30 October 2014

Public procurement as a tool of social integration and local development

Local development

Locally-rooted (endogenous) development is essential for social integration. The local community is the driving factor by socializing its young members, taking care of the elderly, exercising public control, protecting standards and values. The synergy of economic and social functions is the key enabling factor.

The European Union applies the Community Led Local Development [CLLD] concept: ”to mobilise and involve local communities and organisations to contribute to achieving  […] smart, sustainable and inclusive growth, fostering territorial cohesion and reaching specific policy objectives.”

Local development close connects to integration policies

The Commission document  ”Social Business Initiative” identifies barriers to the participation of social economy entities in public procurement. Two of them are:

  1. significant differences between legislations applicable to social economy on the European level and in individual Member States;
  2. “goldplating” (taking a “secure” minimum steps, legally secure.  and therefore not using  full advantage of public procurement directives;

“The regulatory environment at European and national level does not always take sufficient account of the specific characteristics of social enterprises in particular with regard to the rules on public procurement or existing statutes” – we may read in SBI.

Above concepts and Procurement policy seem to lay in different corners

Public procurement regulations aim primarily at other purposes than local development or broadly defined social integration:

  1. Free competition and transparency in business transactions;
  2. Support to sensitive aspects of business processes: product quality, environmental protection etc.;
  3. Acquisition of services that enable provision of public policy commitments and benefits  (for example: employment of job seekers, disabled persons, etc.).

Eligibility criteria in the Social Clauses target administration's direct obligations (public tasks – for example, job seekers or disabled). Eligible beneficiaries are strictly defined on a close-end list. This may lead to legal and physical presence of entitled persons while keeping them clustered.

The social integration circle hardly extends beyond the eligible (excluded) group.

On that measure inclusion would be a more appropriate term than integration. Therefore, support should be provided to the entire comprehensive process of community operation and development.

In numerous debates one hears:

  • Introduction of a regulation strengthens disintegration  (a separate “integration sector” is formed), rather than integrates.
  • A relative success of local units in the application of the social clauses stems from their linkage to the territory.

To be more precise we may observe Polish case. Available opportunities of public procurements’ social impact are not exploited. In 2004, the lowest price was the sole criterion of only 29% of all public procurement contract awards in Poland. Ten years later, 9 out of 10 awards were based on the lowest price. This was probably a fear-driven pattern. Across the EU, only about 30% of all procurement contracts (in excess of the EU thresholds) are awarded solely on the basis of price criterion. It would be interesting to see the differences between particular countries.

The reasons behind this situation are:

  • strict control and formal approach of contracting authorities' supervisory bodies (and of contractors in some instances),
  • poor quality of procurement specifications,
  • weaknesses of local managers,
  • shortage of consulting services
  • lack of determination by politicians.

Complicated structures

As the authors of Scottish guidelines point out: “A degree of sophistication is [….] required to translate the policy goal of ‘local jobs’ to a non-discriminatory contract”. Regulations should be streamlined, along with strengthened professionalization of all those involved in procurement processes, delivered jointly and uniformly with all partners.

Public spending purposes are within the powers of numerous institutions of various levels. Overall impression is that of a surplus of institutions and overlapping powers. Among them Public Procurement Office, of key importance to the quality of procurement, acts as law enforcement-minded (Police type) than merit oriented institution:


  • Supreme Audit Office
  • Ministry of Finance


  • Ministry of Economy
  • Ministry of Labour and Social Policy
  • Ministry of Administration and Digitization


  • Office for Competition and Consumer Protection
  • Public Procurement Office



  • Regional & Local Governments



As a defence, public administration establish the departments that specialize in handling of procedures but have little or no knowledge about the object of procurement.

The guide book on  “Public Procurement Law” has approx. 2000 pages which testifies to the degree of complexity.


We may rise a question whether Putnam would be able to write his Third Italy book under the governance of Public Procurement Directive?

There is an urgent need to initiate a broader dialogue on the strengths and weaknesses of the public procurement system – considering the disparities and contradictions between different goals of procurement (competition and unrestrained flow of goods and services versus territorial approach-based thinking about the development and human communities).

Reintegration of those excluded into the community should be rooted in the communities and through local economic activities.

Narrowing down, the public task definition to the ones that are expressly listed in the law, creates problems. The Scottish legislation is interesting in that context. “A local authority has an express power to do anything that it considers likely to achieve the well-being of the whole or any part of its area and/or all or some of the persons within that area (*Guidance note on Social Issues in Purchasing (the Social Note) 2006 the Office for Government Commerce Scotland).

Alternative opportunity to use under-the-threshold procurement would not suffice for  achievement of the development and integration objectives. Local governments should perceive public procurement procedures as a central instrument of integration policies. Public procurement should be a tool for development programmes prepared jointly with social partners (co-planning).

A debate on the extent of allowable local preferences is necessary. This should include, among other things, a pro-active promotion of procurement size control and its sub-division into parts. Offset arrangements, similar to those applied in military procurements and business contracts, are required.

It is necessary to reverse the tendency of management and audit institutions to focus of law enforcement duties (police type). Their educational and advice-giving role needs strengthening.

As part of procurement system monitoring, European Commission should monitor the transposition (including screening and reinterpretation) of directives into executive levels of multiple levels.

Krzysztof Herbst, FISE