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Surprising purchasing policy in the Netherlands5th of December 2013
Nico Lemmens of ISS Facility Services examines new procurement legislation in the Netherlands.
With the new Public Procurement Act, which came into force in the Netherlands in April 2013, and the recent coalition agreement for the current Rutte II cabinet, the Dutch government has taken two remarkable steps. The new Public Procurement Act aims to counteract ‘unfair competition’ against SMEs.
The ‘unnecessary clustering’ of revenue streams by contracting authorities (in order to then put them out to tender in a single contract) is seen as unfair competition and is therefore to be discouraged. Government bodies which nonetheless wish to cluster revenue streams will need to justify doing so.
This raises a fundamental question: what do we mean by competition? Is a big company that can handle large volumes guilty of unfair competition against smaller companies that cannot? Or is this rather one of the ways in which a big company can differentiate itself in a competitive market? European public procurement legislation aims, among other things, to promote competition. The question is whether the ban on clustering has any place within this.
And there’s more. The government is using purchasing as a policy tool. There is nothing wrong with that per se. It does the same thing to encourage corporate social responsibility (CSR) among service providers, for example. But there is an important difference between these two uses of purchasing as a policy tool.
In the case of the policy of encouraging CSR, service providers acquire a new way of differentiating themselves in the competitive arena. That is not the case with the policy of discouraging clustering. Quite the reverse: in this case, the policy is actually distorting the competitive environment.
The second remarkable step can be seen in the Rutte II coalition agreement. This agreement contains the following passage:
“By opening up the lowest pay scales, contract workers at the lower end of the labour market, such as cleaners and catering staff, can be taken back into regular employment. The government will set a good example in this respect.”
In this case, the government is using purchasing policy (insourcing instead of outsourcing) as a tool of labour market policy (protection of contract workers). That intention is contrary to the desire expressed elsewhere in the coalition agreement to strive for a flexible apparatus of government.
Outsourcing is, of course, an effective tool for ensuring flexibility. Apart from that, the government is missing out on a great opportunity here. It is precisely in the interests of contract workers that the government should focus its facility purchasing policy on the outsourcing of facility services, but in an integrated manner with long-term contracts.
Integral outsourcing means that facility services are bundled in a single contract. This gives service providers the opportunity to offer their staff full-time jobs by combining tasks that were traditionally covered by separate contracts. The government would be doing the ‘lower end’ of the labour market, the taxpayer, the public sector, the trade unions and the facility services industry a great service by studying some of the many examples of this type of outsourcing in the private sector and learning the appropriate lessons from them.