Regulaton & Policy
New EU Directives – procurement fraud more likely?

The new EU Directives are now being transposed into local law in each EU country, a process that can take months or even years. It is clear that there are significant changes within the directives, although how dramatic the changes are in each country will depend on exactly how the new local laws are framed.

Many of the changes are designed with the objective of greater flexibility in mind. There is a desire to make public procurement more dynamic, faster, more like the private sector, we might say. Buyers in the public sector should be suing their judgement more, we hear. That all sounds good – who could possibly disagree with that?

Well … we don’t disagree, but it is important to point out that there are potential negatives around the idea of greater flexibility. That can lead to less rigour, more subjectivity, processes that do not offer fairness to bidding firms, and as the worst case, greater opportunity to manipulate the process for the purposes of fraud or corruption.

For instance, greater freedom to negotiate might mean the positive ability to achieve better value for money for the taxpayer, by challenging supplier’s bids and identifying where further cost can be taken out of the proposals. Or it could mean saying to a favourite supplier who has not submitted the lowest price (or most economically advantageous tender), “if you can just cut your price by 5%, we can give you the contract”. And not making that offer to other suppliers of course.

Take another example. Engaging in discussion before the formal procurement starts is obviously good practice and to be encouraged. Doing it properly can bring great benefits. But interpreting that as finding out what specification your favourite supplier can provide and then designing your requirements and the evaluation process around their strengths, is the less positive way that “engagement” could be carried out.

Now there is some protection against this in the Directives. And ultimately, the EU treaty principles of equal treatment and transparency offer a basis for fair procurement. Indeed, we suspect that these principles will prove be the main defence against the flexibility turning into anarchy or corruption. And in the next few years we predict more challenges from unsuccessful suppliers based around breaches of these fundamental principles, rather than based on detailed interpretation of more specific elements of the regulations.