Modernising the EU-Turkey Customs Union

Transparency and Nondiscrimination in Public
Procurement Agreements:
Lessons for TTIP
Dr Kamala Dawar
Overview
• Government procurement agreements in RTAs or WTO GPA contain:
• Trade principles
• Governance principles
• Core principles for both: transparency, non-discrimination, fairness
• Good governance principles produce global public goods
• TTIP can help produce global public goods in public procurement
markets
• Removing de facto barriers to trade - a win-win outcome
• Governance provisions more significant than trade dimension of
public procurement agreements
The two sides of
government procurement agreements
Government procurement chapters are trade agreements
• but not “just” about trade
Trade aspect: de jure barriers to trade
• Guarantee of market access; equal treatment for all suppliers
(foreign and domestic)
• Dictated by negotiating mandates
Governance aspect: de facto barriers to trade
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Transparent and accountable procurement processes
Efficient and effective management of public resources
Integrity and predictability of procurement systems
Prevention of conflicts of interest and corrupt practices
Guiding principles of government procurement
agreements
1. Non-discrimination between foreign
and domestic suppliers; goods and
services
2. Transparency of procurement system
and of individual procurements
3. Procedural fairness for suppliers &
potential suppliers
Discrimination in public procurement:
de jure and de facto
Non discrimination contributes positively towards:
market competition AND good governance
• Enforcing non-discrimination obligations reduces
opportunities and motivations for arbitrary or corrupt
transactions
• Discrimination is not a corrupt practice per se, but
• awarding contracts through ex. bribes is contrary to nondiscrimination and equal treatment
‘Home Bias’ and
de facto barriers to trade
• Discrimination and ‘Home Bias’ in public procurement
• Pre EU Procurement Directives (Martin et al. 1999)
• Estimated 99% percent of all EU local authority
contracts awarded to domestic firms
• Home Bias not due to de jure barriers alone
• Ex: Buy America; set-asides, off-sets
• Home Bias not due to cost / quality differences alone:
• Political factors: Domestic firms voter sensitivity
Home Bias and
de facto barriers to trade (i)
• Home Bias due to de facto barriers:
• Ex: non transparency – especially negative for SMEs
• Non-discrimination requires transparency in procurement
procedures and tender rules
• Public needs assessments, budgets, award criteria, bid
challenges
• Winning bids (justified against the criteria)
• Contracts (including contract amendments) publicly disclosed
• Require mandatory disclosure of statistics related to procurement
markets
Transparency and good governance
• Promoting transparent regulatory environment and open
administrative practices contributes to good governance
• Transparent, predictable and less arbitrary environment
• changes ex ante risks of conducting corruption practices –
reduces corruption
• as well as competition in procurement markets
Evidence: Slovakia’s transparency reforms in procurement
• increase in bids from an average of 2.3 per public tender 2009 to
3.6 in 2013
• benefits from Increased competition: lower prices, more choice,
value for money, innovation
Home Bias and
de facto barriers to trade (ii)
Home bias and de facto barriers: Ex: Corruption
OECD estimate: 20-25% domestic procurement budget “leaks”
Corruption control ex ante – transparency
• E- procurement more efficient and reduces opportunities for
corruption by limiting dependence on public officials
• Provides full disclosure of conflicts of interest
• Database of blacklisted firms / individuals
Corruption Control post facto: Dispute settlement mechanism
• Bid challenge mechanism
• Open to all interested parties?
• Covered by RTA State–to–State dispute settlement chapter?
• Remedies?
Expanding governance principles
in the TTIP: WTO GPA +
• Expanding E- procurement / enhanced technology
• Standardized documents based on best practices
• EX. South Korea’s e-procurement system KONEPS saved
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the public sector US$1.4 billion in costs
the private sector US$6.6 billion
time to process bids dropped from average of 30 hours to 2 hours
• Expand coverage at sub-central level procurements?
• Transparent and harmonized definitions of SMEs?
• Fast track WTO GPA work programme on SMEs?
• Full chapter on transparency and anti-corruption
• TPP model?
• Bid challenge mechanism + State – to - State DSM
Positive Regulatory Synergies
• Good governance measures in public procurement agreements:
• Transparency, non-discrimination, integrity, corruption control
• Increasingly binding
• subject to dispute settlement mechanism – WTO GPA
• Good governance is a global public good
• Non-divisible, non-exhaustible
• Good governance in procurement not easily confined to ‘covered
procurement’
• Not possible to be strictly reciprocal as with market access concessions
• 2013 OECD study 47 RTAs with public procurement chapters
• >50% include the good governance and corruption control measures introduced in
Revised WTO GPA
• Positive synergies / regulatory externalities - generating global public goods
Conclusion
• TTIP procurement chapter should include WTO GPA+ governance rules
• Focus on de facto barriers to liberalized procurement markets
• Based on WTO GPA / EU-CETA / TPP
• Transparency & non-discrimination underpin corruption control
• Corruption distorts public policy making and weakens governance
• Corruption de facto barrier to market access everywhere
• Corruption is a competition issue
• Negative impact on price, quality, choice, innovation
• Reduces social welfare
• Transparency and non-discrimination particularly important for SMEs
• Transparency and non-discrimination provisions generate global public goods
• benefit all regardless of whether parties to the agreement
• Governance provisions more significant than trade / market access dimension of
public procurement agreements
Thank you