THE PROPOSALS FOR DIRECTIVES ON PUBLIC PROCUREMENT

Transcription

1 JUNE 2012 THE PROPOSALS FOR DIRECTIVES ON PUBLIC PROCUREMENT COM(2011)895final & COM(2011)896final UITP (Union Internationale des Transports Publics) is the international organisation of public transport, it is based in Brussels and covers all urban, suburban and regional public transport modes (bus, metro, light rail, regional rail and waterborne public transport). It gathers over members worldwide, public transport operators, their authorities and suppliers. In the European Union, the UITP EU Committee (EUC) represents the views of the public transport undertakings of the 27 member countries. It is closely following and participating in the elaboration of the different European policies and initiatives that have an impact on urban, suburban and regional public passenger transport. Key facts for public transport in the EU 27: Passenger journeys: 60 billion/year, more or less equally shared between road modes (mainly bus) and rail modes (urban, suburban and regional rail) Economic value of public transport services: billion/year or 1 1.2% of GDP Employment: direct employment 1.2 million and indirect employment indirect jobs for each direct job on average

2 UITP s European members are concerned by the two proposals for public procurement directives. Indeed, on the one hand they are candidates for calls for tenders issued in the public transport sector in the form of public procurement contracts (current Directive 2004/18). Regulation 1370/2007 on public transport services 1 stipulates that public procurement contracts in this sector must comply with the rules set out in the Directives on Public Procurement. Thus, public procurement contracts are awarded for public transport services in Sweden, the United Kingdom, France, Italy, Spain, the Netherlands, Denmark, etc. On the other hand, the large majority of UITP s European members are also contracting entities that apply the rules of current Directive 2004/17 on Utilities to their own procurements. The proposals for Directives on Public Procurement are therefore extremely important for UITP. Members of UITP support the European Commission s objectives of simplifying and enhancing the efficiency of public procurement procedures. Indeed, the new directives should facilitate the daily lives of the bodies engaged in public procurement and limit costs not only for the public authorities that organise the procedure, but also for the enterprises that prepare tenders. UITP would nonetheless like to point out that the current proposals are not entirely consistent with those objectives. On the contrary, many of the proposed provisions make the rules more unwieldy: this is the case, for example, of the proposal to abolish the distinction between the contracts for priority and non-priority services, of the creation of a national oversight body and of the establishment of rules governing recourse to variants. The effect of those developments is to align the systems for utilities more closely on those for the general sectors: yet the specificity of the utilities sectors (transport, postal services, energy etc.) calls for the maintenance of specifically adapted rules. These sectors are undergoing deregulation: indeed this was the reason for adopting an ad hoc directive in the first place and that directive must be maintained today. 1 Regulation (EC) no. 1370/2007 of the European Parliament and the Council of 23 October 2007 on public passenger transport services by rail and by road.

3 1. The definition of the notion of procurement restricts competition (Art. 1 GENERAL and UTILITIES) The proposals for a directive provide a new definition of the notion of procurement. UITP notes a number of inconsistencies in that new definition. For example, the criterion concerning the pecuniary interest of the contract has been deleted from Article 1 (and replaced by the notion of purchase or other forms of acquisition), yet is maintained in Article 2 defining contracts for works, supplies or services. Furthermore, by defining procurement as a purchase or other forms of acquisition the proposals considerably broaden the definition. Moreover, the notion of acquisition is vague, and hence a source of legal uncertainty. It should be deleted and replaced by the criterion of pecuniary interest, which would enable the definition of public procurements to be harmonised and clarified. UITP also wishes to point out that Article 1 now makes provision for an entirety of works, supplies and/or services to constitute a single procurement, even if purchased through different contracts, provided that the contracts are part of one single project. This notion of project is vague. The danger is that this will lead systematically to the conclusion of a single contract in order to avoiding taking any legal risks. Moreover it will be particularly detrimental to the development of competition, especially in the case of SMEs, which do not have the technical and financial resources to respond to calls for tenders for such large projects. By way of example, a national entity wishing to launch a programme for the modernisation of office buildings throughout the country could decide that the whole operation constitutes a single project that should be placed under a single contract. However, given the geographic scope of the undertaking, the deadlines for conducting the works, the specific technical constraints and the different areas of professional expertise involved, it is necessary to be able to divide up the operation into separate contracts. Finally, recourse to a single procedure is likely to make for cumbersome administrative procedures and higher costs and to increase the risk of litigation. In the event of irregularities or technical obstacles affecting one part of the project, the procurement procedure as a whole may have to be cancelled. Hence this global definition of procurement is contrary to the objectives pursued by the European Commission, in particular, to the objective of simplification.

4 2. The conditions for modifying contracts need to be made more flexible (Art. 72 GENERAL, Art. 82 UTILITIES.) Articles 72 general and 82 utilities stipulate that any substantial modification of a contract during its term shall be considered as a new award requiring a new procurement procedure. These provisions refer to an isolated decision by the CJEU. UITP takes the view that it is not appropriate for a situation resulting from a single Court ruling to be cast in stone in the proposal for a directive, particularly since the tautological wording used 2 makes it impossible to precisely define the criteria for such a substantial modification. We must make it clear right away that contract amendments are not used as a means for obtaining additional rights while avoiding the need for a competitive procedure; on the contrary, they are often used to ensure the transition between a contract that is coming to an end and a new contract awarded after a competitive tender. They are also a way of taking account of the contingencies that can affect any business transaction due to the changing requirements of public authorities. Hence, generally speaking, a contract is bound to evolve during its term, while the requirements are determined in advance and are precisely defined in the specifications. Thus amendments give both public authorities and operators the flexibility needed in order to take such developments on board. The two proposals for a directive tolerate a modification to the contract that does not exceed 5% of the price of the initial contract. In practice, however, that threshold is frequently and easily reached and would, if it were maintained, exclude practically all the amendments being signed today. Indeed this is the reason why French law, for instance, makes provision for a threshold of around 15% to be determined on a case-by-case basis. Maintaining that threshold would also mean having to resubmit ongoing contracts almost systematically to a competitive procedure. This is inconceivable in practical terms and would be highly prejudicial to all parties to the procedure in view of the resulting costs and deadlines, for which the requirements would not be satisfied. The strong risk of termination stemming from that provision causes legal uncertainty and needlessly jeopardises the stability of contractual relations that is necessary for both public authorities and enterprises. Moreover, such a risk would necessarily be reflected in the prices quoted by suppliers and lead to higher costs, which is incompatible with the objective of making optimum use of public funds. In the same vein, UITP stresses that the obligation to publish notification of each modification generates procedural constraints in terms of costs and efficiency, which is also contrary to the objectives of the European Commission. 2 A modification shall be considered substantial where it renders the contract substantially different from the one initially concluded.

5 3. The position of the UITP is divided on the rules provided for transport internal operator for in-house entities (Art. 11 GENERAL, Art. 21 UTILITIES.) UITP attaches great importance to freedom of administration for public authorities, 3 allowing them to choose between in-house and outsourced management. The members of UITP have different views on the provisions concerning the in-house entities. The two different positions supported can be found in the annex of this document. 4. The abolition of the distinction between contracts for priority and non-priority services is not justified and is in contradiction with the objective of simplification Articles 31 and 32 of Directive 2004/17 and Articles 20 and 21 of Directive 2004/18 draw a distinction between priority and non-priority services. Contracts for non-priority services may also be awarded by means of a simplified procedure. This concerns, in particular, legal, cultural, educational and vocational training services, hotel and catering services and rail transport services. The flexibility conferred by the adapted procedure is fundamental. Indeed, these contracts have certain specificities related to their subject matter, in particular their strong intuitu personae nature. The relations with a lawyer, for example, call for a relationship of trust that justifies a more flexible procedure. The CJEU itself considers that the organisation of a tender procedure is not justified in such cases. 4 Indeed it points out that these services do not concern exposed economic sectors and that in view of their specific nature they are of very local relevance only. However, the proposals for a directive abolish that distinction and with it the possibility of using a simplified procedure for awarding contracts for non-priority services. This considerably increases the procedural constraints for such contracts, which is not in keeping with the aim of simplifying and modernising the procedures. The more cumbersome procurement rules are also prejudicial to the contracting entities, some of which are in competition with private operators as a result of the ongoing deregulation of those sectors. 3 The UITP represents the networks operated by private companies as well as local and national public enterprises. 4 CJEU, 13/11/2007, Commission v. Ireland; CJEU, 17/03/2011, Strong Segurança.

6 5. The creation of an oversight body is contrary to Community law (Art. 83 to 88 GENERAL, Art. 92 to 97 UTILITIES) The proposals stipulate that an oversight body must be set up in each member state. That body is responsible, in particular, for monitoring the application of the rules on public procurement, processing complaints from the different players and supervising the decisions of the national authorities and courts following a ruling by the CJEU. The creation of such a body is contrary to Community law on three counts: It does not comply with the principle of subsidiarity. Indeed, the proposals require each member state to create a new body that is at least partially judicial in nature. However, the organisation of the judicial system is the sole prerogative of the member states. Moreover, many member states already employ a variety of means to ensure effective oversight and it is not at all clear why a harmonised approach is necessary at EU level. At the very least, the establishment of such a body would entail substantial, and unnecessary, administrative restructuring of existing systems. In addition, the wideranging powers and activities of the oversight bodies seem out of all proportion to the likely marginal benefits in improved enforcement. These proposals would therefore seem to be contrary not only to the principle of subsidiarity, but also to the principle of proportionality. UITP wishes to point out in that regard that numerous member states already have structures that exercise effective oversight: the courts that implement the Directive on Review Procedures, the bodies in charge of access to administrative documents, the competition authorities etc. It is contrary to the notion of independent tribunals entrenched in the European Convention on Human Rights (ECHR). Indeed, the proposals for a directive make provision for an administrative body to supervise the decisions taken by the national courts; this constitutes a breach of the independence of the judiciary vis-à-vis the executive and of the necessary impartiality of those courts. It does not comply with the requirement of impartiality as foreseen by the ECHR, which considers that the exercise of advisory and judicial roles by one and the same institution is incompatible with that institution s impartiality. 5 Not only do those provisions disregard the fundamental principles enshrined in the ECHR, they are also potentially very dangerous. Indeed, the proposals for a directive make provision for the full text of contracts above a certain value 6 to be communicated to the oversight body. Thus, anyone who so requests may have access to those contracts without having to justify their interest, and can freely divulge that information. Yet such contracts reflect the industrial and commercial strategy of the companies concerned. It is vital to protect their confidential commercial information, which is not possible under the proposals for a directive. Hence the creation of such a structure could multiply the amount of litigation, especially in view of the broad possibilities it offers for citizens to register complaints, which is not in keeping with the objective of legal certainty. 5 Pursuant to Article 6-1 of the European Convention on Human Rights, ECHR decision of 28 September 1995, Procola v. Luxembourg, case no / million of supplies and services and 10 million of works.

7 Moreover, the provision for the full text of contracts above a certain value 7 to be communicated to the oversight body would apply to a very large number of contracts in the transport sector. This would be a further administrative burden for no obvious benefit and would overlap with existing regimes in certain member states 8. Finally, the cost of creating such a body would be considerable in relation to its usefulness, which is not desirable at a time of crisis and public spending cuts. Moreover, UITP notes that litigation is often avoided thanks to the institutions that already exist in the member states. Hence, contrary to what the Commission claims, the cost of setting up such an oversight body would not be neutralised by a reduction of litigation costs Better guarantees are needed for the confidentiality of tenders (Art. 18 and 53 GENERAL, Art. 32 and 69 UTILITIES) The proposals for a directive are too generous in allowing the disclosure of certain items of information provided by the operator. Indeed, according to the text the onus is on the operator to specify which parts of the tender should remain confidential, failing which that information may be communicated to others. UITP also notes an inconsistency in the provisions concerning the divulgation of information. Indeed, Articles 53 and 69 concerning the information that may be communicated to candidates allows the characteristics and advantages of the successful tender to be divulged. Yet that information may have been given in confidence, pursuant to Articles 18 and 53. Generally speaking, it is crucial to respect the confidentiality of tenders. The divulgation of information that reveals the operators strategy may be detrimental to their legitimate commercial interests. Consequently, all parts of the tender should by definition be confidential and non-communicable to others, whatever stage of the procedure has been reached. 7. The procedure for framework agreements and the ensuing contracts needs to be simplified (Art. 31 GENERAL, Art. 45 UTILITIES) The proposals limit the duration of the framework agreement to four years, save in exceptional cases. Hence the limit on framework agreements that already applies to contracting authorities (Art. 32 Directive 2004/18) is now to be extended for no apparent reason to contracting entities. In actual fact the framework agreement procedure has never given rise to abuses or difficulties in practice. The alignment of the rules governing contracting entities on those that apply to contracting authorities makes for a more rigid procedure: the rules on the award of contracts based on a framework agreement, for example, are very detailed and lack flexibility. Those new constraints are not conducive to the aim of simplifying and modernising the procedures. 7 1 million of supplies and services and 10 million of works. 8 In the UK, for example, transparency is already ensured through the Freedom of Information Act and Code of Recommended Practice for Local Authorities on Data Transparency. 9 Page 13 of the proposal for a Directive on Public Procurements.

8 8. The provisions on conflicts of interest and illicit conduct are too wide-reaching (Art. 21 and 22 GENERAL, Art. 36 and 37 UTILITIES): The wording of Articles 21 general and 31 utilities is ambiguous. Indeed, those articles apply only to contracting authorities, but are incorporated into both proposals: that for a directive on general sectors and that on utilities. The notion of conflicts of interest as defined in the proposals is in breach of the Charter of Fundamental Rights and Freedoms of the European Union, which protects the right to privacy and freedom of thought. Indeed, staff would be obliged to disclose private information, concerning for example family, emotional, political, economic or other interests. Such information should not be divulged to the employer. UITP notes, furthermore, that the phrase or other (interests) considerably broadens the scope of the information that may be requested by the employer. It could lead to abuses. Moreover, all categories of persons with a direct or indirect interest in the result of the procedure could be questioned. UITP is worried about the wide scope of application of this provision. It is a source of legal uncertainty and could give rise to a lot of litigation. Finally, it is difficult to imagine how these rules can be applied in practice. Generally speaking, UITP considers that the rules designed to detect and avert conflicts of interest or illicit conduct should be left to the initiative of the member states, in accordance with the principle of subsidiarity. 9. The managerial freedom of an enterprise must be respected (Art. 66.2b GENERAL, Art b UTILITIES) UITP generally supports the use of social criteria, which can be very useful for the human resources. However, the proposals stipulate that when the qualifications and experience of the staff are taken into consideration for the award of the contract, such staff may only be replaced with the consent of the contracting authority ( ), which must verify that replacements ensure equivalent organisation and quality. UITP is of the opinion that entrepreneurial freedom must be respected. Managerial issues are the sole responsibility of the enterprise and no interference by a public authority should be tolerated; however that public authority is responsible for making provision for possible penalties and/or sanctions in the event of an enterprise failing to live up to its contractual obligations.

9 ANNEX In-house-contracts - (Article 11 General Directive and article 21 Utilities Directive) Position of some members of UITP: The freedom of administration for public authorities, allowing them to choose between inhouse and outsourced management, is fundamental. Nonetheless, a healthy competition between the different management modes, for this is conducive to quality and performance and hence is to the advantage of the users of services and works, must be organised. Articles 11 1 and 21 1 in house In order to respect a fair competition, they consider that it would be necessary to carry over into the proposal the principles laid down in Regulation 1370/2007 on public transport. The control exercised over in-house entities should be real and effective. It should be reinforced and thus based on factors such as: representation on administrative, management and supervisory bodies; statutes; ownership; effective influence and control over strategic and individual management decisions. Furthermore, in-house entities should not be able to respond to calls for tenders and enter into direct competition with undertakings that operate from a strictly competitive standpoint, even for 10% of their activities only. This threshold may represent a significant amount and the calculation methods are source of legal uncertainty. The respect of a fair competition between management modes would bring clarity and legal certainty, and would also be consistent with the objectives of openness set out in the European Commission s explanatory statement. Articles 11 3 and 21 3 in-house partnership Those articles also provides the option for a public authority to directly award contracts to an in-house entity when it exercises jointly with other public authorities a control similar to that which it exercises over its own departments.

10 The provisions of the proposal of directives allow a public authority to benefit from an entity s services without a prior call for competition, despite having an extremely tenuous relationship with the entity (very limited financial participation, appointment of only one director, etc.). The in-house partnership distorts the very essence of the concept of in house. As its name suggests, this entity originally designates an internal entity, that is to say an entity with which the public authority had such close ties that the competitive tendering procedure had become unnecessary. The criteria selected in the present proposal additionally attest to the slippage in the in house concept. How in fact can an in-house entity, which partially operates on the market, share the same interests as those pursued by bodies charged with representing the public interest? Moreover, ensuring that an in-house entity does not make any profit appears difficult to verify and likely to give rise to disputes. Position of others members of UITP: The provisions on relations between public authorities (in house/public-public cooperation) in the Commission proposals go beyond the conditions the European court of Justice (ECJ) set in his case law. Therefore article 11should be modified. The proposal interprets case law by ECJ in Art. 11 par. 1 lit b) too narrowly. ECJ decided in only one case (C-295/05 [Asemfo Tragsa]): Because 90 % of the activities are carried out for the controlling contracting authority the essential part was carried out. The ECJ did not say that this extent is the ultimate border in other cases. The wording essential part instead of at least 90% would give margin to find flexible solutions. Especially in cases when contracting authorities exercise jointly control over a legal person the Commission proposals establish other conditions than ECJ. It especially did not lay down conditions about gains and reimbursement of actual cost (article 11 3 subpar. 2 lit d) general directive). It would be more appropriate if this terms and definitions furthermore would be developed by ECJ adapted to the actual circumstances of each case. In regulation (EC) 1370/2007 private participation in internal operators is permitted under certain conditions in case of public passenger transport services by rail and by road. There is no reason why authorities or entities are not able to do it in the same way if they want to close a contract of different type. More significant is a solid control from the contracting authority over its dependent entity. Therefore article 11 1 lit. c), 3 lit. c) and 4 lit. e) should be deleted.

11 Special and exclusive rights Article 4 and Annex II lit. e) Utilities Directive Position of some members of UITP: Annex II lit. e) should be deleted for the following reasons: Article 4 defines the scope of application: The Utilities Directive shall apply to entities which are authorities or public undertakings in the utilities sector and to those undertakings in the utilities sector which, when they are not contracting authorities or public undertakings, operate on the basis of special or exclusive rights granted by a competent authority of a Member State. Annex II lists procedures which shall not constitute "special or exclusive rights" within the meaning of this Directive: In this way lit e) defines public service contracts within the meaning of Regulation (EC) No 1370/2007 which have been awarded on the basis of a competitive tendering procedure in accordance with its Article 5(3) as a procedure that shall not constitute a special or exclusive right. Result of this rule would be that public undertakings have a disadvantage in competition. On the one hand public undertakings are obliged to apply the directive (Article 4 1 lit a)) because of the dominant public influence. On the other hand only private undertakings are not obliged by public procurement law when they will get a contract in accordance to competitive tendering procedure of article 5 (3) of Regulation 1370/2007. Exclusive or special rights, per se, imply that the concessionaire is the sole empowered to exercise an activity in a given territory. This nature is not altered by the fact that the granting of an exclusive right is produced through a tender. Such unilateral advantage in favor of one competitor would therefore not be justified. Position of others members of UITP: The article 4 of the proposal of the Utilities directive clearly defines the scope of application of the future directive. The private companies which operate on the basis of special or exclusive rights granted after calls for tenders are not considered as contracting entities and consequently don t have to implement the Utilities directive. The directive 2004/17 already provides it, but only in a recital. This new article is then going to bring clarification and legal security. There is no discrimination between the public and private undertakings as both of them have to implement transparency rules 10 when they are entrusted some compensations for public service obligations. As the undertakings under public influence are owned or managed by public authorities, it is therefore normal that they have to apply the rules provided by the Utilities directive. 10 Provided by the Regulation 1370/2007 on public service transport or by the Almunia package for the other sectors.