New European Union Policy and Legal Framework for

Public Procurement

Niels Schuster

DG Internal Market and Services

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Outline

1. Overview of the Reform

2. Classical Directive

3. Utilities Directive (Water, Energy, Transport, Postal)

4. New Concessions Directive

5. Directive on e-invoiocing in public procurement

6. Government Procurement Agreement (GPA)

7. International Procurement Instrument (IPI)

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Overview of the Reform

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Current Rules

Classical Directive (2004/18/EC)

• Public works, public supplies and public services

Utilities Directive (2004/17/EC)

• Water, energy, transport and postal services sectors

Directive on Defence procurement (2009/81/EC)

Remedies Directives (89/665/EEC and 92/13/EC)

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New Rules: Preparatory works

Greenpaper on modernisation (January 2011)

Evaluation of existing rules

Results of public consultation (June 2011)

623 replies (Business, public authorities, civil society, academics & legal experts, citizens…)

Public procurement conference (June 2011)

European Commission proposal (December 2011)

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New Rules: Legislative process

July 2013: political agreement

February 2014: Adoption

Directive – needs to be transposed by EU Member States

2 years for transposition

4.5 years for e-procurement (at the latest)

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Objectives of the reform

1. Simplification & more flexibility

7. New rules for Concessions

3. Better access for Small & Medium Enterprises (SME)

2. Strategic use

6. Governance

4. Sound

procedures 5. Compliance with GPA

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Classical Directive

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Simplification & more flexibility

Increased use of negotiated procedures

Reduction of administrative burden

Reduced time limits

Simplified rules for sub-central authorities

Light regime for social, health, cultural and other services

e-Procurement

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Strategic procurement I

(1) Strategic policies may be considered in award decision

(2) Technical specifications may refer to production process

(3) Integration of disabled & disadvantaged workers

(4) Innovation Partnership

(5) Use of labels

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Strategic procurement II

Sole Award Criterion:

Most economically advantageous tender (MEAT)

to be assessed on the basis of

1. price, or

2. cost, using cost-effectiveness approach (e.g. "life cycle"), or

3. the best price-quality ratio using criteria such as

• Production process

• Social & environmental criteria

• Innovative characteristics

NB: Criteria must be linked to the subject matter of the contract !

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Strategic procurement III

Life-cycle costs

Costs for the Contracting Authority

Acquisition

Use, Maintenance,

End of life

External Costs

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SME-friendly measures

Division into lots

"apply or explain" principle;

Proportionate criteria for financial standing

limited to twice contract value

Reduced documentary requirements

"European Single Procurement Document"

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Sound procedures I

• Conflicts of interests clarified

• Exclusion grounds strengthened and extended

• Compulsory exclusion in case of abnormally low tender

• Modifications of contracts simplified

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Sound procedures II

Principles of procurement – Horizontal clause

Appropriate measures to ensure that economic operators comply with applicable obligations in the field of environmental, social and labour law

Referred to under:

Non award

Exclusion grounds

Abnormally low tenders

Subcontracting

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Sound procedures III Main changes:

Competitive procedures with negotiation Replaces current negotiated procedure with publication

Competitive dialogue slightly broader scope for negotiations in the final stages

Innovation partnership Research services for the development of an innovative product by

one or more providers plus supply contract

Negotiations without publication no substantial changes

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Utilities Directive

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Utilities Directive

• Procurement for services, supplies or works

• By utilities (public or private)

• Utilitiy activity (water, energy, transport, postal)

Private entities subject to procurement rules if "operating on the basis of special and exclusive rights"

More flexible regime for utilities

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Utilities Directive

Essentially same changes for the Utilities as for the

Classic Directive

Differences

Framework contracts:

max 8 years (classic 5 years)

Contract modifications

Unforseen circumstances: unlimited (classic: max 50%)

Definition of special or exclusive rights

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New Concessions Directive

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New Directive on Concessions

Works & service concessions ≥ € 5 million

Classical & utilities sector

Not:

Drinking Water (supply or distribution)

Exclusive rights

Lotteries

Public passenger transport services

No closed list of procedures

Basic rules for selection and exclusion criteria

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Distinction contracts – concessions

Right to exploit the work or services (sometimes with payment)

transfer of operating risk

no guarantee to recoup the investments and costs.

risk can be limited by regulation, but always real exposure to possible loss, not merely nominal or negligible

demand or supply risk or both

Clear delimitation from situations such as licenses, authorizations

Duration of Concessions

The duration of concessions shall be limited

General principle for concessions lasting more than 5 years:

Shall not exceed time necessary to recoup investments made for operating works/services with return on invested capital

Possibility to take into account investments at beginning and during life of concession and those necessary to achieve specific contractual objectives.

Directive on e-invoicing in public

procurement

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Directive on e-invoicing in public procurement

Key elements:

• Scope: PP invoices only

• Mandates standardisation bodies to draw up a new European e-invoicing

standard

• Buyers obliged to accept electronic invoices compliant with the new

standard

• Transposition: 1,5 years after standard (possibility to postpone for regional

& local for extra 1 year). Standard to be ready in 3 years.

Government Procurement Agreement (GPA)

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Government Procurement Agreement Structure

• Text: General principles

• Annexes: coverage (schedules by parties)

Principle of non-discrimination (subject to coverage)

National treatment

Most favoured nation clause

Treatment of other Parties’ goods, services and suppliers that is “no less favorable than” that accorded to domestic/other parties' products, services and suppliers

Revised GPA

Revised GPA: more user friendly, closer to EU Directives

• Easier access to procurement - Better use of electronic means

• Improved rights of developing countries to accede

• Rules to avoid conflicts of interest and prevent corrupt practices

• Introduces more flexibility for entities

• Use technical specifications aimed at protection of environment

• Technical specification relate to production process and methods

• Award: lowest price or most advantageous tender

Revised GPA : Future

Seeking accession:

China, New Zealand, Albania, Georgia, Jordan, the Kyrgyz Republic, Moldova, Montenegro, Oman, Panama and Ukraine

WTO commitments to accede:

the Former Yugoslav Republic of Macedonia, Mongolia, the Russian Federation and Saudi Arabia

The revised GPA came into force on 6 April 2014!

International Procurement Instrument (IPI)

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Objectives

• Increase EU exports in public markets outside the EU;

• Increase the leverage of the EU in international negotiations;

• Ensure a level playing field;

• Strengthen legal certainty regarding access of third countries to EU markets.

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Main proposals

1. Possibility for contracting authorities to exclude a tender that is not covered by agreements (Article 6);

2. External Commission investigation into alleged restrictive measures and possibility to adopt proportionate restrictive measures (Article 8-10).

State of Play

• Broad support from the European Parliament.

• The amendments of the Parliament are currently under examination in the Council.

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Thank you!

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