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The EU and public procurement law

Public procurement is a most powerful exercise. It carries the aptitude of acquisition; it epitomises economic freedom; it depicts the nexus of trade relations amongst economic operators; it represents the necessary process to deliver public services; it demonstrates strategic policy choices.

The European Union regards public procurement regulation as an essential component of the internal market. Public procurement is identified as a considerable non-tariff barrier and a hindering factor for the functioning of a genuinely competitive internal market. Economic justifications for its regulation are based on the premise that the introduction of competitiveness would bring about price convergence and significant savings to the public sector.

The regulation of public procurement also has significant legal inferences, directly relevant to the adherence of fundamental principles of the EU such as the free movement of goods, the right of establishment, the freedom to provide services, the principle of proportionality, the principle of transparency, the principle of non-discrimination on grounds of nationality, the principle of equal treatment and the principle of mutual recognition.

The purpose for the regulation of public procurement is to insert a regime of competitiveness in the relevant markets and eliminate all non-tariff barriers to intra-community trade that emanate from preferential purchasing practices which favour national undertakings. Apart from reasons relating to accountability for public expenditure, avoidance of corruption and political manipulation, the regulation of public procurement represents best practice in the delivery of public services by the state and its organs.

Public procurement law as a discipline expands from the simple topic of the internal market, to a multi-faceted tool of European regulation and governance, covering policy choices and revealing an interface between centralised and national governance systems. This is where the legal effects of public procurement regulation are felt most. The regulation of public procurement in the European Union has multiple dimensions, as a discipline of European law and policy, directly relevant to the fundamental principles of the common market and as a policy instrument in the hands of member states. The regulation of public procurement reflects on two opposite dynamics: one of a community-wide orientation and one of national priorities.

In addition, the regulation of public procurement is a public policy matter for the European Union. A combination of legal, macro and micro-economic objectives correspond to public sector management principles such as transparency, accountability, fiscal prudency and competition and make public procurement regulation a necessary ingredient for the EU integration process. The commonly accepted assumption is that public procurement is not subject to the same commercial pressure or organisational incentives for sound management as private sector procurement which is underpinned by the foundations of strong competition. This has prompted the imposition, not only by the EU but by many jurisdictions around the world, of legal and regulatory disciplines to encourage the better use of public financial resources, to introduce greater efficiency, and to reduce the risk of favouritism or corruption in public purchasing.

EU Member States 2014
EU member states 2014 by Keshetsven. CC-BY-SA-3.0 via Wikimedia Commons.

The stakes cannot be higher for the European Union. Currently, the total public expenditure directed by the Member States in procuring goods, works and services accounts for over €1 trillion. Public procurement in the Member States is a highly fragmented and complex process. There is a large and heterogeneous range of over 250,000 contracting authorities across the EU, to which the EU public procurement rules apply in order to introduce a discipline that ensures undertakings from across the internal market. This is so they have the opportunity to compete for public contracts by removing legal and administrative barriers to participation in cross-border tenders, for ensuring equal treatment and by abolishing any scope for discriminatory purchasing through enhanced levels transparency and accountability.

The strategic importance of public procurement for the European integration process has been recognised by the 2011 Single Market Act which has prompted a series of reforms to the EU Public Procurement acquis. The Single Market Act relies on a simplified public procurement regime in the European Union, which will result from procedural efficiencies and from streamlining the application of the substantive rules. These reforms aim at linking directly public procurement with the European 2020 Strategy which focuses on growth and competitiveness. The current public procurement acquis has prescribed a different regulatory treatment to public sector procurement and utilities procurement, for two reasons. Firstly, a more relaxed regime for utilities procurement, irrespective of their public or privatised ownership has been justified and accepted as a result of the positive effects of liberalisation of network industries which has stimulated sectoral competitiveness. Secondly, a codified set of rules, covering supplies, works and services procurement in a single legal instrument for the public sector aims at producing legal efficiency, simplification and compliance in order to achieve the opening up of the relatively closed and segmented public sector procurement markets. A decentralised enforcement of the public procurement rules has been introduced by the Remedies Directives.

Judicial activism represents the most influential factor in the evolution of the public procurement acquis. The Court of Justice of the EU has contributed immensely to the deficiencies of the public procurement regime which has been experiencing conceptual and regulatory vagueness, limited interoperability with legal systems of Member States and continuous market-driven modality changes in financing and delivering public services. The EU Public procurement law has been moulded by the instrumental role of the Court of Justice of the European Union, which has provided intellectual support to the efforts of the European institutions to strengthen the fundamental principles which underpin public procurement regulation.

Featured image credit: EU Flagga, by MPD01605. CC-BY-SA-2.0 via Flickr.

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