In an effort to crack down on governments that hand lucrative contracts to domestic companies, the European Commission is about to take France to the European Court of Justice for failing to apply EU laws ensuring transparency and fair competition for all government contracts.
According to a copy of a statement due for release on Wednesday, the commission will also formally warn Italy that it may face similar legal action unless it stops handing helicopter contracts to the local manufacturer Agusta without inviting competitors to bid.
The European Union’s executive body cited France for failing to open its public procurement procedures in the autumn of 2002, and it said Paris had failed to seek competitive bids in areas ranging from banking to legal services.
“Open and competitive tenders are an essential safeguard against corruption,” said Jonathan Todd, the commission’s spokesman on internal market issues. “Transparency makes it impossible for firms with cozy relations with their local public authorities to win contracts by offering them kickbacks.”
The commission statement did not detail the financial amounts involved.
In Italy’s case, Italian police, coast guard and firefighters automatically placed orders for new helicopters with Agusta, a Cascina Costa-based manufacturer, without inviting rivals such as United Technologies’ Sikorsky helicopter division to bid, according to the commission.
“The commission believes this practice is in breach of the European public procurement directive of 1993,” it said.
The warning follows a decision last July to take Italy to court for failing to seek competitive bids for helicopter contracts from its forestry authorities.
Under EU rules, public tenders can be avoided only in cases of emergency, when the rapid appointment of a supplier is essential, or where national security is at stake. The commission said that the civil contracts handed to Agusta do not meet either of these criteria.
In spite of France and Italy’s track record on EU public procurement rules, Todd said the process of opening up such contracts to competition across Europe is improving.
“The existing directives are generally working,” he said.
The number of contracts being handed to companies from neighboring EU states is still limited, but governments are increasingly awarding public contracts to local subsidiaries of foreign companies. Between 1995 and 2002, EU data show, the number of public tender offers within the EU rose to more than 106,000 from less than 55,000.
EU procurement rules require public authorities to invite tenders from other EU countries, but an international government procurement agreement signed by the Union and all other members of the World Trade Organization requires such tenders to be offered to all companies, regardless of whether they are in the EU.
The commission estimates that by opening public contracts to competition, governments have reduced their costs by around 30 percent.