Dr Kamala Dawar

Transparency and Non-discrimination in Public

Procurement Agreements:Lessons for TTIP

• Government procurement agreements in RTAs or WTO GPA contain:• Trade principles• Governance principles

• Core principles for both: transparency, non-discrimination, fairness

• Good governance principles produce global public goods

• TTIP can help produce global public goods in public procurementmarkets

• Removing de facto barriers to trade - a win-win outcome• Governance provisions more significant than trade dimension of

public procurement agreements

Overview

Government procurement chapters are trade agreements• but not “just” about trade

Trade aspect: de jure barriers to trade• Guarantee of market access; equal treatment for all suppliers

(foreign and domestic)• Dictated by negotiating mandates

Governance aspect: de facto barriers to trade• Transparent and accountable procurement processes• Efficient and effective management of public resources• Integrity and predictability of procurement systems• Prevention of conflicts of interest and corrupt practices

The two sides ofgovernment procurement agreements

1. Non-discrimination between foreignand domestic suppliers; goods andservices

2. Transparency of procurement systemand of individual procurements

3. Procedural fairness for suppliers &potential suppliers

Guiding principles of government procurementagreements

Non discrimination contributes positively towards:market competition AND good governance

• Enforcing non-discrimination obligations reducesopportunities and motivations for arbitrary or corrupttransactions

• Discrimination is not a corrupt practice per se, but• awarding contracts through ex. bribes is contrary to non-

discrimination and equal treatment

Discrimination in public procurement:de jure and de facto

• Discrimination and ‘Home Bias’ in public procurement• Pre EU Procurement Directives (Martin et al. 1999)• Estimated 99% percent of all EU local authority

contracts awarded to domestic firms• Home Bias not due to de jure barriers alone

• Ex: Buy America; set-asides, off-sets• Home Bias not due to cost / quality differences alone:

• Political factors: Domestic firms voter sensitivity

‘Home Bias’ andde facto barriers to trade

• Home Bias due to de facto barriers:• Ex: non transparency – especially negative for SMEs

• Non-discrimination requires transparency in procurementprocedures and tender rules• Public needs assessments, budgets, award criteria, bid

challenges• Winning bids (justified against the criteria)• Contracts (including contract amendments) publicly disclosed• Require mandatory disclosure of statistics related to procurement

markets

Home Bias andde facto barriers to trade (i)

• Promoting transparent regulatory environment and openadministrative practices contributes to good governance

• Transparent, predictable and less arbitrary environment• changes ex ante risks of conducting corruption practices –

reduces corruption• as well as competition in procurement markets

Evidence: Slovakia’s transparency reforms in procurement• increase in bids from an average of 2.3 per public tender 2009 to

3.6 in 2013• benefits from Increased competition: lower prices, more choice,

value for money, innovation

Transparency and good governance

Home bias and de facto barriers: Ex: CorruptionOECD estimate: 20-25% domestic procurement budget “leaks”Corruption control ex ante – transparency• E- procurement more efficient and reduces opportunities for

corruption by limiting dependence on public officials• Provides full disclosure of conflicts of interest• Database of blacklisted firms / individuals

Corruption Control post facto: Dispute settlement mechanism• Bid challenge mechanism

• Open to all interested parties?

• Covered by RTA State–to–State dispute settlement chapter?• Remedies?

Home Bias andde facto barriers to trade (ii)

• Expanding E- procurement / enhanced technology• Standardized documents based on best practices

• EX. South Korea’s e-procurement system KONEPS saved• the public sector US$1.4 billion in costs• the private sector US$6.6 billion• time to process bids dropped from average of 30 hours to 2 hours

• Expand coverage at sub-central level procurements?• Transparent and harmonized definitions of SMEs?

• Fast track WTO GPA work programme on SMEs?

• Full chapter on transparency and anti-corruption• TPP model?• Bid challenge mechanism + State – to - State DSM

Expanding governance principlesin the TTIP: WTO GPA +

• Good governance measures in public procurement agreements:• Transparency, non-discrimination, integrity, corruption control

• Increasingly binding• subject to dispute settlement mechanism – WTO GPA

• Good governance is a global public good• Non-divisible, non-exhaustible

• Good governance in procurement not easily confined to ‘coveredprocurement’

• Not possible to be strictly reciprocal as with market access concessions

• 2013 OECD study 47 RTAs with public procurement chapters• >50% include the good governance and corruption control measures introduced in

Revised WTO GPA

• Positive synergies / regulatory externalities - generating global public goods

Positive Regulatory Synergies

• TTIP procurement chapter should include WTO GPA+ governance rules• Focus on de facto barriers to liberalized procurement markets• Based on WTO GPA / EU-CETA / TPP

• Transparency & non-discrimination underpin corruption control• Corruption distorts public policy making and weakens governance• Corruption de facto barrier to market access everywhere• Corruption is a competition issue

• Negative impact on price, quality, choice, innovation• Reduces social welfare

• Transparency and non-discrimination particularly important for SMEs• Transparency and non-discrimination provisions generate global public goods

• benefit all regardless of whether parties to the agreement

• Governance provisions more significant than trade / market access dimension ofpublic procurement agreements

Conclusion

Thank you