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New EU directives favor fairness over price

From making toys for pre-schools to building Hamburg's Philharmonic Hall, public procurement can be a multi-billion dollar business. In future, EU contracts will be awarded based on more than just a low price.

Sometimes cheap is still too costly, even for the public sector. The slogan "greed is good" has had its day - from now on, sustainability and efficiency will carry greater weight in bids for projects across the European Union.

New guidelines for public procurement from Brussels are intended to create a level playing field, encourage greater transparency and stamp out cronyism and corruption in the public tender process.

Historically the price mattered most when awarding major contracts, a fact lamented by the Taxpayers Association of Europe. "The cheapest option isn't always the most favorable in the long term," said Michael Jäger, the association's general secretary. "Now you have a basis to say, 'I have other criteria.'"

Beyond the price tag

One example, he said, is a private builder who lays extra pipes when building a house, because - even in the early construction stage - he's already thinking about potential needs down the track. "You can expect the public sector to treat its money the same way an individual would," he added.

Berlin airport

Berlin's Airport an example of "mismanagement"

This hasn't always been the case. According to Jäger, Hamburg's Elbe Philharmonic Hall and the Berlin airport "are prime examples of mismanagement and poor construction planning."

Under the new EU procurement directives, the federal government, states, municipalities and cities must take the total economic viability of a product into account. Before the guidelines, they were generally obliged to take the cheapest offer.

Push for fair working conditions

Nearly one fifth of the EU's 13 trillion euro ($18 trillion) gross domestic product consists of the bloc's public procurement. In Germany about 400 billion euros are spent each year on public procurement.

Such large sums of much money could really make a difference for both companies and service providers, Franziska Humbert from the Network for Corporate Accountability (CorA-Network) told DW.

"You can favor those providers that are socially responsible and environmentally friendly," she said, adding that there is still room for improvement. "It's clearly also possible to just incorporate the working conditions into production, which won't be visible in the finished product."

For the CorA-Network, the new guidelines have created an opportunity to exclude products produced under unfair working conditions from the publicly funded shopping cart.

A French kindergarten

Fair play: fair conditions along the production line could also be included in bid criteria

The new directives also explicitly stipulate that proof of environmentally friendly and ethically sustainable products can be set as prerequisites for winning a contract. This point has been controversial. "It's a discretionary provision, and it's still possible for you to go for the most advantageous price," Humbert said.

Fresh layer of bureaucracy

But who is going to make sure these social and environmental criteria are being met? That is a job for the administration awarding the contract, according to Michael Jäger of the Taxpayers Association of Europe. There is currently expertise is available, "both at the local level, and at the state and federal level," he said.

He particularly welcomed the opportunity to include social criteria on the tender, rather than just price. Many European jobs were cut in the past because EU firms simply couldn't compete with prices offered by suppliers in countries with low-labor costs. However, Jäger said it's unclear whether the inspections and auditing would involve more bureaucracy, "with that you have to strike the right balance."

The new EU directives come into force in March and will be implemented at the national level over the next two years. In Germany, the Federal Ministry of Economic Affairs is tasked with implementing the national laws and regulations.

DW.DE