The new public procurement regulations and their financial implications

Abstract

Purpose: The aim of the study was to identify the main changes that have occurred in public procurement, as a result of the transposition of Directive 2014/24/EU into Maltese legislation through Subsidiary legislation 174.04, and the issuance of procurement policy notes; to assess the benefits and problems of public procurement participation for Maltese SMEs; and to evaluate the financial implications of these changes for Maltese SMEs. Design: This study adopted a mainly qualitative mixed-methods approach. A total of 22 interviews were conducted, of which 2 were held with interviewees from the Department of Contracts, and 20 were held with SMEs. Findings: This research has identified the main recent changes that have occurred in public procurement and ascertained a number of benefits and problems associated with public procurement participation. As regards financial implications, it was mainly found that e-PPS has resulted in increased participation for Maltese SMEs, and for the majority increased revenues as a result. Costs-wise it was found that whilst the online procedure reduces costs, the need to re-submit the same forms in each tender is what pushes up bidding costs in terms of the time and work involved. SME-friendly policies such as the introduction of ‘lots’ and removal of ‘technical and professional ability’ were not welcomed by SMEs, evidencing their desire to compete for larger projects and to be assessed, not solely on price. It was claimed the current system is leading to the adoption of predatory pricing strategies by new entrants especially in small contracts. Access to large contracts, is on the other hand currently being hindered by the now mandatory pre-financing guarantee. Revisions in tender and performance guarantees have however been successful in alleviating financial burdens for SMEs, by reducing the level of cash needed to be secured to either bid for or perform contracts. Lastly, problems with perceived preferential treatments and an ineffective appeals procedure, are areas that need to be better-addressed. Conclusion: This study noted the Department of Contracts’ pro-active efforts to ensure a more efficient public procurement process and SMEs’ spirit to thrive even in a highly a competitive public procurement market. Value: This research study sought to make a timely contribution to the literature, especially in view of the limited number of empirical studies on this subject from the view point of SMEs, both locally and internationally.