Issue 43 November 2008 - Public Procurement and Human Rights Part I

The Scottish Government is currently under pressure to cancel its award of the £18.5m contract to carry out Scotland's 2011 census to the British subsidiary of CACI International. It is alleged that CACI International has a poor record of compliance with international human rights standards and has been complicit in human rights abuses in Abu Ghraib. A string of cases has been brought in the US¹ and more than 250 witnesses have come forward to substantiate claims of torture against CACI International and its subsidiary companies.² The Scottish Government has been warned that, "they risk alienating Scotland's Muslim community and the entire anti-war movement"³ and that the award of the contract: “...has not only badly wounded the SNP government's claims of being more ethical than Labour and putting human rights at the top of its agenda, but has also led to fears personal data on millions of Scots collected by the company might be sifted by the US government given the close relationship between the Bush administration and [... ] CACI."⁴ 

This is not just bad press for the Scottish Government. States have a legal duty to protect their citizens from the commitment of human rights abuses by non-state actors. In his report to the UN Human Rights Council of March 28, 2007, UN Special Representative John Ruggie states that: "... International law firmly establishes that states have a duty to protect against non-state human rights abuses within their jurisdiction, and that this duty extends to protection against abuses by business entities. The duty to protect exists under the core United Nations human rights treaties as elaborated by the treaty bodies, and is also generally agreed to exist under customary international law. Moreover the treaty bodies unanimously affirm that this duty requires steps by states to regulate and adjudicate abuses by all social actors including businesses."⁵ 

In his 2008 report Ruggie goes on to say that: "The general nature of the state duty to protect is well understood by human rights experts within governments and beyond. What seems less well internalised is the diverse array of policy domains through which states may fulfill this duty with respect to business activities, including how to foster a corporate culture respectful of human rights at home and abroad. This should be viewed as an urgent policy priority for governments- necessitated by the escalating exposure of people and communities to corporate related abuses, and the growing exposure of companies to social risks they clearly cannot manage adequately on their own."⁶

Ruggie makes it clear that although the duty on businesses to comply with human rights standards is well known it is less clear that states know how to ensure businesses within their jurisdiction act in compliance with human rights norms. The challenge is to integrate these considerations into the fabric and culture of government policy. This article will demonstrate that one of the ways in which the Scottish Government can address this "urgent policy priority" is to incorporate human rights considerations into public procurement law. The Scottish Government, public bodies and utilities must procure service contracts, such as the one awarded to CACI International, in compliance with a complex body of European and UK procurement law. There is an identifiable lack of a human rights agenda in this body of law. This means that a contract can be awarded to a body which does not have a human rights compliant history and that little is done to protect the human rights of the intended beneficiaries of the contract, the Scottish Public. 

This article will demonstrate that there is room within European and domestic law for human rights to be considered as part of the fabric of the procurement process. Incorporating human rights considerations into procurement presents the opportunity to benefit both domestic service delivery and the compliance by corporations of all sizes with international human rights law.  

Public Procurement in Scotland Outlined 

Generally speaking, public procurement is the purchase by "Contracting Authorities"⁷ of works, goods or services using public money. If the value of the purchase in question is greater than threshold levels set by Europe then the Contracting Authority in question must make that purchase in compliance with European Directive 2004/18/EC ("the Directive'). The Directive has been implemented in Scotland by the Public Contract (Scotland) Regulations 2006 ("the Regulations”).⁸

The Regulations detail the procedures by which a public contract must be appropriately advertised, tenderers selected and the contract awarded. Advertisement is achieved by publication in the Official Journal of the European Union ("OJEU'). Selection of the "winning" contractor follows a prescribed procedure, which whittles down eligible and appropriate contractors to a pool of tenderers from which the selection is then made. The award of a contract is then made to the tenderer presenting the lowest price offer or the most economically advantageous bid when assessed using pre-published selection criteria. Contracting Authorities must also ensure they comply with the Directive's overarching principles of non-discrimination, equality and transparency.  

The Public Procurement "Rationale" 

Public Procurement in the European Union is big business. It amounts to over €1,000 billion each year which is the equivalent of 11-14 per cent of European GDP.⁹ The underlying principle for the European procurement rules is to open up this market to European-wide competition. In a market without borders free-trade requires that businesses can contract with contracting authorities from other member states regardless of their nationality. European public bodies ought to purchase from throughout the European Union and the procurement rules seek to consolidate the way this is achieved and remove any barriers that might impede this. The emphasis is on competition and transparency rather than developing social purpose through the purchasing power of the public purse. Procurement trade rules, like so much of competition law, have existed historically in "splendid isolation" from human rights or other social considerations.¹⁰ The procurement rules evolved out of the need to encourage intra-community public trade; its rationale is chiefly economic and its ends are to ensure free market competition. This foundation for the procurement rules means that the Directive and Regulations read largely as a set of economic and procedural rules which give little consideration to other non-economic considerations such as human rights.  

Incorporating Human Rights into Scottish Public Procurement 

"Non-economic" considerations, including human rights, can form part of the procurement process. It is possible to procure whilst taking account of, e.g. social or environmental considerations and this is often referred to as "sustainable" procurement or procuring using "secondary" or even "collateral”¹¹ considerations. The European Commission has published an "Interpretative Communication on the Community Law applicable to Public Procurement and the Possibilities for Integrating Social Considerations into Public Procurement" ("the Communication').¹² The Communication is the Commission's attempt to clarify the range of possibilities under existing community law for integrating social considerations into public procurement. It is recognised that the Communication has been drafted conservatively by a Commission which offers a restrictive interpretation of the available law.¹³ As such, the Communication provides a legally "safe" framework within which human rights and procurement can be discussed. However, it is European case-law and not the Commission's views that form black-letter procurement law and recent case law from the European Court of Justice makes it clear there is potential to go beyond the suggestions made by the Communication. 

The Communication details each step in the procurement process and identifies where social considerations may be inserted compatibly with European community procurement law. The Communication provides a good outline to frame an analysis as to how human rights considerations might be integrated into the Scottish Public procurement rules.  

Technical Specifications 

The Communication states that contracting authorities can use technical specifications to define the subject matter of the purchase precisely, provided they comply with the Directive and do not eliminate or favour a particular tenderer. Technical specifications must relate to the goods or services being procured. It is therefore permissible to stipulate the standard to which a service must come to, but it is not permissible to state the process by which that service is delivered. Requirements which bear no relation to the product or the service itself, such as a requirement relating to the way in which an undertaking is managed, are not technical specifications and cannot be imposed. Thus, requirements concerning the use in a contractor's office of recycled paper, the application of specific waste disposal methods on the contractor's premises, or the recruitment of staff from certain groups of persons (ethnic minorities, disabled persons, women) would not qualify as technical specifications. This means that human rights considerations may only be specified in the advance technical specifications of the required purchase where they directly relate to the standard of the purchase in question. It may be permissible to specify that a particular level of service meets specified human rights standards where that is a necessary standard of the contract. For example, it may permissible to specify that the provision of prison security services must meet the legal minimum standards of treatment made necessary by art.3 of the Convention.  

Selection of Candidates or Tenderers 

The Directives contain two sets of rules on selection. The first is a list of cases in which a candidate or tenderer may be excluded from the procurement procedure. These cases concern bankruptcy, conviction of an offence, etc. and "grave professional misconduct". The Communication states that grave professional misconduct is a concept that is not yet defined by European legislation or case-law; as such, "it is for member-states to define this concept in their national legislation". As Colleen Hanley points out this opens up some interesting possibilities:  'A member’s state could perhaps now claim that evidence of complicity of a multi-national company with human rights abuses, or evidence that its management was engaging in gross mistreatment of workers in the developing world, constitutes 'grave professional misconduct' such that those firms could be validly excluded from the procurement process. At present there appears nothing in the Directives that expressly excludes such an interpretation."¹⁴ 

This means that if appropriate legislation is introduced, contracting authorities in Scotland could be given the opportunity to examine and dismiss contractors not displaying a human rights compliant history. For example, complicity by a parent company in jus cogens abuses may be sufficient to justify the exclusion of a subsidiary from further consideration. 

The wording of the Directive is that contractors guilty of grave professional misconduct "proved by any means which the contracting authorities can justify" may be excluded. The Communication makes it clear that res judicata offences would establish the necessary level of "guilt" to justify exclusion. Exactly what is required by way of proof would need to be carefully considered. 

In October of this year the Advocate General's Opinion in Mikhaniki v Ethnikor¹⁵ made it clear that the list of grounds for excluding contractors was not exhaustive. This means that there is there scope in national law to develop additional grounds for the exclusion of tenderers. These grounds for exclusion have the capacity to centre on human rights considerations where they do so in a way which is compliant with European case-law. It is submitted that a more developed set of rules on excluding bidders due to human rights considerations is one of the most effective means of ensuring that our public service providers are those without poor human rights records. 

The second stage in selection is the short-listing of technically competent bidders to be selected to tender. This can be done by reference to "economic or financial standing" and to "technical or professional ability". The Communication makes it clear that if the contract in question requires specialised know how, specific experience could be used as a criterion to evaluate a bidder's technical capability and knowledge. This means that if the performance of the contract is linked to specific human rights considerations these can be taken into account in selecting the appropriate tenderer for the next step in the process. For example, if the successful running of a care home for the elderly requires adherence to Convention rights then evidence of knowledge and experience of dealing with these rights may be sought from bidders. General statements of human rights compliance, however, may not be sought where these do not relate to the specific requirements of the contract.  

Award of the Contract 

Once the appropriate bidders have been selected the contracting authorities evaluate the tenders and award the contract. The contract may be awarded to either the "lowest price" bid or "most economically advantageous tender". The Directive cites examples of considerations such as price, cost-effectiveness, quality, aesthetics, technical assistance, etc. that may be used when considering which bid presents the most economically advantageous tender. The Communication admits that other criteria in addition to those listed may be used to evaluate the most economically advantageous tender but states that these should generate an economic advantage for the contracting authority. 

However, the case-law of the Court of Justice shows us that non-economic criteria may also be used to assess bids. In Commission v France¹⁶ the Court found that using a criterion linked to a campaign against unemployment could be referred to provided that it did not infringe the principle of non-discrimination, or the right to establishment of the freedom to provide services.¹⁷ The Court referred to the fact that the contracting authority in this case regarded the non-economic criterion as a "non-determining criterion" only considered after an economic comparison of two other tenders was conducted. Quite how a contracting authority is to refer to a criterion for the award of a contract without finding that criterion determinative is a problem that required a Kafkaesque grasp of bureaucratic decision-making. The decision of Concordia Bus Finland¹⁸ has made things easier to understand. In Concordia the ECJ held that environmental (and by extension, secondary) criteria, not of a purely economic nature, may be used to assess the award of a contract to the most economically advantageous tender provided that: 

·         the criteria must be linked to the subject matter of the contract;

·         the criteria must not give contracting authorities an unrestricted freedom of choice;

·         the criteria must be expressly mentioned in the contract documents or the tender notice;

·         the criteria must comply with the fundamental principles of Community law, including non-discrimination. 

There is scope for advising Scottish contracting authorities on how to devise award criteria that addresses human right considerations in a way that is compliant with Community law.  

Contractual Terms 

The Communication encourages the use of contractual conditions to fulfil social considerations. As the Communication points out the execution phase of the contract is not regulated by the Directives. There are practical difficulties with adopting an approach that focuses solely on contractual conditions. It is entirely within a contractor's rights to walk away from a contract which seeks to impose human rights or any other social consideration into its terms. Contracting authorities might find that, having successfully cleared the several procurement stages, contractors are unwilling sign up to a contract due to inserted human rights considerations. 

Nevertheless, there is scope for more effectively considering human rights considerations when drafting the contract. In its written evidence on the topic "Bringing Rights Home for Everyone: the problem" the Joint Committee on Human Rights concluded that guidance issued to contracting authorities on integrating human rights into procurement took a very "negative approach" to advising on contractual conditions. The Committee found that existing guidance was inaccessible, difficult to understand, hard to find and written in technical language. The Committee stated that: "[W]e are concerned that the Guidance suggests that HRA obligations required of contractors are dependent on the willingness of the contractor to accept a particular degree of detail, that no model process is recommended and that no guidance is given on how to identify whether a particular service is likely to engage the HRA." 

Current thinking on contractual terms issued to contracting authorities and central government is generalist and geared towards permitting flexibility. Well drafted guidance notes which are easy to use, that contain model clauses and that encourage real and meaningful engagement with human rights issues are necessary. 

In Van der Mussele v Belgium¹⁹ the European Court of Human Rights established that a state cannot satisfy its human rights obligations by contractually transferring those obligations to private bodies. However there would appear to be nothing that prevents the inclusion of a contractual term which specifies that the delivery of public works, goods or services must be compliant with human rights law. Such clauses already exist for health and safety and environmental concerns. Once contracting authorities are better advised on how to incorporate human rights considerations into their contracts they will be better placed to make the best use of human rights to enhance local service delivery for the public at large.  

Conclusion 

The Audit Commission has found that 61 per cent of contracting authorities failed to take action to ensure that contractors complied with human rights legislation.²⁰ This brief article has shown that there is scope for incorporating human rights considerations into public procurement law and that this is one way in which such compliance could be better ensured. Such compliance will encourage a culture within contracting authorities and private businesses which "internalises" human rights as per Ruggie's suggestion mentioned in the introduction to this article. Driving human rights considerations into procurement puts the human rights agenda into the very first stages of public service delivery. 

Further thought needs to be given to the way in which the Scottish Government can deal with the obstacle posed by s.17 of the Local Government Act 1988 which generally does not permit the consideration of non-commercial considerations in public purchasing. This and the role of the Scottish Human Rights Commission in promoting the changes headlined in this article will be dealt with in the second half to this paper published in the next edition of the Scottish Human Rights Journal.

References

[1] http://ccrjustice.org/newsroom/press-releases/ccr-files-four-new-abu-ghraib-torture-lawsuits-targeting-military-contractor [Accessed November 4, 2008].

[2] http://ccrjustice.org/newsroom/press-releases/more-250-torture-victims-come-forward-sue-caci-participating-conspiracy-tort [Accessed November 4, 2008]

[3] http://www.sundayherald.com/news/heraldnews/display.var2432215.0.0.php?act=complaint&cid=1854082 [Accessed November 4, 2008]

[4] “Scottish Government Hires Firm Accused of Torture in Iraq”  Sunday Herald, July 27, 2008

[5] http://www.business-humanrights.org/Documents/SRSG-report-Human-Rights-Council-19-Feb-2007.pdf [Accessed November 4,2008]

[6] Protect, respect and remedy.  A framework for business and human rights.  April 7, 2008.  http://www.unglobalcompact.org/docs/issues_doc/human_rights/Human_Rights_Working_Group/29April08_7_Report_of_SRSG_to_HRC.pdf [Accessed November 4, 2008]

[7] Contracting authorities are listed at length in the Regulations.  The term “contracting authority” will be used throughout this article to avoid confusion with the more indeterminate term “public body”.

[8] The Directive has been implemented in the rest of the UK by the Public Contract Regulations 2006.  Utilities are subject to a similar regime under the Utilities Contract (Scotland) Regulations 2006, but are not considered in this article.

[9] Teal, Joanne “Sustainable procurement: spending it wisely?” S.L.T. 2005, 30 pp.167-171

[10] Cottier, Thomas “Trade and human rights: a relationship to discover”, Journal of International Economic Law, 2002

[11] Arrowsmith, Professor Sue The Law of Public and Utilities Procurement, 2^nd edn (London:Sweet and Maxwell,2005). P.1225.

[12] http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52001DC0566:EN:NOT[Accessed November 6, 2008]

[13] Arrowsmith, ibid p.1273

[14] “Avoiding the issue: the Commission and human rights conditionally in public procurement.”E.L.Rev.2002, 27(6), p.714-735

[15] Case C-213/07 Mikhaniki v Ethniko Simvoulio Radiotileorasis 8/10/2008

[16] Case C-225/98 26/09/2000

[17] Restriction on the freedom to provide services is dealt with strictly by the Court.  Dirk Ruffert v Land Nierdarsachsen (C-346/06); Beentjes V Netherlands State (C-31/87).

[18] Case C-513/99, 17.9.2002 Rep 2002 pI-07213, Concordia Bus Finland Oy Ab, formerly Stagecoach Finland Oy Ab v Helsingin kaupunki and HKL-Bussiliikenne

[19] (A/70) (1983) 6 EHRR 163

[20] http://www.justice.gov.uk/docs/acrep03.pdf [Accessed November 4,2008]