Public procurement in the Commission's Competitiveness Compass
The Commission published yesterday its Competitiveness Compass, providing some details of the political outlook for the Commission in the next year or so. With the upcoming revision of the substantive procurement Directives it is unsurprising that procurement was included in the document.
The revision of the Directives gets called out directly and the timeline for them is now just '2026' which seems a lot more sensible than the 'after summer 2025' I heard on the grapevine in December. It is noteworthy to mention that while some other flagship actions have more specific quarter timelines, ie the EU Cloud and AI Development Act is expected by Q4 2025-Q1 2026 and the Digital Networks Act in Q4 2025, there is no such specificity for the procurement Directives. I take it as a sign that the Commission is not confident in having a proposal ready a year from now so we may still be 18 months away from it being on the table. From then on, maybe a couple of years in the formal legislative process and if the choice of legislative instrument is a Directive again a similar transposition period. Realistically, we are looking at 2029 or 2030 for it to come fully into force.
As for the the content of the Competitiveness Compass connected with public procurement, there is less than one might imagine and the emphasis chosen is a source of worry for me. The Commission highlights public procurement as a means to develop lead markets for clean production and to use procurement as a tool to introduce an European preference in public procurement for strategic sectors and technologies. This is the same behaviour member States engaged in the 1960s before we had secondary EU law applicable to procurement and highlights once more the 'fortress Europe' approach the Commission seems to be keen on. I worry about the effects on competitiveness and how this will enable 'also rans' or 'zombie' companies to stay afloat. It did not work then, and I doubt it will work now despite the obvious difference in size of the EU market in comparison with that of single member States.
On the same paragraph, the Commission also states that "[t]he planned review of the Public Procurement Directives aims at reinforcing technological security and domestic supply chains, as well as simplifying and modernising rules, in particular for start-ups and innovative companies." Again, I am of the opinion these objectives are orthogonal since the first requires more complexity and work by the contracting authority which makes simplifying rules more difficult to achieve as it imposes more constraints, checks and hoops to go through. As for 'simplifying and modernising' rules, was that not the idea for the 2014 reform? For now, we do not know the level of ambition of the modernisation effort but perhaps the 2026 timeline for the Commission's proposal is an indication that perhaps there is scope to be bolder than simply rearranging the chairs in the proverbial deck.
However, the most problematic sign of this Competitiveness Compass is the absence of public procurement in the section discussing the single market. The Commission recognises that the single market is in trouble with a reduction on cross-border trade for goods (23.8%) and services (7.6%) and does not connect the dots with procurement. Import penetration in public procurement was 7.4% in 2021 which compares poorly with 19.6% for the private sector, so public procurement is clearly dragging those single market figures down. But clearly it does not seem we should expect a revision of the Directives that would try to solve this conundrum. That, for me, is a worrying sign of the direction of travel for public procurement regulation in the EU.