Level the playing field in the procurement of public transportation

Transportation may include the word "sport", but that is one of the few things that connects the procurement of public transportation in Region Stockholm with competitive fairness. Today, foreign, state-owned enterprises from France, Germany and Canada win most competitive bids for public bus-, tramway- and ferry traffic in Stockholm. Powered by public funds, these state-owned companies have the financial muscle to outplay most private firms on the market. Private companies are increasingly left on the sidelines – unable to measure up to public enterprises in public transportation tenders.

As one of Sweden’s leding legal practitioners in the area of public procurement, we have identified a number of practices which maintain this unlevel playing field, and which make it hard for private firms to rival state-owned enterprises. Among these issues are:    

1. Carrying of non-market risks
A recurrent theme in the procurement of public transportation in Sweden is that the public procurer requires the operator to carry all non-market risks. Most private enterprises lack the financial ability to do this, why the competition becomes limited to foreign, public enterprises.

2. Bank guarantees from parent companies
Another common theme is that public procurement agencies often request bank guarantees from the tenderers - which large firms and particularly state-owned enterprises can easier provide. However, although a major supplier may present less financial risk than an SME for the same contract, the candidates’ financial standing should only be considered as part of the risk management exercise. It may not, on its own, reflect their ability to deliver.

3.  Technical specifications
Lastly, the public agencies often request high technical specifications in the public transportation tenders. Private tenderers in tram-, bus-, and ferry traffic encounter increasingly detailed requests on vehicles, particularly when it comes to interior design, accessibility, equipment or other cost-driven resources. This benefits tenderers with large vehicle fleets or with the capacity to rebuild their vehicles – which are often found in the public sector. Meanwhile, it is to a great disadvantage for the private companies who do not have this supply, but who are otherwise better equipped to run the traffic.

Public agents on regional and national levels in Sweden must guarantee that the market remains open to competition between big and small firms, privately and publicly funded. The reasons for this should be obvious to everyone: it benefits entrepreneurship, ingenuity and competition. Currently, the public sector in Region Stockholm is no guarantor for this, and this makes our society a little poorer every day. For this to change, it is time for the public sector in Region Stockholm to level the playing field in the procurement public transportation.