Public procurement should focus more on quality and less on the lowest price. The European Commission is presenting a legislative proposal for this today.
The adjustment aims to ensure that public money contributes more to European objectives in innovation, climate, and strategic independence. Moreover, it should become easier to reject a cheap Chinese offer.
The public sector in the EU spends more than 2,500 billion euros annually through public procurement. That is about 15 percent of the European Union's GDP. Changing the rules for these procurements can therefore have a major impact on how public money is spent in the EU.
"Public money must serve our common goals. Therefore, it should not only revolve around price," says European Commissioner for Prosperity and Industrial Strategy Séjourné.
Quality requirements
Governments and semi-governmental institutions must comply with European rules when making purchases. This concerns, for example, ministries, municipalities, hospitals, or educational institutions.
When they hire a construction company or purchase a large number of new desks, they must issue a contract describing exactly what they are looking for and under which conditions.
Companies then have the opportunity to respond to that contract. The government service must choose the bid that best meets the pre-established conditions. The idea behind this is that companies get equal opportunities to carry out government contracts. Conversely, it forces governments to spend public money efficiently.
Public clients may already set quality requirements, but it is not mandatory. Therefore, the European Commission proposes today that at least 30 percent of the conditions set by a public client for a procurement must concern quality. For contracts where labor costs account for more than half, such as in cleaning, a minimum of 50 percent applies.
This can include requirements regarding sustainability, working conditions, or animal welfare, such as new school tables made from recycled material or hospital meals containing only organic chicken.
Competition with China
Behind the new rules lies a geopolitical goal. The legislative proposal is "a response to the increasing geopolitical significance of public procurement," the Commission writes.
It is no coincidence that the quality requirements also give governments the possibility to more easily choose a European company instead of a cheaper Chinese company.
Commissioner Séjourné therefore believes the new law will lead to more investments in the EU. "If a client, for example, chooses good working conditions as a quality requirement, that will often benefit European companies."
But Séjourné also acknowledges that the quality of Chinese products in terms of sustainability is often better than that of European products. "Therefore, we must help European companies to produce that same quality. Or even better."
Security risks
The EU considers competition from China unfair because the Chinese industry can produce more cheaply thanks to state support. China therefore exports many more products to the EU than vice versa. The EU wants to tackle the Chinese trade surplus but fears countermeasures.
Nevertheless, procurement legislation offers various possibilities to keep Chinese products out. Security is also an important aspect. Clients can weigh security risks related to critical infrastructure, sensitive information, cybersecurity, or excessive influence from third countries. In addition, clients may reject offers from countries with which the EU has no agreements on procurement.
Less administration
The legislative proposal does not, however, oblige giving priority to European companies. Public clients may still place much emphasis on a low price, as long as they maintain the thirty percent quality requirements. They may decide for themselves how to implement those quality requirements.
But according to Séjourné, governments can no longer point to Brussels if they choose a cheap option from outside the EU. "If Chinese buses are driving through Berlin in the future, that is not our fault."
The new rules should also make procurement simpler. According to the Commission, this would save 650 million euros annually in administrative costs. Moreover, the Commission hopes the rules will lead to more investments between EU countries.
The European Commission's proposal now goes to the European Parliament and the governments of the EU countries. They can propose amendments and then negotiate a final version of the new procurement rules.