Legal review of public procurement decisions gives rise to long delays and increases costs signficantly. The management of these reviews must be tightened up, says Gösta Ljungberg, a sourcing expert at PA Consulting Group.
Large projects can be delayed significantly while the results of a public procurement are challenged and reviewed. Often, these projects involve business-critical IT installations. The reviews cost hundreds of millions of Krona and often give rise to delays of several years and rarely bring additional value to citizens and society.
Citizens, authorities and society would surely support a move to use specially appointed examiners to speed up the review process.
The law on public procurement has resulted in major improvements in Swedish public procurement. The principles are sound and have even been copied to improve procurement in the private sector. However, the process of reviewing procurement decisions is eating into the financial gains. The indirect costs include delays in finalising new contracts, while direct costs include the legal costs for the authorities and the judiciary.
Given that 1,403 legal reviews took place in 2015, with an average legal fee of SEK 200,000 per contract, legal costs can be estimated at some SEK 300 million a year. The really big losses, however, are caused by the fact that IT procurement is often a key element of major change programmes. With legal reviews taking 6–12 months, large projects are put on hold, with costs for staff and consultants mounting while they wait to continue with their work.
As a result, we have a situation where the right to examine possible violations of the law work against the public benefit. The current system is not optimal and something needs to change to solve this problem. The time for signing agreements must be shortened dramatically.This can be achieved in several ways:
The first two options can only reduce the problem but cannot completely eliminate it. Additionally, the lead times should not be shortened in a way that could put due process at risk.
The third point is about giving government authorities the option to apply for a continuous external review of procurement process when it comes to contracts where a delay would have a significant financial impact or severe negative impact on society.
The continuous review should be performed at predetermined times in the procurement process, all in accordance with the principles of public procurement. Whenever there is an appeal, the reviewer’s task will be to determine whether the grounds for appeal are reasonable or not. This lays the foundation for a rapid initial review to determine whether the appeal should be granted, the case should be put on hold or the review should continue through normal processing in the courts.
In cases where the authorities have not applied the principles of public procurement correctly, it is entirely reasonable that the normal processing procedures should be used. But in the cases where the procurement was conducted in accordance with the principles and only minor shortcomings exist, it is reasonable for the process to accelerated.
Preferably, it should be the courts that appoint the investigative entity. The cost of this can be estimated at approximately SEK 3 million annually, based on some 20 contracts a year undergoing an initial review taking five days and carried out by two people during the procurement process. This approach would cost significantly less than the impact of appeal delays on major projects projects of this type. The proposal is self-financing and ensures that the right of appeal is not restricted.
An increase in the number of procurements covered by this type of audit could be justified if the benefits are significant. These could include reduced pressure on the courts, enhancing the quality of public procurement, and supporting the transfer of knowledge from the reviewing lawyers to those conducting procurements on behalf of the authorities to reduce the errors made on future procurements.
Gösta Ljungberg is a sourcing expert at PA Consulting Group