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Under the EC Treaties the European Commission is responsible for
ensuring that European Union (EU) public procurement law is correctly
applied. As the guardian of the EC Treaty, the Commission has the
option of commencing infringement proceedings under Article 226
EC against a Member State which, in the eyes of the Commission,
infringes EU law, in particular the principle of free movement of
goods. The Commission can try to bring the infringement to an end
and, if necessary, may refer the case to the European Court of Justice.
Ireland – advertising requirements
The Commission has decided to refer Ireland to the European Court
of Justice over the extension, without competition, of the contractual
arrangements with An Post (the national Post Office) for the provision
of social welfare payment services.
The Commission sent a reasoned opinion, to which the Irish authorities
did not reply satisfactorily, in December 2002 (see IP/03/266).
The case is not specifically covered by the detailed procedural
requirements for the advertising and award of contracts laid down
in the Directive on the public procurement of services (92/50/EEC).
However, it is covered by the general provisions of that Directive,
by general EU law obligations such as non-discrimination, equal
treatment and transparency and by the principles covering the free
movement of services laid down in the EC Treaty.
The Irish authorities concerned should therefore have ensured,
for the benefit of any potential tenderer, a degree of advertising
necessary and sufficient to ensure competition.
The precise scope and form of the advertising required depends on
the nature of the services in question and the extent to which the
contract is of interest to potential regional, national or EU-wide
service providers. The contract to An Post, for example, amounts
to around e40 million and could have interested a number of suppliers
outside Ireland. Advertising would therefore have to be more than
simply national.
Italy – competition requirements
Following a reasoned opinion sent in March 2003 (see IP/03/486),
the Commission has decided to bring an action against Italy before
the Court of Justice. According to an Order of the President of
the Council of Ministers dated 24 July 2002 the Italian body responsible
for the surveillance of woodland (Corpo Forestale dello Stato) is
authorised to purchase the most suitable aircraft for its purposes
by means of a direct agreement procedure outside the competition
rules laid down in the EU Directives on public contracts.
As the Court of Justice has repeatedly pointed out, the provisions
which, under the Directive on public supply contracts (93/36/EEC),
authorise derogations from the competition requirement must be interpreted
strictly. It is for the contracting authority wishing to make use
of them to demonstrate the existence of circumstances that justify
these derogations – for example reasons of extreme urgency
brought about by events unforeseeable by the contracting authorities
in question. According to the Commission, there are no such circumstances
in the present case.
Germany – tendering rules
The Commission is referring Germany to the Court of Justice in connection
with a waste disposal contract awarded by the District of Friesland
without the required Europe-wide tendering procedure as provided
for in the Directive on the award of public service contracts (92/50/EEC).
The contract was awarded in 1994, for the period
1995-2004 and for a value of DM29 million (e14.83 million).
Germany admitted the breach of EU law in answer to the letter of
formal notice sent by the Commission in July 2000. However, it argued
that an early termination of the contract was impossible without
claims for damages and that the contract will not be extended beyond
the closing date originally provided for. Future services will be
awarded in compliance with EU law.
However, this has not remedied the existing violation of EU law
as the contract remains in force until the end of 2004. Furthermore,
similar cases continue to occur in Germany. The Commission is currently
at an early stage of assessing a similar case in the District of
Friesland, where the same contracting authority is concerned.
Greece – advertising requirements
The Commission has decided to send Greece a reasoned opinion on
the award by the Greek airforce of a contract for the supply of
14 automatic weather stations without publication of a notice in
the Official Journal of the European Union (OJEU). Since the contract
exceeds the threshold laid down in the Directive on public supply
contracts (93/36/EEC), a notice should have been published in the
OJEU.
The Commission considers that the contract cannot be covered by
the exception provided for in the case of the supply of certain
equipment in the field of defence, since the supplies in question
are not primarily destined for military use.
These weather stations should permit the modernisation of the system
used by the National Meteorological Agency and will principally
be used for the Olympic Games, and subsequently by the Agency to
meet the needs of civil, and possibly military, aviation.
Nor does it seem possible to invoke another exception in connection
with reasons of extreme urgency brought about by events unforeseeable
by the contracting authorities. The need to have operational weather
stations for the 2004 Olympic Games cannot be regarded as an unforeseeable
event. Finally, the need would not appear to be so urgent that the
deadlines required under the open and restricted procedures could
not be respected.
Italy – award procedures
The Commission has decided to send Italy a reasoned opinion on the
award procedures applied for the construction and management of
the Valtrompia and Pedemontana Veneta Ovest motorways.
The competent authority in Italy for the granting of national-level
motorway concessions (ANAS – a body governed by public law)
awarded a concession for the construction and management of the
motorways in question by means of a direct agreement without prior
competition at EU level.
Under the Directive on the coordination of public works contracts
(93/37/EEC), contracting authorities wishing to award a concession
for public works must, if the value of the works is e5 million or
more, announce their intention by means of a notice to be published
in the OJEU.
Netherlands – advertising requirements
The Commission has decided to send the Netherlands a reasoned opinion
on contracts for the supply of household refuse containers awarded
by the local authority in Assen to a supplier under a direct agreement.
The Directive on public supply contracts (Directive 93/36/EEC)
does not apply to these contracts, as the amounts involved were
below the threshold for the application of that Directive. The Commission
considers, however, that the fact of awarding these contracts directly
to a supplier without competition constitutes a violation of the
general principle of the EC Treaty concerning equality of treatment
deriving from the principle of non-discrimination on grounds of
nationality. There should have been an adequate degree of advertising
in order to enable different businesses to compete so that the contract
could be awarded to the tenderer submitting the best bid, thus guaranteeing
that public money is well spent.
Sweden – tendering rules
The Commission has decided to issue a reasoned opinion against Sweden
concerning a decision by the Municipality of Eskilstuna to award
a framework contract covering several works worth at least e19.6
million without applying the tendering rules in the Directive on
the procurement of public works (93/37/EEC).
Although the Swedish authorities have acknowledged the infringement
and announced that some of the works have already been finished,
the Commission considers that the works as a whole are still ongoing
and has decided to issue this reasoned opinion.
If the Works Directive is not properly applied, there is a risk
that EU companies will be deprived of a fair chance to bid and the
public entity in question, and thus the taxpayer, may pay a higher
price than necessary for the works.
Belgium – specification of origin
The specifications for a works contracts awarded in Wallonia stated
that all quarrying of bluestone would have to take place in Belgium.
Prescription of origin is prohibited in principle under European
law. The Commission sent a letter of formal notice dated 16 October
2002, and the specifications will henceforth state that equivalent
natural stone from other countries will also be acceptable. The
Commission has therefore decided to close the case.
Germany – tendering rules
In 2001, the City of Freiburg awarded a 15-year contract worth
e3.7 million to a private company, of which it owns 32%, for the
supply of heating. No Europe-wide tender procedure was carried out
as required by the Directive on public procurement of supplies (93/36/EEC).
Germany has acknowledged this breach of EU law. However, it claimed
that the case constitutes an exceptional misinterpretation of the
European Court of Justice’s case law on ‘in-house’
awards. The city authority believed that the contract would not
require a tender as it was awarded to an entity controlled similarly
to the authority’s own internal departments. The city authority
has awarded a number of other contracts since the one in question,
in accordance with the procedures required by EU law.
However, the Commission’s view is that the breach of EU law
is continuing and will do so until the end of the contract in 2016,
unless steps are taken to remedy it. The fact that the City of Freiburg
has fulfilled its obligations in other procurement activities does
not mean Germany has remedied the breach in question. Consequently,
the Commission has decided to send a reasoned opinion to the German
authorities.
Ireland – tendering rules
The Commission has also decided to send a reasoned opinion to the
Irish authorities asking them to put right non-compliance with EU
public procurement rules in the award, without competition, by the
Irish Forestry Board of contracts for the aerial fertilisation of
forests by helicopter.
The Irish authorities classify the Irish Forestry Board as a private
entity not subject to the public procurement rules, despite the
fact that it has the important role of maintaining national forests
and assisting the development of the forestry industry.
However, the Commission takes the view that the Board is a body
governed by public law, as defined in Article 1(b) of the Directive
on the public procurement of services (92/50/EEC), and therefore
subject to EU procurement rules. A previous judgment of the European
Court of Justice (17 December 1998, case C-353/96) already classified
the Irish Forestry Board as a contracting authority.
As a result, the Commission considers that even if the specific
contracts in question are not covered by the detailed procedural
requirements for the advertising and award of contracts laid down
in Directive 92/50/EEC, they do fall under the general provisions
of that Directive and under EC Treaty principles. The contracts
should therefore have been adequately advertised.
Ireland – advertising requirements
Ireland has not complied with a reasoned opinion sent to it over
the renewal of the contract for Dublin City Council (formerly Dublin
Corporation Fire Brigade) to provide emergency ambulance services
to the Eastern Regional Health Authority (see IP/03/266).
The Commission will now take the case to the European Court of
Justice.
The case is not specifically covered by the detailed procedural
requirements for the advertising and award of contracts laid down
in Directive 92/50/EEC on the public procurement of services. However,
it is covered by the general provisions of that Directive, by general
EU law obligations such as non-discrimination, equal treatment and
transparency and by the principles covering the free movement of
services laid down in the EC Treaty.
The Commission therefore considers that, in line with those obligations,
the Irish authorities should have ensured, for the benefit of any
potential tenderer, a degree of advertising necessary and sufficient
to ensure competition.
Italy – framework law on public works
The Commission has decided to send Italy a reasoned opinion concerning
certain provisions of the framework law on public works, No 109/94,
as last amended by Law No 166/2002.
The Commission wants Italy to amend its legislation to bring this
framework law into line with the Directives on public contracts
and thereby make those contracts open to intra-EU competition.
In particular, the Commission’s action is designed to:
- Avoid situations where national rules on the scope of the Directive
on public work contracts which are not in conformity with EU law
result in public contracts not being published at EU level in
accordance with the Supplies and Services Directives, whose application
thresholds are much lower than those in the Works Directive.
- Ensure that the competition rules of EU Directives on public
contracts are applied in all cases or, where they are not applicable,
to ensure that the contract is sufficiently advertised in accordance
with the general principle of transparency. This applies, for
example, to work performed by way of payment for planning permission
and engineering, architectural and project assessment services
falling below the thresholds of the EU Directives, and to management
services and technical inspection services (collaudo).
- Avoid situations where national rules such as that on the right
of pre-emption (prelazione) of the promoter within the framework
of project-financing procedures discriminate against non-nationals
who bid for public contracts.
Italy – contract awards
The Commission has also decided to send a reasoned opinion to the
Italian authorities concerning their methods of awarding contracts
for the construction and management of gas distribution networks
by the eight municipalities constituting the catchment areas known
as Puglia 25 and Puglia 29 (including San Giovanni Rotondo, San
Nicandro Garganico and San Marco in Lamis).
From 1991, these eight municipalities awarded contracts for the
construction and management of the networks to one company via a
negotiated procedure, without putting the contracts out to tender
at EU level.
The Directive on public works contracts (93/37/EEC) states that
contracting authorities wishing to award a public works contract
(if the value of the contract is e5 million or more) must publish
a notice in the OJEU. The same rules are provided for in Directive
89/440/EEC.
The Commission considers that, as the above-mentioned Directives
do not lay down exemptions for the award of a public works contract
via a negotiated procedure, the aforementioned contract awards should
have been awarded via competitive tender.
Germany – tendering rules
On 10 April 2003, the European Court of Justice ruled in joint cases
C-20/01 and C-28/01 that the Federal Republic of Germany had failed
to fulfil its obligations under Directive 92/50/EEC in two cases
of service procurement by local authorities in the State of Lower
Saxony. In 1996, the City of Brunswick awarded a contract for waste
disposal by negotiated procedure without prior publication of a
contract notice. In 1998, the Municipality of Bockhorn did not invite
tenders for the award of a contract for the collection of its waste
water. The contracts have been signed for a minimum of 30 years.
The Commission asked the German Government to provide information
on the measures it had taken to comply with the judgment of the
Court. However, the German Government simply replied by repeating
its previous arguments, namely that it had always acknowledged the
violations and had taken all necessary measures to avoid their repetition
in the future.
The Court established in its judgment that the violation of procurement
law continues throughout the execution period of the contracts awarded
in breach of the Directive. As the present contracts will be in
effect for decades, the Commission considers that it is not sufficient
to avoid future violations. Measures to end the current infringements
are required. Consequently, the Commission has decided to send a
letter of formal notice. If the German authorities still do not
comply, the Commission can ask the Court to impose a daily fine.
Greece – tendering rules
Presidential Decree 334/2000 (OJ 279, 21.12.2000) imposed restrictions
on the building firms which could take part in procedures for the
award of public contracts. In the absence of official national registers
of contractors, the Decree only allowed companies to produce references
to similar works constructed in their country of origin and other
EU or EEA Member States.
The Commission considered that this provision infringed Directive
93/37/EEC, because it constituted, without any technical justification,
discrimination against tenderers who had carried out works outside
EU and EEA territory, who were consequently automatically eliminated
from procedures for the award of public contracts in Greece.
Following the Commission’s intervention, the Greek authorities
acknowledged the illegal nature of the disputed provision and, on
9 December 2002, communicated the regulatory text (Article 2 of
Presidential Decree 336/2002, published in the Official Journal
of the Hellenic Republic, Vol I, No 281, 20.11.2002) which amends
the disputed provision by allowing companies or physical persons
from EU or EEA Member States in which official registers of contractors
are not held to take part in competitionsfor the construction of
works similar to those that they have already built, irrespective
of where such works are located.
Luxembourg – appeals
The Luxembourg legislation, insofar as it stipulated that the award
involved an amount which was sufficient to justify a competitive
procedure, did not allow a meaningful appeal against a decision
(that is to say, at a stage where infringements could still be corrected
by starting the procedure again, ie prior to the contract being
signed).
In these circumstances, the Commission considered this legislation
to be contrary to Directive 89/665/EEC as interpreted by the Court
of Justice in the Alcatel judgment of 28 October 1999, which requires
the Member States, as part of the award procedure,
to enable tenderers to apply for cancellation of a decision. Accordingly,
the Commission sent a letter of formal notice in October 2002.
By adopting the Grand-Ducal Regulation of 7 July 2003, the Luxembourg
authorities have ended the infringement. Article 90 of the Grand-Ducal
Regulation introduces a 15-day period between notification (to the
unsuccessful tenderers) of the contracting authority’s decision
and signature of the contract.
This is the fifth Supplier Guidance on Infringement. Previous Guidance
Nos 12/2002, 13/2002, 12/2003 and 13/2003 are available at www.bipsolutions.com/html/briefing.php
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