2 Electronic procurement and invoicing
in public administration
| (a)
(35175)
12131/13
COM(13) 453
(b)
(35174)
12104/13
COM(13) 449
|
Commission Communication: "End-to-end e-procurement to modernise public administration"
Draft Directive on electronic invoicing in public procurement
|
| Legal base | (a) —
(b) Article 114 TFEU; co-decision: QMV
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| Documents originated | 26 June 2013
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| Deposited in Parliament | 11 July 2013
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| Department | Cabinet Office
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| Basis of consideration | EMs of 11 September 2013
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| Previous Committee Report | None, but see footnotes
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| Discussion in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information awaited
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Background
2.1 Towards the end of 2011, the Commission put forward proposals[8]
to modernise Directives 2004/17/EC and 2004/18/EC (which respectively
coordinate EU public procurement procedures for certain entities,
such as water, energy, transport and postal services, as well
as more generally). These included provisions which would make
electronic means of communication mandatory for the publication
of notices announcing public procurement tenders, the publication
of related documents, and the submission of tenders, and they
were followed in April 2012 by a Communication[9]
which sought to provide a wider view of the benefits of e-procurement
and of the steps being taken to encourage its use within the EU.
The current documents
Commission Communication
2.2 The Commission has now produced this further Communication
(document (a)), which seeks to identify the current state of implementation
in the public sector on what it describes as "end-to-end
e-procurement" (covering not only the three steps referred
to above, but payment as well). In doing so, it recalls that the
management of public procurement is of prime importance in the
current financial climate, in that expenditure in this area represents
19% of EU GDP, and was identified in the Commission's Annual Growth
Surveys in 2012 and 2013 as a key element in the competitiveness
of the EU economy, thereby contributing as well to the objectives
of the 2020 Strategy.
2.3 It also says the end-to-end e-procurement
can:
- improve overall administrative
efficiency by cutting the duration of the purchase-to-pay cycle,
improving auditability (and so reducing the opportunity for corruption
and fraud), increasing the security of data, and reducing litigation;
- produce spill-over effects by triggering wider
digitalisation of government services, making these more efficient
and citizen and business friendly; and
- be beneficial to small and medium-sized enterprises
(SMEs), most of which are now equipped to use it.
2.4 As regards the current state of play, the
Commission says that, although the electronic notification of
tenders and access to procurement documents is not used for all
procedures and purchases, they are generally available across
the EU, with 22 Member States having already made e-notification
mandatory (and a number, including the UK, having made significant
progress). However, it also says that the overall procurement
landscape is highly fragmented and complex, involving a large
number of different procedures, IT technologies and certification
requirements, with this lack of interoperability having been the
main reason for its earlier proposals that the public procurement
and utilities Directives should be amended to make e-procurement
mandatory.
2.5 At the same time, the Commission observes
that the benefits of e-invoicing are becoming increasingly recognised,
with several Member States having undertaken initiatives towards
its introduction — though it adds that its adoption is nevertheless
still limited, and that those Member States[10]
mandating e-invoicing have adopted their own national standards,
which are for the most part not interoperable. As a result, it
says this has contributed to the fragmentation of the Single Market
and increased the cost and complexity of cross-border public procurement.
2.6 Against this background, the Commission says
that, although its proposals to make e-notification, e-access
and e-submission mandatory will be important in reaping the benefits
of e-procurement, a series of further steps are now needed. These
include a legislative proposal (see below) to make e-invoicing
the rule rather than the exception, in line with the call made
by the Commission in a 2010 Communication[11]
("Reaping the benefits of e-invoicing for Europe")
that this should become the predominant invoicing mode by 2020.
There would also be a number of supporting non-legislative measures,
including further work by the European Committee for Standardisation
(CEN) to develop a new European e-invoicing standard, and the
launching of the "Connecting Europe Facility" programme
to support investments in the infrastructure needed to deliver
cross-border public services.
2.7 Finally, the Commission highlights the need
for national strategies in this area. In particular, it suggests
that specific action plans should be drawn up in order to establish
intermediate targets; to identify the most successful strategies
for e-procurement and e-invoicing; to promote simplification,
the reduction of administrative burdens, and the participation
of SMEs and cross-border suppliers; to foster the development
and use of e-certificates attesting a supplier's suitability to
bid; to monitor procurement spend and key performance indicators;
to set up training programmes, possibly financing these through
the Structural Funds; and to address internal market objectives.
In addition, the Commission says that it will continue the work
of the European Multi-Stakeholder Forum on e-Invoicing, and launch
a study which identifies best practice in areas such as e-auctions
and e-catalogues.
DRAFT DIRECTIVE
2.8 In order to give effect to one of the main
elements in the Communication, the Commission has also put forward
a draft Directive on e-invoicing (document (b)), which would require
the European Committee for Standardisation, on the basis of a
mandate from the Commission at a later stage, to draw up a new
European standard, setting out minimum requirements for the content
("semantic data model") of the core electronic invoice.
The Directive would apply to such invoices issued under contracts
awarded in accordance with the measures which will replace Directives
2004/17/EC and 2004/18/EC, and authorities across the EU would
have to accept e-invoices meeting those requirements (although
suppliers would not be obliged to issue these, and e-invoices
not compliant with that standard, and paper invoices, would still
be permitted if both parties wish to use them).
The Government's view
2.9 These two documents are the subject of Explanatory
Memoranda of 11 September 2013 from the then Minister for Political
and Constitutional Reform at the Cabinet Office (Chloe Smith),
together with an Impact Assessment checklist for the draft Directive.
2.10 She says that the UK agrees that e-procurement
can have significant benefits by reducing costs and timescales;
helping to improve the quality, accuracy, and transparency of
data; reducing error and fraud; and increasing access and competition
in public procurement, thus encouraging better value for money.
It also agrees that the benefits are potentially greatest with
full end-to-end electronic processes, especially where relevant
data can be transferred in machine-readable form without manual
re-keying. She notes that there are already various e-enablement
and e-procurement activities in the UK covering both central government
and the wider public sector, the Commission having estimated that
the UK public sector already used between 30%-50% e-tendering
in 2011, and she points out that a sample of Official Journal
advertisements earlier this year suggested that around 75% of
central government procurements (excluding the Ministry of Defence)
used e-procurement.
2.11 The Minister says that the Government has
recently announced that a new Crown Commercial Service will bring
together in autumn 2013 its central commercial capability into
a single organisation, building on the evolution over the last
few years of the Government Procurement Service (which already
uses e-procurement tools, including e-tendering), thereby enabling
the new body to achieve and encourage further use of e-procurement
and e-invoicing in Government. In view of this, she says that
the UK is already relatively well-placed to achieve high levels
of e-procurement and move towards the 100% target, although further
work will be needed to increase the take up, and to provide information,
assistance and advice to public bodies and suppliers, in order
to ensure the target is successfully met. In addition, the Cabinet
Office will consult with other interests, including economic operators,
and providers of e-procurement solutions and services, as part
of the transposition process of the new procurement Directives,
and afterwards, and will consider what plans and assistance
are appropriate and necessary to achieve the full e-procurement
timescale, building on the progress so far.
2.12 On the proposed Directive, the Minister
says that the Government has accepted that the coordination of
rules governing procurement by public bodies and utilities is
consistent with the principle of subsidiarity, and that this has
long been enshrined in EU public procurement legislation supported
by the UK. It also recognises that public sector e-invoicing saves
time and money and should be encouraged. In particular, the "Information
Economy Strategy" published in June 2013 states that the
Government wants to encourage the use of electronic invoicing,
and that its aim is to use this for all central Government transactions,
based on systems which are easy to install and use, and priced
sufficiently flexibly to suit the needs of diverse businesses.
2.13 The Minister observes that the UK's approach
to interoperability — which expects authorities to accept
e-invoices, whilst encouraging, but not obliging suppliers to
submit these — is similar to the Commission's proposed
approach. However, she points out that the Commission has noted
a raft of existing data standards for e-invoicing across the EU,
and she says that it is not axiomatic that the best means of achieving
interoperability is to add another such standard, even if its
acceptance by public authorities and utilities becomes mandatory
in due course. In particular, the new standard could become just
one among many, and contribute to (rather than address) the problem,
and this may be an especial risk if it allows different interpretations,
or has significant incompatibility with commonly-used existing
e-invoicing standards and solutions. The Government will therefore
wish to ensure that the proposal actually helps to achieve efficient
e-invoicing and does not inadvertently create barriers or difficulties.
2.14 The Minister adds that, in line with the
policy outlined above, it can be expected that UK public bodies
will increasingly adopt e-invoicing over the next few years, before
the current draft Directive has been adopted, and before the new
CEN-developed standard has been accepted. It is therefore important
that this measure does not create difficulties or significant
incompatibilities with the UK e-invoicing already in place. She
also says that standards proposed and adopted by the EU should
assist interoperability; should not create avoidable difficulties
for authorities, suppliers or e-invoicing solution providers;
and should not introduce incompatibilities or conflicts with existing
e-procurement or e-invoicing practice. The requirement of the
Directive should also be unambiguous, with UK e-invoicing interests
being encouraged to contribute fully to the CEN's development
of the new standard, and account also being taken of existing
work elsewhere in the world.
2.15 The Minister also makes the following detailed
comments on the proposed Directive:
- ideally, an e-invoice produced
by any system or service should be machine-readable by other systems,
requiring neither human intervention nor intermediate electronic
translation, but full interoperability covers data content, format
and transmission, and an agreed data format is not necessarily
a sufficient condition for full interoperability: however, as
the draft directive requires that authorities should accept an
electronic invoice which complies with the content standard, this
could create potential issues if it was not compatible with format
and transmission standards and protocols used by authorities,
and this issue may need to be addressed during the negotiations;
- the CEN standard and supporting material should
provide sufficient formatting details and data-type definitions
to facilitate genuine interoperability between systems which adhere
to the standard;
- although pre-award procurement differs from invoicing,
there will normally be common content elements through various
parts of the end-to-end procurement process (for example, the
identity and other information about the contracting authority
and the economic operator), and the whole procurement "lifecycle"
should be seen as stages in a coherent process, not as a series
of independent activities: data standards throughout the procurement
process should reflect that coherence, and this should also be
reflected in the formal CEN standard;
- the draft directive requires that the new standard
guarantees personal data protection in accordance with Directive
95/46/EC, but, whilst some invoices may contain information which
can identify individuals, and therefore need to be handled in
accordance with data protection requirements, it is not clear
that a standard for a semantic data model can "guarantee
personal data protection", as this depends largely on the
behaviour and characteristics of persons and systems involved:
the Government will therefore seek clarification of the Commission's
intentions, and what this will mean in practice for users, its
view being that any data protection requirements should be proportionate
to the actual risks, as over-onerous obligations would add costs
and be counter-productive to effective e-invoicing;
- although the directive would only apply to invoices
in respect of contracts which are subject to the new (modernised)
public procurement, utilities procurement, and the defence and
security public contracts directives, some further clarification
may be needed in respect of contracts which are not fully subject
to the public procurement and utilities directives, (for example
service contracts falling under the "light touch" regime);
and
- unlike the procurement rules, the e-invoicing
proposal does not provide for specific remedies for economic operators
if authorities and utilities breach the measure, and, when the
Directive is transposed in the UK, consideration will need to
be given to the extent to which provisions will be enforced in
order to comply with the UK's obligation to ensure compliant e-invoices
are accepted.
2.16 Finally, the Minister comments on the timing
aspects. She notes that, if the modernised public procurement
directives are (as expected) adopted this autumn, the deadline
for full e-communication under them will be the first half of
2018, and that, if the current proposal is agreed and adopted
within the next year or so, the deadline for acceptance of standards
compliant by Member States might also fall within the first half
of 2018. She says that aligning the dates of full e-communication
and obligatory e-invoicing makes sense in principle, but may put
pressure on procuring bodies to adopt both in a short timescale,
and necessitate central information and assistance.
2.17 She also points out that, although the proposal
requires Member States to transpose the directive within four
years of adoption, it sets no specific timescales by which CEN
is to develop, and the EU is to accept, the e-invoicing standard.
Contracting authorities, economic operators and providers of e-invoicing
solutions and services will need sufficient time to gear-up between
EU adoption of an e-invoicing standard and the requirement to
accept it. The Commission's request to CEN should therefore have
detailed terms of reference, and a suitably firm date by which
CEN is requested to produce a final draft standard. The directive
should make provision if the CEN standard is delayed for any reason.
Conclusion
2.18 In the light of the earlier proposals
to make it mandatory for the transmission of documents relating
to public procurement to be carried out electronically, it would
seem sensible to extend that approach to invoicing by public authorities,
and we note that the Government agrees that this can provide significant
benefits. We also note that the UK's approach to interoperability
is similar to that proposed by the Commission, and that the Government
considers the UK is well placed in this area.
2.19 At the same time, the Government has
also highlighted a number of issues which it will wish to explore
further. These include whether another data standard for e-invoicing
is necessary, and the need to avoid any incompatibility between
a new measure and the e-invoicing already in place within the
UK; issues surrounding the protection of personal data; and the
question of remedies for economic operators if authorities and
utilities breach the measure. Consequently, although we think
it unlikely that these documents raise issues which will require
further consideration by the House, we believe it would be prudent
to hold them under scrutiny, pending further information on the
various points of concern.
2.20 Having said that, we feel bound to express
our disquiet at the timing of the Minister's Explanatory Memoranda,
having regard in particular to the fact that the Subsidiarity
Protocol applies to the draft Directive. In the event, the Government
does not consider the proposal gives rise to any subsidiarity
concerns, and, whilst we do not disagree with that assessment,
it is the case that, despite the documents having been deposited
on 11 July 2013, the Explanatory Memoranda were not signed until
11 September, immediately before the start of the three week Conference
Recess. Had a Reasoned Opinion been required under the Subsidiarity
Protocol, it would clearly have been impossible for the House
to have provided this before the deadline of 26 September, and
we find it disturbing that the Cabinet Office, of all departments,
should apparently have been unaware of this. We would therefore
like the Minister to explain why these Explanatory Memoranda could
not have been submitted in good time to allow this aspect of Parliamentary
scrutiny to be properly discharged.
8 (33585) 18964/11: see HC 428-lii (2010-12), chapter
2 (29 February 2012), HC 86-xxi (2012-13), chapter 5 (28 November
2012) and HC 83-xii (2013-14), chapter 12 (17 July 2013) and (33586)
18966/11: see HC 428-lii (2010-12), chapter 3 (29 February 2012),
HC 86-xxi (2012-13), chapter 4 (28 November 2012) and HC 83-xii
(2013-14), chapter 12 (17 July 2013). Back
9
(33867) 9299/12: see HC 86-vi (2012-13), chapter 6 (27 June 2012). Back
10
The Commission has identified 15 separate national, regional and
industry e-invoicing standards in the EU. Back
11
COM(10) 712. Back
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