More Competition-Oriented Public Procurement to Foster Social Welfare

Abstract:     
Competition is the best means to ensure efficient allocation of resources. Hence, the achievement of value for money depends crucially on the development of public procurement activities in highly competitive markets. However, public procurement can generate significant (negative) effects on market competition dynamics - which, in a significant number of instances, result in a loss of efficiency and, ultimately, of social welfare. Therefore, competition-restrictive public procurement is self-defeating. However, most publicly-generated competition restrictions are avoidable - particularly through the establishment and full-enforcement of a competition principle.

Based on the regulatory situation in the European Union, this paper focuses on the relevance of placing a competition principle amongst the basic foundations and goals of public procurement (together with transparency and efficiency), and offers general criteria for the development of a competition-oriented public procurement system that furthers social welfare by means of increased value for money.

Number of Pages in PDF File: 30

Keywords: public procurement, public buyer, restraints and distortions of competition, competition principle, functional approach

JEL Classification: K21, K23, K42

Accepted Paper Series