Jan Svoboda
April 2019
READ & DELETE BEFORE USING
If replacing the pattern/photo on this slide, first,
click on and delete the pattern/photo. Then, click
on the icon in the placeholder to select a new
image. Size and crop if/as needed. Final image is
7.5”/190.5mm tall x 7.5”/190.5mm wide. Use
images from our library.
Outsourcing and
public
procurement in
ICT
PwC
1. Introduction to public procurement 03
2. ICT public procurement 11
3. Vendor lock-in at ICT public procurement 17
4. Open procedure 22
Content
April 2019Outsourcing and public procurement in ICT
2
Introduction to public
procurement
PwC
Introduction to public procurement
What is outsourcing (outside resourcing)?
Apirl 2019Outsourcing and public procurement in ICT
4
Agreement in which one entity hires another entity to deliver goods/services,
instead of produce goods / perform services internally (instead of using in-house
capacity)
Both private and public sector (including the outsourcing of public services to
private entities)
Both foreign and domestic contracting
Offshoring: transferring the activity to a distant country
Nearshoring: transferring the activity to a nearby country
Why (not) to outsource?
PwC
Introduction to public procurement
What is public procurement?
April 2019Outsourcing and public procurement in ICT
5
The term used in EU legislation (in other jurisdictions also government
procurement or government contracts)
Activity of purchasing works, supplies and services by public bodies (contracting
authorities)
Who are contracting authorities?
State, regional or local authorities, bodies governed by public law or associations
formed by one or more such authorities or one or more such bodies governed by
public law
PwC
Applicable law?
DIRECTIVE 2014/24/EU OF THE EUROPEAN
PARLIAMENT AND OF THE COUNCIL of 26
February 2014 on public procurement and
repealing Directive 2004/18/EC
DIRECTIVE 2014/25/EU OF THE EUROPEAN
PARLIAMENT AND OF THE COUNCIL of 26
February 2014 on procurement by entities
operating in the water, energy, transport and
postal services sectors and repealing Directive
2004/17/EC
DIRECTIVE 2014/23/EU OF THE EUROPEAN
PARLIAMENT AND OF THE COUNCIL of 26
February 2014 on the award of concession
contracts
Introduction to public procurement
%April 2019Outsourcing and public procurement in ICT
6
Government procurement in the European Union accounts for more
than 14% EU GDP *https://ec.europa.eu/growth/single-market/public-procurement_en
PwC
Why to regulate public procurement?
Introduction to public procurement
April 2019Outsourcing and public procurement in ICT
7
Government procurement in the European Union accounts for more than
EUR 2.2 trillion *https://ec.europa.eu/growth/single-market/public-procurement_en
Competition
3E – economy, effectiveness, efficiency
Right to compete in any EU country (if the
entity is established in the EU)
See also: Agreement on Government
Procurement (GPA) - WTO
PwC
Introduction to public procurement
Procedures
April 2019Outsourcing and public procurement in ICT
8
Universal procedures:
Open procedure
Restricted procedure
Other procedures:
Competitive procedure with negotiation (with and without prior publication)
Competitive dialogue
Innovation partnership
What are the differences between universal procedures and other
procedures?
PwC
Introduction to public procurement
Categorization:
April 2019Outsourcing and public procurement in ICT
9
Works (constructions)
Supplies (products)
Services
Which categories would be applicable in the area of ICT?
Above/under the threshold (higher x lower value tenders); the main limits are:
EUR 144 000 for most types of services and supplies purchased by central
government authorities
EUR 5 548 000 for construction contracts
PwC
Introduction to public procurement
Choice of the procedure
Compliance with the legal requirements
Purchase of the works, products and services of the adequate quality
Compliance with the principles of the public investment law (at the time of the
procurement, as well as in the future)
April 2019Outsourcing and public procurement in ICT
10
What are the principles of the public investment law?
Equal treatment
Non-discrimination
Transparency
+
Competition and 3E
Can you find 3E as a stated principle in the relevant directives (or
local rules)?
ICT public
procurement
PwC
Specifics of ICT public procurement
One of the fastest growing areas
Need of specific know-how
Complexity
Need of implementation
Occurrence of the vendor lock-in
Impalpability of the software
Need of legal, technical and economical knowledge
April 2019Outsourcing and public procurement in ICT
12
What are the specifics of ICT public procurement?
PwC
• the needs of the contracting authority cannot be met without adaptation of readily available solutions;
• they (procurement) include design or innovative solutions;
• the contract cannot be awarded without prior negotiations because of specific circumstances related to
the nature, the complexity or the legal and financial makeup or because of the risks attaching to them;
• the technical specifications cannot be established with sufficient precision by the contracting authority
with reference to a standard, European Technical Assessment, common technical specification or
technical reference.
What are the practical examples of aforementioned situations?
April 2019Outsourcing and public procurement in ICT
13
Competitive procedure with negotiation (with prior publication) and
competitive dialogue
PwC
The needs of the contracting authority cannot be met without
adaptation of readily available solutions
Examples
Need for adjustment of the software to work with a particular type of database
(e.g. content management systems)
Need to adapt the software to work with a specific format (e.g., network lock-in)
Cybersecuritiy “training” in the relevant industry
Modular planning (the use of standardized units)
(Based on the objective grounds)
April 2019Outsourcing and public procurement in ICT
14
PwC
They (procurement) include design or innovative solutions
Examples
Typically: consulting services
Designing a software purchasing concept (based on already purchased hardware
or licensing)
Designing measures to prevent vendor lock-in
April 2019Outsourcing and public procurement in ICT
15
PwC
The contract cannot be awarded without prior negotiations because
of specific circumstances related to the nature, the complexity or the
legal and financial makeup or because of the risks attaching to them
Examples
Complex ICT systems
Extensive and complicated, variously conditional license agreements
If the contracting entity stipulates individual technical information and details in the
subject of the contract, in a manner proving that the contracting authority is able to
clearly define the legal and financial conditions, it is not possible to apply
competitive procedure with prior publication on the basis of the above mentioned
conditions. Czech Office for the Protection of Competition: S270,325/2008/VZ-
909/2009/510/MON, decision from 13/2/2009
April 2019Outsourcing and public procurement in ICT
16
Vendor lock-in at ICT
public procurement
PwC
Vendor lock-in (proprietary lock-in
/ lock-in)
A form of a dependence when a contracting
authority (customer) founds itself unable to use
another vendor without substantial switching
costs (in general based on the decision taken in
past)
Vendor lock at ICT public procurement
%April 2019Outsourcing and public procurement in ICT
18
surveyed contracting authorities across the EU found themselves in some form of ICT vendor lock-in,
according to the survey from 2015 (by PwC)
*https://joinup.ec.europa.eu/sites/default/files/inline-files/Task_4_Survey_results’_analysis.pdf
PwC
Vendor lock-in and related matters
Monopoly
Intellectual Property Rights
Technology dependence
Early adopter lock-in
Network lock-in
Incompatibility
Personal lock-in
Switching costs
April 2019Outsourcing and public procurement in ICT
19
PwC
Vendor lock-in
How to avoid vendor lock-in?
April 2019Outsourcing and public procurement in ICT
20
Ensuring compatibility (with both HW and SW)
Standardization (to enable updating and upgrading by third parties): The open
Element Framework, Cloud Data Management Inference…
Ensuring updates and upgrades
Modification by the contracting authority and third parties (what about know-how?)
Modular planning (standardized plug-ins, containers and other standard units)
Open source software
Is the implementation needed?
Is the maintenance needed?
PwC
Exit strategy
Exit strategy
Data processing is often part of the outsourcing in ICT
Contracting authorities often lost the control over the data processed by contractor
-> Vendor lock-in (when the data migration to contracting authority is needed)
How to ensure the control over the processed data after the end of
the contractual relationship?
April 2019Outsourcing and public procurement in ICT
21
The contractor, at the choice of the controller (contracting authority), deletes or
„returns“ all the data and operational information to the controller after the end of
the provision of services relating to processing, and deletes existing copies
Structured, commonly used, machine-readable and interoperable format
Open procedure
PwC
Open procedure
Subject of the contract (public procurement)
Selection criteria (e.g. technical and professional ability)
(Contract) award criteria (for example price, technical characteristics,
functionalities, compatibility, life-cycle costing: LLC, environmental impact,
software ergonomics)
Contract itself
Publishing (TED)
April 2019Outsourcing and public procurement in ICT
23
Thank you for your
attention
Jan Svoboda
jan.svoboda@mail.muni.cz