Why the EU could be adjusting the price of certain tender bids

Will Green is news editor of Supply Management
24 March 2022

The EU is warning countries that do not open up their public procurement markets to European companies face being effectively blocked from tenders.

Under an International Procurement Instrument (IPI) – agreed by the European Commission (EC), Parliament and Council – companies tendering for public contracts in the EU could have the price of their bids raised to make them less competitive.

The EC said the IPI was necessary because while the EU had a policy of open access to its procurement markets, some countries restricted access to public contracts.

The EC said such barriers included requirements by some countries to establish a joint venture with a local company, “buy national” policies that require part of the value of a tender to originate locally, and “price preferences” where a bid by a local company can be up to 15% more expensive than a foreign bid and still win a tender.

The EC said “many of the EU’s major trading partners apply restrictive practices in their markets”, affecting sectors including construction, public transport, medical devices, power generation, and pharmaceuticals.

The IPI empowers the EU to investigate allegations of restrictions on EU companies, engage in consultations with the country concerned, and restrict foreign firms’ access to EU markets. This would be done by “adjustments in the way tenders from the country concerned are assessed” or blocking tenders from the country.

“These adjustments mean that bids from that country would, compared to other bids, be considered to offer a higher price than the actual price put forward,” said the EC. “This would give EU and non-targeted countries’ bidders a competitive advantage on EU public procurement markets.”

The EC said public procurement spend accounted for on average 10-20% of a country’s GDP and represented more than €8tn in business opportunities worldwide.

Valdis Dombrovskis, EC executive vice-president and commissioner for trade, said: “A level playing field is vital for the competitiveness of our companies. While the EU has kept its public procurement market open, the same cannot be said for many third countries, where our companies still face unfair barriers. 

“We continue to favour dialogue to resolve such issues. But in the final instance, this new instrument will give us extra leverage to remove these barriers and promote fair competition for the benefit of all.”

In 2021 a private members’ bill – the Goods and Services of UK Origin Bill – was presented to the House of Commons that would “establish a presumption in public procurement in favour of purchasing goods and services from businesses based in the UK”.

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