European auditors warn over public procurement errors

21 September 2015

The European Commission and member states must do more to address problems with public procurement in EU cohesion expenditure.

The European Court of Auditors said that failure to comply with public procurement rules has been a “perennial and significant source of error in EU cohesion expenditure”, which includes spending on environmental and transport improvements in member states with below average per capita GNP.

It also recommended that payments to member states should be suspended if shortcomings on public procurement were not rectified.

Some €349 billion (£395bn) was allocated in the area of cohesion policy through the European Regional Development Fund (ERDF), the Cohesion Fund (CF) and the European Social Fund (ESF), between 2007 and 2013. A significant part of this money was spent through public procurement, which is governed by the EU public procurement directives.

The auditors’ report assessed whether the European Commission and member states were taking steps to address the problem of public procurement errors in the area of cohesion policy.

It examined more than 1,400 transactions between 2009 and 2013 and detected errors relating to public procurement in around 40 per cent of all projects.

The report said: “A significant number of public procurement errors were due to unjustified direct award, misapplication of selection and award criteria and lack of equal treatment of tenderers.”

Complexity, lack of administrative capacity and insufficient planning were pinpointed as some of the causes. The auditors also noted that EU directives were not always correctly transposed by member states and that interpretation of the legislation was sometimes inconsistent. Fraud could also be a cause of error in the public procurement arena, it said.

However, the auditors noted that the systematic analysis of public procurement errors by the Commission and member states was very limited, and that a lack of detailed data had made a comprehensive analysis of errors impossible.

The Court of Auditors acknowledged that the European Commission and member states had started to address the problem, including legislative changes, but said that their efforts needed to be intensified.

It recommended that the Commission develop a database of public procurement irregularities, analyse errors and publish the results. Member states should provide the Commission with necessary data to achieve this.

The Commission should suspend payments to member states if they have not met conditions under the new European Structural and Investment Funds 2014-2020 regulations, by the end of next year, according to the report.

The Commission should update and publish its internal action plan on public procurement, and should set up a high-level group to provide leadership in tackling the problem of public procurement errors.

Financial corrections should be imposed if member states’ checks are not effective enough and the Commission should pursue infringements procedures for breaches of the public procurement directives, the auditors recommended.

The report also added that the Commission and member states should exploit opportunities provided by developments in information technology, including e-procurement and data mining tools.

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