PUBLIC PROCUREMENT FOR DEBT COLLECTION

Why a public tender?

Public administrations or companies governed by public law are legally bound to follow the regulations of public procurement when they place orders for goods, services or works. The web offers a plethora of details on this complex regulation. In this article, we are more interested in the efficiency of the system than in its details.

The essential aim of this obligation is to guarantee the equal and transparent treatment of any service provider wishing to make an offer for the market in question. Competition must be able to play freely. It must benefit the most suitable competitor and, consequently, the population which, ultimately, is the beneficiary but also the ultimate financier of these orders from the public authorities. Is that the case?

Irrelevant requirements?

The specifications for public contracts list the requirements of companies that order. These texts are quite difficult to digest because they must be strictly compliant with the legislation but also describe the expectations in precise detail to eliminate inadequate or too broad interpretations of the requirements.

However, the main problem is that these texts are “take it or leave it”. This is very different from a traditional consultation process where the buyer sets out his needs in a dialogue with the seller. Dialogue makes it possible to identify the real needs and to provide appropriate solutions. The rigid formalism of the public market gives rise to unnecessary demands but also surprising voids.

For example, a key aspect missing from many collection contracts is the treatment of the debtor. We are a very consumerist country but it seems that the Public Authorities, or at least those who manage debt collection on their behalf, do not care how a debtor is treated and if, for example, the company applying for the tender has been the subject of complaints.

What do we read in public debt collection contracts?

The numerous criteria too often incorporate fallacies. Some examples:

• Contract award criteria – July 2020 – hospital:

The second award criterion (10% of points) is the ratio of the amicable / non-amicable price. According to the specifications, successful amicable recovery (immediate full payment or by successive payments) is paid at a rate of minimum € 5 / maximum € 30 per case and non-amicable recovery (“compensation” if the amicable recovery does not work) is compensated at a rate of minimum € 5 / maximum € 15 per case. This criterion by ratio i should “promote amicable collection”. But in fact, it encourages recourse to legal proceedings, by insufficient prices and by compensating for a failure of the amicable collection.

Indeed, the procedure and the prices offered are a highway to the resources reserved for bailiffs: Bailiffs fees for their legally reserved acts are much more profitable. The system therefore encourages legal action, because amicable solutions are underpaid. As a result, it allows bailiffs to enter the market with excessive extrajudicial prices and to earn a comfortable salary in the judicial phase. The debtor (the hospital patient) is the fall guy.

• Technical criteria for a contract – awarded in December 2019 – hospital:

To qualify “The minimum technical level required is to have 300,000 debtor records in your databases”. Then the question in the application form is: “Can you indicate the number of debtors in your databases in Belgium?” “

TCM was excluded from the contract because its database is hosted by AWS in Ireland. However, the criterion of a Belgium location for the database cannot be justified by any functional or legal reason.

In addition, as Belgium has 5 million households, the criterion of 300,000 debtor records represents 6% of households. That’s many different debtors (representing probably close to a million debts annually) for a single debt collection company. This automatically excludes many competitors.

This criterion is all the more surprising given that the GDPR only allows the management of personal data in the context of the “legitimate interest” of the creditor in question. Therefore, one can’t build a database for the purpose of using data from one debt for another debt. This requirement is simply against the law.

• Experience:

Public debt collection contracts have requirements in terms of experience. Such experience is to be proven by a minimum turnover and / or a number of cases previously processed for the same area of ​​activity.

Experience can be useful in deciding between candidates. However, the minimum requirements for access to the procurement are often high. This has the effect of confining the tendering creditor to its relationships with a few players, generally including the existing provider. This prevents renewal: the application of a more adequate but more recent provider on the market.

Because finally, if it is indeed better for the collection company to have some knowledge of the creditor’s specific trade, it is obviously not necessary to be  a doctor/electrician/dowser to collect hospital, electricity or water unpaid invoices efficiently and ethically. What is the real purpose of  these conditions?

Conclusion

The tender market or procurement system offers many useful guarantees with regard to transparency and equal opportunities for providers in a given market.

However, discretion is left to the procurer (the publicly funded creditor company) to define the terms of the contract. This diminishes the benefit of the guarantees offered in the previous paragraph.

Moreover, unlike private companies which are assessed on their effectiveness, both in profitability and in brand image, public administrations or companies are only rarely sanctioned for their failings. This also applies to the procurement of debt collection contracts.

This public procurement system suffers from its rigidity and is incomplete. It should be reviewed. The aim is to allow the most suitable candidate to compete, and therefore to benefit the citizen.

(Semi-) public institutions seem to favour price. This is done at the expense of quality. And when the public authorities claim to save in this way, it is the citizens who foot the bill.

You have questions? Do not hesitate to contact us.

PUBLIC PROCUREMENT FOR DEBT COLLECTION

Why a public tender?

Public administrations or companies governed by public law are legally bound to follow the regulations of public procurement when they place orders for goods, services or works. The web offers a plethora of details on this complex regulation. In this article, we are more interested in the efficiency of the system than in its details.

The essential aim of this obligation is to guarantee the equal and transparent treatment of any service provider wishing to make an offer for the market in question. Competition must be able to play freely. It must benefit the most suitable competitor and, consequently, the population which, ultimately, is the beneficiary but also the ultimate financier of these orders from the public authorities. Is that the case?

Irrelevant requirements?

The specifications for public contracts list the requirements of companies that order. These texts are quite difficult to digest because they must be strictly compliant with the legislation but also describe the expectations in precise detail to eliminate inadequate or too broad interpretations of the requirements.

However, the main problem is that these texts are “take it or leave it”. This is very different from a traditional consultation process where the buyer sets out his needs in a dialogue with the seller. Dialogue makes it possible to identify the real needs and to provide appropriate solutions. The rigid formalism of the public market gives rise to unnecessary demands but also surprising voids.

For example, a key aspect missing from many collection contracts is the treatment of the debtor. We are a very consumerist country but it seems that the Public Authorities, or at least those who manage debt collection on their behalf, do not care how a debtor is treated and if, for example, the company applying for the tender has been the subject of complaints.

What do we read in public debt collection contracts?

The numerous criteria too often incorporate fallacies. Some examples:

• Contract award criteria – July 2020 – hospital:

The second award criterion (10% of points) is the ratio of the amicable / non-amicable price. According to the specifications, successful amicable recovery (immediate full payment or by successive payments) is paid at a rate of minimum € 5 / maximum € 30 per case and non-amicable recovery (“compensation” if the amicable recovery does not work) is compensated at a rate of minimum € 5 / maximum € 15 per case. This criterion by ratio i should “promote amicable collection”. But in fact, it encourages recourse to legal proceedings, by insufficient prices and by compensating for a failure of the amicable collection.

Indeed, the procedure and the prices offered are a highway to the resources reserved for bailiffs: Bailiffs fees for their legally reserved acts are much more profitable. The system therefore encourages legal action, because amicable solutions are underpaid. As a result, it allows bailiffs to enter the market with excessive extrajudicial prices and to earn a comfortable salary in the judicial phase. The debtor (the hospital patient) is the fall guy.

• Technical criteria for a contract – awarded in December 2019 – hospital:

To qualify “The minimum technical level required is to have 300,000 debtor records in your databases”. Then the question in the application form is: “Can you indicate the number of debtors in your databases in Belgium?” “

TCM was excluded from the contract because its database is hosted by AWS in Ireland. However, the criterion of a Belgium location for the database cannot be justified by any functional or legal reason.

In addition, as Belgium has 5 million households, the criterion of 300,000 debtor records represents 6% of households. That’s many different debtors (representing probably close to a million debts annually) for a single debt collection company. This automatically excludes many competitors.

This criterion is all the more surprising given that the GDPR only allows the management of personal data in the context of the “legitimate interest” of the creditor in question. Therefore, one can’t build a database for the purpose of using data from one debt for another debt. This requirement is simply against the law.

• Experience:

Public debt collection contracts have requirements in terms of experience. Such experience is to be proven by a minimum turnover and / or a number of cases previously processed for the same area of ​​activity.

Experience can be useful in deciding between candidates. However, the minimum requirements for access to the procurement are often high. This has the effect of confining the tendering creditor to its relationships with a few players, generally including the existing provider. This prevents renewal: the application of a more adequate but more recent provider on the market.

Because finally, if it is indeed better for the collection company to have some knowledge of the creditor’s specific trade, it is obviously not necessary to be  a doctor/electrician/dowser to collect hospital, electricity or water unpaid invoices efficiently and ethically. What is the real purpose of  these conditions?

Conclusion

The tender market or procurement system offers many useful guarantees with regard to transparency and equal opportunities for providers in a given market.

However, discretion is left to the procurer (the publicly funded creditor company) to define the terms of the contract. This diminishes the benefit of the guarantees offered in the previous paragraph.

Moreover, unlike private companies which are assessed on their effectiveness, both in profitability and in brand image, public administrations or companies are only rarely sanctioned for their failings. This also applies to the procurement of debt collection contracts.

This public procurement system suffers from its rigidity and is incomplete. It should be reviewed. The aim is to allow the most suitable candidate to compete, and therefore to benefit the citizen.

(Semi-) public institutions seem to favour price. This is done at the expense of quality. And when the public authorities claim to save in this way, it is the citizens who foot the bill.

You have questions? Do not hesitate to contact us.