EU brings innovation into public procurement rules

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The European Parliament has updated EU rules on public procurement on Wednesday (15 January), introducing new provisions allowing for environmental, social considerations and innovation to be taken into account when public contracts are awarded. The move is not aimed at privatising public services, MEPs insisted however.

The European Parliament voted today (15 January) in favour of two directives - on public procurement and awarding of concessions -, which had already been agreed with the EU member states last June in the Council of Ministers.

The aim of the reform is to open up public tenders to smaller businesses and encourage public authorities to consider how they can better provide their services to taxpayers.

The new measures are supposed to cut red tape, promote value for money, transparency and accountability in how public authorities provide goods and services.

"Public procurement will no longer be a question of simply accepting the lowest price. Smart customers will work with smart suppliers to provide better solutions, better tailored to meeting customer needs in more innovative ways," said British MEP and rapporteur Malcolm Harbour from the European Conservatives and Reformist (ECR) group, who's also the chairman of the Internal Market and Consumer Protection Committee.

Common standards

According to official data, public authorities spend around 18% of GDP on works, goods and services. Until now the focus was placed on getting the lowest price, but the European Parliament says the revised EU laws will herald a new era where quality and sustainability criteria can also be taken into account.

The new legislation for the first time sets "common EU standards on concession contracts to boost fair competition and ensure best value for money by introducing new award criteria that place more emphasis on environmental considerations, social aspects and innovation," the EU parliament said in a statement.

Indeed, by introducing the Most Economically Advantageous Tender (MEAT) criterion, environmental and social aspects will also be taken into account more prominently.

Innovation partnership

Moreover, by introducing the “Innovation Partnership”, public authorities will be able to launch a call for tender without pre-empting the solution, leaving room to the tenderer to come up with innovative solutions together with the authority.

The new rules are also expected to cut administrative burdens and help smaller companies to bid by encouraging the division of contracts into lots.

“Abnormally low bids” will be closely monitored in order to avoid social dumping and make sure that workers’ rights are respected in all member states.

MEPs stressed the revised texts do not represent a push to privatise public service, saying the new procurement directive "does not require the privatisation of public enterprises providing services to the public".

Water services have been specifically excluded from the text as MEPs acknowledged the special nature of water as a public good.

Positions: 

EU Internal market Commissioner Michel Barnier welcomed the vote.

“The new rules which have been adopted today by the European Parliament have three main objectives: simplification, flexibility and legal certainty. Through this reform, public authorities can optimise their use of public procurement which, with nearly 19% of European GDP, is a key driver of our economy. Thus, the simplification of procedures, greater flexibility and their adaptation to better serve other public sector policies or the possibility of the best quality-price ratio (‘value for money’) will make public procurement more efficient and more strategic, respecting the principles of transparency and competition to the benefit of both public purchasers and economic operators. The rules on concessions will create a common framework for a major tool of public management in Europe, thus contributing to the conditions set for stimulating investment in major public services of the future."

"The balance achieved reflects the spirit of cooperation between the institutions which prevailed throughout the discussions. I am convinced that the Council will approve in the coming weeks the adoption of these three Directives, in order to allow their entry into force in March.”

The centre-right European People’s Party (EPP) hailed the vote saying: "Now public authorities will have at their disposal a new legal instrument, the concession contract, to support their action in favour of the development of economic infrastructures and the promotion of public services, especially in a context of economic crisis and budgetary constraints. With a clear and effective legal framework, all economic operators will be on an equal footing: the rules of the game will be known to everyone."

The Socialist and Democrats (S&D) in the European Parliament said the rules will help fight social dumping. The rapporteur, Marc Tarabella said:

"These new rules are a step forward in the fight against social dumping and will offer a high-quality service for citizens. Public authorities will be able to insist that social criteria are respected, including collective bargaining for tenders. This will help to eradicate abuses on construction sites where social dumping has become routine. For the first time, mandatory rules on transparency will be introduced in the subcontracting chain. We need to identify clear responsibilities when several subcontractors are involved in the same project.

Contracting authorities will be able to award procurement contracts on the basis of the 'most economically advantageous tender' and no longer on the lowest price offer.”

 The Alliance of Liberals and Democrats (ALDE) said in a statement: "The new rules will make public procurement easier, more modern and transparent, and curb corruption and nepotism. Companies have now better opportunities than ever to take part in public tenders all over in Europe. We have successfully fought to divide large contracts into smaller lots. This helps especially SMEs who create most of the jobs in Europe. Our internal market will significantly grow for the benefit of taxpayers and businesses."

The European Conservatives and Reformists (ECR) group also welcomed the vote. "Public procurement will no longer be a question of simply accepting the lowest price," said Malcolm Harbour, ECR Member and Chairman of the Internal Market and Consumer Protection Committee, who led the Parliament's agreement on the proposal. "Smart customers will work with smart suppliers to provide better solutions, better tailored to meeting customer needs in more innovative ways."

The European Trade Union Confederation (ETUC) was sightly less upbeat: “The revised directive on public procurement will allow public authorities to make sustainable choices and make sure that workers’ rights are upheld. Application of public procurement rules affects working conditions of thousands of workers all over Europe and are therefore of key importance to the ETUC and its affiliates. Public procurement must not contribute to a race to the bottom in terms of pay and working conditions."

"However, the new public procurement rules remain complex and much is left for member states to decide such as the possibility for member states to reserve contracts for health, social and cultural services. Safeguards are needed to make sure that private companies cannot apply for such reserved contracts,” the ETUC confederal secretary Veronica Nilsson said.

Social Platform, the platform of European Social NGOs welcomed the vote. Heather Roy, president of the platform said:

“The recognition of the specificities of social and health services, as well as more emphasis on quality rather than the price or cost are the biggest achievements for our sector. Unfortunately public authorities will still have the possibility to use the lowest price or cost, even for social and health services. If public authorities include quality as a privileged factor to evaluate bids, this will give a guarantee that taxpayers’ money is used to pay for quality services.”

 

The European Construction Industry Federation (FIEC) regretted that “EU institutions did not seize the opportunity to solve one of the most severe shortcomings of the existing public procurement directives: the identification and treatment of abnormally low tenders, which is a real curse in the construction sector.”

“In any case, these new rules will not change the world,” the director general Ulrich Paetzold said, “apart from maybe the brand new concessions directive, which now needs to prove it’s worth. Above all, we regret that the EU legislators seem to underestimate the negative consequences of abnormally low tenders on quality and sustainability to the detriment of both the public authorities and serious, law-abiding private companies. Cheap can prove to be very expensive in the end!” he added.

FIEC “encourages contracting authorities in the Member States to make the best use of the “best price-quality ratio” award criterion for the sake of quality and sustainability of construction works. Price as the only award criterion should have been forbidden for complex procurement, such as construction,” concludes Paetzold

The Council of European Municipalities and Regions welcomed the European Parliament’s adoption of the new EU public procurement directives “as it represents a step in the right direction for local government interests. In total, expenditure by regional and local government represents more than a third of all public sector spending. This is why, CEMR has been involved in the shape of the Commission’s proposal since 2011, and has advocated relevant amendments. We welcome that many of them are reflected in the adopted text.”

Timeline: 
  • March 2014: Entry into force of the new public procurement directive
External links: 

EU institutions

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Comments

Victoria Micalleef's picture

This is all very good but the corruption of the use and practice of bypassing the EU Procurement Directive as it stands in Ireland has resulted in preferential discrimination and perpetual awards to un-tendered for progammes of Consultancy Advisory works to a well-known Consulting Engineer in Dublin where they have secured "tender" after "tender" without recourse to a disclosure for water works and waste treatment works where their fees have increased exponentially from an original base of less than €10 Million to over €120 million by being given order after order for additional works on a project such as the Dublin Waste Project which its tenderer has been in a position to increase its "before award" bid from €250 Million to over €400 Million and the project company has changed names and even gone into administration once.
So DG Procurement take a hard look at this and others in particular (I bet you don't!) and rectify this position at a stroke. The Irish Government was baled out by the rest of the EU and its administration needs dealing with before it returns back to the old old old ways. And in the process take a look at the Emminent University Fellows and other Influential Advisors (not in the pay of the previously mentioned Consulting Advisors and Contractors) who have said that the flawed proposal for the Dublin Waste scheme could be built for less than €120 Million compared to the €430 Million it is now mooted around at.

Luc Bourdeau's picture

This is a great development. This Directive helps public procurers take a positive leadership role for the EU construction sector.

It highlights the opportunity to use building information electronic modelling, or BIM, technology across all 28 EU Member States for public works contracts to ultimately enable more efficient and sustainable construction and building projects in Europe.

Luc Bourdeau, Secretary General of the European Construction Technology Platform
Brussels

Keith's picture

I disagree. This is subterfuge of logic over mis-placed guidance Mr L Bourdeau.

The corruption issues in Public Procurement will not be stopped. They occur in France as well as in Ireland. How many tenders in France are awarded to Non-French Companies? Please advise and name them and then declare whether their numbers are greater than two hands full of digits. The last time we counted them there were less than one hand full.

So it is in reverse the numbers of EU Tenders awarded to French Companies outside of France and in the EU is disproportionately fixed and masked through the Finance Build System where French Banks finance French Companies so making their offerings "very competitive!" TYhis we now know from places as far apart as SE Europe to NW Europe and to elsewhere around the World is bolstered by the French Accounting systems.

But dae we say it is not just restricted to France because Spain is in this corrupion system with their own cartel of companies and banks misusing their Inane bounteousness of wealth given to the Country by the EU wherein they use their "wonderful accounting systsems" to buy in to and buy up other countries assets - in order to defer Corporation Taxes in Spain - such as Santander and Foccaio and FRG and AIG (remember they were the small Spanish Airline that jointly acquired British Airways, the latter of which was larger than themselves, thus they deferred losses and comunicated a serious readjustment of profits after acquisition, and avoided paying UK Corporation Taxes!) and there are numerous others.

Remember also that there are others in Denmark such as Dong Energy (spelling probably wrong) that has been doing the same.

We agree with you that technologies in Construction are there such as the BIM systems but they do not cure the underlieing corruptions.

Keith's picture

I disagree. This is subterfuge of logic over mis-placed guidance Mr L Bourdeau.

The corruption issues in Public Procurement will not be stopped. They occur in France as well as in Ireland. How many tenders in France are awarded to Non-French Companies? Please advise and name them and then declare whether their numbers are greater than two hands full of digits. The last time we counted them there were less than one hand full.

So it is in reverse the numbers of EU Tenders awarded to French Companies outside of France and in the EU is disproportionately fixed and masked through the Finance Build System where French Banks finance French Companies so making their offerings "very competitive!" TYhis we now know from places as far apart as SE Europe to NW Europe and to elsewhere around the World is bolstered by the French Accounting systems.

But dae we say it is not just restricted to France because Spain is in this corrupion system with their own cartel of companies and banks misusing their Inane bounteousness of wealth given to the Country by the EU wherein they use their "wonderful accounting systsems" to buy in to and buy up other countries assets - in order to defer Corporation Taxes in Spain - such as Santander and Foccaio and FRG and AIG (remember they were the small Spanish Airline that jointly acquired British Airways, the latter of which was larger than themselves, thus they deferred losses and comunicated a serious readjustment of profits after acquisition, and avoided paying UK Corporation Taxes!) and there are numerous others.

Remember also that there are others in Denmark such as Dong Energy (spelling probably wrong) that has been doing the same.

We agree with you that technologies in Construction are there such as the BIM systems but they do not cure the underlieing corruptions.

Luc Bourdeau's picture

Indeed, this is not a facette of the story I wanted to address in my comment, which was focused on innovation and not on corruption.