Compliance issues in public procurement Nico Spiegel DG Internal Market and Services

1. Compliance issues in public procurementNico SpiegelDG Internal Market and Services  European Union Cohesion Policy

2. Overview Contract awards outside the scope of the Public Procurement Directives Amendment of public contracts – new award?

3. Contract awards outside the scope of the Public Procurement Directives

5. Contracts outside the scope of the Public Procurement Directives Contracts below the thresholds Contracts for services listed in Annex II B of Directive 2004/18/EC Service concessions

6. Directive 2004/18/EC, Preamble: The award of contracts concluded in the Member States on behalf of the State is subject to the respect of the principles of the Treaty and in particular to the principle of freedom of movement of goods, the principle of freedom if establishment and the principle of freedom to provide services and to the principles deriving therefrom such as the principle of equal treatment, the principle of non-discrimination and the principle of transparency.

7. The Court’s case-lawTelaustria and the consequences ECJ 7.12.2000, C-324/98, Telaustria Verlags GmbH Service concession for the production and edition of phone books

8. Telaustria Formula Although service concessions are excluded from the scope of the Public Procurement Directives, contracting authorities are, none the less, bound to comply with the fundamental rules of the EC Treaty, in general, and the principle of non-discrimination on the ground of nationality, in particular. That principle implies an obligation of transparency which consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of the procurement procedures to be reviewed.

9. ECJ 21.7.2005, C-231/03Co.Na.Me. („Padania“) The award of a concession without any kind of transparency constitutes a discrimination on the ground of nationality. A sufficient degree of transparency implies that undertakings located in other Member States have access to appropriate information on the contract before it is awarded enabling them to express interest in obtaining the contract.

10. ECJ 21.7.2005, C-231/03Co.Na.Me. („Padania“) In individual cases, it might be assumed that because of special circumstances, such as a very modest economic interest at stake, a contract award would be of no interest to economic operators from other Member States. In such a case, the effects on the basic freedoms are too uncertain and indirect to warrant the application of standards derived from primary Community law.

11. The concept of “certain cross-border interest” The purpose of coordinating procedures for the award of public contracts is ... to protect the interests of traders established in a MS who wish to offer goods and services to contracting authorities located in other MS (C-507/03, par. 27). The application of the rules and principles of the EC Treaty to contract awards below the threshold is based on the premise that the contracts in question are of certain cross-border interest (C-147/06, par. 21), i.e. that they are of certain interest to undertakings located in another MS (C-507/03, par. 30, 32).

12. Assessment of cross-border interest A works contract could be of such cross-border interest because of its estimated value in conjunction with its technical complexity or the fact that the works are to be located in a place which is likely to attract foreign operators (C-147/06 and C-148/06, par. 24) In certain cases, borders straddle urban agglomerations situated in different Member States. In such circumstances, even low-value contracts may be of certain cross-border interest (C-147/06 and C-148/06, par. 31).

13. Standards of proof in infringement proceedings The Commission has to provide evidence allowing the Court to establish that an obligation has not been fulfilled. In so doing, it may not rely on any presumption, in this case the presumption that a contract relating to B services is of certain cross-border interest (C-507/03, par. 33). A mere statement, that a complaint was made to it in relation to the contract in question is not sufficient to establish that the contract was of certain cross-border interest (C-507/03, par. 34).

14. Commission Interpretative Communication on the Community law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives OJ C 179, 1.8.2006, p. 2

15. Content of the Communication Relevance to the internal market The standards explained in the Communication apply only to contract awards having a sufficient connection with the functioning of the Internal Market Main criterion: interest to economic operators located in other Member States Case-by-case-approach

16. Structure of the Communication 3 main elements of Telaustria formula Transparency Fair and impartial procedure Adequate judicial protection

17. Transparency Ensuring a degree of advertising sufficient to enable the market to be opened up to competition Requirement of an ex-ante publication Content of publication: essential details of the contract and the award procedure Means of publication: variable, according to Internal Market relevance

18. Fair and impartial procedure Non-discriminatory description of the subject-matter of the contract Equal access for economic operators from all Member States Mutual recognition of evidence Appropriate time-limits Transparent and objective approach

19. Adequate judicial protection Principle: Effective judicial protection of the rights derived from the Community legal order At least decision adversely affecting a person having or having had an interest in obtaining the contract should be subject to review for possible violations of the basic standards derived from Community law.

20. Amendment of public contracts – new award procedure???

21. Contract Amendment Notion: modification of the terms of the award during the performance stage General principle: The contracting authority may not, during the execution stage of the contract, amend an essential condition of the award Unless it expressly provides for that possibility, as well as for the relevant detailed rules, in the tender documents (see Case C-496/99, CAS Succhi di Frutta SpA)

22. Contract Amendment Any amendment of an essential condition of the award of the contract must be considered equivalent to the conclusion of a new contract, requiring, in principle, a new competition (Case C-454/06, Pressetext Nachrichtenagentur) However, in some exceptional cases, the contracting authority may use a negotiated procedure under Arts. 31 and 61 of Dir. 2004/18/EC and Art. 40 of Dir. 2004/17/EC to award the new contract

23. Contract Amendment The notion of «essential condition of the award» A condition which, had it been included in the tender documents, would have made it possible for tenderers to submit a substantially different tender (Case C-496/99), or Would have allowed for the admission of tenderers other than those initially admitted (Case C-454/06), or A condition that might alter the economic balance of the contract in favour of the contracting authority or its contracting partner Requires a case by case analysis See on this issue the Opinion of AG Kokott, C- 454/06, of 13 March 2008, point 46 where she considered that ”The existence of an essential modification should be presumed whenever it cannot be excluded that the less favourable original conditions may have dissuaded other providers from taking part in the tender, or that, in view of the new conditions, other providers would have become interested in the tender” See also case C-84/03 where the Court held that: “In the present case it cannot be denied that, in so far as they authorise the use of the negotiated procedure where it has not been possible to award the contract during an open or restricted procedure or where the candidates were not allowed to tender, provided that there were no modifications of the original conditions of the contract apart from the price, which cannot be increased by more than 10%, Articles 141(a) and 182(a) of the codified law do indeed add a new condition to the provisions of Directives 93/36 and 93/37 which is capable of undermining both their scope and their exceptional character. Such a condition cannot be regarded as a non-substantial alteration of the original terms of the contracts as provided for in Article 6(3)(a) of Directive 93/36 and Article 7(3)(a) of Directive 93/37. See on this issue the Opinion of AG Kokott, C- 454/06, of 13 March 2008, point 46 where she considered that ”The existence of an essential modification should be presumed whenever it cannot be excluded that the less favourable original conditions may have dissuaded other providers from taking part in the tender, or that, in view of the new conditions, other providers would have become interested in the tender” See also case C-84/03 where the Court held that: “In the present case it cannot be denied that, in so far as they authorise the use of the negotiated procedure where it has not been possible to award the contract during an open or restricted procedure or where the candidates were not allowed to tender, provided that there were no modifications of the original conditions of the contract apart from the price, which cannot be increased by more than 10%, Articles 141(a) and 182(a) of the codified law do indeed add a new condition to the provisions of Directives 93/36 and 93/37 which is capable of undermining both their scope and their exceptional character. Such a condition cannot be regarded as a non-substantial alteration of the original terms of the contracts as provided for in Article 6(3)(a) of Directive 93/36 and Article 7(3)(a) of Directive 93/37.

24. Contract Amendment When the amendement is to the detriment of the contractor (with his consent) it is less likely that there is an essential amendement of the terms of the award (see case C-454/06, para. 62-63) However, in some cases an essential amendement may still occur: e.g. a reduction in the scope of the contract which might have made it of interest to smaller companies. The specific case of measure-and-value contracts, in which the estimated quantities of each item are set out in a bill of quantities

25. Contract Amendment Aspects concerned by a change/review clause of the contract: Nature (changes in the subject matter of the contract, see Case C-340/02, La Chauvinière) Price (increase or reduction in price accompanied by change of contractual obligations) Duration (extension or reduction of the period established for the execution of the contract) Volume of work or services (increase or a diminution of the contract works/services or of the volume of items the company has contracted to provide) Other contractual conditions (substitution of a technical process or a bank guarantee for the one provided in the contract).

26. Principles governing the award of a contract for additional works/services through a negotiated procedure without a notice Exceptions to the Directives' general rules should be strictly interpreted Contracting authorities have the burden of proving that the circumstances justifying the use of the negotiated procedure have been met (Case 199/85, Commission v Italy, para. 14, case C-328/92, Commission v Spain, para. 16, case C-57/94, Commission v Italy, case C-318/94, Commission v Germany, case C-385/02, para. 19)

27. Award of a contract for additional works/services through a negotiated procedure without a notice Additional works/services not included in the project initially considered or in the original contract. Tender documents should be the result of careful planning and include all necessary elements for a genuine competition; a vague or incomplete project might violate the principles of equal treatment and transparency Flexible interpretation needed under new Directives - contract specifications may be defined in terms of performance or functional requirements and Competitive Dialogue (Articles 23 (3) (b) and 29 of Dir. 2004/18/EEC)

28. Award of a contract for additional works/services Additional works or services that have, through unforeseen circumstances, become necessary for the performance of the works or services described in the original contract and are awarded to the same contractor Works or services which enable the normal functioning or provision of the work or service originally awarded Awarded to the same contractor (specific works have to be sub-contracted by himself) Justified by unforeseen circumstances

29. Award of a contract for additional works/services « Unforeseen circumstances» Directives’ requirement of relevant circumstances to be «unforeseen» should be interpreted in an objective manner as referring to what the authorities should have foreseen and not to what they actually did Consider the means available to the contracting authority, the characteristics of the project and the good practices in the field Unforeseen circumstances should not be imputable to the contracting authority (see by analogy Case 194/88 R., Order of the President of the Court of 13 September 1988)

30. Award of a contract for additional works/services Circumstances that may qualify as «unforeseen»: Natural events: exceptional bad weather conditions, earthquakes, etc. Events originated by third parties: new requirements resulting from the adoption of EC Directives or Regulations, abnormal increase in bank interest rates or prices of raw materials; Technical nature: composition of sub-soil, leaks in underwater tunnel, scientific findings leading to stricter safety rules, etc

31. Award of a contract for additional works/services Works/services cannot be technically or economically separated from the main contract without great inconvenience to the contracting authorities Where an extension is required to works on an existing site on which a contractor is already present and it would be very troublesome and expensive to remove and replace that contractor. Example: prior to completion of a structure such as a bridge, a safety report reveals a need for alterations to the original structure

32. Award of a contract for additional works/services Works/services separable from the execution of the original contract but strictly necessary to its later stages. Example: an unexpected landslide during the course of a construction work necessitates earthmoving services not envisaged in the original contract, in order for the construction to be completed. New works or services are not additional works (see case C-187/04 and case C-340/02)

33. Award of a contract for additional works/services The aggregate amount of contracts awarded for additional works/services may not exceed 50% of the amount of the main contract. It is the total amount of additional works which must not exceed 50 per cent of the original contract sum. This condition does not apply to additional works/services under the “utilities” Directive.

34. Award of a contract for additional supplies Additional deliveries by the initial supplier for partial replacement of current use goods or installations or for goods required as an addition to existing goods or installations If the change of supplier obliges the authority to acquire goods with different technical characteristics This would result in either i) incompatibility with the existing goods or installations or ii) disproportionate technical difficulties in operation and maintenance (see Case C-337/05, para. 59) Duration of the contract awarded may not, as a rule, exceed 3 years.

35. Contact DG Internal Market Nico Spiegel Tel. 0032 2 299 19 46 Nico.Spiegel@ec.europa.eu Esther Schmidt Tel. 0032 2 296 29 92 Esther-Eva.Schmidt@ec.europa.eu