1. In 2002, public procurement represented some 16% ( 1,493 billion) of the EC's GDP. Ensuring transparency and increasing the level of effective competition in the EC's public procurement market remains a priority of the internal market strategy.
2. Since the last TPR of the EC, there have been no legislative changes to its basic public procurement regime.
[1] Under the current legislative framework, there are directives on public supplies, works, and services
[2], complemented by a remedies directive. Another directive concerns the procurement by publicly owned entities and private entities with special or exclusive rights operating in the water, energy, transport, and telecommunication areas (utilities directive); this is also complemented by a remedies directive. The scope of application in each of the directives is established by minimum thresholds for contracts, which correspond where necessary to those in the GPA, while below-threshold contracts are covered by the provisions and principles of the EC Treaty. The thresholds have been established at 200,000 for public supply and public service contracts
[3], and 5 million for public works contracts.
3. Under the current provisions, member States' contracting authorities are, in general, required to define their technical specifications by reference to EC approved standards or technical specifications. However, under EC Law, contracting authorities may not reject tenders with technical solutions equivalent to the specifications they have defined. Contracting authorities can choose between open and restricted procedures to award contracts; negotiated procedures are available under the conditions set out in the directives. The selection of participants is based on their technical, economic, and financial capabilities. The criteria for awarding contracts include either the lowest price or the economically most advantageous tender.
[4] Contracting authorities have an obligation to inform, within 15 days, any unsuccessful applicant or tenderer who requests the reason for the rejection of his application or tender.
4. Under the relevant remedies directive, an unsuccessful applicant or tenderer is entitled to challenge contract award procedures by contracting authorities before national review bodies. In respect of the remedies available prior to the signature of the contract, national review bodies must be empowered to take, at the earliest opportunity and by way of interlocutory procedures, interim measures including the suspension of the award procedure. National remedies must also provide for the possibility to set aside illegal decisions such as by removing discriminatory specifications or by cancelling the award decision. For utilities only (directive 93/38/EC), and pursuant to Directive 92/13/EEC, some member States have replaced these two remedies by such measures as the payment of daily fines with the aim of correcting infringements and preventing injury to the interests concerned. Under both remedies directives, when the contract is signed, national review bodies, or in some member States a distinct body such as a Civil Court are empowered to award damages to aggrieved tenderers. In addition, at EC level (Article 226 of the EC Treaty), dissatisfied applicants or tenderers can lodge a complaint relating to a contract award procedure covered by the EC Directives with the Commission services. Where appropriate, the Commission can initiate an infringement procedure against the member State concerned for failure to comply with its obligations under EC Law. Thereafter, if the Commission considers that the member State did not take the appropriate measures to correct the alleged infringement, it can bring the dispute before the European Court of Justice, which will give a definitive ruling on the alleged infringement.
5. Where appropriate, the EC's public procurement market is subject to the disciplines of the Government Procurement Agreement (GPA), to which the EC is a party. Consequently, suppliers of goods and services from GPA member countries may tender for contracts above specified thresholds
[5], in accordance with the commitments assumed by the EC.
[6] On 12 December 2002, the EC notified the WTO of modifications to its General Notes in Appendix I to the GPA. This modification entitles suppliers and service providers from Switzerland to challenge the award of contracts by EC entities listed in Annex 2 of the GPA (in accordance with the bilateral agreement between the two parties). Other EC preferential trade agreements (Chapter II(5)(iii)) also provide reciprocal access to procurement markets.
[7]6. As part of the preparation for accession, the acceding countries were required to align their public procurement legislation with that of the EC and implement the latter upon accession. As at March 2004, some of the acceding countries were at the final stages of aligning their legislation on public procurement with that of the EC directives. None of the ten acceding countries are party to the GPA, however they all have observer status in the Committee on Government Procurement, with the exception of Cyprus. As a result of their accession to the EC, from 1 May 2004, the same rights and obligations under the GPA have become applicable to the ten acceding countries as to the 15 existing member States.
7. Trends in EC public procurement transparency show a slight increase in the percentage of public procurement contracts published in the Official Journal (an indicator of market transparency) to 16.3% in 2002 from 15.4% in 2001. As a percentage of GDP, the value of public procurement, which was openly advertised, increased from 2.5% in 2001 to 2.7% in 2002 (TableIII.10). According to the Commission, relatively fewer results of procurement competitions are being made known, as recent trends point to a growing gap between the number of invitations and contract award notices published; of the award notices published in the Official Journal, direct cross-border procurement accounted for only 1.26% of award notices in 2001 (1.5% in 2000).
[8] A recent study by the Commission shows that foreign subsidiaries bidding for contracts in the member State where they are located tend to have a slightly higher rate of success than member State firms bidding for contracts in their own home countries.
[9]
8. The Commission observes that increased transparency resulting from the adoption of a comprehensive set of rules on public procurement at EC level, together with a more systematic approach in its infringement policy, has highlighted problems of implementation of the EC regime by the member States. This is evident in the high number of infringements related to public procurement. For instance, the Commission handled 403 complaints concerning the award of contracts in 2002, and 389 in 2003.
[10] According to the Commission, the EC's public procurement market is still not sufficiently open and competitive; public purchasers, particularly at the local government level, are unaware of the full extent of the rules, which may account for the low level of cross-border procurement.
[11] It is estimated that a 5% cost reduction, resulting from more competitive and efficient public procurement, would save over 70 billion. Under the Internal Market strategy (2003-06), a number of actions have been proposed to address the situation.
[12]9. Measures are being put in place to simplify, modernize and make more flexible the public procurement market in the EC. A common procurement vocabulary (CPV) seeking to standardize and simplify the description of the subject of contract notices was adopted in 2002.
[13] The last TPR of the EC referred to two proposals for new directives on public procurement, one on the coordination of procedures for the award of public works contracts, public supply contracts, and public service contracts, and the other coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors. These two new directives were approved by the European Parliament and Council in the beginning of 2004; they are expected to enter into force in May 2004. EC member States will have up to 21 months to implement the new directive, until which time the current directives will continue to be applicable. According to the Commission, the new thresholds in the draft directives would neither change the effective application of the procurement rules nor pose any issues regarding the GPA.
[14]
[1] The common public procurement rules relate to: (i) the definition of the type of public purchaser and the scope of contracts subject to the Directives; (ii) the definition of the type of contract award procedure public purchasers should normally use; (iii) technical specifications, whereby preferences are to be given to Community standards and discriminatory technical requirements are banned from the contract documents; (iv) advertisement, i.e. tender notices must be published in the Official Journal of the EC, comply with specific requirements concerning deadlines, and be drawn up in accordance with pre-established models; (iv)participation, establishing objective criteria for qualitative selection and for the award of contracts; and (v)obligations as regards statistical reporting to permit the Commission to monitor the functioning of these rules
(European Procurement Brochure, available online at: http://www.simap.eu.int/EN/pub/src/welcome.htm).
[2] Directives 93/36/EC and 93/37/EC, 14 June 1993; and 92/50/EC, 18 June 1992, amended by Directive 97/52/EC, 13 October 1997.
[3] The minimum thresholds for supply and service contracts relating to entities operating in the water, energy, transport and telecommunication sectors is 400,000.
[4] Contractors may be excluded if they are bankrupt or have not met their fiscal obligations with the tax authorities.
[5] The thresholds for the 2004-05 period ranged from 154,014 under Annex I entities for goods and services other than construction to 5,923,624 under Annex III entities for construction services (WTO documents GPA/W/285 and GPA/W/285/Add.4).
[6] Council Decision 94/800/EC, 23 December 1994. The EC's commitments cover the procuring entities listed in Annexes 1, 2 and 3 of Appendix I of its Schedule. These include central government entities, sub-central government entities, and other entities such as those supplying utilities. The contracts are subject to minimum thresholds. Selected goods and services are specified in positive lists (Annexes 4 and 5 of AppendixI) (WTO document GPA/W/35/Rev.1, 8 July 1999).
[7] For instance, the Europe Agreements and Euro-Mediterranean Agreements.
[8] COM(2002) 743 final, "Economic Reform: report on the functioning of the community product and capital market".
[9] For further details, see DG Internal Market (2004).
[10] The Commission has decided to follow a more systematic, horizontal approach in handling cases of infringement of the public procurement rules rather than just reacting case-by-case to complaints received (COM(2001)309, p.88).
[11] Cross-border public procurement is estimated to have stagnated at about 10% since 1998.
[12] COM(2003) 238 final, dated 7 May 2003. Available online at:http://europa.eu.int/eur-lex/en/com/cnc/2003/com2003_0238en01.pdf
[13] Regulation (EC) No. 2195/2002, 5 November 2002.
[14] WTO document WT/TPR/M/102/Add.2, 31 March 2003.