How does the government spend taxpayers’ money fairly?
Public procurement is not a hot topic for the average citizen. That’s a pity, says PhD candidate Erik Plas, who did research on the fair spending of public money: 'If a council project goes completely haywire, because it costs more than expected, it could even mean that local taxes will have to be raised.’
Procurement is everywhere
If T-shirts with text printed on them were still fashionable, Plas would be wearing one: a T-shirt displaying the text: ‘Procurement is fun!’. His enthusiasm for the topic is infectious. And that helps, especially when dozens of half-awake construction and architecture students have to listen to him. Plas: ‘I tell them: procurement is everywhere. Take today. To get to this lecture, you’ve perhaps had to take a train, which is operated on the basis of a licence. The station was built by a contractor on the basis of a tendered contract. The bus you take. Idem ditto. The road the bus drives along, the green areas you see on the way, the toilets you use, the coffee you buy at the university – all the outcome of public contracts.’
The road the bus drives along, the green areas you see on the way, the toilets you use, the coffee you buy at the university – all the outcome of public contracts.’
Both sides of the table
Plas does not always have to convince his listeners of the omnipresence of procurement. As a lawyer in procurement law, his ‘daily audience’ consists of public authorities as well as businesses. So Plas sits on both sides of the table. One day, a municipality comes in about the tender for a construction project. The next day, Plas has to advise a large construction company that has submitted a tender.
Major social interest
For the parties involved, a tender is both a competition and a serious matter; after all, tenders serve a major financial and social interest. Plas: ‘A tender is a competition, the key question being: “Who puts in the best offer?” At the same time, the procedure involves spending public money. That money must be spent fairly. The contracting authorities aren’t spending their own money, they’re spending taxpayers’ money. If a council project goes completely haywire, because it costs more than expected, it could even mean that local taxes will have to be raised.'
Conflicting priorities
Plas takes the renovation of a building as an example: 'A construction company has won a tender to redevelop the property and starts work. If all goes well, the government pays a competitive price for the construction contract. So the tax money will have been spent properly in that case.'
It becomes more complex when parties face unexpected situations in the execution of the project that involve hidden costs. Plas: ‘For example, the soil is much worse than expected and the contractor unexpectedly discovers asbestos. Suppose the current contractor does the extra work and removes the asbestos. Is the government still getting value for money? In other words, is the current contractor really the best party for the job?’ In a case like this, says Plas, it remains to be seen whether taxpayers’ money is being well spent.
Material amendments
So what happens with the asbestos? It is often faster and cheaper if the current contractor solves the problem. But there are limits to the extra work that party is allowed to perform. This is to prevent the current party from gaining an unfair advantage over other competitors. Plas: ‘Other contractors might say: “if I’d known about the asbestos, I’d have put in a different offer, because we could have done a much better job clearing it up”. Perhaps they would then have been awarded the contract.’
In such a case, the contract has been ‘materially amended’. And that’s not allowed. Plas’ PhD thesis deals with ‘material amendments’, and in particular what is – and what is not – allowed.
Follow the Money: in public procurement, the Netherlands is the least transparent country.
Transparency obligations
Plas observes increasingly louder calls for more transparency in procurement. In his thesis, he cites an article by Follow the Money (in Dutch), which shows that in public procurement, the Netherlands is the least transparent country. According to Plas, this lack of transparency is particularly problematic when it comes to extra work and the associated costs, for example in the situation with asbestos. 'What you sometimes see in tender procedures is that the “nos. one and two” finished right behind each other. In cases where there’s a lot of extra work, in retrospect the contracting authority should probably have awarded the contract to someone else.'
If a public authority makes the assessment that it has stayed within the limits of the law, it usually does not have to disclose the extra work. So competitors are often in the dark about whether the public authority has stayed within the limits of the law. Plas expects both competitors and society to be more critical of government spending. 'Citizens reap the fruits of procurement; they can be sweet, but also sour.'
Plas will defend his PhD thesis ‘Wezenlijke wijziging in het aanbestedingsrecht’ (Material amendments to public contracts in public procurement law) on 14 September 2023 at 16.15 hrs in the Academy Building. You can read the summary here and follow the livestream of the defence here.
What is procurement?
Consumers are free when it comes to what they purchase and with which supplier. Public and semi-public organisations, such as universities, are not. If they want to spend above a certain amount, that procurement must follow a specific procedure: a tender.
If something is 'procured', it means that the contract under which a contractor provides its services or goods has come about following a tender.
Procurement can be 'private' or 'public'. In a private invitation to tender, the client determines who may bid for the tender. The contract value then has to remain below a certain threshold. If the contract value exceeds that threshold, the client must opt for a public invitation to tender. In public procurement, any company may respond.
Then there is a difference between 'national public procurement' and 'European public procurement'. Again, the contract value of the contract determines the distinction between the two types of procurement. If the expected contract value is so high that it exceeds a certain threshold, the procurement procedure should run according to a 'European tender'. For that type of procurement, more rules apply and companies from other EU Member States must also be given the opportunity to bid for the tender.’
Tekst: Helena Lysaght.
Photo at top of article: Mathieu Stern via Unsplash.