Research Trends and Conclusions: Public Procurement 2011
Building on the research from the previous two editions of this publication, Who’s Who Legal analyses votes and interviews from clients and private practitioners the world over to establish a picture of recent trends and developments in public procurement law.
At the time of writing, Eurozone finance ministers remain locked in debate over the details of a second multibillion-euro bailout package for Greece. The failure to curb high levels of public sector spending in the country has been a major contributor to Greece’s national debt, which reached €340 billion this year and saw government bonds reduced to junk status in 2010.
While the Greek crisis is an extreme example, public sector spending has come under close scrutiny around the world in the three years that we have published this guide. Numerous governments have attempted to ensure that public money is well invested by developing or expanding public procurement regulations, and for the majority of the lawyers we recognise in this edition, the high levels of advisory and contentious work as a result of these new regulations have dominated their practices over the past year.
Canada is better represented than any other jurisdiction in our research and, in the words of one source, has seen its procurement bar “come into its own” in recent years. In 2009, the Ministry of Finance issued a supply chain guideline that was expanded by a procurement directive earlier this year, and which places an increased emphasis on transparency and accountability in the issuance of contract awards and the investment of public money. A key catalyst for this increase was the eHealth Ontario scandal of 2009, where the province’s eHealth provider spent millions of dollars of public money in contracts without opening them to competitive tender, paying some contracted consultants nearly C$3,000 a day. In the wake of the scandal, public bodies, particularly in the health sector, are engaging the services of public procurement lawyers in reviewing contracts and advising on risk. According to one source “there is a strong desire among lawmakers and clients that tendering processes should be conducted fairly and the demand for our services is increasing”. Canadian lawyers have formed a larger and larger percentage of our overall listings since 2009, eclipsing England, their nearest competitors (chart 1), indicating a steady increase in the sophistication of the national procurement bar over the same period.
A similar regulatory focus on increased transparency and competitive tendering has boosted levels of work for lawyers in Europe, where nearly half of our feature lawyers are based. The EU Remedies Directive came into effect in 2009 and the lawyers we spoke to in numerous jurisdictions reported an increase in litigation as unsuccessful bidders are given clearer tools to challenge tenders. “Whereas clients used to perceive a contract challenge as ‘biting the hand that feeds’, they are now more than willing to go to court” according to a London source, while in Brussels one lawyer said “my work is all litigation now: clients are fighting hard.” Even while most European governments are adopting austerity measures, public money is still perceived to be more viable than private investment following the financial crisis - in the UK alone analysts predict that the value of services outsourced by local authorities will increase by £40 billion in the next five years. With so much at stake, lawyers throughout Europe expect the volume of filings to increase in the coming years.
European lawyers are also debating the proposals issued in the European Commission’s green paper on the modernisation of EU public procurement policy, issued earlier this year. A response to the pressures of public deficits, the need for effective use of public money and the demand that “public purchasing contributes to the achievement of overall societal goals”, the reforms seek to create a more efficient European procurement market by reducing red tape, promoting cross-border transactions and allowing smaller companies greater access to procurement markets. With the first proposals for new legislation due in 2012, lawyers throughout the EU expect the demand for advice among clients to increase.
Lawyers welcomed the green paper’s calls for clarification on the scope, application and extent of the exclusion of bidders for contracts on the grounds of corruption, and noted that the possibility of so-called “self-cleaning” measures being incorporated into the EU to help companies remedy their negative situation could give rise to “greater demand” for compliance and governance advice. Lawyers in the UK are already expecting an increase in compliance advice after the introduction of the Bribery Act earlier this year, under which companies without adequate anti-bribery procedures in place can become subject to unlimited fines, confiscation of property and disqualification of directors, as well as debarment from bidding for public procurement contracts.
Proposals to expand the scope for cross-border bids and contracts, both within the EU and elsewhere, has also engendered debate among the world’s leading public procurement lawyers. While sources reported that clients had welcomed the prospect of increased access to foreign markets, the extent of this access remains in doubt. Recent dissatisfaction over the award of the £3 billion Thameslink contract to German train manufacturer Siemens ahead of Bombardier led to calls for a “sharper focus on domestic supply” from UK cabinet ministers. Similar concerns surfaced recently in Canada, where public support for free trade with the EU was tempered with concerns over opening the bidding rounds for government purchasing contracts to European competitors. Meanwhile, the EU threatened to block Chinese bids for European public contracts late last year in response to a perceived lack of reciprocal access in China. For numerous lawyers in this edition who handle work for multinational clients, the results of regulatory decisions on cross-border procurement will have far-reaching consequences.
Over the past three years, traditionally strong firms like Allen & Overy, Clifford Chance, Norton Rose and White & Case have performed consistently well, demonstrating their ongoing precedence in the international market. The same period has also seen a marked increase in the prominence of other firms such as Ashurst and Blake Cassels & Graydon LLP (Chart 2). The strong year-on-year expansion at these latter firms indicates a steady increase in the visibility and sophistication of the firms’ procurement teams.
A closer look at the geographical distribution of lawyers at the world’s leading firms confirms Canada’s position as the country with the highest concentration of leading public procurement lawyers (Chart 3). Yet the chart also emphasises the advantages of having an international team: each of the three years Allen & Overy has won Who’s Who Legal’s firm of the year award in this discipline, it has also fielded the most geographically diverse complement of lawyers.
The dual advantages of a strong Canadian presence and a varied geographical spread are evidenced in the year-on-year expansion of Blakes and Ashurst respectively. While the number of lawyers recognised at Blakes has increased roughly in conjunction with the development of Canadian public procurement regulations and the country’s steady expansion in terms of the percentage of our overall listings, Ashurst has added to its presence in our research through the recognition of lawyers in different jurisdictions.
Since Who’s Who Legal began investigating the international public procurement law marketplace in 2009, the regulatory response to the public cost of the global financial crisis has gathered pace worldwide. Misuse of public money, from the UK expenses scandal to the eHealth Ontario scandal and the Greek crisis, has fuelled a drive towards increased transparency and accountability in procurement regimes that has kept the lawyers in this edition engaged both in and out of court. Sources expect that governments will continue to introduce fresh legislation in the coming years, which will make the role of lawyers representing clients in an increasingly internationalised marketplace more complex and more important than ever.
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