European government procurement policy and experience

Rita Beuter Senior Expert, European Policies, EIPA,

Maastricht (NL) r.beuter@eipa.eu

© EIPA – 2008

2

Facts on Procurement Procurement represents about 17% of EU

GDP, about Euro 2000 billion 16 % (in value) was published in 2002 at EU

level; publication in the Official Journal (OJ) in 23 languages; Tenders Electronic Daily (TED)

estimated aggregated value of procurement contracts published in the OJ increased from 59 billion (1993) to 270 billion Euros in 2004

cross-border procurement accounted for 10%, but indirect procurement is relevant

European rules apply to 30 countries, the EU, Norway, Iceland, Liechtenstein

3

Legal Framework/Basis - Public Procurement

International Treaties and Agreements WTO: Government Procurement Agreement (GPA) -

plurilateral Agreements with Third countries

EC Treaties: no definition Primary EC law (Internal Market, fundamental

principles) European rules apply to the European Economic Area

(EEA) Secondary EC law: Procurement Directives

National Law Sub-national

4

Objective of Public Procurement

Policy/European Procurement

open up public procurement to competition

buy goods and services of a better qualityand a better price, value for money

anti-corruption tool tool for stimulating innovation tool for stimulating sustainable

development establishment of a single market

5

Principles in the Treaty applying to public contracts and Fundamental Principles:

non- discrimination on grounds of nationality

free movement of goods freedom of establishment freedom to provide services

equality of treatment obligation of transparency proportionality mutual recognition

6

The Rules in Public Procurement

Legislative Package 31 January 2006:

“Classic“ or “Public Sector“ Directive - Directive 2004/18/EC on the coordination of

procedures for the award of public works contracts, public supply contracts and public service contracts

“Utilities” Directive - Directive 2004/17/EC coordinating the

procurement procedures of entities operating in the water, energy, transport and postal services sector

7

The Rules in Public Procurement

Remedies Directives- 89/665/EEC, public supplies and public works- 92/13/EEC, public utilities- amending remedies directive: Directive 2007/66/EC amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts

8

Structure of the Public Sector Directive 2004/18/EC

Preamble- RecitalsTitle I Definitions and general principlesTitle II Rules on public contracts-scope of application (thresholds, specific situations, excluded contracts, special arrangement)-arrangements for public service contracts-technical specifications-procedures (open, restricted, negotiated, competitive dialogue)-framework agreements, dynamic purchasing systems-advertising and transparency-time limits-selection of contractors-award of contracts

9

e-procurement directive provides legal basis for carrying

outelectronic procurement at European level

definition of electronic means and their use shortening of time-limits covers electronic communications covers new tools available:

- dynamic purchasing systems - electronic auctions (reverse electronicauctions) as a tool for the award

10

Definition Contract

concluded in writing; for pecuniary interest; for works, supplies or services

Which contracts are affected? Contracts which exceed certain financial thresholds Contracts which are not excluded in accordance

with the exceptions provided for in the directive

Contracts below the relevant threshold level:fundamental principles apply,transparency (degree ofadvertising), cross-border interest

11

Excluded contracts – Some

examples

Contracts declared secret or requiring special security measures

contracts awarded pursuant to international rules

specific exclusions (employment contracts, arbitration & conciliation services, etc)

service concessions

12

Definition of contracting authorities

the State, regional or local authorities, bodies governed by public law, or associations formed by one or more such authorities or bodies governed by public law

It includes bodies of any kind which contracting authorities create by law, regulation or administrative action

“the State” encompasses legislative, executive and judicial bodies

13

Definition of contracting authorities

Bodies governed by public law: 3 cumulative criteria: established for… meeting needs in the

general interest, not having an industrial or commercial character

having legal personality; and financed, or supervised or appointed, for

the most part, by the State, regional, local, other bodies

14

Thresholds as of 1 January 2008

EUR 133 000supplies/services - central levelAnnex V list of products awarded by contracting authorities in the field of defence

EUR 206 000supplies/services - sub-central levelAnnex B services/non-GPA servicessubsidised service contractsproducts not covered in Annex V

EUR 5 150 000works

15

Defence Procurement

Directive applies to public contracts awarded by contracting authorities in the field of defence (defence ministries are covered), subject to Article 296 of the Treaty

problem: exemption used extensively by the

Member States

initiative at European level for a Directive in the field of Defence and Security

16

Central Purchasing Bodies

definition: contracting authority, which acquires supplies and/or services intended for other contracting authorities or awards public contracts or concludes framework agreements for works, supplies or services intended for other contracting authorities

examples: CONSIP (Italy), OGC Buying Solutions (UK), UGAP (France)

17

Public Sector Directive

special arrangements (reserved contracts) – social consideration

arrangements for public service contracts – distinction between Part A Services and Part B Services

18

Technical Specifications to be set out in contract documentation

(notices, contract documents, etc) take into account accessibility for

people with disabilities should provide equal access for

tenderers reference to technical specifications, “or

equivalent” performance or functional requirements

(environmental characteristics) or mixture not to refer to specific make, source,

particular process, trade marks, patent, etc

19

Public Sector Directive variants (only possible award criteria: most

economically advantageous tender), stimulate innovation

subcontracting in order to stimulate SME participation

conditions for performance of contracts, social and environmental considerations

New procedures/provisions/systems

- competitive dialogue - framework agreements- dynamic purchasing systems

20

Procedures

Open procedure (all potential suppliers / contractors / service providers)

Restricted procedure (only selected potential suppliers/contractors/service providers, two-stage procedure) (minimum of 5 must be invited to tender)

Competitive dialogue contracting authority enters into dialogue with bidders following an OJ notice (only for complex contracts)

Negotiated procedure (direct negotiation with chosen suppliers/contractors/service providers; only in exceptional circumstances; burden of proof on contracting authority; justification)

negotiated procedure with prior publication negotiated procedure without prior

publication Accelerated restricted/negotiated (for use only in

exceptional circumstances of urgency not due to fault of contracting authority)

21

Competitive Dialogue

new procedure for particularly complex contracts

contracting authority considers that the open or restricted procedure will not allow the award of the contract

“a flexible procedure ...which preserves not only competition between economic operators but also the need for contracting authorities to discuss all aspects of the contract with each candidate”

considerably used in France and the UK

22

Framework Agreements Def.: Agreement between one or more contracting

authority and one or more economic operators to establish the terms governing contracts during a certain period

framework duration 4 years, exceptions for contracts based on a framework agreement,

distinction: - all terms are laid down (single economic

operator/versus several economic operators, at least 3)

- not all terms laid down: mini-round of competitionin practice: framework agreements are frequently

used

23

Dynamic Purchasing Systems (DPS)

Definition“A ‘dynamic purchasing system’ is acompletely electronic process for makingcommonly used purchases... which is limited induration and open throughout its validity to anyeconomic operator which satisfies the selectioncriteria and has submitted an indicative tenderthat complies with the specification.”-a new system which has hardly been used in practice-could be seen as an open electronic framework,

similar system for below threshold applied in CONSIP

24

Publication of notices

prior information notice (PIN) or information on buyer profile (to make known intended total procurement after beginning of fiscal year) not compulsory

contract notices notices for design contests (services) notices for works concessions (works) contract award notice (CAN)

25

Debriefing – informing candidates and tenderers

Contracting authority must inform candidates and tenderers of decisions reached: a) award of contracts, conclusion of framework, admittance to dpsb) discontinuation of procedure and groundsc) to restart a procedure or implement a dpswritten information must be given after request to the c.a.

After written request, contracting authority must informa) unsuccessful candidates/tenderers of reasons for rejection of application/tender b) admissible tenderer of characteristics and relative advantages of selected tender, name of tenderer / parties to framework This information must be given within 15 days after receipt of request

26

Selection Criteria

Suppliers, contractors or service providers must meet specific objective criteria:good repute, professional qualifications, economic and financial standing, technical knowledge, ability

mandatory exclusion of tenderers/candidates (i.e. criminal organisation, fraud, corruption, etc.)

tenderers/candidates may be excluded: bankrupt, grave professional misconduct, etc

indication of environmental management measures in appropriate cases

27

Award criteria

the lowest price only,or

the most economically advantageous tender

choice for the contracting authoritiesdepends on the subject matter of the contract

28

Most economically advantageous tender

non-exhaustive list of criteria mentioned in the directive, for

example: quality price technical merit aesthetic and functional characteristics environmental characteristics running costs cost-effectiveness after-sales service and technical assistance delivery date and delivery period or period of completion security of supplies

29

Most economically advantageous tender

award criteria must be linked to the subject-matter of the contract

criteria of most economically advantage tender from the point of view of the contracting authority

30

Most economically advantageous tender

the contracting authority shall state in the contract notice/contract documents/descriptive document the relative weighting which it gives to each of the criteria (range)

if not possible: descending order of importance

31

Some experiences from the Member States

Italy: in the past, the use of the most economic advantageous criterion was not allowed for public works contracts. Following a judgement by the European Court of Justice this limitation was removed.

UK: most economically advantageous tender is used in most procurement as award criteria

Austria: lowest price only allowed if quality standard can be described with precision

Ireland: for more complex projects the most economically advantageous tender award criterion is the most commonly used

trend towards life-cycle costing and sustainability

32

Some experiences from the Member States – most economically advantageous tender – evaluation committees

Italy: a committee must be established for evaluation of tenders (maximum 5 members, experts in the specific sector, no conflict of interest)

UK: in general a committee, for strategic contracts external experts, academics, no conflict of interest

not determined by European directives

33

Award decision and conclusion of contract

contracting authority is obliged to inform tenderers of its award decision prior to conclusion of contract

standstill period between award decision and signature of the contract

decision to award a contract must in all cases be open to review procedures prior to the conclusion of the contract

34

Supervision different systems and levels/degrees in the Member

States (centralised/semi-centralised/decentralised procurement structures)

Italy: Public Procurement Code provides for an independent authority, focus on EC principles and fair and efficient use of public funds, complaint to Court of Auditors

“new” Member States: central procurement offices have strong monitoring and control functions (Poland, Czech Republic, Hungary, Estonia, etc)

France: key institution DAJ (advise) and public procurement observatory

National audit offices and courts of auditors European Commission can ask for report and

monitoring of practices; for Member States obligation to provide statistics

35

Dealing with complaints

Body responsible for appeal/mediation procedures must be indicated in the contract notice

aim of EC remedies: rapid and effective remedies; current reform tackles “race to signature” and illegal direct awards

divergence in national remedies, different legal systems in the Member States (courts, tribunals, arbitration, etc)

complaints to the European Commission infringement proceedings by the European

Commission

36

Procurement trainingSome experiences

professional training in UK: Chartered Institute of Purchasing & Supply

NEVI in the Netherlands some countries: the central procurement

office; other countries: hardly any training

national training institutes for the public sector

University level private providers of training

37

For further information

EIPA website on public procurement

http://www.eipa.eu/en/topics/show/&tid=30Rita BeuterEIPATel. 0031 – 43 – 3296240r.beuter@eipa.eu

EIPA website on public procurement

http://www.eipa.eu/en/topics/show/&tid=30Rita BeuterEIPATel. 0031 – 43 – 3296240r.beuter@eipa.eu