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6.3.  Public procurement in the EU

    In a genuine single market, the public sector must also be open to intra-European trade and competition. Indeed, the requirements of the official authorities for works and supplies of all sorts for the central civil service, regional and local authorities and for public undertakings (companies) and bodies accounts for 15% of the economic activity in the European Union. At the end of the 1980s only 2% of the needs of the official authorities were covered by businesses from a Member State other than that of the official authorities concerned, notwithstanding the price, quality and service advantages that they could offer.

    In some sectors, such as the aeronautical, energy, transport and telecommunications, procurement by public bodies constituted the largest, if not the sole, part of the market, virtually excluding it from the common market. Thus, the protected high technology industries, of particular interest to the public sector, were treated unfavourably in comparison to traditional industries, as the latter had benefited from the liberalisation of trade. These protected industries were a paradise for inefficient suppliers of goods and services who had connections with the civil administration, but public administrations were thus jeopardising their own efficiency. Moreover, the isolation of the markets of high technology industries held back their development, as those industries were the very ones most in need of a large market and the economies of scale that it could offer. It was evident that a common interest existed to open up public procurement to all European businesses, but the vested interests in each Member State slowed down the adoption of the necessary common measures.

    In the context of the single market the award of contracts concluded in the Member States on behalf of the State, regional or local authorities and other bodies governed by public law entities is subject to the respect of the principles of the Treaty and in particular to the principles of freedom of movement of goods, of freedom of establishment and of freedom to provide services and to the principles deriving therefrom, such as the principles of equal treatment, of non-discrimination, of mutual recognition, of proportionality and of transparency. The application of these principles to public procurement was established in the early 1970s [Directive 71/304 repealed by Directive 2007/24]. Nevertheless, the opening up of the public sector to European competition was achieved only in the 1990s through Directives 92/50 relating to the coordination of procedures for the award of public service contracts, 93/36 coordinating procedures for the award of public supply contracts and 93/37 concerning the coordination of procedures for the award of public works contracts.

    These Directives were replaced in 2004 by a single Directive on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, which was in turn replaced in 2014 by a Directive on public procurement [Directive 2014/24, last amended by Regulation 2015/2170]. This Directive establishes rules on the procedures for procurement by contracting authorities with respect to public contracts as well as design contests, whose value is estimated to be [art4]equal to or greater than the following thresholds: (a) EUR 5,186,000 for public works contracts; (b) EUR 134.000 for public supply and service contracts awarded by central government authorities and design contests organised by contracting authorities; (c) EUR 207,000 for public supply and service contracts awarded by sub-central contracting authorities and design contests organised by central government authorities; and (d) EUR 750,000 for public service contracts for social and other specific services. Procurement within the meaning of this Directive is the acquisition by means of a public contract of works, supplies or services by one or more contracting authorities from economic operators chosen by those contracting authorities, whether or not the works, supplies or services are intended for a public purpose. Contracting authorities should base the award of public contracts on the ''most economically advantageous tender'', identified on the basis of the price or cost, using a cost-effectiveness approach, which may include the ''best price-quality ratio'', which should be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question. In any case, the European single procurement document (ESPD) should provide the relevant information in respect of entities on whose capacities an economic operator relies, so that the verification of that information can be carried out together with the verification in respect of the main economic operator and on the same conditions [Regulation 2016/7].

    Similar principles and rules apply to the procurement procedures of entities operating in the water, energy, transport and postal services sectors (public utility sectors), which are covered by a specific Directive [Directive 2014/25, last amended by Regulation 2015/2171].  Specific rules guarantee the opening up to competition of public procurement contracts above a certain value (EUR 414,000 in the case of supply and service contracts, EUR 5,186,000 in the case of works contracts and EUR 1,000,000 in the case of service contracts for social and other specific services). Specific rules for contracts awarded by entities operating in these sectors are necessary because of: (a) the variety of ways in which national authorities can influence the behaviour of these entities, including participation in their capital and representation in the entities' administrative, managerial or supervisory bodies; and (b) the closed nature of the markets in which they operate, due to the existence of special or exclusive rights granted by the Member States concerning the supply to, provision or operation of networks for providing the service concerned. The contracting entities in these sectors, which, by virtue of the existence of exclusive government-regulated networks or concession rights, could formerly not resist political pressure to "buy national", are now obliged to call for tenders throughout the European Union. Since particular competition rules apply to telecommunications, shipping and air transport [see sections 17.3.6, 20.3.4 and 20.3.5], the public procurement contracts in these sectors are not included in the scope of Directive 2014/25

    According to Directives 2014/24 and 2014/25, electronic means of information and communication should be the standard means of communication and information exchange in procurement procedures, as they greatly enhance the possibilities of economic operators to participate in procurement procedures across the internal market. For that purpose, transmission of notices in electronic form, electronic availability of the procurement documents and communication by electronic means at all stages of the procedure, including the transmission of requests for participation and, in particular, the transmission of the tenders (electronic submission) are mandatory. Moreover, a Directive aims to promote electronic invoicing in public procurement [Directive 2014/55].

    A directive on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security [see section 8.2.3] aims to reduce the regulatory fragmentation and increase competition and transparency in these fields, while taking into account the specific features of this market [Directive 2009/81, last amended by Directive 1336/2013]. Under the harmonised rules applicable to the procurement of arms, munitions and war material, the restrictions to access to public tenders are limited to certain exceptional cases, such as those affecting national security, thus enabling European companies, including small and medium-sized enterprises, to tender for contracts throughout the EU. The directive applies to supply and service contracts with a value estimated to be no less than EUR 414.000 and to work contracts with a value of at least EUR 5.186.000.

    Another Directive covers the award of concession contracts [Directive 2014/23, last amended by Regulation 2015/2172]. It establishes rules on the procedures for procurement by contracting authorities and contracting entities by means of a concession the value of which is equal to or greater than EUR 5,186,000. Concessions are partnerships between the public sector and mostly private companies, where the latter exclusively operate, maintain and carry out the development of infrastructure (ports, water distribution, parking garages, toll roads) or provide services of general economic interest (energy, water distribution and waste disposal for example). Concessions are the most common form of Public Private Partnership (PPP). An adequate, balanced and flexible legal framework for the award of concessions, as that established by this Directive, is meant to ensure effective and non-discriminatory access to the market to all Union economic operators and legal certainty, favouring public investments in infrastructures and strategic services to the citizen. According to Article 345 TFEU, the Treaties shall in no way prejudice the rules in Member States governing the system of property ownership. Hence, under EU law, including the Directive on concessions, public authorities remain entirely free to carry out public tasks assigned to them by using their own means or resources. However, if a public authority decides to outsource (e.g. to a private company) the provision of a service and concludes a concession with such an entity, the conditions of the Directive have to be complied with, in particular the obligations with respect to the selection and award criteria to be followed by entities awarding concessions.

    In order to monitor compliance with European legislation, the Commission instituted an information system for public procurement (SIMAP) and a system for checking that the execution of projects or programmes financed from the Structural Funds and the other European financial instruments is carried out in compliance with the European rules on public procurement [COM/98/143]. It also strengthened its measures against infringements of the rules governing public procurement on the basis of the proceedings for failure to act, as provided for in Article 226 (TEC) [see section 4.1.2]. A common procurement vocabulary (CPV) is meant to simplify and modernise the process of publishing contract notices [Regulation 2195/2002]. A stakeholder expert group on public procurement provides the Commission with high quality legal, economic, technical and/or practical insight and expertise with a view to assisting it in shaping the public procurement policy of the Union [Decision 2011/C291/02]. A public procurement observatory is responsible for monitoring the liberalisation of this sector within the European Union and the effects of the process on third countries.

    A Directive concerns the application of review procedures to the award of public supply, works and services contracts [Directive 89/665]. It provides that contractors and suppliers shall have effective remedies whereby alleged infringements by a contracting authority of European law in the field of public procurement can be sanctioned at any stage whatsoever in the procedure for the award of a contract. It defines a conciliation procedure to which parties can have recourse to find an amicable settlement to any disputes regarding the application of rules governing public contracts and introduces a mechanism for the rapid correction of clear and evident offences. Legal recourse in the public utility sectors is provided by a special Directive, which seeks to ensure that effective and rapid means of recourse exist both at national and European level as regards procedures for the award of contracts in the sectors of water, energy, transport and telecommunications [Directive 92/13].

    The European legislation on liberalisation of public procurement incorporates certain provisions of the Government Procurement Agreement concluded in 1994 in the context of the World Trade Organisation [see section 23.4] so as to prevent different rules applying at European and international levels and to exclude reverse discrimination against European enterprises, i.e. more favourable treatment being given to third-country tenderers [1994 Agreement Annex 4, Decision 94/800 and Directive 98/4]. The European Union opens up its public contracts to third states that take similar action. Thus the EC/EU and the USA reached, an Agreement, in 1995, on government procurement. This Agreement gives effect in the area of government procurement to the commitments made in the Uruguay Round of multilateral negotiations and to the results of the bilateral negotiations conducted in this area between the EU and the United States [Decision 95/215, see section 25.7]. Nevertheless, there exist some restrictions of access to certain public contracts from tenderers from the US [Regulation 1836/95].

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