This article is part of our special report SME’s Access to Finance.
Public services provision in Europe is set to be radically liberalised from bureaucracy but will at the same time come under more scrutiny from the EU executive following two proposals tabled by the European Commission yesterday (20 December).
Rules governing larger public procurement contracts will be simplified and give local authorities more leeway to negotiate with contractors, although this will be done under strict conditions and oversight.
Meanwhile, competition rules will be reformed to allow local authorities to subsidise services – such as water, telecoms and transport – more easily where these play a social role in the community.
Smaller companies set to gain from the new rules
The public procurement changes, announced by Internal Market Commissioner Michel Barnier, simplify the process of contracting by drastically cutting back on the compulsory paperwork involved.
The measures are specifically designed to help smaller companies: local authorities will not be able to lock them out of contract competition on account of their size – a frequent complaint – and they must be paid more quickly for their services under the rule change.
The changes are also designed to encourage local authorities to be more environmentally conscious and innovative in providing services. They will be encouraged to clearly indicate ‘green’ service providers, and enter longer-term relationships with companies to help develop innovative products.
Commission smells a rat in rubbish deals
To meet concerns that such a freed-up system might encourage corrupt practices, however, the Commission has included new oversight mechanisms.
Member states will be required to designate a national independent oversight body to watch over the procurement process, and local authorities will have to report to this body explaining the terms of their deals.
Significantly, where longer-term contracts are struck – so-called ‘concessions’ – these must satisfy efficiency targets. The move would give Brussels the power of supervision over some of the least efficient European services providers, such as waste collectors in southern Italy, where the targets are not reached.
Meanwhile changes to EU state aid rules for the provision of key services such as water, energy, health, telecoms and transport were announced simultaneously by Competition Commissioner Joaquín Almunia.
These will enable local authorities to subsidise all contracts with a social dimension including health, childcare, social housing and the care of vulnerable groups.
Under the current rules, local authorities only have such freedom when contracting for social housing.
They will also be able to bypass EU competition rules in respect of all contracts for less than €500,000 over three years. The current limit is €200,000.
As with public procurement, however, the payoff for the freedom is greater scrutiny. A new framework to be introduced will require such contracts to be subject to open and transparent public tender.