Building a uniform market

Date: 31/10/1996

By Tim Jones

NEWS is not what is always in the headlines.

When people talk about completing the single market, they are - as often as not - talking about finalising the liberalisation of the 'sexy' sectors of the economy: telecommunications, electricity or gas.

Politicians hardly talk about these issues at all. Summits are venues for discussions about the future of the Union, foreign and security policy or trade. Actually discussing the large chunks of the single market rules that are being openly flouted would, in some quarters, be considered unduly negative or even distasteful.

Yet, while the eyes of Europe's leaders are increasingly focused on the prize of a single currency, many business executives believe they are losing sight of another vital piece of the internal market jigsaw: public procurement.

There are as many as eight directives setting out the rules for awarding large public works and utilities contracts, with tough guidelines for tendering and award procedures, requirements to advertise contracts and common rules on technical specifications.

Member states must publish all notices seeking tenders from companies for contracts above 5 million ecu in the EU's Official Journal.

Even though the last of these directives was adopted by the Council of Ministers in 1993, many have not been transposed into national law.

Even some of those member states who have put the directives on to national statute books have little interest in enforcing the laws they accepted in the council chamber.

Internal Market Commissioner Mario Monti knows this. When he presented his long-awaited report on the state of play in the single market this week, Monti drew particular attention to the lack of real progress made in the gigantic market for public sector contracts.

A report published earlier this year by consultants KPMG revealed that since 1992, only a handful of government-offered contracts have been awarded to firms outside the member state concerned, while 75&percent; have been won by local companies.

The situation in the construction sector is even worse.

The single market observa-tory of the Economic and Social Committee (ESC) has suggested that it is all-but a 'no-go' area for foreign firms.

Differences in national technical standards have discouraged companies from making rival bids outside their own member state, according to two recent ESC reports.

Glaring examples of discrimination in the awarding of contracts can be found throughout the Union.

Belgium has twice been hauled before the courts by the Commission for failure to uphold procurement rules, most recently in the case of the building of the Vlaamse Raad (see below).

Ireland has still not accepted that its forestry board counts as a normal contracting agency under the terms of the Union's rules and France is facing the Commission's wrath for unfairly awarding a contract for the construction of the prestigious Stade de France intended as the arena for the final of football's World Cup in 1998.

One of the most comprehensive critiques of this area of procurement has been published by the European Federation of Engineering Consultancy. Its 80-page white book on public sector in-house consultancy highlights the distortions of the single market caused by discrimination in allocating public contracts.

In the area of project management, public authorities often resort to the creation of special companies to undertake the preparatory work. These act as the client's in-house engineering consultancy and are not subject to competitive selection.

The 3-billion-ecu Great Belt tunnel project in Denmark appointed its own consultancy with 150 staff, while the company in charge of Brussels Zaventem Airport entrusted all engineering studies to a newly-created private company, BATC.

This is simply one small area of construction, but reflects a much more widespread problem.

The persistent lack of cross-border competition across the board has started to worry some MEPs, who have decided to take what action they can.

At the beginning of December, a multinational alliance of MEPs known as the Crane Group will host a one-day conference on public procurement and the building sector in an attempt to bring all these issues to public attention.

Monti will use the venue to speak his mind for the first time on construction procurement, as will Antonio Di Pietro, the former investigating magistrate turned Italian public works minister in Rome's new centre-left government.

The most commonly heard excuse made by contracting authorities for awarding work to local companies is that foreign firms do not comply with their domestic standards.

Both the Commission and construction firms are hoping to bring an end to this by mandating the EU's standardisation offices - CEN and CENELEC - to develop norms for allowing construction enterprises to qualify as registered contractors entitled to bid for work.

At the moment, five different types of system exist for the registration and qualification of building firms across the EU's 15 member states.

Currently, Spain, Italy, Portugal and Belgium have centralised lists of qualified contractors, decentralised lists or official and unofficial industry systems, while other member states have no qualification system at all.

CEN has been asked to complete its draft standard by the end of this year. The new system will have to include a standardised system of classification, a common mechanism for firms applying for qualification, standard criteria for applicants and notification that a company has been accepted or rejected.

Only once these consolidating rules have been agreed will non-legal barriers be broken down for builders seeking major contracts in what, after all, is meant to be a single market.

While welcoming standardisation, the European Construction Industry Federation (FIEC) points out that change will only come slowly.

“Construction is such a cultural activity,” says FIEC technical adviser John Goodall. “Even in the United States, very little contracting is carried out across state borders. Imagine what it is like here, with language differences and so on. Cross-border activity is limited and probably will remain so.”