Spurred by the report on The Future of European Competitiveness led by former Italian Prime Minister Mario Draghi, institutions across Europe are examining how to promote innovation through public procurement. On November 13-14, 2024, GW Law’s Christopher Yukins met with his colleagues in Europe about these ongoing initiatives.
Photo: C. Yukins, N. Meerschoek, W. Jannsen, E. Manunza, Elior Korem
At the University of Utrecht’s School of Law, Professor Yukins met with Professor Elisabetta Manunza and her team to discuss academic cooperation between the EU and U.S. procurement research communities. Among other things, they discussed ongoing research with NATO’s Defense Innovation Accelerator for the North Atlantic (DIANA). University of Utrecht Associate Professor Willem Janssen and Professor Marta Andhov have dealt often with issues of innovation through procurement in their award-winning podcast, BESTEK. Utrecht PhD student Nathan Meershoek has written on the challenges of innovation in defense procurement; NATO’s unit to foster innovative technology, DIANA, is one answer to those challenges.
DIANA was established by NATO to find and accelerate dual-use innovation capacity across the Alliance. DIANA provides companies with the resources, networks and guidance to develop deep technologies to solve critical defense and security challenges.
Professor Yukins also met with Stephan Corvers and his team in s-Hertogenbosch. The CORVERS consultants are legal experts in strategic public procurement, innovation and contracting. CORVERS has been asked to help assess best practices in procurement for innovation, from around the world, on behalf of the European Assistance For Innovation Procurement – EAFIP, an initiative financed by the European Commission (DG CONNECT) to provide local assistance to public procurers to promote innovation and best practices.
A few days after those meetings, the European Commission announced a series of initiatives to advance innovation in procurement. Those initiatives included a public consultation on possible updates to the EU procurement directives — including, importantly, a review of how the directives might be updated to foster innovation.
On November 14, 2024, GW Law student Justin Duffy (JD Class of 2025) presented on reverse auctions across the U.S. states. He discussed the recent federal rule endorsing electronic reverse auctions (prior webinar), and a proposed federal rule which would bar reverse auctions for construction services. Drawing from the strengths and weaknesses of those federal rules, Justin reviewed reverse auctions in various states’ procurement systems — noting which states are ahead of and behind the federal regulations, and what a provision on reverse auctions might look like in the ABA Model Procurement Code, which is undergoing an update. He was joined by Ben Koberna, who has many years of practical experience in implementing reverse auctions across the United States and the world.
The Court of Justice for the European Union issued what observers have called a “monumental” decision in Kolin InĹźaat Turizm Sanayi ve Ticaret (Case C-652/22 (Oct. 22, 2024)). Taking up an international trade question that had not been raised by the referring court, the Court of Justice ruled that vendors from third nations – from nations, such as TĂĽrkiye, that have not entered into free trade agreements with the EU addressing procurement — cannot demand equal treatment in public procurements under member states’ laws that are founded on the EU Procurement Directives.
Understanding the Kolin Decision
Jean Heilman Grier
As Jean Heilman Grier pointed out in her thoughtful commentary, the Kolin decision may pose a more serious threat to free markets than the EU’s recent measures to boost EU vendors’ access to foreign procurement markets, the International Procurement Instrument and the Foreign Subsidies Regulation. See Jean Heilman Grier, Court Restricts Access of Third Countries to EU Procurement(Nov. 2024); Pascal Friton, The EU’s Consistent Pursuit of a Resilient Economy – Still a Necessity or a Wrong Priority?, 2021 Gov’t Contracts Year in Review Briefs 7; Pascal Friton, Max Klasse & Christopher R. Yukins, The EU Foreign Subsidies Regulation: Implications for Public Procurement and Some Collateral Damage, 65 Gov. Contractor ¶ 63 (Mar. 22, 2023).
Although U.S. vendors are guaranteed access to EU markets under the World Trade Organization’s Agreement on Government Procurement (GPA), Ms. Grier noted that “the EU has incorporated various reciprocal conditions in its GPA commitments, denying the US rights to participate in procurement where the US does not offer reciprocal access, such as in the transportation sector and services purchased by subcentral [e.g., state] entities.” While U.S. firms “generally had de facto access to that procurement,” now, she warned, the Kolin decision may provide a legal basis for procuring entities (agencies) in EU member states “to deny equal treatment to US firms in procurement to which they do not have rights under the GPA.”
Albert Sanchez-Graells
Nor is it clear how, exactly, access to EU public procurement markets might be impaired. University of Bristol (UK) Professor Albert Sanchez-Graells, in his in-depth analysis of Kolin, noted that the Court of Justice opinion leaves unanswered what rights, exactly, vendors from third nations such as Türkiye or China will have in member states’ procurements. While (as he pointed out) the decision nominally leaves it to contracting agencies to decide how to handle bids from third-country vendors, the court’s decision suggests that third-country vendors should suffer less favorable treatment – but does not define what that means. See Albert Sanchez-Graells, The Court of Justice decidedly jumps on the procurement protectionism bandwagon, creating legal uncertainty along the way (C‑652/22) (Nov. 6, 2024).
Editor’s note: Marko Turudić of the University of Zagreb gave a very interesting presentation on Kolin at the ICAPP 2024 conference in Dublin on November 12, 2024.
The Draghi Report: Urging European Preferences
Mario Draghi and Ursula von der Leyen, President of the European Commission
EU Member States’ response to Kolin may be colored by a recent European Commission report led by former Italian Prime Minister Mario Draghi, The Future of EU Competitiveness(Oct. 2024). The Draghi report argued that EU member states should harness public procurement to drive European competitiveness. To do so, among other things the report urged member states to “favour competitive European defence companies” over U.S. suppliers, which dominate the European defense market. (This pronouncement, noted a CSIS report, “will make U.S. defense companies nervous.”) The Kolin decision will make it easier for EU procuring agencies to impose preferences for European companies against U.S. and third-country firms, especially where there are gaps in existing free trade agreements.
Kolin from a U.S. Perspective
Observers from the United States can understand the Kolin decision through both U.S. law and shifting U.S. trade policies.
From a legal perspective, the Kolin decision puts the European Union closer to the United States’ more absolute bar under the Trade Agreements Act of 1979, 19 U.S.C. § 2501 et seq. Under the Trade Agreements Act, vendors from foreign countries are generally barred from larger federal procurements if their nations have not entered into trade agreements with the United States. 19 U.S.C. § 2512; FAR 52.225-5; Christopher R. Yukins & Steven L. Schooner, Incrementalism: Eroding the Impediments to a Global Public Procurement Market, 38 Geo. J. Int’l L. 529, 559 (2007) (citing the “walled garden” set up by the Trade Agreements Act); Christopher R. Yukins & Allen Green, International Trade Agreements and U.S. Procurement Law, in The Contractor’s Guide to International Procurement (ABA 2018) (Erin Loraine Felix & Marques Peterson, eds.). Because the United States has joined the GPA and an array of bilateral reciprocal defense procurement agreements with EU member states (and NATO allies), under current agreements U.S. vendors should continue to have broad access to EU public procurement markets.
Policy changes on the horizon, however, may imperil U.S. access. The Kolin decision was issued just a few weeks before President Trump won a second term in the U.S. elections. The coming Trump administration may raise new protectionist barriers, and (as Ms. Grier noted) the Kolin decision suggests that where there are gaps in U.S. international trade agreements with the European Union – where, for example, U.S. vendors’ access to a European defense market is not clearly defined by a reciprocal defense procurement agreement – the EU member states, responding to fresh U.S. protectionism, may try to raise new barriers to U.S. vendors in the EU’s public procurement markets.
Conclusion — A New Path Forward
As the United States enters a new administration, the Kolin decision marks a point of reflection. Unlike the Trade Agreements Act in the United States, the European Court of Justice decision leaves open the door for third-country vendors’ participation in EU public procurement markets, though under uncertain terms. The decision also reinforces the importance of existing free trade agreements between the United States and the EU and its member states. As with other measures recently undertaken by the European Union, the decision suggests barriers to EU procurement markets are rising, and the United States will need to pay careful attention to ensure that U.S. firms continue to have access to those markets.
Chris Yukins prepared a recorded briefing for Stevens Institute of Technology’s Systems Engineering Research Center (SERC) – Acquisition Innovation Research Center (AIRC) Research Council Meeting on November 13, 2024. In the briefing, Professor Yukins reviewed some of the prior and pending AIRC projects (including on DoD bid protests and mandatory debarment) on which he has worked with David Drabkin, former Senior Procurement Executive (SPE) for the U.S. General Services Administration and chair of the Procurement Roundtable.
Around the world, governments are embracing “green procurement” – environmentally sustainable strategies to reduce global greenhouse gas emissions and other forms of pollution. A number of webinars we have held at GW Law School, including a July 2024 series on emerging international best practices, confirmed that there are many parallels between these “green procurement” strategies.
A ”catalogue” of green procurement strategies in the European Union and the United States, prepared by the European Commission and the Office of the U.S. Trade Representative, confirmed these common strategies on both sides of the Atlantic, as we discussed in a 2024 webinar; see Marta Andhov & Christopher Yukins, A Transatlantic Analysis of EU and U.S. Strategies In “Green Procurement,”66 Gov. Contractor ¶ 60 (Thomson Reuters, 2024).
The brief discussion below highlights some key potential changes to the UNCITRAL model law procurement to further these “green procurement” strategies. In many cases, the proposed changes would mean making the competitive process more flexible, to accommodate emerging approaches to environmental sustainability. A key question for drafters, therefore, would be whether existing Article 15 of the model law — which allows for changes to a solicitation — affords the flexibility necessary to make green procurement work.
For a broader review of potential updates to the UNCITRAL model procurement law — including in green public procurement — see the piece by Christopher Yukins and Caroline Nicholas (previously a member of the UNCITRAL Secretariat), The UNCITRAL Model Law on Public Procurement: Potential Next Steps
UNCITRAL Colloquium — October 2024
To address developments in green public procurement, on October 23-24, 2024, UNCITRAL held a Colloquium on the Law of International Trade for a Greener Future at the UN’s Vienna International Center.
UNCITRAL Colloquium Panel, 23 October 2024
The colloquium was called to discuss potential changes to a broad array of UNCITRAL model laws, to address environmental sustainability. Specifically with the regard to the UNCITRAL Model Law on Public Procurement, a panel chaired by Michel Nussbaumer (European Bank for Reconstruction and Development (EBRD)) and joined by Professors Carina Risvig Hamer (U. Copenhagen) (presentation), Roberto Caranta (U. Turin) (presentation) and Christopher Yukins (George Washington U.) (presentation), and by Reto Malacrida (World Trade Organization) (presentation), discussed (among other things) the green public procurement strategies addressed below.
Planning
The first strategy looks to procurement planning. Brazil has used this strategy aggressively in its efforts to implement “green procurement,” and the U.S. government in April 2024 issued a final rule calling for contracting officials to plan to procure sustainable and services “to the maximum extent practicable.”
To make it easier to incorporate “green procurement” into procurement planning, the UNCITRAL model law might be amended to:
Article 7 – Flexible Communications: Make it easier to change means of communication during the course of a procurement. Article 7 of the UNCITRAL model law calls for the means of communicating and record-keeping to be frozen during a procurement; as a practical matter, however, contracting officials may need to resort to new and unexpected means of interacting with industry and the broader community in order to accommodate new approaches to green procurement, which are rapidly evolving.
Article 10 – Flexible “Subject Matter”: The current version of the UNCITRAL model law requires, per Article 10, that the “subject matter” of the procurement – what will be bought, and how – must be fixed, inflexibly, early in the procurement process. Given the rapid advances in “green procurement” strategies, there may need to be more flexibility built into Article 10 so that vendors and others can recommend other, “greener” approaches during a procurement, even if that means amending the “subject matter” of a procurement.
Contractor Qualification
Having contractor qualification (contractor “responsibility” in the U.S. system) hinge on vendors’ “green” initiatives has long been a very controversial approach. In the U.S. system, for example, a proposed rule which would have forced vendors to chronicle their greenhouse gas emissions in order to qualify for federal contracts has been stalled due to strong congressional opposition. That opposition stems partly from the steep costs of compiling greenhouse gas emissions data, and from the uncertain impact that barring “non-compliant” contractors would have on the U.S. government’s supplier base. Because political opposition to this strategy is likely to ease as data on greenhouse gas emissions becomes more broadly and cheaply available, the UNCITRAL model law might be amended to accommodate the “contractor qualification” strategy by:
Articles 8, 9, 10 and 16 – Contractor Qualification: Taken together, the UNCITRAL model law’s relevant articles on contractor qualifications erect a fairly rigid framework. Article 8, for example, warns the procuring agency, “when first soliciting the participation of . . . contractors in the procurement proceedings, shall declare whether the participation of suppliers or contractors in the procurement proceedings is limited,” and any “such declaration may not later be altered.” These and other constraints under the model law are commendable anti-corruption measures, but may make it more difficult to accommodate emerging “green procurement” approaches. For example, rather than simply asking for a “clarification” (Article 16) of an environmentally related qualification criterion (Article 9), a bidder might recommend that other, equally powerful environmental qualifications be accepted – but Article 16 says that no “substantive change to qualification information or to a submission, including changes aimed at making an unqualified supplier or contractor qualified or an unresponsive submission responsive, shall be sought, offered or permitted.” By building more flexibility into the contractor qualification process, the UNCITRAL model law would make it easier to accommodate rapidly emerging “green procurement” approaches.
Eco-Labels
Eco-labels – typically certifications confirming that a product or service is “green,” i.e., causes low greenhouse gas emissions – are rapidly emerging as a popular “green procurement” strategy, probably because eco-labels are relatively cheap and easy to require and implement. Both the European Union (Directive 2014/24/EU, Art. 43) and the United States (FAR 52.223-23) have embraced eco-labels.
To facilitate eco-labels, the UNCITRAL model law could:
Article 10 — Nondiscriminatory Eco-labels: One common problem with eco-labels is that they tend to be localized and so discriminatory – an eco-label that is fully accepted in another market is unrecognized and so unaccepted in another. One solution would be to bring Article 10 into line with Article 43 of EU Directive 2014/24/EU, to ensure that eco-labels: (a) concern only “criteria which are linked to the subject-matter of the contract and are appropriate to define characteristics . . . that are the subject-matter of the contract; (b) “are based on objectively verifiable and non-discriminatory criteria”; (c) were “established in an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, social partners, manufacturers, distributors and non-governmental organisations,” could participate; (d) are accessible to all interested parties; and (e) were “set by a third party over which the [bidder] applying for the label cannot exercise a decisive influence.” These safeguards, many of which are drawn directly from the Court of Justice for the European Union’s decision in the “Max Havelaar” case (C-368-10), are not fully reflected in the current version of Article 10. Furthermore, because eco-labels are a form of technical specification, and as recital (71) of the EU Directive explains, “technical specifications should be drafted in such a way as to avoid artificially narrowing down competition,” and so where a solicitation references a national standard (such as an eco-label), “tenders based on equivalent arrangements should be considered by contracting authorities,” so long as the bidder can “prove equivalence with the requested label.”
Technical Evaluation
Another popular strategy is to incorporate “green procurement” considerations into the technical evaluation for award in a procurement – for example, to give a “greener” product (one that caused less greenhouse gas emissions) more “points” in the evaluation. The threshold challenge here is to ensure that there is sufficient information in the marketplace to make this kind of requirement workable. (This is why, for example, governments sometimes require vendors to compile information on their greenhouse gas emissions as a condition of qualification – see above.) If vendors’ “green” data on their products and services are available, that information could be more easily assimilated into procurements under the model law by:
Articles 10 and 58 — Flexible Technical Evaluation Criteria: The UNCITRAL model law’s Article 10 and Article 58 (its analogue in second-stage framework agreement competitions) make it relatively difficult to change technical evaluation criteria, once set forth in a solicitation. To make it easier to accommodate emerging “green procurement” approaches in a procurement, Articles 10 and 58 could be made more flexible to allow an agency, once a procurement has begun, to amend the solicitation to accommodate new green procurement strategies that emerge (for example) from exchanges with industry.
Life-Cycle Cost
One “green procurement” strategy is to take the full life-cycle costs of a product – including, potentially, its costs to the broader society due to greenhouse gas emissions – into account when assessing the product for award. To make this strategy work better under the UNCITRAL model law could be amended as follows:
Article 10 – Environmental Characteristics Clarified: Article 10 of the model law currently states that the evaluation criteria for award must include “the characteristics of the subject matter of the procurement, such as . . . the environmental characteristics of the subject matter.” The model law (and its Guide to Enactment) could be amended to make it clear that these “environmental characteristics” can be interpreted broadly to include all the direct and indirect environmental costs of a good or service, across the procurement life-cycle.
Notably, the model law’s Guide to Enactment (2012) already contemplates this broader view of environmental costs in its discussion of sustainable procurement, which in many ways anticipated the current round of reform:
Sustainable procurement is included as a declared objective of some procurement systems. UNCITRAL has noted that there is no agreed definition of sustainable procurement, but that it is generally considered to include a long-term approach to procurement policy, reflected in the consideration of the full impact of procurement on society and the environment, for example through the promotion of life-cycle costing, disposal costs and environmental impact. In this regard, sustainability in procurement can be considered to a large extent as the application of best practice as envisaged in the Model Law. The Model Law allows sustainability to be promoted through procurement via qualification criteria (under article 9, which expressly allows the procuring entity to impose environmental qualifications, and ethical and other standards that could include fair trade requirements).
The question, then, is how the model law itself should be amended to accommodate life-cycle costs as a “green procurement” strategy.
Conclusion
When the UNCITRAL model procurement law and its Guide to Enactment were concluded in 2012, “green procurement” was just emerging as a critical global imperative. As a result, “green procurement” was “not listed as a separate objective in the Preamble of the Model Law,” but instead was “addressed as an element of processes under the Model Law.” The global realities have shifted since then, and the time seems right to update the UNCITRAL model law and its guide to enactment to reflect advances in “green procurement” – and in our understanding of the impact of global warming on our lives.
Professor Daein Kim of Ewha Women’s University’s School of Law (Seoul) is visiting Washington with a team of fellow researchers from South Korea to share lessons learned on humanitarian assistance in fragile states. Professor Kim previously visited George Washington University Law School as a Visiting Scholar, and he is a long-time friend of GW Law’s Government Procurement Law Program.Â
The team’s visit is part of a broader initiative in South Korea to expand foreign aid. As an October 2024 article in the Korea Timesexplained:
The [South Korean] government is expanding financial support to developing countries, with its goal of becoming one of the world’s top 10 donors of official development assistance (ODA) before the end of President Yoon Suk Yeol’s term.
A main source of financing for international development assistance, ODA is government aid designed to promote the economic well-being and welfare of developing countries.
The areas of the country’s support range from the fight against climate change to the energy transition, agricultural transformation, education, digital technology and knowledge sharing.
Such support is being made in partnership with international organizations, such as the United Nations (U.N.) as well as Korea’s decade-long foreign assistance programs such as the Economic Development Cooperation Fund (EDCF).
Professor Kim and his team will be meeting with leaders in the procurement and aid communities in the United States to discuss how contracts, grants and cooperative agreements can be used to make foreign assistance more efficient and effective.
On October 9-10, 2024, the Indo-Pacific Economic Framework for Prosperity (IPEF) held a workshop on anti-corruption in public procurement in Kuala Lumpur, Malaysia. (Workshop materials.) The workshop was part of “Pillar IV” of the Framework, which aims to advance. The objective of Pillar IV of the Framework is to advance cooperation, stability, prosperity, development and peace within the region by focusing on “fair economy” issues, including anti-corruption. The workshop, coordinated by Annika Wythes of the UN Office of Drugs and Crime (UNODC), included representatives from many of the member nations of IPEF — Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam.
Representatives from the Open Contracting Partnership and Open Ownership (which supports public access to beneficial ownership information) also contributed to the workshop. The UNODC report on outcomes of the workshop is available here.
Background
When the White House announced the launch of the IPEF in 2022, the Biden administration said that it would seek a “fair economy,” in “commitments to enact and enforce effective tax, anti-money laundering, and anti-bribery regimes that are in line with our existing multilateral obligations.” Those efforts were reflected in the “Fair Economy Agreement” entered into by the IPEF members, which included extensive measures to fight corruption in procurement, from bid challenges to debarment (including corporate compliance and remedial measures), and from open contracting to efforts to disclose contractors’ beneficial owners.
Report on IPEF Member States’ Anti-Corruption Practices
David Drabkin and Christopher Yukins presented on October 3, 2024 at the International Public Procurement Conference 9, a regular event which was held this year in the emirate of Umm Al Quwain in the United Arab Emirates. (Because of a surge in armed hostilities in the Gulf, they presented virtually.) Messrs. Drabkin and Yukins discussed the congressionally mandated reports they did on bid protests and mandatory debarment for labor violations, through Stevens Institute of Technology’s Acquisition Innovation Research Center; those studies, they explained, are examples of how, as the OECD has noted, public procurement can be seen more broadly as a form of risk management.
South Africa’s National Research Foundation (NRF) (which coordinates with the nation’s research institutions) hosted a weeklong conference, September 3-6, 2024, to discuss South Africa’s new Public Procurement Act, Act No. 28 of 2024.
Prof. Geo Quinot
The Public Procurement Act was approved by South African President Cyril Ramaphosa in July 2024 and now must be implemented through regulations to be issued by South Africa’s Ministry of the Treasury under Section 63 of the new Act. A number of officials from the Ministry joined the Pretoria conference, which was coordinated byProfessor Geo Quinot of Stellenbosch University and Shaun Scott, a leading procurement expert in South Africa.
Shaun Scott
The conference focused on two core issues under the new law: the methods of procurement that will be adopted under the new regulations, and how specifications should be addressed. As the discussion below reflects, those topics extended to related issues such as anti-corruption measures, a new bid challenge forum, and potential issues in South Africa’s international trade policies.
Colloquium Members
The two-day intensive conference, which was attended by several hundred participants from around the world, was book-ended by academic colloquia on methods of procurement and specifications.
Methods of Procurement
How procurement competitions will be run — the “methods of procurement” — is always a key issue under any procurement law. The new South African Procurement Act’s Section 24 is largely silent on what procurement methods South Africa is to use, and leaves it to the Ministry of the Treasury to choose the appropriate methods. (Shaun Scott and his team have compiled an extraordinary list of nearly 200 procurement methods that have been developed worldwide.) The methods ultimately selected in the implementing regulations must be in keeping with Section 217 of the South African constitution, which calls for fairness, equitability, transparency, competitiveness, and cost-effectiveness in the procurement system.
One key goal in choosing appropriate procurement methods will be to encourage innovation in procurement, and Professor Christopher Yukins of George Washington University Law School presented to the conference on some of the innovative procurement approaches that have been followed in the U.S. procurement system and elsewhere.
Prof. Sope Williams
Professor Sope Williams of Stellenbosch followed up to urge, as had Professor Yukins, that South Africa consider adopting “competitive dialogues” — multilateral competitive negotiations — as a method of procurement.
The UN Commission on International Trade Law (UNCITRAL) model law has embraced competitive dialogue (known under Chapter II as “requests for proposals with dialogue”), as have the World Bank’s Procurement Framework and the European Union’s procurement directives. In the U.S. government’s system over 60 percent of procurements are conducted using competitive dialogue, and extensive guidance on competitive negotiations has been promulgated under Part 15 of the U.S. government’s Federal Acquisition Regulation.
Competitive dialogue carries more risks of corruption than traditional open tendering, because multilateral negotiations (as Chris Yukins explained in his presentation) present more opportunities for corruption than traditional tenders. (The National Research Foundation’s own “tender box” is shown at left; these types of boxes were long used by bidders for delivering sealed bids.) Unlike traditional tendering, however, competitive dialogue allows the purchasing agency to assess offerors’ diverse prices and technical solutions to obtain best value, rather than simply awarding to the lowest bidder against rigid government specifications.
Gian Luigi Albano
The new methods may be shaped, in part, by technology. Section 28 of the new law calls for South Africa’s Public Procurement Office to implement a modern online procurement system, with open data. In his presentation to the NRF conference, LUISS university’s Gian Luigi Albano (CONSIP, Italy) noted that although it may not make sense to enable all procurement methods by technology, it will be important to determine early on which methods will be supported by the new integrated platform.
Editor’s note: Gian Luigi Albano and other experts joined for a webinar on the new U.S. reverse auctions rule on Wednesday, September 11, 2024
Anti-Corruption Measures
South Africa may be able to undertake more advanced methods of procurement, such as competitive dialogue, because of the anti-corruption strategies built into its new law. As a commission headed by South Africa’s former Chief Justice Raymond Zondo noted in its recent report on “state capture,” South Africa is emerging from a period of intense corruption, much of it centered on public procurement, under the administration of former president Jacob Zuma. As Devi Pillay of the Public Affairs Research Institute (PARI) explained, quoting from the commission’s report:
Former Chief Justice Raymond Zondo
State capture in the South African context evolved as a project by which a relatively small group of actors, together with their network of collaborators inside and outside of the state, conspired systematically (criminally and in defiance of the Constitution) to redirect resources from the state for their own gain.
This was facilitated by a deliberate effort to exploit or weaken key state institutions and public entities, but also including law enforcement institutions and the intelligence services.
News Report on Work of Zondo Commission
To a large extent this occurred through strategic appointments and dismissals at public entities and a reorganisation of procurement processes.
The process involved the undermining of oversight mechanisms, and the manipulation of the public narrative in favour of those who sought to capture the state. Moreover, the subversion of the democratic process which the process of state capture entailed was not simply about extracting resources but was further geared towards securing future power and consequently shaping and gaining control of the political order (or significant parts of that order) in a manner that was necessarily opaque and intrinsically unconstitutional.
President Cyril Ramaphosa
South Africa’s new Procurement Act attempts to address those corruption risks with new anti-corruption measures in Chapter 3, such as provisions on exclusion (Section 13) and debarment (Section 15), and a new Procurement Tribunal for bid challenges (Chapter 6). More broadly, as South Africa’s President Cyril Ramaphosa said, the new law seeks to eliminate “the problem identified by Chief Justice Zondo of fragmentation in procurement laws by creating a cohesive regulatory framework.”
Specifications: Preferences and International Trade
The issue of specifications — and more broadly, how bids will be assessed — raised collateral questions under South Africa’s new procurement law.
One important issue is how procurement preferences (such as those for small enterprises, and those based on race, gender or former military service) will be addressed. Procurement preferences have been a standard part of procurement systems around the world for centuries, as Professor Christopher McCrudden pointed out in his landmark work, Buying Social Justice. Chapter 4 of South Africa’s new procurement law shifts to new preference strategies (much like those in the U.S. federal system) based not on price advantages but rather on set-asides and mandatory subcontracting plans to favor preferenced groups.
Notably, while Chapter 4 includes strong preferences for certain groups, it has almost no provisions regarding facilitating strategies to encourage participation by small and disadvantaged businesses. These companion strategies to encourage participation by small and disadvantaged business are reflected, for example, in the European Union’s “Small Business Act” (inspired by a U.S. law of the same name).
Professor Tunde Tatrai
A separate but related question, addressed by Professor Tunde Tatrai (Corvinus University of Budapest) at the conference, is how South Africa will integrate into international and regional trade agreements regarding procurement, such as the World Trade Organization’s Government Procurement Agreement. International trade agreements — for example, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership — have grown more accommodating of social preferences in covered procurement regimes. Even with its strong procurement preferences under the new law, therefore, South Africa may be able to join these international free-trade agreements in the coming years, and so increase access to its procurement markets for more international competition while opening opportunities abroad for South Africa’s exporters.
Conclusion
Although South Africa’s new Procurement Act contains some surprising gaps — as noted, the new law contains almost no details on what types of procurement methods are to be used, or on measures to facilitate small enterprises’ participation in procurement — complaining about gaps in the law may miss the broader point. As President Ramaphosa suggested, the law reflects a new direction in South Africa, a bridge away from the corruption that previously deeply tainted its procurement system. The recent conference at the National Research Foundation thus marked an important step forward in South Africa’s progress towards its future as a new nation.
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