The European Commission published on 20 December 2011 its proposals for new procurement directives to replace the current directives on public and utilities procurements. This has been much anticipated and follows a consultation on this area earlier in 2011 (see our earlier law-now). The European Commission has aimed to modernise and simplify the procurement rules.

The European Commission has additionally published a proposal for a directive on the award of concession contracts (partnerships between the public sector and mostly private companies, where the latter exclusively operate, maintain and carry out the development of infrastructure (e.g. ports, water distribution, parking garages, toll roads) or provide services of general economic interest (e.g. energy, water and waste disposal). This introduces competition in the award of high value contracts of this type. This proposal does not set out specific procures for the award of concessions. It will be left to Member States to define the applicable procedures for the award of concessions, while ensuring the procedures used are fair and transparent.  The aim of this new directive is to reduce uncertainty surrounding the award of concession contracts.

These proposals will now enter the EU legislative process, passing to the Council of Ministers and European Parliament. The European Commission hopes that these proposals can be adopted by the end of 2012 with a view to coming into force in Member States by June 2014.

Major changes in the public procurement proposal include:

  • the scrapping of the distinction between Part A and Part B services, although for procurements involving a limited class of “social services”, a higher threshold of €500,000 will apply, below which Member States remain free to determine the procedural rules applicable. There will be an obligation to publish a contract notice and a contract award notice for social services cases. (See below for more detail on what is covered by “social services”);
  • simplification of information obligations in prequalification, notably the mandatory acceptance of self-declarations on the fulfilment of the selection criteria, with only the successful tenderer(s) being asked to submit documentary proof of these matters;
  • there would be no right to negotiate in all cases, but there would be an increased ability to negotiate, whereby contracting authorities can negotiate with the tenderers to improve the quality of the offers. Certain safeguards will be put in place to ensure all parties are aware of changes in those parts of the technical specifications which are open to negotiations and all are able to submit a final tender;
  • simplified procedures for regional and local contracting authorities, who can replace the publication of individual contract notices by the publication of a general notice for their planned procurement for the next year;
  • the promotion of e-procurement, aiming at full electronic communication in public procurement within two years of the implementation deadline of the adopted directive, through, for example, mandatory transmission of notices in electronic form, mandatory availability of procurement documents and e-submissions;
  • improvements to the competitive dialogue procedure. This procedure will no longer restricted to complex cases;
  • time limits for participations and submission of offers have been shortened, with a view to streamlining the overall process; •measures facilitating cross-border procurement;
  • the introduction of a new “innovation partnership procedure”. This is a new , special procedure for the development and subsequent purchase of new, innovative products, works and services, provided they can be delivered to agreed performance levels and costs;
  • it will be possible to base award decisions on life-cycle costs of the products/services/works to be purchased;
  • encouraging access to public procurement for SMEs, for example by introducing strong incentives to divide tenders into lots and limits on the financial capacity requirements for the submission of a tender;
  • the appointment of a single national “oversight” authority in charge of monitoring, implementation and control of public procurement. Contracting authorities will be obliged to transmit the text of concluded contracts to this oversight body for scrutiny for possible favouritism, corruption etc where the value of the contract exceeds €1 million for supplies and services and €10 million for works. Third parties may have access to these contracts “to the extent that legitimate public or private interests are not jeopardised”;
  • obliging Member States to provide support structures offering legal and economic advice, guidance, training and assistance in preparing and conducting procurement procedures.

“Social services” are defined by reference to particular CPV codes covering:

  • “health and social services”;
  • “administrative, educational, healthcare and cultural services”;
  • “compulsory social security services”;
  • “benefit services”;
  • “other community, social and personal services”;
  • “services furnished by trade unions”; and
  • “religious services”.

Many of the features of the public procurement proposal also apply to the utilities directive proposal. In addition, major changes in relation to the utilities procurement proposal include:

  • an exclusion from the scope of the directive for the exploration of oil and gas, because this sector has consistently been found to be exposed to competition;
  • improvements to the exemption mechanism under the current utilities directive;
  • clarification of the notion of special and exclusive rights. The proposal notes that rights which have been granted by means of a procedure in which adequate publicity has been ensured and where the granting of those rights was based on objective criteria, notably pursuant to EU legislation, do not constitute special or exclusive rights for the purposes of the directive;
  • the introduction of the new “innovation partnership procedure”;
  • clarification of the exemption for contracts awarded to affiliated undertakings or joint ventures;
  • the appointment of an oversight body as described for the public procurements proposal and accompanying obligation to transmit the text of concluded contracts to it where they exceed the limits mentioned above.

The new national “oversight” body to be set up under the proposals will have wide-ranging responsibilities:

  • to monitor the application of public procurement rules;
  • to provide legal advice to contracting authorities on the interpretation of public procurement rules and principles and on the application of public procurement rules in specific cases;
  • to issue own-initiative opinions and guidance on questions of general interest relating to the interpretation and application of public procurement rules, on recurring questions and on systemic difficulties related to the application of the public procurement rules; •to establish and applying comprehensive, actionable ‘red flag’ indicator systems to prevent, detect and adequately report instances of procurement fraud, corruption, conflict of interest and other serious irregularities;
  • to draw the attention of the national competent institutions, including auditing authorities, to specific violations detected and to systemic problems;
  • to examine complaints from citizens and businesses on the application of public procurement rules in specific cases and to transmit the analysis to the competent contracting authorities, which shall have the obligation to take it into account in their decision, or, where the analysis is not followed, to explain the reasons for disregarding it;
  • to monitor the decisions taken by national courts and authorities following ECJ reference or findings of the European Court of Auditors establishing violations of EU public procurement rules related to projects co-financed by the EU. This is an extensive package of proposals but is not as far reaching as it might seem or some stakeholders may have sought.

Notably, there has been no increase in the generally applicable value thresholds, largely due to WTO obligations. Negotiated procedures with notice cannot be used as of right for public (as opposed to utilities) procurement and the circumstances when negotiation with notice or competitive dialogue can be used have only been slightly relaxed.

The replacement of the Part A and Part B services distinction with a very light touch regime with a higher value threshold for social services only may be welcomed particularly in the UK National Health Service.

It is unlikely that Member States will universally welcome the obligation to establish a national oversight body, which in the UK might be an “Office of Fair Procurement”. Member States may argue with some justification that such a step is not necessary when the remedies regime has recently been tilted in favour of the challenger of a procedure, and against the contracting authority.

Please click for the texts of the public and utilities proposals and for the proposed new directive on the award of concession contracts.