The new Procurement Directives (2004/17/EC and 2004/18/EC) provide for the first time a framework for conducting a range of procurement activities on an electronic basis. They aim to establish rules in an open, transparent and non-discriminatory way for tendering electronically and to regulate e-communications in procurement processes.
However, the Commission perceives that the increasing use of IT technology in the procurement process introduces new risks. It considers that incorrect application of the new EU rules and discriminatory technical solutions and practices could fragment the Internal Market and increase the risk of inefficiencies and bad governance. It considers that the new EU provisions on electronic public procurement need to be implemented correctly and as quickly as possible to ensure that the public procurement market place is not distorted by the introduction of e-procurement activities.
As a result, the Commission has issued a Communication setting out an Action Plan giving details of the Commission’s views on the activities that need to be undertaken in order to achieve an active e-procurement market-place across Europe, operating on a harmonised basis.
In principle, the Commission would like to see a situation developing where any business in Europe with a PC and internet connection can participate in a public procurement processes that are conducted electronically. In order for this to become a reality the Commission considers that risks and problems need to be addressed in the following areas: legal environment; technical environment; administrative and organisational processes; businesses’ access to public procurement markets; knowledge-building, skills and awareness.
In setting out an Action Plan for e-procurement, the Commission has identified certain objectives:
to prevent fragmentation, e.g. the emergence of new ‘e-barriers’ in EU public procurement markets
to provide the conditions for ensuring good governance and greater efficiency of public procurement markets
to work towards an international framework for electronic public procurement
The Action Plan identifies an ambitious range of activities that the Commission intends to undertake in order to promote e-procurement and sets out goals and objectives for the Member States. The extent to which the Commission and the Member States have the resources or the will to achieve these ambitions remains to be seen.
Action Plan activities
Implementing the legal framework correctly and on time
The Commission regards the early adoption of the new e-procurement provisions as necessary to avoid barriers to and distortion of competition. It is also very important for the rapid development and the effective use of e-procurement.
It considers that erroneous or divergent interpretation of the new rules could create barriers to cross-border trade and ultimately fragment the market. As a result, the Commission aims to monitor transposition closely and encourage appropriate exchanges with the Member States at the draft stage in order to facilitate understanding of the legal framework.
The activities that the Commission has identified are:
1st quarter 2005 - The Commission to issue an interpretative document on the new rules on electronic public procurement
1st quarter 2005 - The Commission to make online training demonstrators available, allowing contracting authorities and economic operators to familiarise with the new e-procurement provisions and tools
2005 - The Commission to provide appropriate assistance to Member States in transposing the new legal provisions
Completing the legal framework by the appropriate basic tools
The Commission will adopt a Regulation in early 2005 on standard forms. This will adjust the existing forms to the elements introduced by the new Directives, e.g. e-auctions, dynamic purchasing systems and buyer profiles.
By the end of 2006, the Commission will propose a new generation of structured electronic standard forms to allow for the electronic collection, processing and dissemination of all procurement notices covered by the Directives. This new generation should facilitate the automatic production of summaries in all official EU languages, and should be easy to integrate into all operational e-procurement systems. The establishment of an electronic directory of EU public purchasers should also be considered.
The CPV is being revised under way to make it work in an electronic environment. A study has been launched to which Member States and interested parties will be invited to actively contribute. The Commission’s aim is to develop a world class international classification model for public procurement contracts.
The activities identified by the Commission necessary to complete the legal framework are:
In early 2005 The Commission to adopt new Standard Forms taking account of new procedures and the use of electronic means of communication
By early 2006 The Commission to presents proposals for revising the Common Procurement Vocabulary based on the results of the review study currently under way
By end 2006 the Commission to present a blueprint for a fully electronic system for the collection and publication of procurement notices on TED
By end 2007 Member States to implement fully electronic systems at national level including appropriate tools for automated collection and publishing in TED
Removing/Preventing Barriers In Carrying Public Procurement Procedures Electronically
Diversity and incompatibility of technical solutions can result in access to e-procurement systems impossible or expensive because of additional difficulties or increased costs. The Commission’s basic principles are that e-procurement systems shall be non-discriminatory, generally available and interoperable and by no means restrict economic operators’ access to the tendering procedure.
To prevent the emergence of e-barriers, the Commission considers that the functional requirements analysis already undertaken by the Commission should be taken into account when Member States draft legislation and design e-procurement systems. The Commission's work on the functional requirements analysis project will be validated by the Commission and the Member States in light of the interpretative document to be issued by the Commission in 2005.
To build up confidence in e-procurement, the Commission strongly recommends that Member States, in accordance with the Directives, introduce or maintain voluntary accreditation schemes to ascertain that e-procurement systems conform to the requirements of the Directives. A European scheme which would build on and integrate national schemes would seem desirable to ensure the smooth functioning of the Internal Market.
For the e-procurement market place to be truly open across Europe, businesses will need to be able to use electronic signatures in transactions with public authorities in a Member State other than their home country. The existing significant differences between qualified signatures as required by some Member States is a cause of concern. The interoperability problems detected despite the existence of standards, and the absence of a mature European market for this type of signatures pose a real and possibly persistent obstacle to cross-border e-procurement.
The Commission aims to find a solution based on the mutual recognition principle. At this stage, the Commission would favour a solution to test and promote solutions enabling cross-border use of qualified signatures. Any solution identified should be easy to generalise also in other fields of activity. In the meantime, the Commission recommends that Member States examine any appropriate transitional measures, e.g. confirmation in paper form for tenderers whose electronic signature does not correspond to the required one.
The activities identified by the Commission necessary to remove and prevent barriers to e-procurement are:
In 2005 Member States and the Commission to test, refine and validate the common functional requirements for e-procurement systems
Early 2006 Member States to review whether all operational e-procurement systems have been adjusted to the requirements of the Directives
By mid-2005 Member States to introduce national accreditation schemes to verify compliance of electronic tendering systems with the legal framework
By end 2005 Member States and Commission to consider through a feasibility study whether to introduce a European compliance verification scheme
In 2005-2006 the Commission to propose action to help Member States coordinate implementing the use of advanced qualified signatures to resolve interoperability problems
By 31 January 2006 Member States to apply, if required by national law, interoperable qualified electronic signatures
Detecting and addressing interoperability problems over time
The Commission intends to monitor the situation with respect to the emergence of interoperability problems in e-procurement activities and, if appropriate, consider issuing standardisation mandates.
The Commission’s activities in this field will include
By 1st quarter of 2005 completion of a gap analysis on interoperability needs for effective electronic public procurement
2005-2007 the Commission proposes to continue activities on electronic public procurement on interoperability issues and monitoring of Member States developments
2005-2007 the Commission and Member States to promote standardisation activities at European level and liaise with international standardisation bodies
Increasing efficiency of public procurement and improve governance
The Commission considers that moving public sector procurement online will require legal, institutional and organisational changes at many levels. Member States will have to decide on the type and scope of purchases to computerise, the policies to implement, the systems and tools to use and the level of administrations involved. The Commission aims to plan and monitor these efforts.
Greater efficiency will depend on the degree of automation in the field of public procurement as a whole, although a phased development of e-procurement is most likely to maximise benefits for both the public and the private sector. The Commission invites all Member States to transpose into national law all aspects of the legislative package in a comprehensive manner. Governments should, however, be able to modulate and adjust implementation of the new electronic tools and techniques over time. In particular, they should pay attention to potential excessive or abusive centralisation of purchases, inappropriate use of electronic auctions and preferences for closed purchasing systems (e.g. framework agreements) over open systems. Such practices may cancel out the benefits from increased efficiency. To optimise benefits, Member States should establish national plans to be complemented by individual plans especially for their most powerful buyers.
Increased efficiency depends also on the automation of certain types of transactions such as invoices, orders and payments. Although their development is currently at an early stage, the Commission believes that product development is likely to increase driven by standardisation and automation of financial and budget systems.
The efficiency gain activities identified by the Commission are:
By end 2005 each Member State to prepare a national plan for introducing electronic public procurement setting measurable performance targets, taking account of the specific national needs
By end 2005 each Member State to encourage preparation of similar plans by individual national buyers and to co-ordinate and monitor their implementation
In 2005-2006 the Commission to continue monitoring work on e-invoices and to continue the work on XML activities undertaken in 2003-2004 on e-invoices and e-ordering
By end 2006 Member States to set up efficient electronic systems for the collection and processing of statistical procurement data
Increasing the competitiveness of public procurement markets across the EU
The Commission considers that e-procurement activities can be more transparent than traditional procurement methods as they allow for easy and timely dissemination of contract information and reduce opportunities and incentives for fraud. They can also improve the quality of government procurement management, including monitoring and decision-making.
To generalise e-procurement, the Commission accepts that steps are taken to reduce the regulatory burden. Standardising and restructuring business documents as well as more uniform tendering documents should help automating certain purchase routines and allow both sides to concentrate on the substance of the purchase.
The use of e-catalogues is a major issue by the Commission. Their deployment is important in particular for involving small and medium-sized enterprises (SMEs) in public procurement. Current applications make it possible for enterprises to present their products and services to contracting entities at reasonable cost, time and effort. However, the lack of uniform specifications and standards for e-catalogues means that there is a risk of IT applications on the market not meeting requirements of the public sector.
The competitiveness action issues identified by the Commission are:
2nd half 2005 the Commission to consider proposing services for the electronic supply of business information and certificates in public procurement
In 2005-2006 Member States and the Commission agree on a common set of frequently required electronic certificates for use in e-procurement procedures
In 2005 the Commission proposes launching a study on e-catalogues in dynamic purchasing systems and electronic framework agreements
In 2005 benchmarking exercise to be launched on transparency, auditing and traceability of e-procurement systems
In 2006 workshops to promote exchanges on tender document standardisation
2005-2007 Member States launch and support specific awareness campaigns and training programmes targeted at SMEs at national and regional level
Working towards an international framework for electronic public procurement
While e-procurement develops worldwide, the existing international agreements do not regulate its use. Legal and technical choices in e-procurement systems may reduce procurement opportunities for EU businesses in third countries, as well as restrict access of third country suppliers to the EU market. The Commission will monitor developments to ensure that implementation of the new EU procurement regime fully respects the international obligations of the Union, while accordingly taking initiatives to adapt international disciplines. It will also follow attentively current and future international standardisation initiatives.
The Commission will also consider any adjustments necessary and the feasibility of e-procurement in the context of the EU's external aid instruments. It already co-operates closely with international bodies such as the World Bank to ensure that execution of purchases financed by these in third countries does not hinder EU suppliers. Finally, it will take all appropriate measures aimed at sharing EU experiences and achievements with developing countries.
The internationally focussed activities of the Action Plan are:
In 2005 the Commission to pursue negotiations on the review of the Government Procurement Agreement (GPA)
In 2007 the Commission takes initiatives in the GPA to progress towards utilisation of a single common nomenclature for the classification of procurement goods and services
In 2005-2007 the Commission to promote the activities of and liaises with international standardisation bodies to avoid emergence of technological interoperability barriers at international level
In 2005-2007 the Commission to cooperate with the Multilateral Development Banks network in view of co-ordinating technical assistance to third countries supporting re-organising and computerising their public procurement regimes
In 2005 the Commission to consider any adjustments necessary and the feasibility of procurement in the context of the EU's external aid instruments
The Commission will monitor overall progress in implementing the Action Plan. By the end of 2007, the Commission will review the situation and report on the results achieved. This will concentrate on the progress achieved on the legal front, the development of the necessary infrastructures for carrying procurement electronically, the use of electronic means and progress achieved in implementing the Action Plan.
The Commission will use the following indicators to monitor progress:
Indicators for the implementation of the legal framework: Proper alignment of national legislations to the legislative package, e.g. transposition of all provisions on electronic public procurement in each Member State; implementation of the directives in due time; number of legal actions for failure in transposing into national legislation; date of transposition of the directives into national legislation.
Indicators for use of electronic means in public procurement process: General development of electronic procurement across the Union, e.g. share of notices dispatched electronically by contracting authorities; share of tender documents accessible electronically; number and volume of dynamic purchasing systems; share of calls for tender using electronic auctions; share of cross-border procurement. And increased transparency and compliance in public procurement activities
Economic indicators: statistical information is already being collected on public procurement markets; this information will be progressively extended to cover electronic means such as the share of central purchasing and evolution of dynamic purchasing systems. The Action Plan envisages improvements to collection and processing of procurement data at both, national and Community level.
To implement the Action Plan on e-procurement, the Commission intends to carry out a substantial number of actions, including an Interpretative Communication on electronic public procurement and a Commission Regulation establishing standard forms for the publication of notices, providing the necessary legal support and assistance to the Member States for the transposition of the public procurement directives and monitor the application of Community law as well as organising meetings of the relevant committees
The extent to which this ambitious programme of activities can be carried through by the Commission is open to question. In any event, given the early stage of development of the public sector e-procurement market, there must be a risk that the market place will be deterred rather than incentivised by the Commission’s activities. There must be a risk that regulation at an early stage will mandate inappropriate technical solutions and hinder innovation in this field. The e-barriers problem that the Commission has identified is probably not a real issue.
It is true that, as with most field of IT development, the e-procurement marketplace will be characterised in its early stages by a multiplicity of competing service and solution offerings. These will lead interoperability and incompatibility issues in the early years of the market-place. However, these issues are probably an inevitable consequence of an innovative product development environment. If the Commission tries to ensure that there is general product compatibility at a too early stage, then product innovation will be stifled.
The IT industry is probably the most international of marketplaces and the concerns that the Commission has over local barriers are ones which may appear to be relevant at the current time but which will be resolved by the natural workings of an unregulated and international marketplace over a relatively short timescale.
If the Commission becomes actively involved on a directional basis in the e-procurement market place at an early stage there is a risk that potential entrants into this market place will be deterred. In particular, the Commission’s activities are likely to deter the SME entrants that the Commission professes to aim to encourage As a result, a particularly innovative sector of the marketplace may well be deterred rather than incentives by the Commission’s Action Plan programme.
First published in the Public Procurement Law Report.