3 International Procurement
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
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| Document details | Draft Council Decisions establishing the position to be taken by the European Union within the Committee on Government Procurement on:
(a) the withdrawal of the Union objections to the delisting of three entities from Japan's Annex 3 to Appendix I to the Agreement on Government Procurement; (b) the accession to the Agreement on Government Procurement of Montenegro; (c) the accession to the Agreement on Government Procurement of New Zealand
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| Legal base | Article 207(4) and 218(9)TFEU;—; QMV
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| Department | Cabinet Office
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| Document numbers | (a) (36316), 12859/14, COM(14) 539 (b) (36337), 13257/14, COM(14) 573 (c) (36342), 13281/14, COM(14) 574
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Summary and Committee's conclusions
3.1 The Agreement on Government Procurement (GPA)
is an international agreement under the WTO whose signatories
agree to mutually open up their public and "utilities"
procurement markets. The GPA covers the rules and procedures by
which the parties will conduct their relevant procurements, plus
the different market sectors which will be subject to the GPA,
and the bodies and organisations within each country which will
be subject to the GPA (the "coverage"). Whilst the
main text of the GPA (covering the procedural rules) is common
to all parties, the coverage (by market sector and procuring bodies)
is unique for each signatory, and is agreed through a series of
bilateral agreements between GPA parties. The current GPA agreement
was negotiated in 1994, and came into force in 1996. After prolonged
renegotiation, a revised and updated GPA was adopted in 2012 and
entered into force in April 2014 after formal acceptance by a
majority of the parties, including the EU.
3.2 There are currently 42 countries under the GPA,
including the 28 EU Member States; other major signatories include
Japan, Canada, South Korea, Taiwan, Hong Kong and the USA. The
Commission negotiates on behalf of the EU as a whole; individual
EU Member States are not separately represented. All the EU Member
States have substantially the same coverage with respect to each
of the other GPA parties. EU Member States meet their GPA obligations
through compliance with the European procurement directives.
3.3 The last time we reported on the GPA was in relation
to the agreement of a new Protocol.[11]
However, these three current documents address different issues.
The purpose of document (a) is to adopt an EU position on the
intention of the Japanese Government to withdraw from its coverage
under the GPA three railway companies formerly majority-owned
by the Japanese Government. Documents (b) and (c) concern the
adoption of an EU position on the accession to the GPA of Montenegro
and New Zealand respectively.
3.4 Although there are no material legal, financial
or policy implications arising from any of these documents, we
wish to draw to the attention of the House our concerns over the
handling of scrutiny on these documents by the Government. Delays
ranging between five and seven weeks in the submission of Explanatory
Memoranda by the Government has resulted in scrutiny overrides
on all three documents (the delay on an associated document is
dealt with in a separate chapter to this Report).[12]
All were adopted prior to the deposit of the Explanatory Memoranda.
We also report on the Government's subsequent apology for these
overrides by letter of 25 November.
3.5 We note the Minister's full and frank apology
for the poor scrutiny handling of these documents which has resulted
in three scrutiny overrides. We welcome his commitment to ensuring
that such lapses in scrutiny do not recur.
3.6 Regardless of the Minister's apology, we consider
that the scrutiny lapses are aggravated by the fact that his department
should set an example to other Government departments in adhering
to its own guidance on Parliamentary scrutiny of EU documents.[13]
It should be a repository of best, and not bad, practice for the
Government's handling of EU scrutiny.
3.7 We also object to his argument that even if
the option of abstaining had been understood by his officials
in relation to documents (b) and (c), it would have been inconsistent
with UK policy on international public procurement. Overriding
scrutiny on the grounds of incompatibility with Government policy
is not an explicit exception to the Scrutiny Reserve Resolution
of 17 November 1998 ("the scrutiny reserve"). The scrutiny
system in the House of Commons is premised on the need to hold
the Government to account for its decisions on EU proposals in
the Council, whether based on established Government policy or
not. Unless the Minister can convince us that agreement to the
proposals was on the basis on explicit exceptions to the scrutiny
reserve — that the proposals were confidential, trivial,
routine or substantially the same as a proposal on which scrutiny
has been completed (paragraph 3(a)) or for "special reasons"
(paragraph 4), then we cannot see why incompatibility with UK
policy should act to mitigate the Government's actions.
3.8 Given that the Minister has already sought
to identify the reasons for the scrutiny lapses and taken steps
to prevent recurrences in future, we think it would be premature
to invite him to give evidence before us at this stage. However,
we will consider issuing such an invitation if:
i) we do not receive an update from the Minister
by the end of January on whether any further issues concerning
his department's handling of EU matters have been identified as
part of his department's ongoing review of current, forthcoming
and outstanding Cabinet Office scrutiny business; and/or
ii) there is any further material scrutiny
lapse, including an override, during the course of the remaining
Parliamentary term.
3.9 The Minister will also be aware that in the
case of documents (b) and (c) our officials, in good faith, gave
the Government short extensions to the date by which Explanatory
Memoranda should be submitted (1 and 2 October respectively) until
6 October. That these extensions were also not met means that
future requests for extensions on EU documents falling within
his department's remit will necessarily be subject to greater
challenge.
3.10 Pending the Minister's response, we are retaining
these documents under scrutiny.
Full details of the documents:
(a) Draft Council Decision establishing the position to be taken
by the European Union within the Committee on Government Procurement
on the withdrawal of the Union objections to the delisting of
three entities from Japan's Annex 3 to Appendix I to the Agreement
on Government Procurement: (36316), 12859/14, COM(14) 539; (b)
Draft Council Decision establishing the position to be taken by
the European Union within the Committee on Government Procurement
on the accession to the Agreement on Government Procurement of
Montenegro: 36337, 13257/14 + ADD 1, COM(14) 573; (c) Draft Council
Decision establishing the position to be taken by the European
Union within the Committee on Government Procurement on the accession
to the Agreement on Government Procurement of New Zealand: (36342),
13281/14 + ADD 1, COM(14) 574.
Previous scrutiny
3.11 Although we have not previously reported on
these documents, their scrutiny history is of particular importance
to the basis of our Report to the House in this chapter. Document
(a) was deposited with us for scrutiny on 10 September and an
Explanatory Memorandum was therefore due to be submitted by 23
September (within ten working days of the document's deposit).
Document (b) was deposited with us on 18 September, with the Explanatory
Memorandum due on 2 October and document (c) on 19 September with
the Explanatory Memorandum also due on 2 October, with an extension
being agreed by our officials for both documents (b) and (c) until
6 October. The Explanatory Memoranda on these three documents
were not submitted until 11 November.
The current documents
Document (a) — Japan
3.12 In 2001 the Japanese Government stated its intention
to withdraw from its coverage under the GPA, three railway companies
which it had formerly owned on a majority basis as the companies
were moving towards full privatisation. All other GPA parties
except the EU have now accepted this; however until the EU also
agrees these bodies will not be formally delisted.
3.13 In the scoping exercise for the EU-Japan Free
Trade Agreement (FTA) the EU agreed in principle to withdraw its
objection to the GPA delisting. The Commission's Explanatory Memorandum
to the document (a) indicates that FTA negotiations on railway
procurement have made good progress; Japan intends to revise the
operation of a rail safety clause affecting the opening-up of
its rail markets under the GPA, and to promote transparent and
non-discriminatory procurement by the three railway companies.
It is therefore proposed that the Council adopts a decision that
the EU withdraws the objection to the delisting.
DOCUMENT (B) — MONTENEGRO
3.14 In 2013 Montenegro applied to join the GPA and
since then the Commission, on behalf of the EU, and Montenegro,
have negotiated market-opening commitments. It now proposes that
the Council formally adopts a position as a result of those negotiations.
The Commission's Explanatory Memorandum to its proposal states
that Montenegro submitted a final offer on 18 July 2014.
3.15 The Commission states that Montenegro's markets
access-commitments mirror those of the EU's existing market access
commitments under the GPA. These include central government,
sub-central government entities, and utilities (in the drinking
water, electricity, airport, port, urban transport, and railway
sectors).
3.16 In terms of market sector, Montenegro provides
a list of goods containing some exceptions which is the same as
for the EU. The list of services is the same as the EU's (i.e.
those so-called "Part A" Services currently subject
to the full EU public procurement rules). Construction coverage
will be the same as for the EU (and most GPA parties).
3.17 The Commission states that as an EU candidate
country Montenegro's public procurement rules are broadly aligned
with the EU acquis, and are non-discriminatory. The Commission
welcomes Montenegro's offer and proposes that the Council agrees
to it.
DOCUMENT (C) — NEW ZEALAND
3.18 In September 2012 New Zealand applied to join
the GPA and since then, the Commission, on behalf of the EU, and
New Zealand, have negotiated market-opening commitments. It now
proposes that the Council formally adopts a position as a result
of those negotiations. The Commission's Explanatory Memorandum
to its proposal states that New Zealand submitted a "final
offer" on 21 July 2014.
3.19 The Commission states that New Zealand's markets
access commitments in its final offer include core central government
ministries and departments. "Sub-central" entities
in coverage will include most District Health Boards, the biggest
city councils (Auckland, Wellington City and Christchurch City)
and regional councils of over 250,000 inhabitants. Coverage of
city councils and regional councils would apply (only) to projects
wholly or partly funded by the New Zealand Transport Agency.
3.20 The Commission adds that 14 New Zealand "Crown
entities" operating in fields such as tourism, aviation,
and education will be covered, as will four State Owned Undertakings
in the utilities sectors of airways, meteorological services,
railways and electricity.
3.21 In terms of market sector the New Zealand offer
covers the opening up of the market for goods, most services (not
including Research and Development public health, education and
welfare) and all construction services (for those entities which
will be subject to full coverage) .
3.22 The Commission Proposal welcomes New Zealand's
offer, but as New Zealand's proposed market-opening is not complete,
the Commission proposes that there should be some balancing "carve-outs"
from the EU's market-opening to New Zealand suppliers as follows:
· New Zealand suppliers would have access
to fewer central-government-level contracting authorities than
are some other GPA parties.
· The Commission proposes that NUTS level
3 bodies[14] and smaller
administrative units should be excluded from coverage (this would
affect UK most district Councils and some county councils).
· Larger units (NUTS Levels 1 and 2) would
only be covered for the sector of urban transport.
· Certain EU utility sectors (airports,
ports, drinking water) would also not be covered.
The Government's view on the current documents
3.23 The Minister for the Cabinet Office and Paymaster
General (Mr Francis Maude) addresses the three documents in three
separate Explanatory Memoranda of 11 November.
DOCUMENT (A) — JAPAN
3.24 The Minister comments on the policy issues arising
from the proposal as follows:
"The UK is committed to removal of unnecessary
barriers to international trade and supports open and transparent
public procurement markets The UK supported the modernisation
of the GPA, and the Government is on record as welcoming the negotiations
to achieve a Free Trade Agreement between the UK and Japan. In
principle it seems this delisting of the Japanese railway companies
it itself is unlikely have substantive effect on the access to
the Japanese rail markets for EU and UK firms. It is only these
three firms which are specifically affected, and as discussed
in the Impact Assessment, as private sector bodies they should
have a market incentive to procure effectively and efficiently,
whether inside the GPA or outside. However, as also noted in the
Impact Assessment, the concomitant changes to the operation of
the Japanese rail safely clause and the positive contribution
to the FTA negotiations as whole, appear helpful. In the longer
term it may help encourage collaboration and joint ventures between
UK and Japanese rail infrastructure and rolling stock suppliers
in bidding into third country markets (for example China, bearing
in mind the latter is moving towards potential GPA membership)".
DOCUMENT (B) — MONTENEGRO
The Minister addresses policy implications, by saying:
"The UK Government agrees with the aims
of the GPA, supported and encouraged the Commission and the other
GPA parties to achieve the recently-adopted updates, and supports
accession of new GPA members, with as wide "coverage"
as possible. This stems from our policy of supporting fair
and open markets, value for money, probity and transparency in
public procurement, support for growth in the global economy,
and guarding against protectionism. According to the Commission,
Montenegro's offer is consistent with the existing EU market-opening
under the GPA. Therefore the UK can support the Proposal that
the Council accepts Montenegro's offer.
"The direct impact on the UK of Montenegro's
accession to the GPA is likely to be small. The population of
Montenegro is less than 1% of that of the UK; GDP is less than
0.2% of the UK's GDP, and its public procurement market above
the EU thresholds was only €25.2m (£20.0m) in 2011,
compared with an estimated UK EU-advertised public procurement
market of over £75 billion. Moreover the UK does not routinely,
or as a matter of policy, exclude suppliers from non-GPA parties;
so the UK public procurement market is not currently closed or
significantly restricted for Montenegrin bidders.
"However, accession of Montenegro will help
maintain the momentum of opening-up international public procurement
markets and encourage other countries to accede to the GPA."
DOCUMENT (C) — NEW ZEALAND
3.25 The Minister comments on the policy implications
as follows:
"Therefore the UK supports the conclusion
of an agreement between the EU and New Zealand in the GPA accession
process. We would prefer more complete coverage than that envisaged
in the Proposal, including a wider opening up of the local authority
sector. But, as it is probably unlikely that there would be substantial
EU - New Zealand public contracts in local authorities in any
case, this is not a crucial deficiency.
"Although New Zealand is not currently a
party to the GPA, the UK does not routinely, or as a matter of
policy, exclude suppliers from non-GPA parties; so the UK public
procurement market is not currently closed or significantly restricted
for New Zealand bidders. Therefore the accession of New Zealand
should confirm access for UK business to New Zealand's public
procurement markets, whilst having little practical impact on
public procurement in the UK. The attached Impact Assessment provides
some analysis of the possible financial impact."
COMMON POINTS ON THE THREE DOCUMENTS
3.26 The Minister makes the following points that
are common to all three documents:
· the principle of subsidiarity does not
apply to them since they fall within the EU's exclusive competence
under the Common Commercial Policy (and the EU is party to the
GPA and not the Member States themselves);
· none of them triggers the UK's JHA Title
V opt-in;
· they will require no addition or amendment
to domestic legislation;
· they do not give rise to substantive fundamental
rights implications;
· no timetable has been specified for them
by the Commission;
· there are no specific financial implications
identified, except in the case of document (a) the potential benefits
in expected improvements to access to the Japanese rail markets
for UK businesses and from the impetus to the FTA negotiation
from the adoption of the proposal and in the cases of documents
(b) and (c), improved access for UK firms to Montenegrin and New
Zealand markets; and
· a detailed impact assessment is provided
for each of them.
The Minister's letter of 24 November 2014
3.27 The Minister explains the delay in the production
of the Explanatory Memoranda on these three documents, which have
resulted in scrutiny overrides and a fourth, on which we report
in the following chapter as follows:
"I would like to apologise for the very
late submission of 4 Cabinet Office EMs on procurements issues
(12642/14, 13257/14, 13281/14 and 12859/14). I appreciate that
the delay falls well short of Committee expectations. Unfortunately
three of the proposals were adopted before you could examine the
EMs and will therefore be recorded as scrutiny overrides.
"Unfortunately, my office did not receive
the EMs for clearance until after the deadline set by the Committee.
When they were received, the advice accompanying them did not
flag up that they were overdue, which resulted in a further avoidable
delay. My office have spoken to the team involved, and understand
that the delay on their side was in part due to a clutch of Commission
proposals arriving at once, with the 10 day deadline attached.
Due to that, and the fact that the team had not previously seen
the details of the paper, it took them longer than usual to assess
and summarise these in a way that would be useful to the Committee.
"Please accept my assurances that there
will be no reoccurrence of this incident on any future EMs associated
with my Department. The team concerned has instigated a lessons
learned review to ensure that we better manage this process in
future and prevent these sort of delays from happening again.
My office has also reviewed the management of scrutiny business
and my Parliamentary-business manager will act as a focal point
within my office to keep track of Cabinet Office scrutiny business.
All Cabinet Office outstanding business recorded in Commons Remaining
Business and Lords Progress of Scrutiny documents is being reviewed
with heads of policy teams with a view to ensuring updates are
provided where required. My officials will also be holding a workshop
on procedure to ensure better handling in the future.
"On further examination since submitting
the EMs, I am advised that the decisions in documents 13257/14
and 13281/14, regarding the accession of New Zealand and Montenegro
to the Government Procurement Agreement were agreed in Council
on 13 October. And the Decision in document 12589/14 was adopted
on 21 October.
"Whilst the Commission proposals for New
Zealand and Montenegro were released on 16 September 2014, while
Parliament was in recess and the decisions were taken by the Council
on the day that Parliament returned from its summer break my EMs
failed to note this and nor was I asked to account for the Scrutiny
overrides until now.
"Officials have advised me that there was
little prospect of these decisions being postponed to a later
Council, (and if it had been possible would have caused knock-on
delay to the progress to GPA accession of New Zealand and Montenegro).
But I am concerned that the option of recording a UK abstention
at the Council was not fully understood and I have asked officials
to ensure that this option is one that is fully explored where
possible in the future.
"On the policy position the UK has consistently
supported open public procurement, and the extension of the GPA.
You may recall that the government submitted an Explanatory Memorandum
on 7915/13 + ADD 1 and 7919/13 + ADD 1 in May 2013 concerning
the proposed amendment to the Government Procurement Agreement,
which both Committees cleared from scrutiny in June 2103[sic].
"That EM stated; 'The UK Government agrees
with the aims of the GPA in principle, [...] This stems from our
policy of supporting fair and open markets, value for money, probity
and transparency in public procurement, support for growth in
the global economy, and in guarding against protectionism in the
current economic climate. The new GPA protocol should provide
a further opening of markets and new opportunities for UK firms,
and is a positive step forward in the global trade agenda'.
"The accession of New Zealand and Montenegro
is consistent with the policy position set out in that earlier
EM, and the UK has encouraged the Commission to achieve a satisfactory
negotiation with these states. It would therefore have appeared
to be inconsistent with our wider GPA policy position, and not
readily understood by other parties, if the UK had opposed or
even abstained from the Council decisions on Montenegro and New
Zealand.
"With respect to 12859/14, in support of
the EU-Japanese Free Trade negotiations, the Council adopted a
position on 21 October. Officials took the view that this fell
within the parameters of previously-cleared matters and in particular
EMs 7915/13 & 7919/13, from May 2013, and that no separate
scrutiny clearance was necessary for this decision. However, this
was clearly wrong.
"The final EM of the current tranche (11642/14)
[sic] concerns a Commission staff working document, and
is not subject to any specific Council decision.
"I hope this goes some way to addressing
the concerns which your Committees will rightly
have about the handling of these proposals. Of course if there
are any further concerns or queries I will be very happy to address
them."
Previous Committee Reports
None; but see Sixth Report HC 83-vi (2013-14) chapter
7 (19 June 2013).
11 Sixth Report HC 83-vi (2013-14), chapter 7 (19 June
2013). Back
12
See (36292), 12642/14, chapter 2 of this Report. Back
13
Parliamentary Scrutiny of European Union Documents Guidance for
Departments August 2013 http://europeanmemoranda.cabinetoffice.gov.uk/files/content/parliamentary-scrutiny-departments-1306.pdf. Back
14
Regulation (EC 1059/2003) established several size levels ("NUTS"
levels) for territorial units in Member States. Back
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