Bonn threatens Commission’s bid to strengthen global procurement rules

Date: 16/07/1998

By Peter Chapman

GERMANY is threatening to scupper European Commission proposals to overhaul a World Trade Organisation treaty aimed at making global multi-billion-ecu public procurement fairer and simpler.

The Commission is preparing to unveil a slate of proposals for talks on updating the WTO's 1994 agreement on government procurement (GPA) which are set to be completed by autumn next year.

This accord was designed to give firms from signatory countries fair and open access to big public contracts in other signatory countries. But the Commission complains that the current GPA is too inflexible, difficult to police and fails to deal with the development of online procurement systems such as the EU's SIMAP Internet-based system.

“The old GPA is limited to open, restricted and negotiated procedures. We want to see any procurement procedures made possible as long as they comply with basic principles,” said one source.

“These principles are not there at the moment. If you follow the procedure in the GPA, the assumption is that everything is OK. But that is not always the case. We want to turn it around so that the system is transparent and non-discriminatory, with equal treatment and real competition among suppliers.”

The Commission wants the WTO to ensure that signatory countries use an independent agency such as a state's anti-trust authority to ensure the treaty is being adhered to. This 'bid challenge' agency would be the port of call for companies wanting to complain about unfair treatment in public tenders.

The Commission also argues that the current GPA rule book is so complicated that it deters more countries - particularly poorer nations with hard-pressed administrations - from signing up.

The EU, Canada, the US, China, Japan, Hong Kong, Korea, Liechtenstein, Aruba, Norway, Singapore, Israel and Switzerland are currently parties to the GPA.

“We think our sights have been set too high if we want the likes of Cameroon or Bangladesh to sign up,” added the source.

The EU's 113 Committee of trade diplomats must approve the initiative at a September meeting before the Commission can take its proposals to the WTO's Geneva negotiations.

But EU sources fear Germany, possibly aided by Austria, could stop the Commission from forwarding its message to the WTO. They say Bonn is reluctant to change its procurement rules again after being forced to revise them only recently.

“Germany had to redo its legislation focusing on 'bid challenge' following a complaint by US firm General Electric that was pursued by the Commission,” said one EU source.

“If the Commission wants to try to change anything now, their first reaction is likely to be 'we should not change'. What they do not understand is that by changing things around you can make them more flexible.”

There are also fears that Austria could wield its power as current holder of the EU presidency to hamper the Commission's initiative if it sides with its powerful neighbour.

“There is no opposition from other member states. But Austria is very close to Germany and it has the presidency of the EU for the next six months. If it sees its allegiance with Germany then there could be a problem,” said the official. “This decision is by qualified majority, but the presidency can cause some problems.”

However, Bonn procurement experts deny any rift with the Commission over its plans to update the GPA. “In general, we are in line with the Commission's way of thinking. For example, we are in favour of increased flexibility,” said one.

Bonn also favours the plan to use independent regulatory authorities such as anti-trust units to police the agreement. But diplomats admit the country has reservations about increasing the use of electronic schemes.

“We are not as enthusiastic as the Commission about these new electronic methods. We don't think that all procurement methods used by the private sector are necessarily a good thing for the public sector,” said one. “We think that you should know their implications for the whole GPA regime before you make changes.”