European Union: Commission Consults On Modernisation Of EU Public Procurement Policy

Last Updated: 10 February 2011
Article by Siobhan Costello

The European Commission has published a Green Paper on the modernisation of EU public procurement policy. Public procurement law was developed to ensure the most efficient use of public funds and to keep the EU procurement markets open.  In light of the current economic climate the Commission considers there is a need to modernise the existing procurement rules.

The aims of the modernisation are:

  • to increase the efficiency of public spending by ensuring the best possible procurement outcomes and the widest possible competition for contracts;
  • to allow procurers to make better use of public procurement in support of common societal goals, including protection of the environment, energy efficiency; and
  • to tackle issues that are not sufficiently addressed in the current rules, such as preventing corruption and favouritism.

The Green Paper does not contain any policy decisions by the Commission, but asks many questions on a wide range of issues including, whether the Part A/B services distinction should be narrowed or eliminated, whether the thresholds should be increased, whether there should be more negotiation in procurement processes, whether the exclusive rights exemption should be narrowed, and whether some utility sectors should still have their own separate regime.  The consultation will close on 18 April 2011. 

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Part A & B services

Under the existing procurement rules, there is a distinction between Part A services and Part B services. While Part A services are subject to the full rigours of the rules, Part B services and do not require to be advertised in the Official Journal of the EU (OJEU). The rationale behind this was the presumption that Part B services were almost exclusively domestic in nature. The Commission now doubts whether that is still the case. It considers services such as water transport services, hotel services and personnel placement and questions whether they in fact do represent a lesser cross-border interest than Part A services.

The Commission acknowledges that the distinction between Part A and Part B services is a source of difficulty and can lead to errors in the application of the rules. It concludes that the simplest solution would be to eliminate the distinction between Part A and Part B services altogether, but given the importance of such a change the Commission will await the responses to the consultation to see whether that indicates a desire to simplify the existing regime.

Thresholds

Some stakeholders consider that the thresholds under the current rules are too low and that they should be raised. The Commission notes, however, that increasing the thresholds would exempt more contracts from the requirements of publishing an OJEU notice, reducing business opportunities for undertakings throughout Europe.

Exclusive rights

The existing rules permit the use of the negotiated procedure without prior publication in cases where "for reasons connected with the protection of exclusive rights, the contract may be awarded only to a particular economic operator", in other words there is non-existent competition so advertisement would be pointless. The Commission has voiced concerns that granting exclusive rights jeopardises fair competition in procurement markets. It is therefore considering whether the rules should only allow contracts to be awarded without a competitive procedure on the basis of exclusive rights if there has been a transparent, competitive procedure at the stage of the award of the exclusive right.

More negotiation

The Commission is considering whether more negotiation should be allowed in public procurement, for example by allowing the negotiated procedure with prior publication to be used more generally.

Some stakeholders argue that more negotiation would be appropriate for smaller contracts, whilst others say that it would be useful for tendering large-scale projects, particularly public-private partnerships. The Commission asks consultees to comment on whether they would be in favour of allowing more negotiation and/or generalizing the use of the competitive negotiated procedure. The Commission will carefully consider the results of the consultation before making any changes.

Public utilities

Activities in the sectors covered by the Utilities Directive are carried out by public authorities and commercial companies (often private) operating on the basis of special and exclusive rights. More and more private entities are also obtaining the right to operate utilities even whether they do not have special or exclusive rights. The Commission asks whether it is still relevant that a private entity has special or exclusive rights, or whether other criteria should be used.

Whilst there has been a degree of sectoral liberalisation, some utility companies still have very high market shares. Furthermore, under Article 30 of the Utilities Directive, certain procurements can be excluded from the scope of the Directive where the level of competition is such that competitive pressure will ensure the necessary transparency and non-discrimination in procurement by utilities.

The Commission asks whether there is still a need for procurement rules covering utilities sectors and, if so, whether certain sectors should be excluded. It is also consulting on whether the Article 30 procedure is effective in adapting the scope of the Utilities Directive to changing patterns of regulation and competition.

Selection and award

Under the current procurement rules, there is a sharp distinction between pre-selection and award. During the selection stage, bidders can only be excluded on the basis of economic and financial standing, professional and technical knowledge and ability. At the award stage, the winner is chosen on the basis of objective criteria related to the quality of the products and services proposed. Considerations linked to the tenderer's ability to perform the contract, such as his experience, manpower, equipment cannot be taken into account at the award stage.

Contracting authorities often argue that this distinction increases the administrative burden. The Commission therefore considers that there might be an argument for reconsidering the organisation and the sequence of the examination of selection and award criteria within the procedural framework. It is seeking views on whether it may be possible, or practical, to examine the award criteria before the selection criteria.

The Commission is also examining whether there may be grounds for the more fundamental change, allowing contracting authorities to take into account pre-qualification bidder-related criteria (for example experience and qualification) as award criteria.

Administrative burdens in the selection phase

The Commission acknowledges that there is a high administrative burden on SMEs in the selection phase. A large number of certificates are required at the selection phase.

The Commission is therefore considering whether to allow undertakings to submit only a summary of the relevant information for selection and/or provide self-declarations on the fulfilment of the selection criteria as a first step. Only the successful tenderer(s) admitted to the award phase would then be asked to submit certificates.

Link to the subject matter of the contract

Under the existing rules, requirements/award criteria must be linked to the subject-matter of the contract. This link ensures that the purchase itself remains central to the process and not other policy conditions. Some stakeholders advocate more flexibility here and suggest softening or even dropping the condition that requirements imposed by the contracting authority must be linked to the subject matter of the contract. Relaxation of this requirement might enable authorities to go further in pursuing Europe 2020 policy objectives through public procurement. It would allow authorities to influence the beahviour of companies in light of these policy objectives e.g. to encourage more environmental responsibility.

The Commission asks whether criteria not linked to the subject matter of the contract, in the sense that contracts could be awarded on the basis other than economic criteria, could give rise to a State aid concern. The Commission also asks whether public procurement legislation should allow contracting authorities to impose contract execution clauses that are not strictly linked to the provision of the goods and services in question (e.g. requiring the contractor to put in place child care services, or allocate a certain amount of remuneration to social projects).

Protection of IP in a competitive dialogue

The Commission notes that there is a concern in competitive dialogue procedures with the "cherry picking" of IP rights or innovative solutions. If a participant discloses unique features of its solutions these may become known to other candidates. The authority finds itself in a bind between protecting confidential information and the need to disclose some information in order to get the solution that best fits its needs. The Commission asks whether the competitive dialogue procedure allows sufficient protection of IP rights and innovative ideas.

Incumbent advantage

The Commission recognises the natural advantages of incumbent bidders and asks whether the advantages of tenderers (because of their prior association with the project or otherwise) is a subject that should be addressed at EU level.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 08/02/2011.

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