Monti redrafts rules for public contract tenders

Date: 25/07/1996

By Tim Jones

THE European Commission is drafting new rules on the conduct of bids for public sector contracts to take the complaints of the EU's increasingly powerful utilities companies into account.

Following last week's rejection by the European Parliament of his most recent proposal on procurement rules, Internal Market Commissioner Mario Monti is also expected to take many of the MEPs' complaints on board.

From the first days of the 1990 Utilities Directive, electricity, water, urban transport and telecommunications companies have argued that they should not be lumped together with government agencies when rules are set on the purchase of equipment.

For example, electricity generators and distributors spend millions of ecu every year on equipment such as cables, switchboards and transformers. Since most of these utilities companies remain within the public sector, the EU wanted to ensure that common rules were applied to the purchase of capital equipment.

In the early Seventies, rules on procurement only applied to central and local government, but these were extended to the utilities sector when the single market was set up - much to its dismay.

“We would regard ourselves as much more akin to the aviation, cars or petroleum sectors than to government,” says John Cottrell, the chairman of the European Procurement Information Group at electricity lobby Eurelectric. “For us, procurement is a professional occupation and we are buying very expensive capital goods. We have expertise in this area and we do not need to be told how to do it.”

Since utility firms were already unhappy with the way they had been drawn into the general procurement rules, it is not surprising proposed extensions of the rules were even more irksome to them.

The Commission had to amend the Utilities Directive to take account of the Government Procurement Agreement (GPA) signed as part of the Uruguay Round in April 1994.

The agreement covered all sectors of government as well as the electricity, water, urban transport, ports and airports sectors but left rail, telecoms and gas supply outside.

When the Commission came to transpose the agreement into an amended directive, it included a series of measures which upset both the utilities companies and the Parliament.

The main objection raised by the utility firms was to an article in the Commission's proposal which, they say, would have made 'technical dialogue' between the companies and their suppliers impossible.

To counter fears that tender documents sent out by contracting companies could effectively be used to exclude certain bidders, the Commission's original proposal banned contractors from seeking or accepting advice on technical matters on a specific contract from a firm with a commercial interest in the contract.

German Christian Democrat MEP Werner Langen, who guided the amended directive through the Parliament, recommended the rejection of this proposal.

Instead, he called for a general reference in the directive to the principle of “equal treatment and fair competition” so as to prevent restrictive specifications.

The Commission will work on the basis of this proposal in its new text. “We need technical dialogue to continue,” says Cottrell. “A general dialogue between industry and its suppliers is vital because it brings innovation into what we are buying.”

A linked complaint about an obligation for contracting companies to explain in detail to unsuccessful tenderers why they were rejected will also be considered by the Commission as it drafts the new paper.

Utilities firms are, however, unlikely to win satisfaction regarding the exclusion of some of their number from the amended directive. Since the GPA did not cover rail, telecoms or gas supply, they felt that these sectors should also be left outside the scope of the new directive.

But Langen, whose report Monti promised to consider in detail when amending the directive, feels that all the utilities should fall under the terms of the new proposal, arguing this would prevent discrimination either between public and private firms or between sectors which might be rivals, such as electricity and gas.

Monti will want to take his time in bringing forward a new proposal, delaying adoption of the law until after the US presidential elections in November since the Americans have still not turned the GPA into national law. MEPs also believe it can be used as a bargaining chip against the Helms-Burton legislation punishing EU firms doing business in Cuba.