Public Procurement by Central Purchasing Bodies, Competition and SMEs: Towards a More Dynamic Model?

Abstract

The creation of central purchasing bodies (CPBs) sought to generate administrative efficiencies and to aggregate public demand to enable the exercise of buying power capable of delivering better value for money and an opportunity for strategic procurement steering. However, CPB activity can have negative dynamic effects on market structure and the ensuing risk of bid rigging, distort competition for future public contracts, and reduce the resilience of the procurement system and the supply chains on which it relies by depleting the supplier pool. It can also generate excessive risks and result in unsustainable procurement systems. The emerging evidence of the failure of the UK’s centralised healthcare procurement system to react to the COVID-19 pandemic is the canary in the coalmine.

Against this background, this paper undertakes a comparative survey of the oversight of CPB activity from the perspective of market competition and SME participation in selected EU jurisdictions and the UK. The analysis shows emerging national practices that increasingly subject CPB activities to competition scrutiny, to judicially enforced limits and to increasing requirements of market engagement and consultation. It also shows a clear prominence of SME concerns in the CPB context. However, there is still limited awareness at national level of the medium- to long-term negative effects of (excessive) CPB reliance and most current checks and balances are still rather static. The paper suggests that a more dynamic model could be used as a regulatory benchmark.

Keywords: Public procurement, centralisation, central purchasing body, CPB, competition, SME, monopsony, dynamic effects, resilience, healthcare procurement, COVID-19, oversight

JEL Classification: H57, I18, K23, K42, L13