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The Wood Review
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Those of us involved in public procurement put a lot of effort into making sure that a level playing field is present. Buyers in the UK public sector are very sensitive to propriety and making sure that real competition secures value for money for the taxpayer. Sellers expect public bodies to be impartial, fair and free from collusion or undue influence.
In general everyone plays according to the rules, which are well known and universally accepted. Those attempting large scale rule bending seem prone to getting caught out, although the investigation and testing in court of any suggestion of impropriety is complex, as the recent Jubilee Line case showed.
And then we try winning business in Europe. The EU public procurement market amounts to 16% of its total expenditure - an impressive 1,500 billion euros per annum. This is clearly a lucrative pie, and many organisations are making a considerable effort to secure a slice of it. Our expectations are that our colleagues on the continent will adhere to the same set of rules and values and the best team will win. Unfortunately life gets a little more complicated when we start trying to do business across the Channel with our EU partners.
Those in Whitehall have had their ears bent for many years about the UK's lack of success in securing EU contracts and finally, at the end of last year, Alan Wood published his report "Investigating UK business experiences of competing for public contracts in other EU countries". He has put down on paper what everyone suspected, but did not like to print for fear of being branded anti-European.
What does Wood have to say?
Although member states "largely respect" the rules, a number of barriers are undoubtedly present, namely:
- Cultural differences (a "buy local" mentality)
- Complex, time consuming and resource intensive procedures
- State aid (particularly for "strategic" industries like defence or transport)
- Lack of commitment to international competition
- Lack of market liberalisation
- Rigid legislative frameworks
- Differences in standards
- Close relationships between procuring authorities and national suppliers
- Regional politics
A Matter of Interpretation
The issue does not seem to be the quality of the rules themselves but rather how they are interpreted by member states. Clear transgression is rare but there is considerable evidence of "local interpretation" to suit ones own agenda i.e. favouring national firms. Another important factor is the fact that the UK has been a good European citizen and progressed quickly along the path of liberalisation, while many of our European partners appear to be adopting a much more relaxed pace. Cynics might suggest that this policy has indeed backfired on the UK and the outcome is an international imbalance in opportunities and chances of success in bidding, which does not act in our favour.
"Flight International" recently reported a case in point. The European Commission has rejected the Italian government's justification for awarding helicopter contracts for the Italian police and fire brigade directly to AgustaWestland and avoiding going through competitive bidding.
Italy now faces a hearing before the European Court of Justice. It states in its defence that the helicopters were being acquired as military products which are exempt from the competition laws, but the argument is not holding much water in Brussels and Strasbourg. It would appear that Rome decided to bend the rules a little too far and are facing some serious wrist slapping.
Tips for Success in Europe
On the positive side EU procurement rules do encourage openness through advertising and providing transparent procedures. If we know an opportunity is out there, having spotted it in the Official Journal, Wood gives some useful tips on improving ones chances of success.
- Act locally through a subsidiary, partnerships or representatives. Local integration is the main factor for securing success.
- Be careful what you bid for - niche players have more chance than someone trying to compete with a generic product or service which can be supplied with ease locally.
- Choose your market carefully - focus efforts on areas where the returns will justify the extra effort required.
Our own mind set may need to change too. In Germany and France the first thing firms do when losing a big public procurement is to challenge the decision and sue the public body awarding the contact. This is a totally different mind set from that in the UK, where such a step is seen as simply being a bad loser. The argument is that the government/local authority will give the next contract to the suing firm, which is usually in the number two spot, to avoid the legal hassle. Evidence shows that this works but is restricted to big, £50 million plus, contracts. It also provides an excellent revenue stream for lawyers!
Wood diplomatically states that there "needs to be a stronger emphasis throughout the EU on achieving the outcome of more openness in addition to demonstrating compliance with the rules". One hopes that the sharing of best practice across Europe by the European Commission, the use of good procurement advisors by organisations, and the political desire to secure the best deal for taxpayers will move things in the right direction. How quickly things move in the right direction remains to be seen.
If you have any questions about the subjects covered in this white paper or you would like to find out more about how Oakleigh Consulting could help your organisation, please contact us on 0161 835 4100 or email us.
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