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EU governments favoring home firms

Gordon Brown
Brown: "This is an essential element of the economic reform agenda and it cannot be ducked."
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LONDON, England -- Many European Union companies are being denied access to a market in public contracts worth $1.8 billion because governments are still favoring home-based firms, according to a British report into fair competition released on Monday.

British Chancellor of the Exchequer Gordon Brown commissioned Siemens chief executive Alan Wood to undertake the review last December based on the experiences of UK-based businesses.

On Tuesday, Brown will address other European finance ministers at the European Commission in Brussels to urge for reforms in the way that government contracts are awarded.

"This is an essential element of the economic reform agenda and it cannot be ducked. To be effective, economic reform must include reform of the state aid regime," said Brown.

"Europe needs to do more to create a genuine single market in public procurement, in which European and international rules are fairly applied, and to allow businesses to compete and create jobs across the EU."

Public contracts are subject to single market rules, which allow for the free movement of goods, services, people and capital around the 25-member EU.

But Woods said many contracts were being awarded locally even when foreign firms offered a better price or a higher quality bid, and highlighted "complex public procurement procedures, unfair national preference and wavering commitment to competition and market liberalization" as key factors holding back the creation of a competitive and dynamic market.

Although finding no evidence of illegality, Wood reported that single market rules were being interpreted in ways that favored local companies, such as in contract requirements shaped to suit a given, national supplier, or by false competition where international bids are invited when there is little intention of awarding a contract to a non-national firm.

Brown said the Wood Review showed that contracts were on average 30 percent cheaper when awarded openly.

"People right across Europe will want to know why their governments are paying over the odds for services and equipment simply because they have refused to open up their markets and promote competition to achieve better value for money and a better quality of service."

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