The Safeguard of Competition in the Execution Phase of Public Procurement: Framework Agreements as Flexible Competitive Tools
Seminar on 'The New Public Law in a Global (Dis)order. A Perspective from Italy', Istituto di Ricerche Sulla Pubblica Amministrazione (IRPA) and Jean Monnet Center of NYU School of Law
18 Pages Posted: 28 Nov 2012
Date Written: September 1, 2010
Competition is usually regarded as a principle of the awarding phase of public procurement. Yet, it is not taken into due account in the procurement process as a whole, particularly at the execution phase. The problem of a lack in competition, transparency and accountability after the award of public procurement or of a master contract is widespread in any legal system (national, European, and international). It seems that it increases in the highly advanced procurement systems. Neither Government Procurement Agreement nor the UNCITRAL Model Law specifically address the performance phase, assuring that the promised quality will be delivered. This leaves a “black hole”, hiding incompetence, inefficiency or lack of integrity. Also EU directives neglect the performance phase and fail to consider that improper behaviour at the execution stage may eventually end up undermining a possibly fairly competitive outcome at the awarding phase.
If the choice of the winner undertaking satisfies the public interest as it results being the best offer to meet the needs expressed in the contract documents, it must be performed precisely and completely. Any violation, change, or worsening of the quality of the execution entail further profit for the winner, a loss for the public procurement entities and subsequently give rise to a change in the contractual equilibrium and in the conditions set in the award. This leads to violations of the competition principles in the awarding phase. In fact, the procurement entity accepts a worse performance than the one envisaged in the contract. The result of the tender could have been different had the conditions set in contract been different. This would have led to the award of the contract to another undertaking offering better conditions for the same subject matter of the contract.
A bidder has the right to obtain the evaluation of its offer in accordance with the fair competition principle. This right does not end with the award procedure but must be safeguarded in the subsequent phase as well. The winning undertaking will have the obligation to perform exactly what it included in its offer. The rejected bidders should have the certainty that they lost because of the winner’s better offer and its better execution of the contract. Should this not be the case, the fair competition principle would be undermined, as the winner may have obtained the contract with a minimum difference in its offer. If the execution of the contract differs from the conditions set in the offer of the winner, the whole equilibrium of the ranking of the bids, set in compliance of the equality treatment and competition is undermined.
Moreover, since those economic operators that participated in the competitive tendering have an in-depth knowledge of the field of the subject matter of the contract, they could be the ideal subjects to be involved in the control of the exact execution of the contract of the winning bidder. Allowing unsuccessful - that is, losing - bidders to play an active role in the control of the execution of contracts would serve as a further effective instrument to guarantee the winning bidder’s compliance with contract conditions.
The use of more complex contractual models such as framework agreements (FAs) seems to provide a well suited environment in which public buyers may achieve a better coherence between the contractor(s)’ promises and actual performance. FAs are generally meant to aggregate demand for goods/services stemming from one or more public agencies by first selecting on a competitive basis a subset of all potentially interested economic operators; and subsequently awarding specific contracts by using a second round of competition. Public agencies can potentially use two different sets of “watchdogs” in order to get a more effective contract execution: those economic operators with whom the FA is concluded (some of which may at the same time execute some contracts and control other contractors’ performance); and the most highly ranked economic operators that could not succeed in entering the FA.
The control of the exact execution of the contract could also be enhanced by having end-users produce valuable feedback/information in the form of customer satisfaction surveys relying on both objective and subjective measures of contractors’ performance. The increasing use of ICT tools, that is already simplifying and speeding up many of public procurement phases, may facilitate information gathering, aggregation and disclosure to anyone deemed to have a stake in the correct functioning of the procurement processes (taxpayers above all). Public entities would in principle be in a position to reduce the risk of infringements, thus better securing the principle of free competition and the quality of contractual performances, and that for the benefit of competition in the market as a whole and for attainment of the public interest and the quality of life of citizens.
Keywords: Public procurement, execution phase, framework agreement, IT Tools
JEL Classification: H57, K41, K42
Suggested Citation: Suggested Citation