Public procurement is about public authorities buying goods, works (e.g construction) or services from private companies. Examples of public procurement include buying computers for a police station, providing water, gas and electricity to people, and building a hospital or a road.
Public procurement in a nutshell
Why does public procurement matter in international trade?
Public procurement affects a substantial share of world trade, amounting to more than €1.3 trillion per year. In the EU, the public purchase of goods and services has been estimated to be worth 16% of GDP.
The EU put new rules in place to open up the public procurement market within Europe in 2016. These new rules reduce red tape and make it easier for smaller companies to do business with the public authorities.
Opening of public procurement markets can be beneficial for many reasons:
- Competition between private companies increases a government's chances of getting better value for money and increases the efficient use of public resources
- Making the application process more transparent helps to fight corrupt practices
- It increases transparency and legal certainty
While the EU public procurement market is one of the most open in the world, European businesses cannot always get equal access to public procurement markets outside the EU. Many countries are reluctant to open their public procurement markets to international competition. This creates an uneven playing field for EU companies and limits business opportunities in these markets.
Some countries have introduced protectionist measures relating to procurement contracts which hit EU companies. Such policies are applied by:
- certain states in Australia
- the US
- and others
EU trade policy and public procurement
Alongside regulating the EU's internal public procurement market, the EU also wants to see more open public procurement markets outside the EU.
To encourage more open and balanced international markets, the EU has committed itself to granting access to its public procurement market for certain foreign goods, services and companies in its trade deals.
This means that EU companies can do business in the international public procurement market more easily, thus grow their business and provide more jobs.
The objectives in trade negotiations are:
- to set standardised public procurement rules to ensure that public money is spent in a transparent, efficient and non-discriminatory way.
- to provide a level playing field for EU suppliers when bidding for contracts abroad.
Trade talks with other countries and regions:
- Rules about public procurement have already been included in Free Trade Agreements (FTAs) with:
- Negotiations are ongoing with several regions and countries and are expected to lead to improvements in the mutual opening of public procurement markets:
Revision of global trade rules:
The revision of the WTO Government Procurement Agreement (GPA) improved the rules for awarding government contracts and offered some €80-100 billion a year of additional business opportunities by further opening up the public procurement markets of each of the 15 countries that are part of the agreement.
The European Commission has suggested a new set of tools in the area of public procurement to ensure more opportunities and greater fairness for EU businesses competing internationally. The proposal provides the Commission with leverage to engage countries outside the EU in negotiations to further open their public procurement markets.
The proposal is currently under review by the European Parliament and the Council.