Public Procurement Directive Article 41 Labels and certificates
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1 March 2013 Public Procurement Directive Article 41 Labels and certificates ClientEarth s full commentary on both the IMCO and Council s positions in respect of the key provisions affecting sustainable public procurement is available upon request. Labels and certificates can simplify the task of procurement officials and tenderers, but only if the law is clear Limited capacity (in terms of both time and knowledge) makes it difficult for contracting authorities to investigate whether tenders meet the criteria set out in the contract notice, particularly in the sustainability arena. However, labels and certification schemes can help by providing third party verification. Essentially this can serve as a short-cut (i.e. somebody else has checked) and facilitate a decision on whether a certain product meets the requirements or not. Despite its potential usefulness and practical benefits, to date there has been confusion about how third party verification can be used in public procurement processes in a way that is compatible with EU law. This is addressed in Article 41 of the proposed Directive on Public Procurement. However, in ClientEarth s view, neither the Council nor the IMCO texts fully meet the revision s objective of ensuring legal clarity. Discussions in trialogue are an opportunity to resolve these concerns. Legal clarity is especially important as both institutions positions show recognition of investment in third party verification and ultimately incentivise more businesses to seek it. 1 1 Article 41(1) second subparagraph states that a tenderer who wishes to submit alternative proof (i.e. not the indicated label or an equivalent label) may only do so if it had no possibility of obtaining the label. Obviously, this adds a new burden for contracting authorities as they must also assess tenderers claims that they have not been able to obtain the label. However, in the long-run it may be that most tenderers will
2 Consensus on the basics of how to use third party verification IMCO and Council seem in agreement that the role of labels and certificates (i.e. using third party verification) in public procurement is as proof that a product or service has a desired characteristic. 2 They also agree that this approach should be taken in relation to technical specifications, award criteria and contract performance clauses. 3 Therefore, a contracting authority seeking to rely on third party verification will have to engage in a two-step process: firstly, define the characteristics that they are looking for and, secondly, indicate which third party verified standard it will accept as evidence that the works, services or supplies correspond to what they want. The approach of expressly mentioning the detailed characteristics rather than simply requiring a label was preferred by the CJEU when interpreting the current Directive s provisions on labels. 4 The reasoning given was based on the principles of transparency and equal treatment which require the contracting authority to formulate its requirements clearly. The Court was concerned to ensure that potential tenderers had easy access to the criteria underlying the required label.... but this is not followed through in the drafting. The benchmark for testing equivalence should be the specified criteria and not the indicated example of acceptable proof In the approach adopted by both IMCO and the Council, if a tenderer presents the indicated label (or certificate) the tender will be assumed to satisfy the requirement or criterion set out in the contract notice. However, in order to respect the principle of equal treatment, Article 41 allows tenderers to present alternative evidence. Contracting authorities will therefore be required to assess equivalence between what they have indicated as acceptable proof and the alternatives they are presented with. With a view to reducing the administration burden placed on contracting authorities it is important that the burden of proof falls on the tenderer to demonstrate equivalence. A key question is whether the alternative evidence should demonstrate that the tender complies with the original criterion stipulated by the contracting authority or the criteria underlying the indicated label. The current drafting suggests that it is the label that becomes the benchmark. Several practical problems arise from this and, as a point of principle, it is not clear why the have realised the value of third party verification and therefore contracting authorities will be less frequently called upon to make such decisions. 2 This is in contrast to the Commission s proposal which would have allowed contracting authorities to make bearing a label the requirement. 3 This is in contrast to the Commission s proposal which only referenced technical specifications. 4 Case C-368/10, Commission v The Kingdom of the Netherlands. (known as the North Holland case), paragraph 67.
3 benchmark is not the characteristic originally specified by the contracting authority. It seems that this part of the article has not been amended to reflect the change to the labels as proof approach. Example: A contracting authority specifies that the product must have X characteristic, with Label A indicated as acceptable proof of X. Label A s criteria guarantee that the product has X characteristic but also Y characteristic. Do tenderers whose products do not bear Label A have to show that the product has Y characteristic (i.e. equivalence to label A), in addition to showing that it has X characteristic (specified by the contracting authority)? If a tenderer seeks to rely on an equivalent label, it must be a label that uses the requirements of the specific label indicated by the contracting authorities. 5 This drafting implies that a match between the relevant criteria of the two labels is required i.e. identical wording. This is a surprisingly high threshold for equivalence. There may be several labels which take different approaches and have different levels of ambitions in respect of any particular characteristic, thus assessing equivalence against each other will be tricky. In practice it is unlikely that two labels would resemble each other so closely. 6 Continuing the above example: A tenderer s product bears label B. Label B s criteria are that the product has X characteristic and Z characteristic. Label B s criteria meet the contracting authority s requirement regarding X characteristic, but its criteria (X and Z characteristics) are not identical to label A s criteria (X and Y characteristics), so can it be considered equivalent to Label A? Instead of an equivalent label, a tenderer may submit alternative means of proof (e.g. a technical dossier). Again the problem with using the specified label as the benchmark can be highlighted using the example of multiple issue labels. Such a label may provide good proof in respect of the characteristic chosen by the contracting authority and therefore be specified by a contracting authority. However, other characteristics not targeted by the contracting authority may also be included in that label s criteria, and on the basis of current drafting it could be argued that a tenderer would also have to address these other characteristics in its technical dossier, even if they were not stipulated by the contracting authority. Article 41(1) subparagraph 2 needs to be revised to ensure that the provisions on equivalence refer back to the criteria set by the contracting authority. 5 This is an extract from the Council text of Article 41(1) subparagraph 2. The IMCO text is almost identical, but replaces the word use with fulfil. 6 Of course, it may well become practice that contracting authorities simply copy the text of relevant criteria of a label which would make the above point moot. Nonetheless, surely the Directive should not anticipate only this eventuality.
4 Labels as proof approach nullifies the need for all criteria of the label to be linked to the subject matter The Commission s original proposal allowed contracting authorities to require a label thereby making it effectively a technical specification to fulfil all the underlying criteria of the label. However, as noted above, under the labels as proof approach an authority simply indicates that it will accept a certain label as proof that the product or service complies with the characteristic it has specified. Therefore, what matters is that the label has criteria that match the criteria that the contracting authority has originally specified. It is irrelevant that a label that targets the desired characteristic also uses some other criteria that are not linked to the subject matter for example, criteria focussing on the company s behaviour unconnected to the product or its production process. Example: A label covering 3 characteristics, one of which is not linked to the subject matter, can provide good proof of the 2 characteristics of interest to the contracting authority. In the same way, there are labels covering multiple issues that may provide good proof in respect of the characteristic desired by a contracting authority and therefore be specified as acceptable proof. However, by specifying such a label, the contracting authority is not importing those other criteria of the indicated label that cover different characteristics. Example: A label covering 5 characteristics (all linked to the subject matter), even if the contracting authority is only interested in 2 of these, can be usefully specified as good proof of those 2 characteristics. The reference to the link to the subject matter in Article 41(1)(a) and the whole of Article 41(2) are therefore redundant. Outstanding points that need addressing in order to optimise the third party verification options available to contracting authorities: Can only labels be used? Use of the term label is unhelpfully limiting the toolbox at the disposal of contracting authorities. This is recognised in the IMCO text but not in the Council position. The term label can be restrictively interpreted as a certification that is applied to a particular product. Third party verified standards can apply to a range of products or a factory or a company s operations. Verification at each of these levels can be relevant to proving that works, service or supplies correspond to the requirements set by a contracting authority. For example, if a contracting authority wants a product that has not been produced using child
5 labour, it might consider accepting that a tender which shows that the products supplied were produced in a factory that has been certified as not using child labour. Ultimately, if what procurement officials want is a written assurance that a process, system, product or a service complies with a certain standard, then the legislation should allow them to use certification and not just labels. Article 41 needs to refer to a concept that is wider than label. IMCO opted for label or certificate. Other options could be assurance scheme or third party verified standard. Is it clear what a robust and credible third party verified standard looks like? Article 41 seeks to restrict which third party verified standards can be used by contracting authorities in the procurement process. Clearly, if a contracting authority is going to rely on a third party s assessment of a product or service it is important that it is robust and credible. Unfortunately, there appear to be inconsistencies between some of the criteria set out in Article 41 that undermine this objective. As drafted, 41(1)(e) 7 seems to overlap confusingly with 41(1)(c) 8 as both deal with governance requirements for the label. The former states that the requirements must be set by somebody who is independent from the economic operator applying for the label, whereas the latter states that the label must be established in a procedure involving all stakeholders. It is unclear what the difference is between establishing a label and setting requirements for a label. But more importantly, given that 41(1)(c) implies that stakeholders establishing a label would include economic operators, why must they then be locked out of the requirement setting stage? This seems to be simultaneously promoting and undermining multi-stakeholder approaches, such as those that include a business chamber in their governance structures. It is assumed that the intention of 41(1)(e) was to avoid business-dominated labels that might be presumed to be less ambitious and self-serving. In fact due to the labels as proof approach, which requires contracting authorities to first set out the characteristics they desire (setting them at their own level of ambition), this should be less of a concern. 41(1)(e) should be revisited to check whether it is unhelpful or even redundant. No standards set in respect of the verification process 7 COUNCIL: 41(1)(e) the requirements to be met in order to obtain the label are set by a third party which is independent from the economic operator applying for the label. (IMCO wording is similar). 8 COUNCIL: 41(1)(c) the labels are established in an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, manufacturers, distributors and non-governmental organisations, may participate. (IMCO wording is similar).
6 It is important to underline that an economic operator should not just assess itself and award itself a label or certificate; greenwash should be guarded against. Therefore, the involvement of a third party audit is crucial self-declarations by economic operators are not sufficiently robust for contracting authorities to rely on. The current drafting does not address the actual arrangements for verification that products or services comply with the standards set by the label, it simply addressed the setting of those standards. This is an oversight.
7 ClientEarth is a non-profit environmental law organisation based in London, Brussels and Warsaw. We are activist lawyers working at the interface of law, science and policy. Using the power of the law, we develop legal strategies and tools to address major environmental issues. As legal experts working in the public interest, we act to strengthen the work of our partner organisations. Our work covers climate change and energy system transformation, protection of oceans, biodiversity and forests, and environmental justice. ClientEarth is funded by the generous support of philanthropic foundations and engaged individuals and with programmatic support from the UK Department for International Development. For further discussion of other points connected with sustainable public procurement and the revision of the Public Procurement Directive, please see ClientEarth s publications at For further information please contact Catherine Weller Lawyer t +44 (0) cweller@clientearth.org Janet Meissner Pritchard Senior Lawyer t +44 (0) jpritchard@clientearth.org ClientEarth offices: Brussels 4ème Etage 36 Avenue de Tervueren Bruxelles 1040 Belgium London 274 Richmond Road London E8 3QW UK Warsaw Aleje Ujazdowskie 39/ Warszawa Poland ClientEarth is a company limited by guarantee, registered in England and Wales, company number , registered charity number , registered office 2-6 Cannon Street, London EC4M 6YH, with a registered branch in Belgium, N d entreprise , and with a registered foundation in Poland, Fundacja ClientEarth Poland, KRS , NIP
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