Brussels sets out plans for major shake-up of EU procurement law

The European Commission has today unveiled its long-awaited proposals for a radical simplification and modernisation of EU procurement law.

The reforms, if adopted, would include enabling contracting authorities to make greater use of negotiation with tenderers to improve the quality of their offers.

Regional and local contracting authorities could also be allowed to replace the publication of individual contract notices with the publication of a general notice for their planned procurement for the next year.

Brussels set out as well its ideas for what it claimed would be a dramatic reduction in documentation requirements.

The Commission said this would be achieved in particular through the compulsory acceptance of self-declarations, “whereby a bidder declares on oath that he fulfils the criteria which are a pre-condition for tendering, e.g. has no conviction for corruption etc”.

Only the winning bidder would then be required to supply the documentary evidence to prove the facts declared in his self-declaration.

Contracting authorities would also be prohibited from requiring economic operators to re-submit documents which were previously submitted to them within the past four years in an earlier procedure and which were still valid.

Brussels claimed that these reforms alone would reduce the administrative burden on companies tendering for contracts by more than 80%.

Member states will meanwhile be expected to set up new national independent oversight bodies to be in charge of monitoring, implementation and control of public procurement.

These bodies will provide support to public authorities and businesses through structures or mechanisms offering legal and economic advice, guidance, training and assistance, the EC said. They would also be expected to cooperate and share best practice.

Brussels’ proposals also envisage a “specific and much simpler” regime for social, health and education services, on the basis that they generally have a limited cross-border dimension.

These areas will be subject to a higher threshold (eur500,000) above which member states will remain free to determine the procedural rules applicable, “while respecting the basic principles of transparency and equal treatment”.

The only obligations will consist in the publication of a contract notice and of a contract award notice, Brussels said. “In addition, member states would have to make sure that contracting authorities may take into account inter alia all quality and continuity criteria they consider necessary for the services in question. Member states may also eliminate the price as sole award criterion for such services.”

The EC said the standard rules – except for social services – would now apply to all services, including legal services.

Brussels argued that it was no longer justified to restrict the application of the normal procurement regime in these other areas, “given that the cross-border tradability of the services which were not covered by the full regime is not significantly lower than those of the others”.

Other significant proposals announced today include:

• A new directive on service concession contracts (for more information, see the bottom of this story)
• Measures on electronic procurement aiming at full electronic communication in public procurement within a period of two-year time after the implementation deadline of the adopted Directives. This should generate “significant savings”
• Shortening of deadlines
• The alleviation of publication requirements
• A new partnership procedure where a contracting authority can cooperate with a company – selected in a regular competitive tender procedure – to develop an innovative product, work or service that does not exist on the market
• Measures to facilitate cross-border procurement
• Improvements to the competitive dialogue procedure
• Specific definition of conflicts of interest, illicit conduct and the limits to when modifications of a contract during its execution are acceptable without new tender procedures
• Contracting authorities should not award a contract to the best bidder if the latter cannot provide the required documentation or if he has provided a false declaration “either on the absence of any privileged links with members of the contracting authority or on the absence of illicit conduct from his side”
• Abnormally low tenders should be investigated
• An established violation of EU obligations in the field of social and labour law or environmental law or violation of the international social and environmental law would lead to the rejection of the tender
• Contracting authorities would be able to specify critical tasks which must be executed by the principal tenderer only and may not be subcontracted
• Changes to the regime applicable to the utilities sector. These include clarification of the notion of special and exclusive rights.

Michel Barnier, European Commissioner for the Internal Market and Services, described the reforms as “necessary, ambitious and realistic”.

He said he wanted the directives to be simpler, more effective and easier for those involved in public procurement.

The Commission said the competitive procedure with negotiation would “simplify public procurement and make it more flexible for more complex contracts”.

The reform would enable contracting authorities to purchase works and services better adapted to their needs and budgetary constraints, it added.

But Brussels admitted that it was conscious of the risks involved in the procedure in relation to transparency, non-discrimination and equal treatment.

“Negotiations shall therefore be supervised: contracting authorities shall specify at the time of prior publication the subject matter of the contract, the award criteria and the minimum requirements to be met,” it said.

“These shall not be changed in the course of negotiations. Any change in those parts of the technical specifications that are open to negotiations must be communicated to all firms participating in the negotiations so that they can submit new, adapted tenders. Before the negotiations are concluded, everybody must be given the possibility to submit a final tender.”

The Commission said that the conduct of the negotiations would have to be documented in the report on the procedure to be drawn up by the contracting authority. All contracting authorities would be subject to oversight by the national independent body.

Brussels has meanwhile rejected calls for increasing the thresholds from their current levels, saying it was not convinced this would achieve further simplification of EU procurement policy. "In essence, increasing the thresholds would mean that a larger proportion of procurement would no longer be covered by the directives, and therefore, only subject to national rules, which might not always ensure the same level of transparency and non-discrimination as provided for by EU law."

It also said the EU had to respect its international obligations and in particular those imposed by the WTO’s agreement on government procurement.

The Commission claimed that its proposals – particularly in relation to the acceptance of self-declarations – would benefit small to medium-sized enterprises, for whom the costs and time of supplying the documents was often a serious obstacle to participation in public tender procedures.

“Furthermore, the list of possible selection criteria is made exhaustive; yearly turnover requirements may not exceed three times the estimated contract value,” it said. “This will hinder contracting authorities from imposing exaggerated turnover requirements which automatically exclude SMEs from participating in the procedure.”

Brussels added that contracting authorities would be ”encouraged” to split contracts into lots allowing for the participation of more bidders and would have to specifically explain why if they were not doing so.

It also suggested that member states might foresee direct payments to subcontractors, “so that these subcontractors – which are often SMEs – get paid quicker and do not suffer from sometimes bad payment practice of the prime contractors”.

The Commission also insisted that its proposals contributed to the Europe 2020 strategy objectives for a “greener, more social, innovative and inclusive economy”.

It has suggested the introduction of a life-cycle cost concept, to encourage public authorities to consider the full life-cycle of products in their purchasing decisions.

Contracting authorities will also be able to take into account criteria linked to the production process of the goods or services to be purchased, and require (subject to safeguards) that works, supplies or services bear specific labels certifying environmental, social or other characteristics.

The current contracts’ reservation in favour of sheltered workshops will also be broadened.

The Commission's proposals will now pass to the Member States and the European Parliament for negotiation and adoption.

If they are adopted by the end of 2012 as provided for in the Single Market Act, the Directives would have to be implemented by Member States at the latest by 30 June 2014.

Philip Hoult

A new directive on the award of concession contracts

The Commission has also unveiled plans for a new directive on the award of concession contracts.

“Unlike public contracts and public works concessions, the award of service concessions is not subject to any clear and unambiguous provisions, being guided only by the general principles of transparency and equal treatment of the Treaty on the Functioning of the EU,” it said.

“This loophole gives rise to potentially serious distortions of the Internal Market such as direct awards of contracts without any competition (with associated risks of national favouritism, fraud and corruption) and generates considerable inefficiencies.”

The EC said the main elements of its proposal were:

• “A clearer and more precise definition of a concession (building on the Court's case law)
• Coverage of award of works and services concessions both in the classic sector (all other sectors not covered by utilities) and in the utilities sector
• Compulsory publication of concessions in the Official Journal of the EU, when their value is equal to or greater than €5m
• Pragmatic solution for dealing with changes to concessions contracts during their term notably when justified by unforeseen circumstances
• Establishment of a minimum deadline of 52 days for the submission of applications for the concession
• Establishment of certain obligations with respect to the selection and award criteria to be applied by the contracting authorities and contracting entities when awarding concessions. These rules aim at ensuring that such criteria are published in advance, are objective and not discriminatory. In general, they are less rigid than similar provisions currently applicable to public contracts
• No specific award procedures but instead definition of certain general guaranties aimed at ensuring transparency and equal treatment with particular reference to negotiation;
• Application of the Remedies Directives to all concessions above the threshold.”

Brussels said it would be for member states to define the applicable procedures for the award of concessions “in observance of certain general rules concerning selection and award criteria and procedural guarantees”.