Competition in the Execution Phase of Public Procurement

Abstract

Competition is usually regarded as an important principle during the “award” phase of a public procurement. Open and competitive processes usually require each bidder to submit a tender, thus committing itself to a certain performance level. In theory, the selecting agency’s contractor choice aligns with the public interest because its selection rewards the most responsive tender. Contractual conditions, as agreed by the involved parties, represent a firm commitment and should neither be modified nor amended — at least not beyond the limits normally allowed and known to all bidders. Any violation, change, or worsening of the quality during the execution phase entails undue profit for the winner. It also changes the conditions set in the award — disturbing the contractual equilibrium. Finally, changes or deviations during contract performance violate the competition principle and infringe on the rights of the losing bidders. While it is a shared view that fair and open competition requires that any bidder has the right to obtain the evaluation of its offer in accordance with the award criteria, we maintain that this right does not end with the award procedure but must be safeguarded in the execution phase as well. Unsuccessful bidders should walk away from the competition knowing that not only did the winning bidder submit a better offer, but the winning bidder will execute the contract better. When this is not true, the competition principle is undermined because the awardee’s lower-than-promised performance makes it as if the selecting agency failed to choose the best tender. This argument is compelling, especially in Europe, where procurement regulations require procuring entities to objectively evaluate tenders — and often require entities to use these evaluation criteria to create a precise ranking. When the execution of the contract differs substantially from the conditions set forth in the award, the whole equilibrium of the bid rankings, set in compliance with competition and nondiscrimination principles, is undermined. The economic operators that participated in the competitive tendering have in-depth knowledge of the conditions and specifications set forth in the contract. Thus, they would be the ideal subjects to be involved in the control of the exact execution of the contract by the winning bidder. Allowing unsuccessful bidders to play an active role in contract execution could be an effective instrument way to guarantee the winning bidder’s compliance with contractual conditions. Public agencies could use two different sets of losing bidders as “watchdogs” in order to obtain a more effective contract execution: those economic operators with whom the Framework Agreements is concluded (some of which may be executing other contracts while performing their “watchdog” duties) and the economic operators that were not chosen for the Framework Agreements. Contract execution could also be enhanced by asking end users to provide feedback in the form of customer satisfaction surveys that seek both objective and subjective evaluations of contract performance. The increasing use of information technology and electronic archives, which are already simplifying and streamlining many phases of the public procurement process, may also facilitate information gathering, aggregation, and disclosure to anyone deemed to have a stake in the efficient functioning of the procurement process (taxpayers above all). Public entities would, in principle, be in a position to reduce the risk of infringement, thus better securing the principle of free competition and the quality of contractual performances, for the benefit of competition in the market as a whole and for attainment of the public interest and the improvement of the quality of life of citizens.

Keywords: Public Procurement, Competitions, Framework Agreements, Execution Phase, Quality of Performance, Losing Bidders

JEL Classification: H57