Public Procurement Directives in the European Union: A Study of Local Authority Purchasing
| Author | Andrew Cox,Keith Hartley,Stephen Martin |
| DOI | http://doi.org/10.1111/1467-9299.00159 |
| Date | 01 June 1999 |
| Published date | 01 June 1999 |
PUBLIC PROCUREMENT DIRECTIVES IN THE
EUROPEAN UNION: A STUDY OF LOCAL
AUTHORITY PURCHASING
STEPHEN MARTIN, KEITH HARTLEY AND ANDREW COX
Prompted by the Single European Market initiative, virtually all public procure-
ment, except for defence equipment, is now subject to European Union rules which
prohibit discriminatory (buy national) purchasing policies. This paper examines the
impact of recent procurement Directives on local authority tendering and contract
award behaviour (compliance), and considers whether the legislation has been suc-
cessful in opening-up such public procurement to international competition.
Although local authorities are making extensive use of the Official Journal to adver-
tise their requirements, there is evidence that purchasers do not always adhere to
the new legislation and it is not obvious that adherence to the legislation is improv-
ing. Moreover, an analysis of local authority contract award data for 1993 revealed
that almost all contracts were won by domestic firms. However, doubts about the
ultimate ownership of such firms and the sourcing of components means that there
remains considerable scope for further work.
I INTRODUCTION
The public sector is a major buyer of goods and services. In the mid-1980s,
discriminatory (buy national) public purchasing was identified as one of
the obstacles to the completion of the Single European Market. A survey
of five member states (Belgium, France, Germany, Italy and the UK) in
1985 revealed import penetration rates of 22 per cent for the economies
as a whole while the comparable figure for the public sector was some 2
per cent (EC 1989, p. 12). As a result, it was concluded that public pur-
chasers were favouring domestic firms at the expense of foreign suppliers,
leading to a series of European procurement Dire ctives in the late 1980s
and early 1990s designed to eradicate discriminatory (buy national) public
purchasing. Earlier Directives, issued in the 1970s, were largely ineffective
(Cox 1993, p. 35); the rules contained so many loopholes that unscrupu-
lous purchasers were able to evade them, and the remedies and com-
pliance regime was far too weak to provide any significant deterrent
against abuse.
Prompted by the Single European Market initiative, virtually all public
procurement, except for defenc e equipment, is now subject to E uropean
Union (EU) rules which prohibit discriminatory purchasing policies. This
Stephen Martin and Keith Hartleyare at the Centre for Defence Economics at the University of York;
Andrew Cox is at the Centre for Strategic Procurement Management at the University of Birmingham.
Public Administration Vol. 77, No2, 1999 (387–406)
Blackwell Publishers Ltd. 1999, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street,
Malden, MA 02148, USA.
388 STEPHEN MARTIN, KEITH HARTLEY AND ANDREW COX
paper examines the impact of the new Directives on local authority ten-
dering and contract award behaviour (compliance), and considers
whether the legislation has been successful in opening-up such public pro-
curement to international competition. Various indicators are used to mea-
sure market openness, although the range of indicators is limited by
data availability.
Under the Directives, all procurement contracts that come within the
scope of the legislation are to be advertised in the Supplement to the Official
Journal of the European Communities (OJEC). For every purchase, the buyer
is obliged to submit for publication a tender invitation document and a
contract award notice. These documents provide a wealth of information
that can be used to analyse the impact of the legislation on the opening-
up of public procurement markets. This study focuses on local authority
purchasing which accounts for almost two-thirds of all contracts advertised.
Section II outlines the economic arguments for non-discriminatory public
purchasing and opening-up national public procurement markets. It also
explains why purchasers may prefer domestic suppliers. Section III briefly
describes the evolution of EU public procurement policy since the initial
Works and Supplies Directives and discusses possible loopholes. Section
IV examines the impact of the latest Directives on local authority tendering
behaviour. Section V reports the findings from a case study of one large
British local authority (Leeds City Council). The final section presents con-
clusions.
II THE ECONOMIC ARGUMENTS
The most recent attempt at ending discriminatory public purchasing
reflected the European Commission’s desire to complete the internal mar-
ket. Commission-sponsored research revealed that in 1986 total purchasing
controlled by the public sector (central and local government, their agenc-
ies, and enterprises with monopoly-type concessions) amounted to 15 per
cent of the Community’s GDP (which in 1995 was worth ECU 1,000 billion).
Although a proportion of this overall figure was for goods and services
that are inherently non-tradable, or are required in quantities too small to
come within contractual procedures, the residual for contractual procure-
ment in 1986 was estimated at ECU 240–340 billion (equal to between 7 per
cent and 10 per cent of GDP in the EC). However, only a very small fraction
of this smaller total (0.14 per cent of GDP) was awarded to companies from
other countries (Cecchini 1988, p. 16).
The costs of not encouraging intra-EU competition (costs of non-
Europe) – if not deliberately rejecting it – are substantial. The public sector
pays more than it should for the goods it buys and, in doing so, supports
sub-optimal enterprises in the European Union. Market fragmentation
makes European industry less competitive than otherwise and thus less
able to compete with Japan and the USA in the global markets of the 1990s.
Commission-sponsored research suggested that substantial public expen-
Blackwell Publishers Ltd. 1999
To continue reading
Request your trial