1 Policy making and regulatory development for PP: challenges and approaches - The Austrian example_English

Policy making + regulatory
development for PP:
challenges + approaches
- The Austrian example
Dr. Michael Fruhmann
OECD/Sigma Paris
24th April 2014

© Michael Fruhmann 2014
OECD reference
• OECD Sigma brief Nr 26 – Organising Central
Public Procurement Functions (see:
http://www.sigmaweb.org/publications/Brief26_C
entralPPFunctions_2013.pdf)

Historic Background –
where did we start from?
 Discussion about “PP-Law” started 1889
 1st law on PP introduced 1993 (several
unsuccessful regulatory projects launched before
1993) – still a quite “young” PP system !
 Background (1993): accession to EEA (resp. EC
in 1995) + need to align AUT legislation to PP
Directives

Background –
constitutional set-up of AUT
 AUT organized as a “federal state” (federation +
9 regions [“Länder”] with legislative
competencies) but federation has a (very) strong
position (“federalized central state”)
 1993: PP considered as part of organizational
competence  1 federal law + 9 regional laws on
PP; but: PP (Länder) Laws very similar to
Federal PP Law (“copy + paste” strategy)

Background –
constitutional set-up of AUT II
 2002: successful parliamentary initiative for a uniform PP
Law – amendment of AUT constitution (see Art. 14b B-
VG)
 Federal level has the competence to regulate material
aspects of PP (definition of “PP” follows system of
Directory of Community Legislation: whatever EU
qualifies as “PP” falls within the federal competence –
dynamic concept! - automatically covers inter alia new PP
areas like concessions)
 since 2002: 1 Federal Law (material aspects + remedies
for federal PP) + 9 Länder PP review Laws (only
remedies for Länder PP)

Background –
constitutional set-up of AUT III
1.1. 2014: major constitutional reform entered into
force: introduction of Administrative Courts!
PP on federal level  Federal Administrative
Court
PP on regional/local level  (resp.) Regional
(Länder) Administrative Court

Background –
constitutional set-up of AUT IV
Constitution provides for unique regulatory
cooperation (“formalized” informal procedure) to
“create” material rules (= primary law) concerning
PP:
• Länder must be involved in the drafting process
and
• publication only upon prior approval of the
Länder (silent procedure rule applies)
– see Art. 14b AUT Federal constitution (B-VG)

Background –
constitutional set-up of AUT V
Constitution provides:
 strict understanding of rule of law: (primary) law
as principle form of legislation!  PP Directives
must be transposed by primary law
 secondary legislation only possible for specifying
primary law  in PP for ex: determining
publication media or fees for review procedures

Set-up on federal level
Federal Chancellery (Constitutional Service) as
responsible ministry (see Federal Ministries Act
1986 – BMG; but “PP” not explicitly mentioned)
 no deliberate decision but historic development
(going back to 1930s)

Set-up on federal level II
Federal Chancellery (Constitutional Service) as
central focal point for PP on federal level;
responsible for:
drafting of legislation
developing/coordinating of PP policy (in a wide
sense encompassing green/social/innovative PP,
defence procurement …)
negotiating PP issues (on EU/WTO/UN-level)
representing AUT in specialized courts (ECJ,
Constitutional Court)

Set-up on federal level III
Line ministries, Länder + specialized bodies (for
ex Central purchasing bodies – CPBs) responsible
for:
implementing PP Law + policies
developing/coordinating specific PP policies in
line with the general PP policy (for ex sustainable PP
Action Plan, “Procure Inno” – Guideline for
innovative PP …)

Consequence of
constitutional set-up
“Cooperative” legislative procedure:
Federal Chancellery has central role in the
legislative process (esp. drafting/consultation phase)
- decides for ex what should be regulated in Federal
PP Law (clean car, late payment, energy efficiency
…)  basic approach: all PP specific provisions
should be contained in Federal PP Law (in order to
avoid patchwork-legislation)

Consequence of
constitutional set-up II
Pros (ctd.):
 one (!) focal point for PP situated at the heart of
(Federal) Government
 unique position with unique oversight on
developments/activities in PP
 single contact point (internally and externally)
 one voice vis-à-vis Union (important for ex for
infringement procedures)
 one (!) team for negotiation and transposition!

Consequence of
constitutional set-up III
Pros:
Federal Chancellery perceived as trustworthy
(quasi-neutral) mediator between various stakeholder
groups (contracting authorities versus business,
federation versus Länder …)
(“moral” + legal) authority because of its
reputation + location within the federal bureaucracy
possibility to harmonize + develop PP policy with
other (horizontal) federal policies (e-Gov strategy,
sustainability strategy …)

Consequence of
constitutional set-up IV
Cons:
Federal Chancellery relies heavily on “authority” (unlike
Germany no guiding competence vis-à-vis line ministries)
limited influence on Länder
limited (institutional) specialized know-how
dependence on feed-back (necessary for coordination)
limited resources to perform all central (core) PP functions
in an equal manner (esp. monitoring, compliance assessment)
– need for prioritization!
 necessity to coordinate other PP functions (performed by
line ministries and spin-offs/outsourced entities)

Decentralized PP functions
why:
 because of constitutional requirements (“federal state”)
 Chancellery cannot perform all functions (resources)
 decentralized system better suited for functions which
should be as close to “customer” as possible
 where specialized know-how is needed
what:
 training, advice (PP hotline), publication platform(s),
central purchasing activity, specific assessments (for ex SME)

Controlling/coordinating a spin-off?
Example – central purchasing body (CPB):
 explicitly founded to perform PP-procedures for
federal level for off-the-shelf products and services
(8 main categories)
 2012: 47,6% of turnover for federal level
 2012: 1335 articles/services in portfolio
Questions: too big to fail? competition? dominant
market position – SMEs – supply chain
management!?, dependence on services!, still
identity of interests with federal state?

Centralizing/decentralizing PP
functions?
no “single” or “correct” solution, because
depends on various factors
AUT experience:
centralizing (specific) core PP functions
worked very well (prerequisite: well educated
personnel + enough resources)
 decentralized system for supplementary PP
functions, but this involves some issues

Future challenges
General:
•“life-cycle” of PP legislation is shortening
(see for ex Directives)
•PP process is becoming more complex
(technically, economically; see for ex PPPs)
•concept of PP is broadening (PP cycle: PP
planning  tendering  invoicing 
evaluating  planning …); trend to regulate
the whole cycle (necessary/sensible?)

Specific challenges
new PP Directives provide for mandatory e-
procurement (see for ex Art. 22 + 90 2014/24/EU)
 will revolutionize PP on all levels (esp.
local/regional)
requires (new) resources + know-how + extensive
training
capacity issue - outsourcing as a solution?
will de facto influence areas outside PP Directives
(esp. PP below thresholds)
challenge not to (inadvertently) create market
obstacles (thorough impact analyses needed)

Specific challenges II
mandatory e-procurement (ctd) – specific additional
AUT issues
e-publication system (single platform [costs!] or
network with mandatory interconnectivity)
 federal state: no (legal) possibility to force
Länder to use specific e-procurement system(s)
but clear policy to avoid e-procurement patchwork
(detrimental to business + contracting authorities)

Specific challenges III
new PP Directives provide for more leeway to use
secondary objectives (see for ex Art. 67, 68, 70, 74ff
2014/24/EU)
will lead to more complex PP procedures 
capacity issue (on all levels)
extensive training (own staff and business)
required
(very likely) result in more review procedures
(esp. in beginning since lot of legal uncertainties;
see for ex. award criteria, LCCs)

Lessons learned
Policy making (for regulator)
good preparation of process (development of
policy as such  coordination/consultation +
communication) and content (basic impact
assessment)
develop a “basic” message for your policy (anti-
corruption, transparency, deregulation,
green/social …) for “selling/promoting” the policy
(vis-à-vis public + political level)
you need a leading figure both on technical and
political level (ownership!)

Lessons learned II
Policy making (for regulator)
take your time!
if not (absolutely) necessary: don’t aim for
unanimity/general consensus re policy (if you
achieve it – be happy) but necessity to sell the
policy to “key” players

Lessons learned III
Regulatory development process
good legislative drafting takes time! + keep
regulation as simple as possible (language!)
involve all relevant stakeholders in a transparent
process + communicate (why + what) –
continuously! (burdensome in short term but
helpful long-term) – “they” can help!
try to find the “golden mean” (btw the opposing
regulatory interests – if both sides are equally
unhappy/happy you are close; doesn’t preclude
that in some cases regulator takes a specific
position – overall regulatory balance!)

Any questions?
Thank you for your attention!
Contact: Dr. Michael Fruhmann, Federal Chancellery,
Constitutional Service, Republic of Austria
michael.fruhmann@bka.gv.at

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