The new European Directive on public procurement law

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1 Silberg, Sebastian The new European Directive on public procurement law The European Legal Forum (E) , IPR Verlag GmbH München The European Legal Forum - Internet Portal Literature Doc

2 304 Issue The European Legal Forum posits from the public and the granting of credits represent the basic activities of credit institutions It is clear from settled case-law that where, as in the case at issue in the main proceedings, such a measure applies to any person or undertaking carrying on an activity in the territory of the host Member State, it may be justified where it serves overriding requirements relating to the public interest, is suitable for securing the attainment of the objective it pursues and does not go beyond what is necessary in order to attain it It must therefore be examined whether the grounds put forward by the French Government meet those criteria. 19. To justify the restriction on freedom of establishment resulting from the prohibition at issue, the French Government prayed in aid both the protection of consumers and the encouragement of medium and long-term saving. 20. It submits, first, that the prohibition at issue in the main proceedings is necessary for maintaining the provision of basic banking services without charge. Introducing remuneration for sight accounts would substantially increase the operating costs of banks, which, to recover those costs, would increase charges and introduce charges for the various banking services currently provided free, in particular the issuing of cheques. 4 5 See, to that effect, inter alia Article 1(1) of and Annex I to Directive 2000/12. See, inter alia, ECJ 4 July 2000 C-424/97 Haim [2000] ECR I-5123, para. 57; Mac Quen (supra note 3), para. 26; and ECJ 15 January 2002 C-439/99 Commission v Italy [2002] ECR I-305, para It must be observed, however, that while the protection of consumers is among the overriding requirements that can justify restrictions on a fundamental freedom guaranteed by the EC Treaty, the prohibition at issue in the main proceedings, even supposing that it ultimately presents certain benefits for the consumer, constitutes a measure which goes beyond what is necessary to attain that objective. 22. Even supposing that removing the prohibition of paying remuneration on sight accounts necessarily entails for consumers an increase in the cost of basic banking services or a charge for cheques, the possibility might be envisaged inter alia of allowing consumers to choose between an unremunerated sight account with certain basic banking services remaining free of charge and a remunerated sight account with the credit institution being able to make charges for banking services previously provided free, such as the issuing of cheques. 23. As regards, next, the French authorities concern to encourage long-term saving, it must be observed that, while the prohibition of remuneration on sight accounts is indeed suitable for encouraging medium and long-term saving, it nevertheless remains a measure which goes beyond what is necessary to attain that objective. 24. In the light of the above considerations, the answer to the questions referred for a preliminary ruling must be that Article 43 EC precludes legislation of a Member State which prohibits a credit institution which is a subsidiary of a company from another Member State from remunerating sight accounts in euros opened by residents of the former Member State. (...) INTERNATIONAL AND EUROPEAN BUSINESS AND COMPETITION LAW The new European Directive on public procurement law Sebastian Silberg * On 30 April 2004 Directive 2004/18/EC of the European Parliament and of the Council of March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts 1 entered into force. The new Directive consists of the amended and complemented legal provisions of the following three directives which have been consolidated in one single legal instrument: the Directive of 18 June 1992 relating to the coordination of public service contracts, 2 the Directive of 14 June 1993 concerning the coordination of public works contracts 3 and * Lawyer with law firm Dr. Zacharias, Berlin (D). OJ 2004, L 134, at 114 et seqq. OJ 1992, L 209, at 1 et seqq. OJ 1993, L 199, at 54 et seqq. the Directive of 14 June 1993 concerning the coordination of public supply contracts. 4 This article gives an overview of the main provisions that have been introduced and amended. 1. Amendment to thresholds In accordance with the new Directive there apply new thresholds which are expressed in Euros (relevant is the estimated value exclusive of value-added tax): a) EUR for public supply and service contracts OJ 1993, L 199, at 1 et seqq. See Article 7.

3 The European Legal Forum Issue awarded by central government authorities (in Germany these are Federal Ministries and the Department of Foreign Affairs), 6 unless they are awarded in the field of defence. This threshold, however, also applies to cases where contracts involve products covered by Annex V. b) EUR for public supply and service contracts which are awarded by other contracting authorities and for public service contracts which are awarded by central government authorities in the field of defence and which are not covered by Annex V as well as for certain other services. 7 c) EUR for public works contracts. In accordance with the recitals, public service contracts that include works continue to be deemed as public services contracts, provided the works are only incidental to the principal subject-matter of the contract and are a possible consequence thereof or a complement thereto Framework agreements Member States may provide that contracting authorities may conclude framework agreements. 9 In accordance with the definition contained in the Directive, a framework agreement is an agreement between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged. 10 The term economic operator covers the following terms contained in the directives which have been consolidated: contractor, supplier and service provider. 11 The term of a framework agreement may not exceed four years, save in exceptional cases. 12 On the basis of the framework agreement, the contracting authority may award contracts to the party or parties to the agreement without having to reopen competition between the parties, provided the contract does not provide for any amendments to the terms of the framework agreement. In contrast, where not all of the terms of the contract are laid down in the framework agreement and the framework agreement has been concluded with several economic entities, then these entities have to compete for the contracts. The contracting authority award each contract to the tenderer who has submitted the best tender on the basis of the award criteria set out in the specifications of the framework agreement Central purchasing bodies Member States may stipulate that contracting authorities may purchase works, supplies and/or services from or through a central purchasing body. 14 The aim of purchasing from or through a central purchasing body is to increase competition and streamline public purchasing. 15 By purchasing works, supplies and/or services from or through a purchasing body, the contracting authorities concerned are deemed to have complied with the Directive, i.e. if the central purchasing body has complied with the Directive, the contracting authority that purchased from or through a central purchasing body is deemed to also have complied with the Directive. 16 In accordance with the definition contained in the Directive, the central purchasing body is a contracting authority which acquires supplies and/or services intended for contracting authorities or awards public contracts or concludes framework agreements for works, supplies or services for contracting authorities Procedure of the competitive dialogue In addition to the open, restricted and negotiated procedure there now exists another procedure referred to as the competitive dialogue, provided member states have made use of their option to introduce this additional procedure. The reason for introducing this procedure is the fact that contracting authorities which carry out particularly complex projects (two of the examples given are transport infrastructure projects and large computer networks) often do not have the necessary expertise to define the means required for their project or to assess what the market can offer in the way of technical or other solutions. 18 In this case, the aim of engaging in a dialogue with the candidates is to provide the contracting authorities with the knowledge required for their project. 19 The dialogue continues until a solution for the contracting authority is found. Once the contracting authority has identified a solution, it declares that the dialogue is concluded and asks the candidates to submit their final tenders on the basis of the solutions specified during the dialogue. 5. Dynamic purchasing systems In order to enable the contracting authorities to make optimal use of all the options available under the electronic purchasing system, 20 the Member States may provide them with the opportunity to use so-called dynamic purchasing sys See Annex IV. In detail see Article 7(b) 3rd indent. Recital 10. Article 32(1). Article 1(5). Article 1(8). Article 32(2)(4). In detail see Article 32(3) and Article 32(4). 14 Article 11(1). 15 Recital Article 11(2). 17 Article 1(10). 18 Recital For the text that follows see Article Recital 13.

4 306 Issue The European Legal Forum tems. In accordance with the definition in the Directive, a dynamic purchasing system is a completely electronic process for making commonly used purchases, the characteristics of which, as generally available on the market, meet the requirements of the contracting authority, which is limited in duration and open throughout its validity to any economic operator which satisfies the selection criteria and has submitted an indicative tender that complies with the specification. 21 If the contracting authority intends to award a contract, it needs to observe a two step process. First, it has to publish a simplified contract notice inviting all interested economic operators to submit an indicative tender. The respective economic operator is admitted to the system, if the tender complies with the specifications, i.e. he will become part of the group of operators that may in a second step be invited to submit their tenders, if required by the contracting authority. 22 The award criteria need to be already contained in the simplified contract notice and may, if appropriate, be formulated more precisely in the invitation to tender that may follow. The dynamic purchasing system is a type of open procedure. The contracting authorities may not use this system in a way that prevents, restricts or distorts competition Electronic auctions Member States may provide for contracting authorities to carry out electronic auctions. In Community law electronic auctions are defined as a repetitive process involving an electronic device for the presentation of new prices, revised downwards, and/or new values concerning certain elements of tenders, which occurs after an initial full evaluation of the tenders, enabling them to be ranked using automatic evaluation methods. 24 The auction may take place in a number of successive phases. All tenderers who have submitted admissible tenders are invited, if applicable several times, to submit new tenders containing lower prices or, if the contract is to be awarded on the basis of the most economically advantageous tender, to submit a tender which is economically more advantageous. 25 The contracting authority is required to communicate by electronic means to the tenderer all the necessary information to enable him to ascertain the ranking of his tender at any moment. 26 In accordance with the recitals, the electronic auction should be made for recurring supplies, works and service contracts for which the specifications can be determined with precision. It must also be possible to evaluate the tenders by elec- 21 Article 1(6). 22 Article 33(5) and Article 33(6). 23 Article 33(7)(2). 24 Article 1(7). 25 Article 54 (4)(2). 26 Article 54(6). tronic means, without any intervention and/or appreciation by the contracting authority, so that the object of this procedure may only be elements which are quantifiable, i.e. elements of a tender that can be expressed in figures or percentages. In contrast, intellectual performances for example may not be the object of this procedure Conditions for performance of contracts Contracting authorities may lay down additional conditions relating to the performance of a contract, i.e. in particular social and environmental considerations not related to the subject-matter of the contract, provided that these are compatible with Community law and are indicated in the contract notice or in the specifications. 28 Social consideration may in particular include training measures for young persons and employees, the fight against unemployment or the integration of handicapped persons. 29 This provision belongs in terms of its subject matter to a controversial part of public procurement law, i.e. the question as to whether and in how far considerations not related to the subject-matter of the contract may be relevant when awarding a contract. Other questions include the issue of whether it is admissible to use public procurement law in order to achieve social and environmental policy objectives or any other objectives. However, first of all one needs to look at the question in which phase of the contract awarding procedure such additional considerations may be taken into account. 30 It has been argued that they may not be qualified as awarding criteria. This view is supported by the wording for the implementation of the contract as well as by the fact that in order for environmental considerations to qualify as awarding criteria they have to relate to the subject-matter of the contract. 31 It therefore appears that conditions for being awarded the contract are those obligations which are imposed on the successful tenderer in the contract he concluded with the contracting authority. 8. Electronic communication exchange The contracting authority may determine the means for communication exchange according to its choice. It is no longer 32 required for the member states to especially allow for the electronic exchange of information (Internet, ). The 27 Recital Article See recital On subject see Opitz, Vergaberecht 2004, at 421 et seqq. 31 Article 53(1)(a). 32 Regarding the legal position so far, see: Article 23(2) of Council Directive 92/50/EEC (supra note 2); Article 15(3) of Council Directive 93/36/EEC (supra note 4); and Article 18(2) of Council Directive 93/37/EEC (supra note 3); whereby the respective articles apply as amended by Directive 97/52/EC.

5 The European Legal Forum Issue respective provisions were not included in the new Directive. 33 The devices for the exchange of information have to conform to the requirements of Annex X. 34 It has to be ensured that the general principles of equal treatment, non-discrimination and transparency are observed. 35 The principle of non-discrimination requires, amongst other things, that the tools to be used for communicating by electronic means, as well as their technical characteristics, are generally available and interoperable with the information and communication technology products in general use Criteria for qualitative selection In the context of the criteria for qualitative selection, obligatory exclusion criteria have been introduced into the new Directive. Accordingly, a candidate or a tenderer who has been the subject of a conviction by final judgment for participation in a criminal organisation, corruption, fraud to the detriment of the financial interests of the European Communities or money laundering of which the contracting authority is aware is to be excluded from participation in the award procedure. 37 The legal elements of these offences are solely determined pursuant to European law, 38 i.e. corruption for example only concerns corruption in the context of business dealings. However, Member States are requested to specify, in accordance with their national law and having regard for Community law, the implementing conditions for the application of this provision. 39 It remains largely unclear to what extent this provision contains any rules on how member states are to implement the Directive. The recitals provide detailed information on the optional exclusion criteria of an offence concerning the professional conduct or grave professional misconduct. Accordingly, this general provision may apply in particular to offences which have been the subject of a final judgment concerning noncompliance with environmental legislation or legislation on unlawful agreements in public contracts or the nonobservance of national provisions implementing the directives concerning equal treatment of workers. 40 When assessing as to whether a tenderer or a candidate is suitable, his economic standing is also taken into considera Article 42(1) of Council Directive 2004/18/EC (supra note 1). Article 42(5)(a) Sentence 2. Recital 12. Article 42(4). Article 45(1)(1). See Article 2(1) of the Joint action 98/733/JHA adopted by the Council (participation in a criminal organisation) (OJ 1998, L 351, at 1); Article 3 of Council Act 98/742/JI (corruption) (OJ 1997, C 195, at 1); Article 1 of the Convention on the protection of the European Communities financial interests (fraud) (OJ 1995, C 316, at 48); Article 1 of Council Directive 91/308/EEC of 10 June 1991 (money laundering) (OJ 1991, L 166, at 77. Last amended by Directive 2001/97/EC of the European Parliament and of the Council of 4 December 2001 (OJ 2001, L 344, at 76)). Article 45(1)(2). Recital 43. tion. In accordance with the new Directive, he may rely on the capacities of other entities, if he proves to the contracting authority that he will have at its disposal the resources necessary by producing an undertaking by those entities to that effect Technical specifications The new Directive 42 provides that the contracting authority may draw up the technical specifications in terms of functional performance and requirements, which may also include environmental characteristics. 43 Environmental characteristics for example include environmentally friendly production methods or specific environmental effects of product groups or services. 44 Where a contracting authority does not define its specifications in terms of performance or function, but by referring to the technical specifications in terms of Annex VI of the Directive, it cannot reject a tender on the grounds that the products and services tendered for did not comply with the specifications to which it has referred, provided the tenderer proves in his tender by appropriate means that the solutions which he proposes satisfy in an equivalent manner the requirements defined by the technical specifications. 45 In contrast, where the technical specifications are defined in terms of performance or function the tenderer has to prove to the contracting authority by any appropriate means that his work, product or service complies with the performance or functional requirements of the contracting authority. 46 These provisions are to ensure that when awarding contracts the contracting authority takes into account the whole of the market which may offer a diversity of technical solutions. 47 While these provisions impose a considerable burden in terms of supplying information, they provide the opportunity for innovative technical designs to be used. 11. Procurement of money and capital by contracting authorities In the new Directive it has been clarified that public procurement law does not apply to public contracts concluded by the contracting authorities for transactions to raise money or capital. 48 Since this issue was not properly regulated in the provisions of the three separate directives, 49 it was controver- 41 Article 47(2). 42 Regarding the law laid down in the three separate directives, see Article 14 of Council Directive 92/50/EEC (supra note 2); Article 8 of Council Directive 93/36/EEC (supra note 4); Article 10 of Council Directive 93/37/EEC (supra note 3). 43 Article 23(3)(b). 44 Recital Article 23(4). 46 Article 23(5)(2). 47 Recital Article 16(d). 49 See Article 1 (a)(vii) of Council Directive 92/50 (supra note 2).

6 308 Issue The European Legal Forum sial as to whether public procurement law applied to such transactions. 12. Award to special tenderers The group of potential tenderers is limited from the start if member states use their legislative powers and require from the contracting authorities that only sheltered workshops where most of the employees concerned are handicapped persons who, by reason of the nature or the seriousness of their disabilities, cannot carry on occupations under normal conditions may participate in the award procedure. 50 Such workshops contributed towards the integration or reintegration of people with disabilities in the labour market, but who were not able to obtain contracts under normal conditions of competition Subcontractors It was already contained in the provisions of the three separate Directives that the contracting authority may request the tenderer to indicate to the contracting authority the part of his tender which he intends to subcontract to third parties should the situation arise. 52 In accordance with the new Directive, the contracting authority may in addition be required by the Member State to request the tenderer to indicate any of the subcontractors already proposed Awarding criteria In the provisions of the three separate Directives it was already contained that the contracting authority was required to indicate how much importance it attached to each individual criteria. So far this was done by indicating the order of importance of the criteria. 54 Indicating the weighting of the criteria according to the order of importance is now only used where an alternative measure is required, i.e. where the contracting authority, in particular on account of the complexity of the contract, is unable to establish the weighting of the criteria in advance. 55 In principal, the contracting authority is required, in case it awards the contract on the basis of the economically advantageous tender, to weigh the criteria in this way, 56 which evidently is to result in a higher degree of transparency. The list of possible criteria was extended by the criteria of envi- 50 Article Recital Article 25 of Council Directive 92/50/EEC (supra note 2); Article 17 of Council Directive 93/36/EEC (supra note 4), Article 20 of Council Directive 93/37/EEC (supra note 3). 53 Article Article 36(2) of Council Directive 92/50/EEC (supra note 2); Article 26(2) of Council Directive 93/36/EEC (supra note 4); Article 30(2) of Council Directive 93/37/EEC (supra note 3). 55 Recital Article 53(2). ronmental characteristics. 57 However, this criteria may only be taken into account in as far as it is related to the actual subjectmatter of the contract. 15. Rejection of abnormally low tenders The contracting authority may not reject particularly low tenders on the ground alone that the tenderer has obtained State aid. In fact, it first has to request the tenderer to prove that the aid he received was granted legally. Only if the tenderer is unable to prove that this was the case, then the contracting authority may reject the tender Shortening the minimum time period for requests to participate and for receipt of tenders Due to the fact that it is much quicker to use electronic means of communications, the contracting authority which employed such means are allowed to shorten the time limits. In accordance with the new provision where notices are drawn up and transmitted by electronic means, the minimum time limit for the receipt of tenders (in open procedures) and for the receipt of requests to participate (in other procedures) may be shortened by seven days. 59 If added up, 60 the time limit resulting from this measure may be reduced by a further five days for the receipt of tenders in the open and in the restricted procedure, if the contracting authority makes available from the publication of the notice the specifications and all other supplementary documents by electronic means whereby it must specify the Internet address at which this documentation is freely, immediately and fully accessible Service concessions When comparing service concessions to public service contracts, they differ only to the extent that the consideration for the provision of services consists either solely in the right to exploit the service or in this right together with payment. 62 Service concessions are not subject to public procurement law. This is clearly stated in the new Directive, 63 i.e. in this respect the Directive corresponds to the decisions of the ECJ. The Member States are obliged to implement the provisions of the Directive into national law by 31 January At that point the provisions of the three consolidated Directives will cease to be effective. 57 Article 53(1)(a). 58 Article 55(3). 59 Article 38(5). 60 Article 38(6)(2). 61 Article 38(6)(1). 62 See the definition in Article 1(4). 63 Article Article 80.

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