e-procurement in Europe – why PEPPOL cannot address the fundamental economic realities

e-procurement in Europe – why PEPPOL cannot address the fundamental economic realities

In my recent article, “e-wheels on my Wagon” I explained why I think PEPPOL is a decade behind the curve. Actually, I want to go further than that and explain why PEPPOL fails to address one of its primary targets – stimulating cross-border trade, particularly by and for SMEs. e-wheels on the wrong wagon in fact.

For European Institutions, cross-border trading is not mere ideology, it is theological orthodoxy. It is a pillar of the creation myth of modern Europe itself, created ex nihilo by mysterious forces.

In the beginning there was chaos and the European market was without form and void, until, the Treaty of Rome reveals, it was resolved to ensure the economic and social progress of their countries by common action to eliminate the barriers which divide Europe, recognising that the removal of existing obstacles calls for concerted action in order to guarantee steady expansion, balanced trade and fair competition and desiring to contribute, by means of a common commercial policy, to the progressive abolition of restrictions on international trade.

Who would gainsay those noble aims?

Purchasing Insight logoIn practice though, treaties, directives and regulations do not themselves change the world. They are aspirational statements of intent which shepherd profane activity towards the desired state of bliss. Overcoming the forces of darkness ranged against that aim has to include some deeper analysis of what those forces are.

Imagine that I am an small/medium sized enterprise (SME) based in Portugal and I identify an opportunity in Poland which is within my sphere of expertise. What would stop me bidding?

Firstly, I probably can’t support myself doing business there. Even if I speak Polish I probably don’t have basic supply chain or other resources in place to support operations there. Putting those resources in place adds an immediate cost to doing that business.

Secondly, if I am an ambitious SME with a clear growth plan, I know that I can overcome the initial cost issue if I can secure working capital. I simply need to arrange some form of trade credit advanced at an acceptable interest rate from my Bank. Aye, right!

Thirdly, if I bid for a Government opportunity I know the buyer is going to select either the lowest priced tender or the most economically advantageous tender. So I am already at a competitive disadvantage compared to local tenderers because of the oncosts incurred which I have to build into my price. Even in an exemplary, non-discriminatory process, general economic pressures mean that my tender is unlikely to be either the lowest price or the most economically advantageous.

Fourthly, procurement is – or should be – an activity that supports the successful delivery of policy outcomes. In “normal” times these outcomes include political imperatives of supporting local or national economic growth. In the context of an international liquidity crisis, which undermines national economies, the focus is on national economic survival and so the political imperative to source locally is magnified.

And so I probably won’t submit a tender. Things would be different if I have a better channel to the market – for example as a subcontractor to a Prime bidder – but that institutionalises the role of larger enterprises which is not the stated policy goal.

The problems with cross-border trade are economic and structural. They are business problems. Putting in place a pan-European Government eProcurement system has no relevance to those problems – that addresses the wrong issues in the wrong way for the wrong reasons.

Ian can be found on twitter @IanBurdon

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