2.4.1 What is the Role of Competition

in Public Procurement?

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Contracting authorities will benefit from keeping competition alive. They need to make sure and build sufficient long term capacity and capabilities within the sectors they regularly procure, through regular engagements with key sectors such as construction, IT etc. along with the development of market intelligence. In a seller’s market with little or no competition it is likely contracting authorities will encounter an up-hill battle in ensuring best value for money.  In a buyers market with a lot of competition, there is a good chance of fulfilling their mandate. Therefore, contracting authorities should use their commercial influence to help improve the competitiveness of their suppliers and ensure that appropriate procurement policies and principles cascade down the supply chain.

The following checklist outlines simple measures contracting authorities can take to include SMEs and/or Social Enterprises in the supplier base.

Checklist 2-3: Maximizing SMEs and SEs in the supplier base

Ensuring the wide dissemination of information about procurement opportunities, through appropriate business and voluntary and community networks;
Ensuring that any consultation panels/groups that are established have adequate representation from a wide range of different suppliers to meet the differing needs of contracting authorities and include SMEs and SEs etc
Encouraging partnerships and collaborations within the sectors or with larger organisations. This is often desirable in order to adequately meet the specific and specialist needs of the contracting authorities
Sponsoring capacity building projects for SME and Social Economy businesses   with respect to procurement
Ensuring all goods and services should be acquired by competition unless there are convincing reasons to the contrary. For example, the ability for a contracting authority to maximize vfm through purchasing supplies through a receiver dealing with a bankruptcy situation.


Working with small and medium-sized and social enterprises suppliers is to be encouraged in order to strengthen long-term competition. The more SMEs and SEs bidding for work in the long term the greater the competition in the market place. However any potential supplier must        meet the basic standards set by the contracting authority, such as:

pass a financial appraisal appropriate to risk (to ensure financial capacity);
show they have the technical capability for the requirement;
demonstrate that they can reliably deliver goods and services within required timescales;
Provide customer support.
meet BVFM criteria
Comply with relevant legislation and policies.

An association of bidders can take either the form of a joint venture or a subcontract. Under a joint venture all members, if awarded the contract, shall individually sign and be jointly and severally liable for the entire assignment. This is not to be encouraged as it is more difficult for the contracting authority to manage. Collaborative partnerships where the lead supplier can propose to subcontract some of the work to another supplier are much more manageable for contracting authorities. In this case the lead supplier should play the main role in the provision of supplies, services or works under the contract.

At first glance it might seem logical to give a number of contracts for a certain type of project to a particular supplier as they have the best historical record of performance. Over time this is likely to diminish competition in the marketplace, leading to a monopoly and creating difficulties in revitalising competition in the longer term.

Suppliers must not:

be awarded contracts without the application of a competition;
be used continuously without referring to the market place from time to time to ensure BVFM is being achieved;
be used to the exclusion of other potential suppliers;
be connected to staff within the contracting authority without a “Declaration of Interest” having been made;

Contracting authorities must refer to the Laws of the Republic in order to ensure that all EU and national policies and procedures related to public procurement are implemented.

© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
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