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EUROPEAN ECONOMIC AREA
FORUM OF LOCAL AND REGIONAL AUTHORITIES
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THIRD MEETING OF THE EEA EFTA FORUM
Hamar
31 May and 1 June 2011
Background paper I for the discussion on the agenda item: Europe 2020: Revising and
relaunching the European Internal Market forming the basis for a Forum opinion.
MODERNISATION OF EU PUBLIC PROCUREMENT POLICY: TOWARDS A
MORE EFFICIENT EUROPEAN PROCUREMENT MARKET
INTRODUCTION
Public procurement – government spending on contracts to buy goods, services and
infrastructure – accounts for 18 % of the EU's GDP. The current generation of public
procurement directives, namely Directives 2004/17/EC and 2004/18/EC, are the latest step in
a long evolution that started in 1971.
The EU Public Procurement Directives apply to all contracts above certain thresholds. Their
main objective is to ensure that companies in all 27 EU Member States as well as the three
EEA EFTA States Iceland, Norway and Liechtenstein, have full and equal access to contract
awards throughout Europe, ensuring a level playing field within the European procurement
market. For this purpose, they oblige public procurers to publish a Europe-wide call for
tenders and provide detailed procedural rules covering all stages of a contract award
procedure.
Under the European Economic Area (EEA), local and regional authorities in the EEA EFTA
countries, Iceland, Liechtenstein and Norway, must comply with the legal regime of the
Internal Market, including the public procurement directives.
Under certain conditions the Directives allow public procurers to take into account other
policy-related objectives when awarding public contracts, such as environmental protection
and social standards.
With time, the shortcomings of the current regime have come to light. Stakeholders claim it is
growing excessively complex due to e.g. the highly sophisticated legislation and
jurisprudence it has engendered and the different and accumulating layers of rules from the
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European, national, regional and local levels. Local authorities face excessive legal challenges
from unsuccessful bidders, lengthy processes with heavy administrative burdens, very little
flexibility and high transaction costs; this in turn has the effect of increased risk adverse
attitude which negatively impacts on the development of innovative solutions and/or services
from new suppliers/bidders. In addition, the so-called „strategic‟ policy objectives risk
creating additional requirements, and thus making the rules even more complex. In short, the
focus on the main objectives of the policy: to ensure value for money and the most efficient
use of public resources has been lost.
As a result, local and regional authorities, and other contracting authorities have consistently
called for modernization, clarification and simplification of the public procurement directives.
Furthermore, as public procurement has a key role to address today’s challenges in a number
of fields, it is imperative that the current regime is revised and modernised to be better suited
to the changing political, social and economic context in Europe.
The European Commission, which initiates EU legislative and policy proposals, has answered
the call for reform and to this end launched an internal evaluation of the public consultation
on how to achieve a more competitive public procurement market – and save more public
money.
In addition to the consultation, the Commission is currently undertaking a comprehensive
evaluation of the efficiency and cost-effectiveness of the current European public
procurement rules. The Commission has also asked the EU Member States to carry our
evaluations at national level (to be published in summer 2011).
The results of the consultation and evaluation will be discussed at a high-level conference in
Brussels on 30 June 2011. This work will then inform the legislative proposals that are to be
tabled by 2012.
A background document to the consultation, the Green Paper on the modernisation of EU
public procurement policy: Towards a more efficient European procurement market outlines
ways in which the existing system can be streamlined to deliver these goals. The key areas
for possible revision of the current rules include:
•
•
Simplification of procedures: The Green Paper looks at possible ways to make
procedures easier and more flexible, such as allowing for a wider use of negotiated
procedures. A particular focus is given to the needs of smaller (local or regional)
contracting authorities. The issue of how far cooperation between public authorities
should be covered by or exempted from the application of public procurement rules is
also widely discussed.
Better access to contract opportunities for all economic operators: reducing the
administrative burden for undertakings could boost participation of all economic
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operators, in particular for the benefit of SMEs. The Commission also proposes to
explore ways to stimulate cross-border bidding.
The potential of public procurement to support other policy objectives: Many
stakeholders call for EU-level rules which would encourage or even oblige public
buyers to take societal concerns into account in their procurement (making more
"green" or more "social" purchases). At the same time, the Europe 2020 Strategy
invites to take a deeper look at this issue. The Green Paper invites stakeholders to
discuss whether the possibilities offered by the current legal framework are sufficient
or if more far-reaching measures or requirements are needed.
Tackling favouritism and corruption: Stakeholders are also consulted on the
question of whether fighting corruption and favouritism requires more specific legal
instruments than what is currently set out in the EU public procurement rules.
Examples of such additional safeguards could be for instance enhanced transparency
concerning the composition and work of evaluation committees.
Furthermore, any changes must also ensure transparency, equal access and fair competition in
the awarding of public contracts. Finally, the Green paper also invites stakeholders to raise
other issues that they think should be addressed in a future reform.
POSITIONS OF LOCAL AND REGIONAL ACTORS
In their replies to the consultation on the modernisation of the procurement rules, local and
regional actors across Europe generally share the same concerns. The Council of European
Municipalities and Regions (CEMR), of which KS and SAMBAND are members, has
commented on the Commissions green paper. The Committee of the Regions has adopted
an opinion in this issue, where it makes several recommendations. Local and regional
authorities in the EEA EFTA states face many of the same challenges as those in the EU
Member States in relation to the implementation of the procurement rules and have, therefore,
also called for reform; KS responded to the consultation on the Green paper.
However, local and regional authorities of the EEA EFTA countries also face several
challenges different to those of local authorities in the European Union. This is particularly
the case for Iceland and Norway due to their sparse population, geographical location and
topography with mountains, valleys and fjords separating towns, cities and villages.
TOPICS OF RELEVANCE TO MUNICIPALITIES AND REGIONS IN THE
EEA EFTA COUNTRIES
Below particular issues of relevance for local and regional authorities are addressed.
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FLEXIBILITY
There is general agreement that public procurement procedures in the EU have become
excessively complex. The directives have created a legally challenging environment with
costly and burdensome administrative procedures. There is a need for real reform of the
procurement regime to bring the policy back to its original objective: to ensure value for
money.
Public procurement law is complex and tenderers have limited possibilities to rectify
omissions in their bids. This is partly a result of (national) case-law and decisions made by the
contracting authorities in the tender documents. The reform should provide a certain scope
for tenderers to rectify omissions and make minor additions or adjustments.
In response to questions from bidders, a contracting authority may need to amend or adapt its
preliminary contract during the procurement procedure. Under the current system, substantial
amendment to the contract entails stopping and then re-launching the procurement process. A
simple mechanism must be introduced for contracting authorities to change the
preliminary contract, such as an official corrigendum with a short extension of the
deadline for submission of tenders.
During execution of the contract it may transpire that the contracting authority has overlooked
a point that it would like to amend, but that cannot be considered unforeseeable and
necessary. Therefore, the existing provision on adjustments should be relaxed. One
possibility could be to allow additional work representing a given percentage of the contract
to be assigned to the original contractor as an adjustment, without the need for compliance
with Article 31 of the Directive.
ENCOURAGING INNOVATION, SOCIAL PROCUREMENT, LABOUR
STANDARDS, SUSTAINABILITY, ENVIRONMENTAL PROTECTION,
FIGHTING CLIMATE CHANGE, ENERGY EFFICIENCY, R&D, PUBLIC AND
ANIMAL WELFARE
Local and regional authorities welcome the formulation of objectives relating to
environmental protection, promoting social inclusion, accessibility criteria for people with
disabilities and innovation in public procurement rules. Achievement of these objectives is,
however, constrained by the criterion that requirements and requests addressed to tenderers
must be relevant to the subject matter of the call. Furthermore, local actors stress that
addressing policy goals such as environmental or social issues via public procurement,
must remain entirely voluntary and be left to the local or regional authority to
determine.
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The Forum stresses that the success of the EU 2020 Strategy depends crucially on how well
the local and regional level manages to implement the innovative solutions set as goals in the
flagship initiatives. Innovative practices do not come about by themselves. The
modernisation of EU procurement rules must increase the strategic agility and activities
of municipalities and other public operators as creators of new solutions.
NON-EXISTING AND IMPERFECT MARKETS
A specific challenge is to create markets and uphold competition in existing ones. This is
particularly the case for the services, but is also in certain goods markets.
To address specific local challenges, municipalities and counties need flexibility to
choose a fitting model to organize the provision of their services. Flexibility is particularly
important in the case of large, sparsely populated countries such as Norway and Iceland. One
useful model is granting exclusive rights; in Norway this has proved decisive for investments
in waste treatment plants in some parts of the country. Furthermore, investment in biogasplants based on biomass and sludge, and incineration plants, has proven necessary to achieve
environmental and energy policy goals, as well as preparedness measures.
Further, to apply the procurement rules to public-public partnerships, for a non-commercial
company, complying with the requirements of a public law body, established with the main
objective of providing a public service, is needless. Granting an exclusive right to a public
law body, in order to perform a public task, is part of local self-government.
ACCESS TO CONTRACTS FOR SMALL AND MEDIUM SIZED ENTERPRISES
(SME)
Market access for SME’s is not only important for the companies themselves but also for the
public sector because of the crucial role SMEs play in securing and establishing local
markets, as well as preventing depopulation through local employment. In order to promote
access for SMEs to public contracts it is vital that the rules are simplified; this will also
ease access to, regional markets as well as cross border markets.
THRESHOLDS
Experience has shown that in the case of Norway and Iceland, purchasing from suppliers in
EU Member States is still very rare and that the thresholds (€ 200,000 for supplies and
services contracts) are too low to attract bids from providers based in other countries.
Iceland’s largest city, Reykjavik, is a case in point; in the past six years it has received only
two tenders submitted by foreign suppliers under the general EEA-rules. Therefore, local
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and regional authorities have called for an increase in the thresholds to a level which
makes bidding across borders commercially viable.
A AND B SERVICES
The directive distinguishes between services listed under A and B (in Norwegian prioritised
and un-prioritised services). A-services are typically transport, telecommunication,
information and communication technology (ICT), research and development, accounting,
publicity, engineering, and others. B-services are i.e. legal, recruitment, security, educational,
health and social, sports and culture. In the Directive, the procurement rules apply only to list
A-services. However, Norway has chosen to extend the application of the rules also to list Bservices.
Local and regional actors in the EU and EEA EFTA generally agree that the distinction
between A and B services must remain and the full provision of the Directive should
thus only apply to services presently listed under list A. Further, the option to add more
services to the B-list should be guaranteed. Many B-list services have traditionally been
those provided by the public authorities such as social and health services. These services in
general have no significant cross-border relevance.
PUBLIC-PUBLIC COOPERATION
It is important that public-public cooperation can be established without applying the
public procurement directives. The municipal structure of the EEA EFTA states, in
combination with the geographical and topographical challenges, frequently necessitates
cooperation between municipalities and counties. In recent years partnerships between
municipal and state bodies are growing steadily. In the case of Iceland this is often necessary
because of the small size of municipalities, for instance, the transfer of specialised services for
disabled people from the state to the municipalities in January 2011 obliges Icelandic
municipalities to establish inter-municipal cooperation. Transfer of more welfare services, e.g.
specialised services for the elderly and primary health care is also being discussed on the
same grounds. Furthermore, the financial crisis has led municipalities to increasingly look at
inter-municipal cooperation to provide cost-effective services. In Norway, the on-going
healthcare reform aims at transferring certain competences from the state owned hospitals to
the municipalities. A large degree of inter-municipal cooperation will be required to
adequately meet the aims of the reform.
Efficient public administration for smaller units calls for the possibility to engage in
cooperation, to establish partnerships on administrative support services such as, ICT,
accounting and auditing without applying the public procurement directives. It is thus
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important to secure the possibility for public-public cooperation partnership without
applying the public procurement rules.
Further, the requirement that “the purpose of the partnership is the provision of a public
service task conferred on at least one of the public authorities concerned”, must not exclude
the possibility of engaging in public-public cooperation which is a prerequisite to provide
those services.
GOLD-PLATING AT NATIONAL LEVEL
When transposing EU law, national authorities of the EEA EFTA countries sometimes “goldplate” directives. There are numerous instances where additional measures have been
"tagged" on to the back of European Directives. The choice made in this regard (i.e. the level
of literal implementation) is highly relevant for local and regional authorities as those actors
implementing the majority of the legislation.
One example is the current discussion in Iceland concerning the transposition of the remedies
directive. In this case, local authorities have voiced their concern that the proposed legal text
on the automatic blocking of the tendering process and rendering contracts ineffective goes
well beyond the literal implementation of Directive 2007/66/EC.
Another example is the definition of thresholds in Norway; NOK 500.000 for contracts,
whereas the threshold of the Directive is more than twice as high (€ 200.000, NOK
1.600.000). Norway’s choice to give the procurement rules full effect both for list A and B
services, whereas the directive proper is only applicable to list A services, is another
examples.