Public Procurement and Labour Rights: Towards Coherence in International Instruments of Procurement Regulation 9781782259039, 9781782259060, 9781782259053

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Public Procurement and Labour Rights This book investigates patterns of fragmentation and coherence in the ­international regulatory architecture of public procurement. In the context of the major international instruments of procurement regulation, the book studies the achievement of social and labour policies, the most controversial and problematic instrumental uses of public procurement practices. This work offers an innovative comparative approach, discussing the ways in which the different international instruments—namely the EU Directives on Public Procurement, the WTO Agreement on Government Procurement, the UNCITRAL Model Law and the World Bank’s Procurement Framework—are able to implement labour and social purposes and, at the same time, ensure a regulatory balance with the principles of efficiency and non-discrimination. Scholarly, rigorous and timely, this will be important reading for ­international trade lawyers and procurement practitioners. Studies in International Trade and Investment Law: Volume 17

Studies in International Trade and Investment Law Series Editors Tomer Broude Krista Nadakavukaren Schefer Federico Ortino This series offers a forum for publication of original and scholarly analyses of emerging and significant issues in international trade and investment law—broadly understood to include the whole of the law of the WTO, the public international law of foreign investment, the law of the EU common commercial policy and other regional trade regimes, and any legal or regulatory topic that interacts with global trade and foreign investment. The aim of the series is to produce works which will be readily accessible to trade and investment law scholars and practitioners alike. Recent titles in this series: Constitutionalism, Multilevel Trade Governance and Social Regulation Edited by Christian Joerges and Ernst-Ulrich Petersmann The Human Rights Impact of the World Trade Organisation James Harrison Developing Countries and the Multilateral Trade Regime: The Failure and Promise of the WTO’s Development Mission Donatella Alessandrini Constitutionalism, Multilevel Trade Governance and International ­Economic Law Edited by Christian Joerges and Ernst-Ulrich Petersmann The Right to Development and International Economic Law: Legal and Moral Dimensions Isabella Bunn Free Trade and Cultural Diversity in International Law Jingxia Shi Tied Aid and Development Aid Policies in the Framework of EU and WTO Law: The Imperative for Change Annamaria La Chimia Balancing Human Rights, Environmental Protection and International Trade: Lessons from the EU Experience Emily Reid

Public Procurement and Labour Rights Towards Coherence in International Instruments of Procurement Regulation

Maria Anna Corvaglia

OXFORD AND PORTLAND, OREGON 2017

Hart Publishing An imprint of Bloomsbury Publishing Plc Hart Publishing Ltd Kemp House Chawley Park Cumnor Hill Oxford OX2 9PH UK

Bloomsbury Publishing Plc 50 Bedford Square London WC1B 3DP UK

www.hartpub.co.uk www.bloomsbury.com Published in North America (US and Canada) by Hart Publishing c/o International Specialized Book Services 920 NE 58th Avenue, Suite 300 Portland, OR 97213-3786 USA www.isbs.com HART PUBLISHING, the Hart/Stag logo, BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published 2017 © Maria Anna Corvaglia 2017 Maria Anna Corvaglia has asserted her right under the Copyright, Designs and Patents Act 1988 to be identified as Author 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/, 1998–2017. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN: HB: 978-1-78225-903-9 ePDF: 978-1-78225-905-3 ePub: 978-1-78225-904-6 Library of Congress Cataloging-in-Publication Data Names: Corvaglia, Maria Anna, author. Title: Public procurement and labour rights : towards coherence in international instruments of ­procurement regulation / Maria Anna Corvaglia. Other titles: Public procurement and labor rights Description: Oxford [UK] ; Portland, Oregon : Hart Publishing, 2017.  |  Series: Studies in international trade and investment law ; v. 17  |  Includes bibliographical references and index. Identifiers: LCCN 2017021991 (print)  |  LCCN 2017022551 (ebook)  |  ISBN 9781782259046 (Epub)  |  ISBN 9781782259039 (hardback : alk. paper) Subjects: LCSH: Government purchasing—Law and legislation.  |  Letting of contracts.  |  Labor laws and legislation, International.  |  Foreign trade regulation.  |  Government purchasing—Law and ­legislation—European Union countries.  |  Letting of contracts—European Union countries. Classification: LCC K884 (ebook)  |  LCC K884 .C67 2017 (print)  |  DDC 352.5/3—dc23 LC record available at https://lccn.loc.gov/2017021991 Typeset by Compuscript Ltd, Shannon 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.

Acknowledgements The completion of this book, based on my doctoral thesis, is the result of the direct and indirect contributions of many people and institutions. I owe my gratitude to all who, at different times and across different countries, have made it possible. First and foremost, I am immensely thankful to Professor Thomas Cottier for his incessant continual encouragement and for constant inspiration since the very first stages of my academic career. His intellectual guidance and integrity will always be an example for me. I am also grateful to the two Swiss institutions that supported me and hosted me during my doctoral research period: the World Trade Institute of the University of Bern and the University of Zurich. I am particularly grateful to the colleagues and the friends I met there. I sincerely thank my PhD supervisor Professor Christine Kaufmann for her strong guidance and her constant support, as well as Professor Rolf H Weber for insightful and constructive feedback, grounded on his vast expertise in the field. I am also thankful to Professor Robert Schütze for giving me the opportunity to work as a post doctoral research fellow under his supervision at the Durham Law School. Durham University provided a stimulating academic environment for me to refine and integrate my research work. In Durham, the development of my work received funding from the European Research Council under the European Union’s Seventh Framework Programme (FP/2007-2013)—ERC Grant Agreement no. 312304 for which I am very thankful. I would also like to thank the Birmingham Law School for welcoming me at the end of this journey, offering me the necessary flexibility to complete this book without further delays. I am also hugely indebted to Miriam Frisenda for going through the very first (and very unreadable) version of this book. Finally, my gratitude goes to Sinead Moloney and her team at Hart for believing in the idea of this book and for supporting me until the very end of this project. On a personal note, friends and family have given me the essential strength and emotional support throughout the years and at every step of this long journey. I sincerely thank my friends—in particular Elisabetta, Francesco and Marta—for their unlimited patience and loyal friendship. It is beyond my limited ability to express my immense gratitude to my parents, Sara and Massimo: voi mi avete dato la forza, la serenità e la liberta di crescere ­umanamente e intellettualmente, in modo da realizzare tutti i miei sogni. Last, but not least, thanks to Jappe. Without him, this book—together with many other happy and important things in my life—would never have existed.

vi 

Contents Acknowledgements����������������������������������������������������������������������������������� v Abbreviations����������������������������������������������������������������������������������������� xiii Introduction���������������������������������������������������������������������������������������������� 1 I. General Overview����������������������������������������������������������������������� 1 II. Premise and Scope of the Study�������������������������������������������������� 2 III. Comparative Research Framework and Methodology���������������� 4 IV. Structure of the Research������������������������������������������������������������ 6 1. International Regulatory Framework of Public Procurement: From Fragmentation to Coherence����������������������������������������������������� 8 I. Introduction������������������������������������������������������������������������������� 8 II. The Challenges of Fragmentation in International Economic Law�������������������������������������������������������������������������� 10 III. Fragmentation in the International Regulatory Architecture of Public Procurement�������������������������������������������������������������� 13 A. The International Landscape of Public Procurement Regulations����������������������������������������������������������������������� 13 i. The Rise of Trade Instruments of Procurement Regulation: The WTO Government Procurement Agreement����������������������������������������������������������������� 14 ii. The Rise of Regional Trade Instruments of Procurement Regulation���������������������������������������� 16 iii. The Influence of Non-Trade Instruments of Procurement Regulation���������������������������������������� 18 B. Horizontal and Vertical Fragmentation in International Procurement Governance�������������������������������������������������� 20 i. The Vertical Integration of Multi-layered Procurement Regulations������������������������������������������� 20 ii. Horizontal Discrepancies Between International Regimes of Procurement Governance������������������������ 23 C. The Shelved Debate on the Harmonisation of the International Procurement Regulations������������������� 25

viii  Contents IV. From Fragmentation to Coherence in the International Framework of Procurement Governance���������������������������������� 26 A. The Broad Spectrum of Regulatory Objectives in Public Procurement Regulations������������������������������������ 26 i. The Fundamental Objective of Best Value for Money����������������������������������������������������������������� 29 ii. The Complementarity of Efficiency and Integrity������ 30 iii. Fairness and Equal Treatment of the Suppliers���������� 32 iv. The Multifaceted Role of Transparency in Public Procurement������������������������������������������������������������� 33 v. The Principle of Non-Discrimination and the International Instruments of Procurement Regulations��������������������������������������������������������������� 35 vi. The Controversial Role of Competition in the Procurement Markets�������������������������������������� 37 vii. Social Model of Public Procurement and Horizontal Policy Objectives������������������������������ 38 B. Mapping the Diversity of International Instruments of Public Procurement Regulation������������������������������������� 39 V. Conclusions������������������������������������������������������������������������������ 41 2. Unpacking the Use of Public Procurement to Achieve Social and Labour Policies�������������������������������������������������������������������������� 43 I. Introduction����������������������������������������������������������������������������� 43 II. Framing the Instrumental Use of Public Procurement for Social and Labour Purposes������������������������������������������������ 44 A. From Horizontal Policies to Sustainable Procurement: Definition and Categorisation������������������������������������������� 45 B. Strategic Procurement, Public Works and Employment����� 50 C. Protective Procurement Policies Against Foreign Competition���������������������������������������������������������������������� 51 D. Proactive Use of Public Procurement: Green Procurement and the Emergence of Sustainable Procurement����������������� 55 III. The Social and Labour Dimension of Public Procurement�������� 58 A. The Broad Scope of the Social Use of Public Procurement���������������������������������������������������������������������� 58 B. Functional Models of Social Justice in Public Procurement���������������������������������������������������������������������� 60 i. Group Justice Model of Public Procurement������������� 62 ii. Individual Justice and Public Procurement���������������� 63 C. The ILO Convention No 94 on ‘Labour Clauses in Public Contracts’����������������������������������������������������������� 65

Contents ix D. Justifications and Implications of the Social Use of Public Procurement������������������������������������������������������� 69 i. Principal Arguments in Support of the Inclusion of Social and Labour Policy Considerations��������������� 69 ii. Potential Adverse Effects of the Implementation of Social and Labour Policies������������������������������������� 72 IV. The Procedural Mechanisms Behind the Social and Labour Use of Public Procurement������������������������������������ 75 A. Procurement Planning and Procurement Decision-Making Process�������������������������������������������������� 77 B. Packaging and Timing of Public Orders���������������������������� 78 C. Set-Aside Procurement Schemes for Social and Labour Purposes���������������������������������������������������������������������������� 80 D. The Instrumental Use of Contract Specifications for Social and Labour Purposes����������������������������������������� 82 E. Shaping Exclusion and Qualification Criteria on Social and Labour Concerns����������������������������������������� 85 F. The Social Dimension of the Evaluation of the Tenders and of Award Criteria������������������������������������������ 87 G. Social and Labour Requirements as Contract Performance Conditions and Compliance Monitoring Management�������������������������������������������������� 90 V. Public Procurement and the Challenges of Assuring Social and Labour Policies Along the Supply Chain: The Roles of Social Certifications, Standards and Labels���������� 91 I. Conclusions������������������������������������������������������������������������������ 95 V 3. The Admissibility of the Inclusion of Social and Labour Rights Under the WTO Procurement Regulatory Framework��������������������� 98 I. Introduction to the Social Dimension of Public ­ Procurement in the WTO Regulation Framework�������������������� 98 II. The WTO Institutional Framework for Public Procurement�������102 A. The Plurilateral Regulatory Architecture of the WTO Agreement on Government Procurement��������������� 103 B. Exclusion of Public Procurement from the WTO Multilateral Regulation��������������������������������������������������� 106 C. Other WTO Multilateral Initiatives Regulate Public Procurement Activities���������������������������������������������������� 109 D. The Renegotiation of the GPA and its Future Work Programme������������������������������������������������������������ 112 III. The Objective of the GPA: The Principle of Non-Discrimination����������������������������������������������������������� 116 A. The Basic Principles of Non-Discrimination and the Prohibition of Offsets����������������������������������������� 117

x  Contents B. The Interpretation of ‘Treatment Not Less Favourable’ in Public Procurement���������������������������������� 119 C. The Differences in the Interpretation of the Non-Discrimination Principle Between the GATT and the GPA�������������������������������������������������������������������� 122 D. Social and Labour Procurement Objectives and the Principle of Non-Discrimination������������������������������������� 125 IV. The Flexibilities in the Revised GPA: Derogations and Exceptions for Discriminatory Procurement Practices������������ 128 A. The Instrumental Use of Procurement and Its Derogation from the GPA’s Coverage������������������������� 129 B. Justifications of Discriminatory Procurement Practices Under the GPA General Exceptions������������������ 133 V. The GPA Regulation of the Award Procedure������������������������� 139 A. Technical Specifications, International Standards and Reference to Social and Labour Considerations�������� 140 i. The GPA Approach to Technical Specifications�������� 141 ii. International Standards and Private Certifications�������143 B. Labour Rights as Qualification Conditions in the Selection of Suppliers������������������������������������������������������ 145 C. Establishing Social and Labour Policy Concerns in the Award Process������������������������������������������������������� 147 D. The Use of Contractual Conditions in the GPA Framework���������������������������������������������������������������������� 150 I. Conclusion����������������������������������������������������������������������������� 152 V 4. The EU Public Procurement Framework: The Internal Market and Socially Responsible Procurement��������������������������������������������������� 153 I. Introduction to the EU Public Procurement Regime and Social Rights������������������������������������������������������� 153 II. The Completion of the EU Internal Market and Fundamental Regulatory Principles��������������������������������� 155 A. The Completion of the EU Internal Market and the Principle of Non-Discrimination������������������������������������� 156 B. Regulatory Purposes of the EU Procurement Regime: The Principles of Competition and Value for Money�����������159 C. Social and Labour Objectives in The EU Procurement Regime: The Principle of Equality����������������������������������� 161 III. Internal Market Economic Freedoms and Regulatory Autonomy in Public Procurement Under the EU Treaties������������165 A. The TFEU ‘Negative Obligations’ and the Social Use of Public Procurement���������������������������������������������� 166 B. Derogations and Justifications Applicable to the Social Use of Public Procurement������������������������������������ 168

Contents xi C. Balancing Economic Freedoms with Social and Labour Rights: The Principle of Proportionality�������������� 170 D. The Relationship between Primary and Secondary EU Law in the Context of Public Procurement���������������� 172 IV. The Enforcement of Social and Labour Policies under the 2014 EU Directives on Public Procurement���������������������� 174 A. The Threefold Importance of the Social Dimension of Directive 2014/24/EU�������������������������������������������������� 176 B. The Inclusion of Social and Labour Rights at Different Stages of the Procurement Process����������������������������������� 180 i. Selection Stage and Award Criteria�������������������������� 182 ii. Grounds for Exclusion��������������������������������������������� 184 iii. Performance Clauses Conditions����������������������������� 185 iv. Exclusion of Technical Specifications����������������������� 187 C. The Limits of the Enforcement of Social and Labour Policies: The Link to the Subject Matter of the Contract�������������������������������������������������������������������������� 188 V. Conclusions���������������������������������������������������������������������������� 191 5. Social and Labour Considerations in Non-Trade International Instruments of Procurement Regulation������������������������������������������ 193 I. Non-Trade Instruments of Procurement Regulation: The UNCITRAL Model Law and the World Bank Guidelines������������������������������������������������������������������������������ 193 II. The UNCITRAL Model Law on Procurement of Goods, Construction and Services������������������������������������������������������ 194 A. The Regulatory Flexibilities Offered by the UNCITRAL Model Law��������������������������������������� 195 B. The Internal Regulatory Objectives of the UNCITRAL Model Law��������������������������������������� 198 C. The Achievement of Socio-Economic Policies and the UNCITRAL Peculiarities������������������������������������������������� 199 D. The 2011 Reformed Model Law and the Changes in the ‘Domestic Procurement’ Preferences���������������������� 201 E. Procedural Implementation of Social and Labour Policy Objectives under the 2011 UNCITRAL Model Law���������������������������������������������������������������������� 204 i. Contract Specifications Under the UNCITRAL Model Law�������������������������������������������������������������� 205 ii. The Inclusion of Social and Labour Considerations in Qualification and Exclusion Conditions�������������� 207 iii. Socio-Economic Award Criteria and Their Evaluation Procedures��������������������������������������������� 208 F. Concluding Remarks on the 2011 UNCITRAL Model Law���������������������������������������������������������������������� 211

xii  Contents III. The World Bank Procurement Framework and the Achievement of Social and Labour Concerns�������������������������� 212 A. The World Bank Public Procurement Regulatory System����������������������������������������������������������������������������� 212 B. The Revised Architecture of the World Bank Procurement Framework������������������������������������������������� 214 C. The Shift in the Regulatory Objectives and Fundamental Principles of the World Bank Procurement Framework������������������������������������������������� 216 D. The Achievement of Sustainable Procurement in the World Bank Procurement Policy and Regulations������������ 220 i. Technical Specifications and the Maximisation of Competition�������������������������������������������������������� 223 ii. Evaluation Criteria: Between Domestic Preferences and Sustainable Considerations������������������������������� 224 iii. Contract Conditions and the Introduction of Contract Performance Monitoring���������������������� 226 E. Concluding Remarks on the World Bank Procurement Framework���������������������������������������������������������������������� 227 General Conclusions����������������������������������������������������������������������������� 229 (A) Fragmentation—International Regulatory Instruments with Conflicting Regulatory Objectives���������������������������������� 230 (B) Implementation of Social and Labour Policies in the Procurement Process����������������������������������������������������� 230 (C) International Legal Framework and the Labour and Social Dimension of Public Procurement������������������������������������������ 232 Bibliography����������������������������������������������������������������������������������������� 238 Index����������������������������������������������������������������������������������������������������� 263

Abbreviations AB

Appellate Body

APEC

Asia-Pacific Economic Cooperation

CETA

Comprehensive Economic and Trade Agreement

CFREU

Charter of Fundamental Rights of the European Union

CJEU/ECJ

Court of Justice of the European Union/European Court of Justice

COMESA

Common Market for Eastern and Southern Africa

CPAR

Country Procurement Assessment Report

CSR

Corporate Social Responsibility

EBRD

European Bank for Reconstruction and Development

ESA

Environmental and Social Assessment

EU

European Union

FLO

Fairtrade Labelling Organization International

GATS

General Agreement on Trade in Services

GATT

General Agreement on Tariffs and Trade

GDP

Gross Domestic Product

GPA

Government Procurement Agreement

IBRD

International Bank for Reconstruction and Development

IDA

International Development Association

ILC

International Law Commission

ILO

International Labour Organization

IPF

Investment Project Financing

MAPS

Methodology for Assessing Procurement Systems

MFN

Most Favoured Nation

NAFTA

North American Free Trade Agreement

NGO

Non-Governmental Organisation

OECD

Organization for Economic Cooperation and Development

OPEC

Organization for the Petroleum Exporting Countries

P&PF

Policy & Procedures Framework

xiv  Abbreviations PPM

Process and Production Methods

PPSD

Project Procurement Strategy for Development

PTA

Preferential Trade Agreement

SBD

Standard Bidding Documents and Consultants’ Documents

SME

Small and Medium Enterprise

SPS

Sanitary and Phytosanitary

TBT

Technical Barriers to Trade

TEU

Treaty on the European Union

TFEU

Treaty on the Functioning of the European Union

TTIP

Transatlantic Trade and Investment Partnership

TTP

The Trans-Pacific Partnership

US

United States

UNCITRAL

United Nations Commission on International Trade Law

WTO

World Trade Organization

Introduction I.  GENERAL OVERVIEW

T

HE INSTRUMENTAL USE of public procurement has a long and complex tradition. Over time, governments have used their economic positions as dominant buyers in the market to promote different legitimate policy objectives. At first, in the 19th and 20th centuries, the management of public works and of public contracts was mainly directed at tackling problems of structural unemployment, as in the case of disabled workers in the aftermath of World Wars I and II. Later on, governments began using public procurement to enforce anti-discrimination laws and stimulate the economic integration of minorities and disadvantaged groups, as advocated by the civil rights movement in the 1960s in the United States. The use of procurement affirmative actions based on anti-discrimination law evolved over time, under the pressure of globalisation, into social systems of selective purchasing, based on justifications of gender equality, human rights and labour protection. In recent years, the practice of ‘sustainable procurement’ has contributed considerably to the promotion and the diffusion of environmentally sound goods, production methods and technologies in the public markets. Of all these procurement instrumental measures, the achievement of social and labour policies in public procurement is the most controversial and particularly problematic. The reason for this controversy is the implicit conflict with the maximisation of the best value for money: including social and labour objectives in the domestic procurement system may alter the efficiency of the process and hence it may become more expensive, complicated and non-transparent. At the same time, the inclusion of concerns of decent working conditions and issues of social equality may have significant repercussions on the fair and equal treatment of suppliers and providers, resulting in discriminatory procurement provisions and trade barriers with negative impact on the level of competition in the public markets. Looking at the international level, the implications of the inclusion of labour policy considerations in the conduct of public procurement are even more controversial. The achievement of social policies and labour standards has often been translated into forms of discrimination and unjustifiable preferences in favour of domestic suppliers, leading to significant trade distortions in market access, international competition and trade dynamics across countries. This is especially true during periods of financial crisis, as the increased importance of public spending has resulted in the adoption of

2  Introduction ‘buy national’ measures, in which the economic justifications of industrial and economic development are particularly difficult to separate from labour and employment considerations. This research mainly addresses the legal challenges arising from the inclusion of social and labour policies in the conduct of the procurement process at the international level. Based on the comparative analysis of four main international instruments of procurement regulation, this study attempts to explore the main regulatory efforts to strike a balance between the objectives of efficiency and transparency in the procurement process and the achievement of social and labour policy concerns at the international level. To introduce the study and its different levels of analysis, this introductory chapter will define first the central argument and the main scope of the research, together with the methodology adopted, and finally an overview of the structure of the work will be provided. II.  PREMISE AND SCOPE OF THE STUDY

From the end of the 19th century, social policies and labour standards have represented crucial components of the public procurement decision-making process, being articulated in diversified practices at the local, national and international level.1 Until now, due to the lack of data collection on public procurement, a mapping and a comparative study of the variety of procurement practices including social and labour concerns has not yet been fully conducted. On this background, the objective of this research is, first, to establish a framework for the comparative analysis of the relationship between the conduct of the public procurement process and the achievement of social and labour policy objectives and, second, to explore if and how this relationship is regulated at the international level. In particular, the research explores the patterns of convergence or divergence of the regulatory frameworks of the inclusion of social and labour policies in the main international instruments of procurement regulation (namely the World Trade Organization (WTO) Agreement on Government Procurement, the EU procurement Directives the EU Directives on public procurement, the UNCITRAL Model Law the UNCITRAL Model Law on Public Procurement and the World Bank’s Procurement Framework. A particular interest of this research consists in framing the controversial aspects of the achievement of social and labour policies in public procurement in terms of tension between the different regulatory objectives of

1  Christopher McCrudden, Buying Social Justice: Equality, Government Procurement and Legal Change (Oxford University Press 2007) 257.

Premise and Scope of the Study 3 national and international instruments of procurement regulation. The major assumption behind this work is that the regulation of public procurement has been developed around different regulatory systems at the domestic and international levels, based on distinguished regulatory objectives. The objectives of efficiency, non-discrimination and social equality in the procurement process, together with the principles of transparency and competition, have significantly shaped the context, the design and the architecture of each international system of procurement regulation. Therefore, the conflicts potentially arising between the procurement systems derive primordially from the difficulty of integrating and balancing the main objectives at the base of the different models of procurement regulations. In this landscape of various international regulatory instruments and different layers of procurement governance, the achievement of labour rights and social equality objectives represents an important dimension of public procurement regulation and it has the potential to raise significant conflicts with other regulatory objectives of efficiency, non-discrimination and competition, at both the national and international levels. The challenge to strike a balance between the procurement objectives of non-discrimination and transparency and the political priorities of ensuring social equality and the respect for decent working conditions is addressed under the different regulatory approaches of the major international instruments of procurement regulations. In the design of this research work, the main international instruments of procurement regulations are explained through their fundamental (procurement) regulatory objectives. For each international regulatory instrument, this work aims at underlining how their regulatory objectives are translated into the regulatory design and the procedural aspects of regulation of the conduct of the procurement process and how the inclusion of social and labour considerations is addressed within this context. The final purpose of this research work consists in translating the main procurement objectives into specific regulatory standards and benchmarks on the basis of a legal comparative analysis of the four main instruments mentioned earlier. With this purpose in mind, this study aims to contribute to the academic literature in two ways. First, by referring to the literature on the procurement regulatory objectives and on the abstract models of procurement regulation, this research explores the complexity of the achievement of social and labour policies in public procurement, integrating more theoretical contributions with practical insights and concrete policy implications. Second, by identifying the key common methods for the enforcement of social and labour policies in procurement contracts, the research also contributes to the ongoing debate among academics and practitioners on the harmonisation efforts of international procurement practices.

4  Introduction III.  COMPARATIVE RESEARCH FRAMEWORK AND METHODOLOGY

From a conceptual and theoretical point of view, the analysis draws on the broader literature on fragmentation and coherence in international economic law. In the context of the proliferation of trade and non-trade international instruments of procurement regulation, this framework offers the possibility to develop the research on two levels of analysis. On a first level, the study of the proliferation of international procurement regulations will emphasise the impact of the fragmentation of law on the international governance of public procurement, under vertical and horizontal perspectives. On a second level of analysis, the research will shift from a perspective of fragmentation to a dimension of coherence and convergence, grounded on the comparative study of the different international procurement regimes. The methodology employed in this work is essentially that of a legal analysis, with slightly different approaches in various parts of the research. Chapters one and two are primarily based on a doctrinal legal study. They examine the main regulatory objectives of procurement regulation and they explore the complexity of the achievement of social and labour policy considerations in the conduct and in the regulation of the procurement process. Moreover, in order to provide a more comprehensive understanding of the complexity of the social dimension of the instrumental use of public procurement, the analysis of chapter two is supported by interdisciplinary considerations of an economic and political nature. Public procurement is a complex regulatory instrument of economic transactions, whereby governments, when procuring goods and services in the market, play the roles of economic actor, market regulator and political authority all at once. The research conducted in chapters one and two on the main procurement principles and the procedural aspects of the inclusion of social and labour policy considerations in the procurement process, provides the research foundation for the development of the comparative legal analysis developed in the following chapters. The legal study conducted in chapters three, four and five is essentially comparative by its legal nature: based on the study of the main principles and objectives of procurement regulations as identified in the literature, the research conducts a comparative study of the four major international instruments of procurement regulation. In the study of the WTO, EU, UNCITRAL and the World Bank legal systems of procurement, the research is developed along different levels of comparison. The frameworks and the membership of these procurement systems, the main regulatory principles, and finally the procedural rules of the procurement process will be taken into consideration in the analysis. The choice of the comparative methodology is based on the assumption that there is not a more appropriate model of procurement system at the international level, and that there is no single regulatory instrument of procurement regulations suitable for all procurement needs and applicable

Comparative Research Framework and Methodology 5 under different national circumstances. As clearly affirmed by Trepte, ‘there is no single appropriate model of regulated procurement which can be applied without distinction in different contexts’.2 The constitutional, historical, administrative and cultural differences between the various national realities represent the influential variables behind the political choice of adopting a specific national procurement regulation. This is also very important at the international regulatory level. Each international procurement regulation represents a regulatory compromise between the specific economic, political and legal implications of the different national realities of their Signatory Parties and the different objectives and methods they want to achieve. For this reason, the comparative analysis will be conducted among the different international systems of procurement regulation and not with reference to a single and ideal model of procurement regulation. The choice of the comparative methodology constitutes the innovative aspect of the work from two perspectives. First, until now the academic efforts to address the legal study of the achievement of social and labour policies in public procurement have been limited to the analysis of the compliance of the inclusion of social requirements to one specific regulatory instrument of public procurement. Second, the procurement literature so far has focused on establishing a comparison of different domestic procurement systems at the national level. The international regulatory instruments of public procurement have rarely been compared, with nontrade regulatory instruments like the World Bank’s Procurement Framework never included in the comparative research. The establishment of this broad analysis allows a comprehensive comparative study on the coherence in the international regulatory instruments of public procurement to be developed which has never previously been conducted. This research aims to partially fill this gap, testing the coherence of the different instruments of procurement regulation on one specific regulatory variable the inclusion of social and labour considerations in procurement practices. Moreover, the research does not only focus on the existing coherence in the main regulatory instruments, but it also addresses the ongoing tendency of convergence, resulting from the parallel reforms of the procurement regulatory systems. In 2011, two historical reforms were achieved within the international procurement framework: the final agreement on the revised text of the WTO Government Procurement Agreement and the approval of a reformed UNCITRAL Model Law on Public Procurement.3 In 2014, the 2 Peter Trepte, Regulating Procurement: Understanding the Ends and Means of Public Procurement Regulation (Oxford University Press 2005) 59. 3  Robert D Anderson, ‘The WTO Agreement on Government Procurement: An Emerging Tool of Global Interaction and Good Governance’ [European Bank for Reconstruction and Development] (2010) 1 Law in Transition Online 32–40.

6  Introduction European Union (EU) Directives on public procurement were extensively reformed to simplify and modernise the procurement regulatory framework that has been in force in the EU Member States since April 2016. Moreover, the review process of the World Bank’s procurement policies, practices and guidelines initiated in 2012 has been only recently concluded in November 2016. The almost parallel processes of reform and renegotiation of these instruments offers the unique opportunity to observe for the first time the dynamics of regulatory convergence between these influential instruments of procurement regulation at an international level. IV.  STRUCTURE OF THE RESEARCH

The work is divided into five substantive chapters. Following this general introduction, chapter one will introduce the conceptual framework of the analysis: it will explore the fragmentation of the international government procurement, introducing the shelved academic debate of the harmonisation of the different international instruments of procurement regulation and suggesting a perspective of convergence and coherence in international procurement governance. To complete the theoretical discussion and to prepare for the comparative research, chapter one will also analyse the main regulatory objectives of public procurement and their classification in the academic literature so far. Chapter two will explore the complexity of the phenomenon of the social and labour use of public procurement in a broader context. First, it will provide an overview of the instrumental use of public procurement practices for the promotion of non-economic objectives. Differentiating between a strategic, a protective and a proactive use of public procurement practices, chapter two will focus on the social and labour dimension of these approaches to procurement contracts, exploring the different concerns of collective and individual justice often behind procurement practices. The analysis of the instrumental use of public procurement for social and labour policies will be integrated with the overview of its main political justifications and the possible economic implications. Moreover, chapter two will explore the different procurement methods for the implementation of social and labour policy objectives along the entire procurement process. More precisely, for each procurement stage, the analysis will explore the possibility of including include labour and social concerns; together with the implications of the inclusion at that specific procedural stage. After having framed the complexity of the instrumental use of procurement for labour and social purposes, chapters three, four and five will explore in more detail the international architecture of procurement regulation. These chapters will analyse, on a comparative basis, how the inclusion of social and labour policies is addressed in the main international

Structure of the Research 7 regulatory instruments of public procurement. First, the international trade instruments of procurement regulation will be analysed, followed by the study of the non-trade procurement regulatory instruments offered by the UNCITRAL and the World Bank. Chapter three will focus on the impact of the principle of non-discrimination on the achievement of social and labour objectives inside the WTO plurilateral framework of procurement regulation. Chapter four will explore how the objective of the integration of the EU single market, of which procurement is a funding pillar, allows the inclusion of social and labour concerns in the regulatory framework composed by the EU Treaty and procurement Directives. Finally, chapter five will consider the non-trade procurement regulation established by the UNCITRAL Model Law and by the World Bank’s new Procurement Framework. These two international instruments are analysed in parallel because they represent hybrid forms of procurement regulations, blurring the difference between domestic and international procurement regulation, without imposing international binding commitments. For each of the four international instruments of procurement regulation, the analysis will developed along the following pattern: each procurement regulatory framework will be first analysed under the light of its main regulatory objectives, then the research will address the different possibilities of the inclusion of social and labour policy considerations in the regulation of each procurement stage, following the analysis developed in chapter two. The general conclusions will summarise and elaborate the comparative insights reached in the different chapters, highlighting the patterns of convergence between these fundamental international instruments of procurement regulation.

1 International Regulatory Framework of Public Procurement: From Fragmentation to Coherence I. INTRODUCTION

T

HE GROWING IMPORTANCE of public procurement, from an economic and a political perspective, has led to a proliferation of legal and institutional regulatory approaches at a national, regional and international level. In the last 20 years, an increasing number of States have radically changed their domestic procurement regulations. At the same time, international and regional instruments regulating public procurement towards market liberalisation as well as the formal and informal coordination of international procurement practices have become more relevant. The proliferation and the diversification of the national and international instruments of public procurement regulation have been described as a ‘Global Revolution’.1 However, this multiplication of regulatory instruments has increased the regulatory challenges faced in the international procurement governance. In particular, the diversification of the international instruments of procurement regulation at different level of governance raises a number of unresolved questions on the fragmentation and coherence of international economic and international procurement law. The problem of fragmentation and coherence of the regulatory framework of public procurement regulation can be approached under two different perspectives. On the one hand, fragmentation of the public procurement regulations has evolved on a vertical tangent, based on the differences between the regulatory scopes of national, regional and international procurement rules. It carries the potential for uncertainty and conflict among different procurement regulations and institutional competences on different levels of national, regional and international governance. On the other 1 Sue Arrowsmith, ‘National and International Perspectives on the Regulation of Public Procurement: Harmony or Conflict?’ in Sue Arrowsmith and Arwel Davies (eds), Public ­Procurement: Global Revolution (Kluwer Law International 1998) 3–26.

Introduction 9 hand, international trade law and international procurement law have mostly expanded independently, thus creating parallel regimes of principles and regulations on a horizontal level. Autonomous development of different institutions regulating public procurement may be experienced within the multilateral trading system as well as outside, such as, for example, in international donor institutions like the World Bank. Therefore, the challenges posed by the horizontal fragmentation in the regulatory evolution of the international procurement regime become even more critical in the absence of a hierarchy of international legal sources between conflicting and overlapping norms. In this challenging regulatory context, this chapter will establish the overall framework for this research on two progressive levels of analysis. First, it will frame the architecture of international public procurement regulation in the debate regarding the fragmentation of international law. Both the horizontal and vertical fragmentation lines of the different instruments of procurement regulation will be analysed, emphasising the collisions between different layers of procurement governance and the overlapping horizontal regimes. Second, it will move from a perspective of fragmentation to a horizon of coherence. Based on a critical overview of the vertical and horizontal fragmentation lines, the discussion will focus on the inevitability of coexistence and coherence between the different international legal regimes of procurement regulation. Rather than advocating the harmonisation or centralisation of the different international instruments, this research emphasises the dynamics of convergence between important regulatory aspects of the different regulatory systems. Later, in the subsequent chapters, the coherence of the international framework of procurement regulation will be tested by looking at one controversial aspect, the inclusion of social and labour considerations in procurement practices. To establish a framework for the comparative analysis of the international architecture of public procurement regulations, this chapter will focus on the possible areas of conflict and overlap among the most important regulatory objectives behind the various procurement regulations. The horizontal fragmentation of public procurement regulatory blocks is mainly associated with current discrepancies and conflicts among the main regulatory principles underlying the different national and international regulations. Various procurement systems allocate different importance to the various regulatory objectives of economic efficiency, liberalisation of procurement markets and social equality. Based on their main regulatory objectives, the various procurement regulations differ in their drafting and shaping their regulation of the procurement process. Following the analysis of their fundamental regulatory objectives, this work will then focus on the comparative study of the major international instruments of procurement regulation, as the concrete evolution and implementation of these principal regulatory principles.

10  International Regulatory Framework of Public Procurement II.  THE CHALLENGES OF FRAGMENTATION IN INTERNATIONAL ECONOMIC LAW

The concept of fragmentation connotes the growing complexity of public international law due to the proliferation of different legal regimes—each one with its own proper legitimacy and specific jurisdiction—the lack of hierarchy and the absence of a clear functional and institutional relation between them.2 As underlined by the UN International Law Commission Study Group, ‘on the one hand, fragmentation does create the danger of conflicting and incompatible rules, principles, rule-systems and institutional practices. On the other hand, it reflects the rapid expansion of international legal activity into various new fields and the diversification of its objects and techniques’.3 In absence of an integrated international judicial authority, the process of fragmentation results in a landscape of self-contained legal regimes progressively eroding the coherence of the international legal system.4 The effects of the diversification of international legal norms and the concept of fragmentation of international law have been the subject of a profusion of academic work and the issues have been addressed from different angles.5 The legal diversity of public international law has been analysed as a substantive fragmentation of international norms along different regulatory areas (as result of the emergence of the legal research field of human rights or international economic law, for example) or interpreted along geographical and regional lines of fragmentation.6 Bilateral, regional and multilateral agreements may, in fact, result in systems of substantive conflicting regulations, also within the same legal field.7 Moreover, there is a concept of fragmentation associated with the proliferation of substantive regulations and a fragmentation of procedures, in particular referring to the fragmentation of secondary sources of international obligations dealing

2 David Kennedy, ‘The Mystery of Global Governance’ in Jeffrey L Dunoff and Joel P Trachtman (eds), Ruling the World: Constitutionalism, International Law, and Global Governance (Cambridge University Press 2009) 37–68. 3 UN International Law Commission, Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law (Report of the Study Group of the International Law Commission, 2006) para 14. 4  The notion of ‘self-contained’ regimes refers to a regulatory system of primary rules, defining the rights and obligations for the Member States and relying on mechanisms for their enforcement. The terms, first adopted in the international jurisprudence in the context of State responsibility, progressively converged with the notion of lex specialis. See Bruno Simma, ‘Self-Contained Regimes’ (1985) 16 Netherlands Yearbook of International Law 111. 5  Joost Pauwelyn, ‘Fragmentation of International Law’ in Rüdiger Wolfrum (ed), Max Planck Encyclopedia of Public International Law, vol IV (Oxford University Press 2006) para 3–4. 6  Ian Brownlie (ed), Problems Concerning the Unity of International Law, vol 1 (Giuffrè Milano 1987) 153–62. 7  Edith Brown Weiss, ‘The Rise or the Fall of International Law?’ (2000) 69 Fordham Law Review 345–72.

The Challenges of Fragmentation in International Economic Law 11 with the interpretation, reform and enforcement of international rules.8 In addition, the fragmented landscape of blurred legal systems of international rules and procedures is even more complex due to the increasing role played by non-State actors and the regulatory challenges linked to the emergence of soft-law guidelines and self-regulation.9 The major institutional and regulatory challenges of the fragmentation of international law remain essentially associated with the conflicting allocation of regulatory powers in horizontal, vertical and functional dimensions of international governance.10 On the one hand, the development of conflicting regulations and institutions at different levels of governance, from the national to the regional to the international level, implies a vertical form of fragmentation.11 On the other hand, the proliferation of different legal regimes and international organisations with specialised mandates reinforces the idea of a horizontal dimension of fragmentation.12 On the horizontal dimension, overlaps among different international regimes with conflicting legal norms are particularly sensitive issues for international organisations with conflicting mandates and identical membership, creating significant legal and political tensions between the contracting parties, such as balancing human rights standards or special environmental regimes and the World Trade Organization (WTO) requirements of compliance. Moreover, as confirmed by the International Law Commission (ILC) Analytical Study on Fragmentation, the relationship and compatibility between different horizontal legal regimes with multiform membership but which regulate the same subject matter is even more controversial, entailing significant effects on the ­coherence of the international legal system.13 The proliferation of regulatory regimes and the diversification of international legal instruments, an intrinsic characteristic of the international legal system, do not necessarily infer a negative connotation to the fragmentation of international law, particularly in the broader perspective of legal pluralism.14 However, theoretical research on the fragmentation of global

8  Joost Pauwelyn, ‘Bridging Fragmentation and Unity: International Law as a Universe of Inter-Connected Islands’ (2003) 903 Michigan Journal of International Law 903. 9  Martti Koskenniemi and Päivi Leino, ‘Fragmentation of International Law? Postmodern Anxieties’ (2002) 15 Leiden Journal of International Law 553. 10 Joel P Trachtman, The Economic Structure of International Law (Harvard University Press 2008) 196–207. 11  Panagiotis Delimatsis, ‘The Fragmentation of International Trade Law’ (2011) 45 Journal of World Trade 87. 12 Bruno Simma and Andreas L Paulus, ‘The “International Community”: Facing the Challenge of Globalization’ (1998) 9 European Journal of International Law 266. 13  UN International Law Commission, Fragmentation of International Law (2006) paras 253–57. 14  For a broad overview of the development of the legal pluralism, see Gunther Teubner and Peter Korth, ‘Two Kinds of Legal Pluralism: Collision of Transnational Regimes in the Double Fragmentation of World Society’ in Margaret Young (ed), Regime Interaction in

12  International Regulatory Framework of Public Procurement governance has progressively emphasised the necessity of limiting conflicts and ensuring coherence in the international regulatory framework.15 In the context of the fragmentation of substantive legal norms in both vertical and horizontal dimensions, different legal approaches have been developed to address the specific problems of disputes arising between different interpretations of international rules,16 between general laws and specialised legal regimes,17 or between different specialised systems of international law.18 In the international literature, however, it is highly disputed and still uncertain which criteria or regime should prevail in case of conflict of norms, aside from the existing rules of treaty interpretation.19 This is also true for the case of conflicts and tensions between legal regimes based on diverging policy objectives, resulting in conflicting norms for the same legal status.20 Until now, faced with the institutional challenge of coordinating decentralised legal regimes, different theoretical approaches have been developed to ensure coherence in international governance, outside the existing rules

International Law: Facing Fragmentation (Oxford University Press 2009). Paul Schiff Berman, ‘Global Legal Pluralism’ (2007) 80 Southern California Review 1155. The emergence of international regimes and institutions reflects, in fact, the diversity and complexity of the globalisation of the international community in a multitude of regulatory layers mutually influencing and enriching each other. Gunther Teubner and Andreas Fischer-Lescano, ‘Regime-Collisions: The Vain Search of Legal Unity in Fragmentation of Global Law’ (2004) 25 Michigan Journal of I­ nternational Law 999. 15  Thomas Cottier, ‘The Prospect of 21st Century Constitutionalism’ (2003) 7 Max Planck Yearbook of United Nations Law 261. 16  The process of treaty interpretation, following the direction established in Articles 31–33 of the Vienna Convention of the Law of Treaties, is the subject of a vast academic literature, generally identified as the principal legal instrument for the reconciliation and the integration of different legal regimes and the challenges of fragmentation. Treaty interpretation has been adopted as the fundamental principle for the multilevel consistency in the tensions between trade and labour rights in Christine Kaufmann, Globalisation and Labour Rights: The Conflict between Core Labour Rights and International Economic Law (Hart Publishing 2007) 272–95. 17  The importance of the principle of lex specialis to ensure coherence between the systems of self-contained regimes is underlined in UN International Law Commission (n 3) para 47. For the application of the approach of self-contained regimes to the field of trade law, see Bruno Simma and Dirk Pulkowski, ‘Of Planets and the Universe: Self-Contained Regimes in International Law’ (2006) 17 European Journal of International Law 483. 18  The literature on the tension between specialised fields of international law has substantially developed in the context of the WTO dispute settlement, particularly in the interpretation of the General Agreement on Tariffs and Trade (GATT) discipline in connection with environmental treaties, see Pieter J Kuyper, ‘The Law of GATT as a Special Field of International Law: Ignorance, Further Refinement or Self-Contained System of International Law?’ (1994) 25 Netherland Yearbook of International Law 227. Joel P Trachtman, ‘The Domain of WTO Dispute Resolution’ (1999) 40 Harvard International Law Journal 333. 19  Joost Pauwelyn, Conflict of Norms in Public Internatioanl Law: How WTO Law Relates to Other Rules of International Law (Cambridge University Press 2003) 158. 20  UN International Law Commission (n 3) para 168.

Fragmentation in the International Regulation of Public Procurement 13 of treaty interpretation.21 The institutional problems related to the vertical fragmentation have been addressed, for example, by the doctrine of multilayered governance, which researches the optimal allocation of regulatory powers among the different levels of governance.22 However, many facets of the institutional and regulatory challenges have emerged, in particular the horizontal fragmentation of international law, and these are still unresolved and highly questioned in the academic literature.23 III.  FRAGMENTATION IN THE INTERNATIONAL REGULATORY ARCHITECTURE OF PUBLIC PROCUREMENT

The fragmentation of international law represents an incontestable reality in the globalised international community, with important implications and still unexplored impacts on the legitimacy and the coherence of the international legal system. This work aims at exploring the impact of fragmentation on the international regulatory architecture of public procurement, an area largely neglected. A.  The International Landscape of Public Procurement Regulations Parallel to the dynamics explored in other fields of international economic law, conflicting international rules and different legal regimes can also be found in the international framework of public procurement regulation. The emergence of international trade instruments regulating public procurement, both at multilateral and at regional level, has led to growing concerns over the risk of fragmentation of international procurement governance.

21 Rolf H Weber, ‘Multilayered Governance in International Financial Regulation and Supervision’ in Thomas Cottier, John H Jackson and Rosa M Lastra (eds), International Law in Financial Regulation and Monetary Affairs (Oxford University Press 2012). In particular, the challenges associated with the emergence of new actors in international law have been addressed in the theoretical concept of polycentric regulation focused on the growing role of the different institutional stakeholders in the process of international rule-making, see Julia Black, ‘Constructing and Contesting Legitimacy and Accountability in Polycentric Regulatory Regimes’ (2008) 2 Regulation & Governance 137. Moreover, the idea of government networks has been elaborated with the aim of enhancing cooperation between disaggregated specialised institutions, see Kal R Raustiala, ‘The Architecture of International Cooperation: Transgovernmental Networks and the Future of International Law’ (2002) 43 Virginia Journal of International Law 1. 22 Thomas Cottier, ‘Multilayered Governance, Pluralism and Moral Conflict’ (2009) 16 Indiana Journal of Global Legal Studies 647. 23  Thomas Cottier and others, ‘Introduction: Fragmentation and Coherence in International Trade Regulation: Analysis and Conceptual Fundations’ in Thomas Cottier and Panagiotis Delimatsis (eds), The Prospect of International Trade Regulation. From Fragmentation to Coherence (Cambridge University Press 2011) 26–37.

14  International Regulatory Framework of Public Procurement In the last 20 years, international instruments of trade law addressing procurement-related aspects and international instruments that exclusively pertain to procurement regulation have developed independently for the most part. Thus, the coherence in international procurement governance has been gradually threatened by the uncoordinated proliferation of trade and non-trade instruments of procurement regulation. i. The Rise of Trade Instruments of Procurement Regulation: The WTO Government Procurement Agreement The liberalisation of international procurement and the promotion of free international competition in government purchases has represented the major driver for the negotiation and the conclusion of international trade agreements in the area of public procurement in the previous two decades and between a growing number of countries.24 International and regional agreements regulating procurement in order to comply with principles of free trade have progressively required governments to liberalise their procurement markets on a non-discriminatory basis, requiring clear commitments on procurement market access.25 The major instrument for procurement liberalisation at the international level is the 1994 Government Procurement Agreement (GPA), one of the two plurilateral agreements in the WTO framework, which came into force in 1996. The WTO regime of public procurement regulation was first elaborated in 1979, with the ‘Tokyo Round Code on Government Procurement’ coming into force in 1981 and amended in 1987.26 After a long negotiating process, the last comprehensive revision of the GPA text was agreed at the Ministerial Conference in December 201127 and the (2012) revised Agreement on Government Procurement formally entered into force in April 2014.28 The GPA, as a plurilateral agreement (formally Annex 4 of the Marrakech Agreement Establishing the WTO), creates legally binding commitments

24 Stephanie J Rickard, and Daniel Y Kono, ‘Think Globally, Buy Locally: International Agreements and Government Procurement’ (2014) 9 The Review of International Organizations 333. 25  Steve Woolcock, ‘Policy Diffusion in Public Procurement: The Role of Regional Trade Agreements’ (2013) 18 International Negotiations 153. 26  Annet Blank and Gabrielle Marceau, ‘The History of Government Procurement Negotiations Since 1945’ (1996) 5 Public Procurement Law Review 77. 27  Robert D Anderson, Steven L Schooner and Collin D Swan, ‘The WTO’s Revised Government Procurement Agreement—An Important Milestone Toward Greater Market Access and Transparency in Global Procurement Markets’ (2012) 54 Government Contractor 1. 28  As two-thirds of the GPA parties were required to accept the Protocol of Amendment as a condition for the entry into force of the revised GPA, this condition was met in March 2014 when Israel submitted its acceptance to the Protocol. See https://www.wto.org/english/news_ e/news14_e/gpro_07apr14_e.htm.

Fragmentation in the International Regulation of Public Procurement 15 only for the signatory parties that negotiated and adhered to the agreement. As a plurilateral agreement, its discipline is not extended to the entire membership of the WTO.29 Its limited membership is probably one of the most characteristic features of the GPA. In the WTO’s negotiating history on public procurement, in fact, the reluctant and protectionist attitude of both developing and developed countries’ governments has been a constant. The limited membership of the GPA is still very mirroring these political concerns and the fears of the high adjustment costs associated to it.30 At the moment only 47 of the WTO Members (19 parties plus the European Union (EU) on behalf of the 28 Member States) are bound by the GPA regulation, which does not include a single developing country.31 Apart from the limitation in the membership and in the coverage of the GPA,32 public procurement in the WTO regulatory framework has constantly been interpreted and disciplined as a non-tariff barrier to free trade, focusing on the elimination of discriminatory and protectionist practices, enhancing transparency and fostering international competition in procurement.33 Moreover, in order to give effect to the GPA provisions, the GPA parties are required to implement the GPA rules on award procedures in their domestic procurement regulation and provide a system of domestic challenge in case of their violation.34 In addition to the multilateral level, a considerable number of procurement agreements oriented towards trade liberalisation have largely been adopted at regional level.

29  Peter Van Den Bossche, The Law and Policy of the World Trde Organization. Text, Cases and Materials (Cambridge University Press 2005) 53–54. 30 Robert D Anderson and Kodjo Osei-Lah, ‘Forging a more global procurement market: issues concerning accessions to the Agreement on Government Procurement’ in Sue Arrowsmith and Robert D Anderson, The WTO Regime on Government Procurement Challenge and Reform (Cambridge University Press, 2011) 61–91. 31  For more information on the parties and the observers of the GPA, see https://www.wto. org/English/tratop_e/gproc_e/memobs_e.htm. 32  Only the entities listed as a signatory party in Appendix I of the GPA are covered by the Agreement. Annexes 1–3 to that Appendix specify the central and sub-central government entities scheduled by each party, which also specify the minimum threshold values above which a procurement is covered by the Agreement. Annexes 4 and 5 to Appendix I specify each party’s covered services and construction services. For an introduction to the issue of the coverage of the GPA, see Peter Trepte, ‘The Agreement on Government Procurement’ in Patrick FJ M ­ acrory, Arthur E Appleton and Michael G Plummer (eds), The World Trade Organization: Legal, Economic and Political Analysis, vol 1 (Springer 2005) 1138–41. 33 Bernard M Hoekman and Petros Mavroidis, ‘Basic Elements of the Agreement on Government Procurement’ in Bernard Hoekman and Petros Mavroidis (eds), Law and P ­ olicy in Public Purchasing: The WTO Agreement on Government Procurement (University of ­Michigan Press 1997) 13. 34  Sue Arrowsmith, ‘The Character and Role of National Challenge Procedures under the Government Procurement Agreement’ (2002) 11 Public Procurement Law Review 235–57.

16  International Regulatory Framework of Public Procurement ii. The Rise of Regional Trade Instruments of Procurement Regulation Public procurement represents an important chapter of many regional and preferential trade agreements (PTAs). The EU’s procurement regulation is probably the most significant and most advanced regional system of procurement regulation and liberalisation.35 Outside Europe, other relevant regional procurement regulations have been achieved, increasing the level of regional fragmentation. The North American Free Trade Agreement (NAFTA) regime on procurement regulation in Chapter 10,36 and the Common Market for Eastern and Southern Africa (COMESA) procurement directives37 represent the more articulated approach to regional procurement regulation apart from the European case, while the non-binding principles of the Asia-Pacific Economic Cooperation Forum (APEC) create an innovative non-binding regulatory platform for the harmonisation of procurement regulation in the region.38 Parallel to the broader institutional dynamics of regional integration, an increasing number of preferential trade agreements include provisions that explicitly address the regulation of procurement activities among their contracting parties.39 More recently, public procurement has also been included in the negotiating agendas of mega-regional negotiations, namely in the case of the EU–Canada Comprehensive Economic and Trade Agreement (CETA), the Trans-Pacific Partnership (TTP) and the Transatlantic Trade and Investment Partnership (TTIP).40 In relation to their main regulatory objectives behind these agreements, PTAs aim at opening international procurement markets, increasing transparency and competitiveness in national procurement regulations and ensuring market access commitments. The landscape of procurement regulations

35 In this respect, it is worth noticing that the EU funding treaties and the EU enlargement treaties do not contain public procurement provisions: the EU regulation of public procurement—probably the most advanced and coherent regional regulatory framework of procurement—has been developed only in secondary EU legislation (directives). Christopher Bovis, EU Procurement Law (Edward Elgar 2012) 11. 36  Stephen Greenwold, ‘The Government Procurement Chapter of the North American Free Trade Agreement’ (1994) 3 Public Procurement Law Review 129. 37  Stephen R Karangiz and Isaac Ndahir, ‘Public Procurement Reforms and Development in the Eastern and Southern Africa Region’ in Roberto Hérnandez Garcia (ed), International Public Procurement: A Guide to Best Practice (Globe Law and Business 2009) 113–30. 38 Sue Arrowsmith, ‘Public Procurement within the Asia-Pacific Economic Cooperation Forum’ (1996) 5 Public Procurement Law Review CS71. 39 Maria Anna Corvaglia, ‘Preferential Trade Agreements’ in Thomas Cottier and Krista Nadakavukaren Schefer (eds), Encyclopedia of International Economic Law (Edward Elgar forthcoming 2017). 40  Maria Anna Corvaglia, ‘TTIP Negotiations and Public Procurement: Internal ­Federalist Tensions and External Risks of Marginalisation’ [forthcoming] The Journal of World Investment & Trade.

Fragmentation in the International Regulation of Public Procurement 17 in PTAs varies considerably in terms of coverage, types of provisions and trade significance.41 Among all the PTAs notified to the WTO Secretariat between 2000 and 2010,42 the majority of the PTAs in force and notified to the WTO include procurement provisions: 35 per cent of these agreements contain aspirational provisions (simply encouraging further liberalisation of the procurement sector), while 28 per cent of the PTAs provide detailed chapters regulating the conduct of the procurement process. The specific types of provisions frequently contained in the procurement chapters of PTAs are: non-discrimination provisions on national treatment and on most favoured treatment; procedural rules similar to the GPA; requirements for the implementation of bid challenge procedures and dispute settlement procedures; regulation of offsets; commitments on further negotiations; and accession to the GPA.43 An important aspect in the study of the procurement provision in PTAs is their relationship with the GPA and other multilateral procurement instruments. A strict correlation can be drawn between the presence of detailed procurement chapters in PTAs and the GPA membership of the PTA parties. The revised text of the WTO GPA, the 1994 text of the Agreement, its preparatory drafts, and the negotiating offers placed by the strongest GPA parties are frequently used as a model for the negotiation of the detailed procurement provisions in PTAs involving both GPA and non-GPA ­parties. Moreover, in the case of detailed procedural provisions, PTAs tend to incorporate and explicitly refer to the procedural discipline already agreed in international procurement agreements (mainly the GPA, but also the NAFTA Procurement Chapter or APEC Principles), in order to avoid conflicting obligations. One of the more visible implications of the development of these international and regional instruments oriented towards the trade liberalisation of public procurement consists in the progressive limitation of the strategic use of procurement for political objectives and protectionist procurement practices, banning discrimination that favours the national industry in the

41  Stephanie J Rickard, ‘PTAs and Public Procurement’ in Andreas Dür and Manfred Elsig (eds), Trade Cooperation. The Purpose, Design and Effects of Preferential Trade Agreements (Cambridge University Press 2015) 275. 42  The WTO Secretariat identifies three main categories of preferential trade agreements: PTAs with no provisions on government procurement, PTAs with a single or few provisions, and PTAs with a detailed regulation of the government procurement sector. Robert D Anderson and others, ‘Government Procurement Provisions in Regional Trade Agreements: A Stepping Stone to the GPA Accession?’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenges and Reform (Cambridge University Press 2011) 561. 43  Coverage commitments are also crucial aspects of the preferential negotiations on public procurement, determining the market access commitments in terms of thresholds, covered entities and goods and construction services among the PTA parties.

18  International Regulatory Framework of Public Procurement procurement process.44 In general, non-GPA parties have achieved a comparable level of market access commitments in their PTAs, with remarkable procurement liberalisation in the case of Latin American PTAs and in services coverage commitments.45 iii. The Influence of Non-Trade Instruments of Procurement Regulation In addition to the international and regional trade agreements, there are other international instruments of procurement regulation, aiming at addressing different regulatory objectives other than the principle of non-discrimination and on the basis of non-trade objectives. The UNCITRAL Model Law on Procurement of Goods, Construction and Services represents one of the most influential of these international instruments, designed as a voluntary regulatory model, with the clear purpose of establishing good practices of public procurement regulation. Adopted in 1994 and revised in 2011, the UNCITRAL Model Law aims at guiding national governments in the reform of their procurement regulations.46 Designed as a regulatory template for reforming the domestic procurement regulations in developing countries and transition economies, the UNCITRAL Model Law recognises the use of procurement as an instrument to achieve various policy objectives, allowing certain flexibilities in particular in implementation of industrial and social policies.47 Even if it includes the objective of promoting trade through the elimination of discriminatory procurement practices, the UNCITRAL Model Law mainly aims to provide a broader guidance to governments to achieve the maximisation of the typical internal procurement objectives of value for money, efficiency, integrity and equal treatment of suppliers.48 With reference to its legal character, the Model Law constitutes a traditional non-binding instrument of soft law, leaving the parties free to conform to it entirely or partially in the reform of their national

44 Sue Arrowsmith, John Linarelli and Don Wallace, Regulating Public Procurement: National and International Perspective (Kluwer Law International 2000) 220–25. 45  Stephen Woolcock, ‘The Interaction Between Levels of Rule-Making in Public Procurement’ in Stephen Woolcock (ed), Trade and Investment Rule-Making. The Role of Regional and Bilateral Agreements (United Nations University Press 2006) 107. 46  Arrowsmith, ‘National and International Perspectives’ (2000) 10. 47 Caroline Nicholas, ‘Work of UNCITRAL on Government Procurement: Purpose, Objectives and Complementarity with the Work of the WTO’ in Sue Arrowsmith and Robert D Anderson, The WTO Regime on Government Procurement Challenge and Reform (Cambridge University Press 2011) 746–72. 48  Sue Arrowsmith, ‘Public Procurement: An Appraisal of the UNCITRAL Model Law as a Global Standard’ (2004) 53 International and Comparative Law Quarterly 17.

Fragmentation in the International Regulation of Public Procurement 19 procurement systems.49 Even if it is difficult to precisely identify its level of ­‘implementation’,50 the Model Law has been put into practice by various countries at different levels of economic development around the world. It represents the main reference in the process of reform of procurement systems in developing countries and transition economies. For this reason, it has been recognised as a fundamental ‘global standard’ for the achievement of good governance in the procurement regulation.51 Parallel to the UNCITRAL Model Law, another perspective on international procurement regulation other than trade liberalisation is offered by the procurement guidelines of international aid institutions. International development institutions, like the World Bank and the Asian Development Bank, as well as international organisations such as the Organization for Economic Cooperation and Development (OECD) and the Organization for the Petroleum Exporting Countries (OPEC), strictly supervise the recipient States regarding the procurement awards financed by their granted international loans. The efforts conducted by the European Bank for Reconstruction and Development (EBRD) provided considerable assistance to diffuse international standards and best practices of public procurement regulation in many countries, like in the case of Armenia, Montenegro, Moldova and Ukraine.52 The results of the modernisation of domestic procurement regulation in the EBRD countries have been reflected in the considerable progress of their GPA accession processes.53 Most of the international financial and aid institutions have strict procurement regulations that aim to assure effective spending in the aid-funded procurement process.54 The primary scope of these procurement guidelines consists of ensuring the effectiveness of the aid in financing the procurement projects in the recipient countries. Even if international donors’ guidelines do not often represent formal agreements and hard law instruments of procurement regulation, the influence of the guidelines is extremely significant at the domestic level, ­particularly

49  Robert R Hunja, ‘The UNCITRAL Model Law on Procurement of Goods, Contruction and Services and Its Impact on Procurement Reform’ in Sue Arrowsmith and Arwel Davies (eds), Public Procurement: Global Revolution (Kluwer Law International 1998) 97. 50  On the status of the implementation of the UNCITRAL Model Law, see www.uncitral. org/uncitral/en/uncitral_texts/procurement_infrastructure/1994Model_status.html. 51  Arrowsmith, Linarelli and Wallace, Regulating Public Procurement (2000) 253. 52 Johannes Schnitzer, ‘The WTO Agreement on Government Procurement in the EBRD Region’ (2013) Law in Transition 50, available at http://www.ebrd.com/downloads/research/ law/lit113e.pdf. 53  Christopher R Yukins and Johannes S Schnitzer, ‘GPA Accession: Lessons Learned on the Strengths and Weaknesses of the WTO Government Procurement Agreement’ (2015) 7 Trade Law & Development 89. 54  Tim Tucker, ‘A Critical Analysis of the Procurement Procedures of the World Bank’ in Sue Arrowsmith and Arwel Davies (eds), Public Procurement: Global Revolution (Kluwer Law International 1998) 139.

20  International Regulatory Framework of Public Procurement in aid-dependent countries.55 The importance of the international donors’ guidelines is two-fold. First, the requirements set for the conduct of procurement procedures in the donors’ guidelines have ­significantly contributed to the introduction of the principles of good g­ overnance, competition and transparency in many administrations within developing countries, even if not Signatory Parties of international trade agreements addressing procurement.56 Second, the guidelines represent the basis for the reform of national procurement systems: developing countries have frequently been under international pressure to reform their entire national procurement systems following the international procurement guidelines as a binding condition for receiving the international aids granted by these international organisations.57 However, the proliferation and the fragmentation of the guidelines set by different donor institutions have also resulted in serious consequences and excessive administrative burdens for many poor c­ ountries, embodying an impediment to the effective delivery of international aids.58 B. Horizontal and Vertical Fragmentation in International Procurement Governance With the growth of international and regional trade agreements, parallel to the emerging regulatory influence of procurement guidelines of international donor institutions, the international regulatory architecture of public procurement has developed in the fragmented landscape of different public procurement regimes. The regulatory diversification of these international procurement instruments has been extended under both a vertical and a horizontal perspective. i. The Vertical Integration of Multi-layered Procurement Regulations The challenges posed by the proliferation of the different international instruments of procurement regulation are also complicated by the ­question of the allocation of regulatory powers in the vertical dimension of its governance.59 55  Eche Nwogwugwu, ‘Towards the Harmonisation of International Procurement Policies and Practices’ (2005) 3 Public Procurement Law Review 131. 56  John Linarelli, ‘The WTO Agreement on Government Procurement and the UNCITRAL Model Procurement Law: A View from Outside the Region’ (2006) 1 Asian Journal of WTO & International Health Law and Policy 317. 57  Chee Khoon Chan, ‘The World Bank Development Agency, Credit Union, or Institutional Dinosaur?’ (2008) 37 International Journal of Political Economy 24. 58  OECD, ‘Harmonising Donor Practices for Effective Aid Delivery. Good Practice Papers’ (OECD 2003) available at https://www.oecd.org/dac/effectiveness/20896122.pdf. 59  Delimatsis, ‘The Fragmentation of International Trade Law’ (2011) 97–99.

Fragmentation in the International Regulation of Public Procurement 21 Public procurement regulation is traditionally belonging to national and local domains but progressively international in its regulatory scope. For this reason, the regulatory field of public procurement is potentially exposed to a significant risk of incoherence and conflicts along the different layers of governance. Each domestic procurement system falls under a complex structure of multilevel overlapping regulations. The stratification of public procurement norms not only entails a national and an international level of regulation; it also involves a regional level of procurement norms, which, as mentioned before, were extensively developed in the European and SouthAsian context. Sub-national procurement authorities are also an important component of this multilevel structure, and the articulation of this network of legal and administrative procedures increases its level of complexity in the case of federal States, as shown in the stratification of norms of local and federal procurement regimes experienced in the United States in the last 20 years.60 The importance of sub-national level of procurement governance has been rediscovered also in the context of the negotiation of procurement chapter in regional trade agreements, such as, in the case of the Canadian provinces in the context of the CETA negotiations61 Most generally, the adaptation to regional and international procurement regulations entails significant conflicts with a strong legal substratum of local procurement dynamics, particularly in developing countries, as shown in the Malaysian procurement regulation and proven by the refusal of developing countries to ratify the GPA.62 However, the vertical integration of different layers of procurement governance represents only an incidental aspect in the scope of this research for two main reasons. First, the process of integration between local-nationalinternational levels of procurement governance is addressed in different ways under the different constitutional and legal domestic systems. Until now, the coherence between different levels of procurement contracts and regulations has been ensured at the national level on the basis of national

60  David Drabkin and Khi V Thai, ‘US Federal Government Procurement: Structure, Proccess and Current Issues’ in Louise Knight and others (eds), Public Procurement, International Cases and Commentary (Routledge 2007) 89–108. See in addition Joshua Schwartz, ‘Regulation and Deregulation in Public Procurement Law Reform in the United States’ in Gustavo Piga and Khi Thai (eds), Advancing Public Procurement: Practices, Innovation and Knowledgesharing (PR Academics Press 2007) 177–201. 61  Corvaglia, ‘TTIP Negotiations and Public Procurement’ (forthcoming). 62  Since the 1970s the Malaysian procurement system has been strongly characterised by an extensive system of set-asides for Malaysian Bumiputera, deeply integrated in the administrative system of the country. Christopher McCrudden and Stuart G Gross, ‘WTO Government Procurement Rules and the Local Dynamics of Procurement Policies: A Malaysian Case Study’ (2006) 17 European Journal of International Law 151.

22  International Regulatory Framework of Public Procurement constitutional approaches or at regional level, like in the context of the harmonisation of the European procurement regulation and the implementation of the EU Directives.63 For this reason, the study of the vertical fragmentation of procurement governance between local, national and regional levels becomes extremely difficult from a broader international perspective, even if it suggests considerable potential for future lines of research. Second, the integration between regional and international levels of procurement regulations does not appear to be particularly problematic, based on the recent literature on the rise of regionalism in international procurement regulations. According to the latest research developments, the increased number of regional and preferential trade agreements does not seem lead to serious risks of conflict connected to the specific content of these different sets of procurement norms.64 The specific government procurement obligations included in these bilateral and preferential trade agreements broadly cover the same legal principles of non-discrimination included in the GPA.65 In the large majority of cases, the provisions in the PTAs are precisely based on the text of the 1994 WTO GPA or on the negotiating offers of the main GPA’s parties.66 Preferential agreements with specific procurement commitments appear to be parallel and complementary to the multilateral discipline, also preparing the countries that have not yet ratified it for a possible future accession to the GPA. Therefore, the fragmentation prompted by the development of PTAs mainly consists in a fragmentation of membership and possible jurisdiction of the different regimes, and not a fragmentation of concrete specific norms that appear to gradually converge.67

63  Laura Carpineti, Gustavo Piga and Matteo Zanza, ‘The Variety of Procurement Practices: Evidence from Public Procurement’ in Nicola Dimitri, Gustavo Piga and Giancarlo Spagnolo (eds), Handbook of Procurement (Cambridge University Press 2006) 14. 64  Corvaglia, ‘Preferential Trade Agreements’ (forthcoming). 65  In the PTAs notified to the WTO Secretariat from 2000 to date, only 28% include specific detailed provisions on government procurement; 37% of the registered PTAs contain no mention of government procurement and 35% include only basic provisions on public procurement, referring in a broad sense to procurement liberalisation as a general objective of the agreement. Anderson and others, ‘Government Procurement Provisions’ (2011). 66  In the case of RTAs signed by the EU or the US with countries that are not GPA’s parties it is common practice to base the text of the agreement on the respective negotiating offer of the EU and US in the WTO forum. Robert D Anderson and others, ‘The Relationship Between Services Trade and Government Procurement Commitments: Insights from Relevant WTO Agreements and Recent RTAs’ (World Trade Organization 2014) WTO Working Paper ERSD2014-21 https://www.wto.org/english/res_e/reser_e/ersd201421_e.pdf. 67 Arwel Davies, ‘Government Procurement’ in Simon Lester and Bryan Mercurio (eds), Bilateral and Regional Trade Agreements. Commentary and Analysis (Cambridge University Press 2011) 274.

Fragmentation in the International Regulation of Public Procurement 23 ii. Horizontal Discrepancies Between International Regimes of Procurement Governance If the vertical system of integration of the various layers of procurement governance occupies only an incidental position in this research, the risks associated to the horizontal fragmentation in the international regulatory framework of public procurement are at the core of the comparative work of this book. The international framework of public procurement appears as a disjointed landscape of independent regulatory instruments, based on conflicting regulatory objectives, parallel membership and overlapping regulatory scopes. Many fundamental and structural discrepancies between the major international instruments of public procurement regulation are still portrayed as a threat to the coherence of the international regulatory frameworks.68 This fragmented landscape creates significant challenges with regard to the institutional and regulatory coordination of the different international procurement regimes on a horizontal level. To analyse the horizontal dimension of the fragmentation of international procurement regulation, it is important to provide an essential clarification of the terminology used. The international regulatory systems emerging from the ‘global revolution’ of public procurement do not exactly correspond to the more consolidated legal notion of regimes as developed in the academic literature in the context of the fragmentation of public international law.69 Not all the procurement regulatory instruments establish regimes that can be considered as self-contained, relying on structured mechanisms of enforcement. Only the WTO trading system—that established a procurement regulation system on the basis of the GPA—could be considered to be an example of a self-contained regime, strengthened by the work of the WTO dispute settlement mechanism.70 The implementation of the UNCITRAL Model Law in the domestic procurement systems and the World Bank’s Procurement Framework do not rely on traditional mechanisms of enforcement or dispute settlement, mainly because of their nature as soft-law

68 Sue Arrowsmith and others, EU Public Procurement Law: An Introduction (EU Asia Inter University Network for Teaching and Research in Public Procurement Regulation 2010) 24. 69 Eckart Klein, ‘Self-Contained Regime’ [2006] Max Planck Encyclopedia of Public International Law 97. 70  The discussion regarding the possibility of considering the WTO as a self-contained regime has produced ambiguous results in the academic literature. For a more in-depth discussion, see Joost Pauwelyn, ‘The Role of Public International Law in the WTO: How Far Can We Go?’ (2001) 95 American Journal of International Law 538. Anja Lindroos and Michael ­Mehling, ‘Dispelling the Chimera of “Self-Contained Regimes” International Law and the WTO’ (2005) 16 European Journal of International Law 857. Bruno Simma and Dirk Pulkowski, ‘Of Planets and the Universe: Self-contained Regimes in International Law’ (2006) 17 The European Journal of International Law 483.

24  International Regulatory Framework of Public Procurement instruments. However, the lack of an internal system of dispute settlement, conceptually indispensable for the definition of ­self-contained regime, does not undermine the influence and diffusion of these regulatory instruments. The UNCITRAL Model Law is one of the most frequently adopted templates for domestic procurement reforms in developing and transition economies.71 Furthermore, if the influence of the UNCITRAL Model Law is based on the voluntary decision of the implementing countries, the enforcement of the World Bank’s Procurement Policy and Regulations is strengthened by the conditionality imposed on the Bank’s funds, and also by the review process on the loan agreement.72 Even if not self-contained regimes,73 the procurement regulations developed around the GPA, the EU Directives, the UNCITRAL Model Law and the World Bank’s Procurement Framework represent regulatory systems of legal principles, international norms and decision-making procedures around specific international actors. The emergence of these international instruments, as independent regulatory blocks, has created significant challenges for the coherence of the international framework of procurement regulation. Originally established as specialised regimes ‘tailored to the needs and the interests of each network’ but which ‘rarely take into account the outside world’,74 the international instruments of procurement regulation appear to be isolated regulatory systems, especially from the perspective of their membership. The parallel membership of the major international regulatory instruments is one of the most characteristic and problematic aspects of the horizontal fragmentation of international procurement governance.75 Apart from the case of the EU procurement framework where all the EU Member States are also signatories of the GPA, the different systems of procurement regulation rely on strongly differentiated and non-overlapping groups of signatory countries and member parties. Moreover, looking at the membership of the main international procurement instruments, the distinction between regulatory instruments adopted by developed and ­developing countries could not be more evident.76 Developing countries have deliberately

71 

Arrowsmith, ‘Public Procurement: An Appraisal’ (2004) 17. World Bank Guideline provisions are included in the conditions of the Loan Agreement between the Bank and the Borrowing countries, subject to the review process set in the Guidelines, Appendix 1. However the review process is mainly focused on the verification of the formal correctness of the documentation and not on the substantive analysis of the procurement procedure. For a more articulated analysis see Tucker, ‘A Critical Analysis’ (1998) 148. 73  Anu Bradford, ‘Regime Theory’ in Rüdiger Wolfrum (ed), Max Planck Encyclopedia of Public International Law, vol VIII (Oxford University Press 2007) 737–42. 74  UN International Law Commission (n 3) para 483. 75 Margaret A Young, Trading Fish, Saving Fish. The Interaction between Regimes in ­International Law (Cambridge University Press 2013) 243. 76 Francis Ssennoga, ‘Examining Discriminatory Procurement Practices in Developing Countries’ (2006) 6 Journal of Public Procurement 218. 72  The

Fragmentation in the International Regulation of Public Procurement 25 decided to remain completely outside the application of the WTO plurilateral regulation on public procurement, relying exclusively on the UNCITRAL’s and World Bank’s provisions for their national procurement governance. Developing countries still maintain a strong adverse attitude regarding hard law trade agreements of procurement regulation. They continue to perceive that the non-discriminatory rules set in the GPA would limit their policy spaces in allocating procurement contracts to protect domestic industrial sectors, and without a significant counterpart in terms of foreign market access gains there do not seem to be any concrete benefits in accession.77 C. The Shelved Debate on the Harmonisation of the International Procurement Regulations As a direct result of the emergence of trade instruments of procurement regulation, the question of the possible harmonisation of the different international procurement regulations has emerged in the academic literature.78 Three main theoretical questions have been developed in the debate: the identification of an appropriate degree of specialisation of the procurement procedures to harmonise, the desirability or not of a margin of discretion left to the national States, and the determination of the most appropriate instrument for the integration of procurement rules in the different national procurement systems across the globe.79 However, in the academic discussion on harmonisation the crucial issue of the actual transferability of procurement regulations and best practices was highly criticised and is still unresolved.80 The divergence between the theoretical approaches to the globalisation of procurement regulations appeared to be irreconcilable, particularly with regard to the possibility and the appropriateness of the use of best practices developed in the EU or US context and applied to developing and transition economies.81 Moreover, the rigid negotiating position of developing countries refusing to engage in negotiations on hard law commitments of international procurement regulations confirmed the necessity of a degree of divergence between the

77 Anderson and others, ‘The Relationship Between Services Trade and Government Procurement Commitments’ (2014) 561. 78  Christopher R Yukins and Steven L Schooner, ‘Incrementalism: Eroding the Impediments to a Global Procurement Market’ (2007) 38 Georgetown Journal of International Law 529. 79  Arrowsmith, Linarelli and Wallace (n 44) 27–28. 80  Robert R Hunja, ‘Obstacles to Public Procurement Reform in Developing Countries’ in Sue Arrowsmith and Arwel Davies (eds), Public Procurement: Global Revolution (Kluwer Law International 1998) 13–22. 81  Joshua Schwartz, ‘On Globalization and Government Procurement’ in Sue Arrowsmith and Martin Trybus (eds), Public Procurement: The Continuing Revolution (Kluwer Law International 2003) 23.

26  International Regulatory Framework of Public Procurement different national and international solutions of procurement regulation.82 In this context, the potential of soft law instruments of procurement regulation was underlined as an innovative instrument to overcome opposing stances in negotiations and to establish a more comprehensive and inclusive multilateral discipline of public procurement.83 Unfortunately, the contribution of soft law as a more flexible approach to addressing the challenges of the international regulation of public procurement remained almost unexplored in this academic discussion. For all these reasons, the debate over the abstract harmonisation of the international regulations of procurement has been shelved and the attention of academics and practitioners has shifted to the processes of reform and a more gradual convergence of the international instruments of procurement regulation. IV.  FROM FRAGMENTATION TO COHERENCE IN THE INTERNATIONAL FRAMEWORK OF PROCUREMENT GOVERNANCE

The aim of this research is to move the analysis of the international procurement governance from fragmentation to coherence. Going further than suggesting a top-down approach to harmonisation, this work concentrates on exploring the elements of convergence84 and coherence in the international regulatory framework of public procurement. In order to underline their coherent regulatory aspects and their convergent dynamics, a comparative framework of the different instruments of procurement regulations will be established, starting from analysis of the main regulatory objectives of these international instruments. A. The Broad Spectrum of Regulatory Objectives in Public Procurement Regulations The main regulatory objectives of public procurement regulations have been extensively explored in the literature, even if the efforts of systematisation

82 Simon Evenett, ‘Multilateral Disciplines and Government Procurement’ in Philip English, Bernard Hoekman and Aaditya Mattoo (eds), Development, Trade and the WTO. A Handbook (World Bank Publication 2002) 417. 83  Lili Jiang, ‘Developing Multilateral Rules on Government Procurement: The Value of Soft Law’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 719. 84  For a more extensive discussion on the typology of the convergence of law, see Mathias Siems, Comparative Law (Cambridge University Press 2014) 233–42.

From Fragmentation to Coherence 27 have produced contrasting classifications to date.85 The principle of best value for money—the overarching principle common to all domestic and international procurement systems—has been associated with the objectives of ensuring integrity and transparency in the procurement process, together with concerns regarding the fair and non-discriminatory treatment of providers. However, these are only a partial excerpt of the various goals that can be implemented in the regulation of the award of public contracts at national, regional and international level. As variedly summarised in the literature,86 between eight and nine primary objectives of procurement systems have been identified: best value for money; integrity; transparency; efficiency; fairness and equal opportunity of the competing providers; accountability, the enforcement of socio-environmental policies, non-discrimination and competition.87 Some of these regulatory objectives support each other; some of them can create dissonance among each other in their implementation.88 Moreover, between these regulatory objectives, it is possible to identify instrumental and functional principles, crucial to the achievement of all the fundamental objectives of the different national and international procurement regulations.89 Transparency and competition have been described as important principles fundamental to the implementation of their internal procurement objectives.90 The combination between the main regulatory objectives, together with their instrumental principles, constitutes the peculiar characterisation of each procurement regulatory regime. However, not all of these objectives can be achieved simultaneously in the same procurement system, but necessarily imply a trade-off

85  John Wm Whelan and Edwin C Pearson, ‘Underlying Values in Government Contracts’ (1961) 10 Journal of Public Law 298. Peter Trepte, Regulating Procurement: Understanding the Ends and Means of Public Procurement Regulation (Oxford University Press 2005) 63. Arrowsmith, Linarelli and Wallace (n 44) 70. 86  Sue Arrowsmith, ‘Public Procurement. Basic Concepts and the Coverage of Procurement Rules’ [2011] Public Procurement Regulation: an Introduction 1. 87  The principle of competition is the most controversial of the main objectives in public procurement systems, in particularly in the context of the EU procurement regulatory framework. For an in-depth analysis, see Albert Sanchez Graells, Public Procurement and the EU Competition Rules (2nd rev edn, Hart Publishing 2015) 79–116. 88  Steven L Schooner, ‘Desiderata: Objectives for a System of Government Contract Law’ (2002) 11 Public Procurement Law Review 103. 89  In the procurement legal doctrine there is a considerable terminological confusion between the concept of ‘objectives’, ‘means’ and ‘principles’ of public procurement. Some authors use the terms as synonyms, see Daniela Decker and Hans-Joachim Priess, ‘The WTO General Council Decision of August 1, 2004: A Note on the Decision Not to Launch Negotiations on Transparency in Government Procurement During the Doha Round’ (2005) 14 Public Procurement Law Review 1. Other authors prefer to merge the differences in nine categories of objectives, see Schooner, ‘Desiderata’ (2002) 103–20. For a comprehensive analysis of the conflicting categorisation of different procurement objectives and principles, see Pierre Bourdon, ‘Essay on the Public Procurement Law Principle(s)’ (Public Procurement Research Study Conference, Nottingham, 12–13 September 2011). 90  Arrowsmith, Linarelli and Wallace (n 44) 28–44.

28  International Regulatory Framework of Public Procurement and a proper balancing act between them.91 In the larger spectrum of the different regulatory principles, at least two major distinctions between the different objectives of public procurement regulations should be drawn. First, the goals of public procurement regulations can be described as internal and external objectives. On the one hand, the goals of achieving efficiency, transparency, accountability and value for money can be described as internal objectives of public procurement. They specifically focus on the conduct of the procurement process itself, the selection process and the performance of the public procurement activities.92 On the other hand, the achievement of competition and socio-environmental policies is often interpreted as an external objective, because it revolves around the external context of the public purchasing activities. These objectives concentrate on the political and economic environment in which the procurement activities are taking place, focusing on the economic and political role of the government in domestic and international market.93 It is undeniable that the goal of guaranteeing that procurement practices do not represent anticompetitive practices or non-trade barriers across borders and the implementation of sustainable policies though the award of public contracts are very different procurement objectives. However, they are both strictly related to the economic influence of the government as the major economic actor in the market, together with its political legitimacy as a legal and political institution.94 See Table 1.1. Table 1.1:  Major Procurement Objectives and Models Internal

External

Domestic

Value for money Efficiency Fairness Integrity

Socio-environmental policies Equity of suppliers Publicity Integrity

International

Transparency

Non-discrimination International competition

Second, it is also possible to distinguish between domestic and international objectives of procurement regulation. These two categories partially overlap with the internal and external differentiation of procurement goals. If value for money, integrity, efficiency and the achievement of non-economic 91  Steven L Schooner, Daniel I Gordon and Jessica L Clark, ‘Public Procurement Systems: Unpacking Stakeholder Aspirations and Expectations’ (2008) No 1133234 GWU Law School Public Law Research Paper. 92  Graells (n 87) 100. 93 Trepte, Regulating Procurement (2005) 63–129. 94  Steven L Schooner, ‘Fear of Oversight: The Fundamental Failure of Business-like Government’ (2001) 50 American University Law Review 627.

From Fragmentation to Coherence 29 policies represent the major concerns of national procurement regulations, the international regulations of government procurement have largely adopted the principles of competition, non-discrimination and transparency as primary aims of the procurement systems.95 However, it is not possible to always draw a clear distinction between domestic and international objectives, as international regulatory instruments are gradually including more reference to objectives traditionally classified as domestic, like in the case of the revised text of the GPA (as developed in more detail in chapter three). The peculiarity of each procurement regulation, at both domestic and international level, is shaped by the specific balance between its own regulatory objectives. Based on their main regulatory objectives, three models of abstract procurement regulation have also been identified in the literature.96 An economic, a social and an international regulatory model of public procurement have been constructed around the three ‘most readily identifiable policy objectives’ between the various procurement goals: economic ­efficiency; promotion of social and political objectives; and trade liberalisation. However, due to the multifaceted nature of public procurement and its complex economic and political implications, it is particularly unlikely that domestic and international procurement regimes are oriented towards the realisation of one unique objective. Public procurement is a complex activity that necessarily requires a multidimensional approach: it is primarily an economic relationship in which the identity of the purchaser is composed of multiple government actors, operating through an articulated bureaucratic apparatus and bound by international commitments.97 For these reasons, every procurement regulatory regime is naturally the result of different influences and elements belonging to different abstract models, but evolving and adapting to the specific regulatory context. i.  The Fundamental Objective of Best Value for Money The concept of ‘value for money’ or ‘best value for money’ represents the fundamental objective of all domestic procurement s­ystems, assuming a special status among the various procurement principles.98 Best value for money indicates that the goods, work and services are acquired under the best available terms regarding quantity, quality and time.99 The principle of value for money represents the principal

95 

Arrowsmith (n 1) 18–20. Trepte (n 85) 59. 97  ibid 5–8. 98 ibid. 99  Arrowsmith, Linarelli and Wallace (n 44) 28–31. 96 

30  International Regulatory Framework of Public Procurement instrument to ensure the faith of taxpayers and funding agencies in the procurement process.100 Value for money has been conceived so far as the primary goal of each procurement activity and it can be interpreted within three different frames. First, the principle of best value for money assures that the goods, services and works at the centre of the procurement process fulfil certain prerequisites, respecting the government’s needs in their purchasing activities.101 At the same time, the procurement process should be concluded on the best available terms, not only taking into consideration the lowest price but the total life cycle costs of a product.102 The principle of value for money implies also that the contractor is capable of delivering the required goods and services according to conditions agreed upon, in order to successfully complete contracts. In these three interpretations, the principle of value for money can be achieved through various legal and regulatory means, reinforced by the procurement principles of efficiency, transparency and competition.103 However, it is important to bear in mind that in the development of any concrete procurement process, there is always a trade-off between the ­ achievement of value for money and the other procurement considerations, potentially conflicting with the social and environmental dimensions.104 ii.  The Complementarity of Efficiency and Integrity The principle of efficiency is strictly linked to the nature of public procurement as an economic activity. Government procurement consists essentially in the economic transaction of the acquisition of goods and services from the market to achieve economic welfare through an efficient allocation of budgetary resources.105 The effective realisation of the entire procurement process, meeting the government’s needs and without inappropriate waste of government resources, is one of the primary internal goals of each ­procurement systems.106

100 Omer Dekel, ‘The Legal Theory of Competitive Bidding for Government Contracts’ (2008) 37 Public Contract Law Journal 237. 101 Nicola Dimitri, ‘Best Value for Money in Procurement’ (2013) 13 Journal of Public Procurement 149. 102  Arrowsmith, Linarelli and Wallace (n 44) 29. 103  Trepte (n 85) 77–78. 104 These procurement principles can be in conflict, mutually support each other in the achievement of the final procurement goal or raise margins of conflict, depending on the concrete translation in the specific national procurement system. Arrowsmith (n 1). Trepte (n 85) 40–42. 105  Arrowsmith, Linarelli and Wallace (n 44) 31. 106  Trepte (n 85) 63–66.

From Fragmentation to Coherence 31 The most crucial aspect of the design of efficiency-maximising procurement regulation is a careful balance between the benefits and the costs of the procurement procedure.107 The principle of efficiency in the procurement process is complementary to the concept of best value for money,108 mutually supporting essential elements to good governance in public procurement. Moreover, as also recognised in international instruments of procurement regulation like the OECD principles109 and it occupies a central importance in the World Bank’s Procurement Framework (for more detail see the analysis in chapter five). Around the principle of efficiency, it has been possible to construct an economic model of procurement regulation, as an abstract regulatory benchmark to achieve the objective of economic welfare, based on the idea of the ‘Pareto-efficient allocation of society’s scarce resources’ in the ­market.110 However, in practice there are many complications and difficulties associated with a strict application of the principle of efficiency in the ­complex political framework of the procurement decision-making process.111 Governments are not single identities but collections of individuals organised in hierarchical and administrative structures.112 The complex identity of the procuring agency is, in fact, shared between the governmental political body and its bureaucratic apparatus actually procuring goods and services.113 This structural complexity of the procuring authority—suitable to be analysed under the political science perspective of the Principle-Agent Theory114— has important legal implications, in particular for the principle of efficiency. One of the major implications of the complex identity of the government procuring authorities consists in the risk of bribery and corruption that may arise in the procurement process through asymmetric information

107  The award of a contract through a formal competitive tendering represents the priority, for example, in the international model of procurement regulation, because it allows choosing the best-qualified suppliers between a large numbers of suppliers. However, formal tendering is a particularly costly procurement process in terms of time and budget, and in particular conditions such as for small contracts or urgent allocation of the contract, it would be preferable to pursue brief and informal contract negotiations. Gian Luigi Albano and others, ‘Procurement Contracting Strategies’ in Nicola Dimitri, Gustavo Piga and Giancarlo Spagnolo (eds), Handbook of Procurement (Cambridge University Press 2006) 82–120. 108  Schooner, Gordon and Clark, ‘Public Procurement Systems’ (2008) 8. 109 OECD, ‘OECD Principles for Integrity in Public Procurement’ (OECD Publications 2009) 64–66. 110  Trepte (n 85) 63. 111 Jean-Jacques Laffont and Jean Tirole, ‘The Politics of Government Decision-Making: A Theory of Regulatory Capture’ (1991) 106 Quarterly Journal of Economics 1089. 112  Jean Tirole, ‘The Internal Organization of Government’ (1994) 46 Oxford Economic Papers 1. 113  Trepte (n 85) 88–89. 114  Joseph Stiglitz, ‘Principal and Agent’ in John Eatwell, Murray Milgate and Peter Newman (eds), The New Palgrave: A Dictionary of Economics (Palgrave Macmillan 2008) http://www. dictionaryofeconomics.com/article?id=pde1987_X001754, doi:10.1057/9780230226203.3330.

32  International Regulatory Framework of Public Procurement and that may considerably undermine the achievement of efficiency.115 A priority in procurement regulations oriented towards the objective of efficiency, together with the maximisation of best value for money, consists in the enhancement of integrity in the selection process and in the creation of disincentives and enforcement measures in order to curb the risk of corruption.116 Integrity becomes complementary to the objective of efficiency, as the government could not benefit from the most efficient and competitive offer if its public contracts were awarded on the basis of corruption,117 bribes, personal interest and conflicts of interests.118 Under this premise, the requirement for efficiency and integrity in the procurement regulation is often translated into strict qualification requirements imposed on the suppliers as well as the transparent and clear definition of award criteria and strict qualification conditions.119 It is also important to notice that integrity is gradually becoming a concern addressed in international procurement regulations, as the most notable example is represented by the inclusion of a specific provision aiming at avoiding conflicts of interests and prohibiting corruption in the revised GPA (Article IV:4). iii.  Fairness and Equal Treatment of the Suppliers In many procurement systems at both domestic and international level, the equal treatment of providers is often included among the objectives of public procurement regulation. Often interpreted as procedural fairness and described as an essential component of the ‘due process’ in public procurement practice, the principle of fairness addresses the core of the internal selection of the award procedure and it is often translated into strict procedural obligations.120 The obligation to achieve fairness and equality in the treatment of the suppliers often becomes functional to the support of other procurement goals, like value for money and integrity in the conduct of the procurement system. However, the role played by the concept of equal treatment as a separate objective of a functional principle remains controversial. The commitment to equality can serve as a separate independent procurement

115  For a more comprehensive analysis of the phenomenon of corruption in public procurement, see Susan Rose Ackerman, Corruption and Government: Causes, Consequences, and Reform (Cambridge University Press 1999). 116  Trepte (n 85) 70–78. 117  Transparency International, Handbook for Curbing Corruption in Public Procurement (Transparency International Publications 2006). 118 OECD, Fighting Corruption and Promoting Integrity in Public Procurement (OECD Publications 2005) Available at https://www.transparencia.org.br/docs/cwa-OECD-2005.pdf. 119 OECD (ed), Integrity in Public Procurement: Good Practice from A to Z (OECD Publications 2007) Available at http://www.oecd.org/development/effectiveness/38588964.pdf. 120  Arrowsmith, Linarelli and Wallace (n 44) 61.

From Fragmentation to Coherence 33 ­ bjective, as in the case of the US Federal Acquisition Regulation,121 or o with a subsidiary status, functional to the achievement of efficiency, ­integrity or competition in the procurement market, as suggested also in the UNCITRAL Model Law.122 The content of the principle of equal treatment in public procurement has been further defined in the context of the EU framework, which states that ‘… the equal treatment principle requires that comparable situations must not be treated differently and that different situations must not be treated in the same way, unless such treatment is objectively justified’.123 This definition naturally implies the balance of the principle of equality with other procurement principles and objectives. However, the difference between the principle of non-discrimination and the application of a treatment of fairness and equality between the suppliers is often difficult to identify.124 In the context of the trade agreements regulating procurement, the concept of equal treatment is strictly associated with the application of the principle of non-discrimination in procurement practices and it consists in an equal opportunity among all the bidders to bid and to be treated in the same way along the entire procurement process.125 iv.  The Multifaceted Role of Transparency in Public Procurement Transparency is an fundamental component in the achievement of good governance in public procurement and in the fight against corruption in many domestic and international legal systems. This is a concept that has been considerably developed in the context of global administrative law,126 and it gained relevance in other international legal fields, like financial regulation.127

121 

Dekel, ‘The Legal Theory’ (2008) 247–49. Even if in the UNCITRAL Model Law the equitable treatment of the suppliers is included in the objectives, the Guide to the Enactment to the UNCITRAL Model Law on Procurement of Goods, Constructions and Services gives a clear indication of the subsidiary status of the principle. Arrowsmith (n 48) 17. 123 Joined Cases C-21/03 and C-34/03, Fabricom v État Belge EU:C:2005:127, [2005] ECR I-1559, para 27. 124  The principle of equity of the suppliers could be in conflict with efficiency, in particular in complex cases of procurement of services and construction where negotiations between a limited number of suppliers are required. In this case, it would be suitable to exclude any providers that clearly are not capable to cope with the requirements of the process, even if with a great exercise of discretion by the procuring authorities. Arrowsmith, ‘Public Procurement. Basic Concepts’ (2011) 11. 125  Simon J Evenett and Bernard M Hoekman, ‘Government Procurement: Market Access, Transparency, and Multilateral Trade Rules’ (2005) 21 European Journal of Political Economy 163. 126 Nico Krisch and Benedict Kingsbury, ‘Introduction: Global Governance and Global Administrative Law in the International Legal Order’ (2006) 17 European Journal of International Law 1. 127 Christine Kaufmann and Rolf H Weber, ‘The Role of Transparency in Financial Regulation’ (2010) 13 Journal of International Economic Law 779. 122 

34  International Regulatory Framework of Public Procurement If the exact meaning of the concept of ‘transparency’ is not precisely defined in international economic law,128 the principle of transparency has assumed a specific ­connotation in the field of public procurement. Encompassing internal and external aspects of the procurement process, transparency can be interpreted in four different and complementary approaches.129 First, transparency consists in the public advertisement of all the ­contract opportunities available on the market and offered by the public ­administrations.130 Second, transparency refers to public accessibility for the competing suppliers and the publicity of the relevant procurement laws and administrative regulations necessary to fulfil in order to compete for the award of the public contracts.131 At the same time, the idea of transparency also constitutes the main limitation to the broad discretion available to the procuring entities, for example imposing the requirement to use formal competitive tendering procedures.132 Another final interpretation of transparency is linked to the mechanisms of monitoring and enforcing procurement rules. Every domestic and international procurement regulation contains provisions regulating the verification and enforcement of procurement rules, from the publicity of the reasons for the rejection of a bidding offer to the creation of dispute resolution mechanisms, as in the case of the GPA.133 In all these different interpretations, the principle of transparency has been traditionally employed as a means to support other procurement objectives in domestic and international procurement systems, primarily the achievement of value for money. Complementary to the principle of integrity, transparency improves accountability in the system and reduces the margin of discretion and corruption in the process. Increasing the publicity of procurement opportunities and the applicable regulations for foreign suppliers, transparency becomes a powerful instrument to attract participation and increase competition by the most efficient bidders. However, the implementation of transparent regulations implies an increase in the burden of control on the bureaucratic administration and in the costs of the entire process, in particular through a widespread use of open procedures.134 Moreover, an excessive

128 Carl Sebastian Zoellner, ‘Transparency: An Analysis of an Evolving Fundamental Principle in International Economic Law’ (2006) 27 Michigan Journal of International Law 579. 129  Arrowsmith, Linarelli and Wallace (n 44) 73–83. 130  OECD, ‘Transparency in Government Procurement: The Benefits of Efficient Governance’ (OECD Publications 2003) TD/TC/WP(2002)31/REV2 http://www.oecd.org/officialdocuments/ publicdisplaydocumentpdf/?cote=TD/TC/WP%282002%2931/FINAL&docLanguage=En. 131  Arrowsmith and others, EU Public Procurement Law (2010) 20–23. 132  Evenett and Hoekman, ‘Government Procurement’ (2005) 170. 133  Sue Arrowsmith, ‘Towards a Multilateral Agreement on Transparency in Government Procurement’ (1998) 47 International & Comparative Law Quarterly 793. 134  Steven Kelman, Procurement and Public Management: The Fear for Discretion and the Quality of Governement Performance (The AEI Press 1990) 90.

From Fragmentation to Coherence 35 t­ransparency can also cause a negative effect in the level of competition, increasing the risk for collusion and anticompetitive practices, particularly in the case of a public buyer with a dominant position in the market.135 The principle of transparency—characterised by clear norms and the relevant means to verify their enforcement—has not only been listed in the fundamental principles of domestic procurement regulation, but it has been frequently used by international regulations of public procurement.136 Due to its implications of publicity and accessibility across borders, transparency represents a shared principle in the major international agreements regulating procurement. Expressly mentioned as a goal in the UNCITRAL Model Law and highlighted not only in the GPA but also in the regional trade contexts of the EU and NAFTA procurement regulations, the principle of transparency is widely adopted as an important instrument for guaranteeing nondiscrimination opening up international markets, achieving value for money, avoiding corrupt practices and assuring legitimacy in the implementation of social policies.137 v. The Principle of Non-Discrimination and the International Instruments of Procurement Regulations Even if traditionally falling in the domain of domestic regulation, the international relevance of public procurement in the global economy is undeniable. The importance of public procurement is not limited to the direct impact on the domestic economy but has also significant and broader implications on international trade.138 The economic benefits deriving from trade liberalisation are strongly based on the theory of comparative advantage, which also applies to the public procurement sector.139 The incentive to take advantage of the benefits resulting from the liberalisation of the international procurement markets is at the basis of the conclusion of the international trade agreements, as highlighted in the context of the ‘global revolution’ of public procurement.140 The main focus of the international trade instruments

135  Albert Sanchez Graells, ‘Collusion and Competition from a State and Market Perspective’ (2013) ‘Public Procurement: Global Revolution VI’ Conference, Law School, University of Nottingham, 24–25 June 2013. 136  Trepte (n 85) 81. 137 Sue Arrowsmith, ‘Transparency in Government Procurement: The Objectives of Regulation and the Boundaries of the World Trade Organization’ (2003) 37 Journal of World Trade 283. 138  Federico Trionfetti, ‘Discriminatory Public Procurement and International Trade’ (2000) 23 The World Economy 57. 139 Paul Krugman and Maurice Obstfeld, International Economics: Theory and Policy (Pearson 2011) 222–321. 140 Sue Arrowsmith and Arwel Davies, Public Procurement: Global Revolution (Kluwer Law International 1998) 5.

36  International Regulatory Framework of Public Procurement r­egulating public procurement towards trade liberalisation, from the WTO’s GPA to PTAs, consists in improving transparency and prohibiting discriminatory procurement practices that restrict market access to foreign industry.141 In these international trade and non-trade regulatory architecture of public procurement, the principle of non-discrimination represents the regulatory cornerstone and the fundamental instrument to liberalise the procurement market. The principle of non-discrimination is generally translated in negative commitments and positive procedural regulations in the award of public contracts, to avoid the creation of non-trade barriers and distortive effects in international trade in public procurement.142 Opening up procurement markets represents a successful strategy to strongly contribute to the achievement of other procurement objectives like the efficient acquisition of goods and services at the best market conditions and the achievement of the best value for money. However, the principle of non-discrimination introduced by these international trade instruments of procurement regulation have created a series of difficulties and conflicts in the systematisation of the main regulatory procurement objectives.143 The principle of non-discrimination has turned out to be potentially in conflict with the other regulatory goals, typically adopted at the domestic level of procurement regulations and focused on objectives internal to the procurement process, like the value for money for small or emergency procurement contracts, and other legitimate policy considerations, requiring a complex process of adaptation.144 National security considerations and the protection of the domestic industry against foreign competition still represent the major political constraints on free trade in the procurement market, as it will be explored more in the context of the GPA. The pressure towards protectionism, based on the significant costs in terms of jobs and profits for the domestic industries, still have a great impact on the political process and deeply influence the design of domestic procurement systems, such as in the case of ‘buy national’ procurement practices.145

141  Sue Arrowsmith, ‘Public Procurement as an Tool of Policy and the Impact of Market Liberalisation’ (1995) 111 Law Quarterly Review 235. 142  Aaditya Mattoo, ‘The Government Procurement Agreement: Implication of Economic Theory’ (1996) 19 The World Economy 695. 143 Sue Arrowsmith, Government Procurement in the WTO (Kluwer Law International 2003) 11–19. 144  Susan Brown-Shafi, Promoting Good Govenrnance, Development and Accountability. Implementation and the WTO (Palgrave McMillan 2011) 90–115. 145  John Linarelli, ‘Global Procurement Law in Times of Crisis: New Buy American Policies and Options in the WTO Legal System’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 773.

From Fragmentation to Coherence 37 vi. The Controversial Role of Competition in the Procurement Markets Strongly linked to objective of achieving fairness and transparency, competition represents an important goal of public procurement, alongside the achievement of the primary goals of value for money and efficiency. In the domestic procurement system, competition generally requires the opportunity for the admission of the largest number of qualified competitors, on the basis of a transparent diffusion of information, with the aim of awarding the contract to the offer that provides best value for money.146 Moreover, it is often associated to the principle of non-discrimination as an instrument for promoting the liberalisation of the international procurement markets. Various authors have underlined the functional role of competition as a method for the achievement of the maximisation of value for money or trade liberalisation, instead of as a procurement goal per se.147 In the construction of the domestic and international procurement systems, the principle of competition comprises two dimensions. From the internal procurement system perspective, competition is referred to as the level of competitiveness within a specific tender that achieves best value for money. As opposed to the external principle of non-discrimination, which implies the absence of protectionist practices in the international procurement market, competition has been often interpreted as an internal goal of procurement regulation.148 However, competition can also be defined as an external principle of procurement.149 Public procurement regulations in fact have a direct impact on the level of competition in the procurement market, in particular when considering the risk of abuses of dominant positions by the contracting authorities. An extreme example of this interpretation of the competitive principle is represented by the concept of competition as incorporated in the EU Procurement Directives, as analysed in more detail in chapter four. Oriented towards the construction of a common market, the principle of competition represents a clear obligation on Member States to avoid any procurement practice that potentially restricts or distorts the fundamental freedoms of movements, in order to preserve competition as an institution on its own.150 146  Roberto Caranta, ‘Public Procurement and Award Criteria’, Research Handbook on EU Public Procurement Law (Edward Elgar Publishing Ltd 2016). 147  Arrowsmith, Linarelli and Wallace (n 44) 28–31. Peter Kunzlik, ‘Neoliberalism and the European Public Procurement Regime’ (2013) 15 Cambridge Yearbook of European Legal Studies 283. 148  Graells (n 87) 105. 149 Albert Sanchez Graells, ‘More Competition-Oriented Public Procurement to Foster Social Welfare’ in Khai Thai (ed), Towards New Horizons in Public Procurement (PrAcademics Press 2010). 150  Albert Sanchez Graells and Christopher Bovis, ‘Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law’, Research Handbook on European Public Procurement (2016) 423.

38  International Regulatory Framework of Public Procurement vii. Social Model of Public Procurement and Horizontal Policy Objectives Apart from the pure economic approach to public procurement, it is also possible to orient procurement regulation towards the support or achievement of non-economic objectives. Public procurement regulation can be used to implement strategic, protective and proactive political economic policies through various methods and at various stages of the procurement process—from the technical specifications to the award criteria.151 As will be explored in more detail in the following chapter, the industrial, social and environmental policy objectives pursued in public procurement are generally referred to as ‘horizontal’ or ‘secondary’ policies, and they represent external regulatory goals in addition to the primary objective of best value for money in the acquisition of good and services.152 Apart from their implementation at different stages of the procurement process, the achievement of social and non-economic policies in public contracts generally implies a trade-off between the economic objective of efficiency and the political priorities of these external goals.153 In this context, it is particularly controversial the implementation of social objectives: it usually implies an increase in the overall complexity of the procurement process and in the transactional costs between the procuring agency and the suppliers, with a considerable impact on the efficiency of the entire procurement process.154 Moreover, it is also highly likely to undermine the level of competition in the procurement markets through the implantation of noneconomic policies, such as restricting market access to only those suppliers guaranteeing respect for certain social standards or favouring domestic suppliers for the industrial development of a specific sector or a disadvantaged region.155

151  Trepte (n 85) 152–76. Christopher McCrudden, ‘Using Public Procurement to Achieve Social Outcomes’ (2004) 28 Natural Resources Forum 257; Rainer Kattel and Veiko Lember, ‘Public Procurement as an Industrial Policy Tool an Option for Developing Countries?’ (Working Papers in Technology Governance and Economic Dynamics, Tallin University 2010). 152 The term ‘secondary policy’ is mainly used in the EU context while according to US terminology it is more frequent to refer to them as ‘collateral’ policies. However, a strong component of the procurement literature adopted the definition of ‘horizontal’ for social and environmental policies in public procurement, in an alternative parallel position to the objectives of efficiency and value for money. Sue Arrowsmith, ‘Horizontal Policies in Public Procurement: A Taxonomy’ (2010) 10 Journal of Public Procurement 149. 153  Trepte (n 85) 205. 154  Christopher McCrudden, Buying Social Justice: Equality, Government Procurement and Legal Change (Oxford University Press 2007) 63–93. 155  Craig Furneaux and Jo Barraket, ‘Purchasing Social Good(s): A Definition and Typology of Social Procurement’ (2014) 34 Public Money & Management 265.

From Fragmentation to Coherence 39 B. Mapping the Diversity of International Instruments of Public Procurement Regulation As previously introduced the international framework of procurement regulation is evolving around different and potentially conflicting regulatory regimes established by the various instruments of public procurement regulation, namely the WTO GPA, the UNCITRAL Model Law on Procurement, the World Bank’s Procurement Framework and the EU Directives. These main international instruments can be compared under various lenses and different variables: their regulatory scope, the extent of their membership, their legal impact at the domestic level, their main regulatory objectives and their hierarchical levels in the procurement ­governance.156 The comparative analysis in this book adopts a special focus on the main regulatory objectives of these instruments of procurement governance. National and international procurement regulations have evolved in different cultural and legal contexts around a limited number of regulatory principles and objectives forming the basis for the political motivations and specific regulatory procedures in the various procurement systems. The study of the regulatory principles allows the analysis to be moved from ‘how’ the procurement practices are regulated to ‘why’ they are regulated in a specific way.157 It allows the diversification of the international regulatory systems to be understood on the basis of their legal and normative interpretation of public procurement, based on the definition of the regulatory objectives of economy, transparency, efficiency and competition as explained in the literature and embodied in their different international legal contexts. On the basis of the study of the fundamental regulatory objectives the academic literature has also been able to construct three models of abstract procurement regulation: an economic, a social and an international model.158 Representing academic abstractions and often tested in the domestic regulation of public procurement, these regulatory models serve the purpose of identifying the major policies pursued and the procedural guarantees set in the different international procurement regimes, guiding the comparative analysis. However, these models do not exist in pure abstraction, either at domestic and or at international level. Moreover, they do not mutually exclude one another and often allow the procurement regulation to evolve over time in a variety of hybrid regulatory forms.

156  The structure of the analysis was inspired by the reading of Rolf H Weber, ‘Mapping and Structuring International Financial Regulation—A Theoretical Approach’ (2009) 20 European Banking Law Review 651. 157  Trepte (n 85) 58–60. 158  ibid 42–45.

40  International Regulatory Framework of Public Procurement In addition to their regulatory objectives, another two variables are involved in the comparative analysis of these international instruments of procurement regulation: the areas of regulation and the legal status, characterising these instruments of procurement regulation. The main international instruments of procurement regulation can be differentiated on the basis of the regulatory areas they principally address. International trade agreements regulating government procurement are substantially very different from the specific non-trade international regulation of procurement practices, in particular in addressing considerations of competition and nondiscrimination in the procurement markets. Moreover, the main international procurement regimes can be characterised and classified on the basis of their legal status the international framework of procurement regulation offers a variety of international instruments of different legal status. See Table 1.2. Table 1.2:  Mapping the Landscape of International Instruments of Procurement Regulations Area of regulation Trade instruments

Non-trade instruments

Instrument

International legal status

Main regulatory principle(s)

EU Procurement Directives

Hard law—binding for Establishment of all EU Member States internal market access—nondiscrimination in the economic freedoms

GPA

Hard law— international agreement binding on the signatory parties

Principle of non-discrimination

UNCITRAL Model Law

Soft law—voluntary

Maximisation of efficiency and economy, openness and competition, fairness, integrity and transparency

World Bank Policy and Regulations

Hybrid Hard law—embedded in the loan agreement

Value for money, economy, integrity, fit for purpose, efficiency, transparency and fairness

Conclusions 41 On the one hand, the GPA is an international agreement imposing binding commitments on the signatory parties.159 On the other hand, the UNCITRAL Model Law on Procurement of Goods, Construction and Services represents a traditional non-binding soft-law instrument. The Model Law constitutes a highly articulated template, leaving the parties free to implement it in the domestic discipline to reform their national procurement system.160 Under the perspective of their legal enforcement, the World Bank Procurement Policy and Regulations represent a hybrid form of international instrument: they correspond to a voluntary regulatory model that applies to all the procurement contracts financed by Bank loans. However, the Procurement Regulations are applicable on the basis of the loan agreement, a bilateral agreement between the Bank and the borrowing country with the formal status of international agreement under public international law.161 Nevertheless, irrespective of their legal status in public international law, these procurement instruments are particularly influential at the national level in completely different ways, as will be explored in the analysis of each specific instrument. These three variables allow us to highlight their main regulatory characteristics and systematise the fragmented landscape of the various international instruments of procurement regulation, as summarised in the table above and explored in the course of this work. V. CONCLUSIONS

As consequence of the global revolution of public procurement, the international architecture of public procurement regulation has evolved around different and partially overlapping international instruments. The WTO GPA has influenced the development of regional and preferential trade agreements regulating public procurement, while the UNCITRAL Model Law and the World Bank’s Procurement Framework have considerably influenced the reform of domestic procurement systems across various countries at any level of economic development. These international fora comprehend various regulatory efforts oriented by specific regulatory principles: from international trade agreements

159  It has been argued that some provisions of the 1994 GPA have not been drafted with the appropriated level of precision to make them directly implementable for the signatory parties. However, all the provisions of the GPA can be challenged under the WTO’s Dispute Settlement Mechanism. Jiang, ‘Developing Multilateral Rules’ (2011) 69. 160  Sue Arrowsmith and Caroline Nicholas, ‘The UNCITRAL Model Law on Procurement: Past, Present and Future’ [2011] Reform of the UNCITRAL Model Law on Procurement: Procurement Regulation for the 21st Century. 161 LEGOP, Comparison of the International Instruments on Public Procurement— Background Paper (World Bank 2013) 3–4.

42  International Regulatory Framework of Public Procurement regulating public procurement towards market liberalisation, to soft-law instruments which aim to reform domestic procurement systems towards development objectives, including procurement guidelines of international donor institutions, aiming at maximising the efficiency and sustainability of their financed procurement projects. In a perspective of both horizontal and vertical fragmentation, the divergences between the regulatory objectives and the principles of the various international instruments, resulting in contrasting procedural rules, has emerged as a fundamental characteristic of the international procurement regulatory framework. In the absence of a regulatory optimal solution or single procurement system suitable for all circumstances; the procurement regulations cannot be ‘analysed or criticised by reference to some universally acceptable and perfect procurement law; they are to be analysed in their ­context’.162 For this reason, a comparative legal analysis, grounded on the main regulatory objectives and functional principles of procurement regulation, may contribute to a deeper understanding of the international framework of procurement governance. In the absence of a formal hierarchy between the different international regulatory systems and without a functional relation between their various procurement objectives, the priority of this work will be to focus on comparative analysis of the major international instruments of procurement regulation, in order to detect potential areas of convergence in the main international procurement regimes. The comparative research, including the study of their progressive evolution over time, allows the analysis to move from a perspective of fragmentation to coherence. In this comparative framework, the achievement of social and labour ­policies in public procurement, one of the most controversial of the procurement regulatory objectives, represents an extremely significant field where the dynamics of fragmentation and coherence between the main international procurement regulatory regimes can be tested. It implies the simultaneous application of conflicting regulatory principles in a complex legal field structured on different levels of governance, with a fragmented landscape of international instruments of regulation. The complexity of the inclusion of social and labour objectives in public procurement, its political justifications and economic implications, will be explored in more detail in the following chapter.

162 

Trepte (n 85) 36.

2 Unpacking the Use of Public Procurement to Achieve Social and Labour Policies I. INTRODUCTION

T

HE USE OF public procurement for the achievement of social and labour policy objectives represents a complex aspect of the legal and political dimension of public procurement. It has a long history and a wide divergence in practice at national and local level. The purpose of this chapter is to gain a better understanding of the political justifications, the legal implications and the procedural modalities of the instrumental use of public procurement to achieve social and labour purposes. What are the social policies most frequently achieved through public procurement? What are the political and economic implications behind the decisions of governmental public authorities? How is it possible to include social and labour concerns in public procurement? In an attempt to address some of these open questions, this chapter provides a reply structured in three parts, each one addressing a different aspect of the use of public procurement for social and labour purposes. First, the analysis provides a framework for the different instrumental uses of public procurement focused on objectives other than the maximisation of ‘best value for money’. An overview of the different definitions and categorisations developed in academic literature is offered, together with an outline of the various types of strategic, protective and proactive uses of public procurement. Special attention will paid to the social and labour concerns adopted in different national procurement realities. Second, the main political and economic tensions behind the inclusion of social and labour policies in public procurement are considered. Conflict between the principles of efficiency and transparency in the procurement process, the goal of minimising the distortive impacts on competition, and the legitimate objective of implementing social policies is inevitable in the development of a regulatory framework of public procurement. Finally, an analysis of the procedural implementation of social and labour policy considerations in the management of the procurement process is ­provided. The different implementation mechanisms for the inclusion of

44  Unpacking the Use of Public Procurement social and labour considerations for each step of the procurement process are explored. This analysis is integrated with important considerations regarding the achievement and enforcement of social and labour concerns along the global production chain of bidders and suppliers. The conclusions reached in this chapter, based on the study of the different phases of the implementation of social and labour concerns along the entire procurement process, provide the framework for the legal comparative analysis of the major international instruments of procurement regulations conducted in the rest of this work. II.  FRAMING THE INSTRUMENTAL USE OF PUBLIC PROCUREMENT FOR SOCIAL AND LABOUR PURPOSES

The use of public procurement for promoting social goals has a long history in which labour policy considerations have played a crucial role. However, the achievement of social policies and labour considerations in procurement practices does not represent an isolated phenomenon. In different periods of history, national governments have promoted various other policy objectives through public procurement, such as environmental concerns and industrial or economic development priorities, to mention only a few.1 The use of public procurement to achieve these policy objectives, regardless of their specific content, is grounded on the economic relevance of the government’s spending in the market. Government purchasing represents a significant fraction of the gross domestic product particularly in Organisation for Economic Co-operation and Development (OECD) countries.2 In many industrial sectors, like defence and infrastructure, national governments represent the dominant buyers with a strong influence and impact on the private actors’ behaviours.3 Moreover, the economic relevance of government procurement is also measured in terms of impact on international specialisation and trade flows, as highlighted in the economic literature on procurement discriminatory practices.4 1  Christopher McCrudden, ‘Using Public Procurement to Achieve Social Outcomes’ (2004) 28 Natural Resources Forum 257. 2  Estimation of the size of the procurement market is particularly difficult in the case of developing and non-OECD countries where, according to the latest OECD estimates, the ratio of the total government expenditure reaches 15% of the gross domestic product (GDP). Denis Audet, ‘The Size of Government Procurement Markets’ (2002) 2 OECD Journal on Budgeting http://www.oecd.org/dataoecd/34/14/1845927.pdf. 3  Simon Evenett and Bernard Hoekman, ‘Government Procurement: Market Access, Transparency, and Multilateral Trade Rules’, World Bank Policy Research Working Paper No 3195. 4  Robert Baldwin, Nontariff Distortions of International Trade (The Brookings Institution 1970); Thomas Lowinger, ‘Discriminatory Practices in Government Procurement of Foreign Goods in the U.S. and Western Europe’ (1976) 42 Southern Economic Journal 451; Aaditya Mattoo, ‘The Government Procurement Agreement: Implication of Economic Theory’ (1996) 19 The World Economy 695; Federico Trionfetti, ‘Discriminatory Public Procurement and International Trade’ (2000) 23 The World Economy 57.

Framing the Instrumental Use of Procurement 45 Based on its economic potential, different non-economic and legitimate political considerations have been driving the development of different public procurement reform and practices at national and local level, in many countries around the world. However, it is important to identify what are the main typologies of policy considerations behind the instrumental use of public procurement. Without trying to operate a rigid classification, it is possible to distinguish three abstract types of political usages of public procurement, establishing strategic, protective and proactive uses. Even if the achievement of social and labour policies can be interpreted as one of the most significant examples of the proactive use of public procurement, labour and social drivers are also very important in the strategic and protective dimension of public procurement. For this reason, the different strategic, protective and proactive aspects of public procurement practices are often interconnected in the award of procurement contracts, grounded on the strong social foundation and on the crucial labour implications of this fundamental political and economic behaviour of the government on the market. A. From Horizontal Policies to Sustainable Procurement: Definition and Categorisation Benefiting from their economic influence on the public markets, national governments are used to managing the award of public contracts based on many different policy considerations. Access to public contracts may be facilitated for specific groups of disadvantaged suppliers or denied to bidders that do not comply with particular criteria, in accordance with a specific policy. However, regardless of different policy contexts, the use of public procurement to achieve different non-economic objectives has traditionally been interpreted as a subordinate function or a derogation to the principal objective of each procurement system: the maximisation of efficiency and the best value for money. For this reason the entire debate on the inclusion of non-economic policy goals in procurement has been framed until now in terms of an ‘inherent conflict between economics and other objectives’.5 Following the traditional interpretation in the economic and legal literature of the inclusion of legitimate concerns as an exception to the main economic objectives, the instrumental use of procurement has been described with different terminology and using different definitions.6 In ­particular, two main issues are highly disputed in the context of the academic 5 Peter Trepte, Regulating Procurement: Understanding the Ends and Means of Public ­Procurement Regulation (Oxford University Press 2005) 134. 6 For a comprehensive overview of the different interpretative approaches, see Steven L Schooner, ‘Desiderata: Objectives for a System of Government Contract Law’ (2002) 11 Public Procurement Law Review 103. Sue Arrowsmith, ‘Horizontal Policies in Public ­Procurement: A Taxonomy’ (2010) 10 Journal of Public Procurement 149.

46  Unpacking the Use of Public Procurement discussion so far: (1) the terminological definition of the i­nstrumental use of public procurement; and (2) the classification of the different legitimate policy considerations behind the instrumental use of public procurement. From a terminological perspective, the difference between economic and non-economic procurement goals has been introduced into the analysis of the objectives of national and international public procurement systems.7 The concept of non-economic policy considerations has been used as an umbrella term, including a broad range of industrial, environmental and social policies, described as ‘secondary’ or ‘horizontal’ concerns.8 In this context, the definition of ‘secondary policies’ was developed to describe the spectrum of public procurement practices achieving various policy objectives other than the primary purpose of maximising the best value for money.9 However, the term ‘secondary policy’ has proved problematic in the legal literature.10 On the one hand, the difference between primary and secondary procurement objectives does not appear to be straightforward in the absence of a uniform and hierarchical system of priorities in the decision-making process of the national procurement authorities.11 On the other hand, the term ‘secondary’ may imply a negative evaluation of these policies as being of only minor or incidental importance, leading to misleading or incorrect interpretations. These procurement policies ‘are both normal in practice, in the sense that they are a common manifestation of market behaviour in both the public and private sectors, and normal from the p ­ erspective of the operation of the market, including in international trade, in that they actually contribute to its effective functioning’.12 For these ­reasons, the term ­‘horizontal policies’ has been introduced to underline the crosscutting nature of the regulatory purposes and political functions of the instrumental use of procurement activities.13 7 Sue Arrowsmith, ‘National and International Perspectives on the Regulation of Public Procurement: Harmony or Conflict?’ in Sue Arrowsmith and Arwel Davies (eds), Public Procurement: Global Revolution (Kluwer Law International 1998). 8 Sue Arrowsmith, John Linarelli and Don Wallace, Regulating Public Procurement: National and International Perspectives (Kluwer Law International 2000) 251–98. 9  Sue Arrowsmith, ‘Public Procurement as a Tool of Policy and the Impact of Market Liberalisation’ (1995) 111 Law Quarterly Review 235; Christian Pitschas and Hans-Joachim Priess, ‘Secondary Policy Criteria and Their Compatibility with E.C. and WTO Procurement Law. The Case of the German Scientology Declaration’ (2000) 4 Public Procurement Law Review 171; Sue Arrowsmith, ‘A Taxonomy of Horizontal Policies in Public Procurement’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law ­(Cambridge University Press 2009); Rolf H Weber, ‘Development Promotion as a Secondary Policy in Public Procurement’ (2009) 4 Public Procurement Law Review 184. 10  Sue Arrowsmith and Peter Kunzlik, ‘Public Procurement and Horizontal Policies in EC Law: General Principles’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law (Cambridge University Press 2009) 3–54. 11  Sue Arrowsmith, The Law of Public and Utilities Procurement (Sweet & Maxwell 2005) 14. 12 Arrowsmith and Kunzlik, ‘Public Procurement and Horizontal Policies in EC Law’ (2009) 14. 13  Arrowsmith, ‘A Taxonomy of Horizontal Policies in Public Procurement’ (2009) 110–21.

Framing the Instrumental Use of Procurement 47 Together with the terms of secondary and horizontal policies, the use of procurement for the achievement of goals other than the mere maximisation of efficiency and value for money can also be addressed and categorised under other different perspectives. Based on the policy function that the economic advantage that the allocation of public contracts entails, it is possible to distinguish three different approaches to the instrumental use of public procurement.14 As explored further in this chapter, it is possible to differentiate between: (1) a strategic procurement for achievement of strategic objectives of industrial economy; (2) a protective approach to public procurement aiming at shielding domestic or local suppliers from foreign competition; and (3) a proactive approach for the support of socio-environmental purposes. The protective use of public procurement overlaps with the traditional classification of public procurement ‘linked’ to the achievement of secondary and horizontal policy objectives. Specifically referring to the use of selective purchasing law for the promotion of human and labour rights,15 the concept of ‘linkage’ between public procurement has been introduced, to include the issues of equality and social justice in the conduct of the procurement process.16 Compared to ‘conditionality’, which implies reference to specific legal requirements, the concept of ‘procurement linkage’ allows the analysis of the social use of public procurement to include more systemic considerations beyond the procedural procurement conditions.17 In the context of the instrumental use of public procurement, there is a substantial difference in the scope of the ultimate goals of procurement, in particular between policy objectives that purely concern the performance of the public contracts awarded in the procurement process and policy goals that exceed the design and enforcement of the specific procurement activities. On one hand, the government is ‘a purchaser’ of goods and services for its needs.18 And as a purchaser, the government may decide what to purchase and how to purchase, choosing selection procedures and purchasing methods, and allocating preferences to different priorities.19 14 Trepte,

Regulating Procurement (2005) 137–39. McCrudden, ‘International Economic Law and Human Rights: A Framework for Discussion of the Legality of “Selective Purchasing” Law Under the WTO Government Procurement Agreement’ (1999) 3 Journal of International Economic Law 3. 16  In the context of the debate on trade and human rights, McCrudden explored the problematic distinction between economic goals and social objectives in public procurement. ­Christopher McCrudden, Buying Social Justice: Equality, Government Procurement and Legal Change (Oxford University Press 2007) 92. 17  Christopher McCrudden, ‘EC Public Procurement Law and Equality Linkages: Foundations for Interpretation’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law. New Directives and New Directions (Cambridge University Press 2010) 271. 18 McCrudden, Buying Social Justice (2007) 114–28. 19  Svetlana Cicmil and David Marshall, ‘Insights into Collaboration at the Project Level: Complexity, Social Interaction and Procurement Mechanisms’ (2005) 33 Building Research & Information 523. 15 Christopher

48  Unpacking the Use of Public Procurement For example, it may impose the inclusion of fair labour considerations related to the production and the distribution of goods and services to be procured. On the other hand, the government is also a complex political authority, interested in maintaining a precise political behaviour in the market and enforcing specific political priorities on the other economic actors. For this reason, legitimate policies that go beyond the contract performance become important considerations that can be taken into account, relating to the contractors’ behaviour and their business activities as a whole, or the support of specific groups in society.20 For example, undertaking economic relations with non-democratic countries where violations of human and labour rights are registered would be a typical example of this second type of instrumental use of procurement. This last group of procurement policies involves more controversial legal considerations because of the potential discriminative impact on trade and their extra-judicial effects that may be implied.21 Another important distinction can be drawn between procurement practices intended to simply enforce compliance with existing legal requirements, as in the case of the enforcement of core labour standards or national employment law, and those aiming to achieve broader and more affirmative political actions.22 In the social perspective, a frequent example is represented by procurement practices that go beyond strictly requiring respect for the labour domestic legislation and aim to promote better working conditions and extend employment opportunities, requiring additional affirmative actions.23 In this second category, the social use of public procurement can assume extended extraterritorial effects, particularly in light of the fragmentation of the global chain of production and supply of goods and services. The allocation of procurement contracts to enforce labour standards beyond the national borders has a consolidated tradition in the US,24 such as the recent growing influence of the ‘sweat-free’ procurement movement.25

20 

Arrowsmith (n 9) 125–27. Joel P Trachtman, ‘Symposium: States’ Rights vs. International Trade: The M ­ assachusetts Burma Law’ (2000) 19 New York Law School Journal of International and Comparative Law 355. 22  Ana Maria Esteves and Mary-Anne Barclay, ‘Enhancing the Benefits of Local Content: Integrating Social and Economic Impact Assessment into Procurement Strategies’ (2011) 29 Impact Assessment and Project Appraisal 205. 23 John Howe, ‘The Regulatory Impact of Using Public Procurement to Promote Better Labour Standards’ in Kate Macdonald and Shelley Marshall (eds), Fair Trade, Corporate Accountability and Beyond: Experiments in Globalizing Justice (Ashgate 2007). 24  McCrudden (n 16) 131–82. Sara H Cleveland, ‘Norm Internalization and U.S. Economic Sanctions’ (2001) 26 Yale Journal of International Law 2. 25 Many US States and local governments—with the important cases of the 2010 New York City Code and the 2007 Los Angeles Administrative Code—require suppliers to comply with some basic labour standards, including the ILO core labour standards and ‘non poverty’ wages. Adrian Barnes, ‘Do They Have to Buy from Burma? A Preemption Analysis of Local Antisweatshop Procurement Law’ (2007) 107 Columbia Law Review 426. 21 

Framing the Instrumental Use of Procurement 49 Strongly linked to this second category of the instrumental use of procurement, the inclusion of political objectives in procurement management can also be assessed on the basis of its regulatory purpose, namely as a supplementary or additional function for the national and international legal framework in which the procurement system is structured.26 On the one hand, the instrumental use of public procurement can serve as a supplementary mechanism in support of existing national or international policies or regulations already implemented on the national territory. For example, particular labour safety criteria are included in the qualification of the procurement processes, as supplementary enforcement mechanisms of the national obligations in conformity with broad national health policies already in place in the enacting country. On the other hand, public procurement may also include specific policy criteria that are outside the framework of the applicable national and international law, filling regulatory gaps or addressing new regulatory concerns. The functional relationship between the procurement system and the applicable domestic legal framework is a particularly important variable to be taken into consideration when looking at the implications at international level of the inclusion of social clauses and labour rights in the tender documentation. It is a widespread procedure for the procurement of construction work to include a requirement for compliance with locally applicable labour and safety law in the standard form of contract performance clauses. Respect for local and national labour legislation in the execution of public contracts almost constitutes general practice that usually does not seem to pose any problem at the national level.27 However, as we will see in the following chapter, this compatibility with national regulation has a considerable impact from the perspective of international trade. The enforcement in procurement practices of certain social regulations supporting national ‘equality’ policies, such as in the case of the encouragement of racial and gender equality, can raise considerable concerns in terms of non-­discrimination against foreign suppliers. Proactive support of the working or employment conditions of specific social groups may implicitly discriminate against ­foreign procurers and suppliers and thus represent a competitive disadvantage in access to the public contract.28 Based on the main distinctions in the instrumental function of procurement, an overview of the development of the strategic, protective and proactive use of public procurement will be provided, underlining how the achievement of social objectives is a ­fundamental dimension of all of these possible categorisations.

26 

Trepte (n 5) 138. Barnard, ‘Using Procurement Law to Enforce Labour Standards’ in Guy Davidov and Brian Langille (eds), The Idea of Labour Law (Oxford University Press 2011) 268. 28 Andrew Erridge and Ruth Fee, ‘Contract Compliance: National, Regional and Global Regimes’ (1999) 27 Policy and Politics 199. 27  Catherine

50  Unpacking the Use of Public Procurement B.  Strategic Procurement, Public Works and Employment The strategic use of public procurement as an industrial policy has a strong historical tradition, directly linked to Keynes’ interpretation of public spending as a powerful instrument for stimulating economic growth and national welfare.29 Many post-war procurement policies were introduced in the United States or Great Britain to alleviate the effects of the Great Depression, derived from Keynes’ interpretation of the use of public contracts as a heavy investment in public works.30 The most exemplary case of the use of public works for the purpose of the economic recovery is probably represented by the policy of the ‘New Deal’: in the political vision of President Roosevelt public procurement had the important function of stabilising the economy, using federal expenditure through public contracts to fuel the business economy and relieve serious unemployment situations.31 Based on the large size of the procurement market and its impact on the gross domestic product (GDP), this strategic approach to public contracts is still nowadays adopted to create an economic stimulus for national economies and industrial sectors, and is seen more and more frequently in developing countries, even if characterised by clear protectionist purposes.32 The economic incentives represented by the strategic placement of public contracts have traditionally been interpreted as an implementation mechanism for industrial policies, in particular to develop and maintain strategic national industries, crucial for the national economies.33 A more recent variation of the strategic approach to public spending with broad implications for the entire national industrial sector is now represented by the increasing practice of public procurement supporting technological innovation.34

29 

Trepte (n 5) 137–41. Arrowsmith, ‘Public Procurement as a Tool of Policy and the Impact of Market Liberalisation’ (n 7) 235. 31  McCrudden (n 16) 33–34. 32  Murat A Yülek and Travis K Taylor, Designing Public Procurement Policy in Developing Countries (Springer 2012) 3. 33  In this context, strategic attention has particularly been paid to the field of defence procurement, due to the crucial economic considerations regarding the highly technological nature of these contracts, the development implications for the national industrial sector and important security considerations. For the industrial implications of the defence procurement in UK, see Ronald Patrick Smith, ‘Defence Procurement and Industrial Structure in the UK’ (1990) 8 International Journal of Industrial Organization 185. 34  Trepte (n 5) 144. Public procurement, in fact, has important indirect effects on the development of innovation technology, increasing the market for innovative goods and services, promoting the adoption of new technical standards, increasing the competition level between innovative suppliers and affecting the final prices for consumers. The so-called ‘public procurement promoting innovation’ is gaining increasing public attention, particularly in Europe, where it has been officially endorsed in different institutional efforts, such as the Europe 2020 Flagship Initiative ‘Innovation Union’ of 6 October 2011 and the European Council conclusions of 4 February 2011. UK, Finland and Norway are the European countries where the inclusion of innovation concerns in their tender documents is most frequent; moreover, 30 

Framing the Instrumental Use of Procurement 51 The strategic management of public contracts oriented towards creating economic opportunities for public investments in research and development35 has been recently described as ‘procurement of innovation’.36 Apart from the strict industrial or technological connotations, labour and employment considerations have always paid a particularly significant role in the strategic use of public procurement. The use of public work as an instrument to generate employment is probably one of the oldest examples of the use of public procurement for the achievement of socio-economic goals and has been frequently used by post-war governments to stimulate economic growth.37 The development of the strategic use of public contracts has progressively focused more on the creation of incentives for long-term economic growth, instead of directly addressing the creation of employment.38 However, procurement practices, as preferences in the government purchasing, have been widely used (particularly after both World War I and World War II)39 and they are still considered as an effective mechanisms to generate employment for workers with disabilities and more marginal workers, linking public procurement to job creation and the promotion of fair labour condition in disadvantaged groups of workers.40 C.  Protective Procurement Policies Against Foreign Competition The protective use of public procurement is closely linked with, and partially overlaps, the practice of the strategic award of public contracts. If strategic procurement is mainly focused on creating economic incentives for the domestic economic development, the award of public contracts can the vast majority of European countries prefers to predominantly use the technical ­specifications (58%) for the integration of innovation concerns into the procurement processes. Michael Essig and others, ‘Strategic Use of Public Procurement in Europe’ (2011) MARKT/2010/02/C Final Report to the European Commission. 35  Max Rolfstam, ‘Public Procurement as an Innovation Policy Tool: The Role of Institutions’ (2009) 36 Science and Public Policy 349. 36 Charles Edquist and Leif Hommen, Public Technology Procurement and Innovation (Springer Science & Business Media 2000); Luis Cabral and others, ‘Procuring Innovations’ in Nicola Dimitri, Gustavo Piga and Spagnolo (eds), Handbook of Procurement ­(Cambridge University Press 2006); Jakob Edler and Luke Georghiou, ‘Public Procurement and ­innovation—Resurrecting the Demand Side’ (2007) 36 Research Policy 949; Charles Edquista and Jon Mikel Zabala-Iturriagagoitia, ‘Public Procurement for Innovation as Mission-­Oriented Innovation Policy’ (2012) 41 Research Policy 1757. 37  McCrudden (n 16) 33. 38  Marius Brülhart and Federico Trionfetti, ‘Industrial Specialisation and Public Procurement: Theory and Empirical Evidence’ (2001) 16 Journal of Economic Integration 106. 39 For a broader analysis, see Stanley Vittoz, New Deal Labor Policy and the American Industrial Economy (University of North Carolina Press 2012). 40  Rosemary Boyle, ‘Disability Issues in Public Procurement’ in Sue Arrowsmith and Peter Kunylik (eds), Social and Environmental Policies in EC Procurement Law. New Directives and New Directions (Cambridge University Press 2009) 310.

52  Unpacking the Use of Public Procurement also be used to provide economic protection to domestic producers and suppliers against international competition in the global economy.41 The protective use of public procurement against foreign competition can have different focuses: public procurement may be used as an instrument of industrial policy oriented towards the protection of the domestic industrial sectors or individual industries, the support of national employment policies, or the economic development of a specific region.42 The social dimension of the protective management of public contracts is extremely relevant. Just to provide with few examples, the strategic use of procurement may be managed as a positive incentive for the creation of employment and economic growth, and the protective use of public procurement may focus on the mitigation of the risks of unemployment and the prevention of the degradation of working conditions in the national labour markets caused by a surge of foreign imports.43 The protection against foreign competition is traditionally translated in the placement of government contracts to the benefit of domestic industries, generally included in formal or informal ‘buy national’ policies and ­legislations.44 Probably the best known case of a ‘buy national’ policy is the Buy American Act of 1933, still at the base of more recent American procurement legislations.45 The preference for locally manufactured goods is still at the centre of the American Recovery and Reinvestment Act of 2009 today, which requires of the US federal procurement of public buildings that ‘all of the iron, steel, and manufactured goods used in the project are produced in the United States’.46 This becomes particularly important practice in period of economic and financial crisis across American history, as demonstrated by the frequent adoption of ‘buy national’ procurement policies in different historical times.47 However, the use of discriminatory policies to favour domestic industries is not limited to the Anglo-American procurement tradition but a common practice in procurement regulations of

41 

Trepte (n 5) 152. Fernando Branco, ‘Favoring Domestic Firms in Procurement Contracts’ (1994) 37­J­ ournal of International Economics 65. 43 R Preston McAfee and John McMillan, ‘Government Procurement and International Trade’ (1989) 26 Journal of International Economics 291. 44  McCrudden (n 16) 26. 45  Kaz Miyagiwa, ‘Oligopoly and Discriminatory Government Procurement Policy’ (1991) 81 The American Economic Review 1320; Linda Weiss and Elizabeth Thurbon, ‘The Business of Buying American: Public Procurement as Trade Strategy in the USA’ (2006) 13 Review of International Political Economy 701. 46  John Linarelli, ‘Global Procurement Law in Times of Crisis: New Buy American Policies and Options in the WTO Legal System’ in S Arrowsmith and RD Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 778–789. 47  Joshua I Schwartz, ‘Procurement in times of crisis: lessons from US government procurement in three episodes of “crisis” in the twenty-first century’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 803–29. 42 

Framing the Instrumental Use of Procurement 53 emerging ­economies.48 The entire Chinese procurement system prescribes the purchase of nationally produced goods and services, unless they are not available under reasonable commercial terms and conditions in the domestic market.49 The importance of protective procurement and stimulus packages significantly increases during periods of financial crisis as instrument for the economic recovery, even if with distortive and protectionist effects.50 The adoption of ‘buy national’ policies and local content requirements in procurement practices have been constantly increasing since 2008 in an attempt to stabilise economies, but bringing, at the same time, inefficiencies and increased costs, international trade retaliations and corrupt practices.51 Protective procurement practices may not only focus on domestic firms in general, but also on allocating economic benefits to a particular industry or a specific industrial sector. In order to correct structural market imperfections, the objective of these procurement practices mainly consists in the allocation of economic resources through the award of public contracts to particular economic sectors, providing them the competitive advantages needed to face foreign competition in international markets.52 This is the case in the instrumental use of procurement to encourage business in the civil aircraft sector.53 These types of procurement practices are often designed to correct imperfections in the functioning of the specific markets, like strong barriers to the market entry in specific industrial sectors or prohibitive research and development costs.54 Particularly in developing countries, the protective use of public procurement has been frequently associated with the ‘infant industry’ justifications.55 The support of particular individual industries is based on the same line of reasoning, even if raising more serious legal concerns in

48 The ‘buy national’ procurement practices are also increasingly implemented in the ­ razilian Procurement regulation, see Levy Ricardo Pagliary, ‘The Law on Government ProcureB ment in Brazil’ (2001) Public Procurement Law Review 15–34. More recently in August 2011, the Brazilian government introduced a ‘Buy Brasile’ clause of 25% preference for local producers and suppliers for the award of public contracts, see http://www.globaltradealert.org/ measure/brazil-introduction-buy-brazil-clause-government-procurement. 49  Ping Wang, ‘China’s Evolving Legal Framework on Public Procurement’ (2004) 6 Public Procurement Law Review 285. 50  Simon J Evenett, ‘Stimulus Packages and Government Procurement’ in Simon J Evenett, Bernard M Hoekman and Olivier Cattaneo (eds), The Fateful Allure of Protectionism: Taking Stock for the G8 (39th–42nd edn, Centre for Economic Policy Research (CEPR) 2009). 51  Steven L Schooner and Christopher R Yukins, ‘Public Procurement: Focus on People, Value for Money and Systemic Integrity, Not Protectionism’ in Richard Baldwin and Simon Evenett (eds), The Collapse of Global Trade, Murky Protectionism, and the Crisis: ­Recommendations for the G20 (VoxEU.org Publication 2009) 87. 52  Arrowsmith, Linarelli and Wallace, Regulating Public Procurement (2000) 241. 53 Gunnar Eliasson, Advanced Public Procurement as Industrial Policy : The Aircraft ­Industry as a Technical University (Springer Science + Business Media, LLC 2010). 54  Arrowsmith, Linarelli and Wallace (n 8) 244–46. 55  John Jackson, The World Trading System, Law and Policy of International Economic Relations (The MIT Press 1997) 224–29.

54  Unpacking the Use of Public Procurement terms of definition of ‘subsidies’ and ‘state aid practices’ in the context of international trade systems.56 However, if focused on a single industry or on the development of an entire industrial sector, the concrete benefits associated to procurement protectionist policies are particularly controversial in the economic literature, where the detrimental effects of this governmental support of unproductive and inefficient industrial sectors on national welfare are often underlined.57 Another important case of discriminatory procurement practices focused on the correction of market imperfection and protection from foreign competition is represented by protective procurement policies focused on the advance of small and medium enterprises (SMEs).58 The most ­remarkable example of an SME preferential scheme is probably integrated into the US procurement framework, which introduced a vast system of set-asides in favour of American small enterprises with the US Small Business Act 1953, and which was reaffirmed in the US Federal Acquisition Streamlining Act of 1994.59 The strategic and protective support of SMEs through procurement practices is also an important pillar of the European effort to increase competiveness in the common market, grounded in Article 163 of the Treaty on the Functioning of the European Union (TFEU), and confirmed by the jurisprudence of the Court of Justice of the European Union (CJEU).60 However, regardless of the specific procurement context in which SMEs preferential procurement practices are implemented, they are all based on the assumption that small local business realities are more suitable to providing best value for money, with important implications in terms of local economy and social development—boosting the competitiveness of local realities, even if their efficiency is highly questionable.61 Finally, the use of public procurement against foreign competition may go beyond the protection of targeted industrial sectors and focus on 56 

Trepte (n 5) 159–68. protectionist policies are often the result of the lobbying powers of uncompetitive industries, rather than rational political decisions, often implying a vicious circle of trade restrictions. Moreover, one of the most controversial aspects of the ‘infant industry’ argument is represented by the determination of the appropriate length of time for the governmental economic incentive. Paul Krugman, ‘Strategic Sectors and International Competition’ in Robert Stern (ed), US Trade Policies in a Changing World Economy (The MIT Press 1987) 207. 58  International Trade Centre UNCTAD/WTO (Genève), Improving SME Access to Public Procurement : The Experience of Selected Countries (International Trade Centre 2000). 59 Chad M Moutray and Major Clark, ‘The Future of Small Business in the US Federal Marketplace’ (2004) 4 Journal of Public Procurement 450. 60 Nicholas Hatzis, ‘The Legality of SME Development Policies Under EC Procurement Law’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law (Cambridge University Press 2009) 345. 61 John Linarelli, ‘The Limited Case of Permitting SME Procurement Preferences in the WTO Agreement on Government Procurement’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenges and Reform (Cambridge University Press 2011) 444. 57 These

Framing the Instrumental Use of Procurement 55 depressed geographic areas. The award of public contracts, in this case, provides ­economic stimulus to encourage the advancement of regions that for structural and geographical reasons remain undeveloped, such as the ‘Mezzogiorno’ of Italy.62 For a long time, a considerable portion of Italian public contracts have been granted to firms from the South of Italy through a system of set-asides, with the main intent of stimulating the economic growth of the region, even if it is often interpreted as a discriminatory state aid ­policy.63 The main political rationale behind this type of procurement practices consists in the redistribution of national welfare, as well as the improvement of economic and living conditions of the citizens in specific declining regions, often associated with other policy instruments like tax incentives and broader public investments.64 D. Proactive Use of Public Procurement: Green Procurement and the Emergence of Sustainable Procurement In addition to its strategic and protective use, public procurement is also invoked for the proactive implementation of other legitimate policy considerations, falling outside the strictly interpreted objective of achieving value for money. In various national contexts from the EU to the US to Canada or South Africa, procurement practices are also driven by the political determination to protect the environment, to enforce the respect of decent labour conditions, to assure compliance with human rights or to alleviate structural discrimination based on race and gender. ‘Green’ public procurement represents one of the most well known and most recent examples of proactive use of public procurement, increasing the awareness of citizens and stakeholders on various environmental p ­ olicy objectives,65 such as the processes of mitigation of and adaptation to climate change,66

62  Sue Arrowsmith, ‘Application of the EC Treaty and Directives to Horizontal Policies : A Critical Review’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law New Directives and New Directions (Cambridge University Press 2009) 182. 63  The system of set-aside of Italian public supply contracts has been challenged in front of the ECJ and defined as a discriminatory practice imposing restrictive effects on trade in Case C-31/88, Du Pont de Nemours Italiana v. Unita Sanitaria Locale No. 2 Di Carrara [1990] ECR I-889. 64  Christopher Bovis, ‘The European Public Procurement Rules and Their Interplay with International Trade’ (1997) 31 Journal of World Trade 63. 65  Christoph Erdmenger, Buying into the Environment (Greenleaf Publishing 2003). 66  The strategic use of public procurement can also aim at directly addressing the phenomenon of climate change, from both a mitigation and adaptation perspective. As widely recognised in the EU and the US, public procurement initiatives have great potential for climate change mitigation through the implementation of national energy saving policies or the development of renewable energies in the procurement of construction, transport and IT equipment. The award of public contracts has great potential as stimulus for the development of

56  Unpacking the Use of Public Procurement the incentives for sustainable and renewable energy resources67 and responsible waste management.68 The study of the environmental use of public procurement exceeds the scope of this research, which is focused on the social dimension of the proactive use of public procurement (further elaborated in the following section). However, some of the fundamental economic and legal implications associated to the proactive use of procurement for environmental purposes are equally shared by the social use of procurement practices. The environmental use of public procurement is grounded on the same economic justifications applicable to the social use of procurement ­practices:69 the presence of externalities in the market.70 As well as in the case of the achievement of social and labour policies through procurement proactive practices, the use of green procurement practices has often been associated with discriminatory and protectionist trade strategies.71 Moreover, the legal analysis of both the environmental and the social use of public procurement is mainly centred on common implementation mechanisms. In the international framework of procurement regulation, the most relevant aspects of the achievement of the instrumental use of procurement are linked to the definition of the subject matter of the contract and the legitimacy of the inclusion of considerations on production methods that do not impact on the final characteristics of the products in the interpretation of the principle of non-discrimination. Based on these similarities, the idea of establishing a shared legal framework applicable for both environment and social concerns was introduced in the literature to ensure consistency in the regulation of instrumental procurement practices.72 The similarities between the proactive use of public procurement for both environmental and social policies have been consolidated in a more innovative solutions addressing the mitigation and the adaptation to climate change in the private sector. Harro van Asselt, Nicolien van der Grijp and Frans Oosterhuis, ‘Greener Public Purchasing: Opportunities for Climate-Friendly Government Procurement under WTO and EU Rules’ (2011) 6 Climate Policy 217; Edquista and Zabala-Iturriagagoitia, ‘Public Procurement’ (2012) 1757. 67  Public procurement represents an important instrument to ensure the purchasing of goods and services based on non-polluting processing and production methods, inducing important crowding out effects. OECD, The Environmental Performance of Public Procurement (OECD Publications 2003). 68  Phoebe Bolton, ‘Protecting the Environment through Public Procurement: The Case of South Africa’ (2008) 32 Natural Resources Forum 1. 69  Arrowsmith (n 9) 108. 70  Trepte (n 5) 175. 71  Garba I Malumfashi, ‘Procurement Policies, Kyoto Compliance and the WTO Agreement on Government Procurement: The Case of the EU Green Electricity Procurement and the PPMs Debate’ in Thomas Cottier, Olga Nartova and Sadeq Z Bigdeli (eds), International Trade Regulation and the Mitigation of Climate Change (Cambridge University Press 2009). 72 Mario E Comba, ‘Green and Social Considerations in Public Procurement Contracts: A Comparative Approach’ in Roberto Caranta and Martin Trybus (eds), The Law of Green and Social Procurement in Europe (Djøf Publishing 2010) 299.

Framing the Instrumental Use of Procurement 57 recent approach to the award of public contracts. The terms ‘responsible procurement’ and ‘sustainable public procurement’ have progressively ­ emerged to describe the more recent procurement practices aiming at ensuring standards of sustainability and addressing the ethical and environmental concerns of citizens and procurement professionals to describe.73 As a recent and emerging area of public contracting, sustainable procurement is still lacking a comprehensive and commonly accepted definition, partly because its application varies substantially from sector to sector.74 Based on the definition of the Sustainable Procurement Task Force of the Chartered Institute of Purchasing & Supply,75 sustainable procurement is ‘a process whereby organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits not only to the organisation, but also to society and the economy, while minimising damage to the environment’.76 This operational definition of ‘sustainable procurement’ emphasises the emerging approach of taking into account a broad spectrum of economic, environmental and social considerations in the award of procurement contracts, as interlinked parts of the integrated process of public purchasing decisions. However, the elaboration and the implementation of a sustainable procurement strategy, based on the consultation of the principal stakeholders and focused on a careful use of global sourcing, still presents considerable difficulties at a practical and theoretical level.77 The lack of coherence in the adoption and implementation of different national and local sustainable strategies as well as the lack of sufficient information for a comprehensive evaluation of the effective impact represent major barriers for the development of a coherent analysis of this recent phenomenon in the legal literature.78

73  Chartered Institute of Purchasing & Supply (CIPS), Ethical and Sustainable Procurement, 2013, available at https://www.cips.org/Documents/About%20CIPS/CIPS_Ethics_Guide_ WEB.pdf. 74 Stephen Brammer and Helen Walker, ‘Sustainable Procurement in the Public Sector: An International Comparative Study’ (2011) 31 International Journal of Operations & ­Production Management 452. 75  The Chartered Institute of Purchasing & Supply (CIPS) is the most recognised international organisation, operating in over 150 countries and grouping international procurement professional worldwide. See http://www.cips.org/en-ZA/homepage/. 76  The CIPS Guideline ‘Procuring the Future' is available at https://www.gov.uk/government/ uploads/system/uploads/attachment_data/file/69417/pb11710-procuring-the-future-060607.pdf. 77  Helen L Walker, Lucio Di Sisto and Darian McBain, ‘Drivers and Barriers to Environmental Supply Chain Management Practices: Lessons from the Public and Private Sectors’ (2008) 14 Journal of Purchasing and Supply Management 69. 78 Only national studies have been addressed until now to explore specific applications of sustainable procurement strategies, Joyce Thomson and Tim Jackson, ‘Sustainable Procurement in Practice: Lessons from Local Government’ (2007) 50 Journal of Environmental Planning and Management 421. Helen Walker and others, ‘Sustainable Procurement: Past, Present and Future’ (2012) 18 Journal of Purchasing and Supply Management 201.

58  Unpacking the Use of Public Procurement III.  THE SOCIAL AND LABOUR DIMENSION OF PUBLIC PROCUREMENT

If the environmental use of procurement can be described as a relatively new phenomenon in the modern management of public contracts, the achievement of social and labour purposes through public procurement contracts has a very long and consolidated tradition. A.  The Broad Scope of the Social Use of Public Procurement Inside a framework of broad policies of social and redistributive justice, procurement has traditionally also represented a complementary instrument for the enforcement of individual labour rights and for the promotion of fairness and equality in the labour market.79 The social use of public procurement has been strongly influenced by the historical context in which it was developed and the geographical framework in which it was implemented. As seen in the context of its strategic and proactive use of public procurement, some of the first interpretations of the social function of procurement have typically been to address structural unemployment in post-war recovery plans or to enforce anti-discrimination measures for minority and racial groups. In addition to the inclusion of different employment considerations, the growth of international awareness of human rights issues after World War II deeply influenced the use of public procurement for social purposes, mainly based on procurement affirmative actions in favour of disadvantaged groups within society.80 Together with the promotion of employment, public procurement has also traditionally been used as an instrument of social justice, to prevent and remedy structural inequality in the national community.81 The case of South Africa is probably the most well known, complex and extensive public procurement system to advance social redistributive policies, embedded in the South Africa 1996 Constitution.82 Based on a system of point and price preferences, the South Africa Reconstruction and Development Programme adopted after the end of apartheid aimed to support through public procurement a variety of socio-economic policies: promotion of gender and racial equality; support of disadvantaged groups in society; advancement of SMEs; and promotion of local industries.83

79 

Erridge and Fee, ‘Contract Compliance’ (1999) 200–03. McCrudden (n 16) 259–60. 81 Christopher McCrudden, ‘Rethinking Positive Action’ (1986) 15 Industrial Law Journal 219. 82  McCrudden (n 16) 245–67. 83 For a more detailed analysis of the South African procurement system, see Bolton, ­‘Protecting the Environment Through Public Procurement’ (2008) 781–80; John D Taylor and Kishore Raga, ‘Preferencial Procurement: A Case Study of South Africa’ (2010) http://www. 80 

The Social and Labour Dimension of Public Procurement 59 Public procurement has not only been used for promoting domestic priorities of social justice linked to reasons of racial and gender equality but also for contributing to the enforcement of human rights outside national borders, generating international legal concerns. The most famous example of selective public purchasing practices with extraterritorial effects is probably the dispute related to the ban imposed by the legislation of ­Massachusetts on the conclusion or the renewal of public contracts with Myanmar (Burma).84 Because of its distortive effects on trade and its controversial extraterritorial effects, the Massachusetts procurement legislation was at the centre of a World Trade Organization (WTO) dispute. The disputes, initiated with consultations between the United States, the EU85 and Japan,86 resulted in a request for establishment of a panel.87 It settled before the release of a panel report, on the basis of a Decision of the US Supreme Court.88 Moreover, with the privatisations introduced in the 1980s and 1990s in the ­delivery of public services, the social use of public procurement assumed a new dimension.89 In recent years, the inclusion of social considerations in public procurement decisions has progressively shifted the importance of ensuring socially responsible practices along the supply chain.90 Procurement practices have gradually been adopted to support voluntary initiatives of ­Corporate Social Responsibility (CSR), strengthening the compliance of suppliers with codes and social standards along their chain of production.91 The relationship between corporate responsibility and public procurement has been extensively developed in the EU framework on CSR, formally recognised for the first time in the 2002 Communication of the European Union on CSR, when stating that ‘making access to … public procurement conditional on adherence to and compliance with the OECD Guidelines for

ippa.org/IPPC4/Proceedings/13ProcurementPreferences/Paper13-6.pdf; Phobe Bolton and Geo Quinot, ‘Social Policies in Procurement and the Agreement on Government Procurement: A Perspective from South Africa’ in Sue Arrowsmith and Robert Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011). 84 

McCrudden, ‘International Economic Law and Human Rights’ (1999) 6. United States—Measure Affecting Government Procurement—Request for Consultations by the European Communities, GPA/D2/1; WT/DS88/1, 26/06/1997. 86  United States—Measure Affecting Government Procurement—Request to Join ­Consultations—Communication from Japan, WT/DS88/2, 02/07/1997. 87  United States—Measure Affecting Government Procurement—Request for ­ Establishment of a Panel by the European Communities, WT/DS88/3, 09/09/1998. 88  Trachtman, ‘Symposium’ (2000) 355–372. 89  Khi V Thai, ‘Public Procurement Re-Examined’ (2001) 1 Journal of Public Procurement 9. 90  Tom Fox, Halina Ward and Bruce Howard, Public Sector Roles in Strengthening Corporate Social Responsibility: A Baseline Study (World Bank Publications 2002). 91 Christopher McCrudden, ‘Corporate Social Responsibility and Public Procurement’ in Doreen McBarnet, Aurora Voicilescu and Tom Campbell (eds), The New Corporate Accountability: Corporate Social Responsibility and the Law (93rd–118th edn, Cambridge University Press 2006) 93–118. 85 

60  Unpacking the Use of Public Procurement Multinational Enterprises, while respecting EC international commitments, could be considered by EU Member States and by other States adherent to the OECD Declaration on International Development’.92 The role of public procurement to facilitate the implementation of the CSR principles is consolidated in the new EU strategy on CSR.93 In the EU Commission ‘Action Agenda for the period 2011–2014’, public procurement is expressively recognised as a valuable policy instrument ‘enhancing market reward for CSR’ and EU Member States are encouraged to ‘include social considerations into public procurement while respecting the existing EU legal framework’ even with the adoption of specific positive actions.94

B.  Functional Models of Social Justice in Public Procurement A broad spectrum of the different social purposes has inspired and guided the management and the allocation of public contracts in various domestic and local procurement systems. On one hand, procurement practices have included a wide variety of labour rights requirements from the inclusion of fundamental labour rights to references to wage levels occupational health and safety conditions.95 On the other hand, it is also not unusual to observe procurement systems being driven by other broad political aspects such as social security, the prohibition of gender or racial discrimination, or the promotion of employment and the creation of formative opportunities for young employees.96

92  European Commission, Corporate Social Responsibility: A business contribution to Sustainable Development, 2 July 2002, COM(2002) 347 final, p 29. For further reading, Reinhard Steurer and others, ‘Sustainable Public Procurement in EU Member States: Overview of Government Initiatives and Selected Cases. Final Report to the EU High-Level Group on CSR’ [2007] European Commission, Brussels http://www.sustainability.at/pdf/csr/policies/Sustainable%20Public%20Procurement%20in%20EU%20Member%20States_Final%20Report.pdf. 93  A Renewed EU Strategy 2011–14 for Corporate Social Responsibility Communication from the Commission to the European Parliament, The Council, The European Economic and Social Committee of the Regions COM(2011) 681 final. 94  ibid 10. 95  Christopher McCrudden, ‘Social Policy Issues in Public Procurement: A Legal Overview’ in Sue Arrowsmith and Arwel Davies (eds), Public Procurement: Global Revolution (Kluwer Law International 1998) 219–239. 96 The issue of the education and the training of young employees has been a crucial concern in the Swiss Public Procurement Federal system. According to Article 27(3) of the ­Ordinance on Public Procurement of 11 December 1995 (OPP), ‘where there are equivalent tenders by Swiss bidders, the contracting authority must take into account the extent to which bidders provide trainee positions’. See Marc Steiner, ‘Is There a Swiss Approach towards Sustainable Public Procurement?’ (2013) 1 European Procurement & Public Private Partnership Law Review 73.

The Social and Labour Dimension of Public Procurement 61 The enforcement of social policies and labour requirements has refle­ cted so far two main functional models of proactive social use of public procurement: an individual justice model and group justice system.97 ­ The linkage of procurement to social and labour policy objectives can be ­oriented towards the achievement of an individual justice model, which aims at promoting fairness and enforcing the equality status among individuals ‘by eliminating from decisions illegitimate considerations based on race or other prohibited considerations that have harmful consequences for individuals’.98 While the main focus in the enforcement of the individual justice model consists in the prohibition of non-discrimination, the principal objective of a model of group justice consists in the achievement of a broader concept of equality and redistributive justice.99 Affirmative procurement actions implemented in Canada,100 South Africa101 or the United States102 to support structurally disadvantaged groups in their societies are probably the most remarkable examples of the historical role of public procurement in the promotion of group justice in the context of a broad policy of economic distribution. The main distinction between an individual and a group justice model of procurement linkage is also reflected in the European Commission’s classification of the different social objectives included in socially responsible procurement practices across Europe. According to the study of the EU Commission, as shown in Table 2.1, there are at least five broad categories of labour and social concerns included in procurement regulations and practices, reflecting the functional models of both individual and group justice.103

97 

McCrudden (n 16) 63.

98 ibid.

99  Christopher McCrudden, David J Smith and Colin Brown, ‘Groups Versus Individuals: The Ambiguity Behind the Race Relations Act’ (1999) 12 Policy Studies 26. 100 Colleen Sheppard, ‘Challenging Systematic Racism in Canada’ in Elaine KennedyDubourdieu (ed), Race and Inequality: World Perspectives on Affirmative Action (Ashgate 2006) 43–62. 101  Phoebe Bolton, ‘An Analysis of the Preferential Procurement Legislation in South Africa’ (2007) 16 Public Procurement Law Review 36. 102 Joseph F Francois and Douglas R Nelson, ‘Public Procurement in the United States: A Post-Uruguay Round Perspective’ in Bernard M Hoekman and Petros C Mavroidis (eds), Law and Policy in Public Purchasing: the WTO Agreement on Government Procurement ­(University of Michigan Press 1997) 105–124. 103  Other social requirements that do not specifically focus on labour rights are also included in the classification conducted by the EU Commission: the promotion of SMEs in the access of public procurement, the reference to ‘ethical trade’, the achievement of the voluntary objectives of ‘corporate social responsibility’ and the protection of human rights. European Commission, ‘Buying Social. A Guide to Taking Account of Social Considerations in Public Procurement’ (Publications Office of the European Union 2010).

62  Unpacking the Use of Public Procurement Table 2.1:  Justice Models in Public Procurement Practices Functional Models Group justice model

Categories Employment opportunities

Social Requirements Promotion of young employment Promotion of gender balance Opportunities for long-term unemployed and older workers

Social inclusion Support for initiatives for the inclusion of people with disabilities Procurement opportunities for migrants and individuals from disadvantaged groups Individual justice model

Decent work

Decent salary and minimum wages Gender equality and non-discrimination Occupational health and safety Access to social protection

Compliance with labour rights

Compliance with national law and collective agreements Compliance with EU labour regulations Compliance with occupational and safety law Fighting discrimination on different grounds

i.  Group Justice Model of Public Procurement Responding to a functional model of collective and redistributive justice, the promotion of ‘employment opportunities’ is one of the crucial social policy concerns integrated in the procurement system. Contracting authorities have frequently taken the promotion of youth employment or of employment opportunities for long-term unemployed, the inclusion of older workers or people from disadvantages and minority groups in the redistribution of public contracts into account in their purchasing activities. A typical example that attracted attention in the literature is the 2002 Public Procurement Policy, adopted in Northern Ireland as a pilot project to address the problem of structural unemployment in the region104 which had arisen as a consequence of religious discrimination in the 1970s and 1980s.105

104  Andrew Erridge, ‘Public Procurement, Public Value and the Northern Ireland Unemployment Pilot Project’ (2007) 85 Public Administration 1023. 105  Christopher McCrudden, ‘Procurement and the Public Sector Equality Duty: Lessons for the Implementation of the Equality Act 2010 from Northern Ireland?’ (2011) 11 International Journal of Discrimination and the Law 85.

The Social and Labour Dimension of Public Procurement 63 In the broad context of group and social justice, public procurement has also been exercised for the purpose of supporting ‘social inclusion’ and promoting socio-economic development in the national and local communities. The award of public contracts has been interpreted as an instrument to ensure a level playing field for social categories traditionally excluded from the access to public contracts or the labour market. Public procurement has often managed to provide incentives and support to firms, cooperatives and non-profit organisations owned by or employing persons belonging to ­ethnic and minority groups, as well as those promoting the inclusion of people with disabilities in the job market. An important example, studied in the procurement literature, of a public procurement system oriented towards the achievement of the social integration of disadvantaged groups—of particular interest because it is outside the European and Anglo-American tradition of redistributive justice—is probably the example of Malaysia. In order to overcome the colonial past and to support the integration of the indigenous Malays or Bumiputera in the society, the Malaysian procurement system introduced various provisions and granted significant preferences to the members of these disadvantaged groups for access to public services and contracts, education opportunities and business licences.106 Since the adoption of these affirmative actions in 1995, the Malaysian governments have considerably improved the procurement system, increasing transparency and accountability in the administration of procurement preferences107 and also being accepted as an observer to the Government Procurement Agreement (GPA) in July 2012.108 ii.  Individual Justice and Public Procurement Together with the objective of distributive justice, public procurement has also been frequently used for the enforcement of models of individual equality. An important pillar of the individual justice model consists in the promotion of fair working conditions in the public markets and along the bidders’ supply chain.109 In the context of socially responsible public procurement, various labour concerns at different stages of the award selection process have been often

106 Christopher McCrudden and Stuart G Gross, ‘WTO Government Procurement Rules and the Local Dynamics of Procurement Policies: A Malaysian Case Study’ (2006) 17 European Journal of International Law 151. 107  Long Seh Lih, ‘Malaysia’ in Christine Kaufmann and others (eds), Business and Human Rights in ASEAN. A Baseline Study (Human Rights Resource Centre University of Indonesia 2013) 193–244. 108  Khairul Naim Adham and Chamhuri Siwar, ‘Transformation of Government Procurement in Malaysia: Direction and Initiatives’ (2011) Conference Paper, International Public Procurement Conference, Seattle, August 2011. 109  Arrowsmith, Linarelli and Wallace (n 8) 280–83.

64  Unpacking the Use of Public Procurement taken into consideration: the right to sufficient and equal payment, decent working hours, the observation of occupational health and safety conditions, freedom of association, collective bargaining and social dialogue, access to training, equal treatment between men and women, including the principle of equal payment for work of equal value, as well as the promotion of gender equality.110 Among EU Member States, the enforcement of decent working conditions represents the main political and economic driver for the social use of public procurement. Requirements related to each of these socio-labour objectives are present in 32 per cent of the tender document and procurement practices in European countries.111 Moreover, the instrumental social use of public procurement not only refers to the promotion of fair labour practices and decent working conditions, but it also aims to achieve the enforcement of and compliance with specific national and international labour regulations on contractors and subcontractors. Procurement practices very frequently request compliance with their national law in their bidding documents, including the basic labour and employment regulations, at national and European level, applicable to public contracts.112 Reference to international standards of labour protection, such as the requirement to comply with International Labour Organization (ILO) instruments of labour protection, is also particularly important in procurement practices. With the objective to ensure freedom, security and human dignity in working conditions—as developed in the Fundamental ILO ­Conventions113 and incorporated in the ILO Declaration on Fundamental Principles and Rights at Work of June 1998114—a number of international labour standards are often included in the procurement context. As confirmed in the research conducted so far at the EU level, the fundamental 110  Leah F Vosko, ‘Decent Work: The Shifting Role of the ILO and the Struggle for Global Social Justice’ (2002) 2 Global Social Policy 19. 111  Essig and others, ‘Strategic Use of Public Procurement in Europe’ (2011) 94. 112  Arrowsmith, ‘Horizontal Policies in Public Procurement’ (2010) 149–186. 113  Eight ILO Conventions, codifying the basic principles and rights of workers, have been classified as ‘Fundamental’ by the ILO’s Governing Body, namely: Freedom of Association and Protection of the Right to Organise Convention, 1948 (No 87), Right to Organise and Collective Bargaining Convention, 1949 (No 98), Forced Labour Convention, 1930 (No 29), Abolition of Forced Labour Convention, 1957 (No 105), Minimum Working Age Convention, 1973 (No 138), Worst Forms of Child Labour Convention, 1999 (No 182), Equal Remuneration Convention, 1951 (No 100) and Discrimination (Employment and Occupation) Convention, 1958 (No 111). See ILO, The International Labour Organization’s Fundamental Conventions, 2002, http://www.ilo.org/wcmsp5/groups/public/@ed_norm/@declaration/documents/publication/wcms_095895.pdf. 114 Adopted by the International Labour Conference at its Eighty-sixth Session, Geneva, 18 June 1998 (Annex revised 15 June 2010). Text and follow up available at http://www.ilo. org/declaration/thedeclaration/textdeclaration/lang--en/index.htm. For a more extensive analysis of the 1998 ILO Declaration, see Francis Maupin, ‘Revitalization Not Retreat: The Real Potential of the 1998 ILO Declaration for the Universal Protection of Workers’ Rights’ (2005) 16 European Journal of International Law 436.

The Social and Labour Dimension of Public Procurement 65 ILO Convention and Principles that have been frequently included in public procurement process and contracts in the European context are: the ban of forced labour (Conventions 29 and 105); the establishment of the right to freedom of associations and collective bargaining (Conventions 87 and 98); the protection from Child Labour (Conventions 138 and 182); the guarantee of non-discrimination in terms of employment and occupation (Conventions 100 and 111); and combating other forms of discrimination (on the grounds of age, disability, race, religion and sexual orientation).115 The role of the ILO and its regulatory instruments has provided crucial guidance and reference in attaining a model of individual justice based on the fundamental rights to equal treatment and non-­ discrimination in employment.116 Public procurement has been described as one of the important political and economic incentives at national level that help ‘promote … equality of opportunity and treatment in respect to employment and occupation, with a view to eliminating any discrimination in respect thereof’, as required by Article 2 of the 1957 ILO Convention on Employment Discrimination and confirmed in the Recommendation R111.117 In the ILO’s 2007 Global Report Equality at Work: Tackling the Challenges, following up to ILO Declaration on Fundamental Principles and Rights at Work, the importance of public procurement as a complementary instrument to guarantee equality in employment at national level is explicitly underlined.118 Reviewing the social use of public procurement in Europe, the United States and South Africa, the 2007 ILO Global Report emphasises the potentiality of public procurement for the promotion of equality in the workplace and along the supply chain, without being necessarily in conflict with the achievement of ‘value for money’ in the tendering processes.119 C.  The ILO Convention No 94 on ‘Labour Clauses in Public Contracts’ Among the different labour requirements included in procurement p ­ ractices, one controversial aspect—the payment of workers of minimum or decent

115  Public World, ‘EU Public Procurement Regulation and Core Labour Standards’ (Public World 2007) available at http://www.publicworld.org/files/dfid2007.pdf. 116  McCrudden (n 16) 67–68. 117  In Section II ‘Formulation and Application of Policy’ para 2:3(b) of Recommendation R111 each member should ‘promote their observance, where practicable and necessary, in respect of other employment and other vocational guidance, vocational training and placement services by such methods as (ii) making eligibility for grants to training establishments and for a licence to operate a private employment agency or a private vocational guidance office dependent on observance of the principles’. 118  ILO—Report of the Director General, ‘Equality at work: Tackling the challenges’ Global Report Under the Follow-up to the ILO Declaration on Fundamental Principles and Rights at Work (ILO Publishing 2007). 119  ibid 64–67.

66  Unpacking the Use of Public Procurement wages—deserves specific attention. Particularly in the context of labour intensive industrial sectors (such as construction and public works, the clothing industry, cleaning and health services), the question of the correct payment of workers becomes even more crucial. The issue of the workers’ wages comprises broad political and economic considerations due to the direct impact on the bid’s final price offers and immediate consequences on the competitive advantages of the suppliers, as well as important implications in terms of corruption and wage dumping strategies.120 The inclusion of fair and decent wage clauses in public contracts does not only have a long tradition in the procurement practices of the United States121 and European countries,122 but is also at the centre of a specific ILO Convention, the only binding international instrument addressing labour rights in public procurement. The International Labour Conference in 1949 adopted Convention No 94 and Recommendation No 84 on ‘Labour Clauses in Public Contracts’. Both Convention No 94 and Recommendation No 84 entered into force in 1952 and were reformed in 2008,123 with a current membership of 62 countries.124 There are two main regulatory objectives at the centre of ILO Convention No 94. First, it aims to ensure high standards of labour protection and avoiding a downward pressure on wages and labour conditions for workers executing public contracts. Second, Convention No 94 also strives to achieve a balance between competition concerns and labour protection; it introduces a ‘truly level playing field for public procurement in so far as labour standards are concerned and puts tenderers on notice that there can be simply no comparative advantage at the expense of workers’ employment and working conditions’.125

120 Thorsten Schulten and others, Pay and Other Social Clauses in European Public ­ ontracts. An Overview on Regulation and Practices with a Focus on Denmark, Germany, C Norway, Switzerland and the United Kingdom. Study on behalf of the European Federation of Public Service Unions (EPSU), 2012. 121  The debate and the inclusion of fair payment clauses in procurement contracts in the United States started with the adoption of the Davis-Bacon Act of 1931 and with the WashHealey Public Contracts Act of 1936, see George Paulsen, A Living Wage for the Forgotten Man: The Quest for Fair Labor Standards, 1933–1941 (Susquehanna University Press 1996); McCrudden (n 16) 37–42. 122  Brian Bercusson, Fair Wages Resolutions (Mansell 1978). 123  Convention No 94 has been denounced by only one Member State, the United Kingdom, in 1982, with the justification that working conditions would have been better ensured by voluntary agreements without state intervention. http://www.ilo.org/dyn/normlex/en/f?p=1000 :11200:0::NO:11200:P11200_COUNTRY_ID:102651. 124  For an overview of the Ratifications of Convention No 94 see http://www.ilo.org/dyn/ normlex/en/f?p=1000:11300:0::NO:11300:P11300_INSTRUMENT_ID:312239. 125  ILO International Labour Conference, ‘General Survey Concerning the Labour Clauses (Public Contracts) Conventions, 1949 (No. 94) and Recommendation (No. 84)’ (ILO Publications 2008) 10.

The Social and Labour Dimension of Public Procurement 67 To achieve these two major objectives, Convention No 94 advocates for the inclusion of labour clauses in public contracts at central, regional and local level,126 ensuring respect of minimum labour conditions to public workers with regard to wages, allowances, hours of work and other working requirements.127 According to Convention No 94 and Recommendation No 84, labour clauses should guarantee the ‘most favourable working conditions’. It requires that labour standards included in contractual provisions should not be less favourable than the ones imposed on the workers of the same trade and industrial sector in the area where the contract is carried out.128 As specified in Article 2(1), the most favourable working condition is established with reference to the relevant collective agreement, arbitration awards and national law or regulations. The purpose of Convention No 94 is not to impose established minimum wages but to ensure that workers enjoy wages and working conditions as satisfactory as the conditions normally established in national law. In this way, Convention No 94 aims to initiate a process of definition and promotion of wages and work conditions between the States that have ratified the Convention. Two crucial aspects of the Convention are particularly significant in relation to the actual promotion of labour rights in procurement practice and their enforceability along the production chain. First, Article 1(3) underlines that the contractual labour conditions required by the Convention also apply to public contracts carried out by subcontractors to guarantee an effective protection of the labour conditions in the actual production chain.129 Moreover, Article 5(1) of Convention No 94 considers the possibility of applying adequate sanctions to private parties of the contracts found in violation of these labour contracts, leaving it to the Member States’ discretion to identify the modalities of enforcement and the sanction for non-compliance.130 However, the 2008 Report of the ILO Committee of Experts of the Application of Conventions and Recommendations still registered significant discrepancies and uncertainties in the application of the Convention among

126  Convention No 94 does not apply to contracts between private parties but at least one should be a ‘public authority’ as specified by Article 1(a). 127  McCrudden (n 16) 554. 128  Henrik Karl Nielsen, ‘Public Procurement and International Labour Standards’ (1995) 2 Public Procurement Law Review 94. 129  Article 1(3) states that ‘This Convention applies to work carried out by subcontractors or assignees of contracts; appropriate measures shall be taken by the competent authority to ensure such application’. 130  Article 5 provides that ‘1. Adequate sanctions shall be applied, by the withholding of contracts or otherwise, for failure to observe and apply the provisions of labour clauses in public contracts. 2. Appropriate measures shall be taken, by the withholding of payments under the contract or otherwise, for the purpose of enabling the workers concerned to obtain the wages to which they are entitled’.

68  Unpacking the Use of Public Procurement its contracting parties: only one fourth of the Signatory Parties were in full compliance with the requirements set in Convention No 94 and, between those providing only a partial acceptance of the Convention, many governments have recently reformed their national labour legislation, in practice no longer giving effect to the requests of the Convention.131 Even if Convention No 94 represents the only binding international instrument addressing specifically the issue of labour protection in public contracts and in a comprehensive manner, it still faces major resistance from members and nonmember states, as proven by the small number of ratifications if compared to other ILO Conventions. While ILO Convention No 94 can be interpreted of a marginal importance for its limited ratification, its influence on the implementation of a model of procurement for individual justice in national legislations and at the European level is particularly significant. Under different modalities many European countries have not only ratified the Convention, but have also offered general or more specific forms of reference to labour clauses in public contracts. Austria, for example, included an explicit reference to Convention No 94 in its procurement system.132 Moreover, ILO Convention No 94 recently gained visibility and relevance thanks to the decision of the CJEU decision in the Rüffert case on April 2008 (Case C-346/06).133 This judgment raised the question—which remained unresolved—of possible conflicts between the ILO Convention No 94 and some crucial aspects of EU law such as the Posted Workers Directive 96/71/EC and the free movement of services, ex Art 54 et seq TFEU.134 The CJEU did not refer to ILO Convention No 94 in the judgment because it has not been ratified by Germany, but the case generated a discussion in the EU institutions on the incompatibility between Convention No 94 and the European legal framework. Emphasising the concerns raised by the Rüffert judgment, in October 2008 the European Parliament issued a Resolution on ‘Challenges to Collective Agreements in the EU’ specifically requesting’ the Commission to clarify this situation as a matter of urgency and to continue to promote the ratification of this Convention in order to enhance further the development of social clauses in public procurement regulations, which itself is an aim of the Public Procurement Directive’.135 131 

ILO International Labour Conference, ‘General Survey’ (2008) 59–61. Schulten and others, Pay and Other Social Clauses (2012) 13–17. 133 The Rüffet case concerns the public procurement regulation of the German federal State of Lower-Saxony allowing companies under public contract to not be obliged to fix wage levels on the basis of current local collective agreements. See Case C-346/06 Rechtsanwalt Dr Dirk Rüffert v Land Niedersachsen EU:C:2008:189, [2008] ECR I-1989. 134  Niklas Bruun, Antoine Jacobs and Marlene Schmidt, ‘ILO Convention No. 94 in the Aftermath of the Rüffert Case’ (2010) 16 Transfer: European Review of Labour and Research 473. 135  EU Parliament, Challenges to Collective Agreements in the EU, European Parliament resolution of 22 October 2008 on challenges to collective agreements in the EU (2008/2085(INI)), in C 15 E/50 Official Journal of the European Union. 132 

The Social and Labour Dimension of Public Procurement 69 Despite some limited developments, the potential of ILO Convention No 94 appears to be almost entirely unexplored, even if it constitutes a unique binding instrument and an important platform for achieving coherence in the implementation of labour rights.

D. Justifications and Implications of the Social Use of Public Procurement After having provided an overview of the main instrumental uses of public procurement, it is interesting to combine the analysis with the main rationales, advantages and disadvantages behind the inclusion of social and labour considerations in public procurement. There are two levels of political and economic considerations associated with the instrumental use of procurement practices: arguments linked to the decision to use procurement as a political instrument itself and implications linked to the choice of the implementation mechanisms adopted in the procurement process. On the one hand, the decision to implement social and labour policies through procurement practices relies on important political and economic justifications, also involving important considerations in terms of efficiency and competition. On the other hand, on a deeper level of analysis, the specific choice of procurement instruments for the achievement of specific social and labour purposes may also entail significant political and economic advantages and disadvantages. i. Principal Arguments in Support of the Inclusion of Social and Labour Policy Considerations Different arguments have been developed so far in support of the inclusion of social and labour policies in public procurement. One can identify two sets of supportive argumentations around the ‘procurement linkage’ based, on the one hand, on economic justification and, on the other hand, on broader considerations of political legitimacy. Together with these political and economic considerations, there are also strong legal arguments in support of the use of public procurement to achieve labour protection, based on the necessity to comply with international obligations, in particular deriving from international agreements on labour rights protection. The main justification supporting the instrumental use of public procurement is grounded in the political nature and role of the government as a buyer in the public market. National governments, acting through public contracting authorities, are not neutral economic players in the market. The award of public contracts is not a mere economic activity, but necessarily implies broader considerations of political philosophy, oriented towards

70  Unpacking the Use of Public Procurement attaining the economic and social welfare of the citizens.136 In a democratic context, national and local governments act in the markets on behalf of the community they represent by awarding public contracts. For this reason, it is reasonable to expect from the contracting authorities that they will not violate the basic social norms of the community when procuring the goods and services needed to carry out public functions. Public procurement has a much broader scope than private procurement and should be oriented towards reflecting the ‘public interest’, defined as ‘normative standards and practices which guide the political life of the society based upon widely shared moral principles or beliefs’.137 For this reason, it would be unacceptable for a government to allow practices in the award of public contracts that violate the basic social policies and labour regulations in force in its own community, such as the violation of basic human rights and labour rights.138 The necessity for a higher standard of behaviour for governmental authorities while acting in the market is further supported by various considerations on the opportunity for the instrumental use of public procurement as enforcement mechanism. One of the main justifications for the social and labour use of public procurement is grounded on rising concerns over the effectiveness of traditional methods of promoting the respect of social requirements and labour rights.139 Public procurement has progressively been used as additional mechanism to achieve social and labour objectives, trying to increase the influence of public authorities’ decisions on business practices.140 Moreover, the use of procurement policies has been argued to be more efficient and more transparent, if supported and linked to a broader social regulatory framework with legal and administrative regulations at a national and local level incorporated into a wider public strategy.141 Moreover, the instrumental use of public procurement not only strengthens the efficiency and coherence of broader national public policies, but it also increases the enforceability of voluntary business practices, for example in the context of CSR strategies.142 Public procurement has progressively been seen as a powerful method to enforce the respect of social and labour

136 

Trepte (n 5) 133–37. Andrew Erridge and John McIlroy, ‘Public Procurement and Supply Management Strategies’ (2002) 17 Public Policy and Administration 52. 138  McCrudden (n 16) 122–24. 139  Erridge and McIlroy, ‘Public Procurement and Supply Management Strategies’ (2002) 58. 140  Joseph E Stiglitz, ‘Government Failure vs. Market Failure: Principles of Regulation’ in Government and Markets Toward a New Theory of Regulation (Cambridge University Press 2010) 13–51. 141  McCrudden (n 16) 124–26. 142 Stefan U Hoejmose and AJ Adrien-Kirby, ‘Socially and Environmentally Responsible Procurement: A Literature Review and Future Research Agenda of a Managerial Issue in the 21st Century’ (2012) 18 Journal of Purchasing and Supply Management 232. 137 

The Social and Labour Dimension of Public Procurement 71 standards and CSR voluntary codes of conduct on businesses and private actors.143 In this light, public procurement becomes an effective method of providing concrete market-based incentives to private actors, in terms of access to public contracts, the adoption of social and sustainable criteria and avoidance of the ‘compliance gap’ typical of CSR initiatives.144 In addition to these political justifications, there are also economic arguments in favour of the instrumental use of public procurement, strictly linked to the role of government in correcting market failures. The use of public procurement to achieve social and labour policy objectives tackles two important types of market failures: the management of external factors and the provision of collective goods.145 First, the instrumental use of procurement has the potential to effectively address the problem of negative externalities and to enable their costs to be internalised.146 A typical example of the internationalisation of the external costs of pollution is represented by the emergence of green procurement.147 However, the economic function of public procurement to address market externalities also has a social dimension. The inclusion of social and labour criteria in the award of public contracts represents a method of shifting the costs to address work discrimination and labour inequalities from the government to the bidders, thus internalising the costs at the business level. Similarly, the necessity to address international market failure is also generally recognised as the basis for the importance of including core labour standards in trade instruments.148 Second, public procurement represents an important tool for providing public goods to all members of society.149 Raising and investing collective money through taxation, national governments traditionally served the primary economic function of providing to their community the goods not sufficiently provided by the market, like national defence, public safety or 143 

McCrudden, ‘Corporate Social Responsibility and Public Procurement’ (2006) 95. a broader overview, see David Vogel, The Market for Virtue: The Potential and the Limits of Corporate Social Responsibility (Brookings Institution Press 2005). 145  Trepte (n 5) 9–10. 146  Externalities can be defined as ‘situations when the effect of production or consumption of goods and services imposes costs or benefits on others which are not reflected in the prices charged for the goods and services being provided’, as in Glossary of Industrial Organisation Economics and Competition Law, compiled by RS Khemani and DM Shapiro, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs (OECD 1993) available https:// stats.oecd.org/glossary/detail.asp?ID=3215. 147  Paul R Schapper, João N Veiga Malta and Diane L Gilbert, ‘An Analytical Framework for The Management and Reform of Public Procurement’ (2006) 6 Journal of Public Procurement 1. 148 Christine Kaufmann, Globalisation and Labour Rights : The Conflict Between Core Labour Rights and International Economic Law (Hart Publishing 2007) 88. 149  The main characteristics of public goods are represented by lack of rivalry in their consumption and in that they cannot be excluded. For a more in depth analysis of the concept of global public goods in the context of globalisation, see Inge Kaul and others, Providing Global Public Goods: Managing Globalization (Oxford University Press 2003). 144  For

72  Unpacking the Use of Public Procurement infrastructures.150 Moreover, the concept of public goods, non-rivalry and non-excludability goods under-provided in the market by private actors, has developed over time and has progressively included complex public services like health care and education, and ‘global’ public goods such as pharmaceutical knowledge, human rights protection or protection of the financial stability of markets.151 In the context of the social use of public procurement, it would be possible to ‘conceptualize status equality as a public good that will not be adequately supplied in the absence of government intervention’.152 The achievement of social equality does not necessarily constitute a goal or a priority of private business firms and it is not in the interest of the firms to provide a level of social and labour protection comparable to the level desired by the national governments. On this ground, an increasing number of national and local governments see public procurement as one of the central mechanisms to address the various social problems of their communities. ii. Potential Adverse Effects of the Implementation of Social and Labour Policies Together with the advantages deriving from the procurement linkage, it cannot be disregarded that the inclusion of social and labour policy considerations—as well as the instrumental use of public procurement for purposes other than the achievement of value for money—has traditionally raised a number of serious concerns. Motivated by considerations of equality more than efficiency, the use of public procurement for social and labour objectives has usually been interpreted as a source of potential inefficiencies in the procurement system, particularly in terms of direct and indirect costs of implementation. Broadly speaking, the implementation of non-economic policy objectives, regardless if of environmental or social nature, has been traditionally presented as per se in conflict with the objective of maximising the e­ conomic efficiency in procurement.153 More precisely, the principal arguments against the instrumental use of public procurement for social purposes as developed in the literature could be grouped around four main lines of argument, all of them based on various interpretation of the object of economic efficiency in the procurement context. First, the main negative impact of the social use of public procurement— also common to the environmental use of procurement—is often attributed to the increase of costs resulting from the inclusion of non-economic 150 

Thai ‘Public Procurement Re-Examined’ (2001) 9. Ernst-Ulrich Petersmann, ‘International Economic Law, “Public Reason”, and Multilevel Governance of Interdependent Public Goods’ (2011) 14 Journal of International Economic Law 23. 152  McCrudden (n 16) 63–94. 153  Trepte (n 5) 59. 151 

The Social and Labour Dimension of Public Procurement 73 ­ bjectives into the procurement process.154 The cost effect associated with o the inclusion of other policy goals in the tendering process seems to be mainly experienced in the short run and related to the necessary adaptation process of the national procurement authorities to the new requirements.155 The increased costs could be explained by the added costs of verification and certification that could be incurred in the procurement process in order to ensure the respect of the non-economic requirements. The verification requirements, relying often on environmental labels and labour certifications, may increase the transaction costs for suppliers and may thus result in higher prices paid by the government authorities for the final goods and services procured.156 It is, however, questionable whether the incorporation of social and labour policies necessarily undermines the achievement of the best value for money purely from the perspective of costs. The increase in financial expenditure has to be evaluated on a case-by-case basis together with the commercial benefits experienced in some specific procurement sectors (for example energy saving products and services) in which an increase of competition for socio-environmental conformed goods and services may lead to price decreases.157 Second, the inclusion of social and labour policy considerations has the potential to undermine the efficiency of the procurement process not only by an increase in expenditure, but also by a rise in the administrative load of the process. Even when not resulting in higher prices, the inclusion of social responsibility requirements necessarily increases the level of complexity of the procurement process. The procurement linkage is frequently translated into additional administrative burdens in the procurement award procedure or ex post enforcement. In fact, the risk that more complex tendering procedures based on additional policy requirements will be reflected into longer time frames for finalisation of the entire procurement process is a very real problem and should be taken seriously, as it may undermine the overall efficiency of the system.158 154 

McCrudden (n 16) 115–17. Trepte (n 5) 14–15. Trionfetti, ‘Discriminatory Public Procurement’ (2000) 57–76. 156  At EU level, procurement officers experienced around 30% of cost increases in the case of Green Public Procurement, mainly in countries that only recently adopted environmental standards, such as Germany, France, Hungary and Lithuania. On the other hand, socially responsible requirements show more stability in the final costs, with a perceived increase of costs around 20% and mainly detected in Greece, Lithuania and Romania. Essig and others (n 34) 115–17. 157  The commercial benefits of the inclusion of non-economic policies have been highlighted in the inclusion of environmental considerations for the procurement of energy saving products. Jas Singh and others, Public Procurement of Energy Efficient Services (The World Bank 2010). 158 It is quite intuitive that the procurement process is lengthened as a natural result of the fact that specifications based on the non-economic policies have to be determined, more requirements have to be considered in the call for tenders and more time is consumed in the selection and the awarding of the bidders. 155 

74  Unpacking the Use of Public Procurement Third, from a perspective of good governance, the incorporation of non-economic objectives may also jeopardise the coherence of the entire procurement process, which is another aspect of the interpretation of the objective of efficiency. If the award procedure is not only focused on the mere achievement of the best value for money, but also oriented towards other legitimate policy objectives having a direct influence on transparency, the level of complexity of the entire procurement process may easily increase. The difficulties in balancing the increased number of policy objectives incorporated in the procurement process may often result in contradictory requirements, threatening the transparency and predictability of the entire system.159 A fourth objection to the instrumental use of procurement it is linked to the argument of good governance and refers to the abuse of power. Undermining the transparency in the evaluation of the entire procurement mechanism, the inclusion of social and labour policy considerations may imply a risk of increasing complexity and undermining transparency in the procurement process.160 Facilitated by complex specifications or selection criteria, the margin of discretion left to procuring entities for taking into consideration other policy objectives often becomes critical, inevitably increasing the risk of favouritism and corruption.161 Rigorous and transparent rules, particularly for the inclusion of social and labour requirements, constitute an important tool for eliminating corruption and limiting uncompetitive and collusive practices of contracting authorities as well as on the ­supplier’s side, as highlighted in the OECD Principles for Integrity in Public P ­ rocurement.162 The principles of transparency, impartiality and reliability are strongly connected to the competition dynamics and, as explained before, they provide mutual support for the achievement of best value for money and efficiency in the public procurement system.163 Strictly linked with the impact on the efficiency of the procurement ­process, the instrumental use of public procurement has the potential to have significant implications on the competition dynamics in the market.164 The difficulty of balancing the need for transparency and competition together with the legitimate policy objectives and corruption concerns 159 Steven L Schooner, ‘Fear of Oversight: The Fundamental Failure of Business-like ­Government’ (2001) 50 American University Law Review 627. 160  Trepte (n 5) 118–22. 161  Arrowsmith, Linarelli and Wallace (n 8) 32–36. 162  OECD, ‘OECD Principles for Integrity in Public Procurement’ (OECD Publications 2009). 163  Arrowsmith, Linarelli and Wallace (n 8) 28–33. 164 Public procurement has a complex relationship with competition law and policies. As a regulator and dominant economic player in the public market at the same time, public procurement plays a crucial role in enhancing the level of competition and limiting the risks of bid-rigging and cartels. Alberto Heimler, ‘Cartels in Public Procurement’ (2012) 8 J­ ournal of Competition Law & Economics 849. Albert Sanchez Graells, ‘Collusion and Competition from a State and Market Perspective’ (2013) ‘Public Procurement: Global Revolution VI’ ­Conference, Law School, University of Nottingham, 24–25 June 2013.

The Procedural Mechanisms of Social Procurement 75 is becoming one of the primary challenges at the different levels of procurement and, at the same time, of market governance. In this delicate regulatory balance, the inclusion of social and labour requirements in the procurement process has a significant direct effect on the level of competition because it may result in unnecessary restrictions to the access of public procurement.165 On the one side, the linkage with social and labour objectives directly and indirectly increases the costs for the bidders who wish to enter into competition for public contracts, thus reducing the actual number of suppliers capable and willing to compete and resulting in a process of negative ‘cost discrimination’ in the competition dynamics.166 On the other side, the imposition of certain social and labour requirements in the tendering documentation may operate as initial blocks, increasing discrimination in the access to the procurement market and with a negative effect on the competition dynamics.167 The inclusion of social and labour requirements often oriented towards employment objectives or focused on specific disadvantaged social groups or underdeveloped geographical areas necessarily imply a certain degree of discrimination against foreign bidders, with even higher loss of competition.168 IV.  THE PROCEDURAL MECHANISMS BEHIND THE SOCIAL AND LABOUR USE OF PUBLIC PROCUREMENT

As explored in its long and complex tradition, the instrumental use of ­public procurement can serve various social and labour purposes, following models of social and individual justice, and with significant implications on efficiency, transparency and competition dynamics. However, the dimension of this impact is strongly related to the choice of procedural mechanisms of integration and implementation of social and labour requirements. There is clearly no agreement on the identification of the most appropriate stage in the procurement process, where social and labour policy considerations could and should be included.169 Each step of the procurement process offers different implementation methods with various implications of legal and economic nature. Based on the findings collected in the literature, the following section aims at providing an overview of the various possibilities of including social and labour requirements in different stages of the procurement process. 165  Albert Sanchez Graells, Public Procurement and the EU Competition Rules (2nd Revised edition edition, Hart Publishing 2015) 230–302. 166 Simon Evenett, ‘Multilateral Disciplines and Government Procurement’ in Philip ­English, Bernard Hoekman and Aaditya Mattoo (eds), Development, Trade and the WTO. A ­Handbook (The World Bank Publication 2002) 417–27. 167 Timothy F Bresnahan and Peter C Reiss, ‘Entry and Competition in Concentrated ­Markets’ (1991) 99 Journal of Political Economy 977. 168  McCrudden (n 16) 116–18. 169  Arrowsmith (n 9) 105.

76  Unpacking the Use of Public Procurement Before moving into the overview, it is important to clarify that the entire procurement process is traditionally divided into three main phases.170 The ‘procurement cycle’ primarily comprises the planning phase, followed by the actual selection and award of the best contracting partner for the goods and services to be procured, and it is concluded with the management and the enforcement of the procurement contract.171 These three different phases are subject to different legal frameworks. Procurement planning essentially remains a political process not bound by stringent legal requirements; the award of public contracts in the second stage of the procurement process is the phase in the procurement circle generally subject to the most extensive procurement laws and regulations, while the public contract management is mainly administrated under contract or administrative law at national level.172 The principal regional and international initiatives regulating public procurement mainly focus on the second stage of the procurement process. The possibility of including social and labour considerations are extended to all three phases of the procurement process, from procurement planning to the final phase of public contract management (as highlighted in Table 2.2). The overview of the different implementation mechanisms along the entire procurement process will provide the basis for following comparative analysis of the regulation of the procurement cycles under the major international instruments of procurement regulations. Table 2.2:  Implementation Methods at Different Stages of the Procurement Process Phases of the Procurement Circle 1. Procurement Planning

Steps in the Procurement Decision-Making Process Decision to purchase or not to purchase Decision on what to purchase Packaging and timing of orders

2. Procurement selection and award

Set-aside schemes Technical specifications and contract requirements Exclusion criteria Preference in inviting firms to tender Award criteria

3. Procurement contract management Contract performance conditions Contract management and compliance monitoring 170 

Trepte (n 5) 37–39. Arrowsmith, Linarelli and Wallace (n 8) 845. 172  Chris Jansen and others, ‘Towards (Further) EU Harmonization of Public Contract Law’ (2012), 5th International Public Procurement Conference, Seattle August 17–19, 2012. 171 

The Procedural Mechanisms of Social Procurement 77 A.  Procurement Planning and Procurement Decision-Making Process Procurement planning represents the first and preliminary stage of the procurement process. As a fundamental element in the effective and efficient achievement of the main procurement objectives, careful procurement planning ensures the successful acquisition of goods and services on the market according to the government needs. This is the phase of the procurement process that characterises procurement as a managerial discipline rather than an administrative one, essentially articulated on a series of strategic political decisions. Two crucial elements are mainly addressed in the planning phase: the decision to purchase and the decision on what to purchase. The legal framework of the decision-making process in the initial steps of the procurement process is very limited and restricted to the overall definition of the main regulatory objectives of the procurement system, which lie behind the decision whether or not to purchase.173 At this stage of the procurement process, the identification of procurement needs is strictly linked to the assessment of the socio-economic priorities of the government in its purchasing activities and in the identification of the sustainable options available in the market.174 The identification of clear social goals at the beginning of the procurement process becomes a fundamental aspect to the design of the specific procurement actions. At this first stage of the procurement process, governmental authorities necessarily interact with the various interests of the relevant stakeholders involved in the public procurement decision-making process.175 The expectations and interests of political leaders, legislators, auditors, other oversight bodies, as well as the media and non-governmental organisations (NGOs), play a crucial role in the procurement decision-making process of governmental authorities. Thus, the initiation of a public procurement process is based not only on the decision to strictly satisfy the specific needs of the public authorities, but it can also be strongly influenced by the political compromise resulting from the economic, but also industrial, social and labour concerns of crucial stakeholders.176 Due to the influence of external

173 

Schooner, ‘Desiderata’ (20012) 103–09. Procura + European Sustainable Procurement Network, The Procura + Manual, a Guide to Implementing Sustainable Procurement (3rd edn, 2016, ICLEI Publications) 46–48. 175 Steven Schooner, Daniel Gordon and Jessica Clark, ‘Public Procurement Systems: Unpacking Stakeholder Aspirations and Expectations’ [2008] GWU Law School Public Law Research Paper. 176  One of the most remarkable examples for the importance of the decision-making process in public purchasing is represented by procurement decisions in times of financial crisis, when government choices were particularly driven by the legitimate desire to use public procurement as an instrument to boost the national economy with stimulus and ‘buy national’ packages. Schooner and Yukins ‘Public Procurement’ (2009) 87–92. 174 

78  Unpacking the Use of Public Procurement actors in the decision-making process during the pre-bidding phase of the procurement process, the risk of undermining the integrity of the process is particularly high.177 However, the establishment of collaboration with different stakeholders and stimulating the engagement with the suppliers can also offer opportunities for the development of innovative solutions in reply to social needs and promote the principles of social responsibility from an early stage.178 B.  Packaging and Timing of Public Orders Another procedural solution for the implementation of social and labour policy objectives at the beginning of the procurement process consists in packaging and timing of the procurement offers on the market. In order to overcome the difficulty for SMEs to tender for public procurement contracts, the strategic placement of public orders on the markets has frequently been adopted in response to social objectives. Two possibilities have traditionally been utilised: it is possible to sub-divide public contracts into different slots that can either be awarded at the same time or allocated over a longer period of time on the market.179 The division of complex public contracts into various slots has the clear advantage of broadening the level of competition, extending the participation from small to large enterprises. As recognised in the European Code of Best Practice, the packaging and timing of the procurement offers f­ acilitates access to public procurement contracts for small and local ­economic ­enterprises.180 However, the increased presence of small and medium ­economic operators not only has a positive impact on the level of competition in the market, but it also increases the potentiality and the capacity of innovation, thanks to the traditional flexibility of SMEs to quickly respond to the governments’ needs with innovative offers.181 However, the decision to fragment public contracts necessarily has to take into account the feasibility of the economic and technical aspects of each single procurement contract. The risk of increasing the administrative costs 177  Common risks to integrity vary from the lack of an adequate need and budget assessment, to political interference and the opportunity for corruption, as well as the unclear definition of requirements that could result in an inappropriate choice of procedure and preparation timeframe. OECD, ‘OECD Principles for Integrity in Public Procurement’ (2009) 53–63. 178  Chartered Institute of Purchasing & Supply (CIPS), Ethical and Sustainable Procurement (CIPS Publications 2013) 8–10. 179  Arrowsmith, ‘Horizontal Policies in Public Procurement: A Taxonomy’ (2010) 174. 180  European Commission, Commission Staff Working Document, European Code of Best Practices Facilitating the Access by SMEs to Public Procurement Contracts, SEC (2008) 2193, Brussels, 25 June 2008. 181  Martin Burgi, ‘Small and Medium-Sized Enterprises and Procurement Law—European Legal Framework and German Experiences’ (2007) 4 Public Procurement Law Review 284.

The Procedural Mechanisms of Social Procurement 79 for each administrative procedure is often implied in the fragmentation of the procurement procedures. The supervision of different award procedures and the administration of various smaller contracts may translate into a loss of efficiency for the public administration because of the disproportionate engagement of public resources in the realization of the projects. Moreover, the loss of economies of scale implied in the separation of award procedures in packages for public offers may discourage larger contractors from participating, even though they may potentially be able to offer better prices, thus leading to the public authorities paying higher prices.182 The division of public contracts into smaller procurement sub-contracts has been traditionally introduced specifically to support the development of SMEs as a national industrial strategy.183 However, the advantages for the whole procurement process arising from the involvement of SMEs go beyond pure industrial and commercial objectives, with broader labour and social implications.184 The economic benefit generated by the allocation of public contracts at local level has been widely interpreted as an important source of job creation, for example in the US procurement tradition, reinforced by the recent Interagency Task Force on Federal Contracting Opportunities for Small Businesses adopted by President Obama in spring 2010,185 as well as the European economic cohesion policy.186 Moreover, the involvement of SMEs in the allocation of public contracts has been traditionally at the centre of the European procurement strategies focused at limiting unemployment and at accelerating economic recovery in disadvantaged regions.187 In many EU countries, the promotion of the participation of SMEs has been translated into specific provisions in the national procurement regulations during the recent financial crisis, like in the case of Italian Law No 214 of 22 December 2011 named Urgent Ordinance on Growth, Equality and Consolidation of Public Expenses. Article 44 of the Italian Ordinance No 214 modifies the Italian Code of Public Contracts, recognising the priority of facilitating the inclusion of SMEs particularly in complex infrastructure projects.188 This recent modification of the Italian Public Procurement Code clearly encourages public authorities to package public contracts and divide them into different functional slots,

182 

Arrowsmith (n 9) 139. O’Brien, ‘Public Procurement and the Small or Medium Enterprise (SME)’ (1993) 2 Public Procurement Law Review 82. 184  Arrowsmith, Linarelli and Wallace (n 8) 238–44. 185  Max V Kidalov and Keith F Snider, ‘Once More, with Feeling: Federal Small Business Contracting Policy in the Obama Administration’ (2013) 1 Public Procurement Law Review 15. 186  Hatzis, ‘The Legality of SME Development Policies’ (2009) 345. 187 Edit Lukács, ‘The Economic Role of SMEs in World Economy, Especially in Europe’ (2005) IV European Integration Studies 3. 188  Angela Troisi, ‘Partenariato Pubblico-Privato Ed Investimenti Infrastrutturali: Opportunità Per Uno Sviluppo Sostenibile’ [2011] 3 Economia e diritto del terziario 553–68. 183 George

80  Unpacking the Use of Public Procurement whenever technically possible and economically reasonable, in conformity with the European Directives.189 The EU Commission, in fact, even though discouraging the adoption of discriminatory policies against large enterprises, has clearly encouraged the promotion of SMEs in their access to award procedures in terms of reduction of participation costs and simplification of bureaucratic procedures in the preparation of bids. C.  Set-Aside Procurement Schemes for Social and Labour Purposes One of the most traditional methods for the implementation of social and labour policies in public procurement is represented by set-aside schemes. Set-asides consist of simple reservation schemes, allowing only firms with prescribed characteristics to compete for contracts reserved for their exclusive execution or portions thereof.190 Their adoption in government contracts has a long consolidated history in the US and Europe: after both World War I and World War II the British and the American governments addressed the needs of disabled and marginal workers with the extensive implementation of these types of preferences in the award of public contracts.191 Traditionally linked to support for SMEs, the adoption of procurement set-asides has been linked to wider redistributive policies in the national economy, the promotion of social equality and the support of national employment policies. This type of affirmative action has been widely used to provide incentives and opportunities for the economic growth and employment of disadvantaged ethnic minority groups, for example those in the US adopted in favour of black-owned businesses.192 Procurement policies based on set-aside preferences have also been adopted in Malaysia, in support of native Bumiputera,193 as well as in Canada, favouring Aboriginal businesses.194 However, the South African system of targeted procurement is probably the most extensive programme of set-asides, established with the principal objective of restoring equity and efficiency after the collapse of the apartheid regime as clearly mentioned in the new South African Constitution.195 189  Article 44 of the Italian Ordinance no 214, in order to encourage the access of small entities to public contracts, the documentation and certification procedures required for the selection in the award procedures of an Italian public contract are simplified for SMEs, together with increased support for electronic submissions in case of smaller firms. 190 Francis Ssennoga, ‘Examining Discriminatory Procurement Practices in Developing Countries’ (2006) 6 Journal of Public Procurement 218. 191  McCrudden, ‘Using Public Procurement to Achieve Social Outcomes’ (2004) 259. 192  McCrudden (n 16) 167. 193  McCrudden and Gross, ‘WTO Government Procurement Rules’ (2006) 12. 194  McCrudden (n 16) 6. 195  Phobe Bolton, ‘Government Procurement as a Policy Tool in South Africa’ (2006) 6 J ­ ournal of Public Procurement 193. Bolton and Quinot, ‘Social Policies in Procurement’ (2011) 459–480.

The Procedural Mechanisms of Social Procurement 81 As proven in their diffuse use, the direct award of public contracts assures a rapid and tangible allocation of economic benefits to the targeted beneficiaries, guaranteeing the immediate availability of public funds through the procurement process.196 Moreover, set-asides are also easy measures for public procurement officials to process, introduce and implement particularly in the procurement systems of developing countries.197 However, this method of enforcing labour and employment policy objectives has proven highly problematic and frequently counter-productive, as it entails major limitations.198 First, the level of competition for contracts is drastically reduced; only targeted subjects and uncompetitive favoured groups are allowed to participate in the public award procedure. This mechanism results in extra costs for the governments and losses in the economy and the efficiency of the whole procurement process.199 Moreover, set-asides have been particularly criticised for being counter-productive in a broader perspective: by protecting the market shares of inefficient firms from favoured groups, set-asides do not always offer sufficient incentives to develop competitive industries and, in the long run, efficiently contribute to the economic growth of the disadvantaged minorities.200 Instead of reflecting a economic strategy of economic growth, in fact, set-asides are often adopted as a result of political and electoral pressure, leading to ambiguous and non-transparent dynamics and increasing the direct and indirect costs for the governmental administration.201 Based on their restrictive effects on the competition and their discriminatory nature, set-aside policies are traditionally interpreted as one of the most distortive type of procurement practice, and, for this reason, are generally not permitted under the principal procurement regulations, unless exclu­ ded by their coverage in the case of the WTO. However, in the ­European procurement regulatory framework—as reformed by the 2014/24/EU ­Directive—there is a clear exception to the general interdiction of set-aside procurement practices, which increases the possibilities of reserving the participation in award procedures to sheltered workshops or sheltered employment programmes, in particular in support of disadvantaged ­workers as

196 

Arrowsmith (n 9) 137. Fenster, ‘Multilateral Talks on Transparency in Government Procurement: Concerns for Developing Countries’ (2003) 34 IDS Bulletin 65. 198  Andrew George Sakallaris, ‘Questioning the Sacred Cow: Reexamining the Justifications for Small Business Set Asides’ (2007) 36 Public Contract Law Journal 685. 199 Ron B Watermeyer, ‘Tools and Techniques to Facilitate the Alignment of Public and Donor Procurement Systems to Promote Sustainable Development Objectives’ [2004] Public Sector Procurement Law Review 30. 200  Arrowsmith (n 9) 137. 201  Susan Rose-Ackerman, Tina Søreide and Gustavo Piga (eds), ‘A Fighting Chance against Corruption in Public Procurement?’, International Handbook on the Economics of Corruption (Edward Elgar Publishing 2011) 141–182. 197 Giovanna

82  Unpacking the Use of Public Procurement well as workers with disabilities.202 The European set-aside scheme aimed to efficiently reintegrate people with disabilities into the labour market, thus maximising their economic opportunities. For this reason, Recital 36 of 2014/24/EU affirms that ‘it is appropriate to provide that Member States should be able to reserve the right to participate in award procedures for public contracts or for certain lots thereof to such workshops or businesses or reserve performance of contracts to the context of sheltered employment programmes’.203 In the EU procurement framework, many European countries adopt similar mechanisms of procurement reservations. The 2006 French Public Procurement Contracts Code (Art 15) is probably the most visible example that makes a system of set-asides and price preferences available to companies striving to employ a certain minimum percentage of disabled workers.204 D. The Instrumental Use of Contract Specifications for Social and Labour Purposes Drafting contract specifications represents an important opportunity for the inclusion of a reference to social and labour policy considerations in the award of public contracts, even if with considerable impact on the level of competition. In this initial phase of the procurement process, the contracting authorities define the essential characteristics of the goods, works and services that they intend to purchase, in the most objective manner possible, generally in terms of quality, performance and safety requirements.205 There are three main types of contract specifications: they can be defined in relation to technical standards, performance and functional requirements. If technical specifications provide a description of the physical and technical characteristic of the products, performance and functional specifications represent more open and flexible approaches to the definition of the contract specifications, on the base of performance and functional parameters. Performance and functional specifications essentially invite the interested suppliers to offer a solution to governmental needs or a problem experienced by the public authorities. Setting the functions and the performances required by the contract, they leave the bidders free to offer different and innovative solutions, based on their better technical knowledge of the specific market and expertise on the supply side.206

202 

Boyle, ‘Disability Issues in Public Procurement’ (2009) 310. accordance with Recital 36, Article 20 of Directive 2014/24/EU provides the ­specific regulatory guidelines for the inclusion of reservations for sheltered workshops in public contracts. 204  McCrudden (n 16) 556. 205  Arrowsmith, Linarelli and Wallace (n 8) 407. 206 Eleanor Aspey and Glenn Fletcher, ‘Social and Environmental Policies in Public ­Procurement’ (Achilles Group Limited 2010) 5. 203  In

The Procedural Mechanisms of Social Procurement 83 The flexibilities offered by functional specifications seem to be particularly promising for addressing non-economic policy objectives in the procurement process.207 The use of functional and performance specifications is, for example, of crucial importance in the case of innovation procurement, allowing the bidders to offer alternative and innovative solutions, which may also be outside the options considered by the public authorities, thus maximising the use of the knowledge of the private actors in the market,208 as recognised by the EU Parliament.209 The same considerations on the advantages of performance-based specifications in the field of innovation can be extended to the instrumental social use of public procurement. In its handbook on the inclusion of social considerations in public procurement the EU Commission suggests to the contracting authorities to draft specifications ‘sufficiently broad to allow bidders to add value’ making use of their skills and experiences, but not unnecessarily broad, and clear enough to allow a proper and justifiable evaluation.210 It is important also to notice that, while providing measurable minimum criteria and often referring to production methods, contractual specifications have been also very frequently adopted for the implementation of environmental policies. The 2010 OECD Public Procurement Survey has revealed that the majority of OECD member countries (24 countries, including Canada, Japan, New Zealand, Switzerland and the United Kingdom) introduced green criteria in the technical specifications of the procurement contract, preferring it to the inclusion in the award phase (18 countries) and as a contract performance clause (13 countries).211 Regardless of the particular policy considerations included in the requirements, the principal scope of contract specifications consists in the definition of the subject matter of the public contract, describing the goods and services needed by the procuring authorities with technical, functional and performance characteristics. Specifications translate the subject of the procurement contract into detailed measurable requirements, taking into consideration the entire procurement procedure. Defining the subject matter of the contract, specifications are usually reprised in the award criteria, by which tenders can be evaluated, often including the f­unction of minimum

207 

Arrowsmith, ‘Horizontal Policies in Public Procurement: A Taxonomy’ (2010) 170–174. Hargeskog, ‘Innovation-Promoting Public Procurement’, International Public Procurement Conference Proceedings, Rome, 21–23 September 2006. 209  The EU Parliament in its report on the modernisation of public procurement, stressed that ‘specifications referring to performance and functional requirements and the express admission of variants give tenderers the opportunity to propose innovative solutions, particularly in highly innovative sectors such as ICT’. A Renewed EU Strategy 2011–14 for Corporate Social Responsibility para 31. 210  European Commission, ‘Buying Social’ (2010) 30. 211  OECD, ‘Special Feature: Green Procurement’ in Government at a Glance 2011 (OECD Publishing 2011), available at http://dx.doi.org/10.1787/gov_glance-2011-49-en. 208  Sven-Eric

84  Unpacking the Use of Public Procurement compliance criteria.212 The ability to meet the contract specifications is a prerequisite for the participation to the procurement selection process and, for this reason, the impact of technical specifications on the level of competition in the procurement markets is particularly intense. In this respect, the legal implications for the risks and the misuses of contract specifications are particularly relevant. By defining the subject matter of the contract more specifically, contract specifications determine the information needed to select the best bid, shaping the actual margin of competition between the potential suppliers and the size of the market of the public contracts.213 If they are not carefully drafted or if they are too strictly defined, the use of specifications can be highly misleading for the bidders, resulting in non-transparent procedures, with the risk of a drastic reduction of competition and inefficiency in the final outcome of the award procedure. In this perspective, the inclusion of social and labour references in the specifications probably increases these risks.214 A crucial aspect of defining the subject matter of the contract is represented by the decision of whether or not to include reference to production methods and delivery performance in the contract specifications.215 ­Production methods and characteristics become extremely relevant for the definition of the social and labour dimension of the goods and services to be procured. For example, a reference to working conditions, even if not necessarily altering the physical characteristics of the subject of the public contract, is very relevant particularly in the case of contracts for public works, which should include technical requirements with the aim of avoiding accidents on the construction site in the specifications. However, it is uncertain whether references to production methods that do not alter the final characteristics of the products (like the environmental or labour aspects of the production) should be included in ‘the subject matter of the contract’ or should be better addressed in the contract award criteria.216

212 Specifications are not simply interpreted as minimum legal standards, but they can require or allow the use of variants. In the EU procurement system the submission of alternative bids, ensuring the performance of work qualitatively equivalent to that for which tenders are invited, specifying the comparative parameters on the basis of which such equivalence is to be assessed, would be possible. See Case C-421/01, Traunfellner GmbH and Österreichische Autobahnen und Schnellstraßen Finanzierungs-AG (Asfinag) EU:C:2003:549, [2003] ECR I-11941. Christopher Bovis, ‘Developing Public Procurement Regulation: Jurisprudence and Its Influence on Law Making’ (2006) 43 Common Market Law Review 461. 213  Arrowsmith, Linarelli and Wallace (n 8) 407. 214  Client Earth, ‘Briefing No 5: Technical Specifications’ (2011) October 2011 Identifying Opportunities for Sustainable Public Procurement Briefing Series. 215 Abby Semple, ‘Production Processes and Methods—How Far Can You Go?’ (2012) Public Procurement Analysis, April. 216  Asselt, Grijp and Oosterhuis (n 66) 219.

The Procedural Mechanisms of Social Procurement 85 E. Shaping Exclusion and Qualification Criteria on Social and Labour Concerns The determination of exclusion and qualification criteria is a vital moment in the public procurement circle. Primarily focused on the identification of suitable candidates, the qualification process is important in ensuring a good outcome and maximising best value for money, but it is also significant in the enforcement of other non-economic considerations. In the overall perspective of the entire procurement process, if technical specifications determine the object matter of the public contract, selection criteria identify the characteristics and the ability of the economic operators to satisfy the requirements of that contract. This stage of the procurement process principally aims at the prequalification and qualification of the contractors suitable to perform the public contract, on the basis of specific minimum standards of exclusion and suitability criteria.217 Exclusion and qualification conditions can involve different types of substantive aspects in their requirements. First, qualification criteria focus on the technical and financial capability of contractors to successfully carry out the public contract to be awarded. For this reason, exclusion criteria can be drafted around the tenderer’s technical capacity to perform the contract according to specific conditions, like in the case of the inclusion of specific requirements in the delivery or the production of the goods and services. Even if the focus of the selection criteria is mainly on the bidders’ technical ability, it is nevertheless possible to include some considerations of a social nature in the evaluation of the technical capacity of fulfilling the contract, for example, the educational and professional qualification of the supplier’s personnel.218 Second, exclusion and suitability criteria can be based on requirements other than financial and technical characteristics. Bidders financially and technically able to perform the contracts are suitable candidates, but also bidders may qualify if they ensure the respect of legitimate policy concerns and have demonstrated their trustworthiness to the public authorities on account of their past behaviour.219 In this respect, qualification and exclusion situations can also concern broader aspects of the supplier’s professional conduct, such as corruption and business integrity, even if they do not necessarily concern the execution of the specific contract. It is thus possible

217  The selection process at this stage of the procurement circle can be conducted with the help of optional or mandatory lists of qualifying suppliers or through different shortlisting procedures. Arrowsmith, Linarelli and Wallace (n 8) 585. 218  European Commission (n 103). 219 Client Earth, ‘Briefing No. 6: Selection Criteria’ [2011] Identifying Opportunities for Sustainable Public Procurement Briefing Series.

86  Unpacking the Use of Public Procurement to imagine qualification and exclusion criteria that concern other aspects of the purchasing efficiency of the bidders, for example the litigation history of the competing firms or pure social policy concerns.220 One of the most significant opportunities offered by the instrumental use of exclusion criteria consists in the capacity to operate a preliminary screening of the contractors on the basis of the respect of national and international social and labour standards.221 Exclusion requirements can efficiently penalise past violations of social and labour rights and, at the same time, guarantee the respect of transparency in the procurement procedure and the efficiency of the procurement process, for example by tackling corrupt practices.222 However, even if based on standards of legal compliance and on the past violation of labour rights, included in national or international instruments of protections, the instrumental use of qualification criteria can also raise some concerns. First, the reference to previous convictions under domestic labour regulations, for example, can sometimes be misleading in countries with poor enforcement of employment laws, where the reliance on legal process may not be sufficient to identify suppliers with poor standards.223 Second, exclusion criteria based on broader social considerations can increase the risk of excluding capable and competitive contractors, thus reducing competition and resulting in restrictive trade distortions in the public markets.224 Moreover, if not specifically referring to minimum standards already embedded in national and international legislations, the use of qualification criteria for the implementation of social policies can expand the margin of discretion and ambiguity left to public authorities. Moreover, qualification requirements based on exclusion—or the simple threat of exclusion—not only represent an important instrument to sanction past violations of social regulations225 but can also incentivise the respect of conditions that go beyond strict requirements of legal compliance. It is technically possible to base the exclusion of certain competitors in the selection process on the firms’ general behaviour in society, taking into consideration their support of broader social and redistributive policies, for example the overall management of the labour force including gender aspects and policies for young unemployment, even if

220 

Arrowsmith, Linarelli and Wallace (n 8) 585–645. Arrowsmith (n 6) 170. 222  Arrowsmith (n 9) 140. 223  Aspey and Fletcher, ‘Social and Environmental Policies in Public Procurement’ (n 206) 6. 224  Arrowsmith (n 6) 187. 225  The selection process at this stage of the procurement circle can be conducted with the help of optional or mandatory lists of qualifiable suppliers or through different shortlisting procedures. 221 

The Procedural Mechanisms of Social Procurement 87 these are outside the requirements fixed in the national and international regulations.226 However, qualification requirements going beyond the compliance with national or international labour regulations can increase the risk of distorting effects and result in barriers to international trade. If qualification requirements based on legal compliance offer guarantees of transparency and objectivity, the exclusion of competitors on the basis of their lack of respect for broader social policies may produce discriminatory effect on the competition and increase the margin of discretion in the procurement process. The potential of the use of exclusion criteria for the achievement of social and labour policy objectives are clearly mirrored in the practice of national procurement systems between EU Member States. In the latest comprehensive survey on the strategic use of public procurement conducted for the EU Commission, it emerged that almost 40 per cent of the public contracting authorities of the Member States prefer to address social responsibility requirements in the exclusion criteria of the tender documentations.227 European public authorities appear to significantly prefer qualification requirements to the other implementation instruments in the different steps of the procurement process (award criteria 34 per cent, contract conditions 33 per cent and technical specifications 33 per cent).228 F. The Social Dimension of the Evaluation of the Tenders and of Award Criteria Probably one of the most common mechanisms for implementing non-­ economic policies in public contracts consists in the inclusion of social and labour considerations (other than price) in the criteria for awarding the contract. When evaluating the different bidders’ proposals, it is possible for the contracting authority to take into consideration broader policy objectives not strictly related to the specific content of the procurement contract, like in the case of fighting long-term unemployment. The stage of the procurement process in the award evaluation offers to the contracting authorities the flexibility to weigh their social and labour priorities against the additional costs and the effects on the level of competition and based on a broader interpretation of the ‘value for money’ principle in the procurement

226 ibid. 227 

Essig and others (n 34). results show that the use of qualification requirements also increases among the Member Countries that have a long tradition of including social considerations in ­procurement, like in the case of Norway, the UK and the Netherlands, where the percentage rises to 46%. 228 The

88  Unpacking the Use of Public Procurement process. Contrary to qualification criteria used as minimum standards, award criteria imply the evaluation and the comparison of the offers, to develop specific ranking.229 After having determined the suitable candidates through the qualification stage,230 the main scope of the award stage consists in identifying the best offer to achieve value for money and it is typically based on two principal mechanisms: the determination of the simple lowest price or the evaluation of more complex factors like quality. As explored in more details in the comparative analysis in the following chapters, the best combination of factors other than price at the award stage is defined by different terms under the major international instruments of procurement regulation: the ‘lowest evaluated tender’ in the UNCITRAL Model Law corresponds to the ‘most economically advantageous tender’ in the EU procurement Directives and to ‘the most advantageous tender’ in the WTO Government Procurement Agreement. However, regardless of the different terminologies, the rules concerning the award of the contract are usually oriented towards maximising transparency and non-discrimination between the tenderers, and minimising the risk of abuse of discretion in the evaluation process. In the evaluation of the offers, two categories of factors other than price can be taken into consideration.231 On the one hand, crucial components of the award criteria are the factors that are directly linked to the performance of the specific public contract. The quality and the technical merit of the tenderer are usually the main variables frequently included in the evaluation procedure. On the other hand, award criteria provide the possibility to also take into account ‘beyond contract’ considerations, focused on social or environmental benefits, even if not linked to the subject ­matter of the

229  It is necessary to clarify the difference between award criteria and qualification conditions, distinguishing them, on the basis of their respective role in the procurement procedure. If qualification and exclusion situations set the prerequisites for being considered a suitable candidate for the contract, award criteria define the framework based on which the procuring authorities select the best bidder among the qualified and responsive tenderers. Award criteria are, in fact, used to compare and rank the offers, while qualification criteria are used as minimum standards. Mario Comba, ‘Selection and Award Criteria in Italian Public Procurement Law’ (2009) 9 Public Procurement Law Review 122; Laurence Folliot-Lalliot, ‘The Separation between the Qualification Phase and the Award Phase in French Procurement Law’ (2009) 9 Public Procurement Law Review 155; Anne Rubach-Larsen, ‘Selection and Award Criteria from a German Public Procurement Law Perspective’ (2009) 9 Public Procurement Law Review 112. 230 The distinction between selection and award criteria has created considerable legal uncertainty in practice. The issue has vastly been disputed at national level and in the procurement jurisprudence of the European Court of Justice. Steen Treumer, ‘The Distinction between Selection and Award Criteria in EC Public Procurement Law—A Rule Without Exception?’ (2009) 3 Public Procurement Law Review 103. The evaluation of criteria such as the experience and reputation of the tenderers is particularly controversial, as at the centre of the recent CJEU decision in the in EMM G Lianakis v Dimos Alexandroupolis, Planitiki case. Philip Lee, ‘Implications of the Lianakis Decision’ (2010) 2 Public Procurement Law Review 47. 231  Arrowsmith, Linarelli and Wallace (n 8) 674.

The Procedural Mechanisms of Social Procurement 89 ­contract.232 Apart from the criteria strictly linked to the subject m ­ atter of the contract, award criteria may concern aspects of the public contracts regarding their delivery and consumption, involving considerations on the accessibility of the goods and services for people with disabilities, as well as elements concerning the production process, such as the use of recycled materials or reference to the workforce management. Social considerations and labour rights have often been taken into consideration in the design of award criteria, not only with reference to the internal structure of the competing firms, its workforce management and the respect of minimum labour conditions, but also in connection with broader social policies, like fighting long-term unemployment or promoting the economic development of specific groups in disadvantaged areas.233 To translate social priorities and labour policy objectives in award criteria, it is possible to design preferences following different approaches.234 First, preferences can be allocated in the contextual evaluation of the bids’ qualities as a fixed price preference or as variable percentages for meeting certain minimum labour standards. Second, one can design varying preferences on the basis of the degree of respect and application of the social and labour policies by the tenderers.235 The implementation of the Preferential Procurement Policy Framework Act 5 of 2000 in South Africa represents the most famous case of varying preferences allocated by a system of weighting points on the basis of the extent of benefits for disadvantaged and discriminated groups with regard to race, gender, ethnicity and disability.236 Another approach in the allocation of preferences for the respect of broad social and labour policies consists in the mechanism of additional award criteria: social concerns are only taken into consideration in the case of equality of the most advantageous tenders, after having applied all the other award criteria.237 This method has been followed, for example, in the pilot project tackling long-term unemployment in the context of the 2002 Public Procurement Policy in Northern Ireland238 and in the case of the

232 

Arrowsmith (n 9) 143. McCrudden (n 16) 546. 234  Dimitri Mardas and Dimitri Triantafyllou, ‘Selection Criteria and the Award Procedure in Public Procurement’ (1997) 3 International Advances in Economic Research 91. 235  Arrowsmith, Linarelli and Wallace (n 8) 697. 236 Ron B Watermeyer, ‘The Use of Targeted Procurement as an Instrument of Poverty Alleviation and Job Creation in Infrastructure Projects’ [2000] Public Procurement Law ­ Review 226; Bolton, ‘Government Procurement as a Policy Tool in South Africa’ (n 195); ­Bolton, ‘An Analysis of the Preferential Procurement Legislation in South Africa’ (n 101); Taylor and Raga (n 83). 237 Client Earth, ‘Briefing No. 7: Award Criteria’ [2011] Identifying Opportunities for ­Sustainable Public Procurement Briefing Series. 238 Erridge, ‘Public Procurement, Public Value and the Northern Ireland Unemployment Pilot Project’ (2007) 84 Public Administration 1023–1043. 233 

90  Unpacking the Use of Public Procurement 2007 Spanish procurement regulation.239 The Spanish Law on Public Sector Contracts 30/2007 highlights four different social clauses as additional award criteria that can justify preferential treatment in the award of a public contract: the involvement of disabled workers, the integration of unemployed and marginalised people, and the preference for NGO bids and ‘fair trade’ products.240 The flexibilities in the award mechanisms offer the possibility to contain the additional costs associated to the respect of social and the labour policies pursued within criteria and percentages defined in advance, limiting the margin of discretion of the contracting authorities as well as increasing transparency in the awarding phase of the procurement process.241 For this reason, one of the major advantages of including social considerations in the award process consists in the possibility to contain the procurement costs and to translate the political priorities into parameters set in advance, thus creating a transparent framework for the consideration of these social policies and providing clear references for the competing tenderers. However, the major risks associated to the inclusion of broader policy considerations in the award selection remain essentially related to the implication of a relatively broad margin of discretion to contracting authorities, potentially generating distortion in the competition. G. Social and Labour Requirements as Contract Performance Conditions and Compliance Monitoring Management Apart from the procedural flexibilities in the selection and award procedure, it is also possible to enforce respect for social and labour policy objectives in the execution phase of the public contract and after the identification of the successful bidder. Contract performance conditions represent obligations that the contracting authority need to set out clearly in the call for tenders and that must be accepted by the successful tenderer.242 These conditions are interesting instruments for enforcing non-economic policies, requiring respect for specific social considerations from contractors and subcontractors. References to performance conditions for certain minimum labour standards are often found, in terms of minimum wages, working hours and safety conditions, and also to ILO Conventions.243

239  Albert Sanchez Graells, ‘Exclusion, Qualitative Selection and Short-Listing in the New Public Sector Procurement Directive 2014/24’, Modernising Public Procurement: The New Directive (Djøf Publishing 2014) 159. 240 Teresa Medina Arnaiz, ‘Social Considerations in Spanish Public Procurement Law’ (2011) 2 Public Procurement Law Review 56. 241  Arrowsmith (n 6) 145. 242  Weber (n 9) 194. 243  Arrowsmith, Linarelli and Wallace (n 8) 281.

The Challenges of Social and Labour Procurement Policies 91 The use of performance conditions as implementation mechanisms for social and labour policies has numerous advantages. First, contract conditions do not per se result in discriminatory practices, as they set neutral parameters of compliance that have to be applied by all potential contractors. For this reason, they do not necessarily undermine ‘value for money’ considerations or alter competition dynamics at national and international level.244 Second, contract performance conditions are particularly effective for the enforcement of social and environmental concerns. They also play a vital role in underlining commitments made by tenderers and providing appropriate remedies in case of breach with contractual remedies,245 even if their violation usually is not a ground for opening a new tender procedure but only result in an administrative sanction.246 Moreover, contract performance clauses may also be used as an incentive for operators to deliver higher levels of social performance, by linking progressive improvements with bonus payments, such as, for example, the Dutch performance-based approach to construction procurement.247 V.  PUBLIC PROCUREMENT AND THE CHALLENGES OF ASSURING SOCIAL AND LABOUR POLICIES ALONG THE SUPPLY CHAIN: THE ROLES OF SOCIAL CERTIFICATIONS, STANDARDS AND LABELS

With the globalisation of the supply chain the effective implementation of sustainable objectives in procurement practices becomes a decisive priority. Government procurement authorities, as well as consumers, in developed and developing countries rely on considerably less assurance with regard to the social impact of the production and delivery of the goods and services purchased.248 The verification of the social performance of national procurement systems has raised a number of crucial questions and critical concerns regarding the management of the fragmented supply chain across national borders. The progressive integration of social and labour objectives in transnational business operations and the increased demand on private actors to take responsibility for the management of their supply chain has resulted

244  Laura Carpineti, Gustavo Piga and Matteo Zanza, ‘The Variety of Procurement Practices: Evidence from Public Procurement’ in Nicola Dimitri, Gustavo Piga and Giancarlo ­Spagnolo (eds), Handbook of Procurement (Cambridge University Press 2006) 17. 245  Arrowsmith, Linarelli and Wallace (n 8) 781. 246 As was made clear in Nord Pas de Calais, Case C-225/98 Commission v France EU:C:2000:494, [2000] ECR I-7445. 247 George Ang, Marcel Groosman and Nico Scholten, ‘Dutch Performance-Based Approach to Building Regulations and Public Procurement’ (2005) 33 Building Research & Information 107. 248  McCrudden (n 91) 93–118.

92  Unpacking the Use of Public Procurement in significant changes not only in the business practices but also in the ­procurement context.249 Private initiatives have emerged to respond to the pressures from citizens and governments.250 Voluntary codes of conduct and labelling schemes were developed to prove and improve voluntary respect for, and the enforcement of, social and sustainable commitments along the supply chain.251 However, the legal definition of these market-based initiatives is still unclear, as well as their effectiveness if conducted through public policies and administrative regulations to ensure better working conditions along the supply chain.252 Market-based initiatives such as standards and codes of conduct send a message to contracting authorities, reaffirming or not the social and sustainable commitments assumed by the suppliers along the stages of their delivery and production around different countries.253 On one hand, the adoption of voluntary initiatives of labour protection has an insignificant indirect impact on the process of award selection, strengthening the reputation of the suppliers adopting them.254 On the other hand, explicit reference to these verification systems in the bidding documents has a direct impact on the management and monitoring of the procurement process, as a channel of information to the procuring authorities, even if the legitimacy and the legality of these mechanisms has not yet been fully explored. The use of standards and labels is one of the most common solutions for the verification of labour and social concerns in the production and distribution chains associated to procurement practices.255 Private initiatives such as certification, codes and standards may vary significantly. They can be mandatory or open to voluntary participation; they may rely on

249  David Vogel, ‘Private Global Business Regulation’ (2008) 11 Annual Review of Political Science 261. 250 José Allouche, Corporate Social Responsibility, vol 1: Concept, Accountability and Reporting (Palgrave Macmillan 2006). 251  Janelle M Diller, ‘Private Standardization in Public International Lawmaking’ (2012) 33 Michigan Journal of International Law 481. 252  For a more extensive analysis of the compliance of these private initiatives and the WTO legal framework see, Maria Anna Corvaglia, ‘Public Procurement and Private Standards: Ensuring Sustainability Under the WTO Agreement on Government Procurement’ (2016) 19 Journal International Economic Law 607. 253 Sarah Roberts, ‘Supply Chain Specific? Understanding the Patchy Success of Ethical Sourcing Initiatives’ (2003) 44 Journal of Business Ethics 159. 254  The suppliers’ reputation is, in fact, of crucial importance in the evaluation of the tenders and in the management of public contracts. Nicola Doni, ‘The Importance of Reputation in Awarding Public Contracts’ (2006) 77 Annals of Public and Cooperative Economics 401. The value of reputation is, in fact, directly proportional to the discretion awarded to contracting authorities in the selection process: it could positively affect the efficiency of the whole procurement process, but would increase the risks of corruption and distortion of competition. ­Giancarlo Spagnolo, ‘Reputation, Competition, and Entry in Procurement’ (2012) 30 International Journal of Industrial Organization 291. 255 Dara O’Rourke, ‘Outsourcing Regulation: Analyzing Nongovernmental Systems of Labor Standards and Monitoring’ (2003) 31 The Policy Studies Journal 1.

The Challenges of Social and Labour Procurement Policies 93 internationally agreed standards such as the ILO’s Core Conventions or refer to industrial business practices; they can be based on independent verification or self-development assessment.256 It is difficult clearly to establish a categorisation of these initiatives, as they significantly overlap. Codes of conduct consist in the formal declaration of principles and policy guidelines to orient particular groups of enterprises in their business conduct, as in the case of the Ethical Trading Initiative, often included in the UK sustainable procurement system.257 Compared to the codes, social labelling programs rely on specific verification systems for the social performances of the enterprises: they associate the possibility to use logos and symbols with the verification of the ethical and labour conditions around the production of the goods or the delivery of services.258 Moreover, investor and stakeholder initiatives are mainly oriented towards improving accountability and transparency in the investment decisions, including the economic return and social outputs of the enterprises’ behaviours.259 Considerable research efforts have been conducted on the effective contribution of these private initiatives on the actual improvement of labour conditions and the social conduct of business enterprises, providing mixed results.260 Also, the specific labour content of these supply chain management initiatives is very heterogeneous and selective: occupational health and safety appears to be the most frequent concern addressed, together with fundamental freedoms followed by wage levels.261 In the specific context of public procurement, social standards and ­labelling schemes assume a crucial role in the management of the relevant 256 Khalid Nadvi and Frank Wältring, ‘Making Sense of Global Standards’ in Hubert Schmitz (ed), Local Enterprises in the Global Economy. Issues of Governance and Upgrading (Edward Elgar Publishing 2004); Khalid Nadvi, ‘Global Standards, Global Governance and the Organization of Global Value Chains’ (2008) 13 Journal of Economic Geography 4. 257  The Ethical Trading Initiative elaborated a ‘Base Code’ of conduct, focused on the minimum labour and human rights, like hygienic and safe working conditions or non-excessive working hours, and no child exploitation. The members of this initiative are required to follow specific ‘Principles of Implementation’ to facilitate the respect of the code. Chartered Institute of Purchasing & Supply (CIPS), Sustainability in Supply Chain (Profex Publishing 2012). 258  Janelle Diller, ‘A Social Conscience in the Global Marketplace? Labour Dimensions of Codes of Conduct, Social Labelling and Investor Initiatives’ (1999) 138 International Labour Review 99. 259  Just to mention one example of an initiative with the scope to improve labour standards in the global supply chain, the JOINT ‘Joint Initiative on Corporate Accountability and Worker’s Rights’ is a multi-stakeholder initiative conducting significant work in the harmonisation and implementation of labour codes of conduct, relying on the collaboration of the ­Ethical Trading Initiative, Social Accountability International, the Clean Clothes Campaign and Fair Wear Foundation. Mick Blowfield and Alan Murray, Corporate Responsibility (Oxford University Press 2011). For more information on the JOINT (Joint Initiative on Corporate Accountability and Worker’s Rights) http://www.jo-in.org/english/index.html. 260  Pamela K Robinson, ‘Do Voluntary Labour Initiatives Make a Difference for the Conditions of Workers in Global Supply Chains?’ (2010) 52 Journal of Industrial Relations 562. 261  Michael Urminsky, ‘Self-Regulation in the Workplace: Codes of Conduct, Social ­Labeling and Socially Responsible Investment’ (International Labour Office 1998).

94  Unpacking the Use of Public Procurement information during the award procedure, particularly relevant in the case of procurement procedures focused on the achievement of legitimate policy objectives other than the objective of pure economic efficiency. Labels and certifications have the main function of providing the purchasing authorities with valuable sources of information and assurance concerning compliance with the environmental as well as the social and labour criteria associated with the production of the procured products and services.262 In this respect, labelling and certification schemes provide the additional value offered by third party or independent certification. Taking advantage of their verification and certification process, the use of labels in public procurement reduces the administrative burdens and the costs for public authorities of actually verifying the bidders’ respect for the standards defined in the technical and award specifications along the procurement process.263 Between the different stages of the procurement process, code standards and certification mechanisms could either be used in the product specifications or in connection with award criteria or contract clauses. However, there is a major difference in the application of codes and certifications in the different procurement steps. In the award selection process, consumer labels or codes of conduct aim to providing assurance regarding respect for ethical and labour standards in the suppliers’ business behaviour, as specified in the award criteria. If incorporated in the contract specifications, codes and standards can also serve as a reference resource for the technical descriptions of the products and services to be procured.264 However, the use of codes and standards in the technical specifications may result in discriminatory effects, although not specifically discriminating on the base of the suppliers’ country of origin but exposing the procuring authority to the risk of indirect discrimination between the competitors.265 The potential of private labelling in public procurement practices has, to date, mainly been explored in connection with eco-labels and fair trade certifications. However, the use of fair trade labels in the procurement process also provides a powerful instrument for promoting social and labour objectives to the contracting authorities. Fair and ethical trade standards aim at

262 Abby Semple, ‘The Role of Environmental and Social Labels in Procurement’ (2012) Public Procurement Analysis, March 2012. 263  For the public authority a certain verification of the independence of the review of the eco-label certification and the strictness of the standards required for the certification, often too rigid for the majority of the suppliers in the market, would be recommendable. See as Best Practice the policy strategy on the inclusion of social considerations developed by the Ministry of Economic Development in New Zealand, Government Procurement Development Group, ‘Guide 4 to Sustainable Procurement—Define Specifications and Invite Tenders’ (Ministry of Economic Development New Zealand 2010). 264  Semple, ‘The Role of Environmental and Social Labels’ (2012). 265 CIPS, Sustainability in Supply Chain (2012) 98.

Conclusions 95 improving the wellbeing and the living conditions of the local producers, particularly of indigenous people and in developing countries, seeking to ensure decent living and working conditions.266 In the standards for small producers and hired labour elaborated by Fairtrade Labelling Organization International (FLO), probably the best-known label in the sector, the supervision of labour conditions plays a crucial part in the management of production practices, together with environmental protection. FLO fair trade, in fact, clearly ‘regards the core ILO conventions as the main reference for good working conditions’.267 The European procurement system has proven to be a particularly fertile context for the inclusion of environmental and social certification schemes in the regulatory procurement framework,268 which is reflected in the increased use of environmental and fair trade certifications in public procurement at the national level.269 Twenty-three per cent of EU Member States specifically take into account, at various stages of the procurement process, ethical and fair trade issues, including, for example, the national procurement regulations in France and Spain.270 VI. CONCLUSIONS

This chapter has shown the complexity that the inclusion of social and labour policy considerations in public procurement entails. Between overlapping terminologies and different categorisations developed in the 266  Therefore, the standards elaborated by fair trade movement organisations, mainly covering agricultural and textile products, become particularly important as references for the labour conditions of small producers in the context of the social use of procurement practices. 267 In particular, the FLO standards for small producer organisations make specific reference in the monitoring process to the respect of ILO Convention No 111 on Discrimination, ILO Conventions Nos 29 and 105 on Forced Labour, ILO Convention No 182 on the Worst Forms of Child Labour, ILO Convention No 87 on Freedom of Association and Protection of the Right to Organize, ILO Convention No 98 on the Right to Organize and Collective Bargaining and ILO Recommendation No 143 on Workers’ Representatives, ILO Convention No 100 on Equal Remuneration and on ILO Convention No 110 on Conditions of Employment of Workers together with ILO Convention No 155 on Occupational Safety and Health. Fairtrade Labelling Organizations International, Fairtrade Standard for Small Producer Organizations. Current version: 01.05.2011_v1.1, expected date of next review: 2016, available at http://www.fairtrade.net/fileadmin/user_upload/content/2009/standards/ documents/2012-07-11_SPO_EN.pdf. 268  EFTA, ‘State of Play of Fair Trade Public Procurement in Europe’ (EFTA European Fair Trade Association 2010) http://www.unpcdc.org/media/402778/state_of_play_of_fair_trade_ public_procurement_in_europe_-_september_2010_-_efta.pdf. 269  The use of eco-labels and certifications (ISO, EMAS, EMS) are very common in national procurement systems in Europe: more than half of the countries cite this consideration in specifications or award criteria. Apart from the reference to national eco-labels, Denmark and Malta, for example, have developed specific procurement labels or certificates (the ‘Green Office’ label in Malta; the ‘Green Transport’ certificate for municipalities in Denmark) in order to guide, but also to provide incentives for procurers and suppliers alike. 270  Essig and others (n 34).

96  Unpacking the Use of Public Procurement l­iterature to date, three approaches to study the instrumental use of public procurement have emerged: a strategic use as industrial policy instrument, a protective use against foreign competition and an instrumental use for the achievement of non-economic policy objectives. All of these approaches to the instrumental use of public procurement showed a significant social and labour importance. Across protective, strategic and proactive uses of public procurement to achieve various legitimate policy objectives, the analysis focused on the specific social and labour policies integrated in the selective public purchasing practices. The overview of the different social and labour considerations demonstrated how the social dimension of public procurement follows both abstract models of social justice and models of individual equality. While integrating different social and labour requirements along the selection process, public procurement has been used to achieve not only the social inclusion of disadvantage groups and minorities but also for encouraging compliance with labour rights and the enforcement of decent work conditions, addressing discrimination on different grounds. Following both goals of individual and social justice, the achievement of the social and labour policies in public procurement has been supported by various political and economic justifications, even where this has implied specific risks for the efficiency and the competition in the procurement process. First, the social use of public procurement has been used to strengthen the enforcement of, and the compliance with, other social and labour regulations, proven to be inadequate or ineffective. Second, the inclusion of social and labour requirements in public procurement has a clear moral ground, as it encourages ethical behaviour by governments, ensuring that they follow the public interest while acting in the market. Moreover, economic justifications based on the inclusion of externalities has also supported the instrumental use of procurement for social and labour purposes. However, the impact of social and labour policy objectives on the efficiency, transparency and competition of the procurement process is strictly linked to the specific design of the procurement mechanisms achieving these social objectives. Each step of the procurement process allows the inclusion of social and labour requirements, offering various advantages and creating different implications for the achievement of best value for money. Moving to a deeper level of analysis, this chapter provided an overview of the various implementation mechanisms of social and labour policies in the conduct of the procurement process. As it is not possible to identify a stage of the procurement process most suitable for the inclusion of social and labour requirements, different considerations can be drawn for each stage of the procurement cycle on the base of the analysis conducted in this chapter. First, packaging and reservation schemes of public offers, like set-asides, have traditionally been used in support of SMEs and for broader employment policies of ­redistributive justice,

Conclusions 97 even if producing considerable distortion and discriminatory effects. ­Second, the instrumental use of contract specifications, particularly in terms of functional and performance requirements, has provided important flexibility not only for the inclusion of environmental criteria but also for responding to social needs and labour policy concerns. Third, qualification and exclusion criteria have been of considerable importance as instruments of workforce equality and as effective mechanisms to address the past behaviour of bidders and to enforce the respect of labour and social standards. Fourth, the achievement of labour policies in the award process of the contracts is grounded on a strong tradition, offering different solutions to balance the need of transparency and the principle of non-discrimination in the procurement process. Finally, the imposition of special performance requirements seems to be a flexible implementation mechanism for social and labour considerations, even if the regulation of the execution phase of public contracts is not fully and coherently regulated at international level. However, if the stages of the procurement process offer various opportunities for the inclusion and the achievement of social and labour policy objectives, the fragmentation and the globalisation of the production supply chain poses new challenges to the achievement of the legitimate policy considerations in the procurement system. For this reason, the analysis developed in this chapter included the study of voluntary and private initiatives, as certifications and labelling schemes, to monitor the compliance of concerns of sustainable development along the global supply chain. Labels, codes of conduct and stakeholder initiatives can provide not only an important source of valuable information for the contracting authorities in the drafting of technical specifications, but also as an important verification mechanism in the award process. Based on the analysis of the complexities of the achievement of social and labour policies in public procurement as established so far, the following chapters will be dedicated to the analysis of the legal implications of these heterogeneous procurement practices. With the main purpose of contributing to the study of the coherence and convergence in the procurement field, the inclusion of social and labour policy objectives, with their different implementation and monitoring mechanisms at the various stages of the procurement process, will be explored under the light of the major international instruments of public procurement regulation.

3 The Admissibility of the Inclusion of Social and Labour Rights Under the WTO Procurement Regulatory Framework I.  INTRODUCTION TO THE SOCIAL DIMENSION OF PUBLIC ­PROCUREMENT IN THE WTO REGULATION FRAMEWORK

A

MONG THE INTERNATIONAL instruments regulating public procurement, trade agreements have the potential to have the most intrusive impact on the freedom to establish domestic regulation of public procurement to achieve multiple policy objectives. The implementation of labour and social policies through the award of public contracts, often resulting in granting preferences to domestic suppliers, is potentially in conflict with the main objective of international trade instruments: the enforcement of the principle of non-discrimination. Trade agreements regulating public procurement aim to achieve the progressive liberalisation of procurement markets, based on the principles of non-discrimination and transparency in awarding public contracts, in order to guarantee fair treatment and competition between national and foreign suppliers.1 However, even if essentially aiming to open up the procurement markets to foreign competition, international trade agreements may also contain some regulatory features that accommodate the social dimension of public procurement policies. From the international trade perspective, the main focus of this ­chapter consists in analysing to what extent the enforcement of social and labour considerations in procurement practices is compatible with the ­Government Procurement Agreement (GPA), which is the World Trade Organization (WTO) plurilateral agreement specifically addressing the procurement discipline in the world trading system. The conformity of procurement policies aiming at enforcing social and labour objectives with the WTO procure1  Peter Trepte, ‘The Agreement on Government Procurement’ in Patrick FJ Macrory, Arthur E Appleton and Michael G Plummer (eds), The World Trade Organization: Legal, Economic and Political Analysis, vol 1 (Springer 2005) 251–52.

The Social Dimension of Public Procurement in the WTO 99 ment provisions, initially the GPA 1994 and later the revised GPA, is particularly disputed in the academic literature. A fundamental regulatory question still remains unresolved in both trade and procurement academic discourse. How is it possible to strike a balance between the WTO objective of the progressive elimination of obstacles to international trade and the achievement of legitimate social and labour policies that national governments are entitled to pursue through their domestic regulations and procurement practices? Before moving the analysis onto the specific flexibilities offered by the GPA, it is important to frame the issue into a wider regulatory discussion. The policy space left for the achievement of social and labour objectives in trade agreements regulating public procurement is to be situated in the broader debate on the relationship between trade liberalisation and the protection of human rights2 and labour rights.3 If WTO agreements aim to liberalise trade flows on the basis of the principle of non-discrimination, the costs of this trade liberalisation can be significantly high in terms of increased unemployment, reduced regulatory and policy space for national governments and lower compliance with labour rights and decent working conditions. However, the tensions between trade obligations and the protection of human rights and labour standards are not impossible to reconcile.4 In the specific context of public procurement as regulated by trade agreements, the implementation of social and labour policies has traditionally been

2  Crucial references within this academic discussion include: Thomas Cottier, ‘Trade and Human Rights: A Relationship to Discover’ (2002) 5 Journal of International Economic Law 111; Frederick M Abbott, Christine Breining-Kaufmann and Thomas Cottier, International Trade and Human Rights : Foundations and Conceptual Issues (University of Michigan Press 2006); Leonard Bartels, ‘Trade and Human Rights’ in Daniel Bethlehem and others (eds), The Oxford Handbook of International Trade Law, 571–95 (Oxford University Press 2009); Christine Kaufmann and others, ‘A Call for a WTO Ministerial Decision on Trade and Human Rights’ in Thomas Cottier and Panagiotis Delimatsis (eds), The Prospect of International Trade Regulation: From Fragmentation to Coherence (Cambridge University Press 2011) 323–358. 3  The relationship between labour rights and WTO regulation is at the centre of the following works: Christine Kaufmann, Globalisation and Labour Rights: The Conflict Between Core Labour Rights and International Economic Law (Hart Publishing 2007); Gabrielle Marceau, ‘Trade and Labour’ in Daniel Bethlehem and others (eds), The Oxford Handbook of International Trade Law (Oxford University Press 2009) 539–567; Krista Nadakavukaren Schefer, Social Regulation in the WTO: Trade Policy and International Legal Development (Edward Elgar Publishing 2010). 4  Ernst-Ulrich Petersmann, ‘Human Rights and International Economic Law in the 21st Century: The Need to Clarify Their Interrelationship’ (2001) 4 Journal of International ­Economic Law 3; Thomas Cottier, Joost Pauwelyn and Elisabeth Bürgi (eds), Human Rights and International Trade (Oxford University Press 2006); Ernst-Ulrich Petersmann, ‘Human Rights, Markets and Economic Welfare: Constitutional Functions of the Emerging UN Human Rights Constitution’ in Frederick Abbott, Christine Breining-Kaufmann and Thomas Cottier (eds), International Trade and Human Rights (University of Michigan Press 2006) 29–68; Andrew Lang, World Trade Law after Neoliberalism: Reimagining The Global Economic Order (Reprint edition, Oxford University Press, USA 2013).

100  The Inclusion of Social and Labour Rights interpreted as controversial for different reasons. First, the active use of procurement to achieve social and labour purposes can potentially create tension with the main non-discriminatory commitments imposed by the GPA on covered procurement (Article IV GPA).5 The inclusion of social and labour considerations in public procurement may often imply direct or indirect forms of discrimination in favour of domestic suppliers. In its preamble, the objective of the achievement of trade liberalisation of the multilateral rules applicable to public procurement is recognised as the main objective of the GPA.6 Also in the preamble it is indicated that the scope of the liberalisation of public procurement is achieved by the principle of non-discrimination, ‘recognizing that measures regarding government procurement should not be prepared, adopted or applied so as to afford protection to domestic suppliers, goods or services, or to discriminate among foreign suppliers, goods or services’. The enforcement of labour standards or the implementation of social policies can result in the interpretation of the relevant procurement practices as discriminatory policies in violation of the principle of non-discrimination and, representing a barrier to trade, potentially in violation of the GPA commitments. Second, even if not explicitly discriminatory, the inclusion of social and labour considerations can still have a distortive effect on cross-border procurement exchanges and may be detrimental to the level of transparency in the procurement process. Allowing the consideration of social policy objectives or labour standards in the evaluation of the competing tenders may increase the complexity of the award procedure, as well as the margin of discretion left to the procuring entities. For this reason, the instrumental use of public procurement to achieve social and labour purposes should never result in a derogation not only of the general principle of non-discrimination but also of the positive commitments and the transparency requirements set in the GPA that regulate the conduct of the procurement process. However, nothing in the GPA seems to suggest the presence of a so-called ‘purity principle’, excluding the possibility of any reference to social and non-economic policy objective in the award procedure. The WTO regulatory framework of public procurement is focused on guaranteeing transparent and non-discriminatory procurement regulations, as well as respect of the market access commitments of its Signatory Parties. In this framework, the GPA does not seem to include ‘the establishment of a system

5  Bernard Hoekman, ‘International Cooperation on Public Procurement Regulation’ in Aris Georgopoulos, Bernard Hoekman and Petros C Mavroidis (eds), The Internationalization of Government Procurement Regulation (Oxford University Press 2017) 568. 6  The first recital of the Preamble of the revised GPA states: ‘Recognizing the need for an effective multilateral framework for government procurement, with a view to achieving greater liberalization and expansion of, and improving the framework for, the conduct of international trade’.

The Social Dimension of Public Procurement in the WTO 101 that reduces as far as possible the insertion of non-economic criteria in the procurement process’ between its regulatory objectives.7 Representing the traditional model of an ‘international’ procurement regulation as theorised by Trepte,8 the WTO’s GPA allows the instrumental use of procurement for social and labour purposes, only if this is not in violation of the principle of non-discrimination, in both its internal and external expression of the principles of national treatment and ‘most favoured nation’ (MFN) status. However, discriminatory procurement practices in violation of this fundamental principle can still be covered under the derogations to the agreement or can be justified under the GPA exceptions of Article III of the revised text.9 In order to explore in more depth the regulatory balance between the implementation of social and labour policy objectives and the enforcement of the principle of non-discrimination in the WTO discipline on government procurement,10 the analysis will be structured as follows. First, this chapter will conceptualise the relationship between the instrumental use of public procurement for social and labour policies and the principle of nondiscrimination, which is the fundamental principle of the WTO regulatory architecture and the main regulatory foundation of the GPA. For a comprehensive understanding of the peculiar interpretation that the principle of non-discrimination assumes in the context of the WTO discipline of public procurement, the special status of the plurilateral GPA in the multilateral trading system will be also explored. Second, the flexibilities in terms of derogation from the coverage and exceptions from the procurement regulations as set in the revised GPA will be explored. Finally, an overview of the key procedural and transparency requirements regulating the award of public contracts that should be implemented to comply with the GPA will be provided.11

7  Christopher McCrudden, ‘International Economic Law and Human Rights: A F ­ ramework for Discussion of the Legality of “Selective Purchasing” Law Under the WTO Government ­Procurement Agreement’ (1999) 2(1) Journal of International Economic Law 30. 8 Peter Trepte, Regulating Procurement: Understanding the Ends and Means of Public ­Procurement Regulation (Oxford University Press 2005) 37–40. 9  The analysis in this book of the WTO procurement provisions will be conducted referring to the articles’ numeration in the revised GPA as reported in the ‘Annex to the Protocol amending the Agreement on Government Procurement’, establishing a specific reference to the 1994 GPA text only in the case of a notable discrepancy between the two legal texts. 10  In the regulatory context of the WTO, it is traditionally referred as ‘government procurement’ instead of public procurement, which is the phrase used in this chapter for consistency with the other chapters of this book. 11  The analysis of the major provisions of the WTO discipline on public procurement will take into account not only the revised text of the GPA, but also the regulation established by the 1994 agreement, in order to underline the developments and improvements resulting from the negotiating process.

102  The Inclusion of Social and Labour Rights II.  THE WTO INSTITUTIONAL FRAMEWORK FOR PUBLIC PROCUREMENT

Dominated by the economic approach to public spending as a strategic instrument of industrial policy and a stimulus for economic growth,12 the sector of public procurement has been traditionally left outside the WTO multilateral efforts of liberalisation.13 As confirmed by its negotiating history, the regulation of procurement activities is explicitly excluded from the single undertaking14 and it mainly stands outside the coverage of the WTO multilateral trading rules of the General Agreement on Tariffs and Trade (GATT) and the General Agreement on Trade in Services (GATS). The plurilateral status of the WTO’s GPA has significant regulatory implications. First, the GPA plurilateral status has significant implications on the interpretation of the Agreement. As public procurement is excluded from the core of the WTO commitments binding its entire membership, it is legitimate to argue that a different interpretation of the main WTO principles of non-discrimination and transparency should be imaginable under the GPA. In the context of procurement, the scope of the principle of non-discrimination, the application of its general exceptions or the use of international standards assume a different connotation if compared to the application in the GATT and other WTO Agreements. Moreover, there are important implications concerning the possibilities of challenging the violation of the non-discriminatory principle. The exclusion of the discipline of public procurement from the GATT and the GATS Agreements implies that discriminatory procurement practices, falling outside the scope of Article III:4 GATT thanks to the exclusion of Article III:8 GATT, could be challenged under the GPA, and only in the limits of its coverage.15

12 Xiangqun Chen, ‘Directing Government Procurement as an Incentive of Production’ (1995) 10(1) Journal of Economic Integration 130–40. 13 Simon J Evenett and Bernard M Hoekman, ‘Government Procurement: Market Access, Transparency, and Multilateral Trade Rules’ (2005) 21 European Journal of Political Economy 163. 14  According to the principle of the ‘Single Undertaking’, all the multilateral WTO agreements are binding for all WTO members, as part of an inseparable package of rights and obligations, as reaffirmed in the Appellate Body Report, Brazil—Measures Affecting Desiccated Coconut, WT/DS22, adopted 20 March 1997, para 177. For a more critical analysis of the single undertaking, see Robert Wolfe, ‘The WTO Single Undertaking as Negotiating Technique and Constitutive Metaphor’ (2009) 12 Journal of International Economic Law 835. 15 An alternative possibility for challenging the WTO legality of discriminatory procurement practices, particularly if designed to grant preferable treatment to domestic suppliers through ‘buy national’ provisions, is represented by the WTO Subsidies and Countervailing Measures (SCM) Agreement. In this hypothesis, the main interpretative question consists of the question whether procurement is a subsidy within the definition of SCM Agreement Article 1. Under SCM Agreement Article 1, a subsidy exists if a government confers a benefit by providing a financial contribution. It is also clarified in Article 1.1(a)(1)(iii) SCM that a financial contribution exists where a government or public body ‘purchases goods’. For this reason,

The WTO Institutional Framework for Public Procurement 103 The following sections will explore in more depth the regulatory s­ ignificance of the WTO discipline of public procurement and the peculiarity of its plurilateral institutional status. First, the regulatory framework established in the WTO Agreement on Government Procurement will be analysed, including its structure of Annexes and Schedule of Commitments. The study of the GPA will then be integrated with the examination of the significance of the exclusion of the discipline of government procurement from the core provisions of the GATT and the GATS. Moreover, in the study of the WTO discipline of procurement, particular attention will be paid to its historical evolution from the Tokyo Round to the more recent renegotiation of the GPA. A. The Plurilateral Regulatory Architecture of the WTO Agreement on Government Procurement At the international level, it is undeniable that the most important binding instrument of public procurement regulation is represented by the Agreement on Government Procurement (GPA). The WTO negotiations on government procurement started in the 1960s within the OECD framework16 and were later transferred to the GATT system, in order to ‘opt for enforceable and multilateral disciplines on government procurement, rather than anything weaker’.17 The first agreement on procurement was concluded under the Tokyo Round of Negotiations, signed in 1979 and entered into force in 1981.18 The achievements reached in the Tokyo Round were progressively renegotiated in 198819 on the base of Article IX:6(b) of the Tokyo Code. Grounded on the preparatory work of the Informal Working Group

there is scope for the possibility of challenging discriminatory procurement practices under the SCM Agreement. John Linarelli, ‘Global Procurement Law in Times of Crisis: New Buy American Policies and Options in the WTO Legal System’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 773–802. 16  As explored by Winham, the OECD discussion on public procurement was initiated in 1962 by a formal complaint raised by Belgium and the United Kingdom against a US ‘Buy National’ procurement policy. Gilbert R Winham, International Trade and the Tokyo Round Negotiation (Princeton University Press 1986) 28. 17  From the study of the negotiation documents, the hypotheses of exclusively relying on legally binding commitments has never been in doubt between the Parties. Blank and Marceau, ‘A History of Multilateral Negotiations on Procurement: From ITO to WTO’ in Bernard M Hoekman and Petros C Mavroidis, Law and Policy in Public Purchasing: The WTO Agreement on Government Procurement (University of Michigan 1997) 40. 18  For a more detailed analysis of the Tokyo Round and the impact on the negotiation on public procurement, Winham, International Trade and the Tokyo Round Negotiation (1986). 19  In 1988 a Protocol of Amendments entered into force, consolidating the textual improvements reached during the negotiations in 1986. See Blank and Marceau, Law and Policy in Public Purchasing (1997), 44–45.

104  The Inclusion of Social and Labour Rights between 1986–1993, an agreement was reached on the improvements on the 1988 text, in terms of both coverage and regulation, and the results were consolidated and translated in the WTO discipline on government ­procurement established by the Agreement on Government Procurement (GPA 1994). The GPA, signed in Marrakesh in 1994 and entered into force in 1996,20 is one of the four original ‘Plurilateral’ Agreements of the WTO.21 ­According to Article II.3 of the Agreement Establishing the WTO (the Marrakech Agreement), the GPA does not impose binding commitments on all WTO members, but only on the WTO members that decide to accept it.22 For its Signatory Parties, the coverage of the GPA consists in a complex system of commitments, consolidated into Annexes, resulting from the bilateral negotiations on coverage. These are set forth in Appendix I which defines the coverage of each Party’s obligations in terms of the procurement entities, the goods, services and construction services procured and the threshold values.23 The 1994 GPA (formally Annex 4 of the Marrakech Agreement) establishes the main disciple of the WTO regulatory architecture in the field of government procurement: the non-discrimination obligation was complemented by specific rules on the conduct of procurement contracts and by the imposition of common tendering procedures. It also extended to the public procurement of services, as this was excluded from the previous Tokyo negotiations.24 The most significant institutional feature of the 1994 GPA consists in the twofold possibility for challenging non-compliance with the Agreement, ie via an independent challenging procedure at national level or by the recourse to the WTO dispute settlement mechanism at intergovernmental level.25 Even if it has been argued that some of the provisions of the 1994 GPA have not been drafted with the appropriate level of precision to make 20  For a brief overview on the history of the GPA see http://www.wto.org/english/tratop_e/ gproc_e/overview_e.htm. 21  After the Uruguay Round, four agreements negotiated in the Tokyo Round maintained their plurilateral status. Together with government procurement, the Agreement on Trade in Civil Aircraft is in force between 30 Signatory Parties, while the dairy products bovine meat agreements were terminated in 1997. For more information, see https://www.wto.org/english/ thewto_e/whatis_e/tif_e/agrm10_e.htm#civil. 22  On the risks connected to the plurilateral status of the GPA in terms of discrimination between the parties and non-parties of the GPA. Arie Reich, ‘The New GATT Agreement on Government Procurement: The Pitfalls of Plurilateralism and Strict Reciprocity’ (1997) 3 Journal of World Trade 125. 23  Robert D Anderson and Kodjo Osei-Lah, ‘The Coverage Negotiations under the Agreement on Government Procurement: Context, Mandate, Process and Prospects’, The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 149–174. 24  The Tokyo Round Agreement was in fact limited to the public procurement of goods. Annet Blank and Gabrielle Marceau, ‘The History of Government Procurement Negotiations Since 1945’ (1996) 5 Public Procurement Law Review 77. 25 Trepte, Regulating Procurement (2005) 374.

The WTO Institutional Framework for Public Procurement 105 them directly applicable to the Signatory Parties, the GPA can be challenged under the WTO’s Dispute Settlement Mechanism, with the exclusion only of the application of cross-retaliation according to GPA Article XXII:7.26 Since the 1988 Tokyo Round Government Procurement Code and even after the establishment of the GPA, the negotiations around a WTO discipline of public procurement have been characterised by the protectionist attitudes of both developing and developed countries’ governments, which seem to be particularly reluctant to accept binding commitments enforced by a system of surveillance, remedies and bid challenge mechanisms.27 Developing countries have been proven to be unwilling to compromise the freedom and discretion of their own procurement buying power.28 In the eyes of developing countries, the widespread use of procurement practices as an instrument for industrial policies and economic growth is still of particular relevance and is at the basis for their unwillingness to ratify international instruments of procurement regulation imposing transparency and non-discrimination requirements.29 Nowadays developing countries still maintain a strong adverse attitude towards membership of the GPA. They have difficulties in assessing the benefits of accession and fear that the GPA’s rules on non-discrimination would limit their policy space in allocating government contracts among their own domestic firms, without offering substantial counterparts in terms of foreign market access gains.30 It is undeniable that significant costs are generally involved in the accession process to the GPA.31 Apart from the direct negotiating costs implicit in any complex trade negotiation it has been estimated that in the specific case of public procurement the costs and the challenges connected to the legislative and institutional adaptation to the transparency requirements set in the GPA are particularly high, not only for developing but also for developed countries.32 26 UNCTAD, Dispute Settlement—World Trade Organization: Government Procurement (2003). 27  Gerard De Graaf and Mathew King, ‘Towards a More Global Government Procurement Market: The Expansion of the GATT Government Procurement Agreement in the Context of the Uruguay Round’ (1995) 29 International Lawyer 431. 28  Blank and Marceau (n 17) 34–40. 29  Bernard M Hoekman, ‘Using International Institutions to Improve Public Procurement’ (1998) 13 The World Bank Research Observer 249. 30  Simon Evenett, ‘Multilateral Disciplines and Government Procurement’ in Philip English, Bernard Hoekman and Aaditya Mattoo (eds), Development, Trade and the WTO. A Handbook (World Bank Publication 2002) 418. 31 Giovanna Fenster, ‘Multilateral Talks on Transparency in Government Procurement: Concerns for Developing Countries’ (2003) 34 IDS Bulletin 65. 32  In the case of developing countries, the GPA—in particular in its revised text—offers a series of flexibilities to overcome these costly difficulties, not granting the same type of facilitations to developed countries. Robert D Anderson and others, ‘Assessing the Value of Future Accessions to the WTO Agreement on Government Procurement (GPA): Some New Data Sources, ­Provisional Estimates and an Evaluative Framework for Individual WTO Members Considering the Accession’ (2011) WTO Staff Working Paper ERSD-2011-15, 6 October 2011, 4–35.

106  The Inclusion of Social and Labour Rights Notwithstanding the flexibilities progressively included in the Agreement (particularly prominent in the revised GPA), membership of the GPA is still fairly limited, including only 47 of the WTO members (19 Parties including the European Union on behalf of the 28 Member States) bound by the GPA regulation.33 A new revitalised interest toward accession to the GPA seems to have been witnessed in the recent years, particularly thanks to the completion of accession of East European countries such as Ukraine and Moldova.34 At the moment, nine WTO members are in the process of acceding to the Agreement (Albania, Australia, China, Georgia, Jordan, Kyrgyz Republic, Oman, the Russian Federation and Tajikistan) and a further six, in their respective Protocols of Accession, have included specific provisions regarding accession to the GPA (Afghanistan, Kazakhstan, Mongolia, Saudi Arabia, Seychelles and the former Yugoslav Republic of Macedonia).35 In its recent reports, the WTO Committee on Government Procurement noted important developments in the accessions to the Agreement, such as the application for accession by Australia and the continuation of negotiations in the accession process of China, Tajikistan and Jordan,36 together with the initiation of work on the Russian Federation’s Accession to the Agreement.37 B. Exclusion of Public Procurement from the WTO Multilateral Regulation The separate approach to the trade liberalisation and trade regulation of procurement adopted under the WTO regulatory framework is grounded on the explicit exclusion of procurement activities from the crucial provisions ensuring the respect of the principle of non-discrimination in the ­Single Undertaking. In Article III:8(a), the GATT Agreement expressly introduces a clear derogation to the principle of national treatment, applicable to ‘laws, regulations or requirements governing the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or with a view to use in the production of goods for commercial sale’. This derogation leaves all the WTO members potentially free to apply discriminatory and non-equally favourable treatment to foreign

33  For an overview of the membership of the GPA, see https://www.wto.org/english/tratop_ e/gproc_e/memobs_e.htm. 34 WTO Committee on Government Procurement, Minutes of the formal meeting of 28 November 2016, GPA/M/67, 10 February 2017. 35  For more information, https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm. 36 Paragraph 14, WTO Report (2012) of the Committee on Government Procurement GPA/116, 6 December 2012. 37  WTO Committee on Government Procurement, Draft Report (2016) of the Committee on Government Procurement, GPA/W/339, 17 November 2016.

The WTO Institutional Framework for Public Procurement 107 suppliers of goods in the award of public procurement contracts, if falling under the scope of Article III:8(a) GATT.38 As the regulation of public procurement activities in light of the principle of non-discrimination has been restricted to the application of the plurilateral GPA, the derogation of Article III GATT represents an extremely sensitive issue. The scope of the application of Article III:8(a) GATT has recently been interpreted for the first time in the Canada—Renewable Energy dispute, addressing a case of ‘buy national’ requirements set in the procurement of the construction of renewable energy generation facilities in the Canadian province of Ontario.39 After having clarified that ‘governmental agency’ should be interpreted as a body performing a function of the government and acting on behalf of the government,40 the Appellate Body (AB) focused on the interpretation of the expression ‘product purchased’ to define the scope of application of the exclusion. When deciding whether the discriminatory provision at issue was a procurement measure under the scope of this provision, the AB clarified that ‘the derogation of Article III:8(a) must be understood in relation to the obligations stipulated in Article III. This means that the product of foreign origin must be in a competitive relationship with the product purchased’.41 In contrast with the panel report,42 the AB established the need for a connection between the foreign products object of the discrimination and the domestic products procured by governmental authorities, in order to prove the application of this derogation. Without a competitive relation between the two products, the discriminatory requirements cannot be considered as ‘laws, regulations or requirements governing the procurement by governmental agencies’ within the meaning of Article III:8(a), and the principle of national treatment set in Article III should apply. Establishing the necessity of the requirement of a competitive relationship between the product at the centre of the discriminatory treatment and

38  Kevin Kennedy, ‘GATT 1994’ in Patrick FJ Macrory, Arthur E Appleton and Michael G Plummer (eds), The World Trade Organization: Legal, Economic and Political Analysis, vol 1 (Springer Science + Business Media) 125. 39  The case, arising from the complaint by Japan and the European Union, concerns the imposition of domestic content requirements in the construction of solar and wind power generators infrastructure under the Feed-In Tariff Programme established in the province of Ontario, Canada. WT/DS412/AB/R Canada—Certain Measures Affecting the Renewable Energy Generation Sector; WT/DS426/AB/R Canada—Measures Relating to the Feed in Tariff Program, adopted 24 May 2013. 40  AB Report, Canada—Renewable Energy (n 39), para 5.61. 41  ibid, para 5.74. 42  Even if noting a ‘close relationship’ between the product subject to the domestic content requirement and the product procured, the panel did not find the establishment of any connection between the two products necessary. Arwel Davies, ‘The Evolving GPA: Lessons of Experience and Prospects for the Future’ in Aris Georgopoulos, Bernard Hoekman and Petros Mavroidis (eds), The Internationalization of Government Procurement Regulation (Oxford University Press 2017) 23, 47.

108  The Inclusion of Social and Labour Rights the product procured,43 the AB provided a narrow interpretation of the exception set in Article III:8 GATT. The implication resulting from this narrowly interpreted derogation consists in a potentially extensive application of the principle of non-discrimination of Article III GATT outside the GPA context. The narrow scope associated to the derogation has the potential to allow the possibility of multilateral application of the principle of national treatment to the procurement field. As result, many procurement provisions could fall into the scope of application of Article III GATT, and then be subjected to the principle of non-discrimination under the Single Undertaking, instead of being exclusively addressed under the plurilateral discipline of the GPA.44 The narrowly interpreted approach to the derogation, based on the ordinary meaning of the wording of Article III:8(a), has been openly criticised as contradicting the original spirit of the history of the WTO negotiation of public procurement. Under the light of the negotiating history of the WTO procurement provisions, the GPA represents the preferred space for procurement liberalisation and regulation under the WTO, but its plurilateral application is grounded and triggered by the scope and the extension of the exception of Article III:8 GATT.45 For these reasons, a refinement of the interpretation of the scope of Article III:8 GATT in the future WTO jurisprudence is likely, taking into account the sensitivity of the application of the principle of national treatment, particularly in the context of ‘buy national’ procurement policies and the systemic balance between the applicable WTO multilateral and plurilateral agreements. Moreover, another interpretative difficulty has been raised in relation to the derogation of public procurement from the application of the principle of non-discrimination. A difference in the scope of the derogation between the two dimensions of the principle of non-discrimination—the national treatment principle and the ‘most favoured nation’ clause—seems to appear from the wording of the GATT Agreement. In the body of the GATT, it is not possible to identify a similar explicit exception to the application of the MFN principles to procurement practices. From a strict textual interpretation, it could be argued that the obligation of non-discrimination may apply to the field of public procurement only in relation to the treatment of different external trading partners and not between domestic and foreign suppliers competing for public contracts. However, even if a similar provision to Article III is not reflected in the letter of GATT Article I, the

43 To be in a competitive relationship, the AB clarified that the two products should be i­dentical or like, or at least directly comparative and substitutable, AB Report, Canada— Renewable Energy (n 39), para 5.63. 44  Linarelli, ‘Global Procurement Law in Times of Crisis’ (2011) 789. 45  Arwel Davies, ‘The GATT Article III:8(a) Procurement Derogation and Canada—Renewable Energy’ [2015] Journal of International Economic Law 543.

The WTO Institutional Framework for Public Procurement 109 academic literature seems to commonly accept that in the GATT framework the MFN principle does not apply to public procurement practices.46 Despite the ambiguity of the text, the exclusion from the MFN rule mirrors the exception from the application of national treatment, as supported by the GATT and GPA negotiating history47 and the subsequent practice of the WTO members.48 Outside the GATT, the area of procurement of services is also exempted from the main GATS commitments on non-discrimination, but, in contrast to the GATT Agreement, GATS Article XIII(1) does not apply any distinction between the national treatment and the MFN clause. Exempted also from the GATS discipline on market access, MFN and national treatment, WTO members are free to adopt ‘laws, regulations or requirements governing the procurement by governmental agencies of services’ with discriminatory effects on the foreign services suppliers competing against national providers and from other WTO countries. C. Other WTO Multilateral Initiatives Regulate Public Procurement Activities So far, this chapter has explored how the trade liberalisation efforts of public procurement have been subject to two interlinked limitations. The WTO regulation of government procurement is, on one hand, expressively limited to the plurilateral discipline set in the GPA and, on the other hand, it is explicitly excluded from the scope of the principle of non-discrimination in the GATT and GATS agreements. However, it is possible to identify other multilateral obligations and negotiating efforts that, directly and indirectly, could apply in the field of public procurement and that are extended to the entire WTO membership. An indirect application of the principle of non-discrimination to ­procurement practices of WTO members is partially offered under the multilateral trading system of the GATT provision on State trading ­enterprises.49 According to GATT Article XVII(1), in fact, WTO Member States must ensure that the market behaviour of enterprises established and maintained by the State, or enterprises where the States have granted exclusive or special rights and privileges, is in conformity ‘with the general principles of non-­ discriminatory treatment prescribed in this Agreement for governmental 46 Sue Arrowsmith, Government Procurement in the WTO (Kluwer Law International 2003) 782. 47  Blank and Marceau (n 17) 81. 48 Martin Dischendorfer, ‘The Existence and Development of Multilateral Rules on ­Government Procurement under the Framework of the WTO’ (2000) 9 Public Procurement Law Review 1. 49 ibid.

110  The Inclusion of Social and Labour Rights measures affecting imports or exports by private traders’. Even if the scope of application of the provision in Article XVII GATT on public procurement is still ambiguous,50 the application of the MFN and ‘fair and equitable treatment’ rules seems to be assured in the purchasing of State-controlled enterprises, from the interpretation of the combined reading of paragraphs 1 and 2 of Article XVII GATT.51 Parallel to the provisions on State trading enterprises, within the GATT and the GATS Agreements it is also possible to identify certain general transparency obligations that have a wider application, also including public procurement practices.52 GATT Article X(1)53 requires, for example, that ‘laws, regulations, judicial decisions and administrative rulings of general application, made effective by any contracting party … shall be published promptly in such a manner as to enable governments and traders to become acquainted with them’. The same indications on transparency may also be easily applied to administrative procurement provisions. Similarly, in the GATS context, in accordance with GATS Article XIII(2), provisions such as Article III(1) GATS on transparency obligations and Article VI(2) GATS on review of domestic regulations, apply to regulatory measures on the procurement of services.54 With a limited focus on transparency, the WTO initiated a multilateral initiative to develop a binding discipline for public procurement. At the 1996 Singapore Ministerial Conference a Working Group on Transparency in Government Procurement was established with the two-stage scope of conducting ‘a study on transparency in procurement practices, taking into account national policies, and, based on this study, to develop elements for inclusion in an appropriate Agreement’.55 The mandate of this multilateral initiative on transparency was confirmed at the Ministerial Declaration of Doha, ‘recognizing the case for a multilateral Agreement on transparency 50  The only reference to government procurement in para 2 of GATT Art XVII indirectly confirms the overlapping scope of application of the discipline of State owned enterprises and public procurement, William Davey, ‘Article XVII GATT: An Overview’ in Thomas Cottier and Petros Mavroidis (eds), State Trading in the Twenty-First Century (University of Michigan Press 1998) 29. 51  Ernst-Ulrich Petersmann, ‘GATT Law on State Trading Enterprises: Critical Evaluation of Article XVII and Proposals for Reform’ in Thomas Cottier and Petros Mavroidis (eds), State Trading in the Twenty-First Century (University of Michigan Press 1998) 71. 52 Arrowsmith, Government Procurement in the WTO (2003) 75–76. 53  A parallel provision is included in Article III(1) GATS stating: ‘Each Member shall publish promptly and, except in emergency situations, at the latest by the time of their entry into force, all relevant measures of general application which pertain to or affect the operation of this Agreement. International agreements pertaining to or affecting trade in services to which a Member is a signatory shall also be published’. 54  Robert D Anderson and others, ‘The Relationship Between Services Trade and Government Procurement Commitments: Insights from Relevant WTO Agreements and Recent RTAs’ (World Trade Organization 2014) WTO Working Paper ERSD-2014-21 https://www.wto.org/ english/res_e/reser_e/ersd201421_e.pdf. 55  Singapore Ministerial Declaration, 9–13 December 1996, WT/MIN(96)/DEC.

The WTO Institutional Framework for Public Procurement 111 in public procurement and the need for enhanced technical assistance and capacity building in this area’.56 Even if the initiative was supported by the US and the EC submissions,57 and even if the role of transparency in the WTO provisions could significantly support value for money and preventing discrimination,58 a consensus on a draft text for a Transparency Agreement has never been reached. The lack of clarity regarding the concept of ‘transparency’ itself and the difficulties experienced in choosing the appropriate modality of its negotiations represented insurmountable obstacles.59 With the General Council Final Decision of the Cancun Ministerial Conference, the negotiations on a binding agreement on transparency were officially terminated without an agreement on 1 August 2004. This was mainly due to the pressure of a strong opposition from developing countries fearing a translation of the future multilateral regulation on transparency into multilateral market access commitments applicable to the field of procurement.60 If the negotiations on transparency in procurement have been officially terminated, public procurement is still being addressed under other ongoing WTO multilateral negotiation, precisely in the GATS legal framework. Even if Article XIII GATS limits the scope of the GATS discipline excluding procurement practices from the application of the principle of non-­discrimination, at the same time the GATS Agreement extends its negotiation mandate to services procurement activities unable to be addressed under the Uruguay Round.61 The multilateral Working Party on GATS Rules was established on the basis of GATS Article XIII(2) with the scope of launching the ‘multilateral negotiations on government procurement in services under this Agreement within two years from the date of entry into force of the WTO Agreement’.62 Since 2001 these negotiations have been integrated into the Doha Devel­ opment Agenda, even if substantial progress is lacking.63 However, it is worth noting that since 2002 and in particular after 2015, the GATS

56 

WT/MIN(01)/DEC/1, 20 November 2001. Trepte (n 8) 381. 58 Sue Arrowsmith, ‘Transparency in Government Procurement: The Objectives of ­Regulation and the Boundaries of the World Trade Organization’ (2003) 37 Journal of World Trade 283. 59 John Linarelli, ‘The WTO Transparency Agenda: Law, Economics and International Relations Theory’ in Sue Arrowsmith and Martin Trybus (eds), Public Procurement: The Continuing Revolution (Kluwer Law International 2003) 235–267. 60 Christian Pitschas and Hans-Joachim Priess, ‘Secondary Policy Criteria and Their ­Compatibility with EC and WTO procurement Law. The Case of the German Scientology Declaration’ (2000) 4 Public Procurement Law Review 171. 61 Anderson and others, ‘The Relationship Between Services Trade and Government ­Procurement Commitments’ (2014). 62  Working Documents and Annual Report of the Working Group available at http://www. wto.org/english/tratop_e/gproc_e/gpserv_e.htm#documents. 63  WTO, Report by the Chairperson of the Working Party on GATS Rules, S/WPGR/21, adopted 14 April 2011. 57 

112  The Inclusion of Social and Labour Rights ­ egotiations have revolved around a series of communications from the EU, n suggesting different guidelines for the framework of a regulation of procurement of services (for example, with an Annex to the GATS on government procurement of services).64 In October 2015 the EU proposed the establishment of an information exchange system regarding the treatment of foreignowned and foreign controlled enterprises active in procurement activities, now currently being discussed in the Working Party on GATS Rules.65 D.  The Renegotiation of the GPA and its Future Work Programme Although the multilateral negotiations addressing public procurement have experienced significant difficulties, the plurilateral negotiations on the text of the GPA Agreement have achieved considerable results. A crucial step in the evolution of the WTO discipline of government procurement is represented by the conclusion, at the Geneva Ministerial Conference of December 2011, of the long-running process of renegotiation of the GPA. After more than 10 years of negotiations,66 an historical agreement was reached on the final renewed text and on the coverage of the Agreement. It was formally adopted on 30 March 2012 with the Decision on the Outcomes of the Negotiations under Article XXIV:7 of the Agreement on Government Procurement (GPA/113).67 The adoption of the revised GPA, consolidating the lists of the Parties’ commitments, represents not only an important development in the context of the WTO specific regulation of public procurement but also achieves a significant progress in the entire WTO trade negotiation dynamics, blocked since the start of the Doha negotiations in 2001. The renegotiation process had the main regulatory purpose of improving the text of the Agreement, increasing its flexibility, eliminating discriminatory procurement practices and including the technical innovations applicable to the field of procurement, and, at the same time, extending its scope.68 Alongside this objective, the agreement reached on the negotiating package in 2011 had twofold significance. On the one hand, it significantly

64 

Anderson and others (n 54) 18–23. Party on GATS Rules, Report of the Meeting Held on 16 June 2016, S/WPGR/ M/90 26 August 2016. 66  The mandate of starting a new round of negotiation on government procurement was included in the 1994 GPA text, in Article XXIV:7(b) stating: ‘Not later than the end of the third year from the date of entry into force of this Agreement and periodically thereafter, the Parties thereto shall undertake further negotiations, with a view to improving this Agreement and achieving the greatest possible extension of its coverage among all Parties on the basis of mutual reciprocity, having regard to the provisions of Article V relating to developing countries’. 67  Robert D Anderson, ‘The WTO Agreement on Government Procurement: An Emerging Tool of Global Interacion and Good Governance’ (2010) 1 Law in Transition Online 32. 68  Committee on Government Procurement, GPA/79, 19 July 2004. 65  Working

The WTO Institutional Framework for Public Procurement 113 expanded the outcome reached in terms of market access: as a result of the bilateral negotiations between the Parties, the coverage of the Agreement has been extended to new goods and services, such as the full coverage of construction services and to more than 200 additional governmental entities and sub-entities.69 On the other hand, the revised GPA included significant improvements in light of the perspective of future accession to the Agreement, trying to find a balance between transparency requirements and national sovereignty.70 New provisions focusing on the special and differentiated treatment for developing countries have been introduced, together with additional flexibilities in the procedural aspects of awarding public contracts. Shorter time frames have been introduced in the case of emergencies or for the purchasing of goods and services that are easily available on the commercial marketplace.71 Temporary flexibilities have been included, offering the opportunity to negotiate a more targeted accession to the Agreement and an alternative approach to the developing countries’ participation in the GPA. These flexibilities are intended to accommodate the specific needs of developing and emerging countries in light of a future accession to the Agreement and they become particularly relevant with regard to the instrumental use of public procurement by developing countries.72 Thanks to the improvements in the revised text, the possibility of using protective measures for particularly sensitive industries and sectors in terms of ‘price preferences, offsets and phased-in addition for specific sectors and gradual thresholds in the coverage’ also seem to have been provided as incentives for developing countries.73 Moreover, newly introduced flexibilities are not only limited to the use of acceding developing countries but in the overall regulatory approach to public procurement, as stated in the new preamble ‘that the procedural commitments under this Agreement should be sufficiently flexible to accommodate the specific circumstances of each Party’. The increase of flexibilities in the GPA tries to balance legitimate policy concerns of national sovereignty

69  Robert D Anderson, Steven L Schooner and Collin D Swan, ‘The WTO’s Revised Government Procurement Agreement—An Important Milestone Toward Greater Market Access and Transparency in Global Procurement Markets’ (2012) 54 Government Contractor 1. 70 Sue Arrowsmith, ‘Reviewing the GPA: The Role and Development of the Plurilateral Agreement After Doha’ (2002) 5 Journal of International Economic Law 761. 71  Robert D Anderson and Anna Caroline Müller, ‘Competition Policy and Poverty Reduction: A Holistic Approach’, WTO Staff Working Paper ERSD-2013-02, 20 February 2013. 72 Robert D Anderson, ‘The Coming into Force of the Revised WTO Agreement on ­Government Procurement, and Related Developments’ (2014) 5 Public Procurement Law Review NA160. 73  Anna Caroline Muller, ‘Special and Differential Treatment and Other Special Measures for Developing Countries under the Agreement on Government Procurement: The Current Text and New Provisions’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 339–376.

114  The Inclusion of Social and Labour Rights with the specific procurement, as mirrored in the inclusion of corruption and non-trade rationales in the GPA preamble.74 In contrast to the 1994 GPA text, the revised GPA preamble includes reference to typical domestic procurement objectives—like integrity, predictability and efficiency in the management of public recourses—even if these objectives are not strictly related to the main objective of trade liberalisation but more oriented at promoting the rule-of-law in the procurement systems of the Parties.75 Thus, the successful renegotiation of the GPA represents an important milestone in the WTO approach to an international regulation of public procurement, with significant future implications also in the definition of the regulatory space for the enforcement of social and labour objectives in procurement practices. Apart from the flexibilities available to developing countries, two aspects of the GPA renegotiation process are particularly relevant. First, the revised GPA offers a new regulatory approach to the procedural aspects of conducting an award process. As will be shown further, the wording of the revised text was extensively amended, harmonising definitions and procedures to other international instruments of procurement regulation and offering new solutions for the inclusion of environmental and social considerations in procurement practices.76 Second, a significant part of the negotiating package annexed to the ­Ministerial Declaration of December 2011 is represented by the ‘Future Work Programmes of the Committee on Government Procurement’, which until now has been almost disregarded in the commentaries. The Future Work Programme represents an innovative solution that emerged during the GPA negotiations, raising particularly interesting questions about the definition of its legal nature in light of the discussion on the value of hard law and soft law mechanisms in the procurement regulation.77 Formally included in Appendix 2 to the Decision on the Outcomes of the Negotiation under Article XXIV:7 of the Agreement on Government Procurement, the Work Programme is composed of seven Annexes (from A to G),

74  The third recital of the preamble states ‘Recognizing that the integrity and predictability of government procurement systems are integral to the efficient and effective management of public resources, the performance of the Parties’ economies and the functioning of the multilateral trading system’. 75 Arie Reich, ‘The New Text of the Agreement on Government Procurement’ (2009) 12 Journal of International Economic Law 989. 76  Sue Arrowsmith, ‘The Revised Agreement on Government Procurement: Changes to Procedural Rules and Other Transparency Provisions’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 285–376. 77  For a preliminary study on the dynamics of interaction between hard law and soft law in public procurement, Maria Anna Corvaglia and Laura Marschner, ‘The Complementarity of Soft and Hard Law in Public Procurement: Between Harmonization and Resiliance’ (2012) 10/2013 Biennial Conference of the American Society of International Law—International Economic Law Interest Group.

The WTO Institutional Framework for Public Procurement 115 each of them including a decision of the Committee on Government Procurement concerning specific procurement issues and setting the future negotiating agenda for each of these issues. Negotiated in parallel with the approval of the revised text of the GPA and the Parties’ market access commitments, the Work Programme reflects the major interests and the socio-economic concerns of the Parties for the future of the WTO discipline of public procurement. The main objective of the Work Programme is to improve the administration of the Agreement and to establish a framework for future discussion between the Signatory Parties to facilitate and share perceptions on issues of continuing interest, such as important socio-political concerns like the inclusion of safety standards. To this end, best practices, as soft law regulatory mechanisms, are clearly identified by the GPA Parties in the Future Work Programme as the best negotiating approach for the future evolution of the GPA. In the negotiating agenda set by the Future Work Programme particular attention is given to the social and labour policies into procurement practices. Between the broadly defined social concerns to be addressed in the future regulation, the Future Work Programme identifies as priority the facilitation of the participation of small and medium-sized enterprises (SMEs) in public procurement contracts.78 In Annex C, the Work Programme asks the Signatory Parties to ‘consider best practices with respect to measures and policies’ regarding the possible approaches to sustainability and the treatment of SMEs under the Agreement.79 While the participation of SMEs in public tendering is often driven not only by social purposes but by economic and industrial reasons, two other Annexes in the Future Work Programme are particularly focused on the achievement of social and labour policies in the future regulatory development. Annex E includes the Decision of 30 March 2012 regarding a Work Programme on Sustainable Procurement. Recognising the increasing practice and importance of sustainable procurement schemes adopted at national and local level, the Committee on Government Procurement is invited to explore the possibilities of integrating sustainable objectives with

78  Together with the question of sustainable procurement and the protection of SMEs, the other issues specified inside the Future Work Programme at the centre of further actions by the Signatory Parties are the collection of statistical data, the exclusion on the Parties’ coverage commitments, safety standards and the legal framework of public private partnership. Anderson, Schooner and Swan, ‘The WTO’s Revised Government Procurement Agreement’ (2012) 3. 79  As registered in the Draft Report (2016) of the Committee on Government Procurement, Work Programme on SMEs (para 3.2) which suggests that the Committee should use a questionnaire to gather information from the GPA Parties regarding measures to assist and promote participation by small and medium sized enterprises (SMEs). It was reported that in 2015 an agreement on the terms of the questionnaire was reached and output has been received from various parties and circulated by the Secretariat. WTO Committee on Government Procurement, Draft Report (2016) of the Committee on Government Procurement, GPA/W/339, 17 November 2016, para 4.2.

116  The Inclusion of Social and Labour Rights the ­principle of ‘best value for money’80 and with the main trade obligations of the Contracting Parties,81 ‘affirming the importance of ensuring that all procurement is undertaken in accordance with the principles of non-discrimination and transparency as reflected in the Agreement’. Moreover, Annex G focuses even more specifically on labour considerations in the ‘Decision of the Committee on Government Procurement on a Work Programme on Safety Standards in International Procurement’. In fact, ‘the need for a balanced approach between public safety and unnecessary obstacles to international trade’, opening the door for the inclusion of labour safety standards in the trade and procurement framework, is recognised as a priority for the Committee on Government Procurement. The Work Programme is advised to conduct further studies on the possibilities of including issues of public safety in ‘legislation, regulations and practices of the Parties and guidelines relating to the implementation of the Agreement by procuring entities’ in Article 2(a) Annex G. Even if it has opened the possibility for the inclusion of social and labour considerations in the future WTO regulation of public procurement, it is still premature to assess the impact that the Future Work Programme will have on the future development of the GPA negotiations. After the formal adoption of the Protocol of the Amendment by two-thirds of the GPA membership in March 2014, the revised GPA finally entered into force in April 2016.82 III.  THE OBJECTIVE OF THE GPA: THE PRINCIPLE OF NON-DISCRIMINATION

Thanks to their explicit derogations, the GATT and the GATS Agreements exclude their application to the field of public procurement, potentially leaving the entire WTO membership free to adopt discriminatory and protectionist procurement practices for the achievement of industrial strategies or socio-economic reasons. However, the WTO Members and GPA Signatories decided to liberalise further their procurement markets through non-­discriminatory obligations. The main regulatory objective of the WTO Plurilateral Agreement on Government Procurement is to guarantee respect

80  Article 2(c), Decision of the Committee on Government Procurement on a Work Programme on Sustainable Procurement, Annex E to Appendix 2 of the Decision on the Outcomes of the Negotiations Under Article XXIV:7 of the Agreement on Government Procurement, adopted on 30 March 2012. 81  Article 2(d), Decision of the Committee on Government Procurement On a Work Programme on Sustainable Procurement, Annex E to Appendix 2 of the Decision on the Outcomes of the Negotiations Under Article XXIV:7 of the Agreement on Government Procurement, adopted on 30 March 2012. 82 https://www.wto.org/english/news_e/news14_e/gpro_07apr14_e.htm.

The Objective of the GPA: The Principle of Non-Discrimination 117 of the principle of non-discrimination in the procurement practices covered by the threshold and by the Schedule of Commitments agreed between the GPA Signatory Parties. The preamble of the revised GPA clarifies that the primary function of the agreement is to establish an ‘effective multilateral framework for government procurement, with a view to achieving greater liberalization and expansion of, and improving the framework for, the conduct of international trade’. The aim of the GPA to liberalise the field of public procurement is achieved through the implementation of the principle of non-discrimination. Immediately after clarifying its primary function, the GPA revised preamble explicitly recognises that ‘measures regarding government procurement should not be prepared, adopted or applied so as to afford protection to domestic suppliers, goods or services, or to discriminate among foreign suppliers, goods or services’. Alongside the primary scope of ensuring the respect of the principle of non-discrimination, the revised GPA preamble includes reference to other procurement regulatory objectives that have traditionally inspired domestic procurement regulation: integrity, predictability and efficiency in the management of public recourses, together with anti-corruption. These regulatory objectives are embraced and recognised by the preamble of the GPA as important objectives of the domestic regulation of public procurement in the GPA members and, for this reason, essential for the promotion of the rule-of-law in procurement systems and essential for the functioning of the GPA system. In the light of its function and main objectives set in its preamble, the GPA establishes a system of legally binding commitments that entail two main sets of obligations for its Signatory Parties: the general non-discrimination principles are combined with a set of detailed transparency rules in the award procedure. Before turning to the analysis of the regulation of the different stages of the procurement process under the GPA (in section V), the discussion will focus on the interpretation of the principle of non-­discrimination in the specific context of the regulatory framework established in the GPA. A. The Basic Principles of Non-Discrimination and the Prohibition of Offsets The GPA regulatory framework of public procurement, including its transparency and procedural aspects, is built around the principle of non-­ discrimination, articulated in the principle of national treatment and in the MFN clause, as set out in Article IV:1 GPA revised text. First, Article IV:1(a) aims at ensuring the respect of the national treatment principle: each GPA Party must provide ‘treatment no less favourable than the treatment the Party, including its procuring entities, accords to

118  The Inclusion of Social and Labour Rights domestic goods, services and suppliers’ in the procurement practices of the GPA. Second, according to Article IV:1(b), GPA Parties must also accord a non-less favourable treatment to ‘goods, services and suppliers of any other Party’, thus ensuring that the regulatory treatment remains the same among the GPA Signatory Parties regardless of the country of origin of the goods and services. With regard to Article IV:1(b), it would be more accurate to refer to it as ‘most favoured party treatment’ rather than the more general concept of ‘most favoured nation’ treatment, as commonly referred in the other WTO agreements. In contrast to the agreements part of the Single Undertaking where the MFN rule extends the non-discrimination treatment to all WTO Parties, Article IV:1 only applies to GPA Parties and its discipline cannot be extended to all WTO Parties due to the plurilateral nature of the GPA.83 However, both national treatment and MFN clauses will be granted immediately and unconditionally within the scope of application covered by the agreement and precisely to ‘to the goods and services of any other Party and to the suppliers of any other Party offering the goods or services of any Party’. Moreover, in the specific regulation of public procurement, the application of the principle of national treatment is further affirmed by the prohibition of offsets that is set out in the GPA. Article IV:6, in fact, specifically requires that the GPA Contracting Parties ‘shall not seek, take account of, impose or enforce any offset’. The definition of offsets in procurement is offered by para (l) of Article I GPA and covers procurement provisions such as local content requirements, licensing of technology and investment requirements, aiming to improve the balance-of-payment account or local development.84 These types of procurement requirements would already be in violation of the national treatment principle as defined in Article IV:1(a); in particular the local content regulations as well as the investment and counter-trade provisions allocate a competitive advantage to domestic producers and locally established suppliers. However, even if established for the support of local development and social groups within the local communities, Article IV:6 clearly states that offsets provision are ‘automatically unlawful’, apart from the flexibilities offered to developing countries in this context.85 For these reasons, the prohibition of offsets in the GPA, read in combination with the national treatment obligation in Article IV:1(a) GPA, has been described as one of the major limitations that the agreement imposes on the achievement of non-economic policies through procurement practices.86

83  Simon Lester, Bryan Mercurio and Arwel Davies, World Trade Law. Text, Materials and Commentary (2nd edn, Hart Publishing 2012) 697–70. 84  Trepte (n 8) 1141. 85  Arrowsmith (n 46) 333. 86  Reich ‘The New Text of the Agreement on Government Procurement’ (2009) 1014.

The Objective of the GPA: The Principle of Non-Discrimination 119 Many strategic, protective and proactive procurement mechanisms focused on the achievement of industrial, as well as labour and social objectives, such as the most evident examples of price preferences or set-aside procurement schemes, can fall into the definition of offsets. However, temporary flexibilities in the use of offsets are accorded to developing countries, according to Article V:3(b), ‘during a transition period and in accordance with a schedule, set out in its relevant annexes to Appendix I, and applied in a manner that does not discriminate among the other ­Parties’. Even if the definition of ‘local development’ is unclear, the provision on offsets is absolute and it becomes extremely important in the effective enforcement of the national treatment and in the identification of the use of public procurement for protectionist purposes beyond legitimate policy considerations for both developed and developing countries. B. The Interpretation of ‘Treatment Not Less Favourable’ in Public Procurement In the GPA, the obligation of non-discrimination is expressed in terms of ‘treatment not less favourable’. As consistently and uniformly interpreted in other WTO agreements, a ‘treatment not less favourable’ consists in the lack of de jure and de facto forms of discriminatory practices.87 In the WTO regulatory framework, the principle of non-discrimination not only ensures that the domestic regulations do not formally apply to the various WTO 87  The principle of non-discrimination is at the core of the WTO law and policy. In the WTO jurisprudence, the distinction between de jure and de facto discrimination was first introduced in the AB Report of Canada—Autos Case. The analysis of the MFN principle in Article I:1 specified: ‘Neither the words “de jure” nor “de facto” appear in Article I:1. Nevertheless, we observe that Article I:1 does not cover only “in law”, or de jure, discrimination. As several GATT panel reports confirmed, Article I:1 covers also “in fact”, or de facto, discrimination. Like the Panel, we cannot accept Canada’s argument that Article I:1 does not apply to measures which, on their face, are “origin-neutral’. See, Canada—Certain Measures Affecting the Automobile Industry, Report of the Appellate Body, WT/DS139/AB/R, 31 May 2000, para 78. On a parallel basis, the interpretation of de jure and de facto discrimination in Article II.1 GATS is confirmed in AB Report in Bananas III, clearly stating: ‘The obligation imposed by Article II is unqualified. The ordinary meaning of this provision does not exclude de facto discrimination. Moreover, if Article II was not applicable to de facto discrimination, it would not be difficult— and, indeed, it would be a good deal easier in the case of trade in services, than in the case of trade in goods—to devise discriminatory measures aimed at circumventing the basic purpose of that Article. For these reasons, we conclude that “treatment no less favourable” in Article II:1 of the GATS should be interpreted to include de facto, as well as de jure, discrimination.’ See European Communities—Regime for the Importation, Sale and Distribution of Bananas, Second Recourse to Article 21.5 of the DSU by Ecuador; Appellate Body Report, (WT/DS27/ AB/R), paras 233–34. Moreover, the principle of non-discrimination is also at the centre of a vast academic production. For a more comprehensive overview of the analysis of the principle of non-discrimination in both the National treatment and MFN obligation in the different WTO agreements, see William J Davey, ‘Non-Discrimination in the World Trade Organization: The Rules and Exceptions’ (2011) 354 Recuiel des cours—The Hague Academy of International Law 317.

120  The Inclusion of Social and Labour Rights members or to both domestic and foreign products (prohibiting a de jure discrimination), but it also ensures that any discriminatory and protectionist effect of the measure at issue is also prohibited in its application (prohibition of de facto discrimination).88 In the analysis of the interpretation of the concept of ‘treatment not less favourable’, first the difference between de jure or de facto discriminatory procurement practices will be clarified and, second, the specific connotation that the principle of non-discrimination assumes when applied in the context of public procurement will be explored. On the one hand, ‘de jure discrimination’ generally refers to regulatory measures involving formal discriminatory provisions or specifications in their wording or prescriptions. In the case of public procurement, typical examples of de jure discrimination are set-aside schemes, fixed percentages of price preference allocated to national suppliers or burdensome qualification conditions that apply exclusively to foreign suppliers. On the other hand, the identification of ‘de facto’ discriminatory practices is more complex; it focuses on the evaluation of the effect and the market implications of the regulatory measure and on ‘the protective nature and purpose’, taking into consideration the specific design and structure of the measure.89 De facto discrimination usually derives from a neutral regulatory provision resulting in the allocation of unfair advantages to national producers or suppliers. In the case of public procurement, a de facto discrimination can be represented by a procurement regulation not formally establishing a distinction between foreign or domestic suppliers or between the different trading partners, but in practice imposing requirements in the award procedure that only domestic producers can easily meet. An example of de facto discrimination would be the use of national standards describing product requirements in the bidding documents which are more difficult for foreign suppliers to meet. Together with the differentiation between de jure and de facto discrimination, the content of the principle of non-discrimination has a specific connotation in the field of public procurement. As argued by Arrowsmith, the interpretation of the principle of non-discrimination in public procurement necessarily has to take into consideration the relevance of the modification of the conditions for competition resulting from the procurement regulatory 88  Thomas Cottier and Matthias Oesch, ‘Direct and Indirect Discrimination in WTO and EU Law’ in Sanford E Gaines, Birgitte Egelund Olsen and Karsten Engsig Sørensen (eds), Liberalising Trade in the EU and the WTO: A Legal Comparison (Cambridge University Press 2012) 141–175. 89  The issue of the design and structure of measure as evidence of protective application of a trade distortion is a question clarified, together with the definition of the “Like Products” in the AB Report Japan—Taxes on Alcoholic Beverages. In particular on the design of the trade measure, the AB report states that ‘[a]lthough it is true that the aim of a measure may not be easily ascertained, nevertheless its protective application can most often be discerned from the design, the architecture, and the revealing structure of a measure’. See Japan—Taxes on Alcoholic Beverages, Report of the Appellate Body, (WT/DS8/AB/R), 4 October 1996, p 29.

The Objective of the GPA: The Principle of Non-Discrimination 121 measures, comparing them to the normal conditions in public and private markets.90 The study of the discriminatory nature and implication of the procurement measures necessarily has to involve the assessment of the modification of the ‘prevailing conditions of competition … and to consider how far the condition is justified by reference to the commercial objectives that it seeks to implement’.91 Following this argument, it would be questionable whether a request to translate the bidding documents into the procuring authority’s national language does not result in less favourable treatment, even if it reflects a legitimate interest of the procuring authority or a normal practice also conducted in private procurement processes. Unfortunately, the interpretation of the principle of non-discrimination— and the national treatment provision particularly relevant to this analysis—has not been fully explored in the GPA jurisprudence under the WTO dispute settlement mechanism.92 The only relevant case addressing the application of the principle of non-discrimination in public procurement is the panel report of the Trondheim case, adjudicated under the Tokyo Procurement Code. This was a dispute involving US and Norway concerning a limited tendering procedure93 of the Norwegian Public Roads Administration that allocated a public contract in violation of the national treatment principle, then contained in Article II:1 of the Tokyo Code.94 It is important to bear in mind that the case was adjudicated on the Tokyo Round Code on Government Procurement, before the establishment of the WTO dispute settlement mechanism.95 Moreover, the panel report did not fully concentrate on the implementation of the national treatment per se, but mainly follows the interpretation that the use of a single tendering process96 in the allocation of procurement contracts was a discriminatory act as opposed to comprising an open tendering procedure.

90 

Arrowsmith (n 46) 163.

91 ibid.

92  Mitsuo Matsushita, ‘Major WTO Dispute Cases Concerning Government Procurement’ (2006) 1 Asian Journal of WTO & International Health Law and Policy 299. 93  The use of limited tendering procedure is often referred as single tendering procedure and it is based on the invitation of a single provider. This procedure was challenged by the United States on the base of its restriction of competition for the US suppliers and it was found unjustifiable under the provision of Article V:15(e) of the Tokyo Code by the panel and remedies were taken into consideration. Davies, ‘The Evolving GPA’ (2017) 32–33. 94  Norway—Procurement of Toll Collection Equipment for the City of Trondheim, Report of the Panel adopted by the Committee on Government Procurement on 13 May 1992 (GPR. DS2/R), para 4.15. 95  Arwel Davies, ‘Reviewing Dispute Settlement at the World Trade Organization: A Time to Reconsider the Role/s of Compensation?’ (2006) 5 World Trade Review 31. 96  The use of the single tendering procedure (in the GPA; called ‘restrictive tendering’ in the UNCITRAL Model Law) consist in a procurement methods that limit the participation to the tenders to a one or a limited number of suppliers, opposed to the open tendering procedure, which does not impose limitation to the suppliers’ participation. Sue Arrowsmith and others, Public Procurement Regulation: An Introduction (The EU Asia Inter University Network for Teaching and Research in Public Procurement Regulation 2010) 44–46.

122  The Inclusion of Social and Labour Rights C. The Differences in the Interpretation of the Non-Discrimination Principle Between the GATT and the GPA The principle of non-discrimination, defined in the standard of ‘not less favourable treatment’ and articulated in the national treatment and MFN provisions, is at the core of the GPA regulatory framework. However, although the application of the non-discrimination principle has not been explored in the specific GPA context, the interpretation of the concept of ‘not less favourable treatment’ has been extensively developed in the WTO jurisprudence.97 For this reason, the interpretation of the GPA provisions on non-discrimination has, so far, often been conducted following an extensive application of the interpretation of the ‘non favourable treatment’ in other WTO legal texts, mainly in the GATT and the Technical Barriers to Trade (TBT) Agreements.98 In the academic literature some concerns has been raised on the legitimacy of adopting this extensive interpretative approach.99 It has been argued that the interpretation of the ‘not less favourable treatment’ in public procurement acquires a substantially different connotation, compared to the relevance that it assumes in the context of GATT and GATS.100 Moreover, the regulatory and interpretative differences in the non-discriminatory treatment acquire a considerable importance in the analysis of the inclusion of social and labour policy objectives in public procurement. In this specific context, there are two major concerns that would suggest a stricter interpretation of the national treatment in public procurement and more focused on the procedural implications of the principle of non-discrimination in the award selection. First, in defining a standard of non-discrimination, the wording of GPA Article IV does not refer to the issue of ‘likeness’ of the procured goods, services and suppliers as established in Article I and III GATT and, similarly, Article II GATS. Article IV GPA prohibits discrimination simply on ‘goods, services and suppliers’ and not of ‘like products’. It has been argued, however, that the notion of likeness is implicit and self-evident in the GPA ­provision.101 At the same time, it is undeniable that the text of the revised GPA represents the result of careful drafting and the outcome of a long negotiating process.102 In this regard, it has also been suggested that the absence of a ‘likeness’ reference in the GPA provision is inherent in the 97 

Cottier and Oesch, ‘Direct and Indirect Discrimination in WTO and EU Law’ (2012) 305. Christopher McCrudden, Buying Social Justice: Equality, Government Procurement and Legal Change (Oxford University Press 2007) 469–506. 99  Arrowsmith (n 46) 160. 100  Lester, Mercurio and Davies, World Trade Law (2012) 714. 101 ibid. 102  Joel P Trachtman, ‘Symposium: States’ Rights vs. International Trade: The M ­ assachusetts Burma Law’ (2000) 19 New York Law School Journal of International and Comparative Law 355. 98 

The Objective of the GPA: The Principle of Non-Discrimination 123 specific nature of public procurement and it is due to the simultaneous role of the procuring authority as regulatory authority and final consumer.103 However, regardless of the speculations on the reasons behind its absence, the clear lack of a ‘likeness’ standard in the wording of Article IV it does not allow the Appellate Body’s approach on the standard of “likeness” in the GATT to be extended to the interpretation of ‘not less favourable’ treatment in public procurement. A greater margin of flexibility for the comparative evaluation of the discrimination in public procurement practices, focused on the competitive conditions in the market, seems to be granted in the GPA text.104 Within the debate on ‘likeness’ in the context of GATT and GATS, the literature has extensively focused on the possibility of the inclusion of ‘process and production methods’ (PPMs) in the determination of the discrimination. The crucial question in the PPMs debate consists of the possibility of differentiating and discriminating between ‘like’ goods and services based on process-based measures that do not impact on the final characteristics of the products (non-PPMs).105 In the WTO legal system the debate concerning the admissibility of discriminatory practices based on ‘non-product related’ PPMs has gradually assumed a crucial importance. It allows non-economic policy goals such as respect for human rights, conservation of the environment or protection of labour standards in the production of the goods and services to be taken into consideration.106 These social and environmental production characteristics may very well have a direct or indirect impact on the determination of the ‘likeness’ between national and imported products and services and, subsequently, on compliance with the obligation of nondiscrimination. The main issue in this debate is represented by the potentially discriminatory and distortive effects that trade measures designed around non-PPM concerns may have on international trade.107 Many trade discussions have been based around the accommodation of PPM measures under the various WTO obligations, particularly in the case of de facto ­discriminatory PPM measures.108 103 Arwel Davies, ‘The National Treatment and Exception Provisions of the Agreement on Government Procurement and the Pursuit of Horizontal Policies’ in Sue Arrowsmith and Robert Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 437. 104  Maria Anna Corvaglia, ‘Public Procurement and Private Standards: Ensuring ­Sustainability Under the WTO Agreement on Government Procurement’ (2016) 19 Journal of ­International Economic Law 607. 105 For the most extensive review of the academic debate on the topic, see Christiane R Conrad, Processes and Production Methods (PPMs) in WTO Law: Interfacing Trade and Social Goals (Cambridge University Press 2011). 106  Robert Howse and Donald Regan, ‘The Product/Process Dinstinction—An Illusory Basis for Disciplinating “Unilateralism” in Trade Policy’ (2000) 11 European Journal of International Law 249. 107  Jason Potts, The Legality of PPMs under the GATT: Challenges and Opportunities for Sustainable Trade Policy (International Institute for Sustainable Development 2008). 108 Conrad, Processes and Production Methods (2011) 149.

124  The Inclusion of Social and Labour Rights The PPMs debate represents an important aspect of the GPA compliance of the inclusion of social concerns and labour rights in procurement practices, as attention to working conditions and minimum labour standards is one of the most frequently used non-PPM concerns. Labour rights and working conditions are typical aspects of the production process that have no impact on the final characteristics of the goods and services procured. However, the legitimacy of non-PPM considerations remains particularly controversial in the interpretation of the non-discrimination principle in the GPA framework, and the possibility of considering non-related PPM issues is still disputed in the procurement literature.109 Moreover, the lack of a ‘likeness’ standard in GPA Article IV significantly reduces the relative importance that the PPM issue has in the interpretation of the principle of non-discrimination per se, which is more focused on the evaluation of the conditions of competition in the public market. For this reason, the context of public procurement, the PPM issue appears to be ‘over-emphasized and unnecessary’ in the context of that Article and not connected to the interpretation of the principle of non-discrimination per se.110 In the absence of a concrete link to the wording of the definition of the non-discriminatory principle, the discriminatory aspects of the procurement measures, including PPM concerns, become more evident and more interconnected with the GPA provisions regulating the procedural aspects of the procurement process and the transparency of different phases of the award procedure. For this reason, the possibility of including production concerns not resulting in the final characteristic of the goods and services procured could be better interpreted if read in conjunction with the GPA provision of transparency in the award procedure, as will be explored later. Together with the lack of the ‘likeness’ standard, the second important difference in the application of the principle of non-discrimination to the context of public procurement consists in the existence of detailed regulations and transparency requirements in the text of the Agreement. In the GPA the non-discrimination principle is enforced by a detailed procedural regulation concerning the award selection, which is intended to increase transparency and openness in the concrete conduct of the procurement process. For this reason, the transparency rules and positive commitments required by the GPA in the procurement process can be applied with a greater margin of certainty and may be interpreted as a ‘proxy for identifying

109  It must to be kept in mind that it is not possible to easily extend the Appellate Body’s approach in the procurement context due to the fact that the issue of ‘likeness’ is excluded from the context of the GPA. GPA prohibits discrimination of ‘products’ and not of ‘like products’. 110  Davies, ‘The National Treatment and Exception Provisions’ (2011) 437. Davies elaborates, in the GPA context, the position on ‘likeness’ developed by Joost Pauwelyn in the GATT and GATS: see Joost Pauwelyn, ‘Comment: The Unbearable Lightness of Likeness’ in Marion Panizzon, Nicole Pohl and Pierre Sauvé (eds), GATS and the Regulation of International Trade in Services (Cambridge University Press 2008) 358–69.

The Objective of the GPA: The Principle of Non-Discrimination 125 discrimination’. However, the relationship between an alleged violation of Article V:1 and the respect for the specific transparency and procedural rules has not been explored at all in the academic literature or in the limited GPA jurisprudence.111 The issue will certainly be at the centre of any panel’s or Appellate Body’s argumentation in the future case law concerning the interpretation of the GPA. D. Social and Labour Procurement Objectives and the Principle of Non-Discrimination The interpretation of the principle of non-discrimination in the context of public procurement represents the fundamental aspect of the evaluation of the compatibility of the attainment of social and labour policies within the WTO regulatory framework of public procurement. The inclusion of social and labour considerations alongside the procurement process has the potential to result in a de jure or a de facto discrimination among the different suppliers based on their origins.112 More precisely, it is the compliance with the national treatment principle that has the major potential of conflict between the realisation of social and labour policy objectives in the award of procurement contract and the principle of non-discrimination.113 It is important to clarify that the different types of instrumental uses of public procurement result in different forms of discriminations and, as a consequence, they have different legal implications under the WTO and the GPA regulatory framework.114 Among the different non-economic regulatory purposes, strategic industrial procurement policies are usually the most likely to imply discriminatory effects violating the obligations set in Article IV GPA. Price preference or set-aside procurement schemes in support of non-competitive national industries or local business from disadvantaged areas represent clear forms of de jure and de facto discriminations, very difficult to justify otherwise (in the context of the GPA general exceptions explored further).115 The attainment of social objectives, for example in support of policies addressing unemployment in local communities or among specific minorities and disadvantaged groups, also potentially create tensions with the respect of the national treatment principle as set in Article IV GPA. The protective use of public procurement for social and unemployment policies grants specific economic advantages—in the form of the allocation of the public contracts to domestic suppliers—to the main beneficiaries of the 111 

Lester, Mercurio and Davies (n 84) 714. McCrudden, ‘International Economic Law and Human Rights’ (1999) 7. 113  Henrik Karl Nielsen, ‘Public Procurement and International Labour Standards’ (1995) 2 Public Procurement Law Review 94. 114  Arrowsmith (n 46) 328–30. 115 Sue Arrowsmith, John Linarelli and Don Wallace, Regulating Public Procurement: National and International Perspective (Kluwer Law International 2000) 301. 112 

126  The Inclusion of Social and Labour Rights social and labour ­policies pursued.116 Moreover, the proactive enforcement of social and labour policies through public procurement may often entail de facto discriminatory effects, if the requirements for the participation in the public tendering process are drafted in a way that is more accessible for national suppliers.117 The most remarkable precedent of de facto discrimination related to the realisation of social objectives in public procurement is arguably the US Massachusetts State Law case, a dispute that attracted lots of attention in relation to the broad debate of the protection of human rights and labour rights in the WTO legal framework.118 The dispute arose from the Commonwealth of Massachusetts State Law, which prohibited State procuring authorities from awarding public contracts to domestic and foreign suppliers doing business with Myanmar, based on serious human rights violations in that country. EU and Japan, in their requests for the establishment of a WTO panel,119 claimed a violation of the non-discrimination principle, as it explicitly did not provide ‘to the suppliers of other Parties offering products or services of the Parties immediate and unconditional treatment no less favourable than that accorded to domestic services and suppliers and that accorded to services and suppliers or any other Party’. The Massachusetts procurement prohibition was factually translated into a system of price penalties for companies involved in business with Myanmar, thus violating the transparency requirements set in Article VIII(b) for the qualification of suppliers.120 Unfortunately, a report providing an official interpretation of the case and of the discrimination following from a trade measure grounded in human rights was never achieved. The dispute was successfully settled at domestic level by a decision of the US Supreme Court that declared the Massachusetts procurement law to be unconstitutional.121 Even if lacking an interpretation in the context of the Massachusetts– Burma case, the implementation of labour rights through proactive procurement practices does not necessarily entail the same discriminatory implications or distortive effects that result from the enforcement of industrial and employment policies in strategic and protective procurement practices. It is not possible to completely exclude the possibility of drafting non-discriminatory bidding documentation and avoiding imposing 116 

ibid 253. Davies (n 103) 433. 118  Kaufnman (n 3) 177–79. 119 EU Request for Establishment of a Panel, WTO United States—Measure Affecting ­Government Procurement, WTDS88/3, 9 September 1998. And Japan’s request to join the consultations, WTO United States—Measure Affecting Government Procurement, WTDS88/2, 2 July 1997. 120  McCrudden (n 7) 12–30. 121 Matthew Schaefer, ‘Government Procurement Disputes: Lessons from the Dispute Over Massachusetts 1996 Act Regulating State Contracts with Companies Doing Business with Burma (Myanmar)’ in Mark A Pollack and Ernst-Ulrich Petersmann (eds), Transatlantic ­Economic Disputes. The EU, the US, and the WTO (Oxford University Press 2004) 327–360. 117 

The Objective of the GPA: The Principle of Non-Discrimination 127 burdensome conditions on foreign suppliers only, while enforcing respect for labour rights requirements. In the literature, it has been even argued that one abstract possibility for enforcing labour policies without infringing on the national treatment principle could be the imposition of strict requirements on domestic suppliers only, resulting in very unpopular procurement policies, unlikely to be implemented at national level.122 More realistically, compliance with legal requirements set in national regulations and enforcing the protection of minimum standards of labour rights, applicable in an undifferentiated way to national and foreign suppliers, could be interpreted as not being in violation of the national treatment principle. Moreover, the reference to international legal standards in procurement documentation as, for example in the International Labour Organization (ILO) Core Labour Rights, guarantees respect for the principle of non-discrimination on the basis of the nationality of the suppliers, avoiding the risk of violation of the national treatment principle.123 The WTO recognises the importance of international standards developed by other international fora, and it even encourages their use in the context of the WTO Agreement on the Application of Sanitary and Phytosanitary ­Measures (SPS Agreement) and the WTO Agreement on Technical Barriers to Trade (TBT Agreement),124 However, to be recognised as international standards various procedural and substantive requirements should be met and it is still uncertain if the use of ILO standards could be fully legitimate under different WTO agreements.125 Another important consideration should be taken in relation to the possible conflict between the inclusion of social and labour considerations and the principle of non-discrimination. In the analysis of their compliance with the WTO it is also relevant to note the difference between procurement policies that require compliance with national legal requirements and policies that impose criteria that go further than the enforcement of the domestic legal norms. In the light of the principle of non-discrimination, there is a substantial difference between specifications and criteria that include references to employment or working national regulations and specifications that exceed the respect of the domestic regulation of working conditions in the State procuring the goods and services. The reliance on national regulations of labour protection, for example, may not raise major concerns in ­relation to the principle of national treatment, because of the indistinct ­application of

122 

Arrowsmith (n 46) 330. Nielsen, ‘Public Procurement and International Labour Standards’ (1995) 94. Pauwelyn, ‘Rule-Based Trade 2.0? The Rise of Informal Rules and International Standards and How They May Outcompete WTO Treaties’ (2014) 17 Journal of International Economic Law 739. 125  Marceau, ‘Trade and Labour’ (2009) 555. 123 

124  Joost

128  The Inclusion of Social and Labour Rights the legal requirements to both national and foreign s­ uppliers.126 ­Moreover, procurement policies that focus on the compliance with existing legal norms have the additional advantages of avoiding the risk for governmental authorities to get associated with the unlawful behaviour of suppliers and, at the same time, assuring a level playing field for the competition among the suppliers.127 Even if they may not constitute a de jure discriminatory behaviour, the inclusion of social and labour considerations based on national labour or social regulations can still imply a de facto violation of the non-discrimination principle or an unjustifiable restriction to trade. An evaluation on a caseby-case basis is necessary in order to evaluate if the allocation of a clear competitive advantage to national producers and suppliers is implied. As it is difficult to identify in abstract terms the discriminatory nature of procurement practices implementing social and labour concerns as most of the discriminatory effects associated with the inclusion of social considerations are related to the specific design of the procurement award procedures. An important variable in the analysis of the discriminatory effect is also represented by the choice of the stage of the procurement process in which the social and labour considerations are included. For this reason, the following sections of this chapter will concentrate on the translation of the non-discrimination principle in the specific transparency requirements set for the conduct of the award procedure in the GPA regulatory framework.

IV.  THE FLEXIBILITIES IN THE REVISED GPA: DEROGATIONS AND EXCEPTIONS FOR DISCRIMINATORY PROCUREMENT PRACTICES

The instrumental use of procurement practices, following strategic and protective policy goals or the proactive implementation of social and labour objectives, have the potential to constitute a violation of the principle of non-discrimination. However, even if proved to be discriminatory measures, they may still be in compliance with the GPA regulatory framework of public procurement. The WTO plurilateral regulation allows the instrumental use of procurement practices for social and labour purposes in de jure or de facto violation of the principle of non-discrimination, under two specific circumstances: (1) if these discriminatory practices are covered by the 126 Sue Arrowsmith, ‘A Taxonomy of Horizontal Policies in Public Procurement’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmetal Policies in EC Procurement Law (Cambridge University Press 2009) 109. 127  Sue Arrowsmith, ‘Horizontal Policies in Public Procurement: A Taxonomy’ (2010) 10 Journal of Public Procurement 149.

Derogations and Exceptions in the Revised GPA 129 derogations to the GPA included in the Parties’ schedules of commitments; and (2) if ­discriminatory, and included in the scope of application of the agreement, these practices can be justified under the general exceptions of Article III of the revised GPA. A. The Instrumental Use of Procurement and Its Derogation from the GPA’s Coverage The GPA discipline, developed around the fundamental principle of nondiscrimination, is extended only to the public procurements activities covered and only to the procurement activities of the GPA Signatory Parties. According to Article II:1, the GPA applies ‘to any measure regarding covered procurement, whether or not it is conducted exclusively or partially by electronic means’. As set out in Article II:1, the GPA regulatory system only has legal relevance for the procurement activities of goods and services handled by the governmental agencies, listed by the GPA Parties in their schedules of commitments and exceeding the values of the relevant thresholds specified by the Parties.128 As specified in Article II:4, the coverage of the GPA legal obligations is defined in the commitments listed in the seven annexes of Appendix I to the GPA for each GPA Contracting Party.129 The precise scope of the agreement is defined in the Contracting Parties’ annexes: these annexes ­provides the specification of the threshold values, the lists of each Party’s procurement agencies at central, sub-central and local level required to comply, together with the lists of sectorial coverage of goods, services and construction services specified by the GPA Parties.130 The complexity of the network of the commitments related to the membership and the coverage of the GPA gave rise, in fact, to the only WTO dispute raised in the context of the 1994 GPA, the Korea-Airport case, which concerns the delicate question of the definition of the GPA’s coverage and the identification of the procurement entities covered in the lists of commitments.131 It is interesting to underline that in the GPA system of the lists of commitments there is a structural difference between the procurement of goods and services: the GPA normally covers public contracts for the supply of goods

128 Peter Trepte, ‘The Agreement on Government Procurement’ in Patrick FJ Macrory, Arthur E Appleton and Michael G Plummer (eds), The World Trade Organization: Legal, Economic and Political Analysis, vol 1 (Springer 2005) 1137. 129  The GPA Parties’ Individual Appendices are available at www.wto.org/english/tratop_e/ gproc_e/appendices_e.htm. 130  Petros Mavroidis, Trade in Goods (2nd edn, Oxford University Press 2012) 803. 131  Matsushita, ‘Major WTO Dispute Cases’ (2006) 301.

130  The Inclusion of Social and Labour Rights unless that good is explicitly excluded; whereas services tend to be excluded unless expressly listed in Annex 5 Appendix 1.132 Moreover, as indicated in Article II:2(c), the GPA only applies to contracts that are above a certain financial threshold set in Appendix 1 of each GPA Party. The main rationale behind setting a financial value as the threshold for covered award procedures lies in identifying the cross-border interests of the procurement activities. In this respect, the frequent practice of ­splitting up contracts in order to fall below the fixed GPA thresholds is particularly problematic. Falling under the level of the financial thresholds leaves the procuring authorities free to derogate from the GPA discipline and free to use the allocation of procurement awards according to their industrial, social or other non-economic needs.133 However, it has been argued that formal competitive tendering can be extremely costly for the procuring authorities, which are then tempted to favour informal procurement practices in order to obtain ‘best value for money’. Nevertheless, the practice of dividing contracts is partially addressed in Article II:7, which requires an aggregation of the value of ‘recurring procurement’ contracts.134 The GPA Signatory Parties usually negotiate the complex issue of the coverage of the GPA on a bilateral basis following the logic of reciprocity and remaining open to political and diplomatic compromises.135 The outcome of these negotiations becomes codified in the Parties’ Schedule of Commitments, contained in GPA Appendix I.136 The finalised results of the negotiations contained in the decision of the WTO Committee on Government Procurement of 30 March 2012 show an important increase in the coverage of the Agreement and the Parties’ market commitments.137 The formal adoption of the Decision on the Outcomes of the Negotiations under Article XXIV:7 of the Agreement on Government Procurement (GPA/113) shows a considerable extension in the coverage in terms of more than 400 additional procurement entities and subentities now included in the commitments lists. The revised GPA discipline now additionally applies to important pro-

132 

Lester, Mercurio and Davies (n 84) 708. Khi V Thai, International Handbook of Public Procurement (CRC Press 2008) 262. Article II:7 provides guidance in the calculation of the contract value when ‘an individual requirement for a procurement results in the award of more than one contract, or in the award of contracts in separate parts (hereinafter referred to as “recurring contracts”)’. 135  One of the most complex and interesting cases of the negotiation of the GPA’s coverage is represented by China, see Ping Wang, ‘Coverage of the WTO’s Agreement on Government Procurement: Challenges of Integrating China and Other Country with Large State Sector into the Global Trading System’ (2007) 10 Journal of International Economic Law 887. 136 Robert D Anderson and Kodjo Osei-Lah, ‘The Coverage Negotiations Under the Agreement on Government Procurement: Context, Mandate, Process and Prospects’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 61–91. 137  Anderson, Schooner and Swan (n 69) 1–5. 133  134 

Derogations and Exceptions in the Revised GPA 131 curement sectors of goods and services, in particular ­telecommunication and construction services and ‘build-operate-transfer’ arrangements.138 As ­confirmed by the WTO Secretariat, the gains expected in terms of procurement market access reach approximately US$80–100 billion annually; this includes the effects of the reduction of applicable thresholds by the Parties and the elimination of miscellaneous items like the offsets schemes ­previously applied by Japan and Israel.139 On the basis of these considerations on its coverage, it could be argued that the GPA framework establishes a double regulatory standard through its legal architecture. It combines a flexible negotiating approach to the issue of the coverage with a strict system of provisions regulating the procurement processes covered by the GPA with detailed award procedure and selection criteria in the Agreement.140 The handling of the negotiations is codified in the final provision of Article XXII, identifying as a guiding principle ‘mutual reciprocity, taking into consideration the needs of developing countries’. For all these reasons, the GPA appears to be relatively flexible in terms of coverage, particularly suitable for the inclusion of social and labour concerns.141 Based on the flexibilities offered by the GPA’s coverage, from the GPA negotiating history it appears clearly that the GPA Signatory Parties used to prefer the exclusion of instrumental and discriminatory procurement schemes, rather than challenging the interpretation of the GPA provisions which were potentially violated.142 For the implementation of non-­ economic policies—from reasons of strategic industrial development to the protective and proactive enforcement of social objectives—that may result in a potential violation of the principle of non-discrimination, the GPA Signatory Parties have traditionally pursued two major types of derogation from the GPA’s coverage. First, to date specific products, services and procuring entities have been excluded from the GPA’s coverage. This option, potentially very appealing for developing countries, has proved to be particularly useful for the protection of infant industries and in the strategic use of procurement for national industries in crucial industrial and economic sectors.143 Second, GPA Parties are allowed to eliminate broader procurement programmes targeting objectives of social integration from the scope of application of the GPA.

138 Build-Operate-Transfer (BOT) and Build-Own-Operate-Transfer (BOOT) are types of outsourcing procurement operating strategies typical of architecture and infrastructure services. See the WTO press release at http://www.wto.org/english/news_e/news11_e/gpro_15dec11_e.htm. 139  World Trade Organization, Report (2012) of the Committee on Government Procurement, GPA/116, 6 December 2012, paras 36–37. 140  Arrowsmith (n 46) 108. 141  Marceau (n 125) 560. 142 McCrudden, Buying Social Justice (2007) 205. 143  Arrowsmith, Linarelli and Wallace, Regulating Public Procurement (2000) 304.

132  The Inclusion of Social and Labour Rights The actual coverage of the GPA, for example, excludes not only Canadian provinces but also key Canadian procurement activities supporting i­ mportant objectives of social equality and integration.144 In Annex 7 of Appendix I of the Final Offer of the Government of Canada it is clearly stated that ‘this Agreement does not apply to set asides for small and minority owned businesses’ (para 2) and that the GPA ‘does not apply to any measure adopted or maintained with respect to Aboriginal peoples’ (para 3).145 On similar basis, the United States’ final offer of Appendix I provides a crucial derogation for the strict application of the national treatment principle in the national procurement system for ‘set-aside on behalf of a small- or minority-owned business’, specifying that ‘set-aside may include any form of preference, such as the exclusive right to provide a good or service, or any price preference’ (para 1 Annex 7). Over the time, the US federal procurement has gradually established an extensive system of domestic and small business preferences, as well as broad socio-environmental requirements, exempted from its international trade commitments.146 Even if yielding mixed economic impacts, the US system of favouring SMEs has been implemented outside the GPA regulatory framework and has been supported by strong human rights and social justifications on a national and international level, based on broad considerations of distributive justice.147 However, it is important to underline that the flexibilities offered by the GPA’s coverage do not allow differentiation between procurement practices based on their regulatory purposes or to balance the content of legitimate policy objectives with protectionist intentions and trade considerations. It is not relevant whether procurement practices are adopted as a form of strategic industrial policies, or they are designed to protect domestic industries from foreign competition, or to proactively support social and labour policies. They all can be excluded from the coverage, if agreed in the negotiation. In fact, the US ‘Stimulus Package’ and the ‘Buy American’ provisions

144 David A Collins, ‘Canada’s Sub-Central Coverage Under the WTO Agreement on ­ overnment Procurement’ (2008) 17 Public Procurement Law Review 21. For an in-depth G analysis of the Canadian public procurement regulation, see Paul M Lalonde, ‘The Internationalization of Canada’s Public Procurement’ in Aris Georgopoulos, Bernard Hoekman, and Petros C Mavroidis (eds), The Internationalization of Government Procurement Regulation (Oxford University Press 2017) 300. 145 WTO Committee on Government Procurement, Adoption of the Results of the ­Negotiations Under Article XXIV:7 of the Agreement on Government Procurement, Following their Verification and Review, as Required by the Ministerial Decision of 15 December 2011 (GPA/112), para 5, 2 April 2012. 146  Christopher R Yukins, ‘US Government Contracting in the Context of Global Public Procurement’ in Aris Georgopoulos, Bernard Hoekman and Petros C Mavroidis (eds), The Internationalization of Government Procurement Regulation (Oxford University Press 2017) 264. 147 John Linarelli, ‘The Limited Case of Permitting SME Procurement Preferences in the WTO Agreement on Government Procurement’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenges and Reform (Cambridge University Press 2011) 444–458.

Derogations and Exceptions in the Revised GPA 133 still benefit from the GPA derogations in the US list of goods and services included in the commitments under the agreement, even though they undeniably impose discrimination based on national preferences with unjustifiable effects on trade.148 B. Justifications of Discriminatory Procurement Practices Under the GPA General Exceptions If it is technically possible to exclude domestic procurement sectors from the coverage of the GPA regardless of the strategic purposes or social rationales, analysis of the justification of discriminatory procurement practices under Article III GPA requires a careful consideration of the regulatory purposes behind the instrumental use of procurement practices. Only a limited list of legitimate non-trade objectives are admissible as legitimate grounds of exception for violation of the non-discriminatory principle. Together with the case of defence procurement practices explicitly excluded by Article III:1,149 derogations to national treatment and MFN rules in the conduct of public award procedures expressly apply to measures necessary to protect public morals or human, animal or plant life or health or products manufactured by handicapped persons, prison labour or philanthropic institutions, according to Article III:2 GPA.150 Few important considerations should be taken regarding the GPA general exception provision of Article III:2. First of all, it is important to clarify that based on the policy grounds expressively listed in the provision in the GPA general exceptions, there are some discriminatory forms of procurement practices that are beyond the scope of Article III GPA and therefore they cannot be justified in this way. The use of public procurement for strategic industrial purposes or in support of uncompetitive and infant domestic industries is clearly excluded from the wording of Article III GPA. This is arguably the main reason why these policies are traditionally pursued under the flexibilities regarding the GPA’s coverage.151 However, the revised GPA offers quite a considerable margin of manoeuvre to developing countries for the implementation of 148 

Lester, Mercurio and Davies (n 84) 710. Trepte, ‘The Agreement on Government Procurement’ (2005) 32. 150  The text of Article III:2 GPA provides: ‘Subject to the requirement that such measures are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between Parties where the same conditions prevail or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent any Party from imposing or enforcing measures: a. necessary to protect public morals, order or safety; b. necessary to protect human, animal or plant life or health; c. necessary to protect intellectual property; or d. relating to goods or services of persons with disabilities, philanthropic institutions or prison labour’. 151  Arrowsmith (n 46) 344. 149 

134  The Inclusion of Social and Labour Rights strategic and protective policies in their procurement systems. Transitional measures in the form of offsets and price preferences can be adopted by developing countries to protect some crucial industrial sectors, recognising in Article V the importance of taking into consideration ‘the development, financial and trade needs and circumstances of developing countries and least developed countries’.152 While strategic industrial policies are not covered by the general exceptions, other instrumental procurement measures, often resulting into a potential violation of the principle of non-discrimination and traditionally described as horizontal policy objectives, can find their justification in Article III GPA. Innovation procurement practices may find an arguable margin of justification for their discriminatory implication under Article III:2(c) GPA if ‘necessary to protect intellectual property’, as well as environmental concerns, together with health concerns, under Article III:2(b) GPA.153 Within the context of the GPA general exceptions, the justification of the inclusion of social and labour considerations into procurement practices may still be fairly problematic. A direct mention of labour standards is not expressly included in the provision. However, even without a direct or indirect reference in the wording of Article II GPA, three subparagraphs of Article III:2 can be invoked as grounds for the inclusion of social and labour considerations into discriminatory procurement practices. First, the most straightforward reference to labour rights is offered by paragraph (d) of Article III:2, which directly mentions procurement practices related to ‘goods or services of persons with disabilities, philanthropic institutions or prison labour’. The wording of the provision opens up the possibility of an extensive interpretation including in the scope of this provision discriminatory procurement practices with references to ILO Convention No 159 concerning Vocational Rehabilitation of Employment of Disabled Persons (1983) and to ILO Convention No 29 on Forced Labour.154 However, it is quite unclear if an extensive interpretation of other ILO standards can be included,155 for example going beyond the evolutionary interpretation

152  Anna Caroline Muller, ‘Special and Differential Treatment and Other Special Measures for Developing Countries under the Agreement on Government Procurement: The Current Text and New Provisions’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 359–62. 153  Under the condition that it does not constitute an arbitrary or unjustifiable discrimination, the environmental use of procurement, being ‘necessary to protect human, animal or plant life or health’, has strong legal grounds for justification in Article III:2(b). For a more articulated analysis see Geert Van Calster, ‘Green Procurement and the WTO—Shades of Grey’ (2003) 11 Review of European Community & International Environmental Law 289. 154 Kaufmann, Globalisation and Labour Rights (2007) 49. 155  Gabrielle Marceau and Joel P Trachtman, ‘A Map of the World Trade Organization Law of Domestic Regulation of Goods: The Technical Barriers to Trade Agreement, the Sanitary and Phytosanitary Measures Agreement, and the General Agreement on Tariffs and Trade’ (2014) 48 Journal of World Trade 351.

Derogations and Exceptions in the Revised GPA 135 of forced labour into the concept of prison labour.156 Moreover, it is also very uncertain what the legal implications of the reference to ­‘philanthropic institutions’ in the provision could be. The concept of philanthropic institutions is unique in the entire WTO regulatory framework and it seems to contradict or expand the more consolidated approach to the protection of labour rights in the multilateral trading system on the basis of sole political economic considerations, to avoid social dumping or unfair competitive practices.157 It is very unclear when interpreting the objectives of those organisations to what extent it is possible to include various institutions providing humanitarian or charitable assistance in the interpretation of the provision, possibly even fair trade organisations. Second, an extensive interpretation of para (b) of Article III:2 may include in the scope of the exception also labour considerations restricting the procurement market as ‘necessary to protect human health’. However, interpretative efforts to assimilate the protection of the physical health with the protection of the workers’ labour conditions find a major limitation in the unresolved question of the extraterritoriality application of WTO general exceptions.158 Third, paragraph (a) of Article III:2 includes ‘public morals, order or safety’ in the scope of the GPA general exceptions, allowing the possibility of granting exceptions based on human and labour rights justifications rooted in public morals. On the basis of the moral exceptions included in the GATT and GATS, it has been argued that inclusion of social considerations, particularly the protection of some basic human rights and labour standards, in the conduct of award procedures are strictly grounded in public morality concerns. This ‘dynamic’ interpretation of the concept of public morals to include international labour standards could be supported by the ILO Declaration at the 1996 Singapore Declaration and in line with the interpretative guidance of the Article 31(3)(c) of the Vienna Convention on the Law of the Treaties.159

156  It is interesting to notice that the definition of forced labour has a very limited scope and ILO Convention No. 29 on Forced Labour (1930) explicitly excludes prison labour from the definition in Article 2, para 2: ‘Nevertheless, for the purposes of this Convention, the term forced or compulsory labour shall not include: (c) any work or service exacted from any person as a consequence of a conviction in a court of law, provided that the said work or service is carried out under the supervision and control of a public authority and that the said person is not hired to or placed at the disposal of private individuals, companies or associations’. 157  Marceau (n 125) 552. 158  Lorand Bartels, ‘Article XX of GATT and the Problem of Extraterritorial Jurisdiction. The Case of Trade Measures for the Protection of Human Rights’ (2002) 36 Journal of World Trade 353. 159  Renee L Chartres and Bryan Christopher Mercurio, ‘A Call for an Agreement on TradeRelated Aspects of Labor: Why and How the WTO Should Play a Role in Upholding Core Labor Standards’ (2012) 37 North Carolina Journal of International Law and Commercial Regulation 101.

136  The Inclusion of Social and Labour Rights Lots of uncertainties still remain regarding the interpretation of the notion of ‘public morals’ inside the WTO regulatory framework ­particularly in the context of Article XX GATT160 and Article XIV GATS,161 and in light of the adjudication of the US—Gambling case162 and the more recent EC— Seal Products case.163 The academic literature on public procurement seems to reject a broad interpretation of the concept of ‘public moral’, limiting it simply to ‘policies directed at promoting standards concerned with equality and other “rights” issues’164 For this reason, the protection of labour standards and the respect of minimum decent working conditions—at least those reflected in the ILO Declaration on Fundamental Principles and Rights at Work—could be accepted as an important component of the undefined idea of public morality.165 However, the idea of public morals entails significant differences between the WTO Member States due to their domestic political structure or the dominant religious or ethical belief,166 and in addition it may require a different interpretation if applied to the context of public procurement. The concept of public morals may assume a broader and more inclusive connotation in the context of procurement as it is necessarily linked to the position of the government as the buyer in the market, responsible and accountable for its moral conduct in its choices when spending taxpayers’ public money. As suggested by McCrudden, the GPA general exceptions should in particular cover procurement practices that aim to guarantee peaceful civil relations and equality between different groups of society, in particular with reference to minorities and disadvantaged groups.167 Even if it were possible to include labour and social considerations in the interpretation of the different grounds for exceptions listed in Article III GPA, other few controversial aspects could call into question the legitimacy 160  Steve Charnovitz, ‘The Moral Exception in Trade Policy’ (1997) 38 Virginia Journal of International Law 689. 161 Nicolas F Diebold, ‘The Morals and Order Exceptions in WTO Law: Balancing the ­Toothless Tiger and the Undermining Mole’ (2008) 11 Journal of International Economic Law 43. 162  Panel Report, US—Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/R, adopted 20 April 2005, as modified by the Appellate Body Report. Appellate Body Report, WT/DS285/AB/R, adopted 20 April 2005. 163 Panel Report, European Communities—Measures Prohibiting the Importation and ­Marketing of Seal Products, WT/DS401/R as modified by the Appellate Body Report. ­Appellate Body Report, WT/DS401/AB/R, adopted 22 May 2014. For an in-depth analysis of the case and the interpretation of the public moral exception, see Paola Conconi and Tania Voon, ‘EC–Seal Products: The Tension between Public Morals and International Trade Agreements’ (2016) 15 World Trade Review 211. 164  Arrowsmith (n 46) 346. 165  Robert Howse, ‘The World Trade Organization and the Protection of Workers’ Rights’ (1999) 131 Journal of Small and Emerging Business Law 169. 166  Robert Howse, Joanna Langille and Katie Sykes, ‘Pluralism in Practice: Moral Legislation and the Law of the WTO After Seal Products’ (2015) 48 George Washington International Law Review 81. 167  McCrudden (n 7) 10.

Derogations and Exceptions in the Revised GPA 137 of these procurement practices under the GPA. The most problematic of those is probably the definition of the so-called ‘necessity test’. In order to be in conformity with the WTO framework, the measures have to be proven to be necessary for the realisation of the policy objectives listed as a ground for exception. Parallel to the general exceptions in other WTO agreements, Article III GPA requires that the adoption of discriminatory procurement practices should be necessary for the achievement of the relevant social and labour policies and should demonstrate a well-defined link between the legitimate policy objective and the regulatory measure adopted for that specific purpose.168 Similarly to the analysis conducted by the Appellate Body in the GATT,169 the evaluation would necessarily imply the assessment of the contribution that the procurement measure makes to the realisation of the social and labour purposes, together with its trade impact. Translating the explanation of the necessity test reached in Brazil—Retreated Tyres,170 the procurement measure should have a genuine relationship to its specific social and labour objectives.171 Moreover, it has to be proven that the protection of social and labour specific concerns cannot be achieved with other regulatory measures less restrictive to trade than the adoption of a procurement preferential scheme.172 The WTO academic literature has extensively focused on the specific interpretation of the term ‘necessary’,173 elaborating on the vast panel and Appellate Body jurisprudence but, the GPA context. Methodological doubts remain regarding the possibility of extending to the plurilateral discipline of procurement the considerations achieved in the rest of the WTO Agreements. As confirmed by the WTO Secretariat, different

168 

McCrudden (n 81) 498. Body Report, Korea—Measures Affecting Imports of Fresh, Chilled and ­Frozen Beef, WTO/ DS161/AB/R adopted 10 January 2001, para. 162. 170  Appellate Body Report, Brazil—Measures Affecting Imports of Retreaded Tyres, WT/ DS332/AB/R, adopted 17 December 2007, para 210. 171  Chad P Bown and Joel P Trachtman, ‘Brazil—Measures Affecting Imports of Retreaded Tyres: A Balancing Act’ in Henrik Horn and Petros C Mavroidis (eds), The WTO Case Law of 2006–7 (Cambridge University Press 2009) 85–135. 172  Appellate Body Report, United States—Measures Affecting the Cross-border Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April 2005, paras 308–11. 173  For the most recent academic contributions to the concept of necessity test, see Tania Voon, ‘Exploring the Meaning of Trade-Restrictiveness in the WTO’ (2015) 14(3) World Trade Review 451; Henrik Andersen, ‘Protection of Non-Trade Values in WTO Appellate Body Jurisprudence: Exceptions, Economic Arguments, and Eluding Questions’ (2015) 18 Journal of International Economic Law 383; Benn Mcgrady, ‘Necessity Exceptions in WTO Law: Retreaded Tyres, Regulatory Purpose and Cumulative Regulatory Measures’ (2009) 12 Journal of International Economic Law 153. For a more critical view, see Gisele ­Kapteriana, ‘A Critique of the WTO Jurisprudence on “Necessity”’ (2010) 59 International and Comparative Law Quarterly 89. 169 Appellate

138  The Inclusion of Social and Labour Rights connotations of the ‘necessity’ requirement are adopted in the various ­contexts of different provisions in the GATT 1994 or in the GATS, the SPS Agreement and the TBT Agreement. The precise dimension of the necessity requirement in the context of public procurement still remains undefined, as ‘despite a similarity of wording between provisions in WTO agreements containing necessity tests, interpretations developed in the context of a specific case and a specific provision cannot be assumed to be transposable automatically to other provisions’.174 Additionally to the necessity requirement and similarly to the wording of the chapeau of Article XX GATT,175 Article III:2 requires of GPA Signatory Parties that selective purchasing measures ‘are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between Parties where the same conditions prevail, or a disguised restriction on international trade’. The evaluation of the appropriateness of the instrumental use of procurement to enforce the protection of social and labour rights becomes crucial at this stage of the analysis. It would take into consideration that often procurement measures are preferred at national level as a more flexible political mechanism to implement social policies because of a lack of formal approval of legislative bodies176 Thus, if procurement practices imply a clear violation of the national treatment principle, it is undeniably difficult to demonstrate the absence of arbitrary discrimination and the lack of restriction to trade which can be distinguished, particularly in connection with the extraterritorial effects typical to the enforcement of labour standards.177 Taking into consideration all these interpretative uncertainties—first on the legal definition of the grounds of exception in the paragraphs of Article III GPA, then the interpretation of the standard of necessity and appropriateness in this specific procurement context—the path for the justification of discriminatory procurement practices aiming at achieving social and labour purposes becomes extremely difficult and uncertain. All these interpretative difficulties and uncertainties, confirmed the preference of the GPA Signatory Parties to exclude from the GPA’s coverage their i­ nstrumental procurement practices for social and labour policies, as supported by the negotiating history of the 1994 GPA, rather than justifying them under the GPA general exceptions.178

174  WTO Working Party on Domestic Regulation, ‘Necessity Test’ in the WTO, note by the Secretariat, S/WPDR/W/27, 2 December 2003. 175  Lorand Bartels, ‘The Chapeau of the General Exceptions in the WTO GATT and GATS Agreements: A Reconstruction’ (2015) 109 American Journal of International Law 95. 176  Arrowsmith (n 46) 347. 177  McCrudden (n 7) 30. 178  McCrudden (n 80) 491.

The GPA Regulation of the Award Procedure 139 V.  THE GPA REGULATION OF THE AWARD PROCEDURE

As shown in the GPA’s negotiating history from the Tokyo Round until now, the GPA Signatory Parties have always underlined the importance of reinforcing the principle of non-discrimination in public procurement with a series of complementary provisions, focused at ensuring transparency, fairness and competition in the award procedure.179 The implementation of these procedural and transparency provisions has a deep impact on the possibility of enforcing social and labour policies in public procurement in the context of the GPA regulatory framework. The procedural aspects of the regulation of the procurement process under the GPA are oriented towards the achievement of two mutually supportive regulatory principles: the principle of non-discrimination and the principle of transparency.180 On the one hand, the fundamental regulatory purpose of the GPA consists of ensuring respect for the MFN and national treatment obligations while progressively liberalising the international procurement markets. On the other hand, the application of the principle of transparency in the award procedures deters the implementation of discriminatory procurement practices and unjustifiable trade restrictions in the public ­markets.181 For these reasons, the inclusion of social and labour considerations in the award procedure necessarily has to respect fully the crucial requirements of non-discrimination and transparency set out in the GPA regulation of the entire procurement process. Apart from the possibilities offered by the derogations from the GPA’s coverage and the uncertainties linked to the possible use of its general exceptions, the GPA regulation of the procedural aspects of the procurement process does allow certain margins of flexibility in the enforcement of social and labour considerations.182 The transparent and neutral inclusion of social and labour concerns at specific stage of the procurement process can still ensure respect of the transparency requirements set in the GPA provisions, avoiding the risk of discrimination in the public market. Different procurement mechanisms at different stages of the procurement process may include social and labour considerations and, at the same time, avoid a discriminatory situation where a favourable treatment applies exclusively to domestic suppliers.

179 Mavroidis,

Trade in Goods (2012) 806–11. Arrowsmith (n 46) 167–71. 6 of the Preamble of the revised GPA recognises ‘the importance of transparent measures regarding government procurement, of carrying out procurements in a transparent and impartial manner and of avoiding conflicts of interest and corrupt practices’. 182  Robert Anderson and Sue Arrowsmith, ‘The WTO Regime on Government Procurement: Past, Present and Future’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 47. 180 

181  Recital

140  The Inclusion of Social and Labour Rights In this respect, the revised GPA represents an important regulatory achievement, as it provides an increased margin of flexibility, compared to the stricter regulatory aspects defined in the 1994 GPA. Following a gradual process of harmonisation with the procurement regulation of the UNCITRAL Model Law, the revised GPA introduces relevant changes in the regulation of the procedural aspects of the award process. The changes implemented in the GPA discipline regarding technical specifications, qualification of suppliers and award criteria open new possibilities for a more inclusive interpretation of the social and labour aspects in public procurement operations. The following analysis will now consider the regulatory approach under the revised GPA towards the different procurement steps and, if possible, identify the relevant changes compared to the 1994 GPA. The legal implications of the inclusion of social and labour concerns will be explored, together with the possibilities of referring to verification mechanisms in the supply chain previously identified. See Table 3.1. Table 3.1:  Correspondences Between the Revised GPA and the 1994 GPA Provisions in 2011 GPA Revised Agreement

Corresponding Provisions in the 1994 GPA

Article X Technical specifications and tender documentation

Article VI Technical specifications

Article VIII Conditions for participation Article IX Qualification of suppliers

Article VIII Qualification of suppliers

Article XV Treatment of tenders and awarding of contracts

Article XIII Submission, receipt and opening of tenders and awarding of contracts

Table partially based on World Trade Organization, Committee on Government Procurement, Revision of the Agreement on Government Procurement Side-By-Side Text, GPA/W/317, 24 April 2012.

A. Technical Specifications, International Standards and Reference to Social and Labour Considerations As previously shown, contract specifications provide the technical descriptions of the goods, services and construction works to be procured by governmental authorities, and they have significant trade implications in the competition for the award of the public contracts. Based on the different technical regulations present in various domestic markets, technical specifications may constitute significant barriers to trade, impeding the suppliers’

The GPA Regulation of the Award Procedure 141 ability to compete freely in certain markets without facing additional monetary and administrative burdens.183 i.  The GPA Approach to Technical Specifications From the Tokyo Procurement Code to the revised GPA, the main regulatory approach to the first stage of the procurement process consisted in ensuring that technical specifications were not drafted in such a way as to cause restrictive effects on competitions and international trade flows.184 In this perspective, Article X GPA aims to enforce the procuring authorities’ respect for the non-discriminatory principle in the preparation and adoption of technical specifications. Article X.1 states that ‘[a] procuring entity shall not prepare, adopt or apply any technical specification or prescribe any conformity assessment procedure with the purpose or the effect of creating unnecessary obstacles to international trade’. In order to ensure the application of the non-discrimination rule to the elaboration and application of the specifications, Article X prescribes guiding indications for contracting authorities. Article X:2(a) formulates a clear preference for functional and performance requirements, assumed to minimise their negative effect on competition. On a similar basis, Article X:3 requires to not refer to trade names, patents and copyrights, unless absolutely necessary for a precise or intelligible description, in order to ensure the ‘functional equivalence’ of the different suppliers.185 The regulatory prescriptions set in Article X also provide useful insights and important guidance for the implementation of non-economic policies at the technical specifications stage, without compromising the principle of non-discrimination. One of the most acclaimed changes in the revised GPA186 consists of the acknowledgment of the growing practice of the environmental use of public procurement.187 Article X.6 allows the procuring entities of the Contracting Parties specifically to ‘prepare, adopt or apply technical specifications to promote the conservation of natural resources or protect the environment’. Considerable uncertainty still remains regarding the implementation of this provision, particularly with reference to the admissibility of non-PPM

183 

Arrowsmith (n 46) 303. Trepte (n 129) 1154. 185  Arrowsmith (n 46) 321–22. 186 Marc Steiner, ‘The WTO Government Procurement Agreement: Assessing the Scope for Green Procurement’ (2015) 9 BIORES—International Centre for Trade and Sustainable Development, available at http://www.ictsd.org/bridges-news/biores/news/the-wto-governmentprocurement-agreement-assessing-the-scope-for-green. 187  Abby Semple, ‘Reform of the EU Procurement Directives and the WTO GPA: Forward Step for Sustainability?’ in Gian Luigi Albano, Keith Snider and Khi Thai (eds), Charting a Course in Procurement Innovation and Knowledge Sharing (PrAcademics Press 2012) 85. 184 

142  The Inclusion of Social and Labour Rights issues in the GPA regulation of the award procedure. It is still unclear on what margin it would be possible to exclude, at the specification stage, certain suppliers on the basis of life circle considerations and production methods, not resulting in distinguishable characteristics of the final goods and service.188 To add some clarity to the discussion on non-PPMs in the context of public procurement, it is useful to take the definition of ‘technical specification’ in the GPA into consideration. Article I, in fact, includes a precise definition of ‘technical specifications’ that, if read in conjunction with paragraph 6 of Article X, seems to open the possibility of including nonPPM considerations in the interpretation of this specific GPA provision.189 Technical specifications are defined, similarly to the wording in Article VI of the 1994 GPA, as a ‘tendering requirement that lays down the characteristics of goods or services to be procured … or the processes and methods for their production or provision’. However, the possibility of including references to production and delivery methods in the definition of the goods and services at the centre of the public contracts is still far from being resolved in the academic literature.190 Without a commonly agreed interpretation of the issue of non-product related PPM in the revised GPA, the reference to production methods in the procurement specifications should be addressed solely on a case-by-case basis, focusing on the de jure and de facto violation of the national treatment and MFN rules on each specific procurement provision.191 While there is a clear textual reference to the implementation of environmental policy objectives in Article X.6 GPA, the proactive use of public procurement for social and labour purposes is not expressively mentioned in the revised GPA regulation of technical specifications. It is undeniable that reference to environmental justifications only represents a clear political and legal compromise resulting from the negotiation process. The new formulation of Article X constitutes a clear sign that the GPA Signatory Parties strongly differentiate between the instrumental uses of public procurement for environmental or social and labour purposes.192 However, the lack of a

188 

Arrowsmith (n 46) 322. Kunzlik, ‘International Procurement Regimes and the Scope for the Inclusion of Environmental Factors in Public Procurement’ in OECD (ed), The Environmental Performance of Public Procurement. Issues of Policy Coherence (OECD 2003) 159. 190 Strongly against the possibility to include reference to non-PPM issues in technical ­specifications, see Reich (n 75) 1012. 191  It has been argued that it is very probable that the new wording of the GPA regulation of technical specifications will raise the chances of procurement cases within the WTO dispute settlements mechanisms. Anderson and Arrowsmith, ‘The WTO Regime on Government ­Procurement’ (2011) 22. 192  The reference to exclusively environmental concerns in the technical specifications has been interpreted as a proof of the careful attitude of the GPA Parties against the risk of politicization of the agreement, see Arie Reich, ‘The Threat of Politicization of the World Trade Organization’ (2005) 26 University of Pennsylvania Journal of International Economic Law 779. 189  Peter

The GPA Regulation of the Award Procedure 143 t­ extual reference does not necessarily mean that the interpretation of Article X excludes any possibility of reference to labour considerations at this early stage of the procurement award procedure.193 Important considerations and recommendations can still be drawn from the analysis of Article X GPA. ii.  International Standards and Private Certifications The possibility to refer to international standards or technical regulations in the provision of Article X opens other interpretative questions regarding the inclusion of labour considerations in the form of international standards of labour rights protection in technical specifications. Article X:2(b) GPA specifies that the procuring authorities should base the formulation of contractual specifications for goods and services ‘on international standards, where such exist; otherwise, on national technical regulations, recognized national standards or building codes’. In the wording of this provision, it is implied that technical specifications drafted on the basis of international standards do not constitute per se a violation of the non-discrimination principle in the framework of the GPA. Based on the role that international standards have in avoiding discrimination in the WTO context,194 it could be argued that contractual specifications referring to ILO labour standards in the production or delivery process of the goods and services procured should not be interpreted as discriminatory procurement practices. Moreover, the non-discriminatory effect associated with the use of international standards of labour rights protection cannot be restricted to the use of technical specifications. Similar considerations can be extended to the other stages of the procurement process, also providing a presumption of non-discrimination for award criteria or performance conditions in the use of international labour standards. The interpretation of international standards as being per se non-­ discriminatory finds a supportive argument in the analysis of the TBT Agreement, the other WTO agreement that addresses the same regulatory issue of standards in domestic technical regulations.195 The definition of ‘international standards’ in the context of the TBT Agreement can be used as an interpretative method to identify the regulatory context of ­Article X GPA.196 As confirmed in the framework of the TBT Agreements and their

193  As previously mentioned, the reference to labour policies is only included in the Future Challenges of the GPA Regulatory Framework and in its Future Work Programme. Anderson and Arrowsmith (n 182) 57–58. 194  Steve Charnovitz, ‘International Standards and the WTO’ (2005) Legal Studies Research Paper No 133. Marceau and Trachtman, ‘A Map of the World Trade Organization Law’ (2014) 386. 195  Arrowsmith (n 46) 306. 196  Joost Pauwelyn, Conflict of Norms in Public International Law: How WTO Law Relates to Other Rules of International Law (Cambridge University Press 2003) 40.

144  The Inclusion of Social and Labour Rights effort towards the international harmonisation of standards,197 the use of technical regulations based on international standards are presumed to not violate the principle of non-discrimination and not to create unnecessary obstacles to trade, unless proved differently.198 On a parallel basis, the presumption of compliance of international standards with the principle of non-discrimination and the regulation on contractual specifications under Article X GPA seems to be confirmed, even if not expressly stated in WTO legal texts and documents.199 However, the main unresolved question remains is whether international labour standards are WTO-­consistent technical regulation in both context of the TBT Agreement and the GPA. It is still very unclear how a panel would react to the invocation of the ILO labour standards if facing a possible conflict of WTO law.200 In the context of technical specifications, the inclusion of social and labour considerations other than international labour standards or the ILO Conventions becomes even more complex. However, an indirect inclusion of social and labour considerations at the beginning of the procurement process can still be pursued through the use of private certifications and labelling in the technical specification.201 To avoid the discriminatory risks that can derive in terms of distortion of consumers’ preferences and in terms of prejudice for foreign suppliers,202 the use of voluntary social labelling schemes and certifications in public procurement, as confirmed in the GATT and TBT context,203 cannot derogate from the application of the general principles of MFN and national treatment.204 The reference to these verification mechanisms should not be translated into a different treatment based on the origin of the products and services, in violation of Article III GPA.

197  Joost Pauwelyn, ‘The Role of Public International Law in the WTO: How Far Can We Go?’ (2001) 95 American Journal of International Law 535. 198  Arthur E Appleton, ‘The Agreement on Technical Barriers to Trade’ in Patrick FJ Macrory, Arthur E Appleton and Michael G Plummer (eds), The World Trade Organization: Legal, ­Economic and Political Analysis (Springer Science + Business Media 2005) 89. 199  Arrowsmith (n 46) 302. 200  Gabrielle Marceau, ‘WTO Dispute Settlement and Human Rights’ (2002) 13 European Journal of International Law 753. 201  Corvaglia, ‘Public Procurement and Private Standards’ (2016) 624. 202  Arrowsmith (n 46) 304. 203  Jasper Stein, ‘The Legal Status of Eco-Labels and Product and Process Methods in the World Trade Organization’ (2009) 1 American Journal of Economics and Business Administration 285; Alessandra Arcuri, ‘The TBT Agreement and Private Standards’ in Michael Trebilcock and Tracey Epps (eds), Research Handbook on the WTO and Technical Barriers to Trade (Edward Elgar Publishing 2013); Tania S Voon, Andrew D Mitchell and Catherine Gascoigne, ‘Consumer Information, Consumer Preferences and Product Labels under the TBT Agreement’ in Michael Trebilcock and Tracey Epps (eds), Research Handbook on the WTO and Technical Barriers to Trade (Edward Elgar Publishing 2013), available at http://papers.ssrn.com/ abstract=2180107. 204  Carlos Lopez-Hurtado, ‘Social Labelling and WTO Law’ (2002) 5 Journal of International Economic Law 719.

The GPA Regulation of the Award Procedure 145 The new wording of Article X in the revised GPA offers precise ­indications to the contracting authorities, in order to avoid a negative effect on competition in the public markets. In the case of reference to voluntary certifications or codes of conducts, similarly to the use of design and descriptive characteristics in the specifications, according to Article X:3 ‘a procuring entity should indicate, where appropriate, that it will consider tenders of equivalent goods or services that demonstrably fulfil the requirements of the procurement by including words such as “or equivalent” in the tender documentation’. Parallel to the conclusions of the Court of Justice of the ­European Union (CJEU) in the judgment of 10 May 2012 in the Max ­Havelaar case,205 which will be analysed in the following chapter, the reference to equivalent labels and certifications guarantees the openness of the competition for the adjudication of the public contract by the contracting ­authorities. However, it has to be underlined that the newly introduced provision of paragraph 3 of Article X GPA was not included in the previous regulation of technical specifications under the 1994 GPA and has never been interpreted in the Dispute Settlement System and, for this reason, the margin of application and interpretation of this specific aspect is still very uncertain in both literature and practice. B. Labour Rights as Qualification Conditions in the Selection of Suppliers The definition and the application of the conditions of admissibility imposed on the suppliers to be able to participate in the procurement award procedure have always raised a number of uncertainties in the GPA context. Article VIII, regulating the conditions for the suppliers’ eligibility, has been at the centre of the negotiating process and underwent significant changes in the revised text. The GPA focuses its regulatory attention to two aspects of the supplier qualification process. On the one hand, it defines the criteria that can be imposed for the qualification of suppliers; on the other hand, it regulates the process for the verification of these criteria, in both open and selective tendering procedures.206 Regarding the qualification requirements, GPA Article VIII demands that procuring authorities exclusively impose conditions ‘that are essential to ensure that a supplier has the legal and financial capacities and the commercial and technical abilities to undertake the relevant procurement’. Compared to the 1994 GPA, the stronger wording of Article VIII 205 Case C-368/10 Commission v Kingdom of the Netherlands (‘Max Havelaar’) EU:C:2012:284. 206  Arrowsmith (n 46) 198.

146  The Inclusion of Social and Labour Rights in the revised text aims to ensure the neutral and non-discriminatory application of qualification conditions to the relevant procurement entities, not allowing the possibility of taking into consideration the specificity of the particular contract in question.207 Similar to the regulation in the 1994 GPA, the procuring authorities can assess the admissibility of the suppliers exclusively on the basis of the conditions explicitly included in advance in the tender documentation (according to Article VIII:3.b) and evaluate the business activities of the suppliers inside and outside the territory of the procuring authority (according to Article VIII:3.a). It is still open to different interpretations and various uncertainties exist regarding the identification of the conditions which are to be taken into consideration for the evaluation of the essential requirements of the suppliers’ legal commercial and technical abilities. The introduction of the provisions set in paragraph 4 of Article VIII represents one of the most significant amendments introduced by the revised text.208 Compared with the 1994 text,209 the new Article VIII:4 introduces a list of grounds for exclusion of suppliers, explicitly referring to ‘a. bankruptcy; b. false declarations; c. significant or persistent deficiencies in performance of any substantive requirement or obligation under a prior contract or contracts; d. final judgments in respect of serious crimes or other serious offences; e. professional misconduct or acts or omissions that adversely reflect on the commercial integrity of the supplier; or f. failure to pay taxes’. In the interpretation of qualification conditions, the relationship between Article VIII paragraphs 1 and 4 appears to be crucial: the main unresolved aspect of the new wording of GPA Article VIII consists in the possibility of applying paragraphs 1 and 4 of this provision in an independent way.210 However, it seems that the list of exclusion conditions set in paragraph 4 does not necessarily have to be mirrored in the requirements under national law for the acquisition of the ‘legal capacity’ to participate in public contracts.211 Bankruptcy, false declaration or professional misconduct can serve as a ground of exclusion for the suppliers, without necessarily being consistent with paragraph 1 Article VIII and the national requirements for ensuring the supplier’s capacity to carry out the contracts. Regarding the regulation of exclusion situations under the GPA, so far the academic literature has been quite divergent on the possibility to include the protection of social considerations and labour rights among the ­qualification 207 

Reich, ‘The Threat of Politicization of the World Trade Organization’ (2005) 308. Arrowsmith (n 46) 309. 209 Art VIII:h of the 1994 GPA simply prescribed that suppliers could be excluded ‘on grounds such as bankruptcy or false declarations, provided that such an action is consistent with the national treatment and non-discrimination provisions of this Agreement’. 210  Lester, Mercurio and Davies (n 84) 721. 211  ibid 722. 208 

The GPA Regulation of the Award Procedure 147 conditions needed to fulfil the contract under Article VIII GPA.212 In particular, elimination from the award procedure based on the violation of human and labour rights in the past conduct of the suppliers does not seem to fully correspond to the GPA regulatory approach to qualification conditions.213 As argued by the EU in the Burma/Massachusetts case, the exclusion of suppliers on the basis of conditions not essential for the performance of the contracts, like in the case of violation of human rights in Myanmar, would not be acceptable under Article VIII of 1994 GPA.214 However, the new wording of Article VIII, partially following the language adopted in the UNCITRAL Model Law, seems to open to the possibility of including more social considerations as a reason for a supplier’s exclusion.215 If the interpretation of the concepts of financial technical and commercial ability appears to be quite straightforward, the new Article VIII GPA establishes a link between the integrity of the supplier and its ‘legal’ ability to perform the contract. According to Article VIII:4(e), ‘professional misconduct or acts or omissions that adversely reflect on the commercial integrity of the supplier’ represent a ground for exclusion, such as the violation of core labour standards in the production or the delivery of the goods and services procured. Moreover, the inclusion of verification mechanisms such as audits at the qualification stage of the procurement process seems permitted in the context of the GPA, if not applied in a discriminatory manner. Article VIII:4, in fact, explicitly refers to a list of possibilities for the exclusion of suppliers, ‘where there is supporting evidence’. Although the new Article VIII provision clarifies many facets of the GPA discipline on qualification conditions, many aspects still remain unclear. It is still open to discussion what is an acceptable length of exclusion for suppliers, when an external judgement is needed to confirm the professional misconduct, and whether it is possible for the suppliers to use mechanisms of ‘self-cleaning defence’.216 C.  Establishing Social and Labour Policy Concerns in the Award Process Once the capability of the suppliers to fulfil the contract has been proven, the procuring authorities will proceed with the evaluation of the award criteria set in the tender documentation for the identification of the best possible 212 

Pitschas and Priess, ‘Secondary Policy Criteria’ (2000) 171–195. Arrowsmith (n 46) 338. 214  Pitschas and Priess (n 60). 215  Arrowsmith, ‘The Revised Agreement on Government Procurement’ (2011) 309. 216  For a comprehensive analysis of the concept of ‘self-cleaning’ as a defence to exclusion or debarment from public procurement for misconduct, see Hermann Pünder, Hans-Joachim Prieß and Sue Arrowsmith, Self-Cleaning in Public Procurement Law (Carl Heymanns Verlag 2009). 213 

148  The Inclusion of Social and Labour Rights supplier. In the revised GPA, Article XV not only defines the basic principles behind the regulation of the award selection procedure, but also provides a number of additional provisions on the different aspects and transparency requirements of the contract selection process of the qualified suppliers.217 According to Article XV GPA a public contract can essentially be awarded on the basis of two grounds ‘(a) the most advantageous tender; or (b) where price is the sole criterion, the lowest price’. If the identification of the lowest tender is very straightforward and it is particularly suitable for the maximisation of best value for money in the case of procurement of standardised goods and services, the identification and the evaluation of the ‘most advantageous tender’ raises a number of questions. So far, the relevant academic literature has focused on whether the interpretation of the term ‘tender’ in connection with 1994 GPA Article XIII:4 could include references to the qualitative characteristics in the award criteria.218 The revised GPA introduces important clarifications for the definition of the most advantageous tender. The newly revised GPA Article X:9 offers significant additional guidance for the identification of award criteria: it provides a non-exclusive list of possible award typologies, requiring that award criteria are specified in advance in the tender documentation. On the basis of this illustrative list, award criteria ‘may include, among others, price and other cost factors, quality, technical merit, environmental characteristics and terms of delivery’. Few considerations could be drawn from the new wording of the provision. First, the new wording of the GPA provision on tender documentation mirrors the introduction of the environmental aspects of technical specifications. The reference to ‘environmental characteristics’ as award criteria in Article X:9 is a direct consequence of the possibility to ‘adopt or apply technical specifications to promote the conservation of natural resources of protect the environment’. If it is possible to design the description of the goods and services procured in terms of environmental characteristics, the criteria used to evaluate the bidders should necessarily take into consideration the impact on the environment of the competing offers.219 Second, the use of ‘quality’ in the evaluation process is expressively recognised even if still open to a margin of flexibility in its actual application, not only in relation to the achievement of best value for money but also for the protection of social and labour rights.

217  An important part of the regulation of award criteria in the revised GPA is focused on the regulation of electronic auction in the submission and evaluation of the tenders, particularly concentrated in Article XIV. For reason of economy of research, the regulatory aspects regarding the use of electronic instruments in public procurement is excluded from the analysis. For an updated study of the GPA regulation, see Lester, Mercurio and Davies (n 84) 726–07. 218  Arrowsmith (n 46) 251. 219  Anderson and Arrowsmith (n 182) 322.

The GPA Regulation of the Award Procedure 149 Moreover, it is important to underline that while the revised GPA increases clarity in the content of the award criteria, it does not impose strict restrictions on the application and the methods of evaluation of the award criteria. In the context of the regulation of the tender documentation, the GPA includes regulatory indications regarding the possibility of ranking the award criteria in their process of evaluation. Article X:7(c) prescribes that the tender documentation must include ‘all evaluation criteria the entity will apply in the awarding of the contract, and … the relative importance of such criteria’. Even if a specific approach to the evaluation mechanism for the identification of the most advantageous tender is not explicitly suggested, the mechanism of weighting the evaluation criteria seems to be indirectly recognised. The emphasis on transparency in the GPA regulation of the award procedure stresses the importance of including the specific importance that the procuring authorities associate with each evaluation criterion in the selection process in the tender documentation. The flexibilities offered by the combination of the GPA provisions regarding the evaluation of award criteria appear to go beyond the simple use of pure economic considerations, leaving the way open to the inclusion of noneconomic concerns in the evaluation process.220 The reference to environmental characteristics in the illustrative lists of award criteria of Article X:9 is a straightforward example of the new regulatory approach of the revised GPA to the instrumental use of public procurement for legitimate policy objectives other than price considerations in its regulatory framework. However, no agreement has been reached in the literature regarding the possibility of a more inclusive interpretation of the concept of the ‘most advantageous’ tender under Article XV.5, extended to other non-economic considerations which are not expressly mentioned under the revised GPA. However, apart from in respect of the unavoidable specific transparency requirements set in the GPA for time-periods (Article XI), treatment of tenders (Article XV) and tender documentation (Article X), nothing in the GPA seems to suggest other major limitations on the inclusion of social and labour concerns in the award criteria and in their evaluation process, together with the overarching principle of non-discrimination.221 If included in the tender documentation with the specification of their relative importance and weight in the evaluation process, a reference to international standards of labour protection or minimum respect of working conditions in the award criteria does not seem to represent a per se violation of the non-discrimination principle in the award stage of the procurement process. Moreover, the possibility of considering social considerations or labour right protection clauses as additional award criteria in the suppliers’ s­ election

220  221 

McCrudden (n 80) 344. Arrowsmith (n 46) 344.

150  The Inclusion of Social and Labour Rights process is not expressively excluded in the wording of the GPA regulation of award criteria, if the evaluation of the price factors and the economic considerations has produced equivalent results.222 One reason for concern in the GPA regulation of the award phase could be the use of labelling schemes and certifications, even if this is a controversial issue that has so far never been raised. In order to not be confronted with a violation of the non-­discrimination principle, the use of labelling and certifications should exclusively be regarded as additional means of confirmation of the quality of the offers, granting suppliers the opportunity to provide equivalent evidence in support of their offers.223 Taking all these aspects into consideration, it seems possible to conclude that if appropriately specified in the tender documentation together with a non-discriminatory and transparent evaluation system of weighting mechanism for their evaluation, labour and social considerations can be involved in the identification of the most advantageous offer among the qualified suppliers. D.  The Use of Contractual Conditions in the GPA Framework Contract performance conditions specify in the tender documentation the conditions that the winning tenderer has to respect in the performance of the public contract.224 Performance requirements may refer to two main types of considerations related to the production process. On the one hand, they can focus on the particular conditions of the production and delivery of a specific public contract, like the request of fair wages for the workers involved; on the other hand, they can concern the general conduct of the business activities of the winning bidder, such as a general requirement to not violate human rights.225 Even if contractual conditions have been traditionally interpreted as the stage of the procurement process which is particularly suitable for the inclusion of social and labour considerations,226 the GPA does not offer a detailed or comprehensive regulation of the management stage of public

222  Luca Tosoni, ‘The Impact of the Revised WTO Government Procurement Agreement on the EU Procurement Rules from a Sustainability Perspective’ (2013) 8 European Procurement & Public Private Partnership Law Review 41. 223  Corvaglia (n 86) 627. 224  Gian Luigi Albano and others, ‘Procurement Contracting Strategies’ in Nicola Dimitri, Gustavo Piga and Giancarlo Spagnolo (eds), Handbook of Procurement (Cambridge University Press 2006) 82–104. 225  Arrowsmith (n 46) 332. 226  European Commission, ‘Buying Social. A Guide to Taking Account of Social Considerations in Public Procurement’ (Publications Office of the European Union 2010).

The GPA Regulation of the Award Procedure 151 procurement contracts.227 Under the GPA regulatory framework, the contracting authorities have substantial freedom to decide the contract conditions which are to be imposed on the winning tenderers.228 However, performance conditions cannot derogate from the principle of non-­ discrimination and transparency.229 On the basis of these fundamental limitations, nothing in the GPA seems to prohibit the use of contract conditions focusing on the production and the delivery of the goods and services procured.230 However, in contrast to what is required by the EU Directives on public procurement, the GPA does not seem to provide any grounds for distinguishing between contract conditions related to the final characteristics of the products and performance conditions that purely address the production processes and delivery methods.231 Moreover, the need to justify contract performance conditions on the basis of the legitimate policy considerations listed in the general exceptions of the revised GPA does not appear to be required in the framework of the agreement. Only if in the presence of a risk that the contract performance conditions may result in discriminatory procurement practices, are they required to reflect the legitimate public interests and comply with the requirements set in Article III GPA.232 Finally, it is important to point out that within the GPA regulatory framework, the prohibition of offsets in Article IV(6) may include in its scope many procurement practices adopting contract conditions focused on the achievement of non-economic purposes.233 Contract performance conditions imposing local content requirements may fall in the definition of offsets included in the GPA Article 1(l) as ‘measures used to encourage local development or improve the balance-of-payments accounts by means of domestic content, licensing of technology, investment requirements, counter-trade or similar requirements’. Imposition of conditions to conduct the manufacturing process locally or use locally produced inputs within the contract is a frequent procurement practice, particularly in the procurement of energy234 and in emerging countries.235 For this reason, if resulting in offsets, the use

227 Sue Arrowsmith and Arwel Davies, Public Procurement: Global Revolution (Kluwer Law International 1998) 219. 228  Tosoni, ‘The Impact of the Revised WTO Government Procurement Agreement’ (2013) 47. 229  McCrudden (n 80) 489. 230  Arrowsmith (n 46) 334. 231  Semple, ‘Reform of the EU Procurement Directives’ (2012) 103–04. 232  Arrowsmith (n 46) 335. 233  Arrowsmith, ‘Horizontal Policies: A Taxonomy’ (2010) 180. 234  For a more detailed research on the procurement practices in the energy sector and their trade implications, see Alan Herve and David Luff, ‘Trade Law Implications of Procurement Practices in Sustainable Energy Goods and Services’ (International Centre for Trade and Sustainable Development (ICTSD) 2012). 235  On the practice of local content requirement in China, see Graaf and King, ‘Towards a More Global Government Procurement Market’ (1995).

152  The Inclusion of Social and Labour Rights of local content requirements for social and labour policy objectives and embedded in contract performance should always be prohibited in the GPA framework. VI. CONCLUSION

This chapter has analysed how and to what extent the WTO regulatory framework of public procurement, and its specific regulation established in the GPA, addresses the implementation of social and labour policy objectives in procurement practices. The plurilateral GPA sets binding obligations of non-discrimination and transparency, to which its Signatory Parties should adhere in their domestic procurement regulations. On this basis, the GPA allows the inclusion of social and labour concerns in the management and regulation of procurement only if in compliance with the principle of non-discrimination, the main regulatory objective of the WTO Agreement on Government Procurement. As previously explored, the inclusion of social and labour considerations may often be interpreted and result in non-tariff trade barriers and de facto violations of the principle of non-discrimination, conflicting with the rule of national treatment at the centre of the regulatory architecture of the GPA. For this reasons, domestic preferences and discriminatory procurement practices—regardless if based on strategic and industrial policy goals, or resulting from the legitimate objective to protect social and labour needs—are expressively excluded from the regulation of the procurement procedure and only accepted as derogation from the GPA’s coverage and if justified under the GPA general exceptions. However, the specific regulation of the different stages of the procurement process offers flexibility allowing the proactive inclusion of social and labour considerations, particularly in the context of the 2011 revised text of the GPA. The revised GPA recognises the possibility of referring to noneconomic considerations—expressively for environmental reasons and establishing a clear differentiation from social and labour policies, only indirectly included—in contract specifications, evaluation criteria and contract conditions. The reformed GPA regulation of the design of award criteria allows considerable flexibility for the inclusion of social and labour references, in respect of the requirements of transparency and non-discrimination sent in the GPA text. Moreover, the reference to international standards, such as the ILO standards, in the different stages of the procurement process seems to guarantee respect for the principle of non-discrimination and at the same time provides valuable information on the social behaviour of the suppliers without compromising transparency and competition in the award of public contracts.

4 The EU Public Procurement Framework The Internal Market and Socially Responsible Procurement I.  INTRODUCTION TO THE EU PUBLIC PROCUREMENT REGIME AND SOCIAL RIGHTS

P

UBLIC PROCUREMENT POLICY represents a fundamental pillar of the legal and political architecture of the EU single market and a crucial instrument to support the strategic vision of the future EU economic and sustainable growth.1 The regulatory importance of public procurement is grounded in its economic potential in the EU common market.2 According to the latest official indicators provided by the European Commission, the estimate of total procurement expenditure in the Union reached €1931.5 billion in 2014, confirming a trend of constant increase in the last few years.3 General procurement activities on goods, services and work represented 13.7 per cent of the EU gross domestic product (GDP) in 2013.4 Moreover, this profitable section of the EU internal market is also identified as a crucial market-based instrument to enhance future economic growth, resource efficiency and strategic industrial and innovation policy, as consolidated in the Europe 2020 strategy.5

1 European Commission, ‘Europe 2020—A Strategy for Smart Sustainable and Inclusive Growth’, Communication from The Commission, COM(2010) 2020 final of 3 March 2010, available at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Aem0028. 2  Eleanor Fisher, ‘The Power of Purchase: Addressing Sustainability through Public Procurement’ (2013) 8 European Procurement & Public Private Partnership Law Review 2. 3 DG GROW G4—Innovative and e-Procurement, Public Procurement Indicators 2014, 2 February 2016, available at http://ec.europa.eu/internal_market/scoreboard/performance_per_ policy_area/public_procurement/index_en.htm. 4  World Trade Organization, Trade Policy Review Body, 2015, ‘The European Union. Trade Policy Review. Report by the Secretariat’, 18 May 2015 WT/TPR/S/317. 5  European Commission, ‘Europe 2020’ 15.

154  The EU Public Procurement Framework The economic activities in the EU public procurement market are governed by a complex system of different levels of procurement regulations, with unique regulatory characteristics. First, this is a multi-layered regulatory structure. The core of the EU regulatory framework of public procurement consists of the provisions of the Treaty on the Functioning of the European Union (TFEU) governing the fundamental freedoms in the EU internal market. The procurement activities carried out in the European territory are subject to the ‘negative obligations’ of non-discrimination established in the TFEU and to the overarching principles of transparency and competition. Moreover, all procurement contracts above a specific threshold are bound by specific Directives— namely Directive 2014/24/EU and Directive 2014/25/EU. The Directives integrate the EU Treaty provisions with positive obligations and a more detailed regulation of the entire procurement process. In this double system of procurement governance, the overriding principle of non-discrimination on non-economic grounds set out in the TFEU has represented the main limitation on the achievement of social and labour policies in procurement activities, while the Directives have guaranteed various possibilities for the inclusion of labour and social considerations in procurement contracts. Second, not only is the EU procurement regime organised in a multi-layered system of Treaty provisions and specific Directives, but it is also continuously shaped by the jurisprudence of the Court of Justice of the European Union (CJEU, previously European Court of Justice ECJ). The interpretative work of the Court has considerably influenced the application to public procurement of primary and secondary EU rules, in particular regarding what the use of procurement for the achievement of environmental and social policies. Even though the potential for the environmental use of public procurement has been extensively interpreted by the Court, in recent years an emerging CJEU case law focused on the guarantee of the protection of labour standards, in particular minimum wages, in the award of public contracts has been consolidated. Finally, this complicated set of EU norms is not only influenced by an abundant jurisprudence, but is also subject to a dynamic and radical process of legislative reform. Following the proposal of the Commission in 2011,6 two new Directives were adopted in 2014 by the European Parliament and the Council and entered into force in April 2016, the deadline for the implementation into the national laws of the EU Member States. The 2014 Directives have been described as a considerable improvement in ensuring more possibilities for the support of broader social and environmental policies in

6 European Commission, Proposal for a Directive on Public Procurement, COM(2011) 896 final, 20 December 2011.

Fundamental Procurement Regulatory Principles 155 the award of public contracts, offering more flexible award criteria, horizontal performance clauses and more detailed rules on subcontractors. In this chapter, the peculiarity of the EU procurement regulatory framework and the possibilities provided in it to protect social considerations and labour rights will be analysed, starting with its fundamental regulatory principles and then exploring the different negative and positive provisions set out in both the EU Treaties and the procurement Directives. The research conducted in this chapter aims to shed light on the efforts conducted in the EU procurement regime to balance the promotion of the freedoms in the EU internal market with the legitimate policy interests of national procuring authorities to ensure the protection of workers’ rights. II.  THE COMPLETION OF THE EU INTERNAL MARKET AND FUNDAMENTAL REGULATORY PRINCIPLES

As previously mentioned, the EU public procurement regime is structured around two regulatory levels of norms: the EU Treaties and the specific procurement Directives. The majority of public procurement activities in Europe are governed, on one hand, by the regulation of the economic freedoms as elaborated in the TFEU and, on the other hand, by two specific Directives, revised in 2014. This overlapping system of norms between Treaty provisions and secondary sources of EU law has defined the architecture of the EU procurement regime through the history of European integration.7 This complex regulatory architecture is inspired by different regulatory principles, reciprocally reinforcing but often contradictory and mutually exclusive. The academic literature has focused on a possible systematisation of the EU fundamental principles of EU procurement law,8 reaching often conflicting theoretical positions.9 Even if the comprehensive classification of

7  For a more comprehensive historical overview, see Friedl Weiss, Public Procurement in European Community Law (The Athlone Press 1993). 8  Christopher Bovis, EC Public Procurement: Case Law and Regulation (Oxford University Press 2006) 19. Peter Trepte, Regulating Procurement: Understanding the Ends and Means of Public Procurement Regulation (Oxford University Press 2005) 63. Sue Arrowsmith, ‘The Past and Future Evolution of EC Procurement Law: From Framework to Common Code?’ (2006) 35 Public Contract Law Journal 337. 9  The most conflicting academic positions regarded the role played by the principle of competition between the objectives of EU public procurement regulation. The position supporting the inclusion of the principle of competition between the EU regulatory objectives has been argued by Albert Sanchez Graells, Public Procurement and the EU Competition Rules (2nd rev edn, Hart Publishing 2015). It was supported by Christopher R Yukins and Jose A Cora, ‘Feature Comment: Considering the Effects of Public Procurement Regulations on Competitive Markets’ (2013) 55 Government Contractor. This position has been heavily criticised by Sue Arrowsmith, ‘The Purpose of the EU Procurement Directives: Ends, Means and the Implications for National Regulatory Space For Commercial and Horizontal Procurement Policies’ (2012) 14 Cambridge Yearbook of European Legal Studies 2011–2012 1.

156  The EU Public Procurement Framework fundamental principles governing the EU regulation of public procurement falls outside the scope of this research, to understand the regulatory space that the protection of social and labour rights has in the EU procurement regime, it is important to clarify first the balance between the regulatory objectives that these two layers of procurement governance have in the EU regulatory context. A. The Completion of the EU Internal Market and the Principle of Non-Discrimination In the EU regulatory framework, public procurement is a fundamental pillar of the EU internal market. Following a neoliberal model of international regulation,10 an external and international regulatory objective has inspired the EU legal architecture of public procurement: the integration and full realisation of the European internal market. Since the beginning of the development of EU law, the EU procurement regime has been gradually developed, with the fundamental aim of achieving the completion of internal market in the sector of public procurement. The 1985 White Paper for the Completion of the Internal Market clearly identifies the foundation for the regulation of public procurement in the project of the European market integration.11 Since 1992, public procurement has been widely recognised to be a crucial element in the strategic approach developed for the completion of the single market.12 Nationalistic and discriminatory procurement activities have consistently been interpreted as significant non-tariff barriers to intra-EU trade flows and the need to address these has frequently been identified as a priority in the regulation of the Single European market.13 For this reason, the objective of eliminating restrictive procurement practices, operating as barriers to trade, represents the main driver behind the regulation of public procurement in the context of the EU Treaties and their progressive evolutions.14 The core of the Treaty provisions defining the internal market rules of the prohibition of non-discrimination (Article 28 TFEU),

10 Peter Kunzlik, ‘Neoliberalism and the European Public Procurement Regime’ (2013) 15 Cambridge Yearbook of European Legal Studies 283. 11  European Commission, Completing the Internal Market, White Paper from the Commission to the European Council, COM (85) final. 12  Julia A Sohrab, ‘The Single European Market and Public Procurement’ (1990) 10 Oxford Journal of Legal Studies 522. Friedl Weiss, ‘Public Procurement Law in the EC Internal Market 1992: The Second Coming of the European Champion’ (1992) 37 Antitrust Bulletin 307. 13  Kenneth A Armstrong and Simon Bulmer, The Governance of the Single European Market (Manchester University Press 1998) 117. 14 Sue Arrowsmith, The Law of Public and Utilities Procurement (Sweet & Maxwell 2005) 10.

Fundamental Procurement Regulatory Principles 157 on the freedom of services suppliers (Article 56 TFEU), on the elimination of barriers to trade (Article 34 TFEU) and on the right to establishment (Article 49 TFEU) are the fundamental provisions governing the regulation of governmental procurement activities in the Union.15 The TFEU free movement provisions prohibit discriminatory procurement practices in the internal market and other restrictions to the freedom of access to the European public procurement markets.16 The original scope of the integration of the European internal market in the procurement sector has also progressively been developed in the specific procurement Directives.17 To ensure the completion of the internal market according to a neoliberal model of liberalisation of the procurement market,18 the negative obligations of non-discrimination of the Treaties have been found since the 1970s19 in specific Directives regulating the award procedure of public procurement contracts, which have been consolidated in the 2004 and 2014 Directives.20 In recital 1, Directive 2014/24/EU identify in the freedoms of the internal market the foundations of the regulation of EU procurement, stating that ‘the award of public contracts by or on behalf of Member States’ authorities has to comply with the principles of the Treaty on the Functioning of the European Union (TFEU), and in particular the free movement of goods, freedom of establishment and the freedom to provide services, as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency’. As interpreted in the light of the strategic function of completing the EU internal market, the regulation of public procurement is anchored to respect for the free movement provisions in the EU Treaties and, for this reason, it is necessarily subject to the obligation to respect the fundamental EU constitutional principles of equality, mutual recognition and proportionality.21 Moreover, in the specific context of the procurement Directives, the constitution and cohesion of the European internal market have been integrated by

15  Christopher Bovis, ‘The European Public Procurement Rules and Thieir Interplay with International Trade’ (1997) 31 Journal of World Trade 63. 16  Peter Trepte, Public Procurement in the EU. A Practitioner’s Guide (Oxford University Press 2007) 1.07–1-31. 17  The function behind the adoption of the procurement Directives consists in the progressive standardisation and harmonisation of the domestic procurement regulations in the EU Member States, see Christopher Bovis, EU Procurement Law (Edward Elgar 2012). 18  Kunzlik, ‘Neoliberalism’ (2013) 304. 19  The first Directive aiming at the coordination of the national procedures for the award of public contracts was Directive 71/305, Council Directive 71/305/EC of 26 July 1971 concerning the co-ordination of procedures for the award of public works contracts [1971] OJ L185/5. 20  Arrowsmith, ‘Past and Future Evolution’ (2006) 339. 21 Christopher Bovis, ‘Developing Public Procurement Regulation: Jurisprudence and Its Influence on Law Making’ (2006) 43 Common Market Law Review 461.

158  The EU Public Procurement Framework three additional supporting regulatory purposes: the prohibition of discrimination in public procurement, the principle of transparency in the award of public contracts and the removal of barriers to access.22 On one hand, many provisions in the Directive ensure respect for the prohibition of discrimination on the ground of nationality and the prohibition of procurement practices with discriminatory effects along the regulation of the entire procurement cycle, for example imposing the use of non-discriminatory selection criteria.23 Instead of representing an ultimate objective itself, as in the context of the World Trade Organization (WTO) regulatory framework—the enforcement of the principle of non-discrimination assumes a functional dimension—in light of the primary goal of the realisation of the EU internal market. On the other hand, various obligations in the Directives complement the negative Treaty obligations of non-discrimination and impose positive commitments and transparency requirements to ensure respect for and monitoring of the obligation of non-discrimination in the EU procurement market.24 The principle of transparency becomes instrumental for the respect of the principle of non-discrimination on the ground of nationality.25 The principle of transparency has been consistently interpreted by the CJEU as a crucial instrument for ensuring non-discrimination and equal treatment in the procurement activities and in the enforcement of the freedoms of the internal market.26 As clearly expressed in the Teleaustria case,27 the principle of transparency was grounded in the EU Treaty prohibition of nondiscrimination in the award of public contracts.28 Transparency obligations, like the obligation to advertise contracts, aims to ensure ‘the fundamental fairness and openness of the award procedure’ in the words of Advocate General Fennelly.29 Moreover, the functional role of transparency obligations for the enforcement and monitoring of respect for the principle of non-discrimination has been confirmed in recital 58 of Directive 2014/24/EU, which claims that it ‘is necessary to ensure an adequate level of transparency that allows for a

22 

Arrowsmith, ‘The Purpose of the EU Procurement Directives’ (n 9) 1–47. Directive 2014/24/EU, Article 56. 24  For a more in-depth exploration of the significance of the monitoring role of transparency in the EU procurement Directives and in the judicial interpretation, see Trepte, Public Procurement in EU (2007) 1.55–182. 25 Arrowsmith, The Law of Public and Utilities Procurement (2005) 191. 26  Berend Jan Drijber and Hélène Stergiou, ‘Public Procurement Law and Internal Market Law’ (2009) 46 Common Market Law Review 805. 27  Case C-324/98 Telaustria Verlags GmbH and Telefonadress GmbH v Telekom Austria AG EU:C:2000:669, [2000] ECR I-10745. 28 Adrian Brown, ‘Seeing Through Transparency: The Requirement to Advertise Public Contracts and Concessions under the EC Treaty’ (2007) Public Procurement Law Review 1. 29  Opinion of Mr Advocate General Fennelly delivered on 18 May 2000. Case C-324/98, Telaustria Verlags GmbH and Telefonadress GmbH v Telekom Austria AG EU:C:2000:669, [2000] ECR I-10745; Opinion EU:C:2000:270 para 47(4). 23 

Fundamental Procurement Regulatory Principles 159 verification of whether the principle of equal treatment has been adhered to’. In this regulatory perspective, the procurement Directives have established a series of positive and explicit obligations imposing transparency requirements in the conduct of the procurement process. (See, for example, Section 2 Publication and Transparency, Articles 48–55 of Directive 2014/24/EU.) B. Regulatory Purposes of the EU Procurement Regime: The Principles of Competition and Value for Money In the context of the progressive removal of discrimination and barriers in the internal market, the notion of competition assumes a crucial importance in the EU procurement regime.30 The enforcement of the principle of competition has been traditionally interpreted as necessary for the removal of discriminatory procurement practices and to achieve efficiency and integrity in the procurement process. However, it is still highly disputed in the literature whether respect of the principle of competition can be defined as a separate regulatory objective of the EU procurement regulatory system.31 The importance of ensuring a fair and undistorted competition in the procurement market has been included in the preamble of the 2004 Directives—recital 9 in Directive 2004/17/ EC, recitals 2 and 36 in Directive 2004/18/EC—and it has been reaffirmed in numerous CJEU cases. However, it remains highly uncertain whether the scope of the regulatory framework of public procurement consists in, directly or indirectly, replicating within the market of public contracts the same competition dynamics typical of a competitive private market.32 The objective of the promotion of effective competition between economic operators seems now more explicitly consolidated in the 2014 Directives.33 The newly introduced Article 18(1) of Directive 2014/24, while providing a clear overview of the main regulatory objectives of the EU procurement regime,34 confirms the importance of ensuring competition in procurement activities under the coverage of the 2014 Directives. Paragraph 1 of Article 18 Directive 2014/24 requires that ‘[t]he design of the procurement shall not be made with the intention of excluding it from the scope of this Directive or of artificially narrowing competition. Competition shall be considered

30 Graells,

Public Procurement (2015) 101. Kunzlik (n 10) 285. 32  Arrowsmith (n 9) 20. 33  Graells (n 9) 207–40. 34  Before addressing the competition considerations, Article 18(1) Directive 2014/24 clearly identifies in the principle of non-discrimination the main regulatory purpose of the Directive, stating that ‘[c]ontracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner’. 31 

160  The EU Public Procurement Framework to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators.’ For all these reasons, the principle of non-discrimination, together with the considerations of transparency and competition, underpins both levels of the EU procurement obligations as crucial instrument to achieve the ultimate external purpose of the European market integration in both the EU Treaty and the procurement Directives.35 In this functional interpretation of procurement in the finalisation of the EU single market, the principle of value for money, the most important regulatory principle focusing at ensuring the internal effectiveness of the procurement process, does not seem to be recognised as an objective per se in the EU procurement regulatory framework. Elaborating on the text of the 2004 Directives, Arrowsmith concludes that ‘the directives are not concerned directly with value for money. Most significantly, the internal market provisions do not confer a power to regulate for this purpose.’36 As confirmed in Advocate General Jacobs’s Opinion in SIAC Construction, the purpose of EU regulation is the harmonisation of national procurement regulation ‘to ensure in addition the abolition of barriers and a level playing-field by, inter alia, requirement transparency and objectivity’.37 The principle of value for money remains, according to the dominant position in the literature,38 a fundamental objective of procurement regulation at the domestic level inside the EU Member States, emphasising the margins of discrepancy and conflict between the national and international regulatory interests of public procurement.39 In line with the approach adopted in the old Directives, the 2016 text of the Directives includes frequent references to the principle of efficiency in public spending its recitals.40 Moreover, the 2014 Directives introduce

35  Christopher McCrudden, Buying Social Justice: Equality, Government Procurement and Legal Change (Oxford University Press 2007) 510–12. 36  Arrowsmith (n 9) 37. 37 Case C-19/00, SIAC Construction Ltd v County Council of the County of Mayo EU:C:2001:553, [2001] ECR I-7725, para 33 of the Advocate General’s opinion as reported in ibid. 38  Sue Arrowsmith and Peter Kunzlik, ‘Public Procurement and Horizontal Policies in EC Law: General Principles’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law. New Directives and New Directions (Cambridge University Press 2010) 30–37. 39 Sue Arrowsmith, ‘National and International Perspectives on the Regulation of Public Procurement: Harmony or Conflict?’ in Sue Arrowsmith and Arwel Davies (eds), Public Procurement: Global Revolution (Kluwer Law International 1998) 3–26. 40  The references to efficiency in the 2014 Directives (particularly prominent in recital 2) suggested the possibility to reopen the debate on the efficiency as a separate objective in the EU procurement regime, see Mario E Comba, ‘Variation in the Scope of the New EU Public Procurement Directive of 2014: Efficiency in Public Spending and a Major Role of the Approximation of Laws’ in Francois Lichère, Roberto Caranta and Steen Treumer (eds), Modernising Public Procurement: The New Directive (Djøf Publishing 2014) 40–46.

Fundamental Procurement Regulatory Principles 161 a new direct reference to the objective of best value for money, namely in recital 47 of Directive 2014/24/EU, but interpreted in a broader sustainable dimension, including reference to green procurement and social innovation. Reaffirming the importance of innovation in procurement as in the Europe 2020 strategy for smart, sustainable and inclusive growth, innovation is also an essential component in the achievement of best value for money in the EU procurement context, ‘as well as wider economic, environmental and societal benefits in terms of generating new ideas, translating them into innovative products and services and thus promoting sustainable economic growth’. C. Social and Labour Objectives in The EU Procurement Regime: The Principle of Equality The implementation of the main regulatory objective set in the EU public procurement regulation, as presented so far, has the potential to deeply impact on the EU Member States’ freedom to promote horizontal policies into public procurement. The overarching scope of the realisation of the EU internal market has the potential of limiting the Member States’ regulatory space in the strategic use of public procurement, significantly reducing the discretion of national procurement authorities to pursue labour or employment policies in the interests of the domestic communities. The use of procurement as instrument of social policy may significantly conflict with the strict application of the principles of non-discrimination and competition, increasing the lack of transparency in the EU public markets.41 For these reasons, it is undeniable that the use of procurement for the achievement of social and labour policy objectives has so far assumed a controversial connotation in the EU procurement regime and it has mainly been interpreted as an exception to the non-discrimination obligations of free movement.42 However, the implementation of social and labour rights and the realisation of the EU internal market are not necessarily mutually exclusive.43 From a broad institutional level, it is important to remember that social values and labour policies have been gradually incorporated over the course

41  For a more detailed analysis, see Colin Turpin and Patricia Brown, Government Procurement and Contracts (Longman 1989). 42  Sue Arrowsmith and others, EU Public Procurement Law: An Introduction (Sue Arrowsmith ed, EU Asia Inter University Network for Teaching and Research in Public Procurement Regulation 2010) 303–37. 43 Jörgen Hettne, ‘Sustainable Public Procurement and the Single Market—Is There a Conflict of Interest?’ (2013) 8 European Procurement & Public Private Partnership Law Review 31.

162  The EU Public Procurement Framework of the history of EU integration, from the EC Treaty of 1951 to the Lisbon Treaty of 2009.44 Consolidating the catalogue of EU values and objectives (in Articles 2 and 3 of the Treaty on European Union (TEU)), the Treaty of Lisbon embedded the EU social and labour rights at the same constitutional and normative level as the internal market provisions and strengthened the EU’s social commitments through the Charter of Fundamental Rights of the European Union (CFREU).45 Of all the values included in Article 2 TEU, the principle of equal treatment plays a crucial role in creating a regulatory bridge between the internal market’s freedoms and the EU social and labour values.46 The right to equal treatment not only ensures the enforcement of the principle of non-discrimination and stability in the functioning of the common market, but it is also fundamental for the protection of social and labour rights, and essential to the improvement of working and living conditions in the context of the free movement of workers.47 To strengthen the application of the socio-economic values set in Article 2 and 3 TEU, the horizontal social clause of Article 9 TFEU becomes particularly relevant in the context of the social use of public procurement. It requires the EU institutions to take into account and guarantee the objectives of social protection, employment promotion and social inclusion in all other policy areas.48 However, even though it has been argued that it represents a weaker obligation compared to Article 11 TFEU guaranteeing the protection of the environment into EU policies, Article 9 TFEU constitutes the legal foundation for the broad integration of social and labour objectives in the implementation of EU activities and policies, including in the field of public procurement.49 44  For a more extensive study on the regulatory balance between the EU internal market law and the protection of EU social and labour rights, see Kenneth A Armstrong, Governing Social Inclusion: Europeanization through Policy Coordination (Oxford University Press 2010); Diamond Ashiagbor, ‘Unravelling the Embedded Liberal Bargain: Labour and Social Welfare Law in the Context of EU Market Integration’ (2013) 19 European Law Journal 303; Catherine Barnard, ‘EU Employment Law and the European Social Model: The Past, the Present and the Future’ (2014) 67(1) Current Legal Problems 199; Catherine Barnard, Steve Peers and Mia Rönnmar (eds), ‘Labour and Equality Law’, European Union Law (Oxford University Press 2014). 45  For a broader overview, see Dagmar Schiek, Ulrike Liebert and Hildegard Schneider (eds), European Economic and Social Constitutionalism after the Treaty of Lisbon (Cambridge University Press 2011). 46  For a more comprehensive analysis, see Alan Dashwood and Siofra O’Leary (eds), The Principle of Equal Treatment in EC Law (Sweet & Maxwell 1997). 47  For a complete overview of equality law in EU employment law, see Catherine Barnard, EU Employment Law (4th edn, Oxford University Press, USA 2012). 48 Article 9 TFEU provides: ‘In defining and implementing its policies and activities, the Union shall take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of education, training and protection of human health.’ 49  Article 9 prescribe that ‘In defining and implementing its policies and activities, the Union shall take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of

Fundamental Procurement Regulatory Principles 163 In the specific regulatory area of public procurement, the relationship between the realisation of the internal market and the protection of EU social and labour rights has been developed around substantial CJEU case law, first in the context of the 2004 Directives and now for the 2014 Directives.50 The originally strict economic approach to the realisation of the EU internal market in the public procurement sector has progressively opened up to the possibility of inclusion of more social considerations, mainly through the flexible and more policy-oriented approach to the principle on non-discrimination and its exceptions in the award of public contracts.51 The CJEU jurisprudence on the social use of public procurement and its academic interpretation has focused on the difficulties of balancing the apparently conflicting objectives of the enforcement of social and labour rights in public procurement on the one hand and economic freedom and competition rules on the other hand.52 Increasingly after 2007 and the landmark judgments in Laval53 and Viking,54 and even more recently with the Rüffert,55 Bundesdruckerei56 and RegioPost57 cases, the CJEU has focused particularly on the difficulty of balancing the freedom of the internal market with the controversial question of the inclusion of obligations to pay minimum wages in public contracts.58 In the context of the significant evolution of the CJEU jurisprudence, the reforms achieved in the 2014 Directives tried to clarify the balance between the different regulatory purposes underpinning the EU regulation

education, training and protection of human health’. For a deeper analysis of its application in the procurement sector, Roberto Caranta, ‘The Changes to the Public Contract Directives and the Story They Tell About How EU Law Works’ (2015) 52 Common Market Law Review 391. 50  Sue Arrowsmith, ‘An Assessment of the New Legislative Package on Public Procurement’ (2004) 41 Common Market Law Review 1277. 51  Christopher Bovis, ‘Public Procurement in the European Union: Lessons from the Past and Insights to the Future’ (2005–06) 12 Columbia Journal of European Law 55–124. 52 Catherine Weller and Janet Meissner Pritchard, ‘Evolving CJEU Jurisprudence: Balancing Sustainability Considerations with the Requirements of the Internal Market’ (2013) 8 European Procurement & Public Private Partnership Law Review 55. 53  Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet and others EU:C:2007:809, [2007] ECR I-11767. 54  Case C-438/05 International Transport Workers’ Federation and Finnish Seamen’s Union v Viking Line ABP and OÜ Viking Line Eesti EU:C:2007:772, [2007] ECR I-10779. 55  Case C-346/06 Dirk Rüffert v Land Niedersachsen EU:C:2008:189, [2008] ECR I-1989. 56  Case C-549/13 Bundesdruckerei GmbH v Stadt Dortmund EU:C:2014:2235. 57 Case C-115/14 RegioPost GmbH & Co KG contro Stadt Landau in der Pfalz EU:C:2015:760. 58  The academic literature, interpreting the cases of Viking and Laval, is vast. More in-depth analysis on these two cases can be found in Catherine Barnard, ‘Viking and Laval: An Introduction’ (2008) 10 Cambridge Yearbook of European Legal Studies 463. Tonia Novitz, ‘A Human Rights Analysis of the Viking and Laval Judgments’ (2008) 10 Cambridge Yearbook of European Legal Studies 541. ACL Davies, ‘One Step Forward, Two Steps Back? The Viking and Laval Cases in the ECJ’ (2008) 37 Industrial Law Journal 126. Mark Freedland and Jeremias Prassi (eds), Viking, Laval and Beyond (Hart Publishing 2015).

164  The EU Public Procurement Framework of public procurement. Recital 1 of Directive 2014/24/EU provides a comprehensive overview of the fundamental principles of EU constitutional law, representing the pillars of the specific regulation of public procurement: equal treatment, non-discrimination, mutual recognition, proportionality and transparency. After having reaffirmed the prevailing principle of non-discrimination and competitions, Article 18 in its second paragraph clearly recognises the use of public procurement to achieve environmental, social and labour policies. Article 18(2) acknowledges the importance of ensuring respect for social and labour law, imposed in international agreements and by EU and national laws, in the award of public contracts in the European territory. However, the respect for labour and social obligations is not the only crucial aspect of the regulatory framework of the 2014 Directive as reaffirmed in recital 37. Also the promotion of employment and occupational concerns for disadvantaged and minority groups, as expressed in recital 36, which is an important dimension of the reformed text of the public procurement Directive 2014/24/EU. In trying to balance the different regulatory purposes of the EU procurement regime, it has been argued that the principle of equal treatment plays a crucial role in the use of public procurement for the achievement of social and labour policies.59 Even if the principle of equal treatment has been defined as ‘comparable situations must not be treated differently and that different situations must not be treated in the same way, unless such treatment is objectively justified’60 its scope of application is particularly wide.61 In the development of a comprehensive social dimension of the EU activities and policies, the principle of equal treatment assumed a complementary dimension to the principle of non-discrimination in the light of the progressive integration of the common market and the implementation of important social considerations, such as in the case of gender equality.62 The principle of equal treatment takes the function of ensuring the absence of discrimination in the employment, educational and other social sectors of the internal market.63 This extensive interpretation of the principle of equality, as developed by McCrudden, represents an important instrument to mitigate the conflicts 59 

McCrudden (n 35) 507–37. Cases C-21/03 and C-34/03 Fabricom v Etat Belge EU:C:2005:127, [2005] ECR I-1559 at para 27. 61  Sylvia De Mars, ‘The Limits of General Principles: A Procurement Case Study’ 38 European Law Review 316. 62  Grainne de Burca, ‘The Role of Equality in European Community Law’ in Alan Dashwood and Siofra O’Leary, The Principle of Equal Treatment in EC Law (Sweet & Maxwell 1997). 63  Christopher McCrudden, ‘EC Public Procurement Law and Equality Linkages: Foundations for Interpretation’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law. New Directives and New Directions (Cambridge University Press 2010) 280. 60  Joined

Internal Market and Public Procurement 165 between regulatory objectives of the EU procurement Directives.64 Article 3(3) TEU tries to develop this regulatory balance even further, stating that the Union ‘… shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment’. In line with this interpretation, an indication of the importance of the principle of equality in the special context of public procurement is provided in recital 37 of Directive 2014/24/EU, focused on the guarantee of the appropriate inclusion of horizontal policies and respect for social and labour obligations linked to the compliance with national, EU and international obligations applicable in the Member States where the contracts are performed.65 In its wording, the principle of equal treatment becomes a bridge between the enforcement of social and labour obligations in procurement practices and conformity with EU law, stating that ‘relevant measures should be applied in conformity with the basic principles of Union law, in particular with a view to ensuring equal treatment’. After having introduced the regulatory friction between the fundamental regulatory principles of the EU procurement regime, in the following sections of the chapter the tensions between the EU internal market law and the promotion of labour rights will be explored in more details, first at the Treaty level (section III) and then in the framework of the EU procurement Directives, as interpreted in the CJEU jurisprudence (sections IV and V). III.  INTERNAL MARKET ECONOMIC FREEDOMS AND REGULATORY AUTONOMY IN PUBLIC PROCUREMENT UNDER THE EU TREATIES

The use of public procurement for the achievement of social policies and aiming to achieve protection of labour and workers’ rights, is deeply rooted in the public procurement tradition of the different EU Member States and the social dimension of EU law.66 However, it is undeniable that the pursuing of social and labour policy objectives in procurement practices is subject to the overriding prohibition of discrimination and the limits set in the 64  The interpretation of the principle of equality along the regulation of the procurement process in the context of the 2004 Directives is explored in McCrudden (n 35) 538–66. 65  Recital 37 clarifies: ‘With a view to an appropriate integration of … social and labour requirements into public procurement procedures it is of particular importance that Member States and contracting authorities take relevant measures to ensure compliance with obligations in the fields of environmental, social and labour law that apply at the place where the works are executed or the services provided and result from laws, regulations, decrees and decisions, at both national and Union level, as well as from collective agreements, provided that such rules, and their application, comply with Union law.’ 66 Ruth Nielsen and Erika M Szyszczak, The Social Dimension of the European Union (3rd rev edn, Copenhagen Business School Press 1997) 25–28.

166  The EU Public Procurement Framework Treaties. As the EU Treaties applies to the generality of public procurement activities, the negative obligations rooted in the fundamental economic freedoms in the EU single market have an extensive impact on regulatory autonomy of the Member States. In the following analysis, the application of the TFEU provisions to public procurement will be explored, focusing first on the negative obligations set in regulation of the internal market’s free movements in the TFEU. The limits that these Treaty provisions place on the possibilities to use of public procurement for the achievement of social and labour rights protection will be explored. Subsequently, the analysis will move to the possible justifications for these restrictions and the regulatory space left to EU Member States in the strategic use of public procurement. In the analysis of the architecture of the EU Treaties, particular attention will be paid to the role of the CJEU in balancing economic freedoms and regulatory autonomy and to its influencing contribution to the clarification of the space left to the use of public procurement for the achievement of labour objectives. A. The TFEU ‘Negative Obligations’ and the Social Use of Public Procurement The core of the EU regulatory architecture of public procurement is represented by the provisions regulating free movement in the internal market, now set out in the TFEU.67 The prohibitions of discrimination in the free movement of goods (Article 34 TFEU), in the freedom of provide services (Article 56 TFEU) and in the freedom of establishment (Article 49 TFEU) apply to all contracts of public procurement, regardless of the scope of application of the specific procurement Directives. It is important to clarify that according to an established case law,68 procurement activities carried out in the European territory, regardless whether they are covered by the provisions of the Directives, are bound by the principle of non-discrimination on the ground of nationality and by the free movement rules if they are of a ‘certain cross border interest’.69 Applied to the field of public procurement, these provisions prohibit three types of procurement discriminatory measures, involving their respective fields of application in the free movement of goods, the free movement of services and the freedom of establishment.70

67  For a more comprehensive analysis of the law of the EU internal market, see Catherine Barnard, The Substantive Law of the EU: The Four Freedoms (Oxford University Press 2010). 68  Case C-324/98 Teleaustria and Telefonadresse EU:C:2000:669, [2000] ECR I-10745. 69  Peter Kunzlik, ‘Green Public Procurement—European Law, Environmental Standards and “What to Buy” Decisions’ (2013) 25 Journal of Environmental Law 173. 70  Peter Trepte, Public Procurement in the EU: A Practitioner’s Guide (Oxford University Press 2007) 1.22.

Internal Market and Public Procurement 167 First, under the provision of Article 34 TFEU (previously Article 28 EC) procurement practices which imply a direct discrimination between the suppliers are prevented as in the case of the use of local content requirements, or provisions imposing a different set of regulations on foreign bidders. Second, indirect discriminatory procurement measures that equally apply to domestic and foreign products but that have the effect of favouring domestic goods or services represent as hindering trade are also prohibited under these provisions.71 The imposition in public contracts of requirements of specific product characteristics that are more difficult for foreign suppliers to meet but which are easily satisfied by domestic producers is a typical example of procurement provisions that can be interpreted as hindering to trade. In the context of the use of procurement for environmental purposes, the Concordia Bus Finland case clearly confirmed this limitation.72 Third, non-discriminatory procurement measures treating domestic and imported products equally and with similar impact on both foreign and domestic products can still fall into the scope of application of the TFEU core prohibitions. Following the interpretation in the Keck case,73 all measures that may actually impact the flow of imports in their application have the potential to result in a hindrance to trade and, therefore, they must be justified under the requirements imposed by the Treaty.74 A similar approach also applies to the interpretation of the freedom to provide services and their establishment, according to Article 57 TFEU. The legality of the use of public procurement for the achievement of social policies and for the protection of labour rights depends essentially on the question of to what extent the inclusion of social and labour concerns constitutes a violation of the principle of non-discrimination or an hindrance to trade, falling into one of the three hypotheses identified by these core prohibitions of the regulation of the EU internal market. More precisely, the inclusion of social characteristics and labour rights’ considerations becomes particularly controversial if it is expressed as a requirement to respect the social and labour domestic legislation in the procuring Member State and their if this requirement will impact the flow of imports into the procurement market.75 What makes it more controversial under the profile of the principle

71  Sue Arrowsmith and Peter Kunzlik, Social and Environmental Policies in EC Procurement Law (Cambridge University Press 2009) 59–67. 72  Case C-513/99 Concordia Bus Finland v Helsingin Kaupunki ‘Concordia Bus Finland’ EU:C:2002:495, (2002) ECR I-7213. 73  Cases C-267/91 and C-268/91 Keck &Methouard EU:C:1993:905, [1993] ECR I-6097. 74  Sue Arrowsmith and Peter Kunzlik, ‘Public Procurement and Horizontal Policies in EC Law: General Principles’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law (Cambridge University Press 2009) 21. 75 Catherine Barnard, ‘Using Procurement Law to Enforce Labour Standards’ in Guy Davidov and Brian Langille (eds), The Idea of Labour Law (Oxford University Press 2011) 256–272.

168  The EU Public Procurement Framework of non-discrimination is the territorial application of labour law, limited to employees of domestic bidders and of bidders that have established an economic activity in another Member State under Article 49 TFEU.76 The discriminatory effect that the inclusion of labour rights considerations may have on the freedoms of the EU internal market has been extensively interpreted by the CJEU. The Court has consistently stressed that the inclusion of social and labour considerations in public award is not prohibited per se, unless resulting in discrimination toward bidders and competitors from other EU Member States. In particular, the Court has extensively tested the possibility of the inclusion of social and labour concerns in particular regarding the controversial issue of the imposition of minimum wages in public procurement contracts. Advocate General Bot in his Opinion on the Rüffert case77—in paragraphs 100–102—clearly explained that the application of domestic legislation aimed at the protection of labour rights may involve additional administrative or economic burdens that can impede or render less attractive the provision of services and result in a discriminatory measure, prohibited under the EU internal market provisions. As confirmed in the Rüffert, the Bundesdruckerei and RegioPost judgments, respectively, the protection of labour rights as a mechanism to avoid social dumping in the internal market cannot result in additional economic burdens depriving suppliers of their competitive advantage enjoyed from the production in a different Member State, which would then result in an obstacle prohibited under Article 56 TFEU.78 However, even if the use of public procurement to protect labour standards is interpreted as a hindrance to trade, this obstruction could be still justified under the explicit and implicit derogations set in the TFEU and developed in the rich CJEU jurisprudence. B. Derogations and Justifications Applicable to the Social Use of Public Procurement Even if the instrumental use of public procurement for the achievement of social and labour policies can potentially represent a form of discrimination regarding the free movement of goods, services and establishment, the limits imposed in EU Treaties to the regulatory freedom of public procurement are open to considerable flexibility. Justifications and derogations allow the

76 

ibid 258. Note 55 above. 78 Niklas Bruun, Antoine Jacobs and Marlene Schmidt, ‘ILO Convention No. 94 in the Aftermath of the Rüffert Case’ (2010) 16 Transfer: European Review of Labour and Research 473. 77 

Internal Market and Public Procurement 169 possibility of justifying discriminatory procurement practices on the basis of specific grounds and a number of conditions.79 First, TFEU allows explicit derogation to the non-discrimination provision of fundamental freedoms and Article 36 TFEU identifies possible grounds for the justification of discriminatory measures in violation of Article 34 TFEU.80 Discriminatory measures that are directed at achieving ‘public morality, public policy or public security, the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial policy’ are potentially covered by explicit derogations. However, these potentially discriminatory measures are subject to two conditions in order to not result in a violation of the Treaty: they should not imply a ‘disguised restriction to trade’ and they should respect the principle of proportionality.81 Second, together with explicit derogations set in the TFEU, the CJEU has also recognised the possibility of allowing implicit limitations to potentially discriminatory practices on the basis of considerations of public interest and subject to proportionality. Other grounds of ‘public interest’, often described as ‘mandatory requirements’, are not consolidated into an exhaustive list but are subject to consideration by the Court on a case-by-case basis.82 According to the established CJEU jurisprudence, the protection of workers and the improvement of working conditions83 have been recognised as overriding reasons related to public interest, and mandatory requirements capable of justifying discriminatory measures.84 Particularly in the context of public procurement, not only the protection of labour rights but also protection from social dumping and from unfair competition have been recognised as possible objectives capable of justifying a restriction on fundamental freedoms.85 The policy objectives of the protection of workers and their protection from unfair competition, in the form of a request for respect for minimum wages, have been recognised as legitimate grounds for derogation

79  For a more comprehensive analysis, see Panos Koutrakos, Niamh Nic Shuibhne and Phil Syrpis, Exceptions from EU Free Movement Law Derogation, Justification and Proportionality (Hart Publishing 2016). 80  Niamh Nic Shuibhne, ‘Exceptions to the Free Movement Rules’ in Catherine Barnard and Steve Peers (eds) European Union Law (Oxford University Press 2014) 473. 81  Paul Craig and Grainne De Burca, EU Law: Text, Cases, and Materials (Oxford University Press 2011) 814–16. 82  Claire Kilpatrick, ‘Internal market architecture and the accommodation of labour rights: as good as it gets?’ in Phil Syrpis (eds) The Judiciary, the Legislature and the EU Internal Market (Cambridge University Press 2012) 205. 83  Case 155/80 Oebel EU:C:1981:177, [1981] ECR 1993. 84  Niamh Nic Shuibhne and Marsela Maci, ‘Proving public interest: the growing impact of evidence in free movement case law’ (2013) 50(4) Common Market Law Review 965. 85 Ruth Nielsen, ‘Social Rights and Market Freedom in the European Constitution: A Labour Law Perspective’ (2007) 44 Common Market Law Review 531.

170  The EU Public Procurement Framework from the non-discrimination provisions of the TFEU, in the established jurisprudence which began with the Laval case86 and was recently developed in the Rüffert,87 Bundesdruckerei88 and RegioPost89 judgments. However, it is important to note that in the broad spectrum of the instrumental use of public procurement, the achievement of economic and industrial purposes in the context of a strategic and protective use of public procurement— even if including references to employment and labour conditions—still represents an extremely controversial case in the EU regulatory context. In interpreting the balance between economic and non-economic objectives,90 the CJEU has frequently made clear the general rule prohibiting economic justifications for restriction on free movement.91 Even if discriminatory procurement practices grounded on the public interest of the protection of labour rights can be justified, measures aimed at economic regulation and the protection of national businesses are usually not accepted under the EU regulatory architecture.92 As confirmed in Case C-360/89 Commission v Italy93 and Case C-21/88 Du Pont de Nemours,94 the justification of discriminatory procurement practices hindering access to the internal market on the basis of economic objectives cannot be justified under the TFEU. C. Balancing Economic Freedoms with Social and Labour Rights: The Principle of Proportionality Regardless of whether the discriminatory national measures are justified under the derogations set in Articles 36 and 52 TFEU or as ‘overriding requirements of public interest’ in the context of Article 34 TFEU, any derogation

86  Reingard Zimmer, ‘Labour Market Politics through Jurisprudence: The Influence of the Judgements of the European Court of Justice (Viking, Laval, Rüffert, Luxembourg) on Labour Market Policies’ (2011) 7 German Policy Studies 211. 87  Note 55 above. 88  Note 56 above. 89  Note 57 above. 90 Erik Jon Dølvik, Jelle Visser, ‘Free Movement, Equal Treatment and Workers’ Rights: Can the European Union Solve Its Trilemma of Fundamental Principles?’ (2009) 40 Industrial Relations Journal 491. 91  A contrasting view about the coherence in the application of this general rules and about the necessity of reform has been presented in Sue Arrowsmith, ‘Rethinking the Approach to Economic Justifications under the EU’s Free Movement Rules’ (2015) 68 Current Legal Problems 307. 92  Sue Arrowsmith, ‘Application of the EC Treaty and Directives to Horizontal Policies : A Critical Review’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law New Directives and New Directions (Cambridge University Press 2009) 147. 93 C-360/89 Commission v Italy [1992] ECR I-3401. 94 C-21/88 Du Pont de Nemours Italiana SpA v Unita Sanitaria Locale No 2 Di Carrara [1990] ECR I-889.

Internal Market and Public Procurement 171 must be ‘proportionate’ to the scope that they aim to achieve.95 More precisely, respect of the principle of proportionality requires that national measures must be appropriate for ensuring the achievement of the objective, aim to achieve a legitimate objective and represent the least trade restrictive measures available.96 For these reasons, the principle of proportionality represents a control mechanism over the application of justifications to national measures in restriction to trade in the EU internal market, in the field of public procurement as well as in many other areas of application.97 The principle of proportionality represents a ‘normative standard’ that requires a reasonable link between the objective and the administrative and legislative measures—necessary and appropriate—used to achieve that objective.98 Transposed into the context of the instrumental use of public procurement, in broad terms it could be argued that the use of public procurement for the protection of social and labour rights can be generally interpreted as a least restrictive measure enforcing labour and social rights. It allocates the costs of the enforcement of the labour rights between the costs associated to the procurement of the goods and services needed for public functions.99 However, compliance with the principle of proportionality in the justifications of market access restriction requires a specific analysis of the precise formulation of the conditions of labour rights and social protection in the procurement process and assessment of the benefits achieved by the specific procurement measure at issue. The issue of proportionality is, moreover, strictly linked to the territorial applicability of the procurement measure at issue and to the balance between the benefits and the economic burdens suffered by the suppliers in competition in the market.100 It appears, in fact, to be particularly difficult to interprete as proportionate a procurement measure that allows only the residents in the procuring States to enjoy its labour benefits, as this entails a significant discriminatory effect on foreign suppliers. The interpretation of the principle of proportionality has assumed a crucial importance in the jurisprudence of the Court on the use of procurement for the achievement of social and labour policies, as it has been interpreted as a mechanism to reconcile economic freedoms and social priorities in the

95  Takis Tridimas, The General Principles of EU Law (2nd edn, Oxford University Press) 193–220. 96 Aurelien Portuese, ‘Principle of Proportionality as Principle of Economic Efficiency’ (2013) 19 European Law Journal 612. 97  Emily Reid, ‘Regulatory Autonomy in the EU and WTO: Defining and Defending Its Limits’ (2010) 44 Journal of World Trade 877. 98  Federico Ortino, Basic Legal Instruments for the Liberalisation of Trade: A Comparative Analysis of EC and WTO Law (Hart Publishing 2004) 408–32. 99 Sue Arrowsmith and Peter Kunzlik, ‘EC Regulation of Public Procurement’ in Sue Arrowsmith and Peter Kunzlik (eds), Social and Environmental Policies in EC Procurement Law (Cambridge University Press 2009) 55. 100  ibid 73–77.

172  The EU Public Procurement Framework EU internal market.101 From this perspective, the interpretation of the principle of proportionality has been elaborated in the context of the enforcement of minimum wages in the performance of public procurement contracts by suppliers and their subcontractors in the Rüffert and Bundesdruckerei cases. In the Bundesdruckerei case, in particular, the Court found that the imposition of the payment of minimum wages, fixed at the level of the State procuring the contract but disconnected from the cost of living in the country where the subcontractors operated, could not be justifiable as proportionate.102 The Court explained that ‘imposing, in such a situation, a fixed minimum wage corresponding to that required in order to ensure reasonable remuneration for employees in the Member State of the contracting authority in the light of the cost of living in that Member State, but which bears no relation to the cost of living in the Member State in which the services relating to the public contract at issue are performed … goes beyond what is necessary to ensure that the objective of employee protection is attained’.103 In this respect, the RegioPost case has been criticised for not engaging in an interpretation of the principle of proportionality in its analysis.104 D. The Relationship between Primary and Secondary EU Law in the Context of Public Procurement Before analysing in more details the regulatory regime established by the 2014 Directives, it is important to define the relationship between the procurement regime as established under the EU Treaties and the specific procurement discipline sent in the 2014 Directives. This relationship between primary and secondary sources of EU law is not only important from a broad constitutional perspective but also has a crucial impact on the instrumental use of public procurement for the enforcement of social and labour rights. It is essential to clarify whether procurement practices which are directly or indirectly discriminatory but are being used to achieve to social and labour purposes should be assessed—at the same time or in a particular hierarchical order—in respect of their compatibility with the Directives’ regime only, or also in the light of EU Treaty law. The linkage between these

101 

Arrowsmith, ‘Application of the EC Treaty’ (2009) 165–70. Jérôme Porta, ‘The Minimum Wage: A National Tool in the Fight Against Social Dumping?’ (2015)] Montesquieu Law Review, available at http://www.montesquieulawreview.eu/ mlr3/mlr3_en/porta_e.pdf. 103  Case C-549/13 Bundesdruckerei GmbH v Stadt Dortmund EU:C:2014:22, para 34. 104  Piotr Bogdanowicz, ‘Article 56 of TFEU and the Principle of Proportionality—When, How and Why Should It Be Applied after RegioPost?’ (2016), presented at the conference ‘Public Procurement and Labour Standards—Reopening the Debate after RegioPost’, University of Bristol, 9 May 2016. 102 

Internal Market and Public Procurement 173 two levels of EU regulatory procurement governance has been clarified in the text of the Directives and has been interpreted in the jurisprudence of the Court. Even if the 2014 Directives clarify and push forward the EU regulation of public procurement, both Directives remain bound by the regulatory framework and the fundamental principles of non-discrimination and proportionality set in the EU Treaties. Recital (1) of Directive 2014/24 clarifies that ‘[t]he award of public contracts by or on behalf of Member States’ authorities has to comply with the principles of the Treaty on the Functioning of the European Union (TFEU), and in particular the free movement of goods, freedom of establishment and the freedom to provide services, as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency’. The importance of respect for the Treaty obligations is reiterated in connection with the recognition of the importance of the use of procurement as an instrument to enforce legitimate policy objectives like the observance of social and labour law provisions (in recital 40). Immediately following, in recital 41 the preamble of Directive 2014/41 incorporates the wording of the TFEU derogations and reiterates the importance of the respect of the principle of non-discrimination. Recital (41) clarifies that ‘[n]othing 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’. Moreover, throughout the body of the Directives, the need for respect for the TFEU is reiterated, and it is reaffirmed in various positive commitments regulating different aspects of the conduct of the procurement process. Over the years, starting with the famous Cassis de Dijon case,105 the CJEU has progressively elaborated on the relationship between the obligations imposed in the Treaties, the interest of free trade and other essential interests. More precisely, since the beginning of its jurisprudence on the social use of public procurement, the Court has repeatedly stated the need to prove the consistency of the measure at issue not only with the specific procurement Directives but also with the Treaty provisions and in particular with the principle of non-discrimination. The need to simultaneously conform with both the Treaty and the Directives was established firstly in the Beentjes case (para 29) and then in Nord Pas de Calais (para 50). Following the considerations already established in the Rüffert case, the latest RegioPost judgment on the inclusion of minimum wages criteria

105 Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein EU:C: 1979:42, (1979) ECR 649.

174  The EU Public Procurement Framework in public procurement contracts has further clarified the relationship and focused on the level of harmonisation achieved in the secondary sources of EU law, grounding on a well-established CJEU jurisprudence.106 In RegioPost, the Court distinguishes between exhaustive and non-exhaustive harmonisation and it qualifies the procurement Directives, and the specific provision at issue, as not exhaustively harmonised at EU secondary level. For this reason, respect of the measure at issue should be tested not only in light of the procurement Directive, but also in light of the primary EU law, ie TFEU (paragraphs 57–60). This consolidated line of argumentation leaves some uncertainties, particularly regarding the possibility of identifying harmonising EU secondary law, when involving social and environmental considerations.107 IV.  THE ENFORCEMENT OF SOCIAL AND LABOUR POLICIES UNDER THE 2014 EU DIRECTIVES ON PUBLIC PROCUREMENT

To coherently and efficiently face its future institutional political and economic challenges, the strategic initiative ‘Europe 2020’ has been developed.108 Public procurement has been explicitly included as a crucial market-based instrument to ensure a smart, sustainable and inclusive growth. This strategic plan of sustainable growth set the path for the reform of the 2004 procurement Directives. On this ground, in 2011 the EU Commission formally initiated a process of reform and modernisation of the procurement regulatory framework, which was then consolidated in the Green Paper on The modernization of EU public procurement policy. Toward a more efficient European Procurement Market.109 The Green Paper highlighted the needs and the priorities in the reform of Directive 2004/17/EC and Directive 2004/18/EC under different regulatory aspects. In particular, the Green Paper tabled a number of suggestions for reform, oriented ‘to make better use of public procurement in support

106 A clear reference in reasoning of the RegioPost is established to the following previous cases: Case C-324/99 DaimlerChrysler EU:C:2001:682, [2001] ECR I-9897, para 32; Case C-313/05 Brzeziński EU:C:2007:33, [2007] ECR I-513, para 44; and Case C-115/13 Commission v Hungary EU:C:2014:253, para 38. 107  Jörgen Hettne, ‘Strategic Use of Public Procurement—Limits and Opportunities’ (Swedish Institute for European Policy Studies 2013) 7, available at http://www.sieps.se/sites/default/ files/2013_7epa.pdf. 108  In Europe 2020 strategy, public procurement—oriented to ensure efficiency in the public money spending—is interpreted as a valuable instrument to develop innovative business solutions, particularly for SMEs, and a market-based instrument for achieving energy efficiency and to reducing carbon emission. Communication from the Commission, Europe 2020. A Strategy for Smart, Sustainable and Inclusive Growth, COM(2010) 2020 final. 109  European Commission, Green Paper on the modernisation of EU public procurement policy. Towards a more efficient European Procurement Market, COM(2011) 15 final.

Social and Labour Policies in the 2014 Directives 175 of common societal goals’ such as in the case of the promotion of equality through the inclusion of social consideration in the procurement process.110 Building on the issues raised in the Green Paper, the Commission provided in 2011 three proposals for reform, which were approved by the Parliament and the Council, and entered into force in 2014. Replacing and repealing the EU Directives 2004/18/EC and 2004/17/EC, the Directive 2014/24/EU on public procurement and Directive 2014/245/ EU on procurement in the water, energy, transport and postal services sectors, have been adopted by the Council and the parliament to establish the new EU legal framework for public procurement, together with Directive 2014/23/EU on the award of the concession contracts. From 18 April 2016—the deadline set for the transposition of the directives into each EU country—this reformed system of directives has officially entered into force and it constitutes the current EU regulatory framework of public procurement. Under the overarching regulatory purpose of opening up the public procurement market and ensuring the free movement of goods and suppliers within the Single Market, Directive 2014/24/EU provides a streamlined and more flexible regulatory framework of public procurement, with significant procedural innovations and new regulatory features.111 Internal market considerations remain fundamental pillars of the new Directives. The preamble of Directive 2014/24/EU makes various references to respect for the TFEU and the core Treaty provisions on free movement.112 However, under the guidance of Europe 2020 strategy, the integration and clarification of the use of public procurement in order to achieve strategic policy objectives has emerged as an important driver of this reform, as introduced by the 2010 Montis Report A New Strategy for the Single Market.113 The need to regulate the instrumental use of public procurement in further detail is underlined in recital 91, stating that the new Directive aims at clarifying ‘how the contracting authorities can contribute to the protection of the environment and the promotion of sustainable development, whilst ensuring that they can obtain the best value for money for their contracts’. The following section of this chapter will offer an overview of the regulatory achievements reached in the reform of the EU procurement directives, with the aim of providing more guidance and increased legal clarity within the scope of the use of public procurement for the protection of social and labour rights. The study of Directive 2014/24/EU will focus on the different opportunities for including social and labour considerations along the 110 

COM(2011) 15 final at 5. Jörgen Hettne, ‘Strategic Use of Public Procurement—Limits and Opportunities’ (Swedish Institute for European Policy Studies 2013) 2013:7, available at http://www.sieps.se/sites/ default/files/2013_7epa.pdf. 112  Caranta, ‘The Changes to the Public Contract Directives’ (2015) 396. 113 Mario Monti, ‘A New Strategy for the Single Market: At the Service of Europe’s Economy and Society’ (European Commission) COM(2010) 608. 111 

176  The EU Public Procurement Framework procurement process offered by the reformed text of the Directive. On this basis, it draws attention to the limits imposed to the strategic use of procurement for social and labour purposes and the difficulty of balancing internal market considerations and social priorities. A. The Threefold Importance of the Social Dimension of Directive 2014/24/EU After reformed, Directive 2014/24/EU stands as a refined instrument of public procurement regulation, opening up opportunities for the achievement of social and labour policies in public procurement.114 Even if some criticism has been raised regarding the discretionary nature of many of the new provisions of Directive 2014/24/EU,115 it is undeniable that the new Directive pays considerable attention to the protection of social and labour rights under different angles. For the scope of this research on the social and labour use of public procurement, there are three salient characteristics of the regulatory approach reformed and developed in the 2014/24/EU Directive. First, in the new regulatory framework of the 2014 Directive, the importance given to the proactive use of procurement for the achievement of social and labour policy objectives has significantly increased and has been assimilated to the environmental use of public procurement. Traditionally, the achievement of environmental purposes received considerably more attention in the 2004 Directives and in the CJEU jurisprudence, when compared to the social dimension of public procurement.116 Following the holistic approach adopted in the Europe 2020 strategy to achieving sustainable growth balancing economic, environmental and social aspects,117 the new procurement Directive does not substantially differentiate between the regulatory solutions in order to proactively achieve the objectives of environmental protection or social development.118 Both environmental and social considerations appear to be treated equally and are often addressed together in the wording of Directive 2014/24/EU. In both the recitals and the central provisions in the body of the Directive, the reference is always to 114  Olivier de Schutter, Trade in the Service of Sustainable Development: Linking Trade to Labour Rights and Environmental Standards (Hart Publishing 2015) 163–64. 115  Anja Wiesbrock, ‘Socially Responsible Public Procurement. European Value or National Choice?’ in Beate Sjåfjell and Anja Wiesbrock (eds), Sustainable Public Procurement under EU Law: New Perspectives on the State as Stakeholder (Cambridge University Press 2016) 75. 116 Dacian C Dragos and Bogdana Neamtu, ‘Sustainable Public Procurement in the EU: Experiences and Prospects’, Modernising Public Procurement: The New Directive on Public Procurement (Djøf Publishing 2014) 301. 117  Kunzlik (n 69) 175. 118  Beate Sjåfjell and Anja Wiesbrock, ‘Why Should Public Procurement Be About Sustainability?’ in Beate Sjåfjell and Anja Wiesbrock (eds), Sustainable Public Procurement Under EU Law: New Perspectives on the State as Stakeholder (Cambridge University Press 2016) 1.

Social and Labour Policies in the 2014 Directives 177 ‘environmental, social and labour’ policies or requirements, without clearly differentiating between these two horizontal policies.119 Second, the new Directive enlarges and embraces, both directly and indirectly, a broad spectrum of social and labour considerations, reflecting both collective and individual models of social justice (see chapter two). Following an individual model of social justice, the protection of individual labour rights included in domestic and EU law, international agreements or collective agreements is an important aspect of the regulation of public procurement of Directive 2014/24/EU: it is explicitly recognised in Article 18(2) and consolidated in the list of international agreements of Annex X of the Directive. Moreover, recital 38 clarifies that all individual working rights and working conditions applicable to the place of work are required to be respected in the conduct of the procurement work covered by the Directive. Deriving from a more collective approach to justice, broader considerations of social justice are also taken into full consideration in the 2014 Directive. See Table 4.1. Table 4.1:  Overview of the Social and Labour Rights included in Directive 2014/24/EU Provisions in Directive 2014/24/EU

Type of Social Considerations

Recital 37 Recital 98 Article 18(2)

ILO labour standards

Specific Social and Labour Rights Directly or Indirectly Guaranteed ILO Conventions listed in Annex X of Directive 2014/24/EU:  ILO Convention No 87 on Freedom of Association and the Protection of the Right to Organise  ILO Convention No 98 on the Right to Organise and Collective Bargaining  ILO Convention No 29 on Forced Labour  ILO Convention No 105 on the Abolition of Forced Labour  ILO Convention No 138 on Minimum Age  ILO Convention No 111 on Discrimination (Employment and Occupation)  ILO Convention No 100 on Equal Remuneration  ILO Convention No 182 on Worst Forms of Child Labour (continued)

119  In the preamble of Directive 2014/24/EU, specific references to environmental measures are only marginal and in Recitals 88 (dealing with environmental management measures in the performance of the contract), 91 (more relevant and substantially different regulation between environmental and social considerations—referring to Article 11 TFEU and environmental protection in EU law and promotion of sustainable development) and 96 (on the use of lifecycle cost analysis at the award stage of the public contracts).

178  The EU Public Procurement Framework Table 4.1:  (Continued) Provisions in Directive 2014/24/EU

Type of Social Considerations

Specific Social and Labour Rights Directly or Indirectly Guaranteed

Recital 36 Recital 99 Article 20

Social integration of disadvantaged person or minority groups

Protection of health in the production process Promotion of employment of long-term job seekers Training measures for unemployment and job seekers

Recital 97

Fair trade considerations

Explanatory mention of minimum wages and price premium

Recital 98

Gender equality Promotion of equality between man and women in the workplace Incentive for the participation of women in the work environment

Even though the objectives of the social integration of disadvantaged persons and minority groups were already recognised as legitimate grounds for restricting tendering procedures in the 2004 Directives,120 the regulatory possibilities allocated to ‘sheltered workshops’ and reservations for social enterprises appear to be considerably extended in the 2014 text.121 This becomes particularly prominent in Article 20 of Directive 2014/24 reserving the possibility of public contracts outside the normal conditions of competition to sheltered workshops and suppliers aiming at integrating persons with a disability or disadvantaged persons into the job market.122 If compared to Article 19 of Directive 2004/18/EC, the requirements imposed on sheltered workshops/employment programs if they are to be eligible for these reservations are more relaxed: the minimum proportion of disabled or disadvantaged workers employed by these suppliers is reduced from 50 per cent to 30 per cent. Lastly, the 2014 Directive recognises the importance of the effective enforcement of social and labour considerations along the production and supply chain. It is explicitly recognised in a new provision stated in recital 40 that the ‘control of the observance of the environmental, social and labour law provisions should be performed at the relevant stages of the

120  Rosemary Boyle, ‘Disability Issues in Public Procurement’ in Sue Arrowsmith and Peter Kunylik (eds), Social and Environmental Policies in EC Procurement Law. New Directives and New Directions (Cambridge University Press 2009) 310. 121  Caranta (n 49) 400. 122  Together with Article 20, Directive 2014/24/EU also reserves the right to participate in public procurement to specifically disadvantaged operators in Articles 76–76 regulating the award for contracts for social services and in Article 77 addressing reserved contracts for health, social and cultural services.

Social and Labour Policies in the 2014 Directives 179 procurement procedure’. Moreover, the Directive extends the scope of its regulation and its compliance not only to the main suppliers but also to their subcontractors. The newly introduced provision of Article 71 of Directive 2014/24 requires that EU Member States make all the necessary efforts to ensure respect for the environmental, social and labour obligations referred in Article 18(2). In line with the objective to ensure the respect of social and labour considerations—together with environmental criteria—in the conduct of the procurement awards, specific attention is paid by Directive 2014/24/ EU to labels, which are increasingly being used as certifications and proofs of compliance of sustainable criteria in the procurement process and along the production chain.123 The newly drafted text of the Directive incorporates the conclusions reached in the Max Havelaar case on the possibility of using labels and certifications in the procurement process.124 The CJEU, focusing on the interpretation of Article 23(6) of Directive 2004/18/EC, allowed the possibility of referring to labels in technical specifications, on the condition that ‘equivalent’ labels would be accepted in the award process. Directive 2014/24/EU pushed forward the regulation of the use of labels in the context of sustainable public procurement. Article 2(1)(23) and Article 2(1)(24) provide the basic working definitions of labels and label requirements,125 and Article 43 represents the main provision of Directive 2014/24/EU entirely dedicated to the inclusion of labels. According to Article 43, the use of labels is not only limited to technical specifications, but is also extended to all the other stages of the procurement process that require and allow a proof of compliance, as award criteria and performance conditions.126 Article 43 allows a ‘specific label as means of proof that the works, services or supplies correspond to the required characteristics’ in a case where ‘contracting authorities intend to purchase works, supplies or services with specific environmental, social or other characteristics provided that all of the following conditions are fulfilled’.

123  Maria Anna Corvaglia, ‘Public Procurement and Private Standards: Ensuring Sustainability Under the WTO Agreement on Government Procurement’ (2016) 19 Journal of International Economic Law 607. 124 Case C-368/10 Commission v Kingdom of the Netherlands (‘Max Havelaar’) EU:C: 2012:284. 125  Article 2(1)(23) provides the working definition of ‘label’ as ‘any document, certificate or attestation confirming that the works, products, services, processes or procedures in question meet certain requirements’. Article 2(1)(24) defines ‘labels requirements’ as ‘requirements to be met by the works, products, services, processes or procedures in question in order to obtain the label concerned’. 126  Bogdana Neamtu and Dacian C Dragos, ‘Sustainable Public Procurement: The Use of Eco-Labels’ (2015) 10 European Procurement & Public Private Partnership Law Review 92.

180  The EU Public Procurement Framework The possibility of referring directly to a specific label seems to be allowed in the 2014 text of the Directive, conditional on a number of requirements.127 Read in conjunction with recital 75, Article 43 sets specific conditions to guarantee the non-discriminatory use of labels: they should be based on verifiable criteria and established through an open and transparent procedure including all the relevant stakeholders, and they should be available to all interested parties. Moreover, according to Article 43(2), the requirements specified in the labels must be linked to the subject matter. These specific provisions regulating subcontractors and labels, together with those focused on environmental management standards (recital 88 and Article 62), significantly increase the clarity in the regulatory framework regarding the inclusion of social and labour considerations and also considerably expand the possibility of enforcing the social and labour policies along the production chain associated to procurement contracts. However, a considerable margin of uncertainty still remains regarding the possibility to refer specifically to social labels along the procurement process in comparison to environmental considerations and how social or ethical labeling programs could be systematically interpreted as linked to the subject matter of the public contract. B. The Inclusion of Social and Labour Rights at Different Stages of the Procurement Process Within the architecture of the EU procurement regimes established in Directive 2014/24/EU, Article 18 represents the cornerstone of the new regulation of the social and labour use of public procurement in the EU Member States. Providing a systematisation of the main regulatory principles of the 2014 in its first paragraph, Article 18(2) establishes the importance of guaranteeing respect for social and labour obligations—together with environmental laws—as a priority of the new EU public procurement regimes. Strengthened by recital 37,128 Article 18(2) explicitly

127  Abby Semple and Mark Cook, A Practical Guide to Public Procurement (Oxford University Press 2015) 4.29. 128  Recital 37 provides: ‘With a view to an appropriate integration of environmental, social and labour requirements into public procurement procedures it is of particular importance that Member States and contracting authorities take relevant measures to ensure compliance with obligations in the fields of environmental, social and labour law that apply at the place where the works are executed or the services provided and result from laws, regulations, decrees and decisions, at both national and Union level, as well as from collective agreements, provided that such rules, and their application, comply with Union law. Equally, obligations stemming from international agreements ratified by all Member States and listed in Annex X should apply during contract performance.’

Social and Labour Policies in the 2014 Directives 181 requires that the EU Member States take appropriate measures to ensure compliance with the social and labour obligations (together with the environmental laws) emanating from national and EU laws, international standards and collective agreements.129 As expressively required in the provision, Article 18(2) has to be read in conjunction with Annex X providing an overview of the relevant international agreements and ILO conventions to which it has to ensure respect when conducting EU procurement activities.130 In the context of Directive 2014/247EU, Article 18(2) becomes the crucial provision establishing legally binding commitments on the EU Member States in the conduct of their procurement practices. In enforcing social and labour obligations, one of the main improvements reached in Directive 2014/24/EU consists of the extension of the potentialities for the inclusion of social and labour requirements along the entire procurement process, based on the provision of Article 18(2). Compared to Directive 2004/18/ EC, there no longer a clear preference for the performance stage of the contract in the inclusion of social and labour criteria.131 Recital 40 clarifies that the inclusion and the verification of the socio-environmental policies is not restricted to one specific stage of the procurement process or a preferred means of proofs, but must ‘be performed at the relevant stages of the procurement procedure, when applying the general principles governing the choice of participants and the award of contracts, when applying the exclusion criteria and when applying the provisions concerning abnormally low tenders’. See Table 4.2.

129  The provision set out in Article 18(2) requires that ‘Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X’. 130 The list of international agreements provided in Annex X of the Directive has been subject to critics, as not including important ILO conventions, for example ILO Convention No 81 (labour inspection), ILO Convention No 94 (labour clauses in public contracts), ILO Convention No 95 (protection of wages), ILO Convention No 102 (minimum standards of social security), ILO Convention No 122 (employment policy), ILO Convention No 155 (occupational safety and health) ratified by most of the EU Member States. Éric Van den Abeele, ‘Integrating Social and Environmental Dimensions in Public Procurement: One Small Step for the Internal Market, One Giant Leap for the EU?’ (European Trade Union Institute ETUI) 2014.08 https://www.etui.org/Publications2/Working-Papers/Integrating-social-and-environmental-dimensions-in-public-procurement-one-small-step-for-the-internal-market-one-giantleap-for-the-EU. 131  Wiesbrock, ‘Socially Responsible Public Procurement’ (2016) 75–77.

182  The EU Public Procurement Framework Table 4.2:  Regulatory Linkages Established by Article 18(2) Direct links to Article 18(2) for the enforcement of social and labour considerations Article 56(1)

General principles (Section 3 Choice of participants and award of contracts)

Article 57(4)(a)

Exclusion grounds

Article 69(2)(d)

Abnormally low tenders

Article 71(6)

Subcontracting

Annex X

List of international social and environmental conventions referred to in Article 18(2)

Grounded on recital 40, the provision of Article 18(2) extends its scope of applications to the different stages of the procurement process, extending from the award stage to the verification of abnormally low tenders or the performance of the contract by the winning supplier. Different provisions through the entire body of the Directive establish direct links between the umbrella provision of Article 18(2) and the regulation of the different stages of the procurement cycle in order to ensure the coordination of the enforcement of labour and social policies in all these stages of the procurement process. i.  Selection Stage and Award Criteria For the enforcement of social and labour rights in the selection stage of the participants and in the award of the contract, Article 56(1) ensures the enforcement of the social and labour policies at the selection stage of the procurement process in coordination with Article 18(2). More precisely, Article 56(1) guarantees to contracting authorities the possibility ‘not to award a contract to the tenderer submitting the most economically advantageous tender where they have established that the tender does not comply with the applicable obligations referred to in Article 18(2)’. The application of Article 56 is strengthened by the flexibilities granted in the regulation of award criteria and in the evaluation of the most economically advantageous tender introduced under Directive 2014/24/EU. Apart from the circumstances where it is still possible to take only the lowest price into consideration, the Directive allows the selection of the suppliers on the basis of the evaluation of a combination of qualitative criteria, opening up the possibility of the inclusion of social and labour considerations, in the selection of the contract to award.132 Article 67(2) establishes the framework 132 Pedro Telles and Luke Butler, ‘Public Procurement Award Procedures in Directive 2014/24/EU’ in Francois Lichère, Roberto Caranta and Steen Treumer (eds), Modernising Public Procurement: The New Directive (Djøf Publishing 2014) 131.

Social and Labour Policies in the 2014 Directives 183 for the assessment and discretional evaluation of the best price-quality ratio by the contracting parties, providing a non-exhaustive list of possible criteria which are not necessarily of an economic nature.133 Together with the possibility of taking into consideration the qualification and the experience of the staff performing the public contract at Article 67(2)(b), other non-economic criteria explicitly mentioned in Article 67(2)(a) are ‘the qualification quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions’. Compared to the 2004/18 Directive, which only referred to environmental characteristics, social criteria are specifically mentioned in the 2014 Directive’s regulation of award criteria in Article 67(2), strengthened by the specific references to fair trade conditions in recitals 97, social aspects of the production process in recital 98 and the social integration of disadvantaged persons or minority groups in recital 99. One of the major changes adopted in the Directive 2014/24/EU for the integration of a more holistic approach to sustainable public procurement in the selection of the procurement suppliers is represented by the introduction of the concept of life-cycle costs in the evaluation of the most ‘economically advantageous’ tender, as addressed in Article 68.134 This cost-effectiveness approach allows taking into consideration all the costs associated to the life cycle of the production and the distribution of the products,135 including long-term costs and externalities, in the evaluation of price-quality ratio of award criteria.136 To avoid distortion on competition, life-cycle concerns should be grounded on non-discriminatory and verifiable criteria. Even if opening new opportunities for the inclusion of broad considerations of sustainable development into public procurement, it is undeniable that the life-cycle costing methodology in Article 68 is mainly focused on the inclusion of environmental externalities in the procurement purchasing strategies. However, in its clarification of the approach to life-cycle costing, recital 96 does not limit the concept to environmental externalities but applies it to the broad category of ‘internal costs, such as research to be carried out, development, production, transport, use, maintenance and endof-life disposal costs’. Even if an explicit reference is only made in relation

133  Paula Bordalo Faustino, ‘Award Criteria in the New EU Directive on Public Procurement’ (2014) Public Procurement Law Review 124. 134  Bogdana Neamtu and Dacian C Dragos, ‘Life-Cycle Costing for Sustainable Public Procurement in the European Union’ in Beate Sjåfjell and Anja Wiesbrock (eds), Sustainable Public Procurement Under EU Law. New Perspectives on the State as Stakeholder (Cambridge University Press 2016) 114. 135  Recital 96: ‘The notion of life-cycle costing includes all costs over the life cycle of works, supplies or services’. 136 Dacian C Dragos and Bogdana Neamtu, ‘Sustainable Public Procurement: Life-Cycle Costing in the New EU Directive Proposal’ (2013) 8 European Procurement & Public Private Partnership Law Review 19.

184  The EU Public Procurement Framework to environmental externalities, the social aspect of life costing analysis is not a priori excluded from this definition. Social considerations like the protection of labour rights, the respect for equal opportunities or the payment to unemployment benefits could be included in the concept of long-term costs associated to the production of the distribution of the procured goods and services.137 However, because of the clear preference for environmental considerations in the wording of the new Directive, it is very uncertain that an extensive interpretation of the life-cycle approach could also include social and labour externalities.138 ii.  Grounds for Exclusion Outside the award stage of the contract, Article 56(1) is also strictly connected to the regulation of the grounds for exclusion of the candidates, as set out in Article 57(4)(a) which allows the possibility of excluding any economic operator ‘where the contracting authority can demonstrate by any appropriate means a violation of applicable obligations referred to in Article 18(2)’. Article 57 of the new Directive clarifies and increases the regulatory space for enforcing social and labour policies through the mandatory grounds for exclusion, as compared to Article 45 of Directive 2004/18.139 Moreover, the list of discretionary grounds for exclusion as grave professional misconduct allows for the enforcement of social and labour considerations under Article 57(4)(c).140 Recitals 100 and 101 establish a link between the violation of social obligations (for example the non-payment of social security contributions or the violation of rules of accessibility for people with disabilities) and grave professional misconduct leading to the exclusion of suppliers from the award procedure. As required in recital 100, the evaluation of these exclusions has to be balanced ‘in exceptional situations where overriding requirements in the general interest make a contract award indispensable’ and according to the principle of proportionality. At the stage of the selection of the suppliers, respect for social and labour considerations as required in Article 18(2) is also enforced in the verification of abnormally low tenders, as prescribed by Article 69 and confirmed in recital 103. If tenders appear to be abnormally low, procuring authori-

137  Oshani Perera, Barbara Morton and Tina Perfrement, ‘Life Cycle Costing: A Question of Value’ (International Institute for Sustainable Development 2009), IISD Publications, http:// ec.europa.eu/environment/gpp/pdf/WP-LifeCycleCosting.qx.pdf. 138  Dragos and Neamtu, ‘Sustainable Public Procurement in the EU’ (2014) 319. 139 Albert Sanchez Graells, ‘Exclusion, Qualitative Selection and Short-Listing in the New Public Sector Procure1nent Directive 2014/24’, Francois Lichère, Roberto Caranta and Steen Treumer (eds), Modernising Public Procurement: The New Directive (Djøf Publishing 2014) 97. 140  Hans-Joachim Priess, ‘The Rules on Exclusion and Self-Cleaning Under the 2014 Public Procurement Directive’ (2014) Public Procurement Law Review 112.

Social and Labour Policies in the 2014 Directives 185 ties must require an explanation from the economic operators of the prices and costs, particularly regarding ‘compliance with obligations referred to in Article 18(2)’ as explicitly allowed under paragraph (2)(d) of Article 69. iii.  Performance Clauses Conditions Together with award criteria, performance clauses have been traditionally interpreted as a crucial stage of the procurement process, particularly suitable for the enforcement of social and labour considerations. This approach is confirmed in the reformed text of Article 70 of Directive 2014/24, expressively identifying ‘social or employment-related considerations’ as admissible conditions for the performance of the contract. As previously indicated in recital 33 of Directive 2004/18/EC141 and as suggested by the Commission in Buying Social—A Guide to Taking Account of Social Considerations in Public Procurement, ‘contract performance clauses are generally the most appropriate stage of the procedure to include social considerations relating to employment and labour conditions of the workers involved in performance of the contract’. This clear preference for the inclusion of social and labour considerations at this stage of the procurement process has been slightly relaxed in the 2014 reform: award criteria are often associated to performance clauses conditions in the Directive text for the inclusion of social and labour consideration. It is worth noticing that in the wording of the preamble of the 2014 Directive addressing the respect of labour rights and the social considerations, in particular in recitals 97, 98 and 99, award criteria and performance clauses are often regarded as the stages of the procurement contract suitable for the inclusion not only of labour rights but also broad consideration of social inclusion of disadvantaged people or minority groups. Moreover, it is also particularly interesting to notice that recital 98 draws the attention to the social use of contract performance conditions not only to enforce ILO conventions or the promotion of disadvantaged social categories but also particularly on the promotion of gender equality. In the approach of the 2014 Directive, contract performance clauses are interpreted as particularly suitable to ensure ‘the implementation of measures for the promotion of equality of women and men at work, the increased participation of women in the labour market and the reconciliation of work and private life’.

141  Recital 33 of Directive 2004/18/EC provides examples for the inclusion of social and labour considerations as performance clauses conditions, ‘as may, in particular, be intended to favour onsite vocational training, the employment of people experiencing particular difficulty in achieving integration, the fight against unemployment … to recruit long-term job-seekers or to implement training measures for the unemployed or young persons, to comply in substance with the provisions of the basic International Labour Organisation (ILO) Conventions (83) … and to recruit more handicapped persons …’.

186  The EU Public Procurement Framework Recital 98 gains particular importance in the interpretation of Article 70 of Directive 2014/24/EU and for the enforcement of social and labour rights in the performance of public contracts. Recital 98 requires that the application of social considerations in award criteria and performance clauses is conducted ‘in accordance with Directive 96/71/EC, as interpreted by the ECJ’.142 Balancing economic freedoms to provide services and social rights in the in the internal market, Directive 96/71/EC on Posted Workers requires Member States to guarantee some minimum employment rights to posted workers active on their territory, as provided under national law.143 The Posted Workers Directive has often had a deep impact in the interpretation of the inclusion of social clauses under the Procurement Directives in the CJEU jurisprudence.144 The overlaps between the regulation of public procurement and the directive on posted workers,145 regarding in particular the inclusion of minimum wages in public contract as performance conditions, has been at the centre of the recent cases of Rüffert,146 Bundesdruckerei and RegioPost.147 Building on the judgments reached in the cases, Directive 2014/24/EU in recital 38 specifically addresses the issue of the respect of minimum social and labour obligations in the delocalised performance of public contracts, clarifying that the services ‘should be considered to be provided at the place where the services are executed, irrespective of the places and Member States to which the services are directed’. The enforcement of social and labour criteria at the performance stage of the procurement process is strengthened by the new provisions on subcontractors introduced by Directive 2014/24/EU. With the scope of monitoring the production and supply chain, the contracting authorities are asked to take appropriate action ‘with the aim of avoiding breaches of the obligations referred to in Article 18(2)’ according to Article 71(6).

142 

Caranta (n 49) 400. Davies, ‘Posted Workers: Single Market or Protection of National Labour Law Systems?’ (1997) 34 Common Market Law Review 571. 144  Barnard, ‘Using Procurement Law to Enforce Labour Standards’ (2011) 267–68. 145  Aristea Koukiadaki, ‘The Far-Reaching Implications of the Laval Quartet: The Case of the UK Living Wage’ (2014) 43 Industrial Law Journal 91. 146  Note 57 above. 147  In the Advocate General’s Opinion in Regiopost, Advocate Paolo Mengozzi elaborates on the judgment in Bundesdruckerei and explains that ‘according to the Court’s reasoning, even though the situation in question was transnational, it did not involve the temporary posting of workers to German territory for the purpose of providing the services at issue. It is also important to note that, in excluding the application of Directive 96/71, the Court drew attention, not to the situation as it stood when the contracting authority issued its contract notice at EU level, at which time the posting of workers to German territory was still a possibility, but to the specific situation in which Bundesdruckerei found itself and which had given rise to the reference for a preliminary ruling. … In my opinion, that is the approach that must be adopted in the present case too’ (paras 56–59). 143 Paul

Social and Labour Policies in the 2014 Directives 187 iv.  Exclusion of Technical Specifications It is important to highlight that the regulation of technical specifications appears not to be involved in the sustainable dimension of the regulation of public procurement established in Directive 2014/24/EU. The 2014 provisions focused on the technical specifications appears disconnected from the regulatory architecture ensuring respect for social and labour considerations along the procurement process and establishing a direct link with the obligation set in Article 18(a). Following the approach already adopted in the 2004 Directive,148 the priorities in the regulation of technical specification under Directive 2014/24/EU consist of ensuring efficiency through the use of functional or performance requirement and in avoiding ‘unjustified obstacles to opening up of public procurement to competition’ as affirmed in Article 42(2). The Directive regulation of technical specifications establishes only two clear references to socio-environmental policies. First, the possibility of including environmental characteristics, as functional or performance requirements, is clearly stated in Article 42(3)(a).149 Second, the objective of ensuring accessibility to people with disabilities is highlighted in the drafting process of technical specifications, a regulatory priority already present in the 2004 Directives.150 Article 42(1) prescribes that ‘[w]here mandatory accessibility requirements are adopted by a legal act of the Union, technical specifications shall, as far as accessibility criteria for persons with disabilities or design for all users are concerned, be defined by reference thereto’. This strict link between technical specifications and the achievement of policies in support of disabilities is reaffirmed in recital 99 of the 2014/24 Directive. Addressing broadly ‘measures aiming at the protection of health of the staff involved in the production process’, recital 99 points out that ‘[in] technical specifications contracting authorities can provide such social requirements which directly characterise the product or service in question, such as accessibility for persons with disabilities or design for all users’. Even if the 2014 Directive maintains a flexible approach to technical specifications, they are still interpreted as a privileged moment in the procurement process for the inclusion of environmental concerns, according to the wording of Article 42(3)(a).

148 

Arrowsmith and Kunzlik, ‘EC Regulation of Public Procurement’ (2009) 103–04. 42(3)(a) clearly states that technical specification should be drafted ‘in terms of performance or functional requirements, including environmental characteristics, provided that the parameters are sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting authorities to award the contract’. 150  Boyle, ‘Disability Issues in Public Procurement’ (2009) 330. 149 Article

188  The EU Public Procurement Framework C. The Limits of the Enforcement of Social and Labour Policies: The Link to the Subject Matter of the Contract If Directive 2014/24/EU considerably increases the possibilities of including social and labour considerations at various stages of the procurement process as previously explored, the strategic use of public procurement for the achievement of social and employment objectives also has some stringent limits under the EU procurement regime. In the preamble to the Directive, recital 98 provides an overview of the essential requirements for the validity of the inclusion of social and labour considerations in award criteria or contract performance. Three main limits are identified in this provision.151 The use of public procurement for the achievement of social and labour policies: (1) should be conducted in conformity with the requirements of Directive 96/71/EC on posted workers as interpreted by the CJEU; (2) should not result in a direct or indirect violation of the principle of nondiscrimination; (3) should not represent discrimination from suppliers of EU Member States, GPA Parties and Signatory Parties of PTAs. The fundamental limit of ‘the subject-matter of the contract’ for the inclusion of social and labour considerations is further elaborated through all the body of Directive 2014/24/EU in the regulation of the public procurement process. Having a link to the subject matter of the contract has been an essential requirement for the lawfulness of the inclusion of any noneconomic criteria along the entire procurement process in the EU regulation of procurement and its historical development.152 The importance of the link to the subject matter of the contract lies in its balancing function. The requirement to have a link with the subject matter of the contract essentially aims to balance the legitimate use of public procurement for the enforcement of social and labour policies with the priority of ensuring efficiency in the conduct of the procurement process itself, excluding considerations falling outside the scope of the contract that may diverge from the needs of the governmental authorities. This fundamental requirement was introduced in the EU procurement system by the CJEU judgments in the Concordia Bus case153 and in the EVN 151  Recital 98 provides: ‘It is essential that award criteria or contract performance conditions concerning social aspects of the production process relate to the works, supplies or services to be provided under the contract. In addition, they should be applied in accordance with Directive 96/71/EC, as interpreted by the Court of Justice of the European Union and should not be chosen or applied in a way that discriminates directly or indirectly against economic operators from other Member States or from third countries parties to the GPA or to Free Trade Agreements to which the Union is party. Thus, requirements concerning the basic working conditions regulated in Directive 96/71/EC, such as minimum rates of pay, should remain at the level set by national legislation or by collective agreements applied in accordance with Union law in the context of that Directive.’ 152  Arrowsmith (n 92) 236. 153  Case C-513/99 Concordia EU:C:2002:495, [2002] ECR 1-7213.

Social and Labour Policies in the 2014 Directives 189 and Wienstrom case154 in the context of the environmental use of public procurement. This mandatory link was then consolidated in the text of Directive 2004/18/EC (namely in Article 53(1) of Directive 2004/18/EU and in recital 1 of the Directive 2004/17/EU) in the context of the evaluation of the most economically advantageous tender at the award stage of the procurement cycle. A further interpretation of the requirement of the link with a subject-matter of the contract under the 2004 Directive has been at the centre of the interpretation of the CJEU in the Max Havelaar case.155 In his Opinion, Advocate General Kokott clarified the limits of the requirement of the subject matter of the contract in relation to fair trade criteria.156 In the 2011 Green Paper of the EU Commission on the modernisation of the EU procurement regulation, the link to the subject-matter of the contract has been reaffirmed as a ‘fundamental condition that has to be taken into account when introducing into the public procurement process any considerations that relate to other policies’. However, increasing concerns have been voiced regarding the necessity of this link with the subject matter of the contract. Regardless of the developments reached by the CJEU, the formulation of this requirement in the 2004 Directives left major areas of uncertainty, raising considerable doubt regarding the margins of application of the requirement of the link to the subject-matter of the contract.157 For this reason, the regulatory clarification of the link to ‘the subject-matter of the contract’ has been described as one of the main achievements reached in Directive 2014/24/EU.158 The 2014 reform of the procurement Directives shed light on a few interpretative issues around the requirement of the link with the subject-matter, in particularly regarding its definition and its application along the procurement cycle. Recital 97 of the 2014/24/EU Directive clarifies that ‘the condition of a link with the subject-matter of the contract excludes criteria and conditions relating to general corporate policy, which cannot be considered as a factor characterizing the specific process of production or provision of the purchased works, supplies or services’. Moreover, Article 67(3) of the

154 

Case C-448/01 EVN and Wienstrom EU:C:2003:651, [2003] ECR 1-14527. C-368/10 Commission v Kingdom of the Netherlands (‘Max Havelaar’) EU:C: 2012:284. 156  In para 111, he argues: ‘It would certainly be going too far for a contracting authority, in determining the economically most advantageous tender, to want to assess the general purchasing policy of potential tenderers and to take into consideration whether all the goods in its product range were fair trade, irrespective whether or not they are the subject-matter of the contract.’ Case C-368/10 Commission v Kingdom of the Netherlands (‘Max Havelaar’) EU:C:2012:284, Opinion of Advocate General Kokott, para 111. 157  Abby Semple, ‘The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?’ in Beate Sjåfjell and Anja Wiesbrock (eds), Sustainable Public Procurement under EU Law. New Perspectives on the State as Stakeholder (Cambridge University Press 2015) 66–70. 158  Caranta (n 49) 417–18. 155 Case

190  The EU Public Procurement Framework Directive—even if focused on award criteria—provides an attempt to define this requirement. Article 67 specifies that conditions linked to the subject-matter and in conformity to the new regulatory framework of the Directive are where they relate to the works, supplies or services to be provided under that contract in any respect and at any stage of their life cycle, including factors involved in: (a) the specific process of production, provision or trading of those works, supplies or services; or (b) a specific process for another stage of their life cycle, even where such factors do not form part of their material substance.

The new regulation of award criteria allows interpretation of the link to the subject-matter of the contract with a great flexibility, allowing the inclusion of criteria based on process and production methods, as clearly stating that these characteristics should not necessarily ‘form part of their material substance’. Moreover, one of the most considerable regulatory improvements reached by the 2014/24/EU Directive consists in the extension of the requirement to the link to the subject-matter to all specifications and criteria along the entire procurement process, and it is not imposed exclusively in the award stage as in the 2004 Directives. In the 2014/24/EU Directive, the linkage to the subjectmatter is required not only in the development of award criteria (Article 67(2)), but also in relation to the technical specification (Article 42(1)), selection criteria (Article 58(1)), contract performance clauses (Article70), as well as imposed on variants (Article 45(1)) and labels (Article 43(1)).159 However, regardless of the extension in the scope of application of the link with the subject matter of the contract under the Directive 2014/24/ EU, the most controversial aspect of this requirement is still represented by the limitations that it imposes on the achievement of broader social and employment policies through public procurement.160 It is highly debatable whether production characteristics concerning the respect of human rights or labour conditions in the workforce could be considered as criteria able to be linked to the subject matter of the contract. Requirements related to the general ethical sourcing policies followed by the bidders or the overall management of the suppliers cannot be included in the procurement process, as well as broad ethical considerations and the possible corporate responsibility policies pursued by the different suppliers remain outside of the evaluation process in the procurement cycle.161 Even if it has been often argued that there should be a relaxation of this requirement,162 the link to the subject matter of the contract remains the 159 

Semple, ‘The Link to the Subject-Matter’ (2015) 61. Earth, ‘Briefing No. 4: Clarifying the Link to the Subject Matter for Sustainable Procurement Criteria’ (Client Earth 2011) Legal Briefing, http://www.clientearth.org/reports/ procurement-briefing-no-4-clarifying-link-to-the-subject-matter.pdf. 161  Caranta (n 49) 418. 162  Semple (n 157) 70–73. 160  Client

Conclusions 191 pillar of the regulation of the sustainable use of public procurement under the EU new procurement regime. Moreover, Directive 2014/24/EU provides even more guidance and specifies the different conditions of transparency at several stages of the procurement process for the inclusion of social and labour considerations, and how the requirement of a link to the subject-matter of the contract is defined at the different stages of the procurement process. V. CONCLUSIONS

This chapter focused on the study of the EU procurement system and how the complex multilevel system of norms between the EU Treaties and procurement Directives tries to achieve a balance between its different regulatory objectives. The EU regulation of public procurement represents a pillar of EU regulatory architecture of the common market. The EU procurement regulation is shaped by the principles of non-discrimination, transparency and equal treatment, with the ultimate scope of the achievement of the fundamental freedoms in the EU internal market. At the same time, the EU public procurement system is an essential part of the achievement of the social dimension of the EU, as confirmed in Article 9 TFEU. The tensions between the internal market’s priorities and the importance of public procurement as a legitimate tool to achieve social and labour purposes characterises the multilevel EU procurement regime between EU Treaties and specific Directives and it has been interpreted by the extensive jurisprudence of CJEU. At the Treaty level, the use of public procurement as an instrument to achieve social and labour purposes implies a fundamental tension between the principle of non-discrimination and the legitimate objective to protect social and labour rights in the internal market. The friction between these conflicting principles translates into a regulatory tension between the TFEU obligations on the common market’s fundamental freedoms and the application of the exceptions to those, only partially mitigated by the principle of proportionality. The regulatory tensions delineated in the Treaties assumes a more complex perspective in the context of the procurement Directives, where the negative approach to the liberalisation of public procurement in the internal market is combined with a more positive regulation of the conduct of the procurement activities. Directive 2014/24/EU not only confirms the developments reached in the CJEU jurisprudence but it also achieves a far reaching procurement framework allowing a greater use of public procurement for ‘common societal goals’ under the strategic objectives of the Europe 2020 strategic agenda for sustainable growth. Thanks to the introduction of Article 18(2) in Directive 2014/24 EU, an extensive spectrum of labour rights and ILO labour conventions are

192  The EU Public Procurement Framework explicitly recognised, together with broad social policies of employment promotion, equality protection and proactive support of disadvantage people and minorities. Many opportunities to include these social and labour considerations are allowed at different stages of the procurement process, from grounds for exclusion to award criteria, alongside with performance clauses, together with the possibilities of enforcing them onto subcontractors and with the support of labels and verification methods. In the regulatory framework offered by the EU procurement regime, the balance between the principle of non-discrimination in public procurement and these positive obligations to ensure the protection of social and labour rights is achieved through the requirement of a link to the subject matter of the contract, representing the main limit on the enforcement of social and labour policies under the 2014 Directive.

5 Social and Labour Considerations in Non-Trade International Instruments of Procurement Regulation I.  NON-TRADE INSTRUMENTS OF PROCUREMENT REGULATION: THE UNCITRAL MODEL LAW AND THE WORLD BANK GUIDELINES

A

FTER HAVING EXPLORED the procurement regulations established by multilateral, plurilateral and regional trade agreements, namely the World Trade Organization (WTO) Agreement on G ­ overnment Procurement and in the EU procurement regime, in chapter five the analysis will move to another type of international instrument of procurement regulation: non-trade regulatory instruments. The UNCITRAL Model Law and the World Bank’s Procurement Framework have been described as the ‘purest form of procurement regulation’.1 These two international forms of regulation of public procurement, even if having substantial differences between each other, have fundamental regulatory similarities that assemble them in the analysis. First, these procurement regulations are not embedded into international trade agreements aiming to liberalise the international procurement market and to ensure respect for the principle of non-discrimination. Instead of addressing the international trade dynamics associated to cross border procurement practices, the UNCITRAL Model Law and the World Bank’s Procurement Framework focus on the domestic dimension of public procurement and their reform. Instead of being oriented towards external objects of procurement regulation as liberalisation and non-discrimination, their procurement regulatory frameworks is built around internal objectives. Both the UNCITRAL Model Law and the World Bank’s Procurement Framework aim to achieve the best value for money and maximisation of efficiency in the domestic procurement systems. 1 Peter Trepte, Regulating Procurement: Understanding the Ends and Means of Public ­Procurement Regulation (Oxford University Press 2005) 266.

194  Social and Labour Considerations in Non-Trade Instruments Second, both the UNCITRAL Model Law and the World Bank Policy and Regulations do not have the legal status of international agreement that the Agreement on Government Procurement (GPA) enjoys. They do not impose binding commitments to be implemented in their Member States like the EU procurement Directives. These are soft law international instruments. However, even if relying on different mechanisms of implementation and enforcement, they have great influence in developing countries and emerging economies. Last, both the UNCITRAL framework and the World Bank’s Procurement Framework represent dynamic international instruments of procurement regulation, subject to a more fluid process of reform and strongly influenced by the social and economic needs of developing and emerging countries in the regulation of their public procurement systems. For all these reasons, they represent influential instruments of procurement regulation, not only as a crucial reference for the reform of the domestic procurement regulation in many countries but also as leading examples in the negotiation and reform of other multilateral, regional and bilateral trade agreements addressing public procurement. II.  THE UNCITRAL MODEL LAW ON PROCUREMENT OF GOODS, CONSTRUCTION AND SERVICES

The Model Law on Public Procurement of the United Nations C ­ ommission on International Trade Law (UNCITRAL) is a particularly influential regulatory instrument, designed to serve as a non-binding guide fostering good governance, transparency and efficiency in domestic procurement regulations.2 The 2011 UNCITRAL Model Law on Procurement of Goods, Construction and Services replaced the 1994 UNCITRAL Model Law and now serves as a regulatory reference for the reform of many domestic procurement systems, thanks to its approach to the regulation of the award of public contracts. Even though it is a soft law instrument, the UNCITRAL Model Law represents a very detailed instrument of procurement regulation at international level. The Model Law provides a highly articulated template helping States in the improvement of their national procurement systems, offering regulatory standards for different procurement methods, including also a specific regulatory framework for defence and security-related procurement.3 2  John Linarelli, ‘The WTO Agreement on Government Procurement and the ­UNCITRAL Model Procurement Law: A View from Outside the Region’ (2006) 1 Asian Journal of WTO & International Health Law and Policy 317. 3  Caroline Nicholas, ‘UNCITRAL and the Internationalization of Government Procurement Regulation’ in Aris Geogopoulos, Bernard Hoekman and Petros C Mavroidis, The Internationalization of Government Procurement Regulation (Oxford University Press 2017) 86.

The UNCITRAL Model Law on Procurement 195 In the following sections, the Model Law will be addressed under the light of its main objectives and the regulatory space allowed for the inclusion of social and labour policy needs will be explored, before moving to the specific analysis of the different stages of the procurement process and the possibilities of inclusion of social and labour concerns. A.  The Regulatory Flexibilities Offered by the UNCITRAL Model Law The UNCITRAL Model Law on Public Procurement has the main purpose of serving as a regulatory benchmark for the modernisation of national procurement systems, promoting progressive harmonisation of national procurement regulations on an international level.4 The General Assembly Resolution 66/95 of 9 December 2011,5 while endorsing the 2011 revised text, recognised that the Model Law ‘has become an important international benchmark in procurement law reform, sets out procedures aimed at achieving competition, transparency, fairness, economy and efficiency in the procurement process’. The Model Law is designed to be applicable to all procurement activities, suitable to all types of procurement, including defence procurement. To ensure its widest and almost universal application, the Model Law ensures greater flexibility to the enacting States. First, it is interesting to notice that the Model Law does not limit its application through thresholds. In contrast to all the other instruments of procurement regulation previously analysed, general thresholds are not identified under which the Model Law does not apply.6 Moreover, the most distinctive characteristic of the UNCITRAL Model Law on Procurement of Goods, Construction and Services consists of its nature as a soft law regulatory tool. The Model Law is not an international agreement but, rather, it is a non-binding instrument providing a flexible model of domestic procurement regulation. It leaves the States free to voluntarily follow it, entirely or partially, in the reform of their national legislation.7 As confirmed by its Guide to Enactment, the Model Law aims to provide a ‘framework law’: it offers a regulatory standard for the efficient management of the public procurement system, without requiring that all 4 Guide to the Enactment of the UNCITRAL Model Law on Procurement of Goods, ­Construction and Services, para 5, p 2. 5  UN General Assembly, 49th Session, Supplement No 17 and corrigendum (A/49/17 and Corr.1), annex I. 6  Guide to the Enactment of the UNCITRAL Model Law, para 40, p 12. 7  The Model Law could therefore even be regarded as special category of soft law designed to connect (international) soft law in the sense of procurement principles underlying the Model Law with (domestic) hard law. Maria Anna Corvaglia and Laura Marschner, ‘The Complementarity of Soft and Hard Law in Public Procurement: Between Harmonization and Resiliance’ (2012) 10/2013 Biennial Conference of the American Society of International Law ­International Economic Law Interest Group.

196  Social and Labour Considerations in Non-Trade Instruments the rules and regulations addressed in the Model Law should be necessarily implemented at the domestic level.8 However, the Guide to Enactment to the Model Law suggests addressing the reform of public procurement according to ‘a holistic approach’, also completing the other domestic legislative framework of regulation, law and administrative procedures required to ensure an efficient implementation of the Model Law, as required by Article 4 of the Model Law.9 The procurement standards of the Model Law have been put into practice by various countries around the world, regardless of their level of development or their particular political systems.10 The UNCITRAL Model Law has been used as the basis for domestic procurement reforms in many transitioning economies, such as in the former Soviet Union,11 as well as many developing countries.12 According to the report on the 49th UNCITRAL Session, the States adopting the Model Law and incorporating its provisions in the reform of their domestic systems are: Afghanistan, Armenia, Egypt, Ghana, India, Jamaica, Kazakhstan, Kenya, Kyrgyzstan, Mexico, Myanmar, Russian Federation, Rwanda, Tajikistan, Trinidad and Tobago, Tunisia, Uganda, United Republic of Tanzania, Uzbekistan and Zambia.13 It is, however, difficult to properly assess the level of ‘implementation’ of the Model Law because of its soft law nature. States enacting legislation based upon the Model Law have the flexibility to depart from the text or to adopt it with modifications. Faced with the difficulties experienced in the negotiation and the accession to the GPA, soft law procurement instruments, like the UNCITRAL Model Law, have provided the ‘flexibility of ­implementation’14 necessary to overcome the issues traditionally related to the ratification of binding agreements of procurement regulation, mainly arising in developing countries.15 8 

Guide to the Enactment of the UNCITRAL Model Law, paras 58–59, p 13. Article 4 of the Model Law, titled ‘Procurement regulations’ requires that ‘[t]he [name of the organ or authority authorized to promulgate the procurement regulations] is authorized to promulgate procurement regulations to fulfil the objectives and to implement the provisions of this Law’. 10  On the status of the implementation of the UNCITRAL Model Law, see www.uncitral. org/uncitral/en/uncitral_texts/procurement_infrastructure/1994Model_status.html. 11 Maria Anna Corvaglia, ‘Accession of Post-Soviet Republics to the WTO Government Procurement Agreement: Commitments and Expectations for Developing Countries’ 7 ICTSD Мосты 2014. 12  On the status of the implementation of the UNCITRAL Model Law, see www.uncitral. org/uncitral/en/uncitral_texts/procurement_infrastructure/1994Model_status.html. 13  UNCITRAL 49th Session, Status of conventions and model laws. Note by the Secretariat, A/CN.9/876, New York, 27 June–15 July 2016. 14  Steven L Schooner and Christopher R Yukins, ‘Public Procurement: Focus on People, Value for Money and Systemic Integrity, Not Protectionism’ in Richard Baldwin and Simon Evenett (eds), The Collapse of Global Trade, Murky Protectionism, and the Crisis: ­Recommendations for the G20 (VoxEU.org Publication 2009) 87–92. 15  Lili Jiang, ‘Developing Multilateral Rules on Government Procurement: The Value of Soft Law’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 719. 9 

The UNCITRAL Model Law on Procurement 197 The success of the broad adoption of the Model Law in the different States cannot only be explained on the basis of its non-binding nature, together with the collaborative procedures and transparent working methods adopted in the UNICTRAL Secretariat.16 The flexibility offered through the non-binding nature of the UNCITRAL Model Law not only relates to its enforcement perspective, but is also demonstrated in the freedom offered to national governments in the choice of procurement methods that can be adopted.17 Regarding the public procurement of goods and construction work, the Model Law not only identifies the open form of tendering as the standard method, it also provides the possibility of recourse, under specific circumstances, to other procurement mechanisms (Chapters IV and V). As the UNCITRAL’s main concern is represented by its widest possible application and applicability,18 the Model Law includes different procurement procedures for various circumstances: requests for proposals, two-stage tendering, framework agreements and competitive negotiations in the case of complex procurement, specific defence purchasing, or research and development.19 In specific cases, even more restrictive types of tendering are allowed by the Model Law with the aim of preserving the efficiency of the entire procurement process and avoiding unnecessary costs, for example in the case of requests for quotation for small standardised procurement and single source procurement in circumstances of urgency. Chapter VI of the Model Law also provides different options for procurement review procedures and remedies. Moreover, the diffusion of the Model Law is also rooted in the flexibilities offered by the UNCITRAL to embrace the various economic and political needs of different groups of countries, including legitimate policy objectives of social protection and economic development.20 In the light of all its flexibilities, it is understandable how the Model Law has played a crucial role in the modernisation of procurement systems in African countries. Moreover, the respect for the Model Law has often been included in the conditionality policies of the major international donor institutions, such as in the case of the World Bank.21 Often described as the international instrument of procurement regulation favoured by developing countries, the Model Law is also widely recognised as a fundamental ‘global standard’ for good governance in procurement regulation and an important ­instrument for 16  Caroline Nicholas, UNCITRAL and the Internationalisation of Government ­Procurement (2007), 89–98. 17  Sue Arrowsmith, ‘Public Procurement: An Appraisal of the UNCITRAL Model Law as a Global Standard’ (2004) 53 International and Comparative Law Quarterly 17. 18  Guide to the Enactment of the UNCITRAL Model Law, para 36, p 11. 19 Trepte, Regulating Procurement (2005) 280–88. 20  Robert R Hunja, ‘The UNCITRAL Model Law on Procurement of Goods, Contruction and Services and Its Impact on Procurement Reform’ in Sue Arrowsmith and Arwel Davies (eds), Public Procurement: Global Revolution (Kluwer Law International 1998) 13. 21  Simon J Evenett and Bernard M Hoekman, ‘International Cooperation and the Reform of Public Procurement Policies’ [2005] World Bank Policy Research Working Paper http://papers. ssrn.com/sol3/papers.cfm?abstract_id=821424.

198  Social and Labour Considerations in Non-Trade Instruments the progressive harmonisation of international standards of procurement conduct.22 In the next section, the specific regulatory approach to socioeconomic policies will be analysed, as it is an essential component of the success of the wide adoption of the UNCITRAL Model Law. B.  The Internal Regulatory Objectives of the UNCITRAL Model Law Developed through an inclusive decision-making process,23 the regulatory flexibilities offered by the UNCITRAL Model Law have the ultimate scope for achieving economy and efficiency in the procurement process, in light of the fundamental regulatory objectives and the specific mandate of the Model Law.24 The preamble of UNCITRAL Model Law sets out six main objectives forming the basis of the UNICTRAL approach to the regulation of public procurement: the achievement of the principles of economy and efficiency; openness to international participation of suppliers and contractors; maximisation of competition; assurance of fairness in the treatment of the suppliers; the guarantee of integrity; and promotion of transparency in the conduct of the procurement process.25 These six objectives are the goals that traditionally characterise the domestic systems of procurement regulations. They shape the regulatory focus of the UNCITRAL Model Law oriented to the achievement of objects internal to the procurement process (as established in chapter one). The internal and domestic objectives highlighted in the Model Law’s preamble are meant to mutually reinforce each other and to be implemented through a cohesive and coherent approach, in accordance with the local and national circumstances.26 Under the Model Law, the 22  Eche Nwogwugwu, ‘Towards the Harmonisation of International Procurement Policies and Practices’ (2005) 3 Public Procurement Law Review 131. 23 Claire R Kelly, ‘The Politics of Legitimacy in the UNCITRAL Working Methods’ in Tomer Broude, Marc L Busch and Amelia Porges, The Politics of International Economic Law (Cambridge University Press 2011) 106. 24 Caroline Nicholas, ‘Negotiations and the Development of International Standards in ­Public Procurement: Let the Best Team Win?’ (2016) 7 Trade, Law and Development 64. 25  The text of the UNCITRAL Model Law preamble states ‘WHEREAS the [Government] [Parliament] of … considers it desirable to regulate procurement so as to promote the objectives of (a) Maximizing economy and efficiency in procurement; (b) Fostering and encouraging participation in procurement proceedings by suppliers and contractors regardless of nationality, thereby promoting international trade; (c) Promoting competition among suppliers and contractors for the supply of the subject matter of the procurement; (d) Providing for the fair, equal and equitable treatment of all suppliers and contractors; (e) Promoting the integrity of, and fairness and public confidence in, the procurement process; (f) Achieving transparency in the procedures relating to procurement.’ 26 Caroline Nicholas, ‘Work of UNCITRAL on Government Procurement: Purpose, ­Objectives and Complementarity with the Work of the WTO’ in Sue Arrowsmith and Robert D Anderson (eds), The WTO Regime on Government Procurement: Challenge and Reform (Cambridge University Press 2011) 746.

The UNCITRAL Model Law on Procurement 199 procuring authorities continue to have a broad discretion on the definition of what constitutes the best value for money and what are the best instruments to achieve it, as reaffirmed in Article 10. The focus on the domestic procurement objectives of efficiency, transparency and integrity adopted in the UNCITRAL regulatory framework fundamentally reflects the nature of the Model Law as a template for domestic procurement regulations and not as an international trade agreement.27 Under this perspective, it is important to underline that the principle of non-­ discrimination is not clearly or expressively mentioned within the ­UNCITRAL fundamental objectives. In contrast to the WTO GPA, the principle of non-discrimination is framed as fair treatment of foreign suppliers and it is addressed only in the body of the Model Law,28 without being included among its fundamental regulatory objectives. The ‘maximisation of competition’ is, however, expressively included within the main principles inspiring the procurement regulation under the UNCITRAL Model Law, which is particularly important in the regulation of restricted tendering procedures. In the UNCITRAL regulatory approach, the principle of competition remains largely instrumental in the achievement of efficiency in the domestic procurement process and as an important support for the maximisation of the best value for money.29 This interpretation of the principle of competition oriented to the internal efficiency of the procurement process appears quite antithetic to the ‘external’ connotation that the principle of competition has in the context of the WTO procurement regulation and in the EU procurement framework, where competition is oriented to the elimination of procurement barriers to trade and to the realisation of the EU internal market. Similarly to the principle of non-discrimination, the realisation of socioeconomic policies is also not expressly recognised as a distinct objective in the UNCITRAL preamble, even if the Model Law establishes a regulatory framework that openly facilitates its integration into public procurement. C. The Achievement of Socio-Economic Policies and the UNCITRAL Peculiarities The capability of the Model Law to implement its fundamental p ­ rocurement objectives in different domestic regulatory systems, taking into ­consideration 27 

Ibid, 747–48, 763. For example, Article 8(2) of the Model Law that prohibits the enacting State from establishing another requirement ‘aimed at limiting the participation of suppliers or contractors in procurement proceedings that discriminates against or among suppliers or contractors or against categories thereof’. 29  Caroline Nicholas, ‘A Critical Evaluation of the Revised UNCITRAL Model Law Provisions on Regulating Framework Agreements’ (2012) 2 Public Procurement Law Review 19. 28 

200  Social and Labour Considerations in Non-Trade Instruments specific local needs and circumstances, is particularly evident in the treatment of socio-economic considerations in the UNCITRAL framework. Inspired by the fundamental objectives set in its preamble and with the ambition of representing an almost universal model of domestic procurement regulation, the regulatory approach of the UNCITRAL Model Law to the achievement of social and labour considerations has several distinct characteristics. First, it is important to highlight that the Model Law and its Guide to Enhancement do not differentiate between different categories of horizontal or non-economic policies: industrial, social or environmental criteria belong to the broader concept of ‘socio-economic policies’, adopted in the Model Law. A working definition of socio-economic policies is explicitly included in the Model Law as guidance for the interpretation of the obligations set out in this international instrument of procurement regulation, as proof of their relevance paid to their achievement. Article 2(o) of the Model Law, in fact, defines socio-economic policies as ‘environmental, social, economic and other policies of this State authorized or required by the procurement regulations or other provisions of law of this State to be taken into account by the procuring entity in the procurement proceedings’. It is interesting to notice that the definition used in the UNCITRAL Model Law chooses to not distinguish between all the various policies other than the achievement of best value for money. Contrary to the clear distinction adopted in the WTO procurement framework in the case of environmental policies, in the UNCITRAL context the inclusion of environmental considerations becomes substantially similar to the enforcement of social or labour concerns, together with support for small and medium enterprises and the development of strategic economic policies. Second, in the UNCITRAL regulatory framework the implementation of socio-economic policies in procurement practices is also interpreted as an exception. However, it is not an exception to the principle of non-­ discrimination as in the WTO agreement or an exception to the EU free movement provisions, but an exception to the objectives of promoting efficiency, transparency and competition, as stated in the UNCITRAL preamble. Moreover, as it necessarily implies restrictions to full and open competition, the achievement of socio-economic policies through procurement practices is mainly understood as a temporary measure in the context of the Model Law. As affirmed in its 2012 Guide to Enactment, ‘as it involves exceptions to full and open competition, the promotion of socio-economic policies through procurement systems in the Model Law is therefore to be considered an exceptional measure’.30 Strengthening the interpretation of the social use of procurement as a temporary exception, the Model Law submits

30 

Guide to the Enactment of the UNCITRAL Model Law, para 16, p 5.

The UNCITRAL Model Law on Procurement 201 the achievement of socio-economic policies in procurement practices to two major limitations and various transparency requirements along the procurement process.31 Based on the interpretation of these limitations, the Model Law has been effectively described as ‘an example of a mainly economic system that allows limited social or political objectives’.32 The first condition imposed on the implementation of socio-economic policies consists in the respect of the international agreements contracted by the enacting States. As required by Article 3 Model Law, the obligations resulting from the trade agreements signed by the enacting State ‘shall prevail’ on the provisions of the Model Law, impeding the unconditioned inclusion of socio-economic requirements in the case of adherence to the WTO GPA. Second, to be recognised as legitimate policy objectives in the UNCITRAL regulatory framework, the social and economic policies have to be included in the official regulations of the enacting State. As specified in the definition under Article 2(o), socio-economic policies should be ‘authorized or required by the procurement regulations or other provisions of law of this State’. To avoid discretionality and non-transparency in identification of the socio-economic policies, the UNCITRAL Model Law limits the reference only to the enacting State, excluding the possibility to refer to the policy objectives of the single procuring authorities. Parallel to these limitations, the UNCITRAL Model Law requires a series of conditions of fairness, transparency and competition in the implementation of socio-economic policies along the different stages of the procurement process, as further analysed in the following sections. In the regulatory body of the provisions set out in the Model Law, the achievement of ­socio-economic policies is allowed through the use of specific single source procurement procedures (Article 30(5)(e)) as well as under specified provisions focusing on the different stages of the procurement process, such as regulations on technical specifications or award criteria (Articles 8–11). Before moving to the study of the various possibilities for the inclusion of social and labour policies along the procurement process, it is important to underline the importance that the promotion of socio-economic policies have assumed under the reform of the UNCITRAL Model Law. D. The 2011 Reformed Model Law and the Changes in the ‘Domestic Procurement’ Preferences The UNCITRAL Model Law has not only stimulated the reform of the national procurement systems in many transitioning and developing countries

31  32 

Guide to the Enactment of the UNCITRAL Model Law, para 13–20, pp 5–6. Nicholas ‘Work of UNCITRAL on Government Procurement’ (2011) 749.

202  Social and Labour Considerations in Non-Trade Instruments around the world;33 but it has also been subjected to a long internal process of reform. Adopted by the United Nations Commission on International Trade Law on 1 July 2011, the 2011 Model Law substitutes the 1994 Model Law adopted at the 27th UNCITRAL Session in 1994.34 The main driver of this process of reform was to integrate electronic innovations and modern procurement mechanisms, like supplier lists and framework agreements, in the UNCITRAL procurement system.35 The process of reform achieved the purpose of strengthening the Model Law’s general principles and their translation into a more detailed, modern and transparent body of procedural rules (set out in the provisions in Chapter I), to be applied to all procurement methods regulated in the following Chapters on the Model Law.36 This comprehensive reform process of the UNCITRAL Model Law has addressed important aspects of the modern procurement reality, for example it succeeded in developing a comprehensive regulation of framework agreements, outside the scope of this analysis.37 Moreover, the application of more defined rules regarding the general conduct in the procurement process has been now extended to all sectors of the national economies, trying to accommodate security and defence concerns which were previously excluded. An important aspect of the recent reform concerned the regulatory approach to the achievement of socio-economic policies under the UNCITRAL Model Law and its relationship with other international instruments of procurement regulation.38 First, in the reformed UNCITRAL Model Law the traditional distinction between industrial policies on the one hand and socio-environmental objectives on the other has been eliminated.39 Now, both industrial and socio-environmental policy considerations fall under the broad concept of socio-economic policies in Article 2(0), previously introduced. In this respect, the 1994 Model Law provided a clear regulatory preference for the possibility to use procurement as an instrument of industrial policy, as compared to the proactive support of environmental and social considerations. In the 1994 Model Law, only ‘economic development’ reasons were included in the regulation, while other legitimate policy considerations, including the protection of human and labour rights, were 33  Don Wallace Jr, ‘UNCITRAL: Reform of the Model Procurement Law’ (2006) 35 Public Contract Law Journal 485. 34 The text of the UNCITRAL Model Law is formally included in Annex I of the work of the 27th Session in Official Records of the General Assembly, 49th Session, Supplement No 17 (A/49/17). 35 Don Wallance Jr, ‘The Changing World of National Procurement Systems: Global ­Reformation’ [1995] Public Procurement Law Review 57. 36  Caroline Nicholas, ‘THE UNCITRAL Model Law on Procurement—The Current Reform Programme’ (2006) 6 Public Procurement Law Review 161. 37 ibid. 38  Nicholas (n 26) 750. 39  Arrowsmith, ‘Public Procurement’ (2004) 20.

The UNCITRAL Model Law on Procurement 203 not expressly mentioned. For this reason, in the 1994 Model Law text, the possibility of including social and environmental considerations has been suggested only on the basis of an extensive interpretation of the reasons of ‘economic development’.40 Another relevant change reached in the 2011 Model Law consists of reform of the provisions allocating preferences to local and domestic suppliers—through price preferences and set-aside schemes—traditionally used to achieve non-economic and social policies in procurement practices. Article 8 of the Model Law (in both 1994 and 2011 UNCITRAL Model Law) defines the exceptions to the principle of competition in the process of selection of the suppliers. It allows the possibility of restricting access to procurement competitions on the basis of nationality and usually in favour of domestic suppliers, under the condition that 1) the requirements are set in provisions of law and 2) open to the possibility that the decision may be challenged. However, the regulatory mechanism established in Article 8 of the Model Law is significantly different to the 1994 UNCITRAL Model Law. In both texts, Article 8(1) states that ‘Suppliers or contractors shall be permitted to participate in procurement proceedings without regard to nationality, except where the procuring entity decides to limit participation in procurement proceedings on the basis of nationality on grounds specified in the procurement regulations or other provisions of law of this State’. In the reformed 2011 Model Law, two new paragraphs (2) and (5) have been introduced to clarify the provision of Article 8(1), in order to increase transparency in the distribution of preferences for ‘domestic procurement’.41 First, the new paragraph 2 of Article 8 prohibits the imposition of other limitations to the participation of suppliers and contractors apart from those ‘authorized or required to do so by the procurement regulations or other provisions of law of this State’, for example in the case of sanctions imposed by the UN Security Council.42 Second, to increase transparency and fairness in the selection procedure, Article 8(5) requires the procuring authorities to provide reasons and justifications that form the basis of the limitation in the participation upon request of suppliers or contractors.43 Moreover, as will be explored in more detail in the following section, the provision of Article 8 is reinforced by Article 11, which regulates the attribution of ‘margins of preferences’ to local suppliers in the evaluation and award procedures.

40 Sue Arrowsmith, John Linarelli and Don Wallace, Regulating Public Procurement: National and International Perspective (Kluwer Law International 2000) 856. 41  According to the definition set out in Article 2(c), the concept of ‘Domestic Procurement’ refers to ‘procurement limited to domestic suppliers or contractors pursuant to article 8 of this Law’. 42  Guide to the Enactment of the UNCITRAL Model Law, para 28, p 258. 43  Paragraph 5 Article 8 requires that ‘[t]he procuring entity shall make available to any person, upon request, its reasons for limiting the participation of suppliers or contractors in the procurement proceedings pursuant to this article’.

204  Social and Labour Considerations in Non-Trade Instruments As specified in the Guide to Enactment, the possibility of allocating domestic preferences under the mechanism of Article 8 opens greater opportunities for the achievement of social and labour objectives, such as support for people with disabilities or the enforcement of labour and employment policies.44 In enforcing procurement preferences, however, the enacting States must consider the risk of possible conflicts with conflicting international commitments resulting from trade agreements, especially in the case of the GPA, as requested in Article 3 Model Law.45 It is undeniable that, even after the 2011 reform, the use of preferences based on nationality is the most controversial feature of the UNCITRAL Model Law. It is undeniable that the considerable potential for conflict with the WTO regulatory framework based on the non-discrimination principle.46 To avoid the risk of complete exclusion of competition in the procurement proccess, Article 8 tries to establish a balance between paras (1) and (2) setting the conditions to limit the participation of the suppliers and paras (4) and (5) providing procedural and transparency safeguards to these limitations. The relationship with other international instruments of procurement regulation and trade agreements with respect to the achievement of socioeconomic policies was also one of the major concerns of the revision of the Model Law, as reflected in the new wording of Article 8. Moreover, it is important to note that, in contrast to the GPA which explicitly excludes the use of domestic preferences, the UNCITRAL Model Law does not prohibit such preferences, but simply regulates them to increase transparency and fairness in their implementation, as in the case of Article 8. E. Procedural Implementation of Social and Labour Policy Objectives under the 2011 UNCITRAL Model Law The UNCITRAL framework addresses in great detail the regulation of the procedural aspects of the implementation of socio-economic policies, in numerous provisions of Chapter I of the Model Law. Articles 8–11 ­constitute the main regulatory reference for the inclusion of social and labour ­policies—as part of the broader category of socio-economic ­policies—at ­different stages of the procurement process. The following analysis will focus on the inclusion of socio-economic considerations at the stages of the contract specifications, the qualification of suppliers and the evaluation criteria and procedures; while the implementation of public contracts and the regulation of performance requirements remain excluded from the 44 

Guide to the Enactment of the UNCITRAL Model Law, Part II Article 8, pp 76–77. Guide to the Enactment of the UNCITRAL Model Law, para 7, p 60. 46 Linarelli, ‘The WTO Agreement and the UNCITRAL Model Procurement Law’ (2006) 327. 45 

The UNCITRAL Model Law on Procurement 205 r­ egulatory scope of the UNCITRAL Model Law.47 With this scope, the study of the UNCITRAL regulatory framework of public procurement will trace the changes adopted under the reform process (see Table 5.1) and underline the most significant improvements from the 1994 to the 2011 UNCITRAL Model Law with respect to the achievement of socio-economic policies. Table 5.1:  Concordances Between the 2011 and the 1994 UNCITRAL Model Law Article of the 2011 Model Law

Provisions of the 1994 Model Law

Article 8. Participation by suppliers or contractors

Article 8. Participation by suppliers or contractors

Article 9. Qualifications of suppliers and contractors

Article 6. Qualifications of suppliers and contractors Articles 7, 8. Prequalification proceedings Article 10. Rules concerning documentary evidence provided by suppliers or contractors

Article 10. Rules concerning description of the subject matter of the procurement and the terms and conditions of the procurement contract or framework agreement

Article 16. Rules concerning description of goods, construction or services

Article 11. Rules concerning evaluation criteria and procedures

New provision based on the 1994 text: Articles 27(e), 34(4), 38(m), 39 and 48(3)

Annex I Table of concordance between the 2011 Model Law and the 1994 Model Law, Guide to Enactment of the UNCITRAL Model Law on Public Procurement, Part III. Changes made to the 1994 UNCITRAL Model Law on Procurement of Goods, Construction and Services.

i.  Contract Specifications Under the UNCITRAL Model Law Contract specifications play a crucial role in maximising efficiency and ensuring competition in the entire procurement process. Article 10 of the 2011 Model Law (corresponding to Article 16 of the 1994 Model Law) aims to endure transparency and objectivity in the preparation of the contract specifications. Under the reformed UNCITRAL Model Law, the regulation of this early stage of the procurement process is oriented towards maximising the principles of clarity, precision, completeness and objectivity in the pre-qualification and pre-selection procurement documents.48 ­Pursuant to 47  The only provision of the 2011 Model law addressing the performance of public contracts is Article 22, paras 4–10, without any specific reference to the possibility of including performance requirements. 48  Guide to the Enactment of the UNCITRAL Model Law, Part II, p 82.

206  Social and Labour Considerations in Non-Trade Instruments para 4 of Article 8, contract specifications ‘to the extent practicable’ should provide a description of the subject matter of the procurement contract ‘objective, functional and generic. It shall set out the relevant technical, quality and performance characteristics of that subject matter.’ This particular attention to the concept of the subject matter of the contract is what mainly differentiates Article 10 of the 2011 Model Law from Article 16 of the 1994 Model Law. The reference to the description of the subject matter of the procurement contract represents the most considerable regulatory innovation compared to the previous text. Together with the focus on the description of the subject matter of the contract, the procedural and transparency requirements set in paragraph 1, such as the requirement of publication in the pre-qualification, pre-selection and the solicitation documents, represent the most distinctive feature of the 2011 Model Law regulation on contract specification.49 In this context, the achievement of social and labour policies at the beginning of the procurement process seems to be accepted by the combined reading of the provisions of Articles 8 and 10 Model Law. Paragraph 2 Article 10 prohibits unnecessary restriction to access and participation in the procurement process, unless expressly authoried by law as defined in Article 8 Model Law. For this reason, the inclusion of social and labour concerns in contract specifications seems to be mainly limited to the criteria set by Article 8(1), ie the imposition of preferences based exclusively on the law of the enacting State as well as respect for other international commitments, as provided in Article 3 of the Model Law. In addition to the inclusion and verification of social and labour concerns in contract specifications, the reformed provision of Article 10 is also particularly instructive with regard to the adoption of regulatory standards. Paragraph 5 of Article 10, in fact, addresses the use of ‘standardized features, requirements, symbols and terminology relating to the technical, quality and performance characteristics of the subject matter of the procurement’ in the definition of the subject matter of the contract, under the condition that it must be included in the solicitation document for transparency reasons. Moreover, the reference to standardised trade terms and standardised conditions (as they could be social labels or fair trade requirements) should not negatively preclude competition regarding the participation in the procurement process, allowing ‘equivalent’ standards and certifications to compete on an equal basis for access to public contracts. To balance the use of standards with competition concerns, the Guide of Enactment of the Model Law suggests that ‘monitoring of the procuring entity’s willingness to accept

49  Guide to the Enactment of the UNCITRAL Model Law, PART III Changes made to the 1994 UNCITRAL Model Law on Procurement of Goods, Construction and Services, para 51, p 262.

The UNCITRAL Model Law on Procurement 207 equivalents will be a necessary safeguard, and guidance on how suppliers or contractors are to demonstrate equivalence, and objectivity in this regard’.50 ii. The Inclusion of Social and Labour Considerations in Qualification and Exclusion Conditions Article 9 of the 2011 Model Law regulates the process of suppliers’ qualification and represents a crucial provision for the achievement of social and labour considerations in the UNCITRAL regulation. The main purpose of Article 9 is to elaborate an exhaustive list of qualification criteria and a list of grounds for exclusion for the assessment of suppliers that may be suitable to carry out the public contracts. Confirming the flexible nature of the Model Law, the definition of the qualification and disqualification criteria set in Article 9 seems to privilege an inclusive approach. Including different requirements set out in para 2, the provision mainly aims to strengthen the transparency guarantees and mitigate the risks to market access and competition that can result from the misuse of qualification requirements. Paragraph 2 Article 9 enumerates a list of qualification criteria in particular addressing the technical, professional, financial and managerial requirements necessary to successfully carry out the public contracts (paragraph 2.a).51 Within the listed criteria, the procurement authorities should refer only to the qualifications ‘appropriate and relevant in the circumstances of the particular procurement’. To guarantee transparency and fair treatment in the selection process, the qualification requirements have to be published in the pre-qualification, pre-selection and solicitation documents, as set out in Article 9 para 4. Letters (b) and (e) of para 2 Article 9 represent the most significant legal grounds for the enforcement of social and labour rights in the qualification stage of the procurement process under the UNCITRAL Model Law. First, letter (b) explicitly recognises the possibility for procuring authorities to impose qualification criteria based on ‘the ethical and other standards applicable in this State’. This provision, as confirmed in the 2012 Guide to Enactment, aims to guarantee, along the procurement selection process, respect for all the standards applicable in the enacting States, such as sustainability concerns, environmental regulations, international labour law

50 Guide to the Enactment of the UNCITRAL Model Law, Commentary to Article 10, para 5, p 66. 51  Article 9 para 2(a) refers to the ‘professional, technical and environmental qualifications, professional and technical competence, financial resources, equipment and other physical facilities, managerial capability, reliability, experience and personnel to perform the procurement contract’.

208  Social and Labour Considerations in Non-Trade Instruments and human rights standards.52 This specific regulatory aspect of Article 9 represents a major improvement compared to the 1994 Model Law. The list of qualification criteria set in Article 6 of the 1994 Model Law was specifically reformed in order to include references to environmental considerations as well as ethical and other standards, eliminating the reference to the ‘reputation’ of suppliers that might have increased the subjectivity and lack of transparency in the selection process. Second, the violation of major labour rights and social standards adopted in the country, can possibly be sanctioned pursuant to the provision set in Article 9.2(e), which includes in the lists of admissible qualification criteria ‘that they have fulfilled their obligations to pay taxes and social security contributions in this State’. The potential discriminatory effects of the inclusion of labour considerations are particularly significant in Article 9.2(e) as opposed to Article 9.2(b): foreign producers and foreign suppliers that do not have a local presence may be discriminated against due to the lack of any obligation to pay taxes or social contributions in the enacting States.53 However, to balance the discriminatory effects that may derive from ­paragraph (2) (e) and ensure fairness in the treatment of foreign suppliers, Article 9 should always be read in connection with Article 8, prohibiting the imposition of requirements not included in the provisions or regulations of the enacting State. Moreover, not only is the inclusion of social and labour considerations recognised in the 2011 Model Law’s regulation of qualification criteria, but also the possibility of the adoption of verification mechanisms for these social standards is expressly included. As validated in the provision of ­Article 9.3, national procuring authorities are allowed to ‘require suppliers or contractors participating in procurement proceedings to provide appropriate documentary evidence or other information to satisfy itself that the suppliers or contractors are qualified’. Nothing in the wording of Article 9.3 seems to explicitly exclude the possibility of including the use of verification mechanisms, such as follow-up questionnaires and external audits or certification mechanisms, in the management of the qualification stage of the procurement contract, as part of the collection of relevant information on suitable candidates. iii.  Socio-Economic Award Criteria and Their Evaluation Procedures Article 11 represents the crucial provision of the UNCITRAL Model Law regulating the formulation and application of award criteria, with the scope 52 Guide to the Enactment of the UNCITRAL Model Law, Commentary to Article 9, para 7, p 62. 53 Guide to the Enactment of the UNCITRAL Model Law, Commentary to Article 9, para 8, p 62.

The UNCITRAL Model Law on Procurement 209 of ensuring objectivity and value for money in the process. In this context, labour and social policy objectives, addressed as ‘socio-economic policies’, are openly recognised in the regulation of evaluation criteria under the 2011 Model Law. The regulation of award criteria set out in Article 11 establishes a binary differentiation of evaluation criteria applicable in the procurement process. In Article 11(1), the UNCITRAL regulatory framework distinguishes between two categories of evaluation criteria. On the one hand, socio-­ economic award criteria are addressed under para 3 Article 11 and, on the other hand, other evaluation criteria are mentioned in para 2 Article 11. The two categories of evaluation criteria are subjected to different types of legal requirements, as mirrored in the structure of Article 11. Moreover, the UNCITRAL Model Law further distinguishes between the regulation applicable to environmental and social considerations based on these different evaluation criteria. Article 11 first addresses the regulation of evaluation criteria other than socio-economic considerations. As set out in Article 11(1), the main requirement for the conformity with the Model Law of other evaluation criteria consists in the establishment of a link with the subject matter of the procurement contract. It is interesting to note that the link with the subject matter of the contract is expressively excluded for evaluation criteria based on socio-economic policies, separately regulated by paragraph 3. On this point, the Model Law clearly moves in a different direction from the EU regulation of the award procedures. In the EU Directives, as explored in chapter four, the link with the subject matter of the public contract is the cornerstone of the regulation of award criteria and the main reason for the exclusion of social considerations at the evaluation stage of the procurement process. Another important aspect which should be emphasised is the inclusion of environmental considerations in the regulation of other evaluation criteria subject to the requirement of being linked to the subject matter of the contract. Article 11(2) provides an overview of the different evaluation criteria with an increasing level of complexity, varying from the simple price criteria to the more complex evaluation of the managerial competences of the suppliers. And in the illustrative list of other evaluation criteria, the ‘environmental characteristics of the subject matter’ are expressly included in Article 11(2)(b). Although the environmental characteristics of the product and of the production process are required to relate to the subject matter of the contract, this condition is not imposed on award criteria based on socio-economic concerns, regulated by Article 11(3) of the 2011 Model Law. Two main types of evaluation criteria are addressed in this provision: on the one hand, the socio-economic standards included in the law of the enacting State, like the respect of the domestic labour regulations, and on the other hand

210  Social and Labour Considerations in Non-Trade Instruments the margin of preference allocated to domestic producers and suppliers.54 For both these evaluation criteria, which are perceived as more discretionary and subjective in the UNCITRAL framework, the Model Law requires their inclusion in a regulation or law of the enacting State rather than a link with the subject matter, as a guarantee of transparency and objectivity.55 The UNCITRAL Guide to the Enactment of the Model Law recommends particular caution with regard to the definition and the use of socioeconomic criteria at this stage of the procurement process, underlining their adoption as temporary measures.56 If the reference to labour standards included in national regulation does not seem to raise excessive concerns in terms of objectivity and fairness, the allocation of preference to domestic suppliers in the bidders’ evaluation for broader social purposes or reasons of collective justice represents the most controversial aspect of the provision in Article 11(3).57 The assignment of a margin of preference appears to be, in fact, in clear conflict with the prohibition of set-aside and price preference included in the GPA. However, the permissive regulatory approach of the Model Law is also confirmed in this respect, allowing the use of domestic preferences, but only in compliance with the transparency requirement of making the method of calculation public according to Article 11(3)(b). Strengthening the fairness and objectivity of the evaluation process, both socio-economic and other award criteria ‘to the extent practicable … shall be objective, quantifiable and expressed in monetary terms’ as required by Article 11(4). On the one hand, the 2011 Model Law recognises wide margins of flexibility in the inclusion of legitimate policy considerations in evaluation criteria; on the other hand, the UNCITRAL regulation imposes a strict transparency regime.58 As specified in the Guide to the Enactment of the Model Law, ‘these transparency provisions are essential to allow the appropriate use of the flexibility conferred in these articles to be e­ valuated’.59 ­Article 11(5) defines the transparency requirements imposed in the evaluation process; in particular, it specifies the essential information concerning the evaluation stage of the procurement process that should be included 54  Article 11 para 3 states that ‘the evaluation criteria may include: (a) Any criteria that the procurement regulations or other provisions of law of this State authorize or require to be taken into account; (b) A margin of preference for the benefit of domestic suppliers or contractors or for domestically produced goods, or any other preference, if authorized or required by the procurement regulations or other provisions of law of this State. The margin of preference shall be calculated in accordance with the procurement regulations.’ 55 Guide to the Enactment of the UNCITRAL Model Law, Commentary to Article 11, para 8, pp 67–68. 56 Guide to the Enactment of the UNCITRAL Model Law, Commentary to Article 11, paras 8 and 9, p 68. 57  Trepte (n 1) 303–04. 58  Caroline Nicholas, ‘The 2011 UNCITRAL Model Law on Public Procurement’ (2012) 3 Public Procurement Law Review 111. 59 Guide to the Enactment of the UNCITRAL Model Law, Commentary to Article 11, para 13, p 69.

The UNCITRAL Model Law on Procurement 211 in the solicitation documents. According to Article 11(5), to guarantee objectivity in the evaluation process, not only the price but the modalities and their relative weight in the application of the award criteria should be included in the selection documents. F.  Concluding Remarks on the 2011 UNCITRAL Model Law From the analysis conducted so far, the reformed UNCITRAL Model Law stands out as an important international instrument that offers great flexibilities and wide margin of preferences needed to accommodate legitimate domestic policy considerations with the principles of efficiency and transparency in the reform of domestic procurement systems. The UNCITRAL regulatory framework openly recognises the possibility of including ‘socio-economic’ policy objectives into the selection and evaluation of bids, including participation, qualification and evaluation criteria (as Articles 8–11). The implementation of socio-economic policies is achieved through a system of granting preferences on the base of the nationality of the suppliers and margin of preferences, considered as exceptional and temporary measures. To mitigate the risks of excessive restrictions on competition, the Model Law specifically allows the allocation of preferences to domestic providers under the condition that a law or a regulation of the country authorises this and it is in conformity with the international obligations of the enacting State. Harmonisation with other international instruments of procurement regulation was, in fact, one of the major drivers behind the reform of the UNCITRAL framework of procurement, particularly with respect to the important role of socio-economic policies and the preference granted to domestic suppliers. The progress reached in the 2011 UNCITRAL Model Law strengthens the transparency and objectivity aspects of this procurement regulation with regard to the achievement of socio-economic policies, minimising the margin of conflicts with other trade agreements, particularly the GPA. The regulatory preference for including social and labour policies as selection and award criteria, balanced with procedural and transparency requirements, aims to ensure that procurement practices for social and industrial policies are carried out in a verifiable and predictable manner, so as to facilitate the analysis of the costs and benefits of the procurement process for both the government and the suppliers. Thus, the reformed regulatory framework of public procurement confirms the flexible nature of the UNCITRAL Model Law as particularly well-suited for the harmonisation and reform of national procurement systems, setting an important regulatory standard for balancing domestic policy concerns with efficiency and objectivity of the procurement system. As confirmation of the flexible approach of the UNCITRAL Model Law to the regulation of the evaluation process, the requirement for a link with the subject matter of

212  Social and Labour Considerations in Non-Trade Instruments the contract is excluded for award criteria based on socio-economic policies, while it is imposed for environmental considerations. III.  THE WORLD BANK PROCUREMENT FRAMEWORK AND THE ACHIEVEMENT OF SOCIAL AND LABOUR CONCERNS

The procurement guidelines of international financial institutions, at international and regional levels, have a decisive influence on the reform and harmonisation processes of national public procurement systems. They provide strict procurement regulatory frameworks, mainly oriented towards ensuring efficiency in the procurement process and the effectiveness of the allocation of loans and aids in the borrowing countries. In recent years, international lending institutions have also begun to acknowledge the importance of the inclusion of sustainability aspects in the financed procurement processes.60 The World Bank’s procurement activities started to support the financing of large infrastructure projects after World War II and gradually expanded in their nature and scope. From the original focus on large infrastructures, the procurement projects supported by the World Bank now finance education strategies and the reform of the health systems, together with projects addressing rural livelihood and poverty. These changes in the scope of its procurement activities were addressed in the vast reform concluded in 2015.61 However, the fiduciary approach of the regulation and the management of the procurement process focused on the maximisation of the economy and efficiency of the Bank’s loans represented the main characteristics of the procurement guidelines adopted by the World Bank group.62 A.  The World Bank Public Procurement Regulatory System The role of the World Bank as international lending institution is set and codified in the Articles of Agreement, the founding charter of the World Bank. Article III Section V specifically requires that ‘(b) The Bank shall 60  World Bank, From Adjustment Lending to Development Support Lending: Key Issues in the Update of World Bank Policy, Operational Policy and Country Services, 2002, Washington, DC. For a comprehensive study on this aspect see Maloe Bosch, Macha Kemperman and Stephan Raes, ‘Sustainable Procurement and International Financial Institutions’ (2012), discussion paper presented at the Seminar on Sustainable Public Procurement and Multilateral Development Banks, the Royal Netherlands Embassy, Washington DC, 22 March 2012. 61 Sope Williams-Elegde, ‘The Evolution of the World Bank’s Procurement Framework: Reform and Coherence for the 21st Century’ (2016) 16 Journal of Public Procurement 22. 62  The World Bank group consists of five financial institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement Dispute (ICSID). For the purpose of the following analysis, the term ‘World Bank’ will refer to the IBRD and the IDA.

Concerns in the World Bank Procurement Framework 213 make arrangements to ensure that the proceeds of any loan are used only for the purposes for which the loan was granted, with due attention to considerations of economy and efficiency’.63 This is the fundamental fiduciary requirement imposed on all the World Bank’s operations in public procurement projects. To implement the principle of economy and efficiency in public procurement set in its fundamental requirement, two guidelines were adopted in May 2004, namely the ‘Guidelines: Procurement under IBRD Loans and IDA Credits’64 and the ‘Guidelines on Selection and Employment of Consultants by World Bank Borrowers’,65 both revised in 2006, 2010 and 2014. To support the implementation of these guidelines by the borrower countries,66 the World Bank provided additional guidance with the preparation of the ‘Standard Bidding Documents and Consultants’ Documents’ (SBD) for the procurement of goods, works and consulting services financed by the Bank.67 The standard bidding documents constitute an important instrument for the comprehensive and coherent inclusion of the regulatory requirements set in the Guidelines at the national level, thus enhancing the harmonisation and improvement of the domestic procurement regulations of borrowers.68 The World Bank’s regulatory efforts to reform domestic procurement law and policies are also supported by a comprehensive system of a­ ssessment ­programmes, namely the Country Procurement Assessment Report (CPAR).69 Developed under the framework of the Development Assistance Committee of the Organisation for Economic Co-operation and Development (OECD), the CPAR system has proven to be an important and effective instrument 63  The Official text of the IBRD Articles of Agreement is available at http://siteresources. worldbank.org/EXTABOUTUS/Resources/ibrd-articlesofagreement.pdf. 64  The official text of the World Bank, Guidelines Procurement Under IBRD Loans and IDA Credits, January 2011 (Revised July 2011) is available at http://siteresources.worldbank. org/INTPROCUREMENT/Resources/Procurement_GLs_English_Final_Jan2011_revised_ July1-2014.pdf. 65  The official text of the World Bank, Guidelines: Selection and Employment of Consultants under IBRD Loans & IDA Credits & Grants, January 2011 is available at http://documents.worldbank.org/curated/en/796061468126898713/pdf/956640PUB0Box3010Revised0 July102014.pdf. 66  According to the Bank’s revised terminology, consolidated in the Procurement Policy and Regulations, a borrower is defined as a ‘recipient of Investment Project Financing (IPF). This term may include any entity of the Borrower that is involved in the implementation of a Project financed by IPF.’ 67  The collection of the World Bank’s Standard Bidding Documents is provided at http:// web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/PROCUREMENT/0,,contentMDK:20 062006~menuPK:84283~pagePK:84269~piPK:60001558~theSitePK:84266,00.html. 68  Marc Frilet and Florent Lager, ‘Public Procurement: The World Bank System’ in Roberto Hernandez Garcia (ed), International Public Procurement: A Guide to Best Practice (Globe Law and Business 2009) 107–09. 69 Country Procurement Assessment Reports are publicly available at http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/PROCUREMENT/0,,contentMDK:20108359~ menuPK:84285~pagePK:84269~piPK:60001558~theSitePK:84266,00.html.

214  Social and Labour Considerations in Non-Trade Instruments for identifying the major institutional and organisational deficiencies of national procurement regimes in the borrowing countries, thus indicating possible reform and adjustment requirements.70 The system of country assessment assumes a crucial function in the ­promotion and the implementation of good procurement practices in the borrowing countries, ensuring efficiency in the use of the Bank’s loans. The adoption of Baseline Indicators Tools contributed to the agreement of international standards of assessment of domestic procurement systems. Moreover, sustainability concerns have been introduced in the assessment reports as part of the broader economic and social impact of public procurement in the borrowing countries: in particular, labour considerations have been included in the country assessment reports in connection with the procurement of construction works.71 In the case of Ghana in 2003, for example, the CPAR specifically referred to ILO Convention No 94, suggesting that ‘procuring entities must ensure that clauses on labour standards (fair wages, health and safety measures and social security) are incorporated in works contracts and enforced by contract managers’.72 B. The Revised Architecture of the World Bank Procurement Framework The World Bank’s regulatory framework of public procurement grounded in the Articles of Agreement and established by the Guidelines and the Standard Bidding Documents has been revised periodically, improving the transparency measures of the award procedures in the Bank’s financed procurement operations.73 However, during the update in January 2011 the Bank Management agreed with the Board of Directors to initiate a first comprehensive review process of the World Bank’s procurement agenda, the first radical reform since its establishment.74

70  Sope Williams-Elegbe, ‘The World Bank’s Influence on Procurement Reform in Africa’ (2013) 21 African Journal of International and Comparative Law 95. 71  Christopher L Pallas and Jonathan Wood, ‘The World Bank’s Use of Country Systems for Procurement: A Good Idea Gone Bad?’ (2009) 27 Development Policy Review 215. 72  World Bank: Ghana, CPAR—2003, Main report, doc No 29055, Vol 2, June 2003, p 32. 73  Jean Jacques Verdeaux, ‘The World Bank and Public Procurement: Improving Aid Effectiveness and Addressing Corruption’ (2006) 6 Public Procurement Law Preview 179. 74 The consultation process among Country Members and key stakeholders was initiated with the document ‘Proposed New Framework for Procurement in World Bank Investment Operations’ presented to Executive Directors of the World Bank Group and currently under revision. For more information on the initiating Discussion Paper see http://documents. worldbank.org/curated/en/2012/03/16249954/world-banks-procurement-policies-proceduresproposed-review-initiating-discussion-paper.

Concerns in the World Bank Procurement Framework 215 This review process had the ambitious purpose of redefining the World Bank’s procurement regulatory framework originally focused on big development infrastructure projects, but now evolving towards new interactive business practices (for example Public-Private Partnerships), with new financing instruments (like the new Program for Results)75 and through new procurement methods (for example e-procurement mechanisms).76 After the consultation phase terminated in February 2013, the review process entered its second phase focused on the preparation and draft of the new procurement policy framework, launched in 2015. In July 2015 the reform received final approval from the World Bank’s Board, officially consolidating the new significant changes reached in the Bank’s procurement framework.77 The World Bank’s new Procurement Framework, composed by the Bank’s Policy and Recommendations, is mandatory for all the procurement projects approved and conducted after 1 July 2016. This review process appears to be the most comprehensive effort towards reform of the World Bank’s policies and regulations on public procurement since their establishment. It regards procurement policies and procedures applicable to borrowing and borrower countries, with the ambitious and overarching goal ‘to position the Bank’s approach to procurement in the broad context of the Bank’s modernization agenda and its multifaceted international commitments to enhance development effectiveness and the mutually reinforcing and complementary goals of harmonisation, use of country systems, advancement of global trade and competition, governance and anti-corruption’.78 Following the Bank’s new Policy & Procedures Framework (P&PF), the newly established regulatory architecture of public procurement will be structured around the Procurement Policy, the Directive and Procedure, and the Procurement Regulations for Borrowers, replacing the previous Procurement Guidelines. The Policy defines the Bank’s procurement strategic vision

75 The World Bank’s Board of Executive Directors approved on 24 January 2012 the ­ rogram for Results (PforR) financing program for the World Bank’s client countries that P links the delivery of funds directly to the achievement of results; for more information see http://siteresources.worldbank.org/EXTRESLENDING/Resources/7514725-1313522321940/ PforR_Overview_12.2011.pdf. 76  See World Bank 2012. The World Bank’s Procurement Policies and Procedures: Policy Review—Approach Paper, Washington DC, The World Bank, available at http://documents. worldbank.org/curated/en/2012/03/16249953/world-banks-procurement-policies-procedurespolicy-review-approach-paper. 77 World Bank, Procurement in World Bank Investment Project Financing. Phase II: The New Procurement Framework, available at http://consultations.worldbank.org/Data/hub/files/ consultation-template/procurement-policy-review-consultationsopenconsultationtemplate/ phases/phase_ii_the_new_procurement_framework_-_board_paper.pdf. 78  The World Bank’s Procurement Policies and Procedures: Policy Review—Approach Paper, World Bank, 2012, para 11.

216  Social and Labour Considerations in Non-Trade Instruments and its core procurement principles,79 while the Procurement Regulations for Borrowers (the Regulations)80 replace the current Bank Procurement and Consultant Guidelines and establish the fundamental requirements for the procurement of goods, works, and consulting and non-consulting services under IPF operations.81 Moreover, a crucial aspect of the reform of the Bank’s regulatory architecture consists of the parallel reform of the procurement assessment mechanisms. The use of the Bank’s CPARs, later integrated with the Methodology for Assessing Procurement Systems (MAPS), over the years raised a number of concerns regarding the lack of quantitative information in its assessment reports82 and the difficulties of coordinating the various efforts towards institutional reform and aid assistance and those at the local level.83 In the Bank’s comprehensive reform in 2016, the Project Procurement Strategy for Development (PPSD) was introduced.84 This new instrument has crucial and broad functions: it analyses the strategic needs, management risks and operational context of each procurement project, to be reviewed and agreed before the finalisation of the loan agreement. Annex V of the Bank’s ­Procurement Regulations specifies the details concerning PPSD. C. The Shift in the Regulatory Objectives and Fundamental Principles of the World Bank Procurement Framework Since its establishment, the fundamental objective of the World Bank’s regulatory architecture of public procurement has been ‘the need for ­ ­economy and efficiency in the implementation of the project, including the procurement of the goods and works involved’.85 Economy and efficiency 79 World Bank, Procurement Policy in Investment Project Financing (IPF) and Other ­ perational Procurement Matters, https://policies.worldbank.org/sites/ppf3/PPFDocuments/ O Forms/DispPage.aspx?docid=4002. 80  World Bank, Procurement Regulations for Investment Project Financing (IPF) Borrowers, https://policies.worldbank.org/sites/ppf3/PPFDocuments/Forms/DispPage.aspx?docid=4005. 81  Peter Trepte, ‘All Change at the World Bank? The New Procurement Framework’ [2016] Public Procurement Law Review 121. 82  World Bank, The World Bank Group and Public Procurement: An Independent Evaluation, 2014, http://elibrary.worldbank.org/doi/abs/10.1596/978-1-4648-0123-5_ov. 83  Michael Riegner, ‘Governance Indicators in the Law of Development Finance: A Legal Analysis of the World Bank’s “Country Policy and Institutional Assessment”’ (2016) 19 J­ ournal of International Economic Law 1. 84  According to the new terminology reached in the 2016 reform and consolidated in the Bank’s Policy and Regulations, the PPSD is defined as ‘[a] project-level strategy document, prepared by the Borrower, that describes how procurement in IPF operations support the development objectives of the project and deliver VfM’. For more guidance in the formulation of the PPSD, the Bank developed a detailed Project Procurement Strategy for Development, Long Form Detailed Guide, July 2016, available at http://pubdocs.worldbank.org/ en/847531467334322069/PPSD-Long-Form-June-30.pdf. 85 As expressed in General considerations of the Procurement Guidelines, para 1.2(a). The World Bank, Guidelines Procurement Under IBRD Loans and IDA Credits, January 2011.

Concerns in the World Bank Procurement Framework 217 have been defined as ‘meta-principles’ in the management of the Bank’s loan financing procurement practices, as they are grounded in the World Bank’s regulation of the use of loans set in the IBRD Articles of the Agreement.86 As required by Section 5 Article III (b), ‘the Bank shall make arrangements to ensure that the proceeds of any loan are used only for the purposes 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’. The combined reading of the provisions in the World Bank’s main instruments confirms the conformity of the approach to a mostly economic model of procurement regulatory system. This fundamental scope was supported, in the previous World Bank’s regulatory approach to public procurement, by four main objectives, as identified in the Procurement Guidelines 1.2. The principles of economy and efficiency, competition, and transparency, together with the objective of promoting development in the borrowing countries thus constituted the main regulatory purposes underlying the World Bank Procurement Guidelines, before the reform. The achievement of these main objectives, mutually and positively influencing each other, represented the World Bank’s interest, ensuring the best allocation of the Bank’s loans.87 In the previous regulatory approach, the Bank’s Guidelines did not provide articulated definitions of these regulatory principles and their interpretation was mainly based on the Articles of Agreement, the World Bank’s founding charter. The reform of the Bank’s procurement regulatory framework expands and clarifies its fundamental procurement principles, set in the Policy and the Regulations. Seven core procurement principles have been identified in the Bank’s Procurement Policy: value for money, economy, integrity, fitness for purpose, efficiency, transparency and fairness. The addition of these core procurement principles seems to move in the direction of creating a common ground in the systematisation of the regulatory foundations of the major international instruments of procurement regulation. The Bank’s development of these core procurement principles moves towards a vision closer to the principles stated in the EU Directives, the WTO’s Government Procurement Agreement and the UNICTRAL Model Law.88

86  World Bank Legal Department (LEGOP), Comparison of the International ­Instruments on Public Procurement, Review of the World Bank’s Procurement Policies and Procedures Background Paper, March 2013, 11. Available at http://siteresources.worldbank.org/­ PROCUREMENT/Resources/84265-1354233251381/Background_paper-International_ instruments.pdf. 87  Tim Tucker, ‘A Critical Analysis of the Procurement Procedures of the World Bank’ in Sue Arrowsmith and Arwel Davies (eds), Public Procurement: Global Revolution (Kluwer Law International 1998) 139–156. 88  Trepte, ‘All Change at the World Bank?’ (2016) 121.

218  Social and Labour Considerations in Non-Trade Instruments Between the newly introduced principles, the inclusion of value for money and its implication for developing countries has attracted considerable attention.89 Defined in the Policy as ‘the effective, efficient, and economic use of resources, which requires an evaluation of relevant costs and benefits, along with an assessment of risks, and non-price attributes and/or life cycle costs’, the principle of value for money has been further articulated in the Regulations (Regulation 1.3(a)) and in Annex I. It is, however, the ­principle of fitness for the purpose that assumes crucial importance in light of the changes adopted in the reform. The principle of fitness for purpose seems to replace the most controversial of the regulatory objectives of the previous the Procurement Guidelines: ‘the Bank’s interest in encouraging the development of domestic contracting and manufacturing industries in the borrowing country’ (Guideline 1.2.c). The reference in the previous Guidelines of the protection of a national industry as a procurement objective represented the main difference to the other instruments of international procurement regulation, particularly the GPA.90 The specific attention of the World Bank, focused on the development of individual borrowing countries, has in the past raised significant concerns about its substantial contrast to the principle of non-discrimination at the basis of the GPA.91 In the reformed Policy, this principle of fitness for purpose becomes a crucial aspect of the new strategic approach to public procurement and an absolute innovation in the context of the international regulation of procurement. The principle is described as the fundamental variable in the determination of ‘the most appropriate approach to meet the project development objectives and outcomes, taking into account the context and the risk, value, and complexity of the procurement’. Section IV of the Bank’s Regulations requires that the procurement activities—their procurement methods and the approaches chosen—are carried out to achieve the needs of the project and to deliver the best value for money under a fit-for-purpose approach on the basis of the specific context in which the procurement is

89 Sope Williams-Elegbe, ‘The Changes to the World Bank’s Procurement Policy and the Implications for African Borrowers’ (2014) 1 African Public Procurement Law Journal 22. 90  Marta De Castro Meireles, ‘The World Bank Procurement Regulations: A Critical Analysis of the Enforcement Mechanism and of the Application of Secondary Policies in Financed Projects’ (PhD Thesis, University of Nottingham 2006) http://www.nottingham.ac.uk/pprg/ publications/phd.aspx. 91  The attention paid in the Procurement Guidelines to the industrial development of the borrowing countries was interpreted in the light of the main purposes of the Bank itself as defined by Article I of the Articles of Agreement. Article I, in fact, defines as the main purposes of the Bank, ‘(i) to assist in the reconstruction and development of territories of members’ and ‘(iii) to promote the long-range balanced growth of international trade and the maintenance of equilibrium in balances of payments by encouraging international investment for the development of the productive resources of members’.

Concerns in the World Bank Procurement Framework 219 conducted. This principle is the cornerstone of the Bank’s new PPSD, which is an in-depth analysis of the procurement project needs and risks in the specific context of the borrowing country.92 In addition to the principles of value for money and fitness for purpose, the regulation of the conduct of the procurement process within the reformed Bank’s architecture is oriented towards the achievement of the principle of fairness. The principle of fairness assumes three different interpretations as explained in the Bank’s Policy. Section III.C.7 of the Bank’s Policy refers to: ‘(i) equal opportunity and treatment for bidders and consultants; (ii) equitable distribution of rights and obligations between Borrowers and suppliers, bidders, consultants, and contractors; and (iii) credible mechanisms for addressing procurement-related complaints and providing recourse.’93 The principle of fairness seems to expand and to substitute the objective of promoting competition between ‘all eligible bidders from developed and developing countries’ (Guideline 1.2 b) already expressed in terms of equal opportunity for bidders in the previous procurement regulation.94 Underlining the importance of ensuring equal opportunity and equal treatment between the bidders, the newly introduced principle of fairness strengthens the regulatory similarities of the Bank’s regulatory framework with the principle of equal treatment as set in the GPA and EU Directives. Finally, to conclude the analysis of the regulatory principles of public procurement, it is important to note that the procurement regime set in the World Bank’s Policy and Regulations around these principles do not allow derogations or general exceptions, as these may only be included in binding regulatory instruments. Similarly to the UNCITRAL Model Law, the Bank’s new Procurement Framework, similarly to the previous Procurement Guidelines, does not include the possibility to derogate from the principles of efficiency, transparency and competition on the basis of external alternative principles, such as public morals or the protection of human, animal or plant life as provided by the GPA.

92  The details of the development of the Project Procurement Strategy for Development are developed in Annex V of the Bank’s Regulations. 93  Bank Policy, Procurement in IPF and Other Operational Procurement Matters, https:// policies.worldbank.org/sites/ppf3/PPFDocuments/4002Procurement%20Policy%20-%20 Final%20-Definitive.pdf. 94 Moreover, competition represents a crucial component of the World Bank regulatory approach as confirmed in Guideline 1.3 ‘open competition is the basis for efficient public procurement’ and as mirrored in the preference for International Competitive Bidding (ICB) as the method for the conduct of the procurement practices financed by the Bank. However, international competitive bidding is not necessarily the most appropriate procurement method for all the procurement practices, and for this reason the World Bank also includes the regulation of limited international bidding, national competitive bidding, shopping and direct contracting in the Guidelines. Frilet and Lager, ‘Public Procurement’ (2009) 101–12.

220  Social and Labour Considerations in Non-Trade Instruments D. The Achievement of Sustainable Procurement in the World Bank Procurement Policy and Regulations Compared to the World Bank’s initiatives and interventions in other p ­ olicy areas like climate change,95 good governance or judicial reform,96 the approach traditionally followed by the Bank to the regulation of public procurement activities appears to be primarily focused on the achievement of efficiency in the conduct of procurement projects.97 Without denying the existence of core human right obligations to which the World Bank is required to confirm,98 the importance of social and labour considerations in the management of its loan activities for procurement activities was often and drastically reduced, as proved in the case of procurement in the infrastructure sector.99 However, the previous World Bank Procurement Guidelines allowed, to a certain extent, the possibility of including references to social and environmental considerations at different stages of the procurement process, focusing on the use of standards and codes of conduct. Within the World Bank’s fiduciary approach to the management of the procurement conduct, standards assumed the important advantage of translating social and labour considerations into quantifiable operating costs, particularly in technical specifications and award criteria, allowing the possibility of balancing efficiency in procurement with the legitimate policy needs of the borrowing countries.100 However, it was evident that the Guidelines’ provisions lacked sufficient guidance regarding the inclusion of non-economic policy considerations—referring to environmental benefits and energy efficiency but not explicitly mentioning labour or social criteria.101

95  For an overview of the linkage between human right concerns and the implementation of the Bank’s action on Climate Change, see Siobhan McInerney-Lankford, Mac Darrow and Lavanya Rajamani, Human Rights and Climate Change. A Review of the International Legal Dimensions (World Bank Publications 2011). 96  For a broader study, see Mac Darrow, Between Light and Shadow: The World Bank, the International Monetary Fund and International Human Rights Law (Hart Publishing 2003). 97  Trepte (n 1) 266. 98  For a comprehensive analysis of the responsibility of the World Bank to the respect of human right obligations see Sigrun I Skogly, The Human Right Obligations of the World Bank and the International Monetary Fund (Cavendish Publishing Ltd 2001); Christine Kaufmann, Globalisation and Labour Rights: The Conflict Between Core Labour Rights and International Economic Law (Hart Publishing 2007) 125–26. 99  Atsushi Iimi and Antonio Estache, ‘Procurement Efficiency for Infrastructure Development and Financial Needs Reassessed’ (2008) World Bank Policy Research Working Papers 1. 100 Rita Roos, ‘Sustainable Public Procurement in LICs—Implications for the Ongoing World Bank Procurement Review’ (Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH 2013). 101  The Independent Evaluation Report which was conducted as background for the reform process of the World Bank Guidelines summarises the sustainability aspects of the previous procurement regulation: ‘Regarding sustainable and environmentally aware procurement, Bank Guidelines and practices already offer many avenues to incorporate “green” ­considerations

Concerns in the World Bank Procurement Framework 221 Against this background, the reformed Bank’s Procurement Policy and Regulations introduced significant attention to the issue of sustainable procurement, as suggested in the Bank’s Initiating Discussion Paper.102 The importance of sustainable public procurement in the new strategic vision adopted by the Bank is underlined in the Procurement Policy. Sustainable considerations are now an integral part of the definition of the principle of economy, bringing together environmental and social concerns. Economy in the context of the Bank’s procurement activities become a more comprehensive concept, incorporating ‘factors such as sustainability, quality, and non-price attributes and/or life cycle cost as appropriate, that support value for money’.103 The new definition of the economy principle ‘permits integrating into the Procurement Process economic, environmental, and social considerations that the Bank has agreed with the borrower. It also permits augmenting identified sustainability criteria with specific criteria in support of the Borrower’s own sustainable procurement policy’. In the more detailed framework of the Bank’s Procurement Regulations, Section 5.12 of the specifically allows the possibility for the borrower country to include sustainable criteria in the procurement projects, as optional objective in the management of the Bank’s loans. Section 5.12 of the Regulations states that ‘[i]f agreed with the Bank, Borrowers may include additional sustainability requirements in the Procurement Process, including their own sustainable procurement policy requirements, if they are applied in ways that are consistent with the Bank’s Core Procurement Principles’. However, this option is framed as a voluntary decision of the borrower country, free to determine to what extent and which standards of the environmental and social criteria should be included.104 The Bank’s Regulations explore in more details the regulation of sustainable public procurement in Annex VII, clarifying the stages and the modalities for the inclusion of sustainable criteria the procurement process. In defining its regulatory purpose, Annex VII reaffirms that the inclusion of sustainable considerations is limited to the voluntary decision of the ­borrower country, into the procurement process, although they are not systematically used. Guidance for s­ ector and procurement staff would help expand this. There is scope for further clarification, especially in circumstances where the most sustainable outcome does not lead to the lowest cost. More guidance on the evaluation of nonquantifiable and nonmonetizable factors would also help.’ 102  Paragraph 54 of the Initiating Discussion Paper of the Bank’s Procurement Policies and Procedures: Policy Review reaffirms the intention to explore the issue of sustainability in public procurement on the basise of the experiences reached in many countries and in the EU. In addition, it states ‘We are also going to take a broader look at the implications of environmentally and socially sustainable procurement.’ The Initiating Discussion Paper of the Bank’s Procurement Policies and Procedures: Policy Review is available at http://documents.worldbank.org/ curated/en/413861468182330960/pdf/684460BR0AC20101200Discussion0Paper.pdf. 103  Bank Policy, Section III.C.2. 104  Trepte (n 81) 42–43.

222  Social and Labour Considerations in Non-Trade Instruments free to ‘determine the extent to which they implement additional sustainable procurement requirements’ (in Annex VII 1.1). To ensure transparency and fairness in the inclusion of sustainable considerations in procurement projects, Annex VII clarifies that these requirements may be based on the borrower country’s domestic policies (Article 2.3), should be based on evidence and existing labelling and certifications (Article 2.4) and should be openly specified in the procurement documents (Article 2.6). Three remarkable regulatory innovations are reached in Annex VII of the Bank’s Procurement Regulations regarding the achievement of social and labour criteria in procurement projects. First, social and labour considerations are perfectly equilibrated to the achievement of environmental considerations in public procurement. There is no indication of a regulatory preference and both environmental and social criteria become part of the holistic approach of the Bank’s to the concept of sustainable development. The Bank adopts a three-dimensional concept of sustainable development, grounded on economic, environmental and social pillars. As confirmed in Article 2.7 Annex VII, the ‘Borrower may include economic, environmental, and social considerations in a contract, provided they are consistent with Bank policy’. The social priorities that the Bank specifically consider as a priority in its approach to sustainable procurement cover a broad spectrum of concerns of individual and social justice considerations: human rights, food security and drinking water, fair pay and labour law protection, gender equality and maternity health, the abolition of anti-child labour and forced labour, fair trade, together with health and safety concerns.105 Second, social and labour considerations are fundamental aspects of the PPSD, the Project Procurement Strategy for Development (set in Article 2.1 Annex VII), which is the most relevant instrument for the assessment of domestic procurement and the development of the new procurement project. It is important to underline that the assessment of the sustainability considerations is a fundamental part of the PPSD analysis, particularly focused on the borrower’s policies on social sustainability, summarised in the Environmental and Social Assessment (ESA) of the country. Third, social and labour criteria may be included in all the stages of the procurement process, from the identification of the procurement needs to the post implementation review. Article 2.2 Annex VII clarifies that sustainable considerations can be included in: ‘a. Prequalification/Initial Selection of firms; b. functional and/or detailed technical specifications; c. evaluation criteria; d. contract terms and conditions; and e. contract performance monitoring’.

105 World Bank, Guidance on Sustainable Procurement, http://pubdocs.worldbank.org/ en/788731479395390605/Guidance-on-Sustainable-Procurement.pdf.

Concerns in the World Bank Procurement Framework 223 The relevance of the importance of the inclusion of sustainable criteria along the entire procurement process is reaffirmed in each of the ­specific regulations of the different stages in the procurement management, and ­particularly in the context of technical specifications and award criteria. i.  Technical Specifications and the Maximisation of Competition The World Bank’s regulation of technical specifications has traditionally been inspired by two main objectives: it aims to guarantee that technical specifications precisely and adequately define the subject of the procurement process and that specifications should not negatively influence the competition’s dynamics. According to the previous Procurement Guidelines (2.19) and confirmed in Regulation 5.26, the main purpose of the specifications is to ‘promote the broadest possible competition, while assuring the critical performance or other requirements for the goods and/or works under procurement’. Particular attention is reserved to international standards, openly preferred, to the extent possible, in the preparation of technical specifications to ensure the broadest possible competition.106 In this context, there is no clear indication on the possibility of including international standards based on production methods in the technical specifications. The World Bank’s regulatory approach to technical specifications, even if oriented towards the maximisation of efficiency and competition, expressly include the possibility of including references to social and labour policies. The Procurement Regulations (Annex VII 2.5) state: ‘The sustainable procurement requirements should be based on evidence (i.e. with supporting data), and on existing social-label criteria, eco-label criteria, or information collected from stakeholders in industry, civil society, and international development agencies.’ As confirmed in the Procurement Regulations (Annex VII, 2.6), international standards, certifications and socio-eco labels are considered by the Bank to be valuable sources of information for the achievement of achieve sustainability outputs, with the condition that they are credible and internationally recognised and that equivalent labels are accepted.107 More guidance is provided in the World Bank’s Standard Procurement Documents, also reformed in 2016. In the World Bank’s Standard Procurement Documents for the procurement of goods and works, technical specifications are interpreted as crucial instruments for ensuring efficient conduct of the entire procurement process. Specifications are defined as important

106  Guidelines 2.19 and Regulation 5.26 both specify also that ‘where such international standards are unavailable or are inappropriate, national standards may be specified’. 107  World Bank, Guidance on Sustainable Procurement, Annex 1 Labels and Certification Schemes Procurement, available at http://pubdocs.worldbank.org/en/788731479395390605/ Guidance-on-Sustainable-Procurement.pdf.

224  Social and Labour Considerations in Non-Trade Instruments benchmarks for the effective verification of the responsiveness of the t­ enders to the specific needs of the contracting authorities and a crucial step towards efficiently approaching the following examination and evaluation of the offers.108 Together with other requirements, like standards of material and workmanship, technical specifications may include clearly specified considerations of sustainable development. Particular attention is paid to the development of innovation in meeting the environmental and social needs, as ‘[t]o encourage bidders’ innovation in addressing sustainable procurement requirements, as long as the bid evaluation criteria specify the mechanism for monetary adjustments for the purpose of bid comparisons, bidders may be invited to offer goods that exceeds the specified minimum sustainable procurement requirements’. Moreover, to ensure more transparency in the inclusion of sustainable criteria, ‘sustainable procurement requirements shall be specified to enable evaluation of such a requirement on a pass/fail basis’. ii. Evaluation Criteria: Between Domestic Preferences and Sustainable Considerations The recent comprehensive reform of the World Bank’s procurement regulatory regime considerably modifies the evaluation stage in the management of their procurement projects. Until now, the Bank’s Guidelines (2.49) relied for the evaluation of the bids on ‘the lowest evaluated cost, but not necessarily the lowest submitted price’. These criteria, namely the price109 together with the other relevant factors that contribute to the identification of the ‘lowest evaluated cost’, had to be specified in the bidding documents, including their relative weight and the modalities adopted for the evaluation process. Moreover, it was expressly required in Guideline 2.52 that ‘the factors other than price to be used for determining the lowest evaluated bid shall, to the extent practicable, be expressed in monetary terms’, framing the options for the inclusion of other horizontal policies in the evaluation criteria into a strict regime of transparency.110 108 

World Bank, Standard Procurement Document—Procurement of Goods, July 2016, p 83. The World Bank Guidelines include precise instructions regarding the opening of the bids (2.50) and the evaluation of the costs on the place of destination prices (2.51). 110  The interpretation of the illustrative list of factors other than prices that can be included in the evaluation process offers some flexibilities—even if not extensive guidance—for the implementation of horizontal policies in the award process. The last two criteria included in the illustrative list in Guideline 2.52 may be referring to the broad definition of horizontal policies: for the procurement of goods ‘other factors may be taken into consideration including, among others, payment schedule, delivery time, operating costs, efficiency and compatibility of the equipment, availability of service and spare parts, and related training, safety, and environmental benefits’. However, no indication is provided in the Guidelines whether socio- and environmental benefits should be counted as evaluation criteria with the same importance of price or other efficiency requirements or if they should be considered only additionally. 109 

Concerns in the World Bank Procurement Framework 225 The previous regulatory approach to award criteria has been integrated with a more detailed methodology for the evaluation of the value for money in the evaluation stage of the procurement process. According to Regulation 5.68, procurement contracts are allocated to the ‘Most Advantageous Bid/Proposal, in accordance with the applicable selection method’ after the evaluation of rated or unrated criteria. Annex X of the newly introduced Bank’s Procurement Regulations clarifies the application of evaluation criteria for the identification of the most advantageous bid/proposal and the maximisation of value for money. An integral part of the PPSD, the evaluation criteria should be ‘appropriate and proportionate’ to the specific nature of the procurement project and quantifiable to the extent possible, in order to ensure transparency and fairness. The different factors that can be included in the evaluation of the applicants are expressively listed in Article 2.3 Annex X. Sustainable criteria are expressively included, together with costs, quality, risks and innovation aspects, to achieve the maximisation of value for money. According to Article 2.3 (b) Annex X, ‘criteria that take into account stated economic, environmental, and social benefits in support of the project objectives, and may include the flexibility of the Proposal to adapt to possible changes over the life-cycle’. The specific modalities for the implementation of the newly reformed qualification and evaluation criteria are further explored in ­Section III of the 2016 Standard Procurement Documents. It is interesting to notice that the evaluation stage of the procurement process is divided into a first initial selection, used to test the capability and the qualification of the applicant, followed by evaluation of the costs. Sustainable criteria can be included in both stages, as clarified in the 2016 specific Guidelines on Evaluation Criteria.111 In particular, in the initial selection,112 the eligibility of the applicant is tested, together with the applicant’s history of non-contract performance and financial situation and experience. The sustainability of the applicant’s business model and its procurement project is scrutinised, not only in the overall policy but also in the track record of its previous sustainable procurement results and any possible sustainable accreditations or awards from a recognised body. Together with the requirements set for the evaluation and comparison of the bids, a crucial part of the bids’ evaluation process in the World Bank regulatory framework of public procurement is represented by the possibility of allocating margins of preference on the basis of the nationality of the producers. Similarly to the UNCITRAL Model Law but in contrast with

111  World Bank, Evaluation Criteria: Use of evaluation criteria for procurement of Goods, Works, and Non-consulting Services using RFB and RFP, July 2016, http://pubdocs.worldbank.org/en/201591478724669006/Guidance-Evaluation-Criteria.pdf. 112  The Initial Selection consists of a shortlisting mechanism used with the Request for Proposals and in the Competitive Dialogue processes.

226  Social and Labour Considerations in Non-Trade Instruments the WTO regulatory approach, the allocation of domestic preference may serve the purpose of achieving legitimate policy objectives of the borrower countries, following models of collective justice, supporting disadvantaged groups of society or addressing the problem of unemployment. The application of domestic preferences in the evaluation process has been widely discussed in the reform process of the World Bank’s ­Guidelines.113 As shown in the review of the World Bank’s procurement policies and practices, the use of domestic preferences in the management of procurement contracts has radically changed since 1966, when the Guidelines were adopted. Nowadays, domestic preferences represent almost a marginal reality in the adjudication of procurement contracts financed by the Bank: in the last decade almost 80 per cent of the procurement awards were allocated to suppliers from borrower countries, progressively reducing the importance and the overall relevance of domestic preference in the World Bank procurement system. Moreover, the economic impact that domestic preferences had on the borrower countries’ local industries and local economies also proved to be controversial, particularly when compared to the benefits gained by the allocation of public contracts to the most efficient suppliers.114 Regardless of the criticisms raised, as previously set out in Guideline 2.55, the new Bank’s Regulations (from 5.51 to 5.53) confirm the possibility of distribution of a margin of preference to producers and suppliers of the borrower country in the case of procurement of goods and in work below certain thresholds of gross national income per capita.115 iii. Contract Conditions and the Introduction of Contract Performance Monitoring Regulation 5.29 identifies the main scope of the Bank’s regulatory approach to contract conditions in the procurement process. In the context of the procurement projects financed by the Bank, contract conditions ‘shall provide an appropriate allocation of rights and obligations, risks and liabilities, informed by an analysis of which party is best placed to manage the risks, bearing in mind the costs and incentives of risk allocation’. Sustainable references could be included in the contract documents that should clearly define the following essential elements: ‘a. scope of work to be performed; b. Goods, Works, Non-consulting Services, or Consulting Services to be provided; c. rights and obligations of the contracting parties; and d. other

113  Myrna Alexander and Charles Fletcher III, The Use and Impact of the Bank’s Policy of Domestic Preferences (World Bank 2012). 114  ibid 9. 115  Annex VI of the Bank’s Regulations clarifies the methodology in the application of these preferences.

Concerns in the World Bank Procurement Framework 227 appropriate conditions.’ Annex IX, Contract Conditions in International Competitive Procurement further develop the essential element constituting the contract conditions even if not providing clear guidance in the inclusion of social and labour standards. As previously explored, the use of performance requirements in procurement contracts represents an important instrument for the inclusion of social policy considerations and, in particular, for the enforcement of labour rights and standards in the supply chain. Previously, the World Bank’s Procurement Guidelines did not provide a comprehensive regulation of the use of contract conditions. The only provision addressing the regulation of contract conditions was Guideline 2.38, differentiating between general and special conditions in public contracts.116 The Bank’s Regulations now expressively address the stage of the contract management in the procurement projects and the Annex is specially dedicated to the implementation of the procurement contract, even if without an explicit reference to labour and social criteria. E.  Concluding Remarks on the World Bank Procurement Framework The 2016 comprehensive reform of the World Bank’s Procurement Framework has radically changed how and to what extent the inclusion of social and labour policies—embedded in the broad concept of sustainable ­development—is integrated in the management and in the regulation of the procurement practices financed with the Bank’s loans. The results achieved in the reform represent probably the most far-reaching standards for the inclusion of social and labour considerations in public procurement, even if their implementation is exclusively left to the voluntary decision of the borrower’s country. From a systemic point of view, sustainability has been included in the ­priorities and the core principles orienting the new strategic vision of the Bank on public procurement, moving from a logic of strict economy and efficiency to a more comprehensive approach of fitness for purpose. From a more operational approach, the World Bank Procurement Policy and ­Regulations allow the possibility for the inclusion of social and labour ­considerations in the entire procurement process, embedded in the analysis of the specific characteristics of the borrower country and its procurement projects developed in the PPSD. 116 General conditions have the main purpose of defining the works to perform and the goods to deliver in the contracts and they can be supplemented by additional special conditions, which are more flexible towards the inclusion of horizontal policy concerns in performance characteristics.

228  Social and Labour Considerations in Non-Trade Instruments The new aspects introduced seem to gradually converge, in their wording and in their regulation, to the regulatory standards adopted by the other instruments of procurement regulation, even with the strong focus of domestic preference that still characterises the World Bank’s framework of public procurement. However, it is too early to assess the scope of the reform and the impact on its actual implementation in procurement projects.

General Conclusions

A

S STATED AT the beginning of this work, the main aim of this research was to conduct a comparative study on the achievement of social and labour policies under the main international instruments of procurement regulations. The objective of this book was not necessarily to advocate greater inclusion of social and labour rights into the international regulatory framework of public procurement, in order to achieve a higher ethical dimension of the regulation of the award of public contracts. The scope of this work was, rather, to explore the international regulatory framework of the instrumental use of public procurement for social and labour purposes. In particular, the main research goal of this research was to explore whether and how social and labour considerations can be included in the interpretation and application of the major international instruments of procurement regulation, without undermining the application of the principle of non-discrimination and transparency. To this end, the research developed a three-fold framework for the analysis. (A) At the first level of the analysis, the research framed the instrumental use of public procurement to achieve social and labour purposes as a conflict between different procurement regulatory objectives: the internal and domestic objectives of value for money and efficiency against the international commitments of non-discrimination and the external objectives of social equality. (B) At the second level of the analysis, the research explored the complexity of the modalities for the implementation of social and labour policies along the procurement process, which are supported by strong justifications but which bring the risk of serious implications for competition and transparency. (C) Lastly, the research focused on the regulation of the achievement of social and labour policy objectives—in all the different stages of the procurement process—under four main instruments of international procurement regulation: the World Trade Organization (WTO) Agreement on Government Procurement (GPA); the EU procurement Directives; the UNCITRAL Model Law; and the World Bank’s Procurement Framework. The remainder of this concluding chapter will present the major findings and contributions of the comparative study of the instrumental use of public procurement for social and labour policies, at these three different levels of analysis.

230  General Conclusions (A)  FRAGMENTATION—INTERNATIONAL REGULATORY INSTRUMENTS WITH CONFLICTING REGULATORY OBJECTIVES

To delineate the purpose of the research, chapter one defined the debate on the fragmentation and coherence within the international framework of public procurement governance. This research has been the first attempt to focus on the impact of fragmentation on the international framework of public procurement regulation. In a horizontal dimension of fragmentation, the international regulatory regimes of public procurement emerge as isolated and potentially conflicting regulatory blocks developed around a limited number of regulatory objectives and functional principles in specific international fora, with nonoverlapping membership. Within this framework of fragmented procurement governance, instead of approaching the debate from a perspective of top-down harmonisation, this work adopted a dynamic approach focused on the gradual convergence between these international instruments. To highlight convergence and coherence, a comparative framework of analysis was established and used throughout the research to study the instrumental use of public procurement for social and labour purposes. This use of public procurement has been framed as a tension between the principles of efficiency and nondiscrimination in the procurement process and the social and labour priorities of the procuring governmental authorities. (B)  IMPLEMENTATION OF SOCIAL AND LABOUR POLICIES IN THE PROCUREMENT PROCESS

Chapter two contributed to a deeper understanding of the complexity of the achievement of social and labour policies in public procurement with respect to two main issues. The study advanced knowledge relating to the instrumental use of public procurement to achieve social policy objectives, looking at: (1) the specific content of the social and labour policies; (2) the stages of the tendering process at which these policies can be implemented. (1) In terms of advancing our knowledge of the complexity of the instrumental use of public procurement for social and labour purposes, chapter two provided an overview of the different definitions, terminologies and categories used in the academic literature relating to the study of non-economic policy objectives in public procurement. As a starting point, the research differentiated between the strategic use of public procurement as an industrial policy instrument, the protective use of public procurement against foreign competition and the proactive use of public procurement for the achievement of non-economic policy objectives. The work highlighted how all of these three dimensions of the instrumental use of public procurement to achieve legitimate policy objectives have a significant social and labour dimension.

Social and Labour Policies in Procurement 231 (2) In the context of the instrumental use of public procurement to achieve social and labour policy objectives, chapter two presented a broad systematisation of the different social usage of the procurement practices. The analysis differentiated between two main functional approaches of social justice (namely an individual justice model and group justice model) and four categories of social considerations. On the one hand, according to a functional model of collective and redistributive justice, public procurement has been used essentially for the promotion of employment opportunities, for example to address youth unemployment or the promotion of gender balance, and to achieve the purpose of social inclusion of disadvantaged members of the community, aiming to achieve inclusion of, for example, people with disabilities or migrants in the workforce. On the other hand, to enforce a model of individual justice, public procurement practices have been used to promote decent working conditions, such as minimum wages or health and safety standards, or to guarantee compliance with labour rights, referring to domestic legal law and international agreements. (3) The study of the different social and labour considerations included in the procurement process has been integrated with the overview of the political, economic and legal implications of the inclusion of social and labour policy objectives and the main justifications behind this linkage. However, the extent of the implications is strictly related to the particular procurement mechanism and to the specific stage of the procurement process at which social and labour considerations are implemented. For this reason, chapter two provided an extensive critical overview of the main implementations mechanisms of social and labour policies at the different stages of the procurement circle, highlighting the main advantages and the potential risks. Important considerations can be derived from this overview. It appears to be technically feasible to include references to social and labour policies in all stages of the procurement process, including in the procurement-planning phase. Even if the social use of packaging public orders and set-asides has been extensively adopted, contract specifications, qualification requirements, award criteria and contract performance conditions are the steps of the procurement process that offer the greatest potential for balancing labour, efficiency and transparency concerns. To be more specific, the following main conclusions can be drawn from the analytical overview conducted in chapter two. (i)

Contract and technical specifications provide great flexibility for the inclusion of social and labour policy objectives, when referring to the characteristics of the goods and services which are to be procured in functional and performance terms. However, defining the subject matter of the procurement process, contract specifications have a major impact on competition and, for this reason, it is highly questionable whether or not, at this stage, references to production methods that are not reflected in the final characteristics of the goods and services (as in the case of social and labour rights) should be included.

232  General Conclusions (ii)

The selection stage of the procurement process is a privileged moment for the inclusion of social and labour concerns. Exclusion and qualification conditions have a long tradition in terms of enforcing workplace equality and penalising past violations of social and labour standards. Moreover, in the award selection process, social and labour factors have also often been taken into consideration as award criteria, not only with reference to the internal structure of the competing firms, their workforce management and respect for minimum labour conditions, but also in connection with broader social policies, such as fighting long-term unemployment or promoting the economic development of specific groups in disadvantaged areas. (iii) The execution phase of the public contracts provides additional opportunities for the enforcement of horizontal policy concerns. Performance contract conditions based on social and labour concerns do not represent discriminatory procurement measures per se and guarantee the effectiveness of the implementation of the social requirements on the behaviour of the winning supplier. To integrate the analysis of the different inclusion of social and labour concerns along the various stages of the procurement contract, it becomes important in the context of the global fragmentation of the supply chain, to draw attention to the integration of verification and enforcement mechanisms along the suppliers’ production lines, as another important contribution to the understanding of the social and labour dimension of procurement practices. The implementation of social and labour concerns at the different stages of the procurement process has to be integrated with research on the different verification mechanisms for the enforcement of socially responsible procurement requirements along the suppliers’ production chain, opening new future lines of research. Labelling and certification schemes are only some of the different verification schemes that can be introduced along the entire procurement process. In particular, the research showed the importance of social standards and labels as sources of valuable information for the procuring authorities at two important stages of the procurement process: in the preparation of the contract specifications and in the evaluation of the suppliers’ offers. (C)  INTERNATIONAL LEGAL FRAMEWORK AND THE LABOUR AND SOCIAL DIMENSION OF PUBLIC PROCUREMENT

Based on the research conducted in chapters one and two, chapters three, four and five analysed the achievement of social and labour policy objectives under the main international instruments of procurement regulations (the WTO GPA; the EU procurement Directives; the UNCITRAL Model Law;

International Legal Framework and the Labour Dimension 233 and the World Bank’s Procurement Framework). The different international regulations on public procurement offer—in both their negotiating and reform processes—the possibility of including social and labour concerns in the conduct of the procurement process, in light of their different regulatory objectives. The research showed that the fragmented landscape of partially overlapping and partially conflicting international regulatory approaches to the instrumental use of procurement practices for social and labour purposes shows significant patterns of convergence. (1) This work established a clear distinction between trade agreements addressing public procurement (the WTO GPA and the EU procurement regulatory framework) and non-trade instruments specifically regulating the conduct of the procurement process (the UNCITRAL Model Law and the World Bank’s Procurement Framework). In both trade and non-trade instruments of procurement regulation, the research focused on three main variables: the institutional design of the regulation, the main regulatory objectives behind the regulations and the specific commitments for the conduct of the procurement process. Based on the comparative research conducted in chapters three, four and five the following conclusions can be drawn. (i)

(ii)

Compared to non-trade instruments offering a straightforward and coherent regulation of the procurement process, international trade instruments of procurement regulation rely on a complex institutional design and a multi-layered structure. On one hand, the GPA is a WTO plurilateral agreement, standing outside the WTO mechanism of Single Undertaking and establishing its regulation on a very limited membership and a complex coverage structured through different Annexes and Schedules of Commitments. On the other hand, the EU procurement framework is developed on double layers of commitments, under the EU Treaties and specific procurement Directives, integrating with each other in a relationship extensively interpreted by the Court of Justice of the European Union (CJEU). This multi-layered design increases the interpretative difficulties of balancing trade non-discrimination priorities with the protection of legitimate policy objectives, between core commitments, general exceptions and coverage derogations. Under the light of their main regulatory objectives, non-trade instruments seem to focus mainly on the achievement of domestic and internal objectives of the procurement process, not including the principle of non-discrimination as separate goal of the procurement regulation. The UNCITRAL Model Law aims at achieving economic and efficiency in the regulation of the domestic dimension of the procurement process, together with the objectives of openness, competition, fairness, integrity and transparency. The World Bank Procurement Policy and Regulations are inspired by seven core principles aiming at

234  General Conclusions maximising the efficiency in the procurement process as financed by the Bank’s loans under a fiduciary approach. Value for money, fitness for purpose, economy, integrity, efficiency, transparency and fairness are the principles behind the 2016 reform of the World Bank Procurement Framework. (iii) The achievement of social and labour policies is usually not included as a separate goal within the regulatory objectives of the main international instruments of procurement regulations, with the exception of the World Bank. The newly reformed World Bank Procurement Regulations indirectly include the achievement of social purposes in the definition of economy in the procurement process, adopting a more comprehensive approach to the concept of sustainable development. (iv) Between the broader spectrum of non-economic, horizontal or secondary policies, it is interesting to note that the main international instruments of procurement regulation, particularly thanks to their recent process of reforms, seem to tend towards the adoption of a common regulatory approach to environmental and social policy consideration, traditionally regulated separately. If environmental and social criteria are assimilated in the wording of the 2014 EU procurement Directives, the 2011 UNCITRAL Model Law eliminates the traditional distinction between industrial and socio-environmental policies, under the broader definition of ‘socio-economic policies’. The 2016 World Bank Procurement Regulations pay considerable attention to the concept of sustainable development, embracing both environmental and social concerns. In contrast, the WTO government procurement agreement maintains a distinction between the two sets of policies, only including explicit references to environmental policies in its revised GPA. (v) In the international trade negotiation of public procurement, the most controversial aspect of the achievement of social and labour purposes in public procurement proved to be the impact of the application of the principle of non-discrimination. The instrumental use of public procurement is extremely difficult to isolate from the allocation of preference and economic benefits to domestic suppliers, often implied in the social and labour policy objectives pursued. The achievement of social and labour policies—particularly in the context of the strategic use of public procurement or as protection from foreign competition—are very difficult not be proved in potential violation of the trade instruments of procurement regulation, both at WTO and EU level. For this reasons, the use of public procurement for social and labour objectives often finds its privileged regulatory space in the interpretation under derogations and general exceptions. (vi) The research showed how international trade instruments of procurement regulation frame the use of public procurement as an instrument to achieve social purposes as a derogation and exception from the main

International Legal Framework and the Labour Dimension 235 discipline, ensuring respect for the principle of non-discrimination (the WTO GPA) and the fundamental freedoms of the internal market (the EU procurement framework) and the non-trade instruments of international procurement regulations (the UNCITRAL Model Law and the World Bank Policy and Regulations). On the one hand, chapter three demonstrated that the application of the principle of non-discrimination in the WTO GPA categorically excludes the allocation of preferences to domestic producers deriving from the social and labour use of procurement, unless justified under its general exceptions or excluded from its coverage. The GPA allows extensive margins for the exclusion from its coverage of procurement practices used as an instrument to achieve social and labour policies, resulting in discriminatory barriers to trade. On the other hand, the EU does not allow extensive derogation from its coverage but permits exceptions to the fundamental freedoms of the internal markets, under the strict application of the principle of proportionality. (vii) The common regulatory challenge experienced in trade agreements regulating public procurement consists in the balance between negative commitments of trade liberalisation and positive requirements in the regulation of the procurement process. The EU principle of proportionality and the WTO necessity test guide the application of the exceptions to the principle of non-discrimination in these trade instruments of procurement regulation. Moreover, in the EU procurement regulatory framework a regulatory seems to be ensured by the balance between the non-discrimination and social goals with the requirement of the link of the subject matter of the contract, imposed in all the stages of the procurement process in the 2014 Directives. (viii) In contrast to trade agreements, non-trade instruments of procurement regulation expressly include the possibility of including preference for domestic providers in the award of public contracts. The analysis conducted in chapter five underlined the flexibilities for the inclusion of social and labour priorities offered by the non-trade instruments of procurement regulations in terms of domestic preferences. Even if oriented to the maximisation of efficiency in the procurement process and assimilated to an economic model of procurement regulation, both the UNCITRAL Model Law and the World Bank Regulations recognise the possibility of allocating preference to domestic producers and suppliers at the evaluation stage of the procurement process, including considerations relating to labour and social protection. (2) Building on the research conducted in chapter two on the identification of the different implementation mechanisms at the various stages of the procurement process, the comparative analysis of the regulations of the procurement process and its different stages under the four main international

236  General Conclusions regulatory instruments produced valuable research outcomes. The comparative analysis showed a pattern of convergence between the regulatory approaches of these regulatory instruments with regard to the inclusion of social and labour policies along the procurement process. (i)

The regulation of technical and contract specifications has been ruled by the main common concern—shared under the GPA, the Model Law and the World Bank Regulations—not to impose unnecessary restrictions on competition in the public market. As a result, it seems difficult to include references to social and labour policies in contract and technical specifications at this stage of the procurement process. In particular in the analysis of the EU framework established by Directive 2014/24/EU, technical specifications are clearly excluded from the network allowing the inclusion of social and labour considerations (according to Article 18). However, if it is difficult to find an agreement regarding social and labour concerns, there is a clear preference under all the international instruments examined to include environmental concerns in the specification stage of the procurement process. The revised GPA included a new substantive provision, legitimising the preparation of technical specifications based on environmental considerations. (ii) The suppliers’ qualification process, aimed at identifying whether the firm has the necessary capability to fulfil the contract, represents a very flexible stage of the procurement process for the inclusion of social and labour concerns into the EU procurement framework, similarly to the UNCITRAL Model Law and in the World Bank. The UNCITRAL Model Law seems to have adopted a more permissive interpretation, including ethical and other standards among the qualification requirements, whereas the GPA and the World Bank Regulations openly recognise the possibility of including social considerations between the limitation of qualifications and exclusion criteria. However, this is subject to a more restrictive regulatory approach under the WTO regulation of public procurement. (iii) The award selection process appears to be the most suitable stage for the inclusion of social and labour concerns in all of the international instruments of procurement regulation analysed in this study. On the one hand, if they are specified in the tendering documents and respondent to the principle of transparency and non-discrimination, social and labour considerations may contribute to the identification of the most advantageous offer under the GPA. On the other hand, the UNCITRAL Model Law expressly includes socio-economic award criteria in the regulation of the evaluation process, and the World Bank in the illustrative list of factors other than prices useful for the identification of the lowest evaluated cost. The EU procurement regulation

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Index accountability as policy objective  27, 28 affirmative action social justice  61–65 sustainable procurement  48–49, 55–57 Agreement on Trade in Civil Aircraft plurilateral agreement  104n Armenia EBRD donor guidelines  19 Asia-Pacific Economic Cooperation Forum (APEC) generally  16 Asian Development Bank loan conditions  19 Austria ILO Convention 94 ratification  68 award stage award criteria definition  85–95 comparative conclusion  231–232, 236–237 decision-making process  76 EU procedure on award criteria  87, 158, 182–185, 190 social and labour policy concerns  139–152, 232 transparency  148, 149 UNCITRAL  207–211 World Bank Procurement Framework  224–226 WTO GPA 139–152 Beentjes case see CJEU EU public procurement policy  173 best value for money see value for money Bot, Advocate General  168 Brazil protectionist procurement  53n Bundesdruckerei case EU public procurement policy  163, 168, 170, 172, 186 Canada affirmative procurement action  61 ‘buy national’ requirements, WTO dispute  107 CETA  16, 21 NAFTA  16, 17 set-aside schemes  80, 132 WTO GPA  132

Cassis de Dijon case EU public procurement policy  173 certification certification schemes, generally  73, 92–95, 144–147, 150, 179–180, 223, 232 costs of  73 EU regulations  95, 179 China procurement system  53 civil rights movement United States  1 Common Market for Eastern and Southern Africa (COMESA) generally  16 comparative research framework and methodology  4–7 competition costs of competitive tendering  130 domestic preferences  1, 36, 47, 51–55, 230 European Union  37, 54, 154, 159–161, 164 fairness  37, 169–170 international donor guidelines  20 international market liberalisation  14 non-discrimination and  37 as policy objective  27, 28, 37, 38 preferential trade agreements  16–17 principle of  1, 3 set-aside schemes  81 socio-environmental objectives and  38, 75 transparency principle  35, 37 UNCITRAL Model Law  33, 40, 195, 198–199, 200, 201, 203–204, 211 unfair  169–170 value for money and  37 World Bank Procurement Framework  217, 219, 219n, 223–224 WTO GPA  15, 135, 139, 141, 145 compliance labour rights  62, 64–65, 231 monitoring  90–91, 222, 226–227 supply chain  178–180 WTO requirements  11 Comprehensive Economic and Trade Agreement (CETA) procurement chapter  16, 21

264  Index Concordia Bus Finland case EU public procurement policy  167, 188 conflict of interests generally  32, 72–75 construction work sustainable procurement  49 WTO GPA  113, 131 contract management compliance/performance monitoring  90–91, 222, 226–227 decision-making process  76 World Bank Procurement Framework  226–227 WTO GPA  151 contract performance conditions/clauses see also contract management inclusion of social and labour requirements  90 EU regulation  185–186, 185n, 188n, 190 World Bank Procurement Framework  226–227 WTO GPA  150–152 comparative analysis  236 contract specifications see also technical specifications EU procurement regulations  180–182, 187, 190 subject matter of contract in EU  83–84, 188–191, 188n comparative conclusion  231, 236 green specifications  83 monitoring  90–91 inclusion of social and labour requirements  82–84, UNCITRAL  205–207, 236 World Bank Procurement Framework  223–224 WTO GPA  140–145,152, 236 Corporate Social Responsibility (CSR) generally  59–60, 70–71 corruption efficiency and integrity  31–32 generally  32 supplier exclusion criteria  85–86 transparency  33–35 WTO GPA  117 Court of Justice of the European Union (CJEU) Beentjes  173 Bundesdruckerei  163, 168, 170, 172, 186 Cassis de Dijon  173 Commission v Italy  170 Concordia Bus Finland  167, 188 Du Pont de Nemours  170 EVN and Wienstrom  188–189 Keck  167 Laval  163, 170

Max Havelaar  145, 179, 189 Nord Pas de Calais  173 proportionality principle  171–172 RegioPost  163, 168, 170, 172, 173–174, 186 Rüffert  68, 68n, 163, 168, 170, 172, 173, 186 Influence on the EU procurement regime  154, 163–165, 166, 167–168, 170, 173–174, 233 SIAC Construction  160 Teleaustria  158 transparency principle  158 Viking  163 defence and security procurement UNCITRAL  194, 195, 202 developing countries protectionist procurement  53–54 UNCITRAL  19, 25, 196, 197 WTO GPA  21, 24–25, 105, 113, 131, 133–134 disabled workers aftermath of World Wars  1, 51, 80 discrimination against  65 EU regulations  184, 187 set-aside schemes  80–82 strategic procurement  1, 51, 62–63, 89–90 supplier’s treatment of  184 UNCITRAL  204, 208 WTO GPA  133, 134 disadvantaged groups civil rights movement  1 European Union  80–82, 178, 183, 192 set-aside schemes  80–82, 132 social and labour policy measures  1, 50–51, 58–59, 61–65, 89–90, 125–126, 231 strategic procurement  1, 50–51 disadvantaged regions protective procurement  55 social policy objectives  38, 125–126 discrimination affirmative action  58, 61 age  62, 65 competition and  37 conflicting policy objectives  36, 49, 72–75, 230 de Jure and de facto  119–120, 125–126, 128 domestic preferences  1, 17–18 employment policy  62–63, 231 European Union  40, 154, 156–159, 160, 162, 164, 166–170, 188, 191 GATS  116, 122–123 GATT  107–109, 116 GATT and GPA compared  122–125

Index 265 generally  1 ILO Conventions and Principles  65–69, 127 international regulations  35–36 international standards as non-discriminatory  143–144 ‘like products’  122–123 Massachusetts State Law case  59, 126 minority groups  21n, 63, 80, 132 non-discrimination as policy objective  3, 27, 28, 35–36, 49, 89–90 preferential trade agreements  17–18, 36 process and production methods (PPMs)  123–124 religious  62, 65 set-aside schemes  81, 132 sexual orientation  65 supplier award criteria  88–90, 94–95, 158 sustainable procurement  55 TBT Agreement  122, 143–144 technical specifications  141 trade instruments, generally  98 ‘treatment not less favourable’  119–121, 122 Trondheim case  121 UNCITRAL  199, 208 WTO  119n WTO GPA  15, 36, 40, 98, 99–100, 102, 102–103n, 104, 106–109, 116–138, 152, 235 dispute settlement procedures preferential trade agreements  17 transparency  34 WTO GPA  15, 23, 34 Doha Development Agenda Transparency in Doha Declaration  110–111 public procurement  111–112 domestic legislation and fragmentation of international regulation  10 national security considerations  36 objectives  28–29 sub-national procurement authorities  21 UNCITRAL Model Law as template  18, 194, 195–196 WTO GPA  15 domestic preferences and competition  1, 36, 38, 47, 51–55, 230 generally  1, 234 horizontal policy objectives  38, 45–49, 134 introduction of  8 non-discrimination  1 UNCITRAL  203–204, 209–210, 211, 235

World Bank Procurement Framework  224–226, 234, 235 WTO GPA  104–105 Du Pont de Nemours case EU public procurement policy  170 economic development as policy objective  44 economy importance of government spending  44–45 Keynesian economic theory  50 EC–Seal Products case WTO dispute  136 education public knowledge concept  72 efficiency conflicting policy objectives  33n, 72–75, 230 corruption affecting  31–32 cost-benefit balance  30–31 European Union  160–161, 160n generally  231 Pareto-efficient resource allocation  31 as policy objective  3, 9, 27, 28, 30–32 Principle-Agent Theory  31 sustainable procurement and  45 UNCITRAL Model Law  18, 33, 194, 198–199, 200, 205 value for money  32 World Bank Procurement Framework  40, 195, 212–213, 216–217, 220, 234 WTO GPA  114, 117 employment measures see also labour policy measures; social and labour policy measures contract performance conditions  90–91 disadvantaged groups  61–65, 125–126 gender balance  62, 231 ILO Conventions and Principles  64–69, 127 labour rights compliance  62, 64–65 long-term unemployed  62 non-discrimination  62 older workers  62 redistributive justice  231 sheltered  81–82 strategic procurement  50–51 supplier exclusion and suitability criteria  85–90, 231–232 supply chain  63–64, 85–87, 91–95 UNCITRAL  204 wages  62, 65–67, 231 working conditions  62, 63, 67–69 youth  60, 60n, 62, 231 environmental policies see also sustainable procurement

266  Index contract performance conditions  90–91 contract specifications  83 converging policies  234 European Union  154, 164, 176–177, 178–180, 189, 234 GATT and environmental treaties  12n green procurement  55–57, 55–56n, 71, 83 as policy objective  1, 27, 28, 38, 44 UNCITRAL  200, 202–203, 207–208, 209–220 value for money and  30 World Bank Procurement Framework  222 WTO GPA  123–124, 133, 134, 148, 234 equality/equal opportunity conflict with efficiency  33n, 72–75 definition of equal treatment  33 European Union  33, 157, 161–165, 178, 191, 192 ILO Conventions and Principles  65–69 labour market  58, 178, 185 as policy objective  3, 27, 28, 32–33, 58–59 suppliers, treatment of  1, 18 UNCITRAL Model Law  18, 33 World Bank Procurement Framework  219, 222 Ethical Trading Initiative generally  93, 93n European Bank for Reconstruction and Development (EBRD) donor guidelines  19 European Union access, removal of barriers to  158 animal life or health, protection  169 Buying Social  185 CETA  16 ‘Challenges to Collective Agreements in the EU’  68 Charter of Fundamental Rights of the European Union (CFREU)  162 CJEU see Court of Justice of the European Union Code of Best Practice  78 competition principle  37, 54, 154, 159–161, 164 CSR framework  59 Directives see European Union Directives disabled workers  184, 187 disadvantaged groups  80–82, 178, 183, 192 domestic preferences  234 efficiency principle  160–161, 160n elimination of trade barriers  156–157 energy services sector  175 environmental policies  154, 164, 176–177, 178–180, 180n, 189, 234

equality principle  33, 157, 161–165, 178, 185, 191, 192 Europe 2020 strategy  153, 174, 176 fair trade  178, 183 free movement of goods  166, 191 free movement provisions  157, 158, 161, 166, 170, 175, 191 freedom of establishment  166, 191 freedom to provide services  68, 157, 166, 186, 191 GATS proposals  112 gender equality  178, 185 generally  232–233 harmonisation of procurement regulation  160 hindrance to trade  167–168 human life or health, protection  169 human rights considerations  190 ILO Conventions  68, 177, 181, 181n industrial and commercial policy, protection  169 innovation procurement  83 internal market  154, 155–174, 175, 191, 235 labour objectives  62, 154, 161–192, 180n legally binding commitments  181, 181n link to subject matter of contract  188–191, 188n minimum wages  154, 163, 169–170, 172, 173–174, 178 minority groups  178, 183, 192 The modernization of EU public procurement policy  174–175, 189 Monti Report  175 mutual recognition principle  157, 164 national treasures, protection  169 nationalistic procurement  156, 158, 166 non-discrimination principle  40, 154, 156–159, 160, 162, 165, 166–170, 173, 188, 191 performance clauses conditions  185–186, 185n, 188n, 190 plant life or health, protection  169 policy objective  160 postal services sector  175 primary and secondary law  172–174 procurement regulation, generally  4, 16, 24, 153–155, 232–233 proportionality principle  157, 164, 169, 170–172, 173, 184, 235 public interest considerations  169, 170 public morality, protection  169 public security, protection  169 set-aside schemes  81–82 sheltered employment schemes  81–82 single market  153

Index 267 small and medium enterprises (SMEs)  54, 79–80 social objectives  154, 161–192, 180n, 234 socio-environmental certification schemes  95, 179–180 strategic procurement  166, 170, 188 supplier exclusion and suitability criteria  87, 158, 182–185, 190, 236 supplier subcontractors  179, 180 supply chain compliance  178–180 sustainable procurement  183–184 technical specifications  187, 190, 236 territorial application of labour law  168 training measures  178 transparency principle  35, 154, 157–159, 160, 164, 191 transport services sector  175 Treaties see European Union Treaties unfair competition, protection from  169–170 value for money principle  160–161 water services sector  175 WTO GPA  15, 24, 106 European Union Directives 2014 Directives  154–155, 157, 163–164, 172–191, 234 comparative analysis  39–41 competition principle  159–160 enforcement of policies under  174–191 environmental policies  178–180, 180n generally  2, 6, 154, 155, 232–233 ILO Conventions  68, 177, 191–192 internal market  40 legal status  40 legally binding commitments  181, 181n non-discrimination principle  40, 156, 158, 160, 173, 188 Posted Workers  68, 186, 188 social and labour rights  174–191, 180n, 191–192 transparency principle  158–159, 160 treaty regulations and  172–174 European Union Treaties directive regulations and  172–174 EC Treaty  162 flexibility  168–169 free movement provisions  157, 166 generally  155, 165–166, 233 negative obligations  154, 166–168 non-discrimination principle  156–159, 166–170, 173, 191 proportionality principle  169, 170–172, 173 social and labour rights  162–163, 166–172, 191 Treaty on European Union (TEU)  162, 165

Treaty on the Functioning of the European Union (TFEU)  54, 154, 162–163, 162–163n, 166–171, 173, 175, 191 EVN and Wienstrom case EU public procurement policy  188–189 exclusion and qualification criteria/ conditions inclusion of social and labour requirements  85–90 EU procurement regulation  184–185, 192 UNCITRAL  207–208 WTO GPA  145–147 World Bank Procurement Framework  224–225 comparative conclusions  236 fair trade European Union  178, 183 evaluating tenders  90, 94–95 FLO standards  95, 95n, 97 labelling  95, 97 World Bank Procurement Framework  222 fairness and competition  37 labour market  58 as policy objective  27, 28, 32–33 suppliers, treatment of  1 UNCITRAL  40, 195, 198–199, 201, 203, 207, 208, 210 working conditions  63 World Bank Procurement Framework  40, 217, 219, 234 WTO GPA  135, 139 Fennelly, Advocate General  158 financial crises effect  1–2 fitness for purpose World Bank Procurement Framework  40, 217, 218–219, 234 fragmentation of international regulation conflicting norms  11, 12 conflicting objectives  230 differing interpretations  12 fragmentation of procedures  10–11 generally  8–9, 10–11 harmonisation debate  25–26 horizontal  20, 23–25, 42, 230 ILC Analytical Study  11 national legislation contributing to  10 overlaps between regimes  11 parallel membership  24 proliferation of legislation  10–11 research on  11–12 secondary sources  10–11 self-regulation  11 soft-law guidelines  11

268  Index sub-national procurement authorities  21 treaty interpretation  12n UN study  10 uncoordinated proliferation  14 vertical  12–13, 20–22, 42 France ethical and fair trade procurement  95 gender equality see also discrimination procurement objective  1, 62, 231 World Bank Procurement Framework  222 General Agreement on Tariffs and Trade (GATT) Canada–Renewable Energy dispute  107 environmental treaties and  12n generally  102, 103 GPA non-discrimination principle compared  122–125 moral exceptions  135 ‘necessity’  138 non-discrimination principle  107–109, 116, 122–125 public procurement  106–109 state trading enterprises  109–110 transparency  110 General Agreement on Trade in Services (GATS) EU proposals  112 generally  102 moral exceptions  135 ‘necessity’  138 non-discrimination principle  116, 122–123 public procurement  109, 111–112 transparency  110 globalisation see also fragmentation of international regulation; international regulation effects generally  1, 23, 41 supply chain  97, 232 sustainable procurement  48–49, 51–55 good governance, principles of international donor guidelines  20 UNCITRAL  194 health protection of human, animal or plant life  133, 134, 169 health care public knowledge, concept of  72 human rights contract conditions  150 EU regulations  190 generally  1 protection  47–48, 55–57, 58–59, 72 supplier violating  147

sustainable procurement  47–48, 55–57 UNCITRAL  202–203, 207–208 World Bank Procurement Framework  123–124, 220, 222 WTO GPA  99–100, 123–124 industrial development as policy objective  44, 47, 58 protective procurement  51–55, 104–109 small and medium enterprises (SMEs)  54, 58, 79–80, 96 strategic procurement  131, 133–134, 230 UNCITRAL  202–203 World Bank Procurement Framework  217, 218, 218n, 224 innovation see technological innovation integrity cost-benefit balance  30–31 as policy objective  27, 28, 30–32 risks of corruption  32 and transparency  34 UNCITRAL Model Law  18, 33, 40, 198 undermining  78, 78n World Bank Procurement Framework  40, 217, 234 WTO GPA  114, 117 intellectual property WTO GPA  134 international donor institutions policies, generally  9 International Labour Organization (ILO) Conventions and Principles  64–69, 90, 93, 127, 134, 135, 143–144 ‘Declaration on Fundamental Principles and Rights at Work’  136 Equality at Work  65 EU Directives  68, 177, 181, 181n, 191–192 forced labour  135n ‘Labour Clauses in Public Contracts’  65–69 International Law Commission (ILC) Analytical Study on Fragmentation  11 international regulation see also individual instruments comparative analysis  39–41 compromise  5 convergence  5, 9, 26–27, 234, 236 differing interpretations  12 fragmentation see fragmentation of international regulation free international competition  14 harmonisation, UNCITRAL  195, 198 harmonisation debate  25–26 horizontal fragmentation  20, 23–25, 42 lex specialis principle  12n market liberalisation  8, 14

Index 269 non-discrimination principle  35–36 non-trade instruments of procurement regulation  18–20, 233–235 objectives  28–29 parallel membership  24 PTAs see preferential trade agreements regional trade instruments  16–18 tension with national objectives  2–3 trade instruments of procurement regulation  14–15, 233–235 trade regulation, relationship with  9 treaty interpretation  12n uncoordinated development  14 vertical fragmentation  12–13, 20–22, 42 Italy small and medium enterprises (SMEs)  79 Jacobs, Advocate General  160 Keck case EU public procurement policy  167 Kokott, Advocate General  189 Korea-Airport case WTO dispute  129 labelling schemes certification via  179–180, 223, 232 EU regulations  179–180 fair trade products  95, 97 non-discrimination  144–145 socio-environmental procurement  92–95, 97, 179–180 labour policy measures see also domestic preferences; social and labour policy measures conflicting policy objectives  1, 3, 230 construction work  49 contract conditions  82–84, 90–91, 150 contract specifications  231 European Union  62, 154, 165–192 foreign competition  51–55, 230 generally  1, 47–49, 58–60, 230–232 labour rights compliance  62, 64–65, 231 labour rights as supplier qualification conditions  145–147 minimum wages, EU policy  154, 163, 169–170, 172, 173–174, 178 safety criteria  49 strategic procurement  50–51 sustainable procurement  45–49, 55–57 ‘sweat-free’ procurement  48 technical specifications  231 trade barriers  1 value for money and  1, 45 World Bank Procurement Framework  212–228 WTO GPA  99–100, 123–152

Laval case EU public procurement policy  163, 170 Malaysia procurement regulations  21, 21n set-asides for Bumiputera  21n, 63, 80 market access preferential trade agreements see (PTAs) market liberalisation comparative advantage theory  35–36 international and regional regulations  8, 9, 41–42, 98 preferential trade agreements  17–18 Tokyo Round  14, 103–104 WTO GPA  15, 98–100, 116 Marrakech Agreement WTO  104 Massachusetts State Law case WTO dispute  59, 126 Max Havelaar case generally  145, 179, 189 minority groups see also disadvantaged groups; discrimination European Union  178, 183, 192 set-aside schemes  80, 132 social and labour policy measures  1, 61–65, 136, 178 Moldova EBRD donor guidelines  19 Montenegro EBRD donor guidelines  19 Montis Report A New Strategy for the Single Market  175 most favoured nation (MFN) non-disprimination  101 WTO  108–109, 110, 122 WTO GPA  117–118, 133, 139, 142, 144 multinational companies generally  91–92 OECD guidelines  59–60 mutual recognition principle European Union  157, 164 national legislation see domestic legislation national regulatory objectives international objectives and  2–3, 12 national security considerations conflict with international regulations  36 national treasures EU procurement regulations  169 national treatment principle WTO GPA  117–119, 121, 127–128, 133, 138, 139, 142, 144–145, 152 Nord Pas de Calais case EU public procurement policy  173

270  Index North American Free Trade Agreement (NAFTA) generally  16, 17 transparency principle  35 Norway Trondheim case  121 objectives see policy objectives offsets preferential trade agreements  17 WTO GPA  113, 117–119, 131, 134, 151–152 openness UNCITRAL Model Law  40 Organization for Economic Cooperation and Development (OECD) CSR framework  59–60 efficiency and integrity  31 government spending  44 Guidelines for Multinational Enterprises  59–60 loan conditions  19 Principles for Integrity in Public Procurement  74 Public Procurement Survey  83 World Bank Procurement Framework  213 Organization for Petroleum Exporting Countries (OPEC) generally  19 packaging and timing of orders decision-making process  76, 78–80, 96 Pareto-efficient resource allocation efficiency  31 performance conditions see contract performance conditions/clauses planning stage decision-making process  76, 77–78 policy objectives see also under own heads accountability  27, 28 collective justice  231 competition  27, 28, 37, 38 conflicting  12, 36, 230 domestic  28–29 efficiency  3, 9, 27, 28, 30–32, 231 equality/equal opportunity  3, 27, 28, 32–33, 58–59 fairness  27, 28, 32–33 fitness for purpose  40, 217 generally  26–28 horizontal (secondary)  38, 45–49, 134 identifying  77 industrial development  44, 47 integrity  27, 28, 30–32 internal and external  28 international  28–29

non-discrimination  3, 27, 28, 35–36 non-economic  38, 44, 45–49, 72–75, 83–84, 123–124, 152, 230 political  44–45 publicity  28 redistributive justice  58–59, 96, 231 socio-environmental  27, 28, 38, 44, 45–49, 58–59 strategic  45, 47, 50–51 transparency  27, 28, 33–35, 231 value for money  27, 28, 29–30, 34 political objectives affirmative action  48–49, 61 generally  44–49 proactive  45 strategic  45, 47, 50–51 pollution green procurement  71 predictability WTO GPA  117 preferential trade agreements (PTAs) dispute settlement procedures  17 generally  16–17 Latin America  18 most favoured nation (MFN)  108, 110, 117–118, 139, 142 non-discrimination  17–18, 36 offsets  17, 113, 117–119 procurement provisions  17 transparency principle  36 and WTO GPA  17, 104–109, 113, 119 price preferences UNCITRAL  203–204 WTO GPA  113, 119, 134 price-quality ratio award criteria  183 Principle-Agent Theory efficiency  31 privatisation public services  59 process and production methods (PPMs) award criteria  190 discrimination  123–124 procurement regulation relationship with trade regulation  9 production methods sustainable  1 proportionality principle European Union  157, 164, 169, 170–172, 173, 184, 235 World Bank Procurement Framework evaluation criteria  225 protectionism disadvantaged regions  55 domestic industry  36, 45, 47–49, 51–55, 230 human rights  47–48, 55–57, 58–59, 72 labour protection  1, 47–49, 50–51

Index 271 small and medium enterprises (SMEs)  54, 58, 79–80, 96 strategic procurement  50–51 WTO GPA  15, 104–109, 113 public goods and knowledge concept of  72 public interest European Union  169, 170 public procurement and  70 public-private partnerships World Bank Procurement Framework  215 publicity of contract opportunities  34, 207 as policy objective  28 transparency principle  34, 207 ‘purity principles’ generally  100 redistributive justice social policy measures  58–59, 96, 231 RegioPost case EU public procurement policy  163, 168, 170, 172, 173–174, 186 responsible procurement use of term  57 Rüffert case EU public procurement policy  68, 68n, 163, 168, 170, 172, 173, 186 safety standards promotion  231 WTO GPA  116 selection stage decision-making process  76 ‘self-cleaning defence’ suppliers  147 self-regulation fragmentation of international regulation  11 set-aside schemes competition and  81 decision-making process  76, 80–82 disadvantaged groups  80–82 disadvantages  81–82 discriminatory nature  81 European Union  81–82 generally  96, 231 Malaysian Bumiputera  21n, 80 offsets  119 small and medium enterprises (SMEs)  79–80, 96 UNCITRAL  203–204 WTO GPA  119, 125–126, 131 small and medium enterprises (SMEs) European Union  54, 79–80 industrial development  54, 58 set-aside schemes  79–80, 96

United States  54, 79 WTO GPA  115 social and labour policy measures see also employment; labour policy measures; protectionism administrative load  73 adverse effects  72–75 affirmative action  48–49, 61 award stage  139–152, 232 collective justice  231 competition and  38, 75 conflicting policy objectives  1, 2, 3, 49, 72–75, 230 construction work  49 contract management stage  76 contract performance conditions  90–91, 185–186 contract specifications  82–84, 231 converging policies  234, 236 Corporate Social Responsibility (CSR)  59–60, 70–71 developing countries  105 disabled workers  1, 50–51, 62, 80–82 disadvantaged groups  1, 50–51, 58–59, 61–65, 80–82, 125–126, 136 disadvantaged regions  55, 125–126 economic relevance  44–45 education and training  60, 60n, 62, 178 employment  50–51, 62–64, 231 equality  3, 27, 28, 32–33, 58–59 European Union  64, 154, 161–192, 234 extraterritorial  58–60 functional models of social justice  60–65 generally  2, 4, 43–44, 58–60, 95–97, 230–232 goal identification  77 green procurement  55–57, 55–56n, 71, 83 group justice model  61–63, 231 human rights  47–48, 55–57, 58–59, 72 ILO Conventions and Principles  64–69, 90, 93, 127 implications  69–75 individual justice model  61–62, 63–65, 231 justification  69–72, 168–170 labour rights compliance  62, 64–65, 231 Massachusetts State Law case  59, 126 non-discrimination  62, 98, 99–100 planning stage  76, 77–78 as policy objective  27, 28, 38, 44–49 privatised public services  59 procedural mechanisms  75–82 proportionality principle  157, 164, 169, 170–172, 173, 184 ‘purity principles’  100 redistributive justice  58–59, 96, 231

272  Index selection and award stage  76, 139–152, 182–185 set-asides see set-aside schemes small and medium enterprises (SMEs)  54, 58, 79–80, 96 supplier award criteria  85–95, 139–152, 182–185, 231–232, 236 supply chain employment conditions  48, 63–64, 85–87, 91–92 sustainable procurement  45–49, 55–57 ‘sweat-free’ procurement  48 technical specifications  231 technological innovation  50–51, 50–51n tenders, evaluation  87–90 trade barriers  1 UNCITRAL  202–203, 204–211 and value for money  1, 30, 45 verification/certification  73, 92–95, 145–147, 150, 232 voluntary practices  59–60, 70–71, 92–95, 97 wages  62, 65–67 working conditions  62, 63, 67–69 World Bank Procurement Framework  212–228 WTO GPA  98–109, 123–152 socio-economic policies UNCITRAL  199–201, 208–211, 234 soft-law guidelines see also World Bank Procurement Framework fragmentation of international regulation  11 UNCITRAL see United Nations Commission on International Trade Law Model Law South Africa social use of public procurement  58, 61, 80, 89 Spain ethical and fair trade procurement  95 social inclusion procurement  90 strategic procurement employment  50–51 European Union  166, 170, 188 generally  45, 47, 50–51, 230 industrial development  131, 133–134, 230 technological innovation  50–51, 50–51n WTO GPA  131, 133–134 suppliers accessibility for  34 business integrity  85–86, 150 certification see certification competitive tendering costs  130 contractual conditions  150–152 corruption  85–86 disadvantaged  45

employment conditions  63–64 equal treatment  1, 18, 28, 32–33 EU award criteria  158, 182–184, 190, 236 EU grounds for exclusion  184–185 exclusion and suitability criteria  85–95, 139–152, 182–185, 207–211, 231–232, 236–237 fair treatment  1, 28 ‘functional equivalence’  141 human rights violations  147, 150 labour rights violations  147, 150, 184, 208 limited tendering procedure  121, 121n professional conduct  85, 146–147, 184 protection  45, 47–49 ‘self-cleaning defence’  147 socio-environmental merits  85–90 subcontractors  179, 180 sustainable procurement  45–49, 179–180 technical merits  88 tenders, evaluation  87–90 UNCITRAL tendering  197, 207–211, 236 WTO GPA  122, 140, 145–147 WTO GPA award procedure  139–152 supply chain certification schemes  73, 92–95, 144–147, 150 compliance  178–190 employment conditions  63–64, 85–87, 91–94, 178–179 Ethical Trading Initiative  93, 93n EU regulations  178–180 globalisation  97, 232 labelling schemes  92–95, 97, 144–145, 150, 232 sustainable procurement  91–95 verification mechanisms  140, 145–147, 232 voluntary codes  92–95, 97 sustainable procurement see also environmental policies affirmative action  48–49 anti-discrimination  55 certification schemes  73, 92–95, 144–147, 150, 179–180 definition  57 disadvantaged suppliers  45 Ethical Trading Initiative  93, 93n European Union  183–184 generally  1, 45–49 global economy  48–49, 51–55 green procurement  55–57, 55–56n, 71, 83

Index 273 human rights  47–48, 55–57, 58–59, 72 labelling schemes  92–95, 97, 144–145, 179–180, 232 labour rights and safety  47–49, 55–57 life-cycle costs  183–184, 221 meaning  46 production methods  1 protection against foreign competition  51–55 renewable energy  56 strategic procurement  50–51 suppliers  45–49 supply chain  91–95 ‘sweat-free’ procurement  48 value for money and  1, 30, 45, 116 waste management  56 World Bank Procurement Framework  214, 220–223, 224–226, 234 WTO GPA  115–116 Switzerland education and training  60n Technical Barriers to Trade Agreement (TBT) generally  127 international standards as non-discriminatory  143–144 ‘necessity’  138 non-discrimination principle  122 technical specifications European Union  187, 190, 236 generally  231, 236 non-discrimination  141 World Bank Procurement Framework  222, 223–224, 236 WTO GPA  140–145 technological innovation contract specifications  83 EU procurement  83, 161 strategic procurement  50–51, 50–51n sustainable  1 Teleaustria case internal market freedoms  158 tenders see suppliers Tokyo Procurement Code national treatment principle  121 Tokyo Round on Government Procurement WTO  14, 103–104 trade hindrance to, EU regulations  167–168 liberalisation see market liberalisation unjustifiable restriction on  128 trade barriers EU internal market  156, 157 social and labour measures  1 Trans-Pacific Partnership (TTP) generally  16

Transatlantic Trade and Investment Partnership (TTIP) generally  16 transitioning economies UNCITRAL  19, 196 transnational companies see multinational companies transparency accessibility  34 award stage  148, 149 competition and  35, 37 dispute resolution  34 Doha Declaration  110–111 European Union  35, 154, 157–159, 160, 164, 191 excessive  34–35 fight against corruption  33–35 GATS  110 GATT  110 generally  1, 231 integrity and  34 international donor guidelines  20 Massachusetts State Law case  126 monitoring and enforcement of rules  34 NAFTA  35 non-economic objectives  74–75 as policy objective  27, 28, 33–35 preferential trade agreements  16–17, 36 principle of  3 public advertisement  34 supplier exclusion and suitability criteria  86, 88 UNCITRAL Model Law  35, 40, 194, 195, 198, 200–201, 203, 206, 207, 210–211 World Bank Procurement Framework  40, 217, 224, 234 WTO  110–111 WTO GPA  15, 35, 36, 98, 100, 102, 113, 117, 124–125, 139, 148, 149, 152 Ukraine EBRD donor guidelines  19 United Kingdom Keynesian economic theory  50 Northern Ireland  62, 89, 231 United Nations Commission on International Trade Law (UNCITRAL) Model Law 2011 reformed text  195, 201–204, 205 award criteria  207–211 comparative analysis  39–41 competition principle  33, 40, 195, 198–199, 200, 201, 203–204, 211 contract specifications  205–207, 236 defence and security procurement  194, 195, 202 developing countries  19, 25, 196, 197 disabled workers  204

274  Index domestic dimension of public procurement  193, 194, 198–199, 201–204 domestic preferences  203–204, 209–210, 211, 235 efficiency principle  33, 40, 194, 195, 198–199, 200, 205 environmental policies  200, 202–203, 207–208, 209–210 equal treatment principle  33 fairness principle  40, 195, 198–199, 201, 203, 207, 208, 210 flexibility  195–198, 211–212 generally  2–332 as global standard  19, 24 good governance, principles of  194 Guide to Enactment  195, 196, 200, 204 human rights  202–203, 207–208 industrial policies  202–203 influence  24, 41, 194 integrity principle  18, 33, 40, 198 international harmonisation  195, 198 international suppliers and contractors  198–199 legal status  194, 195 ‘lowest evaluated tender’  88 no financial thresholds  195 non-binding status  18–19, 23–24, 40–41, 194, 195, 197 non-discrimination principle  199, 208 non-economic policies  200 objectives  198–199, 198n objectivity principle  210, 211 openness principle  40 price preferences  203–204 publicity of contract opportunities  207 purpose  18 set-aside schemes  203–204 social and labour objectives  202–211 socio-economic policies  199–201, 208–211, 234 as template  18, 194, 195–196, 197, 199 tendering  197 transitional measure, as  200–201 transitioning economies  19, 196 transparency principle  35, 40, 194, 195, 198, 200–201, 203, 206, 207, 210–211 value for money principle  18, 193, 198, 200, 209 verification mechanisms  208 voluntary nature  18, 23–24, 40 WTO GPA compared  196 WTO GPA harmonisation  140 United Nations International Law Commission lex specialis principle  12n Study Group on international law fragmentation  10

United States affirmative procurement action  61 American Recovery and Reinvestment Act (2009)  52 Buy American provisions  52, 132–133 civil rights movement  1 federal acquisition regulation  33, 54 federal system  21 Massachusetts State Law case  59, 126 NAFTA  16, 17 New Deal  50 protective procurement  54 small and medium enterprises (SMEs)  54, 79 WTO GPA  132–133 US–Gambling case WTO dispute  136 value for money competition and  37 conflicting policy objectives  1, 30, 36, 45, 72–75 and efficiency  32 European Union  160–161 as policy objective  27, 28, 29–30, 34 sustainable procurement and  1, 30, 45, 116 UNCITRAL Model Law  18, 193, 199, 200, 209 World Bank Procurement Framework  40, 193, 217–218, 221, 225, 234 verification costs, generally  73 mechanisms  140, 208, 232 Vienna Convention of the Law of Treaties interpretation of treaties  12n, 135 Viking case EU public procurement policy  163 voluntary codes supply chain  92–95, 97 UNCITRAL Model Law  18 waste management sustainable procurement  55–57 World Bank generally  212, 212n loan conditions  19, 24 World Bank Procurement Framework Baseline Indicator Tools  214 certification schemes  223 comparative analysis  39–41 competition principle  217, 219, 219n, 223–224 contract performance monitoring  226–227 Country Procurement Assessment Reports (CPARs)  213–214, 216

Index 275 domestic dimension of public procurement  193 domestic preferences  224–226, 234, 235 economy and efficiency  31, 40, 195, 212–213, 216–217, 220, 234 environmental considerations  222 Environmental and Social Assessment (ESA)  222 equality/equal opportunity  219, 222 evaluation criteria  224–226, 224n fairness principle  40, 217, 219, 234 fiduciary approach  212, 213 fitness for purpose principle  40, 217, 218–219, 234 generally  2, 4, 9, 193–194, 212–214, 233–234 Guidelines  213, 214, 217, 220, 227 human rights  123–124, 220, 222 industrial development  217, 218, 218n influence  41, 194 integrity principle  31, 40, 217, 234 legal status  23–24, 40–41, 194 loan conditions  24 Marrakech Agreement  104 objectives  216–219 Policy and Procedures Framework  215–216 Program for Results  215, 215n Project Procurement Strategy for Development (PPSD)  216, 216n, 219, 222, 225 revised  6, 214–216, 234 social and labour concerns  212–228 Standard Bidding Documents (SBD)  213, 214 sustainable procurement  214, 220–223, 224–226, 234 technical specifications  222, 223–224, 236 transparency principle  40, 217, 224, 234 value for money principle  40, 193, 217–218, 221, 225, 234 World Trade Organization (WTO) Doha Declaration  110–111 Doha Development Agenda  111–112 GATS see General Agreement on Trade in Services GATT see General Agreement on Tariffs and Trade GPA see World Trade Organization Government Procurement Agreement ILO standards  127, 134, 135, 143–144 Massachusetts State Law case  59, 126 most favoured nation principles  108, 110 non-discrimination principle  119n SPS Agreement  127, 138

TBT see Technical Barriers to Trade Agreement transparency  110–111 World Trade Organization (WTO) Government Procurement Agreement (GPA) animal life or health, protection  133–134 anti-corruption  117 ‘appropriateness’  138 associated costs  15 award criteria  148–150, 152 award procedure  114, 139–152 build-operate-transfer arrangements  131 comparative analysis  39–41 competition  15, 135, 139, 141, 145 compliance requirements  11 construction services  113, 131 contract management  150–151 Contracting Parties’ annexes  129 contractual conditions  150–152 de Jure and de facto discrimination  119–120, 125–126, 128 derogations to  129–133 developing countries  21, 24–25, 105, 113, 131, 133–134 disabled workers  133, 134 dispute settlement  23, 34, 104–105 domestic regulations  15 efficiency  114, 117 environmental policies  123–124, 133, 134, 148, 234 EU membership  15, 24, 106 fairness  135, 139 financial threshold for application  130 flexibility  113–114, 128–138, 139–140 Future Work Programme  114–116, 115n general exceptions to non-discrimination principle  129, 133–138 generally  2, 4, 14–15, 98–99, 232–233 goods, supply of  122, 129–131 human life or health, protection  133–134 human rights protection  123–124 influence  41 integrity  114, 117 intellectual property  134 Korea-Airport case  129 labelling schemes  144–145, 150 labour policy measures  99–100, 123–152 labour rights as supplier qualification conditions  145–147 legal status  40–41 ‘like products’  122–123, 124 limited tendering procedure  121, 121n market liberalisation  15, 98–100, 116 membership  14–15, 104, 105–106, 233

276  Index most favoured nation rule  108, 110, 117–118, 133, 139, 142 national treatment principle  117–119, 121, 127–128, 133, 138, 139, 142, 144–145, 152 ‘necessity’  138, 235 non-discrimination principle  15, 36, 40, 98, 99–100, 102, 102–103n, 104, 106–109, 116–138, 152, 235 non-economic objectives  123–124, 131–133, 152 objectives  29, 116–128 offsets  113, 117–119, 131, 134, 151–152 Parties’ Schedule of Commitments  130 philanthropic institutions  133, 135 plant life or health, protection  133–134 plurilateral status  102, 103–106, 233 predictability  117 preferential trade agreements and  17, 104–109, 113 price preferences  113, 134 prison labour  133, 135, 135n process and production methods (PPMs)  123–124, 141–142 protectionism  15, 104–109, 113 public morals, order or safety, protection  133, 135, 136 public procurement, exclusion  106–109 revised  5, 112–116, 128–138, 140, 152

safety standards in international procurement  116 self-contained regime, as  23 services, supply of  122, 129–131 set-aside schemes  119, 125–126 small and medium enterprises (SMEs)  115 social dimension of public procurement  98–100, 123–152 strategic procurement  131, 133–134 supplier ‘functional equivalence’  141 supplier qualifications  140, 145–147 suppliers generally  122, 148–150 sustainable procurement  115–116 technical specifications  140–145, 236 telecommunication services  131 Tokyo Procurement Code  121 Tokyo Round  14, 103–104 transparency  15, 35, 36, 98, 100, 102, 113, 117, 124–125, 139, 148, 149, 152 ‘treatment not less favourable’  119–121, 122 Trondheim case  121 UNCITRAL compared  196 UNCITRAL Model Law harmonisation  140 unjustifiable restriction on trade  128 verification mechanisms  140, 145–147 violations  15, 104 whether barrier to free trade  15