Partner Article

The rules are off: foreign applications to European calls for tender

The European Union holds itself to world leading standards on public procurement. The legislative emphasis is on fairness, fitness of contractors, and the avoidance of corruption. But many might ask whether the European public procurement code should be reformed? Indeed, does it still work in the current international paradigm?

World stage idealism

In recent years, the rules-based philosophy that guided EU policy for more than six decades has found itself on rocky ground. The emergence of an assertive China, the reorientation of the United States towards Asia, and the free-for-all approach taken in national Covid-19 responses indicate a change. They have all, according to European thought leader Mark Leonard, underscored “the shift from the dream of a rule-based order to the reality of great power competition.”

Yet Europe forces itself, righteously and alone, to respect rules from which other economic powers remain free. How can the EU justify to its public that European contracts are awarded to foreign companies? In no uncertain terms, this is public money being lost to external powers, that is, competitors and lacklustre allies with increasingly poor track records.

**Fair game **

In early 2021, Commissioner for the Internal Market, Thierry Breton, described the Single Market as “fiercely competitive and attractive to foreign investors and companies.” He also emphasised that “being open to the world only works if everyone who is active in the Single Market…plays by our rules.”

Indeed, efforts have been made by the EU to reduce the impact of unfair distortion through subsidies from non-member states. Some holes have been filled with necessary legislation but worries remain.

One example of this are the rules for procurement on EU external actions — activities conducted in support or partnership with non-member states — which continue to invite opportunism.

The entry techniques of non-EU actors such as security contractor GardaWorld during a resourceful partnership with French’s Amarante can only be described as a circumnavigation of EU procurement rules. For instance, in Afghanistan, Amarante’s staff represented a very small parts of the operational layout on the ground. The rest were locals. This clearly undermines the principles mandated in order to keep the levels of training, ethical standards, and clear auditability high.

There have already been numerous failings in private security contracts supporting other powers, the UK and US Embassies, being examples. What has become clear is that companies frequently fall short of EU standards for conduct, as indeed GardaWorld famously did during the Kabul Airlift when it abandoned equipment and personnel as the Taliban swept the capital.

The episode informed many narratives. The two most relevant in this instance being that European external actions need greater safeguards, and that the freedom to trust the US to coordinate with its partners is a ship that has long since sailed.

In the realm of cybersecurity too, bids by foreign tech giants have been just as problematic. The European Data Protection Supervisor (EDPS) opened an enquiry into the contractual arrangements between EU institutions and Microsoft in April 2019, due to concerns over Windows 10 and data regulations.

At the time, “preliminary results reveal[ed] serious concerns over the compliance of the relevant contractual terms with data protection rules and the role of Microsoft as a processor for EU institutions using its products and services.”

Even the debacle with Huawei’s 5G telecoms contracts in the EU remained on the table for a surprisingly long time — showing by indecision alone the possible vulnerabilities and naivety of the European methodology. It was only late in the game that the German government brought its thinking in line with other European leaders — in particular, the French and UK governments — who were pressing for ‘decoupling’ from untrustworthy Chinese operators. Bizarrely, it took a full two years for concerns about strategically sensitive domains like communication infrastructure to bubble to the surface. Winds of change

In the US, they might no longer be chanting “America first,” but real trade policy change has been subtle. Protectionist sentiments have not changed significantly since Trump’s defeat, and the relationship between Europe and the US will remain tarnished for many years, regardless of any second term by the divisive business mogul.

In Europe, a dramatic change in outlook is clearly required, particularly from German leaders whose decisions over the years have been characterised by extreme reluctance to take action — particularly on issues relating to state-orchestrated security concerns.

It has become clear, in these times of crisis, that “European companies are finding it hard to survive in the face of what is far too often unfair competition from countries outside the EU,” according to the former French Member of the European Parliament, Franck Proust.

In questions to the European Parliament as far back as 2014, Proust highlighted the impact that the “By American Act” had had in the US.

Proust proposed a similar preferential mechanism for companies from EU member states in European public procurement process. Protectionist notions at the time went against conventional thinking. As such, no legislation passed. But the proposal has aged well; it now looks all the more prescient, and perhaps necessary, in the current configuration of international affairs.

Indeed, the Biden administration has also signalled a desire to add “the most robust changes to the implementation of the Buy American Act in almost 70 years.” If the EU wishes to leverage its economic might going forward, a similar revision of its own nice-guy philosophy could become essential.

This was posted in Bdaily's Members' News section by Daniel Brooks .