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European Union (EU) public procurement law aims to ensure that
all European companies have a fair chance to bid for public contracts.
Open and transparent tendering procedures mean more competition,
stronger safeguards against corruption, better service and value
for money for taxpayers and, ultimately, a more competitive Europe.
Representatives of the European Parliament and Council agreed on
2 December 2003 – on the basis of a proposal submitted by
the Commission in May 2000 – on a legislative package simplifying
and modernising EU public procurement law (see IP/03/1649). This
package was formally adopted in early 2004. The Commission will
shortly be publishing a report setting out the potential of more
open procurement to boost the EU economy. Public procurement represents
approximately 15% of EU GDP.
Italy – tendering rules
The Commission decided to bring a case before the Court of Justice
against Italy concerning the award of service concessions for sports
betting operations. The Commission has found that Italy failed to
comply with the general principle of transparency under the EC Treaty
and the resulting publicity requirement when, without any tendering
procedure, it renewed until 2006 with the former concessionaires
some 300 concessions for the management of horserace betting.
Italy – tendering rules
The Commission will also refer Italy to the Court in two cases concerning
the award by ANAS, a body governed by public law, of contracts for
the construction and management of two motorways, the Valtrompia
and Pedemontana Veneta Ovest routes, without any prior invitation
to tender at EU level. The Public Works Directive (93/37/EEC) stipulates
that when the value of the work is at least e5 million contracting
authorities are required to publish a contract notice in the Official
Journal of the European Union (OJEU).
Italy – contract awards
Italy is also to be brought before the Court with regard to the
award by the Municipality of Mantova of the management of a series
of IT services. At the end of 1997, the management of these services
was entrusted by negotiated procedure to the public limited company
ASI, in which at the time the same Municipality of Mantova had a
majority interest. According to the Court’s case law, application
of the tendering procedures provided for in the Directives can be
waived only in cases where the contractor, even if formally separate
from the contracting authority, is not essentially independent of
it as regards decision-making. The Commission considers that the
sole fact that a contracting authority has a majority holding in
a company’s capital is not sufficient to deny that company’s
decision-making independence and thus cannot justify the failure
to apply EU rules.
Italy – contract renewals
In addition, the Commission has decided to send a reasoned opinion
asking Italy to repeal Article 44 of Law 724/1994, which allows
contracting authorities in Italy to renew a public supply or service
contract when it expires with the same contractor without applying
the tendering rules laid down in the public procurement Directives.
UK – bodies governed by public law
The Commission has decided to refer the UK to the Court because
Registered Social Landlords, the main providers of social housing
in the UK, do not apply EU public procurement Directives. These
Directives impose strict procedural and other requirements on bodies
governed by public law so as to ensure that their procurement of
goods, works and services is transparent and non-discriminatory.
The Commission considers that the relationship between Registered
Social Landlords and the Housing Corporation, a public body sponsored
by the former Department for Transport, Local Government and the
Regions, is such that they should be treated as bodies governed
by public law and thus comply with the public procurement Directives.
Austria – sale of company shares after contract award
The Commission will refer Austria to the Court over the award of
a contract for the collection and treatment of waste in the Municipality
of Mödling. The contract was awarded on 15 September 1999 for
an unlimited period directly to a company which was previously established
and fully owned by the Municipality. However, in parallel with the
award of the service contract, the Municipality sold 49% of the
company’s shares to a private undertaking.
The Austrian authorities argued that the Court’s case law
on ‘in-house’ awards applies in this case. That case
law stipulates that the award to entities over which a contracting
authority exercises control similar to that over its own internal
departments does not fall under European public procurement law.
The Commission considers that the Municipality of Mödling does
not exercise such control over the said company, of which it owns
only 51% of the shares. Therefore, the Municipality should have
put the contract out to tender in accordance with the Directive
on the public procurement of services (92/50/EEC).
Finland – advertising requirements
The Finnish contracting authority in charge of government real estate,
Senaatti-kiinteistöt, awarded a contract for the supply of
kitchen equipment worth 1 050 000 Finnish marks (e176 000) without
advertising it. Finland has argued that the sum is below the threshold
of application of the public procurement Directives. However, the
Court’s case law confirms that a contracting authority in
such cases must ensure an adequate degree of advertising, sufficient
to ensure competition and to avoid discrimination on the grounds
of nationality. The Commission will now take the case to the Court.
Greece – competition requirements
On 26 July 2002 Attiko Metro AE (the Athens metro company, a public
entity) signed a contract with Hanhwa Koros for the supply of four
trains for a dual-voltage network, and the transformation of three
trains from single voltage to dual voltage. Hanhwa Koros had already
been awarded a contract for the supply of 17 single-voltage trains.
The July 2002 contract was the subject of an option clause in that
earlier contract, which was neither evaluated nor awarded during
the first procedure. The Commission believes that the award of the
new contract without competition breaches the EU Directive on the
procurement of supplies (93/36/EEC). It has therefore decided to
send Greece a reasoned opinion.
The Greek authorities have not provided evidence to show that the
contractor in question is the sole manufacturer or supplier of the
items concerned, which would be one possible ground for exemption
from the rules in the Directive. Neither can they justify the absence
of competition on the basis of urgency arising from unforeseen circumstances
connected with the 2004 Olympic Games. The fact that the Games would
be held in Athens has been known for many years, and the contracting
authority should have scheduled the work accordingly. Besides, the
inclusion of an option clause in the original tender for dual-voltage
trains to be used on the suburban track suggests that the contracting
authority considered such a development likely.
The new contract cannot be considered as a partial renewal of the
existing supply contract, which would be another potential basis
for exemption, because the dual-voltage trains are different from
the single-voltage ones.
Finally, problems regarding different spare parts and the need
for additional training and more personnel do not constitute disproportionate
technical difficulties within the meaning of the Directive.
Greece – advertising/tendering procedures
The Commission also decided to send Greece a reasoned opinion with
regard to contracts for technical assistance to farmers. To help
farmers take full advantage of certain EU aid measures under the
common agricultural policy, the Greek Government used to conclude
technical assistance contracts each year with specialist firms for
each region, following suitable tendering procedures. In 2001, contrary
to the approach followed previously, a framework programme was drawn
up and the implementing contracts were awarded by negotiation.
The Commission considers that all the implementing contracts fulfil
the same purpose and therefore have to be considered together, which
means that they exceed the threshold in the Directive on public
service contracts (92/50/EEC) and thus come within its scope. The
detailed advertising and tendering procedures laid down in the Directive
should therefore apply. Lastly, the argument put forward by the
Greek authorities that only the chosen contractors had the technical
capacity to carry out the contracts was at odds with the facts,
since up to 2001 these contracts were subject to tender and they
would be again from 2003 onwards.
Greece – tendering rules
A reasoned opinion is also to be sent to Greece with regard to a
call for tenders issued by the Ministry of Public Works to recruit
a technical consultant in connection with the construction of a
wastewater treatment plant on the island of Psitallia. The award
criteria related to tenderers’ economic, financial and technical
capacities and their experience. However, according to Directive
92/50, these aspects must be part of the selection criteria, and
the Directive stipulates that the evaluation of bids must be divided
into two distinct phases – first the selection phase and then
the award phase. The function of the selection criteria, including
the above-mentioned capacities, is basically to allow the contracting
authority to establish a list of tenderers capable of carrying out
the work concerned, whereas the award criteria are used for assessing
tenderers’ bids and awarding the contract.
Greece – use of standard forms
Furthermore, Greece has not notified the Commission of the transposition
into national law, as regards supplies and the special sectors,
of the Commission Directive of September 2001 (see IP/01/1271) on
the use of standard forms for public procurement notices. The Commission
has therefore decided to send a reasoned opinion asking Greece to
transpose the Directive. The compulsory use of these forms improves
the quality of the notices published, which promotes open markets,
efficiency and transparency and facilitates the award of contracts
electronically. In particular, using these forms makes it easier
for potential suppliers to use automatic search tools to find the
contract notices that interest them. For contracting authorities
the standard forms reduce the work and costs associated with complying
with the European rules on public procurement works.
Netherlands – advertising requirements
The Commission has decided to send the Netherlands a reasoned opinion
asking it to rectify breaches of EU law over works contracts for
renovating the city centre of Hoogezand-Sappemeer. The local authority
signed an agreement giving a particular company the exclusive right
to carry out several types of work and then awarded it several contracts
without competition. The Commission considers that such direct awards
constitute a violation of the Public Works Directive (93/37/EEC),
if the threshold for application of this Directive is reached, in
terms of the value of the contracts concerned. Even if that threshold
is not reached, the EC Treaty requires, in order to comply with
the principles of equality of treatment and of non-discrimination,
an adequate degree of advertising to enable different businesses
to compete.
Belgium – non-compliance with obligations
The Commission has decided to issue a reasoned opinion against Belgium
owing to its failure to comply with the obligations of the Remedies
Directive on public procurement. In its Alcatel judgment (case C-81/98),
the Court stipulated that Member States were required to set up
review procedures permitting a decision awarding a public procurement
contract to be suspended and annulled at a stage where the infringement
can still be rectified.
The result of this judgment with regard to the applicable Belgian
law is that a reasonable period must be allowed between unsuccessful
tenderers being notified of the decision awarding a contract and
the signing of the contract. However, under Belgian law there is
no obligation to allow such a period.
France – public procurement code
The Commission has decided to take France to the Court of Justice
for the non-compliance of its public procurement code with the Directives
on public contracts and with the EC Treaty. The Commission found
that the new code adopted on 7 January 2004 did not take into account
the 11 complaints which the Commission had made in its reasoned
opinion of 23 October 2002 regarding the earlier version of the
code dated 7 March 2001 (see IP/02/1507).
Firstly, the new code, like the March 2001 version, provides ‘simplified’
procedures for certain service contracts listed in Annex B of Directive
92/50/EEC. These are primarily legal services, social and health
services, recreational, cultural and sporting services, education
services and vocational training and placement services.
For these services, the public authorities are not required by
the French code to ensure a proper degree of advertising, which
according to the Telaustria judgment by the Court of Justice (case
C-324/98) is in fact absolutely necessary for the award of a contract
to comply with the principle of transparency required by the EC
Treaty.
Secondly, the code continues to exclude loan contracts from advertising
and competition requirements, whereas the Commission considers that
generally contracts concerning loans or other financial commitments
are covered by Annex IA of Directive 92/50/EEC (public service contracts)
and Annex XVIA of Directive 93/38/EEC (public contracts in the water,
energy, transport and telecommunications sectors) and are thus subject
to the requirements of transparency laid down by the Directives.
Lastly, the Commission considers that the new code continues to
infringe the Directives on public contracts with regard to the minimum
number of participants to be invited in a restricted procedure (ie
not open to every tenderer wishing to submit a bid). Indeed, according
to the case law of the Court of Justice, even if there is no range
laid down in the contract notice published in the OJEU, the minimum
number of applicants invited to tender should not be less than five
(see the judgment Commission v France, case C-225/98). The code
in fact applies this minimum number only if a range has been indicated
in the contract notice.
France – local development agreements
The Commission has sent the French authorities a reasoned opinion
in connection with the incompatibility of Article L300-4 of the
French town planning code with European law. This article allows
local development agreements and appointment contracts for the follow-up
of preliminary studies for a development project to be concluded
without being advertised and without competition.
France makes use of local development agreements primarily for
global projects, including the construction of public amenities
to be handed over to the awarding authority and for buildings to
be resold or rented, eg as part of the implementation of a town
planning project and local housing policy or urban renewal.
The Commission considers that the main purpose of these agreements
concerns works, even if they are not actually performed by the planner
but by a builder selected by the planner. These types of local development
agreements must in principle be concluded in accordance with the
advertising and competition rules laid down in Directive 93/37/EEC
on public works contracts.
When these local development agreements are concluded with a restricted
category of public or semi-public bodies defined in Article L300-4
of the town planning code (eg semi-public companies), these bodies
may also be given the right to perform the procedures for the expropriation
decided by the State of the land to be developed. In this case,
the Commission feels that granting this right to ‘public’
planners, when there is nothing to prevent it from being granted
to private individuals, does not provide grounds for exemption from
the rules of the EC Treaty. Indeed, the application of this right
is not an activity involving the exercise of official authority,
as referred to in Article 45 of the Treaty.
Other types of local development agreement may refer to the management
of economic activities or the development of recreation and tourism,
in which case the Commission takes the view that they must be regarded
in the same light as service concessions, which according to the
Treaty must be awarded with a proper degree of advertising for the
benefit of all potential applicants (see the Court of Justice’s
Telaustria judgment, case
C-324/98).
As for appointment contracts for preliminary studies needed to
define the features of a development project, the Commission considers
that such contracts must be awarded in accordance with the advertising
and competition rules laid down in Directive 92/50/EEC on public
service contracts.
Italy – purchasing procedures
The Commission has decided to send Italy a reasoned opinion on the
procedures followed by the Italian Government in connection with
the purchase of helicopters for civilian use. The Italian Government
has for a long time followed a practice of awarding to an Italian
manufacturer, directly and without any kind of competition, contracts
for helicopters to be used by certain public services, and especially
by the forestry department (Corpo Forestale dello Stato), financial
police (Guardia di Finanza), fire services (Vigili del Fuoco), police
and security forces (Polizia di Stato and Carabinieri), coastguard
(Guardia Costiera) and the civil defence department (Dipartimento
della Protezione Civile). The Commission feels that this practice
is contrary to the Directive on public supply contracts (93/36/EEC),
since none of the strict conditions governing the possibility of
using a negotiated procedure without prior publication of a contract
notice is met in this instance.
It also feels that Italy has in no way shown that the practice
in question is justified on the basis of Article 2 of Directive
93/36/EEC, which states that the Directive does not apply to “contracts
which are declared secret or the execution of which must be accompanied
by special security measures in accordance with the laws, regulations
or administrative provisions in force in the Member States concerned
or when the protection of the basic interests of the Member State’s
security so requires”.
The Commission has already referred Italy to the Court of Justice
in connection with a government order authorising one of the services
mentioned – Corpo Forestale dello Stato – to purchase
helicopters without any form of competition (see IP/03/1037). The
case in question at the moment, on the other hand, concerns the
general practice followed by the Italian Government for the purchase
of all helicopters for civilian use by the services concerned.
EU public procurement law aims to ensure that all European companies
have a fair chance to bid for public contracts. Open and transparent
tendering procedures mean more competition, stronger safeguards
against corruption, better service and value for money for taxpayers
and, ultimately, a more competitive Europe. EU public procurement
markets are worth over e1500 billion, approximately 15% of total
EU GDP. The existing EU public procurement Directives have increased
cross-border competition in procurement markets and reduced by around
30% the prices paid by public authorities for goods and services,
according to a European Commission working document (see IP/04/149).
The European Parliament and Council of Ministers adopted in February
2004 a new legislative package modernising and simplifying procurement
procedures which should further boost cross-border competition (see
IP/04/150).
Italy – award procedures
The Commission has decided to send Italy a reasoned opinion concerning
the procedures used by its national railway administration, Ferrovie
dello Stato (FS), to award the company TAV contracts for the construction
of high-speed railway lines. In 1991, FS decided to contract TAV
to build these lines in accordance with criteria to be set out in
a performance agreement, which stipulated that TAV had to use general
contractors to be chosen among Italy’s leading industrial
groupings.
After considering the arguments put forward by the Italian authorities,
the Commission took the view that this provision effectively reserved
the contracts for the lines in question for Italian companies, in
breach of the principles of freedom of establishment and freedom
to provide services enshrined in Articles 43 and 49 of the
EC Treaty. The Commission’s action under this procedure is
primarily aimed at opening up to EU-wide competition work on lines
(particularly those between Milan and Verona and Milan and Genoa)
whose construction phase has not yet commenced.
Greece – award procedures
The Commission is sending a reasoned opinion to Greece for non-compliance
with Directive 92/50 (public service contracts) in relation to the
printing and publications of schoolbooks in Greece.
The Organisation for the Publication of Schoolbooks cooperates
with approximately 80-90 relevant companies, based in the region
of Attika, to which it awards the publication and printing of the
schoolbooks every year, without launching a tender, on the basis
of the companies’ personnel, equipment and productivity.
The Greek authorities argue that there are time constraints as
the books need to be ready for the beginning of every school year.
Although the Directive (Article 11(3)(d)) allows agreements to be
negotiated directly with suppliers without publishing a general
invitation to tender in justifiable cases of extreme urgency, the
Commission does not consider that these conditions are met in this
case. First, there is no evidence that these time constraints are
tight enough to prevent adhering to even the reduced time limits
for accelerated restricted procedures provided for in Article 20
of the Directive. Furthermore, the reasons of urgency invoked by
the Greek authorities are not brought about by events unforeseeable
by the contracting authorities or by events which are not within
the latter’s control, as the Directive would require if the
circumstances were to be considered of extreme urgency – after
all, the school year begins every year, on a date set by the Greek
authorities themselves. Therefore, the approximate number of books
to be published and edited every year, as well as the expected delivery
date, are known beforehand by the contracting authority.
Portugal – non-compliance with EU law
The Commission has decided to send Portugal two reasoned opinions
for incorrect implementation of Directive 93/38/EEC, coordinating
the procurement procedures of entities operating in the water, energy,
transport and telecommunications sectors, and of Directive 92/13/EEC,
aimed at guaranteeing the effective implementation of the previous
Directive by ensuring that effective and rapid remedies are available
to suppliers, contractors and service providers in the event of
infringement of the relevant EU law or national rules implementing
that law.
The Commission takes the view that the Portuguese legislation does
not comply with EU law, particularly in relation to the scope and
application thresholds of the Directive, time limits for receipt
of tenders, design competitions and abnormally low tenders.
Ireland and UK – failure to comply with Remedies Directive
The Commission has decided to issue reasoned opinions against Ireland
and the UK owing to their failure to comply with the obligations
of the Remedies Directive 89/665/EEC on public procurement. In its
Alcatel judgment (case C-81/98), the European Court of Justice stipulated
that Member States were required to set up review procedures permitting
a decision awarding a public procurement contract to be suspended
and annulled at a stage where the infringement can still be rectified.
This should allow an aggrieved tenderer to have a contracting authority’s
decision suspended by way of interim measures and set aside, notwithstanding
the possibility once the contract has been concluded of obtaining
an award of damages.
In the Commission’s view, neither Irish nor UK legislation
currently complies in full with these requirements. The UK authorities
are proposing amendments to their current remedies system, but the
Commission does not consider these sufficient to comply with the
Alcatel judgment.
Germany – competition requirements
The Commission is sending three reasoned opinions to the German
authorities over the award without competition of contracts for
the disposal of waste and wastewater.
In the first two cases, the Court of Justice has already ruled against
Germany on 10 April 2003 (joint cases C-20/01 and C-28/01). The
Commission is now asking the national authorities to comply with
this judgement, failing which it can ask the Court to impose a daily
fine.
The Court ruled that the Federal Republic of Germany had failed
to fulfil its obligations under the services procurement Directive
(92/50/EEC) in two cases of procurement by local communities in
the State of Lower Saxony. In 1996, the City of Braunschweig awarded
a contract for waste disposal by direct negotiations with contractors
without prior publication of a contract notice. In 1998, the Municipality
of Bockhorn did not invite tenders for the award of the contract
for the collection of its wastewater. The contracts have been concluded
for durations of a minimum of 30 years.
The Commission sent a letter of formal notice to Germany in October
2003 asking it to provide information on the measures it had taken
to comply with the Court’s judgment. However, the German authorities
replied by simply repeating previous arguments which the Court had
not accepted. Its judgment established that the breach of procurement
law continues throughout the period of the contracts awarded illegally.
As the current contracts will continue to produce effects for decades,
the Commission considers that it is not sufficient to avoid breaches
in future procurement procedures. To comply with the judgment, measures
to end the actual infringements are required.
Finally, in December 1999 the Municipality of Hinte, also in Lower
Saxony, awarded a service concession to the Oldenburgisch Ostfriesischen
Wasserverband for the provision of wastewater disposal services.
No transparent award procedure was carried out as required under
EU law as interpreted by the Court of Justice (C-324/98, Teleaustria).
Germany argued that the Municipality was justifiably assuming that
its decision was in compliance with EU law because at the time of
that decision it could not have been aware of the developments in
the Court of Justice’s case law. However, the Commission does
not accept this view, because an interpretation of EU law by the
Court does not mean that the provision which it interpreted had
a different substance before the Court’s decision. Thus, EU
law was broken by the award of the service concession.
This is the sixth Supplier Guidance on Infringement. Previous Guidance
Nos 12/2002, 13/2002, 12/2003, 13/2003 and 9a/2004 are available
at www.bipsolutions.com/html/briefing.php |
