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Sustainable public procurement (SPP) provides Governments with the opportunity to move beyond procuring only from suppliers that deliver the least expensive products, to prioritizing procurement from suppliers that respect human rights and the environment. Since public procurement, on average, represents 13 to 20 per cent of gross domestic product, SPP has the potential to provide a major boost to sustainable development and could be seen by many countries as a strategic priority. However, to be really sustainable, public procurement also needs to be efficient, to assure that public money is spent for good reasons and that the best possible price is achieved.
The existing public procurement legislation in most countries permits to use the “best bid” (combination of qualitative and quantitative assessment) or the “lowest price” (just price counts) criterion to select the winner. The EU procurement directives today even propose that the “best bid” criterion should be the preferable solution, especially for works and services. The purpose for such expectation is obvious and perfectly expressed by a well-known slogan:
“I’m Not Rich Enough to Buy Cheap Things”
This expression does not neglect the option to search for the lowest possible price – but only as long as a person/institution knows exactly what it will receive for such a price and is happy with such a product. It gets what it pays for. However, this is possible only if “standard” items are purchased; and most services and almost all works cannot be fully standardized!
At first glance it seems to be obvious that experienced governmental purchasers well understand that it is very risky and problematic to use the lowest price criterion when purchasing services and works (and even some goods), and it is often also not the most sustainable solution. However, the real data are surprising – for example, the information from the Tenders Electronic Daily (EU procurement journal) shows that most old EU member states purchase approximately 90 percent of works and services using the “best bid” (MEAT) criterion. However, most of the new EU member countries purchase 80-90 percent of their works and services using the “lowest price” criterion. In a detailed research mapping 2016-2020 health care procurement in the Czech Republic and Slovakia (APVV-17-0360) it was found that the “lowest price” was for almost all hospitals the only selection criterion.
The fact that purchasing works and services using the lowest price approach does not help to save public money is well known and documented on many examples. If we look just at the area of road constructions in Central Europe, for example Poland had to cancel a deal for a builder to work on a key highway when it failed to pay its Polish partners; the Czech Republic still did not settle (after more than ten years) all disputes with the firm that constructed a part of its highway D1 close to Ostrava with a very poor quality; and the Slovak Republic had to cancel the deal with a builder of its D1 highway part close to Zilina.
Almost everybody should understand the principle, but the practice in many countries differs. Why? A full and definite answer may not exist. However, some explanations might be found.
Is it, for example, possible to connect this issue with the quality of public procurement (public sector) control and audit? We think so. The existing knowledge suggests that in less developed countries “compliance” control dominates - process is more important compared to results. However, this type of control has devastating effects on public procurement results. Public authorities and their purchasing officials need to be sure that the process does not include any problematic element. And in such environment the decision to purchase for the “lowest price” is the safest decision. Control bodies/media, and other watchdogs can question the way how the “best bid criterion” was operationalized via the set of used sub-criteria (for example: was the weight of experience well selected?). However, at least as of today, the simple selection by the “lowest price”, realized by reverse e-auction is normally not attacked by any external body, and is usually approved without disputes. Why take risks to achieve public savings – especially if budgets and salaries of involved officials are fixed? There is no motivation to do things differently.
How to escape form this trap? There is no simple answer; however the general recipe exists: we need to start to understand procurement as management and not as administrative process. And to try to check results, not probity. Only then, SPP can become a new standard for effective and efficient PP, as promoted by the UN Committee of Experts on Public Administration (CEPA) in April 2021.
by Juraj Nemec and Louis Meuleman, Members of the UN Committee of Experts on Public Administration