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Konkurrencestyrelsen:
Danske virksomheders muligheder ved offentlige EU-udbud i udlandet

The present EU rules on public procurement represent a much needed strategy for opening the markets, and it has proved to be right to start the process of liberalisation. But there is still a long way to go before the rules start to work as intended, and it is extremely important that the European Commission and the national competition authorities support the further development of this important market. The rules need more time to be fully implemented, before major changes are made, and in the meantime it would be of great value for enterprises as well as for those responsible for public procurement if clarifications were made on a number of essential points in the directives.

These are amongst the conclusions of this study of barriers for the participation of Danish enterprises in the European market for public procurement. The study has been financed by the Danish Competition Secretariat, the body responsible for the implementation of the rules in Denmark.

The study is based on 21 extensive interviews with Danish enterprises with experience in the European public procurement market, and with 17 representatives of public authorities involved in public procurement on a regular basis in Germany, the Netherlands, Spain, Sweden, United Kingdom and France. Furthermore interviews have been made with the Council of Ministers (EU) and the European Commission. The European Parliament did not wish to be interviewed for the survey.

The interviews show that the experience in working with the EU directives is so far relatively limited. Enterprises and public procurement officers indicated that the market is still rather small and in particular that successful bids won by companies from countries other than country of the procurement authority are still very limited. The interviews also showed that both parties find the rules quite difficult and rigid to work with. Publication rules and consequent delays were often criticised. A further effect of the procurement rules has been more costly procedures, but as the rules have formalised the procedures, many authorities have developed more stringent and more efficient procurement policies.

It can also be concluded that in general the procurement authorities prefer to deal with companies from their own culture, and in particular with companies with whom they have a working relationship and experience from previous deliveries. As such criteria can not be applied under the EU rules an important explanation of the perceived rigidity and difficulties could very well originate from such considerations.

It has been disappointing to note that most companies find that the rules have not made it much easier to penetrate foreign markets. On the other hand, many authorities have noted more bids under the EU rules, but mostly from domestic companies. Therefore the rules seem to have increased local competition on public supplies rather than cross-border competition.

Public procurement is not very popular with either enterprises or with authorities. This form for procurement does not necessarily provide for many bids, and it does not ensure the participation of the most qualified companies. Many companies regret the lack of opportunities to negotiate with the procurement authorities. This gives them limited possibilities to adapt their offer to real needs. The lack of opportunities to negotiate is also regretted by the public authorities.

Concerning prices, there is agreement amongst the interviewed that prices have been marginally lower during recent years, but very few of the interviewed were willing to accept the procurement rules as the reason for this. Instead they referred to the increased competition at the European market after the introduction of the Single Market as a plausible reason for lower prices.

The report concludes that a part of the explanation of the limited effects of the EU procurement rules is that the rules still are new and need to be integrated into procurement policies in general. But also that a more important reason seems to be that structural difficulties still exist in the market for the proper effect to take place. Companies have in reality to accept that they in most cases must be represented in the markets where they wish to participate in public tenders, as procurement authorities want to deal with companies which can offer immediate service and provide installation advice and training in the local language.

Most companies do not find much help in the Official Journal. In fact most companies indicate that they do not use the Journal, and they will have to know about forthcoming bids before they are advertised officially to have a chance in a bid.

Other barriers indicated are based on a too wide use of the accelerated procedure in a number of countries, on too late publication, on too late dispatch of material for the tender, on incorrect definitions and standards and what companies often characterise as irrelevant demands for tests and documentation. It seems to be a problem that the information requested is only harmonised to a limited degree in the EU. This could concern information such as yearly reports, information from banks, and company statutes.

It also seems that the system established to deal with complaints is not very widely used.

Preliminary conclusions in the report concerning the situation of Danish enterprises are accordingly:

Denmark has a clear interest in a better application of EU public procurement rules in the country's largest markets

There is a need for assisting Danish enterprises in overcoming the barriers in the market

There is a need to strengthen the complaints system and the dialogue between competition authorities

There is a need for a dialogue with public procurement agencies to make them feel more comfortable and less bureaucratic in their application of the rules.

A number of success criteria for Danish companies on the European market for public procurement has been identified through the survey. An important factor seems to be local presence (daughter company, representative office or an agent) in the country where the tender takes place. Other important factors are good relations to the procurement agency and fine references. Price is obviously also an important factor.

Amongst the problems often leading to failures for Danish companies are special authorisation rules, licensing rules, division of tenders into smaller lots, and different labour market rules. Lack of harmonisation on standards and norms is still a problem, as the European standardisation has not reached the level foreseen in the Single Market programme.

The report also recommends that smaller enterprises form alliances, including cross-border alliances, in order to respond to tenders in other European countries and to increasingly complex tenders. A more intensive use of BC Net and European Economic Interest Groups are recommended.

As a summary of the results the following points are established as recommendations for future action:

• A clearer definition of 'tendering authorities' and other concepts should be established.
• There needs to be a better control with the use of the accelerated procedure, deadlines and the quality of tendering material. Better insight into the practices of other countries' competition authorities should be established.
• Thresholds for public supplies of goods and services should be increased. There should be clearer rules for bidding and negotiations.
• More simplicity and transparency of the directives are requested by enterprises. Wording should be updated and be more understandable.
• There should be clearer and more standardised rules on information requested by tenders.
• There should be more clear rules on payment principles applied by tendering authorities, including payment schedules.
• It must be ensured that the principle of equal treatment is not interpreted in such a way that qualified bidders are excluded from bidding.

Based on the above recommendations, it is suggested that the following actions should being taken by the national competition authorities and the European Commission:

Access to information concerning tenders should be improved and there is a need for training and education of bidders and tendering authorities. Improvements should be made in co-operation between enterprises, organisations and competition authorities.

The dialogue amongst tendering authorities and bidders at national and European level on the implementation of the rules should be amplified. In Denmark it is recommended that a permanent body with representation of business organisations, tendering authorities, competition authorities and other relevant parties is established with the purpose of monitoring and discussing the content and implantation of EU procurement rules.

Small and Medium Sized Enterprises with an interest in public procurement should use opportunities for co-operation and partnerships with similar enterprises in other countries. The public sector, EU and trade and industry organisations should contribute to this effort.

As an integrated part of a pilot project, the Danish competition authorities should develop co-operation with authorities in other EU member states and establish a network of treatment of complaints at a low conflict level on the international basis. This effort should be based on the very positive experiences made by the Danish competition authorities in Denmark.