Public procurement: Commission proposes to simplify and modernise the legal framework, May 2000

On the 10 May 2000 the European Commission adopted a package of amendments to simplify and modernise EU legislation in the area of public procurement. These proposals follow on from an extended period of consultation with interested parties on ways of making the existing EU legislation work more effectively and adapted to the changing business environment.

The proposals also form part of the 2000 Internal Market Stategy Review, issued on the 8 May 2000, which stressed the need to further liberalise public procurement markets, as one element in improving the business environment.

Background

The concept of 'public procurement' (or 'public purchasing', as it is traditionally called in the United Kingdom) encompasses the process whereby public bodies such as European, national, regional and local public entities enter into contractual arrangement with commercial concerns to purchase goods, supplies, services and works. The latest estimation by the European Commission is that the total value of such contracts accounts for some 14&percent; of the EU's gross national product (GNP), or around 1,000 billion euro a year. Clearly, the purchasing of goods, supplies, works and services by public bodies is a phenomenon which, in its totality, has a considerable impact on the overall European economy.

The European dimension to the issue of public procurement is that traditionally only a very small proportion of public contracts are awarded to companies from a Member State other than the one in which the invitation to tender is issued. Indeed, before the establishment of EU public procurement legislation in the 1970s, it is estimated that approximately only 2&percent; of contracts went to companies outside the country of the tender. This is seen to be both anti-competitive and against the fundamental spirit of the single market. As a result the objectives of the EU's public procurement policy are:

• the creation of the conditions of competition necessary for the non-discriminatory award of public contracts
• the rational allocation of public money through the choice of the best offer presented
• suppliers' access to a truly single market with significant business opportunities
• the reinforcement of competition among European enterprises.

It is estimated that the European economy would be significantly enhanced if there was a truly effective liberalised public purchasing environment.

As a result since 1971 a whole raft of legislation has been adopted, and subsequently strengthened and extended.

Further background information on public procurement can be obtained from:

• SCADPLUS
• Fact Sheets

Current legislation in the area of public procurement can be accessed on EUR-LEX:

• Public contracts
• General
• Public works contracts
• Public supply contracts
• Public services contracts
• Other public contracts

Thirty years on and the situation is still seen to be unsatisfactory. For example, dissatisfaction is regularly expressed in the European Commission's 'Single Market Scoreboard' with the lack of effective implementation of the legislation. See also the executive summary in the Single Market Review volume on public procurement issued in 1996 and the Special Sectoral Report No.1 on public procurement issued in 1997.

The current proposals

In November 1996 the Commission adopted a Green Paper (consultative document) (COM 1996)583 final) called 'Public procurement in the European Union: Exploring the way forward'. A summary is also available. The Green Paper suggested that even though there had been some positive developments following the adoption of the existing legislation there were still two main problems:

• insufficient and incomplete implementation by Member States of the public procurement Directives
• a relatively limited economic impact to date, since effects on price convergence, public sector import penetration and the increase in the number of bidders have not so far matched expectations

The issues addressed in the Green Paper were:

• the objectives of the Union's public procurement policy and its impact to date,
• the implementation in national law and effective application of the Community legislation,
• how market access can be facilitated by information and training and also through the development of electronic procurement,
• how public procurement policy can be combined with other Community policies, in particular the policies on small and medium-sized enterprises (SMEs), on standardisation, on Trans-European Networks (TENs), on the Cohesion and the Structural Funds, on contracts awarded by the European institutions or financed by Community funds, in the social field, on the environment and on the defence sector, and, finally,
• access to other countries' procurement markets.

For bibliographical references of sources presenting the opinions of the European Parliament, Economic and Social Committee and Committee of the Regions on the issues raised by the Green Paper see PreLex.

In March 1998 this was followed up by a Communication [pdf] (COM (1998)143 final) called 'Public procurement in the European Union.' A summary (IP/98/233) is available. It recommended that the:

• legal framework needed to be simplified and made more flexible

• implementation of public procurement rules must be improved

• access to procurement opportunities must be made easier

The Commission said it intended to propose amendments later in 1998 to the existing Directives concerning their scope (notably to take account of utilities operating in an effectively competitive environment following liberalisation and establish uniform rules for concessions) and to introduce greater flexibility as regards dialogue between purchasers and suppliers and the use of framework contracts.

In addition, the Commission would clarify its position on interpretation of the current Directives and ultimately combine the Directives on works, supplies and services procurement into a single consolidated Directive. The Communication also outlined other initiatives to improve immediately enforcement of the rules on open and competitive procurement, including faster infringement proceedings and encouraging Member States to respect the existing rules (e.g. through independent authorities).

For bibliographical references of sources presenting the opinions of the Council of the European Union, European Parliament, and Committee of the Regions on the issues raised by the Green Paper see PreLex.

The proposals introduced in May 2000 derive from the recommendations in the 1998 Communication. At the time of compilation of this In Focus only a summary (IP/00/461) of the proposals is available.

The proposals comprise a package of amendments to existing EU public procurement legislation. The package is said to have a number of objectives:

• to simplify and clarify the existing Community Directives
• to adapt them to modern administrative needs in an economic environment that is changing as a result of things such as liberalisation of telecommunications or the transition to the new economy.
• With the object of enhancing transparency in the award process and of combating corruption and organised crime, the legislative package also includes measures designed to make for greater clarity in the criteria determining the award of the contract and the selection of tenderers.

In due course the full details of the proposals will be presented on the public procurement pages on the web of the European Commission's Directorate-General for the Internal Market and on the SIMAP website.

Note that a week earlier the European Commission had adopted an 'interpretative communication' on 'concessions' under Community law, explaining how EC Treaty rules and principles apply to partnerships between the public and private sectors.

Further information within European Sources Online:

European Sources Online: European Voice, 5.3.98: Monti's bid to shake up big contract regime

European Sources Online: European Voice, 9.3.00: Bid to ensure fair play in concession contracts

European Sources Online: European Voice, 16.3.00: Bid to update procurement rules

Business Guide to EU Initiatives: Public procurement (AmCham, 1999)

Further sources can be traced by carrying out an 'Advanced Search' and selecting 6.4.b from the Subject list and inserting 'public procurement' in the Keyword field..

Further information can be seen in these external links:
(long-term access cannot be guaranteed)

European Commission: DG Internal Market: Public Procurement
including

• Common Procurement Vocabulary (CPV)
• Government Procurement Agreement (GPA)
• Public Procurement Guidelines
• Infringements

SIMAP (Système d'Information pour les Marchés Publics)
including:

• Site map
• Text of EU legislation
• National procurement databases in EU Member States
• Thresholds

The SIMAP site also provides links to the sites of other European Commission DGs and non-EU international and national organisations websites providing information on procurement opportunities.

Tenders Electronic Daily (TED)

Organisation for Economic Co-operation and Development:

• Competition policy and procurement markets (OECD, 1999) [pdf]
• Public procurement (OECD, 1997)
• OECD Anti-Corruption Unit (OECD, 2000-)

Further detailed sources of information on aspects of public procurement, particularly in relation to the countries of Eastern and Central Europe, can be found by a search on the OECD site

World Trade Organisation

• Government procurement (WTO, 2000-)

United Kingdom: HM Treasury: Procurement guidance (HM Treasury, 2000-)

United Kingdom: Department of Trade and Industry: Tendering for public contracts (DTI, 2000-)

Sweden: Sustainable Sweden: Committee for Ecologically Sustainable Procurement (2000-) including:

• Public procurement in the EU (2000)

Sweden: Swedish competition policy and public procurement (Swdeish Institute, 1999)

Glossary of Terms used in Public Procurement and Purchasing (EuroProfile TBG, 1995)

Green purchasing in Europe (European Green Purchasing Network, nd)

Ian Thomson
Executive Editor, European Sources Online
Compiled: 13 May 2000

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