The purpose of this paper is to analyze, on the basis of novel empirical data from Finland and previous research literature, trust in procurement judicial review and the factors that influence the decision of businesses to complain or not.
The paper applies legal and social sciences methodology. The background is based on a legal literature review, whereafter it presents the results of a survey that applies qualitative empirical methodology and discusses possible avenues for reform of rules (de lege ferenda, legal dogmatics). The main results are based on an empirical data set collected through a survey to Finnish companies (352 responses).
The results are not encouraging: almost 70 % considered that there is somewhat, a little or no trust in the public procurement judicial review system and its ability to correct an erroneous decision. This is particularly alarming as the lack of trust also appears to affect economic operators’ interest in participating in public contract awards, which is problematic from the perspectives of competition, effective public expenditure and achieving other goals such as sustainability. This study confirms that the decision of whether or not to appeal is primarily a business decision and not closely related to the actual breach in question. The public procurement remedies are designed for enabling courts to correct erroneous decisions, but the system is not equipped to solve the issues of reputational business risks. One way of addressing this issue and increasing the effectiveness of public procurement judicial review and remedies, would be to increase the availability of anonymous review mechanisms and the role of public procurement monitoring authorities.
Provides new insights how companies view procurement litigation and on how remedies rules should be developed.
Collection and application of novel empirical data on factors impacting companies decision-making regarding procurement litigations.
1. Introduction
“Trust is a fragile thing. Easy to break, easy to lose, and one of the hardest things to ever get back” (English proverb)
The public procurement remedies system aims to ensure enforcement of procurement rules and to provide effective remedies for economic operators in the event those rules are infringed. This requires that companies can appeal against contract awards and other decisions as efficiently and quickly as possible. The effectiveness of the public procurement remedies system has attracted some research interest, but the earlier research has mostly focused on analyzing the reasons for the large number of complaints, long processing times of procurement appeals and high court and lawyers’ fees [Pachnou, 2003; Finnish Ministry of Justice (Oikeusministeriö), 2021]. In recent years, however, more attention has been paid to analyzing how appeals against procurement decisions and measures have affected tenderers′ reputation towards contracting authorities and other business partners when they choose their collaborators for consortium or as subcontractors (Pachnou, 2003; Craven and Arrowsmith, 2016).
In our previous study, we focused on assessing whether concerns relating to the establishment or preservation of a good business relationship affect companies’ decisions to withdraw an appeal. The study was conducted among Finnish companies that had submitted, but later withdrawn their public procurement appeal. We showed, that reputational factors significantly influence companies’ decisions to withdraw their appeal from court. We also showed that these concerns relating to jeopardizing business relationships affect also companies’ decisions and actions in future public contract awards. However, the number of companies that responded to our earlier survey was relatively small (52 companies) and the survey was only addressed to companies that had appealed, but later withdrawn their appeal (Heikkinen and Halonen, 2023). Therefore, the previous study could not properly address the question of why companies do not appeal against the award decision in the first place. Thus, we conducted a larger, new study and a survey based on a random sample of Finnish companies where our main focus was on companies’ conception of trust and its interlinkage with the public procurement remedies system.
Earlier research has shown that trust plays an important role in companies’ business decisions (La Porta et al., 1997). Our earlier study suggested that companies’ decisions are highly affected by reputational factors (Heikkinen and Halonen, 2023, pp. 171–185). Thus, in the context of this paper, we start with a hypothesis that the risk of losing one’s reputation as a trustworthy and easy business partner may impact the decision-making process regarding whether or not to appeal against a procurement decision. It is important to understand the reasons and motivation why companies appeal or do not appeal against procurement decisions, as then it is possible to propose improvements to the public procurement remedies rules [1] and to provide tools for contracting authorities to assess the potential risks related to award decisions and the possible delays in their execution in the event of an appeal and the automatic suspension related to it [2].
In this paper, we respond to three research questions. First, we answer to a question: do economic operators have trust in the judicial review system’s ability to correct errors made in public contract awards and has there been changes thereto over the past 10 years? Second research question is divided into two subquestions: what are the reasons behind the lack or weakened trust (if any) and have these an impact to companies’ interest to participate to public contract awards. Final and third research question looks into the main reasons why companies do not appeal against procurement decisions that they find erroneous.
The structure of this article is as follows. First, in Section 2, we discuss the element of trust in the economic operators’ decision-making processes through previous research. Then, in Section 3, we present the results of our empirical survey conducted in 2023 among Finnish companies. Thereafter, in Section 4, we discuss what these results suggest from the perspective of public procurement remedies and whether any reforms or amendments would be appropriate to tackle the challenges identified in the empirical data. And finally, we gather the most important conclusions in Section 5.
2. Trust
Trust is generally seen to improve productivity and economic performance (Casson and Della Giusta, 2006; Lane, 1998, pp. 19–21). While trust often has a positive impact on business, extreme levels of trust can also have negative effects. According to Gargiulo and Ertug, such negative effects can be, e.g. blind faith, which increases the risk of malfeasance and impoverishes the quality of information transfer between parties. Excessive trust can also lead to complacency and passivity in the face of inadequate outcomes from such a relationship. Gargiulo and Ertug refer to the negative effects of trust as “dark side of trust” (Gargiulo and Ertug, 2006, pp. 173–182).
As we will show later, trust plays a major role in the effectiveness of public procurement. Regardless of the numerous articles and books on trust’s role in society, business and enterprises, only a few studies focus on the importance of trust in public procurement (Pachnou, 2003; Craven and Arrowsmith, 2016; Popelier et al., 2022, pp. 66–72) or on the negative outcomes of trust in general (Gargiulo and Ertug, 2006, pp. 173–174).
Trust as a concept has been widely studied by economists, psychologists, sociologists, management theorists as well as legal scholars. Yet, there is little consensus on how to define it [3]. According to Popelier et al., five central elements are common to most definitions.
These are assessment of the trustee’s trustworthiness, the trustor’s general propensity to trust, the trustor’s predisposition or propensity to trust others and that trust is a relational concept. Trust is also context-specific, which means that the trust relationship changes on whether the type of the actor involved is an individual, an organization or a system such as a judicial review system (Popelier et al., 2022, p. 356; Six and Verhoest, 2017, pp. 3–7). Related, but different concepts of trust are legitimacy, public support and confidence (Luhmann, 2000, pp. 97–98; Wallace and Goodman-Delahunty, 2021; Popelier et al., 2022, pp. 353–354 and 356–359). However, trust and confidence are frequently used interchangeably (Magalhães and Garoupa, 2020, p. 1743; Wallace and Goodman-Delahunty, 2021, p. 5).
Legal research has mainly focused on assessing trust in courts, judges or legal systems. Magalhães and Garoupa have studied how the performance of courts and their ability to resolve cases in a timely manner affects citizens’ trust in the legal system. Based on data from more than 20 European countries, 80 surveys and 100,000 respondents they concluded that judicial performance, operationalized as the ability of courts to avoid delays in the delivery of justice, is a significant determinant in citizens’ evaluation of their country′s legal system (Magalhães and Garoupa, 2020). According to their study, levels of trust in the legal system are quite stable within countries and through time, but there are large differences between countries, with eastern and southern European countries showing the lowest levels of trust in the legal system and Scandinavian countries, Turkey and Luxembourg, demonstrating the opposite extreme (Magalhães and Garoupa, 2020, p. 1748).
Mayoral has studied trust in the Court of Justice of the European Union (CJEU) by the national judges. He submits that national judges might be more likely to co-operate with the CJEU if they trust that the Courts’ decisions offer clear guidance for the correct application of EU law and will not create any conflict with their national legal order. In turn, the research underlines the CJEU’s ability to create and promote trust through its case law – facilitating the application and assimilation of the common legal framework shared by national judges (Mayoral, 2017).
Popelier et al. (2022, pp. 351–374) conclude in their trust research literature review that empirical studies on trust and distrust in and between courts in Europe are still very fragmented and incomplete. Also, a wider variety of courts deserves more investigation. Studies, where respondents were asked whether they think that courts protect citizens’ rights, that judges are honest, that court decisions are fair, etc., equate according to Popelier et al. the concept of trust with the drivers of trust. This way procedural fairness and performance become parts of the concept of trust instead of independent variables that may explain trust. They suggest that a wider approach should be taken to the actors in the trust relationship and the factors that determine the level of trust.
Trust plays an important role in business relationships. It is regarded to involve a willingness to rely on the behavior of others and to reduce the degree of uncertainty regarding the outcomes of actions (Huang and Wilkinson, 2014). However, little research has attempted to understand the dynamics and evolution of trust and the causal mechanisms and processes driving trust (Huang and Wilkinson, 2013). Trust in the integrity of the public sector can, among other things, influence the number of court cases.
According to Pachnou′s research in the UK procurement market, there is trust in the integrity of the public bodies and the fairness of their procedures. Trust thus impacts on the companies’ tendency to seek legal action as it affects their perception of potential flaws or irregularities and because they consider the fairness of the process sufficient and minor breaches not worth of challenging. Pachnou’s study presents, based on interviews of both companies and public authorities, that the perception of justice is mutual: interviewed authorities regarded themselves to be fair in the sense of not discriminating between bidders (Pachnou, 2003, pp. 361–364).
Craven and Arrowsmith in their empirical research sought to gauge the level of supplier complaints and challenge activity and to identify the factors influencing this. Their results, concerning suppliers who do not take any action, were consistent with the findings of Pachnou regarding the general trust in the integrity of the process [4].
Tátrai and Vörösmarty investigate noncompliance in public procurement with the aim of revealing different types of noncompliance and to structure the knowledge on what are the effects of the remedy system thereto. They conclude that when companies consider appealing, they consider how it will impact the relationship with the contracting authority and the potential risk of authority not welcoming their bids in subsequent public procurement awards (Tátrai and Vörösmarty, 2020, p. 157).
Trust and legal actions are strongly interlinked to the legal culture within a particular jurisdiction. In a nonconfrontational legal culture, it may be preferable to resolve disputes in other ways and litigation is seen as a last resort (Bu, 2015). It appears that it is exactly this nonconfrontational national legal culture that is one of the main reasons contributing to low litigation rates in the UK [5] in addition to other factors such as reputational concerns (Craven and Arrowsmith, 2016, p. 244) and the costs of litigation (Pachnou, 2003, p. 285). The culture-oriented factors have also been recognized in a study concerning Japanese litigations, where it was submitted that in the Asian culture disputes in general are resolved through nonconfrontational means rather than the highly confrontational process of litigation (Cole, 2007, p. 30). On the other hand, there are examples from other and more confrontational legal culture as well. This is indicated by the exceptional amount of public procurement appeals in Poland (Bogdanowicz et al., 2017, p. 20).
Trust presupposes a situation of risk. In the context of public procurement, and for the purposes of this paper, trust is understood here as trust in the judicial review system (damage caused by the appeal). Trusting the judicial review system in the context of this article means that an appeal against the decision of the contracting authority will not damage the reputation of the tenderer and reduce the tenderer’s chances to be successful in future public contract awards. The fear of reputational factor seems not to be unwarranted. Several studies have shown that litigious reputation influences the decisions of contracting entities (Pachnou, 2003; Craven and Arrowsmith, 2016; Heikkinen and Halonen, 2023). One of the peculiarities in public procurement, as Ivanova mentions, is that the companies involved in the procurement procedure will not complain to the court because it may deteriorate their relationship with the contracting authority, cause them difficulties in the future and often lead to irreversible destruction of the relationship between the company and the contracting authority (Ivanova, 2019, p. 136).
If trust is culture-oriented, it is also highly context oriented. Already Popelier et al. stated that “a wider approach should be taken as to the actors in the trust relationship – trustor and trustee – and the factors that determine the level of trust”. More research and attention should be focused for instance on the trustee, its organization and the system in which the trustee operates (Popelier et al., 2022, pp. 373–374). Thus, to understand the phenomenon within public procurement in particular, we need to understand the circumstances and competitive surroundings. In public procurement, the contracting authorities hold vast discretionary powers which enables them, should they want to act accordingly, to set thresholds for companies to participate or to succeed in contract awards. Therefore, trust and concerns relating to losing trust seem highly relevant in public procurement. The aim of this paper is to provide evidence and new insights in the context of public procurement on trust and the factors affecting trust between tenderers and contracting entities.
3. Empirical evidence
The main purpose of our survey was to map companies’ trust in the public procurement judicial review system and to find out how trust or lack of it affects companies’ decision-making in relation to appealing against procurement decisions or participating in public procurement contract awards. For this purpose, trust is viewed from two different perspectives: economic operators’ trust in the procurement judicial review process on one hand and on the other hand, trust as a reputational characteristic of a company, i.e. the importance of being considered as a trustworthy business partner by others. Thus, we also wanted to look into the reasons that affect companies’ decisions to appeal or not to appeal a public procurement decision to the Finnish Market Court.
Our survey was a subsurvey belonging to a larger economic conjoint survey, which was conducted between February 1, 2023 to December 31, 2023. The survey involved employees from companies that potentially participate in procurement tenders in Finland. The sample of the firms was randomly selected from a Finnish company register and contacted through our collaboration partner, the Finnish Competition and Consumer Authority. Phone calls were first made to reach out to potential participants. Then each respondent received a unique Web link for accessing the survey. Some respondents were contacted only by e-mail, containing a unique web link for accessing the survey. In the survey, all respondents first answered background questions, including how many public tenders their company had participated in over the past three years. If a company had participated as a bidder in at least one public procurement procedure in the past three years, such company was included in our subsurvey.
The reliability of our survey responses, particularly regarding our subsurvey on judicial review, is affected by the knowledge and experience of the respondents in public procurement (Wallace and Goodman-Delahunty, 2021). From this perspective, our results can be considered reliable as these questions on trust and judicial review were solely presented to those companies that had in the past three years participated in public procurement awards [6].
Moreover, the sample of the study is reliable as it was based on random selection of firms and not only focused on those that had complained about the procurement process. A total of 352 companies responded to our subsurvey, which can be considered a large enough sample of companies to provide a credible view on the importance of trust within public procurement.
Our subsurvey has three distinct sections. In Section 1, we asked whether the company had appealed against procurement measures to the Finnish Market Court or not. Out of 352 respondents, 45 companies replied yes and 302 companies answered no [7]. The 45 companies that answered yes were then asked about the factors that influenced their decision to appeal. First, we gave three options from which the respondents could choose one or several options. The options were as follows (the number of respondents who chose the option in parentheses): an error in the procurement process (40 responses), a desire to secure a temporary contract during the legal process (0) and a desire to make it harder for a competitor to win the contract (3) [8]. If the appeal was a result of an error in the procurement process, the respondents were asked to describe the nature of the error. For the purposes of this paper, i.e. to analyze the systemic trust in the context of public procurement, the nature of errors are not that relevant, but rather these impact the trust in the performance of public procurement procedure. Therefore, we will not focus on errors in this paper particularly.
In the past two decades, there has been efforts to improve the effectiveness of the public procurement remedy system in Finland (Heikkinen and Halonen, 2023, p. 171). The survey questions regarding trust were threefold. First, we asked the companies “Do you trust in the judicial review and that an error made during the award stage will be corrected due to a complaint?”
A total of 93 companies (26%) responded that they trust the judicial review either completely or a lot. But a total of 123 respondents (35%) had only a little or not at all trust, 117 (33%) trusted the judicial review somewhat and 19 (5%) replied cannot say (Figure 1).
The pie chart shows distribution of responses on trust in the judicial review based on 352 responses. The largest share shows somewhat with 117 responses. A lot shows 80 responses. A little shows 73 responses. Not at all shows 50 responses. Cannot say shows 19 responses. Completely shows 13 responses.Trust in the judicial review
Source: Created by the authors
The pie chart shows distribution of responses on trust in the judicial review based on 352 responses. The largest share shows somewhat with 117 responses. A lot shows 80 responses. A little shows 73 responses. Not at all shows 50 responses. Cannot say shows 19 responses. Completely shows 13 responses.Trust in the judicial review
Source: Created by the authors
For the 259 companies that responded either somewhat, a little, not at all or cannot say to the question about trust in judicial review, we asked whether their trust in the judicial review had changed over the past 10 years.
As shown in Figure 2, despite the earlier efforts made to improve the Finnish procurement judicial review (Heikkinen and Halonen, 2023, p. 171), 43% (112) of the companies responded that their trust in the procurement judicial review had declined in the past 10 years. 49% (128) replied that their trust had stayed the same and only 0.7% (2) replied that their trust had increased. In addition, the companies whose trust had declined were asked an open field question about the reasons thereto. These reasons are categorized here into three main categories (Figure 3).
The pie chart shows how trust in the judicial review has changed over the last 10 years based on 259 responses. Stayed the same shows 128 responses. Declined shows 112 responses. Cannot say shows 17 responses. Increased shows 2 responses.Has your trust in the judicial review system changed in the past 10 years?
Source: Created by the authors
The pie chart shows how trust in the judicial review has changed over the last 10 years based on 259 responses. Stayed the same shows 128 responses. Declined shows 112 responses. Cannot say shows 17 responses. Increased shows 2 responses.Has your trust in the judicial review system changed in the past 10 years?
Source: Created by the authors
The conceptual diagram shows reasons for the decline of trust represented by three labelled areas. The largest area states favouritism corruption. Another area states litigation risks with text duration, costs, lack of courts expertise. A third area states public procurement rules.Reasons for the decline of trust
Source: Created by the authors
The conceptual diagram shows reasons for the decline of trust represented by three labelled areas. The largest area states favouritism corruption. Another area states litigation risks with text duration, costs, lack of courts expertise. A third area states public procurement rules.Reasons for the decline of trust
Source: Created by the authors
Most of the replies concerned favoritism [9]. Many respondents believed that procurements were tailored to a certain preferred supplier. Also, there were responses that addressed the issue that some contracts are not subjected into competitive bidding in the first place due to excessive use of different kind of in-house arrangements. The second most common category was reasons relating to litigation and court procedure such as high litigation costs, long court proceeding times and the uncertainty of the outcome due to varying levels of expertise of judges [10].
Third, as the decline in trust in the judicial review may have an impact on the willingness of companies to participate in public contract awards in general, we asked the respondents who had answered “somewhat”, “a little”, “not at all” or “cannot say” to the question of their trust in the judicial review (Figure 4), whether their weakened trust affects their interest in participating in public procurement contract awards. As shown in the Figure 4, the weakening of trust in the judicial review has a significant effect on companies’ willingness to participate in the tendering process. 61% (158) of the companies responded that weakening of trust had a complete, a lot or somewhat negative impact on their willingness to participate in competitive tenders. This is perhaps one of the most important results of this study, as low competition is one of the major concerns relating to the efficiency of the public procurement framework and public expenditure [11].
The pie chart shows whether weakening of trust in the remedy system affects interest to participate in the tendering process based on 259 responses. Somewhat shows 108 responses. Not at all shows 50 responses. A little shows 35 responses. A lot shows 32 responses. Completely shows 18 responses. Cannot say shows 16 responses.Weakening of the trust
Source: Created by the authors
The pie chart shows whether weakening of trust in the remedy system affects interest to participate in the tendering process based on 259 responses. Somewhat shows 108 responses. Not at all shows 50 responses. A little shows 35 responses. A lot shows 32 responses. Completely shows 18 responses. Cannot say shows 16 responses.Weakening of the trust
Source: Created by the authors
The third part of our survey focused on the companies that had participated to an award procedure, but had not appealed against any decision (302 companies). To the question of “What factors contributed to the fact that your company did not complain, even if there was an error in the procurement process?” Companies could select a maximum of six out of 12 factors from the list and then rank them in order of importance. In addition, they could give other reasons for not appealing in the open field.
As can be seen from Table 1, five options stand out from other factors. Long court proceeding times together with litigation costs form a significant threshold for appealing, as have been shown also in other previous studies (Heikkinen and Halonen, 2023) [11]. But two of the most common reasons for not appealing were the risk of jeopardizing a good business relationship with the contracting authority and other companies. These proved to be the most important factors affecting companies’ decisions not to appeal even though these have nothing to do with how the procurement remedies system and court procedures are constructed (Table 2).
Factors contributing to not complaining even though there was an error
| What factors contributed to the fact that your company did not complain, even though there was an error in the procurement process? | No. of respondents |
|---|---|
| Risk of jeopardizing a good business relationship with the contracting authority | 135 |
| Risk of jeopardizing good business relations with other companies | 106 |
| Long court proceeding times for complaints to the market court | 120 |
| Own legal costs | 103 |
| The risk of having to pay the contracting authority’s and the opposing party’s fees | 92 |
| The amount of court fees | 68 |
| Procurement decision could not have been annulled anymore | 30 |
| Alternative review possibilities were considered adequate (possibility to seek for correction by the contracting authority) | 23 |
| Settling the matter with the contracting authority | 16 |
| Obtaining a replacing contract | 14 |
| Pressure from the contracting authority | 10 |
| New information received after the procurement decision | 7 |
| What factors contributed to the fact that your company did not complain, even though there was an error in the procurement process? | No. of respondents |
|---|---|
| Risk of jeopardizing a good business relationship with the contracting authority | 135 |
| Risk of jeopardizing good business relations with other companies | 106 |
| Long court proceeding times for complaints to the market court | 120 |
| Own legal costs | 103 |
| The risk of having to pay the contracting authority’s and the opposing party’s fees | 92 |
| The amount of court fees | 68 |
| Procurement decision could not have been annulled anymore | 30 |
| Alternative review possibilities were considered adequate (possibility to seek for correction by the contracting authority) | 23 |
| Settling the matter with the contracting authority | 16 |
| Obtaining a replacing contract | 14 |
| Pressure from the contracting authority | 10 |
| New information received after the procurement decision | 7 |
Source(s): Created by the authors
Importance of jeopardizing a good relationship with the contracting authority and with other companies
| Order of importance | Respondents |
|---|---|
| Panel A: Risk of jeopardizing a good relationship with the contracting authority | |
| 1 | 85 |
| 2 | 21 |
| 3 | 10 |
| 4 | 10 |
| 5 | 2 |
| 6 | 1 |
| Panel B: Risk of jeopardizing a good relationship with partners/other companies | |
| 1 | 27 |
| 2 | 37 |
| 3 | 19 |
| 4 | 12 |
| 5 | 6 |
| Order of importance | Respondents |
|---|---|
| Panel A: Risk of jeopardizing a good relationship with the contracting authority | |
| 1 | 85 |
| 2 | 21 |
| 3 | 10 |
| 4 | 10 |
| 5 | 2 |
| 6 | 1 |
| Panel B: Risk of jeopardizing a good relationship with partners/other companies | |
| 1 | 27 |
| 2 | 37 |
| 3 | 19 |
| 4 | 12 |
| 5 | 6 |
Note(s): Panel A: Six respondents answered that jeopardizing the business relationship with the contracting authority influenced the decision, but did not indicate the order of importance. Panel B: Six respondents answered that jeopardizing the business relationship with partners/other companies influenced the decision, but did not indicate the order of importance
4. Discussion
The purpose of this paper was to study whether companies’ trust procurement judicial review process in Finland, how that trust affects companies’ decision-making in participating public procurement awards and what are the main reasons why economic operators do not appeal against erroneous procurement decisions. To reply these questions, trust is viewed from two different perspectives: trust in the judicial review process on one hand and trustworthiness and reputation of an economic operator on the other.
Our first research question concerned companies’ trust toward judicial review in public procurement and whether it has changed over the past 10 years. Our research shows that in Finland, only one-fourth of companies that responded to the survey trusted completely or a lot in the judicial review. Instead, as much as 68% of companies said they had somewhat, a little or no trust at all in the judicial review in public procurement. It is clear that these figures seem quite problematic from the perspectives of legal protection and efficiency of the public procurement framework. As there has been an ongoing interest toward effective judicial review and remedies both by the European Commission and the Member States over the years, we asked the companies whether their trust in the judicial review has changed over the past 10 years [12]. 43% of these companies answered that their level of trust had gone down over the past 10 years, whereas only less than 1% answered that their trust had increased. Trust is a subjective belief (Mayoral, 2017, p. 555). According to Wallace and Goodman-Delahunty, when individuals are asked to report their level of trust, their answers reveal the respondents’ perceptions based on their subjective assessment. Thus, behavior is a more accurate indicator of individual attitudes and beliefs than self-assessment (Wallace and Goodman-Delahunty, 2021, p. 8). Even though, according to the Commission Report, the Remedies Directives have generally met their objectives of increasing the guarantees of transparency and nondiscrimination (European Commission, 2017), our study shows that the weakening of trust in the judicial system has an impact to companies’ interest in participating to tendering processes.
Our second research question concerned the reasons that impact the trust in the judicial review process and whether these affect companies’ willingness to participate in public contract awards. 7% of the companies responded that weakening of trust had not had a negative impact on their willingness to participate in public contract awards. In contrast, 54% of respondents said that the weakening of trust had had a negative impact either a lot or to some extent. This is particularly alarming as the effectiveness of the whole public procurement regime is subject to its ability to attract competition (Sanchez-Graells, 2016; Halonen, 2021). Decreasing level of competition and its negative effects on public expenditure is one of the main concerns of European and national policy makers and is likely to be addressed in the upcoming procurement directives’ reform [13]. Lower competition transfers into higher prices [14] and consequently lowers the regime’s possibilities to promote other goals such as sustainability. If there is no competition and companies are not incentivized to bid for the award of the contract, other goals cannot be achieved through public procurement either. The level of competition is generally low across EU, but from the perspective of sustainability objectives associated with public procurement it is particularly problematic if firms are not encouraged to participate in public contract awards as the use of sustainability criteria may further decrease the amount of tenders [15].
The most important factors behind the distrust or the weakening of trust [16] according our results were favoritism (corruption), which relate mostly to the lack of transparency or tailored requirements in the procurement documents. Different forms of transparency have different consequences. Bauhr et al., who studied the impact of ex post and ex ante transparency concluded that especially problems relating to ex ante transparency, such as missing information in the call for tender documents, has a direct impact on companies’ decisions to participate (Bauhr et al., 2020, pp. 502–503). Usually those economic operators that have prior experience and contractual relationship with the contracting authority are the ones that know how to fill the gaps of missing information. Similar findings can also be made on the basis of our survey. There were many replies to the open field questions that suggested that the weakening of trust is a result of a belief that certain awards are designed for a certain preferred bidder [17]. This tailoring effect has also been recognized in earlier studies in the UK by Craven and Arrowsmith [18].
The aim of the Public Procurement Directive 2014/24/EU was to simplify public procurement procedures and make them more flexible, provide better access to public procurement markets for SMEs and strengthen measures to prevent conflicts of interest, favoritism and corruption, among other changes (European Commission, 2015, p. 20). Also the Remedies Directives 89/665/EEC and 2006/77/EC aim for effective enforcement of procurement rules and effective judicial protection. Our research shows that this goal has not been achieved with the current regime as the main reasons for the weakened trust toward judicial review are the doubts toward its ability to fix tailored procurements (favoritism), which in consequence appears to impact also companies willingness to participate in future public procurement procedures.
Our third and final research question was to understand the reasons why companies do not appeal against procurement decisions. We had looked into this briefly already in our previous study where we studied reputational factors in the context of Finnish procurement litigation from two different perspectives. Reputational factors proved to be one of the main reasons for companies to withdraw their appeal from the Finnish Market Court as well as to refrain from litigation in the first place. This previous survey had however certain limitations regarding the small sample size as well as the fact that it only included replies from companies that had already appealed. Thus, this is why it was not possible to draw broader conclusions based on the earlier results. But the survey presented in this paper and carried out with a larger randomized sample, confirms the results of our earlier study. As mentioned above, 302 out of 352 respondents replied that they had not appealed against procurement decisions to the Finnish Market Court. The two most important factors affecting companies’ decision not to appeal was either the risk of jeopardizing a good relationship with the contracting authority or with other companies.
This finding is interesting as it suggests that the main reasons for not appealing against an erroneous decision is not related to the error in question or even to the procurement as a whole nor the perceived effectiveness of the judicial review system itself, but instead to a fear of losing business opportunities in future. Addressing reputational concerns through public procurement rules is difficult. If gaining a brand of being litigious or difficult business partner is the main driver for not appealing against erroneous public procurement decisions, we should perhaps consider whether there could be some kind of anonymous review mechanisms or at least increase the possibilities to make requests to the national procurement monitoring authority to investigate the matter instead of court proceedings. This would likely mean a larger role for the monitoring authorities in the judicial system and would likely require a significant increase of resources to the procurement monitoring authorities. Similarly, the concerns and potential thresholds created by litigation costs and duration of court proceedings are difficult to address through EU public procurement rules as these are issues related to national procedural rules.
The results of this study concerning the three research questions – trust in the judicial review system, reasons for weakened trust thereto and the reasons for not appealing against erroneous procurement decisions demonstrate an interesting divergence. Most companies do have limited trust in the Finnish procurement judicial review system and it has stayed the same or decreased over the past 10 years. But the main reasons why companies do not initiate legal proceedings appears not, however, to be related to the lack of trust to the judicial review system itself, but rather to the fear of gaining litigious or bad reputation. These results can perhaps be explained by the fact that to most companies refraining from initiating court proceedings is a more long-term business decision than an attempt to seek for justice in a particular contract award.
Trust and reputational factors are both culture and context oriented. This topic has been studied before in the context of other jurisdictions and the concerns have been identified in other studies as well. It should however be recognized that there may be some country specific differences between the jurisdictions which need to be taken into account and may render difficult to develop an EU wide approach that would enhance the remedies systems across the internal market. From the perspective of this paper, it appears that there can be some cultural differences between reputational concerns and whether being litigious and appealing against a procurement decision is considered to harm one’s business opportunities. This appears to be the case at least in the UK, Japan and Finland, whereas, for example, in Poland, similar concerns are not perhaps as relevant. In Finland in particular, the open field replies to our survey questions revealed that the court proceedings are considered long and resources consuming, which seems to be particularly problematic for the SMEs. Finnish court processing times are among the slowest in the EU due to the absence of statutory maximum proceeding times, expedited proceeding rules or flexible and quick complaints board system.
5. Conclusions
The importance of trust in the context of public procurement remedy system has so far not been studied this extensively or with such extensive empirical material. The purpose of this paper was to study companies’ trust in the judicial review, how this affects companies’ interest to participate in public procurement contract awards and factors affecting their decision to appeal against erroneous decisions. The results are not encouraging: almost 70% considered that there is somewhat, a little or no trust in the public procurement judicial review system and its ability to correct an erroneous decision. This is particularly alarming as the lack of trust also appears to affect economic operators’ interest in participating in public contract awards, which in turn is problematic from the perspective of effective public procurement regime as a whole. Regardless of whether or not the public procurement remedies rules provide an effective avenue to seek justice and to correct errors, the remedies system does not work if companies’ do not have trust in it. In public procurement, the factors behind the weakened trust, such as favoritism, should be tackled more effectively.
Even though the weakened trust in judicial review has an impact on companies’ willingness to participate in public contract awards, our study showed that the main reasons for companies not appealing are not related to the judicial review procedure or even the breach in question. Instead, companies view appealing primarily as a business decision and are mostly concerned about the risk of losing business opportunities in future. This finding aligns with earlier studies that have shown that reputational factors and the risk of being considered litigious are common reasons for not appealing, although this may be subject to certain cultural differences. This result is problematic from the perspective of public procurement remedies system, which is designed for enabling courts to correct erroneous decisions, but not to solve the issues of reputational business risks. One way of addressing this issue and increasing the effectiveness of public procurement judicial review and remedies, would be to seek for alternative, anonymous review mechanism (if any) and to increase availability to request procurement monitoring authority to intervene procurements.
Notes
European Commission has considered to reform the remedies directive some years ago, but did not find it necessary, see Commission, Report on the effectiveness of Directive 89/665/EEC and 92/13/EEC as modified by the Directive 2007/66/EC concerning review procedures in the area of public procurement. See more about the topic (Sanchez-Graells, 2018). It has also been suggested in the legal literature that one way to make the remedies system more efficient is to combine lean thinking, proactive legislation and legal design as tools and methods to redesign the public procurement review system to make it more efficient, accessible, understandable and user-centred (Kaave et al., 2025).
In many Member States, the delay caused by the appeal is considered a significant risk for the procurement’s execution as the exact length of the process is unknown and previous contracts are about to expire, for example, Sweden and Finland, see SOU (2018), Upphandlingsmyndigheten (2017) and Halonen and Tukiainen (2020, pp. 32–33).
See for instance different definitions of trust in Hardy et al. (1998, pp. 66–72).
Craven and Arrowsmith (2016). However, in their research data, there was one answer, where the supplier said that “we have strong suspicions that many projects are defined in such way as to prejudge/pre-select the winner”.
Pachnou (2003, pp. 257–259 and 326–329). Nonconfrontational legal culture had a significant influence on both suppliers and procuring entities, see Craven and Arrowsmith (2016, pp. 245–246).
There was an earlier control question and only those companies that had experience from public procurement award from the past three years received our subsurvey.
Five respondents replied “cannot say”.
If the respondents chose more than one option, they were asked to rank the options in order of importance.
See about corruption in public procurement Preventing Corruption in Public Procurement, OECD 2016.
Trust may vary depending on the type of the court. Popelier et al. argues that judges specializing to certain subjects in specialized courts will contribute to more effective, efficient and predictable decision making. On the other hand, specialization is often connected to some potential drawbacks, such as isolation and even developing stereotypes about the cases that they analyze, see Popelier et al. (2022, pp. 361–362).
See Halonen and Tukiainen (2020), Titl (2023), Konkurrence og Forbrugerstryrelsen (2023), See Special report 28/2023: Public procurement in the EU – Less competition for contracts awarded for works, goods and services in the 10 years up to 2021, European Court of Auditors, Special report 28/2023: Public procurement in the EU (europa.eu).
See e.g. European Commission (2015, 2017).
Also, in Finland, the need to increase the efficiency of judicial review in public procurement matters has attracted attention and some attempts to shorten the lengthy proceedings have been made, see e.g. Halila (2021, p. 47).
See fn 42.
A recent research paper based on Spanish data presents empirical evidence that the use of sustainability criteria decreases number of bids a bit: use of environmental award criteria (−5.6%) and socially responsible award criteria (−8.3%), see Carreras (2023). There is empirical evidence from several countries on the relationship between amount of tenders and prices in public procurement, see Jääskeläinen and Tukiainen (2019, p. 17 and 20), Halonen and Tukiainen (2020), Titl (2023), Konkurrence og Forbrugerstryrelsen (2023).
See on the low level of competition across the EU, European Court of Auditors Special report 28/2023 and on the relation between sustainability criteria and amount of tenders Carreras (2023, p. 25).
Oomsels and Bouckhaert define distrust as the intentional and behavioral rejection of vulnerability by a trustor on the basis of negative expectations of a trustee, see Oomsels and Bouckhaert (2014, p. 588). See also Popelier et al. (2022, 358).
These included among others the following phrases: “certain ones are preferred, for example, old acquaintances”, “call for tenders are customized”, “it is known in advance who will win the competition” (translated by the authors).
A supplier in their study stated that “many projects are defined in such a way as to prejudge/preselect the winner”, see Craven and Arrowsmith (2016, p. 249).
The authors would like to express their gratitude to the Finnish Consumer and Competition Authority for the valuable collaboration in the conclusion of the survey and collecting the data, to Aarne Puisto (LL.M.) for helping to draft the survey questionnaire and the reviewers for their valuable comments to this paper. This study was supported by the Academy of Finland research project funding, Kulttuurin ja Yhteiskunnan Tutkimuksen Toimikunta, Grant No. 340044.

