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EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Dr Aris Georgopoulos

EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Dr Aris Georgopoulos Assist. Professor in European and Public Law- Advocate University of Nottingham Global Governance Fellow, Robert Schuman Centre of Advanced Studies, European University Instirute - Florence.

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EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Dr Aris Georgopoulos

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  1. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Dr Aris Georgopoulos Assist. Professor in European and Public Law- Advocate University of Nottingham Global Governance Fellow, Robert Schuman Centre of Advanced Studies, European University Instirute - Florence

  2. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Outline • Introduction • Coverage • Procedures

  3. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Introduction We have seen in the previous seminar that the rules (the various free movements) and principles (non-discrimination on grounds of nationality etc.) of the EU Treaties apply in PP

  4. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Introduction However there are additional legal instruments that regulate PP in EU: A. Directives regulating award procedures: • Directive 2004/18/EC (also known as the “public sector directive” • Directive 2004/17/EC (also known as the new “utilities directive”. It regulates bodies in the field of water, transport, energy and postal services) • Directive 2009/81/EC (also known as the “defence and security procurement directive”) B. Directives on Enforcement • Directive 89/665/EEC (public sector remedies) • Directive 92/13/EEC (utilities sector remedies)

  5. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Introduction !!!! THERE ARE NEW DIRECTIVES THAT ENTERED INTO FORCE ON 26 FEBRUARY 2014. MEMBER STATES HAVE TO IMPLEMENT THE NEW RULES BY 18 APRIL 2016. A. Directives regulating award procedures: • Directive 2014/24/EU repealing Directive 2004/18/EC (“public sector” • Directive 2014/25/EU repealing Directive 2004/17/EC (“utilities”) • Directive 2014/23/EU (“concessions”)

  6. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Introduction According to Article 288 TFEU Directives have to be implemented by Member States in their national legal order. (However remember Direct Effect)

  7. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Introduction What is the reason for the distinction between “public sector”, “utilities sector”? • Historically PP in the Utilities sector was not regulated at EU level. The reason was that utilities activities were delivered in some MSs by public bodies and in others by private enterprises • Where as the first “wave” of PP regulation in the “public sector” started in 1964, PP regulation in “Utilities” began in 1993 • PP regulation in “Utilities” is more flexible than the one in the “public sector”

  8. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Introduction Evolution of PP regulation in the EU: The previous PP regime in the “public sector” had three separate directives depending on the subject matter of the contract: • Directive 93/36/EEC (Supplies Directive) • Directive 93/37/EEC (Works Directive) • Directive 92/50/EEC (Services Directive)

  9. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Introduction The public sector Directive (2004/18/EC) • consolidates all previous three directives into one • follows the basic structure of the previous directives - This means that previous CJEU case law remains relevant

  10. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Introduction Evolution of PP regulation in the EU: The previous PP regime in the “Utilities” sector: • Directive 93/38/EEC (Utilities Directive) Current “Utilities” sector regime - Directive 2004/17/EC

  11. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Introduction Evolution of PP regulation in the EU: The defence and security sector: Previously considered excluded (to a large extent based on Article 346 TFEU • Directive 2009/81/EC (Defence and Security Directive) Flexible “tailor-made” regime for defence

  12. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage [For practical reasons we will focus on the most comprehensive of these directives (the public sector directive)] “Contracting Authorities” Art 1 (9): • State • regional and local authorities • associations formed by the above bodies • "bodies governed by public law"

  13. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Meaning of “Bodies governed by public law“- Art 1 (9): Any Bodies that: • has legal personality and is either • (i) is financed for the most part by a contracting authority , or • (ii) is subject to management supervision by a contracting authority , or • (iii) has a board more than half of whose members are appointed by a contracting authority and is “established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character

  14. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage See Also Annex III of the Directive (indicative list of covered contracting authorities for each MS)

  15. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Meaning of “financed“: Case C-380/98, R v HM Treasury ex parte University of Cambridge, [2000] ECR I-8035 (paragraph 21) • “only the payments that have the effect of creating or reinforcing a relationship of dependency” • Examples : • Grants to support research work • Government payment (fully or partially) of student tuition fees Negative examples: • Money for services on a (contractual basis): Use of patents registered by the University

  16. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Meaning of “for the most part“: Case C-380/98, ex parte University of Cambridge (para 33) • “Most part” = “more than half”

  17. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Meaning of “management supervision“: • Case C-237/99, Commission v French Republic [2001] E.C.R. I-0939, (para 48 et seq.) • Level of dependence comparable to the one that exist under finance or appointment criteria • The supervision does not have to be linked with the procurement procedures per se • General power of intervention is an strong indicator of “management supervision”

  18. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Meaning of a body “established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character“: • Case C-360/96, Gemeente Arnhem v BFI Holding BV, [1998] E.C.R. I-6821) • No “numerus clausus” of activities considered to involve needs in the public interest • Negative criterion: if the relevant body has been established in a market where public needs are already covered by the private sector ANDthe government tries only to raise money

  19. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Meaning of a body “…., not having an industrial or commercial character“: • Joined Cases C-223/99 and C-260/99, Agora v Ente Autonomo Fiera Internazionale di Milan, [2001] ECR I-3605 • Existence of competition in the relevant market constitutes a strong indicator • Risk bearing (no “bail out” guarantees from other “contracting authorities”)

  20. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Contracts covered Art. 1(2): • contracts concluded in writing for pecuniary interest which are either public works contracts, public supply contracts or public service contracts • services contract = procurement contracts which are not works or supply contracts • Distinction between priority (Annex II) and Non- Priority services contracts (Arts 20-21)

  21. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Contracts covered Art. 1(2): • Possibility for contracts having both works and services aspects or supplies and services aspects (Art 1(2)(d) - In this case the contract is a works, supplies or services contract depending on what the main object of the contract is

  22. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Applicable Thresholds (i.e. contracts have to be at least of the threshold value): • most Central government contracts: € 134 000 • Most local/regional government contracts: € 207 000 • Most works contracts: € 5 186 000

  23. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Contracts not covered by the Directive: • Hard-Defence contracts linked with essential security interests of the Member States (Art. 10) • Arbitration or conciliation services; certain financial services connected with the issue, purchase, sale or transfer of securities or other financial instruments; and certain research and development services (Art. 16) • Some international contracts (Art. 15) • Publicly subsidised housing schemes (Art. 34)

  24. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage • Hard-Defence contracts linked with essential security interests of the Member States (Art. 10) - !!! New Defence and Security Procurement Directive 2009/81/EC A tailor-made Directive for carrying out sensitive procurement in the field of security and defence

  25. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Contracts not covered by the Directive (continued): • Services contracts performed on the basis of special or exclusive rights (Art. 18) • “Utility” contracts (Art. 16)- (covered by Dir. 2004/17/EC • Service concession contracts (Art. 17) • Contracts awarded to central purchasing bodies (Art. 1(10) and Art. 11)

  26. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Contracts not covered by the Directive (cont): • What happens with the so-called “In-house contracts” as well as work awarded to entities in which the contracting authority has an interest? • ECJ: Purely “in-house” contracts not covered Case C-107/98, Teckal Srl v Comune de Viano, [1999] ECR I-8121

  27. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Criteria for “in-house” procurement: • when the procuring entity exercises over the party awarded the contract “a control which is similar to that which it exercises over its own departments” and • the entity awarded the contract carries out “the essential part” of its activities for the public controlling entity

  28. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage • “In-house” -further elaboration from the ECJ: • Case C-26/03 Stadt Halle, : any private interest in the entity awarded the contract, however, small, will preclude the possibility of the test being satisfied • Case C-458/03, Parking Brixen v Gemeinde Brixen: usual “shareholder” power or power to appoint board members is not sufficient to satisfy the “control test” • Case C-340/04, Carbotermo v Comune di Busto Arsizio: shareholding power insufficient (even if almost 100% of shares owned by public authority)

  29. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage General Principles of the Directives (Art. 2): • Equal Treatment • Transparency • Non-discrimination The principles have been used as: • Tools of interpretation of the rules • A source for establishing new obligations not explicitely provided in the Directive

  30. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Meaning of Equal Treatment: • “comparable situations must not be treated differently and that different situations must not be treated in the same way, unless such treatment is objectively justified” Cases C21/03 and C-34/03, Fabricom v État Belge (para 27) • Case C-87/94, Commission v Belgium [1996] ECR I-2043 (Walloon Buses) ET prevents CA to accept changes in the bid from one but not other bidder or accept a bid that does not comply with the conditions of bid document

  31. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Coverage Meaning of Equal Treatment: • C-16/98, Commission of the European Communities v French Republic, [2000] Equal Treatment applies also to companies that have not participated in the procurement process but would like to participate

  32. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Standard Procedures: • open procedure • restricted procedure Non-standard procedures (i.e can be used only if specific conditions are met): • competitive dialogue • negotiated procedure with a contract notice • negotiated procedure without a contract notice

  33. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures !!!The Utilities directive and the Defence directive have the negotiated procedure with prior notice as a standard procedure

  34. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Art. 28: “...They shall award these public contracts by applying the open or restricted procedure.” • Open procedures: - Any party can submit a tender • Restricted procedure: - Two stage process - Only the invited economic operator can submit tenders

  35. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Common requirements for open and restricted procedures: • Draft clear specifications of the contract • Publication of procurement notice in the Official Journal of the EU • Evaluation of the bids on the basis of objective award ctiteria – NO Negotiations • Award the contract • Post award requirements

  36. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Competitive Dialogue (Art. 29): • New procedure established by Directive 2004/18 • Aim: Introduce more flexibility. The open and restricted procedures deemed unsuitale for certain complex infrasrtucture projects • It provides a compromise between the relatively unstructured negotiated procedure and the strict and structured open and restricted procedures

  37. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Competitive Dialogue (Art. 29) cont: • It is applicable only when the contracting authority cannot define the technical, financial or legal aspects of the project using open or restricted procedure • Question: It is applicable when the contracting authority cannont find the best solution or simply a solution? • The legislation is not clear if the negotiated dialogue is a standard or a non-standard procedure

  38. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure with a contract notice(Art. 30): • The award of the contract is made upon objective, transparent criteria, but they allow for more interraction between contracting authority and economic operators (less structured process) • Can only be used on specific grounds (these grounds are narrowly construed)

  39. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure with a contract notice(Art. 30) cont: Grounds: • For works carried out purely for research, experiment or development Build a “prototype” technique (if the authority then needs to buy more then it has to use one of the standard procedures) • “in exceptional cases” where overall pricing is not possible • Where specifications cannot be drawn up with sufficient precision for formal tendering under the open or restricted procedures (services)

  40. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure with a contract notice(Art. 30) cont: • Question: Is there an overlap with the grounds for the use of competitive dialogue? It is not clear which procedure would apply. The CJEU has not ruled yet. It could be that as a matter of principle competitive dialogue would be required since it is more transparent as a procedure.

  41. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure without a contract notice(Art. 31) : • The least transparent procedure • CJEU: The grounds for the use of this procedure are narrowly construed, AND the burden of proof is on the contracting authority to show that these grounds are met

  42. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure without a contract notice(Art. 31) cont: Grounds • Goods to be manufactured purely for research, experiment, study or development • where the works, goods or services can be provided only by one particular provider for technical or artistic reasons or for reasons connected with exclusive rights (for example intellectual property rights) !!! Contracting authorities should be cautious because even if there is a contractor with a patent there might be other firms that can manufacture alternative equivalent products. The use of negotiated without notice would not be justified in that case.

  43. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure without a contract notice(Art. 31) cont: Grounds • In cases where it is "strictly necessary" for reasons of "extreme urgency", which were unforeseeable and cannot be attributed to the authority • CJEU: extremely strict interpretation Commission of the European Communities v Kingdom of Spain("Madrid University case"), [1992] ECR I-1989

  44. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Commission v Kingdom of Spain("Madrid University case"): Contract about an extension and alteration of a building. Spain argued that the use of the negotiated procedure was necessary because it was urgent to complete the alteration before the start of the new academic year (more student were expected) CJEU: the contract could be completed in time by using the accelerated restricted procedure(a specially shortened version of the restricted procedure). Also the urgency was foreseeable

  45. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure without a contract notice(Art. 31) cont: Grounds • in certain cases where extra work is awarded to an existing contracting partner: • for unforeseen works or services which are additional to an existing contract • work/services cannot technically or economicallybe separated from the main contract without great inconvenience • works/services are “strictly necessary” to the original contract NB the value of the work does not exceed 50% of the value of the original contract. • repetition of works or services under an existing contract, where the original contract notice mentioned that additional work might be awarded to the same party, and it is part of the same project

  46. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure without a contract notice(Art. 31) cont: Grounds • in certain cases where extra work is awarded to an existing contracting partner: • where the goods are a partial replacement for or addition to existing goods or installations, and to use another firm would involve incompatibility or disproportionate technical difficulties

  47. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure without a contract notice(Art. 31) cont: Grounds • where an open or restricted procedure was held but no tenders were received • for services, where the contract is negotiated with firms who were successful in a design contest held under the directive • Where an open or restricted procedure has been held, but all tenders were eitherirregular or unacceptable If the authority continues to negotiate with all tenderers there is no need to re-advertise. If it does not wish to negotiate with all the tenderers, it must use the advertised version of the negotiated procedure

  48. EU Public Sector Directive Coverage and Procedures Seminars 3 and 4 Public Sector: Award Procedures Negotiated procedure without a contract notice(Art. 31) cont: Grounds • for goods purchased on a commodity market i.e an international market in which goods or bought for future delivery through an exchange on which prices are set by regulation rather than the market example, metals, cocoa etc. • for purchases under particularly advantageous conditions from firms which are winding up, or in circumstances of insolvency/bankruptcy NB only for supplies Example “liquidation sales”

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