Regulaton & Policy
Pinelopi-Alexia Giosa on Leniency, Competition, Corruption and Debarment

Pinelopi-Alexia Giosa had the honour of leading off the presentations at the recent early career researcher event in London, organised by Dr Pedro Telles (see our overall report of the event here). She’s Greek, speaks four languages fluently, has a range of law qualifications already, and is now studying for a Ph.D at the University of East Anglia in Norwich in England. (Follow that link for more about her). She spoke (very rapidly) and her session was titled “Debarment and leniency programme – can two birds be killed with one stone?

Pinelopi GiosaShe packed a lot of issues into her 15 minutes, starting with reference to Article 57 of the Procurement Directives, which covers exclusion grounds, debarment and the triggers that can lead to firms being barred from future bidding for government contracts. That includes if they have been involved in agreements that distort competition (such as bid-rigging) or have been found to be acting with “grave professional misconduct.”

Under Article 57, there are some mandatory grounds for exclusion, where the contracting authority has no choice, such as fraud, and others like the two above where it is discretionary. Giosa asked whether “distorting competition” covered all anti-competitive behaviour as described in other regulations? If it does not, she said, then the state might still have to deal with suppliers who have broken competition law. But if we widen our “net” too far, there may be no suppliers left in some markets if we can only work with those who have never infringed!

There were several of these paradoxes outlined in her session. The purpose of debarment is to reduce the number of dishonest suppliers (and, we would think, also to discourage others from becoming dishonest?) Yet the “self-cleansing” provisions weaken the determent effect of disbarment. And the discretion given to states in the Directives undermines the deterrence against (for example) bid rigging – we know that sort of co-ordination that adversely affects outcomes is widespread across many markets and countries.

Giosa’s central point is this tension between leniency, which may be needed in order to maintain future competition, and debarment as a deterrent; these are the “two birds” of the presentation’s title.

She then presented some potential solutions or at least actions that might mitigate the risks. This was a strength of her presentation; some others on the day were rather stronger on the “problem” rather than the “solutions” although to be fair that probably depended in part on the maturity of the research project in question.

In terms of protection against bid rigging, she suggested actions such as taking a wide interpretation of the problem; any firm participating in a cartel that comes forward to expose bid rigging should be excluded from disbarment; and there should be a more uniform application of Article 57 across the EU.

What about the problem of reduced competition if we do go in for major debarment? Giosa suggests that 3 or 5 firms is enough to compete under the different EU procurement procedures, as defined elsewhere in the regulations. If it is difficult to achieve even that level of competition, she recommends keeping specifications flexible enough to enable different suppliers to be considered (very sensible). She also suggests aggregating demand so there are fewer competitions that need multiple suppliers competing (I have my doubts on this idea, as aggregation and fewer contracts potentially has other anti-competitive outcomes).

So all in all, an interesting discussion of those tensions between leniency, self-cleansing, and strict sanctions against wrong-doing firms. We need to keep strong competition in our key markets; equally we need to punish the bad guys. It is a delicate balancing act really, which probably needs to be considered case by case. But some over-arching thinking about the likely best routes will be very useful and this certainly seems a worthwhile topic for Giosa’s research.


First Voice

  1. Kyriacos Christofides says:

    Congratulations Pinelopi !!! It must be a real struggle balancing legislation vs healthy ( and free ofcourse) competition.