EFCA D&S 16 January 2006

EFCA D&S16 January 2006 Mario Marti Secretary General usic

usic • Swiss Association of Consulting Engineers • 800 member firms (including 380 branches) • approx. 7‘000 employees • gross turn-over approx. CHF 965 Mio. p.a.

Why a Research Study? • 1994 Entry into force of the Federal Statute on Public Procurement (BoeB) • complaints by member firms on the increase in costs for the preparation of the offers • 2003: First internal study by usic calculating the costs connected with the public tendering procedure.

An Example • value of contract (fee): EUR 200’000 • monetary return due to competition: EUR 30’000 • 8 engineering firms participate: each one of them spends EUR 10’000 for preparing the offer, total of EUR 80’000 • costs of public authority (publication, evaluation etc.): EUR 20’000 • Overall macroeconomic cost: EUR 100’000 • Conclusion: to save EUR 30’000 we spend EUR 100’000

The Study • 67 public procurement proceedings, including the costs of: • 67 contracting authorities • 70 usic member firms participating in these proceedings (extrapolation for the rest)

Volkswirtschaftliche Kosten bei öffentlichen Ausschreibungen von Planeraufträgen Projektleitung: Prof. Dr. Franz JaegerOrdinarius für Wirtschaftspolitik an der Universität St. Gallen und geschäftsführender Direktor des Forschungsinstituts für Empirische Ökonomie und Wirtschaftspolitik an der Universität St. Gallen (FEW-HSG) Projektbearbeitung: lic. oec. HSG Thomas Höppli lic. oec. HSG Oliver Atzenweiler

Public Procurement:Definitions Public procurement above the statutory thresholds: • open procedure • selective/restricted procedure Public procurement below the statutory thresholds: • invitation/negotiated procedure • direct contract

Benefits and Costs of Competition < Cost of Competition = Benefits of Competition > redundant competition offenes/selektives Verfahren S* = optimal treshold redundant competition Efficient competition

Result 1: Quelle: FEW-HSG

Result 2: Current treshold according to BoeB Quelle: FEW-HSG

Result 3: Quelle: FEW-HSG

optimal treshold for variable benefit aktueller Schwellenwert Ideal Treshold Optimaler Schwellenwert Quelle: FEW-HSG

Conclusions • economic costs of public procurement are considerable • particularly for small contracts the costs can be disproportionately high in comparison to the contract size • the costs are lower under the invitation/negotiated procedure than under the open or restricted procedure • public awarder equally bears high costs in comparing and evaluating the bids • Depending on the assumptions of the monetary benefit attributed to the competition, the threshold for intellectual services should be set between EUR 400’000 and 580’000 from a macroeconomic viewpoint. • With the current threshold of approx. EUR 166’000, the competitive bid would need to generate a monetary return of approximately 52% of the contract size

Political Conclusions for usic (Switzerland) • National legislation should completely capitalize on the international thresholds (no lower national thresholds). • The threshold should be respected in both ways by the authorities (no open procedure for contracts below threshold). for Efca/Fidic (WTO) • The internationally set threshold should be increased for services (WTO treaty negotiations). • Lobbying activities (EU authorities and national governments).

Documents • Factsheet (summary in English) • Factsheet (German, French) • Full Text Version (German only): www.usic.ch

EFCA D&S 16 January 2006