WATCHING THE WORLD EC'S PROCUREMENT POLICY

Industry ministers from the European Community will try again later this year to reach agreement on the controversial question of procurement policy in the energy, telecommunications, water, and transport industries.

The last attempt, late last year, disintegrated amid recriminations over access to those industries by companies from outside the community, leaving unsolved the question of whether upstream oil operations in the British, Danish, and Dutch sectors of the North Sea should be exempt from any new regulations.

'BUREAUCRACY RUN WILD'

Under EC proposals, offshore operators would be obliged to advertise all but the very smallest contracts in the official EC journal and face guidelines on how to award contracts.

The United Kingdom Offshore Operators Association, representing all U.K. operators, sees the proposals as bureaucracy run wild, which would add substantially to costs at a time when there is great pressure to restrain offshore budgets.

The British government is backing Ukooa's opposition but needs to gather support from other community members. That's not easy because a number of countries see the proposals as an ideal vehicle to maneuver their engineering companies into the North Sea market.

Support could be forthcoming from West Germany, which is opposed to another aspect of the public procurement proposals.

The EC's directive also is aimed at the European gas and electricity industries and has aroused considerable opposition from the continent's most influential gas company, Ruhrgas AG of West Germany.

Ruhrgas was upset because procurement regulations would be imposed throughout Europe without taking into account differences in gas industries in various states. These range from integrated, state controlled companies that dominate domestic gas markets to the situation in West Germany where a few large merchant companies, including Ruhrgas, supply hundreds of utilities throughout the country.

In its campaign against the procurement policy, Ruhrgas has found support from an academic, Prof. Yves Smeers, director of the Center for Operations Research and Econometrics at the Catholic University of Louvain, Belgium.

Smeers analyzed competition in the nontransportation energy market and in particular how far gas companies in various states are protected by barriers that make it hard for potential new suppliers to gain access to the market.

SMEERS' FINDING

Not surprisingly, Smeers found that private sector gas companies cannot afford inefficient procurement policies. In fact, suppliers find themselves squeezed to provide even lower prices.

The professor concluded that the proposed directive would only bring about formal harmonization. In reality, the new regulations would amount to discrimination against gas companies already exposed to substantial competitive pressures.

He suggested a directive that exempts gas companies that already operate in a sufficiently competitive environment.