Difficult balance between #transparency and #competition in #publicprocurement

This paper stresses the negative impact that the excessive levels of transparency imposed by public procurement rules can have on competition for public contracts and, more generally, on the likelihood of cartelisation of the markets where public procurement takes place. The paper critically assesses some recent Judgments of the Court of Justice of the European Union and the General Court from this perspective and shows how the top EU Courts are still oblivious to the fact that excessive transparency may diminish the effectiveness of procurement by reducing competition. It also indicates that the case law itself has unused balancing tools that may help reduce the negative impact of excessive transparency, particularly if coupled with a reduction of the financial incentives offered to litigants that have no other claim than a 'mere' lack of compliance with full transparency. The paper concludes that a reform in the enforcement and oversight mechanisms oriented towards the setting up of a semi-opaque review system would overcome some of the deficiencies identified in the current case law from a law and economics perspective.
Sánchez Graells, A 'The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives' (November 2013). University of Leicester School of Law Research Paper No. 13-11. Available at SSRN: http://ssrn.com/abstract=2353005.

#GAO reports that there is scope for more competition in #US Defense #procurement

The US Government Accountability Office (GAO) has published an interesting report on Defense Contracting: Actions Needed to Increase Competition, where it finds that the proportion of defense contracts subject to competition "declined over the past five fiscal years, from 62.6 percent in fiscal year 2008 to 57.1 percent in fiscal year 2012". Moreover, GAO also found that "the competition rate in fiscal year 2012 varied by specific DOD component with the Air Force having the lowest at 37.1 percent and the Defense Logistics Agency the highest at 83.3 percent. The majority of the noncompetitive awards cited the availability of only one responsible source to meet the government’s needs as the reason for using noncompetitive procedures". 

This overall reduction of 5.5 points has been provoked by a number of factors. "For example, reliance on an original equipment manufacturer throughout the life cycle of a program has been a long-standing challenge for DOD competition, and budget uncertainty can also hinder DOD’s ability to compete. Noncompetitive purchases that DOD makes on behalf of foreign governments can also affect DOD’s competition rate".

In a deeper analysis, GAO points out that the justifications provided for noncompetitive procurement are not always sufficient, despite procurement officials ticking all the boxes and meeting the regulatory requirements to proceed with direct awards. "Many of the noncompetitive justifications GAO reviewed included the required elements as defined by the Federal Acquisition Regulation; however, the level of insight into the reasons for noncompetitive awards varied. For example, some justifications included clear descriptions of market environments where only one source was available to meet the government’s needs or described planned actions that could help improve competition in the future. However, other justifications provided limited insight into the reasons for the noncompetitive award or did not fully describe actions that the agency could take to increase future competition. Without this information, DOD may be missing opportunities to gain a fuller understanding of why past acquisitions were not competitive and may be unable to apply those lessons to effectively facilitate competition for future acquisitions".

Interestingly, GAO stresses that "these factors are not always considered when setting DOD’s annual competition goals" and recommends that "DOD identify, track, and consider the specific factors that affect competition when setting competition goals; develop guidance to apply lessons learned from past procurements to help achieve competition in the future; and collect reliable data on one-offer awards".

For European readers, the report is interesting not only because it raises issues that sound familiar (such as the 'abuse' of void justifications when resorting to negotiated procedures or direct awards of contracts), but also because it stresses the importance of developing solid tools of procurement statistics, monitoring and intelligence in order to develop a continuous appraisal of public procurement activities and foster their increasingly pro-competitive development. 

Forthcoming, revised EU rules on public procurement should indeed promote such tools, with a particular focus on data collection and analysis (which was promoted by the European Commission, but which may be significantly reduced with the proposed suppression of article 84 of the 2011 Commission's proposal by the Council and the European Parliament in the current negotiation of future revisions of EU procurement rules). 

As I already said, I think that the general transatlantic message to carry home in the current revision of the EU rules is that more planning and more oversight / analysis are required. Otherwise, EU public procurement rules will still fall short from ensuring the development of a dynamic and growingly competitive set of tools that can deliver value for money.

Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law

I have just published on SSRN a new paper on "Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law": http://ssrn.com/abstract=2206502.

The paper updates some of my previous commentary to the competition law implications of the ongoing reforms of EU public procurement rules, particularly in view of the 2 October 2012 revised Compromise Text published by the EU Council: http://register.consilium.europa.eu/pdf/en/12/st14/st14418.en12.pdf 

This is the abstract:
The relationship between public procurement and competition has recently been receiving an increasing amount of attention, both in academic and policy-making circles. It is becoming common ground that public procurement holds a complex and bidirectional relationship with market competition and that, consequently, a tighter link between public procurement and competition law enforcement needs to be established.
This paper explores the recent OECD push for more competition in public procurement and its role as an influential factor in the ongoing reform of EU public procurement rules. Afterwards, it critically assesses three of the main challenges to keeping public procurement precompetitive: (i) the difficult balance in terms of procurement transparency created by the clash between competition and corruption concerns; (ii) the magnification of the undesired (potential) anticompetitive effects of public procurement that centralised procurement may generate, as well as its increasing use as an improper tool of market regulation; and (iii) the possible competitive distortions and the potential advantages resulting from the generalization of eProcurement. The conclusions extract some common patterns derived from the previous analysis and suggest some policy recommendations mainly oriented at boosting oversight and professionalization of procurement.
The paper is due to appear in C Bovis (ed) Research Handbook on European Public Procurement (Elgar Publishing, 2013).