New EU procurement regulations – more challenges, more corruption, the end of the EU?

What do the new EU Directives on public procurement mean?  It’s interesting to look beyond the headlines, and think about what challenges they might bring for procurement professionals, and indeed more generally.

We’re not trying to be prophets of doom here, and at first sight none of the changes look silly, and most seem sensible and appropriate. However, to take a contrarian stance, might the implications be less positive over the next few years?  There is a risk (only a risk, we’re not in predictive mode here), but a risk of the following outcomes:

  1. More legal challenges to procurement decisions and indeed successful challenges from unhappy suppliers
  2. More corruption in public procurement across Europe
  3. A slow move away from one of the fundamental principles of the EU – open cross-border trade

These all come in a sense from an underlying theme behind many of the changes. That theme is the desire to give contracting authorities (we’ll call them ‘buyers’ for simplicity) more freedom and flexibility within the public procurement process.  As Sally Collier, top UK procurement mandarin, said,

“... we will have less slavish adherence to the rules and people will feel more confident about using their judgement in taking decisions about how they run procurement.”

Now less slavish adherence, more freedom and flexibility sound great, making public sector buyers more like the dynamic, successful private sector in the eyes of many politicians. But ‘using their judgement’  also might mean potentially less rigorous process, less objectivity, more room to manipulate the process. And that could all lead to more corruption, poor decisions and subjective factors intruding into the decision making processes around selecting suppliers.

The people who draft the Directives and indeed the national legislation aren’t stupid. They understand the risks, we suspect. In terms of the new ‘competitive procedure with negotiation’, for instance, there will be caveats such as making it clear that suppliers must all be treated in a similar manner. However, it is still likely that we will see favoured suppliers ‘tipped off’ by a friendly official or politician. “If you can just reduce your price by a couple of percent, the contract is yours”. The opportunity for corrupt behaviour is obvious.

The point about cross-border trade was raised with me by a very knowledgeable private sector executive and supplier to government from southern Europe. He pointed out that there is an increasing desire in probably all European countries to award more business to ‘local’ firms – whether that is at a sub-national or national level. (We’ve seen lots of noise about this in the UK and I’m sure we’re not unique here). But, as we say, one of the fundamental principles of the EU was, and is, to encourage cross border trade and open access to markets for businesses everywhere in the community.

The drive to consider ‘social value’ in bids, the ability to use shorter time limits or even not to advertise contracts, will all make it easier for buyers to favour ‘local’ bids. And quite right too, many will say. But remember that most economists will argue that protectionism (and that is what this is, dressed up nicely, but basically protectionism) does ultimately harm everyone. And if EU public procurement becomes simply national procurement, then that might be another potential nail in the coffin of the EU.

Now personally, I’m not sure this would be a bad thing, but I’m not sure all our politicians have thought this through when they go on about awarding contracts to ‘our’ firms! Even aspects in the Directives such as being able to exclude suppliers based on poor past performance, whilst intuitively reasonable, give more scope for subjective decisions. And subjectivity if we’re not careful can lead to all the issues outlined above.

Anyway, enough of that for now, and we’ll come back to individual changes in more detail soon. But what do you think? Problems ahead or are these false prophecies of doom?

Voices (4)

  1. flog:

    From the CA’s viewpoint, I foresee practical difficulties (I’ll not use the challenge word here) arising from the move to self certification with only the successful bidder having to evidence its capability and capacity prior to award. What happens if they can’t evidence it? Or the rose tinted specs were on when the declarations were signed several months ago? In Ireland, they’ve been using self declarations in works tenders for a number of years and have ‘pulled’ verification of the declarations back to between the selection and ITT stages Ie capability and capacity is checked before getting tenders – to minimise problems later.

    From the bidder’s point of view, a potential 15 day response time where PIN’s have been published for 45 days is a tad tight – that’s really 11 days given there’ll be 2 Saturdays and Sundays in there. Ops, sorry, I forgot bidders work 7- day weeks!

  2. Roger Holloway:

    Beyond the political spin, the new regs are likely to open up new fruitful areas of challenge as contracting authorities struggle to get to grips with the rules. The fact that there’s 333 pages of text to wade through before you get to the final Article 94 says a lot in itself.

    To quote the new Directive’s preamble: “the competitive procedure with negotiation should be accompanied by adequate safeguards ensuring observance of the principles of equal treatment and transparency. Award criteria should remain stable throughout the entire procedure and should not be subject to negotiations”. Doesn’t sound much like freedom and flexibility to me.

    Public procurement is a quasi-legal discipline these days and the skill is in getting decent outcomes despite the byzantine nature of the system. As someone who’s studied this area in depth, it really is a minefield and many smaller contracting authorities are an easy target for challenges.

  3. Dan:

    For all the talk of them being ‘revolutionary’, these new regs don’t change all that much. For the most part they just clarify the law a codify existing case law. Do they make it easier to negotiate? Not really.

    They allow organisations to engage in pre-procurement dialogue with interested firms. But they could do that anyway, its just that a lot of organisations didn’t know how. And the restrictions on non-discrimination are still in place so organisations are going to have tread carefully anyway.

    They change the rules for the Negotiated Procedure to bring it on a par with the Competitive Dialogue Process. But that one wasn’t used all that much anyway.

    I foresee it being business as usual, but consultants are going to make a lot more money from the training of procurers and suppliers.

  4. Final Furlong:

    We mustn’t forget that, despite the massive investment (aka cost) in complying to EU public procurement legislation, particularly in our in-country policies, procedures, processes, training (in our procurement teams to be reactive ‘tender-jockeys’) and fighting-off legal challenges, only 3-4% of our total, annual, public sector spend is actually (European) ‘cross-border’.

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