30/04/2019

Is Procurement Law Broken?

According to a recent study, competition is sorely lacking in public procurement in Finland. Over half of procurement proceedings only receive one or two bids, or none at all. The median number of bids in competitive tenders during 2010–2017 was two. This lack of competition can be seen in every field of business.

As an adviser to bidders, we regularly run into situations where the contracting entity is trying, for example, to push the risk of demand entirely onto the bidders. Bidders are expected to provide fixed prices despite the fact that the contracting entity refuses to commit to fixed volumes. The conditions of the request for bids often don’t allow for any flexibility in the fixed price if the volumes or standards change. The problem here is not with procurement law, but with contracting entities.

Public procurements are often take-it-or-leave-it situations for bidders—you either bid on the contracting entity’s terms or not at all. Success can often prove elusive if the contracting entity is looking only to secure its own position and pushes the risks onto the bidders.

At the same time, we are seeing a drive for procurement to have more strategic impact. Low-carbon construction, prevention of social marginalisation, higher employment rates and other kinds of outcomes-based procurement projects have found their way onto the wish list, and all of this is already possible under current procurement legislation. Contracting entities still have a great deal of room for improvement, though the KEINO Competence Centre is doing good work on this front.

Procurement legislation is a good tool, provided you know how to use it. In order to inject some much-needed competition into tendering, we need more dialogue between contracting entities and bidders. Normal agreements always seek to create a win-win situation for the parties. Why would public contracts be any different?