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Governments illegally specify brands in IT tenders - study

By naming companies such as Microsoft in tenders for public works, administrations hurt competitors, a study shows

One in eight government IT tenders in the European Union illegally specifies a brand, according to a new report from Openforum Europe (OFE).

OFE's annual assessment of procurement in E.U. member states has found that 13 percent of a sample of tenders for IT products published in the Supplement to the Official Journal of the European Union made reference to specific trademarks or brand names. This is usually illegal under E.U. procurement rules as it is anti-competitive.

The report also shows that government agencies are increasingly resorting to so-called 'negotiated procedures' using one preferred supplier without any call for competition.

The European Commission itself was accused of favoritism earlier this year when it decided to move its internal IT systems to Microsoft Windows 7 without holding a public tender. This was at odds with the Commission's own guidelines for governments installing IT systems, the European Interoperability Framework, which broadly supports the use of open specifications and warns of the danger of being locked in to one software vendor.

More recently, open source activists criticized a German government decision to abandon free software in favor of Microsoft products.

"While there can be good grounds for applying the negotiated procedure without any call for competition, it can also be used to renew contracts with existing vendors without the complications of holding an open tender. The discriminatory practice of specifying brands in tender documents, instead of holding open competition may in the long run result in higher administrative costs for contracting agencies," said the OFE.

This is the third year in a row that the OFE report has identified a significant number of government agencies illegally specifying trademarks. European governments represent 19 percent of all software purchases in the E.U. according to IDC. By opting for one preferred supplier, governments are helping existing suppliers maintain their dominant hold on markets to the detriment of smaller competitors.

"The abuse of the tendering process we identify in our latest procurement monitoring report is just the tip of the iceberg," said Bob Blatchford, chief operating officer of Openforum Europe.

OFE called for lawmakers to improve E.U.-wide guidelines and to create more awareness of the long-term costs of lock-in at local level. It also wants to see closer scrutiny of the use of the negotiated procedures.

The latest OFE Procurement Report examined 441 tenders issued by contracting authorities between February and April 2010.


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