EU drafts 'Buy European' rules for public tenders to curb foreign dependence

By Julia Payne

BRUSSELS, July 9 (Reuters) - New EU procurement rules will seek to harness the European Union's collective purchasing power to favour the bloc's own companies and reduce dependence on foreign suppliers, a draft document seen by Reuters shows.

The measures stop short of a blanket "Buy European" requirement, but would allow European authorities to rule out bids for big public contracts that have less than 50% European content and favour EU companies in strategic sectors.

Although the draft document does not specifically name China, the European Commission has already put forward other Buy European policies as it seeks to reduce China's dominance of critical materials production and narrow a trade gap that expanded by 10% in the ⁠first four months of this year. 

The proposal, which could change before publication and will require endorsement from the 27 EU member states, would make it harder for authorities to award contracts largely on the basis of cost to counter the cheap goods offered by heavily subsidised Chinese companies.

An outline timetable had shown the Commission, the EU executive, would outline the public procurement proposals on July 1, but the timetable now schedules the announcement for early September. EU officials have given no reason for the delay.

Public procurement accounts for around 15% of the EU's GDP, according to the draft proposal, equating to about €2.5 trillion ($2.86 trillion) based on the EU's 2025 GDP. 

That makes it one of the bloc's most powerful economic policy tools for tackling intense international competition and supply chain vulnerability.

"The way public buyers spend money has become a matter of strategic relevance," the draft says.

PROPOSAL TACKLES SECURITY THREATS

The proposal increases the security role of public procurement in that it allows authorities to examine whether a bidder's ownership, control or financing structure creates a risk of foreign interference. 

Buyers could also take into account whether companies are subject to third-country laws that may force disclosure of sensitive information or otherwise interfere with the contract's performance.

Contracts would have to be awarded on the basis of the "best price-quality ratio", with quality criteria accounting for at least 30% of the total score and at least 50% for labour-intensive contracts. 

The proposed new regulation would replace the EU's three existing public procurement directives, thereby reducing national discretion in how the rules are applied. 

Authorities would be encouraged, and in some cases required, to take account of risks linked to critical infrastructure, cybersecurity, supply-chain disruptions, strategic dependencies and foreign influence when awarding contracts.

The regulation would also create an EU-wide digital procurement system, including electronic business credentials, interoperability rules for procurement platforms and national and EU-level procurement data spaces designed to improve transparency, oversight and cross-border access to contracts.

($1 = 0.8750 euros)

(Reporting by Julia Payne; additional reporting by Foo Yun Chee; editing by Barbara Lewis)