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EU Launches Public Procurement Overhaul
Source: http://www.publicserviceeurope.com/article/1293/eu-launches-public-procurement-overhaul
Source Date: Wednesday, December 21, 2011
Focus: Electronic and Mobile Government
Country: Europe
Created: Dec 22, 2011

The European Commission has proposed new rules on public procurement and concessions in a bid to reduce red tape for companies. But this attempt at simplification triggered negative reactions from industry, and potentially poses new challenges to workers.

"This reform is necessary, ambitious and realistic," claimed the commissioner in charge of the dossier, Michel Barnier, presenting his plan in Brussels. In a nutshell, the changes attempt to simplify procedures on signing public contracts, and cut the requirements for documentation which have often hampered small and medium sized enterprises in their efforts to take part in tenders.

The pro-simplification measures mainly involve "an increased possible use of negotiation," according to a commission note. It will, therefore, be easier for public administrations to bargain elements of tenders with applicants in order to forge deals more closely tailored to their needs. The risk of more opaque dealings should be offset by new transparency procedures and stronger supervision by independent authorities.

The tendering process is also expected to benefit from increased use of electronic procurement and lower documentation requirements. This should in turn widen the number of participants pitching in public tenders, including smaller companies, and ultimately lower costs for public administrations – which could obtain the same services for a lower price.

For instance, applicants will be no longer forced to produce a string of certificates as a precondition for tendering, but will instead be able to rely extensively on self-declarations. Only the winning bidder will have to provide the necessary original documents.

Barnier also launched a proposal for European Union-wide rules on service concessions, which at the moment are not covered by EU legislation. Surprisingly, companies that operate public services such as waste or water management have not yet been covered by specific rules.

In some countries, including the United Kingdom, there are no rules at all on concessions, to the detriment of transparency, according to the EU executive. Like the proposed overhaul of public procurement, the objective of reform to concessions is to increase the participation of private actors and make the market more competitive and possibly transnational.

Public administrations inevitably tend to favour local companies rather than foreign competitors even within the EU internal market, meaning that cross-border public procurement and concessions account for a very limited amount of total contracts. More often than not, foreign firms do not even participate in tenders for fear of myriad complications created by a foreign bureaucracy. Instead, bigger companies are more likely to set up local branches and bid with their subsidiaries in foreign tenders, as underlined by a commission report on the EU public procurement market.

Europe has frequently complained to international competitors, such as Japan and China, for keeping domestic public procurement markets closed to foreign competition. But in reality this occurs even within the European internal market. The proposed rules, which will now be subject to a long legislative process expected to end by mid-2014, will attempt to cope with this paradox of the unfinished European market.

A further trigger for the simplification of rules and the elimination of pre-EU legacies should come from a deal reached last week at the World Trade Organisation in Geneva. Members agreed to open access to their national markets in a move that could turn procurements into a truly globalised business. The stakes are very high, since procurement markets account for around 10 per cent of the average gross domestic product of industrialised countries.

Even as this global landmark deal pushes towards more openness, the EU's new approach to procurement is likely to face protectionist hurdles from within Europe. "An overhaul of the current legislative framework is unnecessary," stated BusinessEurope, the lobbying group which represents European employers' organisations.

"The main problems lie in poor enforcement of the rules at national level and a lack of training among contracting authorities over how to apply the rules correctly," adds a note issued by the group. "Efforts should concentrate on better enforcement of public procurement rules given that legal certainty for business is crucial," clarified BusinessEurope director general Philippe de Buck.

Improving the efficiency of public spending is crucial when resources are limited. Greater competition is the usual recipe suggested by the EU bureaucracy to optimise results, but will it bring real improvements? In such a delicate market, where losing a tender can result in companies laying off hundreds of employees, it is not uncommon to think that stability is more important than competition.

In a more globalised environment, workers may also turn into the biggest losers of a regime where increased competition from countries with little social protection pushes down social and labour standards. Paradoxically, in a period of harsh social confrontations, employers and employees might find common ground in opposing these new procurement rules.
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