Procurement rule changes could open up markets

Changes finally agreed to EU public procurement rules could open up markets worth €300bn to Irish companies including SMEs and they will also have easier access to state aid as a result of changes to EU rules.

Designed to boost competition and ensure best value for money for governments and public authorities looking for goods and services, the new rules fail, however, to include the water sector.

Taxpayer-funded contracts from public authorities account for close to one-fifth of each country’s GDP but the rules have militated against smaller companies competing for them up to now.

The emphasis of the new rules will be on quality, environmental considerations, social aspects and innovation — broadening from price, heretofore the main criteria.

Public authorities will also be able to request tenders for innovative solutions rather than specifying what that solution must be and so open the way for greater innovation, the European Parliament said.

Bidding will be simpler with a standard European single procurement document reducing administration on companies by more than 80%, they claim. It will also encourage contracts to be divided into lots making it easier for smaller firms to bid.

It will also try to prevent social dumping that results from encouraging the cheapest labour possible.

The new state aid framework announced by Competition Commissioner Joaquin Almunia aims to make the rules on risk finance more flexible and extends them for the first time from SMEs to cover companies with medium capitalisation.

Risk finance up to €15m per company will be allowed without notifying the commission in advance, up from €1.5m in total. Unlimited amounts above this will be allowed provided the commission finds they do not distort competition.

Financial intermediaries and investment funds will be able to provide and combine financing as loans, equity, quasi-equity and guarantee instruments. Minimum private investor participation will be between 10% and 60%.

Mr Almunia said this will allow higher amounts of public finance to support company creation when private sources are reluctant. “Member States will be able to provide up to 90% of the investment in seed and start-up companies before their first commercial sale — that is to say, companies which are less likely to attract private financing from market players.”

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