Bad ideas die hard
Work for long enough in a field and you will watch the same debates happen time and time again. This time around it is the idea of local preferences in public procurement. Now, for the particular debate I cannot say having been part of it multiple times, but some of its ideas are very old and some of them I have come across in different guises earlier on in my career.
Something I did not have on my bingo card for EU public procurement law in 2026 is a discussion about the merits of local preferences in public procurement. This is easy to explain on my part: our current rule set was designed from day one to root out this idea at the member State level. That’s why non-discrimination and equal treatment are core principles of EU public procurement law. The whole idea of local preferences is to explicitly discriminate suppliers based not on their ability to do a contract but instead where they are based, where their inputs come from or their workforce origin. It is the antithesis to the single market’s thesis. So let’s call a spade a spade: when someone suggests local preferences what they really mean is that they want to discriminate in favour of - how shall I put it? - preferred suppliers. That is the bit of the idea that is older than EU (then EEC) public procurement regulation.
Beyond the obvious issues of cutting across the general principles and other outdated ideas such as free movement of goods, what puzzles me about this discourse is how little sense it makes. First, only a tiny fraction of contracts above the EU thresholds is awarded to foreign firms. By tiny fraction we are talking around 5%, that’s how tiny it is. That means 95% of all contracts above EU thresholds are already being won by national firms which so far are free to set up their supply arrangements as they see fit (wondering why I mentioned free movement earler on?). So above EU thresholds this idea of local preferences could be construed as an approach to make sure the internal market isn’t either internal nor a market. [The same internal market which may be already in reverse.](Trade between EU member states is slowing, data shows) Be careful with what you wish for.
Second, below thresholds represents a fairly significant chunk of procurement spend across the EU and there it is pretty much already a free for all for the member States. Thanks to the CJEU and it’s inoperable concept of ‘certain cross-border interest’ which, just like Schrodinger’s cat can exist or not exist when a procedure should’ve been launched, member States and contracting authorities pretty much can do whatever they like from an EU law perspective. This means that in reality and in practice they can already discriminate in favour of national suppliers since those contracts prima facie are not part of the internal market, so all those pesky, pesky EU rules do not apply. Might not be de jure how things are supposed to work, but de facto is another matter. So, again, any advantage the mythical local preferences may offer is going to come at the expense of sub-contracting or the supply chain…which are supposed to still be covered by free movement of goods and the like.
As for the downsides, I have mentioned a few already. This will lead to the atomisation of the internal market (even more!) and ensure that we increase the number of small, financially weak firms that can be charitably described as zombie firms. The fundamental problem here is the beggar thy neighbour incentive this idea creates. Once local preferences are allowed, then the vast majority of firms become local. And by local I do not mention national or even regional, I really mean local.
Allow me to offer an example from earlier on in my career, when I was working in Wales. Wales is for all intents and purposes a rather small country with only 22 local authorities. At Bangor University we did a lot of work with a few of those 22 Welsh local councils. Some of the discussions mentioned community benefits which is a concept that works as a dog whistle for localism under the guise of getting more bang for the buck from a given contract. The textbook example was the school being built hopefully using a local unemployed workforce. Ignore for a moment that the community benefit of that contract is the actual school being built (on time and hopefully on budget) and let’s focus instead of what is really at play here. Who will have the contacts to hire this hyper local workforce? Local firms, naturally. Now, you may think I am being a bit unfair here so surely non-local firms should not be disadvantaged. Let’s go back to the example then.
There I was on a meeting about procurement with a couple of heads of local councils from North Wales. The discussion of community benefits comes up and one of them goes on a tirade about how he wants the contractual benefits to go to firms based in his local authority as any benefits that could be felt in South Wales were not community benefits for him. The implications are obvious: once a localism agenda takes root it works as a fractal. First localism means national. Then it means regional. Finally - and that’s pretty much the Welsh case - it becomes truly local at the level of contracting authority. In practice this means many firms will be constrained to be competitive in only their home turf, not the national or regional market, but instead the local authority they are based upon.
How does that play out? Firms based in local authority A will lobby and press the authority to ‘protect their market’ and the ‘local jobs’ because now they cannot really compete for contracts tendered on authority B because those crooks are tilting the contracts in favour of their local suppliers, and by the way all do the same so we need to protect our firms. The same argument we always hear about cross-border procurement but at a much smaller scale when the border is the local authority boundary.
The end result will be a beggar thy neighbour model full of really small firms that will not scale. I know that for some size matters not or small is mighty, but that isn’t me. Sometimes, really old wine comes in new bottles and so here we are having this conversation again.