever a direct solicitation procedure is used, albeit not requiring any specific procedural obligations or competition. For the future, the Green Paper contains proposals encouraging entities to use competition but without imposing any specific legal obligation to do so, proposals which clearly take inspiration at least in part from the experience of the pandemic. Thus the November 2020 NAO general report recommended reviewing the rules to encourage greater competition, while the December Boardman Review suggested that the process should be conducted, ‘wherever possible and where there is time, by inviting proposals/presentations from a few suppliers’.154 More specifically, the Green Paper proposes for limited tendering under the urgency or crisis provisions, that ‘when there are a number of potential suppliers and scope to undertake a degree of competition, a contracting authority should consider this’; and if they do not, they should keep a record of their reasoning. It is unclear whether these obligations to consider the issue and to record the reasoning are to be legal obligations or merely instructions in guidance, but what is clear is that there is no suggestion of a legal obligation actually to use a competitive approach where practical, as there is under the UNCITRAL Model Law and in Italy, for example.155 This reflects the kind of approach proposed by Arrowsmith in September 2020, arguing that a legal obligation actually to require competition in specific cases is not appropriate for the UK for reasons of certainty.156 A legal obligation to consider the issue and record the reasons for not acting, on the other hand, strikes an appropriate balance between different interests, and it is submitted that the obligation should take a legal form. In the meantime, the 2021 general PPN, while taking the view that this is not required by law, advises entities to ‘consider some form of advertisement, running an informal competition and/or undertaking due diligence on the supplier market before making a direct award’.157 Related to the issue of competition, a further proposal, mentioned above, is that procedures based on the urgency or crisis grounds be excluded from automatic suspension.158 This is aimed at the risk that entities may be reluctant to engage with more than one supplier through fear of delay caused by challenges by the



153 Public

First at [162]. Review (n 18) Part 2, para 23. 155 See ch 2, section V.A.i and ch 3, section II.E.vii. 156 Arrowsmith, ‘Reimagining public procurement law after Brexit’ (2020) Part 2, 36. 157 2021 general PPN, 4. 158 Green Paper (n 43), para 81. 154 Boardman

Emergency Procurement: The United Kingdom  375 loser;159 this occurred with at least one contract (concerning testing analysis) early in the pandemic, leading to a large financial settlement with a losing supplier.160 As discussed in section III.G below, this would limit effective remedies but overall is likely to enhance the level of transparency and competition. As regards selection of suppliers to participate or receive contracts, none of the investigations have suggested laying down positive substantive criteria, whether in the legal framework or otherwise; instead the focus has been on ensuring articulation and documentation of decisions, as outlined below. This seems entirely appropriate given the variety of different circumstances, providing sufficient flexibility but also control, through justification requirements although, as suggested in chapters 2 and 4, a list of prohibited criteria161 and some general considerations on the type of criteria to use,162 might be set out, at least in guidance. In the absence of ‘positive’ substantive criteria, the function of such articulation and documentation requirements in ensuring that rational (appropriate) criteria are actually applied and, as an element of this, that criteria that are clearly improper under principles of administrative law (such as personal interest) are not taken into account, is important, as is discussed below. One significant positive consideration, however, is, as chapter 2 notes, the importance of existing and previous suppliers for emergency purchasing.163 The Boardman Review highlighted a need for more accessible information on past and current contracts, recommending introducing a searchable, centralised contracts register.164 This information will in fact be readily available through the centralised platform proposed in the Green Paper as part of its ‘transparency by default’ recommendation considered later. As chapter 2 also discussed, proactively keeping supplier lists, both of past and previous suppliers and of other interested suppliers, with certain defined information, can also help identify participants for direct solicitations; and using lists for competitive procurements, also, will encourage suppliers to submit details. However, as discussed earlier, lists can currently be used for most public procurement to advertise contracts and to select participants only under a DPS, and the Green Paper’s proposals on this aspect are unclear. The main legal controls over the conduct of the procedure are the requirements for articulating and recording the reasons for decisions under PCR, reg 84, replicating Art 84 of the Directive. As chapter 3 discussed, the Directive does not refer explicitly to the key decisions in direct solicitations, such as how to structure the procedure and which suppliers to invite, but these must still be documented under the general obligation. One of the NAO’s main criticisms of pandemic procurement was that in a few cases the reasons for supplier



159 Green

Paper (n 43), paras 214–16. ‘Government to pay £2m’ (8 October 2020). 161 ch 2, section V.4. 162 ch 4, section II.B.ii. 163 Noted also in Public First at [161]. 164 Boardman Review (n 18) Part 2, para 29. 160 Josephs,

376  Sue Arrowsmith and Luke RA Butler selection and the related issue of how conflicts of interest were managed165 were not properly documented, making it impossible to assess those decisions;166 and the PAC also highlighted the importance of this for cases without competition.167 The 2021 general PPN has consequently placed further emphasis on this ­documentation obligation, including in relation to conflicts of interest.168 The potential importance of such articulation and documentation requirements for both promoting consideration of appropriate criteria and monitoring their application, and for ensuring that improper criteria are not taken into account, is illustrated by the (at the time of writing) ongoing legal challenge PestFix. While, as noted above, permission to challenge inter alia use of the urgency ground was denied, permission was given to proceed with a challenge that three PPE awards were irrational, based on allegations that (a) there was no sufficient financial or technical verification of these suppliers and (b) there were no stated criteria for the referrals to the ‘priority’ lane mentioned earlier, through which these suppliers had been considered, and/or the source of the priority referrals was not always identified and/or justified169 (concerns which the NAO had expressed but which the Government has contended in the case were not wholly accurate). For PPE specifically, the PAC recommended in December 2020 that the Government issue guidance on what is considered a credible offer and communicate that to suppliers.170 While that particular horse had already long bolted, given the very different PPE market situation by December 2020, the recommendation highlights the importance of the value of both articulating and disclosing any general policies by which decisions are made. The PCR do not in fact explicitly require this for direct solicitations (which more often involve one-off procurements than situations susceptible to general rules), although such an obligation could exist under the general transparency principle in PCR, reg18(1). As mentioned, the Green Paper’s proposal for transparency by default will have an important impact on information transparency, and this of course applies to the conduct as well as use of limited tendering, allowing for better scrutiny of both processes and outcomes, as discussed below in section III.F. A particularly significant issue for direct solicitations is managing conflicts of interest. As chapter 4 indicates,171 its importance has increased because of the alleged ‘priority lane’ for PPE and, more recently, concerns about awards connected to persons with political connections, as exemplified by Public First discussed below. This seems at least as significant as general information transparency in terms of impact on public trust. 165 Explicitly mentioned in PCR, reg 84(1)(i). 166 NAO (n 11) Summary paras 20 and 22 and paras 3.20–3-22. 167 House of Commons Public Accounts Committee (n 15) Conclusions and recommendations, point 1. 168 PPN 2021, 3–4. 169 Pestfix at [66]. 170 House of Commons Public Accounts Committee (n 15) Conclusions and recommendations, point 3. 171 ch 4, section II.B.i.ii.

Emergency Procurement: The United Kingdom  377 Conflicts are addressed by PCR, reg 24 (transposing Art 24 of the Public Contracts Directive) and common law public procedural fairness rules. Under reg 24, procuring entities must take appropriate measures to effectively prevent, identify and remedy conflicts arising to avoid distortion of competition and ensure equal treatment. Regulation 57(8) provides that an irremediable conflict is a discretionary exclusion ground and the reg 84 report must include conflicts detected and measures taken. The NAO general report found in one of its sample of 20 pandemic contracts reviewed that there was no documentation that a potential conflict had been considered or managed,172 reiterating the importance of regs 24 and 84 for non-competitive awards.173 In Public First a judicial review was based on the domestic public law rule on apparent bias, which exists where the circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility of bias.174 (There was no suggestion of actual bias.175) Regulation 24 was considered a useful indicator of circumstances that might give rise to apparent bias.176 As indicated in section D.iv, the court found apparent bias.177 It noted that a prior relationship is insufficient and does not alone preclude a lawful judgment as to the suitability of the supplier’s appointment or require recusal of the decision-maker;178 but that personal connections might be perceived to compromise impartiality and, absent a tender competition, it was incumbent to demonstrate that the procurement was fair and impartial by means of objective criteria used to select the supplier over others.179 On the facts, failures included: lack of criteria to determine why the supplier was the appropriate choice (the determination that Public First was considered competent, reliable and honest being a necessary but not sufficient basis for selection) or assessment against criteria; no use of an existing DPS to identify potential suppliers; absence of contact with other suppliers, for which there was time given Public First were briefed via telephone; and no evidence to conclude no other supplier could meet the requirement.180 In legal terms, as discussed in section D.iv, whilst Public First identifies considerations (focusing, in particular, on why efforts have not been made to contact and consider other suppliers) that might counter an apparent bias claim, it remains unclear whether there is a broader obligation to demonstrate a procedure is fair and impartial but short of an obligation to hold a competition. In policy terms, as indicated in section I, the Boardman Review examined certain Cabinet Office communications contracts pre-empting Public First. 172 Only a standard new supplier form declaring no conflicts of interest, with due diligence checking for political connections for directors. A second round of checks did not include senior advisers or identify any conflicts: NAO (n 11) 35. 173 NAO (n 11) para.3.16. 174 As set out in [137]–[141]. 175 Public First at [136] and [166]. 176 ibid at [148]. 177 ibid at [168] and [169]. 178 ibid at [146]. 179 ibid at [147] and [153] 180 ibid at [158]–[163].

378  Sue Arrowsmith and Luke RA Butler Of its 28 recommendations, 12 address conflicts including: reinforcing the budget holder’s responsibility to manage them; aligning the model for managing them more closely to the ‘identify, prevent, rectify’ sequence in reg 24 with accompanying guidance; increased recording of declarations of interests; keeping separate records on conflicts; a clear approvals process for managing this risk; and additional disclosure where no competition is undertaken, including automatic escalation of the decision to procure without competition to the Commercial Director; sanctions for non-compliance; and flow down of such requirements to suppliers. A 2021 PPN further states that contracting authorities should maintain documentation on how conflicts were considered and managed, eg as set out in the Ministerial Code and Civil Service Management Code, and that particular attention should be paid to ensure award decisions are made on the basis of relevant not personal considerations.181 More generally, chapter 4 indicated that both principles and processes for direct solicitations, particularly for emergencies, could be more clearly articulated in guidance, both to assist procurement and to enhance accountability. This could set out procedural key stages on aspects ranging from approaches to market testing, identifying key selection and award criteria and principles (in particular, to ensure these are relevant to the contract), and how decisions are made on structuring the process with competition or otherwise. This would align with the Boardman Review’s recommendations for clearer internal guidance on process and also mitigate the legal risk of potential challenges on grounds of bias. The authors are currently working with the Department of Health and Social Care to further develop its guidance (some, on PPE and test and trace procurement, already being extensive and further revised in light of the pandemic) to identify key processes in using direct solicitations for emergencies.182

E.  Modification of Existing Contracts to Obtain New Requirements Domestic rules on the scope of permitted contract modifications in PCR 2015, reg 72, are also largely copied out from the Public Contracts Directive, and were analysed in chapter 3.183 Regulation 72(1)(c) allows successive modifications necessitated by unforeseeable circumstances up to 50 per cent of the original contract value (provided the overall nature of the contract is not altered). As we have seen, modifications to existing arrangements accounted for about 3.7 per cent of pandemic-related procurement by value as of July 2020. 181 Cabinet Office, Procurement Policy Note – Procurement in an Emergency, Information Note PPN 01/21 (February 2021) 4. 182 Under the terms of AHRC Grant (AH/V012657/1). The detailed Department of Health and Social Care guidance on both PPE and test and trace does not specifically elaborate direct solicitation processes. 183 ch 3, section II.D.

Emergency Procurement: The United Kingdom  379 As chapter 3 explained, the main control over modifications, found in domestic law in reg 72(3)–(4), is publication of a modification notice, requiring a ‘description of the circumstances’ making modification necessary;184 but reporting and record keeping obligations (which are found in domestic law generally in reg 84(7)–(9)) do not seem to apply to modifications. Chapter 3 suggested that it is unclear whether all elements of the legal test for invoking the provision (existence of need, unforeseeabilty, etc) must be covered in the modification notice, or the level of detail required, and that the language used, requiring a description of the relevant ‘circumstances’185 is, unjustifiably, different from that for award notices (which require ‘justification’ for choice of method).186 Although it is not clear that this is required by reg 84, the 2020 general PPN in fact advised entities to keep a written justification referring to the facts giving rise to the conditions that warrant modification (such as staff being off sick and thus unable to run a tender) rather than simply referring to the legal ground, but also appears to indicate that such detail, as opposed to reference simply to the legal ground for the modification, is not needed in the published modification notice, stating that ‘You should publish the modification by way of a … notice to say you have relied on regulation 72(1)(c)’.187 The Green Paper proposes that both the extreme urgency ground and new ‘crisis’ ground for limited tendering should also be included as a ground for contract modifications,188 thus allowing modifications in urgent cases without current limits, such as the 50 per cent limit for each modification under the unforeseeability rule. This is a welcome recognition of the need for consistency between rules on modifications and on new contracts, as well as potentially simplifying the process of concluding emergency arrangements with existing suppliers. Similarly, there is a proposal for ex ante notices followed by a standstill for major modifications as well as for new awards,189 further removing current inconsistency of treatment (although also raising difficulties over distinguishing between modifications and application of existing contract clauses190). This will retain and – through the standstill – enhance the visibility that already exists through modification notices around some types of modification (including under the unforeseeable events provision). Presumably, existing discrepancies in the language of the justifications required will also be ironed out. The ‘transparency by default’ system proposed in the Green Paper, outlined in section III.F, will provide an even more comprehensive approach than at present to making information on modifications available but, as with award decisions, does not itself determine what information must be articulated and recorded – and thus made accessible.

184 Public

Contracts Directive Annex VG, referred to in reg 72(3). reg 72(3)–(4) and Public Contracts Directive Annex VG, point 6. 186 ch 3, section II.D. 187 2020 PPN, 7. 188 Green Paper (n 43), para 231. 189 ibid, paras 233–39. 190 Edenred (UK Group) Ltd v Her Majesty’s Treasury [2015] UKSC 45. 185 PCR,

380  Sue Arrowsmith and Luke RA Butler

F.  Information Transparency The PCR 2015 include the various information transparency obligations provided for under the piecemeal approach of EU law, including for award notices, as set out earlier. This is, however, supplemented for major contracts in two further important ways, such that information transparency obligations are thus already significant, going well beyond what the EU required, particularly at central Government level. First, there are requirements for proactive publication going well beyond EU requirements. Thus from 2015, Government entities have been instructed through administrative means191 to adopt a presumption in favour of proactive disclosure of procurement information including, specifically, of contracts themselves,192 which it is advised should be disclosed within 20 days following the end of the standstill period or, where there is no standstill, 20 days of award;193 significant amendments; and other commercial information, such as performance data. These time limits for publishing contracts, as well as those for award notices, were not complied with during the pandemic, and were also the subject also of a declaration in the Good Law Project publication case: under domestic law administrative policies must be complied with unless dispensed with for good reason and since there was no deliberate decision not to comply (for example, because of the difficulties of the pandemic), the court declared the non-compliance a breach of law.194 Further, as chapter 4 discussed,195 there are several practical challenges regarding publi­ cation; in the UK’s case there may be a further difficulty of reconciling legal and policy requirements. A requirement to publish a contract award notice within 30 days196 must be reconciled with UK policy guidance advising publication of a (redacted) contract (accompanied by a contract award notice) within 20 days; by implication since a contract cannot be published without an accompanying award notice, an award notice would need to be complete within 20 days, which may be impractical in emergencies. For local government in England, publication of certain information is required or expected under the Local Government Transparency Code 2015;197 regulations198 require quarterly publication of information in Part 2 of the Code, 191 Initially by Action Note 13/15 of 31 July 2015, now in ‘Procurement Policy Note – Update to Transparency Principles’ (PPN 01/17, February 2017) and The Transparency of Suppliers and Government to the Public (June 2021); and see Crown Commercial Service, ‘Publication of Central Government Tenders and Contracts: Central Government Transparency Guidance Note’ (November 2017). 192 For contracts above £10 000 on the ContractsFinder website. 193 Crown Commercial Service, ‘Publication of Central Government Tenders and Contracts’ (2017) para.9.1. 194 Good Law Project publication case, at [129]–[235]. 195 ch 4, section II.C.i. 196 Other legal requirements are contained in regs 50(1), 112(1), 52(3) and 52(4). 197 Issued by the Secretary of State for Communities and Local Government under Local Government, Planning and Land Act 1980, s 2. 198 The Local Government (Transparency Requirements) (England) Regulations 2015, 2015/480.

Emergency Procurement: The United Kingdom  381 referring to brief details only (such as purpose and amount) of certain transactions, including tenders and contracts; while the Code itself199 recommends, but does not require, publication of further matters, including contracts in real time or, failing that, monthly. Secondly, as alluded to earlier, the Freedom of Information Act 2000 also gives a right of access to public sector information. Among other things, this enables anyone to access internal reports and records, including those produced in accordance with reg 84, even though there is no legal obligation to provide these proactively, or even to allow access on request, enhancing the value of reg 84. It also allows access on request to other documents, ranging from planning documents to bid evaluation reports, and also to contracts or amendments themselves where not already made available proactively under the provisions above.200 With all these provisions, disclosure may be limited by considerations such as commercial confidentiality which form the basis for exemptions in the Freedom of Information Act 2000. As already mentioned, these have been given a narrow scope – commercial confidentiality is the ‘exception rather than the rule’.201 As indicated in the guidance, the main categories of information that may (according to circumstances, such as currency of information) be withheld on grounds of commercial confidentiality are the way that the supplier has arrived at its pricing (but not the pricing itself); proprietary details of the supplier’s solution; and information on how the supplier expects to obtain its financial return, including its investment plans.202 Applying appropriate redactions to reflect these limitations can be quite a significant burden, however, and was the main reason for the difficulty of timely compliance in the pandemic.203 Chapter 4 examines these issues further.204 While information transparency is thus already significant, for the future the Green Paper proposes an even more ambitious approach: citing the experiences of countries such as the Ukraine, it proposes to legislate to ‘embed transparency by default throughout the commercial lifecycle’,205 with disclosure of all procurement and contract data206 through a central platform207 using the Open Data Contracting Standard (which is already used where publication is required). Publication will be subject, however, to the above-mentioned Freedom of Information Act 2000 limits, and an important role is envisaged for soft law guidance on how to apply these limits,208 which will be crucial to the proper and efficient application of the new policy.

199 Local

Government Transparency Code, para 60. Arrowsmith (n 8) 13-78–13-102. 201 ‘The Transparency of Suppliers and Government to the Public’ (June 2021) para.4. 202 ibid, para 10. 203 See Good Law Project publication case, at [55]. 204 ch 4, sections II.C.i and II.E. 205 Green Paper (n 43), para 165. 206 ibid. 207 ibid, para 167. 208 ibid, para 168. 200 See

382  Sue Arrowsmith and Luke RA Butler While, as reviewed in chapter 2, several countries have enhanced elements of information transparency, including ex post publication, in the pandemic as a counterbalance to the inherently limited transparency in direct solicitations, this proposal was discussed before the pandemic hit.209 However, it has significant potential to enhance the capability for monitoring and assessing the processes and outcomes of emergency procurement, by both internal parties and external stakeholders. However, as chapter 4 discussed,210 its value will depend crucially, first, on the extent of political will and resource; and secondly, the nature and quality of information made available which, as also noted above, mere publication does not address; such a policy does not obviate the need still to clarify and streamline the information required for different decisions, including justification of choice of method and modifications, as discussed at various points above. As chapter 4 discussed, policy guidance could give a clearer steer on the types of information and standard of evidence required in justifications.211

G.  Challenges and Remedies Suppliers can enforce the PCR 2015 using remedies212 implementing the EU Remedies Directive 89/665.213 Key features – similar to the Model Law214 – are a focus on pre-contractual remedies, including a notification and standstill before concluding the contract;215 automatic suspension of concluding a contract after challenge216 which the court may, however, lift, including for public interest reasons;217 and a set aside remedy.218 While, as the Remedies Directive allows,219 suspension and set-asides are not made available after the contract is concluded, for certain violations, including for unlawful direct solicitations, the contract must generally be declared ineffective,220 subject to protection if a VEAT notice was published.221 There is also a discretionary exception to ineffectiveness for

209 For example, Arrowsmith proposed this approach at the academic focus group with the Cabinet Office on 7 August 2019 at the University of Nottingham, attended by both authors. 210 ch 4, section II.E. 211 ch 4, section II.C.ii. 212 In PCR, Pt 3 (regs 85–104). 213 Council Directive 89/665/EEC of 21 December 1989on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts, OJ 1989 No L395/33. See also ch 5. 214 See ch 5 passim. 215 PCR, reg 87. 216 PCR, reg 95. 217 PCR, regs 95(2) and 96(1)(a). 218 PCR, reg 97(2)(a). 219 Remedies Directive, Art 2(7). 220 PCR, reg 99. 221 PCR, reg 99(3)–(4).

Emergency Procurement: The United Kingdom  383 overriding reasons of public interest,222 although sanctions through contract shortening and/or financial penalties must then be imposed.223 However, the domestic system does not generally provide effective protection including because it requires expensive High Court proceedings and suspensions are generally refused, length of proceedings being a key reason.224 The Green Paper explicitly recognises the problems and has proposed reforms,225 including by speeding up and otherwise court procedures for procurement cases,226 by encouraging more suspensions, through an explicit preference for pre-contractual remedies227 and a reformulation of the suspension test228 and by the proposal mentioned earlier for ex ante notices and standstill for all limited tendering, including in urgent situations.229 Of particular interest here are elements of the proposals targeted specifically at balancing interests in urgent procurements, which seem in part to derive from reflections on the pandemic. Thus, for contracts awarded under the crisis or extreme urgency grounds an exception is proposed both to the standstill following the proposed ex ante notice230 and – provided the ex ante notice was published – to automatic suspension,231 the latter proposal – as mentioned in section III.D.iv – aiming to avoid competition in direct solicitations being deterred by a fear of delay from challenge in urgent cases. The Green Paper also proposes removing the right to recover lost profits and capping damages at one and a half times bid costs, but these limits will not apply when there is no real opportunity for pre-contract challenge.232 Such measures seem likely to enhance both transparency and competition and effectiveness of remedies for procedures in general, including direct solicitation procedures. However, in genuinely urgent situations, obtaining remedies will still be problematic, even to prevent use of urgency methods when the governing conditions (such as absence of delay) are not met; as chapter five discusses, this is an inherent problem in any system, however well designed.233 Thus by definition there will be compelling reasons to refuse suspensions, set asides or ineffectiveness remedies; proving loss to obtain damages will be very difficult;234 and, although the contract shortening remedy might sometimes assist, often there will still be little incentive for a competitor to sue given the speculative nature 222 PCR, reg 100. 223 PCR, reg 102(2)–(3). 224 S Arrowsmith and Craven, ‘Public Procurement and Access to Justice: a Legal and Empirical Study of the UK System’ (2016) 25 Public Procurement Law Review 227. 225 Green Paper (n 43), ch 7. 226 ibid, para 202. 227 ibid, para 204. 228 ibid, para 206. 229 ibid, para 77. 230 ibid. 231 ibid, para 215. 232 ibid, para 212. 233 ch 5, section II. 234 As illustrated by Nationwide Gritting Services v Scottish Ministers (No 2) [2014] ScotsCS CSOH 151.

384  Sue Arrowsmith and Luke RA Butler of future participation and difficulty of challenging discretionary decisions, as discussed in chapter five.235 Challenge by competitors may be more likely where the complaint concerns the conduct of direct solicitations with competition than unlawful reliance on direct solicitations, however, as here damages may be feasible and significant in the absence of a prospect of pre-contract challenge. Chapter five suggested that an effective review system can also play some a role in preventing abuse of urgency methods when there is no genuine urgency, and this should be facilitated by the proposed ex ante notice requirement. However, the proposed exemption from standstill following the ex ante notice and from automatic suspension will make pre-contractual remedies difficult, and although the post-contractual remedies, including availability of ineffectiveness, may be more effective than where there is genuine urgency again, as with all direct solicitations, suppliers themselves may have limited incentive to challenge. Given the inherent difficulties with supplier review it is important that standing is not limited in the UK to aggrieved suppliers, but remedies also available236 to others directly affected by a violation or where the gravity of departure from public procurement law justifies a remedy, taking account also of other ways to litigate a matter, including the prospects of actions by aggrieved suppliers.237 In the pandemic, standing was afforded to the Good Law Project, a non-profit body that pursues public interest litigation, both to challenge the Government’s failure to publish in a timely manner award notices and contracts relating to contracts worth billions of pounds, and to challenge a directly solicited award for apparent bias and breach of the PCRs, on the basis of strong public interest; the fact that suppliers could not be expected to litigate these types of breaches (in the case of direct solicitations without any competition the court noting the difficulty of obtaining damages that mean suppliers are unlikely to risk the costs of litigation); and the fact that the Good Law Project was an appropriate litigant.238 (However, standing was denied to Members of Parliament to challenge non-publication on the basis that the Good Law Project was an appropriate litigant.239)

IV.  Modification of Contracts to Adapt them to the Pandemic As chapter 4 discussed, the pandemic has raised issues where services can no longer be provided or need to be reduced in light of closures – for example, with 235 ch 5, section III.I. 236 Using the judicial review procedure and remedies, which are slightly different from those under the Regulations. 237 R (on the Application of Chandler) v Secretary of State for Children, Schools and Families [2009] EWCA Civ 1011; Good Law Project publication case. 238 Good Law Project publication case at [102]–[105]; Public First at [176]–[181]. 239 Good Law Project publication case at [106]–[108].

Emergency Procurement: The United Kingdom  385 school transport contracts – or where new requirements entail additional costs, such as installing new health and safety measures. In the UK, there is no dedicated legislation or central policy on contract administration. Individual government departments such as the Ministry of Defence and other procuring entities have their own policies which may confirm the status of certain events and prescribe standard clauses; if not, these matters will be negotiated in individual contracts. Standard clauses allow ‘termination for convenience at any time’.240 Further, its force majeure policy, in force since 2017 (and apparently not revised expressly for the pandemic) is that ‘pandemics (such as Swine Flu) are not force majeure events’ such that it is the supplier’s responsibility to ensure they have business continuity plans to mitigate against such risks.241 As discussed below, how such clauses are then interpreted and applied depends on private law doctrines. The 2020 general PPN acknowledged that procuring entities may need to take action in response to claims of ‘force majeure’ or ‘frustration’ given likely supply chain disruption. A second 2020 PPN on ‘Supplier Relief due to COVID-19’242 (‘PPN on supplier relief ’) contained specific sections explaining ‘force majeure’, ‘frustration’, and ‘excusing causes, relief events and other options’. However, procuring entities were instructed not to accept claims for force majeure but instead work with suppliers to maintain business and service continuity, if appropriate, by providing other relief against current contractual terms. This could include amending/varying contractual requirements, delivery locations and frequency, and targets/performance indicators, as well as revising milestones and waiving or delaying exercise of rights or remedies such as liquidated damages or termination. These would be limited to the specific circumstances and subject to PCR 2015 (for example, to prevent unlawful modifications). Further, the PPN emphasised the option of advance or interim payments, to ensure business continuity. Similarly, a 2020 PPN (‘recovery and transition PPN’)243 which was, in hindsight, premature (being published before the second and most severe lockdown) required entities to review contracts, including where they had provided contractual relief and, if appropriate, continue such measures and develop transition plans to exit any relief as soon as reasonably possible. These policies appear geared more towards service continuity than using procurement to secure jobs or stimulate recovery (although also recognising that payments could be made to cover salary costs). Other general schemes such as the Coronavirus Job Retention Scheme (‘furlough’) provided a means of paying salaries for employees affected by the pandemic. Guidance on maintaining supplier continuity was more detailed than the guidance on procurement processes. 240 eg Ministry of Defence, Termination for Convenience, DEFCON 656A and DEFCON 656B. 241 Ministry of Defence, ‘Force Majeure Commercial Policy Statement’, Version 1.4 (1 February 2017), 3, para 12. 242 Cabinet Office, ‘Procurement Policy Note – Supplier relief due to COVID-19’ Action Note PPN 02/20 (March 2020). 243 Cabinet Office, ‘Procurement Policy Note – Recovery and Transition from COVID-19 ‘Action Note PPN 04/20 (June 20200.

386  Sue Arrowsmith and Luke RA Butler A 2021 High Court case illustrates some of the difficulties in applying contract clauses in the pandemic. This case concerned Westminster Council’s claim for declaratory relief244 in relation to a contract for a supplier to pay a management fee as consideration for the right to provide leisure facilities and retain customer revenue after COVID-19 Regulations required closure of facilities, resulting in a loss. Neither party suggested the pandemic was a force majeure event and accepted that it fell within a change of law clause. However, the parties did not agree on the allocation of risk under the contract. The council agreed to waive the management fee and pay certain losses (eg salary costs) whereas the supplier argued that the council should pay it a ‘reverse’ management fee to prevent it being worse off from the change in law. Ultimately, the court declared risk and recovery a matter of contractual interpretation on private law principles; here the management fee could be reduced but not reversed, but the contractor was still entitled to a capital payment. Some of the complex issues in allocating risk and determining cost recovery during the pandemic are considered in chapter 4.245

V.  Security of Supply and Supplier Fraud The speculation necessary to obtain reliable PPE increased risks of supplier fraud and even collusion with public officials. Despite press and other claims either asserting or intimating corruption and cronyism in the UK during the pandemic,246 official reports have not made any such findings; other sources have simply identified that any corruption risk existing before the pandemic has been increased by it.247 For example, the National Crime Agency has reported that there have been cases of suspected fraud in ‘large-scale procurement contracts’ (not identified) during the pandemic, but ‘no supporting evidence of any contracts with, or any funds paid out by, the UK government’.248 Further, the NAO did not find any instances despite identifying potential risks. The PAC report on PPE indicated that the Department of Health and Social Care was investigating potential fraudulent activity but that levels of fraud were very low.249

244 Westminster City Council and Sports and Leisure Management Limited [2021] EWHC 98 (TCC). This was a Part B services contract under Directive 2004/18/EC awarded in February 2015. 245 ch 4, section III. 246 eg ‘Spotlight on Corruption’, available at publications.parliament.uk/pa/cm5801/cmpublic/ FinancialServices/memo/FSB06.htm. 247 Transparency International, ‘Track and Trace – Identifying Corruption Risks in UK Public Procurement for the COVID-19 Pandemic’ (April 2021), available at www.transparency.org. uk/sites/default/files/pdf/publications/Track%20and%20Trace%20-%20Transparency%20 International%20UK.pdf. 248 National Crime Agency, ‘COVID-19 Suspicious Activity Reporting’ (May 2020) Issue 2, 2, available at www.nationalcrimeagency.gov.uk/who-we-are/publications/453-covid-19-suspiciousactivity-reporting/file. 249 House of Commons Public Accounts Committee (n 15) 15.

Emergency Procurement: The United Kingdom  387 As noted in section IV above, to ensure security of supply, particularly for services, the PPN on supplier relief encouraged advance or interim payments subject to safeguards such as record-keeping and monitoring. Further, it sought to safeguard against fraud: thus, if payments were made under public contracts to continue services and prevent staff redundancies, suppliers could not also receive furlough support. The NAO has reported ‘significant levels’ of furlough fraud, but not specifically in reference to government contracts250 and it is unclear whether there will be a specific investigation of this issue.251 In PestFix the Government acknowledged significant pre-payments (eg 75 per cent of contract value) on contracts to secure PPE. The Good Law Project argued that this contravened the PPN policies on responsible payments and supported a claim that an award was irrational as the supplier had no manufacturing capacity; however, the court rejected the irrationality claim since the awardee could evidence ability to source PPE despite that.252 The PAC reported that the Government told it that PPE contract clauses allow the Government to reclaim costs for substandard PPE or PPE not provided, but the Government could not indicate how many of these contracts it was pursuing or progress made.253 Within central and local government, many publications and guidance documents have now been issued on fraud control expressly in reference to COVID-19.254 The Green Paper proposals on new fraud exclusions and central debarment lists could further protect against such risks.255

VI.  Use of Procurement for Industrial or Social Objectives, Including Building Resilience As chapter 9 indicated, another important issue is the extent of states’ freedom of action under international legal frameworks to build domestic supply bases for future emergencies. Beginning in May 2020, the Government has stated that it is rapidly addressing strategic over-reliance on China and has built up its national capability and 250 NAO, ‘Report by the Comptroller and Auditor General Implementing employment support schemes in response to the COVID-19 pandemic’, HC 862 (16 October 2020). 251 R Syal, ‘Watchdog warns over UK furlough fraud and government contracts’ The Guardian (16 September 2020), available at www.theguardian.com/uk-news/2020/sep/16/ watchdog-warns-over-furlough-and-government-contracts. 252 R (on the application of Secretary of State for Health and Social Care) v PESTFIX, Notification of the Judge’s decision on the application for permission to apply for judicial review (CPR 54.11, 54.12) at [8]. 253 House of Commons Public Accounts Committee (n 15) 15. 254 eg at central government level: ‘Fraud Control in Emergency Management’, available at www.gov. uk/government/publications/fraud-control-in-emergency-management-covid-19-uk-governmentguide; cfa.nhs.uk/fraud-prevention/COVID-19-guidance/Procurement-fraud-risks; ‘Review into the risks of fraud and corruption in local government procurement A commitment from the UK AntiCorruption Strategy 2017–2022’. 255 Green Paper (n 43) 37–38, paras 110–19.

388  Sue Arrowsmith and Luke RA Butler resilience with the potential for 70 per cent of PPE to be produced in the UK; and the Department of International Trade’s Project Defend is looking into other critical areas of manufacturing dependency.256 It is understood that ‘onshoring’ is not being considered257 but few details of Project Defend have been published. It is worth emphasising that these efforts have been encouraged not just by the Government but by cross-party Parliamentary inquiries. For example, a PAC Report recommended that Government should incentivise the NHS supply chain, Trusts and other providers to buy UK-made PPE and ensure sufficient supply chain resilience where UK manufacturers cannot provide PPE.258 It remains to be seen whether this new strategy will result in procurement-specific measures or will impact on public procurement generally. Chapter 9 discussed whether such policies, even if motivated by health and security rather than solely economic considerations, might violate trade agreements, highlighting the lack of clarity in this area. The UK Government does not, on the other hand, appear to have explicitly used the pandemic as a tool of industrial policy. It has not adopted or revived any legislation on domestic production or economic stimulus. As section IV indicates, the PPNs use procurement policy to maintain business and service continuity, but are not targeted interventions to protect certain industries; the encouragement to make advance and interim payments could raise the risk of state aid but this has not been challenged to date and is unlikely to be. Concerning social policy, in September 2020, the Cabinet Office published Procurement Policy Note 06/20 on this.259 The Public Services (Social Value) Act 2012 already requires many procuring entities to consider how procurement might improve economic, social and environmental well-being, but the PPN requires actual inclusion of such considerations and provides a Social Value Model identifying specific themes and metrics for reaching social value outcomes.260 It is based on a pre-pandemic model, but now adds helping local communities to manage and recover from the pandemic’s impact as a specific theme, and emphasises model award criteria which include inter alia creation of employment, retraining and other return-to-work opportunities for those left unemployed by COVID-19. The Government will monitor delivery of a number of related outputs to assess its effect. The Green paper emphasises the drive for social value.261 It remains 256 J Lopez MP, ‘Closing Remarks on Westminster Hall debate on procurement’, available at www.gov.uk/ government/speeches/minister-lopez-closing-remarks-on-westminster-hall-debate-on-procurement. 257 House of Commons International Trade Committee, ‘The COVID-19 pandemic and international trade First Report of Session 2019–21 Report, together with formal minutes relating to the report’ HC 286 (23 July 2020) 40. 258 House of Commons Public Accounts Committee (n 15) 9. 259 ‘’Procurement Policy Note – Taking Account of Social Value in the Award of Central Government Contract’ Action Note PPN 06/20 (September 2020). 260 Government Commercial Function, ‘The Social Value Model’, Edition 1.1, 3 December 2020, available at assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/ file/940826/Social-Value-Model-Edn-1.1-3-Dec-20.pdf. 261 Green Paper (n 43) 16, para 37.

Emergency Procurement: The United Kingdom  389 to be seen to what extent this policy will meaningfully address the relevant challenges, however.

VII.  The Pandemic as a Catalyst for Procurement Reforms As explained, the UK had already launched a post-Brexit reform of procurement regulation in 2019, so the pandemic itself was clearly not the catalyst. However, the timing, with a Green Paper published in December 2020, allowed consideration of the pandemic experience. While the Green Paper does not link any specific proposals to the pandemic, that experience certainly focused attention on, in particular, direct solicitations, and many measures proposed in pandemic-related governmental audits and reviews and academic analyses arising have appeared in the Green Paper, as this chapter has outlined. As explained, we consider the proposals to provide a suitably nuanced approach to balancing speed and flexibility with transparency and competition, enhancing both. While, as chapter 2 highlighted, overregulation is a common response to problems arising in a crisis, especially reputational issues, that has not occurred, in part because the response formed part of a detailed and expert broader review, which was applied also to issues of urgent procurement and their relationship with the whole regulatory framework. That timing has also been fortuitous for the broader reform, prompting more careful consideration of direct solicitations than might have occurred otherwise.

VIII. Reflections The UK faced considerable procurement challenges in the pandemic, in particular in obtaining PPE, in part because poor political decisions meant procurement got off to a slow start and because plans for dealing with a pandemic were not implemented, being derailed by austerity and Brexit. Once procurement got underway, key issues were widespread delay in publishing information on awards; failure in a minority of cases to follow documentation requirements, including over conflicts of interest; and failure to consider sufficiently use of competition in direct solicitations. These failures, combined with prioritising PPE leads from government insiders, resulted in accusations of cronyism, creating widespread distrust. Problems seem to have been exaggerated for political reasons: the High Court rejected allegations of deliberate non-compliance with information obligations and criticised the Good Law Project for overstating its case (and also the Government for not acknowledging earlier the widespread nature of the violations). It is also notable that investigations have so far found no actual bias, corruption or other wrongdoing. However, the extent to which

390  Sue Arrowsmith and Luke RA Butler politically connected businesses have had better opportunities because of their connections as such – rather than known reliability – is hard to unravel. Views may also, of course, differ on the extent to which the expediency that can produce reliable outcomes should be allowed to trump abstract notions of equal treatment, even in emergencies. A first general lesson from these experiences, highlighted by the finding of appearance of bias in Public First, is the importance of processes that are both transparent and appear fair, even beyond any value that such processes might have to prevent actual wrongdoing. Not applying such processes in public procurement can alone seriously damage trust, fuelling suspicions regardless of evidence of misconduct or proven connections between adverse outcomes and specific process failures. A second conclusion, of which the Public First litigation serves as a reminder, is that irrespective of actual wrongdoing, risks of this will always exist given the inevitable connections between government and business, justifying procedures to manage conflicts of interest from an outcomes perspective, also. A third general conclusion, in our view, is that overall the package of accountability mechanisms has seemed to work well to expose failings. The outcry experienced, alongside absence of any evidence of actual widespread corruption or fraud despite extensive investigations, indicates not a regulatory system with serious problems, but one functioning well to root out any suspicions, conflicts or abuses, which are inevitable in any system. It is worth reflecting that the outcry over public procurement has often seemed louder than the outcry over the thousands of deaths from other policy failures, and has already been the subject of several investigations, while the Government continues to refuse a wider public inquiry into its handling of the pandemic. A fourth general point is that the pandemic has served as a reminder of the limited role of the regulatory framework for procurement outcomes. It has highlighted the crucial importance of strategic decisions, such as on the creation, maintenance and distribution of stockpiles, sourcing in times of shortage, and building resilient supply chains, that are not susceptible to detailed regulation but depend on sound political and commercial decision-making. In terms of concrete lessons for the regulatory framework for crises and other urgent procurement, the UK has been well placed to reflect and implement such lessons given the timing of the ‘once in a generation’ post-Brexit reform. In this regard, the Green Paper proposes several specific reforms to the direct solicitation rules, as we have seen, with both some additional flexibility – notably a new ‘crisis’ provision – but also the counterbalance of better information transparency and encouragement to competition in direct solicitation procedures, accompanied by parallel provisions on contract modifications. In addition, activity with direct solicitations and modifications will benefit considerably from the proposed ‘transparency by default’ programme, the main benefits of which might perhaps be seen not just in the extension of (already considerable) information transparency requirements, but the long-term impact of more integrated systems and more

Emergency Procurement: The United Kingdom  391 effective use of connected information by both the Government and its stakeholders to analyse performance. Overall, this proposed package offers a more nuanced approach to urgency that we consider will improve the overall balance of interests for both crisis and other urgent procurements. It will also improve the regulation of direct solicitations more generally, which we suggested above might be a result of closer scrutiny of this whole area following the pandemic. However, we suggested also some further tweaks, including improving clarification and consistency for justification requirements for limited tendering and modifications (which we suggested should be quite extensive), and closer attention to advance procurement mechanisms, including removing the 10-day time limit for tendering under DPSs in urgent cases; introducing truly dynamic systems allowing continuous revision of offers; and giving consideration to wider availability of qualification systems within GPA constraints.

392

16 Emergency Procurement and Responses to COVID-19: The Case of the US CHRISTOPHER R YUKINS

I.  General Introduction COVID-19 struck the United States (US) with cruel ferocity, killing hundreds of thousands of people.1 In responding to this crisis, governments at all levels across the US learned important (if painful) lessons in public procurement. This chapter highlights five main points and focuses on the experience of the Federal Government.2 The first is that the Federal Government, based on previous US disasters such as Hurricane Katrina in 2005,3 did well to consolidate and reinforce its established emergency contracting procedures; those were readily available and apparently worked ably in the crisis. Second, the federal contracting regime4 operated effectively – the established provisions and processes (including framework agreements, to use UNCITRAL terminology) were generally adequate to address the crisis. However, new and urgent requirements for medical supplies (in the US normally handled mainly by private suppliers, not public procurement) led to 1 See, eg, Johns Hopkins University, Coronavirus Resource Center, available at coronavirus.jhu.edu. 2 See CR Yukins, ‘United States Procurement and the COVID-19 Pandemic’ (2020) 29 Public Procurement Law Review 220. For an in-depth study of the experience of state procurement officials in the US during the pandemic, see R Handfield, Z Wu, A Patrucco, C Yukins and T Kull, ‘Assessing State PPE Procurement During COVID-19: A Research Report’ (National Association of State Procurement Officials (NASPO), March 2021), available at publicprocurementinternational.com/2021/04/06/ naspo-study-of-state-procurement-in-the-pandemic-key-lessons-learned. 3 See US Congress, ‘Select Bipartisan Committee to Investigate the Preparation for and Response to Hurricane Katrina, Failure of Initiative (Final Report)’ (2006) 329, available at www.hsdl. org/?view&did=460326; CR Yukins and JI Schwartz, Katrina’s Continuing Impact on Procurement – Emergency Procurement Powers in H.R. 3766, 47 Gov. Contractor para 397 (2005), available at ssrn.com/abstract=811265; JI Schwartz, ‘Procurement in Times of Crisis: Lessons from US government procurement in Three Episodes of “Crisis” in the Twenty-First Century’ in S Arrowsmith and R Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (CUP, 2011). 4 See generally, CR Yukins, ‘The US Federal Procurement System: An Introduction’ (2017) Upphandlingsrattslig Tidskrift 69, available at ssrn.com/abstract=3063559.

394  Christopher R Yukins serious difficulties. The third lesson arose at the boundaries of federal and state sovereignty: there, the legal regime which the Federal Government used to ensure security of supply in one of the first truly national natural catastrophes did not work well, in part because the Federal Government arguably abused its power in preempting the states’ prerogative to protect their citizens’ health and welfare. Fourth, Congress’s efforts to shift federal agencies’ contracting resources to restore the economy and protect public health did poorly, perhaps because Congress left it to individual agencies to distribute their funds to contractors hard-hit by the pandemic. Fifth and finally, the protectionist measures that the Trump administration announced in response to the pandemic will help frame future discussions – after the pandemic – on how governments should respond to risk in a global supply chain.

II.  Introduction to the US Procurement System and Regulatory Framework Public procurement law in the US is actually made up of thousands of different bodies of law, at the federal, tribal, state and local levels, most of which are at best only loosely coordinated. The most prominent procurement law regime is that of the Federal Government; the Federal Government spends approximately US $500 billion every year on procurement, and the roots of its procurement laws – which run to many thousands of pages – can be traced back to the eighteenth century.5 The lion’s share of the federal procurement budget is consumed by the US military, which spent US $381 billion on procurement in the 2019 fiscal year, of a total federal procurement expenditure of US $586 billion.6 The entire federal procurement regime is overseen by the Office of Federal Procurement Policy (OFPP), which rests within the Office of Management & Budget (OMB) in the Executive Office of the President (the White House).7 Across the Government as a whole, OMB coordinates management and spending among the agencies. Consistent with OMB’s role, OFPP serves as the coordinator of federal procurement policy and regulations, and the OFPP Administrator chairs the Federal Acquisition Regulatory Council which produces the governing Federal Acquisition Regulation (FAR).8

5 See, eg, JF Nagle, A History of Government Contracting, 2nd edn (George Washington University, 1999). 6 See, eg, US Government Accountability Office, ‘A Snapshot: Government-Wide Contracting – A 2019 Update’ (2019), available at blog.gao.gov/2020/05/26/a-snapshot-of-government-wide-contractingfor-fy-2019-infographic. 7 See, eg, Office of the Federal Register, National Archives and Records Administration, and US Government Publishing Office (GPO), ‘The United States Government Manual’, available at www.usgovernmentmanual.gov. 8 See, eg, ‘Federal Acquisition Regulatory Council’, available at www.acquisition.gov/far-council.

Emergency Procurement: The US  395 In contrast to the very mature federal regime, procurement at the state and local levels in the US tends to be less well-developed and transparent. State governments (which have sovereign authority over their procurement systems, under the US Constitution) and local governments have their own procurement laws, which may share common features (many state and local governments, for example, have adopted elements of the American Bar Association’s Model Procurement Code9), but which are not necessarily uniform.10 The Federal Government, through its grant-making authority, does impose some measure of ‘vertical’ uniformity through state and local procurement systems because the Federal Government demands that state and local governments adhere to certain minimum procurement requirements (which echo the Federal Government’s own rules) when spending federal grant funds.11 Beyond that, however, the procurement laws across the US are strikingly disparate. In principle, the many free trade agreements that the US and its sub-central entities (primarily the states) have entered into could lend some uniformity to procurement laws at federal and state levels in the US.12 In practice, however, those trade agreements have had little impact in shaping procurement law across the US. The most prominent trade agreement, the World Trade Organization’s Agreement on Government Procurement (GPA), has been joined by only 37 states in addition to the Federal Government,13 and though the GPA’s national treatment obligations are honoured in the main by the Federal Government,14 the GPA has done little to reshape procurement laws at the state or federal levels. Nor have the regional and bilateral trade agreements, including the recently signed US-MexicoCanada (USMCA) agreement, reshaped US procurement; as with the GPA, trade agreements in general are difficult to enforce by private vendors through bid challenges,15 and the federal and state governments have little stomach for conforming to trade agreements that seem obscure and unimportant to many procurement officials, in no small part because so little of what the US purchases

9 American Bar Association, ‘Model Procurement Code’, available at www.americanbar.org/groups/ public_contract_law/committees/model. 10 See, eg, DM Conway, ‘State and Local Government Procurement’ (2012) American Bar Association, available at papers.ssrn.com/sol3/papers.cfm?abstract_id=2080914. 11 See US Office of Management and Budget, ‘Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards’ (Grants, 26 December 2014) [‘Uniform Guidance’] § 200.317 et seq, available at www.grants.gov/learn-grants/grant-policies/omb-uniform-guidance2014.html. 12 See, eg, ‘Government Procurement’ (Office of the US Trade Representative), available at ustr.gov/ issue-areas/government-procurement. 13 WTO, ‘Revised GPA: United States’ Annex 2, available at www.wto.org/english/tratop_e/gproc_e/ gp_app_agree_e.htm#revisedGPA. 14 See 48 Code of Federal Regulations sub-s 25.4. 15 See, eg, CR Yukins, ‘The Trump Administration’s Policy Options in International Procurement’ (2016) West Government Contracts Year In Review Conference Sess 2-I (February 2017), available at papers.ssrn.com/ abstract=2925953 (discussing obstacles to Danish vendors’ efforts to enforce bilateral agreement by which US agreed to afford procurement award preference at Greenland base).

396  Christopher R Yukins is actually bought from foreign vendors.16 As a result, although numerous, the US trade agreements touching on procurement have not brought uniformity or order to procurement laws across the US. Amidst this hodgepodge of US procurement laws, the Federal Government’s laws are certainly the most prominent. Bid challenges involving contract formations are heard in the Government Accountability Office and the US Court of Federal Claims,17 and the latter court hears post-award disputes under the Contract Disputes Act, as do the Civilian and Armed Services Boards of Contract Appeals.18 The statutes that govern the federal procurement system are generally implemented through regulations. Statutory changes are often effected by Congress through the annual National Defense Authorization Act; every year, Title VIII of that legislation serves as the primary vehicle for federal procurement reform.19 After a legislative reform becomes law, the Defence Acquisition Regulations Council (the DAR Council) and the Civilian Agency Acquisition Council (the CAA Council, or CAAC), with oversight by the Office of Federal Procurement Policy and input from stakeholders, will typically publish implementing rules in the FAR.20 Of the thousands of provisions and clauses which govern federal procurement, three sets of regulations were immediately relevant to the COVID-19 crisis. The first were the provisions gathered in Part 18 of the FAR, which relate to emergency procurement. The second were the standard clauses which allocate risks and responsibilities in the event of natural disaster, which are included with other standard clauses in FAR Part 52. The third set of regulations and guidance includes the executive orders and regulations used to implement the Defence Production Act, which (among other things) gives the US president authority to control production and distribution of essential supplies in an emergency.21 In part because an additional initiative reviewed below, the move to provide financial support to contractors under Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, was rushed and without precedent, at the time of writing no regulations had been published to implement Section 3610. Various agencies and the Office of Management of Budget (in the White House) have published guidance documents,22 which are discussed below. 16 US Government Accountability Office, ‘Buy American Act: Actions Needed to Improve Exception and Waiver Reporting and Selected Agency Guidance’ (GAO-19-17, December 2018) 14, available at www.gao.gov/assets/700/696086.pdf. 17 See, eg, J Cibinic, Jr, RC Nash, Jr and CR Yukins, Formation of Government Contracts, 4th edn (CCH, 2011) ch 12. 18 See, eg, J Cibinic, Jr, RC Nash, Jr and JF Nagle, Administration of Government Contracts, 5th edn (CCH 2016) ch 13. 19 See, eg, Congressional Research Service, ‘Defense Primer: Navigating the NDAA’ (15 January 2021), available at crsreports.congress.gov/product/pdf/IF/IF10516. 20 See FAR 2.101-1 (US). 21 See Federal Emergency Management Agency (FEMA) ‘Defense Production Act’ (23 November 2020), available at www.fema.gov/disasters/defense-production-act. 22 Guidance under Section 3610 is gathered at a website maintained by GSA, ‘Coronavirus Acquisition-Related Information and Resources’, available at www.acquisition.gov/coronavirus.

Emergency Procurement: The US  397

III.  Procurement of New Requirements A.  Emergency Procurement Provisions The US federal regulations regarding special emergency procurement authorities, which are referenced collectively in FAR Part 18, were catalogued in an effort to make it easier for contracting officials to respond to catastrophes.23 FAR Part 18 did not create new contracting authorities, but instead gathered those authorities in one part of the FAR.24 The authorities that have proven most critical in response to the COVID-19 pandemic are discussed here. FAR Subpart 18.1 gathers together various provisions and authorities that allow for more flexible procurement methods even if there is no formally declared emergency. These commonly used contracting flexibilities are an important part of disaster preparedness in the US Government. Contracting officials are, for example, allowed to enter into contracts even when the awardee vendors are not yet registered on the System for Award Management (the central federal repository for information on contractor qualification),25 and officials may make awards without normal transparency or competition when there are exigent circumstances.26 Multi-agency catalogue contracts – commonly known as government-wide ‘indefinite-delivery/indefinite-quantity’ (IDIQ) contracts in the US federal system and as ‘framework’ agreements internationally27 – are readily available for emergency purchases.28 These standing IDIQ contracts are analogous to the ‘closed’ framework agreements contemplated by Arts 58–59 of the UNCITRAL Model Law on Public Procurement.29 Contracting officials may also use other standing contracts from other federal agencies,30 including the ‘Multiple Award Schedule’ contracts sponsored by the General Services Administration (GSA),31 which would be termed ‘open’ framework agreements (because new vendors may always join) under Arts 60–61 of the UNCITRAL Model Law. Important socioeconomic requirements, such as those calling for purchases of items made by

23 Under then-Administrator of the Office of Federal Procurement Policy (OFPP) Daniel Gordon, the OFPP published an ‘Emergency Acquisitions Guide’ (January 2011), available at www.whitehouse. gov/sites/whitehouse.gov/files/omb/assets/procurement_guides/emergency_acquisitions_guide. pdf, which recommends management measures to prepare for emergency acquisitions. The guide is referenced at FAR 18.205(b). 24 72 Fed Reg 46342 (17 August 2007). 25 FAR 18.102. The System for Award Management is available at www.sam.gov. 26 FAR 18.103–18.104. 27 See, eg, GL Albano and C Nicholas, The Law and Economics of Framework Agreements (CUP, 2016); and see ch 2 of this volume. 28 FAR 18.105. See generally CR Yukins, ‘Are IDIQs Inefficient? Sharing Lessons with European Framework Contracting’ (2008) 37 Public Contract Law Journal 545. 29 See ch 2. 30 FAR 18.113. 31 GSA, ‘GSA Schedules’, available at www.gsa.gov/buying-selling/purchasing-programs/gsa-schedules.

398  Christopher R Yukins federal prisoners or by persons with disabilities, may be ignored under exigent circumstances32 and agencies may bypass previously established special qualification requirements.33 While normally federal procurement rules require agencies to maximise competition (even when open competition is not used),34 under exigent circumstances (circumstances in which delay in the award would result ‘in serious injury, financial or other, to the Government’) agencies may purchase directly from a single supplier without competition (referred to in the US as ‘solesource’, rather than ‘single-source’ as is the general terminology of this book) up to the ‘simplified acquisition threshold’ (US $250,00035 and up to US $7.5 million for commercial items).36 Procurements with the field of bidders sharply restricted (for reasons such as national security, or the need to resort to an original supplier), called ‘other than full and open’ competition, may always be used for contracts of any size. However, those procurements require more justification and transparency, and carry the presumption of using multiple sources, if possible37 – a presumption against single-source procurement. Contracts under special socioeconomic programs (such as those for women, service-disabled veterans and socially disadvantaged groups) were also available for use on a sole-source basis.38 Under the pandemic’s exigent circumstances, contracting officials could issue oral solicitations39 to initiate competitive negotiations,40 if delay would be to ‘the detriment of the Government’. In the US federal system, competitive negotiations are by far the dominant competitive method of procurement. Competitive negotiations typically launch with a solicitation (a request for proposals) and offerors will present technical and price proposals promising best value to meet typically ambitious technical goals. Awards under competitive negotiations are almost always inherently subjective, but – because of their flexibility – they allow the US Government to identify and procure cutting-edge technologies. During the pandemic, because the Government was looking to new suppliers and new technologies, it was even more important that contracting officials were able to rely

32 FAR 18.106–18.107. 33 FAR 18.108. 34 FAR 7.102(a)(2) (policy to maximise competition). 35 FAR 2.101 (definition of simplified acquisition threshold). 36 FAR 13.106-1 (reduced competition for procurements under the simplified acquisition threshold); FAR 13.001 (simplified acquisition threshold for commercial items); FAR 2.101 (definition of commercial items). 37 See FAR 6.301(d). 38 FAR 18.114–18.117. 39 FAR 18.111 (citing FAR 15.203(f) (discussing use of oral proposals). 40 Multilateral, highly structured competitive negotiations under FAR pt 15 (a highly detailed set of procedural requirements, buttressed by agency-specific rules and guidance) dominate the federal system; see Yukins, ‘The US Federal Procurement System’ (2017) 81-82, and are perhaps most analogous to ‘competitive procedures with negotiations’ and ‘competitive dialogues’ under Arts 29 and 30, respectively, of the EU Procurement Directive, 2014/24/EU.

Emergency Procurement: The US  399 upon the flexibilities and strengths of competitive negotiations. While oral requests for proposals to initiate competitive negotiations are very rare in practice, the fact that oral solicitations could be used was emblematic of the Government’s need to wed exigency with well-developed procurement techniques, such as competitive negotiations, which open the door to potentially life-saving solutions. During the time of emergency, contracting officials could also enter into ‘letter contracts’ (simple agreements, rapidly concluded, which defer ‘definitisation’ of terms and conditions until a later time).41 To meet contractors’ pressing economic needs in a time of crisis, agencies also could waive their rights to set-off claims against contractors that assigned contract proceeds to financing institutions42 and agencies could make direct payments bypassing the Federal government normal electronic funds transfer (EFT) system.43 FAR Part 18.2 gathers together special procurement authorities that could be used when, as occurred on 13 March 2020, the president declares a national emergency44 (which was declared with retrospective effect as from 1 March 202045). The declaration of an emergency is a critical step in the US, both to enable procurement flexibilities (discussed below) and even more importantly, to trigger other legal authorities for response and recovery.46 In this case, the declaration of an emergency automatically raised the caps on micro-purchases47 – small, largely unregulated purchases, often made directly by government users – from the normal US $10,000 to US $20,000 generally. GSA on 26 June 2020 also awarded contracts which would allow federal users to make micro-purchases directly from commercial platforms (including Amazon)48 and by mid-October 2020 those platforms were available to participating agencies.49 The declaration of an emergency

41 FAR 18.112. 42 FAR 18.123. 43 FAR 18.124. 44 President Donald J. Trump, ‘Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak’ (US Embassy Rome, 13 March 2020), available at it.usembassy.gov/proclamation-on-declaring-a-national-emergency-concerning-the-novelcoronavirus-disease-covid-19-outbreak. 45 ibid. 46 See, eg, Congressional Research Service, ‘Congressional Primer on Responding to and Recovering from Major Disasters and Emergencies’ (3 June 2020), available at fas.org/sgp/crs/homesec/R41981. pdf. 47 FAR sub-s 13.2. 48 See, eg, CR Yukins, ‘US Government to Award Billions of Dollars in Contracts to Open Electronic Marketplaces to Government Customers – Though Serious Questions Remain’ (2019) 61 Government Contractor 303, available at ssrn.com/abstract=3471405; CR Yukins, A Young, K Ittig and E Valle, ‘GSA’s Commercial Marketplaces Initiative: Opening Amazon and Other Private Marketplaces to Direct Purchase by Government Users’ (2020) Thomson Reuters Briefing Papers No 20-13, available at ssrn.com/abstract=3773096. 49 GSA, ‘Awarded E-Marketplaces’, available at www.gsa.gov/buying-selling/purchasing-programs/ commercial-platforms/awarded-emarketplaces (noting that the contracts with the commercial platforms (including Amazon) had been modified after award to include the standard contract clause, FAR 52.204-25, which implements the ‘Huawei ban’ discussed below).

400  Christopher R Yukins raised the simplified acquisition threshold (under which much simpler and less transparent competitive procedures may be used) from US $250,000 to US $800,000 for all contracts performed in the US which supported the federal government’s response to the pandemic emergency.50

B.  Ensuring Security of Supply under the Defence Production Act As noted, the Defence Production Act (DPA) authorises the US president and his designates to control production and distribution of essential supplies during an emergency.51 The authorities of the DPA also were used to constrain exports of essential medical supplies during the pandemic52 and to ‘on-shore’ production of essential medicines to be purchased by the US Government.53 President Obama updated the regulatory structure under the DPA in 2012 when he issued Executive Order 13603,54 which recognised the Department of Commerce’s role in shaping industrial priorities under the Defence Priorities and Allocations System, the administrative structure to implement the DPA.55 The Obama Order afforded other agencies, such as the Federal Emergency Management Agency (FEMA), authority to issue their own consistent regulations under the Defence Priorities and Allocations System. FEMA has issued its own implementing regulations under the DPA, which provide that FEMA has authority to issue ‘rated’ orders (orders which must by law be given priority over other orders, commercial or governmental) for essential supplies. The regulations also give FEMA the authority to control distribution of essential supplies during a

50 FAR 2.101. 51 While the Defence Production Act of 1950, Public Law 81-774, originally afforded the US president extraordinary authorities to control production and distribution only as ‘appropriate to promote the national defense’, gradually Congress has expanded the president’s authority under the Act to include the power to respond to a national emergency. See, eg, Congressional Research Service, ‘The Defense Production Act of 1950: History, Authorities, and Considerations for Congress’ (2 March 2020) 2, available at crsreports.congress.gov/product/pdf/R/R43767. 52 See, eg, President Donald J Trump, ‘Memorandum to the Secretary of Health and Human Services, the Secretary of Homeland Security, and the Administrator of the Federal Emergency Management Agency on Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use’ (US Embassy Rome, 3 April 2020), available at it.usembassy.gov/memorandum-on-allocating-certainscarce-or-threatened-health-and-medical-resources-to-domestic-use. 53 See Executive Order 13944, Ensuring Essential Medicines, Medical Countermeasure, and Critical Inputs Are Made in the United States (Washington DC, 6 August 2020). 54 President Barack Obama, Executive Order – National Defense Resources Preparedness (Washington DC, 16 March 2012), available at obamawhitehouse.archives.gov/the-press-office/2012/03/16/executiveorder-national-defense-resources-preparedness. 55 ‘15 CFR 700 – Defense Priorities and Allocations System’ (SuDoc Number: AE 2.106/3:15/, 1 January 2012), available at www.govinfo.gov/app/details/CFR-2012-title15-vol2/CFR-2012-title15vol2-part700/summary.

Emergency Procurement: The US  401 time of emergency. By emergency order on 12 March 2020,56 President Trump specifically directed FEMA to assist state, local and tribal governments in accessing stocks of essential emergency supplies and he ultimately gave FEMA first authority to direct supplies under the Defence Production Act.57 In a subsequent executive order, Trump, again acting under the DPA, gave FEMA authority to block the export of essential medical supplies, including personal protective equipment.58

IV.  Modification of Contracts to Respond to the Pandemic (Contract Administration) While the provisions in FAR Part 18 primarily provide guidance for expedited contract formation during an emergency, the standard contract clauses gathered in FAR Part 52 offer different means of easing contract administration when contracting during an emergency.59 For purposes of delays caused by the pandemic, two categories of standard contract clauses were of special relevance.60 The standard clauses in the first category – a codification, really, of traditional principles of force majeure – allow excusable delays (and thus, for example, foreclose default and forgive any liquidated damages for delay) when contract performance is delayed for reasons beyond a contractor’s control.61 A delay may be excusable even if the delay was caused by the Government acting in its sovereign capacity.62

56 See FEMA, ‘President Donald J. Trump Directs FEMA Support Under Emergency Declaration for COVID-19’ (Press Release, HQ-20-017, 2020), available at www.fema.gov/news-release/20200514/ el-presidente-donald-j-trump-dirige-fema-proporcionar-apoyo-bajo-la. 57 See, eg, Z Kanno-Youngs and J Nicas, ‘“Swept Up by FEMA”: Complicated Medical Supply System Sows Confusion’, The New York Times (6 April 2020), available at www.nytimes.com/2020/04/06/us/ politics/coronavirus-fema-medical-supplies.html. 58 President Donald J. Trump, ‘Proclamation on Declaring a National Emergency’ (2020); see K Breuninger and C Wilkie, ‘Trump bans export of coronavirus protection gear, says he’s “not happy with 3M”’, CNBC (3 April 2020), available at www.cnbc.com/2020/04/03/coronavirus-trump-to-banexport-of-protective-gear-after-slamming-3m.html. 59 See, eg, K Daniels, C Holman, K Ittig and T Pettit, ‘Feature Comment: Prepare, Communicate, Document And Segregate – A Government Contractor’s Guide To Addressing Performance Disruptions And Delays Related To COVID-19’ (2020) 62 Government Contractor 74. 60 See generally, JS Gabig, RJR Raleigh and CL Lockwood, ‘A Contractor’s Guide To Government Shutdowns’ (2019) Thomson Reuters/West 19-13 Briefing Papers 1. 61 eg, FAR 52.249-14; see, eg, ‘Coronavirus Pandemic Disrupts Contractors, Agencies, Courts’ (2020) 62 Government Contractor 70. 62 eg, FAR 52.212-4 (excusable delay involving commercial items); FAR 52.249-14(a) (‘Except for defaults of subcontractors at any tier, the Contractor shall not be in default because of any failure to perform this contract under its terms if the failure arises from causes beyond the control and without the fault or negligence of the Contractor. Examples of these causes are (1) acts of God or of the public enemy, (2) acts of the Government in either its sovereign or contractual capacity, … (5) epidemics, (6) quarantine restrictions, … . In each instance, the failure to perform must be beyond the control and without the fault or negligence of the Contractor.’).

402  Christopher R Yukins The second category of clauses allows contractor recovery for compensable delay, when the delay is caused by a direction from the Government, pursuant to an express or constructive stop work order.63 In the event of government-caused delay or disruption, contractors may also be able to recover additional costs under the standard changes clause.64 The Government may argue, however, that its actions that delayed or disrupted work were ‘sovereign acts’, ie acts of public and general applicability, and that thus under the sovereign acts doctrine, recognised in US law, the Government cannot be held liable for the contractor’s additional costs.65 Both contractors and contracting officers were keenly aware of the delay clauses as the pandemic crested in the spring of 2020; the well-established clauses meant that delays caused by delay would be excusable or (if the Government drove the delay) even potentially compensable. As the economic downturn caused by the pandemic deepened, however, it became clearer that additional relief would be needed – contractors would need additional relief to survive the pandemic. To address the need for further economic relief during the pandemic, Congress passed legislation that would have allowed an agency, based on a claim by a contractor, to reimburse the contractors for unpaid leave paid to the contractor’s employees. The question, then, was whether this experiment in fiscal relief would prove successful; initial reports suggest not.66 The initiative has stalled, in part because of its very novelty; without an institutional model, the initiative has been reshaped by agencies’ parochial needs and ultimately may have failed. The initiative was born as Section 3610 of the CARES Act, a multi-trilliondollar legislative package passed by Congress in the early days of pandemic.67 The CARES Act was intended to mitigate the health and economic impacts of the pandemic and Section 3610 was specifically intended to ease the economic impact of the pandemic on federal contractors. Section 3610 allowed agencies to modify existing contracts to compensate contractors for leave paid to their employees during the pandemic; in essence, while contracts are normally modified during an epidemic to forgive delays caused by the disease, in this case contracts would be modified (or funds would be moved between contracts) to pay for delays caused by the disease.

63 eg, FAR 52.242-15, Stop Work Order. 64 eg, FAR 52.243-4, Changes. 65 See Horowitz v. United States, 267 US 458, 461 (1925) (the ‘United States when sued as a contractor cannot be held liable for an obstruction to the performance of the particular contract resulting from its public and general acts as a sovereign’). 66 See, eg, US Government Accountability Office, ‘COVID-19 Contracting: Observations on Contractor Paid Leave Reimbursement Guidance and Use’ (September 2020), available at www.gao. gov/assets/710/709128.pdf. 67 See, eg, C Yukins and K Ittig, ‘Feature Comment: Maximizing Recovery: Contractor Reimbursement For COVID-19 Paid Leave Under § 3610 Of The CARES Act’ (2020) 62 The Government Contractor para 156, available at publicprocurementinternational.com/wp-content/uploads/2020/07/Yukins-IttigSection-3610-TGC62-22-156.pdf.

Emergency Procurement: The US  403 While the congressional sponsors of the CARES Act framed it as a broader effort to preserve health and stimulate the economy during the pandemic,68 in its implementation Section 3610 came to be focused on a much narrower problem: contractors’ economic losses in the pandemic due to idled labour. This was due, in part, to how Section 3610 was implemented: agencies issued a string of guiding directions,69 which often conflicted and yet ultimately were all accommodated by the Office Management and Budget (OMB) in the White House.70 Rather than providing superseding guidance that could have encouraged agencies to use Section 3610 creatively to address the much broader economic and health effects of the pandemic, the OMB guidance largely deferred to the agencies’ guidance.71 This meant, in effect, deferring to agencies’ parochial concerns – concerns over preserving the workforce in the intelligence community, for example, or over ensuring the economic health of the ‘industrial base’ at the Defence Department – and ignoring the broader social and economic goals of the CARES Act. To make an initiative of this type work – to shift available contract funds to mitigate a national emergency – similar relief efforts will, in future, need to ensure that Congress’s intent to sustain the broader economy, not just contractors, is made more clear, and the Executive Branch will need to make a sustained effort to shape relief in ways that look beyond agencies’ own concerns.

V.  Supply Chain Risks Peculiar to Public Procurement During the most difficult days of the pandemic, the federal Government’s established contracting methods generally functioned well, as they accelerated to meet the pandemic’s rushed pace. As is discussed in detail below, however, cracks emerged in nationwide emergency procurement, as governments at all levels – federal, state, tribal and local – competed fiercely for emergency supplies, the national stockpile of critical supplies largely failed, and the state and federal responses were thrown into chaos because, while the federal Government had ultimate legal authority over the supplies, the states were left with political and constitutional accountability for the health and survival of their own citizens. There were no public indications that the US $500 billion federal procurement system strained or collapsed during the pandemic’s early stages. While a number of agencies reminded contracting officials of special authorities for

68 See 166 Cong Rec 2021 et seq (25 March 2020). 69 eg, ‘Agencies Issue Guidance On Implementing CARES Act Contractor Sick Leave’ (2020) 62 The Government Contractor para 121. 70 See Yukins and Ittig, ‘Feature Comment’ (2020). 71 US Office of Management and Budget, ‘Preserving the Resilience of the Federal Contracting Base in the Fight Against the Coronavirus Disease 2019 (COVID-19)’ (Memorandum M-20-22, Washington DC, 17 April 2020), available at www.whitehouse.gov/wp-content/uploads/2020/04/M-20-22.pdf.

404  Christopher R Yukins emergency procurement in a crisis,72 the existing structure and authorities appeared to work well. Of special note, the Government’s careful allocation of risks under principles of force majeure – the contractual provision, for example, which explicitly states that contractors will not be liable for delay caused by an epidemic73 – helped smooth matters, even during a relatively chaotic time. Neither bid challenges nor the inspector general community74 revealed widespread chaos in the federal contracting process as a result of the COVID-19 crisis.75 The federal procurement system was conscious of, but certainly not undone by, the spreading pandemic, despite chaos that emerged in other quarters, driven in part by a bitterly contentious national election. Where chaos emerged was at the state and local levels, as agencies scrambled to locate sufficient ventilators, PPE and other critical medical supplies.76 Some measure of disruption was inevitable, given the scope and ferocity of the pandemic. What was not foreseen, however, was how conflicting claims of authority within the governance structure – the federal Government’s claim of ultimate a­ uthority to control the supply chain, and the states’ competing sovereign obligation to provide critical equipment – would up-end the COVID-19 relief effort and deepen divisions in an already polarised nation. 72 See, eg, Office of the Under Secretary of Defense, US Department of Defense, ‘Emergency Acquisition Flexibilities – Disaster or Emergency Assistance Activities’ (Washington DC, 6 March 2020), available at www.acq.osd.mil/dpap/policy/policyvault/Emergency_Acquisition_Procedures_ DPC.pdf. 73 FAR 52.249-14. 74 See Pandemic Response Accountability Committee, ‘Top Challenges Facing Federal Agencies: COVID-19 Emergency Relief and Response Efforts, as Reported by Offices of Inspector General Across Government’ (June 2020) (noting need for increased efforts to oversee massive COVID-19 spending, but not noting any specific issues with emergency procurement procedures), available at www.oversight.gov/ report/prac/top-challenges-facing-federal-agencies-covid-19-emergency-relief-and-response-efforts. 75 It should be stressed that this review focuses on the first period of the pandemic, before vaccines were approved in the US. As the discussion above reflects, the state governments – not the Federal Government – had chief responsibility for emergency procurements of medical equipment during the early stages of the pandemic. See, eg, K Eban, ‘How Jared Kushner’s Secret Testing Plan “Went Poof Into Thin Air”’, Vanity Fair (30 July 2020), available at www.vanityfair.com/news/2020/07/how-jaredkushners-secret-testing-plan-went-poof-into-thin-air (‘Six months into the pandemic, the United States continues to suffer the worst outbreak of COVID-19 in the developed world. Considerable blame belongs to a federal response that offloaded responsibility for the crucial task of testing to the states.’) The US entered a new phase as vaccines were first released for distribution in early December 2020. See generally GW Law, ‘Delivering the Vaccine’ (10 December 2020), available at publicprocurementinternational.com/webinar-delivering-the-vaccine (public resources on vaccine distribution plans in the US). During this next phase of the pandemic, the Federal Government took responsibility for purchasing the vaccines and distributing them to the states, which would in turn distribute them to individuals. Almost immediately, a different set of issues with production and distribution of the vaccines began to emerge – though now, those issues were tied to the Federal Government, which was the central figure in the vaccine supply chain. See, eg, E Lawler, ‘Federal “Corruption or Ineptitude” Delaying COVID-19 Vaccines, Says [Michigan] Gov[ernor] Whitmer’, MLive.com (Michigan, 18 December 2020), available at www.mlive.com/coronavirus/2020/12/federal-corruption-or-ineptitude-delaying-covid19-vaccines-says-gov-whitmer.html. 76 eg, M Brown, ‘Illinois adjusts on the fly to meet medical supply needs in a coronavirus “Wild West”’ Chicago Sun-Times (3 April 2020), available at chicago.suntimes.com/coronavirus/2020/4/3/21207488/ coronavirus-illinois-medical-supplies-wild-west.

Emergency Procurement: The US  405 For public procurement in the US, the first and most obvious impact of the pandemic was a surge in demand for protective equipment, medications and medical equipment such as ventilators. This was part of a worldwide shortage in the pandemic; for example, in early March 2020, as the pandemic gained force, the World Health Organization (WHO) called for a global increase of 40 per cent in PPE manufacturing to meet the new surge in demand.77 One important aspect of this surge in demand was a shift in the nature of the perceived demand. In normal times, most healthcare in the US is provided through a private healthcare system; demand is generated within that private system and private suppliers (say, of critical medical equipment) meet that demand.78 During the pandemic, however, all that shifted, and previously ‘private’ goods became (in economic terms) ‘public goods’ – goods that, in popular perception, every person has a right to access, like water and air or a public highway. (Economists define ‘public goods’ more technically,79 but for the general populace the common understanding that everyone should have access to ‘public goods’ is a powerful organising principle.) The most pronounced transformation from private to public probably came in the COVID-19 vaccines themselves. In an extraordinary shift from a generally private system of healthcare, the federal Government paid outright for all the vaccines and their distribution.80 The shift to place more responsibility for health in the public sector was not surprising – this was, after all, a case of public officials responding to a public health crisis in the public at large. This shift to place responsibility for healthcare in the public sector was noticeable in the US precisely because (unlike many industrialised nations) US healthcare is normally handled by the private sector. This abrupt shift of responsibility, to burden the public sector with a much broader role in healthcare procurement, exposed weaknesses in the public supply chain and its established processes – weaknesses that strained an already chaotic supply system.

77 WHO, ‘Shortage of Personal Protective Equipment Endangering Health Workers Worldwide’ (Geneva, 3 March 2020), available at www.who.int/news/item/03-03-2020-shortage-of-personalprotective-equipment-endangering-health-workers-worldwide. 78 For detailed data on healthcare spending in the US (including historical data), see US Centers for Medicare and Medicaid Services (CMS), ‘National Health Expenditure Accounts’, available at www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealth ExpendData/NationalHealthAccountsHistorical. 79 See, eg, OpenStax, ‘Principles of Economics’ s 13.3, available at openstax.org/books/principleseconomics-2e/pages/13-3-public-goods (‘public goods’ are, strictly speaking, goods that are ‘nonexcludable’ (it is impossible to exclude anyone from using the goods) and ‘nonrivalrous’ (one person’s use does not exclude another’s). 80 S Kliff, ‘The Vaccines Are Supposed to Be Free. Surprise Bills Could Happen Anyway’ The New York Times (17 December 2020), available at www.nytimes.com/2020/12/17/upshot/vaccines-surprisebills.html. (‘When Americans receive a coronavirus vaccine, federal rules say they shouldn’t have to pay anything out of pocket. Congress passed legislation this spring that bars insurers from applying any cost sharing, such as a co-payment or deductible. It layered on additional protections barring pharmacies, doctors and hospitals from billing patients.’)

406  Christopher R Yukins Vigorous competition across the largest possible range of vendors (a staple of US federal procurement under the Competition Contracting Act81), for example, created a new set of problems, for the Government’s outreach to multiple vendors sometimes created ‘ghost demand’: in a chaotic, non-transparent environment, the market sometimes responded to the Government’s multiple solicitations by assuming that the Government planned to purchase from all the vendors contacted and this inaccurately perceived government demand sometimes inflated market prices even more than might otherwise have been the case.82 Traditional government payment systems, which almost always pay in arrears in the federal procurement system, were also outmatched in the pandemic, for in a volatile market vendors could not bear the payment risks caused by delay. So, too, were traditional delivery processes overwhelmed: while US agencies normally expect to take on risk at the government destination (reflected in the standard ‘FOB [Free on Board] destination’ contract term83), during the pandemic vendors demanded that agencies take delivery at the point of manufacture, often abroad – creating a new delivery risk for government agencies. The public supply chain thus experienced new and extreme challenges, many of them unique by-products of the pandemic. However, probably the most controversial disruption in the public supply chain came not from procurement itself, but from politics: from an assertion of statutory power by the Trump administration that, in effect, divorced responsibility for supply from authority to control that supply chain. Although the Trump administration failed to implement a prior plan for a pandemic-type emergency (the ‘Crimson Contagion’ plan)84 and also reportedly shelved another response plan developed early in the pandemic by Trump’s son-in-law (and senior advisor) Jared Kushner and his team,85 the Trump administration ultimately did use the Defence Production Act to control both production and distribution of essential supplies. The Trump administration’s use of the Defence Production Act ironically came after many calls from state governments (and others) for the federal government to use the Act to boost private sector production of essential supplies.86 As 81 See generally K Manuel, ‘Congressional Research Service, Competition in Federal Contracting: An Overview of the Legal Requirements’ (30 June 2011), available at fas.org/sgp/crs/misc/R40516.pdf. 82 In a series of webinars procurement professionals discussed their experiences during the pandemic found archived at Public Procurement International, available at www.publicprocurementinternational.com. 83 See, eg, FAR 47.304-1. 84 US Department of Health and Human Services, ‘Crimson Contagion 2019 Functional Exercise Key Findings’ (coordinating draft), available at int.nyt.com/data/documenthelper/6824-2019-10key-findings-and-after/05bd797500ea55be0724/optimized/full.pdf#page=1; DE Sanger, E Lipton, E Sullivan and M Crowley, ‘Before Virus Outbreak, a Cascade of Warnings Went Unheeded’ The New York Times (19 March 2020), available at www.nytimes.com/2020/03/19/us/politics/trumpcoronavirus-outbreak.html. 85 Eban, ‘How Jared Kushner’s Secret Testing Plan ‘Went Poof Into Thin Air’ (2020). 86 A Kavi, ‘Virus Surge Brings Calls for Trump to Invoke Defense Production Act’ The New York Times (22 July 2020), available at www.nytimes.com/2020/07/22/us/politics/coronavirus-defenseproduction-act.html. (‘Experts say the law could be more actively used to secure medical supplies, but the Trump administration’s reluctance has left states and medical providers in “chaos.”’)

Emergency Procurement: The US  407 noted, the Defence Production Act allows the President (or agency officials he designates) to order private firms to prioritise production of urgently needed goods. The Trump administration went further, however, and also controlled distribution of essential supplies, prioritising distribution to those parts of the country that the Federal Emergency Management Agency (FEMA) (and other designated agencies) concluded needed the supplies the most.87 There were several critical problems with the Federal Government’s decision to control the distribution of essential supplies under the Defence Production Act. First, as a practical matter this meant that the Federal Government sometimes diverted supplies that state governments had worked hard to source for their own emergency needs.88 This was extremely politically unpopular with the states, especially because the US constitutional structure, grounded in federalism, leaves the states with first responsibility for their citizens’ health and welfare.89 In effect the states bore responsibility for public health in the pandemic, while the Federal Government had the power to control the supplies critically needed to ensure public health – a dangerous dichotomy. Worse yet, it emerged – first by President Trump’s actions, then through a published report in Vanity Fair magazine – that Trump had made a tactical decision not to take first responsibility for the public health response; he preferred to leave that potentially overwhelming responsibility with the state governors, especially since (at least in its early days) the pandemic was concentrated in Democratically controlled states.90 Even more grievous, it also emerged that supplies were sometimes diverted to those who were able to reach President Trump personally to plead for supplies,91 adding a sense of unfairness and favouritism, coloured by Trump’s chequered reputation. 87 See, eg, Federal Emergency Management Agency, ‘Applying the Defense Production Act’ (Press Release No HQ-20-099, Washington DC, 13 April 2020), available at www.fema.gov/newsrelease/20200726/applying-defense-production-act. 88 eg, D Falzone, ‘“Like a Bully at the Lunchroom”: How the Federal Government Took Control of the PPE Pipeline’ Vanity Fair (6 May 2020), available at www.vanityfair.com/news/2020/05/howthe-federal-government-took-control-of-the-ppe-pipeline. (‘FEMA denies seizing shipments of masks and ventilators, but hospital workers tell a different story, and one medical-equipment supplier says the agency – “those rat bastards” – along with the FBI, has taken over his entire operation.’); K Masters, ‘Virginia’s senators call on federal government to explain seizures of medical supplies’, Virginia Mercury (10 April 2020), available at www.nbc12.com/2020/04/10/virginias-senators-callfederal-government-explain-seizures-medical-supplies; J Rose, ‘A “War” for Medical Supplies: States Say FEMA Wins by Poaching Orders’, National Public Radio (15 April 2020), available at www.npr. org/2020/04/15/835308133/governors-say-fema-is-outbidding-redirecting-or-poaching-their-medicalsupply-or?t=1614511197957. 89 eg, American Bar Association, ‘Two Centuries of Law Guide Legal Approach to Modern Pandemic’ (April 2020), available at www.americanbar.org/news/abanews/publications/youraba/2020/youraba-april-2020/law-guides-legal-approach-to-pandemic; National Conference of State Legislatures, ‘Responsibilities in a Public Health Emergency’ (29 October 2014), available at www.ncsl.org/research/ health/public-health-chart.aspx. 90 Eban (n 75). 91 eg, Z Kanno-Youngs and J Nicas, ‘“Swept Up by FEMA”: Complicated Medical Supply System Sows Confusion’ (6 April 2020). (‘Adding to the disarray is the White House’s ad hoc system of disaster response in which the right call to Mr. Trump can result in one county getting priority over another.’)

408  Christopher R Yukins All of this would seem an isolated, irrelevant tale of one nation’s politics were it not for the important lessons it carries, both for the US procurement system and abroad. First, the US experience points up the danger of dividing responsibility from authority in the supply chain; because the states bore ultimate responsibility for successful procurement of critical health supplies in the pandemic, it was extremely disruptive (both politically and practically) to assign ultimate authority over that supply chain to the president. Second, and relatedly, the US experience shows that while public procurement bears the same risks as any other supply chain,92 a public supply chain is uniquely vulnerable to political risks – to the risk that the vicissitudes of politics will disrupt the supply chain. That special political risk in a public supply chain was highlighted later in the pandemic, when a separate initiative – the ‘Huawei ban’ – apparently stalled the Government’s ability to use commercial sources to mitigate supply risk. On 26 June 2020, the US General Services Administration issued ‘no-cost’ contracts to Amazon and other commercial platforms; under those contracts, federal users are allowed to make ‘micro-purchases’ (generally up to US $10,000) directly from the commercial platforms.93 Although federal customers could have used these commercial platforms to fill supply gaps in the pandemic, the platforms’ launch was temporarily stalled, perhaps because of the Huawei ban, which was issued after the commercial platform contracts were awarded.94 Under the ‘Huawei ban’ rule, suppliers may not use telecommunications products from Huawei and certain other Chinese companies,95 both because of the espionage risk that those products may pose (the US government alleges that Huawei and the other companies could steal secrets in transit during telecommunications, and pass those secrets back to the Chinese government) and because challenging Huawei is part of a broader US strategy to confront China’s growing economic might.96 The ‘Huawei ban’ may well have been the source of the delay in opening the commercial platforms, to the detriment of users who needed access to the COVID-19 supplies

92 See, eg, T Kull and S Talluri, ‘A Supply Risk Reduction Model Using Integrated Multicriteria Decision Making’ (2008) 55 IEEE Transactions on Engineering Management 409, available at www. researchgate.net/publication/3077124_A_Supply_Risk_Reduction_Model_Using_Integrated_ Multicriteria_Decision_Making. 93 See, eg, C Yukins, R Handfield, T Kull and A Patrucco, ‘Feature Comments: Emerging from the Pandemic: US Government Poised to Award “Commercial Platforms” Contracts’ (24 June 2020) 62 The Government Contractor para 172; GSA, ‘Commercial Platforms’, available at www.gsa.gov/ buying-selling/purchasing-programs/commercial-platforms. 94 85 Fed Reg 42665 (14 July 2020), available at www.gsa.gov/buying-selling/purchasing-programs/ commercial-platforms/awarded-emarketplaces. On the website announcing that the commercial platforms are now available to federal purchasers, GSA specially noted that the commercial platform contracts have been amended to accommodate the ‘Huawei ban’ under s 889 of the National Defence Authorization Act for Fiscal Year 2019. 95 eg, ‘FAR Interim Final Rule Implements Huawei, ZTE Contracting Ban’ (2020) 62 The Government Contractor para 203. 96 eg, C Yukins, ‘GW Law Webinar – A Tumultuous Year for Trade’ (Public Procurement International, September 2020), available at publicprocurementinternational.com/2020/08/16/gwlaw-webinar-a-tumultuous-year-for-trade.

Emergency Procurement: The US  409 available on those platforms. The Huawei ban – a unique geopolitical and economic initiative – in effect introduced another layer of risk to the US Government’s supply chain and brought attention to the special pressures on a public supply chain. Finally, these political risks point up a gap in the scholarship itself, as there has been little serious study of supply chain risk in the US public procurement law community97 (there is, of course, a robust literature on private supply chain risk management, which overlapped into the public sector when during the pandemic (as noted above) the line between public and private supply chains became blurred98). By ignoring supply chain risks (a staple of private supply chain study), public procurement law has, as a discipline, largely overlooked the legal and institutional means available to check those risks, including (especially) the special political risks that a public supply chain presents. By highlighting solutions to the potentially catastrophic effects of supply chain risks, including political risks, our discipline could substantially enhance governments’ responses to pandemics and other public emergencies.

VI.  Security of Supply and Contractor Fraud Strong anti-fraud measures, including the stiff penalties available under the federal False Claims Act,99 are a bulwark of integrity in the US system. During the pandemic, the US Government has made clear that it will punish fraud perpetrated by COVID-19 suppliers. The US Government has launched scores of False Claims Act cases involving fraud perpetrated during the pandemic, although the Justice Department’s enforcement efforts have focused not on procurement fraud per se, but rather fraudulent claims for pandemic-related relief.100 The US Government has also launched a parallel – and less s­uccessful – campaign to discourage price-gouging (excessively high pricing) among

97 A rare exception – though not from the US public procurement law community – was a recent piece by Paul Henty, ‘Procuring in a pandemic: cash-flow, contracts, construction, cards and (curtailing) competition’ (2020) 4 Public Procurement Law Review NA156, which analysed supply chain risk in the pandemic. 98 See, eg, DJ Finkenstadt, R Handfield and P Guinto, ‘Why the US Still Has a Severe Shortage of Medical Supplies’ Harvard Business Review (17 September 2020), available at hbr.org/2020/09/whythe-u-s-still-has-a-severe-shortage-of-medical-supplies (assessing causes of failure of the National Strategic Stockpile). 99 US Department of Justice, ‘The False Claims Act: A Primer’, available at www.justice.gov/sites/ default/files/civil/legacy/2011/04/22/C-FRAUDS_FCA_Primer.pdf. 100 See, eg, GB Breen and A Boaz, ‘False Claims Act Enforcement During the COVID-19 Pandemic and Beyond’ (2021) XI National Law Review (28 August 2020), available at www.natlawreview. com/article/false-claims-act-enforcement-during-covid-19-pandemic-and-beyond; R Summers and N Schwellenbach, ‘Lamborghinis, Strip Clubs, Bogus Companies, and Lies: The First 56 Paycheck Protection Program Fraud Cases’ (Project on Government Oversight (POGO), 20 October 2020), available at www.pogo.org/investigation/2020/10/lamborghinis-strip-clubs-bogus-companies-and-lies.

410  Christopher R Yukins COVID-19 suppliers.101 Perhaps, in part, because there is no federal law that outlaws price-gouging (the Government’s enforcement actions have had to rely on the Defence Production Act),102 the price-gouging initiative has flagged, and very few prosecutions have been announced.103 The success and relative failure of the two campaigns highlight the benefits and perils of an anti-fraud campaign during an emergency. With a flood of potentially dangerous supplies, often from unknown suppliers, the US Government appropriately focused its fraud enforcement efforts on the quality of the products delivered. Indeed, focusing on price could raise new dangers, because if a government threatens to punish high prices in a rapidly rising market, suppliers may simply go elsewhere in a global economy – in essence, decreasing security of supply and raising yet another risk in the public supply chain.

VII.  Industrial and Social Objectives, Including Use of Procurement to Advance the Trump Administration’s ‘Buy American’ Agenda Security of supply emerged as a critical issue of industrial and social policy in the pandemic – notably, far more critical than the socioeconomic initiatives that normally play such a large role in the US procurement debate. The issue of security of supply has also played out in the US against the backdrop of the Trump administration’s ‘Buy American’ agenda. That agenda has unfolded in largely predictable ways over the four years of the Trump administration, as the administration has opted for protectionist measures that advance Trump’s ‘economic nationalism’ and play well in his deeply conservative, anti-establishment political base.104 Ironically, the pandemic that deeply wounded the Trump administration also presented the administration with a vibrant opportunity – in the midst of the 2020 presidential campaign – to propose new barriers to international trade, under the banner of security of supply.

101 See US Attorney General William Barr, ‘Memorandum re: Department of Justice COVID-19 Hoarding and Price Gouging Task Force’ (Washington DC, 24 March 2020), available at www.justice. gov/file/1262776/download. 102 US Department of Health and Human Services, ‘Notice of Designation of Scarce Materials or Threatened Materials Subject to COVID-19 Hoarding Prevention Measures Under Executive Order 13910 and Section 102 of the Defense Production Act of 1950’ (25 March 2020), available at www. justice.gov/file/1264276/download. 103 US Department of Justice, ‘Press Release: Georgia businessman charged with hoarding and price gouging face masks in violation of Defense Production Act’ (Georgia, 6 August 2020), available at www. justice.gov/usao-ndga/pr/georgia-businessman-charged-hoarding-and-price-gouging-face-masksviolation-defense. 104 See, eg, CR Yukins, ‘International Procurement Law: Key Developments 2019 – Part I: How the Trump Administration May Reshape International Procurement Markets – Defense and Electronic Marketplaces’ (2020) Government Contracts Year in Review 3.

Emergency Procurement: The US  411 By blaming foreigners for the ravages of the pandemic (derisively calling it the ‘Kung Fu flu’, for example)105 and demanding new barriers to trade to reduce the US’s exposure to an international supply chain for critical supplies, Trump was able to deflect public attention from the apparent failure of the US’s Strategic National Stockpile (SNS). The SNS was intended to provide for the emergency health security of the US,106 by stockpiling and providing essential medical supplies (including pharmaceuticals) in response to natural disasters or manmade attacks.107 In the pandemic, however, the SNS was inadequate to meet US emergency demand108 and its failure may have explained the Trump administration’s aggressive and controversial use of the Defence Production Act (discussed above) to fill supply shortfalls by redirecting critical supplies among the states. Many argued that the Trump administration also failed to put forward a successful national plan to contain the COVID-19 virus (the administration’s indifferent approach to the pandemic may even have contributed to the infection of Trump and members of the Republican leadership in October 2020109), but by beating the drum of economic nationalism, the Trump administration was able to divert attention from its own shortcomings. One of the most notable protectionist measures by the Trump administration was an executive order issued in August 2020, in which Trump called for the US Government to decrease its dependence on foreign suppliers by ‘on-shoring’ the production of critical medical supplies that would be purchased by the Government.110 This ‘on-shoring’ initiative was not the only or even necessarily the best means of decreasing international supply chain risk, for experts warned that ‘on-shoring’ could raise costs and serious practical difficulties.111 Nor was it clear that the Trump administration’s ‘on-shoring’ initiative even took the most expedient path to protectionism. President Trump’s executive order

105 eg, D Nakamura, ‘With “kung flu,” Trump sparks backlash over racist language – and a ­rallying cry for supporters’, Washington Post (24 June 2020), available at www.washingtonpost.com/politics/ with-kung-flu-trump-sparks-backlash-over-racist-language--and-a-rallying-cry-for-supporters/ 2020/06/24/485d151e-b620-11ea-aca5-ebb63d27e1ff_story.html. 106 See, eg, National Academies of Sciences, Engineering, and Medicine, ‘The Nation’s Medical Countermeasure Stockpile: Opportunities to Improve the Efficiency, Effectiveness, and Sustainability of the CDC Strategic National Stockpile: Workshop Summary’ (The National Academies Press 2016) 12, available at doi.org/10.17226/23532. 107 See, eg, US Department of Health and Human Services, ‘Strategic National Stockpile’ (Public Health Emergency), available at www.phe.gov/about/sns/Pages/default.aspx. 108 See, eg, Finkenstadt, Handfield and Guinto, Why the US Still Has a Severe Shortage of Medical Supplies (2020). 109 See, eg, J Mathis, ‘Trump is sick. So is the GOP’, The Week (5 October 2020), available at theweek. com/articles/941678/trump-sick-gop. 110 See Executive Order 13944, Ensuring Essential Medicines, Medical Countermeasure, and Critical Inputs Are Made in the United States (2020). 111 See, eg, A Schrager, ‘“Buy American” Isn’t Always Best: Onshoring all drug manufacturing would make us less resilient’ (11 June 2020), available at www.city-journal.org/buy-american-drug-manufacturing; D Wilson, ‘White House Seeks to ‘Onshore’ Key Drug Manufacturing’ (6 August 2020), available at www.law360.com/articles/1299253/white-house-seeks-to-onshore-key-drug-manufacturing.

412  Christopher R Yukins called (among other things) for the US Trade Representative to renegotiate US coverage under the World Trade Organization (WTO) Government Procurement Agreement (GPA) and other trade agreements, to remove critical medicines from the lists of products that the US has committed to purchase without protectionist discrimination. Revamping US coverage under the trade agreements could take years, however – it is a complicated process112 – and it was not clear why the Trump administration did not simply assert the US’s rights, for example under Article III of the GPA, to take extraordinary measures to protect national security and public health. The Trump administration’s ‘on-shoring’ initiative did, however, help to frame the policy debate in public procurement after the pandemic. To reduce supply chain risk in public procurement, governments will have at least three choices: (a) to stockpile for catastrophe (a potentially fragile strategy which demands accurate forecasts and effective execution); (b) to reinforce international supply chains (more difficult and riskier and politically less popular, but a strategy to leverage a global marketplace); and (c) to shift production ‘on-shore’.

VIII. Reflections The COVID-19 pandemic has placed new strains on the public procurement system in the US. At the federal level – largely outside the immediate health demands of the pandemic – the highly mature public procurement system has worked well, in no small part because the established legal regime was designed to adjust to disaster. At the state level, where the ravages of the pandemic had to be addressed first-hand, public procurement systems struggled, however, partly because the Federal Government was not fully prepared for the pandemic and often responded at cross-purposes with state and local interests, and partly because state governments had to pivot to purchase medical supplies that traditionally had been bought primarily by the private healthcare industry. While this chaos may have resulted in more death and disease in the US, it did yield important lessons for public procurement. The first is that failures in public procurement (as in its private counterpart) can be assessed as a matter of supply chain risk, with additional measures of political risk inherent in a public function. The second is that public procurement’s supply chain risks can be mitigated through a broad range of strategies, spanning from a flexible regulatory regime to forced domestic production – and potentially including new legal and institutional means of containing the political risk endemic to public procurement. To resolve those risks, among other things it is important to ensure that those responsible for the success of a supply chain have authority over the supply chain – not, 112 See, eg, WTO, Revised Agreement on Government Procurement, Art XIX, available at www.wto. org/english/docs_e/legal_e/rev-gpr-94_01_e.htm#articleXIX.

Emergency Procurement: The US  413 as occurred in the US, to allow the national Government (which did not have first responsibility for local public health issues) to pre-empt emergency procurements by state governments (which did have that responsibility, practically, politically and constitutionally). Finally, the pandemic response in the US taught us that a massive public procurement system can be deployed creatively in a crisis, to address fiscal and public health challenges outside the traditional public supply chain. Thus, for example, funds appropriated for procurement can be redirected to provide a fiscal stimulus for struggling contractors, and public procurement can be used to procure and distribute vaccines for hundreds of millions of people, at a remarkable pace. Although the US effort to leverage public procurement for the broader good faltered at times in the pandemic, it did yield important lessons for the future.

414

17 Emergency Procurement and Responses to COVID-19: The Case of Brazil MARÇAL JUSTEN FILHO AND CESAR PEREIRA*

I.  General Introduction The figures on the COVID-19 pandemic in Brazil illustrate its impact. As of the end of March 2021, official data indicated 321,515 reported deaths attributed to COVID-19.1 Exceptional measures to prevent the spread of the virus and fight its consequences started formally as early as February 2020. Law 13.979 of 6 February 2020 granted the Federal Government special powers to face the crisis, and a declaration of public catastrophe on 20 March 2020 by Legislative Decree 6 allowed the application of an exceptional regime for government action and expenditure until the end of 2020.2 Related economic effects followed the gradual spread of COVID-19 to more distant areas of Brazil, which were hit at different speeds, with similar severity but varying ability to respond. Although economic impacts differ between sectors, estimates by the OECD point to a GDP reduction of between 7.4 per cent and 9.1 per cent in 2020.3 COVID-19 hit Brazil as it was coming out of the 2014-15 political and economic crisis that culminated with the ousting of President Roussef in 2016. * We acknowledge the invaluable assistance of our associates at Justen, Pereira, Oliveira & Talamini, especially Juliane Erthal de Carvalho, Luísa Quintão and Victor Luis Rocha. 1 Available at covid.saude.gov.br. 2 Since the end of 2020 the pandemic was ongoing, but the state of emergency (Legislative Decree 6) had not been extended. Brazil’s Supreme Court granted an interim injunction in an action filed by a political party to extend the provisions of Law 13.979 related to emergency measures, namely Arts 3, 3-A, 3-B, 3-C, 3-D, 3-E, 3-F, 3-G, 3-H, 3-I and 3-J (BR, Federal Supreme Court (STF), ADI 6.625/DF, Justice Ricardo Lewandowski, 30 December 2020); but this does not encompass the provisions directly related to public procurement. However, the Federal Government issued in January 2021 Provisional Measure 1.026, repeating virtually all the provisions of Law 13.979 discussed in this chapter, but limited to items connected with vaccination. Provisional Measure 1.026 was converted into Law 14.124 but has had the force of law since its enactment on 6 January 2021. 3 Available at www.oecd.org/economic-outlook/#Country-scenarios.

416  Marçal Justen Filho and Cesar Pereira The ensuing temporary Temer and elected Bolsonaro administrations, with the support of Congress through constitutional changes and new legislation, had focused on fiscal responsibility, austerity and reducing public expenditure and fiscal deficits. This scenario changed radically with the pandemic, which brought about a rebirth in the role of government and a growth in the population’s dependency on government support. According to the Federal Treasury data,4 as of 31 December 2020, the Federal Government had planned to spend BRL 604.7 billion (US $106.13 billion)5 and had already incurred expenditure of BRL 524.0 billion (US $91.97 billion). Procurement had consumed BRL 58.09 billion (US $10.19 billion) in federal funds, some of it through cooperation with local entities, and BRL 79.19 billion (US $13.89 billion) had been transferred to states and municipal governments. The bulk of the expenditure (around BRL 296 billion – US $51.95 billion) was in the form of direct money transfers to support vulnerable persons and families. Pre-existing structural deficiencies in areas such as health and basic sanitation inevitably led to an increase in the presence of government in the economy. Conflicts arising from the controversial Bolsonaro administration, which became notorious internationally for mishandling the emergency,6 and unsettled issues regarding the interplay between the various levels of government added to the mix, making the challenges of COVID-19 even more significant. This chapter focuses mainly on the legislative and regulatory changes undertaken by the Federal Government to promote more expedited and reliable procurement for the COVID-19 emergency. Brazil is a federal state, and a large portion of government action in health services is taken at state and municipal levels. Nevertheless, public procurement at all three levels is almost exclusively regulated by the same federal laws. Availability of funds, efficiency, integrity and transparency in state and municipal procurement practice certainly varies. Nevertheless, it is appropriate and useful to carry out a critical analysis of the legal framework based on the federal measures. In addition, in most states and municipalities, the greater part of COVID-19 purchases are federally funded. For example, even the state of São Paulo, with roughly one-quarter of Brazil’s GDP, reported by March 2021 that almost BRL 2.50 billion (US $438 million) of its BRL 6.73 billion (US $1.18 billion) pandemic procurement expenditure had come from federal funds.7 This chapter highlights how the crucial needs of COVID-19 procurement have shed light on the deficiencies of the existing bureaucratic and cumbersome

4 Available at www.tesourotransparente.gov.br/visualizacao/painel-de-monitoramentos-dos-gastoscom-covid-19. 5 All currency conversions were carried out at the exchange rate for the 31 March 2021 according to money.cnn.com/data/currencies. 6 Available at www.economist.com/the-americas/2020/05/28/brazils-losing-battle-against-covid-19. 7 Available at www.saopaulo.sp.gov.br/coronavirus/transparencia.

Emergency Procurement: Brazil  417 procurement regulations.8 The immediate, extreme response at the outset of the pandemic was the adoption of a temporary flexible regime that relied almost exclusively on information transparency to promote integrity. Legislative changes in September 2020 adopted a more balanced and mature view and tackled specific issues to advance efficient contract management. In addition to allowing a comparative view of national legal responses to COVID-19 procurement, the chapter reflects on what the Brazilian system may or should have learned from the emergency as the system evolves towards a more efficient and reliable tool for good governance. In May 2020, Brazil submitted to the WTO its bid to initiate accession to the GPA.9 The Brazilian Congress passed in December 2020 a bill that had been under discussion for several years to reform public procurement legislation, which was signed into Law 14.133 at the beginning of April 2021. Existing laws will remain in force for two years, and new rules may be applied optionally during this period. The bill was prepared before the pandemic and fundamentally compiles existing statutes and case law. Due to the specificities of the legislative process, it passed without incorporating lessons from the pandemic and runs contrary to the pandemic-related practice of simplification and streamlined procedures. It is likely that partial reforms will reflect more recent developments. Especially in this context, Brazil’s radical public procurement experiment in the pandemic must not be wasted.

II.  Introduction to the Regulatory Framework As mentioned, Brazil is a federal state, and public procurement is carried out by federal, state and municipal government agencies. The Brazilian Constitution has detailed provisions regarding the administrative organisation of the state and expressly requires government procurement to be subject to competitive public tender, except where provided by law (Art 37, XXI). It also provides that state-owned or state-controlled entities (SOEs) adopt their own competitive procurement methods (Art 173, § 1, III). Article 22, XXVII, provides that Congress has exclusive powers to legislate on general rules for public procurement, with states and municipalities having little or no legislative or normative powers. Federal general rules govern virtually all government procurement and there are multiple federal statutes.10 Law 8.666, 8 This chapter is inspired by the discussion of COVID-19 emergency procurement between Sue Arrowsmith and Marçal Justen Filho, moderated by Cesar Pereira, available at www.youtube.com/user/ jpotadv/videos. 9 www.wto.org/english/news_e/news20_e/gpro_19may20_e.htm. 10 See further M Justen Filho, C Pereira and MA Rost (eds), Brazil Infrastructure Law (Eleven International Publishing, 2016); C Pereira and RW Schwind, ‘Public Procurement in Brazil. Access for foreign suppliers and compatibility with international procurement practices’ in A Georgopulos, B Hoekman and P Mavroidis (eds), The Internationalization of Government Procurement Regulation (OUP, 2017).

418  Marçal Justen Filho and Cesar Pereira of 1993 sets out the basic outline of procurement methods and contract management. This statute follows in the footsteps of legislation of the early 1980s with domestic concerns in mind and not aligned with any international model. Brazil is not a party to any international procurement agreement in force since the Mercosur Agreement,11 to which Brazil became party in March 1991 and which governs public procurement through a 2017 protocol12 that is not yet in force and, as noted, only in May 2020 did Brazil apply to join the GPA. Nevertheless, Brazil’s system is considered generally compliant with international standards such as those in the GPA and OECD requirements.13 In addition to Law 8.666, other relevant statutes are Law 10.520 (reverse auctions), of 2002, Law 12.462 (RDC – Differential Procurement Regime), of 2012 (a regime discussed later below) and Law 13.303 (governing SOEs), of 2016. Secondary legislation governs reverse auctions (Decrees 5.450, of 2005, and 10.024, of 2019) and framework agreements (Decree 7.892, of 2013, updated in 2018). As mentioned, new legislation was approved by Congress in December 2020 to replace Laws 8.666, 10.520 and 12.462. It was signed into Law 14.133 on 1 April 2021 and up to 1 April 2023, procuring entities may choose between applying Laws 8.666, 10.520 and 12.462 or the new legislation. The latter does not depart from the basic structure of the existing laws and involves no radical changes, but gives statutory status to significant prior practices and creates new tools that may prompt improvements if used effectively. Law 14.133 also provides for a new procurement method, competitive dialogue, and sets out novel requirements for centralised transparency, efficiency-driven management and data availability, potentially advancing open contracting systems.14 The bill leading to Law 14.133 predates the pandemic, however, and so has not drawn on that experience. Law 13.303 will remain in force and unchanged so procurement by SOEs is unaffected. The list above is not exhaustive, and the regulatory framework is complex and excessively detailed. Although Law 8.666 remains the basic statute most tender procedures are governed by other rules, especially on reverse auction laws and framework agreements. In addition, under Law 13.303 the approximately 500 Brazilian SOES enact their own rules subject to the statute’s general principles. Also relevant is legislation on misconduct and corruption and Law 8.429 (Administrative Improbity Act), of 1992, and Law 12.846 (Anti-Corruption Act), of 2013, both focus on wrongful conduct involving public procurement among other things. A difficulty underlying the system is that integrity is sometimes wrongly considered as the main tool to achieve efficiency; application of the legislation 11 For an Agreement overview see www.itamaraty.gov.br/en/politica-externa/integracao-regional/ 6347-mercosur-en. 12 On how this affects Brazilian procurement see F Motta, ‘A harmonização das normas sobre licitação nos Estados-partes do Mercosul’ in Interesse Público – IP, ano 21, n. 17 (Fórum, 2003). 13 See Pereira and Schwind, ‘Public Procurement in Brazil’ (2017). 14 See in detail M Justen Filho, ‘Comentários à Lei de Licitações e Contratações Administrativos: Lei 14.133/2021’ (Revista dos Tribunais, 2021).

Emergency Procurement: Brazil  419 tends to focus more on avoiding wrongdoing than on seeking efficiency and the most advantageous tenders. Strict procedures are simpler to enforce and comply with; thus, an inefficient system arises in which officials are held accountable for how closely they comply with predetermined procedures, rather than i­ ncentivised to adopt creative, efficient solutions.15 The system has developed over the years rejecting the notion of market, replacing the market with an artificial set of purportedly controllable procedures aimed at avoiding misconduct. This process has led generally to inefficiency, since efficiency is hardly possible without relying on the market, but at the same time has not succeeded in avoiding wrongdoing, as seen in the integrity problems revealed in Operation Car Wash relating to, among other things, construction for the 2014 FIFA World Cup and 2016 Olympic and Paralympic Games.16 Since the facts tend to find a way to escape from artificial solutions and align with reality, for the past few years Brazil has seen an increase in direct awards, with no competition, and procurements conducted under simplified selection procedures or electronic reverse auctions. More traditional and complex procurement methods are becoming obsolete. Further, many infrastructure investments are undertaken through concessions or public-private partnerships, or by SOEs subject to more flexible rules. With simplified procedures and auctions, involving strong procedural scrutiny, the focus is often on lowest price rather than best value, and problems of adverse selection17 arise, with unreliable quality. It is relevant also to note that Courts of Audit, especially the Federal Court of Audit (TCU) but also its state or – more rarely – municipal counterparts, have expanded from their original role of expenditure supervision.18 TCU has become a key player in determining how public procurement takes place in practice and its legal interpretations are a source of guidance for officials.19 Finally, a picture of the existing legal regime is incomplete without considering planning and contract management. There has been little evolution in planning since 2016, when Law 13.303 innovated by providing for lifecycle cost analysis

15 On this issue in procurement generally see S Kelman, Procurement and Public Management: The Fear of Discretion and the Quality of Government Performance (The AEI Press, 1999); SL Schooner, ‘Fear of Oversight: The Fundamental Failure of Businesslike Government’ (2001) 50 American University Law Review 627; S Arrowsmith, ‘The EC Procurement Directives, National Procurement Policies and Better Governance: The Case for a New Approach’ (2002) 27 European Law Review 3. 16 See, in English, eg, A Spalding and University of Richmond Law School Anti-Corruption Team, Olympic Anti-Corruption Report: Brazil and the 2016 Rio Games (e-book, Richmond School of Law, 2017), available at law.richmond.edu/olympics/archive-brazil.html; S Arrowsmith et al, ‘Procuring infrastructure for international sporting events: mapping the field for IPACS and beyond’ (2019) 28 Public Procurement Law Review 257, 287. 17 On the adverse selection problem see G Akerlof, ‘The Market for “Lemons”: Quality Uncertainty and the Market Mechanism’ (1970) 84 The Quarterly Journal of Economics 488. 18 See M Justen Filho, ‘An overview of Brazilian law’ in M Justen Filho, C Pereira and MA Rost (eds), Brazil Infrastructure Law (Eleven International Publishing, 2016). 19 See C Pereira, ‘Public procurement in Brazil: general rules’ in M Justen Filho, C Pereira and MA Rost (eds), Brazil Infrastructure Law (Eleven International Publishing, 2016).

420  Marçal Justen Filho and Cesar Pereira for SOEs, which may become an experiment extended to other areas. Other more general rules incentivise planning by facilitating purchases contemplated previously in the procuring entity’s long-term plans.20 However, other than requiring the prior existence of budgetary funds at the time of opening a public tender21 planning has received little attention. On contract management, French administrative law has inspired Brazil to subject administrative contracts to a separate legal regime from that applying to private contracts. Law 8.666 provides for government contractual prerogatives to change or affect the supplier’s contractual obligations and supervening legislation, other than Law 13.303 (SOEs), has not changed this basic arrangement. With grounds in the Brazilian Constitution, Law 8.666 protects the economic and financial equilibrium of the contract as a counterbalance for such prerogatives, but lack of effective instruments to exercise such counterbalancing rights causes legal uncertainty and difficulties in risk assessment for supplier, leading in turn to higher prices and ultimately adverse selection. Before turning to the Covid-19 pandemic, we should also note that – although in a much less unfortunate scenario – in 2011 Brazil underwent another crisis in its public procurement system, arising out of the 2014 FIFA World Cup and 2016 Rio Olympics. After falling behind schedule, Brazil tried, as in many other situations, to solve its cultural and practical difficulties by legal change, enacting the RDC Act (Law 12.462).22 This created a radical change by avoiding the defined selection method in Law 8.666 and providing instead for tools for entities to adopt a format and selection criteria suitable for individual cases. However, little or nothing changed with regard to contract management. One of the novelties in the RDC Act was the extended use of ‘integrated contracting’, based on a less precise description of scope than usual. This aimed to overcome planning problems by releasing agencies from the obligation to plan and define requirements clearly. RDC became in fact an experiment in more flexible procurement, and subsequent legislation extended its application to various other settings. Law 14.065, of 30 September 2020, made RDC (Law 12.462) available also to COVID-19 public procurement (Law 13.979). Much more so than the 2011 environment, the severity of the 2020 crisis and its serious personal impact for such a large portion of the population made it impossible to tolerate any delay or frustration in procuring emergency needs and preventing the spread of the pandemic. Given this situation, it is understandable that Brazil has enacted temporary legislation that – with a few notable exceptions – departs radically from the existing framework.

20 See G Reisdorfer, ‘Instrumentos para gestão e controle das empresas estatais: planos de negócios e estratégia de longo prazo’ in M Justen Filho et al, ‘Estatuto jurídico das empresas estatais – Lei 13.303/2016 – Lei das Estatais’ (São Paulo, Revista dos Tribunais, 2017). 21 Article 7, § 2º, II and III, Law 8.666 (corresponding to Art 150, Law 14.133). 22 See in English, Arrowsmith et al, ‘Procuring infrastructure for international sporting events’ (2019) 285–86.

Emergency Procurement: Brazil  421

III.  Procurement of New Requirements A.  The Enactment of Special Legislation in Law 13.979 Brazil was early in enacting special legislation, and Law 13.979 conferring special powers to deal with the crisis came into force on 6 February 2020. From its initial vague language, it underwent changes through a series of Presidential Provisional Measures (MP) (executive acts with temporary force of law until confirmed or otherwise by Congress). As of November 2020, the latest change had been made by Law 14.065, which resulted from MP 961 with changes introduced by Congress.23 The pandemic’s importance made it impossible for the Government not to act. This section outlines the most significant provisions in the temporary legislation and explains their relationship with the general rules still applicable to non-COVID-19 procurement. A separate section below discusses management of existing contracts affected by the emergency or which had a role in the Government’s response. The chapter deals only with public procurement in the sense of purchasing on the market. Law 13.979 additionally provides for other exceptional tools, such as emergency requisitioning of private goods with compensation.24 This tool is reserved for situations in which public needs are so immediate and urgent that not even emergency procurement can suffice. It is an exceptional measure based on executive powers, designed to be used rarely and not to supersede or affect the procurement system. It was used especially during the first months of the pandemic, when the Federal Government attempted to requisition ventilators and other goods that had been sold, but not yet delivered, to local governments. This gave rise to disputes between federal and local authorities with the courts generally upholding local government contracts and blocking requisitioning.25 Since it is not a form of public procurement and became less frequent from mid-2020,26 requisitioning is not considered further. Article 3, Law 13.979, provides for ample government powers to ‘face the public health emergency of international concern arising from the coronavirus’. There are important guidelines on § 1, Art 3, for the adoption of rational and proportional reasons for government action in the exercise of such powers: the measures

23 From an economic standpoint see EPS Fiuza (ed), ‘Revisão do Arranjo das Compras Públicas a Partir de um Contexto de Crise’, Nota Técnica Ipea/Diset nº 68/2020, available at www.ipea.gov.br/ portal/images/stories/PDFs/nota_tecnica/200619_nt_68_diset.pdf. 24 For background and critique see M Justen Filho, ‘A epidemia da requisição administrativa e seus efeitos destruidores’ in M Justen Filho (ed), Covid-19 e o Direito Brasileiro (Curitiba, Justen, Pereira, Oliveira & Talamini, 2020). 25 See further R Carvalho, ‘Requisição administrative durante a pandemia’, available at raquelcarvalho. com.br/2020/09/08/requisicao-administrativa-durante-pandemia/#223_Instituicao_Conflito_federativo_Requisicao_de_bens_publicos_Procedimento. 26 A notable exception was a federal attempt to requisition items intended for the São Paulo state government vaccination programme, an attempt quashed by the Supreme Court (BR, Federal Supreme Court (STF), ACO 3463 MC-Ref Justice Rapporteur Ricardo Lewandowski, 8 March 2021).

422  Marçal Justen Filho and Cesar Pereira ‘may only be ordered based on scientific evidence and on analyses about health strategic information and must be limited in time and space to the minimum indispensable for the promotion and preservation of public health’.27 Although such guidelines are not directly applicable to the modified public procurement rules discussed below, they provide the basis for interpreting Law 13.979 as a whole. The procurement provisions in Law 13.979 are general rules binding on all levels of government. In accordance with its Art 8, the Law will be in force while Legislative Decree 6, of 20 March 2020, declaring a public catastrophe, is in force.28 As discussed above, public procurement in Brazil has been much concerned with integrity. Given the magnitude of the emergency and need for effective action, one of the purposes of Law 13.979 is to protect officials from later second-guessing with regard to compliance with specific requirements. General rules of interpretation (in LINDB – Decree 4.657, a 1942 act reformed in 2018 by Law 13.655) already provide that a government official’s obstacles and difficulties must be considered at the time of assessment of their conduct; however, Law 13.979 went further to prevent action being paralysed by fear of prosecution. Obviously, fraud or misconduct are not condoned. However, certain basic features of an official’s conduct are legally assumed as correct to prevent unacceptable delay. Article 4-B, items I through III, Law 13.979, provide that the existence of an emergency, need for prompt action and existence of a risk to safety are assumed, so that conduct based on such grounds will not be open to question. Article 4-B, item IV, provides for a presumption that the scope of the contract is limited to what is necessary for the emergency. It is suggested below that the latter is not a lawful presumption, however. The simplified system under Law 13.979 and related legislation is intended to supersede the complex requirements of the existing legislation.29 Its novelties include additional possibilities for direct awards (section B below), lower qualification requirements, simplification of procedures and greater flexibility in supplier selection (section D below), advance and lump sum payments, and a broader application of framework agreements (section E below).

B.  The Special Provisions on Direct Awards Law 8.666 (the General Procurement Law) provides in Art 2430 for a long list of situations in which direct award, without a competitive tender, is admitted including under certain conditions, emergencies. Under the simplified Law 13.979, Art 4 provides that direct award may be used for the purchase of goods, services 27 Authors’ translation from Portuguese. 28 On the period during which Law 13.979 applies; see n 2 above. 29 M Justen Filho, ‘Efeitos jurídicos da crise sobre as contratações administrativas’ in M Justen Filho (ed), Covid-19 e o Direito Brasileiro (Curitiba, Justen, Pereira, Oliveira & Talamini, 2020). 30 Corresponding to Art 75, Law 14.133.

Emergency Procurement: Brazil  423 (including engineering or works) and resources ‘with the purpose of facing the public health emergency of international concern with which this Law deals’. This is temporary, applying only while the Public Health Emergency of International Concern is ongoing.31 The procuring entity must show the link between the intended contract and certain needs related to the pandemic, but urgency of the contract is then presumed and need not be proven.32 Law 13.979 does not provide for a maximum duration for these contracts. Article 4-H also provides that the maximum six-month contract duration that usually applies to direct awards may be extended successively while the emergency is still ongoing and Legislative Decree 6 is in force.33 As indicated above, and in contrast with the position under the general emergency procurement rules, which requires proof of all the elements below before using emergency methods, Article 4-B provides for certain facts to be presumed and not subject to further review, namely: (a) the existence of an emergency situation; (b) the need for prompt care of the emergency situation; (c) the existence of risk to the safety of people, works, provision of services, equipment or other public or private assets; and (d) the fact that the scope of the contract is limited to the action to take care of the emergency situation. Items (a) to (c) are clearly admissible as definitive presumptions but item (d) requires further discussion because of the dangers of abuse. This element probably cannot be subject to an irrebuttable legal presumption as constitutional requirements of administrative probity and morality (Art 37 of the Constitution) make such a presumption necessarily rebuttable. Thus, where there is direct and clear connection between the contract and the pandemic, such as with the purchase of medicine or medical equipment immediately necessary for delivery to patients, the admissibility of direct contracting is unequivocal. The technology or services needed to continue other services that are necessary but affected by the pandemic – for example, because of the impossibility of physical attendance in government offices – are also considered as sufficiently linked to the pandemic for direct contracting to be allowed. However, there are other situations in which a service or good may be useful but not necessary or unavoidable to face the pandemic. An example from a July 2020 court ruling (upholding a suspension of the procurement) involves a tender for a water supply contract in which the court required compliance with procedural steps regardless of the underlying importance of the services in the pandemic context.34 The procedure for selecting specific suppliers for a direct award is ­discretionary but not arbitrary. The procuring entity must state in the document it issues to 31 On the period during which Law 13.979 applies; see n 2 above. 32 Brazil’s Superior Court of Justice (STJ) points out that the emergency does not exclude the obligation to comply with the legal framework and principles of public administration (BR, Superior Court of Justice (STJ), SLS 2.736, Judge Rapporteur João Otávio de Noronha, 17 June 2020). 33 On the period during which Law 13.979 applies; see n 2 above. 34 BR, Superior Court of Justice (STJ), SLS 2.745, Judge Rapporteur João Otávio de Noronha, 1 July 2020).

424  Marçal Justen Filho and Cesar Pereira allow the direct award (Art 26, Law 8.666 – see below35) its reasons for selection and for the price. Although there is no requirement to choose the lowest price (Art 4-E, § 3, Law 13.979), the freedom granted by Law 13.979 does not authorise the selection of suppliers incapable of delivery or failure to carry out some minimum confirmation of market prices. The authorisation document is part of the procurement records available to the public on request (Art 4, § 2, Law 13.979). Other transparency requirements, such as the availability of documentation online within a short period after concluding the contract, are discussed later below. Law 14.065 of 30 September 2020 also introduced further changes in direct contracting to overcome the difficulties in showing the connection between the contract and pandemic for smaller contracts. In this respect, Art 24, I and II, Law 8.66636 provide for the direct award of small contracts for ‘works and engineering services’ (item I) or ‘other services and purchases’ (item II). The threshold for such direct awards was raised by Law 14.065 around sixfold to BRL 100,000 (US $18.738) and BRL 50,000 (US $9.369) respectively. Provided that such a small contract is not a part of a requirement that could be subject of a larger contract there is no need to show its connection with the pandemic. Article 2 of Law 14.065 only requires that the contract resulting from the direct award be signed while Legislative Decree 6 (declaration of a public catastrophe) is in force,37 regardless of duration and without prejudice to any contractual extension. The procedural requirements of Art 26, Law 8.66638 apply to direct awards under the simplified provisions of Law 13.979. These seek to ensure that direct contracting is properly recorded, ratified by the superior officials and carried out without abuse. Unlike under Art 52 of the UNCITRAL Model Law, Art 26 does not require negotiation with the single-source supplier but requires a demonstration that the price is compatible with the market and the supplier is adequate. Article 26 deals with the procedure for the two main categories of direct awards under Brazil’s general procurement laws, namely those based on: (a) impossibility of competition, such as when only one possible supplier exists (inexigibilidade de licitação); or (b) inconvenience of competition, due to its costs (low-value contracts), pressing urgency (emergency contracts) or other situations expressly provided for by law (dispensa de licitação).39 Law 13.979 also introduced changes in tender procedures under Law 8.666 and Law 10.520 (reverse auction) and some of these, such as qualification requirements and contracting with debarred suppliers, apply to direct contracting also.

35 Corresponding to Art 72, VIII, Law 14.133. 36 Corresponding to Art 75, I and II, Law 14.133. 37 On the period during which Law 13.979 applies; see n 2 above. 38 Corresponding to Art 72, VIII, Law 14.133. 39 For more detail on the Brazilian system of direct award or single-source contracting see Pereira and Schwind (n 10).

Emergency Procurement: Brazil  425

C.  Waiver of Preliminary Studies and More Flexible Rules on Specifications and Price Estimates Article 4-C of Law 13.979 provides that no preliminary studies are required for the tendering of ordinary goods or services while the COVID-19 emergency is ongoing.40 These are defined under Law 10.520 as standardised commercial items commonly found in the market with no distinct features. Although the phrasing ‘ordinary goods or services’ is typical of the regulation of reverse auctions (Law 10.520) any other procurement method may be used if appropriate under the applicable law. Such studies may be conducted, however, by choice; it is recognised that there are different levels of sophistication in commercial items and the needs of the procuring entity may require specific features. Further, some minimum specifications are still needed, requiring provision of at least some terms of reference with the tender documents. Article 4-C does not abolish any requirement or clarity in the required subject matter but merely to avoid unnecessary detail. Thus, the standard regime of Art 6, Law 8.66641 sets out a basic design requirement for launching a public tender. Article 7, § 2, I,42 provides that works and services may only be procured through bidding when the competent authority has approved a basic design and made it available to interested parties. Article 3, XI, Decree 10.024 (regulating reverse auctions under Law 10.520) requires terms of reference for a reverse auction. Both pieces of legislation require a detailed description of the subject matter. In contrast, Article 4-E, Law 13.979 admits for needs during the pandemic a tender or auction based on much less detailed and much more simple assessments and definitions: Article 4-E, § 1 requires only a specification of the subject matter, summary description of its purpose, minimal description of the solution intended, definition of specific contractual requirements, criteria for measurement and payment, estimate of price and statement of existence of budgetary funds. The estimate of price is also simplified. Item VI of § 1 provides that it is sufficient to consult one of various possible options of portals, specialised websites or other sources. Article 4-E, § 2 also allows a waiver of the price estimate and its omission from the tender or auction documents in exceptional circumstances during the pandemic. There must be a good reason for this, such as lack of time or the unreliability of available information. If there is a price estimate, the exceptional regime allows for the conclusion of a contract during the pandemic for a higher amount, provided the procuring entity negotiates with other bidders and states compelling reasons for a change due to supervening factors (Art 4-E, § 3, items I and II). This is because the pandemic may affect price estimates quickly and prevent a contract being concluded in



40 On

the period during which Law 13.979 applies; see n 2 above. to Art 6, Law 14.133. 42 There is no corresponding Article in Law 14.133. 41 Corresponding

426  Marçal Justen Filho and Cesar Pereira accordance with expectations. However, as explained above, in case of abusive behaviour by suppliers, Law 13.979 provides for exceptional measures such as requisitioning of goods with fair compensation.

D.  Waiver of Qualification Requirements and Flexibility in Debarment Policy Law 13.979 also provides for a further flexibility that it is submitted should be applied even outside the pandemic context, in the form of a waiver (in Article 4-F) of certain qualification requirements when available suppliers are limited. However, certain requirements relating to social security and embedded in the Constitution may not be waived. This solution is exceptional. The legal provision mentions examples of what is a possible waiver of requirements to be of good standing in respect to tax or labour matters, which means a supplier may be hired even if it owes taxes to the procuring entity. A justification may be the need to have access to suppliers capable of performing the contract who do not meet the requirements, but other justifications may be the practical difficulty for suppliers in obtaining necessary certifications in a context of restricted access to government offices. The procuring entity must, however, ensure the bidder is capable to p ­ erforming, although it may do so in a simplified manner without the rigours of Law 8.666 (Art 4-F, Law 13.979). Another new measure allows contracting with debarred suppliers (Art 4, § 3, Law 13.979) when the procuring entity has no alternative to enable the purpose of the contract to be fulfilled. This applies to any type of debarment (of which there are several under Brazilian law.) It does not erase the debarment, which remains in force for other situations, nor affect its duration. The acknowledgement of the possible need to hire debarred companies in certain contexts should draw the Government’s attention to the importance of solutions such as self-cleaning, in which appropriate responses to wrongdoing or contractual non-performance are adopted that might facilitate access to qualified suppliers.

E.  Reverse Auctions In its original language, Law 13.979 only provided for direct awards as an emergency procurement method. However, the rules on procurement methods subsequently evolved, and one of the most important sets of changes is related to reverse auctions. Electronic reverse auctions are the most commonly used procurement method in Brazil, even outside the pandemic context. Firstly, the Law now provides for an expedited and simplified procedure for reverse auctions. Under Article 4-G the minimum timescales in reverse auctions – physical or electronic – are halved. It also provides that appeals or

Emergency Procurement: Brazil  427 protests will not suspend the auction and waives the Article 39, Law 8.66643 requirement for public hearings before large-scale auctions. Secondly, Law 13.979 now allows two options for contracts necessary to face the COVID-19 pandemic – direct award without a prior competitive tender process or a reverse auction. The procuring entity must assess the urgency of the situation to exercise its discretion to opt for either solution. The fact that it is possible to wait for the reduced time necessary for a reverse auction does not preclude a direct award, but factors such as the existence of multiple potential bidders or a high contract value might lead a procuring entity to prefer the more competitive auctions approach. As chapter 2 explained, the UNCITRAL Model Law on Public Procurement 2011 requires the use of a rapid competitive method, competitive negotiations, whenever possible in a case of catastrophe, in preference to single-source procurement44 and the EU directives explicitly allow the latter method for major civil contracts only when regular tendering is not possible on the facts.45 This approach may guide application of Law 13.979, but is not a legal obligation; the procuring entity has freedom to assess the viability and utility of an auction and the swiftness and foreseeability of a direct award may be preferred to the uncertainty of a competitive procedure, however simplified and expedited. The combination of the simplified qualification requirements, reduced time periods and waiver of public hearings creates a highly expedited process. Taking into account Law 10.520 and the reduced time limits of Law 13.979, the minimum time between the notice or solicitation and auction is four working days, and the time for appeals and responses only one working day. In addition, taking into account Decree 10.024, the reduced time limit for requests for clarifications and to protest the notice or solicitation is one business day. Therefore, reverse auctions may be carried out in just a few days under Law 13.979.46

F.  Framework Agreements As explained in chapter 2 and in other chapters in Part 5, framework agreements of various kinds – in the sense that term is used in the UNCITRAL Model Law on Public Procurement 2011 – are provided for in international instruments and national laws for, among other things, emergency procurement. Another common strategy is provision for joint procurement for a number of agencies or even (as chapter five discusses) countries.

43 There is no corresponding Article in Law 14.133. 44 See ch 2, section V.A.iii. 45 See ch 3, section II.E.iii. 46 See further AW Nester, ‘Pregão eletrônico, quarentena e home office’ in M Justen Filho (org), Covid-19 e o Direito Brasileiro (Curitiba, Justen, Pereira, Oliveira & Talamini, 2020).

428  Marçal Justen Filho and Cesar Pereira Law 14.065, of 30 September 2020, introduced §§ 4 to 8 into Art 4, Law 13.979 which contain clarifications and limited modifications on framework agreements for pandemic purchases. The provisions deal with certain types of framework agreements, referred to as registro de preço (price registration), for contracts involving more than one procuring entity. In the registro de preço, there may be (and usually is) more than one supplier registered for a certain item, with various prices and for various quantities. The basic structure of framework agreements for procurement in general is found in Law 8.666 and mainly in Decree 7.892, and Law 12.462 deals with the RDC context. They all set out a system of tendering for the registration of the lowest price for a certain quantity of a certain item. The agreement does not oblige the procuring entity to purchase nor prevent its procurement through a separate tendering procedure, but instead grants the winning supplier a right of first refusal. Other bidders may also be allowed to register their prices provided they agree to lower them to amount of the winning offer. There are no mini competitions held. For larger purchases, other suppliers will be called upon in order of their bids. A distinct feature of the registro de preço is that it allows (a) other procuring entities to join as participants in the tendering and (b) non-participating procuring entities to adhere afterwards and request purchases, provided all parties agree. The existing laws and regulations limit the total amount a participant or non-participant may purchase, so that a framework agreement for a certain quantity may not be used for an excessively higher quantity. The main pandemic-related changes47 are twofold. Firstly, they allowed a framework agreement without competitive tendering, using single-source or limited tendering. Secondly, they declared pandemic purchases to be ‘nationwide purchases’, which warrants under Decree 7.892 the application of higher-quantity limits for additional purchases by non-participant procuring entities. Other new rules merely clarify the existing regime and make it easier to apply. Article 4 § 6 Law 13.979 aims to facilitate joint procurement through the adhesion, by one entity, to framework agreements between another entity and its respective suppliers. Article 4-J lays down quantity limits to avoid an excessive increase above the original quantities: each new adherent may purchase only up to 50 per cent of the original quantities, and the total purchases by the original entity and any new adherents may not exceed the double the original quantities of each item. The waiver of price estimates and authorisation to contract above the estimated price (Article 4-E) do not apply to framework agreements (§ 7). In accordance with § 8, purchases more than 30 days after the framework agreement was concluded

47 See further LE Reis and MV Reis de Alcântara, ‘O sistema de registro de preços e a Lei nº 13.979: avanços para o combate da Covid-19?’ in JU Jacoby Fernandes and AL Jacoby Fernandes et al, ‘Direito provisório – ESPIN – Covid-19: soluções para temas polêmicos’ (Forum, 2021).

Emergency Procurement: Brazil  429 must be preceded by a new price verification to assess compatibility with market prices. The structure of framework agreements governed by Law 13.979 – the temporary COVID-19 legislation – is not substantively different from that under Decree 7.892. The novelties introduced for the pandemic are the simplification of procedures, the declaration of pandemic framework agreements as ‘nationwide purchases’, express statutory authorisation for states and municipalities to use the federal regulations of Decree 7.892 and express authorisation to enter into pandemic-related framework agreements through a non-competitive procedure (single-source or limited tendering). Since the last two elements were already impliedly permitted (under Law 8.666 and Decree 7.892 respectively), the only significant changes are the simplification and clarification of the Law 13.979 rules and the Article 4-G declaration of pandemic framework agreements made through reverse auctions as ‘nationwide purchases’ – ie, those intended to carry out federal programs made in association with local governments. The significance of this declaration is that Article 22, Decree 7.892 allows for ‘nationwide purchases’ that non-participant entities purchase up to five times the original quantity, provided the supplier is able and willing to supply – a significant increase from the 100 per cent excess generally permitted. Under Law 13.979, a framework agreement may result either from a competitive process, such as a reverse auction, or from a direct award. However, the two processes are not completely interchangeable. A framework agreement derived from a competitive process allows the purchase of a larger quantity based on the registered prices, and also the purchase conditions in framework agreements by direct award are less flexible. In addition, since a framework agreement is designed for purchases over a certain period of time, it is unlikely that a procuring entity will not be able to use a reverse auction instead of a direct award; in this respect it can be noted that the choice of the procuring entity for such an approach must be adequately reasoned in the procurement public records and also have contractual consequences.48

G.  Used Goods Article-A of Law 13.979 provides for a solution that is admissible but uncommon under regular procurement rules, namely purchase of second-hand goods, provided the supplier warrants the use and work conditions. This fl ­ exibility may be useful, for example, in the face of scarcity of medical or c­ onstruction equipment. 48 See further C Pereira, ‘Regime especial de contratações administrativas em face da pandemia da Covid-19: Lei 13.979, de 2020’ in M Carvalhosa and F Kuyven (eds), Impactos jurídicos e econômicos da Covid-19 (Thomson Reuters, 2020).

430  Marçal Justen Filho and Cesar Pereira

H.  Modification of Contracts Concluded under Law 13.979 As discussed later in the chapter, Law 13.979 does not deal with the extension of pre-pandemic contracts to address needs in the pandemic; this is covered by the general public procurement legislation on contract modifications. However, its Art 4-I provides that contracts concluded under Law 13.979 itself may be increased or reduced by the procuring entity up to 50 per cent of the escalated initial value (more than the 25 per cent allowed for most kinds of contracts under the general rules, as outlined in section M below).

I. Transparency Article 4, § 2 of Law 13.979 provides for a crucial aspect of pandemic regulation, namely transparency, requiring a public notice for contracts under Law 13.979 on a specific website within five working days, containing certain minimum information. This requirement does not supersede formal requirements under Law 8.666 for publication of formal extracts, with more limited information, in official gazettes.49 As elaborated below, transparency and availability and manageability of information are areas in which the exceptional pandemic regime and practice has led to noticeable evolution. The specific requirements of Law 13.979 have led to production of easily accessible sources of data that may facilitate important developments for procurement information in general.

J.  Foreseeability of Accountability Initiatives As outlined above, a key player in the effectiveness of public procurement in Brazil is the competent Court of Audit. The Federal Court of Audit (TCU) is governed by Arts 70 and 71 of Brazil’s Constitution and specific legislation. Its original task was oversight of expenditure, but it evolved into an independent agency with in-depth technical expertise and extensive prosecution capabilities. The nature and extension of TCU’s powers are constantly disputed before Brazil’s Supreme Court, but no final decision has been made to interpret definitively the applicable constitutional and statutory rules. All states and some larger municipalities, such as São Paulo, also have their own Courts of Audit with similar powers, although not as extensive as those of the TCU. Law 14.065 of 30 September 2020 acknowledged the practical importance of ensuring the situation of government officials vis-à-vis the competent Court of 49 Articles 174-76, Law 14.133 provide for a National Public Procurement Portal (Portal Nacional de Contratações Públicas – PNCP), expected to be implemented by the end of 2021, for all tender notices and other documents.

Emergency Procurement: Brazil  431 Audit or other accountability agencies charged with overseeing officials’ actions. Article 4-K provides that such accountability offices will prioritise analysis and decision-making relating to the legality, legitimacy and economic reasonableness of expenditure based on Law 13.979. In addition, Article 4-K provides that ‘the courts of audit must act to increase legal certainty in the application of the rules of this Act, including through the response to consultations’. This is an important novelty, since Courts of Audit are generally averse to responding to consultations and refrain from committing themselves to a binding position prior to examining a specific case and may lead to a change in the relationship between procuring entities, suppliers and the Courts of Audit.

K.  Challenges or Protests Any aggrieved bidders or legal person may lodge a complaint, challenge or protest with the procuring entity or competent Court of Audit. Such initiatives are governed by Articles 4150 and 113,51 Law 8.666. Other accountability agencies such as the Federal Comptroller-General Office (CGU) and its state and municipal counterparts also accept and process such complaints. In addition, Brazil has an open and accessible system of practically cost-free citizens’ actions, in the form of a constitutional remedy allowing any natural persons (but not legal entities) who are Brazilian nationals or resident foreigners to challenge in court government conduct. This includes direct awards, tenders and contract modifications. During 2020, citizen’s actions were used often to compel city governments to comply with the transparency requirements set out by Art 4, § 2, Law 13.979, namely to make publicly available data and documentation on COVID-19-related procurement.52 Corporate entities, individuals or organisations may rely on administrative complaints or notices of possible misconduct, brought before accountability agencies or courts of audit such as CGU and TCU, respectively. Where they are affected by the relevant conduct they also have standing to sue before national courts.

L.  Antitrust Issues As in other countries (see chapter 7), antitrust (competition law) issues have arisen that affect public procurement. In this regard, Brazil’s competition authority, 50 Corresponding to Art164, Law 14.133. 51 Corresponding to Art 170, Law 14.133. 52 See, among several others, BR, State Court of São Paulo, Appeal 1003029-85.2020.8.26.0278, Judge Marcelo L Theodósio, 6 April 2021; BR, State Court of São Paulo, Appeal 2093810-97.2020.8.26.0000, Judge Aliende Ribeiro, 19 September 2020; BR, State Court of São Paulo, Appeal 214318397.2020.8.26.0000, Judge Alves Braga Junior, 15 September 2020 and BR, State Court of São Paulo, Appeal 2145626-21.2020.8.26.0000, Judge Antônio Carlos Faria, 24 September 2020.

432  Marçal Justen Filho and Cesar Pereira CADE, initiated investigations on the pharmaceutical market on 20 March 2020; on the same date Legislative Decree 6 was issued ‘to evaluate whether companies in this sector are raising prices and profits abusively in light of the high demand caused by measures related to COVID-19’.53

M.  Modification of Pre-pandemic Contracts for Pandemicrelated Purchases Modification of pre-pandemic contracts for procurement of pandemic-related requirements is governed by general procurement legislation; as mentioned above, Law 13.979 does not contain any special rules to facilitate this. The basic provision on modifications is found in Art 65, Law 8.666.54 As described above, this was changed for contracts concluded under Law 13.979, but not in general, allowing modification by agreement of the former contracts provided accrued modifications do not increase or reduce the total escalated contract value by more than 25 per cent (or 50 per cent for refurbishing of buildings or equipment). Increases and reductions do not offset each other.55 Article 65, Law 8.666, also allows modifications unilaterally by the procuring entity within certain limits and with compensation rights for the supplier. However, a new bill on modifications, PL 2.139/2020, submitted to Brazil’s Senate by Senator Antonio Anastasia on 30 April 2020, is pending discussion56 proposing a special temporary pandemic regime on modification of existing contracts, including long-term contracts such as concessions and public-private partnerships. It favours negotiation and consensual solutions but also provides for administrative procedures and due process of law to enable a decision by the procuring entity and subsequent dispute resolution through binding arbitration. Its Art 3, § 1 expressly provides that the limits for agreed modifications under Art 65 of Law 8.666 are not applicable for the duration of the special regime. Its purpose is to mitigate or avoid the impacts of the emergency on existing contracts, not to enable them to be used to procure additional requirements, but its aim could be extended as it is subject to amendments and congressional discussions.

53 Available at en.cade.gov.br/cade-started-collecting-data-to-support-investigation-in-the-medicalpharmaceutical-sector. 54 Corresponding to Art 124, Law 14.133. 55 M Justen Filho, ‘Um novo modelo de licitações e contratações administrativas? – A MP 926 pode funcionar como experimento para a reforma das licitações’ in M Justen Filho (org), Covid-19 e o Direito Brasileiro (Curitiba, Justen, Pereira, Oliveira & Talamini, 2020). 56 On PL 2.139/2020 see further Pereira, ‘Regime especial de contratações ­ administrativas’ (2020). FH Unes, CS Loureiro and R Borelli, ‘Pragmatismo e continuidade dos contratos administrativos: a necessidade de um regime jurídico emergencial e transitório para a contratação administrativa’, available at www.jota.info/opiniao-e-analise/artigos/pragmatismo-e-continuidadedos-contratos-administrativos-30042020.

Emergency Procurement: Brazil  433 However, as of November 2020, the bill had not advanced in the Senate and it seemed unlikely it would pass into law before the parties to existing contracts had negotiated modifications or initiated disputes regarding the impacts of the COVID-19 pandemic. As discussed below, contractual adaptations to overcome the impacts of the pandemic on existing contracts are currently not subject to the quantitative limits of Art 65, Law 8.666. The question that arises here is whether changes beyond such limits are also allowed to enable the procurement of items related to administrative needs. In fact, the only way to circumvent such limits seems to be for the supply to be considered as a new contract awarded directly to the existing supplier under Law 13.979, when the temporary rules on the award of new contracts will apply. In this situation, the fact that the supplier is a reliable current supplier of the procuring entity may differentiate it from others in the entity’s choice for direct award, and advantages such as synergy with the existing contract or logistical facilitation may also come into play.

IV.  Modification of Contracts to Adapt to their Performance to the Pandemic A different question from the one just considered of whether current contracts can be modified to acquire new, pandemic-related, goods, works or services is how performance of such contracts is treated in the light of the pandemic’s implications for performance. In this respect, the impacts of the COVID-19 pandemic are generally acknowledged in Brazil as uncontrollable circumstances allowing adaptation to the new circumstances. For example, a supply of foreign equipment that requires onsite acceptance or training at the supplier’s plant outside Brazil may be precluded by travel bans or involve necessary adaptations and additional costs. Unlike some legal systems, Brazilian law grants a supplier the same rights for disruption whether this is due to force majeure, factum principis or to extraordinary economic risks. As discussed below, the main issue is whether such uncontrollable factors amount to force majeure as a cause for contract termination or may be overcome through modifications that preserve the existing contract. So far as private law is concerned, in particular under Art 393 of the Brazilian Civil Code, an Act of God or force majeure57 exonerates the debtor from its obligation. If an uncontrollable circumstance affects a long-term contract and renders one party’s performance excessively onerous while providing an extraordinary gain to other party, the contract may be terminated or reviewed as the case may be

57 Article 393 of the Brazilian Civil Code (Act 10.406 of 2002) defining such as an ‘inexorable fact whose effects could not be avoided or prevented’.

434  Marçal Justen Filho and Cesar Pereira (Arts 478, 479 and 480 of the Civil Code). If a force majeure event has not rendered performance impossible, it may lead to review. Public procurement contracts are, however, governed primarily by Law 8.666, which deals with force majeure events from two basic perspectives. The first is as a cause for contract review (unforeseeability doctrine). In the large majority of cases, force majeure events do not render performance impossible, but only make it more onerous and affect the contract’s economic and financial equilibrium. Some scholars distinguish this situation from force majeure by describing it as ‘danger of force majeure’ – a situation that may evolve into force majeure and give cause for contract termination.58 In the language of Law 8.666, such circumstances are addressed as force majeure, to which different effects are ascribed depending on whether performance becomes impossible or not. Article 57, § 1, II, Law 8.66659 provides that the contractual times for start, completion or delivery may be extended due to ‘supervening exceptional or unforeseeable facts, outside the will of the parties, which alters fundamentally the conditions for performance of the contract’. In this scenario, Article 57, § 1, provides that the contract’s economic and financial equilibrium – the original balance between the supplier’s compensation (or other advantages) and its obligations – must be restored. For example, if a force majeure event delays performance and requires the supplier to remain mobilised for longer, the supplier will be entitled to additional payment. Article 65, II, ‘d’, Law 8.666,60 provides for the contract’s amendment to restore its original equilibrium for other disruptions that do not affect only the times for performance. The language of Art 65, II, ‘d’ is broad and comprises supervening unforeseeable facts, or foreseeable facts with consequences that cannot be calculated or avoided, as well as (expressly) force majeure, acts of God or factum principis. These are all factors that are outside the supplier’s will or control. The logic of the above provisions of Arts 57 and 65, according to public procurement scholars, is that the théorie de l’imprévision (unforeseeability doctrine) applies to force majeure events that do not create an impossibility of performance.61 If performance becomes impossible, force majeure applies fully, and the contract is terminated without responsibility for either party. If performance is only more onerous, the unforeseeability doctrine applies.62 The second approach under public procurement law in Law 8.666 is precisely that a force majeure event that renders performance impossible is a cause for termination of the contract without responsibility on either party. Accordingly,

58 EB Moreira and AC Bagatin, ‘Contratos administrativos, direito à greve e os eventos de força maior, in Doutrinas Essenciais de Direito Administrativo, Vol 4 (Revista dos Tribunais, 2012). 59 The duration of contracts is governed by Arts 105-06 in Law 14.133. Although no exact provisions correspond to Art57 Law 8.666, Art 124 Law 14.133 governs modifications in general. 60 Corresponding to Art 124, II, ‘d’, Law 14.133. 61 See M Justen Filho, Curso de Direito Administrativo, 13th edn (Revista dos Tribunais, 2018). 62 See TCU, Ruling 720/2008-Plenary, Rapporteur Augusto Nardes.

Emergency Procurement: Brazil  435 if a force majeure event is sufficiently severe, final and permanent to render performance impossible, Art 78, XVIII, of Law 8.66663 provides for force majeure or acts of God events as causes for termination of the contract. In this instance of force majeure, a supplier will not be entitled to damages, only to payment for what it has performed. Termination under such conditions is only admissible if the contract cannot be preserved by amendments that restore its equilibrium. Therefore, whether a contract must be terminated or amended is a matter of proportionality. Brazilian scholars and case law generally acknowledge that the force majeure risks under Arts 57 and 65 are allocated to the government party.64 The rationale behind this allocation is that, by assuming the force majeure risk, the Government ensures the supplier will submit its best possible offer, since it will not be required to include in its bid or price offer any amounts designed to cover the risks of force majeure. If such risks materialise, the corresponding costs will be borne by the Government. Whether or not these costs are covered by specific budgetary funds is not a decisive factor in determining whether the situation is one of contract review or termination. The Government’s duty to restore the contract equilibrium is governed by Arts 5765 and 65,66 Law 8.666, and they provide sufficient grounds to allow such additional payments. The Art 65 limit of 25 per cent for voluntary changes does not apply to contract review to restore its equilibrium,67 so this is not a cap that will affect whether the situation is one for contract termination instead of contract review. The parties are free to some extent to contract around this general allocation of risks, however. In practice, long-term contracts such as concessions and public–private partnerships, in particular, often provide for a risk allocation matrix in which certain risks relating to unforeseeable events are allocated to the private parties, typically when such risks are insurable and can be managed efficiently by a private party. In various sectors, such as federal concessions in general, the government party or regulators have been adopting measures designed to alleviate the burden that force majeure events have placed on private suppliers or concessionaires. The Federal Government Attorneys Office (AGU) acting within the Ministry of Infrastructure issued on 9 April 2020 an Advisory Opinion acknowledging that the Covid-19 pandemic and related government measures amount to force majeure and entitled suppliers and concessionaires to protection of their contractual equilibrium.68

63 Corresponding to Art 137, V, Law 14.133. 64 See Justen Filho, Curso de direito administrativo (2018); O Medauar, Direito Administrativo Moderno, 19th edition (Revista dos Tribunais, 2016). For case law, see BR, São Paulo State Court, Appeal 1021537-46.2018.8.26.0053, Judge Marcos Pimentel Tamassia. 65 Corresponding to Art 105, Law 14.133. 66 Corresponding to Art 124, Law 14.133. 67 See further M Justen Filho, Comentários à Lei de Licitações e Contratos Administrativos, 18th edn (Revista dos Tribunais, 2019). 68 Federal Government Attorneys advisory opinion’s nº 261/2020/CONJUR-MINFRA/CGU/AGU, available at sapiens.agu.gov.br/valida_publico?id=406894540.

436  Marçal Justen Filho and Cesar Pereira Since, as explained, force majeure in government contracts is generally a cause for review and amendment of the contract, not termination due to permanent impossibility, it is not a matter of defining post-termination financial liabilities but of changing contractual conditions to allow full performance. A supplier must not receive compensation if it has caused the event it intends to claim as force majeure. However, the fact that a supplier is in default does not entail an immediate loss of its rights to protection of the economic and financial equilibrium granted by the Constitution and procurement laws; this is generally acknowledged as instrumental to protect the suppliers’ rights to private property, which must not be taken directly or indirectly without adequate reasons, due process and compensation. Suspension of obligations due to force majeure may apply directly to the calculation of fines and application of other penalties, and to the duty to cure any existing default. Therefore, a party may not be required to cure its default within the contractual deadlines if the force majeure event means that this is not viable or is excessively burdensome. Consistently with this, daily fines or other penalties cease to run for the duration of the force majeure event or of related impacts.

V.  Security of Supply and Supplier Fraud As discussed above, there is perceived to be a strong and natural connection between public procurement and anti-corruption legislation in Brazil. Although the legislation does not state this clearly, the quality of procurement rules is measured in of their ability to prevent, disclose or punish corruption and misconduct than their ability to promote efficiency or more advantageous purchases. The Federal Office of the Comptroller General (CGU) maintains a ­channel for the general public or any interested party to report wrongdoing. As of November 2020, it had reported that 20 out of its 37 investigations in 2020 were related to misconduct in the use of government funds for fighting the pandemic.69 One well-known case is that of the state governor of Rio de Janeiro, impeached for a variety of accusations of misconduct, including over pandemicrelated procurement.70

69 Available  at  www.gov.br/cgu/pt-br/assuntos/noticias/2020/05/cgu-divulga-balanco-deacompanhamento-das-acoes-do-orgao-durante-pandemia and www.gov.br/pt-br/noticias/financasimpostos-e-gestao-publica/2020/07/cgu-monitora-recursos-enviados-a-estados-e-municipios-durantepandemia. The agency also offers a benchmark with data on COVID-19 related contracts for use by procuring entities (www.gov.br/cgu/pt-br/assuntos/noticias/2020/07/cgu-lanca-painel-para-dar-transparencia-acontratacoes-relacionadas-a-covid-19). 70 See further www.stj.jus.br/sites/portalp/Paginas/Comunicacao/Noticias/02092020-Corte-Especialconfirma-afastamento-do-governador-Wilson-Witzel-por-180-dias.aspx. The case number was not disclosed for confidentiality reasons.

Emergency Procurement: Brazil  437 An issue affecting security of supply, although integrity-related, was the buyer competition between the federal and state governments. In a series of cases state governments initiated, or sometimes concluded, procurement procedures and the Federal Government then requisitioned the goods – usually medical equipment – to use or redistribute in accordance with what the Federal Government viewed as a more reliable, efficient or universal plan. Several cases were submitted directly to the Supreme Court, which has competence over such state-federal disputes. In all cases listed in its COVID-19 disputes report,71 the Court quashed the federal initiatives and preserved the procurement powers of local administrations. The Federal Government invoked as grounds the authorisation for requisitioning under Law 13.979. The Court understood in preliminary injunctions that such actions violated the constitutional allocation of powers, amounting to an abuse of federal powers. This led the Federal Government to issue Decree 10.329 in April 2020, expressly acknowledging the powers of local administrations and restraining subsequent federal action.

VI.  Use of Procurement for Industrial or Social Objectives In Brazil, pandemic-related procurement has not been specifically used to promote economic or social goals. In general, procurement is considered a tool for the indirect advancement of such goals and in 2010, Law 8.666 was amended to include ‘sustainable national development’ as a purpose of the general procurement regime, together with non-discrimination and seeking the most advantageous offer; and this general framework underpins the pandemic regime, also. However, there are no specific rules or programmes aiming at using public procurement as in instrument for post-pandemic economic recovery. However, with existing long-term contracts, such as concessions and PPPs, areas most affected by the pandemic have received special attention from government agencies. A notable example is the sector of airport concessions. Discussions regarding contractual review due to changing conditions and force majeure have been expedited, and ANAC has issued Directives to waive contractual obligations that are incompatible with the current situation, such as compliance with performance indicators.72 By November 2020, ANAC was expected to announce adaptations in several airport infrastructure contracts due to the immediate effects in the pandemic in the 2020 fiscal year.

71 See further transparencia.stf.jus.br/extensions/app_processo_covid19/index.html. 72 For example, see Decision ANAC 80, of 16 April 2020, which waives compliance with requirements related to the availability of fire rescue teams (available at www.anac.gov.br/assuntos/legislacao/ legislacao-1/decisoes/2020/decisao-no-80-16-04-2020).

438  Marçal Justen Filho and Cesar Pereira

VII.  The Pandemic as a Catalyst for Procurement Reforms As mentioned above, the special temporary pandemic regime tackles some of the issues that had traditionally led to ineffectiveness in public procurement. Taking into account both federal expenditure and the funds assigned to states and municipalities for their own purchases, the temporary legislation will have applied to a significant portion of government purchases in 2020. It is to be expected that this experiment with expedited purchases will yield a commitment to make public procurement more effective and more efficient after the pandemic.73 A specific area in which the gains are already clear is transparency. A variety of federal and state government websites offer detailed and organised information about their procurement.74 In addition to websites linked to public procurement platforms, such as Comprasnet in the Federal Government75 or BEC in the state of São Paulo,76 the Ministry of the Economy provides consolidated and detailed information on the amount and nature of purchases77 and the Comptroller General’s office provides information on investigations into wrongdoing and misconduct. The engagement to promote transparency involves the court system, and the STF (Supreme Court) provides systematised information about the more than 5,000 cases that have reached it as of November 2020. These include some fundamental cases that have addressed the constitutionality of the temporary legislation or laid out the interplay between the federal and state or city governments in the exercise of public authority in the pandemic.78 Thus, it can be expected that both transparency and the availability of useful and manageable data on public procurement will be one area of improvement resulting from the pandemic-related experiments with new practices and legislation.

73 See Justen Filho, ‘Um novo modelo de licitações e contratações administrativas?’ (2020). 74 See, for example, www.gov.br/compras/pt-br/painel-covid (federal); www.saopaulo.sp.gov.br/ coronavirus/transparencia (state of Sao Paulo); painel.saude.rj.gov.br/contratos/transparencia.html (state of Rio de Janeiro); and www.coronavirus.pr.gov.br/Campanha/Pagina/TRANSPARENCIAEnfrentamento-ao-Coronavirus-0 (state of Paraná). 75 Available at www.gov.br/compras/pt-br. 76 Available at www.bec.sp.gov.br/BECSP/Home/Home.aspx. 77 Available at paineldecompras.economia.gov.br/planejamento. 78 The key Supreme Court decisions related to COVID-19 are available at www.stf.jus.br/portal/cms/ verTexto.asp?servico=resumocovid&pagina=resumocovid. On federal-state disputes on purchase of medical equipment see, for example: BR, Federal Supreme Court (STF), ACO 3.393 MC/MT, Justice Roberto Barroso, 22 June 2020; BR, STF, ACO 3.398/RO, Justice Roberto Barroso, 22 June 2020; BR, STF, ACO 3.385/MA, Justice Celso de Mello, 22 April 2020. The latter was made available in English by the Federal Supreme Court (STF) at portal.stf.jus.br/hotsites/webinar-cortes/assets/img/case_law_ compilation_covid19.pdf (a compilation in English of several pandemic-related STF cases).

Emergency Procurement: Brazil  439

VIII. Reflections The dramatic experience of the COVID-19 pandemic in Brazil, with high numbers of infections and deaths and visible economic impacts on everyday life, should entail a much-delayed reflection on the profound general inefficiency and lack of public purpose of its government structures. The limited and focused realm of public procurement may be a proxy for this broader discussion and is a suitable candidate in its own right for necessary and urgent reform. The emergency needs of the pandemic and the serious consequences of continued chronic inefficiency prompted the Brazilian state to discard existing methods and practices amassed over decades and start anew. Brazil was forced by the circumstances to adopt simplified, transparent, expedited procedures, with no more requirements than those strictly necessary, and to ensure that the officials in charge of applying them would have a safe means to implement them. As in many areas of life, it is impossible to determine at the present time precisely what lessons will have been learned and what will remain of the experiments of this period. Despite its gains in flexibility, transparency and a sense of purpose, even the emergency procurement regime in Brazil is far from ideal. For one thing, it left untouched the main issues of lack of planning and deficient contract management. Its shortcomings reflect broader, cultural problems that Brazilian society may overcome in time. Meanwhile, we may only rejoice that, albeit small, Brazil’s steps are in the right direction.

440

18 Emergency Procurement and Responses to COVID-19: The Case of Colombia SEBASTIÁN BARRETO CIFUENTES

I.  General Introduction As of 31 March 2021 there had been a death toll of 63,422 in Colombia1 out of a total population of roughly 50 million.2 At the beginning of the pandemic the country was not, comparatively speaking, severely hit, in part due to an early lockdown – commencing 25 March by Decree 457 2020, extended several times with exceptions, until 1 September 2020 by Decree 1076 2020 – but as the months have passed the numbers have gradually increased. The lockdown was presented by the Government as a measure to gain time to prepare the healthcare system and reduce the overall death toll by reducing infections. However, the by-product of such a long confinement is the impact on the economy and the most vulnerable sectors of the population that derive their income from street-selling and similar informal activities. Thus, an important part of the procurement during the pandemic is related to foodstuffs. It is also important to mention that the healthcare system was in a precarious state and subject to stress prior to the pandemic.3

1 Instituto Nacional de Salud, ‘COVID-19 Colombia’, available at www.minsalud.gov.co/salud/ publica/PET/Paginas/Covid-19_copia.aspx. 2 DANE, ‘Censo Nacional de Población y Vivienda’, available at www.dane.gov.co/index.php/ estadisticas-por-tema/demografia-y-poblacion/censo-nacional-de-poblacion-y-vivenda-2018/ cuantos-somos. 3 CA Agudelo et al, ‘Sistema de salud en Colombia: 20 años de logros y problemas’ (2011) 2817 Ciência & Saúde Coletiva 6.

442  Sebastián Barreto Cifuentes

II.  Introduction to the Regulatory Framework Colombia is a Civil Law country4 where the Constitution and Acts are the ­highest sources of law.5 However, progressively, as in many other countries, executive regulations have acquired an important role.6 From the moment of its independence Colombia distanced itself from its colonising country, Spain, and followed the legal tradition of France.7 This was especially the case for administrative law, including the sub-branch of public procurement, and the French concept of administrative law and administrative contracts was, and still is to an extent, well embedded in Colombia’s legal tradition.8 Public contracts are seen as a distinct legal category from private contracts and have their own legal regime and special judges: the administrative jurisdiction headed by the Council of State.9 However, exceptionally some public bodies can conclude contracts generally governed by private law. This means that there are two different public procurement legal regimes:10 (a) a regular public procurement law; and (b) a special type of public procurement law, similar in many respects to private law for certain bodies such as universities and state-owned enterprises (SOEs). However, for SOEs the legal regime of administrative contracts, stricto sensu, is reserved to public entities that are not in competition. Act 80 1993, Act 1150 2007 and Decree 1082 2015 are the main legal instruments regulating public procurement. These instruments focus mainly on the pre-contractual stage and, in particular, on procurement methods. The default method is an open procedure (licitación) – a single-stage, formal tendering procedure without negotiation or dialogue, in which the procuring entity set outs the needs from the outset of the procedure. This applies even for complex projects such as public–private partnerships (PPPs). In addition, the law

4 MG Monroy Cabra, Introducción al Derecho, 17th edn (Temis, 2018) 161; JH Merryman, La tradición jurídica romano-canónica, 1st supp, 2nd edn (Fondo de Cultura Económica, 2011). 5 H Santaella Quintero, ‘Del principio de legalidad al principio de juridicidad: implicaciones para la potestad normativa de una transición constitucionalmente impuesta’ in A Montaña and A Ospina (eds), La Constitucionalización del Derecho Administrativo. XV Jornadas Internacionales de Derecho Administrativo (Universidad Externado de Colombia, 2006). 6 H Santaella Quintero, ‘Las mutaciones del sistema de fuentes del derecho administrativo en Colombia: en tránsito hacia un ordenamiento jurídico administrativo menos jerárquico, menos rígido, menos formal y menos estatal’ in JI Rincón Córdoba (ed), Las transformaciones de la administración pública y del derecho administrativo, vol 1 (Universidad Externado de Colombia, 2019) 87. 7 L Rodríguez, Derecho Administrativo: General y colombiano, vol 1, 20th edn (Temis, 2017) 65. 8 S Barreto Cifuentes, ‘La pérdida de protagonismo del Estado: la Administración vista en un escenario de globalización’ in JI Rincón Córdoba, Las transformaciones de la administración pública y del derecho administrativo, vol 1 (Universidad Externado de Colombia, 2019). 9 A Montaña Plata, Dimensión teórica de la jurisdicción contencioso administrativa en Colombia (Universidad Externado de Colombia, 2005) 89. 10 JC Expósito Vélez, ‘Definición de “contratos estatales”. Contratos estatales propiamente dichos y contratos estatales especiales. Regulación del contrato suscrito con entidades estatales. Jurisdicción competente’ in AF Ospina (ed) Los grandes fallos de la jurisprudencia administrativa colombiana, (Universidad Externado de Colombia, 2013).

Emergency Procurement: Colombia  443 allows, on specified grounds, certain other methods that are shortened versions of formal tendering whereby entities formulate their needs at the outset and suppliers submit offers that must be, in broad terms, responsive to the specifications; selección abreviada, which has shorter terms than the open procedure for each stage; and concurso de méritos, reserved for consultancy projects, in which price cannot be evaluated and experience must be an award criteria, contrasting with the general procedures in which experience can be a qualification criterion only and price is always evaluated. Finally, in certain circumstances such as emergency situations or when only one supplier is available, entities can use contratación directa, a procedure allowing awards without competition similar to the UNCITRAL single-source method. Framework agreements are available, awarded in a two-stage procedure. The first stage includes an award by Colombia Compra Eficiente (the central procurement body) by the ‘open procedure’ licitación pública to one or a limited number of suppliers. The award of a place on the framework is determined by the tender, which generally includes price, except for framework agreements specifically designed to address the needs of the COVID-19 pandemic, where price is only evaluated in the second stage, all suitable suppliers having access to the framework. The second stage consists of individual purchase orders by procuring entities, through the issue of a request for quotations, submission of tenders (price only) to obtain lower prices and then award. Framework agreements must be used, when available, by central government authorities. This is highly relevant since, as will be seen, the central procurement body concluded framework agreements to deal with the COVID-19 pandemic. Previously, such framework agreements were optional for sub-central authorities.11 However, Decree 310 of 25 March 2021 now provides, subject to a schedule of implementation issued through regulation, that framework agreements will also become mandatory for sub-central authorities. Both Acts and the Decree provide very detailed rules on the steps that procuring entities must follow to plan, budget and award contracts. Once the contract is concluded the legal ‘density’ of regulation decreases;12 however, there are a few rules on the management stage and other post-contractual matters. For example, procuring entities enjoy public law powers to unilaterally modify, terminate and interpret contracts, as well as to declare breaches of contract and enforce liquidated damages clauses of their own accord.13 Colombia is not party to Mercosur or the World Trade Organization’s Agreement on Government Procurement (GPA) (which was discussed in chapter three), nor has it directly used the UNCITRAL Model Laws on public

11 S Barreto Cifuentes, ‘On the decision of the Colombian Council of State to prohibit the use of Framework agreements for “minimum amount” public contracts’ (UoN Law Blog, 8 December 2017), available at blogs.nottingham.ac.uk/schooloflaw/2017/12/08/decision-colombian-council-state-prohibituse-framework-agreements-minimum-amount-public-contracts. 12 LG Dávila Vinueza, Régimen Jurídico de la Contratación Estatal, 3rd edn (Legis, 2016). 13 JL Benavides, Contratos Públicos: Estudios, 1st edn (Universidad Externado de Colombia, 2014) 109.

444  Sebastián Barreto Cifuentes procurement (discussed in chapter 2). However, the influence of international organisations can be seen in various respects in the design and reform of public procurement law. Thus, the enactment of Act 80 1993 seems to have been influenced by the Guidelines of the World Bank and the Interamerican Development Bank.14 More recently, Colombia acceded to the Organisation for Economic Cooperation and Development (OECD) and as part of its accession process it reformed the public procurement ‘ecosystem’. For example, in 2011, a central purchasing body, Colombia Compra Eficiente, was introduced, which is in charge of procurement policy and has also put in place framework agreements, introduced in 2007 following development banks’ recommendations.15 In general, Colombia has adapted to internationally recognised good practice and has a working system. Currently, the main problem relates to supplier remedies: procurement decisions can be challenge before the authority and the administrative jurisdiction, but the former process is generally seen as a formality with no possibility of reconsideration, while the judicial system is inefficient, with cases taking up to 15 years.16 Colombia has two bodies controlling public procurement. One is the Procuraduría General de la Nación, a kind of ombudsman, which has disciplinary powers to sanction public officers who violate their civil service duties. The other is the Contraloría General de la Nación, which is the overview authority on financial matters of the state and may order restitution of public monies by civil servants or suppliers if it finds that public resources have been misused, although only after an administrative procedure involving due process. The OECD has suggested that this may have led officers to focus on compliance rather than commercial results, in order to avoid personal liability.17 There is also social control over public procurement, under Statutory Act 1757 2015, which allows all citizens to intervene or request information or documentation related to procurement procedures, unless it is reserved information.

III.  Procurement of New Requirements, Including the New Emergency Procurement Law The COVID-19 pandemic has led to new and unanticipated procurements, including for urgent PPE and other medical supplies in the face of competition from countries with more economic power. As mentioned, the pandemic and related 14 G Lozano Villegas, ‘La incidencia de los estándares internacionales sobre los sistemas de compras públicas y su relevancia en América Latina’ in G Lozano and JC Covilla (eds), Del contrato estatal a los sistemas de compras públicas (Universidad Externado de Colombia, 2019) 24. 15 Barreto Cifuentes, ‘On the decision of the Colombian Council of State’ (2017). 16 OECD, ‘Public Procurement in Colombia’ in OECD, ‘Colombia Implementing Good Governance’ (OECD Publishing, 2013) 417, available at read.oecd-ilibrary.org/governance/colombiaimplementing-good-governance_9789264202177-en. 17 OECD, ‘Towards Efficient Public Procurement in Colombia: Making the Difference’ (2016) OECD Public Governance Reviews, OECD Publishing, available at doi.org/10.1787/9789264252103-en.

Emergency Procurement: Colombia  445 lockdown exacerbated the already difficult economic situation of a significant proportion of the population, creating a significant need to distribute monetary aid (not covered in this chapter) and to procure and supply foodstuffs to citizens, in order for the lockdown to be effective.

A.  Urgent Procurement under Ordinary Public Procurement Law As mentioned above, the legal framework, particularly Art 2-4-h of Act 1150 2007, provides for single-source awards in cases of urgency, involving direct negotiations with a chosen supplier, where they are held to address an urgent situation. To invoke this possibility, procuring entities must declare by means of a published administrative act (open to challenge before the administrative jurisdiction) the urgency of the procurement, including the circumstances that justify use of the urgency method and, to the extent practicable, list the contracts to be concluded to address the urgent needs. No legal rules or guidelines exist on how to choose the supplier. Procuring entities must send all contracts concluded by this method immediately after conclusion to the fiscal controlling bodies (national or regional audit bodies) under Art 43 of Act 80 1993, which must issue an opinion, within two months of receiving the documentation, relating to the facts and circumstances that justified the emergency procurement. Fiscal controlling bodies tend to focus on cost issues, possibly as a consequence of the scope of their functions. This procedure and the subsequent review of contracts appear to be aimed at allowing flexibility to procuring entities to deal with urgency, while also ensuring through ex post review that concerns over value for money and integrity are met. Contracts must also be published in the SECOP, the public electronic procurement platform, within three days of conclusion and the Colombia Compra Eficiente has clarified18 that this obligation applies to emergency procurement. Unlike, for example, EU law,19 Colombia does not provide for shortened versions of the normal open-tendering procedures or other methods for urgent situations, nor does it include any rapid and flexible competitive procedure with direct solicitations along the lines of the UNCITRAL competitive negotiations method. This, it might be argued, impels authorities towards single-source awards for urgent needs. Act 1523 2012 addresses management of the risk of disasters and creates a system with special resources. Article 66 provides for a special private law procurement regime for all authorities that are party to the system of contracting using these resources, subject to the special oversight by the audit bodies foreseen in Art 43 of Act 80 1993.

18 In

this sense see Colombia Compra Eficiente’s Legal Opinion C-408 of 26 July 2020. ch 2, section III.

19 See

446  Sebastián Barreto Cifuentes

B.  The New Rules Addressing the COVID-19 Pandemic In addition to the above provisions of general procurement law for urgent situations, the constitutional order envisages special rules for emergencies situations. For these the president must declare a formal emergency, and, from the moment of the Decree making the declaration, is invested with authority to issue legislative Decrees with the legal force and status of Acts of the congress. These Decrees, as a rule, may be in force only as long as the emergency itself is legally in place. Both the Decree declaring the emergency and the related Decrees are subject to automatic control by the Constitutional Court; the Executive must send them to the Court, which then renders a judgment on their constitutional validity. Under these powers, the President issued Decree 417 on 17 March 2020 ­declaring a State of Economic, Social and Ecological Emergency. The resulting power to issue emergency Decrees has been exercised on numerous occasions, but few of these Decrees are relevant to this chapter. However, some are linked directly or indirectly to procurement, including trade aspects. In particular, Decree 440 was issued on 20 March 2020, only three days after the emergency was declared, with the object of adopting ‘urgency measures with regard to public procurement, on the occasion of the State of Economic, Social and Ecological Emergency arising out of the COV/19 Pandemic’. Decree 537, with the same object, introduced minor changes to Decree 440 2020, relating mainly to the order and transparency of the legislation by adding the new provisions to the regular procurement legislation, arguably tacitly replacing Decree 440 2020; and the rules of these Decrees are thus analysed together. Decree 537 remains in force for the duration of the emergency as declared by the Health Ministry (which is different from the emergency declared by the President, and now determines the duration of Colombia’s extraordinary legislation). As of 31 March 2021, this was scheduled to last until 31 May 2021. Other Decrees also contain measures relevant to this chapter and are analysed below.

i.  Use of Electronic Means for Procurement Procedures and Other Administrative Measures The first two Articles of both Decrees allowed use of electronic means for hearings in procedures for awarding public contracts (Art 1) and in administrative proceedings for sanctioning contractors (Art 2). Further orders were introduced requiring authorities to choose and indicate the relevant electronic means as well as recording of data. Article 9 introduced an obligation to implement electronic billing for all public contracts. The Decrees also allow procuring entities to suspend award procedures and to revoke the Act that initiates the procurement procedure, which is not permitted under ordinary circumstances (Art 3), seeking to save resources that may then be redirected to address the pandemic and its consequences.

Emergency Procurement: Colombia  447

ii.  The Mandatory and Recommended Use of Framework Agreements Ordinary legislation and regulatory provisions (Art 2 Act 1150 2007, and Art 2.2.1.2.1.2.7. of Decree 1082 2015) oblige national authorities of the executive branch to acquire off-the-shelf goods and services through framework agreements. Sub-central entities, on the other hand, as well as judicial, legislative or autonomous bodies, were not generally required to use such agreements but could do so, although this changed as of 25 March 2021 under Decree 310 2021, mentioned earlier. In this context, Art 4 of Decree 440 2020 and Decree 537 2020, prescribed that during the emergency sub-national authorities acquiring off-the-shelf goods and services had to give preference to purchasing by catalogue or framework agreements available in the virtual shop of the Colombian state managed by the Colombia Compra Eficiente. The meaning and extent of the ‘preference’ required was not clearly stated, thus apparently leaving some discretion to sub-central authorities. Arguably the preference required simply that sub-central authorities must justify on a case-by-case basis decisions not to use framework agreements. The alternative and thus the preference ceased to exist due to Decree 310 2021 which, as noted, made use of available framework agreements for sub-central authorities mandatory. Another interesting development has been the introduction of a new approach to framework agreements. As mentioned, these are normally awarded for a period after an open procedure and generally concluded with a few suppliers (although an option to award to just one also exists). Once a framework agreement is concluded, procuring entities can place orders only with these suppliers, and new suppliers may not accede to the agreement. Art 5 of Decrees 440 and 537 2020, however, conferred on Colombia Compra Eficiente the authority to design and organise framework agreements to be awarded ‘directly’ – that is, without an open procedure with competition. This authority was only given for the period of the declared emergency and exclusively ‘to facilitate the provision of goods and services directly related to the emergency’. In practice, Colombia Compra Eficiente has established some requirements for acceptance onto framework agreements that are apparently concerned simply to ensure ability to deliver, providing for admission to the framework of all suppliers that meet the requirements. Thus, there is no single tendering exercise to select the pool of suppliers, but an agreement permanently open and permanently advertised (on the website of Colombia Compra and by TV via the official government communication spaces).20 Moreover, once on the system, suppliers are permitted to submit quotations at the request of procuring entities, and the entity must award the order on the basis of the best offer. This is similar to the open framework agreement concept of the UNCITRAL Model Law, discussed in chapter 2. 20 Colombia Compra Eficiente, Instrumento de Agregación de Demanda Emergencia COVID-19, available at www.colombiacompra.gov.co/tienda-virtual-del-estado-colombiano/salud/instrumentode-agregacion-de-demanda-emergencia-covid-19.

448  Sebastián Barreto Cifuentes Procurement of medical equipment and protective equipment during a pandemic seems to be a textbook example of when it is appropriate to use this kind of arrangement that does not involve limiting the number of suppliers through a first-stage competition; it is not meaningful for suppliers to submit their own terms – such as price – when applying to go on the framework because of the volatile nature of the market.

iii.  Direct Contracting and Department Store Buying To enhance legal certainty for procuring entities both Decrees incorporated two rules already applicable under ordinary legislation. First, Art 6 allowed acquisition of goods ‘related to the emergency’ from major stores (grandes superficies) – an undefined concept but one intended to include, in particular, supermarkets and department stores – subject to a legal maximum amount which differs for each authority based on its budgets. In addition, Art 7 of the Decrees clarified that under the prevailing circumstances procuring entities were allowed to make direct awards under Art 42 Act 80 1993 – that is, they were directed to the urgency methods in ordinary legislation – for provision of goods, delivery of services, and performance of works in the immediate future, with the objective to prevent, contain, and mitigate the effects of the pandemic, as well as for the necessary works to optimise the flow of resources in the healthcare system.

In practice, these rules have been widely used for construction of hospitals, and acquisition of medical equipment and of foodstuffs to address the pandemic and its effects.21 The controlling bodies have found evidence of misuse of resources in relation to the pandemic and suspicions of corruption are regularly in the news.22 The media seems to suggest, and the general public to perceive, that this is a consequence of widespread use of non-competitive procurement methods. However, evidence so far is anecdotal only and there is no data on the link between these methods and corruption.

iv.  Ordinary Modifications Rules and Expanded Grounds for Modifications Colombian public procurement law, following and adapting the French tradition, expressly provides, in Art 16 Act 80 1993, the power for procuring 21 For example, by the municipality of Bogota whose contracts related to COVID-19 are published at secretariageneral.gov.co/transparencia/contratacion/relacionadas-con-COVID-19; and as seen also on the national e-procurement website: www.secop.gov.co/CO1BusinessLine/Tendering/Contract NoticeManagement/Index. 22 eg, Editorial, ‘La corrupción tras los recursos para la pandemia’ Revista Dinero (25 June 2020); R López Pérez, ‘Pandemia crea la tormenta perfecta para la corrupción’, Portafolio (19 May 2020); Judicial, ‘La pandemia disparó el virus de la corrupción en los contratos’ Revista Semana (23 May 2020).

Emergency Procurement: Colombia  449 entities unilaterally to modify a contract – by reducing or adding works, labour, supplies or services – to avoid paralysing the contract or a serious impact on the public services concerned. This must be done via a duly motivated administrative act, challengeable before the administrative jurisdiction. This power is, however, limited to protect the supplier, so that if the price is altered in respect of more than 20 per cent of the original contract value the supplier can renounce performance. Moreover, for both bilateral and unilateral modifications, public procurement legislation provides a further limit to protect the public interest, prohibiting adding more than 50 per cent of value (Art 40 of Act 80 1993). As in other jurisdictions,23 case law has developed an array of limits based on the principles of the system to prevent modifications undermining the public procurement rules, the principle of competition and, in particular, supplier selection procedures.24 These allow entities to modify contracts only when: (a) facing a new circumstances not within the control of either party;25 (b) the modification responds strictly to the new needs created by the unforeseen circumstances; and (c) the contract’s object is not completely modified to transform it into a new agreement. The emergency procurement law for the pandemic introduced one new rule on modifications, in that Art 8 of Decrees 440 and 547 2020 expressly allows a modification ‘regardless of its value’. This change was, however, provided only for contracts ‘related to goods, works, or services that permit better management and mitigation of the emergency’. Thus, contracts for medical equipment or personal protection equipment will not be subject to the 50 per cent limit, but contracts for the construction of works or buildings, such as schools or governmental buildings, will still be subject to such a limit. This rule appears applicable to relevant contracts concluded prior to and after the pandemic. This rule can be criticised for disregarding the effects of the pandemic on some contracts – for example, increased biosecurity related costs or the halting of construction works while wages were still due. However, the principle of economic equilibrium of the contract may allow suppliers to recover some of these costs under the theory of l’imprevision.26 This implies that if facing unforeseeable circumstances that seriously disrupt the economic balance of the contract, the contracting partner may recover the cost of performance, but claim profit on the original contract value only. This is grounded on the idea that had the contracting partner known of the unforeseeable events, it would not have concluded the contract on such terms; thus, it should be put it in the position it would have agreed to had it known. Specifically for the pandemic, the National Agency for the Legal

23 eg EU law. 24 Corte Constitucional, decision C-300/2012; S Barreto Cifuentes and J Santos Rodríguez, ‘Los límites a la modificación de los contratos estatales en Colombia’ in JL Benavides (ed), Fallos referentes en contratación estatal (Universidad Exterado de Colombia, 2020) 321. 25 Consejo de Estado, Sala de lo Contencioso Administrativo, Sección Tercera, decision of 29 January 2004, file 10779. 26 L Rodríguez, El Equilibrio Económico en los Contratos Administrativos, 2nd edn (Temis, 2012).

450  Sebastián Barreto Cifuentes Defence of the State issued ‘Guidelines on economic disequilibrium of the contract caused by Covid 19’,27 summarising this concept and providing a questionnaire/ checklist to guide procuring entities on when to pay such compensation. Thus, the 50 per cent limit on modifications arguably has not hindered the ability to take into account the new circumstances in which contracts must be performed. For example, prices of works contracts can be adapted to biosecurity measures, including reduced numbers of construction workers on site. For those contracts where modifications are allowed under the new provisions without limit, Art 8 requires procuring entities ‘to justify in advance the need and the way in which the goods and services will contribute to the management or mitigation of the emergency’. This, in practice, means an assessment of the needs and the subject matter of the contract. Colombian law perceives this as a consequence of the ‘planning principle’, which requires attention to the planning stage, and has been interpreted as imposing certain precontractual obligations on both parties. The studies and justifications must be published in the SECOP and can be challenged before the administrative jurisdiction. This provision removing the 50 per cent limit for certain contracts will only apply while the formal declaration of emergency continues. After that time no further modifications to the price (additions) are permitted for contracts already expanded by more than 50 per cent of their original value, the 50 per cent limit of the ordinary legislation acting once again as the parameter. Although this last rule limits authorities’ post-pandemic capacity to renegotiate, it is grounded on the idea of respect for competition and other public procurement principles. It also incentivises planning by forcing authorities to launch tendering procedures for goods and services originally acquired through contracts that reach the 50 per cent limit. One final comment is that the emergency law on modifications did not introduce new legislation to overrule or exclude the case law-based limits on modifications or the right of the contractor to renounce performance if a unilateral modification exceeds 20 per cent of the original contract value. It might be hypothesised that since competition is a constitutional right and principle,28 limits to modifications arising directly out of this principle cannot be restricted via legislation; or the emergency legislator might have considered it unnecessary to suspend these limits. Finally, sub-standard performance or the non-enforcement of contractual rights is not considered in Colombia as a modification stricto sensu and thus competitors cannot challenge such conduct before a court. Nonetheless, other controlling bodies, particularly the Contraloría and the Procuraduría, review the quality of goods and services received, and personal liability of procurement officers may deter such conduct. 27 Agencia Nacional de Defensa Jurídica del Estado, ‘Lineamientos sobre desequilibrio contractual por Covid-19’ (September 2020). 28 Colombian Constitution 1991, Art 333.

Emergency Procurement: Colombia  451

v.  The Creation of a Legal Regime Governed by Private Law The previous sections have been concerned with procurement of items and services such as medical equipment, hospital construction and foodstuffs in the national market, but also important in the pandemic generally was procurement in international markets. For this purpose, the Government issued Decree 544 of 13 April 2020, which states its object as being: [T]o adopt measures in public procurement for the acquisition in the international market of medical equipment and personal protection items, concerned with urgent needs and due to the turbulence of the global markets for goods to mitigate the pandemic of the coronavirus COVID-19.

Under Art 1 contracts for certain products, namely biomedical equipment, medical implements, goods to furnish hospitals, items for personal protection, and medicines, are excluded from the obligations arising out of public procurement law and, consequently, private law will apply; this is the case regardless of whether the seller is a natural person or a legal person. Article 3 of Decree 544 2020 requires authorities to submit the relevant contracts to the fiscal controlling bodies, as occurs with the regular urgency procedure described earlier. The private law regime appears to have responded to the need to compete in international markets for goods that were in high demand at the beginning of the pandemic, and still are to an extent. The regime in this particular instance allows the Government to act as a competitive buyer without being bound to follow lengthy and complex public procurement rules. This special regime grants significant flexibility. It contrasts sharply with the approach of ordinary public procurement law which, in Colombia, is not generally concerned with the state as a competitive buyer (in the sense that is competing with other buyers and needs to ‘win’), but with securing competition between suppliers. It is also notable that Legislative Decree 559 2020 creates a sub-account for the Mitigation of Emergencies in the National Fund for the Management of Risks of Disasters, created by Act 1523 2012. Article 4 of this Decree establishes that contracts concluded by the trust company administering the fund are ‘subject only to the requisites and formalities provided for by the law to contracting between private parties’. It also provides for a post-contract review procedure conducted by the Office of the Head of the National Audit Body reviews, similar to the regular urgency procedure outlined above. Acquisition of vaccines has been managed in secret and the contracts are covered by confidentiality agreements. However, a Ministry of Health statement29 indicates that they were signed by the National Unit for the Management of Risk of Disasters and the trust company administering the funds referred to in Decree 559 2020. This means that they are excluded from public procurement requirements and subject to a special private law regime, 29 Ministerio de Salud y Protección Social, ‘Comunicado a la opinión publica’, 11 January 2021, available at www.minsalud.gov.co/Paginas/Comunicado-a-la-opini%C3%B3n-publica.aspx.

452  Sebastián Barreto Cifuentes which allows the Government to agree non-disclosure agreements and confidentiality clauses, and even to subject these contracts to laws other than those of Colombia.

C.  Export Controls and Distribution Priority Although export control measures are not directly linked with the national public procurement system, they do have a direct impact on the international trade aspects of procurement. In this respect, Decree 462 2020 of 22 March 2020, expressly forbids the ‘export or re-export of products needed to address the emergency caused by the coronavirus 2019’, as well as introducing some rules on distribution of such goods within Colombia. The recitals expressly mentions that the General Agreement on Tariffs and Trade (GATT), Art XI, allows temporary export controls to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party, and that under Art XX nothing in GATT shall be construed as preventing the adoption of measures necessary to protect human life or health. The extent to which these provisions can, in fact, justify such export control measures is discussed in chapter 9. In Art 1 of the Decree, the Government listed 10 products of which export is prohibited, including alcohol, soap, sanitiser, plastic gloves and plastic masks. Article 4 prohibits export or re-export of some listed products regardless of origin; thus for products in this list even products imported specifically for re-export cannot be exported. The list includes medical equipment, particularly respiratory, ventilators and surgical implements. However, this provision does not prevent export of goods imported before the Decree entered into force (Art 7). In addition, distributors of products listed in Art 1 are instructed to prioritise supply to certain institutions. In order of priority these are, first, health institutions with intensive care units, intermediate care units for newborns, infants, or adults, or hospitalisation or emergency services for adults or infants, that are certified by ICONTEC (a Colombian private body dealing with technical norms and certification) at the time of the sale and other health institutions duly authorised by the Ministry of Health and Social Protection. These are followed, in order, by urban transport companies, airports and coach stations, public authorities, armed forces and civil services such as firefighters and disaster response bodies, subdistributors and delivery-sellers of the products in the list, drugstores, and other enterprises authorised by the Government (the last group receiving only supplies necessary for employees to function for one week). Another interesting measure affecting trade, and procurement indirectly, is the elimination of trade tariffs for some foodstuff products. In particular, Art 2 of Decree 523 of 7 April 2020 mandated a zero per cent trade tariff for hard yellow corn, sorghum, soy and soy cake. This seems to respond to the need to decrease costs, including import costs, for foodstuffs since the Government is currently one of the main buyers, purchasing them to supply to vulnerable persons.

Emergency Procurement: Colombia  453

D.  Joint Procurement The author’s review of the electronic procurement platform (SECOP) found no evidence of relevant joint procurement, although it cannot be concluded definitively that none was undertaken. In ordinary circumstances, with the exception of some contracts awarded by the Federation of Municipalities and Federation of Departments, joint procurement between entities is not in fact common, and no specific legal rules exist for this, although some authorities may conclude inter-administrative contracts, which can be concluded directly without competition, under which one authority acts as the procuring entity for more than one authority. The other relevant aggregation demand mechanism is the conclusion of framework agreements by Colombia Compra Eficiente on behalf of all procuring entities, as discussed above.

E.  Supplier Remedies Colombia has two main mechanisms for protection for suppliers: an administrative application before the procuring entity itself (reposición and apelación); and the judicial remedies system before the administrative jurisdiction. Moreover, aggrieved bidders may attempt to challenge decisions through the acción de tutela (exclusively for the protection of human rights) or to call issues to the attention of controlling bodies, particularly the Procuraduría (ombudsman with disciplinary powers) and the Contraloría (the fiscal controlling body). In addition, Art 140 of the Code of Administrative Procedure and Judicial Administrative Process expressly mentions that Acts relating to procurement activity that occur before the conclusion of the contract may be challenged under Arts 137 and 138, which refer to actions for nullity or nullity with damages. Contractual disputes are dealt with under a different procedure in Art 141. Thus, the Council of State, as well as administrative tribunals and judges, will examine claims against procuring entities for all pre-contractual or contractual acts related to urgent procurement. The Council of State has expressly said: It is evident that [the] administrative act that declares the existence of a manifest urgency and determines, orders or authorises the direct conclusion of contracts, without following procurement procedures that have to be normally used to select the supplier, is an administrative decision adopted before the conclusion of the respective contracts. Thus, it corresponds to what traditionally are known in doctrine or jurisprudence as pre-contractual administrative acts that may be controlled … via the action of nullity or nullity with damages.30

30 Consejo de Estado, Sala de lo Contencioso Administrativo, Sección Tercera, decision of 27 April 2006, file 05229.

454  Sebastián Barreto Cifuentes Although this is the principle underlying the law, the practice differs dramatically. As a rule, suppliers are limited to damages since there is no standstill period, interim measures are not generally granted, and legal proceedings are lengthy – up to 15 years for damages cases (including all appeals) according to an OECD analysis.31 Thus, the OECD points out, adoption of interim measures by judges is needed to render the system effective. However, since judges will balance the likelihood of breach, the risk of harm and the interests at stake,32 while no general abstract conclusion is possible, judges may be disinclined to adopt interim measures with respect to emergency procurement for medicines, medical equipment or foodstuffs, especially in a pandemic. The 2018 Mechanism for Assessment of Procurement Systems (MAPS) reported that a specialised procurement tribunal was desirable.33 However, financial reasons were presented to justify not introducing such a tribunal; no such a tribunal has been created, nor is this part of the current legislative agenda of the national Government. To the best of the author’s knowledge there have been no cases related to urgency before the courts so far and supplier remedies do not seem to have had a role in controlling pandemic-related procurement, although the prospect may, of course, have a deterrent effect. However, the public enforcers, such as Contraloria and Procuraduria, are free for suppliers to use (and do not involve lawyers’ fees), and offer some real possibility of preventing the award, rather than just damages. Further, while members of the public cannot bring proceedings under the traditional contract mechanisms of control before the judiciary, they can complain to the public enforcers and can also use other legal means such as the acción popular (literally, popular action), aimed at protecting collective rights such as public funds.34

IV.  Security of Supply and Contractor Fraud At the time of writing this chapter, no security of supply or contractor fraud measure had been adopted specifically because of the pandemic. However, it is worth noting that to conclude contracts with the state suppliers must be previously registered in the Registro Único de Proponentes (RUP). This is a formal

31 OECD, ‘Towards Efficient Public Procurement in Colombia: Making the Difference’ (2016) 92 OECD Public Governance Reviews, available at doi.org/10.1787/9789264252103-en 20. 32 Art 231 of the Code of Administrative Procedure and Judicial Administrative Process mandates that the judges must verify that one of the following conditions is met: ‘4. […] a) not granting the injunction will cause an irremediable prejudice or b) There are serious reasons to consider that not granting the injunction will render nugatory the effects of the judgement’. 33 Colombia Compra Eficiente, ‘Evaluación del Sistema de Compras Públicas de Colombia: Metodología MAPS Versión 2017’ (CCE, April 2018) 36, available at www.colombiacompra.gov.co/ sites/cce_public/files/cce_documentos/borrador_informe_final_maps.pdf. 34 See Art 88 of the Colombian Constitution, and Art 144 of the Code of Administrative Procedure and Judicial Administrative Process, amongst others.

Emergency Procurement: Colombia  455 register administered by the Chambers of Commerce, in which suppliers register all their relevant information including, although not exclusively, relevant technical experience, financial capacities, past contracts, sanctions and suspensions and debarments.

V.  Use of Procurement for Industrial or Social Objectives In Colombia the use of procurement to promote industrial, social or environment objectives (horizontal policies)35 is not a central aspect of public procurement law as an academic or practical issue. However, the ordinary public procurement law does have several examples of horizontal policies in place. These include reserved contracts for SMEs,36 additional points as award criteria for contractors employing people in situation of disability37 and women-owned enterprises,38 and preference in the case of a tie for national goods or services (with due respect of international trade obligations of national treatment), SMEs, or contractors with people with disabilities in their staff.39 This has not been an issue in the pandemic and no special measures have been adopted, although coincidentally during this time Act 2040 2020 was enacted giving preference in the case of a tie to contractors employing those who have reached retirement age but have no retirement pension, and Act 2069 2020 establishes a whole new system of preferences in cases of ties.

VI. Reflections The pandemic, it is submitted, has shed light on many weaknesses, systemic and occasional, of the public procurement system. However, the country has not yet overcome the worst part of the disease or of its economic consequences and the authorities are still extinguishing fires rather than considering how to prevent future ones. Thus lessons learned from the experience of the pandemic can be provisional only. It can be argued, first, that Colombia Compra Eficiente has proven, more than ever, its importance for public procurement. In particular, it organised, negotiated and concluded framework agreements for the acquisition of supplies to address the pandemic and (with the acquisition of foodstuffs) the pandemic’s economic consequences which, as explained were mandatory for central level authorities 35 S Arrowsmith, ‘Horizontal policies in public procurement: a taxonomy’ (2010) 10 Journal of Public Procurement 149, 186. 36 Act 590 2000, Art 12.4; Colombia Compra Eficiente’s Legal Opinion C-214 of 21 April 2020. 37 Act 1318 2013, Art 13; Colombia Compra Eficiente’s Legal Opinion C-302 of 12 June 2020. 38 Act 2069 2020, Art 32. 39 Decree 1082/2015, Art 2.2.1.1.2.2.9; Colombia Compra Eficiente’s Legal Opinion C-460 of 15 July 2020. Now regulated by Art 35 of Act 2069 of 31 December 2020.

456  Sebastián Barreto Cifuentes and also used by sub-central authorities. In this manner, commercial prices were guaranteed for the relevant authorities. Secondly, the authority prepared the emergency legislation adopted by the president under its special constitutional powers to adapt the procurement system to the pandemic. The fact that the authority had built capacity to identify weaknesses of the system to address the pandemic greatly facilitated, it is submitted, the rapid response in preparing and adopting such legislation (Decree 440 was adopted four days after the emergency was declared). Moreover, it is possible that open framework agreements used in Colombia for the first time in the pandemic could be adopted by permanent legislation. The conclusion of such agreements in practice, moreover, could prepare for future events similar to the current pandemic. Another important fact that deserves attention is the lack of an effective remedies system under both urgent and normal circumstances. One lesson, patent but possibly still not learnt, is that Colombia has a greatly inefficient and ineffective pre-award remedies system. This, in ordinary circumstances, is compensated for by the interim measures adopted by judges. However, because they need to balance the public interests at stake, in urgent situations the system is wholly ineffective. It is submitted that a complete rethink is needed in this area, including the creation of a specialist procurement tribunal.40 The pandemic has possibly offered a much-needed opportunity to modify and improve the suppliers’ remedies system. However, this does not seem to be on the current agenda of the government or public opinion. In fact, generally, impetus for reform directly linked to the pandemic does not seem to exist. There was, however, a general review of the system underway prior to the pandemic but a creation of a specialised tribunal or similar measures apparently will not be part of the reform. Due to the secondary role of suppliers’ legal remedies in the control of the system given the lack of effectiveness of those remedies, the controlling bodies have acquired a prominent position in pre-contractual matters, to the point that they seem to be the only controllers of the pre-contractual stage for the pandemicrelated procurement activity. Thus, they have acted as a backstop for corruption and competition restrictions. Furthermore, these bodies have exercised pressure on procuring entities to get value for money. This has been done, for example, through their functions of reviewing contracts after emergency procurements carried out by the fiscal control authorities, and also through the general oversight functions. Thus, as mentioned, they have highlighted contracts where excessive costs have been paid and commenced investigation into the officers involved in those irregularities. Therefore, it is submitted, they have accomplished their role to balance the needs for limited competition in emergency procurements with value for money and other objectives. Moreover, it must be stated that the appetite for reform does not seem to have reached an especially high peak during the pandemic for emergency procurement

40 On

remedies generally see ch 5.

Emergency Procurement: Colombia  457 or similar. This, it might be hypothesised, responds to the fact that the pandemic is not yet not over, and the limited administrative capacity is being used in other areas. Another possible explanation for this is that no emergency-specific reforms are required taking into consideration that temporary legislation changing procurement law can be enacted directly by the Government each time a similar event arises. Although this is not ideal from a theoretical and legal certainty standpoint, it may be the practical rationale for the lack of impetus for reform. Finally, it is submitted that the Colombian Procurement Law in the area can be improved by allowing shortened versions of competitive procedures for emergency procurement, directly linked to the pandemic or generally, as is permitted under EU law.41



41 See

ch 3.

458

19 Emergency Procurement and Responses to COVID-19: The Case of India SANDEEP VERMA

I.  General Introduction COVID-19 seemed to have travelled to India with students and tourists in January 2020,1 which was also when administrative measures for its containment were first conceived.2 Handling of the pandemic as a ‘national disaster’ under the Disaster Management Act 2005 began in earnest with instructions of 11 March 2020 delegating powers of the National Executive Committee of India’s National Disaster Management Authority to the Secretary, Ministry of Health and Family Welfare.3 Further instructions of 14 March 2020 outlined reimbursement mechanisms available to state governments for handling the pandemic.4 By then, some states had already declared COVID-19 to be an epidemic under their state legislation,5 giving rise to the possibility of localised action for severe containment (lockdown) measures. A more formal notification of containment measures under the Central Act of 2005 was issued6 on 24 March 2020 by the Government of India, which continues to serve as the starting point for almost all subsequent administrative mechanisms for handling the pandemic. Recorded cases peaked at about 1,200 per day in mid-September 2020 but had reduced to around 500 a day

1 Press Information Bureau, ‘India’s Response to COVID Outbreak’ (28 March 2020), available at pib.gov.in/PressReleaseIframePage.aspx?PRID=1608727. 2 ibid. 3 Ministry of Home Affairs, Order No F.40-2/2020-DM-I(A) (11 March 2020), available at www. mohfw.gov.in/pdf/disastermanagmentact.pdf. 4 Ministry of Home Affairs, Letter No. 33-4/2020-NDM-I (14 March 2020), available at www. mohfw.gov.in/pdf/RevisedItem&NormsforutilisationofSDRFdt14032020.pdf. 5 See eg, Government of Rajasthan, Notification No. F9(58)M&H/2/09/Part (11 March 2020), available at www.rajswasthya.nic.in/PDF/09%20Dt.12.03.2020%20%20website%20Part.pdf. 6 National Disaster Management Authority, Orders No 1-29/2020-PP(PtII) (24 March 2020), available at ndma.gov.in/sites/default/files/PDF/covid/ndmaorder240320.pdf.

460  Sandeep Verma by November 2020, with an expected winter surge7 that actually materialised much later, towards the end of March 2021. Constitutional authority for awarding public contracts by elected governments in India flows primarily from Art 298 of its Constitution.8 This specifies that the executive power of the Union (the Central Government) and of each state extends to carrying on any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose. Two of its provisos state that: (a) the Union’s executive power shall, in so far as such trade or business or such purpose is not one with respect to which Parliament may make laws, be subject in each state to state legislation; and (b) each state’s executive power shall, in so far as such trade or business or such purpose is not one with respect to which the state legislature may make laws, be subject to legislation by the Parliament. India’s Constitution also provides for three lists9 which allocate subject-wise lawmaking and executive authority between the Union and the states: (a) List I (the Union List), which reserves rule-making authority over subjects such as defence, atomic energy and foreign affairs with the Indian Parliament and Central Government; (b) List II (the States’ List), containing subjects such as public health and sanitation, police, agriculture and land, reserving rule-making authority in such cases to the states; and (c) List III (the Concurrent List), which includes drugs, prevention of the extension from one state to another of infectious or contagious diseases or pests affecting humans, and civil and criminal courts, where central legislation and instructions, if any, prevail over states’ legislation and instructions, if any. Thus, while public health (including intra-state epidemic management) in general, as well as public procurement for health purposes, is reserved for action by states, inter-state epidemic management clearly lies in the Concurrent list, enabling the Central Government to act with overriding powers. It is, however, debatable whether this extends to allowing the Central Government procurement rules to supersede states’ rules for inter-state pandemic management or centralised procurement of vaccines or drugs by the Central Government without states’ consent. It is therefore unsurprising that epidemic-related legislation in India by the Union has generally adopted a minimalist approach, in the form of the Epidemic Diseases Act 1897 (the 1897 Act).10 Conceived when a pandemic as extensive as COVID-19 was perhaps never envisaged, the Act provides for only

7 ‘The curious case of India’s success in taking COVID-19’, Livemint (7 February 2021), available at www.livemint.com/opinion/columns/the-curious-case-of-india-s-success-in-taming-covid1911612711676750.html. 8 National Portal of India, Constitution of India (full text), available at www.india.gov.in/mygovernment/constitution-india/constitution-india-full-text. 9 ibid. 10 The Epidemic Diseases Act, 1897 (India).

Emergency Procurement: India  461 very limited Central Government measures, such as containment restrictions and control of entry into Indian ports.

II.  Introduction to the Regulatory Framework The main pillar of India’s legal framework for public procurement by central (federal) agencies – the ‘General Financial Rules’ – were first issued11 in 1947 and last amended in 2017.12 They are supplemented by three subject-specific manuals: the Manual for Procurement of Goods (last revised 2017);13 the Manual for Procurement of Works (last revised 2019);14 and the Manual for Procurement of Consultancy and Other Services (last revised 2017).15 These rules and manuals issued by the Ministry of Finance, together with executive instructions issued by a host of ministries and departments, form a comprehensive set of executive rules16 governing transparency and competition during contract award, as well as issues relating to post-award oversight and contract administration. The default method of procurement prescribed under the General Financial Rules is open and competitive procurement,17 and the primary method of bid-comparison for goods and works is the ‘least price technically acceptable’ method,18 with the entire contract being awarded to the lowest-priced technically qualified bidder. These rules also allow limited use of ‘quality and cost-based selection’ for consulting and IT services, involving award criteria relating to both technical aspects and price.19 The primary method of receiving sealed bids in India is the ‘1-stage, 2-envelope’ system where both technical and financial bids must be submitted simultaneously,20 although some specialised works procurement and

11 General Financial Rules (InsightsIAS, 22 May 2020), available at www.insightsonindia.com/ 2020/05/22/general-financial-rules. 12 Ministry of Finance, General Financial Rules (2017), available at www.doe.gov.in/sites/default/ files/GFR2017_0.pdf (GFR). 13 Ministry of Finance, Manual for Procurement of Goods (2017), available at www.doe.gov.in/sites/ default/files/Manual%20for%20Procurement%20of%20Goods%202017_0_0.pdf. 14 Ministry of Finance, Manual for Procurement of Works (2019), available at www.doe.gov.in/sites/ default/files/Manual%20for%20Procurement%20of%20works%202019.pdf. 15 Ministry of Finance, Manual for Procurement of Consultancy and Other Services (2017), available at www.doe.gov.in/sites/default/files/Manual%20for%20Procurement%20of%20Consultancy %20and%20Other%20Services%202017_0.pdf. 16 See eg, S Verma, ‘Integrity Pacts and Public Procurement Reforms in India’ (Inaugural International Conference on Public Procurement Regulation in Emerging Economies, Malaya, 2010), available at papers.ssrn.com/sol3/papers.cfm?abstract_id=1656722. See also: S Verma, ‘Caught between the Devil and the Deep Blue Sea’ (2017), available at papers.ssrn.com/sol3/papers.cfm?abstract_id=3085185. 17 See eg, GFR, rr159–60. 18 See eg, GFR, r 149(ii)–(iii). 19 Ministry of Finance, Consultancy Manual, para 3.9. See also, S Verma, ‘Love in the Time of Cholera: Taking Procurement Reform Forward Amidst Increasing Incidence of Anti-GFR Provisions in Government Tenders’ (2015), available at papers.ssrn.com/sol3/papers.cfm?abstract_id=2590007. 20 GFR, r 163.

462  Sandeep Verma complex public–private partnerships allow for a ‘2-stage, 2-envelope’ system of evaluation, ie, technical submissions followed by sealed financial bids only from those who pass the first stage of technical evaluation.21 Single-source procurement is permitted under Rules 166(ii) and 194(ii) of the General Financial Rules and its use requires approval of the ‘competent authority’ – undefined but usually the authority financially competent to sanction the particular level of expenditure. However, during an emergency, this ‘higher’ level may not be contactable or it may otherwise be difficult to obtain prior approval, limiting practical use of the method. Advance payments and shorter timelines for open tendering are permissible under the General Financial Rules in ‘exceptional cases’, which presumably include emergencies. It appears, however, that most procuring entities did not make use of these existing provisions in the COVID-19 pandemic, necessitating the Ministry of Finance to step in quickly in March 2020 and devise certain innovations to make pandemic procurement more efficient, as discussed below. Procurement at the sub-national levels – including by state governments, municipal and urban local bodies and local public utilities – is governed by state procurement rules, even when the Central Government could be the primary funding agency.22 For projects funded by external agencies such as multilateral development banks, lending agencies’ procurement guidelines supersede central or state rules, although there are increasing instances of reliance on national or state procurement rules even for externally funded projects, given the global shift to the use of country procurement systems by multilateral development banks.23 International pressures during the period 2011–15 led to some central ministries drafting legislation along the lines of the UNCITRAL Model Law on Public Procurement 2011 for central agencies. While these experiments were later abandoned,24 a large number of useful mechanisms and features from the Model Law were still included in revisions to India’s General Financial Rules in 2017. Further, while the Central Government continues to procure under its executive rules, five states, namely Tamil Nadu (in 1998), Karnataka (in 1999), Rajasthan (in 2012), Assam (in 2017) and Punjab (in 2019), have moved to legislation-controlled public procurement frameworks, largely because of funding agency pressures for public financial management reforms. Relevant also is specialised legislation such as The Epidemic Diseases Act, 1897 permitting temporary acquisition of private premises for population containment25 21 GFR, r 164. 22 S Verma, ‘Procurement Reform: Jugaad Legislation in India’ Financial Express (24 March 2020), available at www.financialexpress.com/opinion/procurement-reform-jugaad-legislation-in-india/ 1907196. 23 S Verma, ‘Use of Country Procurement Systems by MDBs-A Good Time to Switch?’ (Public Procurement-Global Revolution VIII Conference, Nottingham, 2017), available at papers.ssrn.com/ sol3/papers.cfm?abstract_id=3024599. 24 Verma, ‘Procurement Reform’ (2020). 25 The Epidemic Diseases Act, s 2(b). Amended by, The Epidemic Diseases (Amendment) Ordinance, 2020 (India), available at www.prsindia.org/sites/default/files/bill_files/Ordinance%202020%20-%20 epidemic%20act%20.pdf.

Emergency Procurement: India  463 and the Disaster Management Act, 2005 allowing government agencies to do the same, as also to make a first claim on privately manufactured or stored supplies or resources.26 The Industries (Development and Regulation) Act, 1951 allows the Central Government to control the supply, distribution and prices of any articles as required in the public interest, and also control or manage industrial undertakings in peculiar market situations such as abnormal production shortfalls or unjustifiable price movements.27 Other relevant legislation indirectly connected to public procurement includes The Essential Commodities Act, 1955 permitting control of supply, stocks and prices of essential commodities including essential drugs;28 The Essential Services Maintenance Act, 1968 allowing declaration and regulation of services deemed essential in the public interest in the event of potential strikes, so as to ensure normal life in the community;29 and The Drugs and Cosmetics Act, 1940 allowing regulation of the manufacture of drugs and cosmetics in the public interest.30 Thus when the pandemic began, India already had a fairly elaborate yet flexible set of laws and rules to handle procurement-related aspects. Once the pandemic hit India and the need for speed in a sellers’ market became clear, both Central and state governments in India were quick to recognise efficient procurement as a key desideratum in their policy responses. Perhaps for the first time in India’s procurement history, the Central Government recognised that procurement of essential supplies and equipment, such as personal protective equipment (PPE) and testing kits, requires some built-in resilience and therefore explicitly allowed simultaneous progression of multiple procurement processes for the same items: for example, from domestic as well as international supplies and through both single-source and competitive procurement. This multi-channel strategy, as an alternative to relying on a single procurement process (without a plan for its possible failure) was implemented through a set of far-reaching circulars issued in March 2020.31 Simultaneously, some states (including states such as Rajasthan with UNCITRAL-style legislation)32 were equally quick to recognise the strain their detailed procurement legislation would place on process efficiency and suspended the operation of virtually their entire public procurement law for COVID-19 related procurement.33 India’s Epidemic Diseases Act, 1897 was amended by an ordinance in April 2020, but changes were largely limited to law enforcement issues such as violence 26 The Disaster Management Act, 2005 (India), ss 24(h) and 34(j), available at www.ndmindia.nic.in/ images/The%20Disaster%20Management%20Act,%202005.pdf. 27 The Industries (Development and Regulation) Act, 1951 (India), available at legislative.gov.in/ sites/default/files/A1951-65.pdf. 28 The Essential Commodities, 1955 (India), available at legislative.gov.in/sites/default/files/A195510.pdf. 29 The Essential Services Maintenance Act, 1968 (India), available at indiankanoon.org/doc/902835. 30 The Drugs and Cosmetics Act, 1940 (India), available at legislative.gov.in/sites/default/files/ A1940-23.pdf. 31 S Verma, ‘COVID-19 in India: A Review of Recent Measures on Public Procurement’ (2020) 29 Public Procurement Law Review 238, 245–46. 32 Verma (n 22). 33 Verma, ‘COVID-19 in India’ (2020) 249–51.

464  Sandeep Verma against healthcare personnel and detention at entry ports.34 Interestingly, in what seems to have been an unintended effect of one clause,35 the fact that some states not covered by the original 1897 Act had their own state-specific legislation on epidemics was perhaps not fully accounted for; and in the absence of a ‘savings clause’ in the ordinance, some states such as Rajasthan (which had just issued implementing regulations for the COVID-19 pandemic a month before in March 202036), were forced first to issue their own state ordinance37 to fill the legal vacuum thus created by the federal ordinance; then to renotify COVID-19 as a pandemic in the state in May 202038 having already done so in March that year;39 and then to (re)issue (sometimes with small amendments) their (earlier) regulations.40 As regards procurement by individual entities, India’s General Financial Rules prohibit them from splitting purchases simply to avoid obtaining administrative and financial sanctions from higher authorities, but at the same time discourage entities from buying in advance of current requirements.41 Such restrictions can make procurement in pandemic situations difficult, especially when agencies are under severe pressure to scoop up as much as is available at any given moment to ensure adequate stocks, but without sufficient guarantee of their future use. One option then is multiple procurement processes at an individual procuring entity level, although joint or collaborative procurement can be a more efficient alternative in such situations, both to deal with a supplier-driven market scenario and to avoid competition and price variations among numerous user agencies.42 However, rules in India on collaborative or joint purchases can be even more complex to navigate, and a very limited opportunity for collaborative procurement exists through the use by multiple procuring agencies of centrally negotiated rate contracts (equivalent broadly to closed multi-supplier framework agreements under the UNCITRAL Model Law 2011, as outlined in chapter 2). Such framework agreements, however, were not the primary procurement method for COVID-19, and Central Government instead notified a set of vendors that were

34 Amended by The Epidemic Diseases (Amendment) Ordinance. 35 ibid, s 2. 36 Rajasthan Epidemic Disease COVID-19 Regulations (Government of Rajasthan, 12 March 2020), available at www.rajswasthya.nic.in/PDF/09%20Dt.12.03.2020%20Website%20Part%201.pdf. 37 Governor of Rajasthan, ‘Rajasthan Epidemic Diseases Ordinance, 2020’ (1 May 2020), available at nidm.gov.in/covid19/PDF/covid19/state/Rajasthan/234.pdf. 38 Home Department (Government of Rajasthan), Notification No F.9(16)Home-5/2020 (3 May 2020), available at covidinfo.rajasthan.gov.in/admin/uploads/1588578824Notifications%20Eng%20 03-05-20.pdf. 39 Medical, Health & Family Welfare Department (Government of Rajasthan), Notification No F.9(58) M&H/2/09/Part (12 March 2020), available at www.rajswasthya.nic.in/PDF/09%20Dt.12.03.2020%20 Website%20Part%202.pdf. 40 Home Department (Government of Rajasthan), Notification No F.9(16)Home-5/2020 (n 38). 41 See, generally, S Verma, ‘Size Matters: exploring the rules, practices and rationale behind splitting and combining of administrative requirements under India’s public procurement frameworks, in Public Procurement Policy’ in G Piga and T Tatrai (eds), Public Procurement Policy (Routledge, 2015) 75–89. 42 Verma (n 31) 239–43.

Emergency Procurement: India  465 approved or put on a panel for use by various central and state procuring agencies, particularly for COVID-19 testing kits. State agencies thus did not have to waste precious time in technically qualifying testing kit suppliers, and they could quickly process single-source or limited tender procurement with these suppliers. In such a system, however, competition amongst states for supplies continued, leaving the possibility of rate differences and delivery scheduling at the option of the suppliers that perhaps could have been avoided through greater collaboration. During the initial stages of COVID-19 management in March 2020, there had been some discussions within Central Government on centralised purchases of PPE kits, masks, etc, but the idea seems to have been discarded soon thereafter.43 Some discussions around centralised or coordinated procurement also took place in the context of potential vaccine procurement.44 In its first meeting on 12 August 2020, a national expert panel tasked with drafting a roadmap for procuring, financing and distributing a potential coronavirus vaccine for mass immunisation began some initial paperwork,45 but its deliberations were preliminary and in the nature of open discussions. The unpredictability of other countries’ responses to vaccine procurement, as well as problems with sustainably organising a national procurement effort devoid of inter-state conflicts could present obstacles, as had happened with March 2020 discussions on centralised PPE kits procurement. To begin with, procurement of vaccines for Phase I of India’s COVID-19 vaccination programme covering its frontline health workers, sanitation workers and police forces across all states has in fact been undertaken in a centralised manner by the Central Government, but it appears there may be a need for greater state and/or private sector involvement once the programme seeks to cover its general populace. Some evidence of inter-state conflicts was seen in the context of the procurement of oxygen cylinders and logistical arrangements. While some net-consuming states such as Madhya Pradesh started stock-piling medical oxygen supplies and banned their industrial use,46 some manufacturing states like Maharashtra placed restrictions on inter-state movement of certain supplies.47 This led to the Central

43 ibid. 44 R Kaul, ‘Vaccine procurement to be done centrally: Govt panel’ Hindustan Times (13 August 2020), available at www.hindustantimes.com/india-news/vaccine-procurement-to-be-done-centrally-govtpanel/story-LTqYpptXM5P29oZSH8Ac4M.html. 45 ‘National Expert Group on Vaccine Administration for COVID-19 deliberates on strategy to ensure COVID-19 vaccines’ availability and its delivery mechanism’, Press Information Bureau (12 August 2020), available at pib.gov.in/PressReleasePage.aspx?PRID=1645363. 46 H Sharma, ‘Coronavirus: Madhya Pradesh bans industrial use of oxygen’, India Today (15 September 2020), available at www.indiatoday.in/india/story/coronavirus-madhya-pradesh-bansindustrial-use-of-oxygen-1721956-2020-09-15. 47 Public Health Department (Government of Maharashtra), Order No CORONA-2020/C.R.385/ Arogya-5 (Mumbai, 7 September 2020), available at www.maharashtra.gov.in/Site/Upload/Acts%20 Rules/Marathi/Medical%20Oxygen%20Supply%20Notification....pdf. See also, T Barnagarwala, ‘Maharashtra crosses one million Covid cases, shortage of oxygen hits hospitals’, The Indian Express (Osmanabad, Satara, 21 September 2020), available at indianexpress.com/article/india/ maharashtra-crosses-one-million-covid-cases-shortage-of-oxygen-hits-hospitals-6592655.

466  Sandeep Verma Government issuing a strong advisory message to state governments not to impose the latter kind of restrictions,48 reinforcing an earlier April advisory.49 This included requiring states not to invoke their inherent powers under the Essential Commodities Act, as well as asking states to conduct audits of oxygen cylinders being used in hospitals and to check for theft. It is arguable, however, whether state government authority granted under legislation can be so easily restricted or overruled in this manner by administrative letters issued by the Government of India; and it is therefore unlikely that these Central Government advisories will be the last word on inter-state conflicts during the pandemic.

III.  Procurement of New Requirements50 A.  Standardisation and Centralised Procurement The need for some centralisation in the procurement of essential medical kit was felt as early as March 2020, when the Government of India issued directions for a ‘whole-of-Government’ approach, assigning specific tasks to various ministries and departments in Central Government, including a (unilateral) decision for centralised procurement of some items on behalf of state governments.51 The Ministry of Textiles was assigned the task of ensuring availability of medical textiles and equipment (PPE in particular), and of implementing plans for ensuring PPE availability through adequate manufacture, standardisation and testing. These directions were purely administrative in nature and not linked to specific legal authority under either the Epidemic Diseases Act, 1897 or the Disaster Management Act, 2005 since no decision had been taken at that time for invoking either instrument for COVID-19 containment.52 Pursuant to this decision, the Ministry of Textiles

48 Ministry of Home Affairs, DO Letter No 40-3/2020-DM-I(A) (New Delhi, 18 September 2020), available at www.mha.gov.in/sites/default/files/MHADOLr_18092020.pdf. See also, ‘Curbs on oxygen transportation relaxed after Center intervened’, The New Indian Express (15 September 2020), available at www.newindianexpress.com/cities/vijayawada/2020/sep/15/curbs-on-oxygen-transportation-relaxedafter-centre-intervened-2196960.html. 49 ‘MHA writes to States to give special attention on keeping the supply of Medical Oxygen smooth and hassle-free across the country’, Press Information Bureau (New Delhi, 6 April 2020), available at www.mha.gov.in/sites/default/files/Supply%20of%20Medical%20Oxygen%20smooth%20and%20 hassle-free.pdf. 50 The material in this and some subsequent sections in part develops analysis in Verma (n 31) 251. 51 Government of India, Letter of Cabinet Secretary addressed to Secretaries of all Central Government Ministries/Departments (New Delhi, 8 March 2020), available at www.mohfw.gov.in/pdf/ COVIDCabSecLetterGuidelines.pdf. 52 The first clear reference to any specific section of the National Disaster Management Act for COVID-19 management seems to have been on 14 March 2020, when the Government of India allowed state governments to use state funds under the Act for some specific procurement actions and for expenses towards quarantine measures, samples collection and screening; Ministry of Home Affairs letter dated 14 March 2020, copy available from the author.

Emergency Procurement: India  467 organised a meeting for the various ministries and departments the same month, and a number of decisions were taken on technical standardisation of essential medical supplies and for centralised procurement through HLL Lifecare Ltd, a Government of India-owned enterprise.53 While the meeting’s minutes record that some technical and test requirements for body coveralls were already specified earlier by the Ministry of Health and Family Welfare, certain basic technical requirements were apparently made available after a week or so for some PPE items54 and later for ventilators.55 However, there followed constant modifications leading to some uncertainty, as these specifications were quite different from the specifications already set by India’s Bureau of Indian Standards56 which in turn, were different from the technical specifications contained in some of HLL Lifecare’s tender notices.57 Complicating matters further, the Bureau issued certain specifications in April 2020 for coveralls but retracted them after just three days, in favour of earlier specifications released by the Ministry of Health and Family Welfare.58 The unilateral decision of March 2020 for centralised procurement of PPE through HLL Lifecare for use by central and state agencies met a similar fate. Contrary to the spirit of this decision, a list of manufacturers and suppliers was circulated by India’s National Pharmaceutical Pricing Authority to various state governments and union territories facing problems in ordering masks, gloves and sanitiser,59 indirectly indicating that PPE procurement could remain decentralised with state governments in practice.60 As for ventilators, there was never any decision for their centralised procurement, and the Government of India’s e-marketplace announced hosting of items including ventilators and certain PPE 53 Secretary (Textiles), ‘Minutes of meeting to assess the availability of protective wears for use of health professionals in the country in the wake of Covid-19’ (18 March 2020), available at scroll.in/article/956866/ investigation-crucial-coronavirus-gear-supply-clouded-by-allegations-of-government-malintention. 54 Ministry of Health & Family Welfare, ‘Novel Coronavirus Disease 2019 (COVID-19): Guidelines on rational use of Personal Protective Equipment’ (24 March 2020), available at www.mohfw.gov.in/ pdf/GuidelinesonrationaluseofPersonalProtectiveEquipment.pdf. 55 Ministry of Health & Family Welfare, ‘Essential Technical Features for Ventilator for COVID-19’ (31 March 2020), available at www.mohfw.gov.in/pdf/EssentialTechfeaturesforVentilators.pdf. 56 See eg, Bureau of Indian Standards, ‘Indian Standards Ensuring Safety and Performance in COVID-19’, available at www.bsbedge.com/IndianStandardsonCovid19. 57 See eg, HLL Lifecare Limited, Amendment No 6: Revised Specification of Ventilators (28 March 2020), available at www.lifecarehll.com/tender/view/reference/a4a587f3d0835928d30c2253f0624953jIiIgA. See also, S Manek, ‘Favouritism and fake certifications mar India’s Ventilator Procurement’, The Ken (5 May 2020), available at the-ken.com/story/ventilator-procurement-problems. 58 See eg, A Dutt, ‘BIS retracts new guidelines for coveralls in PPE kits’ Hindustan Times (18 April 2020), available at www.hindustantimes.com/india-news/bis-retracts-new-guidelines-for-coverallsin-ppe-kits/story-Qm71T603HSmVYHk6r637FN.html. 59 National Pharmaceutical Pricing Authority, F.No 37001/2020/Div.III/NPPA (New Delhi, 28 March 2020), available at www.nppaindia.nic.in/wp-content/uploads/2020/03/DO-28.3.20.pdf. 60 See eg, Indian Railways, ‘Instructions for continuation of sanitiser, masks and PPE procurement both from HLL Lifecare Limited as well as from alternative sources’ (6 April 2020), available at www.indianrailways.gov.in/railwayboard/uploads/directorate/stores/downloads/2020/Centralised_ Procurement_060420.pdf. Thus, even Central Government entities are procuring these items from various channels, and not merely from the designated agency HLL Lifecare Limited.

468  Sandeep Verma items through a dedicated COVID-19 platform in March 2020 for purchase by various central and state government users.61 While procurement was thus continuing in a completely decentralised manner, a month later, the initial (unilateral, but still unimplemented) decision for centralised procurement of N95 masks and PPE was expanded to include ventilators in a decision of the National Disaster Management Authority, communicated to state governments on 2 April 2020 by the Ministry of Health and Family Welfare.62 However, this decision was effectively reversed just a week later, when the Ministry clarified in a press briefing that the Government of India’s 2 April 2020 directions for centralised procurement were merely ‘advisory’,63 even though a strict reading shows that they were in fact binding directions of an ‘empowered group’ issued in pursuance of the Central Government’s authority64 under the Disaster Management Act.65 Procurement of testing kits remained decentralised as with PPE kits and ventilators. However, standardisation of these testing kits charted a unique path, through an approved list of suppliers maintained under the supervision of the Indian Council for Medical Research. As of 9 November 2020, that body had identified more than 24 centres across the country for validating kits for COVID-19. These together had evaluated more than 296 real-time polymerase chain reaction kits and approved 13766 (for use in addition to kits approved by the United States Food and Drug Administration, which were also permitted for use in India); evaluated as of 6 November 2020 42 antigen-based polymerase chain reaction kits, approving 11;67 and evaluated 173 antibody-based kits, approving 23 vendors as on 3 November 2020.68 Another Central Government authority, the Central Drug Standard Control Organisation (CDSCO), also maintains lists of approved testing kits,69 but there have been some minor differences between lists publicly notified by the Indian Council for Medical Research and the CDSCO, possibly because of

61 N Malhotra, ‘Fast-Track Procurement for COVID-19’ InvestIndia (26 March 2020), available at www.investindia.gov.in/team-india-blogs/fast-track-procurement-covid-19. 62 Ministry of Health & Family Welfare, No A45013/5/2020-HPE (New Delhi, 2 April 2020) (image of letter), available at scroll.in/latest/958755/letter-telling-states-centre-will-procure-covid-19ppes-for-them-is-an-advisory-health-ministry. 63 A Saikia, ‘Covid-19: Letter on central procurement of PPEs is an “advisory” to states, says Health ministry’ Scroll (9 April 2020), available at scroll.in/latest/958755/letter-telling-states-centrewill-procure-covid-19-ppes-for-them-is-an-advisory-health-ministry. 64 Ministry of Health & Family Welfare, No A45013/5/2020-HPE (n 62). 65 Eleven ‘empowered groups’ have been set up for accelerated decision and recommendation-making in the Government of India by Ministry of Home Affairs (under the National Disaster Management Act), No 40-3/2020-DM-I(A) (New Delhi, 29 March 2020), available at www.mha.gov.in/sites/default/ files/MHA%20Order%20on%20%20Disaster%20Management%20Act%202005_0.pdf. 66 ICMR’s list is available at www.icmr.gov.in/pdf/covid/kits/RT_PCR_Tests_Kits_Evaluation_ Summ_09112020.pdf. 67 ICMR’s list is available at www.icmr.gov.in/pdf/covid/kits/List_of_rapid_antigen_kits_06112020. pdf. 68 ICMR’s list is available at www.icmr.gov.in/pdf/covid/kits/Antibody_based_tests_03112020.pdf. 69 See eg, ‘Public Notices’, Central Drugs Standard Control Organization, available at cdsco.gov.in/ opencms/opencms/en/Notifications/Public-Notices.

Emergency Procurement: India  469 different update periods. State procuring agencies may therefore have experienced differing levels of supplier competition, depending which lists they relied on. As of November 2020, state agencies continued to procure these items in a decentralised manner, with neither consolidation nor aggregation at the state government level nor a national collaborative effort. This has been the case even in the face of earlier demands by some states for centralised procurement of ventilators, PPE, masks and testing kits for reasons of standardisation, efficiency70 and assurances over quantities and quality – although there has been little clarity or consensus among states or between the states and Central Government over how limited supplies would be allocated (including between public and private providers of medical care in the states).71 As mentioned earlier, India’s federal structure does not in fact generally allow the Central Government to issue administrative directions such as those of 18 March 2020 for centralised procurement of PPE and ventilators, unless procurement is financed from Central Government grants or assistance,72 and especially when procurement is financed by states purely from their own resources. Even during this period of buyer competition and even though an administrative decision for preferential treatment of government buyers was taken as early as in middle of March 2020, India has yet to invoke specific legal authority under sections 24(h) and 34(j) of the Disaster Management Act for prioritising government purchases over privately placed orders. This is despite notification of the pandemic as a disaster by India’s National Disaster Management Authority as early as on 24 March 2020.73

B.  Suspension of Procurement Laws As mentioned above, a few states in India have adopted public procurement legislation in the style of the UNCITRAL Model Law on Public Procurement 2011. However, some states suspended either their public procurement law in its entirety or the operation of specific sections it for the purposes of COVID-19 management and timely procurement of medical supplies. The reasons may relate in part 70 See eg, ‘Gehlot demands centralised procurement of testing kits’ The Times of India (22 April 2020), available at timesofindia.indiatimes.com/city/jaipur/gehlot-demands-centralised-procurement-oftesting-kits/articleshow/75282239.cms. 71 See eg, S Sayeda ‘COVID-19: Congress CMs blame Center for not giving any financial assistance to States’ The Economic Times (23 April 2020), available at economictimes.indiatimes.com/news/politicsand-nation/covid-19-congress-cms-blame-centre-for-not-giving-any-financial-assistance-to-states/ articleshow/75316189.cms?from=mdr. 72 Or (a) where specific legal authority is invoked by the Central Government under s 6(2)(d) or s 10(2)(d) or s 10(2)(l) of the National Disaster Management Act; or (ii) upon a declaration of nationalwide or state-specific financial emergency by the central government under Art 360(3) of India’s Constitution. 73 National Disaster Management Authority, ‘Order’ (New Delhi, 24 March 2020), available at www.mha.gov.in/sites/default/files/ndma%20order%20copy.pdf.

470  Sandeep Verma to the detailed nature of the Model Law combined with the practical burden and difficulty of aligning such detailed provisions with pre-existing regulations and practices. While the Model Law has been pushed in some Indian states as part of the World Bank’s financial management reform agenda for sanctioning Bank loans, arguably this has been done in a way that involves ‘optical’ rather than ‘real’ reform: while states have been quick to enact detailed procurement legislation, there has generally been neither any meaningful study of their own systems and procedures nor any serious efforts to align them with the Model Law’s detailed procedural requirements. For example, Rajasthan, the first state in India to enact ‘modern’ UNCITRAL-style legislation, in 2012,74 is yet to align its procurement rules and guidelines with primary legislation after eight years of operation. When faced with a surging pandemic and need for efficient procurement by officials used to following traditional practices ignoring key legal provisions of this new legislation, it is unsurprising that some states considered that medical supplies could only be efficiently procured without numerous legal violations either by suspending the legislation in its entirety, as in Rajasthan, or by suspending important parts of it, as in State of Tamil Nadu. Thus, on 6 April 2020, Rajasthan suspended operation of the Rajasthan Transparency in Public Procurement Act, 2012 for procurements related to management of the pandemic75 for some of its important procuring entities such as ‘incident managers’ under the Disaster Management Act and entities under the Medical and Health Department and the Medical Education Department in the state government. Another exception was made a few days later for emergency procurement of foodstuff and their transportation76 for its Food and Civil Supplies Department and for the Rajasthan State Food and Civil Supplies Corporation Limited, using authority under section 50 of the Disaster Management Act. This was subsequently strengthened by exempting procurement by these organisations from all provisions of the Rajasthan Transparency in Public Procurement Act, as had been done earlier for incident managers and others.77 Tamil Nadu similarly suspended sections 9 and 10 of its Tamil Nadu Transparency in Tenders Act78 1998 using authority under section 16(a) of the Act, for all COVID-19-related procurement by its Tamil Nadu Medical Supplies Corporation Limited. This southern state had notified COVID-19 as an epidemic under the Tamil Nadu Public Health Act,79 1939, and in view of the perceived need 74 See eg, Verma, ‘Devil and the Deep Blue Sea’ (2017). 75 Government of Rajasthan, Rajasthan Gazette (6 April 2020), available at finance.rajasthan.gov.in/ PDFDOCS/GT/F-GT-8729-06042020.pdf. 76 Government of Rajasthan, F No F8()/DMRD/DM/2020/4551-54 (13 April 2020), available at www.dmrelief.rajasthan.gov.in/covid_19/4551_54_13042020.pdf. 77 Government of Rajasthan, F.2(1)/FD/SPFC/2017 (20 April 2020), available at finance.rajasthan. gov.in/PDFDOCS/GT/F-GT-8765-20042020.pdf. 78 Government of Tamil Nadu, Tamil Nadu Transparency in Tenders Act, 1998 (26 June 2018), available at cms.tn.gov.in/sites/default/files/acts/TNTIT_act_Rules_Amended_upto_June_2018.pdf. 79 The Tamil Nadu Public Health Act, 1939 (India), available at www.lawsofindia.org/pdf/tamil_ nadu/1939/1939TN3.pdf.

Emergency Procurement: India  471 to exempt procurement of all equipment and consumables for medical care and similar by its dedicated medical procurement agency – the Tamil Nadu Medical Service Corporation Limited – from these sections, issued a notification80 in March 2020 exempting such procurement. One key effect was that certain public notification requirements were completely dispensed with, including: (a) the need to publish decisions on single source procurements; and (b) the need for public notifications of tendering opportunities for them to be considered ‘open and competitive’, although presumably the need to publish final contract awards remained. The other important change was that detailed procedural requirements particularly in relation to mandatory market price comparison, preferences to domestic bidders, and mandatory public notification requirements justifying contracted prices were suspended for COVID-19-related procurement by the Corporation. Some other states with dedicated public procurement legislation, such as Assam and Punjab, have not, however, introduced similar suspensions, possibly because in absence of any in-depth assessment these states have remained unaware of the discrepancies between their laws and their existing procurement practices. Both states have very limited experience in working with UNCITRAL-type legislation and have either very recently notified or are yet to notify detailed rules of operation under their Acts in the form of subordinate legislation: they are still, therefore, continuing with their prior rules and practices, highlighting in the process possible pitfalls of superficial reform.

C.  Simplified and Accelerated Procurement Procedures Suspending procurement legislation for COVID-19-related purchases helped some states move quickly. However, as we have seen, most states and the Central Government do not have specialised procurement laws, working historically through ‘executive’ rule-based frameworks; and these jurisdictions also needed to find ways to accelerate procurement processes particularly during the first few months of the pandemic. India’s public procurement framework already permits some fast-tracking by administrative departments themselves under para 8.2 of the Manual for Procurement of Goods, which deals with procurement in urgent situations, in emergencies and in the context of disaster management. The way this happens (or is at least is supposed to happen) is through enhanced delegation of financial powers for sanctioning purchases of goods and services, and by allowing rapid methods such as spot purchases (local shopping) or tender by direct solicitation from a limited set of suppliers without full competition (referred to as ‘limited

80 Government of Tamil Nadu, Order regarding letter Ref.No.29158/M(P)/TNMSC/2019 (27 March 2020), available at cms.tn.gov.in/sites/default/files/go/hfw_e_161_2020.PDF.

472  Sandeep Verma tendering’) above the normal thresholds for these methods. However, it appears that this flexibility was not much used for COVID-19-related procurement and the critical situation with availability of medical supplies and equipment eventually led the Ministry of Finance to modify its standard rules and permit simplified procedures, greatly expanding the scope for flexibility and discretion beyond that already permitted under the General Financial Rules. The Ministry issued special instructions in March 2020 for procurement and transportation of medical and other essential supplies for COVID-19 operations for use by some Central Government ministries and departments, replacing some of the standard systems and procedures established by the General Financial Rules 2017. In effect, these instructions81 permitted several important new options. They initially applied until 30 April 2020 and were later extended to 31 May 2020, but not then renewed further – possibly creating some difficulties after that time, especially with international purchases. One important change was to dilute Rule 149 of General Financial Rules, which generally requires use of the Government e-Marketplace for items on the platform up to certain threshold values: this option enabled entities to obtain purchases that were immediately required but not necessarily available readily from suppliers on the platform. Another modification was to allow multiple single-source procurement orders, even with differing rates for the same item, if the entire quantity required was not available from a single source or manufacturer. This freed officials from having to justify differential prices (and potentially face audit objections and disciplinary enquiries) for items purchased at a higher rate within a short period of a previous purchase, as was inevitable in supplierdriven markets for items such as PPE and ventilators early in the pandemic. A third change was that procurement could be made through Indian diplomatic missions abroad for imported items at prices to be fixed by the particular Indian mission in consultation with the user Ministry or Department, freeing users and procuring officials from having to justify purchase prices for supplies not available in India. This was especially useful, since price determinations were being undertaken by Indian missions closer to the (foreign) locations where supply commitments were actually being negotiated. Last but not the least, procurement was allowed to be processed through a number of simultaneous processes – such as singlesource procurement, spot purchases, limited tenders and open and competitive tendering – to the extent of even allowing simultaneous procurement of the same item at varying rates under these different methods, as mentioned earlier. Meanwhile, forced to compete with alternative procurement approaches authorised above, the Government e-Marketplace shortened timescales for COVID-19-related procurement from two weeks to three days for bidding 81 Ministry of Finance, ‘Special instructions relating to relief operations for COVID-19 global pandemic’ (New Delhi, 27 March 2020), available at doe.gov.in/sites/default/files/Special%20 Instructions%20relating%20to%20relief%20operations%20for%20COVID-19%20global%20 pandemic_0.pdf.

Emergency Procurement: India  473 windows and down to as little as two days for delivery periods.82 The World Bank also subsequently stepped in by raising the financial thresholds for Bankfunded public procurement in India for spot purchases on the Government e-Marketplace; the upper limit was raised 10-fold to US $1 million (INR seven crores).83

D.  Special Budgetary and Financing Allocations To supplement India’s efforts at financing the upgrading of medical services infrastructure (such as ICU beds with reliable oxygen supply) and procurement of essential medical supplies, the World Bank approved a fast-track India COVID-19 Emergency Response and Health Systems Preparedness Project worth US $1 billion (about INR 7,000 crores) – a project now being co-financed by the Asian Infrastructure Investment Bank.84 This project covers, among other things, procurement of testing kits, PPE and ventilators, with the ultimate objective of enhancing India’s health surveillance capacities, strengthening diagnostic systems and expanding the capacity of testing laboratories.85 Pursuant to Bank approval, the Ministry of Health and Family Welfare issued directions in April 2020 to state governments for implementing the India COVID-19 Emergency Response and Health Systems Preparedness Package as a fully Central Government-financed project, including allowing states to procure inter alia ventilators, PPE and masks beyond what is being procured and supplied by the Government of India.86 Since this package is fully centrally financed, the Central Government could insist explicitly on centralised procurement, but so far has not done so. The Asian Development Bank further announced towards the end of April 2020 a US $1.5 billion loan for disease containment and prevention as part of the Indian COVID-19 Active Response and Expenditure Support project,87 while the BRICS New Development Bank has also disbursed a US $1 billion Emergency Assistance Programme Loan in May 2020 for fighting COVID-19.88 82 Malhotra, ‘Fast-Track Procurement’ (2020). 83 ibid. 84 ‘AIIB Approves USD 500M to Support India’s Response to COVID-19’ (AIIB, 8 May 2020), available at www.aiib.org/en/news-events/news/2020/AIIB-Approves-USD500M-to-Support-IndiasResponse-to-COVID-19.html. 85 ‘World Bank Fast Tracks $1 Billion COVID-19 (Coronavirus) Support for India’ (The World Bank, 2 April 2020), available at www.worldbank.org/en/news/press-release/2020/04/02/world-bankfast-tracks-1-billion-covid-19-support-for-india. 86 Ministry of Health & Family Welfare, D. O. No V.14O13D1P020-B (NHM) part V (7 April 2020), available at www.mohfw.gov.in/pdf/DOASMDCOVID19MD.pdf. 87 ‘ADB Approves $1.5 Billion Financing to Support India’s COVID-19 Response’ (Asian Development Bank, 28 April 2020), available at www.adb.org/news/adb-approves-1-5-billion-financingsupport-indias-covid-19-response. 88 ‘NDB Fully Dispersed Emergency Assistance Program Loan to India to Fight COVID-19 Outbreak’ (New Development Bank, 12 May 2020), available at www.ndb.int/press_release/ ndb-fully-disburses-emergency-assistance-program-loan-india-fight-covid-19-outbreak.

474  Sandeep Verma

E.  Temporary Acquisition of Private Facilities India’s decades-old Epidemic Diseases Act 1897 (including its provincial variants such as the Rajasthan Epidemic Diseases Act89 1957) as well as the more recent Disaster Management Act 2005 both allow for temporary acquisition of private facilities and for setting up quarantine centres within private establishments, without agreement of the owners. These powers have been used extensively by district authorities in all states across India: although no precise data is available, the author was, for example, part of a state government crisis management group overseeing the use of such powers by district authorities on an almost daily basis from March to July 2020. While the Epidemic Diseases Act does not contain any guidance on compensating private owners, section 66(1) of the Disaster Management Act requires compensation for temporary use of premises on the basis of rental values prevailing in that area. In the absence of initial guidance either from the Central or state governments, the process of fixing rates and terms and conditions differed from state to state and district to district during the early days of the pandemic, when these powers were first used extensively throughout India for short quarantine stays for migrant workers returning home. In Rajasthan, district magistrates acting as ‘incident commanders’ started temporary acquisition of properties (including hotels) under the Disaster Management Act and the Rajasthan Epidemic Diseases Act without mentioning the compensation payable.90 In contrast, other administrative offices set uniform rates for all types of properties across an entire district91 – an approach arguably not in conformity with the ‘rent-equivalence’ principle under the Disaster Management Act. Later, hotel room rates across Rajasthan for duty medical personnel were allowed to be fixed, subject to a daily maximum, by a committee constituted by the District Magistrate.92 Rajasthan Tourism Development Corporation Limited (a state-owned enterprise) was the first responder offering hotels at these rates.93 However, while ‘ceiling rates’ could mitigate allegations of corruption and favouritism, again they seem not to conform with the rent-equivalence requirements under Indian law. Once international travel restarted in April 2020, albeit on a limited scale, many Indian citizens and persons of Indian origin began returning to India either

89 The Rajasthan Epidemic Diseases Act, 1957 (India), s 2, available at www.rajswasthya.nic.in/ Rajasthan%20Epidemic%20Diseases%20Act%201957.pdf. 90 See eg, orders dated 26 March 2020 of District Collector, Ajmer and orders dated 21 April 2020 of District Collector, Jaipur; copies available from the author. 91 See eg, orders dated 21 April 2020 of District Collector, Udaipur; copy available from the author. Room rates have been fixed uniformly across Udaipur District at INR 55 (US $1 approx) per day for non-air-conditioned rooms and INR 238 (US $3 approx) per day for air-conditioned rooms, irrespective of the room size, location and nature of the property being acquisitioned. 92 Government of Rajasthan, Orders dated 28 April 2020 issued by Medical education Department; copy available from the author. 93 RTDC Orders dated 1 May 2020, copy available from the author.

Emergency Procurement: India  475 because they had been stuck elsewhere by travel bans or in order to deal with family emergencies. For cases requiring quarantine or isolation, the Ministry of Health and Family Welfare issued an order94 permitting rates for private facilities to be fixed by the facility in consultation with the relevant state government. These orders did not refer to containment or acquisition authority under either the Epidemic Diseases Act or the Disaster Management Act, and being arrangements between purely private parties do not in fact seem to amount to requisition or acquisition of private property by the Government. Some state governments, such as Rajasthan, also constituted ad-hoc committees to fix rates at city hotels where international travellers were to be quarantined.95 The rate-fixing process has become increasingly streamlined, although it still remains uncertain as regards its legal basis. Rajasthan, for example, has now issued very detailed instructions authorising district magistrates to temporarily acquire private hospitals for COVID-19 treatment, at rates fixed for different categories of hospital accommodation, using general authority under state-specific legislation on epidemic diseases.96 It has also issued administrative orders (although without stating a source of legal authority as such arrangements do not amount to ‘requisition or acquisition’) allowing private hospitals to enter into Memoranda of Understanding with nearby hotels, simultaneously fixing daily rates for use of hotel rooms of various categories for recovering patients.97

F.  Export Controls on Medical Supplies and Equipment As international competition for essential medical supplies intensified in early 2020, India placed a limited ban on export of N95 masks, body overalls and both two- and three-ply masks on 31 January 2020, given its small manufacturing capacities at that time.98 However, just a week later, it lifted the export ban on gloves and

94 Ministry of Health & Family Welfare, ‘Additional Guidelines for Quarantine of Returnees from Abroad / Contacts / Isolation of Suspect or Confirmed Cases in Private Facilities’ (undated), available at www.mohfw.gov.in/pdf/Additionalguidelinesforquarantineofreturneesfromabroadcontactsisolation ofsuspectorconfirmedcaseinprivatefacilities.pdf. These (undated) guidelines appear to have been issued on 7 May 2020, as per: ‘Fresh Returnees from Abroad May Opt For Paid Quarantine: Health Ministry’ NDTV (8 May 2020), available at www.ndtv.com/india-news/coronavirus-health-ministry-says-freshreturnees-from-abroad-may-opt-for-paid-quarantine-isolation-facilities-2225171. 95 Tourism Department (Government of Rajasthan), Orders No 3949 (19 May 2020), copy available from the author. 96 Medical and Health Department (Government of Rajasthan), Orders No F.1(1)M&H/ Gp-2/2020 (11 September 2020), available at www.rajswasthya.nic.in/PDF/Private%20Hospital%20 Acquisition%20Order%2011-09-2020.pdf. 97 Medical and Health Department (Government of Rajasthan), Orders No F.1(1)M&H/Gp-2/2020 (5 September 2020), available at www.rajswasthya.nic.in/PDF/Covid-19%20Private%20Hospital%20 and%20Hotal%20MOU%2005-09-2020.pdf. 98 DGFT, Notification No 44/2015-2020 (31 January 2020), available at content.dgft.gov.in/Website/ Noti%2044_0.pdf.

476  Sandeep Verma surgical masks (without offering any clear reasons for such a U-turn), continuing only with an export ban on N95 masks.99 By March 2020, the domestic situation had turned critical, and the Central Government once again restricted exports of certain masks, all types of ventilators and all textile raw materials used in manufacturing masks and coveralls.100 Most of these restrictions were, however, gradually lifted within a few weeks or months as domestic manufacturing capacity improved to match domestic requirements. Thus by mid-March 2020, the Government had allowed export of non-medical and non-surgical masks of all types, although retaining restrictions on some masks; and in June 2020 export of PPE medical coveralls with a monthly quota of five million units was allowed.101 Some restrictions on masks were lifted in July 2020102 as well as some on textiles used for production of masks and coveralls;103 and by 1 August 2020 the Government had lifted the export ban on all ventilators and breathing apparatus104 that had been imposed in mid-March. The export situation has also been easing for drugs used for COVID-19 treatment. Towards the end of March 2020, India’s Directorate General of Foreign Trade (DGFT) had prohibited the export of hydroxychloroquine other than to fulfil export obligations and on humanitarian grounds105 and shortly afterwards ended even these exceptions, disallowing exports even against full advance payments.106 This ban was very short-lived, however, and within a matter of days of imposing it the Directorate decided to lift the export ban in view of the humanitarian aspects of the pandemic, as well as the need to ensure availability of this essential drug to some nations that had been particularly badly affected.107

99 DGFT, Notification No 47/2015-2020 (8 February 2020), available at content.dgft.gov.in/Website/ Noti%2047_0.pdf. See also, DGFT, Notification No 48/2015-2020 (25 February 2020), available at content.dgft.gov.in/Website/Noti%2048%20PPE_0.pdf. 100 DGFT, Notification No 52/2015-2020 (9 March 2020), available at content.dgft.gov.in/Website/ Noti%2052_0.pdf. See also, DGFT, Notification No 53/2015-2020 (24 March 2020), available at content. dgft.gov.in/Website/Noti%2053_0.pdf. 101 DGFT, Notification No 16/2015-2020 (29 June 2020), available at content.dgft.gov.in/Website/ dgftprod/78ceceb3-0638-4a28-9a29-d0627a147a90/Noti%2016%20Eng_0.pdf. 102 DGFT, Notification No 21 /2015-2020 (28 July 2020), available at content.dgft.gov.in/Website/ dgftprod/e576fbb1-b0f9-4276-913e-cab13010b16b/Noti%2021%20Eng.pdf. 103 DGFT, Notification No 18/2015-2020 (13 July 2020), available at content.dgft.gov.in/Website/ Noti%2018%20Eng_0.pdf. See also, DGFT, Notification No 21/2015-2020 (ibid). 104 DGFT, Notification No 23 (4 August 2020), available at content.dgft.gov.in/Website/ dgftprod/5b45c9f5-baab-4dd6-b576-348e2fb8cf03/Noti%20No.%2023%20dated%2004.08.2020% 20-%20Eng.pdf. 105 DGFT, Notification No 54 (25 March 2020), available at content.dgft.gov.in/Website/notification% 2054_0.pdf. 106 DGFT, Notification No 01/2015-2020 (4 April 2020), available at content.dgft.gov.in/Website/ Noti%201%20Final%20Eng_0.pdf. 107 S Haidar, ‘Coronavirus: Government gives in demands by US, Brazil, revokes blanket ban on hydroxychloroquine exports’, The Hindu (7 April 2020), available at www.thehindu.com/news/international/ coronavirus-brazil-seeks-lifting-of-curbs-imposed-by-india-on-export-of-hydroxychloroquine/ article31274106.ece.

Emergency Procurement: India  477

IV.  Modification of Contracts to Adapt to the Pandemic From January 2020 onwards concerns arose regarding implications of force majeure clauses for delayed deliveries in view of COVID-19-related restrictions on movement of supplies and labour. The Ministry of Finance therefore clarified early in February 2020108 that the pandemic could be considered a natural calamity allowing force majeure clauses to be invoked, apparently by either contracting party where appropriate, using due procedure outlined in para 9.7.7 for the Manual of Procurement of Goods 2017 (and a similar provision in para 8.14.1 of the Manual for Procurement of Services 2017, with a slightly differently worded para 6.4.2 of the Manual for Procurement of Works 2019). Force majeure under central rules allows a government supplier109 either to seek extension of time without liquidated damages or to terminate the contract unilaterally in the case of an event longer than six months110 (para 9.7.7 of the goods manual, equivalent to para 8.14.1 of the services manual or para 6.4.2 of the works manual): the COVID-19 pandemic has clearly lasted longer than that six-month period. These clauses also require a government contractor to give timely notice of a force majeure event (within 30 days of the event) – prior notification requirements that were quite possibly not complied with given the sudden nature of lockdowns. These Finance Ministry instructions further allow termination of a contract without financial repercussions on either side if the performance is prevented or delayed by any reason of force majeure for a period exceeding 90 days.111 Despite such clear language, some administrative ministries have allowed the invocation of force majeure clause as the basis for giving extensions of time due to supply chain disruptions irrespective of such duration and they have also apparently allowed contract extensions irrespective of contractor notification,112 claiming (perhaps erroneously) that such guidance is based on the Ministry of Finance’s clarification of the application of force majeure. Subsequent to its February 2020 clarification, the Ministry of Finance issued another general circular in May 2020 allowing an automatic time extension (including extension of the concession period for PPP contracts) for not less than 108 Department of Expenditure, ‘Force Majeure Clause (FMC’) (19 February 2020), available at doe. gov.in/sites/default/files/Force%20Majeure%20Clause%20-FMC.pdf. 109 As in other chapters, the term ‘supplier’ is used to refer to anyone supplying, or interested in supplying, the public sector, whether with goods, construction works and/or non-construction services. 110 P Mazzacano, ‘Force Majeure, Impossibility, Frustration & The Like: Excuses for Non-Performance; the Historical Origins and Development of an Autonomous Commercial Norm in the CISG’ (2011) 2 Nordic Journal of Commercial Law, available at ssrn.com/abstract=1982895. See also, A Koundal, ‘Understanding Force Majeure’ ET EnergyWorld (29 March 2020), available at energy.economictimes. indiatimes.com/news/renewable/understanding-force-majeure/74876447. 111 Ministry of Finance, Manual for Procurement of Goods (2017). 112 Ministry of Non-Renewable Energy, ‘Time Extension in Scheduled Commissioning Date of RE Projects considering disruption of the supply chains due to spread of coronavirus in China or any other country as Force Majeure (FM) event – reg.’ (20 March 2020), available at https://mnre.gov.in/img/ documents/uploads/file_f-1584701308078.pdf.

478  Sandeep Verma three months (but not more than six months) without any cost or penalty on a contracting partner where contractual obligations were to be completed on or after 20 February 2020. It has been clarified in this circular113 that invocation of force majeure will be valid only when the contracting parties are not in default of contractual obligations as of 19 February 2020; that invocation of this authority will absolve only non-performance that is attributable to a lockdown situation or restrictions imposed under any Act or executive order on account of the COVID-19 pandemic; and that all contractual obligations revive on completion of the period. Simultaneously, the Ministry issued a related instruction114 allowing the return of the value of performance security to the supplier proportionate to the supplies made or contract work completed but only where: (a) an application is made by a supplier; (b) such supplier is not in default of any contractual obligations; (c) a force majeure clause is invoked by the supplier; and (d) the requirements of force majeure are satisfied. This second instruction has the effect of inserting a new paragraph in the General Financial Rules and relevant manuals, given that such a dispensation was not specifically permitted under existing rules. Both goods and service manuals define force majeure as events ‘beyond human control’, while the works manual describes it as ‘events beyond control of both parties’. It is thus submitted that government-mandated restrictions on movement of goods or labour, export restrictions, and regulatory orders for lockdowns of manufacturing facilities are not in fact beyond the control of either party, but within the control of Government as party to a public contract and therefore amount instead to ‘change of law’. Within such an interpretation, there are several points of interest in the above instructions. First, linking non-performance with lockdown situations and similar practical hindrances makes this look even more like a ‘change of law’ situation than a force majeure situation, and therefore more relating to paras 9.7.5 and 9.7.11 of the manual for goods rather than para 9.7.7 as mentioned in the Ministry’s February circular. Secondly, the fact that the instructions apply only to situations where the parties are not in default as of 19 February 2020 is likely to be problematic for procuring entities in that they will have to certify a ‘no default’ situation before allowing a time extension when in fact it is routine for procuring entities, especially in works contracts, to treat delays in stipulated work progression as contractual default and to issue notices stating this. In addition, the instructions do not require a procuring entity to certify that work is likely to be continued by the supplier upon partial refund of their performance security, creating a risk that some suppliers may not resume work even after receiving a substantial refund.115 113 Ministry of Finance, ‘Force Majeure Clause (FMC)’ (13 May 2020), available at doe.gov.in/sites/ default/files/Force%20Majeure%20Clause-%20FMC%20.pdf. 114 Ministry of Finance, ‘Performance Security in terms of Rule 171 of General Financial Rules, 2017 (GFR) – Guidelines Regarding’ (13 May 2020), available at doe.gov.in/sites/default/files/Performance% 20Security%20in%20terms%20of%20Rule%20171%20of%20GFRs%202017-%20Guidelines%20 regarding.pdf. 115 See in more detail Verma (n 31) 243–45.

Emergency Procurement: India  479 Clearly, the Ministry of Finance may have to finally draw some fine legal distinctions between force majeure and ‘change of law’ clauses once it reviews application of its February 2020 guidance, and may even want to make modifications, including on whether price escalations or variations are permitted upon contract extension – generally unallowable if a simple force majeure classification is used. Clarification and refinement of May 2020 instructions may also become necessary, at least in their application to contracts liable to be terminated for supplier default. Otherwise, suppliers receiving significant refunds of their performance guarantees may walk away, leaving the balance of guarantees or due payments as insufficient to cover the costs that were at the suppliers’ risk. Another refinement that may perhaps become necessary originates from the fact that suppliers in India typically have the option of meeting their performance guarantee requirements in three different ways: (a) upfront or piece-meal deposits in cash or as bank drafts; (b) upfront submission of bank guarantees (whether conditional or unconditional); and (c) piecemeal deductions from their running account bills (such bills certified for payment) until 10 per cent of contract value (or some other contractually mandated percentage) is reached. Given this range of options, administrative departments may need to provide supplementary implementation guidance on how to ensure ‘proportionate refunds’ under each of these different scenarios. Insofar as the original February 2020 orders allowing unilateral termination of public contracts on account of COVID-19induced force majeure are concerned, there may be some initial evidence that this is being used strategically by suppliers to quickly terminate contracts without breach where they have bid aggressively low and are no longer be willing to perform, as an alternative to relying on these instructions to obtain more time to perform without paying liquidated damages.116

V.  Security of Supply and Supplier Fraud It is difficult to detect when supplies needed for a pandemic are sub-standard other than early in the inspection and supply process.117 They are typically fast-moving consumables; they are therefore difficult to keep track of and are also highly likely to have been either consumed or destroyed after use to avoid contamination, making it difficult to verity quality later. Another issue in India

116 ‘Citing “force majeure”, ACME Solar terminates 600-MW Rajasthan project’, Indian Express (21 May 2020), available at indianexpress.com/article/business/citing-force-majeure-acme-solarterminates-600-mw-rajasthan-project. 117 The municipal corporation of Delhi recently witnessed serious differences between its administrators and doctors over stock-taking of certain face shields; A Rajput, ‘Delhi: North MCD Head meets Doc to resolve PPE issue’, Indian Express (19 April 2020), available at indianexpress.com/article/cities/ delhi/delhi-north-mcd-head-meets-doc-to-resolve-ppe-issue-6368728.

480  Sandeep Verma that may emerge in audit is a quality problem with ventilators since specifications of ventilators (as well as PPE) are quite rudimentary, so that very basic ventilator equipment supplied could pass a simple check against such sketchy specifications.118 Standard contract guidance in India generally discourages any advance payment to government suppliers;119 but such payments are permitted of up to 30 per cent of contract value to private firms and up to 40 per cent to state or central government agencies or corporations for, for example, maintenance contracts for servicing air-conditioners, computers or other costly equipment, fabrication contracts120 and turn-key contracts. Government of India’s rules allow advance payments beyond this only in exceptional cases and with prior approval of the integrated finance divisions of the respective administrative departments. Rule 172(2) of the General Financial Rules also allows for ‘part payment’ (which could potentially be even 100 per cent) on proof of despatch. In addition, para 8.2 read with para 4.10.2 of the Manual for Procurement of Goods allows for provision of advance cash for direct procurement modes (those without a public solicitation) such as spot purchases, with accounts and vouchers to be submitted after purchase in case of emergencies, urgent situations or disasters. The rules also require adequate safeguards to be applied while making advance payments in the form of measures such as bank guarantees from suppliers;121 however, it appears that these exceptions were not used in the COVID-19 pandemic.122 This general position is quite different from that of India’s own Ministry of Defence, which while issuing a Standard Operating Procedure for COVID-19 related procurements under the Defence Procurement Manual for procurement conducted by the Indian armed forces under their emergency powers, allowed ‘competent financial authorities’ to dispense with safeguards such as bank guarantees, if required, while making such advance payments.123 It remains unclear if, and to what extent, any defence entities have used this power; and it is also unclear why a similar dispensation was not made for procurement of medical supplies.

118 Ministry of Health & Family Welfare, ‘Novel Coronavirus Disease 2019 (COVID-19): Guidelines on rational use of Personal Protective Equipment’ (24 March 2020), available at www.mohfw.gov. in/pdf/GuidelinesonrationaluseofPersonalProtectiveEquipment.pdf. See also, Ministry of Health & Family Welfare, ‘Essential Technical Features for Ventilator for COVID-19’ (2020). 119 Ministry of Finance (n 13) para 6.5.5. See also, Ministry of Finance, GFR, r 172(1). 120 Fabrication contracts are typically small-value contracts for made-to-order manufacturing of items such as specialised equipment or display cases. 121 GFR, r 172(1)(ii)(c). See also, Ministry of Finance (n 13) para 6.5.1(ii)(d). 122 See eg, Ministry of Health and Family Welfare, ‘Facts on the controversy around prices of Rapid Antibody tests’ (27 April 2020), available at pib.gov.in/PressReleasePage.aspx?PRID=1618664; and for more detailed discussion of the topic, Verma, Review of Recent Measures (2020) 251–52. 123 Controller General of Defence Accounts, ‘Standard Operating Procedure on COVID-19 Related Procurements – reg’ (Delhi, 3 April 2020), available at cgda.nic.in/ifa/circulars/SOP-COVID-07042020. pdf para 5(c).

Emergency Procurement: India  481

VI.  Use of Procurement for Industrial or Social Objectives The COVID-19 pandemic in India started becoming severe around May 2020, a time when neighbouring China undertook certain aggressive postures on India’s northern boundaries.124 The resultant tense border situation, together with rising concerns over over-reliance on international supply chains for PPE and other essential medical supplies and drugs, led to India making important changes to foreign bidder participation in public contracts. Ongoing reforms providing a preference for ‘Made in India’ products based on minimum indigenous content that had been initiated by the Department for Promotion of Industry and Internal Trade (DPIIT) in 2017–18 were picked up again in May 2020 when the Department notified product lists to which the policy would be applied, as well as a list of administrative departments responsible for ensuring compliance for each product across all departments and ministries of Central Government.125 This was followed by further revisions to the Public Procurement (Preference to Make in India) Orders with the result that: (a) works contracts are now covered by domestic content rules in addition to goods and services already covered;126 (b) purchases by central (federal) agencies must give preferences to products with high domestic content (normally 50 per cent or more);127 and (c) the threshold below which procurements must be set aside exclusively for participation by domestic bidders has been raised from INR 50 lakhs (approximately US $63,000) to INR 200 crores (US $25 million approximately).128 Simultaneously, the Ministry of Finance through insertion of a new Rule 144(xi) in the General Financial Rules has also permitted the imposition of restrictions on bidders from a country or class of countries on grounds of national security and defence;129 and bidders whose beneficial ownership vests in entities incorporated in any of India’s land bordering countries now need to register with Central Government agencies in order to remain eligible for bidding.130

124 ‘2020 China-India skirmishes’, Wikipedia, available at en.wikipedia.org/wiki/2020_China–India_ skirmishes. 125 DPIIT, ‘Public Procurement (Preference to Make in India) Order 2017: Approved Product Categories and Associated Ministry/Department’ (6 May 2019), available at https://dipp.gov.in/ sites/default/files/APPROVED%20PODUCT%20CATEGORIES%20AND%20ASSOCIATED%20 MINISTRIES%206.5.2019.pdf. 126 DPIIT, Orders No P-45021/2/ 2017-PP BE(II) (29 May 2020), available at dipp.gov.in/sites/default/ files/PPP-MII%20Order%20dt%2029th%20May%2019_0.pdf. 127 DPIIT, Orders No P-45021/2/ 2017-PP BE(II) (4 June 2020), available at dipp.gov.in/sites/default/ files/PPP%20MII%20Order%20dated%204th%20June%202020.pdf. 128 ibid. 129 Ministry of Finance, O.M. No F.6/18/2019-PPD (23 July 2020), available at www.doe.gov.in/sites/ default/files/OM%20dated%2023.07.2020.pdf. 130 Ministry of Finance, Public Procurement Order No 1 23 July 2020), available at www.doe.gov. in/sites/default/files/OM%20dated%2023.07.2020.pdf. See also, Order (Public Procurement No 2) (23 July 2020), available at www.doe.gov.in/sites/default/files/Exclusion%20from%20restrictions%20

482  Sandeep Verma In addition, some Government of India ministries and departments have initiated a process of identifying product categories where there is sufficient local capacity and competition, starting with the Ministry of Railways in June 2020 identifying 28 items131 and followed by the Department of Defence Production identifying 24 more items in August.132 These lists, however, may not have any significant or lasting impact on domestic manufacturing capability; they are so limited that they look to have been adopted only for the sake of appearance of compliance with DPIIT’s mandate, the defence list including, for example, 10 different ‘sealing rings’ among the 24 items.

VII.  The Pandemic as a Catalyst for Procurement Reforms As discussed in chapters two and three, and in other country case studies in this book, pandemic situations, and for that matter, most emergency situations, serve to test the rigour of national public procurement frameworks. Emergency situations bring to the forefront issues of efficiency and user satisfaction while testing integrity and accountability parameters in execution, potentially restoring some balance amongst various procurement desiderata in a procurement system that otherwise tends to tilt towards pricing and accountability alone. Procurement systems were tested in India as well, where Central and state governments have thus far responded in well-measured ways, both proactively and reactively. On its part, the Central Government has clearly led unprecedented innovation in its reform efforts, breaking out of India’s traditional complacent and conservative policymaking structures, especially with its far-reaching guidance in 2020 on use of simplified and flexible procurement, force majeure, and contract modifications.133 On the first point, the simplified, accelerated and multi-option procurement guidance issued by the Ministry of Finance in April 2020 as discussed in

under%20Rule%20144%20xi%20of%20the%20General%20Financial%20Rules%202017.pdf; read with clarifications issued vide Ministry of Finance, Public Procurement Orders No 3 (24 July 2020), available at doe.gov.in/sites/default/files/Clarification%20to%20order%20public%20 Procurement%20NO%201%20dated%2023%20July%202020.pdf. See also, J Kumar and V Dixit, ‘India: Stirring the Embers of “Make in India”’ Mondaq (24 September 2020), available at www. mondaq.com/india/government-contracts-procurement-ppp/987890/stirring-the-embers-of-makein-india39-amendment-of-the-public-procurement-order-2017. 131 Railways Board, Orders No 2015/RS(G)/779/5(Vol.III) (22 June 2020), available at dipp.gov.in/ sites/default/files/Ministry%20of%20Railways%2022%2006%202020%203%20a%20MoR.pdf. 132 Department of Defence Production, Orders No 18(2)/19/PPO-Notification/DP(Plg-MS) (25 August 2020), available at dipp.gov.in/sites/default/files/Department%20of%20Defence%20 Production%20Re%20notification%20of%2024%20items%20under%203%28a%29%20dated%20 25082020.pdf. 133 S Verma, ‘Public Projects: Why States should go beyond “Heads I Win, Tails You Lose”’, Financial Express (26 May 2020), available at www.financialexpress.com/opinion/public-projects-why-statesshould-go-beyond-heads-i-win-tails-you-lose/1970417.

Emergency Procurement: India  483 section III allowed extremely quick and deft action by Central Government agencies, and through such agencies, also by state governments. Procuring entities were allowed to use as many channels of procurement as required without being overly concerned with differential prices for the same items; without reform they may have refrained from this, perhaps even at the risk of not being able to secure supplies, out of an innate fear of audit objections. This change has perhaps been the single most important measure to help India procure what it needed in the face of intense competition from international buyers. On the second point, India’s February 2020 guidance on force majeure has so far allowed procuring agencies to extend contract periods without any complaint of undue benefits to government suppliers, minimising avoidable conflicts and litigation. While India’s guidance was indeed path-breaking, the case was perhaps more one of a ‘change of law’ than simple force majeure, and offered the Ministry of Finance an opportunity to introduce a well-drafted ‘change of law’ clause into the General Financial Rules and associated manuals in order to ensure solid and meaningful procurement reform.134 The Ministry relied instead on some existing parts of the General Financial Rules, something which alone may be insufficient for dealing with a complex subject across hundreds of thousands of public procurement contracts all over India. Similarly, COVID-19 management offered an opportunity to address and expand existing procurement guidance on advance payments, with backup guarantees that can be called on upon failure to deliver, at least for pandemic and emergency situations. However, as analysed earlier, the issues remain complicated in the absence of clear-cut guidance, even though the Ministry of Defence issued some very aggressive operating procedures. Pandemics generally lead to continuously unfolding situations that usually stay one step ahead of public agency responses. Where India could have done better is in areas such as collaborative procurement, both between agencies at various tiers within a department and across a number of government departments and across state governments; that policy approach that seems to have been discarded too soon, perhaps in view of its logistical complexities in a country with such a sizeable population. This area now needs to be faced head-on to ensure efficient procurement and delivery of a vaccination programme in the face of stiff international competition for vaccines as well as logistical and supply chain requirements for cold storage of vaccines. India’s August 2020 deliberations on vaccine procurement may therefore need to be finalised quickly, while retaining the adaptability of proposed solutions to domestic and international situations that may arise. Similarly, procurement regulations need to be issued as soon as possible on vital matters such as government priority in relation to private supplies and resources and temporary acquisition of private property and private human resources, regulations that are already permitted under legislation such as the Disaster Management Act (since 2005) but are yet to be disseminated. Also worthwhile may be the introduction of

134 Verma

(n 31) 243–45.

484  Sandeep Verma some permanent provisions, replacing the current transitional ones, on aspects such as multi-channel procurement, including vaccine procurement from multiple domestic and international sources.

VIII. Reflections Coordinating multiple state responses for tackling a pandemic the size and scale of COVID-19, while simultaneously navigating meaningful public procurement reform around emergency procurement, is an extremely challenging task in a country the size of India. This task was made even more complex by India’s federal structures and procurement autonomy of state governments, municipal and rural local bodies, public utilities and state-owned enterprises. The pandemic has offered an unparalleled opportunity both to test and to tweak India’s public procurement system as it applies to emergency procurement; and initial early steps towards this by the Government of India have been successful both in terms of organising timely procurement decisions for medical supplies and equipment and in terms of addressing ‘time-essence’ contracts in the context of lockdowns and restrictions on movement. India’s health systems, both public and private, and related regulations will, however, continue to be tested. Issues of availability of treatment facilities and medical supplies such as oxygen (especially in rural areas with weak health infrastructure and fewer medical personnel) and regulating the cost of treatment and essential tests (such as COVID sampling and lung CT scans) to keep them reasonable and affordable will remain challenging areas where policy responses will need to be constantly sharpened and made more effective. A key test of public healthrelated manufacturing, procurement and supply chain systems will be vaccination; in a country the size of India, there will be issues not only of ensuring streamlined manufacturing of vaccines in massive numbers and procuring and distributing them efficiently down to the last mile; but also a host of important policy issues such as balancing competing priorities among multiple vulnerable groups. What inspires immense confidence in India’s ability to successfully navigate these challenges is the fact that the country has steadily moved out of its traditional, conservative and mistrust-based approaches towards a more aggressive, flexible, efficient and practical approach to public procurement reform under its present leadership, which has focused on introducing much-needed efficiency in public service delivery rather than merely managing the optics of it.

20 Emergency Procurement and Responses to COVID-19: The Case of Singapore HENRY GAO*

I.  General Introduction As one of the world’s busiest trade and travel hubs, Singapore quickly became the worst affected of all countries by COVID-19 in the very early stages of the pandemic. On 5 February 2020, two weeks after the lockdown in Wuhan, Singapore had the highest infection rate in the world (24 cases in a five million population), higher than China (20,502 cases in a 1.5 billion population).1 Alongside the health emergency, Singapore also had to cope with another emergency as countries resorted to export and import restrictions and suspension of international transportation of both goods and people. With the world’s highest trade to GDP ratio at 400 per cent,2 Singapore sees trade as its ‘lifeline’3 and, with the domino effects of more and more trade restrictions, the health emergency quickly escalated into a trade emergency threatening not only the prosperity of ‘the little red dot’,4 but its very survival.

* This research/project is supported by the National Research Foundation, Singapore under its Emerging Areas Research Projects (EARP) Funding Initiative. Any opinions, findings and conclusions or recommendations expressed in this material are those of the author and do not reflect the views of National Research Foundation, Singapore. 1 M Gonzalez, ‘Morning brief: Wuhan coronavirus update for Feb 5, 2020’ The Independent (5 February 2020), available at theindependent.sg/morning-brief-wuhan-coronavirus-update-for-feb-5-2020. 2 World Trade Organization (WTO), ‘Trade Policy Review, Summary of Report by the Secretariat’ (5 June 2012, WT/TPR/S/267) vii, available at www.wto.org/english/tratop_e/tpr_e/s267_sum_e.pdf. 3 Minister Chan Chun Sing, Speech at the Singapore Maritime Lecture 2019 (Singapore Maritime Lecture 2019, 8 April 2019), available at www.mti.gov.sg/Newsroom/Speeches/2019/04/ Speech-by-Minister-Chan-Chun-Sing-at-the-Singapore-Maritime-Lecture-2019. 4 A nickname often used as a casual reference to Singapore, ‘little red dot’ refers to how the country is depicted on many maps of the world and of Asia as a red dot. See here, Wikipedia, ‘Little red dot’, available at en.wikipedia.org/wiki/Little_red_dot. Former Indonesian President BJ Habibie is widely credited as the first to make the reference, in an article in the Asian Wall Street Journal, on 4 August 1998. See, R Borsuk and R Chua, ‘Singapore Strains Relations with Indonesia’s President’ Wall Street Journal (4 August 1998), available at www.wsj.com/articles/SB902170180588248000.

486  Henry Gao From early on, Singapore has taken the pandemic very seriously. For e­ xample, on 22 January 2020, the Government announced the establishment of a multiministry taskforce on the Wuhan strain of coronavirus,5 co-chaired by the Minister for Health and Minister for National Development to, ‘Direct the national whole-of-government response to the novel coronavirus outbreak; Coordinate the community response to protect Singaporeans and stay vigilant against the spread of the disease; and work with the international community to respond to the outbreak’.6 As of October 2020, Singapore had emerged relatively unscathed in the pandemic. It had not only one of the lowest levels of COVID-19 and mortality rates,7 but also did not suffer from a shortage of food and other essential products, as has been seen in some countries8 – a remarkable feat, especially considering that it does not produce a single grain of rice or any other agricultural commodity. Singapore’s success can be explained by many factors. One is its efficient government procurement framework, which enabled the city-state to procure its pandemic-related requirements in a speedy manner. This chapter discusses how Singapore’s procurement policies and practices helped it to fight the pandemic, including its use of emergency procurement procedures, its provision of temporary relief measures and its creative use of trade agreements to ensure the supply of essential goods.

II.  Introduction to the Regulatory Framework Already a Party to the original World Trade Organization (WTO) Government Procurement Agreement (GPA) since 20 October 1997, Singapore became a party to the revised GPA on 6 April 2014. The main statute for implementing the GPA

5 T Goh, ‘Wuhan virus: MOH sets up multi-ministry task force, advises against non-essential trips to Wuhan’ The Straits Times (22 January 2020), available at www.straitstimes.com/singapore/health/ wuhan-virus-3-more-suspected-cases-in-singapore-avoid-non-essential-travel-to-wuhan. 6 Ministry of Health, ‘Multi-Ministry Taskforce on Wuhan Coronavirus, Terms of Reference (TORs) and Composition (Singapore)’, available at www.moh.gov.sg/docs/librariesprovider5/default-documentlibrary/multi-ministry-taskforce-on-wuhan-coronavirus-and-tor---final.pdf. 7 There were significant outbreaks of COVID-19 cases among migrant workers early in the pandemic, but the situation was quickly brought under control with the adoption of various measures. Moreover, as the migrant workers mostly live in dormitories provided by the employers, the cases were contained among the migrant population. See A Hwee Min, ‘“Multi-layered” strategy in place to detect, contain new COVID-19 cases in migrant worker dormitories: MOM’ Channel News Asia (9 September 2020), available at www.channelnewsasia.com/news/singapore/ covid-19-dormitories-new-cases-multi-layered-strategy-13095412. 8 A Gunia, ‘How Coronavirus Is Exposing the World’s Fragile Food Supply Chain – and Could Leave Millions Hungry’ Time (8 May 2020), available at time.com/5820381/coronavirus-foodshortages-hunger.

Emergency Procurement: Singapore  487 is the Government Procurement Act,9 first enacted in 1997 and most recently in 2014. The Act is supported by three pieces of subsidiary legislation: (a) Government Procurement Regulations,10 first enacted in 2002 and revamped in 2014, when the revised GPA entered into force for Singapore. These set out the general procedure for conducting procurement. (b) Government Procurement (Application) Order,11 first enacted in 2002 and last amended in 2021. This implements Singapore’s free trade agreements (FTAs) by setting out the lists of covered procurement entities and the thresholds applicable to various FTA partners. (c) Government Procurement (Challenge Proceedings) Regulations,12 first enacted in 2002 and last revised in 2004. These set out the bid challenge procedures before the Government Procurement Adjudication Tribunal. In general, Singapore’s laws and regulations closely follow the GPA, with many parts of the GPR copied from the GPA almost verbatim. As a small country, Singapore only has one level of government and does not have sub-central government bodies in Annex 2 of its GPA schedule. In a way, this makes it easier to fight the pandemic as the chain of command is shorter. Government procurement is conducted according to three core principles: (a) transparency, with requirements, procedures and evaluation criteria published openly on the one-stop Government Electronic Business (GeBIZ) portal; (b) open and fair competition, with equitable opportunities on a level playing field; and (c) value for money, balancing benefits and costs on the basis of total cost of ownership.13 The policy framework is administered by the Ministry of Finance (MOF),14 but there is no central procurement office. Procurements are usually carried out by individual ministries, agencies and statutory boards, which follow MOF guidelines.15 While centralised purchasing is carried out for common goods and services, ministries, departments, organs of state and statutory boards may still 9 Government Procurement Act (Singapore), available at sso.agc.gov.sg/SL/GPA1997-S269-2014? DocDate=20140404. 10 Government Procurement Regulations 2014 (Singapore), available at sso.agc.gov.sg/SL/GPA 1997-S269-2014?DocDate=20140404. 11 Government Procurement (Application) Order (Singapore), available at sso.agc.gov.sg/SL/GPA 1997-OR1. 12 Government Procurement (Challenge Proceedings) Regulations, available at sso.agc.gov.sg/SL/GPA 1997-RG1. 13 WTO, ‘Trade Policy Review: Report by Singapore’ (7 June 2016, WT/TPR/S/343) 3.81, available at docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/TPR/S343.pdf&Open=Truepara. 14 ibid. 15 ibid, para 3.81.

488  Henry Gao purchase off service-wide contracts;16 and the private sector delivers some public services through public–private partnerships (PPPs), usually for large projects.17 Procurements of no more than S $6,000 (US $4,400) are designated small value purchases, which can be sourced directly, so long as prices reflect fair market value.18 Contracts between S $6,000 and S $70,000 (US $52,000) are fulfilled through invitation to quote (which can be open or limited to a few selected suppliers).19 Procurements above S $70,000 are done through open tender, selective tender or limited tender, which parallel the GPA’s three award procedures set out in chapter 2 of this book. Procurement opportunities are published in GeBIZ.20 Open tendering is the most common method for purchases above S $70,000.21 Selective tendering, defined as a ‘procurement method whereby only qualified suppliers are invited by a contracting authority to submit a tender’,22 involves a two-stage process with shortlisting of interested suppliers based on their capabilities via an open prequalification exercise, followed by tender or request for proposals from qualified suppliers.23 In a limited tendering procedure, ‘the contracting authority contacts a supplier or suppliers of its choice to submit a tender’.24 It can only be used on one of nine grounds defined under the Government Procurement Regulations, reg 26, which are exactly the same as those under the GPA itself, with only minor tweaks in expression, and include extreme urgency as set out in chapter 2.25 Compliance audits are conducted annually by the Auditor-General’s Office (AGO),26 which occasionally identifies laps and irregularities despite Singapore’s reputation for clean government.27 Singapore generally enjoys high rankings for its regulatory system. For ­example, it was ranked 12th globally and first in Asia in the 2020 Rule of Law Index of the World Justice Project,28 and for many years was ranked first in the world for ease of doing business. (It is currently second behind New Zealand, and first for enforcing contracts.29) As noted above, procurement complaints are 16 Guide to Singapore Procurement (GeBIZ), available at www.gebiz.gov.sg/singapore-governmentprocurement-regime.html#guide-for-suppliers. 17 WTO, ‘Trade Policy Review’ (2016) para 3.81. 18 Ministry of Finance, ‘A Guide for Suppliers Participating in Singapore Government Procurement Opportunities’ (27 October 2020) 6, available at www.gebiz.gov.sg/docs/Supplier_Guide_Detailed.pdf. 19 ibid. 20 ibid, 8. 21 WTO (n 13) para 3.83. 22 Government Procurement Regulations, reg 2. 23 Ministry of Finance, ‘A Guide for Suppliers’ (2020) 6; WTO (n 13) para 3.83. 24 Government Procurement Regulations, reg 2. 25 Government Procurement Regulations, reg 26. 26 WTO (n 13) para 3.85. 27 G Ho, ‘Auditor-General finds lapses in procurement, contracts and IT controls in public agencies’ The Straits Times (16 July 2019), available at www.straitstimes.com/singapore/auditor-generalfinds-lapses-in-procurement-contracts-and-it-controls-at-public-agencies. 28 World Justice Project, ‘Rule of Law Index 2020’ (Washington DC, 2020), available at worldjusticeproject.org/sites/default/files/documents/WJP-ROLI-2020-Online_0.pdf. 29 World Bank Group, ‘Doing Business 2020: Singapore’ (2020), available at www.doingbusiness.org/ content/dam/doingBusiness/country/s/singapore/SGP.pdf.

Emergency Procurement: Singapore  489 handled by the Government Procurement Adjudication Tribunal, whose decisions are subject to judicial review.30

III.  Procurement of New Requirements As a small country with limited or even no local production of many medical supplies (for example, production of surgical masks stopped 10 years ago31) Singapore faced special difficulties procuring such supplies for the pandemic. To ensure supply to frontline medical workers, it had to establish production capacity in a short span of time32 and even shifted mask production lines owned by Singaporean companies overseas back home, when restrictions on exports of masks were imposed.33 For the procurement of medical supplies and other products, Singapore reversed its normal practice of open tendering and chose limited tendering; there have been no reports of using other methods, such as extending existing contracts, probably because existing contracts were limited given the small population base. In September 2019, the Government disclosed that it had a national stockpile of 16 million N95 masks,34 but since then the exact number stockpiled has not been shared out of concern over compromising Singapore’s negotiating position, thus endangering national security.35 This also implies that limited tendering is probably used for most, if not all, procurements of medical supplies, although the Government has not confirmed this. Mirroring GPA, Art XIII.1.d with only minor language tweaks, limited t­ endering is available (Government Procurement Regulations, reg 26.2(e)) ‘when it is strictly necessary, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the goods or services cannot be obtained in time by means of open tendering or selective tendering’. This gives broad discretion and is considered to obviate the need to have specific legislation on emergency procedure. 30 Government Procurement Act, s 20. 31 J Lim, ‘Made-in-Singapore surgical masks given to frontline healthcare workers in fight against Covid-19: Chan Chun Sing’ Today Online (6 May 2020), available at www.todayonline.com/singapore/ made-in-Singapore-surgical-masks-given-frontline-healthcare-workers-covid-19-chan-chun-sing. 32 C Yang, ‘Coronavirus: Singapore boosting production of masks since February’ The Straits Times (7 May 2020), available at www.straitstimes.com/singapore/singapore-boosting-productionof-masks-since-feb. 33 KA Lim, ‘Ho Ching clarifies her reaction to Taiwan donating masks to Singapore’ AsiaOne (13 April 2020), available at www.asiaone.com/singapore/ho-ching-clarifies-her-reaction-taiwandonating-masks-singapore. 34 ‘16 million N95 masks available in national stockpile as haze covers Singapore’ Channel News Asia (19 September 2019), available at www.channelnewsasia.com/news/singapore/haze-n95face-masks-available-national-stockpile-moh-government-11919286. 35 N Meah, ‘Singapore is building up mask stockpile, but people should not take availability of masks for granted: Chan Chun Sing’ Today Online (21 May 2020), available at www.todayonline.com/ singapore/singapore-building-mask-stockpile-people-should-not-take-availability-masks-grantedchan-chun.

490  Henry Gao The policy of using this emergency method was confirmed in official statements noting that the COVID-19 emergency made it impractical to conduct open-source procurement for medical goods, services and quarantine and treatment facilities on the GeBIZ platform.36 Instead, the relevant agencies ‘established direct contracts with the suppliers outside GeBIZ who were best able to meet the requirements within the shortest time frame possible’.37 This is possible as reg 26.5 allows entities to bypass most procedural requirements such as initial procurement notices and documentation. Nonetheless, government agencies are still required to ensure ‘there is proper evaluation and necessary approvals are sought’ and transactions are still be subject to audit and compliance reviews.38 Moreover, as required by GPA, Art XVI.2 and the Government Procurement Regulations 2014, reg 30, procuring entities must still publish award notices within 72 days of award, including a description of the goods or services procured; the name and address of the procuring entity; the name and address of the successful supplier; the value of the successful tender or the highest and lowest offers taken into account in the award of the contract; the date of award; and the type of procurement method used, and in cases where limited tendering was used in accordance with Article XIII, a description of the circumstances justifying the use of limited tendering.39

While some questions on the use of emergency procedures were raised by opposition Members of Parliament, they were duly answered by the Government and did not result in further controversies.40 In addition to using limited tendering for medical supplies, the Government also used limited tendering to source other goods and services, such as tracing devices. In May, for example, limited tendering was used by the Government Technology Agency to contract with local firm PCI Pte Ltd to supply 300,000 dongles for the TraceTogether Token, a contact-tracing device.41 In June, GovTech further announced another limited tender for the design and manufacturing of the TraceTogether Token, and more than 20 companies were pre-qualified.42 The details of the tender were also made available on GeBIZ, but available only

36 Z Zheng, ‘Govt procurements in Covid-19 period done to respond quickly, processes being scrutinised: Wong’ Mothership (5 June 2020), available at mothership.sg/2020/06/emergencyprocurement-covid-19-pritam. 37 F Koh, ‘Government can obtain necessary goods and services for fighting Covid-19 without tender’ The Straits Times (5 June 2020), available at www.straitstimes.com/politics/parliamentgovernment-can-obtain-necessary-goods-and-services-for-fighting-covid-19-without. 38 Zheng, ‘Govt procurements in Covid-19 period’ (2020). 39 Government Procurement Regulations, reg 30. 40 ibid, see also, Ministry of National Development, ‘Oral Answer by Ministry of National Development on setting up of COVID-19 facilities’ (5 June 2020), available at www.mnd.gov.sg/ newsroom/parliament-matters/q-as/view/oral-answer-by-ministry-of-national-development-onsetting-up-of-covid-19-facilities. 41 ‘S’pore-based electronics manufacturer PCI secures bid to make GovTech’s TraceTogether Tokens’ The Online Citizen (13 June 2020), available at www.onlinecitizenasia.com/2020/06/13/ spore-based-electronics-manufacturer-pci-secures-bid-to-make-govtechs-tracetogether-tokens. 42 GovTech, ‘TraceTogether Token: Media Statement’ (16 June 2020), available at www.tech.gov.sg/ media/media-releases/2020-06-16-tracetogether-token-media-statement.

Emergency Procurement: Singapore  491 to invited tenderers.43 In August, GovTech announced that the award had been made to PCI and another bidder,44 the award notice published in GeBIZ on 30 October 2020,45 stating that the reason for limited tender was because ‘Products or services cannot be obtained in time by means of open or selective tendering procedures’. The Government Procurement Regulations 2014, reg 30 and GPA, Art XVI(2) require in the award notice a description of the circumstances j­ ustifying the use of limited tendering and this is arguably sufficient to meet that requirement, although a different view, put forward in chapter 3, is that a more detailed justification might be required in the notice. To prevent the virus spreading, the Government imposed two-week quarantine requirements for overseas arrivals and facilities for recovery and care were also needed for local cases. Given the scarcity of land and high population density in Singapore, finding sufficient premises was a challenge. The Government used emergency procurement procedures to contract with hotels and fit out works for the above purposes.46 This also helped hotels, which suffered from low occupancy due to global travel restrictions. According to National Development Minister, Lawrence Wong, while not required by any law or other formal requirement, agencies still tried to make sure ‘that the quotes from the commercial partners are reasonable by comparing against market benchmarks, scrutinising the invoices and ensuring that the works meet the standards required by the Government before processing the payments’.47 In some cases, they were even ‘able to get private sector companies to support the projects on a cost-recovery basis as part of their contributions to the community’.48 It can be noted that in supplying to the private sector some suppliers took the opportunity to escalate their prices in the face of increased demand for face masks, thermometers and hand sanitiser; in just one and a half months, the Consumers Association of Singapore (CASE) received 387 allegations of overcharging.49 To combat such practices, the Ministry of Trade and Industry (MTI) exercised its powers under the rarely used Price Control Act to conduct investigations.50 43 Email from GovTech office (on file with the author) (10 November 2020). See also, A Leow, ‘Over 20 companies pre-picked in limited tender for TraceTogether Token: GovTech’ Business Times (17 June 2020), available at www.businesstimes.com.sg/government-economy/over-20-companiespre-picked-in-limited-tender-for-tracetogether-token-govtech. 44 GovTech, ‘TraceTogether Token Limited Tender Award: Media Statement’ (21 August 2020), available at www.tech.gov.sg/media/media-releases/2020-08-21-tracetogether-token-media-statement-2. 45 GeBIZ, ‘Tender No GVT000ETT20300025: For the Provision of Design and Manufacturing Services for Portable Bluetooth Enabled Contact Tracing Device (Pr200830)’ (30 October 2020). 46 Zheng (n 36). 47 F Koh, ‘Govt agencies allowed to obtain Covid-19 supplies without tender’ The Straits Times (6 June 2020), available at www.straitstimes.com/singapore/govt-agencies-allowed-to-obtain-covid-19supplies-without-tender. 48 ibid. 49 JA Baker, ‘387 complaints on overcharging of face masks, thermometers, hand santisers: CASE’ Channel News Asia (17 February 2020), available at www.channelnewsasia.com/news/singapore/ covid-19-coronavirus-case-complaints-fask-masks-sanitisers-12443210. 50 ‘MTI inspects 3 Stars’ premises amid complaints of COVID-19 mask profiteering’ Channel News Asia (17 February 2020), available at www.channelnewsasia.com/news/singapore/coronaviruscovid-19-mti-3-stars-masks-prices-12442304.

492  Henry Gao In a widely publicised case involving retailer 3 Stars, the MTI sent a formal letter of demand and requested the shop to provide ‘complete information and documentation explaining the basis of their selling prices’, including ‘their cost price and profit margins’.51 This led to an apology and price reduction, but no formal legal action was taken.52

IV.  Modification of Contracts to Adapt to the Pandemic The first COVID-19 case in Singapore, a visitor from China, was reported on 23 January 2020.53 The multi-ministry task force then blocked the entry of anyone who had travelled to Hubei in the 14 days before arrival54 and soon afterwards restricted entry to all recent visitors to China. In February local cases started to emerge, and the Government raised the level for its disease alert system – Disease Outbreak Response System Condition (DORSCON) – to Orange, the second highest level.55 On 21 March 2020, when Singapore reported its first COVID-19 death,56 it further tightened travel restrictions and banned all short-term visitors and transit passengers.57 On 3 April 2020, Prime Minister Lee Hsien Loong announced the beginning of a circuit-breaker58 (lockdown) from 7 April 2020, two days after daily cases jumped to three digits, during which time all schools and most workplaces, except for essential services such as supermarkets, hospitals, transport and utilities, closed. Originally scheduled to end on 4 May 2020, the circuit-breaker was extended on 21 April 2020 to 1 June 2020,59 but even then many restrictions, especially on travel, remained.60 As one of the busiest trading hubs in the world, Singapore found its trade and businesses greatly disrupted by these travel restrictions. Moreover, Singapore also relies heavily on foreign workers for construction and certain other services, 51 Baker, ‘387 complaints’ (2020). 52 ‘Retailer 3 Stars apologises, reduces face mask prices after MTI inspections’ Channel News Asia (25 February 2020), available at www.channelnewsasia.com/news/singapore/covid19-coronavirus3-stars-mask-prices-mti-12469262. 53 M Yong, ‘Timeline: How the COVID-19 outbreak has evolved in Singapore so far’ Channel News Asia (18 April 2020), available at www.channelnewsasia.com/news/singapore/singapore-covid-19outbreak-evolved-coronavirus-deaths-timeline-12639444. 54 JA Baker, ‘Singapore’s circuit breaker and beyond: Timeline of the COVID-19 reality’ Channel News Asia (2 June 2020), available at www.channelnewsasia.com/news/singapore/covid-19-circuitbreaker-chronicles-charting-evolution-12779048. 55 ibid. 56 V Liu, ‘Singapore reports first two coronavirus deaths: A 75-year-old Singaporean woman and 64-year old Indonesian man’ Channel News Asia (21 March 2020), available at www.straitstimes.com/ singapore/singapore-reports-two-covid-19-deaths-health-minister-gan. 57 ibid. 58 Prime Minister Lee Hsien Loong, ‘PM Lee: the COVID-19 situation in Singapore’ (3 April 2020), available at www.gov.sg/article/pm-lee-hsien-loong-on-the-covid-19-situation-in-singapore-3-apr. 59 M Mohan, ‘COVID-19 circuit breaker extended until Jun 1 as Singapore aims to bring down community cases “decisively”: PM Lee’ Channel News Asia (21 April 2020), available at www.channelnewsasia. com/news/singapore/covid-19-circuit-breaker-extended-june-pm-lee-speech-apr-21-12662054. 60 Baker (n 49).

Emergency Procurement: Singapore  493 with more than 100,000 workers from Malaysia alone crossing the border daily.61 With the circuit-breaker restrictions, many affected sectors found it hard or even impossible to fulfil their contractual obligations. Thus on 7 April 2020, the first day of the circuit-breaker period, the Parliament passed the COVID-19 (Temporary Measures) Act 2020,62 which provides temporary relief for inability to perform contracts in five broad categories: certain loan contracts; event contracts; tourism-related contracts; construction contracts and construction supply contracts;63 and leases or licences for non-residential immovable property.64 This covers both contracts between private parties and those with the Government.65 Contracting parties were also prevented from invoking certain legal remedies such as issuing court or insolvency proceedings, enforcing security or calling on performance, and forfeiting deposits.66 Those taking such actions without reasonable excuse would have had their actions dismissed or voided.67 In addition, taking such actions without reasonable excuse is an offence subject to a fine of up to S $1,000 (US $700).68 The Government also introduced sector-specific relief measures, including for the construction sector, where the circuit-breaker has resulted in suspension of work at construction sites, operations at the showrooms of housing developers and home viewings. To help tide construction firms and developers over, the Government introduced measures69 which can be grouped into two broad categories, namely: (a) measures granting additional time for the commencement, completion and sale of construction projects for developers;70 and 61 TT Mei and J Lim, ‘Hopes high for Singapore-Malaysia cross-border travel’ Channel News Asia (19 July 2020), available at www.straitstimes.com/singapore/hopes-high-for-spore-malaysia-crossborder-travel. 62 COVID-19 (Temporary Measures) Act 2020 (Singapore), available at sso.agc.gov.sg/Act/COVID19 TMA2020. 63 See Ministry of Law, ‘FAQs for Construction Contracts or Supply Contracts, or Any Performance Bond Granted Thereto’, available at www.mlaw.gov.sg/covid19-relief/faq/construction s 1 (What types of construction or supply contracts are covered by the Act?). 64 COVID-19 (Temporary Measures) Act 2020, Sch 1 (Scheduled contracts). 65 ibid, s 4. 66 ibid, ss 5–7. 67 ibid, s 8. 68 ibid. 69 Building and Construction Authority, ‘Support Measures for Built Environment Sector Firms’, available at www1.bca.gov.sg/COVID-19/support-measures-for-built-environment-sector-firms. 70 Ministry of National Development, ‘Temporary Relief Measures for Property Sector due to Coronavirus Disease 2019 (COVID-19) Pandemic’ (6 May 2020), available at www.mnd.gov.sg/ newsroom/press-releases/view/temporary-relief-measures-for-property-sector-due-to-coronavirusdisease-2019-(covid-19)-pandemic. These measures were further extended in October and November. See Ministry of National Development, ‘Additional Temporary Relief Measures for Property Sector due to Coronavirus Disease 2019 (COVID-19) Pandemic’ (8 October 2020), available at www.mnd.gov. sg/newsroom/press-releases/view/additional-temporary-relief-measures-for-property-sector-dueto-coronavirus-disease-2019-(covid-19)-pandemic. See also, Building and Construction Authority, ‘[Updated] Circular on the COVID-19 (Temporary Measures) (Amendment No.) Bill’ (5 November 2020), available at www1.bca.gov.sg/docs/default-source/bca-restart/circular-covid-19-temporarymeasures-amendment-no-3-bill.pdf.

494  Henry Gao (b) measures facilitating the cash flow for construction firms, such as advance payment for public construction contracts affected by the circuit breaker71 and shorter payment intervals.72 It is interesting that the COVID-19 (Temporary Measures) Act 2020 explicitly provides in Section 5.13 that the temporary relief under the Act does not affect the taking of any other action in relation to the subject inability,73 including ‘an action pursuant to … a force majeure clause in the contract where applicable’. As the Act does not explicitly makes COVID-19 a force majeure event, contractual parties may also invoke the relevant force majeure clauses. In the construction sector in Singapore the most common standard form contracts used include the International Federation of Consulting Engineers (FIDIC) forms of contract; Singapore Institute of Architects Articles and Conditions of Building Contract (SIA Conditions); Public Sector Standard Conditions of Contract (PSSCOC); and Real Estate Developers’ Association of Singapore Design and Build Conditions of Contract (REDAS Contract).74 All include force majeure provisions, but none explicitly include in their definition an epidemic or pandemic. It is unclear how many firms have invoked the force majeure clauses. It could be argued, however, that COVID-19 constitutes a ‘natural catastrophe’, which is one of the grounds for a force majeure event under the FIDIC contract. Similarly, the SIA conditions provide possible extension of time for contracts due to ‘the shortage of labour resulting from domestic or foreign government actions’, which arguably covers the travel restrictions and ban on construction work during the circuit-breaker period. The only obstacle here is that the actions must not have been reasonably foreseen at the date of the contract, which would exclude contracts entered into post-COVID. The PSSOC provides reliefs for delays caused by ‘Compliance with the requirements of any law, regulation’, which is satisfied by the Government’s COVID-19 restrictions.

71 Building and Construction Authority, ‘Circular on (A) one-off advance payment for ongoing public sector construction contracts affected by the suspension of activities at workplaces due to COVID-19; and (B) passing down of foreign worker levy rebate to work permit and S Pass holders’ (7 April 2020), available at www1.bca.gov.sg/docs/default-source/docs-corp-news-and-publications/ circulars/circular-on-advance-payment-and-passing-down-of-foreign-levy-revate.pdf. 72 Building and Construction Authority, ‘Fortnightly Progress Payment Claims in Public Sector Construction Projects’ (4 March 2020), available at www1.bca.gov.sg/docs/default-source/ docs-corp-news-and-publications/circulars/fortnightly-progress-payment-claims-in-public-sectorconstruction-projects. These measures were further extended in September. See Building and Construction Authority, ‘Circular on Treatment of Claims Arising from COVID-19 in Public Sector Construction Contracts’ (25 September 2020), available at www1.bca.gov.sg/docs/default-source/bcarestart/circular-treatment-claims-covid-19-public-sector-construction-contracts.pdf. 73 Defined in the Act as inability to perform an obligation in the contract. See Section 5.1.a of the Act. 74 Norton Rose Fulbright, ‘Construction force majeure and alternative relief, Force majeure and alternative relief under standard form construction contracts and local law’ (May 2020), available at www.nortonrosefulbright.com/en/knowledge/publications/bfe53cf3/singapore-reliefprovisions-in-construction-contract-suites.

Emergency Procurement: Singapore  495

V.  Security of Supply and Contractor Fraud A.  Security of Supply As a land-scarce and resource-scarce country, Singapore relies heavily on international trade to meet its basic needs. For example, more than 90 per cent of food is imported.75 With the pandemic-related restrictions on trade and transportation, the supply of essential products such as food and medical products faced major disruption. To deal with this, Singapore co-sponsored a series of high-level declarations and joint statements with like-minded countries, to affirm the importance of free trade and the rules-based multilateral trading system.76 In addition, Singapore also entered into specific arrangements with New Zealand to ensure continuity of trade in essential goods, including medical supplies and foodstuffs. One example is the Declaration on Trade in Essential Goods for Combating the COVID-19 Pandemic, dated 15 April 2020.77 Unlike other high-level declarations which envisages essential goods to include food items, agricultural products and inputs, and medical supplies generally, this agreement specifically defines products considered essential by both parties, and further distinguishes them based on their importance and applicable rules. Goods listed in Annex I include certain food products, antibiotics, vitamins, medications, vaccines, dressings, pharmaceutical goods, soap, washing and cleaning products, disinfectants, prepared culture media, surgical gloves, textiles, 75 ‘Singapore’s Food Supply’, Singapore Food Agency, available at www.sfa.gov.sg/food-farming/ singapore-food-supply/the-food-we-eat#:~:text=Singapore’s%20Food%20Supply,-The%20Food%20 We&text=With%20little%20farming%20land%2C%20Singapore,markets%20mainly%20comes%20 from%20overseas. 76 See eg, Ministry of Foreign Affairs Singapore, ‘Declaration of the Ministerial Coordination Group on COVID-19 on Maintaining Essential Global Links’ (17 April 2020), available at www.mfa.gov.sg/ Newsroom/Press-Statements-Transcripts-and-Photos/2020/04/18042020-Ministerial-CoordinationGroup-on-COVID-19; WTO, ‘Responding to the COVID-19 Pandemic with Open and Predictable Trade in Agricultural and Food Products (Revision)’ WT/GC/208/Rev.2, G/AG/30/Rev.2, 20-3862 (29 May 2020), available at docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=Q:/WT/GC/ 208R2.pdf; Ministry of Trade and Industry Singapore, ‘Joint Ministerial Statement on Action Plans to Facilitate the Flow of Goods and Services as well as the Essential Movement of People’ (29 May 2020), available at www.mti.gov.sg/Newsroom/Press-Releases/2020/05/Joint-Ministerial-Statementon-Action-Plans-to-Facilitate-the-Flow-of-Goods-and-Services; WTO, ‘Statement on COVID-19 and the Multilateral Trading System by Ministers Responsible for the WTO’ WT/GC/212/Rev.1 (29 May 2020), available at docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=Q:/WT/GC/212R1.pdf; WTO, ‘June 2020 Statement of the Ottawa Group: Focusing Action on COVID-19, Communication from Canada’ WT/GC/217, 20-4263 (16 June 2020), available at docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=Q:/WT/GC/217.pdf; ASEAN, ‘Hanoi Plan of Action on Strengthening ASEAN Economic Cooperation and Supply Chain Connectivity in Response to the COVID-19 Pandemic’ (26 June 2020), available at asean.org/hanoi-plan-action-strengthening-asean-economic-cooperationsupply-chain-connectivity-response-covid-19-pandemic. 77 Ministry of Trade and Industry, ‘Declaration on Trade in Essential Goods for Combating the COVID-19 Pandemic’ (15 April 2020), available at www.mti.gov.sg/-/media/MTI/Newsroom/ Press-Releases/2020/04/Press-Release--SingaporeNew-Zealand-Declaration-on-Trade-in--EssentialGoods-FINALv2.pdf.

496  Henry Gao laboratory glassware, sterilisers, medical instruments and appliances, ­therapeutic respiration apparatus, equipment related to x-rays and thermometers. This list is much more comprehensive than the list of personal protective equipment and medical goods Switzerland envisaged, for example, when introducing its own unilateral declaration of temporary elimination of import tariffs in May 2020.78 Goods listed in Annex II include, inter alia, live animals, meat, fish, milk and dairy products, plants, fresh and dried fruits and vegetables, coffee, tea, spices, wheat, flour, edible oils, pasta, jams, yeast, condiments, beer and wine. Annex I goods are those considered most critical and are subject to least restrictions, including elimination of all customs duties and charges of any kind within the meaning of the General Agreement on Tariffs and Trade (GATT) 1994, Art II:1(b).79 The Parties also agree not to apply export to these goods prohibitions or restrictions within the meaning of GATT 1994, Art XI:1.80 In contrast, the parties have only agreed to endeavour not to apply export prohibitions or restrictions for Annex II goods, unless they fall within exceptions set out in GATT 1994.81 Where export prohibitions or restrictions are introduced, parties must give advance notice.82 In effect, in light of COVID-19, parties may be able to introduce export prohibitions on Annex II goods by relying on, inter alia: (a) GATT 1994, Art XI:2(a), on the basis that the party needs to prevent or relieve critical shortages of foodstuffs;83 or (b) GATT 1994, Art XX(b), arguing that such restrictions are necessary to protect human life or health.84 Aspects of these provisions are examined further in chapter 9 of this book. With respect to non-tariff barriers, parties merely commit to intensifying consultations with a view to removing such barriers, without differentiating between Annex I and Annex II goods.85 This is probably due to the complex nature of non-tariff barriers, involving policy considerations such as public safety and health that fall within the jurisdiction of government agencies other than the trade ministry. Parties also agree to expedite and facilitate the flow and transit of all products through their air and seaports,86 as well as to endeavour to expedite the release of such products upon arrival, including introducing measures to speed up the processing of import documentation.87

78 In contrast to the Annex 1 Goods, Switzerland’s own unilateral declaration covers only HS Chapters 28, 38, 39, 40, 48, 61, 62, 63, 65 and 90. See, WTO, ‘Notification of Unilateral Measures Related to the COVID-19 Pandemic: Temporary Suspension of Customs Duties on medical Goods, Communication from Switzerland’ G/MA/W/154 (27 May 2020), available at docs.wto.org/dol2fe/ Pages/SS/directdoc.aspx?filename=q:/G/MA/W154.pdf&Open=True. 79 Ministry of Trade and Industry, ‘Declaration on Trade in Essential Goods’ (2020) para 1. 80 ibid, para 2. 81 ibid, para 8. 82 ibid, para 9. 83 GATT, Art XI:2(a). 84 GATT, Art XX:b. 85 Ministry of Trade and Industry (n 77) para 3. 86 ibid, para 4. 87 ibid, para 5.

Emergency Procurement: Singapore  497 Finally, the Declaration requires parties to review it, including coverage, ­periodically, and allows for adding products to the Annexes.88 The agreement is a significant one and beneficial for Singapore for a number of reasons. Singapore is New Zealand’s largest trading partner in South-East Asia, and seventh-largest trading partner globally.89 In the year ending December 2018, bilateral trade amounted to NZ $5.2 billion (US $3.6 billion). Securing a continued partnership during the pandemic was crucial, especially at a time when many countries were adopting protectionist measures. As the High Commissioner of New Zealand to Singapore noted, the real benefit is that food arrives from New Zealand to Singapore, which depends on imports for most of its food, and medical supplies and other goods are sent from Singapore to New Zealand.90 The first freight flight to Singapore from New Zealand after the signing of the Declaration saw 20 tonnes of chilled meat arriving in Singapore, while subsequent flights carried more meat, fruits and eggs.91 Singapore and New Zealand, despite being small countries, have a long history of pioneering rule-making efforts at the international level. For example, it was Singapore and New Zealand, along with Chile, that first created the TransPacific Strategic Economic Partnership Agreement (P4 Agreement) in 2005 to ‘act as a benchmark for trade liberalization among APEC economies and create a demonstration effect for the WTO’.92 The P4 Agreement later morphed into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, one of the largest FTAs ever. Approximately 15 years later, it was also Singapore’s initiative, along with New Zealand and Chile, to create the Digital Economy Partnership Agreement, to ‘set forward-looking standards on digital trade, and establish new international approaches to support the digital economy and trade in the digital era’.93 The Declaration on Trade in Essential Goods could set an example for ‘Inverse-Exceptions’94 which helps all countries in their ongoing fight against 88 ibid, para 13. 89 New Zealand Foreign Affairs and Trade, ‘CEP overview’, available at www.mfat.govt.nz/en/trade/ free-trade-agreements/free-trade-agreements-in-force/nz-singapore-closer-economic-partnership/ cep-overview. 90 J Tyndall, ‘S’pore and New Zealand: Standing together amid Covid-19 challenges’ The Straits Times (1 May 2020), available at www.straitstimes.com/opinion/spore-and-new-zealand-standing-togetheramid-covid-19-challenges?xtor=CS3-18&utm_source=STiPhone&utm_medium=share&utm_ term=2020-05-01%207%3A05%3A37. 91 L Loke, ‘New Zealand sends first batch of essential supplies to Singapore, as part of pact to keep trade flowing amid Covid-19’, Today Online, (23 April 2020), available at www.todayonline.com/ singapore/new-zealand-sends-first-batch-essential-supplies-singapore-part-pact-keep-trade-flowing. 92 For the early history of the P4 Agreement, see H Gao, ‘The Trans-Pacific Strategic Economic Partnership Agreement: High Standard or Missed Opportunity?’ (ARTNeT Conference on Trade-Led Growth in Times of Crisis, Bangkok, 2–3 November 2009) 79–95, available at ink.library.smu.edu.sg/ sol_research/973. 93 Ministry of Trade and Industry, ‘Singapore leads the way in new Digital Economy Partnership Agreement with Chile and New Zealand’ (17 May 2019), available at www.mti.gov.sg/Newsroom/ Press-Releases/2019/05/Singapore-leads-the-way-in-new-Digital-Economy-Partnership-Agreementwith-Chile-and-New-Zealand. 94 M Pinchis-Paulsen, ‘COVID-19 Symposium: Thinking Creatively and Learning from COVID-19How the WTO Can Maintain Open Trade on Critical Supplies’ (OpinioJuris, 2 April 2020), available

498  Henry Gao the pandemic. This may be why the Declaration also includes an open-accession clause, welcoming the participation ‘by any Member of the WTO, or State or separate customs territory in the process of acceding to the WTO’.95

B.  Contractor Fraud Despite its generally good reputation,96 Singapore is not entirely immune to contractor fraud cases. A 2020 survey by PwC covering both public and private organisations found 21 per cent of Singaporean organisations reported procurement and vendor fraud, just slightly lower than the 22 per cent global figure.97 Often Singaporean fraud cases do not involve wrongdoing by procurement officers; in the cases where the officer collaborated, it was sometimes due to a special relationship between, as in the husband-and-wife fraud case reported in 2018 mentioned below.98 Approaches to combat misconduct include disqualifying suppliers. For ­example, the Government Procurement Regulations provides that a supplier may be excluded from participation in a procurement for furnishing ‘any false information or document to the contracting authority’, conviction of ‘any offence involving fraud, dishonesty or moral turpitude’ or commitment of ‘professional misconduct or acts or omissions that adversely reflect on the commercial integrity of the supplier’,99 although exclusion is not mandatory. There is no public information available on how these powers are exercised.100 There are also procedural safeguards and the system has been reformed when problems have come to light. For example, following a discovery of contractor fraud by a husband and wife through abuse of the small value purchases process

at opiniojuris.org/2020/04/02/covid-19-symposium-thinking-creatively-and-learning-from-covid-19how-the-wto-can-maintain-open-trade-on-critical-supplies. 95 Ministry of Trade and Industry (n 77) para 11. 96 For example, Singapore was ranked as the fourth least corrupt country in the world in the Transparency International (TI) Corruption Perceptions Index in 2019. See, The Corrupt Practices Investigation Bureau, ‘Singapore Maintains High Score for Transparency International Corruption Perceptions Index 2019’ (23 January 2020), available at www.cpib.gov.sg/press-room/press-releases/ singapore-maintains-high-score-transparency-international-corruption#:~:text=The%20 Transparency%20International%20(TI)%20Corruption,which%20Singapore%20has%20 successfully%20maintained. 97 PwC, ‘PwC’s Global Economic Crime and Fraud Survey – Singapore report: Economic crime reported by Singapore-based companies converges towards global average’ (2020) 8, available at www.pwc.com/sg/en/publications/assets/global-economic-crime-and-fraud-survey-2020-sg.pdf. 98 S Alkhatib, ‘Technical officer jailed 45 months for cheating PUB into awarding contracts worth almost $2m’ The Straits Times, (27 November 2018), available at www.straitstimes.com/singapore/ courts-crime/technical-officer-jailed-45-months-for-cheating-pub-into-awarding-contracts. 99 Government Procurement Regulations, reg 13.4. 100 In the issues arising from this kind of discretionary debarment see, S Arrowsmith, ‘Constructing Rules on Exclusions (Debarment) Under a Post-Brexit Regime on Public Procurement: A Preliminary Analysis’ (SSRN, 2020), available at ssrn.com/abstract=3659909.

Emergency Procurement: Singapore  499 at the Public Utilities Board, the Board swiftly reduced the number of small value purchases by 96 per cent, combining them into aggregated contracts awarded through open tender.101 The small number of remaining small-value purchasers are now administered centrally by officers with no involvement in operational duties, while the potential suppliers are generated randomly by the computer system.102 More generally, the MOF also has guidelines to ensure procurement integrity, mainly through segregation of procurement roles and responsibilities to ensure checks and balances,103 including requiring evaluation and approval of tenders to be conducted by different persons.104 Complex tenders are evaluated by a team, while those above S $80,000 (US $59,000) must be approved by a tender board comprising a minimum of three senior officers.105 Officers with procurement responsibilities are also subject to periodic rotation.106 Thirdly, there are strong monitoring and enforcement mechanisms. These include the annual audit by the Auditor-General’s Office, with the latest report for 2019 noting mainly procedural lapses, but no fraud or corruption among public officers.107 Investigations are conducted on cases identified by the AuditorGeneral’s annual report, with disciplinary actions such as reprimand or warning given for cases of negligence, and legal prosecution of more serious cases such as fraud.108 So far, no pandemic-related contractor fraud cases have come to public attention, but there is no specific information on this.

VI.  Use of Procurement for Industrial or Social Objectives As the pandemic has wreaked havoc in the economy, some governments have started to use procurement as a tool of industrial or social policy. This is, however, not the case in Singapore. There is no system-wide initiative to use procurement to stimulate the economy or to divert contracts to local firms, for example. Instead, government support packages have tended to address the economic problems directly with wage credits and hiring incentives, directly targeting the problems

101 Alkhatib, ‘Technical officer jailed 45 months’ (2018). 102 ibid. 103 Ministry of Finance, ‘What safeguards are there to minimise the risk of procurement fraud?’, available at www.ifaq.gov.sg/mof/apps/fcd_faqmain.aspx?FAQ=36616. 104 ibid. 105 ibid. 106 ibid. 107 G Ho, ‘Auditor-General flags lapses in IT controls, procurement, contracts’ The Straits Times (17 June 2019), available at www.straitstimes.com/singapore/auditor-general-flags-lapses-in-it-controlsprocurement-contracts. 108 Ministry of Finance, ‘Addressing Procurement Lapses’ (13 August 2012), available at www.mof.gov. sg/Newsroom/Parliamentary-Replies/Addressing-Procurement-Lapses.

500  Henry Gao and avoiding the potential inefficiencies and other problems of indirect incentives such as procurement.109 However, this does not necessarily preclude some procurement from contributing to various industrial or social objectives. For example, renting hotel rooms for quarantine facilities helped to keep the hospitality industry afloat; but this was done mainly to meet quarantine needs, rather than to support the hotels. Another initiative with positive spillover effects is the decision to boost government ICT spending in the light of reduced physical interaction. Thus, in June 2020, the Government of Singapore announced that it would increase its fiscal 2020 ICT spend by 30 per cent to S $3.5 billion (US $2.6 billion).110 This is not only to facilitate the adoption of digital technologies, but also to help businesses recover from the COVID-19 pandemic, with small and medium-sized businesses (SMBs) expected to participate in 80 per cent of these procurement opportunities.111 As these measures are system-wide policies rather than sector-specific, they are unlikely to violate WTO obligations such as those under the Subsidy and Countervailing Measures Agreement, and are likely to be applied in a manner compliant with the GPA.

VII.  The Pandemic as a Catalyst for Procurement Reforms In some countries, the pandemic has helped to shed light on general problems within the procurement system, including its ability to handle emergency procurement, and provide a catalyst for wider reform. This, however, is not the case for Singapore, as with a ‘siege mentality’ that almost amounts to paranoia,112 it seems to be well prepared to handle potential emergencies, including pandemics. In the procurement context the existing rules and procedures, which already provided for emergency procurement procedures, were duly invoked to obtain what was needed.

109 See eg, the review by S Arrowsmith, ‘Horizontal Policies in Public Procurement: a Taxonomy’ (2010) 10 Journal of Public Procurement 149. 110 E Yu, ‘Singapore government ups ICT spending by 30% to fuel post-pandemic recovery, digital transformation’ By the Way (9 June 2020), available at www.zdnet.com/article/singapore-governmentups-ict-spending-by-30-to-fuel-post-pandemic-recovery-digital-transformation. 111 ibid. 112 For more discussions on Singapore’s ‘siege mentality’, see P Ho, ‘The Challenges of Governance in a Complex World, IPS-Nathan Lectures III: The Paradox of Singapore and the Dialectic of Governance’ (National University of Singapore, 3 May 2017), available at lkyspp.nus.edu.sg/docs/ default-source/default-document-library/mr-peter-ho-s-speech22ad087b46bc6210a3aaff0100138661. pdf?sfvrsn=a5116a0a_0.

Emergency Procurement: Singapore  501

VIII. Reflections In general, Singapore has coped well with the pandemic, despite being a small country with few resources and low production capacity. This was achieved partly through Singapore’s efficient procurement policies and practices, which also provide some interesting lessons. A first lesson is the value of adopting emergency procurement procedures from early on, as described above. In view of the global shortage of requirements such as masks, the Government proactively sourced for supplies and even considered local manufacturing options.113 This ensured that Singapore obtained the new requirements very quickly, of great importance to a country with limited resources. At the same time, the procuring agencies also worked hard to ensure compliance with procurement requirements. It is unclear whether emergency procurements have led to more breaches and lapses, something which can only be assessed once the dust settles. Questions can also be raised over the continuation of emergency procurement procedures, as emergencies, by definition, cannot last long; it may be advisable for the Government to shift to normal procurement procedures for items with envisaged long-term needs, including PPE items, tracing devices and apps, and quarantine and care facilities. Adopting legislation to provide contracting parties with temporary relief for inability to perform contracts and suspending the availability of certain legal remedies was also very useful. Such measures address the potential problems in procurement and other contracts in a systemic way and pre-empt the myriad of legal disputes which could otherwise arise. It provides a better solution than simply relying on force majeure clauses, which often come with considerable ambiguity and rarely provide explicit cover for pandemics. The only problem, however, is that, as suggested by the title of the Singapore Act, such legislative interventions are supposed to be temporary; if COVID-19 turns out to be the ‘new normal’, the ‘temporary’ Act may become a more permanent fixture.114 If so, there might need to be a more thorough rethinking of contract law, to ensure fairness to all parties. The third and final point to emphasise is the creative use of trade agreements to secure essential supplies. Singapore’s bilateral agreement with New Zealand, the first of its kind in the world, has obvious symbolic value as it bucks the trend of trade protectionism and sets an example for free trade. However, it is more than

113 C Yang, ‘Coronavirus: Singapore looking for new sources of masks, looking at manufacturing them locally’, The Straits Times (19 February 2020), available at www.straitstimes.com/singapore/ coronavirus-singapore-looking-for-new-sources-of-masks-looking-at-manufacturing-them. 114 Indeed, this is what is happening in Singapore, as the Government has extended many of the measures with the introduction of the COVID-19 (Temporary Measures) (Amendment No 3) Bill on 2 November 2020. See Minister Desmond Lee, ‘2nd Reading Speech by Minister Desmond Lee on the COVID-19 (Temporary Measures) (Amendment No 3) Bill’ (3 November 2020), available at www.mnd.gov.sg/newsroom/parliament-matters/speeches/view/2nd-reading-speech-by-ministerdesmond-lee-on-the-covid-19-(temporary-measures)-(amendment-no.-3)-bill.

502  Henry Gao just symbolic; the Declaration, by listing in detail the specific products deemed to be ‘essential products’, and by differentiating medical products and food products into two annexes with different obligations, has provided a practical model for other countries, which can also sign up to the existing Declaration pursuant to its open-accession clause.

21 Emergency Procurement and Responses to COVID-19: The Case of China PING WANG AND KE REN

I.  General Introduction On 31 December 2019, the WHO China Country Office was informed of cases of pneumonia with unknown etiology in Wuhan, China,1 later identified as the outbreak of the COVID-19 pandemic. This triggered a Class I emergency response in China in January 2020 and a coordinated emergency response mechanism and team under the Chinese Central Government (the State Council) was established.2 The National Health Commission has reported a death toll of 4,636 as of 31 March 2021, and as at that time the infection seemed under control with only six new domestic cases within 24 hours on 31 March 2021.3 As of 31 March 2021, 114,690,000 people have received the COVID vaccine.4 China demonstrated astonishing efficiency in establishing quarantine and travel restrictions, and in providing essential supplies, medical equipment and treatment facilities – for example, constructing the specialised Huoshenshan Hospital in Wuhan in just eight days.5 Its highly centralised political structure is well equipped to address emergencies, being able to rally all available resources, such as state-owned design institutes, construction companies, hospitals and the military. In fact, the meeting of many needs through central direction of resources meant that procurement through the market played a limited role in addressing the pandemic in comparison with the other countries studied in this book. However, the system for market-oriented procurement was relevant to a degree and the experience with this activity has highlighted that emergency procurement and supply is not regulated by a uniform and coherent legal 1 WHO, ‘Pneumonia of unknown cause – China’, available at www.who.int/csr/don/05-january2020-pneumonia-of-unkown-cause-china/en. 2 See (in Chinese) med.china.com.cn/content/pid/157426/tid/1026. 3 See (in Chinese) www.nhc.gov.cn/xcs/yqtb/202104/e7a8c492aa0b404e9039dd3a308bc06a.shtml. 4 See (in Chinese) www.nhc.gov.cn/xcs/yqjzqk/202103/3cf9e74a0c2546f7b13f5c206f738fd9.shtml. 5 See (in Chinese) www.sasac.gov.cn/n4470048/n13461446/n14326116/n14326136/index.html.

504  Ping Wang and Ke Ren framework. Thus, despite China’s experience in dealing with the SARS pandemic in 2003 and other natural disasters, such as earthquakes and floods, securing a supply of essential goods through procurement remains a challenge. In a speech to the Chinese Communist Party’s Deepening Reform Committee in February 2020, President Xi Jinping acknowledged that ‘the shortage of medical equipment, protection suits and face masks showed the weakness of the country’s emergency supply mechanism’ and ‘a uniform national emergency procurement and supply framework shall be established’.6 Regarding the legal framework, as discussed in section III below: (a) emergency procurement is largely excluded from national procurement laws such as the Government Procurement Law (Art 85) and Tendering Law (Art 66), even though suitable procurement methods – competitive negotiations and single source procurement – are available for emergencies under the Government Procurement Law; (b) national regulations on handling of emergencies do not provide clear guidance on emergency procurement; and (c) ad hoc rules adopted by certain local governments lack uniformity and coherence. On the basis of the emergency procurement exclusion the Ministry of Finance – the government procurement regulator and administrative review body – provided a ‘green pathway’ for emergency procurement during the pandemic, relieving procuring entities of the duty to comply with the Government Procurement Law and implementing regulations provided there was internal monitoring and records were kept. This created a legal vacuum which could not effectively be filled by abstract provisions found in national regulations on handling emergencies or the few (ambiguous) local rules. This chapter provides a critical analysis of the Chinese legal rules relevant to emergency procurement. It suggests that excluding emergency procurement from government procurement regulation altogether does not strike the right balance between rapidity and other objectives such as integrity and value for money. Further, although Chinese authorities, especially the Ministry of Finance, are deeply concerned about abuse of single-source procurement, supplier lists and framework agreements, it is suggested that the value of these tools and their application to emergency procurement should be carefully considered rather than dismissed. This chapter proposes several reforms to address these issues and also highlights the need for a clear and uniform institutional framework and set of rules, which is necessary if electronic procurement gateways and platforms – already encouraged by regulatory bodies – are to fulfil their potential in emergencies. More coordination between national rules on handling of emergencies and public procurement is also required. In summary, emergency procurement should be brought – with

6 See

(in Chinese) www.xinhuanet.com//2020-02/29/c_1125643629.htm.

Emergency Procurement: China  505 necessary adaptations – within the general regulatory framework for government procurement, rather than procuring entities simply having a ‘green pathway’ to ‘wander in the wilderness’ by themselves.

II.  Introduction to the Regulatory Framework7 China is in essence a civil law jurisdiction. The hierarchy of norms8 has the Constitution at the top, followed by primary legislation (national laws enacted by the National People’s Congress (NPC) and its Standing Committee), then implementing Ordinances/Administrative Regulations (xingzhengfagui 行政法规) enacted through State Council Decrees/Orders and, at the fourth level, Ministerial Measures (bumenguizhang 部门规章, sometimes also translated as ‘Rules’ or ‘Provisions’) enacted through Ministerial Orders signed by the Minister and also local legislation of the People’s Congress at provincial level. However, the most common instruments used by ministries and local government bodies to exercise their authorities, including in public procurement, are administrative regulatory documents (xingzhengguifanxingwenjian 行政规范性文件)9 (also sometimes translated as notices or provisions), which need not be enacted through a Ministerial Decree/Order; thus they are easier to roll out and often purport to confer ultra vires powers.10 Chinese judges generally lack the power of their common law counterparts to interpret ambiguous primary legislation to fill gaps, or to create precedent.11 However, the Supreme People’s Court does have the power to adopt authoritative and binding judicial interpretations.12

7 For an overview of China’s public procurement regulation, see P Wang, Regulating Public Procurement in China (Routledge, 2021, forthcoming). 8 Article 90 of the Constitution; and see also the Legislation Law (enacted on 15 March 2000 and entered into force on 1 July 2000) and two State Council Regulations: Regulation on Enactment Procedure for [State Council] Administrative Regulations (State Council Order 321 2001, enacted on 16 November 2001 as amended on 22 December 2017) and Regulation on Enactment Procedure for [ministerial and local government] Decrees (State Council Order 322 2001, enacted and amended on the same date as the previous regulation). 9 Defined as ‘a public document with binding force, involving rights and obligations of natural and legal person as well as other organisations, enacted by administrative or authorised organs in accordance with procedure and powers laid down by law, which is not a State Council Administrative Regulation, Ministerial Rule or Local Government Rule’. See State Council, ‘Notice on Strengthening Supervision and Management of Enacting Administrative Regulatory Documents’, State Council Secretariat No 37, 2018, available in Chinese at www.gov.cn/zhengce/content/2018-05/31/content_5295071.htm. All translations are the authors’ own unless otherwise stated. 10 On legislation generally (in Chinese) see W Zhou, Law of Legislation, 2nd edn (Law Publisher China, 2015). 11 Q Lin and S Shen, ‘The Issue of Legal Force of Regulatory Documents’ (2004) 3 Administrative Law Research 15 (in Chinese). 12 For example, the Supreme Court, in its Judicial Interpretation on Various Issues related to the Enforcement of Administrative Litigation Law first adopted in 2000 (amended in 2015), provides in Art 62 that ‘People’s Courts, while adjudicating administrative suits, may refer to legally compliant and effective regulatory documents’ [emphasis added].

506  Ping Wang and Ke Ren Chinese courts often have to rely on administrative regulatory documents in adjudicating administrative cases, as detailed and directly relevant provisions can only be found there and not in national laws, administrative regulations or ministerial rules.13 Public procurement in the sense of purchasing in a competitive market did not exist in pre-reform, centrally planned China (1949–78);14 the needs of public entities were met by allocations under fixed terms through central planning. From 1978 central planning started to give way to market forces, and a tendering system and related legislation were gradually introduced, including two national laws of the NPC,15 two State Council Regulations and numerous ministerial measures and provincial legislative acts. However, competition between, not coordination of, various procurement rules was the theme. In the view of the EU, the Chinese procurement regime remains ‘incomplete and not transparent’ and ‘major reforms are needed to ensure compliance with international standards and a predictable environment for bidders’.16 The first of four phases of evolution was marked by the 1999 enactment of the Tendering Law, drafted by the National Development and Reform Commission (NDRC, then State Planning Commission) and enacted by the NPC in 1999. The Tendering Law focuses on tendering activity rather than public procurement regulation in general, and applies to both the public sector – where it is compulsory for publicly funded infrastructure – and the private sector, where its application is optional. This law lacks many features of modern public procurement legislation such as a clear definition of public procurement or a supplier review mechanism. It mainly provides detailed procedural rules for open tendering (‘公开招标’) – the default method similar to the open tendering method of the UNCITRAL Model Law – and tendering by invitation (‘邀请招标’) – similar to the Model Law’s restricted tendering method. From the mid-1990s, however, the Ministry of Finance and its local branches initiated a second reform phase resulting in the Government Procurement Law 2002 and establishing a western-style public procurement regime. Inspired by the UNCITRAL Model Law on Procurement of Goods, Construction and Services 1994 – predecessor to the 2011 version of the Model Law (discussed in chapter 2) – the Government Procurement Law provides for methods additional to open and restricted tendering, namely competitive negotiations, request for 13 Article 63 of the amended Administrative Litigation Law provides that ‘People’s Courts, while adjudicating administrative suits, rely on laws and administrative regulations, and make reference to [ministerial and local government] rules’, without explicit reference to regulatory documents. However, Art 64 provides that ‘regulatory documents, that have failed the legality review, shall not be used as the basis to establish the legality of any administrative act’. 14 Q Kong, ‘Chinese Law and Practice on Government Procurement in the Context of China’s WTO Accession’ (2002) 11 Public Procurement Law Review 201, 202. 15 The Tendering Law enacted on 30 August 1999, which entered into force on 1 January 2000; and the Government Procurement Law enacted on 29 June 2002, which entered into force on 1 January 2003. 16 ‘EU Trade and Investment Barriers Report 2011’, European Commission, SEC(2011) 298, 25.

Emergency Procurement: China  507 quotations and single-source procurement, comparable with those of the Model Law, and also for supplier remedies. It applies to procurement using fiscal funds, above a certain threshold or included in designated catalogues, by government departments and agencies, and by public institutions (such as schools and hospitals) and social organisations, but excluding state-owned enterprises (SOEs). However, the Government Procurement Law failed to integrate the Tendering Law into the new framework; instead, it simply provides (in Art 4) that the Tendering Law applies to government procurement of works if open or selective tendering is used. This state of affairs arguably came about because of competition to regulate between NDRC and the Ministry of Finance. The third phase saw the entry into force of the Implementing Regulation of the Tendering Law in 2011 and the Implementing Regulation of the Government Procurement Law in 2015. These were adopted by the Central Government (the State Council) and thus have greater legal authority and impact than ministerial orders, regulatory documents and local legislation. The fourth phase involved initiatives in electronic government procurement, including e-tendering,17 and public private partnerships (PPPs)18 and the introduction of public resources trading platforms at the local level, integrating to an extent the institutional frameworks for awarding and monitoring contracts. However, NDRC and the Ministry of Finance have continued concurrently to enact competing rules on all aspects of public procurement. This has led to duplication of resources and inconsistency which jeopardises legal certainty; and addressing this fragmentation is a pressing imperative.

III.  Current Provisions on Emergency Procurement of New Requirements This section first explains the extent to which emergency procurement is excluded from the Government Procurement Law and the Tendering Law and the problems caused by using the term ‘emergency’ to describe both the grounds for using competitive negotiation and single source procurement and the emergency procurement exclusion. Secondly, we examine national provisions on handling emergencies and infectious diseases, which are limited, abstract and uncoordinated. Thirdly, the very brief Ministry of Finance Secretariat Notice on Facilitating Procurement related to COVID-19 Prevention and Control19 is discussed, as 17 P Wang, ‘Development of Electronic Government Procurement in China: A Case Study Prepared for the Asian Development Bank’, October 2011, available at www.adb.org/sites/default/files/ projdocs/2011/43149-012-reg-tacr-05.pdf. 18 P Wang, ‘Regulation of PPP in China’, SLS Annual Seminar Series Paper Collection, The Future of Commercial Law (Hart Publishing, 2019). 19 Ministry of Finance Secretariat, ‘Notice on Facilitating Procurement related to Covid-19 Prevention and Control’, 26 January 2020, available in Chinese at www.gov.cn/zhengce/zhengceku/2020-01/26/ content_5472325.htm.

508  Ping Wang and Ke Ren the most significant central guideline on emergency procurement. (A separate Ministry of Finance document on non-emergency procurement during the pandemic is discussed in section IV.) Fourthly, emergency procurement measures adopted by certain local authorities are analysed to identify some areas of confusion and issues relevant to reform. Finally, but very importantly, we give an overview of the Chinese Government’s logistical support during the pandemic. As no review of COVID-19 related procurement has been conducted (and it is unclear whether there will be any) the examination can only rely on (often incomplete) public information.

A.  Emergency Procurement Exclusion in the Tendering Law and Government Procurement Law Article 66 of the Tendering Law (applicable to publicly funded works and infrastructure) provides that ‘projects involving special circumstances such as national security, national secrets, handling of disasters …, where tendering is not suitable, may be exempted from the duty to follow tendering procedures’ [emphasis added]. Due to the length of tendering proceedings it is common not to use them for emergency requirements; and it is noteworthy that the Tendering Law does not provide for any simplified or shortened tendering procedure for emergencies. A more explicit emergency exclusion is found in the Government Procurement Law, which provides in Art 85 that that Law does not apply to ‘emergency (‘紧急’) procurement caused by a severe natural disaster20 and other force majeure’. That Law does not define ‘emergency procurement’ and ‘force majeure’ but the Civil Code (Art 180) defines ‘force majeure’ briefly as ‘unforeseeable, unavoidable and insurmountable circumstances’ capable of relieving civil and contractual liabilities (Arts 180, 563, 590).21 The above emergency exclusion appears capable of being construed either broadly, covering any procurement meeting emergency needs regardless of severity, or narrowly, relating only to the most urgent needs caused by force majeure, such as a severe natural disaster, beyond the control of procuring entities. The rationale for any emergency exclusion from the Government Procurement Law seems questionable given that the Law provides for methods for emergencies. Thus, first, Art 30 provides for competitive negotiations when, inter alia, ‘procuring entities emergency (‘紧急’) needs cannot be met through tendering

20 Translation of the Chinese term ‘自然灾害’. In Chinese, the difference between ‘灾害’ (translated as ‘disaster’) and ‘灾难’ (‘catastrophe’) is negligible. 21 The same definition as under Contract Law, Art 117, available in Chinese at www.gov.cn/ banshi/2005-07/11/content_13695_3.htm), replaced by the Civil Code (28 May 2020, and in force from 1 January 2021), available in Chinese at www.npc.gov.cn/npc/c30834/202006/75ba6483b8344591abd0 7917e1d25cc8.shtml.

Emergency Procurement: China  509 procedures due to the time needed’,22 with Implementing Regulation, Art 26 stating (similarly to Art 30(4)(a) of the UNCITRAL Model Law) that this does not apply when the emergency was foreseeable or caused by the procuring entity’s dilatory acts. Secondly, Art 31 of the Government Procurement Law allows single source procurement for an ‘unforeseeable emergency (‘紧急’) making it impossible to purchase from any other suppliers’.23 The same Chinese term ‘紧急’ （jinji）is used in the Government Procurement Law in Arts 30, 31 and 85 without clarification. Thus it is unclear whether any specific urgent need should be subject to competitive negotiations, single-source procurement or excluded from the Law altogether. The Government Procurement Law and its implementing rules contain important requirements on information transparency applicable to all methods, including competitive negotiations and single-source procurement. For example, Art 42 of the Law requires records to be kept for 15 years covering, among other things, subject matter, price, reasons for using methods other than open tendering and the evaluation report. Article 43 of the Implementing Regulation requires an award notice on official media, including the name of the winning supplier, price and quantity, within just two days of the award. Article 50 of that Regulation also requires ex ante approval of single-source procurement by the financial department at the same level of the government as the procuring entity24 (although, in contrast with use of single source procurement on the basis that there is only one supplier, no pre-procurement standstill period is required to facilitate challenge).25 Excluding emergency procurement altogether from the Government Procurement Law arguably removes these safeguards. The COVID -19 pandemic, like the 2003 SARS pandemic, is classified in China as a force majeure event mainly for the purpose of contract law.26 However, it is noteworthy that although the Ministry of Finance Notice on Facilitating Procurement related to COVID-19 Prevention and Control,27 discussed in section III.C below, conceded that any COVID-19 related procurement ‘may not need to comply with procurement methods and procedures provided in the Government Procurement Law’ [emphasis added], the Notice makes no reference to the emergency procurement exclusion in Government Procurement Law Art 85. Arguably the Ministry is aware of the ambiguities surrounding the exclusion and deliberately refrained from quoting it.

22 Other grounds include failure of a tendering procedure; complexity or special characteristics of the subject matter making specifications impossible; and that the overall price cannot be estimated. 23 Other grounds include subject matter being only available from one supplier; and for additional orders from the existing supplier to ensure compatibility (up to 10% of contract value). 24 This is identical to Art 5 of the Ministry of Finance Measure on Procurement Methods other than Tendering (Ministry of Finance Decree 74 2013, in force from 1 February 2014). 25 Art 38 of Implementing Regulation of Government Procurement Law. 26 Z Tiewei, Spokesperson of Legal Committee of the NPC Standing Committee, 10 February 2020, available at www.chinanews.com/m/gn/2020/02-10/9086203.shtml. 27 Ministry of Finance Secretariat, ‘Notice on Facilitating Procurement’ (2020).

510  Ping Wang and Ke Ren In December 2020, the Ministry of Finance published a revised text of the Government Procurement Law for public consultation.28 The proposed revised text contains a new provision, Art 52, entitled ‘emergency procurement procedure’,29 but there seems to be no material departure from Art 85 of the current Government Procurement Law: emergency procurement remains excluded from the Law. There is, it is submitted, no need for the emergency exclusion, even for severe natural disasters or pandemics given that – as under the UNCITRAL Model Law30 – competitive negotiations and single-source procurement are both available and sufficient to deal with emergencies under the Government Procurement Law. Using these methods will also effectively ensure the preservation of transparency safeguards. Articles 30 and 31 of the Law should also be amended to differentiate the level of urgency with a view to minimising the use of single-source procurement, as under the Model Law where single-source procurement applies only in cases of ‘extreme urgency’ (and also only in cases where the extreme urgency results from a catastrophic event, although chapter 2 suggested this may be too narrow).

B.  Meeting Emergency Needs under Laws and Regulations on Handling of Emergencies and Infectious Disease Control China has adopted several laws and regulations specifically designed for handling emergencies and controlling infectious diseases. The Central Government also approved the nation’s response plans for COVID-19 in accordance with these regulations. The relevant instruments, drafted by Ministries, other than procurement regulators define emergencies and provide the procedure for, inter alia, expropriating products, materials and equipment. They have paid little or no attention to emergency procurement and make no reference to the Government Procurement Law. Nevertheless, as we will see in section III.D, these instruments, the Emergency Response Law in particular, have been quoted as the legal basis for some local emergency procurement rules.

28 See (in Chinese) www.ccgp.gov.cn/news/202012/t20201204_15563002.htm. 29 It provides ‘[E]mergency procurement caused by natural disasters, accidents, public health and public security incidents may be exempted from following the rules on procuring methods, procedure and information opening as provided in this law. However, relevant documents and records shall be kept. The procuring entity shall not eliminate competition where the emergency need can be met by the market in time. Suppliers shall not demand unreasonable conditions when participating in emergency procurement such as those related to price and payment’. 30 See ch 2.

Emergency Procurement: China  511

i.  Emergency Response Law31 The Emergency Response Law was introduced to address various issues perceived to arise in China’s handling of emergencies such as the 2003 SARS pandemic. The topics covered include publication of misleading information and avoidance of responsibilities by local government. Procurement was not a particular issue discussed in the drafting process.32 Article 3 defines ‘emergency incidents’ as ‘natural disasters, man-made catastrophes and public health or security incidents that occur suddenly, capable of causing or having caused severe damage to society and needing to be addressed swiftly with counter measures’. It divides each of these four categories (natural disaster, etc) into classes (extremely severe, severe, relatively significant, general) in accordance with their level of damage and scope of impact. The COVID-19 pandemic was classified as an extremely severe public health emergency triggering a Class I response. Article 12 provides that the government ‘may expropriate properties from natural and legal persons; and shall return such properties promptly after use and compensate for any damage caused’ [emphasis added]. Article 52 further provides that the Government may, besides expropriation, ‘require manufacturers and suppliers of goods essential to support life and to deal with emergencies to organise production and ensure supply; require providers of public services (such as health and transportation) to provide the respective service’ [emphasis added], but does not explicitly deal with compensation or procedural rules. The subject matter of Art 52 differs from that of Art 12 (expropriating existing properties) as services and specifically produced products cannot simply be returned. It is inconceivable for the Government not to pay, however. Article 52 arguably has the potential, after adequate amendment, to address emergency procurement, at least by reference to the procedures of the Government Procurement Law. For example, Art 52 could require that the rules on competitive negotiations (or single-source procurement in the case of extreme urgency) in that Law be followed when deciding what action to require under Art 52. Article 32 of the Emergency Response Law requires the establishment of a state mechanism for securing emergency supplies with a special focus on stockpiling essentials. It also provides, in sub-section (3), that ‘local governments above county level shall conclude agreements with relevant enterprises in order to secure production and supply of rescue materials, life sustaining goods and equipment

31 Emergency Response Law of the People’s Republic of China, enacted 30 August 2007, in force from 1 November 2007; English version available at english.www.gov.cn/archive/laws_regulations/ 2014/08/23/content_281474983042515.htm. 32 W Yongqing, Spokesperson of the Legislative Office of the State Council, speech at a press conference, 3 July 2006; Chinese text is available at www.scio.gov.cn/xwfbh/xwbfbh/fbh/ Document/308193/308193_3.htm.

512  Ping Wang and Ke Ren for handling emergencies’ [emphasis added]. This provision seems potentially interesting for procurement, but it is ambiguous and there is no clarification or guidance. As Art 32(3) is clearly separate from the sub-section on stockpiling, it can be argued that the ‘agreement’ here implies creating a legal duty for suppliers to meet new requirements for future emergencies, perhaps under frameworktype arrangements. However, without further clarification it is difficult to see how a local government body can comply with the duty and the authors found no evidence of this provision being applied. As chapter 2 discusses, the value of framework agreements in preference to less transparent emergency m ­ ethods is widely acknowledged, including in the UNCITRAL system, and arguably Art 32(3) of the Emergency Response Law, albeit unclearly and possibly by accident, points in the right direction for future reform. Its revision should therefore be considered when reconstructing a legal framework for emergency procurement, as discussed later.

ii.  State Council Regulation on the Handling of Public Health Emergencies33 This is an Administrative Regulation adopted by the State Council, enacted during the 2003 SARS outbreak before the Emergency Response Law entered into force. There is no cross-reference between these two pieces of legislation. The Regulation does not address emergency procurement explicitly; Arts 32 and 46 simply provide that the governments above county level ‘shall ensure the production and supply of medical equipment, medicines and other medical products necessary for dealing with public health emergencies’. The Regulation provides for administrative and criminal sanctions for failure, but does not give any guidance on how to comply.

iii.  Law on the Prevention and Treatment of Infectious Diseases34 Article 45 of the Law on Prevention and Treatment of Infectious Diseases provides that in the case of a pandemic, government has the power, within its own jurisdiction, to ‘mobilise personnel; use stockpiled supplies’ and ‘temporarily expropriate houses, means for transportation, relevant facilities and equipment’; and requires that reasonable compensation be provided. Article 63 simply provides that local government bodies above county level are responsible for stockpiling medicines, medical equipment and other goods needed for controlling infectious diseases, 33 State Council Regulation on the Handling of Public Health Emergencies, enacted on 9 May 2003, as amended in 2011; Chinese text is available at www.gov.cn/gongbao/content/2011/content_1860801. htm. 34 Law on the Prevention and Treatment of Infectious Diseases, enacted on 21 February 1989, entered into force on 1 September 1989, as amended in 2004 and 2013; available in Chinese at www.npc.gov.cn/ wxzl/wxzl/2000-12/05/content_4516.htm.

Emergency Procurement: China  513 without specifying any method or procedure. It is otherwise silent on emergency procurement.

iv.  National Public Emergency General Response Plan35 and National Response Plan for Public Health Emergencies36 These response plans were drafted on the basis of the above laws and regulations on the handling of emergencies and disease control. Apart from reiterating the responsibility of the Government to stockpile, they do not address emergency procurement. Thus, the Chinese legislation on emergency response and disease control pays insufficient attention towards emergency procurement and pays little heed to procurement rules. So far as securing supplies in emergencies is concerned it focuses primarily on stockpiling, expropriation and the duties of local bodies in ensuring logistic support, without clear and workable guidance on how to do this. However, the regulations’ classification of emergencies is potentially useful in reforming emergency procurement in the Government Procurement Law, especially in making a choice between competitive negotiations and single-source procurement. Furthermore, certain provisions, such as Art 32(3) and 52 of the Emergency Response Law, could be used as legal basis for reforming emergency procurement.

C.  Ministry of Finance Secretariat Notice on Facilitating Procurement Related to COVID-19 Prevention and Control37 Before considering the Ministry of Finance Notice on COVID-19 procurement, it is worth noting that NDRC Secretariat also issued a Notice on this topic, ‘Notice on Conduct of Tendering Procedures in Dealing with the Pandemic’, shortly afterwards.38 In accordance with the emergency procurement exclusion in the Tendering Law, Art 66, the NDRC Notice provides that ‘construction projects such as emergency medical facilities and isolation barriers may be procured using methods other than tendering or using a tendering procedure with shortened time period depending on circumstances’ [emphasis added]. However, a simplified tendering procedure cannot be found in the Tendering Law or its Implementing Regulation, 35 State Council: National Public Emergency General Response Plan; see www.gov.cn/jrzg/200601/08/content_150878.htm. 36 National Response Plan for Public Health Emergencies; available in Chinese at www.gov.cn/ yjgl/2006-02/26/content_211654.htm. 37 Ministry of Finance Secretariat (n 19). 38 NDRC Secretariat, Notice on Conduct of Tendering Procedure in Dealing with the Pandemic, 6 February 2020, available in Chinese at www.ndrc.gov.cn/xxgk/zcfb/tz/202002/t20200208_1220179. html.

514  Ping Wang and Ke Ren and the NDRC Notice provides no guidance; thus it is unclear which timescales may be shortened and for how long. However, this suggestion of simplified tendering may be relevant when considering reform. The Ministry of Finance Secretariat Notice on Facilitating Procurement related to COVID-19 Prevention and Control39 is a bespoke instrument on emergency government procurement adopted by Central Government during the pandemic. However, it was arguably not intended to provide any clarification or guidance on the regulation and conduct of emergency procurement but merely to ensure that compliance with the Government Procurement Law would not be an obstacle to rapid procurement. The Notice is an administrative regulatory document with only four Articles. Article 1 provides that any procurement related to prevention and control of the pandemic by procuring entities using fiscal funds does not need to comply with methods and procedures provided in the Government Procurement Law, encouraging rapid procurement without checks, on the so-called ‘green pathway’ (‘绿色通道’). Article 2 requires procuring entities to establish an internal control mechanism to monitor the timeliness, effectiveness and quality of the procurement; Art 3 provides for all documents and receipts to be kept for possible future review; and Art 4 requires ‘any natural or legal person’ to report any illegalities to finance departments or other competent government organs. Strangely, it does not refer at all to the emergency procurement exclusion in Government Procurement Law, Art 85. The provisions of the Notice, such as those on record keeping and complaints, are too simple to deduce the Ministry of Finance’s understanding of possible inconsistences with, and uncertainties in the light of, the Government Procurement Law provisions emergency procurement methods. The exclusion seems to allow a procuring entity to award the contract directly to a supplier of its choice without following any of the procedural requirements in the Law outlined in section III above. It is difficult to see how irregularities can be detected and questionable whether record-keeping and the threat of future review and complaints are sufficient to deter irregularities. Xie and Liu argue that COVID-19 related emergency procurement, even if excluded from the Government Procurement Law, remains subject to certain procedural requirements40 in the State Council Regulation on Opening up of Government Information,41 which requires the Government ‘to proactively publish information involving the public interest’ (Art 19) within 20 days of its generation. This includes information on ‘the centralised government procurement catalogue, thresholds and their implementation’ and ‘response plans for, early warnings and

39 Ministry of Finance Secretariat (n 19). 40 Q Xie and H Liu, ‘Legal Consideration of Emergency Government Procurement in Covid-19’ (2020) 2 China Government Procurement 66, 70 (in Chinese). 41 State Council Regulation on Opening of Government Information, State Council Decree (2019) No 711, enacted on 5 April 2007, as amended on 3 April 2019. Available in Chinese at www.gov.cn/ zhengce/content/2019-04/15/content_5382991.htm.

Emergency Procurement: China  515 ongoing update of public incidents’ (Art 20(9) and (12)). However, this argument is difficult to accept since the Regulation’s Art 20 refers only to information regarding centralised procurement catalogues and general emergency responses, rather than results of emergency procurement. With a view to implementing the Notice and facilitating local emergency procurement, some provincial governments issued Notices on emergency procurement during the pandemic in January and February 2020. Some of these provide procedural guarantees beyond that in the Ministry of Finance Secretariat Notice. For example, Guangxi Provincial Department of Finance requires all procuring entities to submit via email a quarterly report on emergency procurement containing detailed information such as prices and whether imported goods were used.42 Hangzhou Municipal Government (Zhejiang Province) provides that ‘the outcome of emergency procurement may be published on the provincial government procurement website’s non-government procurement section where circumstances permit’ [emphasis added].43 This is a weak provision since it is optional and it is also unclear what ‘outcome’ means; additionally, the authors found no such notices as of 20 December 2020.44

D.  Local Measures on Emergency Procurement Certain local authorities at various levels, on their own initiative, adopted local measures dealing with emergency procurement prior to the COVID-19 pandemic. No public information can be found on their application in the pandemic, making assessment of their practical significance impossible. Nevertheless, these measures are of interest in demonstrating that in the absence of clear, central guidance local divergences are likely on important aspects of emergency procurement such as methods, price caps and review procedures, and also because they offer food for thought for reform.

i.  Gansu Province: Interim Measure on Administration of Emergency Government Procurement 201045 This is the only provincial emergency procurement measure that can both be found in the public domain and remains in force. It was jointly adopted by the 42 Guangxi Province Bureau of Finance, Notice on Data Collection regarding Pandemic Related Emergency Procurement, No 14, 21 February 2020, available at www.ccgp.gov.cn/zcdt/202002/ t20200225_13921642.htm. 43 Hangzhou Bureau of Finance, Notice on Procurement Work During the Pandemic, 7 February, 2020, available in Chinese at czj.hangzhou.gov.cn/art/2020/2/7/art_1651878_41888628.html. 44 The non-government procurement section of the Zhejiang Province Government Procurement Gateway, in Chinese, available at zfcg.czt.zj.gov.cn/purchaseNotice/index.html?categoryId=10001, 10002,10012,10003,10014,10004,10013. 45 Available in Chinese at www.ccgp.gov.cn/zcfg/dffg/gansu/201312/t20131217_3929119.htm.

516  Ping Wang and Ke Ren provincial Department of Finance, Department of Supervision (the anti-corruption agency) and Department of Audit on 12 November 2010. The Interim Measure cites (in Art 1) the Government Procurement Law and the Emergency Response Law as its legal basis without referring to any particular Articles. However, as discussed above, emergency procurement is arguably excluded from the scope of the Government Procurement Law, and therefore not ‘government procurement’, while the Emergency Response Law does not address emergency procurement explicitly, and certainly does not authorise such measures. Thus, the legality of this measure is questionable. The Interim Measure in Art 4 defines ‘emergency procurement’ as ‘emergency procurement by the government, after the initiation of an emergency response plan, of goods, services and works to be used directly or indirectly in disaster rescue, emergency treatment, prevention of infectious diseases etc’. Article 5 further provides that this includes procurement necessitated by natural disasters and public health and security incidents. Article 19 further clarifies that projects outside the scope of emergency procurement as provided in Art 5 must comply with the Government Procurement Law. This recognises that emergency procurement is outside that Law, although it does not acknowledge Art 85 of that Law and cites the Law as the legal basis of the Interim measure itself. It is noteworthy that the Interim Measure provides several procedural guarantees, such as (Art 10) assigning at least two members of staff for each procurement project to counter-sign receipts. Article 13 requires publication, within 10 days of completion of an emergency procurement project, of a notice containing information such as the winning supplier and price and quantity. Article 14 requires record-keeping for the purpose of inspection by the relevant finance, supervision and audit departments, without specifying what exact information must be kept. Regarding selection of suppliers and contract award, Art 11 provides that: (a) preference must be given to suppliers that have had past contracts with a good performance record; (b) the Government may select suppliers from the specific supplier list for emergency procurement; and (c) in principle (or where possible) quotes shall be sought from at least three suppliers. It is not clear whether single-source procurement can be used, although this is not ruled out. Thus, the Interim Measure seeks to maintain a level of competition. In the absence of reference to specific provisions of the Government Procurement Law, it is unclear whether the Measure contemplates any particular procurement methods or what happens after seeking quotes (for example, whether negotiation is allowed). The Government Procurement Law itself is silent on using supplier lists or past records for selection. As discussed below in section VII, establishing lists for emergency procurement may be beneficial but current Ministry of Finance rules are designed to limit their use, fearing abuse or a negative impact on competition.

Emergency Procurement: China  517 Article 18 of the Interim Measure is dedicated to price control and security of supply. It requires diligent performance and also that prices ‘shall not exceed the level prior to the emergency’, the sanction being debarment (from the Gansu provincial market) for three years. However, such efforts at price control in times of shortage of supply might simply lead to a shortage of supply as buyers turn to purchasers willing to pay more.

ii.  Shandong Province: Interim Measure on the Administration of Emergency Government Procurement 2009, Repealed in 201846 The Shandong Interim Measure was very similar to Gansu’s – for example (in Art 7) in its provisions on selection of suppliers and contract award. The Measure was, however, repealed in 2018 and replaced by a notice saying simply that according to Art 85 of the Government Procurement Law emergency procurement is outside that Law and must simply be conducted in an efficient and responsible manner,47 possibly after realising that the Law did not provide a legal basis for the Interim Measure.

iii.  Sub-Provincial Level Rules There are also municipal- and county-level rules. These diverge significantly. For example, one local rule, whilst recognising that national procurement law does not apply to emergency procurement, provides that competitive negotiations, request for quotations, single-source procurement and framework agreements are all suitable approaches for this.48 On the other hand, an Interim Measure on Emergency Procurement adopted by Yangquan Municipal Government (Shanxi Province) on 26 August 2020 follows the approach of Gansu Province Interim Measure adopted a decade earlier,49 providing for selection from at least three suppliers with preference to those awarded past contracts (Art 5) and prices which must not exceed pre-pandemic levels (although without threat of debarment (Art 10)). These local initiatives, adopted to fill gaps in the legal framework, can provide lessons for regulating emergency procurement at national level. However, in the absence of reliable data on their operation assessing their value is difficult.

46 Depart of Finance, Shandong Province, enacted and entered into force on 15 December 2009, repealed on 3 September 2018, available in Chinese at czt.shandong.gov.cn/art/2009/12/25/ art_100312_7840187.html. 47 See the notice available in Chinese at czt.shandong.gov.cn/art/2018/9/6/art_10591_5015290.html. 48 Huangshan Municipal Government Provisional Measure on Emergency Procurement 2006, not officially reported; the only text available is from an unofficial source: www.enet.com.cn/article/2006/0419/A20060419524438.shtml. 49 Chinese text available at xxgk.yq.gov.cn/zfbgt/fdzdgk/fgwj/gfxwj/202009/t20200904_1061271. shtml.

518  Ping Wang and Ke Ren

E.  Logistical Support Related to COVID-19 While there is little evidence on operation in the pandemic of the procurement rules, there is evidence of application of the emergency response rules outlined in section III.B. The Central Government – the State Council – established the joint command and control mechanism for the pandemic as required by the Emergency Response Plan under this regulation. This mechanism consists of several subgroups, including one for logistical support, led by the Ministry of Industry and Information Technology (MIIT). According to a report on 3 February 2020, the MIIT sent officials to domestic suppliers and manufacturers of medical supplies to coordinate production but also relied on procurement to acquire PPE from the international market.50 With regard to domestic suppliers, it is not clear whether any contracts were signed or how much payment was agreed. A significant proportion of COVID-19 related demand, such as for hospitals, medical equipment and testing facilities, was met by SOEs following the administrative orders of government (for example, with construction of hospitals), by donation (by SOEs and other social organisations) and by expropriation, rather than through procurement from the market. Expropriation has not been without controversy. For example, it was reported that expropriation of goods in transit by one local authority – of face masks sent to a neighbouring authority – exceeded the power conferred by the Emergency Response Law.51 The construction of Wuhan Huoshenshan Hospital is a typical example of logistical support via state allocated and organised resources rather than procurement. This 34,000 m2 hospital, with 1,000 beds, was constructed in eight days. The design was completed in 24 hours by a state-owned institute and construction undertaken by a combined force of central (China Construction) and local SOEs.52 It is also reported that Chinese construction SOEs, such as China Construction, China Railway and China Railway Construction, were involved in building more than 100 hospitals. SOEs in sectors including electricity, oil, mining, equipment importation and telecommunications also contributed goods and services, often without charge.53

F.  Modification of Existing Contracts to Meet New Requirements As chapter 2 discussed, another issue in the procurement of new requirements is extension of existing contracts. Government Procurement Law, Art 49 50 See news report in Chinese at www.gov.cn/xinwen/2020-02/03/content_5474197.htm. 51 See news report regarding Dali Municipal Government Health Bureau, available in Chinese at www.sohu.com/a/371177815_362042. 52 See the report in Chinese at www.sasac.gov.cn/n4470048/n13461446/n14326116/n14326136/ index.html. 53 See news report in Chinese at www.sasac.gov.cn/n4470048/n13461446/n14326116/n14326131/ index.html.

Emergency Procurement: China  519 allows orders with existing suppliers of the same goods, services or works of up to 10 per cent of original contract value, provided other contractual terms remain unchanged. However, there is no limit on the number of additional orders, creating some danger of abuse. It is not clear either whether such orders need to be publicised ex ante or ex post, although Art 96 of the Implementing Regulation (providing administrative sanctions for, inter alia, ‘unauthorised modification of government procurement contract … or placement of additional orders exceeding 10% of contract value’) seems to imply some kind of notice. There is a significant overlap between Art 49 and Art 31 of the Government Procurement Law, with a 10 per cent cap in both Articles. Article 31 allows singlesource procurement of, inter alia, additional supplies from existing suppliers of up to 10 per cent of the original contract value to ‘ensure compatibility’. Arguably Art 49 provides a ‘safe harbour’ for minor modifications without the procedural requirements – such as ex ante approval and publication of award notices – that apply under Art 31 and is distinguished from it, the latter being wider in covering orders for not just the same subject matter but also technologically related subject matter. However, it remains unclear whether the single-source procedure and its accompanying safeguards must be used for additional small orders rather than Art 49. In practice, Shanghai Municipal Government has allowed its procuring entities to extend existing service contracts (such as IT maintenance, property management and road maintenance) without emphasising the 10 per cent limit or mentioning any procedural safeguards.54

IV.  Modification of Contract Award Procedures and Existing Contracts to Adapt to the Pandemic As well as giving rise to the need to procure new requirements, the COVID-19 pandemic has also affected procurement unrelated to the pandemic and performance of existing contracts. As to the former, the Ministry of Finance Secretariat issued a notice on 6 February 2020 on conducting procurement during the pandemic. The general approach is that non-emergency procurement not yet concluded may be suspended or postponed. If it needs to be completed electronic means must be used as far as possible to avoid human contact. Entities, including centralised purchasing bodies, with access to advanced electronic procurement platforms have an advantage in this regard. For example, the centralised procurement centre for the Central Government can conduct most of its procurement via its electronic procurement portal. 54 Shanghai Bureau of Finance, Opinion on Government Procurement Activities During the Pandemic, 14 February 2020, available at www.czj.sh.gov.cn/zys_8908/zcfg_8983/zcfb_8985/zfcg_9033/ 202002/t20200217_182041.shtml.

520  Ping Wang and Ke Ren On modification of concluded contracts, Government Procurement Law, Art 50 provides that: [P]arties to a government procurement contract shall not modify, suspend or terminate the contract without due cause and agreement. If the performance of the contract may be detrimental to national and public interests, the contract shall be modified, suspended or terminated with the party at fault assuming the liability for compensation.

Article 43 clarifies that ordinary contract law applies to these contracts. The new Chinese Civil Code55 does contain a force majeure clause, Art 590, which states that ‘unless otherwise provided in law, force majeure may relieve, partially or totally taking into account its impact, liabilities of the party for non-performance of the contract’. As noted earlier, the COVID-19 pandemic is classified by the Chinese authorities as a force majeure event.56 Thus arguably contracts may be modified (eg delayed) without liability for either party if a causal link between non-performance and the pandemic is established. Certain local regulations (for example of Ningxia Autonomous Region, Hubei Province) have emphasised Art 50 of the Government Procurement Law, which requires agreement between the parties before modification of government procurement contracts even if force majeure is invoked. The Shanghai local regulation requires procuring entities terminating a contract due to the pandemic to report this to the Finance Bureau.

V.  Security of Supply and Contractor Fraud As explained above, the lion’s share of pandemic supply in China has been met not by procurement from the market, but by administrative allocation of resources. Supplier fraud is thus not a significant risk since the SOEs as well as the military are capable of providing the necessary resources. Further, as the ‘manufacturing hub of the world’,57 it is arguably easier for authorities in China than in other countries to secure domestic supplies with limited risk of supply chain disruption. However, authorities, at least at local level, are concerned that potential suppliers may collude, refuse to sell or raise prices. We have seen that Gansu Province’s Interim Measure on Administration of Emergency Government Procurement 201058 thus provides (Art 18) that contractors must perform diligently, refrain from collusion and not raise prices, on pain of debarment, although similar measures elsewhere have not adopted the same approach on debarment. 55 Adopted on 28 May 2020; entered into force on 1 January 2021; available in Chinese at www.npc. gov.cn/npc/c30834/202006/75ba6483b8344591abd07917e1d25cc8.shtml. 56 Z Tiewei, Spokesperson of Legal Committee of the NPC Standing Committee, 10 February 2020, available at www.chinanews.com/m/gn/2020/02-10/9086203.shtml. 57 www.forbes.com/sites/kenrapoza/2020/03/01/coronavirus-could-be-the-end-of-china-as-globalmanufacturing-hub/?sh=64a3fc845298. 58 Available in Chinese at www.ccgp.gov.cn/zcfg/dffg/gansu/201312/t20131217_3929119.htm.

Emergency Procurement: China  521

VI.  Use of Procurement for Industrial or Social Objectives (‘Horizontal’ or ‘Collateral’ Policies) There is no coordinated central mechanism or plan on horizontal policies in emergency procurement – unsurprising given that emergency procurement is largely excluded from the Government Procurement Law and Tendering Law. However, Government Procurement Law, Art 9 provides in general terms that government procurement must facilitate national economic and social development goals including environmental protection and development of minority regions and small and medium-sized enterprises (SMEs), and this provision, even in the absence of clear guidance, has influenced local branches of the Ministry of Finance in drafting emergency procurement rules. For example, Gansu Province’s Interim Measure on Emergency Procurement (Art 7) requires (although without further guidance) that emergency procurement must promote national economic and social development goals. Furthermore, the Ministry of Finance in 2016 adopted the Interim Measure on Government Procurement Facilitating the Development of SMEs, requiring 30 per cent of contracts by value to be set aside for SMEs (of which 60 per cent must be reserved for small and micro enterprises). SME support has gained particular attention during the pandemic since SMEs are hit the hardest. For example, Beijing Municipal Government Secretariat’s Measure on Promoting SMEs’ Development during the COVID-19 Pandemic provides (Art 15) that the share of contracts awarded to SMEs must be further increased, although no target is specified.59

VII.  The Pandemic as a Catalyst for Procurement Reform The pandemic has exposed several issues with legal regulation of emergency procurement, and the lack of clarity and certainty suggests reform is needed. The regulatory authorities, in particular the Ministry of Finance, often struggle to strike the right balance between different objectives. In light of widespread abuse, the regulator tends to tighten the rules without considering how much discretion and flexibility should be retained. This is most evident with the regulation of single-source procurement, supplier lists, and framework agreements, which – as chapter 2 discussed – are all potentially important for an adequate emergency procurement framework. Amendments to deal with these issues would ensure that China has a sufficiently detailed framework, with arguably no need then to exclude emergency situations from the Government Procurement Law. As regards single-source procurement, the rules are arguably unsuitable both in a pandemic and for other situations. Indeed, we have seen that these rules



59 Adopted

on 7 February 2020; see sc.people.com.cn/n2/2020/0222/c379471-33818308.html.

522  Ping Wang and Ke Ren were not used in the COVID-19 pandemic; rather, the exclusion of emergency procurement from the Government Procurement Law was invoked. As section III.A explained, use of the single-source method is subject to ex ante approval regardless of grounds. Arguably, with no time limit for financial departments to process approvals, this requirement should not apply to emergencies and the total exclusion of emergencies from the Law would then be much less justifiable. The Government Procurement Law is silent on supplier lists, but they have been widely used at central and local level since the Government Procurement Law was enacted in 2002. Further, the Ministry of Finance Measure on Procurement Methods other than Tendering provides (Art 12) that in conducting competitive negotiations or request for quotations, procuring entities must invite at least three qualified suppliers through a public notice or ‘random selection from supplier lists established by Financial Departments at or above provincial level’ and that qualified suppliers may join the list at any time, without cost, before the procurement commences. This is the first mention of supplier lists in an official document and seems to assume that provincial level financial departments can establish lists. However, the Measure does not explicitly and clearly define supplier lists, but merely mentions the possibility. Further, by mentioning only lists at provincial level or above it also creates doubts over whether bodies below provincial level may maintain lists, although it is not clear why that would not be allowed. Further, Ministry of Finance 2019 Notice on Facilitating Fair Competition and Improving the Business Environment60 explicitly prohibits registration on lists as a prerequisite for participation – that is prohibits mandatory lists in the sense outlined in chapter 2 – except in the context of framework agreements or other circumstances provided by the Ministry of Finance. These measures thus exhibit a very cautious attitude towards optional lists and preclude use of mandatory lists. That approach may be justified for regular procurement as lists have been used to narrow down competition to favour certain suppliers (such as local businesses). However, a list of suppliers qualified to provide goods and services needed for an emergency can – as discussed in chapter 2 – be very useful in ensuring a response that is both effective and is more transparent and competitive than would be the case without lists; and we have seen above that the Gansu Interim Measure mentions use of lists in emergencies (although there is no information on their use during the pandemic). The Ministry of Finance seems not to have considered these benefits. The potential benefits of framework agreements, in the broad sense of the UNCITRAL Model Law, as a tool for emergency procurement are widely recognised, as chapter 2 explained. However, they are not mentioned in the Government Procurement Law or its Implementing Regulation or Ministry of Finance Measure on Procurement Methods other than Tendering 2014 despite

60 MoF, No 38, July 2019, available in Chinese at www.gov.cn/xinwen/2019-07/30/content_5417344. htm.

Emergency Procurement: China  523 their being widely used in practice by government agencies and SOEs.61 There is an urgent need for formal regulation of framework agreements within the Government Procurement Law, paying attention to their use in emergencies, as framework agreements on PPE, medical equipment, testing gear or even temporary medical centre construction could clearly enhance security and efficiency of supply. It is encouraging that the revised Government Procurement Law text published for public consultation on December 202062 attempts, for the first time, to regulate framework agreements (Arts 83–90). It provides (Art 83) for these to be used for repeated needs the quantity and timing of which cannot be ascertained; for establishing a list of service providers for end users to choose; or under other circumstances provided by the government procurement authority (Ministry of Finance). It requires framework agreements to be established through open solicitation (Arts 84–85) and supplier responses to be evaluated by a panel using predisclosed criteria focusing on price or quality (Arts 86–88), and addresses the content of the framework agreements (Art 89) and the award of contracts (Art 90). However, these provisions, unlike those of the UNCITRAL Model Law, do not differentiate types of framework agreements. Arguably only two-stage multi-supplier frameworks are covered. It is unclear whether further competition is required at the call-off stage since Art 90 only provides that ‘the procuring entity shall, in accordance with the framework agreement, award the contract to the chosen framework supplier provided the quality is above the minimum standard and the price is below the maximum threshold’. It is disappointing that the grounds for using framework agreements (Art 83) do not explicitly mention emergency procurement.

VIII. Reflections The public procurement system, involving acquisition by agreement from the market, had a limited role in China during the pandemic, the Government relying to a large extent instead on state-led organisation and allocation of resources. However, the market-oriented system of public procurement regulation, based broadly on the approach of the 1994 UNCITRAL Model Law, has still been relevant to a degree. In this regard, the unsatisfactory nature of the current regime on emergency procurement has been widely recognised by stakeholders. For example, at the 2020 plenary sessions of the NPC and the Chinese People’s Political Consultative Conference, the Government was criticised for, among other things, the very limited use of framework agreements for emergency procurement, lack of

61 K Ren, ‘The Use and Regulation of Framework Agreements in Chinese Government Procurement’ (2019) 28 Public Procurement Law Review 2. 62 See (in Chinese) www.ccgp.gov.cn/news/202012/t20201204_15563002.htm.

524  Ping Wang and Ke Ren clarity on available sources and stocks of supplies normally required in an emergency, hasty acquisition of supplies regardless of cost, and supply shortages and late deliveries.63 President Xi, Jinping, at the 12th Meeting of the Commission for Deepening Overall Reform of the CPC Central Committee, specifically proposed establishing a unified national emergency supplies procurement system.64 An overhaul of Chinese legislation on emergency procurement thus seems necessary. To that end, this chapter has suggested, first, that emergency procurement should not be excluded from the Government Procurement Law as some of the Law’s procurement methods, namely competitive negotiations and singlesource procurement, are designed for, and in principle capable of achieving, the required efficiency. However, some amendments were suggested, including removing the ex ante approval requirement where emergency procurement is concerned and providing for, and regulating, supplier lists and framework agreements, which would be especially useful for emergency procurement but also have wider value. Although, as noted above, the revised text of Government Procurement Law refers to emergency procurement (Art 52), emergency procurement remains excluded in principle under this provision. The proposed provisions on framework agreements are also arguably insufficient to indicate clearly how these agreements are to be used, especially for emergencies. In any case, the future of the new proposals is arguably uncertain as the revised text proposes expanding the scope of its coverage significantly, to include public-private partnerships and arguably procurement of SOEs, which may be fiercely contested by other Ministries, in particular the NDRC. The pandemic has also highlighted the longstanding lack of coordination and consistency between the general legislative instruments on public procurement, and even different provisions within the same legislation. This has always been a weakness of the Chinese legal system, arguably caused by conflicts between different government organs, insufficient public consultation and poor drafting technique, and we have seen this in the context of the measures relevant for procurement in the pandemic. Finally, a more systematic and cooperative approach is desirable between central government departments involved in the handling of emergencies and dealing with public procurement regulation. These organs need to consult and cooperate in amending the laws and regulations discussed in section III, in particular to coordinate the national emergency response legislation and public procurement regulation, to create synergy, to avoid inconsistency and to provide clearer guidance to local government and procuring entities. 63 See X Gong, ‘The National People’s Congress Deputy He Dachun: Let Emergency Procurement Have Laws to Follow’, 26 May 2020, News Report, available in Chinese at special.chinadevelopment. com.cn/2020zt/2020qglh/dbwyzf/2020/05/1648496.shtml?from=groupmessage&isappinstalled=0, and W Yang, ‘Suggestions on Establishing National Emergency Procurement System for Major Emergencies’, 27 May 2020, News Report, available at china.prcfe.com/global/2020/0527/80697.html. 64 See News Report, 14 February 2020, available in Chinese at www.gov.cn/xinwen/2020-02/14/ content_5478896.htm.

22 Emergency Procurement and Responses to COVID-19 in Africa: The Contrasting Cases of South Africa and Nigeria GEO QUINOT, SOPE WILLIAMS-ELEGBE AND KINGSLEY TOCHI UDEH

I.  General Introduction The COVID-19 pandemic hit African countries later than most other parts of the world. Theoretically, this should have allowed them more opportunity to prepare. At the same time, this posed significant challenges in securing critical pandemicrelated goods given the already high pressure on supply chains. The ability to respond was further impacted by frail public healthcare systems, weak infrastructure including logistics capabilities, severe pressure on public finances and poverty. By 31 March 2021, total reported deaths stood at 77,928, which is significantly lower than most other regions.1 South Africa stood out as the single worst-hit African country. The first wave peaked in July 2020 and by 31 March 2021, the country had recorded 52,788 deaths.2 Nigeria in comparison recorded relatively low numbers. The first peak was in mid-June 2020 and by 31 March 2021 the total number of confirmed deaths was 2,056.3 Many African countries have adopted similar social distancing and lockdown measures, and arrangements to deal with the procurement implications. These have typically included instructions or guidance from central government to limit procurement processes to those needed for critical items. Instructions have been issued by the Ghanaian Public Procurement Authority,4 the South African Office of

1 WHO 2 ibid. 3 ibid.

Coronavirus Disease (COVID-19) Dashboard: covid19.who.int.

4 Republic of Ghana Public Procurement Authority, ‘Guidelines to Public Entities on the Conduct Procurement During the Shutdown Period as a Result of COVID-19’, available at ppa.gov.gh/

526  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh of the Chief Procurement Officer,5 the Kenyan Public Procurement Regulatory Authority6 and the Nigerian Bureau of Public Procurement.7 Procuring entities have been advised to consider extending closing dates for bid submission during lockdowns in, for example, Kenya,8 Ghana,9 Uganda,10 South Africa11 and Namibia.12 Bid meetings or briefing sessions have generally been cancelled or limited in Kenya,13 South Africa,14 Ghana15 and Uganda.16 Procurement has also been used to enforce measures to reduce the spread of the virus. In Kenya, the Public Procurement Regulatory Authority has instructed procuring entities to review implementation of ongoing contracts to ensure that performance complies with measures implemented in response to the pandemic, including imposing a reporting requirement on suppliers17 on interventions undertaken in response to such measures.18 In many African countries, existing procurement rules have continued to apply to pandemic-related procurements, with little or no adjustments. In some instances, continued application of standard rules has been confirmed, such as in Kenya where the Public Procurement Regulatory Authority has reminded accounting officers ‘to comply with the Act and the Regulations’ in its procurement circular on how to proceed during the pandemic.19 In some countries, procuring bodies guidelines-to-public-entities-on-the-conduct-of-procurement-during-the-shutdown-period-as-aresult-of-covid-19. 5 Office of the Chief Procurement Officer, ‘Correspondence Regarding Procurement Dates during the National Lockdown Declared in South Africa’ (25 March 2020), available at ocpo.treasury.gov.za/ Resource_Centre/Publications/Correspondence%20on%20procurement%20dates%20due%20to%20 National%20Lockdown.pdf. 6 Public Procurement Regulatory Authority (Kenya), ‘PPRA Circular No 02/2020: Preventative Measures for Handling of Procurement Activities for Procuring Entities due to Corona Virus (COVID-19)’ (27 March 2020), available at ppra.go.ke/circulars. 7 Bureau of Public Procurement, ‘Guidelines on the conduct of Public Procurement Activities by Ministries, Departments and Agencies As A Result Of the Covid-19 Pandemic/Lockdown’ (May 2020), available at www.bpp.gov.ng/wp-content/uploads/2020/05/BPP-Guideline-on-COVID-19Procurements-1.pdf. 8 Public Procurement Regulatory Authority (Kenya), ‘PPRA Circular No 02/2020’ (2020). 9 Republic of Ghana Public Procurement Authority, ‘Guidelines to Public Entities’ (n 4). 10 Public Procurement and Disposal of Public Assets Authority (Uganda), ‘Circular on Emergency Measures for Handling Procurement Activities in Procuring and Disposing Entities’ (24 March 2020), available at www.ppda.go.ug/circular-on-emergency-measures-for-handling-procurement-activitiesin-procuring-and-disposing-entities. 11 Office of the Chief Procurement Officer, ‘Correspondence Regarding Procurement Dates’ (2020). 12 Central Procurement Board of Namibia, ‘Lockdown Notice’ (30 March 2020), available at www.cpb.org.na/index.php/89-news/124-closing-notice. 13 Public Procurement Regulatory Authority (Kenya) (n 6). 14 National Treasury, Instruction No 8 of 2019/2020 (19 March 2020); National Treasury, Instruction No 5 of 2020/2021 (28 April 2020). 15 Republic of Ghana Public Procurement Authority (n 4). 16 Public Procurement and Disposal of Public Assets Authority (Uganda), ‘Circular on Emergency Measures’ (2020). 17 As in other chapters, the term ‘supplier’ is used to refer to anyone supplying, or interested in supplying, the public sector, whether with goods, construction works and/or non-construction services. 18 Public Procurement Regulatory Authority (Kenya) (n 6). 19 Public Procurement Regulatory Authority (Kenya) (n 6).

Emergency Procurement: South Africa and Nigeria  527 have explicitly directed procuring entities to rely on existing and standard emergency procurement rules, for example Mauritius.20 Whilst some African countries have adopted specialised procurement arrangements to obtain pandemic related goods and services, others have relied on emergency procurement provisions in their procurement legislation. In this chapter, we consider the approaches adopted by South Africa and Nigeria, Africa’s two largest economies.

II.  Procuring for COVID-19 in South Africa A.  Introduction to the Regulatory Framework in South Africa South Africa is a weak federal state with public power primarily located in central government; limited powers are granted to nine provincial governments and local government authorities. Under South Africa’s Constitution, legislative power is vested in a national parliament consisting of the National Council of Provinces and National Assembly.21 The latter elects the president as head of state and executive.22 Public procurement is governed by national legislation and there is, accordingly, a centralised, if fragmented, procurement law regime. The Constitution itself sets out the core principles in section 217(1): procurement must be conducted ‘in accordance with a system which is fair, equitable, transparent, competitive and cost-effective’. Below the constitutional level, there is, however, no single procurement law and specific rules governing procurement across all levels of government emerge from distinct primary and secondary pieces of legislation.23 These enactments have not been influenced to any significant extent by international procurement law instruments. The procurement system created by this statutory framework is highly decentralised. Each public entity procures on its own account and conducts its own supply chain management policy under the broad regulatory framework with minimal centralised procurement or control.24 However, in recent years, healthrelated procurement has been increasingly centralised, with both the National Treasury and National Department of Health playing a key role. According to procurement regulations issued under the Public Finance Management Act 1 of 1999, National Treasury may procure transversally; that is centrally, on behalf

20 Procurement Policy Office (Mauritius), Directive No 44: Emergency Procurement to Combat COVID-19 (19 March 2020), available at ppo.govmu.org/English/Directives/Documents/Directive%20 44%20for%20COVID-19.pdf. 21 Constitution of the Republic of South Africa, 1996, s 44. 22 ibid, ss 85, 86. 23 G Quinot, ‘Reforming Procurement Law in South Africa’ (2020) 7 African Public Procurement Law Journal 1, 2. 24 M Brooks, ‘The Legality of Centralised Public Procurement in South Africa’ (2016) 3 African Public Procurement Law Journal 42.

528  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh of multiple public entities.25 Participation in such contracts is at the public entity’s discretion, but once it has decided to participate, it may not solicit goods or services outside that contract for its duration. A public entity may, however, also decide to join a contract that has already been procured by another organ of state (under a ‘piggy-backing arrangement’ or ‘post award participation’), that is, opt-in after the fact (ie where they were not named in the original bid invitation). The public entity only requires consent of the original procuring entity and supplier(s) under the contract, to join.26 Transversal contracts are, by nature, often in the form of framework agreements for supply as and when required. Participating entities are bound to acquire goods or services under the framework agreement, but only if required, ie they are typically not obliged to acquire them if not needed.27 The supplier is obliged to supply upon order. However, this is typically restricted to quantities stated in the contract. Under South African law, there is only one contract in a framework arrangement – the framework contract itself – and procuring entities order from that contract, without engaging in another round of competition or contracting with suppliers under the framework.28 There are no dedicated rules governing framework arrangements. All aspects of the arrangement must thus be provided for in the particular contract. This includes how a supplier will be identified to supply a specific order in instances where multiple suppliers participate in the same arrangement. The terms of the framework agreement may provide for a rotation system and be based on locality; supply in certain geographical areas may be assigned to particular suppliers, or simply be within the discretion of the procuring entity. Typically, when there are multiple suppliers under a framework suppliers all contract under the same terms, including price, since suppliers are appointed following a single competitive bidding process. While prices offered by preferred suppliers may differ, they will typically be offered an award on the same price, determined by the procuring entity, which may be the lowest price offered, but may also be a market price determined by the procuring entity. However, the law does not prohibit a Treasury from agreeing on different prices with different suppliers.

B.  Procurement of New Requirements In responding to the pandemic, South Africa’s National Treasury has primarily relied on existing framework agreements and emergency procurement procedures. However, for both, further special arrangements have been introduced covering procurement at national and provincial levels including, but not restricted to, health-related procurement.

25 Treasury

Regulations, reg 16A6.5, Notice R225 in Government Gazette 27388 of 25 March 2005. reg 16A6.6. 27 Butsana Textile Services CC v National Treasury [2015] ZAGPPHC 163. 28 ibid. 26 ibid,

Emergency Procurement: South Africa and Nigeria  529

i. Frameworks Prior to the outbreak, a number of critical items had already been procured through transversal contracts by the National Department of Health, eg masks, sanitiser and gloves. An immediate response by National Treasury was to open these transversal contracts up to all procuring entities at national and provincial levels. Under successive National Treasury Instructions, National Treasury waived the requirement for consent to join these contracts.29 These legally binding instructions under the Public Finance Management Act30 meant that all procuring entities could immediately order from contracted suppliers, who were bound to supply, upon the terms already negotiated by National Treasury, including prices and any quantities of supply where agreed. National Treasury also retained control over supply to particular entities, eg by limiting the quantity of any one order to a maximum of two weeks’ requirements, and oversight of shortages of supply. In addition, National Treasury solicited quotations from suppliers for items not covered by existing transversal contracts to facilitate use of the standard quotation form of procurement by individual procuring entities. National Treasury invited suppliers via the Central Supplier Database, on which all suppliers must be registered, to provide quotations for identified commodities. These quotations were made available to all public entities in the same instructions noted above. Procuring entities were invited, although not obliged, to procure items from these suppliers, ostensibly using the standard price quotation method, which involves requesting quotes from a number of pre-selected suppliers rather than full open bidding. The effect was that procuring entities could immediately proceed to contract with the listed suppliers since the quotation process had already been completed. Procuring entities, however, retained freedom to procure from suppliers other than those participating in the transversal contracts or that had provided quotations. Firstly, if a procuring entity already had its own contract in place, it remained bound to that contract and had to procure under it rather than the transversal contracts but subject to price restrictions in terms of maximum pricing determined by National Treasury.31 This implied that where existing contract prices exceeded the maximum, the supplier either had to reduce the price or the procuring entity could not procure under that contract and had to use alternative mechanisms. This approach raises potentially difficult questions of breach of contract by the procuring entity given that statutory prescripts issued after

29 National Treasury, Instruction No 8 of 2019/2020, issued on 19 March 2020 and repealed by National Treasury, Instruction No 3 of 2020/2021 from 15 April 2020; National Treasury, Instruction No 5 of 2020/2021 issued on 28 April 2020, replaced by National Treasury, Instruction No 11 of 2020/2021 from 1 September 2020. 30 s 76(4)(c). 31 National Treasury, Instruction No 5 of 2020/2021; National Treasury, Instruction 11 of 2020/2021.

530  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh the conclusion of a public contract does not automatically trump contractual terms. However, no instances of legal action have been reported, which is probably because procuring entities largely did not adhere to National Treasury’s price controls, as noted below. Secondly, a public entity was allowed to procure from any other supplier not participating in the transversal contracts or already under contract to supply. This is in contrast to the normal position where entities participating in a transversal contract may not procure from suppliers outside the transversal contract. This departure was explicitly authorised in the instructions noted above. However, when an entity procured outside of centrally organised contracts, the goods had to meet the specifications centrally determined by the Department of Health, the prices could not be higher than those offered under the transversal contracts and the supplier had to be registered in the Central Supplier Database.32 In addition, for procurement of masks prior to 1 September 2020, suppliers also had to be registered with the Department of Small Business Development, which implies that only qualifying small businesses were eligible for these effectively reserved contracts.33 This requirement can be understood within the broader policy framework of preferential procurement in South Africa, noted below. These measures only applied in relation to personal protective equipment (PPE), not to other critical commodities, such as cleaning and water. These continued to be subject to the normal rules, including ordinary emergency procurement rules.

ii.  Emergency Procurement Rules and Centralisation Normal procurement rules for all levels of government (national, provincial and local) allow for deviation from prescribed methods under certain circumstances.34 In all instances, these circumstances include emergencies. These emergency rules provide that procuring entities may completely deviate from prescribed rules and procure by any other means, including single-source (direct contracting), provided that the reasons for the deviation are approved by the entity’s accounting officer prior to the procurement.35 All items procured using the emergency procurement rules have to be reported to the relevant national or provincial treasury within 30 days for national and provincial entities and at the next local council meeting for local government entities.36

32 National Treasury, Instruction No 5 of 2020/2021; National Treasury, Instruction 11 of 2020/2021. 33 National Treasury, Instruction No 5 of 2020/2021. 34 For national and provincial public entities these rules are contained in Treasury Regulations, reg 16A6.4 read with National Treasury, SCM Instruction Note 3 of 2016/17, and for local government entities these rules are contained in the Municipal Supply Chain Management Regulations, reg 36, Notice 868 in Government Gazette 27636 of 30 May 2005. 35 Treasury Regulations, reg 16A6.4; Municipal Supply Chain Management Regulations, reg 36. 36 ibid.

Emergency Procurement: South Africa and Nigeria  531 For any pandemic-related items not covered by the approaches discussed in the previous section, all procuring entities at national and provincial levels were instructed by the National Treasury that such procurement automatically qualified as emergency procurement and to follow the existing emergency procurement rules up to 1 September 2020.37 On 1 September, this instruction38 was repealed and procuring entities were instructed to follow standard procurement rules.39 This still included the option of utilising emergency procurement rules, but COVID-19 was no longer automatically deemed to qualify for emergency procurement. The standard approach to the application of emergency procurement rules had to be applied in every instance, which essentially requires determining, objectively, whether it is ‘impractical to invite competitive bids’.40 Impracticality will be justified when ‘there is a serious and unexpected situation that poses an immediate risk to health, life, property or environment which calls an agency to action and there is insufficient time to invite competitive bids’.41 This approach applied at local government level throughout the pandemic. That is, there was no deeming provision as in the case of national and provincial entities and local government entities were thus obliged to determine in every instance whether the conditions for emergency procurement applied. However, since most entities would have had time to adjust to the pandemic by 1 September 2020, it is to be expected that acquisitions that would qualify for emergency procurement would decrease significantly. The drastic increase in centralised involvement in procurement and regulation of the market through price control during the pandemic was justified with reference to the need to control prices and to coordinate to ensure security of supply.42 While the latter objectives seem sensible, the achievement of the former is questionable. Thus, it seems sensible for government to centrally coordinate supply of critical goods within an institutional context where entities conduct their own procurement. In the absence of such centralised coordination there is the real danger that procuring entities will compete with each other for the same goods and which might not get to where they are most needed. The special procurement rules implemented during the pandemic sought to achieve this by increasing use of transversal contracting and providing procuring entities with quotations, which they could simply accept. However, this coordination remained limited in that entities were not obliged to adopt these methods and could continue to contract on their own. However, the attempt to control prices seems less likely to be useful. The special arrangements outlined above may hamper effective supply. In particular, the

37 National 38 ibid.

39 National

Treasury, Instruction No 5 of 2020/2021.

Treasury, Instruction No 11 of 2020/2021. Regulations, reg 16A6.4; National Treasury, Instruction No 11 of 2020/2021. 41 National Treasury, SCM Instruction Note 3 of 2016/17. 42 National Treasury, Instruction No 8 of 2019/2020, para 3.1. 40 Treasury

532  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh prescript that procuring entities may not procure outside of the negotiated prices (either under existing transversal contracts or through centrally obtained quotations) seems unrealistic. Given the very high global demand for the extremely limited supply of critical items, prices will inevitably increase significantly and suppliers will adopt a take-it-or-leave-it approach. A procuring entity that is able to find goods in short supply will simply not be able to secure it if it is hamstrung by strict price control measures. As allegations of fraud have indicated (to which we return below), attempts to cap prices have seemingly also not been successful. In its audit of COVID-19 spending, the Auditor-General has found that overpricing was widespread, with ‘some items … priced at more than double and even five times the prescribed price’.43 The large-scale reliance on direct contracting for items not covered by centrally organised transversal contracts and quotations (non-PPE items) resulted in opencontract systems being completely circumvented. Apart from the province of Gauteng (the commercial hub of South Africa) there is no fully open contract system in use in South Africa generally, but only limited aspects of open contracting such as publication of invitations to bid, award decisions and amendments to existing contracts. In Gauteng a formal open-contracting system involves publication of all key records, open adjudication of tenders and scrutiny by independent, external probity auditors throughout the process.44 However, based on the general discretion to deviate from standard procurement rules under the emergency procurement rules, this system was not applied to COVID-19 procurement up to 1 September 2020. Gauteng Premier David Makhura has stated that the open tender system could not facilitate procurement of essential goods fast enough resulting in abuse which has now been referred for investigation.45 This abuse has been abetted by increased centralisation of procurement. Attempts to consolidate demand and coordinate supply across different departments and ensure minimum PPE quality seem to have resulted in improper easing of integrity controls.46 This is primarily because established procedures, such as open bidding, and segregation of duties within entities that would involve multiple officials scrutinising bids and suppliers before award, were largely replaced by direct contracting that seemingly allowed individual officials to award contracts to any supplier without justification. While investigations regarding the exact nature and scope of these abuses were still ongoing at the time of writing (March 2021), it seems that the option of acquiring goods outside framework agreements, including by way of quotations (whether obtained by National Treasury or by the procuring entity itself) under the special COVID-19 procurement rules outlined above, opened the door to abuse.

43 Auditor-General of South Africa, ‘First Special Report on the Financial Management of Government’s COVID-19 Initiatives’ (2020) 18. 44 Gauteng Finance Management Supplementary Amendment Act 6 of 2019. 45 Q Masuabi, ‘Mamabolo Appointed as Acting Gauteng Health MEC’ City Press (30 July 2020). 46 See C Bhengu, ‘Five Important Takeaways from David Makhura’s Briefing on PPE Tender Irregularities’ TimesLive (31 July 2020).

Emergency Procurement: South Africa and Nigeria  533

iii.  Expansion of Existing Contracts Normal procurement rules provide that any contract for non-construction goods and services may be expanded by a maximum of 15 per cent or R15 million (US $958000)47 (whichever is smaller) and for construction goods and services by 20 per cent or R20 million (US $1,278,000) by the procuring entity itself.48 For any variations above these thresholds, prior approval from National Treasury is required.49 In National Treasury Instruction No 8 of 2019/2020, which was the first procurement instrument issued under the pandemic, the pre-approval requirement was waived. Procuring entities could expand existing contracts without limit or approval to allow rapid acquisition without the delay of completing a new procurement process. This was repealed by National Treasury Instruction No 3 of 2020/2021 from 15 April 2020, which confirmed the standard rules governing variations set out above. However, this instruction was in turn repealed by National Treasury Instruction No 5 of 2020/2021 from 28 April 2020. In the new instruction, the waiver of pre-approval requirement was retracted and replaced by increasing the thresholds up to which entities could vary contracts without approval to 25 per cent or R25 million (US $1,597,000) for non-construction and 30 per cent or R30 million (US $1,917,000) for construction for the pandemic’s duration. For variations above these thresholds, prior approval from either National Treasury or the provincial treasury was required and would only be provided ‘in exceptional cases’. This adjustment reflected awareness that the initial special arrangements digressed too much from the normal rules in favour of speed at the cost of transparency, fairness and equity (three of the constitutional principles governing procurement in South Africa). The unlimited variation of a contract (in terms of quantity and price) may be abused, especially in the context of urgent need and may lead to significant price hikes and adjustment in the economic balance of the contract. Furthermore, there is no reporting requirement in relation to contract variations, whereas all the procurement mechanisms used during the pandemic, including direct contracting under the emergency procurement rules, included some reporting. The later rules on variations, introduced on 28 April, reflected a more balanced approach, although allegations of fraud and poor quality continued to question whether the right balance was achieved. These arrangements were consequently revoked in National Treasury Instruction No 11 of 2020/2021 with effect from 1 September 2020, which reinstated the standard rules and explicitly prohibited any extension or variation concluded under the special arrangements.

47 All values in this chapter are converted to US dollars at the exchange rates shown by the Federal Reserve at www.federalreserve.gov/releases/h10/hist/default.htm. 48 National Treasury, Instruction SCM No 3 of 2016/17: Preventing and Combating Abuse in the Supply Chain Management System. 49 ibid.

534  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh

iv. Remedies South Africa has a fairly robust, if fragmented, remedies regime.50 For national and provincial levels, the regime is premised on judicial review by ordinary courts reviewing administrative action.51 The regime is effective in that courts often entertain applications for review of tender awards and issue remedies.52 These include setting aside of the award decision and invalidation of the contract concluded on the basis of that award or an order to pay compensation such as loss of profit.53 Such remedies are not uncommon.54 Non-compliance with statutorily prescribed rules for procedures is a primary basis for judicial review.55 This includes challenges to the use of rules allowing deviations from prescribed procedures, such as direct awards under emergency procurement rules.56 However, judicial review applications take a considerable amount of time and are not conducive to a speedy resolution in emergencies.57 While there has been no reported judgments on COVID-19 procurement, given the extent of alleged malfeasance (noted below), it is expected that judicial review applications will be forthcoming. Parties generally have 180 days after becoming aware of the decision to launch proceedings, but may also apply for condonation of a longer time period.58 Furthermore, in the absence of reasons for a decision, a party may first request reasons from the decision maker within 90 days with 90 days to provide such reasons (ie, 180 days in total).59 Only after reasons have been provided would the time period for bringing the review commence.60 At the outer limit (and without a condonation application), a review may thus be launched 360 days after becoming aware of the decision and reasons for it. If successful, the default

50 G Quinot, ‘Enforcement of Procurement Law from a South African Perspective’ (2011) 20 Public Procurement Law Review 193. 51 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others 2014 (1) SA 604 (CC) at [31], [45]; Steenkamp NO v Provincial Tender Board of the Eastern Cape 2007 (3) SA 121 (CC) at [21]. 52 The Supreme Court of Appeal stated in its judgment in South African Post Office v De Lacy 2009 (5) SA 255 (SCA) at [1] that ‘Cases concerning tenders in the public sphere are coming before the courts with disturbing frequency’ and again in Moseme Road Construction CC and Others v King Civil Engineering Contractors (Pty) Ltd and Another 2010 (4) SA 359 (SCA) at [1] that ‘Courts (including this court) are swamped with unsuccessful tenderers that seek to have the award of contracts set aside and for the contracts to be awarded to them.’ 53 Quinot (n 50) 203-05. 54 ibid 203. An extreme example is Eskom Holdings v The New Reclamation Group 2009 (4) SA 628 (SCA) where the court invalided the tender award and set the contract aside after 22 months of the 24-month contract had already lapsed. 55 Moseme Road Construction CC and Others v King Civil Engineering Contractors (Pty) Ltd and Another 2010 (4) SA 359 (SCA) at [1]. 56 CEO of the South African Social Security Agency N.O and Other v Cash Paymaster Services (Pty) Ltd 2012 (1) SA 216 (SCA); Lornavision (Pty) Ltd v South African Broadcasting Corporation SOC Limited [2017] ZAGPJHC 208. 57 Quinot (n 50) 198, 202. 58 Promotion of Administrative Justice Act 3 of 2000, ss 7(1), 9. 59 ibid, s 5. 60 ibid, s 7(1)(b).

Emergency Procurement: South Africa and Nigeria  535 remedy is setting the award aside and (where relevant) invalidating the remainder of the contract.61 Even where the supplier had performed, the court may still invalidate the contract, including contractual payment obligations in respect of any outstanding payments.62 However, the remedy remains within the court’s discretion and the court may invalidate the contract but not set it aside to preserve any rights already accrued such as a right to payment.63

C.  Modification of Contracts to Adapt to the Pandemic In South African law, contractual obligations will be extinguished when performance becomes objectively impossible after the contract had been concluded, under the doctrine of supervening impossibility.64 The standard is objective but is not limited to actual physical and absolute impossibility to perform. Supervening impossibility could also occur where performance may, strictly speaking, still be objectively possible, but will not be reasonably expected, applying what the authors call ‘a standard of society’.65 Such a scenario would include where performance becomes illegal after the contract was concluded, because of a change in law.66 Performance would be excused also if the impossibility resulted from an unforeseen or unforeseeable event outside of the control of a reasonable person.67 It is evident that mere difficulty or hardship in performance would not meet these standards such that the parties remain obliged to perform. In addition to these general rules of contract law, parties can also include termination provisions to manage intervening conditions. The South African general conditions of contract, which are applicable to all procurement contracts, except if replaced by special conditions, contain a force majeure clause (even though the doctrine does not apply in South African law). Under this provision, suppliers’ performance failure may be excused where failure to perform ‘is the result of an event of force majeure’. Such an event is defined as ‘an event beyond the control of the supplier and not involving the supplier’s fault or negligence and not foreseeable [including] acts of the purchaser in its sovereign capacity, wars or revolutions, fires, floods, epidemics, quarantine restrictions and freight embargoes’. Only such performance that is no longer ‘reasonably practical’ due to the event will 61 Eskom Holdings v The New Reclamation Group 2009 (4) SA 628 (SCA). 62 Vulindlela Security Force CC v MEC of the Department of Public Works, Province of Kwazulu-Natal [2008] ZAKZHC 16 (10 March 2008). In such a case, the supplier may have an enrichment claim against the organ of state. 63 Buffalo City Metropolitan Municipality v Asla Construction (Pty) Limited 2019 (4) SA 331 (CC) at [105]. 64 MV Snow Crystal Transnet Ltd t/a National Ports Authority v Owner of the MV Snow Chrystal 2008 (4) SA 111 (SCA). 65 LF van Huyssteen, GF Lubbe and MFB Reinecke, Contract: General Principles, 5th edn (Juta, 2016) 518. 66 Bayley v Harwood 1954 (3) SA 498 (A). 67 Peters Flamman and Co v Kokstad Municipality 1919 AD 427.

536  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh be excused. This standard is akin to supervening impossibility insofar as mere difficulty or hardship in performance will not be excused. It is evident that both supervening impossibility and force majeure would potentially apply to the pandemic. The key question would be whether measures adopted by government in response to the pandemic would render performance impossible or merely difficult. For example, a contract for school transport would be rendered impossible following the closure of schools. In contrast, a contract for the provision of cleaning services may not be excused even though more difficult and expensive given social distancing and PPE requirements. Even under circumstances of force majeure, a supplier remains obliged to ‘continue to perform its obligations as far as is reasonably practical and shall seek all reasonable alternative means for performance not prevented by the force majeure event’.

D.  Security of Supply and Contractor Fraud i.  Protecting Domestic Supply In respect of limited supply, two measures are of interest. The first is an amendment to the Export Control Regulations68 under the International Trade Administration Act 71 of 2002. By means of the COVID-19 Export Control Regulations,69 new export tariffs were imposed on certain items considered critical in response to the pandemic such as hand sanitisers, face masks and certain vaccines. In addition, the International Trade Administration Commission must also consult with the Department of Trade, Industry and Competition and other departments when it receives an application for an export permit in relation to these items. These are clearly aimed at securing domestic supply through restricted export. The second measure is the national ventilator project launched by the Department of Trade, Industry and Competition. Ventilators are typically imported into South Africa and the project was a response to the realisation that traditional procurement methods will not work to meet demand. The project adopted an extremely expedited timeline in a call for proposal procedure.

ii.  Contractor Fraud The haste with which procurement was conducted at the outbreak of the pandemic linked to significant amounts of money channelled towards response efforts have, unsurprisingly, resulted in abuse of the procurement system. The Auditor-General has found that: The pre-existing deficiencies in the supply chain processes of government were amplified by the introduction of the emergency procurement processes allowed for personal

68 Notice 69 Notice

R92 in Government Gazette 35007 of 10 February 2012. R424 in Government Gazette 43177 of 27 March 2020.

Emergency Procurement: South Africa and Nigeria  537 protective equipment. Based on what we have audited to date, there are clear signs of overpricing, unfair processes, potential fraud as well as supply chain management legislation being sidestepped. In addition, delays in the delivery of personal protective equipment and quality concerns could have been avoided through better planning and management of suppliers.70

The president has consequently, inter alia in response to requests from provincial premiers, issued a proclamation to enable the Special Investigating Unit, established under the Special Investigating Units and Special Tribunals Act 74 of 1996, to investigate all pandemic procurement.71 Cabinet has also appointed an Inter-Ministerial Committee (IMC) to deal with corruption allegations.72 The purpose of the IMC was to coordinate data collection across all levels of government regarding COVID-19 procurement, make such data publicly available and develop a plan to deal with corruption.73 The publication of procurement data promises important reforms regarding transparency (to which we return below). In the wake of allegations of malfeasance, the Gauteng provincial government has halted payments to a large number of suppliers that obtained contracts under the emergency procurement procedures to supply PPE, pending the outcome of the probe by the Special Investigating Unit. Allegations include undue influence in the award of tenders to friends and family members of public officials (including the Gauteng member of the executive council for health and the president’s spokesperson), poor quality supplies, failures to deliver and overpricing.74 These allegations also include ‘Covidpreneurship’, referring to persons tendering for COVID-19-related tenders without any prior experience and with the clear intention of defrauding the state, which have been widely reported in the media and condemned by civil society organisations.75

E.  Use of Procurement for Industrial or Social Objectives South Africa has an extensive regime for the use of procurement to promote developmental objectives, primarily under its black economic 70 Auditor-General of South Africa, ‘First Special Report’ (2020) 5. 71 Proclamation No R23 of 2020 in Government Gazette 43546 of 23 July 2020. 72 The Presidency, ‘Statement on the virtual Cabinet Meeting of Wednesday, 5 August 2020’, available at www.presidency.gov.za/cabinet-statements/statement-virtual-cabinet-meeting-wednesday% 2C-5-august-2020. 73 Department of Justice and Constitutional Development, ‘Presentation to SCOPA on Work Related to Corruption Associated with the COVID-19 Pandemic’ (21 August 2020). 74 Bhengu, ‘Five Important Takeaways’ (2020); Masuabi ‘Mamabolo Appointed as Acting Gauteng Health MEC’ (2020); N Njilo, ‘Hawks Raid Municipal Offices as Anger Grows Over “Covidpreneurship Feeding Frenzy”’ Timeslive (31 July 2020); A Winning, ‘South Africa Probes Medical Suppliers over COVID-19 Tender Allegations’ Reuters (30 July 2020). 75 Njilo, ‘Hawks Raid Municipal Offices’ (2020); T Mokone et al, ‘Black Business Chief Blasts “Covidpreneurs” as PPE Scandal Grows’ Sunday Times (26 July 2020).

538  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh ­empowerment policy.76 One special measure put in place for COVID-19procurement, as mentioned above, is the reservation of the procurement of masks for suppliers registered with the Department of Smalls Business Development. Procuring entities were furthermore ‘encouraged’ to procure all requirements from small black enterprises.77 Judging from the lists of suppliers qualified for supply of masks under the reservation condition (periodically published by National Treasury during the pandemic), there seems to have been a considerable market of such suppliers. More generally, the Western Cape provincial government has, for example, indicated that between 1 April 2020 and 31 August 2020, 39.5 per cent of its total COVID-19 procurement went to small enterprises.78 However, subsequent investigations suggest that many suppliers simply acted as brokers or middlemen when they secured contracts.79 It is thus not clear whether an actual competitive market exists for the supply of masks by small enterprises, and thus whether this policy is a sensible one.

F.  The Pandemic as a Catalyst for Procurement Reforms The National Treasury published a draft Public Procurement Bill in February 2020, just before the pandemic truly hit. The aim is to introduce wholesale reform of the procurement law regime.80 Although the draft bill is not related to the pandemic itself, debate on the proposed reforms and experience of procurement under the pandemic have quickly become intertwined. One significant proposal is the introduction of a regulator with power to prescribe procurement rules and practices to all levels of government and which would be a significant strengthening of the current role of National Treasury. Closely linked to this strengthening of central procurement powers is the proposal that participation in transversal contracts will be binding on all procuring entities. As noted above, central steering of procurement practices was a key characteristic of government’s approach in the pandemic. This approach would also have been quite a bit easier under the draft bill given the extended powers granted to the regulator to force all entities to participate in central procurement. Another proposal is an overhaul of the remedies regime. The draft bill proposes the introduction of a system of reconsideration of decisions by procuring entities, comparable to the provisions of the UNCITRAL Model

76 See L Shai, C Molefinyana and G Quinot, ‘Public Procurement in the Context of Broad-Based Black Economic Empowerment (BBBEE) in South Africa – Lessons Learned for Sustainable Public Procurement’ (2019) 11 Sustainability 1; G Quinot, ‘The Third Wave of Preferential Procurement Regulations in South Africa’ (2018) Journal of South African Law 856. 77 National Treasury, Instruction No 5 of 2020/2021. 78 Western Cape Provincial Treasury, ‘2020 Procurement Disclosure Report’ (issue 3, 20 September 2020) 7. 79 M Zuzile, ‘Diko’s “proxy” paid R46m in PPE deal, Gauteng government report confirms’ TimesLive (1 October 2020). 80 See Quinot (n 23).

Emergency Procurement: South Africa and Nigeria  539 Law 2011, which were outlined in chapter 2. As also provided for in the Model Law, the draft bill proposes a suspension of the procurement process when an application for reconsideration has been lodged. Given the long delays inherent in judicial review and its implications for effective relief, the reconsideration proposal may have provided a quicker and more effective form of redress for dealing with cases of abuse of the procurement system during the pandemic. The many and much debated procurement challenges that have emerged during the pandemic have underscored the urgent need for procurement law reform. While the effective change in administration following the ousting of former-President Jacob Zuma and the inauguration of President Cyril Ramaphosa has led to a sense of a new dawn of clean government and a strong anti-corruption stance, the experience of the pandemic, described by the president of the Black Business Council, Sandile Zungu, as a ‘heart-wrenching, unscrupulous and filthy feeding frenzy’,81 has once again shown how deep and ingrained procurementabuse is in South Africa. In response to the public outcry following allegations of widespread malfeasance in COVID-19 procurement, government has taken important steps to enhance transparency. This has included regular publication of full details of all contracts concluded for COVID-19-related procurement by all procuring entities on a central online system.82 This includes the date of the procurement, a description of the goods or services, the process followed, the supplier’s name and registration details, the contract value and the quantity. Previously, only award notices in respect of competitive bidding procedures, ie procurements above the threshold value, had to be published online on the Government’s central e-procurement portal,83 similar to the approach under the UNCITRAL Model Law. The new publication requirements, imposed by way of National Treasury instruction, apply to all forms of procurement for all goods and services acquired in relation to the pandemic.84 In addition and also for the first time, data is now consolidated and reports published online in the form of a dashboard, allowing the public to easily scrutinise aspects of COVID-19-related procurement, such as top 10 spend to suppliers, total payments, item spend analysis and supplier details (including aggregated awards to particular suppliers across entities as well as company directors’ information). There are indications that these steps will not be limited to COVID-19 procurement but may lead to higher levels of transparency more generally. The president stated in Parliament on 27 August 2020: This is a watershed moment that marks the start of a new era in transparency and accountability in the procurement of goods and services by public entities …



81 Mokone

et al, ‘Black Business Chief ’ (2020). information is available at www.treasury.gov.za. 83 This portal can be accessed at etenders.treasury.gov.za. 84 National Treasury, Instruction No 11 of 2020/2021. 82 This

540  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh The measures that we are taking will definitely lead to procurement reform that will ensure that we find solutions to many procurement maladies, including corruption, and ensure that government does not overpay for goods and services and gets value for money.85

III.  Procuring for COVID-19 in Nigeria A.  Introduction to the Regulatory Framework in Nigeria Nigeria is a highly populated country in West Africa with a strong federal government and 36 states. Executive power is vested in the president, who is the head of both state and government.86 Legislative power is vested in the National Assembly, a bicameral legislative body comprised of the Senate and the House of Representatives.87 All executive, legislative, and judicial authority derive from its 1999 Constitution.88 The Constitution gives both the Federal Government and the states competence over procurement.89 There exists a procurement law which governs procurement by the Federal Government90 and separate procurement laws for each state91 (although some states have not adopted procurement legislation). Nigeria thus has a decentralised procurement system, with no central law addressing procurement and no method of centralising procurements across procuring entities, as was discussed in relation to South Africa. In addition, there is no centralised oversight. The Federal Government provides oversight over federal procurements through the Bureau of Public Procurement (BPP), and the states provide localised oversight through state procurement agencies. The healthcare system is also decentralised. The Federal Government is responsible for national health policy, federal hospitals/medical centres and teaching hospitals; and the states are responsible for state hospitals/primary care centres, and state university teaching hospitals. This section will focus on the emergency procurement framework of the federal government and COVID-19 regulations in Nigeria. The federal legislation is known as the Public Procurement Act, 2007 (PPA). The PPA was influenced by the 1994 version of the UNCITRAL Model Law,92 as were the procurement laws adopted by the states. The PPA is a comprehensive statute governing procurement of goods, services and works and disposal of state assets. The PPA created the National Council on 85 The Presidency, ‘President Signals Watershed in Transparency and Accountability in Public Procurement’ (27 August 2020), available at www.presidency.gov.za/press-statements/president-signalswatershed-transparency-and-accountability-public-procurement. 86 Constitution of the Federal Republic of Nigeria 1999, s 130. 87 s 4(1). 88 Chs V, VII. 89 Second Sch (Concurrent Legis. List). 90 Public Procurement Act, 2007 (PPA). 91 See, for example, Oyo State Public Procurement Law 2010; Lagos State Public Procurement Agency Law 2011; Edo State Public Procurement Agency Law 2012. 92 ibid.

Emergency Procurement: South Africa and Nigeria  541 Public Procurement (responsible for policy direction on procurement) and BPP (responsible for oversight by federal entities). The PPA applies to the Federal Government and all procurement entities.93 A public entity is defined as ‘any public body engaged in procurement and includes a Ministry, Extra-Ministerial office, government agency, parastatal, and corporation’.94 It also applies to ‘all entities … which derive at least thirty-five percent of the funds appropriated, or proposed to be appropriated, for a procurement from the Federation share of the Consolidated Revenue Fund’.95 The PPA requires the use of competitive procedures, provides for a remedies system and also requires a debarment sanction in the event of breaches of procurement law. The BPP has also issued a set of detailed subsidiary regulations.96 Although there has not been coordination of pandemic-related procurement efforts across the states and the Federal Government, there has been a coordination of other responses. In March 2020, the Federal Government created a Presidential Task Force to develop a coordinated policy response to the pandemic and an Emergency Operations Centre within the Nigeria Centre for Disease Control to monitor the public health implications. The Presidential Task Force has overseen the implementation of lockdown measures, improvement of testing capacity, contact tracing, training of health sector workers, and addressing the socio-economic challenges through palliative measures for the poor.97 The Federal Government also issued regulations under the Quarantine Act 200498 to restrict movement in Lagos, Ogun and Abuja, to suspend commercial flights, and to repurpose Federal Government-owned stadia and pilgrim centres as isolation centres. In addition, the legislature is debating an Emergency Economic Stimulus Bill that will give tax rebates of up to 50 per cent to registered companies to enable them to weather the effects of the pandemic.99

B.  Procurement of New Requirements The decentralisation of procurement and healthcare systems at federal and state level combined with funding challenges meant that the Federal Government could not implement centralised procurement measures in response to the pandemic.

93 PPA, s 15(1)(a). 94 PPA, s 60. 95 PPA, s 15(1)(b). 96 See Public Procurement (Goods and Works) Regulations SI 45 of 2007; Public Procurement (Consultancy Services) Regulations SI 44 of 2007, available at www.bpp.gov.ng/all-downloads. 97 See The Africa Report, ‘How Nigeria is faring nearly two weeks into COVID-19 lockdown’ (10 April 2020), available at www.theafricareport.com/25998/how-nigeria-is-doing-nearly-two-weeksinto-the-covid-19-lockdown. 98 The Quarantine Act (CAP Q2 LFN 2004) Covid-19 Regulations 2020, available at www.statehouse. gov.ng/wp-content/uploads/2020/04/COVID-19-REGULATIONS-2020_20200330214102-1.pdf-1.pdf. 99 A Jimoh, ‘Nigeria: Covid-19 Economic Stimulus Bill, Crude Price Crash and Social Unrest’ Cislac Nigeria (24 April 2020), available at www.cislacnigerinmja.net/nigeria-covid-19-economicstimulus-bill-crude-price-crash-and-social-unrest.

542  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh

i.  Foreign and Corporate Involvement in the Pandemic In the early days of the pandemic, foreign and local corporate sponsors were heavily involved in providing some of the funds and immediate goods needed such as isolation centres, ventilators and PPE. These were donated either by foreign corporations and governments100 or local citizens and corporates.101 In March 2020, a large regional bank, GT Bank,102 and other corporate donors, in collaboration with the Lagos State Government, converted government-owned sports stadia into COVID-19 isolation centres and also donated ventilators. This construction did not follow the template for public-private partnerships as it was wholly funded and built by the private sector and permanently handed over to the Government. As of July 2020, several multilateral, bilateral and private sector donors, coordinated by the UNDP had donated US $63.8 million to help the Presidential Task Force.103 These funds are being managed by the UNDP under the One UN Covid-19 Response Basket Fund in Nigeria. According to the UNDP: [T]he Basket Fund serves as the One COVID-19 Financing and Investment Platform, through which different stakeholders (including UN, other multilateral and bilateral donors, as well as private sector donors, foundations and philanthropists) can channel their financial support to the multi-sectoral efforts of the Presidential Task Force on COVID-19 Response.104

Procurement using these funds is being conducted directly by the donors, in this case, UN agencies covering sectoral areas. It is not being conducted by Nigerian procuring entities, relying on the donors’ procurement rules. For instance, in July 2020, the Government received PPE and medical supplies sent by the EU. These supplies were funded partly by the EU and partly by the One UN response budget.105 In August 2020, the World Bank approved a US $114.28 million financing facility to the Federal Government to help Nigeria ‘prevent, detect and respond

100 See T Omilana, ‘Nigeria to receive 18 Chinese medical experts to fight coronavirus’ The Guardian (3 April 2020), available at www.guardian.ng/news/nigeria-to-receive-18-chinese-medical-experts-tofight-coronavirus. See also Anadolu Agency, ‘COVID-19: US donates 200 ventilators to Nigeria’ (11 August 2020), available at www.aa.com.tr/en/africa/covid-19-us-donates-200-ventilators-to-nigeria/1938572. 101 See for instance Oyo State, ‘Oyo State Covid-19 Endowment Fund Summary of Cash and Gifts Donations (as of 3 September 2020)’, available at www.covid19.oyostate.gov.ng/donations.html. 102 See Business Day, ‘As GTBank leads in giving for Corona: A spirit of community is critical and essential to managing in these coronavirus times’ (27 March 2020), available at www.businessday.ng/ editorial/article/as-gtbank-leads-in-giving-for-corona. 103 See UNDP in Nigeria, ‘Nigeria One UN Covid-19 Response’, available at www.ng.undp.org/ content/nigeria/en/home/covid-19-pandemic-response/support-to-national-response.html. 104 See UNDP in Nigeria, ‘The EU and UN handover 270 cubic meters of medical supplies to the Government of Nigeria to further enhance the Covid-19 response’ (31 July 2020), available at www. ng.undp.org/content/nigeria/en/home/presscenter/pressreleases/2020/the-eu-and-un-handover270-cubic-meters-of-medical-supplies-to-t.html. 105 UNDP in Nigeria, ‘The Nigeria One UN Covid-19 Response Board holds inaugural meeting and approve US$ 22 million procurement of essential medical supplies to enhance the national response’ (13 May 2020), available at www.ng.undp.org/content/nigeria/en/home/presscenter/pressreleases/2020/ the-nigeria-one-un-covid-19-response-basket-fund-board-holds-ina.html.

Emergency Procurement: South Africa and Nigeria  543 to the threat posed by COVID-19 with a specific focus on state level responses’. The Federal Government will use these funds to provide grants to the 36 states and the Federal Capital Territory to break the chain of COVID-19 local transmission and limit the spread.106 This World Bank loan is provided as budget support and will be expended by Nigerian procuring entities, using the PPA.

ii.  Procurement for the Pandemic under Local Laws For goods and services not provided or funded by donors both the states107 and Federal Government108 have relied on existing requirements for emergency and direct procurement under the relevant legislation. The reliance on emergency provisions occurred despite the fact that there was no declaration of a national emergency as obtained in South Africa. Each state and the Federal Government used these provisions to procure their direct requirements, with no coordination across states and limited coordination between the Federal Government and states. As indicated, the PPA is based on the 1994 UNCITRAL Model Law, which does not provide explicitly for the use of framework arrangements, including those involving aggregating procurement requirements across a range of procuring entities. To our knowledge, no arrangements of that kind were previously used in Nigeria although at least some might be legally possible. It is interesting to speculate whether including specific provisions on framework arrangements of the type found in the 2011 Model Law might have encouraged or facilitated aggregated purchasing of the kind employed in other countries, such as South Africa (as described above) and the UK (see chapter 15). In relation to pandemic procurement by the Federal Government, procuring entities have been permitted to utilise the exceptional procedures under the PPA, which permit direct contracting in the sense of single-sourcing in several cases, which include urgency, in emergencies and where national security is a concern. These procedures are applicable, under the PPA, inter alia: (a) where ‘there is an urgent need for the goods, works or services and engaging in tender proceedings or any other method of procurement is impractical due 106 The World Bank, Press Release ‘Nigeria to Boost States Capacity for COVID-19 Response’ (7 August 2020), available at www.worldbank.org/en/news/press-release/2020/08/07/nigeria-to-booststates-capacity-for-covid-19-response. 107 Lagos State Public Procurement Agency Law 2011, s 60, which provides: ‘(1) Subject to the approval of the Board a procuring entity may initiate emergency procurement where: (a) the State is either seriously threatened by or actually confronted with a disaster, catastrophe, war, insurrection or an act of God; (b) the condition or quality of goods, equipment, building or publicly owned capital goods may seriously deteriorate unless action is urgently taken to maintain them in their actual value or usefulness. (2) Subject to the approval of the Board, in an emergency situation, a procuring entity may initiate direct contracting of goods, works and services. (3) All procurements made under emergency shall be handled expeditiously having due regard to accountability’. See also s 51 Oyo State Public Procurement Law 2010. 108 See PPA, ss 42 and 43.

544  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh to unforeseeable circumstances giving rise to the urgency which is not the result of dilatory conduct on the part of the procuring entity’;109 (b) ‘owing to a catastrophic event, there is an urgent need for the goods, works or services, making it impractical to use other methods of procurement because of the time involved in using those methods’;110 (c) ‘the procuring entity applies this Act for procurement that concerns national security, and determines that single-source procurement is the most appropriate method of procurement’;111 (d) ‘the country is either seriously threatened by or actually confronted with a disaster, catastrophe, war, insurrection or Act of God’.112 The emergency procurement provisions in (a) and (b) above are based on the 1994 UNCITRAL Model Law and allow the procuring entity to invite a proposal or price quotation from a single supplier by providing that procuring entities ‘may procure the goods, works or services by inviting a proposal or price quotation from a single supplier or contractor’.113 This method equates to what the 1994 UNCITRAL Model Law refers to as single-source procurement.114 As explained further in chapter 2, the position is slightly different under the 2011 Model Law, which allows single-source procurement only on the second of these grounds, now requiring use of competitive negotiations in cases of general urgency as referred to in case (a) above. The PPA does not, however, make provision for competitive negotiations as a method. As stated in point (d), a procuring entity may also carry out an emergency procurement where the country is seriously threatened. This also allows a procuring entity to engage in single-source procurement (direct contracting). This provision is interesting as it clarifies that a threatened catastrophe is sufficient for using emergency procedures, which as was suggested in chapter 2 is a gap, or at least an uncertainty, in the provisions of the Model Law itself. This provision does not indicate whether a formal declaration of emergency is required, but in relation to the pandemic, there was no declaration, as mentioned above. In cases in which one of the emergency provisions applies, prior approval from the BPP is dispensed with, although the PPA requires a detailed report setting out the reasons for reliance on the emergency provisions.115 The BPP may, where appropriate, issue ex post approval in the form of a Certificate of No Objection

109 PPA, s 42(1)(b). 110 PPA, s 42(1)(c). 111 PPA, s 42 (1) (f). 112 PPA, s 43(1)(a). 113 PPA, s 42 (2) (a). 114 Art 20, UNCITRAL Model Law on procurement of goods, services and construction, 1994. 115 By PPA, s 42(2)(b), the procuring entity ‘shall include in the record of procurement proceedings a statement of the grounds for its decision and the circumstances in justification of single source procurement’.

Emergency Procurement: South Africa and Nigeria  545 after the cessation of the situation warranting any emergency procurement.116 It appears that where the BPP does not approve the procurement, payments from the Federal government to the procuring entity will be withheld, as is discussed further below. In May 2020, the BPP issued guidelines to federal procuring entities, clarifying the direct procurement and other emergency requirements for COVID-19 purchases and requesting transparency, accountability, probity and value for money.117 These Guidelines are aligned with the emergency provisions in the Public Procurement (Goods and Works) Regulations, 2007 (‘the regulations’). These regulations allow the BPP to issue guidelines for what is called ‘emergency procurement’ following the occurrence of national disasters, which expressly include pandemics;118 and the Guidelines issued provide a level of detail missing from both the PPA and the regulations. The main provisions of the Guidelines are as follows: (1) Procuring entities must prepare emergency procurement plans for all projects that specifically respond to the pandemic. These must be uploaded onto the national open contracting portal, and failure to do so will mean that contract payments will be withheld from the Federal Government to the procuring entity. The guidelines also advised that for such procurements, the extensive statutory requirement for advertisement in several different forms for those cases in which certain competitive methods of procurement apply,119 is suspended, and procuring entities are only required to publish contract opportunities on the BPP’s website. Procurement plans are, however, not required for essential goods and services that require immediate delivery. In such cases, and in line with PPA, section 43(4), the procurement record must simply be provided to the BPP after cessation of the emergency. 116 PP,A s 43(4) provides ‘Immediately after the cessation of the situation warranting any emergency procurement, the procuring entity shall file a detailed report thereof with the Bureau which shall verify same and if appropriate issue a Certificate of “No Objection”’. 117 See Bureau of Public Procurement, ‘Guidelines on the Conduct of Public Procurement Activities by Ministries, Departments and Agencies as a Result of the Covid-19 Pandemic/Lockdown’ (May 2020), available at www.bpp.gov.ng/wp-content/uploads/2020/05/BPP-Guideline-on-COVID-19Procurements-1.pdf. 118 Regulation 65 provides: ‘Following occurrence of natural disasters such as droughts, floods, pandemics, civil disturbances, insurrections, war or such times that government declares that an emergency situation has arisen, Procuring Entities may for causes directly related to the alleviation or remediation of the aforementioned circumstances carry out direct contracting of goods, works and related services in accordance with the emergency procurement guidelines formulated by the BPP. In such circumstance, every Procuring Entity shall apply principles of sound procurement, economy, efficiency, transparency and accountability’. Regulation 66 provides: ‘At the end of the emergency situation, Procuring Entities that have applied emergency procurements shall prepare a report to BPP for its approval on the procurements so carried out. Subsequent procurements shall apply the Regulations without exception’. 119 Under PPA, s 25(2)(ii), the non-emergency advertisement requirements state that invitations to bid ‘shall be advertised on the notice board of the procuring entity, any official web sites of the procuring entity, at least two national newspapers, and in the procurement journal not less than six weeks before the deadline for submission of the bids for the goods and works’.

546  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh (2) The Guidelines confirmed that in line with PPA, section 43, prior approval for contracts provided for under PPA, sections 6 and 16 and referred to as a Certificate of No Objection, which normally applies to non-emergency procurements over certain thresholds,120 is not required for emergency procurements, including any pandemic related procurement. Under the Guidelines (and in line with PPA, section 43(4)) after the end of the pandemic, or the situation that led to the emergency, procuring entities are required to send a detailed report to the BPP ‘for verification’. The Guidelines however differ slightly from PPA, section 43(4), which provides that ‘Immediately after the cessation of the situation warranting any emergency procurement, the procuring entity shall file a detailed report thereof with the Bureau which shall verify same and if appropriate issue a Certificate of ‘No Objection’. Under the Guidelines, it is not clear whether the BPP will provide ex post approval for pandemic-related procurement; all that is stated is that the BPP verifies records of contracts submitted. There is no indication whether this includes ex post approval, which means that the Guidelines may contain information that contravenes the PPA, calling into question the legality of this approach. (3) The Guidelines contain further instructions in relation to pandemic related purchases. The salient parts are reproduced, with comments, below: (a) Procuring Entities shall identify the goods, works and services to be procured. (b) Procuring Entities shall prepare procurement plans based on the identified needs and forward these plans to the BPP for publishing …

Guideline (b) creates a requirement additional to PPA, section 43, on emergency procurement, as the PPA itself allows procuring entities to use single-sourcing in emergency situations without informing the BPP, until the procurement is concluded, after which a detailed report is submitted to the BPP for post-procurement review. This additional requirement does not contravene the PPA, as the BPP has statutory powers to request and receive any information at any time.121 Publishing procurement plans notifies interested contractors of upcoming opportunities. This substitutes for a notice of procurement involving direct solicitation or single-sourcing, as the PPA, unlike the 2011 UNCITRAL Model Law, does not actually require it.122 (c) Procuring Entities shall identify firms that possess the requisite technical and financial capacities to carry out the procurement.

120 By virtue of PPA, s 16(3)-(4), ‘For all cases where the Bureau shall set a prior review threshold. The Bureau shall prescribe by regulation, guidelines and the conditions precedent to the award of Certificate of “No Objection” under this Act. Subject to the prior review thresholds as may be set by the Bureau, any procurement purported to be awarded without a “Certificate of ‘No Objection’ to Contract Award” duly issued by the Bureau shall be null and void’. 121 PPA, s 6(1)(h). 122 Art 34(5).

Emergency Procurement: South Africa and Nigeria  547 (d) Procuring Entities shall invite bids by placing advertisements on the BPP’s website for open competitive bidding and through direct emails to shortlisted bidders for direct and restricted tendering methods.” (e) The bidding periods for open competitive bidding and restricted tendering should not be less than seven (7) days and three (3) days respectively due to the urgency of these procurements.123

Guidelines (d)-(e) identify open competitive and restricted tendering as methods for COVID-19 procurement, apart from single-sourcing. This is reasonable considering the indefinite duration; besides, not all procurements during the period are for urgently needed goods and services for COVID-19. Abridging the six-week minimum bidding period required under the PPA124 for open competitive bidding and restricted tendering to seven and three days respectively for COVID-19 procurement attempts to balance competition and expeditiousness. Abridging the bid submission period, though not prescribed by the PPA, aligns with the general intent of the law for an emergency procurement. (f) The presence of bidders … shall not be required during bid opening …

While contrary to the express requirement of the PPA,125 this is a necessity to contain the spread of disease. (i) Procuring entities must give preference to purchasing from other governmental institutions.126 (j) Bid Registers, Bid Return Sheets and other relevant documents required by the PPA, 2007 should be kept by the Procuring Entity in their record of the Bid Opening. (k) Procuring Entities shall evaluate bids in line with the requirements in the bidding documents and recommend the least evaluated responsive bidder for award of Contract’ (l) Procuring Entities shall proceed to award the contract at prevailing market prices, specifying quantity/quality (in terms of specification requirements) and time within which the execution of the Goods, Works and Services must be completed. (m) Procuring Entities shall ensure that prices are as obtainable at the moment given the circumstances at hand. (n) All records of supplies and locations should be properly kept including Store Receipt Vouchers, Delivery Notes and Invoices. (p) Lump sum contracts shall be used wherever possible, with milestone payments identified at intermediate levels.



123 Note

that under PPA, s 25(2) the bidding period is usually six weeks. 25(2) and 40(4). 125 s 30(b). 126 This will include PPE manufactured by state-owned entities. 124 ss

548  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh (q) Details of the award of all COVID-19 Contracts should be forwarded to the BPP not later than five working days after award has been made. This information should be transmitted to the Bureau’s official email address info@bpp. gov.ng and should be signed by the Accounting Officer. The hard copy shall be forwarded to the Bureau after the suspension of the lockdown exercise. The details should include the name of contractor, description of the project, contract sum and duration of the contract. (r) All COVID-19 Contracts should be handled with expedition but along the principles of accountability, due consideration being given to the gravity of each emergency.”

Guidelines (i)–(q) merely repeat, for emphasis, various provisions of the PPA relating to record-keeping, bid evaluation, value for money, transparency visà-vis expeditiousness during emergency, and reporting to BPP.127 The Nigeria Open Contracting Portal contains lists of COVID-19 procurements, but as of November 2020, only 10 federal agencies had provided information on these contracts.128 For other agencies, there is little publicly available information. This lack of transparency is not unusual for Nigeria as even at the best of times, there is limited transparency on federal procurement.129

iii. Remedies Bidders have access to both administrative and judicial review for breaches of the PPA, its subsidiary legislation or the provisions of bidding documents.130 This remedies system covers procurement during emergencies. No procurement matter is exempted from review,131 in contrast with the exemptions under Art 52(2) of the 1994 UNCITRAL Model Law, discussed in chapter 2; in this respect the Nigerian legislation follows the approach in the 2011 Model Law instead. Thus, suppliers have a right to challenge any procuring entities’ decision, including the choice of method.132 Suppliers could successfully challenge the inappropriate use of single-sourcing in an emergency, especially as the Guidelines, as seen above, enshrine use of competitive tendering where possible. Furthermore, the PPA prescribes general conditions, procedures and requirements for emergency procurement,133 a breach of which is reviewable. 127 PPA, ss 38(1), 32(1)-(2), 16(c) -(f) and 43(3)-(4). 128 Bureau of Public Procurement, ‘Nigeria Open Contracting Portal (NOCOPO) Covid-19 Emergency Procurement’, available at www.nocopo.bpp.gov.ng/ContractReportCovid19.aspx. 129 S Williams-Elegbe, ‘Systemic Corruption and Public Procurement in Developing Countries: Are there any solutions?’ (2018) 18 Journal of Public Procurement 131–47. 130 PPA, s 54(1). 131 PPA, s 54(1). 132 See Etudo & Co Estate Surveyors & Valuers v Federal Mortgage Bank of Nigeria BPP Petition Treatment and Tracking (2017) s/n 48, 6; Etudo & Co Estate Surveyors & Valuers v Veterinary Council of Nigeria BPP Petition Treatment and Tracking (2017) s/n 257, 31, available at www.bpp.gov.ng/ wp-content/uploads/2019/02/2017-PETITIONS-compressed-1.pdf. 133 PPA, ss 42-43.

Emergency Procurement: South Africa and Nigeria  549 There are two types of administrative review available: internal and external.134 A bidder is required to pursue internal administrative review by submitting a complaint to the ‘accounting officer’ of the procuring entity against its procurement decisions or actions,135 making internal administrative review the first recourse.136 In contrast with the approach of the 2011 UNCITRAL Model Law which now rejects any possibility of compulsory administrative review137 the PPA does not permit waiving such internal review to pursue external administrative or judicial review, even in an emergency.138 This is tenable, as this stage is the least adversarial, affording the parties opportunity to redress grievances with minimal disruption to the process.139 The supplier only submits written complaints with documents for reconsideration, without being required to be represented in person,140 thus also supporting social distancing. This forum decides cases within a short time in comparison with other review fora. Bidders are required to submit a complaint ‘within 15 days of when the bidder first became aware of the circumstances giving rise to the complaint, or when he or she should have been aware, whichever is earlier’.141 The accounting officer ‘on reviewing a complaint … shall make a decision within 15 working days’.142 This is the maximum review time, and the actual time can be shorter. This may afford a realistic hope of remedy before urgency compels the procuring entity to act beyond the reach of review. Next, where the bidder is dissatisfied with the accounting officer’s decision, or it did not make a decision within the prescribed time, the bidder has a further option of external administrative review by complaining to the BPP within 10 days of receipt of the accounting officer’s decision.143 BPP’s review procedure requires parties to submit their written complaint or reply, with documentary evidence and the procuring entity to present the related records; and if BPP deems fit, will hold an oral hearing.144 The BPP must issue a decision within 21 working days of receiving the complaint.145 This is a relatively short time

134 PPA, s 54(2)-(3). 135 PPA, s 54 (2). The accounting officer in a federal ministry is the permanent secretary and the director-general or its equivalent in parastatals and other government agencies: PPA, s 20(1). 136 KT Udeh, ‘A Comparative Study of The Effectiveness of Bidder Remedies in South Africa and Nigeria’ (unpublished LLD thesis, Stellenbosch University, 2018) 124. 137 Arts 64(2) and 66(1). See Guide to Enactment, commentary 11 to ch VIII of Model Law 230. 138 PPA, s 54(2)-(3). See Ofscon Nig Ltd v Min of Niger Delta Affairs FHC 21-03-2012 suit no FHC/ Abj/CS/315/2011; Integrated Remediations Limited v Federal Ministry of Environment FHC 14-11-2012 suit no FHC/Abj/CS/841/2010; A.C Egbe Nig Limited v DG BPP FHC 21-07-2010 suit no FHC/B/ CS/116/2010. 139 Udeh (n 136) 144. 140 PPA, s 54(2); Udeh (n 136) 135. 141 PPA, s 54(1)(a). 142 PPA, s 54(1)(b). 143 PPA, s 54(3). 144 Standard Operating Procedures: Administrative Review paras 3-5, 8-11 and 14-23. See Udeh (n 136) 159. 145 PPA, s 54(6).

550  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh within which to obtain a remedy, especially an interim suspension, in some urgent situations. However, the BPP may be constrained in an urgent situation to dismiss a complaint without going into full hearing, if it determines from documentary evidence that the complaint lacks merit or that the irregularity complained about is inconsequential.146 Where the bidder is not satisfied with the BPP’s decision, it may, either within 30 days of receiving the BPP’s decision, or at the expiration of the time limit imposed on the BPP, file a complaint at the Federal High Court.147 Judicial review has no deadline for conclusion and usually lasts for years. Thus, judicial remedies are unlikely to be helpful in an emergency other than to obtain damages. The remedies depend on the forum to which the complaint is submitted. The accounting officer may take any corrective action,148 including suspending the process. Whilst the PPA does not provide detail on what amounts to a corrective action, presumably the accounting officer may set aside an improper decision and substitute their own decision for that of the procurement official.149 The PPA provides that the BPP may suspend ‘any further action’ by a procuring entity while it considers the complaint.150 Arguably this suspension relates both to the suspension of the procedure as well as to the suspension of the award and performance of the contract.151 The BPP may also prohibit the procuring entity from taking any further action, and may nullify in whole or in part, an unlawful act or decision.152 The BPP may also dismiss the complaint or issue a declaration on the rules or principles that govern the subject matter of the complaint or revise an improper decision by the procuring entity or substitute its own decision.153 By its Standard Operating Procedure, the BPP will not allow a challenged contract to go ahead merely because of urgency. However, as seen above, if it assesses that the irregularity is inconsequential (also considering the urgency), it can dismiss the complaint and allow the contract to go on.154 There is yet to be an available reported case of urgency/emergency under the BPP’s review jurisdiction. The BPP does not have statutory powers to award damages,155 but a dissatisfied complainant can appeal BPP’s decision in court and obtain damages, where appropriate.156 The courts may annul any act; compel a procuring entity to make a lawful decision; prevent it from making or implementing an unlawful decision; or declare an act unlawful.157 146 PPA, s 54(4)(b). 147 PPA, s 54(7). 148 PPA, s 54(2)(b). 149 S Williams-Elegbe, ‘The Reform and Regulation of Public Procurement in Nigeria’ (2012) 41 Public Contract Law Journal 339. See also Udeh (n 136) 143. 150 PPA, s 54(4)(a). 151 Williams-Elegbe (n 149) 361. 152 PPA, s 54(4)(b). 153 PPA, s 54(4)(b)(iii)–(iv). 154 PPA, s 54(4)(b). 155 PPA, s 54(4)(b)(i)-(iv). 156 PPA, s 54(7). See Udeh (n 136) 200. 157 P Crane, Administrative Law, 5th edn (OUP, 2004) 299.

Emergency Procurement: South Africa and Nigeria  551 In relation to concluded contracts, and contrary to the position in South Africa, PPA, section 16 provides that arbitration shall be the primary method of dispute resolution. This does not necessarily preclude the courts’ involvement and where arbitration proceedings contain an error of law, or there has been misconduct on the arbitrator’s part, the parties retain the right to obtain judicial relief.158 The reference to arbitration may be a result of long-standing challenges in the Nigerian judiciary, which affect the administration of justice such as corruption and the very slow pace of court proceedings.159 In relation to complaints about pandemic-related contracts, most complaints are resolved by the BPP. This is in part due to court delays as well as the wide powers of correction granted to the BPP under the PPA. It is expected that complaints will also be predominantly resolved by the BPP, although at present there is no public information on any such complaints.

C.  Modification of Contracts to Adapt to the Pandemic The BPP issued Guidelines discussed above contain information on the approach to be taken to existing non-essential procurements. Procuring entities are required to suspend all non-essential procurements that will not have an adverse impact on government activities. However, this applies only to the procurements where a contract has not been awarded. The Guidelines also suspended the evaluation of received tenders or the submission of bids that would have fallen within the lockdown period until the Presidential Task Force gives clearance that such activities may resume. Procuring entities are also required to communicate this information to all bidders via the BPPs website. There is no publicly available information on the impact of the pandemic on the status of existing government contracts.

D.  Security of Supply and Contractor Fraud i.  Promoting and Protecting Domestic Supply Nigeria is a net importer of health and other manufactured goods and the disruption of supplies from China dealt a severe blow to efforts to address the pandemic in the early weeks. Since then, there have been attempts to manufacture locally. Thus, a state-owned enterprise, the Defence Industries Corporation of Nigeria (DICON), was granted federal approval to produce PPE for sale at affordable 158 Arbitration and Conciliation Act (1988) Cap 19, s 29, 30 (Nigeria); Kano State Urban Dev Bd (KSUDB) v FANZ Ltd [1990] 4 NWLR 1, 43 (Nigeria). 159 Williams-Elegbe (n 149) 358.

552  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh rates to other procuring entities,160 hand sanitiser, and a ventilators.161 In addition, the Government of Abia state provided financial support to over 100 local tailors to produce face masks and PPE.162 Other local manufacturers also ramped up production of PPE.163 The Federal Government has also made it easier to import goods, and with effect from 1 May 2020, President Muhammadu Buhari approved the waiver of all duties on imported medical equipment, and directed the Nigerian Customs Service to expedite their clearing at the ports.164

ii.  Contractor Fraud As discussed above, the BPP Guidelines attempted to ensure transparency in relation to pandemic-related procurements. These measures include publication of pandemic procurement plans, procurement opportunities and the details of contracts, including the name of the contractor, description of the project, contract sum and duration. Despite these requirements, there is limited information on government spending data,165 and anecdotal evidence to suggest that there has been widespread corruption. Civil society found evidence that the Federal Ministry of Health paid US $53 a piece for ‘ordinary face-masks’.166 Prices far in excess of market rates are often an indication of an underlying corrupt transaction. There are also rumours of theft of donated funds, especially after a fire gutted the Office of the Accountant-General responsible for the disbursement of the government’s COVID-19 intervention funds.167 There have also been media reports that the 160 Nigerian Investment Promotion Commission, ‘Nigerian Military Begins Mass Production of Ventilators, PPE kits’ (21 April 2020), available at www.nipc.gov.ng/2020/04/21/nigerian-militarybegins-mass-production-of-ventilators-ppe-kits. 161 G Onyedinefu, ‘COVID-19: Nigerian military begins mass production of ventilators, PPE kits, Business Day’ Business Day (20 April 2020), available at www.businessday.ng/news/article/ covid-19-nigerian-military-begins-mass-production-of-ventilators-ppe-kits. 162 A Salaudeen, ‘Nigerian tailors are hand-making PPE to help fight coronavirus’ CNN (17 April 2020), available at www.edition.cnn.com/2020/04/17/africa/hand-made-coronavirus-kits-nigeria-spc/ index.html. 163 Y Olatunbosun, ‘Why COVID-19 could mean a new dawn for Nigeria’s manufacturing sector’ World Economic Forum (12 August 2020), available at www.weforum.org/agenda/2020/08/ covid-19-opportunity-nigeria-manufacturing-sector. 164 See Nigerian Investment Promotion Commission, ‘FG waives import duty on medical equipment’ (8 May 2020), available at www.nipc.gov.ng/2020/05/06/fg-waives-import-duty-on-medical-equipment. 165 B Schmidt and K Bernier-Chen, ‘Hamzat Lawal: Leading Africa Anti-Corruption Activist Shares Online Media Strategy, COVID-19 Response’ (27 July 2020), available at acgc.cipe.org/ business-of-integrity-blog/hamzat-lawal-leading-africa-anti-corruption-activist-shares-onlinemedia-strategy-covid-19-response. 166 FT.com ‘Africa’s Covid-19 corruption: ‘Theft doesn’t even stop during a pandemic’ (1 September 2020), available at www.ft.com/content/617187c2-ab0b-4cf9-bdca-0aa246548745. 167 See I Onuba, S Nwogu, A Adepegba and S Utebor, ‘Fire guts Accountant General unit’s office, FG orders probe’ The Punch (9 April 2020), available at www.punchng.com/fire-guts-accountantgeneral-units-office-fg-orders-probe. See JO Nwachukwu, ‘Fire at Accountant-General office a stranger coincidence – HURIWA makes fresh claims’ Daily Post (9 April 2020), available at www.dailypost. ng/2020/04/09/fire-at-accountant-general-office-a-stranger-coincidence-huriwa-makes-fresh-claims.

Emergency Procurement: South Africa and Nigeria  553 procurement and distribution of food parcels and cash transfers to vulnerable groups was marred by fraud and corruption.168

E.  Use of Procurement for Industrial or Social Objectives Whilst the PPA provides for use of preferences in favour of domestic bidders and locally manufactured goods,169 these have not taken centre stage in the pandemic. The BPP Guidelines, however, state that ‘purchases from government institutions must be given preference’. This provision relates to PPE and other goods manufactured by state-owned entities such as DICON discussed above and is one way of protecting local supplies.

F.  The Pandemic as a Catalyst for Procurement Reforms Nigeria’s unsuccessful battle against corruption has been a source of anxiety in relation to the country’s response to the pandemic.170 However, there is some indication that conditions that have been tied to domestic and multilateral funds raised for the pandemic may assist in ensuring those funds are properly used. Donor funds, especially those provided as budget support, which will be spent using the PPA, have been tied to various accountability measures. For instance, in the contract for the US $3.4 billion emergency support loan received from the IMF in April 2020171 the Government committed itself to: (a) creating specific budget lines to facilitate the tracking and reporting of emergency response expenditures and to reporting monthly on the transparency portal (opentreasury.gov.ng) on funds released and expenditures incurred; (b) publishing procurement plans and procurement notices for all the emergency response activities – including the name of awarded companies and of beneficial owners – on the BPP website; and 168 S Dixit, Y Kofoworola Ogundeji and O Onwujekwe, ‘How well has Nigeria responded to COVID-19?’ Brookings (2 July 2020), available at www.brookings.edu/blog/future-development/2020/07/02/ how-well-has-nigeria-responded-to-covid-19. See also L Unah, ‘The African movement tracking coronavirus cash corruption’ The National (27 May 2020), available at www.thenational.ae/world/africa/ the-african-movement-tracking-coronavirus-cash-corruption-1.1025455. 169 PPA, s 34(1). 170 See S Steingrüber, M Kirya, D Jackson and S Mullard, ‘Corruption in the time of COVID-19: A double-threat for low income countries’ U4 Basic guide (27 March 2020), available at www.u4.no/ publications/corruption-in-the-time-of-covid-19-a-double-threat-for-low-income-countries. See also J Cortese, ‘COVID-19 and the coming corruption pandemic’ The Hill (4 June 2020), available at www. thehill.com/opinion/criminal-justice/491300-covid-19-and-the-coming-corruption-pandemic. 171 See International Monetary Fund, ‘IMF Executive Board Approves US$ 3.4 Billion in Emergency Support to Nigeria to address the COVID-19 Pandemic’ (28 April 2000), available at www.imf.org/en/ News/Articles/2020/04/28/pr20191-nigeria-imf-executive-board-approves-emergency-support-toaddress-covid-19.

554  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh (c) publishing no later than three to six months after the end of the fiscal year the report of an independent audit into the emergency response expenditures and related procurement process. This audit will be conducted by the Auditor General of the Federation, who will be provided the resources necessary and will consult with external/third-party auditors.172 Whilst the PPA and its regulations provide for publication of procurement plans and notices for non-emergency contracts,173 there has historically been limited compliance with these requirements, but better compliance with publication requirements for contracts since the pandemic under the open contracting portal.174 It is thus hoped that there will continue to be compliance with these measures long after the pandemic, improving the accountability, transparency and efficacy of procurement in Nigeria.

IV. Reflections South Africa and Nigeria’s approaches to procurement during the pandemic raise a number of interesting points. In both countries donor funding from both domestic and foreign sources made significant contributions to the overall funding of governmental responses. However, in South Africa this had little impact on the domestic procuring entities and on procurement rules and practices. In contrast, in Nigeria, such donor funding resulted in much procurement being done directly by the donors, and not by Nigerian procuring entities. The highly decentralised systems in both South Africa and Nigeria have been a major stumbling block. In both countries, swift and coordinated procurement was not possible. In South Africa, extraordinary regulatory measures had to be introduced to enable coordination (eg through existing framework agreements), but even those were fairly limited and not extensively used. In Nigeria, the constitutional distinction between procurement by the Federal Government and by the states makes centralisation extremely challenging, but the Federal Government was able to achieve limited coordination across federal procuring entities. This experience thus indicates a need to re-evaluate the balance between centralised and decentralised approaches to procurement in both systems. The introduction of clearer rules governing flexible procurement mechanisms that can facilitate (centrally) coordinated procurement, within an inherently decentralised public management system, such as centrally procured framework agreements, may be one effective mechanism to achieve such a balance. 172 See International Monetary Fund, ‘Nigeria’, available at www.imf.org/en/Countries/NGA. 173 PPA, ss 16(1), 16(12)-(13) and 18; Public Procurement (Goods and Works) Regulations, reg 11. 174 See Nigeria Open Contracting Portal (NOCOPO) ‘Covid-19 Emergency Procurement’, available at www.nocopo.bpp.gov.ng/ContractReportCovid19.aspx.

Emergency Procurement: South Africa and Nigeria  555 The disruption of global supply chains and shortages of supplies have undermined the normal and extensive reliance on ordinary procurement markets to acquire critical health-related supplies in both systems. This has highlighted the inherent risks of such an approach. Both countries have been forced to adopt strategies to mitigate this risk. In both countries, import duties on critical items have either been waived or reduced. Importantly, however, South Africa has also raised export tariffs and barriers to avoid supplies produced in the country from flowing elsewhere and in effect forcing such producers to supply to the South African Government (and private domestic buyers). Nigeria has not adopted a similar approach to export duties. This difference may largely be due to the different manufacturing capacities of the two countries. These differentiated strategies of course stand in tension to each other within global supply chains and analysis of the respective effects of such strategies globally, once global trade return to normal, will provide interesting insights into their relative impact. In both systems traditional procurement approaches have also been supplemented by direct government interventions in the supply market, especially acquisition of ventilators and PPE. In Nigeria, this has taken the form of public production of critical goods, which has meant that normal reliance on procurement approaches have effectively been replaced by in-house provisioning. In South Africa, in contrast, government has continued to rely on procurement mechanisms to secure supply from the private market, in the form of soliciting research and development contracts in order to encourage local production by the private sector of goods that are typically imported. Both countries have relied extensively on their existing rules governing emergency procurement. It is particularly interesting to note the similarities in regulatory approaches to emergency procurement inter alia because of the different roots of the two procurement regulatory regimes. While Nigeria’s rules are explicitly (and verbatim) based on the 1994 UNCITRAL Model Law, the regime in South Africa is not derived from or influenced by the Model Law at all.175 However, the emergency procurement rules are highly comparable. In both systems, the existence of an emergency allows a procuring entity to depart from prescribed procedures and procure directly from a single supplier, ie, by single-source procurement. The descriptions of what would constitute an emergency for the purposes of using these rules are also very similar.176 Controls on use of emergency procurement rules are also similar. In both countries, procuring entities were only required to report their emergency procurement to central oversight bodies. These bodies retained no effective approval powers over the use of the emergency procurement rules. Another noteworthy aspect is the formal declaration of an emergency as the basis for the use of emergency procurement rules, in South Africa, but not in Nigeria.

175 See ch 2 for a discussion of the relevant rules of the Model Law. 176 National Treasury, SCM Instruction Note 3 of 2016/17 (South Africa) and PPA, s 42(1)(b) (Nigeria).

556  Geo Quinot, Sope Williams-Elegbe and Kingsley Tochi Udeh In South Africa, the use of emergency procurement rules followed directly on the declaration of a national disaster. On the basis of this declaration, an instruction was issued that deemed all procurement for responding to the pandemic as emergency procurement. This removed any uncertainty on the material precondition for the use of emergency procurement rules by procuring entities. In both Nigeria and South Africa, serious integrity concerns have arisen in respect of the use of expedited procedures. This is not surprising given that procurement is often characterised by corruption in both countries, even under normal circumstances. However, it does seem that the concerns about these abuses during the pandemic have heightened attention on increasing transparency. New levels of transparency have been introduced in the form of publication of more details on all types of procurement, including supplier and commodity details as well as aggregated data across multiple procuring entities. It is to be hoped that these will not be temporary measures, but will become permanent features in both countries.

part 6 Beyond the Pandemic

558

23 Emergency Procurement: The Role of Big Open Data MIHALY FAZEKAS AND ALFREDO HERNÁNDEZ SÁNCHEZ

I. Introduction The COVID pandemic has been a watershed moment for the world economy on a scale unseen since the 2008 global financial crisis. It has demanded rapid government responses around the world, from the instatement of travel and internal mobility restrictions to the massive and sudden acquisitions of medical supplies such as personal protective equipment (PPE) and ventilators. These developments have had an impact on public procurement systems, not the least on data and analytical frameworks, putting existing mechanisms to the test and shining a light on areas of opportunity for reform. Many countries have already made strides towards incorporating transparency requirements into their procurement legislation along the lines of the approach found in traditional public procurement models, such as the UNCITRAL Model Law on Public Procurement (2011) and the systems of the EU and the Government Procurement Agreement (GPA) of the WTO. As elaborated in chapters two and three, these instruments and many of the national laws that implement them require disclosure to the public or (often the case with information on selection and evaluation) just to participating suppliers, of certain very specific pieces of information, proactively, in some cases, or on request, in others. In some countries these procurement-specific obligations are also supplemented by general rights of access-to-information that allow both suppliers and others – including citizens in general – to access governmental information, including information relating to public procurement as, for example, under the Freedom of Information Act 2000 in the UK (see chapter 15). However, openness has, in recent years, taken on a new meaning; it is now more focused on online data availability, format and reliability for information made available in a proactive manner, rather than on specific disclosure or access-to-information rights and institutions facilitating freedom of information requests. Some countries have already moved significantly down the road towards an open contracting or transparency by default model: for example, this is the case

560  Mihaly Fazekas and Alfredo Hernández Sánchez with Ukraine and of the countries studied for this book, the UK Government has recently proposed this approach in its December 2020 Green Paper, as explained in chapter 15. The novel technology-oriented understanding of transparency brought about by the open data movement and the era of Big Data seeks to increase the capacity of governments, bidding firms and citizens to monitor the procurement process by reducing information asymmetries and enabling both vertical and horizontal accountability. The overarching goal is reducing the costs of accessing and processing information, as well as increasing the quality of publicly available data. Naturally, these capacities and features are crucial for effective and rapid COVID-19 responses. Rather than having large teams of analysts pouring through archives to gather and summarise data from contracts and invoices, today interested parties can potentially access this information, in seconds, through dashboards or readily available datasets. New computational tools have increased the capacities of all stakeholders, including policymakers, members of civil society and researchers, to make complex queries on large datasets in a manner that was not possible just a few years ago. However, currently, the actual quality and availability of data on public procurement often remains underwhelming. On the one hand, creating high-quality datasets presents several challenges. These come from the technical problems associated with gathering all the relevant data – often reported unsystematically – as well as the complexity of the legal reporting requirements and their differences across countries and over time. On the other hand, even when these data quality conditions are met, they must be complemented by intelligence systems and trained users. It is essential for making sense of large-scale datasets to develop robust and interpretable indicators and communicate them to users in a userfriendly manner, such as dashboards or regular reports. Crucially, though, even the best analytics system fails to improve procurement outcomes in the absence of sophisticated users who can draw analytical insights and act on them.1 Importantly, the COVID-19 crisis has exacerbated some pre-existing weaknesses and disrupted the reliability of current measures of efficiency and integrity in public procurement. Given the pressure on government buyers seeking to satisfy demands for emergency medical equipment and supplies, two challenges have emerged which we emphasise in this chapter. First, the crisis has put tremendous pressure on procurement institutions and their corresponding data systems, bringing to light weaknesses and showing how detrimental data shortcomings really are for effective policy responses. Second, the crisis has created opportunities for reforming data systems for the better or the worse. As is illustrated below, some governments have opted for drastically increasing transparency and

1 M Fazekas, G Ugale and A Zhao, ‘Analytics for Integrity. Data-Driven Approaches for Enhancing Corruption and Fraud Risk Assessments’ (OECD, 2019), available at www.oecd.org/gov/ethics/analyticsfor-integrity.pdf.

Emergency Procurement: The Role of Big Open Data  561 data availability to better steer procurement systems and increase accountability, while others have taken the opportunity to restrict or delay data publication in the interest of speedy purchases and lowering the administrative burden for public administrations.2 To explore these challenges in a structured way, this chapter seeks to answer the following questions. How can data be leveraged to improve procurement outcomes in emergency situations? What do we need to do now to get our data systems ready for the next crisis? The chapter is organised as follows. In section II, we define the term ‘Big Data’ and identify the characteristics that distinguish it from traditional sources. We outline the features of high-quality datasets and their importance for transparency. In section III, we consider the challenges that the COVID-19 pandemic has posed for the public acquisition of emergency goods, as well as for wider monitoring efforts to assess the integrity of such transactions. In section IV, we argue that the crisis has highlighted important shortcomings in procurement data reporting such as the lack of sufficiently detailed information on suppliers, products, demand and subsequent utilisation. In the final section, we trace a path forward in which the promises of Big Data are fulfilled, reflecting on the lessons learnt from this crisis and present proposals to face subsequent ones on a stronger footing. These proposals include improving reporting practices as well as data literacy among policymakers and stakeholders.

II.  Transparency, Big Data and Public Procurement Outcomes Transparency serves as the broad umbrella term under which much of the subsequent arguments surrounding data, outcomes and COVID-19 are spelled out. Government transparency in this broad sense encompasses any public information made available for actors outside or within government, irrespective of the way in which it is made available (upon request, automatically, etc).3 Crucially, the subsequent discussion of open and Big Data predominantly focuses on de facto transparency rather than transparency as prescribed by laws and regulations.

2 D Cepeda Cuadrado, ‘The Ignored Pandemic Behind COVID-19: The impact of corruption on healthcare service delivery’ (Transparency International, 17 December 2020), available at ti-health.org/content/corruption-covid-19-coronavirus-health-delivery. Some governments, as is the case in Hungary, have also capitalised on the pandemic in an effort to curtail general access to information and to benefit well-connected suppliers with favourable contracts on emergency medical equipment; see B Mikola, Hungary’s Rule of Law Backsliding Continues Amidst the COVID-19 Crisis’ (Transparency International, 18 February 2021), available at www.transparency.org/en/blog/ hungarys-rule-of-law-backsliding-continues-amidst-the-covid-19-crisis. 3 M Bauhr, Á Czibik, J de Fine Licht and M Fazekas, ‘Lights on the shadows of public procurement: Transparency as an antidote to corruption’ (2020) 33 Governance 495.

562  Mihaly Fazekas and Alfredo Hernández Sánchez Hence, this discussion builds on and goes beyond most other chapters in this book taking a largely legal perspective. Given the scale and complexity of government procurement systems, the term Big Data [emphasis added] has occupied a central location in our understanding of transparency in public procurement, even though it only occupies a limited section of what transparency entails in this domain.4 Big Data has several definitions; however, in this chapter we focus on the characteristics that distinguish it from traditional data sources. In contrast to data collected from traditional sources,5 Big Data has a higher frequency of availability, often in real time. Similarly, the coverage and detail of Big Data is larger, encompassing several additional layers about observed cases. Not only does Big Data enjoy higher levels of granularity in comparison to traditional sources, but it can also be made more widely available to the public. Its many advantages notwithstanding, Big Data approaches face several challenges that are not present when working with traditional sources. Importantly, the information used to build Big Data-sets is often generated for purposes that are different than the analytic aims of those who compile it. For example, social media posts are generated by users with the purpose of communicating a wide range of ideas to peers and the public. However, said posts can be recollected by parties interested in developing insights about user behaviour and preferences. Thus, the analyst must not only collect the target number of posts from the internet, but also extract relevant information (eg text from HTML code) and structure it in a format that can be easily analysed. Similarly, whereas questions in surveys are designed to extract information relevant to researchers and analysts, information scraped from online government publication portals or data repositories is collected with a multitude of purposes in mind and thus must be cleaned, processed and filtered for analytical uses.6 Given the need to clean and collect data, there is a high technical entry-barrier for users who wish to analyse public procurement information scraped from the internet. The analysis of Big Data-sets demands a different set of tools and methods with which policymakers and researchers must first familiarise themselves.7

4 The term ‘transparency’ has a wide variety of connotations, each emphasising distinct overarching goals and corresponding to the perspectives of different scientific disciplines take (see eg C Ball, ‘What Is Transparency?’ (2009) 11 Public Integrity 293); and the discussion of transparency in ch 2. 5 By traditional sources we refer to data that has been created ex profeso for analysis. This encompasses a wide range of data sources such as surveys, aggregate statistics, indicators and structured interviews. 6 Fazekas, Ugale and Zhao, Analytics for Integrity (2019). 7 Often, analysing Big Data demands employing sophisticated machine-learning algorithms (eg, random forests and support vector machines). Though there are overlaps between these tools and more conventional statistical approaches (eg logistic regressions are often used in both cases), there is a difference in focus. Whereas in conventional statistical analyses the goal is typically to calculate the impact of a variable or the difference between groups within a predetermined confidence level; machine learning approaches use the predictive capability of the data feed to a wide array of algorithms as a standard of validity.

Emergency Procurement: The Role of Big Open Data  563 Furthermore, interpreting the analytical results from these methods is often far from straightforward given data uncertainty, errors, complexity and the diversity of markets that public procurement incorporates. Public procurement has long been a data-rich area of public spending due to its reliance on public tendering and the demand and obligations relating to transparency that are designed to provide scrutiny of public procurement decisions by suppliers, monitoring authorities and citizens, whether for the purposes of legal compliance – as discussed in chapter 2 – or for other reasons. The turning point in Big Data and public procurement has been the transition from individual records on transactions to structured datasets. This was enabled by the proliferation of electronic and online procurement tools and reporting platforms such as the Tenders Electronic Daily (TED) site in the EU or national e-procurement system such as Portugal’s BASE.8 These electronic procurement platforms reduce the cost of monitoring and lower information asymmetries between wellconnected insiders (bidders and procuring entities alike) and outsiders in the procurement process (suppliers who are potential market entrants, civil society, journalists and others). In addition to this cost reduction, the granularity and streamlining of data is also increased considerably. Interested parties can access not only data on the attributes of contracts and bids, but also gain a deeper insight into network effects by exploiting relational data.9 Similarly, they can access near real-time updates on the dynamics of the procurement market fostering rapid responses. Although procurement data is widely available, it is not always reported systematically and completely. Systematising the collection and publication of procurement data can reveal missing or unclear data points (eg reporting the names rather than the tax codes of bidders or winners). However, high-quality and integrated data systems are both complex and costly. They demand reliable data management structures and IT expertise to maintain, and cross-departmental collaboration to ensure the adequacy of their content.10 Crucially, the availability of machine-readable data on public procurement transactions – even if it is of the highest quality and scope – does not directly translate into results without the relevant actors being capable of making use of them.11 The emphasis here is on relevant actors who have an interest in using the data and capacity to make sense of it as well as sufficient power to make a difference. This argument is empirically tested by Bauhr et al who – based on a regression 8 This is a result of the reporting requirements set by Portugal’s Code on Public Procurement, see Decree-Law 111-B / 2017 (Portugal). 9 M Fazekas and J Wachs, ‘Corruption and the network structure of public contracting markets across government change’ (2020) 8 Politics and Governance 153. 10 M Fazekas and S Saussier, ‘Big Data in Public Procurement. Colloquium’ in G Piga and T Tátrai (eds), Law and Economics of Public Procurement Reform (Routledge, 2018). 11 Bauhr, Czibik, de Fine Licht and Fazekas, ‘Lights on the shadows of public procurement’ (2020); M Fazekas and JR Blum, ‘Improving public procurement outcomes: review of tools and the state of evidence base’, Policy Research Working Paper: WPS 9690 (The World Bank).

564  Mihaly Fazekas and Alfredo Hernández Sánchez analysis of 3.5 million public procurement contracts across Europe (2006–15) – find that providing bidding information such as submission deadlines to insiders of the procurement process (suppliers) is crucial for controlling corruption risks in public procurement.12 Moreover, these actors with an interest in procurement and decision-making powers also needed to have adequate understanding of public procurement regulations and market dynamics as well as be sufficiently trained for drawing insights from data analysis. Data quality, data use and behavioural changes resulting from data-driven insights should not be viewed in isolation. Data producers and monitoring bodies are among the principal actors potentially benefiting from better data on public procurement transactions. However, often the value of data is underestimated, with this being considered merely as a question of compliance with legal ­requirements – which, as we have set out above, are currently often quite ­piecemeal and limited – rather than an asset for driving policy change and market efficiency. By realising the power of Big Data analytics in public procurement, the impetus for wider scope and greater quality data can grow, eventually creating a virtuous circle with better data feeding into greater data use which in turn supports even better data. The challenges of data availability, quality and use notwithstanding, there have been many such developments in collecting, analysing and using Big Data in public procurement. One example is the DIGIWHIST project,13 which collects micro-level (at the contract level) public procurement data in Europe and offers an open, structured and standardised platform to make it accessible to the public. Furthermore, DIGIWHIST generated robust indicators from procurement Big Data, making it easier for non-technical audiences to benefit from the project’s findings. Regular users range from journalists and civil society through academia to governments and development banks. Nevertheless, much work remains to be done both in increasing the quality of data reported by European governments, as well as in the creation of reliable indicators to ensure that better data leads to a subsequent demand for better results. The desirability of transparency for fighting corruption, improving government accountability, enhancing value for money and supporting administrative efficiency have all received lots of policy and advocacy interest. However, a better understanding of the impact various types of transparency interventions have on increasing integrity, value for money and administrative efficiency remains of crucial importance.14 Increasing the availability of public procurement data at a low-cost decreases transaction costs to all key players of public procurement. For bidders, easily and cheaply obtaining bidding and market information is paramount. For 12 Bauhr, Czibik, de Fine Licht and Fazekas (n 3). 13 DIGIWHIST, ‘The Digital Whistleblower. Fiscal Transparency, Risk Assessment and Impact of Good Governance Policies Assessed’, available at digiwhist.eu. 14 Fazekas and Blum, ‘Improving public procurement outcomes’ (2021).

Emergency Procurement: The Role of Big Open Data  565 buyers, quickly and cheaply identifying suitable suppliers and understanding supply markets carries the benefit of improving purchasing and tapping into adequate supply markets. More and better accessible data has been shown to increase the quality and quantity of bidders, thus improving value for money.15 The effect of information on administrative efficiency is somewhat less clearcut; nevertheless, the evidence suggests that better and more readily accessible public procurement data can help buyers more quickly and cheaply vet bidders, considerably cutting down on the time needed for bid evaluation.16 However, transparency requirements, if they are not properly implemented in transactional e-procurement systems, can impose additional administrative burden on procurement officials too.

III.  The COVID-19 Challenge and Changes to Transparency Regimes The COVID-19 crisis has presented multiple challenges to public procurement data systems, all at once, while also leading to drastically different policy responses. Generally, governments had to rely more on timely and accurate data to make rapid decisions while many of them increased transparency to improve accountability and efficiency of markets for critical products, while others decreased transparency in the name of flexibility and speed.17 As experienced in past crises, public health emergencies and the need for rapid government response increase integrity risks, the current pandemic is no exception.18 The rapidly evolving and unusual market pressures on governments weakened their usually strong market power in supply markets. Especially during the early stages of the crisis, there was a shift in bargaining power away from procuring entities to suppliers of emergency goods which suddenly saw a large surge of demand

15 JR Blum, A Datta, M Fazekas, S Samaddar and I Siddique, ‘Introducing e-procurement in Bangladesh: The promise of efficiency and openness’ (Policy Research Working Papers, forthcoming); D Coviello and M Mariniello, ‘Publicity requirements in public procurement: Evidence from a regression discontinuity design’ (2014) 109 Journal of Public Economics, 76; S Lewis-Faupel, Y Neggers, BA Olken and R Pande, ‘Can Electronic Procurement Improve Infrastructure Provision? Evidence from Public Works in India and Indonesia’ (2016) 8 American Economic Journal: Economic Policy 258; R de Michele and G Pierri, ‘Transparency and Digital Government: The Impact of COMPR.AR in Argentina’ (2020) Inter-American Development Bank Discussion Paper No IDB-DP-767, available at publications.iadb.org/publications/english/document/Transparency-and-Digital-Government-TheImpact-of-COMPR.AR-in-Argentina.pdf. 16 JR Blum, A Datta, M Fazekas, S Samaddar and I Siddique, Introducing e-procurement in Bangladesh: The promise of efficiency and openness. Policy Research Working Paper, Washington, DC: The World Bank (forthcoming). 17 Open Contracting Partnership, ‘Lessons from the COVID-19 pandemic: Findings and recommendations for better emergency procurement from 12 countries’ (2020), available at www. open-contracting.org/wp-content/uploads/2020/10/OCP2020-Action-Research-COVID19.pdf. 18 J Schultz and T Søreide, ‘Corruption in emergency procurement’ (2008) 32 Disasters 516.

566  Mihaly Fazekas and Alfredo Hernández Sánchez for their products.19 As explained in chapter 2, in order to maximise value for money, guarantee integrity and realise other procurement objectives, the public sector model involves open market competition to select the best suppliers while meticulously evaluating their prior experience and suitability. However, if major procurement decisions must be made overnight, there is no time for lengthy open tendering procedures nor for detailed background checks and verifications. These unusual conditions, in turn, increased the need for speedy and accurate data to assess unusual offers from companies which had no prior history of supplying medical and emergency goods in order to screen fraudsters and low-quality providers. Readily available Big Data on market entrants in any award procedure could drastically cut down on time needed for checking potential suppliers and verifying their track record, even under emergency procurement pressures. However, for this to really make a difference, data must be readily available, highquality and of sufficient scope and detail. In this context, ready availability means that data could be retrieved for analytical purposes rapidly, within a couple of hours or a couple of days at most. High-quality procurement data implies that it is correct and accurate in representing actual tendering and contracting decisions, while lacking any notable omission or missing information that would bias the analysis. Sufficient scope means that the data covers the bulk of relevant procurement markets and hence the relevant suppliers and their track record. Finally, sufficient detail means that the relevant bits of information for understanding medical markets are available, such as unit prices and technical details on product quality and quantity. With extreme pressures on healthcare systems, stakeholders became much less concerned with transparency and procedural rules and more concerned with seeing results and seeing them quickly. In the scramble to acquire PPE, ventilators and other critical supplies, states resorted in a significant way to exceptional award procedures involving limited transparency as illustrated in the country study chapters in this book. Even limited transparency requirements for those procedures, in particular ex ante reporting requirements, often appeared as a burdensome barrier to rapid and flexible procurement decisions needed in unusual circumstances. For example, in China (where much pandemic-related work has been done outside the public procurement system altogether, through a state-directed system for use of resources), pandemic-related procurement has been done mainly under a complete exemption from the Government Procurement Law for emergencies, under which control is limited to purely internal record-keeping and internal scrutiny, as discussed in chapter 21. In chapter 21, it is argued that a problem with the legal framework in terms of requirements for ex ante publicity for urgent 19 For example, some suppliers demanded advanced payments from procuring entities during the first stages of the crisis, which in certain cases was not even enough to secure the goods, see OECD, ‘Stocktaking Report on Immediate Public Procurement and Infrastructure Responses to COVID-19’ (24 June 2020), available at read.oecd-ilibrary.org/view/?ref=132_132982-9i47fud8xb&title=StocktakingReport-on-Immediate-Public-Procurement-and-Infrastructure-Responses-to-COVID-19.

Emergency Procurement: The Role of Big Open Data  567 procurement would have made that framework difficult to apply, but that this has also diminished other – desirable – elements of transparency relevant under that framework, including ex post information). Hence, for some countries, unsurprisingly, the urgency and novelty of the COVID-19 crisis resulted in a reduction in transparency. The scale of decreases in de facto transparency is revealed by selected case studies from around the world, as well as large-scale data analysis for the EU. Contract award data was published with substantial delays in places like Buenos Aires and justification for emergency procedures was not clearly spelled out in Georgia.20 Looking at the substantial changes to transparency practices, such as the use of procedure types which require the timely publication of call for tenders in the EU, lends further support to our argument. Figure 23.1 shows the total value of awarded contracts related to medical and emergency products (eg medical breathing devices, protective gear, antiseptics, etc) in the EU by quarter (2017–20).21 This classification was made using text analytics of tenders to determine whether the explanation for extreme urgency included terms related Figure 23.1  COVID-related contracts by quarter and procedure types, 2017–20 (EU, TED data)

20 Open Contracting Partnership, ‘Lessons from the COVID-19 pandemic’ (2020). 21 Contract-level data comes from the EU’s Tenders Electronic Daily site (TED). The classification was done by selecting the following Common Procurement Vocabulary (CPV) codes: 45215142, 33631600, 33191000, 33192120, 33157000, 39330000, 35113400, 33157110, 33157400, 33694000, 33141420, 33195110, 33670000, 18143000, 18424300. These have been denoted as predominantly COVID-19related in SIMAP, ‘COVID-19-related tenders’, available at simap.ted.europa.eu/covid-related-tenders.

568  Mihaly Fazekas and Alfredo Hernández Sánchez to COVID-19 (eg ‘COVID’, ‘coronavirus’ or ‘pandemic’). Prior to the second quarter of 2020, most contracts were awarded following an open procedure with the total value of medical procurements remaining relatively stable. However, at the onset of the COVID-19 crisis, the total value of contracts for emergency medical goods skyrocketed, with the bulk of them through COVID-related emergency procedure types, which do not require the prior publication of a call for tenders in the Official Journal of the EU. There is also reduced appetite and, importantly, practical capability, for public scrutiny and oversight in this context. For instance, when large medical purchases are made in a matter of a few days; quite apart from the much more limited scrutiny that is inevitable when open tendering approaches are not applied, opportunities for external scrutiny are greatly reduced in such cases even below the level often applied to direct awards. This is the case with ex ante scrutiny, at least, in some of the countries discussed in this book. For example, in Nigeria, as discussed in chapter 22, the emergency procurement rules that apply under that system were invoked and gave exemption from the usual ex ante approvals from the Bureau of Public Procurement – albeit also requiring a significant transparency of information regime both before and after awards;22 while in the Indian state of Tamil Nadu, some of the procurement laws were suspended, affecting, in particular, ex ante publication obligations, although ex post transparency less so.23 Disruptions to open competitive practices – temporary or otherwise – such as open tendering and transparent publication can have detrimental effects as they increase the risk of inter-bidder collusion and corruption. For example, in a study of public procurement in Italy, Coviello and Mariniello found that increasing publication requirements leads to an increase in the average number of bidders per contract, thus reducing the risk of corruption and increasing the intensity of competition.24 Similarly, the link between improved competition and increases in value for money and product quality has been validated empirically both in the developed25 and the developing worlds.26 Increased risks set off by the pandemic are evidenced by scandals involving politicians, purchasing officials and suppliers of medical supplies from around the world, some of which are referred to in the country-study chapters in this book, although for the most part ex ante audits and investigations on these matters have yet to be completed.27 Furthermore, temporary relaxation of reporting 22 See ch 22, section II.B. 23 See ch 19, section III.B. 24 D Coviello and M Mariniello, ‘Publicity requirements in public procurement: Evidence from a regression discontinuity design’ (2014) 109 Journal of Public Economics 76. 25 Bauhr, Czibik, de Fine Licht and Fazekas (n 3). 26 Lewis-Faupel, Neggers, Olken and Pande, ‘Can Electronic Procurement Improve Infrastructure Provision?’ (2016); A Iimi, ‘Auction Reforms for Effective Official Development Assistance’ (2006) 28 Review of Industrial Organization 109. 27 See, for example, the discussions in ch 15, on the UK (passim); ch 22, section II.D on Nigeria and section III.D on South Africa; ch 17, section V on Brazil.

Emergency Procurement: The Role of Big Open Data  569 standards can also result in the reversal of the modest increases in data quality and overall transparency in recent years. Unchecked, a protracted relaxation in reporting standards can set off a vicious cycle of less data, less transparency and less accountability. The dual demands, in the name of speed, for weaker procedural safeguards against corruption and collusion and lower transparency requirements, in certain respects – such as ex ante approvals or through use of competitive procedures – have also given rise, on the other hand, to movements to increase (emphasis added) ex post transparency of information in some countries. For example, as described in this book, this is the case in Brazil, Nigeria (as noted above) and South Africa.28 In the last case, for example, full details of all COVID-19-related contracts must be published, rather than just the limited information required of contracts in general. Similarly, other countries such as Lithuania29 and Paraguay30 have also decided to increase transparency on COVID-related spending to improve public accountability and trust in the crisis response. Increased transparency and hence the opportunity for public scrutiny may serve as a suitable counterbalance to the weaker procedural rules of emergency procurement. Furthermore, the need to improve data reporting and use also presents an opportunity to advance the data infrastructure of public purchases as well as data requirements in the longer term. This is discussed, for example, in chapter 22 in relation to South Africa – where there are clear indications from the Government that the heightened transparency of COVID-19 contracts may be applied more broadly in future – and in chapter 17 in relation to Brazil.31 As chapter 15 explains, the UK Government has also proposed a ‘transparency by default’ regime as well as reforms on both ex ante transparency, reporting requirements and competition in direct awards; as that chapter explains, while these are not all specifically linked to the pandemic but part of a wider reform programme, public concerns over pandemic-related procurement were an important backdrop to the proposals that may have had some influence. Another example is that of Greece, which not only experimented with new data collection and analysis techniques but also aimed to embed them on post-pandemic processes and investigations.32 The Hellenic Competition Commission meticulously collected itemised product, price and quantity data for COVID-related purchases such as

28 See ch 17, section VII; ch 22, section III F on South Africa. 29 See A Homolova and D Lyndell, ‘Europe’s COVID-19 Spending Spree Unmasked’ (OCCRP, 21 October 2020), available at www.occrp.org/en/coronavirus/europes-covid-19-spending-spree-unmasked. 30 See Rindiendo Cuentas, ‘Los recursos publicos son del pueblo paraguayo’ (Paraguay’s public spending), available at www.rindiendocuentas.gov.py. 31 See ch 17, section VII. 32 See Hellenic Competition Commission, ‘Press release – The interim results of HCC’s investigations on health and hospital equipment during covid-19 pandemic’ (11 September 2020), available at www.epant.gr/en/enimerosi/press-releases/item/1083-press-release-the-interim-results-of-hcc-s-investigations-on-health-and-hospital-equipment-during-covid-19-pandemic.html.

570  Mihaly Fazekas and Alfredo Hernández Sánchez masks. However, because the Greek public procurement information system, like most others in Europe, is centred around contracts rather than items, it had to spend months fielding a large-scale survey of suppliers as well as resorting to advanced text analytics to extract the relevant data. In such cases, increasing transparency standards can set off a virtuous cycle (emphasis added) with better data management systems and actionable indicators providing easily communicable insights and highlighting the importance of investing in data. Of course, when transparency is mandated, it is also necessary to ensure that the requirements are complied with, in a timely manner, which has not always been the case. Chapter 22 suggests that there has been low compliance in Nigeria with requirements to publish information on COVID-19-related procurement. For example, a study by Timothy Kiprono demonstrated almost no transparency in Kenya despite requirements to publish tenders and contracts relating to the fund for addressing COVID-1933 and, as discussed in chapter 15, the UK National Audit Office found a problem with late publication of required award notices.34 The various types of impact in the pandemic on different types of transparency provision are reviewed further in chapter 2 and in the reflections in chapter 24, where the authors argue that an overall assessment of the application of trans­ parency in the pandemic, the pandemic’s potential future impact on transparency and lessons to be learned from the pandemic are not straightforward and require a careful and nuanced analysis. However, it is clear that in some countries, certainly, transparency has been insufficient and/or reduced and that this has created risks for procurement both in the pandemic and for the future in certain cases.

IV. The COVID-19 Challenge and Weaknesses of Data Systems The COVID-19 crisis has exposed several data challenges, most of which have long hampered the effective policy uses of public procurement data, but it has also brought up new, pressing problems. To date, few procurement data systems have the required quality and level of detail needed to make sense of the large volumes of information that they contain. Crucially, for procurement data to support purchasing decisions effectively, they must have reliable information on quantities, unit prices and the key qualities of products purchased. Unfortunately, most procurement data systems around the world operate on the level of contracts, which masks the itemised [emphasis added] details of purchases. Such a lack of detail means that analysts are typically left with best-guessing market efficiency

33 Open Contracting Partnership (n 17) 8; T Kiprono, ‘Resilience of Procurement Systems – Kenya’ (August 2020), available at drive.google.com/file/d/1SR8uP4-ZYyH10gNUC5NteeIA1OYwEAkh/view. 34 See ch 15.

Emergency Procurement: The Role of Big Open Data  571 from proxies such as the number of bidders or where bidders come from. These crucial data gaps also severely limit the capacity of non-governmental actors to use Big Data to hold governments accountable. Unsurprisingly, ‘there is little evidence that technology-based openness initiatives and tools have fulfilled their democratic promises’.35 To enhance analytical value, not only must the level of detail and quality of datasets be improved upon but expanding the scope of what is reported to include all relevant purchases of a market is crucial. Micro-level public procurement data sets typically capture only a fraction of total spending in developed, as well as developing countries (even if it is imprecisely measured from budget data, equating it with procurable spending).36 For example, TED data capturing high-value contracts in the EU typically accounts for less than half of total spending.37 However, even if public procurement data reporting improves on the standards mentioned above – sufficient scope, high quality, all the needed detail and easily accessible – this data remains largely isolated from the upstream supply markets and downstream user needs. In any reporting system, the names and registry IDs of the suppliers, bidders and contracting entities as well as the price and quantity of the items purchased are essential for analytics.38 Crucially, the use of registry IDs enable linking to external datasets such as company ownership data or budgetary spending. However, even when these basic data points are reported, there are several key aspects that are left uncaptured. Procurement prices by themselves tell only an incomplete story in the absence of background data on supply markets such as production costs, the range of producers, transportation costs or production bottlenecks. This is of even greater importance in the context of a crisis such as the COVID-19 pandemic. In normal times, we can assume that production costs move slowly so variation in procurement prices reflect the efficiency of the procurement process. However, this assumption does not hold in times of crisis when production costs and global market prices move rapidly and often erratically. Similarly, the quantity of items purchased cannot, on its own, provide information about the efficiency of a given purchase, more so in a crisis setting.

35 S Schnell, ‘Vision, Voice, and Technology: Is There a Global “Open Government” Trend?’ (2020) 52 Administration and Society 1593. 36 This is troubling considering that public procurement represents nearly 30% of total government spending in OECD countries, see OECD, ‘Preventing Corruption in Public Procurement’ (2016), available at www.oecd.org/gov/ethics/Corruption-Public-Procurement-Brochure.pdf. These levels are even higher in developing economies E Bosio, S Djankov, E Glaeser and A Shleifer, ‘Public Procurement in Law and Practice’ (2020) NBER Working Paper Series No 27188, available at papers.ssrn.com/sol3/ papers.cfm?abstract_id=3603820. 37 OECD, ‘Preventing Corruption in Public Procurement’ (2016), available at www.oecd.org/gov/ ethics/Corruption-Public-Procurement-Brochure.pdf. 38 M Mendes and M Fazekas, ‘DIGIWHIST Recommendations for the Implementation of Open Public Procurement Data. An Implementer’s Guide’ (DIGIWHIST and Open Knowledge Foundation Deutschland, 2017), available at digiwhist.eu/wp-content/uploads/2017/04/digiwhist_implementers_ guide.pdf.

572  Mihaly Fazekas and Alfredo Hernández Sánchez Past trends are not enough to gauge the optimal quantity of items purchased, regardless of price. Once again, during normal times, government demand for certain items may evolve slowly and predictably; however, this assumption does not hold during times of upheaval. In the absence of data on the demand size of a purchase (eg existing stocks and utilisation trends), quantities become meaningless as there is no benchmark against which to compare them. Reporting existing inventories and supply-flows of emergency goods – or any other type of goods for that matter – within healthcare systems allows interested parties to hold procuring entities and suppliers more accountable even during hard times. Furthermore, improving demand-side reporting practices can allow procuring entities to increase the efficiency of their purchases and provide would-be suppliers with better information on untapped or under-tapped markets. Another crucial issue is supplier history data. Suppliers that have no experience with producing emergency goods, may be awarded emergency contracts to combat the pandemic. Awards to suppliers with no prior experience in the medical supplies sector can occur even in relatively robust procurement systems in the context of an emergency, such as the 2020 pandemic. In the case of Georgia, around half of the total value of emergency contracts during the summer of 2020 was awarded to companies that had no prior experience in public procurement.39 During normal times, the entry of new suppliers is desirable, especially in the context of supply shortages. However, over-reliance on newly established providers or those with little experience in the market during times of crisis can increase integrity risks, especially when contracts are directly awarded and reporting standards are loosened. This poses even higher risks in procurement markets with less competition overall, as is the case in Georgia.40 Including supplier history into data reporting frameworks can further government accountability and support efficient procurement decisions, even in cases where procurement data reporting is already relatively robust. Failure to address these issues could prove detrimental to existing systems as a protracted reduction in reporting standards could spark a downward spiral in the absence of public pressure for transparency. Without high-quality datasets, all interested parties in the procurement process would have their monitoring and (self-)evaluation capabilities diminished. Furthermore, in the absence of such data, insiders in the process (suppliers and procuring entities) would have fewer tools to keep each other in check, thus preventing market mechanisms leading to efficient public purchasing. The importance of robust transparency and accountability frameworks both from the public and insiders in the bidding process increases during times of crisis, such as the one brought on by the global pandemic, as the market power of key suppliers rises sharply. Publishing complete information about emergency contracts, even ex post, is a step forward. 39 Nevertheless, most of these suppliers (93%) were registered at least six months prior, with the rest having been registered between 22 March and 1 May 2020. See NB Baratashvili, ‘Direct Emergency Contract Awards in Georgia during the COVID-19 Pandemic. (2020), available at drive.google.com/ file/d/1fewOLRvu1c-qerv_TZhOo4N_VkcV3QSl/view. 40 Baratashvili (ibid).

Emergency Procurement: The Role of Big Open Data  573

V. Lessons We argue that the main obstacle towards realising the full potential of Big Data in public procurement is the inadequacy of currently available datasets for analytic purposes. Though there is growing optimism about the promises of the procurement data revolution, crises such as the 2020 global pandemic exposed the inadequacy of existing data frameworks. Two shortcomings stand out. The first is the lack of detail and overall quality of most procurement data systems. The second is that procurement process data, on its own, tells little about the effectiveness and efficiency of emergency purchases in isolation from supply markets and healthcare utilisation data. Public scrutiny became far more results-oriented during the early stages of the COVID-19 crisis, focusing on getting the right supplies to hospitals on time, thus adding to existing challenges. Diminished concern over transparency, integrity and cost-effectiveness in the acquisition of emergency goods is a critical issue; given that, the degree to which citizens tolerate corruption and inefficiency has a significant impact on the government’s capacity – and willingness – to curb corruption in public procurement.41 The ability of civil society, members of the business community and other stakeholders to organise themselves to safeguard their interests and to maintain a level playing field fundamentally affects the levels of cronyism, corruption and price-gouging in public procurement.42 Similarly, governments that do not uphold strict data-reporting standards throughout the crisis and even post-pandemic miss out on valuable insights that could improve procurement efficiency. During normal times, general market conditions are stable on both the demand and supply sides. This allows for the relatively easy assessment of the quality of public purchasing decisions. However, during times of crisis, supplementary information is necessary to make similarly meaningful assessments. Data on starting stocks of purchased items (such as masks) and the rates of use are indispensable to assess the quality of procurement decisions. Depending on the actual usage of critical supplies such as PPE, the very same procurement decision can be efficient or wasteful in terms of acquiring too much or too little. Even simple price charts beg the question of whether overpricing was justified by the urgency of healthcare demand or the uptick in factory prices. In sum, without contextual supply chain and healthcare data, analysing public procurement outcomes such as prices and quantities purchased cannot provide sufficiently robust insights about the quality of procurement decisions during times of emergency. Building sectoral integrated data systems is thus crucial for meaningful analysis in times of crisis, as without them crisis governance is blinded by rapid price and demand fluctuations of essential products. 41 A Persson, B Rothstein and J Teorell, ‘Why Anticorruption Reforms Fail – Systemic Corruption as a Collective Action Problem’ (2012) 26 Governance 449. 42 A Mungiu-Pippidi, ‘The Quest for Good Governance: How Societies Develop Control of Corruption’ (CUP, 2015).

574  Mihaly Fazekas and Alfredo Hernández Sánchez In addition to improving the scope and quality of reporting, we need more advanced indicators and analytic methods in order to make sense of the large amounts of data available. The emergence of a wide array of actionable indicators that rely on Big Data to award objective proxies of value for money, efficiency and integrity in public procurement is promising but should be taken further.43 Strengthening procurement data frameworks comes hand-in-hand with an overall change in data culture. Stakeholders – in the broadest sense of the term – must adapt their technical skills and expectations to accommodate for this new and evolving landscape. Data overload and misinterpretation of results are of significant concern. The transition from a data-poor environment to a world of Big Data can be daunting. The lack of expertise in managing and analysing such high-frequency and detailed datasets can lead to misinterpretation and unrealistic expectations regarding the role of large swaths of procurement data in efficient decision-making. It is thus paramount to combine data improvement efforts with a general shift towards improved data literacy, by training public officials and monitors in the methods needed to analyse and assess the quality of the windfall of information made possible by the era of Big Data. The COVID-19 crisis underlines the need to move forward in this direction by demonstrating that current data reporting frameworks, though a step in the right direction, remain vulnerable.

43 S Trapnell, ‘User’s Guide to Measuring Corruption and Anti-corruption’ (United Nations Development Program, November 2015), available at www.undp.org/content/undp/en/home/ librarypage/democratic-governance/anti-corruption/user-s-guide---measuring-corruption-and-anticorruption.html.

24 The Experiences and Lessons of the COVID-19 Pandemic: Public Procurement Regulation in (a) Crisis? SUE ARROWSMITH AND LUKE RA BUTLER

I.  Exploring the Experiences and Lessons of the Pandemic As chapter 1 explained, our objectives have been to explore, in the light of the COVID-19 pandemic, the application, operation and adequacy of regulatory frameworks for urgent – including crisis – procurement, and to consider any wider lessons for procurement regulation. The previous chapters addressed some or all of these questions in their own context. This final chapter sets out our key observations and conclusions of a general nature, organised largely around the specific sub-questions outlined in section II of chapter 1. The chapter focuses first on the book’s main subject of procurement in actual urgent situations, whether one-off or in the context of a widespread crisis. Here section II first highlights how traditional regulatory frameworks address these situations and the underlying policy considerations, and also sets out some important general observations pertinent to this kind of legal analysis. Section III reviews the regulatory responses of the pandemic to see what adjustments were made to address the pandemic itself. Section IV then reflects on regulatory approaches to urgent procurement in the light of both existing frameworks and the pandemic’s experiences highlighting, in particular, issues for future consideration in regulating urgent procurement. Section V then examines, from all these perspectives, the particular problem of security for critical supplies, which was thrown into sharp focus by the pandemic. Section VI considers briefly issues raised in modifying existing contracts to adapt them to an emergency situation. Section VII reviews the specific issues raised in the book’s chapters on procurement and development aid. In section VIII we consider the impact and lessons of the pandemic on public procurement regulation and reform more broadly. Finally, section IX rounds off by reflecting on the question in the book’s title, namely whether or not public procurement regulation is itself in crisis.

576  Sue Arrowsmith and Luke RA Butler

II.  Application of Traditional Regulatory Frameworks to Emergency Situations The book’s first objective was to elucidate how traditional frameworks address urgent situations and the policy considerations behind regulatory design. Drawing on literature on the objectives and policy of procurement regulation and the concepts that underpin traditional frameworks, notably transparency, chapters two and five explored these issues from a ‘domestic’ perspective through the lens of the UNCITRAL Model Law on Public Procurement 2011, drawing also on our 10 country case studies. Looking specifically at the WTO and EU, chapter 3 then considered these issues from the perspective of trade instruments. The issues were also considered in relation to the 10 domestic case studies in part five. An initial point to draw from the analysis is the need for extreme care when analysing regulatory frameworks or using their concepts for critical, comparative or empirical analysis, given the complexity of the legal rules and concepts and of their target factual scenarios. This is true of many legal situations, but the book’s analysis usefully illustrates this for, for example, policy-makers or for those from other disciplines examining COVID-19 procurement. For example, information on procurement methods in the EU’s Official Journal indicates the method called the negotiated procedure without prior publication for any procedure for which EU law itself requires no public solicitation1 but, as the analyses of Italy and the UK show, that EU method embraces quite different national procedures, both those normally requiring bids from a minimum number of suppliers (certain cases in Italy) and those with complete flexibility to use competition or single-source approaches (UK);2 and practice within this legal flexibility may also vary. The term ‘direct award’ is also often used in presenting pandemic-related data, but again3 potentially covering a range of methods. For example, UK audit authorities use it to refer to awards which could be competitive or single-source, either under the above EU method or under exclusions.4 While UK audit bodies have examined PPE procurement processes in the pandemic there is, so far as we are aware, no data on how far competition was used (or not) for non-PPE procurements;5 nor are we aware of data on

1 ch 3, section IIE. 2 ch 14, section III.A; ch 15, section II.D.iv. 3 ch 4, section II.E See also eg Spend Network, ‘An assessment of European procurement around COVID-19’ (9 November 2020), available at spendnetwork.com/new-covid-procurement-reportlaunches-today, which defines direct awards as procedures without competition and suggests that there is no ‘competition’ in the EU’s negotiated procedures without prior publication, which it classifies under this heading: 7-8 and 20. Although competition here could be intended to refer more narrowly to competition open to any interested party following public solicitation, the report does seem to equate the concept with contracts given ‘directly’ to a single supplier: 7. It is also unclear why concession awards even without a notice are considered to be without competition. 4 ch 15, section III.A. 5 ch 15, section III.D.4.

The Experiences and Lessons of the COVID-19 Pandemic  577 actual practice in Italy under the broad emergency powers allowing departure from the usual principle of competition.6 Thus for a properly nuanced picture of both the regulatory framework and actual processes, reference to the commonly used concepts and procedures for classification is insufficient. Transparency is also a concept with potential for misunderstanding and over-simplification, with at least four dimensions in the context of procurement regulation, not limited to information transparency.7 Distinguishing between them and between different measures within the dimensions is important, as is a distinction between ex ante and ex post information transparency, with the former often not applying under urgency rules,8 but the latter generally playing an important role, increasing in some countries in the pandemic (see section III below). Thus, evaluating levels of ‘transparency’ in the pandemic requires a very nuanced analysis. Complexity was also apparent when applying specific policy considerations to the design of rules. For example, one reason given for restricting direct solicitation methods, and behind conditions such as unforeseeability, commonly placed on urgency methods, is their abuse to favour particular suppliers. However, the idea that a procuring entity will deliberately fail to prepare for a foreseeable crisis with a view to abuse seems fanciful, and is one of several reasons identified for questioning the need for the usual conditions in crisis situations.9 Related to all this is the importance of the whole legal and factual context for analysing regulatory concepts and their application. For example, while the case study countries generally procured from the free market to address the pandemic, China met many needs without recourse to that market and even when it did so excluded its market-based activity from ‘emergency’ methods in its procurement law. Thus, comparison between China and other countries of, for example, the proportion of procurement done by urgency ‘methods’ without direct solicitation would need to take into account this context, which would not be apparent from award notices. The interrelationship between parts of the regulatory framework is also important for understanding any system. For example, highly regulated public solicitation methods present an appearance of a transparent system but, as we have seen, it is often a requirement for special urgency methods10 that public solicitation methods are impractical, and extensive transparency in public solicitations may, effectively, extend the scope for non-transparent approaches, as discussed further in section VII below. Such complexities require each system to be studied carefully in context. Bearing this in mind, however, some broad observations can still be made about traditional approaches to emergencies. First, unsurprisingly, the frameworks examined generally follow the paradigm ‘transactional’ approach of relying on competitive tendering with a public

6 ch

14, section III. 2, section II. 8 ch 2, section V.C. 9 ch 2, section V.A.III. 10 Reflected in the UNCITRAL Model Law on Public Procurement 2011: ch 2, section V.A.ii. 7 ch

578  Sue Arrowsmith and Luke RA Butler solicitation as the default – and thus assuming a competitive and available supplyside market. All, however, provided for exceptions for urgency, recognising the need for speed and flexibility. Not all provided clearly11 for the situation that arose in the pandemic of shortages and hence a competition between buyers, rather than between suppliers, which does not fit the traditional public sector model; but in cases of urgency the exceptions based on the urgency itself are generally available to deal with that scenario. Such exceptions for urgency can take different forms, including over whether and exactly when they require, or at least encourage or provide for, some competitive element, ranging from requiring this wherever possible (prioritising transparency and competition above legal certainty),12 through requiring explicit justification where only one supplier is consulted,13 to giving procuring entities a free choice,14 although here guidance can highlight the value of competition. The UNCITRAL Model Law was unique, however, among the systems studied in limiting the single-source approach solely to catastrophic events, requiring competition in all other urgent cases.15 Apart from the existence of urgency, ‘regular’ urgency-based methods are subject to (one or more of) similar substantive conditions, found in all three international systems and also in countries not covered by those systems, namely unforeseeability of the event creating urgency, absence of delay in addressing it, and impossibility or impracticality of using other methods.16 Considerations in interpreting such conditions in different contexts were examined in detail in ­chapters 2 and 3.17 Those discussions illustrate the uncertainty of such conditions, arising both from different possible legal meanings and uncertainty in factual application – uncertainty that is problematic when urgent action is needed, and possibly exacerbated by limitations of supplier review to provide interpretations.18 Systems differ, however, over their provision specifically for crisis situations. Many national systems make special provision for crises, variously described as, for example, ‘crises’ or ‘catastrophic events’ (the Model Law).19 The UNCITRAL Model Law leaves the definition of ‘catastrophic event’ open, while other systems provide some type of definition or illustration of the covered events. Many systems also provide for some kind of central declaration of the existence of the crisis situation before special provisions come into effect, to remove at least some of 11 Contrast eg the Model Law and the EU rules on single-source procurement on grounds that only one supplier is able to deliver (ch 2, section V.B.iii and ch 3, section II.E.v); although ch 3 suggested the EU rules can be interpreted to allow single-source procurement with any available suppliers in such a case. 12 ch 2, section V.A.ii; ch 14, section III. 13 As the UK has proposed: ch 15, section III.D.iv. 14 eg ch 15, section III.D.iv. 15 ch 2, section V.B. 16 ch 2, section V.A.ii; ch 3, section II.E.ii and section III.B; and see also eg ch 17, section III.B. 17 ch 2, section V.A.ii; ch 3, section II.E.ii. 18 ch 5 passim. 19 Reviewed in ch 2, section V.A.iii.

The Experiences and Lessons of the COVID-19 Pandemic  579 the uncertainty over invoking the crisis rules.20 Some apply their special rules to threats of crisis events as well as actual events.21 On the other hand, the GPA and EU rules do not explicitly provide for crises in relation to civil procurement (although the EU which, unlike the WTO, regulates hard defence procurement, does do this in its defence rules22), leaving regulated states in some uncertainty over their procurement powers in a crisis.23 This adds to other uncertainties in the EU over how far Member States may adopt national regulatory rules to elaborate the scope of their own entities’ procurement powers in a crisis,24 although some including Italy, have done so.25 These ‘crisis’ provisions relax various rules that normally govern urgent procurement. Some of these provisions – as with the Model Law and EU’s defence procurement crisis provisions26 – operate through permanent provisions, while other systems have facilitating provisions allowing adoption of special rules when a crisis or threatened crisis occurs, which were operated in the pandemic (section III below), and can be geared to the specific crisis. Typically, whether ad hoc in the pandemic (see section III) or permanent, they relax some or all of the common governing conditions for urgency methods,27 including those relating to foreseeability and delay, and sometimes (although UNCITRAL retains this) conditions relating to inability to use alternative methods. The need for urgency is often maintained (as in both the UNCITRAL and EU defence crisis provisions), but some ad hoc measures in the pandemic28 have gone further, requiring only that the procurement was undertaken to address the pandemic. Systems also typically provide for an array of regulatory controls over both use and conduct of exceptional procurement methods. Some apply to all methods but, given the limited transparency and competition in exceptional methods and absence of, or (in competitive cases) difficulty of, monitoring by suppliers, such controls are particularly important for urgent procurement. While perhaps primarily perceived as concerned with verifying legal compliance, particularly by preventing deliberate abuse, they can also – through the need to justify decisions – promote better decision-making. One typical control is hierarchical approval, internal or external. Such approvals can vary in their scope (notably whether they merely cover legal conditions for choice of method or also commercial outcomes of the procedure) and (related to that) their timing.29 These are very dependent on national structures (including relationships with general spending approvals) and trade instruments thus may

20 ch

2, section V.A.iii. 2, section V.A.iii. 22 ch 3, section II.E.iii. 23 ch 3, section II.E.iii. 24 ch 3, section IIEii. 25 ch 14 passim. 26 And eg Nigeria: ch 22, section III.B. 27 ch 2, section V.A.iii; ch 3, section II.E.iii; 28 As summarised in ch 2, section V.A.iii; and see section III below. 29 ch 4, section II.D. 21 ch

580  Sue Arrowsmith and Luke RA Butler not address them.30 Obviously such approvals may need adapting in urgent situations to avoid delay and if used need to operate swiftly. The two countries significantly influenced by the 1994 UNCITRAL Model Law, which provided for such approvals for single-source procurement, take opposite approaches on this to cases of urgency, with Nigeria replacing the usual requirement for prior approval by the Bureau of Public Procurement with ex post review, but China applying this in its regulatory framework. A second control, found in the Model Law and some national systems,31 but not the GPA or EU systems, is an ex ante notice of direct solicitations; but, notably, the Model Law does not provide for this when urgency is invoked. A third, included in all three international systems examined, is internal record-keeping of decision-making, including of reasons for using urgency methods32 – an important control over conduct of urgent procurements as well as choice of method. Fourth, proactive ex post information transparency in a public medium is important and required by all three international systems through award notices,33 but some countries go further, generally requiring, for example, proactive publication of contracts or summaries thereof,34 or even of all procurement information. Fifth, proactively published information may be supplemented by rights to access further information on request.35 Finally, and importantly, controls are provided by various types of ex post review, for example, by central public procurement authorities36 or audit bodies.37 Two important general points on information transparency emerge. First, the traditional approach is piecemeal, requiring release of specified and limited items at specified times to specified persons or the public, with timescales in months38 to take account of time considered necessary to curate information and make it accessible in an earlier era. This is the position with all three of the international frameworks studied in chapters two and three, for example, as well as many of the countries studied in part five of the book. However, some systems have moved further along the spectrum towards full information transparency with disclosure of full documentation on request or to some degree proactively, such as Colombia’s general requirement to publish contracts within three days39 and the UK’s right of access and policies requiring proactive publication of much information.40

30 ch 2, section II.E.vi. 31 ch 2, section V.A.iii; ch 14, section III.C. 32 ch 2, section V.A.iii; ch 3, sections II.E.vi and III.B. 33 ch 2, section V.A.iii; ch 3, sections II.E.vi and III.B. 34 eg ch 15, section III.F; ch 18, section III.A. 35 eg ch15, section III.F. 36 eg Nigeria: ch 22, section III.B. 37 eg Brazil: ch 17, section II; Columbia: ch 18 section III.B; South Africa, ch 22 section II.B.ii; and UK, ch 15 section I. 38 eg ch 2, section V.C (30 and 72 days respectively for the EU Public Contracts Directive and GPA). 39 ch 18, section III.A. 40 ch 15, section III.F.

The Experiences and Lessons of the COVID-19 Pandemic  581 A second, and separate, point is that the level of detail required for justifications for decisions is often uncertain, potentially exacerbated by lack of care and consistency in drafting41 – an issue not solved simply by publishing original documentation although this can help elucidate the reasons for decisions. Expanding existing contracts is another possible approach to emergencies with potential benefits of speed, reliability and value.42 The frameworks studied allowed flexibility for this, generally within prescribed value limits,43 within general rules on modifications and in some cases more generous provisions for unforeseeable events.44 Reflecting the general focus of regulatory regimes on the pre-contract stage, however, the controls and protections above governing new contracts do not always apply or their application is unclear,45 making verification and enforcement of activity rather difficult. In addition to providing for new awards under exceptional methods or unanticipated modifications, regulatory frameworks are also providing increasingly for mechanisms to facilitate advance planning, even for emergencies of unknown timing and extent. Thus many systems now provide explicitly for advance arrangements with several suppliers – ‘framework agreements’46 in Model Law terminology – either establishing some or all terms of future procurements (and then allowing immediate awards based on these terms or – in some cases – supplementary mini-competitions) or establishing lists of interested suppliers who are all invited to submit rapid offers when a need arises (the latter labelled ‘open’ framework agreements by the Model Law and dynamic purchasing systems by the EU). Chapter 2 reviewed the different types of arrangement and their value and drawbacks, explaining that all can potentially speed up emergency procurement, as well as enhancing reliability and security of supply in certain cases and at the same time potentially maintaining more extensive competition and transparency than the emergency methods. The Model Law has provided for such arrangements since 2011, including specifically for urgency, and the EU’s Public Contracts Directive since 2004,47 and although not specifically regulated in the GPA, many types can be operated under GPA rules.48 The country studies showed that such arrangements, albeit of varying types, detail and nomenclature, are found in many national systems,49 with regulatory provisions – if not always the practical phenomenon50 – arguably having been given impetus by

41 eg ch 3, section II.E.vi; ch 4, section II.C. 42 ch 2, section VI. 43 eg ch 3, sections II.D and III.B; ch 15, section III.E; ch 17, section III.M; ch 18, section III.B; ch 21, section III.F; ch 22, section II.B.iii. 44 eg ch 3, section II.D; ch 15, section III.E. 45 eg ch 3, section II.D; ch 15, section III.E; ch 21, section III.F. 46 ch 2, section IV; on the different EU definition, see ch 3, section II.C.i. 47 ch 3, section II.C.i. 48 ch 3, section III.B. 49 eg ch 15, section III.B; ch 16, section III.A; ch 17, section III.F; ch 18, section II; ch 19, section II. 50 As in the UK where such arrangements operated extensively before 2004.

582  Sue Arrowsmith and Luke RA Butler international recognition and regulation.51 Some countries, such as China52 and Nigeria,53 which both use the 1994 Model Law that does not include framework agreements, and South Africa,54 which has limited hard law, do not have national-level regulatory provisions, but entities use framework approaches in practice in both China and South Africa, at least (and in China there are now some legislative proposals55). The value of framework agreements for emergencies was highlighted by their use in the pandemic, including under new rules to extend their use, as noted later below. We also noticed that some systems provide for supplier lists which entities can use to select a limited number of suppliers to participate in award procedures, whether formal tendering for major contracts – the GPA and EU Utilities Directive allowing such lists to be used even as the call for competition for some entities56 – and/or for identifying suppliers for direct solicitations, including for emergencies;57 and we noted their value where listed suppliers’ capabilities and/or past performance have been assessed, and also for speeding up processes. Chapters two and three argued that preferences for listed suppliers and/or those with past performance records should not generally be considered to infringe equal treatment obligations given the objective commercial justification for such an approach.58 However, other than in the context of open frameworks (which are lists where all listed suppliers may tender), the UNCITRAL Model Law makes no provision for lists, either for public tendering or for urgency methods, and the EU does not allow invitees for major contracts to be limited to listed suppliers (even when lists are advertised), although it does not preclude their use for direct solicitations.59 The possibility of using public tendering approaches in emergencies is addressed not only by specific provision for framework agreements but also, in many systems, by shortening and/or simplifying for urgent cases the usual rules applicable in conducting public tendering. All three international frameworks studied provide explicitly, or at least allow for, shorter timescales for urgency, for example60 (and, as section III below notes, several countries provided for this in parallel regimes or modified regimes for the pandemic). Finally, we briefly studied supplier review.61 The three international systems all require effective review, but most of the national systems studied – even those covered by international obligations – do not have effective systems, review being

51 eg

the UK regulated these in 2006 to transpose the 2004 Directive. 21, section VII. 53 ch 22, section III.B. 54 ch 22, section II.A. 55 ch 21, section VII. 56 ch 2, sections II.C.ii and III.B. 57 eg ch 4, section II.B.i.i; ch 14, sections III.A and C; ch 21, section III.D. 58 ch 2, section V.A.iv; ch 3, section II.E.vii. 59 ch 2, section V.A.iv. 60 ch 2, section V.A.ii; ch 3, sections II.B and III.B. 61 ch.5 passim. 52 ch

The Experiences and Lessons of the COVID-19 Pandemic  583 before the (lengthy) court system.62 However, as chapter five discussed through the lens of the UNCITRAL Model Law, even the best-designed system cannot secure effective remedies in a genuinely urgent situation without significant adverse impact on the public interest, and this, combined with other disincentives to challenge, limit its role.

III.  Regulatory Responses to Address the Pandemic The book’s second objective was to examine responses to COVID-19 in terms of the use and revision of procurement frameworks to address the pandemic. We have seen, first, that domestic governments relied almost wholly on market mechanisms, China being the only major exception63 in our case studies. Although some other governments provided specifically for exceptional powers, such as requisitioning (as in Brazil64) or price regulation, or already enjoyed them,65 they were generally used, if at all,66 only in a limited way.67 In this context of reliance on the market, the response of competition (antitrust) regulators has been relevant for the public as well as private sector, and chapter 7 explained how these regulators have responded in the pandemic through flexibility, improved communication with stakeholders and enhanced cooperation with other authorities, including public procurement authorities, to enhance the operation of markets. In the context of global shortages which created the unusual situation of buyer competition rather than supplier competition, other stresses on the market which form the background to the operation of public procurement rules were efforts to interfere with markets by government buyers using their regulatory power to favour their own purchasing in forms such as requisitioning subject matter intended for other parties or controlling exports out of the country or (within countries) region. In some cases, these efforts gave rise to clashes between countries and – for example, in Brazil, India and the US – also disputes between federal and other levels of government over critical supplies which were, or may need to be, resolved at the constitutional level,68 a potentially interesting area for future research. Addressing such issues is one of the reasons favouring a cooperative approach, rather than competition between and within governments, in situations

62 See eg ch 14, ch 15, section III.G, ch 17, section III.K, ch 18, section II, ch 22, section II (South Africa). cf ch 16, section II, ch 20, section II and ch 22, section III.B. 63 ch 21, section III.E. 64 ch 17, section III.A. 65 eg ch 15, section III.A; ch 16, sections II and III.B; ch 19, section II. 66 eg ch 15, section III.A. 67 For examples see ch 15, section III.A; ch 16; ch 19, section III.E. 68 eg ch 17, section III.A (where courts generally blocked federal requisitioning); ch 19, section II; ch 16, section III.B.

584  Sue Arrowsmith and Luke RA Butler of global supply shortages, as seen in, for example, EU Member State cooperation through the Joint Procurement Agreement (JPA).69 These regulatory interventions have not been the main focus of our book, but do raise issues for the future linked to the building of resilience through domestic and regional production and supply, as section V discusses below. Such tendencies were initially experienced in respect of procurement of PPE and other items in shortage at the start of the pandemic, but have continued in respect of vaccines.70 So far as applicable regulatory frameworks are concerned, it should also be mentioned that for governments that have relied on multilateral development banks for aid to meet pandemic needs, alongside the banks’ emphasis on using countries’ own regulatory systems on public procurement (subject to compatibility with the banks’ rules and principles),71 the banks have also allowed other international organisations (eg World Health Organization) involved in the financed project to procure using the latter’s own rules and procedures as banks and international organisations have necessarily become more interventionist to address the pandemic.72 Further, some countries have been assisted by foreign governments, charities or private sponsorship (for example, Nigeria73), in which case (as with private gifts) it may be that no public procurement framework applies at all. Use of the market has meant that, in general, national public procurement laws were widely called into play. How, then, did systems, use and/or adapt their traditional frameworks? In terms of the international instruments, their nature and revision processes allow little scope, if any, for rapid adjustment, and responses were limited to guidance from the European Commission on applying the EU Directives in the pandemic. This was more by way of a summary of and justification of the rules with almost no interpretation or strategic advice.74 At domestic level, however, the case studies illustrate several types of responses, with some adopting more than one type of response, sometimes distinguishing between, in particular, supplies subject to global shortages and others. Recognising that the different responses all represent shades on a spectrum, four broad categories can be identified – the ‘exclusion’ response, the ‘parallel regime’ response, the ‘adaptation’ response and the ‘no change’ response. At one end of the spectrum public procurement norms did not directly play a significant governing role (the ‘exclusion’ response). This was the case for all types of procurement in China when, even when needs were purchased from the market, a general (permanent) exemption from the regulatory framework was applied, 69 ch 6 passim. 70 A Williams and K Stacey, ‘Is there a ban on Covid vaccine exports in the US?’ Financial Times (1 May 2021), available at www.ft.com/content/82fa8fb4-a867-4005-b6c2-a79969139119. 71 ch 11, section VIII. 72 ch 11, section VIII. 73 ch 22, section III.B. 74 ch 3, section II.A.

The Experiences and Lessons of the COVID-19 Pandemic  585 subject only to internal monitoring and record-keeping. This created a ‘legal vacuum’ (although to some extent filled by ad hoc local rules) – even though the national framework provides an alternative of specific ‘emergency’ procurement methods.75 Colombia and Italy applied a similar approach, but only specifically for medical needs subject to global shortages. In Colombia, a decree was adopted to subject procurement of these items in international – as opposed to domestic – markets solely to private law, subject only to submitting contracts to the audit authorities.76 In Italy, after an initial phase of more limited emergency amendments in January 2020 (see below), in March 2020 bodies exercising the functions of the civil protection authorities were permitted to procure certain (shortage) medical items by way of derogation from the usual regulatory provisions, including on award procedures and upfront payments;77 and in March 2020 the relevant powers were conferred on a special Commissioner given even greater exemptions, including from the usual control of the accounting court and from legal liability (other than for malicious acts), although still with a duty to report and account for expenditure.78 These exemptions were considered important in Italy because of the deterrent effect to swift action under the regular system created by fear of liability combined with detailed legal rules.79 In India, operation of procurement laws was largely suspended in some states, particularly for specific entities with important pandemic responsibilities, in some instances limited to medical supplies, but in some cases more broadly.80 It can be seen that several, but not all, of these exclusion responses were initially largely aimed at the unusual market conditions early in the pandemic. A second type of response was to largely disapply the usual framework and replace it with a ‘parallel’ regime that still provided significant rules and controls, but specifically adapted to the pandemic (the ‘parallel regime’ response). This was seen in two countries, Italy and Brazil, whose general frameworks are complex, rigid and onerous and considered by some as obstacles to effective procurement generally, not just in emergencies.81 Both have some history of special regimes displacing the regular rules: Italy has often adopted special regimes and/or entrusted powers to a Special Commissioner in emergencies;82 and Brazil adopted a special regime for procurement for recent major sport events (which was subsequently greatly extended).83 Thus Italy, in addition to an exemption for health-related procurement in March 2020, in May 2020 (under the so-called Relaunch Decree) provided a special approach

75 See

generally ch.21, section III. 18, section III.B. 77 ch 14, section III.B. 78 ch 14, section III.B. 79 ch 14 section III.B. 80 ch 19, section III.B. 81 ch 14, section II; ch 17, section II. 82 ch 14, section V. 83 ch 17, section II. 76 ch

586  Sue Arrowsmith and Luke RA Butler for larger contracts84 in some sectors deemed sensitive for the pandemic, such as construction in the education, health, and transport fields, which seemed to go beyond truly urgent contracts. This allows broad derogation from the Public Procurement Code, including its usual methods and procedural rules, without proving the usual governing conditions for urgency methods; however, it still requires adherence to principles of competition, transparency and non-discrimination, as well as conflicts-of-interest rules and certain others, rendering it more a parallel regime than regulation-free area. In Brazil a special law adopted originally in February 2020 replaced many of the usual rules, with key features including possibilities for direct solicitations (including single-sourcing) for all requirements addressing the pandemic, with the usual conditions for invoking urgency deemed to be met, although subject to record-keeping and approval requirements; simplified planning rules; waiver of certain qualification requirements; expedited and simplified procedures for electronic auctions (the most common award procedure in Brazil); and broader application of, and more flexible use of, framework agreements. This falls some way along the spectrum towards the ‘modification’ approach (see below), but is probably better regarded as a parallel regime. It is important to stress, as chapter 14 on Italy does,85 that these responses do not necessarily entail an approach that in practice lacks appropriate competition or transparency; empirical research of the processes followed is necessary to determine this. Our concern is simply to note that the traditional regulatory approach was perceived as a barrier to a balanced approach, requiring an urgent regulatory response. Further along the spectrum, other countries have adapted the normal regulatory framework (the ‘adaptation’ response). Thus Colombia, as well as applying the above special private law regime for certain medical needs purchased on international markets, in mid-March 2020 adopted decrees under emergency powers to introduce some special rules for pandemic-related procurement, including indicating in a general way that conditions for reliance on emergency single-source methods were met and extending use of electronic means, centralised framework agreements and scope for contract modifications.86 In South Africa conditions for urgent (including single-source) methods (including single-source procurement) were deemed by National Treasury instruction to apply automatically for purchases required to respond to the pandemic;87 and South Africa initially also removed the approval requirement for large modifications to existing contracts, but ultimately rescinded this measure as too risky.88 It also extended access to existing framework agreements.89 India at national

84 As

we well as measures for smaller contracts. ch 14, section III.C. 14, section III.C. 86 ch 18, section III.B. 87 ch 22, section II.B.ii. 88 ch 22, section II.B.iii. 89 ch 22, section II.B.i. 85 ch

The Experiences and Lessons of the COVID-19 Pandemic  587 level modified its (soft law) framework in March 2020 including relaxing rules limiting certain purchases to the Government e-marketplace and shortening time limits for that marketplace; relaxing a general rule prohibiting multiple singlesource purchases and differing rates for the same item (a significant change for India); and allowing purchases through Indian diplomatic missions abroad for imported items.90 In Italy, as noted, the Government eventually responded with an exclusion and parallel regime for some sectors, but initially it simply modified the usual rules for the civil protection agencies dealing with the pandemic by, in particular, deeming the existence of the emergency and other governing conditions for using direct solicitation methods, and disapplying certain other obligations, such as planning obligations; and the Curia Italia Decree also modified the regular rules for certain pandemic-related procurements not within its medical supplies derogation, for example, for smart working procurement by deeming conditions for direct solicitations to be met, simplifying and reducing numbers of participants and dispensing with some documentation.91 In the US, the Declaration of Emergency on 13 March 2020 (with retrospective effect as from 1 March) automatically gave rise to certain flexibilities already set out in the regulatory system for emergencies under such a declaration (which are additional to those for urgency in general); these included raising the simplified acquisition threshold, allowing much simpler and less transparent competitive procedures from US $250,000 to US $800,000.92 The nature of these adaptations in different systems has depended, of course, on the existing regulatory framework, some being very specific to the local system, such as India’s relaxation of rules on multiple sourcing at different prices. However, certain measures, such as ‘deeming’ urgency methods (usually singlesource) to be available for pandemic-related procurement without needing to prove conditions are met, and expanded use of framework agreements, were common, and provide some interesting food for thought when considering the lessons from the pandemic, as we will discuss in section IV. It is also important to highlight that, while for the most part the responses above have been concerned with conferring enhanced flexibility, shortening timescales and removing procedural obstacles, to allow more rapid and flexible procurement, as chapter 2 has highlighted there are also many examples of the pandemic acting as a spur to improved information transparency obligations, systems and/or compliance (although not necessarily all three), especially ex post transparency, providing a counterbalance to the inherent lack of transparency and other problems with direct solicitations; this was seen in Brazil, some provinces in China, and South Africa (the last requiring publication of full details of all COVID-19-related contracts)93 and also in Nigeria (see below). Improved information transparency

90 ch

19, section III.C. 14, section III.B. 92 ch 16, section III.A. 93 ch 17, section III.I, ch 21, section III.C and ch 22, section II.F. 91 ch

588  Sue Arrowsmith and Luke RA Butler has also been a response seen in other countries,94 although probably far from universal.95 These special provisions adopted for the pandemic under the various responses above have varied greatly in length, with the above special measures for South Africa expiring as early as 1 September 2020,96 for example, while many of Italy’s modified measures remained applicable to all procedures launched before the end of 202097 (with a broad definition of procedures covered) and the Colombian measures were, as of April 2021, scheduled to expire only on 31 May 2021.98 The appropriate length for maintaining special provisions, of course, varies between states and the different, often fluctuating conditions within them, but questions might be raised over the length of some the very flexible emergency measures. In a fourth group of countries, Singapore, the UK and Nigeria,99 there was no change to the main legislation governing award procedures. In the first two, hard law is largely limited to that implemented (by copy out) to comply with the GPA and (in the UK) EU requirements;100 thus the absence of further legislation is not surprising. This is quite apart from uncertainty over whether those international instruments allow governments to confer, or even clarify, the power to use direct solicitations for pandemic-related procurement in general, or certain types, with no, or limited, governing conditions,101 a common emergency response in other countries, as noted above (although Italy, which is also subject to EU and GPA rules, has done this). Nigeria already had provision for single-source procurement for catastrophes and threatened catastrophes without conditions other than impracticality of other methods,102 but also has not adopted other legislation. However, its Bureau for Public Procurement issued guidance under pre-existing regulations authorising ‘guidelines’ on procurement following natural disasters, explicitly including pandemics. While largely emphasising existing legislative powers and controls, these also introduced new soft law requirements to publish information on proposed emergency procurements, and appeared to reduce bidding periods contrary to primary legislation.103 In the UK, guidance notes issued in March 2020 94 See eg ch 23, section III regarding Lithuania and Paraguay; and this was a finding also in OECD, ‘Stocktaking report on immediate public procurement and infrastructure responses to COVID-19’, available at www.oecd.org/coronavirus/policy-responses/stocktaking-report-on-immediate-publicprocurement-and-infrastructure-responses-to-covid-19-248d0646. 95 eg Spend Network, ‘An assessment of European procurement’ (9 November 2020) 18, suggesting a drop in publication volumes (although how far due to lower contract volumes is unclear) and that publication data is incomplete in most European countries, possibly because of regulations relating to the pandemic. 96 ch 22, section II.B.ii. 97 ch 14, section III.C. 98 ch 18, section III.B. 99 ch 20, ch 15 and ch 22, section III. 100 ch 15, section II; ch 20, section II. 101 ch 3, sections II.E.ii and III.B. 102 ch 22, section III.B. 103 ch 22, section III.B.

The Experiences and Lessons of the COVID-19 Pandemic  589 and February 2021 largely remind entities of the rules and give a limited steer on interpretation, although the 2021 note does (belatedly in response to reviews of the pandemic) give policy guidance by encouraging competitive approaches to direct solicitations based on urgency.104 This soft law ‘supplementing’ the hard law perhaps places these countries, particularly Nigeria, some way along the spectrum towards the adaptation response countries. The UK has also proposed several future reforms that will have a significant impact on emergency procurement as part of its post-Brexit reform programme and apparently drawing on the pandemic’s experience, albeit too late for urgent procurements in the pandemic itself.105 As indicated above, the unusual market shortage situation for PPE and vaccines, etc has raised issues of cooperation – between countries, within countries between the federal/sub-federal level, and between entities within the same level of government. Cooperation might address several concerns that have arisen. One is the use of regulatory power by public bodies to interfere with inter-country trade or free market competition within a country to benefit the regulator’s own purchasing (which has happened, as discussed above). This creates a danger of distorting and disrupting supply chains, impacting on both the demand and supply side. At the inter-country level, as chapter 6 discussed, EU Member State cooperation through the JPA illustrates a way to address measures which limit international trade by encouraging coordination of demand, and discouraging government-directed procurement from domestic suppliers for domestic use which affects free market competition. Another issue is buyer competition, which can raise prices. Demandside coordination can leverage the public sector negotiating position against the private sector and was seen to a limited extent in our study.106 At the federal/state level, framework agreements and other advance purchasing arrangements could also address buyer competition problems. A final issue is inequitable distribution of critical items, as seen in the development context and discussed further in section VII in that context, where inter-country cooperation is a vital means of securing equitable distribution and likely to be a more important reason for coordination than negotiating better prices. As chapter 6 indicates, the EU JPA also has a distributive mechanism. Within countries, as chapter 22 illustrates, in South Africa the Government time-limited the quantity of supply of any one order under a framework agreement with oversight of any shortages of supply.107 So far as supplier review is concerned, this study revealed little by way of completed supplier challenges arising from the pandemic, even among those countries with review systems that are reasonably effective and/or well used, although more challenges may well emerge.108 (It also needs to be mentioned that, unlike many countries, none of our case study countries had an extensive history 104 ch 15, sections III.A and II.D.vii. 105 ch 15 passim, in particular sections III.D and VII. 106 eg Italy: ch 14, section III.B. Both at international or internal level bilateral cross-border collaborative procurement and centralised purchasing might be further developed. 107 ch 22, section II.B.i. 108 See eg ch 22, section II.B.iv.

590  Sue Arrowsmith and Luke RA Butler of supplier challenge before rapid and bespoke review bodies; other countries may well present a very different picture and would make useful future study.) However, there are some cases, such as public interest challenges in the UK, which have helped to highlight some deficiencies and probably influenced guidance and reforms,109 and citizens actions in Brazil.110

IV.  Current Frameworks: Reflection and Evaluation The book’s third objective is to reflect on and evaluate the current regulatory frameworks for urgent procurements and to highlight issues for consideration. Individual chapters comment on specific systems, but here we reflect on these issues from a broader perspective. As chapter 1 emphasises, there has been time so far for only limited empirical study of the use and impact of regulatory systems in the pandemic on which to draw. We also cannot draw conclusions of universal application from studying a few systems, nor make precise recommendations on how countries in general should address emergency procurement given the complexities, nuances and different needs and preferences of individual situations, which require country-specific approaches, including measures tailored to the whole regulatory context. Nevertheless, our study of various policy issues and regulatory approaches gives rise to some useful general observations and also highlights some specific issues that might merit future consideration in some systems.

A.  General Observations A first general observation is that it seems worth considering whether it is useful to amend the regular procurement system to address emergencies in a sufficiently rapid and flexible way. It is possible, as many countries have done, to adopt special emergency procurement rules when an emergency arises, and in some cases there may be a need for rules adapted to the exact emergency. However, it seems preferable as a general rule to provide for emergencies in advance. This facilitates an unhurried consideration of the appropriate balance of interests, with appropriate controls, avoiding the need for wholesale exclusions or parallel regimes when a particular emergency strikes, and also provides greater familiarity for stakeholders. This is perhaps a particular issue for countries which have complex, detailed and rigid procurement rules, as we saw with Italy – which has such a system for its ‘regular’ urgent procurement111 – Brazil and some systems in India (see section III above). While such rules may appear to provide significant



109 ch

15, in particular sections III.D.iv and III.G. 17, section III.K. 111 ch 14, section III.A. 110 ch

The Experiences and Lessons of the COVID-19 Pandemic  591 competition and transparency in some cases, that approach can be counterproductive if those rules need to be jettisoned altogether when an emergency arises because they give insufficient attention to the interests of speed and flexibility. Related to this is another point, namely that individual rules that appear to promote transparency and competition may have the opposite effect, for similar reasons. For example, chapter 21 suggests that the requirement for ex ante approvals of emergency methods in China – which adopted a total exclusion for pandemic procurement as noted above – made application of these methods unfeasible.112 Grounds for using direct solicitation methods sometimes depend (as under the Model Law) on whether use of other methods is practical; in this case one consequence of a rigid and burdensome public tendering system may simply be greater use of the less transparent and competitive methods. From this perspective it may, for example, be useful to consider whether amendments to regular methods are appropriate, including simplified rules or shortened bidding timescales for urgency (bearing in mind that shorter timescales will have limited impact in major public tenders where most of the time is devoted to preparing documentation, evaluating tenders and other matters).113 This is one consideration justifying chapter 3’s proposal for shortening tendering time limits for urgent call-offs under the EU’s dynamic purchasing system, for example.114 Another general point is that some reforms may be possible to improve speed and flexibility in urgent situations that do not involve any trade-offs with transparency and competition (or other interests, such as procedural costs) or involve only very minimal trade-offs, including reforms that promote use of more transparent and competitive methods, as just mentioned above. Allowing use of existing framework agreements by entities not party to the agreement, which chapter 3 suggested for the EU rules, is another specific example.115 More generally, advance planning for emergency needs through public tendering, including framework agreements, is an important way to address emergencies, as we highlight again in section IV.B below. Chapter 4 highlighted another general point of great importance for emergencies, and also more broadly, namely the need for much greater attention to single-source methods. While, as we emphasise, better planning and regulation can help to reduce reliance on such methods in urgent cases, they will still inevitably play a role, particularly in a crisis. Some specific key issues in this respect are highlighted in section IV.B below, but it is worth also emphasising more generally the need for regulatory policy and academic analysis to play closer attention to this subject, which the pandemic has brought sharply into focus. A final general point is the importance of a properly nuanced approach in developing the law, whether through regulation or interpretation, that takes account of

112 ch

21, section VII. eg ch 3, section II.B. 114 ch 3, section II.C.i. 115 ch 3, section II.C.i; and section IV.B below. 113 See

592  Sue Arrowsmith and Luke RA Butler all complexities, including those highlighted in section II above. In this regard all individual rules need considering on their own merits, taking into account their place in the overall regulatory system. Thus chapter 3 suggested that presumptions of interpretation against use of direct solicitations in EU law, for example, should not be applied in a rigid manner that takes no account of the varied and complex policy considerations that underlie the exercise of balancing affected interests here; indeed the WTO’s much more nuanced approach seems preferable.116 Because of the complexity of the concept of transparency in public procurement it is also not necessarily helpful to consider reform options in terms of more or less transparency; nor, given the possibility of reforms that involve no or minimal trade-offs, is the issue necessarily one of trade-offs between transparency and competition, on the one hand, and speed and flexibility on the other (and where trade-offs are involved it is also important to note that these may be trade-offs involving other considerations also, such as procedural costs). Applying this approach, chapters two and three proposed recommendations for the UNCITRAL, GPA and EU involving tweaks to many specific rules, some to enhance transparency and competition – particularly information transparency – some to provide greater speed and/or flexibility, and others involving no or minimal trade-offs. A similar pattern is also reflected in the specific issues for consideration set out in section B below. If any general messages were to be emphasised above all others from our study on implementing and improving emergency procurement frameworks, it would perhaps be, first, the need to limit conflicting interests by providing the legal tools to facilitate planning through open and competitive methods and, secondly, echoing both the views in chapters two and three and a phenomenon seen in several responses to the pandemic in our case study countries, that many systems might benefit from providing greater procedural flexibility, especially for times of crisis, but more information transparency.117 These points are closely related, in that robust information transparency can make fewer constraints on substantive discretion more acceptable. However, although a useful starting point for reform in many cases, we recognise that it is not necessarily appropriate for all systems.

B.  Specific Issues What then, are the specific points that our study suggests might merit consideration in developing regulatory frameworks to address emergencies?

i.  Advance Planning First, to the extent that advance planning is feasible, whether through competitively procured stockpiles or use of framework agreements, this is clearly the paradigm

116 ch 117 ch

3, sections II.E.ii and II.B. 2, section VII; ch 3, section IV.

The Experiences and Lessons of the COVID-19 Pandemic  593 for an approach that minimises or eliminates the trade-offs typically presented in emergency situations, allowing a speedy response but with no or limited loss of transparency (in any of its dimensions) and competition. The fact that framework agreements were both invoked in the pandemic and regulatory adaptations commonly made to extend their use reinforces this point, as noted in section II above. This indicates the potential value of looking closely at such arrangements, whether to introduce them into the regulatory framework or to amend existing rules (or retain those already introduced for COVID-19) to enhance their use in emergencies on a permanent basis, rather than depending on ad hoc regulation. Chapters two and three proposed some specific tweaks to current international instruments in this regard, including allowing use of framework agreements in urgent cases by entities not originally party to the framework, as proved valuable in several countries in the pandemic118 (and which may also involve amending rules related to permitted quantities); including specific provisions on (at least open) framework agreements in the GPA, allowing their use for all entities;119 providing for very rapid timescales for tendering under open framework agreements in EU and GPA rules;120 and amending GPA Art IX.11 on access to procurement by those not on supplier lists to allow an exception for urgency, as well as complexity.121 It is necessary, of course, to be aware of the limitations and potential drawbacks of both stockpiling and different types of framework agreements, and the considerations to take into account – such as predictability of needs – which chapter 2 briefly reviewed.122 Ensuring appropriate use and maintenance of such arrangements is also important, a lesson apparent both from the COVID-19 pandemic123 and previous emergencies.124

ii.  Specific Grounds for Direct Solicitation Methods in Times of Crisis In reality, however, even with perfect planning and even more so in real world conditions, rapid and flexible procurement methods by way of derogation from public tendering will inevitably be important in a crisis, as we have noted. While any extension of such methods carries some risk, our study does suggest that it is worth considering for any regulatory framework whether to include a permanent provision offering flexibility for crisis events, in particular to allow direct solicitation methods with no further, or very limited, conditions. We have seen that such methods (including single-source procurement) are provided by the UNCITRAL Model Law and EU Defence and Security Directive and (modelled on the 1994



118 See

ch 2, sections IV.A and B; ch 3, section II.C.i. 3, section III.B. 120 ch 3, sections II.C.i and III.B. 121 ch 3, section III.B. 122 ch 2, section IV. 123 eg ch 15, section III.B. 124 ch 2, section IV. 119 ch

594  Sue Arrowsmith and Luke RA Butler Model Law) Nigeria; that in the pandemic the national Governments of Colombia, Brazil, Italy and South Africa all adapted their regular frameworks to adopt a similar approach;125 and that one of the few systems studied that relied on regular urgency rules in the pandemic, the UK, has recently proposed introducing a special crisis provision, facilitated by Brexit since it is not wholly clear whether the EU allows such provisions outside defence and security procurement.126 The prevalence of such provisions indicates that standard approaches to urgency are widely considered inadequate for crises, and chapter 2 analysed the many important and valid policy considerations that favour such special provisions.127 As chapter 2 argued, those considerations mean that the balance of interests in some states, depending on circumstances, may favour a flexible crisis provision, and that it is something that states should consider (although more information may become available to judge the value and risks for different countries once pandemic-related audits are complete). As chapter 3 suggested, those considerations also seem to justify including explicit provisions in the EU Public Contracts Directive to allow this for Member States, since the current position is uncertain.128 Chapter 2 also highlighted issues for attention: these include which conditions should be disapplied, including whether it should be necessary at least to show urgency for the specific procurement and possibly (as under the Model Law although not some national provisions) that more competitive methods were not practical; whether the provision should be limited to addressing only specified harms, such as threats to life, health or property; whether some form declaration of crisis is required (which it was suggested should be added to the Model Law); and the need to limit and review the crisis period.129 Obviously controls over both use and operation of such a provision (see below) also need careful attention.

iii.  Use of (Direct) Competitive Approaches for Urgency Another important consideration, highlighted in section II, is that direct solicitation need not equate to single-source procurement and that some form of competition is often quite feasible in situations of urgency. Requiring or encouraging competition in direct solicitation methods for urgent cases thus also seems an important point to consider for countries that do not already do this, and as the UK has proposed following recommendations arising from the pandemic.130 This can provide an important counterbalance to the flexibility necessary in urgent cases, and can in fact help to justify wider use of direct solicitations in times of crisis. As section II above noted, the systems studied in this book provide a range of models to consider in requiring or encouraging a competitive approach.

125 As

reviewed in ch 2, section V.A.iii and see section II above. 15, section III.D.ii. 127 ch 2, section V.A.iii. 128 ch 3, section II.E.iii. 129 ch 2, section V.A.iii. 130 ch 15, section III.D.iv. 126 ch

The Experiences and Lessons of the COVID-19 Pandemic  595 From the perspective of international trade systems, chapter 3 explained that the EU Public Contracts Directive and GPA probably do not constrain states in this regard and allow a free choice for parties through a single ‘method’ (respectively, the negotiated procedure without prior publication and limited tendering). This seems appropriate, allowing for flexibility for different national circumstances and preferences.

iv.  Supplier Lists A further area for consideration is the better accommodation of simple supplier lists (those not covered by the concept of open framework agreements) within regulatory frameworks, given the value of such lists for direct solicitations in emergencies, as noted above. In this respect, as chapter 2 suggested, the UNCITRAL Model Law could play a role by at least providing for optional supplier lists, which could be used for direct solicitations in emergencies, under rules setting out standards for publicity, time periods for completing registration, continuous access and reasons for any qualification decisions.131 We have already also noted in section III.B.i above that it would be useful to amend GPA Art IX.11 on access to procurement by those not on supplier lists to allow an exception for urgency, which would then facilitate use of mandatory lists for open and selective tendering for major contracts in emergencies, in preference to direct solicitation methods. Another possibility mooted in chapter 3 is that of using small mandatory lists, with open and transparent access criteria, in certain fields for developing long-term partnering relationships with limited suppliers to develop new products for use in emergencies or facilitate switches in production at short notice for emergency purposes. As section II noted, other than – arguably132 – the GPA (for sub-federal entities) and the EU Utilities Directive, the international frameworks do not allow this approach, but an approach of this kind has been operated by some EU utilities for critical products and services. Even where wider use of mandatory lists more generally is off the agenda, such an approach could perhaps be considered in fields critical for likely emergencies. In practical terms, policy and processes need to be clear regarding terms and conditions for use of lists, who is responsible for their operation, who can use them and how procurement is conducted, eg whether with centralised lists individual procuring entities still bear legal responsibility for conducting direct solicitations pursuant to such lists.133 Development of open contracting systems might provide accurate real-time indications of suppliers with more detailed contextual information on key data on



131 ch

2, section IV.C. 3, section II.C.ii. 133 ch 4, section II.B.i.i. 132 ch

596  Sue Arrowsmith and Luke RA Butler prices and quantities available as well as supply chain data that could better inform choice, as indicated in chapter 23.134

v.  Shortened Procedures and Other Adaptations While, as noted, some regulatory systems provide explicitly for shorter time periods or other simplified processes for public tendering in urgent cases, the value of this depends on the importance of these timescales in the overall context. It is not clear how useful shortening timescales for supplier responses is per se for very urgent public tenders given the other constraints of regular public tendering (such as the time needed to prepare documentation and evaluate tenders), although further empirical study on the value of this in the pandemic may be useful. Shortened tendering periods seem useful, however, in the context of already rapid processes, such as call-offs under frameworks (see section III.B.i above) and flexible processes that do not require extensive documentation, potentially substituting for direct solicitations, as noted in section IV.A above. Simplifying and speeding up tendering may also be an important area for broader review in some countries, benefiting time-critical procurements as well as others.135

vi.  Contract Modifications to Obtain New Urgent Requirements The advantages in an emergency of modifications to existing contracts, highlighted further by their use in the pandemic and the special rules sometimes adopted in the pandemic to provide greater scope for such modifications (see sections II and III above), indicates that it may be useful to review regulatory systems to consider whether rules on modifications cater adequately for emergency situations, allowing their use in preference to new single-source awards. At the same time, given the general focus of regulatory regimes on the pre-contract stage that we have already noted, attention needs to be paid to whether there are adequate and clear controls over their use, which we noted in section II is not always the case. Chapters two and three noted the limitations of the international frameworks in this regard and made several recommendations. Thus, as chapter 2 suggested, the Model Law can help guide a suitable approach for domestic regulators by at least including rules limiting agreed (bilateral as opposed to unilateral) amendments, to prevent its tendering rules being undermined. In doing so, it should expressly address the scope for modifications in emergencies rather than leaving this to states’ ad hoc emergency rules, integrating these rules as appropriate with those on single-source procurement – for example, allowing modifications

134 ch

23, section IV. IX below.

135 Section

The Experiences and Lessons of the COVID-19 Pandemic  597 at least when single-source procurement is allowed, and probably more widely136 and also ensuring consistency of controls on matters such as ex ante notices and justifications.137 For the GPA the current skeletal rules may also be an area to develop in future. While the EU gives more attention to modifications, as ­chapter 3 indicated, there is a need to extend and clarify the rules on justifications and record-keeping for modifications – to which internal record-keeping obligations do not seem to apply at all – to provide adequate controls and align them in that respect with rules on direct solicitations, possibly also introducing an ex ante notice requirement as was suggested for major new direct solicitations.138 It is also worth emphasising again here that an open contracting regime spanning all procurement phases (see section III.B.vii below) can not only provide more comprehensive transparency, but also encourage consistency across phases.

vii.  Information Transparency Section III above highlighted that enhanced publication of ex post information has been one important country response to the pandemic, to help counteract the inherent lack of transparency, including monitoring, in direct solicitation, and particularly single-source, methods widespread in the pandemic; and we highlighted in section IV.A our view that improved information transparency of this kind can be a key element for improving emergency procurement regulation. The COVID-19 pandemic occurred at a time when electronic systems and tools for publishing and analysing procurement information were improving immeasurably. However, as section II highlighted, many international and domestic systems of regulation have not kept pace, applying still the piecemeal approach and with long timescales. An alternative approach is the use of open contracting, ie systems to facilitate wider access to contracting information, supported by what chapter 23 identifies as ‘big data’, namely more granular ‘real time’ contract data. The pandemic exposed weaknesses in data systems where there was a need for timely and accurate information to make rapid decisions.139 Information gaps included data on production costs relating to pricing and supply chain data which could reveal production bottlenecks and transportation issues. The design of effective open contracting architectures for use by a range of stakeholders could not only assist in verifying regulatory compliance for the purpose of legal challenge (often a key reason for requesting access to data), but also for improving commercial-decision making and audit by both internal and external stakeholders, to achieve better outcomes and public trust.



136 See

the discussion of the EU, ch 3, section II.D. 2, section VI. 138 eg ch 3, section II.D. 139 ch 23, section IV. 137 ch

598  Sue Arrowsmith and Luke RA Butler However, these approaches are not without difficulties. These systems can be complex to design and remain in their relative infancy. The pandemic showed that these may not be used at all even in countries that have committed to their full implementation.140 This may suggest that there is still some way to go in terms of professionalisation, allocation of resource, and a cultural shift towards a commitment to transparency by default which is ultimately tested in emergencies. Further, as chapter 4 discussed,141 information disclosed to the public generally is a different proposition to information disclosed within government and to regulators such that careful consideration must be given to the user in the design of open contracting systems. In addition, systems must still balance disclosure against legitimate interests of confidentiality and commercial information that may need to be subject to exemption or redaction, with a need for further research on how this balance is struck in regulatory terms in different countries.142 How far it may be possible to enhance transparency, and how this should be done, then, is something many states will want to address, either through a fully open contracting approach (providing access to the public generally), or a partial one (eg providing access within and across government), through proactive disclosure requirements beyond the traditional piecemeal approach and potentially embracing all documentation through the whole procurement cycle. In terms of the role of international regulatory frameworks, chapter 2 suggested that while the UNCITRAL Model Law and the GPA can usefully encourage open contracting it seems too early for those instruments to provide for that. However, it was suggested that their information transparency requirements should be improved in specific ways.143 Thus the Model Law, could usefully extend ex ante notices to urgent procurement; require reasons for invoking urgent procurement be made available at the time of the notice, where available electronic tools allow; and require proactive public disclosure of more information through the record requirement, including, specifically, on conducting direct solicitations, indicating reasons for selecting suppliers; while the GPA should consider an obligation to document all decisions with possible exceptions, however, depending on availability of electronic means.144 For the EU, by contrast, while recognising the difficulties, as chapter 3 suggested, it may be a suitable time to migrate from the ‘piecemeal’ approach to a full open contracting approach, leveraging the political impetus from the pandemic, as well as introducing ex ante notices.145 Obviously, for any system still operating a piecemeal approach, however, the kinds of requirements found in these instruments and the recommendations above provide a useful guide to appropriate levels of information transparency.



140 ch

4, section II.E. 4, section II.E. 142 ch 4, section II.E. 143 Summarised in ch 2, section VII. 144 ch 3, section III.B. 145 ch 3, section IV. 141 ch

The Experiences and Lessons of the COVID-19 Pandemic  599 A separate issue is what detail is needed in justifications required under notices, records and reports. As chapters two146 and three highlighted,147 there is currently uncertainty and some inconsistency in respect of the type of information and standard of evidence required. It was suggested that the EU should streamline and clarify the level of detail required in justifications, including in respect of accelerated procedures, procedures without prior publication and modifications as indicated in section III.B.vi below, alongside an expansive approach to interpretation; while, for the GPA, a similarly expansive approach to interpreting and applying justifications for limited tendering in notices and reports was recommended. Chapter 4148 suggested that guidance could illustrate the types of information and evidence necessary for robust justifications and that states might consider whether these should evidence not only legal conditions for use but also a good business case. However, any reforms need to ensure proportionality, especially in emergencies. Related to all these proposals, an important point is a special crisis provision of the kind discussed in section III.B.ii above would significantly reduce disproportionate administrative burdens, and should be considered alongside expansion of information obligations.

viii.  Other Issues for Single-source Procurement As indicated above, the pandemic has revealed that in some countries singlesource procurement has been a much-neglected area. We have already identified a range of issues that arise regarding conditions for use and the quality of justifications given. As chapter 4 indicates, however, there is scope for a more fundamental examination of single-source regulation in emergencies and generally. One aspect concerns the choice of method when the procuring entity must rely to a great extent on the market to lead the procurement response.149 International legal frameworks are not necessarily adaptable to such instances, prompting a need to consider other methods such as unsolicited proposals, while recognising the trade-offs with transparency here. In addition, there is a need for clear policies and processes for selecting suppliers in terms of the type of criteria used and principles for assessment and fully documented decisions.150 Finally, contract pricing and related contract management, which are at particular risk in single-source awards, need addressing carefully.151



146 ch

2, section V.C. 3, sections II.E.vi and III.B. 148 ch 4, section II.C.ii. 149 ch 4, section II.A. 150 ch 4, sections II.B and C. 151 ch 4, Part III. 147 ch

600  Sue Arrowsmith and Luke RA Butler

ix. Remedies A further point to make, given the limited potential of supplier remedies in genuine emergencies, is the importance of ensuring other monitoring and enforcement mechanisms for legal compliance in this context, particularly in systems that usually place heavy reliance on supplier review mechanisms. Such mechanisms could include citizen or other public interest challenges (which played a role in some countries in the pandemic), as chapter five noted,152 as well as ex post audits and other investigations.

x.  Cooperative Arrangements Finally, although often difficult to address, especially for inter-country arrangements or where internal constitutional issues arise, attention needs to be given to what can be done to facilitate in advance the various types and levels of cooperative arrangements referred to in section II, to address issues of market disruption from regulation, buyer competition and equitable distribution. At domestic level this includes, for example, considering the power of central purchasers to procure framework agreements for other bodies and/or require their use. It is also necessary to address the practical problems created by cooperation, such as the respective responsibility (in legal and policy terms) of central and local government where, for example, central framework agreements or supplier lists are opened for local use; responsibility for approvals; or, in the development context, issues of legal responsibility and agency of a leading organisation acting on behalf of others.

V.  Building Resilience Another area the book addressed was building resilience for future emergencies, in particular global shortages. This involves planning within the procurement system to enable security of supply, already discussed above, as well as procurement to increase domestic production and wider initiatives to develop supply chain resilience. As chapter 8 indicated, policy-makers in major trading powers concluded that cross-border supply chains failed in respect of PPE.153 As already mentioned, this led to regulatory interventions that included requisitioning, export restrictions and state-directed domestic production, a prime example of the latter being the US Presidential Executive Order,154 although some countries did not impose



152 ch

5, section III.B. 8, section IV. 154 ch 16, section III.B. 153 ch

The Experiences and Lessons of the COVID-19 Pandemic  601 formal restrictions on exports (eg Japan) and there were also measures to facilitate trade through easing imports.155 However, many countries, including those not imposing export restrictions, have since favoured everything from domestic repatriation of foreign supply chains to diversification of supply through increased domestic production and reform to foreign sources of supply.156 These measures were also in distinct preference to pursuing international cooperation to build up regional or international collective resilience, a limited example of which is the EU JPA discussed in chapter 6. These measures raise both policy and legal questions. On the former, as chapter 8 observed, international trade agreements were designed to circumscribe the behaviour of importing states, not that of exporting governments disrupting cross-border supply chains.157 These policy interventions thus depart from the organising logic of the pre-pandemic trade and government procurement nexus: domestic production goes sharply against the logic of eliciting bids from abroad. Any change in trade policy (eg a rethink on the merits of cross-border supply chains) could implicate procurement policy. In this regard, chapter 8 observed that there are no easy solutions in the form of stockpiling and incentivising spare capacity.158 From a legal perspective, measures aimed at increasing domestic or regional production must comply with applicable trade agreements. This involves a number of aspects: constraints on domestic freedom of action to take import, export and other measures, including ‘buy national’ procurement policies; international organisations’ competence in respect of non-members (eg EU measures on export restrictions to third countries in its areas of competence); and the potential for states and international organisations to modify existing commitments. Chapter 9159 indicated that there is some legal uncertainty, both under specific procurement rules (eg EU Directives and the WTO GPA) and wider treaty rules (eg prohibitions on quantitative restrictions on exports and equivalent measures and non-discrimination rules) which apply to other measures (eg import and export restrictions and buy national policies) likely to hinder access to procurement markets unless justified (eg on health grounds). This is quite apart from other regimes such as state aid; proposed policy initiatives have included subsidies to shift production out of China and funding domestic production of medical supplies.160 Chapter 9 indicated that these instruments may give flexibility for immediate and temporary export restrictions (eg to source urgent PPE) but showed that there is significant uncertainty over measures to support ‘on-shoring’ where



155 ch

8, section III. 8, section IV. 157 ch 8, section V. 158 ibid. 159 ch 9, sections II and III. 160 ch 8, section IV. 156 ch

602  Sue Arrowsmith and Luke RA Butler alternative supply sources exist.161 Further, measures favouring domestic supply markets may violate treaties unless justified, and the scope for health or security justifications in this context is unclear. Chapter 8 also raised the pertinent point that, whatever the legal consequences, disputes were unlikely to come before the WTO within the pandemic’s timescales.162 However, these legal issues could give rise to renegotiation of members’ commitments with the risk of variability further undermining the multilateral regime. As chapter 9 discussed,163 in the US, the Trump administration proposed such a modification of coverage under the GPA. The EU and seven other GPA members requested arbitration in objection. Following President Biden’s election, the relevant Order has been withdrawn although the US continues to review its policy. This is a positive sign of multilateral cooperation to try to address these issues in a way that prioritises open markets. However, as chapter 12 indicated in respect of USAID, this still leaves unaddressed the tensions faced by country-based international aid agencies in reconciling increased domestic production initiatives and international aid commitments.164 The above leads to a consideration of ways in which international frameworks could facilitate more cooperative mechanisms while also respecting individual state competences. Chapter 9 referred to the Agreement on Import Licensing procedures as a possible model.165 Chapter 6 also discussed the EU JPA. However, by design and perhaps, in part, a consequence of the need to coordinate a response whilst respecting Member State competences and decisions to also procure individually, the EU JPA framework was too complex for an effective rapid response and achieved limited results. It was also subject to the same national tendencies of imposing export restrictions. However, the EU had also identified stockpiling measures and chapter 6 recommended ways to increase the distributive effect of the JPA, eg through reallocating surpluses among members.166 More generally, the chapter provoked more critical reflection on a current paradigm that sustains individual rather than collective action in this area. Clearly the pandemic has given rise to fundamental policy questions about how states and international organisations build resilience, with public procurement having a central role. However, the legal position with possible policies is uncertain, a fuzziness that leaves scope for evolution of either ‘open’ or ‘closed solutions in practice and law. The possible solutions, both policy and legal, are not easy, but legal frameworks will play a role in determining what they are and study of these policies, including cooperative efforts, as they continue to evolve, as well as international cooperation to find solutions, will be vital.

161 ch

9, section III.B. 8, section III. 163 ch 9, section III.B. 164 ch 12, sections I and III.A. 165 ch 9, section IV. 166 ch 6, section V.C. 162 ch

The Experiences and Lessons of the COVID-19 Pandemic  603

VI.  Modifications to Existing Contracts to Adapt them to Emergencies Part V of the book briefly reviewed measures taken to adapt existing contracts in the pandemic for purposes other than to obtain new requirements, eg to relieve supplier hardship and ensure service continuity. Whilst many of these issues concern practical contract administration rather than regulation, they have been an important area of emergency response and suggest that the neglected area of contract administration requires more attention and research from a regulatory perspective in emergencies, as more generally. One issue is whether a particular emergency constitutes a force majeure-type event with consequences for modification of contract performance, whether through termination or other relief. Some countries have pre-existing legislation, eg in Brazil where different consequences are provided for a contract depending on whether it is a cause for review or impossible to perform,167 whilst others provide for termination, eg Italy.168 Some countries have treated the pandemic as a force majeure event (India,169 Brazil170 and potentially South Africa171). This gives rise to issues about the scope of relevant clauses; the extent to which prior agreement is required between the parties before clauses are invoked (eg India and China172); problems with invoking them (eg where not notified and used for long periods to a supplier’s advantage (India)); the relationship to other clauses such as change of law and their effects (eg whether they permit price increases or variations, waiver of damages, etc); and how risk in respect of losses are allocated where such clauses apply (eg as in the UK173). The review suggests that national laws and policies could provide clearer guidance on how the consequences of emergencies are addressed in respect of performance of public contracts to ensure effective contract planning and execution. Another aspect is a tendency in some countries to avoid invoking force majeure where possible. Singapore adopted legislation to provide relief in preference to ad hoc invocation of force majeure clauses to the extent possible.174 Other countries, such as the UK,175 have adopted procurement policies in the pandemic which promote supplier continuity and other forms of relief in a principled way subject to appropriate safeguards, rather than providing supplier support ad hoc. UK policy has emphasised that procuring entities can provide contractual relief



167 ch

17, section IV. 14, section IV. 169 ch 19, section IV. 170 ch 17, section IV. 171 ch 22, section II.C. 172 ch 21, section IV. 173 ch 15, section IV. 174 ch 20, section VIII. 175 ch 15, section IV. 168 ch

604  Sue Arrowsmith and Luke RA Butler through encouraging changes to key performance indicators and making advance and interim supplier payments, backed by transparency controls such as recordkeeping.176 Further, while some countries (including the UK) introduced general employment support or furlough schemes and discouraged public procurement payments that would involve ‘double’ support, the US went further, with legislation intended to address the broad economic and health effects of the pandemic; however, this legislation was ultimately used to pay to ensure the readiness of government suppliers and serve parochial needs of individual departments rather than the economic health of the industrial base.177 The practical application of these kinds of policies presents an interesting area for further research.

VII.  The Development Aid Perspective As this book has shown, states have primarily pursued unilateral procurement strategies in a race to procure PPE and secure vaccines, with relatively limited regional and international cooperation. Those countries with the finances and resources have generally been more successful than other countries. At the time of writing, the culmination is now a state of ‘vaccine nationalism’, as chapter 13178 predicted, with powerful states able to capitalise on advance purchasing agreements to lock-in commitments on supply. It is therefore perhaps unsurprising that a focus on national priorities, with, recently, calls for increasing domestic production in support, has meant that bilateral aid agencies face a conflict with their commitment to international aid, despite the argument that ‘no one is safe until everyone is safe’, as discussed in chapter 10.179 Developing countries had little option other than to rely on multilateral development organisations, two prominent examples being the World Bank and UNOPs, as discussed in chapters 10 and 11; individual donor countries; or even the private sector, as discussed in chapter 22 (Nigeria).180 There will be scope for much future research on the extent to which the pandemic has reinforced existing global inequalities and the ability of international trade and aid systems to respond effectively and equitably. However, the focus of this book is on how key organisations managed their procurement responses in emergencies, in particular, in light of the pandemic. As indicated in chapter 1,181 each development chapter offered distinct insights into how development organisations organised, procured and executed projects to aid developing countries in response to the pandemic. These accounts have value in their own right in research terms in offering the first comparisons of how

176 ch

15, section V. 16, section IV. 178 ch 13, section IV. 179 ch 12, sections I and VI. 180 ch 22, section III.B. 181 ch 1, section III. 177 ch

The Experiences and Lessons of the COVID-19 Pandemic  605 international organisations have responded in the context of procurement for aid, identifying challenges and successes of international cooperation for developing countries, in marked contrast to the limited national cooperative efforts of developed countries (such as the EU’s JPA considered in chapter 6). These chapters also reveal important insights into how these organisations used and adapted their existing institutional organisation and regulatory models (procurement rules, policies and principles) to respond to the pandemic, experiences of which are in some respects distinct given the specific circumstances pertaining in the development context, but also to a degree shared with states and other international organisations. An important observation at the outset is that multilateral development organisations have more direct experience of undertaking or assisting in public procurement in emergencies than states where major public health threats such as epidemics and their effects can be everyday realities. Therefore, the pandemic provided an important stress test for existing frameworks which the chapters have shown were capable of responding. However, even for international development organisations, the pandemic’s globally unprecedented scale necessitated further adaptations. As chapter 11182 discussed, the World Bank had already (in 2016) revised its procurement policy and regulations to better respond in emergencies, and these revised rules were heavily employed in its pandemic response. Examples included less focus on reviewing procurement transactions for compliance with its guidelines to directly supporting countries; use of alternative procurement arrangements by which the World Bank no longer assesses use of a country’s system of procurement laws according to a strict ‘equivalence test’ against the Bank’s rules and instead simply assesses consistency with the Bank’s core procurement principles, as well as enabling other organisations or agencies (eg WHO) to use their own rules to implement a project;183 Hands-on Expanded Implementation Support allowing the World Bank’s staff to support a country in drafting of procurement documents, assessing strengths and weaknesses of bids, and observing dialogue and negotiations with bidders; and, as will be considered in more detail below, Bank-facilitated procurement (BFP).184 Therefore, there was a clear emphasis on ensuring greater flexibility in procurement systems to respond more quickly and directly. This required multilateral development organisations to become more interventionist in respect of the conduct of procurement in contrast to their formerly more facilitative and supporting role. Of course, this was necessarily the case. As we have noted, states could have undertaken more domestic production and requisitioning, but many chose to use procurement from the market as a principal response tool. Absent the former possibilities, multilateral organisations had even fewer options than to direct procurement and engage with the market directly, where possible.

182 ch

11, section VII. 11, section VIII. 184 ch 11, sections VII and VIII. 183 ch

606  Sue Arrowsmith and Luke RA Butler This interventionism has certain ‘principal-agent’ implications. As chapter 4 indicated,185 within countries, central government may have either procured on behalf of, or assisted, individual procuring entities to procure requirements during the pandemic, raising questions about the allocation of responsibility (in applying laws and policies) in respect of coordinated procurement. There are also implications of use of brokers or agents in foreign countries, a supply-side dynamic which procurement systems do not adequately address. This has a particular significance in the development context. As chapter 11 discussed,186 the World Bank used Bank Facilitated Procurement (BFP), by which the Bank facilitates direct contracting between client countries and manufacturers to quickly source PPE and medical equipment. Whilst the World Bank is not party to a contract, this can create a perception that the World Bank is acting as agent for or bears some responsibility for the procurement. This interventionist approach also has practical consequences in terms of accountability and the risk of conflicts of interest under procurement rules and principles. It was explained that the World Bank’s policy provides that contracts awarded are not usually subject to prior review but rather ex post review. However, given its facilitative role in negotiating the terms and conditions of BFP contracts it is unlikely the bank would ever acknowledge that its own actions were in violation of its own rules. It also creates a risk of a possible organisational conflict of interest where the Bank must determine that there has been non-compliance with agreed procurement requirements, but has been directly involved in facilitating the procurement process.187 That chapter raises a pertinent policy issue going forward: if the World Bank could have had authority to act as an agent or procure in its own right for on-selling (without a mark-up) to its members, the Bank would have been in a stronger position to secure quicker supply. This is further confirmation that issues regarding the role of ‘agency’ broadly construed in the procurement process during emergencies necessitates further research. As indicated in Section III, a recurring theme in our case studies (eg South Africa188 and the UK189), namely the perceived need for coordination of the procurement response demand-side in situations of global shortage, is also seen in this context. While such coordination can help reduce prices, as section III discussed, developing countries and their domestic entities are not generally competing against each other to the same extent but rely on organisations and donors to act on their behalf, and cooperation in this context has a distinct purpose: cooperation between agencies can through a multiplier effect can help secure access for countries to vital equipment on an equitable basis. Further, as chapter 10190 explained, coordination may also be influenced less by supply-side

185 ch

4, section II.B.i.i. 11, section IX. 187 ch 11, section X. 188 ch 22, section II. 189 ch 15, section III.A. 190 ch 10, section V. 186 ch

The Experiences and Lessons of the COVID-19 Pandemic  607 considerations, avoiding requests to suppliers from different offices from the same and different organisations which can overwhelm suppliers’ ability to plan and respond (as well as leading to differential and higher prices for the same items). There are numerous examples of coordination in the development context. The World Bank adopted a centralised organisational model, apparently viewing its decentralised regionally disaggregated organisation as ill-suited to meet the challenges of a global emergency; and this may herald further changes to the organisation of the Bank’s procurement function when facing other global challenges such as climate change.191 Further, chapter 10 indicated, demands for assistance to multiple donors, multiple agencies and multiple offices of the same agency caused problems of coordination and price inflation. To overcome the lack of coordination between UN agencies, proposals were made within the UN group to form a ‘consortium of buyers’ which prompted a WHO and WFP joint initiative for a COVID-19 supply chain system to request and receive supplies.192 Similarly, as chapter 11 explained, the World Bank centralised competences of the regional offices and established a centralised BFP task force to approach multiple manufacturers and suppliers and negotiate multiple deals to offer to all countries participating in the BFP arrangement. This enabled the World Bank to conduct market research to obtain real-time market information on available sources of supply, reputable suppliers, quantities of products, product specifications, prices and delivery times, and offer suppliers contracts on standard terms and conditions, which countries had to ‘take or leave’ in view of the urgency under the BFP arrangement.193 Coordination on the demand side also resulted in benefits for suppliers. For example, the BFP arrangements had the advantage for suppliers that they could sell high volumes to multiple countries under a single set of terms and conditions. Future research could also focus on the impact of procurement regulation in emergencies on the supply side. However, as the authors of both chapters explain, coordination was at times hampered by either the internal system of financing and incentives typical to each agency or a more general reluctance to use new instruments and the inability of purchasing countries to meet suppliers’ short timeframes for accepting offers.194 In addition, the EU COVAX Facility is an example of regional cooperation to achieve international vaccine equity with its target to deliver 1.3 billion doses for 92 low- and middle-income countries by the end of 2021,195 as is the USAID contribution to vaccination schemes.196 The chapters also show that donors’ regulatory frameworks were sufficiently flexible to adapt to the emergency. None appear to have excluded much procurement or adopted emergency measures that abandon standard regulations and 191 ch 11, section XII. 192 ch 10, section X. 193 ch 11, section VIX. 194 ch 11, section IX. 195 European Commission Press Release (19 February), available at ec.europa.eu/commission/ presscorner/detail/en/IP_21_690. 196 ch 12, section III.B.

608  Sue Arrowsmith and Luke RA Butler processes altogether. Further, there is no suggestion in the chapters that existing frameworks require a fundamental redesign. However, there were some practical problems, such as in ensuring accountability in ex post reviews and organisational conflicts, as mentioned. Further, as chapter 11 indicated, the World Bank responded to the pandemic with a number of adaptations; for example, as with some states, it pushed back ex ante approvals for procurement projects to the implementation stage to provide a rapid response.197 As with states in general, single-source procurement was widely used by countries under bank-financed projects, raising general issues of the kind explored in, in particular, chapter 4,198 which could merit further research in the particular context of development. A further flexibility was the ability to divert loans already earmarked for one activity under a project to respond to the pandemic.199 Finally, the development context has also revealed the extent to which aid will inevitably be affected by national efforts of the kind reflected on in section V to build resilience. For example, in chapter 12200 USAID identified the potential tension between, and impact of, US domestic policy which focuses on strengthening domestic production on a bilateral agency with a principal commitment to international aid. As indicated, similar to resiling on orders that could signal US withdrawal or modification from the GPA,201 there has in the development area been a renewed commitment under the Biden administration to multilateralism. The impact of global resilience measures on procurement is not only a concern domestically for developed countries with industries capable of being strengthened by such measures, but also developing countries who may continue to be impacted by import and export restrictions and buy national policies that could limit the effectiveness of bilateral aid.

VIII.  Public Procurement Reform: Impact and Lessons from the Pandemic A final objective of this book was to highlight the longer-term impact of the pandemic on regulatory frameworks for public procurement, whether for future emergency procurement or with implications for public procurement more generally, and any broader lessons for public procurement reform. How far the pandemic has actually been a catalyst for, or informed or expedited, broader changes to national regulatory frameworks?

197 ch 11, section III. 198 ch 11, section IV. 199 ch 11, section VI. 200 ch 12, section I. 201 JH Grier, ‘Biden Team Pulls Proposed GPA Modification to Remove Medicines’, Perspectives on Trade (20 April 2021), available at trade.djaghe.com/?p=6962.

The Experiences and Lessons of the COVID-19 Pandemic  609 In the case study countries for our book, reforms or proposed reform have already been influenced by experiences with procurement of an emergency nature – the main focus of our book, given its timing – in two main ways: first, from maintaining measures introduced for pandemic-related purchases, and secondly, as a result of lessons learned in the pandemic, as outlined below. As will be seen, changes have not been confined to those relating just to emergency procurement but have had a broader impact – for example, in improving information transparency across the board or (as in the UK) enhancing controls over direct solicitations in general. Other reforms have also already taken place influenced by the need to facilitate economic recovery, as in Italy (one of the hardest-hit countries early on), where recent reforms have focused on speeding up procurement to aid recovery;202 while in the UK the Government has cited the need for sound procurement policy to play a role in recovery, including by ensuring access to small and medium-sized enterprises, in support of its planned reforms,203 although this is not tied to any specific reforms and may simply serve to bolster the case of reforms already planned. This issue of using procurement to promote economic recovery is increasingly on countries’ agendas and in the longer term might have an even more significant impact than experiences of emergency procurement. Such reforms seem largely likely to be concerned with procurement more broadly than focused on emergency situations. Illustrating these points, first, and not surprisingly, the most immediate impact on broader regulatory frameworks can be seen already in countries that had commenced reform programmes before the pandemic. Thus, in South Africa where a draft bill for reform was introduced just before the pandemic, the pandemic has reinforced the importance of intended reforms of broad scope (and affected the debate on the bill), in particular, strengthening the role of the Government, which was at the forefront of the pandemic response; reforms include enhancing the role of the National Treasury as regulator and extending use of central contracts for common purchases and providing for improved supplier remedies.204 The president has also announced that important requirements imposed for the pandemic by the National Treasury for improved scope and format of published information will mark the start of a broader new era in transparency.205 In the UK we have seen that a Green Paper issued in December 2020, which was the culmination of a reform process begun well before the pandemic, shows clear influence from the pandemic experience and incorporates recommendations from official investigations into pandemic procurement, notably in proposing more flexibility for using direct solicitations and contract 202 ch 14, section I. 203 Cabinet Office, ‘Procurement Policy Note – Reserving Below Threshold Procurements’ Action Note PPN 11/20 (December 2020). 204 ch 22, section F. 205 ch 22, section F.

610  Sue Arrowsmith and Luke RA Butler modifications in a crisis, but also in proposing more transparency through ex ante notices, and encouraging more competition, reforms applicable for all direct solicitations and modifications, including but not limited to urgent cases.206 There have also been important soft law measures to address conflicts of interest again prompted directly by the pandemic experience but relevant well beyond emergency procurement.207 The experience of the pandemic may also bolster support for the Green Paper’s more general ‘transparency by default’ proposal, even though that is not a direct result of the pandemic. Conversely, in Brazil, a bill for a new procurement law had already been under discussion for several years, but because of the nature of the legislative process passed without being able to consider the need for simplification and streamlining (which chapter 17 suggests has been highlighted – again – by the pandemic208). However, importantly, one consequence of the law creating a ‘parallel’ regime for the pandemic has been the production of easily accessible sources of data for publishing required information on pandemic-related contracts, which chapter 17 suggests may facilitate better transparency of information more generally for public procurement in future. Further, opportunities to address lessons from the pandemic in future reform might be presented by the reform process that will be needed to comply with the GPA should Brazil’s recent application to accede to that Agreement209 be successful. In Italy the legal framework was the subject of several waves of rapid reforms to address the pandemic, followed by radical measures in July 2020 to simplify and speed up procurement to aid recovery, as just mentioned; key features are broad scope to use a competitive form of direct solicitations; mandatory short timescales to complete procedures; and for some contracts the possibility for widespread derogation from most procurement norms.210 These reforms were motivated by the fact that the detailed and cumbersome nature of the regular procurement system – a situation that also prompted radical derogations from the regular framework during the emergency phase of the pandemic and in many previous situations when rapid procurement was needed,211 despite extensive rules governing urgency in the regular framework212 – was perceived as an obstacle to economic recovery.213 The reforms were originally to apply, however, only to procedures for which some activity had taken place during 2020.214 Chapter 14 highlights the fact that the measures chosen to improve the system in the recovery phase have been subject to significant criticism, including because of potential sanctions for

206 ch

15, section III.D. 15, section III.D.iv. 208 ch 17, section III. 209 See ch 17, section I. 210 ch 14, section III. 211 ch 14, section V. 212 ch 14, section III.A. 213 ch 14, section III.C. 214 ch 14, section III. 207 ch

The Experiences and Lessons of the COVID-19 Pandemic  611 procurement officials to ensure compliance with timescales and, while reform towards simplification and more rapid procurement has long been on the agenda, it is unclear what influence, if any, these latest temporary measures will have on any longer-term reforms.215 Reform initiatives have also recently been seen in China, which in December 2020 published a proposed revised national law for consultation, including to regulate framework agreements, which it had been suggested were not sufficiently used in the pandemic. However, it is unclear what actual influence the pandemic had on these proposals; and there are no specific proposals for emergencies, with emergency procurement remaining as an exclusion from procurement law.216 In some provinces measures were also taken to improve information transparency for emergency procurement in the pandemic,217 which could be retained, although this is not clear. In Nigeria there had, as in Brazil, been at the time of writing no proposed reform to the legal framework. However, again as in Brazil, there have been improvements to transparency of information – in Nigeria’s case as a result of intervention by aid donors and involving better compliance with pre-existing publication requirements which had not been widely followed; and chapter 22 mooted that this development might have long-term consequences for improving compliance with these information transparency obligations.218 On the other hand, in Singapore, with its flexible legal framework, there has been no suggestion of regulatory reform or related information measures as a result of the pandemic.219 Likewise in the US, also, no specific need has been identified by the Federal Government for reform of its highly developed rules, including on flexibility for emergencies, and no related initiatives were reported in the area of information transparency. In Colombia there has similarly been no suggestion of longer-term reform as a result of the pandemic, although chapter 18 suggested some tools introduced for that emergency, specifically open framework agreements, might usefully be maintained.220 Chapter 18 suggested that, so far as emergency procurement itself is concerned, this may because of the existing flexibility in Colombia in introducing rapid ad hoc emergency measures, but also that the situation could be affected by the continuing need to focus on the pandemic itself in the short term.221 It is also notable that Colombia already had prior to the pandemic a strong system of information transparency, including a requirement to publish all contracts themselves electronically within three days, which already applied to emergency procurement.222 Finally, while in India chapter 19

215 ch

14, section III.C and section V. 21, sections VII and VIII. 217 ch 21, section III.C. 218 ch 22, section IV.F. 219 ch 20, section VII. 220 ch 18, section VI. 221 ch 18, section VI. 222 ch 18, section III.A. 216 ch

612  Sue Arrowsmith and Luke RA Butler suggests that the rapid regulatory response to the pandemic in terms of the Central Government reforms to provide greater speed and flexibility in addressing the particular emergency is a welcome step, the new measures are in their terms temporary only and it is unclear whether they will be reflected in any longer-term changes either for emergency procurement or procurement more generally. The content of any national reforms as a result of the pandemic vary, and are likely to vary, according to each country’s situation. However, albeit not a universal effect, a particularly striking theme that emerges from the summary above is the pandemic’s influence and potential influence in expanding and/or bolstering information transparency obligations, compliance and/or systems in some countries in a way that seems likely to produce changes, benefitting not just future – as well as pandemic-related – urgent procurement, but also procurement more generally. This is obviously a very welcome development in the light of the points made in section III.B.vii on the importance of this topic, in particular (but not only) for direct solicitations. This can perhaps best be seen as continuing and speeding up a development well underway as a result of technological developments, but it is a development that has certainly been given a huge boost, and the pandemic’s impact in this area could well be one of its most significant and enduring legacies. It is also worth noting here that the pandemic’s likely beneficial impacts on frameworks regulating public procurement from the demand side may well be reflected also in the related field of competition law. As chapter 7 explained, many beneficial practices have been introduced – such as improved procedures and communications with stakeholders. Chapter 7 mooted that these might be retained to the benefit of the future system and, as a result, supply markets in public procurement, but noted that any longer-term impact of the changes made for the pandemic is not yet clear.223 While the impact of the pandemic on future procurement policy seems in many respects beneficial, there are also, however, dangers in terms of its possible boost to ever-present protectionist tendencies in public procurement (as well as in other fields, such as exports controls). Such dangers are presented by legitimate concerns over security of supply and calls to leverage procurement to promote economic reform morphing into national protectionist policies with no sound economic or other rationale.224 Nevertheless, as identified in section V, referring to policy changes under the US Biden administration, there are reasons to be hopeful that countries will continue to pursue open international trade through multilateralism. While, as noted, it is too early to make an overall judgement on the pandemic’s likely impact on regulatory frameworks in public procurement, it is clear, then,

223 ch 7, sections V and VI. 224 eg in the UK under the flexibility set out in Cabinet Office, ‘Reserving Below Threshold Procurements’ (December 2020).

The Experiences and Lessons of the COVID-19 Pandemic  613 that the pandemic has had such an impact. It will be interesting to observe over the coming months and years the precise nature and extent of that impact. In terms of the pandemic’s lessons for regulatory reform, in our reflections in section IV on current emergency frameworks and regulatory responses in the light of the pandemic, we have set out a series of recommendations and matters for consideration in regulating emergency procurement. In this section we consider some broader reform issues. A first and obvious point is the desirability both of building on what has already been done in the pandemic to improve procurement – such as the work on improving information transparency or introducing new tools such as framework agreements – and of leveraging any momentum for reform that has already arisen as a result of the pandemic to seek further improvements. It is important for systems to study measures taken in the pandemic and to consider their wider value. A second general point is the need to give full attention to the regulation and study of single-source procurement. We have already highlighted this point and specific areas for consideration in section IV, but it is worth emphasising here that these issues are relevant well beyond the context of emergency procurement. A third point to make, or, rather, to emphasise in a broader context, is the potential of information transparency for procurement in general, not just for emergency procurement or indeed just direct solicitations. We have seen how this can provide a counterbalance to flexible procedures that can justify conferring greater flexibility for rapid and appropriate responses in emergencies, but it can potentially play a similar role in other contexts, arguably facilitating regulatory frameworks that are less bureaucratic and slow, with fewer procedural rules and controls and which place fewer limits on substantive discretion, by substituting information dimensions of transparency for other aspects. This is in addition to the other benefits of information transparency in a given regulatory system, such as enhancing public trust by providing better information for commercial decision-making, and allowing better monitoring by both external and internal stakeholders. Finally, and following on from some of these points, for some countries, such as Brazil and Italy, and for some states in India – as the relevant chapters discuss225 – the pandemic appears to have highlighted broader problems with procurement systems (or indeed with the public administration more widely), as being unduly slow, complex and/or rigid. As we have discussed in section III, such problems have led to the operation of largely parallel systems for the pandemic or their wholesale suspension, despite those systems sometimes already containing explicit and detailed rules on emergency procurement. As we have noted, some of these cases illustrate how extensive transparency rules can have the opposite effect to that intended. In this kind of situation there is huge potential for an event

225 ch

14, sections III.C and V; ch 17, section VII and VIII; ch 19, section III.B.

614  Sue Arrowsmith and Luke RA Butler such as the COVID-19 pandemic to prompt a major reform. In the case of Brazil – where we have noted that potential GPA accession is a further potential catalyst to reform – chapter 17 suggested that the parallel regime adopted for the ­emergency is, involving as it does simplification and more flexibility, a step in the right direction,226 albeit not a perfect regime. In Italy, on the other hand, chapter 14 suggested that the most recent wave of pandemic-related reform designed to simplify and speed up procurement could be counterproductive because of the potential liability for procurement officers in the face of a need to attract good personnel. What the future holds for these and other systems that have had similar experiences remains to be seen.

IX.  Public Procurement Regulation in (a) Crisis? Finally, to conclude our analysis, we come to the question in the title of this book title and ask: is public procurement regulation, in particular in the way that it governs emergency situations, itself in a crisis? Our conclusion, based on the book’s research, is that it is not. In terms of the regulatory frameworks that govern public procurement, whether at international level or at national level – and whether subject to international frameworks or otherwise – no systemic crisis is evident. Certainly, the international frameworks seem generally fit for their purpose and exhibit no serious defects, although they are capable of improvement in certain respects in the general direction – we suggest – of slightly enhanced discretion for emergencies, counterbalanced by strengthened information transparency. Further, the regulatory approaches adopted by national governments in the pandemic largely seem to follow the approaches of these international frameworks, although with important divergences and additions. Thus for many systems, incrementalism based on an informed understanding of regulatory options is the direction in which we suggest reform discourses should be moving, not radical reform. The pandemic has, however, also shone a spotlight on ongoing regulatory deficiencies in certain specific countries, where there are certainly problems with the general regulatory framework providing an obstacle to effective procurement. Even in these countries, however, rapid and appropriate measures were often taken to respond to the particular emergency, which could provide the basis or catalyst for future reform. Of course, there have been many problems in ensuring effective public procurement in the pandemic, but by and large we do not see that these are mainly attributable to defects in the general approach to procurement regulation that is embodied in the broadly accepted norms. Public procurement success is affected by (related) factors such as political failure, difficult market conditions, weaknesses in structure, culture (including ethical standards) and human resources,

226 ch

17, section VIII.

The Experiences and Lessons of the COVID-19 Pandemic  615 and strategic deficiencies in planning and conducting public procurement, including its oversight. Other studies will no doubt consider these kinds of issues. As indicated at the outset of our own study,227 the regulatory framework itself can only provide a starting point for effective procurement, and improvements to procurement rules can only support and not dictate effective emergency procurement strategies. The challenge for designing improved rules for specific systems is now set and, as a result of this book, we hope that policy-makers and stakeholders are equipped with a more informed understanding of the regulatory dimension of this field.



227 ch

2, section I and ch 4, section I.

616