Vendor Lock – In (hereinafter referred to as VLI) describes, in simplified terms, the state of exclusivity of an existing supplier of goods or services, which makes the contracting authority dependent on the existing supplier to meet its needs. It may arise artificially, but it may also be the result of objective facts.
The state of VLI is currently perceived, especially by state authorities, negatively, with an a priori assumption that it has been created artificially. However, it is impossible to agree with such a conclusion that the VLI status is always illegal. An artificially induced VLI is the result of improper conduct on the part of the contracting authority itself, where the procurement has been carried out in an improper manner, either deliberately or even negligently. Consequently, the state of VLI limits the contracting authority in the future.
The result tends to be a lack of competition in the procurement of (in this case) IT services, the direct consequence of which may be the provision of services at above-market prices (although even this equation does not hold absolutely).
The state of VLI is mainly caused by the existence of exclusive intellectual property rights on the part of the supplier, when the contracting authority has not secured such rights and entitlements on its side in the tender conditions as well as in the supply contract itself, which would allow it to dispose of the subject of supply (the result of IT services) in the future according to its own needs and without the binding or consent of the existing supplier. The key point in breaking the VLI thus becomes the securing of such rights in relation to the subject matter of the intellectual property (in particular copyright) on the part of the contracting authority which will ensure that it will be able to carry out a public procurement of IT services in the future in which a number of bidders will be able to participate.
The cooperation of the existing IT service provider is most essential in removing the VLI condition. In the case of its cooperation, the contracting authority has the possibility to contractually secure for its own benefit the acquisition, in particular, of property rights and the necessary information (e.g. interface description), the necessary documentation on the subject of the copyright work, as well as the existing data itself.
At the same time, however, the fact is that if the existing supplier does not intend to cooperate, the VLI status is maintained and the contracting authority is left with the procurement of a completely new solution (service), which is usually associated with high costs.
In any case, the contracting authority shall have an existing contract in force with the original supplier. On the basis of this contract, the contracting authority may require the supplier to supply ‘connectors’ to enable the IT system to be linked to other SW solutions, if the agreed volume of hours and budget allow it. The contracting authority may also require the contractor to supply a detailed description of the interface of the information system, identification of the data format or identification of the system protocol, or the supply of an integration platform. These services delivered under an existing contract are capable of enabling the contracting authority to prepare a new tender to link the existing software solution (information system) with the new supplier.
In any case, the sequence for securing performance under VLI status should be as follows: 1) use of an existing contract, 2) new contract through open procurement procedures, 3) direct negotiated procedure.
Should the above solutions not be applicable due to the non-cooperation of the existing supplier, the contracting authority essentially only has the option of ‘living out’ the existing contract and procuring an entirely new system (service).
If there is no cooperation with an existing supplier, or if it is not possible to secure the supply of the above information and services (information, data, “connectors”), the contracting authority is often left with no other option but to proceed by direct negotiated procedure (hereinafter referred to as “DPR”).
The approach of the Public Procurement Office (PPA) in controlling procurement through the PRK is very conservative and the provisions of the Public Procurement Act are interpreted very restrictively by the PPA. In doing so, the OPC assesses the terms of tenders that were often launched many years earlier (often tenders launched more than 10 years ago).
In order for the contracting authority to be able to “withstand” control by the Office, it will be necessary to demonstrate that the need to proceed with the PKR was triggered by the existence of exclusive rights on the part of the contractor, whereby the delivery of the procured services could not have been foreseen at the time of the original tender, as this need was triggered by objective facts that were not dependent on the will of the contracting authority (e.g. a change of tasks triggered by new legislation, new tasks imposed by a superior authority or the contracting authority, etc.). It is also important for the contracting authority to be able to demonstrate that it was not necessary at the time of the call for tenders to secure the acquisition of the necessary proprietary copyright, as is currently being stressed by the public authorities (in particular MIRRI) and the Office for Harmonisation in the Internal Market (OHIM).
However, when procuring a completely new solution, the issue of cost and the principle of cost-effectiveness is important. Procuring a completely new solution can therefore be orders of magnitude more expensive than achieving the desired objective by extending the original contract with the existing supplier. This circumstance also comes into play when the Authority assesses whether the direct negotiated procedure is unlawful, as the 3 E’s (economy, efficiency, effectiveness) principle must be taken into account.
In any event, when launching a new tender (whether for the supply of a new system or for the extension of an existing system), the contracting authority should ensure that, in the context of the relevant contract with the successful tenderer, it acquires such rights, information and documentation on the subject-matter of the contract as will enable it to organise tenders in the future in which several tenderers may participate. This avoids problems with the Office for Harmonisation in the Internal Market, which judges procurement by direct negotiation strictly.
