Public Procurement’s Competition Problem: Are we Nearing the Destination or Still Slip-Slidin’ Away?
Competition should be the engine of public procurement: more suppliers bidding should mean better prices, better quality, more innovation and greater value for taxpayers. Yet across major procurement systems, the number of suppliers willing to compete appears to be shrinking. The European Union provides a striking illustration, but the problem is repeated elsewhere. Average participation fell from 5.4 bids per procedure in 2006–2010 to 3.4 in 2017–2024 – a decline of about 37%. Over roughly the same period, the share of procedures attracting only one bid increased from 15.66% to 19.43% – an increase of nearly a quarter. The problem is not universal: contracts worth more than €20 million attracted around 9.2 bids on average in 2017–2024, indicating that the problem is principally a difficulty in attracting suppliers to ordinary/smaller tenders. Figure 1. Average bids per EU procurement procedure. Source: European Commission (2025) This raises a more fundamental question: is the problem really a lack of suppliers willing to participate? Competition starts before the tender A tender can be formally open to everyone (often the default starting point in public procurement) and still be weakly competitive. Explanations for declining competition in public procurement coalesce around three main areas: regulatory complexity, coupled with bureaucratic and cumbersome administrative rules; public buyer weaknesses – inadequate market knowledge, risk aversion reflected in onerous compliance requirements, prohibitive resource requirements, unnecessarily complex, prescriptive or poorly written qualification criteria and specifications; and on the supplier side, a diminishing supplier pool and unwillingness to participate. The regulatory and many aspects of buyer side have been well-ventilated in the literature, so this piece assumes reforms are ongoing to tackle them and will focus on improving contracting authorities’ market knowledge and suppliers’ willingness to participate. Suppliers engaging or considering engaging in public procurement have a series of hurdles to overcome: discovering an opportunity, deciding that it is commercially worthwhile, understanding what the buyer wants, establishing that they are eligible and capable, and then investing the time and money needed to prepare a bid. At each stage, suppliers may decide not to proceed. The contract may be too small or fragmented; the probability of winning may appear too low; the requirements may be unnecessarily demanding; or an incumbent may appear to have an unspoken advantage because it already knows the buyer, the system and the requirements. That last factor is sometimes under-emphasised. The US Government Accountability Office has identified incumbent advantage and market consolidation (as previously competing bidders consolidate into larger supplier teams) among factors that reduce effective competition. A supplier does not need to be formally excluded to be deterred: if it believes that the incumbent is likely to win, the rational decision may simply be not to bid. This suggests that procurement policy needs to think about competition as a process, not an event. The key question is not simply, “What formal rules require open competition?” but also, “How many credible suppliers knew about the opportunity, understood it and thought it was worth pursuing?” From repeated contests to a relationship with the market Traditional public procurement has largely addressed the risk of favouritism by requiring repeated, discrete competitions. With some exceptions – framework agreements, qualification systems and similar mechanisms – the contracting authority and supplier effectively start from scratch each time. There is an obvious virtue in this model: it protects contestability. But it also has costs. Buyers repeatedly investigate the market, and suppliers in turn repeatedly incur costs of entering a new procurement process. Continuing relationships with (selected) suppliers could reduce those costs, but could create another danger: greater incumbent advantage, supplier lock-in and a shrinking pool of competing suppliers. A third way could be a continuing relationship with the market, rather than a continuing relationship with suppliers. The UK’s Procurement Act 2023 is testing this idea. It creates a more graduated sequence of communication before the formal competition: a Pipeline Notice can provide a forward view of expected procurements; a Preliminary Market Engagement (PME) Notice signals engagement with the market; and a Planned Procurement Notice (PPN) can give advance warning of a particular forthcoming competition. Only then does the Tender Notice formally open the competition. Notice Main purpose When? Mandatory? What does it tell suppliers? Pipeline Notice (UK1) Give the market a forward view of the authority’s procurement plans Up to 18 months ahead Yes, for certain large-spending authorities “These are the contracts we expect to procure” PME Notice (UK2) Tell the market about preliminary market engagement Before/around market engagement and before Tender Notice Conditional “We are engaging (or have engaged) the market about this requirement” Planned Procurement Notice (UK3) Give advance notice of a specific forthcoming competition Before Tender Notice Optional “We intend to launch this particular competition” The difference is subtle but important. In a conventional system, the first meaningful signal to many potential suppliers may be the tender itself. The UK model attempts to give the market visibility and an opportunity to engage before the procurement has been fully designed. Why earlier engagement might matter Early engagement can address two different barriers to participation. First, suppliers need time to see an opportunity, assess it and plan capacity. A forward pipeline can make a procurement visible months before the tender is launched. Second, market engagement can improve the buyer’s understanding of what the market can actually provide. The UK Government’s rationale is that this can help authorities clarify requirements, assess market capacity, shape procurement strategy and identify barriers, including barriers facing SMEs. There are safeguards. Market engagement must not distort competition or give an individual supplier an unfair advantage. The objective is not to replace competition with a preferred-supplier relationship, but to make the eventual competition more informed and accessible. The early evidence is encouraging, although it should not be oversold. Open Contracting Partnership analysis of the first year of the Procurement Act found that procedures using a UK2 or UK3 notice attracted an average of 4.7 bids, compared with 3.8 where neither was used—roughly 24% more bids. OCP also found a notable