27th Feb 2024

EU public procurement reform 'ineffective', find auditors

  • Public authorities spend €2 trillion annually on public procurement, equivalent to 14 percent of EU GDP (Photo: Pixabay)
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Public contracts in the EU are not attractive enough to businesses — and competition for these tenders is shrinking as a result, according to a damning new report by the European Court of Auditors (ECA) published on Monday (4 December).

Between 2011 and 2021, the number of companies competing to provide works, goods, and services to public bodies fell from an EU average of 5.7 bidders to 3.2, per procedure.

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"Over the past 10 years, the EU and its member states failed to increase competition for public contracts, and we must now regrettably talk about a lost decade," said Helga Berger, the ECA member in charge of the audit.

In addition, the majority of contracts were awarded to the lowest bidder, highlighting the fact that price is the most important aspect when awarding a contract and that environmental, social and innovation criteria are rarely taken into account.

Eight EU countries, including Slovakia, Romania and Lithuania, awarded the contract to the lowest bidder in more than 80 percent of cases in 2021, ECA reports.

In 2014, the EU Commission reformed the EU's procurement directives to make bids more attractive (and thus more competitive), but the reform had more misses than hits, the EU's auditors concluded.

In practice, procedures have become 50 percent longer in over a decade, transparency is not up-to-date, and the number of direct awards and single bidding has increased over the past 10 years.

For the Luxembourg-based auditors, even though the Brussels reform was "ambitious", the root causes behind the drop in competition were not addressed because there was no in-depth analysis of the problem.

"In the commission and the member states, there is simply too much focus on complying with the rules and upward legal challenges," Berger told reporters on Monday. "They do not draw enough attention to ensuring value for money".

The decrease in competition over the past decade was driven by the administrative burden of these procedures, the overly-restrictive criteria of the bids, and the market concentration, the audit shows.

"The commission should put forward an action plan to overcome key barriers to competition and make public contracts more attractive to companies," Berger said.

From 2011 to 2021, more than one-in-four public contracts in the EU were awarded under single bidding procedures — a share that has nearly doubled from 23.5 percent to 41.8 percent in only 10 years.

Significant increases in single bidding were recorded in all sectors, but particularly in health, transport, and equipment services.

The practice also differed across EU member states, with Slovenia (73 percent), Cyprus (60 percent) and Poland (53.5 percent) recording the highest single-bidding rates in 2021.

(Photo: European Court of Auditors, 2023)

What's worse, almost 16 percent of all procurement procedures in the single market didn't involve a call for tenders in 2021, meaning that direct awards, which are supposed to be an exception in the public procurement directives, are in fact frequent in almost all member states.

Lack of data

National, regional and local authorities spend €2 trillion a year on public procurement, equivalent to 14 percent of the gross domestic product (GDP) of the 27 member states.

Despite the scale of this public investment, the prices of works, goods and services under these contracts are no longer monitored.

"In the absence of such information, the impact of changes in competition on prices and the cost of a lack of competition cannot be assessed," says the report, which recommends that the EU executive improve its monitoring of public procurement.

Angry farmers block Brussels again, urge fix to 'unfair' prices

Following weeks of demonstrations across Europe, farmers returned to Brussels to protest over unfair competition in prices, as EU agriculture ministers met just a few metres away to discuss a response. The police used water cannon and tear gas.

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