Public procurement is one of the major items of expenditure for purchasing authorities in Europe and an important element of the European Single Market. We take a look at what’s new...
In 2009, the European Parliament estimated that those projects advertised in the Official Journal of the European Union (OJEU) represented approximately €420 billion for the 27 Member States. They noted that this figure only includes those projects which are subject to compulsory advertisement EU-wide, as a result of being above the thresholds for the application of the directives, and which they claim only represents around 19% of the total expenditure on public works, goods and services.
In December 2011, the Commission published proposals for revised directives on public procurement and procurement in the utilities sector together with the introduction of a new directive on the award of concession contracts.
(A concession contract describes the process where a ‘private sector’ Contractor does not usually own the asset it has constructed, but it may receive revenue from it or, for example, a payment from the public authority. Examples include roads, bridges and suchlike, or the operation of the UK’s rail franchises, sometimes described in the UK under the Private Finance Initiative [PFI] where the revenue may take the form of a toll, or regular payment over a period of years.)
In January 2014, the Parliament voted to approve new directives in the latest overhaul of the public procurement regime. These will supercede the existing Public Sector Directive (2004/18/EC) and the Utilities Directive (2004/17/EC)
The revisions to the directives cover the following main topic areas:
Award criteria
The requirements for Most Economically Advantageous Tender (MEAT) have been revisited, which is intended to bring particular focus on quality, environmental considerations, social aspects and innovation. These are in addition to the UK’s Public Services (Social Value) Act 2012 
, which came into force in January 2013 and introduces a legal requirement to “have regard to economic, social and environmental well-being in connection with public services contracts”.
This is all designed to make them more SME-friendly. The Commission estimates this should reduce the administrative burden on companies by over 80%.
Simplifying procedures and SME friendly measures
There has been a long time call for simpler procedures, especially with regard to tendering, in particular those surrounding negotiation and competitive dialogue, where the circumstances in which these procedures may be used have been extended.
In a bid to reduce unnecessary paperwork, in future only the winning tenderer will have to provide supporting documentation.
Pre-qualification requirements are being streamlined, with the introduction of a standard European Single Procurement Document based on self-declarations, as well as division of contracts into lots or establishing a turnover cap limited to no more than twice the contract value. Furthermore, contracting authorities will have to explain in their OJEU advertisement why the works or services were not split up, if this would have been possible.
The new rules will see much simpler and more streamlined procurement processes, as well as more appropriate timescales in which tenderers have to respond.
This is all designed to make them more SME-friendly. The Commission estimates this should reduce the administrative burden on companies by over 80%.
But it isn’t all good news... also included are a number of more prescriptive rules reducing the buyer’s flexibility when conducting the procedure, and there is now an express requirement that there may be no negotiation of final tenders. Tenderers that have shown significant or persistent deficiencies in performing prior contracts may be excluded from the process – in particular, this will apply where it can be shown that a tenderer has not complied with EU or domestic legal requirements concerning social, labour and environmental concerns.
Purchasing authorities will now be obliged to make procurement documents freely available electronically from the date of publication of the notice.
Electronic document transfer and tendering
Purchasing authorities will now be obliged to make procurement documents freely available electronically from the date of publication of the notice. It will also be mandatory to submit notices in electronic form and support fully electronic procurement, including all communication and submission.
Exemptions due to organisational structure
Changes have been made following the outcome of the Teckal legal case , which in certain circumstances provides an exemption where contracts are formed between buyers and their subsidiaries. In future, there will be recognition of “shared services” arrangements, where two or more contracting authorities set up and organise a separate entity to deliver a particular service.
Innovation Partnerships (IPs)
This is a new addition to the list of procurement methods. The commission describes IPs as follows:
IPs streamline, simplify and better coordinate existing instruments and initiatives and complement them with new actions where necessary. This should make it easier for partners to co-operate and achieve better and faster results compared to what exists already. Therefore, they build upon relevant existing tools and actions and, where this makes sense, they integrate them into a single coherent policy framework. Flexibility is important; there is not a 'one-size-fits-all' framework.”The intention is that when a need for the development of an innovative product, service or works arises, a public authority may call for tenders to solve a specific problem whereby the authority and the bidding companies work together to find the most appropriate solutions.
Subcontracting
New rules will be included on subcontracting and tougher provisions introduced on "abnormally low bids".
No privatisation imperative
One interesting paragraph in the new concessions directive highlighted in the accompanying press release emphasises that member states are still free to decide how they want public works or services to be performed – in-house or outsourced to private companies. The new directive “does not require the privatisation of public enterprises providing services to the public”, it states.
It goes on to record that in addition, MEPs acknowledged the special nature of water as a public good and therefore accepted the exclusion of this sector from the scope of the new rules.
Summary
The proposed content of the new directives has been available in draft for some time, so there should be no real surprises. The intention is to improve, rather than fundamentally change the processes themselves. We will soon see how effective the results are.
The directives will come into force 20 days after publication in the OJEU. After this date, member states will have 24 months to implement the provisions of the new rules into national law.
