The Map of the Problematique in EU Public Procurement

Ask someone in the private sector what they think about public procurement and more often than not their first complaint is that it is too complex, full of red tape and time consuming. Plus, the State does not know what to buy and how to buy it. From procurers you will get an answer along the lines that they do know what to buy, but if only regulation would allow it to happen!

EU rules are the first in the blame game for the current state of affairs, perceived as they of being an hindrance. Full EU rules are applicable to contracts with a value above certain financial thresholds and yes, they are indeed quite detailed and prescriptive. However, that is only half of the story as they only apply to the top 20% or 50% of contracts by value.

By agreement of EU Member States, contract value became a convenient proxy to determine if said contract was of interest to the EU’s internal market and worthy to regulate with the full might of EU rules.

Anything below those rules is up for Member States to regulate.* (with the exception of contracts generating “cross-border interest” a concept the Court of Justice has been trying to explain for 15 years.)

These values are arbitrary and there is no reason why they are not higher or lower. Perhaps it is time to make do with the distinction between contracts below and above thresholds: they all belong to the single market and in theory they can all be of interest to suppliers from other Member States.

The real problem, however, lies not with the rules themselves but with the contracts they apply to.

We should be applying detailed rules to low value contracts while taking a more principles based approach to bigger contracts.

To understand this we need to know what is the logic of the current public procurement system in the EU: it does not exist to enable great procurement (for procurers or suppliers) but to put a floor on how bad procurement can get (ie, preventing corruption and violation of competition rules and associated principles).

This is not wrong in itself but is misaligned with reality. By definition, people working on a day to day basis with low value, low risk contracts have less expertise than the ones working at the other end of the scale.

The first group need a lot more help from the legal system to ensure procurement is not really bad. On the other hand, the second group could use with more flexibility. The pyramid needs to be inverted.

To re-align the interests of the system with reality we need to have detailed rules where they are needed by providing a step-by-step guide to people working with low value contracts.

More flexibility is needed at the other end of the scale too and both the Utilities Directive (Directive 2014/25) and the Concessions Directive (Directive 2014/24) show that it is possible to have more flexibility with the application of principles or a simplified set of rules for larger, more complex contracts. Inverting the pyramid would incentivise aggregation of procurement if procurers wanted more flexibility. At the same time it would give the benefit of standardisation for both procurers and suppliers where it is needed: in smaller contracts. * The odds of this ever happening are approximately 3,720 to 1.


Author: Dr. Pedro Telles

Date: 18th March 2015

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