The Cost of Different Goals of Public Procurement

The Swedish Competition Authority invited leading experts to discuss the goals that ought to govern public procurement in the future, at a well attended conference with participants from 24 countries.

Give citizens value for their money

To provide citizens/taxpayers with the best value for their money was something that all the speakers agreed should be a lodestar when public bodies buy goods and services.

What should be the goal of public procurement? It was on this theme that the Swedish Competition Authority arranged an international conference in Stockholm with the title The Cost of Different Goals of Public Procurement. The conference also marked the beginning of Sweden’s presidency of the Public Procurement Network (PPN).

Light was shed during the conference on the issue referred to in the heading and other topical matters considering the on-going reform of the procurement rules within the EU and Sweden. The speakers were internationally leading academics within the field of procurement, within economics, law and organisational theory and centrally placed actors in the reform process.

All speakers agreed that public procurement is of great importance and that the design of the public procurement rules plays a great role. However, several speakers articulated views on how the system of rules should be reformed that deviated from the orientation indicated in the Green Paper issued by the European Commission.

The market contra citizen welfare

All speakers were of the view that one important goal of public procurement should be to provide citizens with value for their tax money. However, both Sue Arrowsmith, who heads the Public Procurement Research Group at the University of Nottingham, and Giancarlo Spagnolo, with the Stockholm School of Economics, were of the opinion that the EU public procurement rules basically has the aim of integrating the common market. Arrowsmith also observed that such an objective is supported by the Union Treaty, while this is actually not the case as regards the goal of getting value for tax money, which is rather the concern of the Member States.

Interaction: goal – rules

However, Klaus Wiedner, from DG Internal Market and Services of the European Commission, maintained that a very important objective for the modernisation of the European public procurement rules is that public funds should be used effectively. He also discussed how the work with this modernisation is progressing and the lessons learned from the consultative responses in connection with the Green Paper.

Steven Kelman, from the Kennedy School of Government at Harvard, discussed the interaction between rules, or restrictions, and goals, and the risk that placing far too great an emphasis on restrictions may be at the cost of achievement of goals. The safest way to avoid breaking any rules is to do nothing at all.

More effective with greater freedom

Several speakers discussed the need for the rules to be a simplified. Spagnolo argued, referring to research results based on Italian data, that increased discretion for procurers normally improves effectiveness, despite the increased risk of corruption. He also emphasised the importance of the public procurement rules that allow for taking sellers’ past performance into account, and showed that this need not make it more difficult for new businesses to participate in procurements.

Steve Tadelis, from UC Berkeley and e-Bay research labs, emphasised the importance of the public procurement rules functioning for complex procurements where, typically, it is necessary to modify a contract several times during the term of the contract. Central issues therefore include the scope for negotiation between the parties, the possibility of taking into account the provider’s past performance and follow-up of the contract.

Tadelis was doubtful as to why the current orientation of the Green Paper is to only allow negotiations in exceptional cases. Kelman noted earlier that the American system of rules is unfortunately also restrictive in this respect. He also emphasised the importance of follow-up.

Absence of statistics

Both follow-ups and ex-post evaluations require information, and several speakers that such information should be collected and made available to researchers.

Anders Wijkman, who leads the Swedish Committee of Inquiry on Public Procurement, observed that improved procurement statistics comprise an important part of the mandate of the Committee. He also provided a picture of the work of the Committee and its priorities, and referred to several of the trains of thought that had been touched on earlier during the day. He also emphasised the issue of resources and competence on the part of contracting authorities.

Later this year the papers underlying the presentations at the conference will be released in book form by the Swedish Competition Authority and also be made available electronically on the Authority’s website.