28th Mar 2023

How €2trn EU public tendering pushes 'race to the bottom' for labour standards

  • Before Covid-19, half of tenders in Europe were awarded based on 'the most economically advantageous' criteria (Photo: Unsplash)
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Around €2 trillion is spent each year on the award of public contracts, generally linked to the service sector — that's 13 percent of the EU's GDP.

Yet before Covid-19, half of tenders in Europe were being awarded simply based on a "most economically-advantageous" criteria, as recorded on the tenders' electronic daily (TED) database.

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That approach ignores minimum working conditions, as some companies undercut workers' conditions and wages in order to bid low prices to win public contracts, according to UNI Europa (a regional union representing seven million workers in the services sector).

That's generally for three reasons, the union states.

First, the 2014 directive regulating EU public procurement does not require contractors to comply with fundamental labour rights.

Second, it is left to national, regional, or local authorities to decide whether to respect collective bargaining agreements.

And third, because the same applies to compliance with social criteria.

In practice, this is likely to have a detrimental effect on workers—but it also impacts on state coffers and competitiveness of the businesses themselves.

For example, Denmark awarded all interpretation services to a new and cheaper supplier that required all employees to work as self-employed, and at lower rates. When many of them refused the conditions, the company had to withdraw from the contract, the federation's report details.

And it's not only Denmark. In the Netherlands, during Covid-19, call centre operators commissioned by the Dutch government were underpaid and had no toilet breaks or entitlement to pension contributions, according to the Netherlands trade union confederation (FNV).

The list goes on, proving the old saying that 'cheap can be expensive'.

The same can be applied to the member states' coffers. "If all services workers were covered by a collective agreement the authorities would be €108bn a year richer," UNI Europa estimates.

Lead by example

Despite differences between member states, the snapshot from the global trade union concludes that current European rules do not ensure that public money goes to companies respecting decent conditions for their workers.

Paradoxically, this hampers competition and encourages unfair play by limiting social standards and giving a competitive advantage to those who employ on very low wages. In other words, it encourages a race to the bottom.

"We need to reopen the 2014 directive and develop sectoral legislation that makes using these [social] criteria mandatory," Green MEP Anna Cavazzini told EUobserver.

Cavazzini is one of over 160 MEPs who have joined the 'Procuring Decent Work' campaign to change EU rules and clear up the legal uncertainty surrounding them.

Procurement officers "need clear criteria and guidance, and help with ex-post monitoring to ensure that the social elements promised by bidding companies are effectively respected once they are awarded contracts," she warned.

To date, the European Parliament has already adopted a series of reports and motions to strongly enforce the social clause of the existing directive — with no action in response from the EU's executive arm other than to postpone the review until 2024.

"Public money can only be invested where decent working conditions are respected, where people are paid decent wages," said MEP Agnes Jongerius (S&D) during a February plenary session.

The investment should not be used into creating "lousy jobs that exploit people," she concluded.

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