An assessment of "home bias" in public procurement in Malta

Abstract

Public Procurement in the European Union (EU) is huge business where billions of euros are traded daily by contracting authorities. The products and services procured come in all forms and sizes, ranging from the most basic to the most technical. Public procurement is an important tool for any government. Such tool enables the daily functioning of the various public agencies and institutions. It is also the tool, which enables economic growth and development through the procurement of infrastructural works and investments in education and health. Thus public procurement affects the lives of each and every one of us, and public procurement today will ultimately also affect the daily lives of future generations. More importantly public procurement must create a level playing for all economic operators to enable efficiency and foster competition. To enhance efficiency, an effective system of checks and balances must be put in place, since the money at the disposable of the public procurers is the contribution of every citizen within a society. Contracting authorities may have a natural inclination towards favouring local economic operators. Such biased behaviour distorts competition and hampers the optimal allocation of production. Throughout these last years the EU has been busy regulating the sector through the formulation of new Directives. The objective of having a common European public procurement procedure is to counter act the contracting authorities' home-biased behaviour. Still shortcomings are hampering the functioning of the single procurement market, which are reflected in the low rate of cross-border procurement across the EU. This thesis will first illustrate the determinants of home-biased behaviour, the various forms that it can take and the legislative efforts of the EU to curb such behaviour. The last part will attempt to assess the level of home-biased behaviour in public procurement in Malta through a comprehensive analysis of the participation rate and the success rate of foreign economic operators within the public procurement system in Malta.