Countries in the EU spend two trillion euros annually on public procurement of works, goods, and services. The 2014 reform of EU public procurement: a missed opportunity with no proven effects on competition. Businesses are losing interest in public procurement contracts, citing excessive bureaucracy. Over the last decade, competition for public procurement contracts awarded by national, regional, and local authorities in the EU has decreased, according to a new report from the European Court of Auditors.

Decreasing competition

Between 2011 and 2021, fewer and fewer companies competed to provide works, goods, and services to public bodies, while authorities often directly contacted certain companies.

The 2014 reform failed to increase the attractiveness of public procurement procedures, which could have enhanced competition and helped member states achieve the best cost-benefit ratio for the use of public funds. In reality, procedures became even more prolonged, and the lack of transparency remains an issue.

Public procurement is crucial for the EU's single market as it stimulates economic growth, creates jobs, and helps public bodies secure the best contracts in an open and competitive manner.

In 2014, the EU reformed its public procurement directives to simplify procedures, make them more transparent and innovative, and facilitate access for small and medium-sized enterprises (SMEs).

"In the last 10 years, the EU and its Member States have failed to increase competition levels for public procurement contracts. We are forced now to talk, unfortunately, about a lost decade," said Helga Berger, a member of the Court responsible for the audit. "The Commission should present an action plan addressing the main obstacles to competition and increasing the attractiveness of public procurement contracts for companies."

Trends in three key competition indicators – single-bid contracts, direct awards, and the number of bidders – remained unsatisfactory in most member states, with no overall improvement in competition.

In 2021, single-bid contracts reached a record high, with 42% of total contracts awarded through single-bid auctions. Moreover, at the EU level, single-bid contracts nearly doubled from 2011, while the number of companies bidding per procedure almost halved, from about six to three bidders per procedure. Additionally, authorities often directly asked one or more companies to submit a bid without launching a public bidding procedure to secure a contract.

Such direct awards are allowed in very specific circumstances but undermine competition and should be exceptional. However, they have become more common in almost all member states, accounting for around 16% of all reported procurement procedures in 2021.

Although the Commission launched a new strategy in 2017, neither it nor the Member States have made sufficient efforts to identify and address the root causes of reduced competition, which, according to auditors, include administrative burdens, overly restrictive criteria and specifications, as well as market concentration.

Both the Commission and Member States have also focused more on rule compliance than performance, and there is a lack of awareness of competition as a prerequisite for public procurement with a good cost-benefit ratio.

The 2014 reform has proven largely ineffective in reducing bureaucracy. On the contrary, procedures have become 50% longer over the decade, and both bidders and authorities considered them burdensome compared to private sector procurements, which are more flexible.

The share of contracts awarded to SMEs has not increased, and most contracts are still won by bidders with the lowest prices, indicating that more strategic aspects (such as environmental, social, or innovation-related aspects) are rarely considered.

Auditors are also concerned not only about the transparency of procedures, which is an essential safeguard against the risk of fraud and corruption but also about the low volume of cross-border procurement.

They specifically call on the Commission to clarify procurement objectives and present measures to overcome the main obstacles to competition.

Background Information

EU countries annually spend about two trillion euros – approximately 14% of the EU GDP – on public procurement.

Practices differ: in 2021, the highest share of direct awards was recorded in Cyprus (42%), and the lowest in Greece (3%); the highest level of single-bid contracts (73%) was recorded in Slovenia, while in Poland, such contracts remained at a high level of around 50% over the ten-year period.

Differences were also noted between sectors: since 2011, there have been fewer and fewer direct awards for financial services, while in 2021, the highest number of direct awards was recorded in the energy sector.

The European Court of Auditors' special report No. 28/2023, titled "Public Procurement in the EU – Reduced Competition in Contracts for Works, Goods, and Services in the Last 10 Years until 2021," is available on the Court's website, along with an interactive dashboard on public procurement developed by the Court. The dashboard provides a useful comparison of trends in certain national markets and key industries.