MEPs back new rules for public-transport tenders

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The European Parliament put an end to seven years of negotiations on 10 May 2007, by adopting a compromise text on how public transport service contracts should be awarded in member states.

The Parliament backed, at a second-reading vote on 10 May 2007, a compromise found with the Council on rules for local and regional public transport contracts, putting an end to seven years of haggling between institutions. 

The regulation establishes that contracts with an average annual value of more than €1 million, or for the annual provision of more than 300,000 kilometres of public transport services, will automatically be subject to open competition, unless the local authority chooses to provide the service itself or to award it directly to an “internal operator” that it controls. 

For smaller-scale contracts, local authorities will also retain the right to choose whether to award directly or open them to tender. Furthermore, to help smaller businesses to survive, the rules allow local authorities to grant more important contracts, of up to €2 million or 600,000 km, directly to SMEs employing between 50 and 250 people. 

In addition, where public-procurement procedures are required, local authorities will have the right to award tenders based not only on price but also on certain social, environmental and quality standards. 

Contracts will have to be concluded for a duration of three to 15 years for rail services and for up to ten years for coach and bus services. 

Positions

Brigitte Ollier, head of the International Union of Public Transport’s European office (UITP), told EURACTIV that public transport operators were "relieved that it's over". 

"The compromise is indeed a compromise…The text is not something that anyone likes very much, but we are at least happy that it’s over and we do not think it was possible to get much more," she said, explaining that operators had been deeply divided, with private enterprises pushing for a stronger focus on market opening while public operators fought for the status quo. 

"The major contribution of the text will be to put an end to all the court cases and increase legal certainty in all member states,” she said, adding that otherwise, the regulation, with its lengthy 12-year transition period, was in effect "toothless" and would maintain the status quo "in 99% of cases". 

The Community of European Railway and Infrastructure Companies (CER) welcomed the clear and simple framework provided by the regulation but regretted that "the crucial issue" of under-compensation in the rail sector, which is a particular problem in Central and Eastern Europe, has been ignored. 

Executive Director Johannes Ludewig said: "Not compensating railways for public service transport creates a vicious circle: passenger transport is cross-financed by the freight business; the underinvestment in the whole sector affects the quality of services; and eventually rail further loses market share to the road sector. Politicians must urgently tackle this unacceptable situation!" 

Shadow rapporteur Mathieu Grosch (EPP-ED) said the new rules would help ensure that public transport services are efficient and adapted to local needs. By giving local authorities the right to award certain contracts directly, those "who are best able to judge the needs in their town or region can decide what is the most adequate form of service and maintain control over this service. It would have contra-productive to award all public service contracts via uniform tender procedures as the transport challenges in the different regions across Europe vary too widely," Grosch explained. 

He added that the system will also allow for a better protection of SMEs, which would have a hard time competing with international companies in the case of a tender procedure, adding: "SME's play a vital role for the stability of the regional economy and employment. It is therefore perfectly acceptable to offer them a certain degree of protection." 

Background

Public transport is becoming an increasingly important tool – particularly in cities – to tackle rising congestion and environmental problems related to excessive car use. 

But efforts to preserve and expand services in this loss-making sector, without implementing substantial fare increases, have become increasingly dependent on public funding. As a result, public enterprises and their established private-contract partners have acquired a stronghold on the sector, generating a multiplication of complaints and court cases from private operators regarding unfair award procedures. 

To remedy this situation, the Commission suggested a proposal, in July 2000, aimed at creating a level playing field for businesses wishing to operate public rail and road services, by introducing compulsory tendering of public-service contracts. 

However, local authorities, as well as users' organisations, green groups and trade unions, argue that carrying out public-procurement procedures in every case would put publicly-owned operators out of business and that the Commission's proposed five-year duration for contracts would create a lack of continuity that would hamper investment and create job insecurity. 

In November 2001, the Parliament took up these objections in a first-reading report but the Council then took more than six years to reach a common position, only reacting after the Commission submitted a revised text in July 2005. 

In April 2007, the German Presidency finally reached a compromise with Parliament's transport committee, allowing greater subsidiarity for member states. 

Timeline

  • 2009: The regulation must enter into force within three years. 
  • 2019: The award of public transport service contracts for road and rail must comply with the new regulation within ten years of its entry into force. 

Further Reading

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