The European Union Public Procurement Laws - Background and Underlying Principles - Case Study Example

THE EUROPEAN UNION PUBLIC PROCUREMENT LAWS: A CRITICAL ANALYSIS OF THE BACKGROUND AND UNDERLYING PRINCIPLES Outline Introduction Framework Reasons for the EU Public Procurement Laws Overview of Underpinning Principles Transparency Publicity Objectivity Accountability Non-Discrimination Flexibility & Redress Conclusion Introduction Basis of the EU Procurement Law is a framework of laws that seeks to supervise the award of service contracts and supply contracts to third parties in the European Public Sector. It is a body of rules that apply to public institutions in the Union. This paper aims at critically analysing and evaluating the EU Public Procurement rules and its underpinning rules and regulations. The paper seeks to attain three main objectives. First of all, to evaluate the framework and scope of the Law, secondly, to assess and rationalise the need of the Law and finally, to critically evaluate the fundamental principles of the Procurement Policy. Framework Procurement can be defined as “the purchase of commodities, goods, works or services by public administrators”.1 A public administrator in the EU Law includes state, government, association governed by public law and similar bodies. Collectively, public procurement accounts for 13.5% of the European Union’s GDP.2 This therefore means that the authorities have a duty to provide a legally acceptable set of guidelines that promotes the European Union’s single market system and also prevents leakages and unfair procurement practices and corruption. However, some challenges in the EU Procurement Laws do not enable the EU Procurement system to achieve its objectives. In the UK, the threshold for the observance of EU Public Procurement Law is £100,000 for government supplies and £4 million for works and services.3 These thresholds are really high. This gives room for various forms of manipulation. A public institution that desires to be mischievous is likely to buy goods and services in lower amounts so that they will not be required to follow the EU Procurement Rules. This gives room for easy evasion and manipulation. Reasons for the EU Public Procurement Laws The first reason why the EU Public Procurement Law was enacted was that the European Union has laws that guarantee the freedom of movement, person, capital and services across borders so nations and governments should not have public procurement systems that discriminate against people from other EU nations.4 Also, non-tariff protection exists for all EU businesses in the transfer of their goods and services across the various borders.5 The EU Procurement Law avoids amongst other things, discrimination against efficient companies by ensuring the fair treatment of all potential bidders for a public supply tenders across the EU. The extent to which the procurement law has protected non-national businesses in bids and tender is quite questionable. This is because with higher transportation costs and diversity issues, it is often common for public institutions to choose local suppliers and not external suppliers. In summary, the EU Procurement Laws state that public institutions should honour three things in their operations.6 The are: 1. They must treat a business and person of other EU nationality fairly7 2. No discrimination, there should be equality 3. There should be transparency in bidding and tender selection process. However, with the uneven trends of development in the EU, there are cases when there is the need for positive discrimination to help some national businesses to grow by supplying to public institutions in the country. Adhering strictly to the public procurement framework can only cause some local businesses in smaller nations like Portugal and Latvia to collapse in the face of other richer businesses from more powerful nations like Germany, France and Britain. Overview of Underpinning Principles The main areas and aspects of the EU Public Procurement policy include transparency, publicity, objectivity, accountability, non-discrimination and flexibility/redress. Transparency If any public organisation in the European Union gives out a contract, all the information, relevant rules about tendering policies and practices should be made available to all interested parties.8 Also, all businesses that submit tenders must receive without delay, precise information concerning the conduct of the entire procedure. First of all, this need for transparency gives public institutions additional costs. This is because they need to pay money to advertise and ensure that all the policies and rules are adhered to. Secondly, with a continental focus, public institutions are likely to have too many tenders from far ends of the continent that can be counter productive. Publicity Before a supply contract is given out by a public institution, it needs to send out a Prior Information Notification (PIN) to the official journal for publication or through the Internet.9 The Prior Information Notification must include the total value of the contract, framework of the arrangements, clear terms, estimated value of the various categories if applicable and the framework of the agreement. Also, the notice of the results of each bid should be sent by the public institution 48 days after the award of a contract or the conclusion of the agreement.10 A tender should be left opened for at least 52 days.11 Sub-contracting of a major procurement policy must also be based on these principles.12 These additional provisions encourage the waste of time. Leaving a tender open for 52 days might be too much for an institution that is seeking goods costing just ₤100,000. This arrangement can be concluded in just a week if the procedure was not in place. Objectivity When tenders and bids are made, public organisations need to use objective standards to select the best bidder.13 All bidders for a given supply contract must be treated equally with fairness.14 To ensure objectivity, public entities need to set standards before they take bids15. After they start taking bids, these entities should not use standards other than those set before the bids were taken.16 Fairness can lead to the contracting of bidders from other richer nations in the Union at the expense of local businesses in the country at hand. It will also take a lot of time to set the metrics for taking bids this also comes with cost implications. Also, standards setting in a formal setting might tilt towards traditional financial indicators rather than other important qualitative factors that cannot be quantified. In most cases, except where specific conditions demand otherwise, a business must seek best value for money by assessing price-quality ratios17 against market conditions. This is done as objectively as possible, based on facts presented and available and not influenced by any external pressures. Value-for-money analysis calls for pecific standards and requirements of the EU procurement act. Invoking these rules and standards often makes it extra difficult for some specialised purchases to be completed easily. Accountability Public Procurement forms a major part of audit risks in public sector organisations because it cannot be handled fully by external audits, it is open to insider trading and most of all, it is opened to so many forms of malpractices that can cause the misuse of public funds.18 Centralised budgets need democratic accountability.19 This therefore means that people charged with managing these public sector organisations have the duty of ensuring that there is responsible purchases and the system ensuring that is preserved and honoured. However, it is very difficult to check conflict of interest problems like institution heads receiving bribes and kick-backs to influence their decision. This is a major limitation of the Procurement Law because it cannot effectively check favouritism based on insider dealings. Non-Discrimination A public institution should never discriminate between local and international suppliers. They should not place any restrictions or conditions on foreign European Union bidders.20 EU Procurement Laws and other laws places the principle of mutual recognition and proportionality on public institutions that seek to take bids from external suppliers. Under Regulation 9(15), public institutions receiving bids should always consider the local equivalents of the qualifications of bidders or technical specifications presented for the tender. Also, businesses should not apply disproportionate technical, professional or financial conditions to different bidders.21 There should be no overt or covert discrimination meted out to one bidder against the other. 22 This system comes with additional administrative costs and burdens for public institutions. This is because they have to go through a lot of effort to understand other foreign bids. Also, as much as this law attempts to promote fairness, there are realism issues relating to culture and the execution of the supplies. These cultural differences can lead to undue difficulties in the delivery of the procurement contract. Flexibility & Redress In any case where a bidder feels a public institution has not followed the requirements of the EU Procurement systems, they are free to take action in the European Union Courts. The EU Court of Justice Article 258 TFEU ensures that people with administrative infringements can always get redress by going to the European court.23 Thus if an organisation gets a problem with a public organisation over malpractices relating to procurement, it has to petition the European Courts for redress.24 It is thus important for businesses and organisations to try to use the European Procurement Laws and as this is done, they can avoid getting into legal disputes that will always rule in favour of the use and respect of these laws.25 Clearly, there are several loopholes in the procurement system that makes it difficult for legal action to be taken against a mischievous procurement entity. First of all, they can indulge in so many covert discrimination practices that can make it difficult for aggrieved persons to push their case. Secondly, there are some cases where accused persons can come up with equitable explanations of their actions26 and this makes EU Law ineffective Conclusion The Procurement Law of the European Union is put in place to ensure that the principles inherent in the formation of the Union are applied to all public procurement cases. Elements like fostering a single economic community, promoting anti-trust systems and efficient businesses and the promotion of the values of the Union lies in the heart of the Procurement Laws. However, these laws come with extra time burdens and administrative requirements that makes it difficult for the ends of the arrangements to be met. Read More