Malta: under-cutter sues government over pro-worker procurement

Cleaning workers faced grave uncertainty when a company sued the Maltese government for awarding a public tender based on having a collective bargaining agreement. UNI Europa warns that the threat of legal action is having a cooling effect on the inclusion of social conditions in public procurement. 

The Maltese government procurement agency awarded a contract for cleaning public educational facilities to a company partly because it had a collective bargaining agreement with its workers. An undercutting company, which does not negotiate with its workers over their conditions, sued the agency to overturn this decision. Through its legal action, the company attempted to force the government not to consider collective bargaining as a preference in a public contract tender. 

The favouring of companies with collective bargaining agreements when awarding public contracts is in line with best practice guidelines like the EU’s Buying Social and aligns with the European Economic and Social Committee advice entitled ‘public procurement as a tool to create value and dignity in work in cleaning and facility services’. However, this case in Malta reveals the very real threat of legal action that public buyers face. 

“This is the visible part of the iceberg. The legal uncertainty means that public authorities are often hesitant to include pro-worker clauses in their tenders. Across Europe, the threat of legal action puts local authorities off adding strong pro-worker conditions to their public tenders. This example in Malta shows that certain undercutting companies are emboldened enough to follow through. The European Commission must take note and fix the Public Procurement Directives so that this threat is neutralized,” said Oliver Roethig, Regional Secretary of UNI Europa.  

Lowest price: against public interest 

Too often public contracts are awarded based only on one criteria: the lowest price. This incentivises companies to undercut each other on labour costs. Given that collective bargaining is the main tool workers have to improve their pay and conditions, companies are incentivized to shut it down. 

By refusing to negotiate with workers’ unions, they impose the lowest pay and conditions they can get away with. This often results in people having to survive on poverty pay, precarious conditions and irregular hours. When public contracts are awarded based solely on lowest price, public money fuels a race to the bottom on working people’s pay and conditions. 

It is not only workers and their unions alone who are raising the alarm about lowest price public procurement. Employers in the cleaning and private security sector have also warned that it is having negative implications for them. “By putting lowest price above all other selection criteria, public bodies risk discouraging quality service provision, harm socially responsible companies and create unsustainable levels of labour shortages,” reads a joint statement by social partners in the cleaning sector. 

UNI Europa has compiled some examples of the real cost of lowest price tendering in its Put your money where your mouth is report.