EU Auditors Flag Declining Competition in Public Procurement

A new report from the European Court of Auditors (ECA) reveals troubling trends regarding competition for European public sector contracts. As bidding managers know, EU public procurement represents a massive €2 trillion market. Yet despite the scale of this opportunity, securing public contracts appears to be getting more complicated, not easier.

The audit shows that between 2011-2021, the average number of bidders per public tender dropped dramatically from 5.7 to just 3.2 companies. With fewer businesses competing, single-bidder contracts have almost doubled over the decade, accounting for 42% of awarded contracts in 2021. This indicates a highly unattractive and challenging landscape for procurement bids.

What’s driving this decrease in competition?

The analysis calls out three primary factors:

• Excessive administration and complexity
• Stringent, poorly designed tender criteria
• Concentration and dominance of incumbents

European public procurement has become increasingly burdensome, and barriers to entry keep increasing. The report notes that bid response process timelines have expanded by 50% in ten years. For SMEs with limited resources, this presents a significant impediment.

The criteria and specifications also appear to limit market interest, with contracts still overwhelmingly awarded solely to the lowest bidder. Environmental, social value and innovation scarcely influence decisions. This discourages product or service differentiation.

Also, incumbent vendors and large enterprises are consolidating their grip on these contracts. Smaller players stand little chance without obliged considerations for spreading awards more equitably between suppliers.

Implications for Bidding Managers

So, for bidding managers, the implications appear rather concerning. With single-bidder contracts nearly doubling, simply showing up and offering the lowest price will win a majority of tenders by default. That may seem attractive in the short run, but it’s unhealthy for spurring competitive value in the long term.

Recommendations to Boost Competition

To remedy these issues, the ECA offers several recommendations primarily targeted to the European Commission:

• Relax overly stringent, poorly designed criteria that restrict bidder interest
• Reduce administrative complexity to lower barriers to tendering
• Improve procurement transparency and monitoring of pricing
• Institute balanced bidder rotation and supplier diversity policies

Many of these align with best practices procurement leaders already strive toward. In the meantime, managers should re-evaluate their bid targeting strategy in light of declining tender competition. Refocusing efforts where participation currently remains more open and equitable may prove wise. Of course, advocating for positive changes in procurement practices also pays shared dividends.

We have previously covered some of the UK Procurement Act’s impact on proposed changes for small and medium enterprises in our article “Assessing the Procurement Act 2023: What’s in Store for UK SMEs?“.

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