EU brings innovation into public procurement rules
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.
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.
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.
Public procurement accounts for roughly 18% of the EU's GDP. Small and medium-sized enterprises (SMEs) play an important role in procurement markets. They are estimated to secure between 31% and 38% in terms of total contract value of public procurement.
Public procurement refers to the purchase by public authorities of goods, services or works. Such activities are governed by a series of national and European rules with a view to making sure that taxpayers' money is well spent, preventing fraud and discrimination and ensuring equal treatment of bidders.
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.”
- March 2014: Entry into force of the new public procurement directive