Supply Side
Munir Podumljak at Prague EC Conference – Why Supporting SMEs May Be Bad for Europe

One of the highlights of the recent European Commission organised Public Procurement Conference in Prague came at the end of the day, with Munir Podumljak. He is the Executive Director of the Partnership for Social Development (PSD) in Croatia (here is their Integrity Observers website) and is a noted campaigner against corruption and for transparency in public procurement.

PSD is one of twenty research groups in fifteen EU countries which are part of ANTICORRP – a large-scale research project funded by the European Commission’s Seventh Framework Programme. The project started in March 2012 and will end in February 2017. The full name is Anticorruption Policies Revisited: Global Trends and European Responses to the Challenge of Corruption and the central objective is to investigate factors that promote or hinder the development of effective anti-corruption policies.

According to their website, “This interdisciplinary project includes researchers from anthropology, criminology, economics, gender studies, history, law, political science, public policy and public administration. The project is organised into four thematic pillars, which include 11 substantive work packages”.

We will come back to ANTICORPP and look in more detail at their work in the future, but back to Podumljak. He energised the event in Prague, not only by his engaging and passionate style, but also through his subject matter. It is always good when someone challenges the orthodox views, and he certainly did that. We had heard a lot during the day about the “social purposes” of public procurement, and how governments want to help small firms (and local firms, which is often what contracting authorities really mean when they talk about SMEs). But Podumljak immediately told us that he believes that sort of approach is against the basic principles of the EU. He sees that helping small firms is often economically unsound, and can even be a driver of corruption.

“If we believe in the principles of the EU, then SME friendly is not competition friendly. It leads to inward looking behaviour, stagnation, even recession” he said.

Europe will lose if we don’t open up our markets, and support to SMEs often in reality means favouring firms who do not deserve to win contracts, just because they are small and local. But if they are not challenged to get better and become more competitive, then eventually Europe will not have a successful economy. There are big dangers if we try “to preserve the richness of our countries and continent” by closing ourselves off to competition .

Podumljak also talked about Croatia more specifically. There is a good infrastructure for public procurement in some ways – for instance, some legislation is positive, such as sub-contractors must be declared at the time of contracting and the government pays them directly. But the country has not developed the skills it needs in public procurement, and his organisation has been digging into procurement data to try and identify likely areas of corruption or less than satisfactory competition.

He pointed out that corruption is not just about bribery – it is “deviation from universal principles” such as competition. Construction contract awards and tenders have been analysed, and whilst at the lower value end, there appears to be quite good competition, at the either end (over 10 million Euros), there is not. In some 40% of tenders, there is only one bidder! And there is a further large percentage where there is only 2 or 3 bidders, so collusion is quite possible.

In his view, “you cannot win a large contract if you are not connected”. Many of the successful suppliers are subsidiaries of state owned organisations or have other connections with government. One of the top construction suppliers is the subsidiary of the state controlled public sector oil company, for instance.

But it is not just Croatia that has issues. Podumljak mentioned that the sort of data he has analysed is not available in many countries – you just can’t get it in Germany for instance. And that country, for all its positioning at the heart of the “European Project”, has one of the lowest percentages of public sector spend actually advertised on OJEU (and we will return to that issue soon as well).

So thank you to Munir Podumljak for an excellent 20 minutes in Prague, and a very enjoyable beer afterwards to continue the discussion. We will feature him, his organisation and his work here again before too long, I’m sure. Finally, if anyone has other interesting anti-corruption stories, data or ideas we can feature here, please do let us know – it is a vitally important topic for all European citizens! (psmith (at) spendmatters.com)

First Voice

  1. Peter Stuttard says:

    A rather short sighted view WRT SME’s. SME’s are typically not looking for any bias in public sector procurement systems, rather they are looking for the very significant bias against them to be removed.

    Large companies dominate public sector procurement, SMEs are frequently, cheaper, deliver better quality products and services and do so in shorter time scales. But very bad practice and culture, in particular an aversion to accepting any perceived risk or responsibility, prevent the effective utilisation of SME’s in the public procurement sector.

    There is an argument for bias to SME’s, if only as a mechanism for forcing the playing field to a more level position, for undoing some of the significant damage that has been inflicted on SMEs in the past; ‘firms who do not deserve to win contracts’ have been doing so for many, many years, typically they are not SMEs however.