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The Fiscal Crisis and Government Procurement; Market Failure in an Ideal Environment

Greg Barnes

The ongoing Fiscal Crisis in the European Union has brought to the attention of all Member States, the need for effective Procurement practices that reduce the cost of outsourcing wherever possible. The EU Public Procurement Regime (constituted by a series of Directives) should facilitate this goal by enabling free and transparent competition across an integrated market. The Neoclassical Economic rationale for the Regime suggests that in the search for cost reductions, the use of procurement practices that are adherent with the directives, and cross border trade, should therefore have increased during the five year period 2007 to 2013. Governments should be seeking the best prices possible at times of fiscal constraint providing the perfect environment for the market to flourish. This has proven to not be the case, with the level of measureable procurement stagnating and indirect protectionist measures remaining.This paper shall discuss the findings of a research project into the empirical and discursive aspects of the EU Procurement Regime, and the implementation of the policy in the context of the Fiscal Crisis. It will draw upon primary interviews with the Commission, European Institutions, Stakeholder Groups, and other professional procurement bodies. This will be contextualized with fresh empirical data on the use of the OJEU in the subject period (not as yet published).A conclusion will be that the market has failed to gain traction in the 'real economy' due to a schism between the construct of the ideal market, and the 'social economy'. This shall be analyzed with reference to Economic Sociology and Critical Political Economy approaches to the Social Construction of Markets.

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