How are public contracts winners chosen in the EU?

The answer is, mostly by offering the lowest price according to a study conducted by DataLab using data from 2016 onwards:

Unknown.png

I don’t think the findings are surprising at all, but gave a good look at the data after seeing price + quality + qualification as the third most common category. Most countries have very low usage of that combination, except for the UK where 55% of contracts fell into that category. In other words, that category only shows up in third because of the UK.

The explanation for what was as qualification by the researchers is not entirely clear but includes “references, team, capacity, certifications, training.” I was worried this referred to general qualification of the tenderers (which would constitute an illegal award criterion) but it may well be a consequence of the UK’s preference until recently for the restricted procedure (or the “open procedure” run as a restricted procedure…).

The use of qualitative criteria is a lot more common in older Member States than newer ones, so DataLab provides three potential explanations for the lowest price preference, based on the geographical differences identified. The first is the use of EU funds which tend to have very stringent conditions attached and very tight oversight, thus favouring less risky approaches to procurement. The second are institutional differences between Member States and competing priorities, ie older Member States are more interested in improving procurement quality than simply fighting corruption. We could describe this finding as older Member States being further down in the procurement evolutionary path: you start by fighting corruption and then move onwards to achieving other goals as the country becomes more proficient in public procurement. The third one is expertise, or lack there of in procurement practitioners. Frankly, this is more of a red herring in my view since the problem of expertise is transversal to all procurement systems, particularly once you start looking at sub-central contracting authorities as well.

Finally, resources is another culprit to consider that DataLab did not point out. Expertise is one resource but not the only one, human factors, money and time are others that play part as well in the decisions of how to procure. Qualitative criteria raise complexity in procurement so you need resources to deal with those extra requirements.

Overall, I always boil down these decisions to incentives. It is easier to just compare prices, so unless the incentives are structured to move decision makers from that option, by default we will always have a significant percentage of lowest price tenders.

Food for thought.