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Public Procurement

The EU and Japan are both signatories to the WTO Agreement on Government Procurement and have rules aimed at ensuring public money is spent in a transparent, efficient and non-discriminatory way. Nevertheless, European companies currently face obstacles in winning public contracts in Japan.

Both the EU and Japan are committed to achieving increased liberalisation and expansion of world trade, and in the FTA negotiations have a chance to remove remaining obstacles and to ensure that EU and Japanese firms can bid for public tenders on equal terms.

Further market opening in public procurement would be good for both the EU and Japan. For public authorities with tight budgets, it can bring:

  • better value for money
  • more choice
  • greater economic efficiency
  • good governance.

 

For companies it could:

  • increase demand for their products or services
  • create opportunities for growth
  • safeguard existing jobs
  • create new jobs.

 

public procurement

 

What are public procurement and concessions?

Public procurement refers to the process by which public authorities such as government departments or local authorities purchase work, goods or services from companies which they have selected for this purpose. Examples include building a state school, purchasing furniture for a public prosecutor's office or contracting cleaning services for a railway station.

A concession is a kind of partnership between the public sector and a (usually) private company that has shown its added value in a specific area, for example developing infrastructure. While in a public contract a company is paid a fixed amount for completing the required work or providing a service, in a concession a company is remunerated mostly through being permitted to run and exploit the work or service and is exposed to a potential loss on its investment. Examples include road and rail transport, port and airport services, motorway maintenance and management, waste management, energy and heating services.

Public contracts falling within the scope of the European directives represent EUR 425 billion annually or 3.4 % of the EU’s GDP (2011 figures).  According to the European Investment Bank, more than 1 300 public private partnership (PPP) contracts were signed in the EU between 1990 and 2009, representing more than EUR 250 billion. Concessions are the most common form of PPP (60 %).

 

Public procurement-related policy developments in the EU

Key EU legislation on public procurement includes:
- a directive on public procurement (Directive 2014/24/EU)
- a directive on procurement by entities operating in the utilities sectors, eg water, energy, transport and postal services (Directive 2014/25/EU); and
- a directive on the award of concession contracts (Directive 2014/23/EU).

The 'utilities sectors' are covered by separate and more flexible rules, which apply not only to traditional public purchasers (the state, municipalities, regions, etc.), but also to public or private companies. Unlike the 'public procurement' Directive, the 'utilities sectors' Directive also applies to contracts awarded by public undertakings (on which public purchasers have a dominant influence), and to those awarded by private entities which have obtained the exclusive or special right to operate in one of the sectors concerned.

In addition to regulating public procurement within the EU market, the EU advocates for an ambitious opening of international public procurement markets outside the EU, and has committed itself to granting market access to its public procurement market for certain foreign goods, services and companies. The EU negotiates both bilateral/regional and plurilateral international agreements.

 

Useful links

Public procurement-related policies of the European Commission: DG Trade; DG Internal Market, Industry, Entrepreneurship and SMEs. Tenders Electronic Daily (TED)