EU Procurement

What is public Procurement?

Public Procurement is the term used to describe the purchasing of works, supplies and services by national, regional and local public bodies, including central government, local authorities, fire and police authorities, defence, health services, joint consortia of public bodies, and public and private utilities. Throughout Europe, the public sector and utilities, referred to as 'contracting authorities', need to purchase goods and services for a huge range of activities. Many of these form large contracts which must be advertised all over Europe, the annual value amounts to around £500 billion, estimated at around 11.5% of EU Gross national product. This represents potentially profitable opportunities for companies to supply the market at home and overseas.

Who is affected?

The range of contracting authorities affected by public procurement rules is very large - there are numerous local and central government departments, agencies and other bodies. The rules also apply the utilities sector - suppliers of water, energy, transport and telecommunications, and sometimes private sector firms involved in public sector and utilities contracts. Types of contract vary tremendously; examples include the supply of office machinery and computer equipment; facilities management; general construction work; street lighting materials; medical products; financial and insurance services. The EC Directives only cover contracts above certain threshold values - but this can include almost everything a public body or utility buys.

Public sector bodies must comply with the EC rules if they subsidise more than 50% of works' contracts awarded by others, including private bodies. Private bodies are also affected if they act as agents for a public body in the letting of an EC contract.

The EC public purchasing rules apply to the 15 member states and also to the European Economic Area (EEA - Iceland, Norway and Liechtenstein) and to many countries associated with the Union, for instance those covered by Europe Agreements (Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia). Agreements have also been made with Turkey, Morocco and Tunisia to develop competitive public procurement practices. All member states of the EU are members of the World Trade Organisation, the international organisation that deals with the global rules of trade between nations. A new WTO Government Procurement Agreement (GPA) came into force in 1996 extending coverage to include works and services contracts as well as supplies, and Directives were amended accordingly. The new GPA is no longer limited to procurement at central government but covers contracts awarded by public authorities at regional and local level and also a number of utilities sectors. The GPA broadly follows the same principles as the Directives and signatories should be treated on the same basis as states within the EU.

The Principles

The EU public procurement market is a fundamental part of the Single Market and is governed by rules intended to remove barriers and open up new, non-discriminatory and competitive markets markets. The principle of public procurement is to open up the choice of potential suppliers to the public sector and utilities resulting in reduced cost, while at the same time, opening up potential markets for companies. The rules aim to ensure the free movement of goods and services within the EU and that public sector purchasing decisions are based on value for money achieved through competition. The principles are applied through the advertising of contacts across the EU, treating all enquiries equally to avoid discrimination on the grounds of nationality or the origins of goods and services, encouraging the use of EC based technical standards as opposed to national ones, and using objective criteria in tendering and contract award procedures.