Last Friday, 10 November, PAI welcomed attendees to Dublin’s Croke Park for our seventh annual conference on Public Procurement. The day’s discussions revolved around the idea of technology-driven procurement practices and their implications in the Irish public sector.
Speakers on the day were:
- Declan McCormack, Programme Manager, Office of Government Procurement (jump to this presentation)
- Aaron Boyle, Partner, Arthur Cox (jump to this presentation)
- Margaret Hearty, Director of Programmes and Business Services, InterTradeIreland (jump to this presentation)
- Pauric Marray, Director, Quigg Golden (jump to this presentation)
- Pearse Ryan, Partner, Arthur Cox (jump to this presentation)
- Patrick Kenny, Competition and Consumer Protection Commission (jump to this presentation)
- Thomas Griffin, CEng., Head of Local Government Operational Procurement Centre, Kerry County Council (jump to this presentation)
The conference was chaired by independent procurement consultant Patrick McGovern.
The newly-published European Standard on eInvoicing: Irish Implications and the role of PEPPOL – a practical guide
Declan McCormack spoke about the recent changes in e-invoicing across Europe, with particular attention on the newly-published European Standard. Mr McCormack sees effective e-invoicing as a way to tie all steps of the procurement chain together. At present, “there is a lot of momentum building across Europe” as we approach April 2019. By 18 April 2019, all contracting authorities of member states “need to have the capability to receive and process an einvoice that complies with the European standards”.
Not only does compliance remove barriers to cross-border trade, it has also been shown to create significant savings for governments.
In creating the Standard, time was taken to examine what was essential in the formation of an invoice. They established what the common legal and business functions on an invoice are, and what fields are needed on it. Thus, “the standard itself is a data model that sets out what is acceptable in the format of e-invoicing”.
While there are a number of national standards in place, Mr McCormack noted that “national standards create barriers and complexity in cross-border trade”, where standardised invoices help aid this.
Mr McCormack went on to speak about the forthcoming Irish implementation of the Pan-European Public Procurement Online, or PEPPOL. PEPPOL aims to help contracting authorities and suppliers “connect once, and connect to all”. It helps with inter-operability and allows those from outside the country to apply, as a supplier, to contracts in other member states. In terms of successfully obtaining business, Declan commented:
“If you’re a supplier, the most likely approach is that you’ll engage with the service provider; and if you’re a service provider, the most likely approach is that you’ll engage with a supplier.”
Mr McCormack spoke about the practice of e-invoicing in the Ireland. In response to the European Directive 2014/55/EU, a report was commissioned to look at the practice in the Irish public sector. The report found that in excess of four million invoices are processed every year; some 90% of those are paper-based. This undoubtedly creates an enormous administrative burden. This situation could only be improved by the introduction of an efficient and standardised system.
“At this point in time, e-procurement is optional”, but the deadline for compliance with the Directive is fast-approaching. The OGP have established an e-Invoicing Initiative “to champion e-procurement across the Irish public sector”, and hopes to deliver a procurement framework and guidance on its implementation in the future. They also plan to develop a stronger web space presence that would aim to answer questions for contracting authorities and suppliers.
Aaron Boyle of Arthur Cox followed Declan’s presentation. He spoke about the consolidation of EU Procurement Directives. The Directives released in 2014 codified what had happened in the 10 years between 2004 and 2014. They pay direct attention to case law and what was happening in the public procurement space in member states.
Ireland transposed the Directives for public sector bodies and for utilities in 2016. In late 2017, the concessions Directive was transposed. As a result, the public sector is highly regulated, with a number of prescriptive measures in place. However, there are still distinctions in the text that will be upheld by the Courts. The utilities industry has taken the lead from the public sector and, as such, the sector is “a bit more regulated now than it was in 2004”.
In terms of below threshold contracts, there is an extremely “light touch” regime. The general principles will apply where there is a likelihood of cross-border trade. While it is only strictly necessary in cases where there may be cross-border interest, as a matter of best practice, applying general principles to all contracts is advisable. When planning a contract, organisations should ask themselves:
“Does this contract have a cross-border interest?”
In general terms, Mr Boyle noted, “principles that are being applied are converging and consolidating”. Because of this, people are becoming more aware. However, the new Directives have only been in place in Ireland for one year – we could very well still be in a period of bedding down. This could explain the fact that case volumes have fallen off since they transposing of the Directives. During the Q&A session, due regard was also paid to the increased professionalisation of procurement in the public sector in aiding the fall in case numbers.
Mr Boyle also paid regard to the fact that, at present, people are unsure of what they are and are not allowed to do when it comes to contracts that have already been awarded – a problem that is loudly voiced in the housing sector. He commented that “there are processes in place; we should look at how we can develop a way to do these things outside the scope of procurement contracts.”
Later, in the Q&A session, he added:
“These contracts need to be bespoke. If you know beforehand that things are likely to change, put it in your contract. It’s part of planning.”
Margaret Hearty of InterTradeIreland (ITI) spoke next. In the main, she was concerned with the impact of Brexit on cross-border trade as a whole. She presented the question:
“What are the implications for SMEs?”
As a business, she said, you must ask yourself if you are asking the right questions. The most important way to mitigate the damage is to make sure businesses know what the effects of Brexit will be, and try to make plans to account for those effects. ITI research showed that 95% of businesses have no plan in terms of dealing with Brexit. Ms Hearty said,
“To a certain degree, we can understand that, as there are no hard facts at the moment … If you’re a business and you don’t know what those possible implications could be, that’s a dangerous position to be in.”
Her advice was simple:
“Plan for the worst. It is most dangerous to have no plan at all.”
The impact of, for example, WTO tariff schedule costs, could be up to 8% for some suppliers. For a number of north-south companies, there is little experience with such a border. Therefore, knowledge is power. Costs are not the only area of concern for suppliers – logistics can also be impacted. What impact would having to stop at border have on times? This is especially salient where active contracts are concerned. ITI research also estimates that 58% of the value of cross-border trade is in services. Therefore it is important to ask, “how would a hard border affect employees getting to work?”
Public sector contracting bodies and service providers are an important market for SMEs, and ITI “want to keep it open” to SMEs across the island. Ms Hearty provided a note of hopefulness by the assertation that EU Law is at the heart of UK Procurement law, and vice versa. “This gives us a good footing going forward, because the laws are built with the principles of transparency and fairness in place”. The UK, she commented, will likely want to have access to the EU procurement market, a fact that should help assuage the fear.
ITI currently have a Brexit advisory service. There is also a voucher of up to £2000 available to suppliers that can be used to get advice from experts on the panel/project. They also maintain a list of tariffs that could be put in place should we get a hard Brexit and border checks congruent to that.
Going forward, ITI plan to work to break down barriers and make the public contracting authority market more visible where cross-border trade is concerned. They also play a part in the development of best practice at a policy-level, as part of the All-Ireland Steering Committee. They play the part of “the honest broker” in their representation on the DPER SME Working Group. Through these avenues, they provide feedback from “boots-on-the-ground” SMEs to the policy developers.
On a final note to contracting bodies, she noted that they should be aware of the challenges that suppliers may face going forward. She advised attendees to talk to their clients/suppliers, and work together to tackle the issue that Brexit may present.
Pauric Marray, Director of Quigg Golden, followed with a presentation concerned with evaluations. He prefaced his presentation with the affirmation that the information would be “nothing entirely new”; instead, he sought to “emphasise a few points on why evaluation is very important”. To do this, he would look at what the legislation says, and what the courts say. The central idea when evaluating should be transparency; keeping documentation and having clear records of how and why you reached a decision can help greatly if a challenge is brought against the final decision.
He noted that an unexpected side-effect of the 30 day window for challenges against evaluations on tenders is that it makes it more difficult to bring challenges against them. Challenges that do come are, in Mr Marray’s words, motivated by a “strange, lethal cocktail of greed and hope”. Therefore, evaluation teams need to be thorough.
The Regulations provide no explicit detail on the “how” of evaluation. They simply speak of the things that contracting authorities should be cognisant of: the principles of procurement (transparency and proportionality), confidentiality, and conflicts of interest. The Regulations also call for authorities to verify the information given to them. In Mr Marray’s experience, a lot of public authorities have a blasé attitude to this, where they should have a “critical, probing and challenging mind-set”.
Regulation 55 creates a new reporting requirement for contractors. They must now inform unsuccessful candidates of why they have lost the tender. From the perspective of a supplier, he said, “It’s nice to know why you’ve lost, and where you can improve.”
In terms of operating in a transparent way, he said, “Don’t be afraid of notebooks, but keep them all.”
Mr Marray gave attendees this piece of advice:
“You must discipline yourself to make records of the whole process. Transparency is not something to fear.”
Planning is key. It is up to those on the procurement team to create well-structured questions that adequately address what they need tenderers to tell them. They should “think of your evaluation team when designing the bid”. Further, your contract should be written in a way that it can easily be understood by whoever would like to apply. “It shouldn’t be an optical illusion – we should all see the same thing when we look at it.”
Having documentation available should you be challenged can mitigate against claims of what Mr Marray called “Wednesbury unreasonableness”, where a “decision is so unreasonable that no reasonable person acting reasonably could have made it”.
For those on evaluation teams, you should consider what you are prepared to pay more for, and document the way you weight and consider this in any potential tender. It is important to plan how you will calculate the value of one quality point. Ask the question,
“How much can [a supplier] increase their bid by if they know they can gain one extra quality mark?”
Following on from that, it is important to have cohesion when working as a team. For example, while tenders can be reviewed individually, awarding of marks should be done together, as a group. The more you can hone the information in the evaluation room that will be provided to unsuccessful candidates, the less likely you are to have to eat your words or take things back should the evaluation be challenged.
Unlocking the potential in e-procurement, cloud computing & shared services: examination of the structural & legal issues involved
Arthur Cox Technology lawyer Pearse Ryan presented following the mid-morning break.
As someone whose area of practice lies mainly in Digital transformation and cloud computing, he discussed the possibilities of where e-procurement could go in the Irish public sector. He prefaced his discussion with the caveat:
“It’s a long road to implementation. Everything has changed and nothing has changed.”
He spoke about where procurement is going to go, in a very short period of time. For example, he foresees the implementation of a blockchain technology coming down the line in the public sector. In two years, he noted, “it could be a huge issue, and in 3-5 years it could be completely ubiquitous”.
Unfortunately, the take-up rate of new technology in the public sector is low. Currently, very little is cloud-based, which “will probably change”, especially considering the implementation and future use of PEPPOL technology. This move towards cloud computing is wide-spread, and will soon be largely the only option available. “Large vendors do not want to sell you in-house solutions,” Pearse commented, “cloud is the way forward.” Therefore, going forward, it is important that the public sector considers, and plans for, the implementation of newer tech.
When dealing with technological transformation of systems, it is valuable to consider whether or not the Directives and the SI are adequate to deal with the challenges. This is something the Commission are looking at. New research is being done on the opportunity and feasibility of an EU blockchain infrastructure. If this study is successful and the findings are integrated into the Digital Single Market strategy, then it is important to look at how contracting authorities could even go about procuring a system for this.
As a case study, Mr Ryan discussed Dubai, where they are intending to go completely paperless and move all transactions to a blockchain model by 2020. Although there is a “very particular political structure” there that enables them to do things quickly, it is still a massive move. They expect a large reduction in paper consumption that will free up 35 million hours of administrative work. Mr Ryan believes this is “doable” in an Irish context. That being said, “to do it in a little over a year, especially with a multi-party system such as we have, it’s a great challenge”, he commented.
There can often be a distrust of new technology and the security of information thereafter. Breach of security is a risk, but a very minor one when all proper controls are in place. Fundamentally, the blockchain model is completely different, architecturally. It is “not the old-fashioned centralised system”, which is not used any more. The architecture is based on a particular type of language that is, at all times, encrypted. It ensures all communications are recorded. It is inherently safe.
So, then, “we have here a question of policy, as opposed to technology issue. [But] the SI is very enabling.” The greatest challenge is that Irish Public Sector procurement processes are not set up for procuring this kind of architecture.
“It’s not just about SMEs, it’s about micro-suppliers. This kind of thing would have to be custom built. There is nothing of that nature already on the market.”
Patrick Kenny of the Consumer and Competition Protection Commission spoke next. He spoke about the ways their application of technology to help do two things:
- Protect public interest, and
- Help SMEs and contracting authorities procure smarter.
The CCPC remit is to enforce consumer protection legislation and protect consumers from unfair practices. Mr Kenny noted that what they do is largely about harm, asking:
“What are the things that are causing the most harm?”
Mr Kenny said that “it’s usually a small amount of things that are causing the most harm.” Further, “bid-rigging, worldwide, is the biggest harm in procurement”. The background of the situation is simple. There was great concern that the modernisation of procurement meant SMEs couldn’t keep up. From there, issues grew. Just earlier this year, Ireland saw its first criminal conviction for bid-rigging. Aston Carpets and Flooring and Carpet Centre Contracts colluded on two major contracts in 2012 and 2013. A whistleblower reported to the CCPC and a Garda investigation followed. As a result, both fines and a suspended prison sentence were handed down. The CCPC have released a guide for SMEs on how to properly carry out consortium bidding that is in line with competition law.
By focusing on public sector bid-rigging in procurement, the CCPC aim to protect the whole economy. They focus largely on the public sector because the information is there. Through this information, they can use machine learning to spot patterns that indicate potential bid-rigging. Once the data is centralised, it’s easier to notice patterns that signify other crimes, such as corruption and fraud.
Mr Kenny’s advice was simple:
“If you’re doing something you don’t want to tell your customer, start worrying. By all means, cooperate with competitors for bids, but be open about that.”
During the Q&A session, the issue of “hunting” was raised. This is where suppliers go directly to manufacturers in order to get mass discounts if they ensure they will use that manufacturer to carry out the contract. Mr Kenny assured attendees that this, in principle, was not an issue. It would, however, become an issue, if exclusivity came into play, thus threatening competition.
Thomas Griffin gave the final presentation of the day. Mr Griffin is Head of Local Government Operational Procurement Centre at Kerry County Council, where they designed and delivered a Dynamic Purchasing System (DPS) for plant hire. The platform went live in March 2017. It sought to cater to the “particular requirement of local councils” where plant hire is concerned. It is described as a “sector-driven procurement service”.
The system was piloted using the need for road marking services by the County Council. There are less than 20 suppliers for road marking, nationally. This presented the best case to pilot the platform as it was limited.
Lessons to be learned for their process include:
- Streamlining the process and documentation.
- It is important to invest the time in design, it will pay off later.
Mr Griffin’s presentation had a heavy focus on the practicalities of the platform, which included a live demonstration of the site from the perspective of both a contracting authority and a supplier.
While this platform is not currently available for all local authorities, Mr Griffin commented that the intention of the Local Government Operational Procurement Centre was to work with the OGP in future in order to engineer a roll-out nationally.