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Procurement contracts – technical, but essential for humanitarian operations management

How does procurement connect with public international law? This blog entry explores the importance of procurement contracts for humanitarian operations management from a public international law (PIL) perspective. How do the two connect?

These are tough times once again for PIL: Its incoherent enforcement structures make it easy to dismiss the discipline as such, and watching the live news from Aleppo morally shames us all. At the same time, PIL continues to be (a sometimes invisible) part of the international political argument. (For a discussion of the role of PIL in the Syrian situation, see for example this recent blog entry.) Populist particularism will be in search of strictly cooperative PIL arrangements where unavoidable, as much as idealist universalists are in search of its constitution. Acknowledging PIL as a fragmented legal order means embracing highly specialist systems of PIL, each with its own dynamics regarding norms and institutions. More sovereignty-focused elements enter the picture (think international state responsibility, which emphasizes the enforcement of international legal obligations between the states themselves, and not on the level of the international legal order) as much as highly coordinative ones (think World Trade Organization (WTO) adjudication in international trade law, and thus collective international law enforcement). Beyond big international political questions of war and peace, innovative PIL scholarship is interested in understanding the legal orders that govern functioning international institutions. International institutions exercise public authority that shape the lives of affected population groups, and are legally regulated. Procurement contracts are a vital ingredient for operational authority exercised by international institutions. In other words, procurement is essential for any goods and services that need to reach affected population groups, but that international organizations such as the United Nations (UN) cannot produce or cater for on their own. Procurement contracts are part of the legal infrastructure that is essential when delivering aid. And as such, they are part of the internal legal structure of international institutions under PIL. Of course, it is limited by and cannot substitute the political will to allow for humanitarian aid delivery as well as the legal and ethical obligations that condition this will.

Dust them off! Procurement contracts are technical but essential for humanitarian management

This legal infrastructure surrounding international public procurement is dusty: There is little specific scholarship on procurement activities by international institutions, and the existing scholarship is often highly technical. There are exceptions such as this monograph, and the general bibliography on the internal laws governing international institutions is growing. This contribution will specifically spotlight procurement within the UN system as the most comprehensive international organization. Procurement by bilateral aid agencies would follow their respective domestic procurement laws. For European Union (EU) member states EU-wide rules apply when certain thresholds are triggered; these also govern direct EU aid. International harmonization of these procurement systems is at the core of processes at the WTO (the Agreement on Government Procurement (GPA) is a binding PIL treaty), UNCITRAL (the UN Commission on International Trade Law) model laws and guidelines, or the Organization for Economic Co-operation and Development (OECD) Principles for Integrity in Public Procurement

Back to the UN system: Procurement is principally governed by the regulations and rules of each UN organization. These are guided by the UN Common Guidelines for Procurement, and supportive materials. Harmonization efforts within the UN system are led by the High-Level Committee on Management’s Procurement Network, the former Inter-Agency Procurement Working Group (IAPWG). The IAPWG process had also led to the creation of the UN Global Marketplace (UNGM) in the 1990s, a central portal where companies can register and receive tender alerts for almost all UN procurements. As concerns a comparative view on the internal legal hierarchy of the institutions, Article 100 of the UN Charter is often mentioned on top (granting the Secretariat independence in its institutional set-up), followed by the financial regulations and rules (FRR) of the relevant institution as part of their constitutive documents, administrative directives, and specific procurement manuals. These documents are described as, by and large, generic across UN institutions in the literature.[i] Among the harmonization processes within the UN, the above-mentioned High-Level Committee issued guidelines for Common UN Procurement at the Country Level in order to support UN field operations. The authority for this process stems from UN General Assembly (GA) resolutions A/RES/62/208 § 121 of 14 March 2008 and A/RES/59/250 of 17 December 2004 § 36 – both calling for procurement harmonization across the UN system.

The entire UN system also agrees on principles governing procurement. In law, and based upon the theoretical school of Ronald Dworkin and later Robert Alexy, principles are norms containing “optimization commands”. By contrast, rules are norms that are “definitive commands”, providing a binary decision-making code.[ii] The UN procurement principles are based on the concept of stewardship. This means that the UN organizations are but the stewards of the public funds which they have been entrusted with for agreed purposes. This concept translates into the principles of promotion of UN objectives (1), fairness, integrity, and transparency through competition (2), economy and effectiveness (3), and best value for money (4). While providing one conceptual framework, conflicts can arise among the principles, which need to be balanced. In humanitarian aid, urgent action required in emergency situations in line with UN objectives (1) might e.g. justify a waiver of competition (2) under the FRR of any given UN institution. There is also considerable overlap with professional conduct and business ethics as moral norms between the stewardship concept generally and principle (2) specifically. Principle (1), namely the promotion of UN objectives, does not only relate to specific mandates of UN institutions, but also allows to streamline broader UN policies. Currently, this holds especially true with a view to the Sustainable Development Goals (SDGs) and sustainable procurement more generally. This is particularly true for SDG 12 covering sustainable consumptions and production patterns. Sustainable procurement can trickle down into aspects of whole-life costing (also in relation to principle 4), green procurement (for example, paperless procedures) or supplier adherence to the voluntary UN Global Compact (GC) principles on human and labour rights, environment, and anti-corruption for businesses. There is a UN-wide Supplier Code of Conduct in force detailing such principles. Non-adherence by suppliers can lead to non-registration within the UNGM system (this holds especially true with a view to a zero-tolerance policy for corruption). Specific social and / or environmental sustainability criteria can be outlined in product requirement definitions of solicitation documents for suppliers. Another important area is the support of local procurement markets, especially in developing countries. The 2013 strategic evaluation of WFP’s pilot project Purchase for Progress (P4P) shows how challenging interventions on the supply side of local procurement can be. As a result, the UN has an opportunity to internally put teeth into otherwise or externally soft policy mechanisms through their procurement contract management.

This contract management lies at the heart of the legal infrastructure governing UN procurement. UN procurement contracts generally do not allow for choice of law clauses, also excluding domestic jurisdiction and thus internationalizing the contract. The UN Procurement Practitioner’s Handbook, a non-binding guidance document for the entire UN system, explains that the rationale is safeguarding the privileges and immunities of the UN as an international organization. The same applies to tax exemptions. Here is not the space to dive deep into the question, which law applies to contentious cases not regulated in the contract. Suffice it to note that an internationalized contract between a UN institution and a company (or an individual) has a private-law like nature serving a business interest under international administrative law. By contrast, cooperation agreements between the UN and non-governmental organizations (NGOs) serve a public good with the NGO committed to a social purpose in line with UN mandates (and bound by voluntary standards such as UN Inter-Agency Standing Committee (IASC) guidelines or the Sphere Project Humanitarian Charter and Minimum Standards in Humanitarian Response), and not a mere business interest. Such cooperation agreements then have a public-law like nature.[iii] The general principles of law governing private-law like UN procurement contracts would then resemble the lex mercatoria. Likewise, the 2010 UNIDROIT (International Institute for the Unification of Private Law) Principles of International Commercial Contracts may be applied when the parties agree that their contract will be governed by general principles of law. This result is supported by the fact that the UN Procurement Practitioner’s Handbook for example mentions the use of a few Incoterms (International Commercial Terms) for the provision of goods.

Finally, let’s shortly give an idea of the content of UN procurement infrastructure. In terms of UN procurement numbers, UNOPS (the UN Office for Project Services) is an internal UN service provider and entrusted by the GA with a knowledge management mandate (originally dating back to Resolution A/RES/39/220, § 9 (c) of 18 December 1984) especially as concerns statistical reporting for the UN-wide gathering and analysis of procurement data. According to its latest Annual Statistical Report on UN procurement from 2015, the overall UN procurement value was USD 17.6 billion with an almost equal share of both, goods and services. The top four UN institutions with the highest procurement volumes (each above USD 3 billion) are UNICEF (UN International Children’s Emergency Fund), UNPD (the UN Procurement Division, which is especially relevant for peacekeeping operations), UNDP (the UN Development Programme), and the UN WFP (World Food Programme) – all of which are also relevant humanitarian actors. The ten major countries of supply, led by the USA, include Afghanistan as a least developed country and India, Kenya, and the United Arab Emirates as developing countries, representing 18% of the total procurement volume. As concerns procurement sectors, disaggregated data is now also available for humanitarian aid exclusively among five additional sectors. These new sectors were introduced in order to align with other UN processes such as the SDGs. Exclusive humanitarian aid procurement within the UN amounted to 1.38% in 2015. Note, however, that the other sectors contain categories relevant for humanitarian aid. For example, the health sector with the highest UN procurement volume ranks the category “emergency and field medical services products” fifth highest.

What does this imply for better operational performance and leadership?

Understanding the legal framework of UN procurement (for humanitarian purposes) is normative work which cannot address empirical causalities.[iv] This legal framework is a social construct[v] that can be described, systematized, and ideally conceptualized through doctrinal constructivism.[vi] Such structural, and not case-specific knowledge can deepen the understanding of the general conditions of humanitarian management. In other words, the legal framework of the UN procurement exemplified in this blog post defines conditions and limits whilst pursuing the humanitarian mandates. In a highly technical field such as international procurement, systematic research can also shed light on existing standards.

In terms of tangible results, it also makes sense to quickly flag accountability mechanisms and judicial review in the context of UN procurement. When disputes arise at any stage within the procurement process, hierarchical review within the international administration and amicable solutions between the UN and its business partner are always favoured. Mediation by an independent third party is another option, but it is unclear how often it is actually sought. As a last step, international commercial arbitration under the UNCITRAL Arbitration Rules can be sought. Article 34 § 5 provides that the disclosure of an arbitration award to the public requires the consent of all parties involved to the proceedings.


[i] See Morlino, Elisabetta: UN Procurement, in Cassese, Sabino / Carotti, Bruno / Cassini, Lorenzo etc.: Global Administrative Law: The Casebook, 3rd edition 2012, Chapter III.D.3.4. [Kindle version, retrieved from Amazon.com].

[ii] For an introduction see Alexy, Robert: On the Structure of Legal Principles, Ratio Juris 13 (2000), 294-304. A good explanation of Ronald Dworkin’s thinking can be found in Taking Rights Seriously, Cambridge, Massachusetts (Harvard University Press) 1977, 14-45.

[iii] On the determination of publicness in international law see von Bogdandy, Armin / Goldmann, Matthias / Venzke, Ingo: From Public International to International Public Law: Translating World Public Opinion into International Public Authority (February 25, 2016), especially 29 et seqq. [Max Planck Institute for Comparative Public Law & International Law (MPIL) Research Paper No. 2016-02. Available at SSRN: https://ssrn.com/abstract=2770639].

[iv] An accessible introduction to this distinction can be found in Petersen, Niels: Avoiding the common-wisdom fallacy: The role of social sciences in constitutional adjudication, International Journal of Constitutional Law (I-Con) 14 (2013), 294-318.

[v] The social philosopher John Searle introduced the theory of social constructs in “What is an Institution?“ to economists: Journal of Institutional Economics 1 (2005), 1-22.

[vi] On the method see von Bogdandy, Armin: The past and promise of doctrinal constructivism: A strategy for responding to the challenges facing constitutional scholarship in Europe, I-Con 7 (2009), 364-400.

 
Leonie Vierck is a research fellow with the Max Planck Institute for Comparative Public Law and International Law (MPIL) in Heidelberg, and builds upon several years of practical experience in the aid sector.    

 

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