Italy & Public Procurement: A public good beyond the public purse?

Public procurement is rarely regarded as a hot topic of conversation, yet more than ever it appears to be in vogue with lawmakers globally. In the UK, the Procurement Bill, currently making its way through the House of Commons, promises a comprehensive re-write of procurement policy post-Brexit; in the US, the CHIPS Act passed by Congress last summer sets out significant investment to boost domestic production of semiconductors and direct an industrial strategy towards procurement in American R&D; and in Germany, an ESG-focused supply chain due diligence law was recently enacted, with more reforms in the works for defence procurement.

Italy is the latest example of procurement reform gaining traction as an effective tool to spur economic growth. The newly elected Meloni Government is in the process of passing a bill to achieve the most significant reform of public procurement in a decade or so. The bill is an important step forward, improving digitisation, cutting red tape and codifying the principle of delivering value for money. It simplifies tendering procedures and incentivises public-private partnerships on a more effective, repeatable scale, with the aim of tackling the problem seen in many countries – overly burdensome and complex procurement frameworks leading to slow execution and difficulty for smaller businesses to take part in public contracts.  

Set to be signed into law in April, this bill mandates for the core principles of “legality, transparency, and competition” to guide all tendering procedures. SMEs are also set to benefit from the bill’s provision of price adjustment mechanisms in line with inflation and the creation of a new, fully integrated online procurement dashboard to improve ease of access to what is currently a highly fragmented system lined with bureaucratic roadblocks and lengthy paper trails.

The bill also addresses what is often seen as the core problem of the current Italian procurement system, perhaps best exemplified by the adage frequently uttered by frustrated business leaders: “fear of the signature”. This refers, in other words, to the overlapping signed authorisations required before a public contract is awarded, with government officials spread across various agencies often fearful of giving a project the go-ahead due to the risk of personal liability if something were to go wrong down the line. Indeed, presently a legal requirement to exercise appropriate due diligence before signing off parts of a tendering procedure often freezes decision-makers. To fix this, more flexibility and less delays to authorisation will be built into the new procurement architecture, including integrating global best practice, such as a single overarching contractor responsible for a number of subcontractors rather than having a hard-to-navigate crowd of suppliers for complex projects, or expedited procedures for ‘special sectors’ such as transport and utilities.

Although these reforms are an important shift, the landscape is moving quickly, with many of the measures already implemented in other countries. We are seeing around the world that governments are increasingly recognising that there is more to public procurement, and what it can achieve for the public good, not just the public purse. ESG, social value, ‘should-cost-modelling’ (estimating the cost of a project over its whole lifespan), and public Key Performance Indicators are all aspects increasingly being considered as part and parcel of a dynamic procurement infrastructure that works to deliver more than just vital services and economic growth.

A focused and effective procurement framework can have a huge positive impact well beyond the transaction itself. It can create local jobs, help accelerate the delivery of critical services, spur on environmental innovation, the construction of national infrastructure and,  foster virtuous public-private partnerships.

Could Italy take this opportunity and leapfrog other nations, delivering a public procurement system that is not only good for the taxpayer, but for many more aspects of society too?

The Italian government has a significant window of opportunity. The National Plan of Recovery and Resilience (NPRR), the policy document that lays out reform targets and investment spending priorities necessary to access to the EU’s deep pot of post-pandemic funds, already requires Italy to streamline public procurement. However, a more holistic approach could further integrate some of the social value, environmental and regional development targets of the NPRR into the bill, leveraging the inherent reach and impact of a reformed procurement system to achieve not just value for money, but value for so many other aspects of society as well.

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