Politics and contract law in Europe, Part 2

European governments spend about €1.5 trillion a year on procurement, and those contracts are in theory supposed to be open for competition to firms from all member nations.  But a recent report says that reality bears little relationship to the theory.

The new “Wood Report” outlines various practices by which European governments steer contracts to favored firms in a “jobs for the boys” system of favoritism and political allegiences.  Among the tricks European countries use to prevent having to let non-favored firms compete are: (1) breaking a large contract into many small ones, each below the threshold at which the regulations apply; (2) letting local firms match (or at least get close to) the bid by the winning foreign firm; (3) encouraging state-owned enterprises to make artificially low bids; and (4) avoiding trouble altogether by refusing to publish notices of the procurement.

The study was produced at the request of the British government, which is concerned about the difficulties British businesses have had in cracking the EU’s government market.