A rigged system? Corruption in European government buying

Spend Network features in this new article from the Economist on the scale of corruption in public sector procurement in Europe.

37 businessmen and former politicians are on trial in Spain for directing public sector construction contracts to favoured companies in return for kickbacks including call girls and Caribbean holidays. The cost to the taxpayer is estimated at €120 million.

Meanwhile, Britain’s Nuclear Decommissioning Authority was found to have blocked an American company from a £7 billion tender by fudging numbers and shredding documents.

Just last week, the Welsh government has had to pay out £1.25 million in compensation after conducting an unfair furniture tender.

So how big a problem is corruption in public procurement?

The article shows that, since the recession of 2007, more European governments are contracting out public services and this market is now worth €1.9 trillion. At the same time, more and more tenders are attracting single bidders. Tenders Electronic Daily said that in 2006 17% of calls to tender attracted a single bid, but by 2015 it was 30%.

The fewer the bidders, the more chances for corruption. The larger the advertised contract, the greater the chance that there will be fewer bidders. As the trend of contracting out more public services in high value contracts grows, there has been a marked increase in the number of cartels detected, from eight a year in the 1990s to 29 in the 2000s.

Our data illustrates the decline in competition in the UK by showing how the largest suppliers are increasing their domination of the public sector market. In 2012, the 20 largest suppliers accounted for 10% of the government’s spend. By 2015, it was 14%. The charts above show how certain large companies are consolidating their hold on the public sector market. This means public sector tendering in the UK is growing less competitive and more beholden to large contractors. The Economist article illustrates how an uncompetitive market can lead to an increase in corruption in public sector procurement.

At Spend Network, we agree that increased competition in public procurement reduces the risk of fraud, but also makes for better services for the taxpayer. Our belief in competition is borne out by Openopps.com, which allows businesses of any size to search for tenders all over the world, which means more suppliers can bid for contracts, reducing the likelihood of corruption.

Our work is all about making public procurement better: better for government, better for businesses, especially smaller ones, and better for taxpayers. To us, the first step on that journey is about more competition and more transparency. Get in touch to find out more: contact@openopps.com.