OFT calls for information on supply of ICT to public sector
In July 2013, the Office of Fair Trading (OFT) issued a call for information on the supply of information and communications technology (ICT) goods and services to the public sector. A call for information is a precursor to a potentially lengthy investigation of the market by the UK competition authorities and possible enforcement action against individual ICT suppliers.
Having heard concerns over high levels of concentration, high margins and certain “restrictive practices and features” of the supply of ICT in the UK, the OFT wants to ensure there is in fact sufficient competition in the market. Its specific concerns regarding restrictive practices and market features relate to the costs and difficulties of switching ICT supplier due to the terms of licence agreements, lack of interoperability, and risk of disruption.
The OFT is seeking information on a number of aspects of ICT supply in the UK, including:
- the structure and operation of the public sector ICT markets;
- the identity of the key suppliers and their respective market shares;
- the barriers to entry into the market for smaller suppliers and barriers to switching suppliers;
- whether suppliers seek to limit the use and interoperability of competitor systems with their own; and
- the level of dependence public bodies have on suppliers.
Over the course of August 2013, the OFT will issue requests for information to (and hold meetings with) ICT suppliers, central and local government, other public sector organisations, trade bodies, academics, business organisations, and others across the UK.
The OFT invites additional written views and evidence to be submitted by 18 August 2013. It is also interested in hearing about appropriate comparators or overlaps with the supply of ICT to the private sector in the UK and the supply of ICT to the public sector abroad. The OFT’s findings and any proposed further action are due to be announced in October 2013.
European Commission issues communication and guide on ICT procurement best practice
On 25 June 2013, the European Commission published a communication on building open ICT systems by making better use of standards in public procurement (the communication), accompanied by a best practices guide for the procurement of standards-based ICT (the guide).
The communication identifies the main difficulties faced by public authorities when procuring ICT systems:
- as the Commission identified in its Digital Agenda for Europe, many public authorities are “locked in” to contracts with suppliers;
- public bodies lack sufficient information on their existing ICT system to transfer to another ICT supplier;
- public authorities make extensive use of the brand names of their existing ICT systems in tender documents (which restricts competition to suppliers of that brand); and
- there are high costs associated with switching supplier (since only the current provider has detailed knowledge of how the existing ICT system works).
The communication recommends the use of ICT systems based on standards rather than proprietary technology. The Commission hopes that making better use of standards will diminish “lock-in”, which will, in turn, foster the introduction of more competitive prices and/or greater innovation and reduce business continuity problems. For ICT suppliers, the Commission believes that standard-setting will lead to the creation of a level playing field.
The accompanying guide is intended to assist public authorities with making the best use of ICT standards and provides practical advice to public authorities on alleviating “lock-in”.
Best practices include:
- the development and maintenance of expertise on standards and other technical specifications relevant to each area of ICT;
- the development of a relevant ICT strategy that defines the strategic direction of an authority’s ICT components and their interfaces, with a view to coordinating ICT systems across organisations and governments;
- engaging with the market to encourage participation by a wide range of firms and examine the alternative solutions that exist;
- developing know-how from ICT strategies and expanding knowledge through engagement with the market, including the development of templates and delivery of training;
- understanding the ICT that is required – in particular, at local level; and
- evaluating the effect of using certain standards, obtaining feedback and planning ahead.
The guide also contains guidance on how to draft procurement documents, including example wording that can be used in certain tender documents.
Ultimately, the Commission intends to create a more open ICT systems environment – one which is based on standards that should help to develop more efficient public ICT services, more aggressive price competition amongst suppliers and the introduction of more innovative products.
New procurement directives agreed
On 26 June 2013, the European Parliament announced that political agreement has been reached on two new procurement directives aimed at modernising the EU public procurement rules and reducing the administrative burden on public authorities. The proposed new directives will, once formally adopted, make a number of significant changes to the procurement rules.
This EU announcement was followed by a UK Cabinet Office Procurement Policy Note (PPN) (Information Note 05/13), issued on 25 July 2013, providing a further progress update on this “modernisation” of the EU procurement rules. This PPN summarises the main changes the new directives will bring about, including:
- constraints on using the negotiated procedure will be relaxed;
- there will be a much simpler process for assessing bidders’ credentials;
- it will be possible to exclude bidders on the grounds of poor performance under previous contracts;
- the statutory minimum time limits by which suppliers must respond to advertised procurements and submit tender documents will be reduced by about a third;
- purchasers can take into account the relevant skills and experience of individuals at the award stage, where relevant;
- various improved safeguards from corruption have been inserted, including specific safeguards against conflicts of interest and illicit behaviour by candidates and bidders, such as attempts to improperly influence the purchasers’ decision-making process or collusion; and
- a cornerstone of the modernisation process will be the promotion of electronic procurement systems, the use of which is to become mandatory in less than five years.
Through changes such as these, the new directives are intended to offer greater flexibility in procurement processes in order to achieve better procurement outcomes.
The new rules are also designed to save companies a lot of initial paperwork, making the process of bidding for public contracts quicker, less costly, and less bureaucratic, and include:
- a greater emphasis on award criteria such as quality, environmental considerations, social aspects, innovative characteristics, and staff experience, while still taking into account full life-cycle costings;
- a standard “European Single Procurement Document” form in all EU languages;
- an obligation on public authorities to share information on eligible bidders from national databases – designed to make it easier for companies to bid;
- a system based on self-declarations where only the winning bidder has to provide original documents; and
- an “Innovation Partnerships” procedure enabling public authorities to call for tenders to solve a specific problem without indicating what they believe the solution to be (ie allowing for negotiation).
The Council of the European Union announced on 17 July 2013 that the agreement of this legislative reform package has now also been endorsed by the Committee of Permanent Representatives. This paves the way for formal adoption of the new directives later this year.
Implementation of these changes in the UK will require new procurement regulations but, according to the PPN, the Cabinet Office plans to introduce the new rules early. It invites stakeholders with a particular interest in any of these aspects and who wish to be involved further to contact them by 7 August 2013.