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THE REFORM TO EU UTILITIES
PROCUREMENT: SMART,
SUSTAINABLE AND
INCLUSIVE?
Dr Eleanor Aspey, University of Manchester
Overview
Recent reform to EU procurement regime
Aims of reform
Europe 2020 strategy – smart, sustainable and inclusive
Focus on utilities procurement regime
Four key areas of reform discussed:
Innovation partnerships
Technical specifications
Contractual conditions
Contract award criteria
Europe 2020
“Smart” growth –
developing innovation
“Sustainable” growth –
developing a greener
economy
“Inclusive” growth –
improving employment
and developing social
cohesion
Reform to EU Procurement Regime
Reform announced by European Commission in 2011
Three main aims:
Simplify rules and increase flexibility
Encourage access to procurement by SMEs
Facilitate a “qualitative improvement” in procurement by encouraging greater consideration of green and social issues
Reform to EU Procurement Regime
Three new procurement directives adopted in
February 2014
Directive 2014/23/EU – concessions procurement
Directive 2014/24/EU – public sector procurement
Directive 2014/25/EU – utilities sector procurement
Must be implemented into national law by 2016
EU Utilities Procurement
EU currently regulates utilities procurement through free movement provisions of the Treaty on the Functioning of the European Union (TFEU) and Directive 2004/17/EC
Covers:
◦ Public Authorities
◦ Public Undertakings
◦ Private bodies with “special or exclusive rights”
Covers utilities performing activities in the energy, water, transport and postal services sectors
Innovation Partnerships
Under the current law, no specific
rules relating to developing
innovative products or services.
Art. 40(3)(b) Directive 2004/17 –
contract purely for R&D can be
awarded without a prior call for
competition BUT can only be used
where contract is not for profit.
Normal competitive procedure therefore needed where procuring entity
hopes to purchase the innovative product/service at the end of the
process.
Innovation Partnerships
Art. 49 Directive 2014/25 sets out new innovation partnership procedure
Long term partnership covering both research and purchase in one contract.
Relatively unstructured but must contain successive stages (Art. 49(2))
Very vague on purchase requirements – value of product should not be “disproportionate in relation to the investment for their development” (Art. 49(7)).
Technical Specifications
Should set out the “required characteristics of a
product or service” and (for works), allow the
relevant product “to be described in a manner such
that it fulfils the use for which it is intended” (Art. 1,
Annex XXI, Directive 2004/17; Art. 1, Annex VIII,
Directive 2014/25)
Focus on two areas:
Production methods
Product labels
Production Methods
Under current law, European
Commission suggested that
production methods could only be
considered where they had a
practical impact on the
characteristics of a product, whether
visible or invisible.
Argument was illogical since European Commission also accepted that
requiring electricity from sustainable source would be allowable but this
has no impact on product characteristics (Kunzlik 2009)
Production Methods
Art.60(1) Directive 2014/25:
“[Technical specifications] may also refer to the specific
process or method or production or provision of the
requested works, supplies or services or to a specific
process for another stage of its life cycle even where
such factors do not form part of their material
substance, provided that they are linked to the subject-
matter of the contract and proportionate to its value
and its objectives.”
Labelling Requirements
Under current law, can refer to specifications of certain eco-labels(Art.34(6) Directive 2004/17)
Must also accept other “appropriate means of proof” (Art. 34(6))
Also applies to social labels – Case C-368/10, European Commission v Netherlands
Labelling Requirements
Art. 61, Directive 2014/25 allows procuring entities to “require a specific label as means of proof that the works, supplies or services correspond to the required characteristics”.
Now only required to accept equivalent proof where a supplier can show “demonstrably no possibility of obtaining the specific label ... within the time limits” (Art. 61(1)).
BUT label can only be required where “the label requirements only concern criteria which are linked to the subject matter of the contract” (Art.61(1)(a))
Contractual Conditions
Current law set out in Art. 38 Directive 2004/17 –
procuring entities may set out “special conditions
relating to the performance of the contract”.
Difficult to reconcile performance requirement with
Art. 54 Directive 2004/17, which allows utilities to
exclude firms from bidding under any “objective
rules and criteria”.
Contractual Conditions
Art. 87 Directive 2014/25 allows contractual
conditions to be set “provided that they are linked
to the subject-matter of the contract”.
Subject-matter includes anything which “relate[s] to
the works, supplies or services to be provided under
that contract in any respect and at any stage of
their life-cycle” (Art. 82(3)).
Award Criteria
Under current law, utilities may award on either of
two grounds (Art. 55, Directive 2004/17):
Lowest price
Most economically advantageous tender (MEAT)
After reform, MEAT is only allowable award basis
(Art. 82(1) Directive 2014/25)
Award Criteria
Life-cycle costing system introduced in Art. 83
Can consider environmental externalities so long as
their monetary value can be determined and
verified in accordance with requirements set out in
Art. 83(2) – based on non-discrimination,
transparency and accessibility.
May use a system for repeated application (Art.
83(2)(a))
Conclusion
Smart growth primarily developed through new
innovation partnership
Clearer inclusion of green and social issues in
directive might boost use of such techniques
Lack of clarity in many places
New introductions could have high administrative
burden reducing use in practice