New EU Directives Richard Heath, Associate New EU Directives One of a package of 3 Directives Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC Aim is to simplify and update EU public procurement rules
1. Simplification and flexibility Definition of procurement Article 1(2) Procurement within the meaning of this Directive is the acquisition of a public contract of works, supplies or services by one or more contracting authorities from economic operators chosen by those contracting authorities, whether or not the works, supplies or services are intended for a public purpose. 56 1. Simplification and flexibility Scope of the Directive Removal of Part B services No distinction between Part A and Part B New light touch regime for social services and other services Financial threshold of 750,000 Ensure transparency and equal treatment Provide access to the remedies rules 57
1. Simplification and flexibility Scope of the Directive Changes to excluded services (Article 10) List of services revised Research and Development services now governed by Article 14 The Directive only applies to R&D contracts if: The benefits accrue exclusively to the contracting authority for its use in the conduct of its own affairs, AND The service provided is wholly remunerated by the contracting authority. 58 1. Simplification and flexibility relations between public authorities Article 12 Codifying Teckal and Hamburg waste cases on inhouse procurement The contract will be outside the scope of the directive if: The contracting authority exercises a control over the legal person concerned which is similar to that which it exercises over its own departments, AND At least 80% of the activities of that legal person are carried out for the controlling contracting authority or for other legal persons controlled by that contracting authority, AND There is no direct private capital participation in the controlled legal person. 59
1. Simplification and flexibility relations between public authorities Article 12 The controlled legal person which is a contracting authority can award a contract to its controlling contracting authority, or to another legal person controlled by the same contracting authority. Contracts can be awarded to a legal person controlled jointly with other contracting authorities. The decision-making bodies of the controlled legal person must be composed of representatives of all participating contracting authorities. However, individual representatives may represent several or all of the participating contracting authorities. The contracting authorities must be able to jointly exert decisive influence over the strategic objectives and significant decisions of the controlled legal person. The controlled legal person does not pursue any interests which are contrary to those of the controlling contracting authorities. 60 1. Simplification and flexibility relations between public authorities Article 12 An agreement concluded between two or more contracting authorities shall not be deemed to be a public contract where the following cumulative conditions are fulfilled: The agreement establishes or implements a cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common, AND The agreement is governed only by considerations relating to the public interest, AND The participating contracting authorities do not perform on the open market more than 20% in terms of turnover of the activities which are relevant in the context of the agreement. 61
1. Simplification and flexibility relations between public authorities Article 12 To calculate what proportion of an entity's activities are carried out for a contracting authority or on the open market, you must look at: The average total turnover (or an appropriate alternative activitybased measure such as costs incurred by the relevant legal person or contracting authority) with respect to services, supplies and works for the three years preceding the contract award shall be taken into consideration. Where, because of the date on which the relevant legal person or contracting authority was created or commenced activities or because of a reorganisation of its activities, the turnover, or alternative activity based measure such as costs, are either not available for the preceding three years or no longer relevant, it shall be sufficient to show that the measurement of activity is credible, particularly by means of business projections. 62 1. Simplification and flexibility - Procedures Open - Article 27 Restricted - Article 28 Competitive negotiation - Article 29 Competitive dialogue Article 30 Innovation partnership Article 31 Negotiated without prior publication Article 32 63
1. Simplification and flexibility Procedures Key changes Competitive negotiation - Article 29 Revised procedure Provides express safeguards against discrimination and unfair treatment during the procedure Must specify the subject matter of the contract, the award criteria and the minimum requirements at time the contract notice is published Any changes must be communicated to all firms participating Every tenderer must be given the possibility to submit a final tender. The conduct of negotiations must be documented in a reporting by the contracting authority. 64 1. Simplification and flexibility Procedures Key changes New Innovation Partnership Article 31 Identify the need for an innovative product, service or works that cannot be met by purchasing products, services or works already available on the market. Define minimum requirements to be met by all tenders. Can set up with one partner or with several partners conducting separate R&D activities. Receipt of requests to participate shall be a minimum of 30 days from the date on which the contract notice is sent. Only those economic operators invited by the contracting authority following the assessment of the information provided may participate in the procedure. May limit the number of suitable candidates to be invited to participate in the procedure in accordance with Article 65. The contracts shall be awarded in accordance with the rules for a competitive procedure with negotiation. The sole basis of the award criterion is the best price-quality ratio in accordance with Article 67. 65
1. Simplification and flexibility Procedures Key changes The Directive also clarifies that tenders: Which do not comply with the procurement documents, which were received late, where there is evidence of collusion or corruption, or which have been found by the contracting authority to be abnormally low, shall be considered as being irregular. Submitted by tenderers that do not have the required qualifications, and tenders whose price exceeds the contracting authority s budget as determined and documented prior to the launching of the procurement procedure shall be considered as unacceptable. 66 1. Simplification and flexibility Other procurement methods Framework agreements (article 33). The existing rules have been clarified, particularly in relation to the use of a framework agreement by contracting authorities which are not themselves party to it. Dynamic purchasing systems (article 34). The rules have been simplified so that such systems must be operated in the form of a restricted procedure. This means that any economic operator that submits a request to participate and meets the selection criteria should be allowed to take part. Electronic auctions (article 35). Electronic catalogues (article 36). Where contracting authorities require the use of electronic means of communication they may require tenders to be presented in the format of an electronic catalogue. Member States will be entitled to render the use of electronic catalogues mandatory in connection with certain types of procurement. 67
1. Simplification and flexibility - Other procurement methods Central purchasing activities and central purchasing bodies (article 37). Joint procurement (article 38). New rules for when two or more contracting authorities may agree to perform certain specific procurements jointly providing that all of the authorities involved will be jointly responsible for fulfilling the obligations set out in the directive. Different Member States (article 39). Joint procurement between contracting authorities from different member states. In particular, it sets out rules for the choice of applicable national law for the procurement and limits the ability of a member state to stop a contracting authority from using centralised purchasing activities offered in another member state. 68 1. Simplification and flexibility e- procurement Article 53 Contracting authorities shall offer unrestricted and full direct access free of charge by electronic means to the procurement documents from the date of publication of the contract notice. The directive provides for a switch to fully electronic communication, in particular e-submission, in all procurement procedures. Member states may delay full implementation of the mandatory use of e-procurement until 18 October 2018 69
1. Simplification and flexibility Conduct of procurement A new section on "preparation". This sets out provisions relating to: preliminary market consultations in order to assess the structure, capability and capacity of the market and to inform economic operators of their procurement plans and requirements (article 40); the rules relating on technical specifications and the use of labels (article 42); and the rules relating to variants (article 45), division of contracts into lots (article 46) and setting time limits (article 47). Rules on publication and transparency, including the use of prior information notices (article 48), contract notices (article 49), contract award notices (article 50) and the form and manner of publication of notices (article 51). New rules on invitations to submit a tender or to participate in the dialogue and invitations to confirm interest (article 54). 70 1. Simplification and flexibility Contract Award Article 67 The most economically advantageous tender" On the basis of the price or cost. Using a cost-effectiveness approach, such as life-cycle costing. Using the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question. 71
1. Simplification and flexibility Contract Award Article 67 Criteria may include: Quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions. Organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract. After-sales service and technical assistance, delivery conditions such as delivery date, delivery process and delivery period or period of completion. 72 1. Simplification and flexibility Contract Award Article 67 The directive also states that Member States may provide that contracting authorities may not use price only or cost only as the sole award criterion or restrict their use to certain categories of contracting authorities or certain types of contracts. 73
1. Simplification and flexibility Modification of contracts during their term Article 72 The directive clarifies that a substantial modification of the provisions of a public contract during its term shall be considered as a new award and shall require a new procedure. Substantial modifications include: Modifications that would have allowed for the admission of other candidates than those initially selected or for the acceptance of a tender other than that originally accepted or would have attracted additional participants in the procurement procedure. Modifications changing the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement. Modifications extending the scope of the contract or framework agreement considerably. The replacement of the contractual partner. 74 1. Simplification and flexibility Modification of contracts during their term Article 72 A modification shall not be considered to be substantial where its value does not exceed the thresholds and where it is below: 10% of the price of the initial contract (service and supplies contracts). 15% of the price of the initial contract (works contracts). This is provided that the modification does not alter the overall nature of the contract. 75
1. Simplification and flexibility Modification of contracts Article 72 New rules increasing flexibility to allow the contract to be adapted in the event of external circumstances that cannot be foreseen. Substantial modification will not require a new procurement procedure where the following cumulative conditions are met: The need for modification has been brought about by circumstances which a diligent contracting authority could not foresee, AND The modification does not alter the overall nature of the contract, AND Any increase in price is not higher than 50% of the value of the original contract. However, notice of these modifications must be published in the Official Journal. A contractor may also be replaced without the need for a new procurement process where the contract permits it or following a corporate restructuring. 76 1. Simplification and flexibility Excluding bidders Article 57 The grounds for exclusion of candidates and tenderers have been reviewed and clarified. Most importantly contracting authorities will be able to exclude economic operators who have shown persistent or significant deficiencies in performing contracts. However, there is a "self cleaning" mechanism, allowing contracting authorities to accept candidates or tenderers where they have taken appropriate measures to remedy the consequences of any illicit behaviour and to prevent the same behaviour in the future. 77
2. Strategic use of public procurement Easier for contracting authorities to use their purchasing power to procure goods and services that: foster innovation, respect the environment, and combat climate change, while improving employment, public health and social conditions. 78 2. Strategic use of public procurement Life cycle costs award criteria Article 68 Award decisions may be based on life-cycle costs of the products, services or works to be purchased. Life-cycle covers all stages of the existence of a product or works or provision of a service, from raw material acquisition or generation of resources until disposal, clearance and finalisation. The costs to be taken into account do not only include direct monetary expenses, but also external environmental costs in so far as this can be monetised and verified. 79
2. Strategic use of public procurement Life cycle costs award criteria Article 68 If assessing the costs using a life-cycle costing approach the Contracting authorities must indicate in the procurement documents: the data to be provided by the tenderers, and the method which the contracting authority will use to determine the life-cycle costs on the basis of this data. If a common EU methodology for the calculation of life-cycle costs has been made mandatory by the European Union, contracting authorities must make use of it. 80 2. Strategic use of public procurement Social and other services Article 74 and Annex XIV Commission considered that these services have specific characteristics which make them inappropriate for the application of the regular procedures for the award of public service contracts. These services are typically provided within a specific context that varies widely between member states due to different administrative, organisational and cultural circumstances. These services have, by their very nature, only a very limited cross-border dimension. 81
3. Better market access for SMEs and start ups Division into lots Article 46 Contracting authorities will be invited to divide public contracts into lots to make them more accessible for SMEs. If they decide not do so, they will be obliged to provide a specific explanation. Where contracts are divided into lots, contracting authorities may limit the number of lots for which an economic operator may tender. They may also limit the number of lots that may be awarded to any one tenderer. The directive also provides discretion to Member States to make the breaking up of a contract into separate lots mandatory in certain circumstances. 82 3. Better market access for SMEs and start ups Limitations of requirements for participation To avoid unjustified barriers for SMEs, the directive contains an exhaustive list of possible conditions for participation in procurement procedures and states explicitly that any such conditions will be restricted "to those that are appropriate to ensure that a candidate or tenderer has the... capacities and... abilities to perform the contract to be awarded". As regards financial capacity, contracting authorities should not be allowed to require economic operators to have a minimum turnover exceeding two times the estimated contract value (Article 58(3)). That said, in duly justified circumstances, higher requirements may be applied. 83
3. Better market access for SMEs and start ups Direct payment of subcontractors Article 71 At the request of the subcontractor (and where the nature of the contract allows), Members States can provide that the contracting authority will transfer due payments directly to the subcontractor for services, supplies or works provided to the main contractor. 84 4. Sound procedures Conflicts of Interest Article 24 Specific provisions on conflicts of interest covering actual, potential or perceived conflict of interest situations affecting staff members of the contracting authority or of a service provider acting on behalf of the contracting authority. They relate to those who are involved: in the conduct of the procurement procedure or may influence the outcome of that procedure, or have directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure. 85
4. Sound procedures Illicit conduct Article 58 Provisions against illicit behaviour by candidates and tenderers. Candidates or tenderers who attempt to improperly influence the decision-making process or enter into agreements with other participants to manipulate the outcome procedure may have to be excluded from the procedure. 86 4. Sound procedures Unfair advantage Article 41 Provisions to safeguard against undue preference in favour of participants who have advised the contracting authority or been involved in the preparation of the procedure. Appropriate measures must be taken where a candidate or tenderer or an undertaking related to a candidate or tenderer has advised the contracting authority, or has otherwise been involved in the preparation of a procurement procedure, to ensure that competition is not distorted by the participation of that candidate or tenderer. Such measures shall include: Communicating to the other candidates and tenderers relevant information exchanged in the context of or resulting from the involvement of the candidate or tenderer in the preparation of the procurement procedure. Fixing of adequate time limits for the receipt of tenders. 87
4. Sound procedures Unfair advantage Article 41 The candidate or tenderer concerned shall only be excluded from the procedure where there are no other means to ensure compliance with the duty to observe the principle of equal treatment. Before such an exclusion, candidates or tenderers must be given the opportunity to prove that their involvement in preparing the procurement procedure is not capable of distorting competition. 88 5. National oversight and governance Article 83 Not all member states are consistently and systematically monitoring the implementation and functioning of the public procurement rules. To address this, the directive provides that member states designate one or more bodies to be in charge of monitoring, implementation and control of public procurement (article 83). The directive also requires that contracting authorities shall, at least for the duration of the contract, keep copies of all concluded contracts with a value equal to or greater than: 1 million in the case of public supply contracts or public service contracts. 10 million in the case of public works contracts. Further, contracting authorities shall grant access to those contracts, subject to certain exclusions, e.g. data protection. 89
Our contact details James Clarke, Partner, Capsticks Email: james.clarke@capsticks.com Tel: 0208 780 4871 Richard Heath, Associate, Capsticks Email: richard.heath@capsticks.com Tel: 0208 780 4753 90