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COUNCIL OFBrussels, 22 December 2011
THE EUROPEAN UNION
18966/11 ADD 1
Interinstitutional File:
2011/0438 (COD)
MAP 10 MI 686
COVER NOTE
from:
Secretary-General of the European Commission, signed by Mr Jordi AYET PUIGARNAU, Director
date of receipt: 21 December 2011
to: Mr Uwe CORSEPIUS, Secretary-General of the Council of the European Union
No Cion doc.: SEC(2011) 1585 final
Subject: COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT Accompanying the document Proposal for a Directive of the European Parliament and of the Council on Public Procurement and the Proposal for a Directive of the European Parliament and of the Council on procurement by entities operating in the water, energy, transport and postal sectors
Delegations will find attached Commission document SEC(2011) 1585 final.
EUROPEAN COMMISSION
Brussels, 20.12.2011 SEC(2011) 1585 final
COMMISSION STAFF WORKING PAPER
IMPACT ASSESSMENT
Accompanying the document
Proposal for a Directive of the European Parliament and of the Council
on Public Procurement
and
the Proposal for a Directive of the European Parliament and of the Council
on procurement by entities operating in the water, energy, transport and postal sectors
COMMISSION STAFF WORKING PAPER
IMPACT ASSESSMENT
Accompanying the document
Proposal for a Directive of the European Parliament and of the Council
on Public Procurement
and
the Proposal for a Directive of the European Parliament and of the Council
on procurement by entities operating in the water, energy, transport and postal sectors
This report commits only the Commission's services involved in its preparation and does not prejudge the final form of any decision to be taken by the Commission
TABLE OF CONTENTS
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1.Procedural Issues and Consultation of Interested Parties .......................................... 12
1.1. Procedural issues ........................................................................................................ 12
1.2. External expertise and consultation of interested parties........................................... 12
1.2.1. Overview .................................................................................................................... 12
1.2.2. Summary of the findings from the 2011 evaluation of public procurement rules ..... 12
1.2.3. Summary of the synthesis of responses to the GP on the modernisation of EU public procurement policy..................................................................................................... 13
1.2.4. Summary of the findings from the 2010 evaluation of the 2004 Action Plan for e- procurement................................................................................................................ 14
1.2.5. Summary of the synthesis of responses to the e-procurement GP ............................. 14
1.2.6. External expertise....................................................................................................... 14
1.2.7. Impact Assessment Board .......................................................................................... 15
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2.Policy context, Problem definition and Subsidiarity.................................................. 16
2.1. Policy context............................................................................................................. 16
2.1.1. Scope of the review and this impact assessment........................................................ 17
2.1.2. Overview of legislative framework............................................................................ 17
2.2. Background ................................................................................................................ 17
2.2.1. What is public procurement? ..................................................................................... 17
2.2.2. Nature and size of the market concerned ................................................................... 18
4.1.1. Abolition of the Directives......................................................................................... 32
4.1.2. Full harmonisation ..................................................................................................... 33
4.1.3. Conclusions on radical options .................................................................................. 33
4.2. Development and screening of possible options ........................................................ 34
4.2.1. "No change" options .................................................................................................. 34
4.2.2. Non-legislative / soft law options .............................................................................. 34
4.2.2.1. Narrowing down the soft law options ........................................................................ 34
4.2.3. Framing the legal options........................................................................................... 35
4.2.4. Detailed mapping of options ...................................................................................... 38
4.3. Summary of options to be analysed further ............................................................... 43
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5.Analysis of Impacts.................................................................................................... 43
5.1. Scope .......................................................................................................................... 44
5.1.1. Impacts of SCO.NC option ........................................................................................ 44
5.1.1. Impacts of SCO.LEGI.TARGET option.................................................................... 44
5.1.1.1. Impacts for CAEs ....................................................................................................... 44
5.1.1.2. Impacts for businesses (including SMEs) .................................................................. 46
5.1.1.3. Impacts on Member States ......................................................................................... 46
5.1.1.4. Impacts on the Internal Market .................................................................................. 47
5.1.1.5. Summary of stakeholder views on this option ........................................................... 47
5.1.1.6. Impacts on administrative burden and simplification ................................................ 47-
5.2.2.1. Impacts on CAEs........................................................................................................ 52
5.2.2.2. Impacts for businesses (including SMEs) .................................................................. 53
5.2.2.3. Impacts on Member States ......................................................................................... 54
5.2.2.4. Impacts on the Internal Market .................................................................................. 55
5.2.2.5. Summary of stakeholders views on this option.......................................................... 55
5.2.2.6. Impacts on administrative burden and simplification ................................................ 56
5.2.3. Impacts of PRO.LEGI.FLEXIB option...................................................................... 56
5.2.3.1. Impacts on CAEs........................................................................................................ 56
5.2.3.1. Impacts for businesses (including SMEs) .................................................................. 57
5.2.3.2. Impacts on Member States ......................................................................................... 58
5.2.3.3. Impacts on the Internal Market .................................................................................. 58
5.2.3.4. Summary of stakeholders views on this option.......................................................... 58
5.2.3.5. Impacts on administrative burden and simplification ................................................ 59
5.2.4. Summary of impacts of options in Procedures against specific objectives ............... 59
5.3. Strategic public procurement ..................................................................................... 60
5.3.1. Impacts of STR.NC option......................................................................................... 60
5.3.2. Impacts of STR.LEGI.FACILIT option..................................................................... 60
5.3.2.1. Impacts on CAEs........................................................................................................ 60
5.3.2.2. Impacts on businesses (including SMEs)................................................................... 62
5.3.2.3. Impacts on Member States ......................................................................................... 63-
5.4. Access ........................................................................................................................ 70
5.4.1. Impacts of ACC.NC option........................................................................................ 70
5.4.2. Impacts of ACC.SOFT option.................................................................................... 70
5.4.3. Impacts of ACC.LEGI.FACILIT option.................................................................... 70
5.4.3.1. Impacts on CAEs........................................................................................................ 70
5.4.3.2. Impacts on businesses (including SMEs)................................................................... 71
5.4.3.3. Impacts on Member States ......................................................................................... 72
5.4.3.4. Impacts on the Internal Market .................................................................................. 72
5.4.3.5. Summary of stakeholders views on this option.......................................................... 72
5.4.3.6. Impacts on administrative burden and simplification ................................................ 73
5.4.4. Impacts of ACC.LEGI.ENFORC option ................................................................... 73
5.4.4.1. Impacts on CAEs........................................................................................................ 74
5.4.4.2. Impacts on businesses (including SMEs)................................................................... 75
5.4.4.3. Impact on Member States........................................................................................... 75
5.4.4.4. Impacts on the Internal Market .................................................................................. 76
5.4.4.5. Summary of stakeholders views on this option.......................................................... 76
5.4.4.6. Impacts on administrative burden and simplification ................................................ 76
5.4.5. Summary of impacts of options in Access against specific objectives...................... 77
5.5. Governance ................................................................................................................ 78
5.5.1. Impacts of GOV.NC option ....................................................................................... 78
5.5.4.3. Impacts on Member States ......................................................................................... 82
5.5.4.4. Impacts on the Internal Market .................................................................................. 83
5.5.4.5. Summary of stakeholders views on this option.......................................................... 83
5.5.4.6. Impacts on administrative burden and simplification ................................................ 83
5.5.5. Summary of impacts of options in Governance against specific objectives .............. 84
5.6. Regulatory form ......................................................................................................... 84
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6.Comparing the Options .............................................................................................. 85
6.1. Preferred solution ....................................................................................................... 88
6.1.1. Scope .......................................................................................................................... 88
6.1.2. Procedures .................................................................................................................. 89
6.1.3. Strategic procurement ................................................................................................ 89
6.1.4. Access ........................................................................................................................ 90
6.1.5. Governance ................................................................................................................ 91
6.2. Conclusions ................................................................................................................ 91
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7.Monitoring and Evaluation ........................................................................................ 92
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8.ANNEXES ................................................................................................................. 94
8.1. ANNEX 1 Procedural issues................................................................................... 94
8.1.1. Inter-service steering group........................................................................................ 94
8.1.2. External expertise....................................................................................................... 95
8.1.3. Public consultations ................................................................................................... 96
8.3.1.3. A/B-type services .....................................................................................................
8.3.1.4. Legal uncertainty......................................................................................................
8.3.1.5. Conclusions ..............................................................................................................
8.3.2. Problem drivers in Procedures .................................................................................
8.3.2.1. Disproportionate costs of procedures for low value contracts .................................
8.3.2.2. Complexity of the rules on procedures ....................................................................
8.3.2.3. Insufficient flexibility...............................................................................................
8.3.2.4. E-procurement..........................................................................................................
8.3.2.5. Aggregation of demand............................................................................................
8.3.2.6. Conclusions ..............................................................................................................
8.3.3. Problem drivers in Strategic public procurement.....................................................
8.3.3.1. Insufficient provisions with regards to the integration of strategic goals ................
8.3.3.2. Uncertainty with regards to extent of integration of strategic goals ........................
8.3.3.3. Conclusions ..............................................................................................................
8.3.4. Problem drivers in Access........................................................................................
8.3.4.1. Low cross-border procurement ................................................................................
8.3.4.2. Import penetration lower than in the private sector .................................................
8.3.4.3. Reluctance to bid cross-border amongst firms.........................................................
8.3.4.4. Market access barriers (SMEs in particular) ............................................................
8.3.4.5. Conclusions ..............................................................................................................
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8.7.1. SCO.LEGI.TARGET - New regime for all services and a lighter treatment for social services .....................................................................................................................
8.7.2. SCO.LEGI.REDUCE- General increase of EU thresholds......................................
8.7.2.1. Impacts on the use of procedures .............................................................................
8.7.2.2. Impacts on the number and volume of transactions no longer covered ...................
8.7.3. PRO.LEGI.DESIGN - Increase in the use of e-procurement...................................
8.7.4. PRO.LEGI.DESIGN - Improve tools for repetitive purchasing ..............................
8.7.4.1. Impacts of using framework contracts .....................................................................
8.7.4.2. Impacts of increasing the use of the DPS.................................................................
8.7.4.3. Impacts of using e-catalogues ..................................................................................
8.7.5. PRO.LEGI.FLEXIB - Permit more negotiations .....................................................
8.7.5.1. Impact on the costs of procedures ............................................................................
8.7.5.2. Impacts on competition ............................................................................................
8.7.5.3. Impacts on the duration of the award stage..............................................................
8.7.5.4. Impacts on the costs of procedures ..........................................................................
8.7.5.5. Impacts on cross-border trade ..................................................................................
8.7.6. PRO.LEGI.FLEXIB - New lighter regime for sub-central authorities ....................
8.7.7. STR.LEGI.FACILIT - Directly linked externalities taken into account..................
8.7.8. STR.LEGI.FACILIT - Innovation partnership ........................................................
8.7.9. STR.LEGI.ENFORC - Quotas in strategic procurement .........................................
8.8. ANNEX 8 Background data to support the analysis of impacts...........................
8.8.1. Comparison between above and below EU-thresholds procurement ......................
8.8.2. Comparison between above EU-thresholds procurement and private procurement
8.8.3. Litigation costs .........................................................................................................
8.8.4. Costs of procedures ..................................................................................................
8.8.5. SMEs impacts...........................................................................................................
8.8.6. Administrative burden..............................................................................................
8.9. ANNEX 9 Glossary...............................................................................................
Introduction
In 2009, the public sector spent over 2,200 billion on goods, services and works amounting to around 19% of EU GDP. The efficient and strategic management of public purchasing is an issue of paramount policy importance on a number of levels: the sound management of increasingly scarce public resources; the daily administration of the 250,000+ government departments, agencies and public bodies involved in the award and management of public contracts; the impact on the supplier base, many of whom are heavily dependent on public sector business; the role of the public sector as a buyer of 'first resort' for innovative or environmentally superior solutions.
The EU public procurement Directives seek to support the emergence of open and efficient markets for public procurement contracts and thereby facilitate the best use of public resources. They do this by applying common principles of transparency, open competition and sound procedural management to higher-value public procurements which are likely to be of most interest to suppliers across the single market. In 2009, EU legislation applied to 150,000 procedures, involving a total estimated expenditure of 420 billion or 3.5% of EU GDP.
The design of EU public procurement disciplines has very significant and tangible repercussions given the economic significance of the activities concerned, the large numbers of public purchasers and the time and resource involved. EU public procurement Directives must provide an enlightened framework for the organisation of public procurement which responds to the most pressing challenges of the time. A number of critical reports from the European Parliament and other stakeholders testify to a widespread concern that the current EU public procurement rules can be enhanced in a number of important respects. Businesses often find the procedures to be a "big irritant"
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1.These concerns have prompted the Commission to undertake a
profound evaluation of the rules and a widespread consultation on possible adjustments to the legislative framework (620 respondents).
Reflecting these concerns, the Single Market Act2 foresees the publication of
tackling them. It aims to help the Commission services in identifying possible improvements to the existing legislation.
1. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES
1.1. Procedural issues
The project was led by Directorate C of the Directorate General Internal Market and Services. It was assisted by an inter-service steering group containing representatives from 16 other Directorate Generals, which met four times
3.
1.2. External expertise and consultation of interested parties
1.2.1. Overview
This impact assessment builds on the extensive external expertise, consultation and analysis supporting the evaluation of public procurement published on 24 June 2011
(hereafter: the evaluation report) and the 2010 evaluation of the 2004 Action Plan for e-procurement (hereafter: the e-procurement evaluation). It also draws on the findings of two Green Paper consultations on:
(a) The modernisation of EU public procurement policy (hereafter: the GP);
(b) Expanding the use of e-procurement in the EU (hereafter: the e-procurement
GP).
Both of these Green Papers were supported by well attended conferences in Brussels (on 30.06.2011 and 26.11.2010, respectively), where stakeholders had a further opportunity to express their views
4.
Both these evaluations and the Green Paper findings have been presented and discussed with Member State's (hereafter: MS) representatives at meetings of the Advisory Committee for Public Contracts (hereafter: ACPC) and the e-procurement working group. A special meeting of the ACPC was held on 6.07.11 to discuss the emerging findings and possible implications for the reform. A similar agenda was discussed with a wide range of Directorates General at an internal Commission meeting on 15.07.11.
procedures covered by the EU Directives has been estimated at 5.6 billion per year or 1.3% of the total value of contracts published. This is more than offset by the estimated savings, which are around 5% of the total i.e. 20 billion in 2009, without making any allowance for improvements in quality and wider environmental or social benefits. However there is some evidence that the current procedures are not as efficient as they could be (average cost of an above threshold procedure is approximately 28,000) which sometimes leads to higher costs for certain parties. Cross-border procurement is still not as high as had been expected, accounting for around just 1.6% of contract awards (3.5% of total value)
5.
1.2.3. Summary of the synthesis of responses to the GP on the modernisation of EU public
procurement policy
A focussed and very broad GP consultation of stakeholders was held between 27 January and 18 April 2011. Over 620 replies were received and whilst responses reveal diverging views on the priority which should be given to different areas, there is strong support for simplification, improving market access (particularly for SMEs) and fostering innovation. There is a certain consensus that the existing procedures should be streamlined and made more flexible. The issue of using public procurement to support other policies provoked mixed reactions but it was possible to identify certain basic orientations and identify certain concrete measures
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6.The
issues which attracted the most responses are shown in Figure 1).
Figure 1): Most frequently answered questions in the GP consultation
1.2.4. Summary of the findings from the 2010 evaluation of the 2004 Action Plan for e-
procurement
The e-procurement evaluation found that the technology to conduct e-procurement is now ready to be used and that the replacement of paper-based public procurement procedures by automated processes can, as expected, deliver faster and more streamlined procurement administration. However, e-procurement take-up across Europe was fairly low and whilst one or two countries have made significant progress (often due to mandatory use), generally no more than 5% of procurement procedures above the EU thresholds involved electronic processing. Public authorities were often deterred by the significant costs and challenges of the switch- over (administrative, organisational and technical) whilst economic operators faced difficulties due to different systems and interfaces making different demands (not just if trying to operate across borders, but also within a single Member State)
7.
1.2.5. Summary of the synthesis of responses to the e-procurement GP
Across the 77 replies received, there is broad support for EU level action to improve the legislative and policy environment and provide support to CAEs and firms which choose to use e-procurement. This included use of legislation to facilitate the use of standardised e-procurement solutions. A large majority (76%) of respondents call for changes to EU public procurement legislation in order to integrate better the use of ICT in procurement procedures. 85% of respondents considered that EU intervention is needed to avoid the emergence of unnecessary or disproportionate barriers to cross-border participation in e-procurement. Particular attention is needed to resolve access barriers linked to e-signatures and identification. A small majority (53%) of respondents support the imposition of EU level requirements to use e-procurement
8.
1.2.6. External expertise
Both the evaluations were supported via the following studies conducted by external consultants.
Table 1): External expertise list of studies
Title of a study Consultant in charge, date
"Cross-border procurement above EU thresholds" Rambøll Management, 2011
"Public Procurement in Europe Procedures and techniques A study on the cost and effectiveness of procurement regulation" PricewaterhouseCoopers, London Economics and Ecorys, 2011
"Strategic use of public procurement in Europe" Adelphi, Belmont, PPRC, 2011
"Estimating Benefits and Savings from the Procurement Directives" Europe Economics, 2011
"Taking stock on utilities procurement" Europe Economics, 2011
"Evaluation of SMEs' Access to Public Procurement Markets in the EU" GHK, 2010 (for DG Enterprise and Industry)
"Study on the evaluation of the Action Plan for the implementation of the legal framework for electronic procurement " Siemens Time.lex, 2010
1.2.7. Impact Assessment Board
The Impact Assessment Board discussed a draft of this report on 7 September 2011 and requested a resubmission, based on which a final opinion was issued on 23 September 2011. The draft report was significantly amended to address both sets of comments from the IAB. In particular, the following changes were implemented:
· The problem definition has been modified to identify more clearly the specific issues in the legislative framework which need to be addressed. More effective use has been made of the available empirical evidence and more examples have been included both in the problem statement and more generally throughout the report.
· stakeholder views have been integrated more systematically, both in the problem definition (section 2.3) and to complement the analysis of impacts (sections added for each legislative option discussed in chapter 5);
· a more systematic treatment of administrative burden has been introduced for each legislative option (sections added for each legislative option discussed in chapter 5);
· Conclusions regarding the preferred options for the content of the legislative reform have been integrated in the report (section 6.1). This preferred option reflects the opinion of DG MARKT Services and does not prejudge the final form of any decision to be taken by the wider Commission Services. It is based on the vertical combination of the optimal solutions identified for each given (horizontal) problem theme. Whilst the IAB recommended that alternative packages of options should be compared, this has not been done as part of the main impact assessment, since the influencing factors would generally be of a more political nature. Alternatives have however been discussed during the inter-service consultation process and the main resultant changes are identified
in section 6.2.
2. POLICY CONTEXT, PROBLEM DEFINITION AND SUBSIDIARITY
2.1. Policy context
The first EU legal acts relating to public procurement date back to the early seventies. The Directives establish common disciplines which regulate the way that CAEs organise purchasing procedures above designated thresholds by respecting the principles of transparency, regularity / fairness of procedures to ensure openness and non-discrimination. Through subsequent developments further aims were added and the scope was extended (e.g. utilities sectors, services), resulting in legislation intended to:
more flexible procurement procedures for contracting authorities and provide easier access for companies, especially SMEs" .
2.1.1. Scope of the review and this impact assessment
This impact assessment will analyse the specific challenges which public procurement policy faces today and explore possibilities to adapt and support Directives 2004/17/EC (hereafter: the Utilities Directive) and 2004/18/EC (hereafter: the Classic Directive) in order to better respond to its current objectives and new challenges. The Remedies Directive (2007/66/EC)
9 and the Directive on Defence and
Sensitive Security procurement (2009/81/EC)10 are not included in this review.
Equally, concessions are addressed through a separate initiative and impact assessment. A future impact assessment will consider the access of third country companies and goods to the EU public procurement markets. It should also be noted that the scope of any possible legislative change analysed here may be affected by constraints arising from both existing and future EU international commitments defined in the Government Procurement Agreement (hereafter: the GPA) and other bilateral agreements.
2.1.2. Overview of legislative framework
The first public procurement Directive (71/305/EEC) coordinated the procedures for the award of public works contracts. Over time, the field of application has gradually increased to include services and goods as well as procurement in certain utilities sectors and has been complemented by flanking measures to ensure that the rights given to firms by the EU rules were observed (i.e. the Remedies Directives). The most recent reforms took place in 2004 and were intended to simplify and modernise the framework. Public procurement legislation is supplemented by rulings by the European Court of Justice (hereafter: ECJ). The EU is also party to a range of international agreements, most importantly, the GPA. For further detail on the public procurement legislative framework, see: section 8.2.4).
Figure 2): Public procurement rules overview of general principles
2.2.2. ature and size of the market concerned
Government expenditure is a significant and influential factor in the economy - over 2,200 billion
11 (19% of EU GDP) is spent annually by different levels of
government (central, sub-central, bodies governed by public law) to procure goods, works, and services. Almost a fifth of this total is spent on purchases whose value exceeds certain thresholds
12 and which should therefore be awarded according to the
rules set out in the public procurement Directives. In 2009, the value of the contracts governed by EU public procurement rules was approximately 420 billion
13 (3.6%
of EU GDP). Of this total, approximately 39% (approx. 165 billion) was spent on works, 38% was spent on services (approx. 160 billion) and 23% on goods (approx. 95 billion)
Figure 3): Estimated value of tenders published in OJ/TED by EU MS in bn
Value
450420.44
400377.06367.2392.42
350319.87
300
250
200
150
100
50
20052006200720082009
Source: DG MARKT estimates based on OJ/TED data
Transparency in these markets is improved by the publication of a variety of standardised notices relating to contracts in OJ/TED
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15.This single point of access
makes information on contracts above the EU thresholds easily available to any interested company. The two most important notices are the: Contract Notice
(hereafter: CN)
16 which contains information on possible contracts and details how to
bid; and the Contract Award Notice (hereafter: CAN) which provides details of the award process and winner. Significant improvements have been observed in the transparency rate over the last five years - the ratio of CANs published relative to the number of CNs has grown from 60% to almost 90% (see: Figure 4).
Figure 4): Number of CNs and CANs published in OJ/TED in 2005 -2010 by EU MS
170000
Source: DG MARKT estimates based on OJ/TED data
On average between 5 and 6 offers are submitted for each CN published in OJ/TED, meaning that firms prepare an estimated 870,000
17 offers each year. The open
procedure remains the most commonly used procedure, accounting for approximately 73% of all CANs but only 52% of published value. The second most popular procedure is the restricted, which is used in contracts of much higher value (9% of CANs, 23% of the total value).
An increasing trend to aggregation has also been observed. Strong growth in the use of framework agreements means that in 2006-2010 they accounted for around 11%
of the number of transactions and 17% in value terms. The various forms of joint purchasing
18 accounted for just 4% of number of contracts, but are worth 12% of the
total value19.
Figure 5): Procedures by use and value in 2006-2010 in percentages
100%0%
90%7%2%
Competitive dialogue
8%5%2%4%
80%9%14%
Accelerated procedures
70%
60%23%
Negotiated without publication
50%
40%Negotiated
73%
30%
52%Restricted
20%
10%Open
0%
2.3. Problem definition
2.3.1. Key problems and problem drivers
The evaluation of the Directives confirms that they have encouraged a high level of competition, enhanced transparency in public procurement markets and achieved measurable savings, generating associated increases in employment and GDP of between 0.08-0.12% after one decade (164-240,000 jobs
20). However, the evaluation,
taken together with other recent information and the results of the GP consultations, points to three areas where there may be opportunities to improve further the existing public procurement environment and enable the full potential of the Internal Market for public procurement to be realised. These three areas and their associated problem drivers are presented below
21:
(1) Sub-optimal cost-efficiency of procurement
Overall it appears that the cost-efficiency of public procurement procedures is sub- optimal. This is driven by the following issues:
(a) Disproportionate procedures defined in the EU rules, which generate excess costs (especially for smaller contracts). CAEs generally consider that costs are higher for procedures above threshold compared with below. A clear majority of respondents to the GP have misgivings about the level of detail of the EU public procurement rules; Member States and business representatives tend to have a more positive opinion, whilst CAEs, legal experts, citizens and civil society organisations are more negative. The typical (above threshold) procurement procedure costs nearly 28,000. This cost can be split between CAEs who typically have costs amounting to 5,500 per tender launched and firms whose costs are around 3,800 per offer submitted
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22.While larger contracts are generally associated with
higher costs, there appears to be a substantial element of fixed costs23.
For the low value contracts close to the threshold of 125,000 this means total costs can amount to between 18-29% of the contract value. In total, the cost for all procedures covered by the Directives is some 5.6 billion p.a. or 1.3% of the total value of contracts published
and maximum:241 days). There is also considerable support among stakeholders for measures to alleviate administrative burdens related to the choice of bidder e.g. reducing the evidence required from bidders. Whilst much of this documentation is specified under national legislation, the EU could set stricter limits on the documents which can be requested.
(b) Complex EU rules defining scope and coverage which generate
uncertainty, lead to risk-averse and 'box-ticking' behaviour by public purchasers to the detriment of the quality of procurement outcomes. The EU provisions lay down prescriptive requirements governing the organisation of procedures, subsequent communication with all participants and the running of the evaluation of tenders. There are many 'grey zones' regarding the activities covered by the Directives (e.g. form of public-public cooperation) and the rules that apply to different types of contract. Problems are also experienced in relation to the concept of "bodies governed by public law" contained within the Directives, which has resulted in a series of judgements by the ECJ. This is fertile ground for error and uncertainty, 'gaming' of the system or circumvention behaviours. Analysis of TED data shows that in 30% of the CNs published a CAE classifies itself as "other"
reflecting either its confusion, or a potential desire to benefit from a more favourable, but possibly incorrect, regime. The other side of the coin is that this complexity is a source of litigation risk.
(c) The absence of clear counterparts at national level with responsibility for strategic oversight of public procurement administration and the effective implementation of EU procurement legislation has led to the emergence of different models and fragmented national procurement administration and resource dispersion, resulting in inconsistent application, control and monitoring across the EU. At present, the EU rules do not touch on national arrangements to perform these tasks (other than specifying some information requirements that Member States should meet). Confronted with the complex challenges implied by public procurement policy, some (generally smaller and newer) MS (e.g. Slovenia, Lithuania, Portugal) have established well resourced central procurement organisations, able to provide training and advice to individual CAEs. These Member States are better able to track and direct public procurement spend. Others have dispersed responsibility for the organisation of public procurement procedures across myriad CAEs who are poorly resourced, entrusted with responsibility for procurement procedures on a part-time basis, and will only rarely undertake a procurement procedure following EU rules. This context is ripe for administrative error, and inconstant application of the principles and provisions of EU law.
resources, which would leave considerable scope for further cost efficiency savings. Recent audits of projects funded by Community funds have found around 40% error rates due to the wrong application of public procurement rules and, in some instances, the incorrect transposition of the Directives into national legislation
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26.Three major
weaknesses were identified:
· Inadequate assessment of bids;
· Absence of tendering or award of contract based on inappropriate procedure and award of supplementary contracts without competition;
· Non-compliance with publication requirements.
(d) Such errors mean that certain high value purchases are not being opened to EU wide competition. As a result CAEs may not be obtaining optimal outcomes. Some businesses are being excluded from competing for these contracts or are not competing on an equal footing to others. Errors of this nature are more often related to the conduct of a procurement process and a lack of knowledge rather than to the procedures set out in legislation and therefore improvements could be expected as a result of better monitoring and control at Member State level, combined with the provision of greater support.
An analysis of the infringement procedures launched by the Commission since 2005 identified a similar range of errors and issues to the above audits, implying that such mistakes are not "one-offs" but occur repeatedly. It is extremely unlikely that the errors identified by the Commission's audits are limited to Community funded projects.
(2) Missed opportunities for society
The current rules may not always allow stakeholders to make the best use of the resources at their disposal and/or the best (or optimal) purchasing choices. This generates missed opportunities for society which appear mainly as the result of:
certainty remain. More significantly, some consider that the provisions of EU directives do not leave sufficient latitude to permit other policy considerations to be taken into account when awarding contracts. Whilst many MS have undertaken national or regional initiatives to achieve other policy objectives via public procurement, it is not yet clear how successful these policies have been. In some cases, where the integration of some strategic objectives incurs additional costs that are directly linked to the life-cycle and can be reliably estimated and verified, they can be evaluated through the use of economically most advantageous tender (EMAT) criteria using a well understood life cycle costing methodology. There is, however, considerable difficulty in evaluating the trade-off between some other strategic objectives and value for money in other cases, where there may be no widely agreed or reasonable method of estimating, verifying or comparing the actual additional costs involved.
(b) Inflexible procedures, defined at EU level, that do not allow CAEs to make the best use of non-standard procurement solutions (e.g. purchasing innovative goods and services
29, ability to integrate other
strategic goals, etc). As a result, many respondents to the GP call for more flexibility in the conduct of procedures (with suggestions
including: greater ability to negotiate; a less rigid sequencing of examination of selection and award criteria; ability to take into account previous experience with a bidder
30, greater use of life cycle
costing approaches, etc.) A clear majority of respondents advocate further promoting and stimulating innovation through public procurement. The impact of green procurement in three major areas which offer the greatest potential environmental benefit (as covered by the current defined Green Public Procurement (GPP) criteria) - construction, transport and IT equipment - would extend to contracts worth more than 100 billion.
31 Socially responsible criteria could be
relevant to at least all works and service contracts or some 77% of above threshold procurement.
follow the full regime related to services are actually B services which should have followed a lighter regime. Similarly, many authorities have not considered switching to e-procurement as they are uncertain of what it means and fear that any errors they commit would result in legal proceedings being brought by firms
-
32.Many smaller CAEs will
never have awarded a contract above the thresholds and without this experience or appropriate legal resources, they will be extremely aware of the dangers of getting it wrong when they do so for the first time.
(d) Insufficient instruments at (national and) EU level to efficiently protect against possible violations of public procurement law, which may generate less favourable outcomes. Again, the different governance models and administrative capacities developed by MS may be affecting the timely identification of and reaction to possible bad practices
-
33.Several respondents to the GP suggested that there
was a need to build additional competence amongst CAEs and improve monitoring arrangements.
(e) Due to a combination of these two problems (sub-optimal cost- efficiency of procurement and missed opportunities for society) it is not possible for the economy in general to obtain "best value for money", a key public procurement objective.
(3) National rather than European public procurement market
Despite nearly 40 years of public procurement legislation one of the key objectives the creation of a single market - has yet to be achieved. The evaluation found that direct cross-border procurement accounts for 1.6% of awards or roughly 3.5% of the total value of contract awards published in OJ/TED during 2006-2009
34 and that 50%
of contracts above EU thresholds are awarded within the distance of 100 km35.
Indirect cross-border procurement through subsidiaries or foreign affiliates makes up another 11.4% of awards or 13.4% by value, but in many respects, public procurement markets remain national rather than European
subsequent EU action has concentrated on the provision of soft law measures. At present, much discretion is left at national level and even where similar national objectives have been identified, they are being implemented through different commitments/means and to a different extent across the EU. For example, businesses moving between contracts often face different green criteria for the same product group. A certain fragmentation of the market already exists (within countries as well as between. In most cases national action plans are recent, so the actual fragmentation is still small and the risk could still be avoided if appropriate action were taken.
(b) Regulatory and "natural" market barriers (e.g. requirements stemming from both inside and outside the EU Directives and other EU law and language, geographic location) cause asymmetric market access across Europe
, lowering involvement of SMEs in
particular, and cross-border procurement in general. As mentioned above, procurement contracts awarded directly across borders are still limited. This can be explained by both supply and demand factors. Low levels of import penetration may be due to the composition of public demand, which is dominated by services that are sourced locally. However, recent survey data shows that companies are also reluctant to tender cross-border. In a recent large scale survey around 73% of firms, otherwise active in public procurement, said that they have not made any cross-border tenders in the last three years
-
37.The
fact that the average success rate when bidding abroad is lower than when bidding at home may go some way to explain this behaviour. Additionally, a recent survey highlights inertia/lack of experience and language barriers as the two main obstacles preventing cross-border bidding, whilst legal barriers were ranked fourth
-
38.Some of these
issues are technical and result from a certain lack of recognised standards e.g. electronic signatures. The most significant factor affecting SME participation is the size of a contract SMEs do not the resources or capacity to bid for or fulfil requirements of large public contracts and in general, contracts above 300,000 seem to be beyond their capacity (50% of contracts are below 390,000
achieve a single market has been costing European industry dearly in unnecessary costs and lost opportunities "
-
40.Although savings have
been achieved since then, Europe 2020 and Mario Monti's report both point out that much more could still be done. Strictly comparable figures are not available but the figures for total public sector import penetration remained 11 percentage points below private sector import penetration between 1995 and 2005. Some but not all of this may be accounted for by the structure of public sector demand or natural barriers.
(d) Taken together, these three key problems lead to the conclusion that the Internal Market is not achieving its full potential in public procurement. All three problems are important and affect the functioning of the Internal Market in different ways, making it difficult to identify one of them as the primary issue to be addressed.
2.3.2. Graphical representation of problem drivers
These three main problems might be generated by various factors related to the functioning of public procurement regime (e.g. procedural issues, policy choices, market failures, etc). The problem drivers identified above as the origin of these three key problems have been grouped under the following five headings:
-
-Scope and coverage of public procurement rules;
-
-Procedures;
-
-Strategic public procurement;
-
-Access to public procurement markets;
-
-Governance (MS administrative organisation).
Relationships between these problems and relevant drivers are summarised graphically in the problem tree (Figure 6) below. Further detail and information on the problem statement and drivers is provided in section 8.3).
Figure 6): Problem tree for the modernisation of public procurement Directives
2.4. How would the problem evolve, all things being equal?
If no changes were introduced, the current trends in transparency and competition would probably remain high and could even increase slightly, with an associated "knock-on" benefit to prices. However, despite these positive influences, some less promising developments could be expected.
-
-The current scope of the Directives captures certain categories of transactions, actors or markets for which such rules may not be proportionate or productive (e.g. contracts relating to arrangements between two public entities or low value contracts). Continuing this approach would prolong uncertainty about the treatment of certain common forms of procurement (public-public co- operation, shared services etc). Continued uncertainty about the scope of application could also result in the non-application of procurement disciplines to certain markets or transactions where they would be appropriate (by allowing circumvention behaviour or maintaining loopholes).
-
-If no change is made to the existing procedures, any disproportionate costs of procedures (especially for lower value contracts) would persist. The continuing lack of flexibility for CAEs and firms could get worse, as could the consequences if they become more frustrated by their inability to adapt to changing markets or incorporate strategic criteria. This could ultimately result in lower compliance rates. Also, no increased take-up of e-procurement could be expected. If no improvements or clarification of rules defining the aggregation of demand (e.g. CPBs, framework agreement, DPS) are introduced, lost opportunities (for example due to savings that could have been generated because of the economies of scale) would persist and accumulate.
-
-The status quo would restrict the scope for CAEs to use public procurement to achieve strategic goals. Within the limits imposed by the legislation, MS would continue to implement uncoordinated national action plans or approaches, with the associated risks of creating legal or policy barriers to cross-border procurement.
continue. Sub-optimal choices, particularly in strategic terms, would continue due to limits on, and inconsistencies in, approaches, which could also prevent convergence. Markets would continue to remain predominantly national and hence it seems reasonable to assume that the full benefits of the Internal Market for public procurement would not be achieved.
2.5. The EU's right to act and justification
The EU competence to take action on public procurement matters comes from the articles of the Treaty on the Functioning of the European Union (TFEU). Whilst this Treaty does not contain any specific provisions regarding public procurement, it lays down the fundamental principles which are generally applicable and which have to be observed by contracting authorities and entities when awarding all contracts. These principles are: the freedom of movement of goods (Article 34 et seq TFEU) , the freedom to provide services (Articles 56 et seq. TFEU) and the freedom of
establishment (Articles 49 et seq. TFEU).
Finally, the right of the EU to act is already established by the existence of the Directives. Given that many of the problems identified above are the result of actions and interpretations resulting from these Directives, it follows that the EU level action is required to address these issues.
3. OBJECTIVES
The evaluation finds that the general objectives of existing public procurement policy are still relevant. Indeed, given the current strained public finances, they may be even more relevant since they seek to ensure that public procurement policy fulfils its potential and delivers value for money to society. As a result of the issues identified in the problem statement, the following objectives have been identified for the three different hierarchical levels (i.e. general, specific and operational).
3.2. Specific objectives
Given the problems outlined in Section 2.3 above (Problem definition), the specific objectives identified for this intervention are to:
-
-Improve the cost-efficiency of EU public procurement rules and procedures;
-
-Take full advantage of all opportunities to deliver the best possible outcomes for society;
-
-Create European rather than national markets for procurement.
3.3. Operational objectives
Five different problem themes have been highlighted. To address these individual themes and deliver focussed solutions, the following operational objectives have been set:
-
1.Scope and coverage
-
-Ensure that the rules capture the appropriate actors and subject-matter of procurement;
-
-Provide clarity and legal certainty with respect to said scope and coverage.
-
2.Procurement processes/procedures
-
-Streamline and simplify procurement procedures to (i) reduce operational costs (ii) ensure proportionality and (iii) provide for more legal certainty;
-
-Improve the flexibility of procedures to better respond to purchasing needs of authorities.
-
-Reduce errors and problems with compliance with EU public procurement rules.
The table presented in section
[[note: 8.4)]] summarises the different levels of objectives which have been identified, mapping them to the three key problems and the associated problem drivers which have been identified. It is clear that there are tensions between these objectives, and as a result, certain trade offs will need to be considered
-
42.The content of any amended rules and the concrete measures proposed
should aim at making life easier for CAEs and firms whilst at the same time continuing to guarantee a high level of transparency and efficient safeguards for equal treatment of bidders. These tensions and trade-offs will be highlighted further in the discussion of impacts presented in chapter 5.
4. POLICY OPTIONS
The problems identified above manifest themselves in many and diffuse ways. Tackling them comprehensively could entail a large number of changes affecting many different aspects of the legislation. The GP invited stakeholder comment on approximately 120 adjustments to the current legislation. This chapter proposes an approach for structuring this extensive set of possible adjustments under a number of options which will then be analysed in chapter 5.
Before considering the range of possible concrete adjustments to the Directives Section 4.1 presents some more radical options including outright abolition of the Directives or the application of fully harmonised rules to a larger set of public purchasing procedures including some below-threshold procurement.
4.1. Radical options
When initially considering all the possible alternatives, four broad types of action were identified. At one extreme, consideration was given to abolishing the EU directives, whilst action at the other end of the spectrum would lead to full harmonisation or the creation of a single, pan-European system for public procurement. In between these two extremes fall two other categories of action: to keep the Directives as they are (no change) or to introduce changes within the current framework (some change). This section considers the two radical options - abolition of the Directives and full harmonisation.
Directives have boosted competition, which in turn has yielded the hoped for improvements in procurement outcomes (both savings and qualitative performance). The Directives are conservatively estimated to deliver cash savings of around 20 billion on the 420 billion advertised in accordance with the Directives. The total cost for purchasers and suppliers of organising public procurement procedures in compliance with the requirements of the legislation is around 5.6 billion per annum and we estimate that 2/3 of this cost would remain even if the Directives were abolished. Therefore, the abolition of EU public procurement legislation would be self-defeating. Removing the Directives would also create a "vacuum" in relation to the EU's international obligations. Each MS is a signatory to these treaties and would have to individually put in place measures to comply with the conditions to which they have agreed.
Many of the varied stakeholders at the Conference on 30 June commented that "the Directives have proved their worth ", whilst nonetheless going on to identify areas for further improvement. Although not an explicit question in the Green Paper, it could be inferred from many replies that such an approach was not supported.
In view of the above, this option has not been considered further.
4.1.2. Full harmonisation
An alternative broad approach would be to propose a full harmonisation of the public procurement rule-book across the EU. This could entail deeper and more prescriptive harmonisation of the current rules which currently leave considerable latitude to MS regarding their implementation. It could also entail extension of EU procurement procedures to some of the estimated 2 million public procurement procedures for purchases below the thresholds of the Directives (an action likely to prove unpopular with stakeholders, even if a majority of GP respondents recognised a need for additional guidance on below threshold procurement). This could ensure greater consistency and legal certainty, increase transparency, and increase the leverage effect of EU procurement legislation in support of other policy goals. It would however run directly counter to the concerns regarding the over-intrusiveness of EU regulation and disproportionate costs resulting from the imposition of strict procedural disciplines. Moreover, it is not clear to what extent such an approach would yield countervailing benefits given the limited cross-border interest in small- value procurement procedures.
4.2. Development and screening of possible options
The rest of the Impact Assessment analysis will concern itself with policy options ranging from "no change", through a menu of options which vary in terms of the level of change to the current legislation.
In impact assessment terms, an option is defined by its content e.g. possible action(s) and the means by which that content will be delivered e.g. soft law, legislative change. This section summarises how the options / option packages presented in Tables 2 to 6 were constructed.
4.2.1. " o change" options
Preserving the current situation would perpetuate a system that gives rise to unintended consequences, missed opportunities and high costs. However, this solution can only be finally ruled out after measuring the impacts of any other proposals against the baseline of doing nothing. It could yet be possible that the status quo provides the best solution for a particular problem area. Hence five no change options have been defined for scope, procedures, strategic procurement, access and governance. The consequences of following this course of action are discussed in more depth in section 2.4.
4.2.2. on-legislative / soft law options
Non legislative approaches may constitute a viable and proportionate response to certain issues. There may be possibilities for soft-law solutions providing further guidance and explanation on particular aspects of the existing rules. For example, benchmarking and best practice sharing between MS may be an effective means of improving public procurement administration and practice.
4.2.2.1. Narrowing down the soft law options
Considerable guidance has already been provided addressing many aspects of the Directives. The Commission services have also provided additional training and assisted in the development of training related to the existing public procurement rules. Some of the main initiatives and documents are listed in the following box.
-
Interpretative Communication on the Community law applicable to public procurement and the possibilities for integrating social considerations into public procurement (COM(2001) 566 final);
-
Pre-commercial procurement "Pre-commercial Procurement: Driving innovation to ensure sustainable high quality public services in Europe" (Commission Communication 2007);
-
Risk management in the procurement of innovation - Concepts and empirical evidence in the European Union, Expert Group Report 2010 (24229 EN), Directorate-General for Research, European Research Area;
E-procurement: functional requirements for conducting electronic public procurement under the EU framework, January 2005, produced by European Dynamics
S.A. on behalf of the European Commission;
http://ec.europa.eu/idabc/servlets/Doc1ad3.pdf?id=22191
While this guidance has helped to clarify how the existing provisions can be implemented, it cannot compensate for gaps or shortcomings in the legislation. Many of the problems in these areas stem from the absence of a sufficient legal treatment of the issues, or restrictive provisions which prevent authorities from pursuing alternative policy approaches (e.g. as it is the case for some potentially legitimate approaches for strategic procurement). By their very nature, interpretative documents or guidance cannot overcome problems which are inherent to the current legal framework. After considering in more detail the possible content of the five soft law options initially identified, it was decided that no significant benefits were likely to be achieved through the provision of further guidance/training/clarification in the areas of Scope, Procedures and Strategic procurement. Thus only soft-law options for Access and Governance will be considered further.
4.2.3. Framing the legal options
The two recent GPs on public procurement asked over 120 questions, each relating to a potential issue for modification or inclusion. Whilst very extensive, these two consultations were not necessarily exhaustive. Further concerns or areas for improvement were identified through the evaluation and other independent sources and reports.
Step 1: Framing the critical strategic options
The principal changes, identified through consultations and evaluation, are grouped in terms of their relevance in tackling the key problems described above. These strategic options centre on the critical choices to be made in terms of the ambition and impact of the legislative change, and the degree of change compared to the existing legislation. This leads to a menu of options for each problem area, ranging from 'soft law' through evolutionary/incremental legislative change to a more fundamental departure from the current scope or regulatory approach. These strategic options are mapped out in tables 2 - 6.
Two broad categories of legislative change have been identified, reflecting the different levels of ambition possible. In general, the first legislative option presented considers changes and improvements, which build on current principles and provisions (i.e. the left-hand side column under LEGI options). Such actions would clarify existing legislation or introduce new possibilities, but not constitute a fundamental change to the scope or approach. In broad terms, stakeholders would continue to operate within a familiar framework. This corresponds to an incremental evolution of existing principles to respond to changing market conditions or new policy challenges.
The second legislative option for each problem area considers changes which seem more fundamental in nature compared to the approaches within public procurement legislation until now (i.e. the right-hand side column under LEGI options). Such options consider more prescriptive action e.g. making compulsory a certain type of purchase or behaviour on the part of CAEs (e.g. moving away from "how to buy"
and considering "what to buy") or actions which entail a departure from core principles of existing legislation (e.g. that recourse to negotiated procedure is exceptional). The classification of a particular legislative adjustment in one or other category is based on an appreciation by DG MARKT of how radical a change is, in relation to both the current and previous acquis. The evaluation of options will abstract from the precise form of the legislative instrument at this stage. Further discussion of the regulatory form is provided in section 5.6.
-
-Relevance to tackling implementation problems with the EU legislation (identified in chapter 2);
-
-Ability to improve the functioning of public procurement markets (scored High, Medium, Low);
For each action, the balance of stakeholder opinion, as expressed through responses to the GP, is also presented. (Annex) 8.6 provides a more detailed description of the content of each headline action.
The analysis of the impacts in subsequent chapters will refer primarily to the expected impacts of the headline actions. The discussion will therefore be framed primarily in terms of these measures, but the analysis and reflections will provide a basis for drawing general conclusions on the critical choice and the related issues.
The following acronyms are used to describe the legislative options discussed:
SCO.LEGI.TARGET: targeted adjustments & clarification of boundaries under
Scope
SCO.LEGI.REDUCE: significant reduction of Scope
PRO.LEGI.DESIGN: improve design of Procedures
PRO.LEGI.FLEXIB: increase choice available to CAEs in Procedures
STR.LEGI.FACILIT: facilitate Strategic public procurement, leaving the
choice of action to Member States / CAEs
STR.LEGI.ENFORC: enforce Strategic public procurement at an EU level
ACC.LEGI.FACILIT: facilitate Access to EU public procurement markets
ACC.LEGI.ENFORC: enforce at an EU level certain tools for Access
4.2.4. Detailed mapping of options
Table 2): Scope
SCO.NC SCO.SOFT SCO.LEGI.TARGET SCO.LEGI.REDUCE
Maintain the status quo Guidance / Critical choice:
Targeted adjustments to current scope of public procurement legislation Critical choice:
Far-reaching change to scope of the current rules involving exclusion of entire groups of purchasers or transactions.
training /
clarification
Problems addressed:
-
-Complex and unclear rules defining scope and coverage lead to uncertainty, circumvention behaviour, and arbitrary inclusion/exclusion of some transactions all at margins.
The actions under this option should simplify the identification of who and what is covered by the EU public procurement rules. Problems addressed: - Complex and unclear rules defining scope and coverage lead to uncertainty, circumvention behaviour, and arbitrary inclusion/exclusion of some transactions.
-
-Application of costly regulatory apparatus to large populations of purchasers or transactions without sufficient countervailing benefit. Greater certainty and clarity should result from the exclusion of particular groups or purchases where there are reasons to doubt that the current rules should apply,
Headline actions(s)43: Headline actions(s):
-
-Raise the thresholds
-
-Higher threshold for social services , with a special regime for social services above this threshold
-
-Inclusion of all former B-services (except for social services)
in the regular regime
Examples of other (possible) actions:
-
-Establish conflict of laws rule to determine the applicable national law and jurisdiction
-
-Clarify exemptions (e.g. for public-public cooperation and other);
-
-Clarify notion of bodies governed by public law;
-
-Clarify exclusion grounds.
Examples of other (possible) actions:
-
-Radically modify the material scope of the Directives by excluding sub-central authorities;
-
-Radically modify the material scope of the Directives by exclusion of B services;
-
-Exclude the utilities from procurement rules altogether;
Table 3): Procedures
PRO.NC PRO.SOFT PRO.LEGI.DESIGN PRO.LEGI.FLEXIB
Maintain the status quo Guidance / Critical choice:
Correct and enhance existing procedures. Critical choice:
Expand menu of procedural options available to public purchasers and alleviate procedures where they result in disproportionate costs.
training /
clarification
Problems addressed: - Disproportionate and inflexible procedures;
-
-Legal uncertainty;
The actions proposed under this option are intended to streamline many of the existing provisions, reducing administrative burden, procurement costs, and ensuring more efficient outcomes. By specifying when or how a procedure should be used, concerns about the legal requirements and conditions should be addressed. Problems addressed:
-
-Disproportionate and inflexible procedures for certain types of actor;
-
-Legal uncertainty;
The actions proposed under this option should address the inability experienced by some CAEs to tailor procedure to characteristics of market or purchase, which can lead to inefficient outcomes. The actions should where possible streamline the process, reducing administrative burden and procurement costs and clarify exactly when or how a procedure can be used.
Headline actions(s): - Improve tools for repetitive purchasing (DPS, framework agreements, e-Catalogues);
-
-Increase use of electronic communication tools (e-procurement). Headline actions(s):
-
-Greater freedom for CAEs to use negotiated procedure;
-
-New lighter publication regime for sub central authorities (possibility to use the prior information notice as a means of calling for competition).
-
Examples of other (possible) actions:
-
-General shortening of time limits for tender procedures
-
-Implementing legislation to ensure open/accessible e-procurement solutions;
-
-More flexibility in selection and award (possibility for contracting authorities to examine selection before award; experience of staff taken into account in the award phase )
-
-Clarification of the notion of special or exclusive rights
Examples of other (possible) actions:
-
-Allow MS to eliminate the lowest price only criterion;
-
-Mandatory full use of electronic communication to be phased in
by set deadline;
-
-Mandatory transmission of notices in electronic form;
-
-Mandatory electronic availability of tender documents;
Table 4): Strategic procurement
STR.NC STR.SOFT STR.LEGI.FACILIT STR.LEGI.ENFORC
Maintain the status quo Guidance / Critical choice:
Enable CAEs to frame procurement needs in ways that integrate other policy goals. Critical choice:
Remove discretion from CAEs: they must award (all or part) contracts on the basis of performance in respect of other policy goals.
training /
clarification
Problems addressed: - Legal restrictions or ambiguity which prevent CAEs from explicitly introducing performance on range of other policy into selection, award process or contract. This approach would permit CAEs to reorient spending towards solutions. Whilst the EU would clarify and improve the possibility to conduct strategic procurement, it would stop short of imposing such policy goals on MS and CAEs. It should remove legal uncertainty and risk which prevents some CAEs from integrating their policy choices into their public procurement strategy. Problems addressed:
-
-Legal restrictions or ambiguity which prevent CAEs from explicitly introducing performance on range of other policy into selection, award process or contract. This approach would ensure that public purchasing is redirected towards solutions / technologies that are more beneficial/less harmful for society as a whole. It should remove legal uncertainty and risk which prevents some CAEs from integrating their policy choices into their public procurement strategy
Headline actions(s): - Allow consideration of entire life-cycle costs in award criteria
-
-Allow inclusion of factors directly linked to production processes in award criteria and technical specifications
-
-Introduce the "Innovation partnership": a new, special procedure for purchases not yet available on the market Headline actions(s): - Introduce obligations on "what to buy" (quotas);
-
-Require CAEs to use certain defined award criteria and / or technical specifications
Other (possible) actions: - Possibility for contracting authorities to explicitly require certain labels (certification schemes), but safeguard that equivalent labels must also be accepted;
-
-Violation of obligations from EU environmental or social law or from certain international labour law provisions = ground for exclusion of bidders;
-
-Tenders which are abnormally low because of non-compliance with obligations from EU environmental or social law, including throughout the supply chain, must be rejected. Other (possible) actions: - Allow CAEs to source only from local or regional suppliers to limit emissions, support local culinary traditions;
-
-Mandatory use of life-cycle costing when determining the economically most advantageous offer or lowest cost
-
-Allow CAEs to take considerations having no link to production/performance to be taken into account (e.g. gender balance on company board);
Table 5): Access
ACC.NC ACC.SOFT ACC.LEGI.FACILT ACC.LEGI.ENFORC
Maintain the status quo Guidance / Critical choice:
Remove administrative barriers to SME participation & cross-border access. Adopt non-coercive measures to increase SME participation &
cross-border access at reduced costs, whilst maintaining high levels of transparency. Critical choice:
Introduce prescriptive measures to reserve parts of public procurement markets for SMEs or require structuring of purchases in way that favour SME participation.
training /
clarification
In particular, possible training campaign on doing business abroad
Problems addressed: - Regulatory and administrative market access barriers leading to asymmetric market access;
-
-Insufficient participation of SMEs in public procurement markets and low cross-border participation/access. Under this option, many of the burdensome and sometimes difficult to fulfil (especially in the cross-border context) requirements placed on business would be reduced by EU level action limiting and standardising the information requested and only asking for original proof to be provided by the winning bidder. This should have particular benefits for SMEs and firms interested in bidding across borders. Problems addressed:
-
-Insufficient participation of SMEs in public procurement
markets and low cross-border
participation/access. Under this option actions would be proposed to use public spending to support diversity of the economic base and support start-ups and SME innovators. The actions foreseen here would force Member States and CAEs to take action to ensure that public procurement markets are made accessible to SMEs and non-national firms.
Headline actions(s): - Mandatory acceptance of self-declarations as prima-facie evidence for selection;
-
-Introduction of a European Procurement passport: a standard document, validated at MS level, which confirms that a bidder is compliant with certain, frequently requested criteria. Headline actions(s):
-
-Impose mandatory use of lots for all above threshold contracts
-
-Introduce quotas for share of procurement contracts/budget awarded to SMEs
-
Other (possible) actions: - List of possible requirements for selection of candidates made exhaustive
-
-Turnover cap: CAEs may not require that economic operators have a turnover greater than e.g. 3 times the contract value in order to participate
in the procedure
-
-Increased use of lots under certain circumstances
-
-Obligation for MS to feed e-Certis (an electronic repository of certificates required for selection criteria) Other (possible) actions: - Obligation to subcontract a certain share of the main contract to third parties;
-
-Obligation to draw up tender specifications for high- value contracts in a second language;
Table 6): Governance
GOV.NC GOV.SOFT GOV.LEGI.TARGET GOV.LEGI.ENHANC
Maintain the status quo Guidance / Critical choice:
Leverage achievement of economies of scale and optimal outcomes for CAE through the use of specialised, professional bodies which aggregate purchasing where appropriate. Critical choice:
Oblige MS to identify a national authority in charge of implementation, control & monitoring of public procurement which reports annually on performance
training /
clarification
In particular, guidance on better monitoring and control;
possible introduction
of Problems addressed: - Different capabilities of CAEs; (possible limited improvement to the different models leading to different public procurement capacities developed across MS).
This option should lead to further improvements in the professionalisation of bodies which can either perform procurement on behalf of a CAE or offer advice. This should improve the consistency of application across the EU and reduce non- compliance with the EU rules. In particular, it should benefit smaller CAEs who may have little/no experience of conducting large procurements and following EU rules. Problems addressed: - Different models leading to different public procurement capacities developed across Member States;
-
-Different capabilities of CAEs
Under this option the EU would oblige MS to take action to monitor and control the application of EU rules. National oversight bodies would be responsible for controlling public procurement, checking for and re-acting to any problems in a timely and efficient manner. This should improve the overall application of EU rules, increase consistency and ensure firms operate in a single market.
peer
review and/or benchmarkin
g
(perhaps
through MS committees)
Headline actions(s): - Establish clear rules for purchases made through CPBs (inc. safe haven concept; small contracting authorities could transfer responsibility for procurement to CPBs).
Headline actions(s):
-
-Obligatory designation of central national oversight body by Member States, with clear obligations on monitoring, enforcement and reporting.
Other (possible) actions: - EU definition of conflict of interest in public procurement;
-
-Safeguards to prevent, identify and resolve conflict-of-interest situations;
-
-Better assistance to CAEs and businesses ("knowledge centres").
Other (possible) actions: - Better administrative cooperation between MS, using IMI for information exchange;
-
-Additional instruments to tackle organised crime in public procurement;
4.3. Summary of options to be analysed further
The probable consequences of the five "no change" options have already been presented in section 2.4. So, the next section will look at the advantages and disadvantages of the remaining 12 different option packages in global terms, using the headline actions identified to discuss the expected impacts and changes.
This analysis may lead to the conclusion that it is not always an "either/or" choice in favour of one of the options. In some instances, the best solution could combine different options within a particular problem group. For example, while concluding that the more ambitious approach is justified, it would also be possible to implement the incremental improvements in the areas covered by Scope, Procedures and Governance/administrative capacity. For Strategic procurement and Access, the legislative options are essentially alternatives and address the same problems. Under these headings, one option relates to the adoption of a permissive approach (which enables contracting authorities to pursue certain purchasing preferences) whilst the other one is coercive (the revised directives would impose an obligation on CAEs to favour a particular procurement outcome).
Table 7): Summary table of retained options for the analysis of impacts (retained marked in grey)
Options No change Soft law Legislative generally Legislative new or
Problem groups options options within current framework significant change
(NC) (SOFT) (LEGI._) (LEGI._)
Scope (SCO) SCO. C SCO.LEGI.TARGET SCO.LEGI.REDUCE
(targeted adjustments & (significant reduction of
clarification of boundaries) scope)
Procedures (PRO) PRO. C PRO.LEGI.DESIG PRO.LEGI.FLEXIB
(improve design) (increase choice)
Strategic (STR) STR. C STR.LEGI.FACILIT STR.LEGI.E FORC
(facilitate strategic public (enforce strategic public
procurement) procurement)
Access (ACC) ACC. C ACC. ACC.LEGI.FACILIT ACC.LEGI.E FORC
SOFT (facilitate access) (enforce tools for access)
Governance GOV. C GOV. GOV.LEGI.TARGET GOV.LEGI.E HA C
categories of stakeholder have been identified CAEs, businesses (including SMEs), MS and the Internal Market.
As explained, in section 4, the impacts of every possible legislative adjustment are not analysed here for presentational and feasibility reasons
-
44.The approach adopted
(and discussed in the Steering Group) is to concentrate on a high-level analysis of the critical policy choices that will determine the thrust and content of the future policy initiative. Each of the options as framed in chapter 4) is discussed as a whole. Further detail is provided through analysis of the impacts of the individual headline actions.
For these options in particular, the time period within which any changes would be adopted is very important. In general, the shorter the time allowed, the more unfavourable the trade-off between costs and benefits
45.
Finally, some of the measures proposed under various options discussed in this Impact Assessment might influence the administrative costs and burden
-
46.The
expected effects of such measures are summarised for each of the options discussed.
5.1. Scope
5.1.1. Impacts of SCO. C option
The expected consequences of the "no change" scenario are presented in section 2.4.
5.1.1. Impacts of SCO.LEGI.TARGET option
Critical choice:
Targeted adjustments to current scope of public procurement legislation.
Headline action(s):
- Higher threshold for social services, with a special regime for social services above this threshold;
person days are spent annually across Europe on managing complaints and litigation for government authorities
47, with an estimated associated cost of up to 54 million
per year48. To this must be added the costs of risk-avoidance behaviour which are
more difficult to measure.
Clarification (through targeted legislative intervention) of the applicability of EU rules could bring valuable support to the development of public-public cooperation in procurement. These types of collaborative purchasing between groups of public purchasers (often for purposes of achieving scale or administrative efficiency) seem set to increase as local authorities look for ways to optimise the use of scarce public resources. Improved clarity could also help to reduce the unnecessary application of EU procurement disciplines. Many below threshold contracts are published in OJ/TED, sometimes because of a lack of knowledge and misunderstanding of what is and is not covered by the EU rules and a desire to minimise exposure to legal risk. These problems may be particularly acute for small CAEs, who may not apply such rules very often and as a result may not achieve optimal outcomes when they do. In 2010, 14,000 local contracting authorities published notices in OJ/TED; of these, over half (8,000) published only one notice in that year. It is these inexperienced and often under-resourced purchasers who are most likely to suffer from lack of clarity surrounding the scope of Directives.
Under this option, the current separation of services into two categories A-type, which are assumed to be more tradable across borders and to which the full rules apply; and B-type which are less tradable across borders and as a result, covered by a lighter regime - would be altered. Analysis of the classification of services according to these two categories points to many errors which result in the wrong regime being applied. The catch-all category of 'other services' is unclear and consequently improperly used by CAEs resulting in non-compliance with the rules in over 30% of cases (see 8.3.1.3 for more detail). Revising these lists would therefore remove unnecessary costs and risks currently faced by CAEs i.e. if they follow the full regime when it is not appropriate or the light regime when they should be compliant with the full set of rules. Equally, recent research shows that several of the B type services exhibit higher rates of cross-border tradability than originally expected (e.g. legal services
Table 8): Economic importance of potential intervention targets
Intervention target Number of CANs removed (% of CANs ) Value of CANs
removed (% of
total value)
All service contracts 68,000 (49%) 160 billion (38%)
B-type service 20,000 (14%) 40 billion (10%) of which approx. 18 billion covered by social services
contracts
Source: DG MARKT estimates based on OJ/TED data
Several "services to the person" or "social services" (hereafter: social services) are characterised by very low tradability
50 and a general absence of cross-border
interest51. For these services, it would therefore be appropriate to maintain a lighter
regime. However in the interests of transparency and to ensure that potentially interested bidders are at least aware of possible opportunities, greater publication requirements could be introduced than currently exist. Whilst this might increase slightly their related workload, such change should be offset by the increased legal certainty it provides in terms of the general transparency obligations that a CAE must meet under the Treaty.
5.1.1.2. Impacts for businesses (including SMEs)
Excessive regulatory requirements and complicated rules can be an important barrier in accessing public procurement markets. Around 60% of firms consider that participation in EU-regulated procurement procedures is more, or much more, time- consuming and costly than supplying the private sector. This is particularly valid for SMEs. Whilst most of the changes relating to this option would affect CAEs, a better definition of scope should help firms to identify confidently valid opportunities and organise themselves accordingly. It should also increase the consistency with which such rules are applied and ensure markets of interest are open to firms across the EU.
authorities to implement EU legislation more effectively, and work with CAEs to this end. The targeted adjustments to services and the creation of a new regime for social services should simplify the identification of the rules applying to a key area of government expenditure.
5.1.1.4. Impacts on the Internal Market
Overall, we could expect that increasing the clarity of the Directives would improve the functioning of the Internal Market, as clarity improves efficiency and reduces regulatory burden. It would also reduce the likelihood that risk-averse CAEs would follow more burdensome rules than needed.
A review of the categorisation of services as tradable or non-tradable could help to re-align the scope of the Directives to economic/commercial reality. It would also reduce the number of anomalies due to misclassification. The new, higher threshold for social services should ensure that such contracts remain open and transparent, where there is a probable cross-border interest
-
52.Increasing the number of services
under category A would increase the markets open to third countries under the GPA;
reciprocal changes from other partners would then have to be discussed.
5.1.1.5. Summary of stakeholder views on this option
A slight majority of stakeholders responding to the GP support the idea of reviewing the distinction between A and B services although almost 2/3 reject the idea of applying the same regime to all services. The most frequently repeated arguments in favour of reviewing the two lists refer to the fact that some of the B-services might not merit differentiated/lighter treatment (for example restaurants, legal services). Stakeholders argue that the market in a number of services classified as category B is now developed and these should now be moved to category A (whilst new or emerging services could be classified as B, until the markets mature).
In relation to social services, there is again some disparity between the different stakeholder groups. Civil society organisations and a slight majority of contracting authorities call for a special procurement regime to better take into account the specificities of social services. Many of them consider that the procurement of these services should be less regulated at EU level.
increase nor decrease). However, this option seeks to clarify and simplify public procurement rules and therefore it is expected to optimise the way procedures are carried out. For example, improved clarity and reduced legal uncertainty should also lower "business as usual" costs. Equally, CAEs should find it easier to identify whether a particular contract warrants application of the EU rules, with less checking or need for specialised legal advice, hence reducing their administrative costs.
5.1.2. Impacts of SCO.LEGI.REDUCE option
Critical choice:
Far-reaching changes to scope of the current rules involving exclusion of entire groups of purchasers or transactions.
Headline action(s):
- Raise the thresholds.
5.1.2.1. Impacts for CAEs
In countries where approximately the same rules apply for procurement following the EU or national rules, no change (to any aspect) would be expected as a result of excluding certain contracts from the scope of the EU rules. However in MS where these national rules are "lighter" and less burdensome for CAEs, exclusion would be expected to reduce complexity and allow more proportionate procedures, making the process easier for CAEs. In these countries there should be a net reduction in the operational cost, as CAEs could be more flexible, choosing the process which suits them best. Based on the findings of a recent survey
53 they should also take less time
to procure. However, regulatory costs for these procedures would not fall to zero. On the contrary, a number of MS are progressively strengthening transparency and procedural requirements for below-threshold procurement.
The impact on the price paid by CAEs is likely to be negative: transparency at both EU and national level would drop as a result of the different country-defined publication methods which would apply. Given the clear finding from the evaluation, that transparency triggers competition which in turn yields savings, this reduction in transparency would lead to higher prices being paid by CAEs. However in the medium to longer term, this option is, on balance, expected to deliver efficiency benefits for the CAEs concerned. The efficiency case is stronger if any envisaged exclusions are targeted at smaller CAEs or small value procurement procedures where running full procedures is found to be demanding and can generate disproportionate costs.
be affected either because their contracts remained in scope or because their national rules were not so different to the EU ones. Smaller CAEs, which in general let smaller value contracts, would benefit most from such a move.
5.1.2.2. Impacts for businesses (including SMEs)
As a number of contracts would no longer be advertised EU-wide in a single source (OJ/TED), firms would need to check other sources to identify business opportunities. This would take more time and make participating in public procurement more costly. Firms operating across borders would clearly be affected, but there could also be national level consequences, depending on how centralised publication is within a given country. For some (often incumbent) firms, reduced transparency could have a positive impact, lowering the level of competition they might face, and possibly allowing them to raise prices. Overall there would be an expectation that for the excluded markets the rates of cross-border bidding would probably drop. Nowadays, even if foreign firms do not win a contract, the fact that they can enter domestic markets at any time, influences the behaviours of domestic firms (contestability of markets) and again, without this pressure, prices could rise.
If the exclusions broke international agreements, firms active on those markets could also lose out on international trade, as partner countries would exclude some of their target contracts from international competition.
The consequences for SMEs could be relatively greater as they do not have the same resources to address the additional costs of finding opportunities or adapting to new rules. In particular, higher thresholds would increase the market entry barriers for SMEs since contract value is a key factor in determining SMEs' chances of winning a public procurement contract
54.
SMEs win a relatively high share of contracts close to or just above EU thresholds. Doubling the thresholds would remove around 20,000 contracts from the scope of the current rules and could have a significant and negative impact on SMEs competing in these markets. Reducing the visibility of these opportunities and not applying the EU rules could reduce transparency and reduce guarantees of fairness and objectivity in award of these contracts. This could be to the detriment of successful SMEs.
regulatory/administrative savings are likely to be offset by higher prices due to the lower transparency, which may reduce the average number of bids submitted. This reduced competition is also expected to reduce the total savings to the economy. There could also be some negative impacts on the integrity of procedures, as the below threshold systems may have weaker procedural safeguards against fraud.
A significant additional complication for MS would result from the market access compensations due to violating any international obligations. For MS with firms which win contracts in these partner countries, the implications could be quite considerable. Losing contracts could lead to reduced profits and might cause firms to lay-off staff, with a subsequent cost to society of supporting them. The current thresholds in place at EU level are derived from the GPA (the values are set in Special Drawing Rights or SDR) and any changes, other than those specifically agreed to reflect currency fluctuations over a given period, would lead to re- negotiation and possible sanctions.
5.1.2.4. Impacts on the Internal Market
Any exclusion reduces the size of the Internal Market covered by the EU rules. Within the wider public procurement market, cross-border procurement would be likely to reduce and many markets would remain (or even become more) national.
Table 9): Impacts of exclusions (number and volume of CANs is based on 2009 data)
Exclusion Number of CANs removed (% of CANs ) Value of CANs Internat. conse quences Comments
removed (% of
total value)
Double thresholds around 20,00056 Around 20 billion57 Yes Could be less depends
on CAEs reaction
(5%) 58
Exclude sub-central 45,000 (33%) 116 billion (28% ) Yes Could be more "other"
or "bodies governed by public law" not counted
Exclusions relating to thresholds, particular sectors or actors would have international impacts and force the renegotiation of the GPA and other individual agreements. GPA partners would be likely to demand compensation and retaliate by withholding a similar percentage of their own market and could decide for strategic reasons to restrict EU access in areas were the latter is competitive (and where a GPA partner industry is actually less competitive). Re-negotiation would be time- consuming and costly, creating uncertainty and increasing the potential for litigation during the negotiation period.
5.1.2.5. Summary of stakeholder views on this option
A majority of CAEs responding to the GP supports an increase in the thresholds, whilst a slight majority of Member States would be opposed to such a change. Many CAEs argue that contracts with a value close to the existing thresholds generally attract little interest from firms based in a different Member State but that they nonetheless generate an additional administrative burden. Business representatives reject such an increase, pointing out that higher thresholds would lead to lower transparency and less cross-border business opportunities.
5.1.2.6. Impacts on administrative burden and simplification
If certain transactions are excluded from the scope of the Directives, the information obligations, which currently fall on CAEs, firms and MS would be reduced in proportion to any exclusion adopted.
However, the excluded transactions would then be covered by national rules on public procurement which are also likely to be subject to some administrative requirements. Therefore it is unlikely that all information obligations would be removed, it is more likely that they would be replaced by national rules (that might be equally burdensome). Hence the overall impact of option SCO.LEGI.REDUCE in terms of the administrative burden is expected to be positive to neutral depending on the national rules in force in each MS.
Table 10): Summary of impacts of all options in Scope
Specific objectives Improve cost efficiency Realise opportunities to Create EU wide rather than
achieve best outcomes for national markets
Option society
SCO.NC
SCO.LEGI.TARGET (+) (+ / ) (+)
Elimination of grey zones Scope remains largely Improves the consistency
and better targeting of rules constant: greater of how the market is
improves outcomes for transparency on former B defined across all EU
transactions concerned type service contracts and countries
rules on social services
better suited to their
specificities
SCO.LEGI.REDUCE (++) (-) (--)
Based on assumption Smaller scope reduces More/less significant
national measures are leverage of EU legislation exclusions from scope of EU legislation: increased
"lighter" and easier to in implementing strategic
apply; if necessary, might procurement scope for nationally driven
need to offset international policy/market fragmentation
consequences
5.2. Procedures
5.2.1. Impacts of PRO. C option
The expected consequences of the "no change" scenario are presented in section 2.4.
5.2.2. Impacts of PRO.LEGI.DESIG option
Under this option, provisions to improve design by more frequent use of repetitive purchasing would be envisaged, also through a more intense use of e-Procurement tools (e.g. DPS, e-Catalogues). The latter can create savings and reduce operational costs for CAEs, who would be able to procure more quickly and efficiently
-
59.This
could generate significant savings for CAEs both in terms of lower prices paid for contracts
60 and in operational costs. Some trials have reported price reductions of
20% or more and reduced transaction costs (both in time and monetary terms). In addition, e-procurement can open up cross-border opportunities, reduce information barriers and streamline document exchange.
Making e-procurement mandatory at EU level would ensure the critical mass and force the pace of change. It would also remove any uncertainty on the part of CAEs as to whether paper procedures still have to be permitted and remove the "risk averse" culture of conducting double circuits (i.e. both paper and electronic) which has evolved. However, there are risks to blanket imposition of e-procurement on all CAEs for all procedures. Although the technology to undertake e-procurement is now widely available and its use is steadily gaining ground, only around 5% of procurements involve e-tendering/e-submission. Full switchover, will involve investment in the capacity to organise procedures electronically, and training CAEs to use these possibilities
-
61.Therefore, a phased or targeted imposition of e-
procurement would currently appear most appropriate at CAE level, allowing them greater choice to make the transition at a time which is appropriate to them.
For professional bodies such as CPBs, who are already strong users of e-procurement and repetitive purchasing techniques, there may be reasons to move more quickly to a mandatory use of electronic communication allowing them to make better use of repetitive or aggregation techniques whilst also involving more suppliers thereby keeping the competition higher. The DPS is a fully electronic procedure (albeit one requiring some adjustment); framework agreements may be organised on paper but also electronically. In the latter case there would be little additional cost involved in running a framework with many operators as the bulk of the administrative work could be automated.
They consider that e-procurement would increase transparency and access to on-line tender opportunities. Action to reduce technical fragmentation via the specification of clear standards and norms would reduce entry barriers for firms. However in the current situation where there are many systems with different technical requirements, many businesses face high learning costs in relation to using these systems which would need to be addressed, possibly through the development of EU level standards and/or templates. These problems are not just limited to would-be cross border procurers; even within a single country, many different systems and interfaces may exist. In Germany, the X-Vergabe project is seeking to create a common interface, irrespective of the actual system being used, thereby facilitating supplier access.
The risk that e-procurement could exclude SMEs, because they have less access to this technology, is not borne out by experience. A recent study
62 shows that many
SMEs are already "e-procurement savvy" and taking full advantage of the opportunities it provides. Some MS/countries (Portugal, Wales) that have made the transition have found that SMEs can increase their share of market for public contracts.
Many businesses are interested in participating in repetitive purchasing arrangements and competition for such contracts is generally high. However there is general recognition that such practices may close the market, particularly to SMEs and so there would be a need to build in safeguards and ensure that wider use of such tools was not abused.
5.2.2.3. Impacts on Member States
Improving the cost efficiency of public procurement procedures by redesigning procedures to make them more proportionate could bring significant net savings for Member States. As mentioned before, "a full switch to e-procurement may save between 50 to 75 billion on public procurement in the EU per year. On top of that are increases in transparency and public accountability which are arguably the most interesting categories but also the hardest to quantify "
-
63.Increasing the uptake of e-
procurement could increase the visibility of how money is spent as it allows clear monitoring of spend and easy benchmarking. This could also enable MS to track "socially responsible" and "environmental friendly" spending and improve their planning.
this reflects costs in experimental 'first-movers'; time-frames and the cost benefit trade-off should be more favourable for MS which implement proven solutions.
Greater use of repetitive purchasing techniques can generate economies of scale and also reduce transaction costs associated with purchasing/supplying. Often repetitive methods can be opened to several CAEs allowing the purchaser to maximise the benefits and share them out over a wider circle of users. Where such contracts are let by CPBs, who have greater experience and knowledge, procurement should be done to higher standards, ensuring greater compliance with the EU rules and reducing the risks associated with poor capability and uncertainty.
5.2.2.4. Impacts on the Internal Market
Better designed, efficient procedures should incentivise greater and more correct use of the EU rules by CAEs and attract more suppliers, ensuring high competition with the associated benefits. Increased use of e-procurement should reduce information barriers in procurement markets and provide less cumbersome on-line methods for compliance with documentary and procedural requirements. On both counts, e- procurement can be expected to reduce the transactional impediments to cross-border tendering particularly if cheap solutions to e-signatures/e-identification are introduced. The removal of these barriers would not in itself remove underlying structural or economic barriers to entering new markets language, logistic and competitive obstacles to market entry may still discourage bidders. However, over time, greater use of e-procurement could be expected to erode these natural and economic barriers.
Care should be paid to ensuring repetitive purchasing techniques which can also lead to greater aggregation do not close the market to competition nor take contracts out of the reach of SMEs. The DPS which is designed as a fully open procedure should combine the best of both electronic and repetitive purchasing, ensuring open, competitive and cost efficient procedures. Additional safeguards on the use of framework agreements should permit similar benefits to be achieved.
5.2.2.6. Impacts on administrative burden and simplification
Option PRO.LEGI.DESIGN probably contains some of the most important measures in terms of reducing administrative burden. In particular, the various e-procurement solutions presented as part of this option should improve the ease with which CAEs and firms can track and audit data. As such, it should be possible to introduce automated reporting at all levels, reducing the time taken to produce reports. Depending on the individual solutions adopted, the administrative burden placed on the CAEs or firm should reduce for example, more ambitious e-Catalogue solutions, whilst creating a certain set-up and familiarisation cost, should facilitate the process of bidding for suppliers, standardising the data required and the format for submission. Equally evaluating bids and providing information back to suppliers should be easier for CAEs due to a standardise recourse to electronic means.
Finally, the reporting efficiencies possible via increased use of e-procurement could equally improve the collection of other data which might be required under other options analysed in this impact assessment (e.g. strategic targets, SME wins), in some way mitigating or even negating any potential increases.
5.2.3. Impacts of PRO.LEGI.FLEXIB option
Critical choice:
Expand menu of procedural options available to public purchasers and alleviate procedures where they result in disproportionate costs.
Headline action(s):
- Greater freedom for CAEs to use negotiated procedure;
- ew lighter publication regime for sub central authorities (based on use of annual or Periodic Information otices).
However, there would be a need for more clarity and stricter rules governing the increased use of the negotiated procedure to guard against potential risks of misuse and to avoid problems with inequality of treatment and discrimination
-
65.Increased
negotiation could potentially reduce the opportunity for cartels, as the less predictable behaviour of a CAE during negotiation prevents collusion between participants beforehand.
In terms of cost-effectiveness, as far as increasing the flexibility of procedures is concerned, the example of the negotiated procedure shows that it is marginally more expensive for CAEs than the open procedure, but cheaper than the restricted procedure
-
66.Additionally, CAEs may pay higher prices per purchase as in general
the negotiated procedure is less efficient in generating savings than the open and restricted procedures
-
67.This evidence would seem to contradict the views of CAEs,
who generally claim that they can achieve better outcomes through increased negotiation.
Another example giving sub-central authorities the possibility to use a lighter regime - should be the source of significant savings for CAEs in terms of the costs of procedures. This procedure would simplify the way smaller CAEs announce their willingness to award a contract as, for instance, the award of contracts would be made without publishing an individual contract notice (provided that the contracting authority has announced its intention and published specific information in a periodic indicative notice). Increased choice and simplification through the introduction of a PIN-based procedure for (usually smaller and less-professional) sub-central contracting authorities would nonetheless maintain some common elements of transparency to sustain wide supplier involvement and competition.
5.2.3.1. Impacts for businesses (including SMEs)
Many firms who replied to the GP favoured increasing the possibility to negotiate with CAEs
-
68.However, such procedures usually take much longer than open
contests69. More negotiation would permit suppliers to present their offers and
address more efficiently the needs of CAEs. Finally, as prices in the negotiated procedure are estimated to be higher than in the open contest
Depending on the design of the lighter procedure, suppliers and particularly SMEs would benefit from being able to transact more easily with sub-central CAEs, particularly if there are less onerous procedural or documentary requirements. However, this procedure could reduce procedural guarantees and possibly the redress/remedy procedures available to suppliers in the event of problems. The design of the transparency requirements would also need to be carefully conceived to avoid depriving suppliers of access to information of potential interest to them.
5.2.3.2. Impacts on Member States
Almost all MS favour greater flexibility in public procurement and measures which make it easier to meet individual country/CAE needs. They are generally in favour for example, of greater freedom to use the negotiated procedure
-
71.This possibility is
also compatible with the GPA. While using negotiations, CAEs should find it easier to make purchases which meet their precise needs - at the MS level this could result in more effective use of public funds. If the negotiated procedure with publication was more easily available, there could be less incentive to circumvent the Directives (e.g. by direct awards) and again, this could result in more effective use of public funds. Such measures could also generate some reduction to the total cost of procurement, as this procedure is globally cheaper than the open procedure
72.
A new lighter regime for sub-central authorities would be in line with international obligations (GPA), therefore no significant negative impacts on the international level are expected.
5.2.3.3. Impacts on the Internal Market
More flexibility and increased choice in procurement is expected to generally improve procurement outcomes. The typical negotiated procedure attracts fewer tenders than the corresponding open procedure. However, a higher proportion of negotiated contracts are awarded to cross-border suppliers.
The impacts of a lighter regime would depend on the details of provisions to be introduced if for example publication obligations were to be lighter for certain actors (e.g. publication of a PIN instead of a CN), transparency would diminish. This measure could also have implications on the international level.
respondents share the view that a generalised use of the negotiated procedure might entail risks of abuse and discrimination and that additional safeguards for transparency and non-discrimination would be necessary in order to compensate for the higher level of discretion.
The GP analysed the possibility of providing a lighter procedural framework for local and regional authorities allowed under the GPA rules for sub-central authorities. Responses on such suggestions are mixed. A majority of public authorities and civil society organisations support such a regime while all other groups of stakeholders are against it. Some respondents mainly public authorities question the appropriateness of a special treatment for local and regional authorities, arguing that it would be preferable to simplify the rules for all contracting authorities instead of creating new classes and distinctions.
5.2.3.5. Impacts on administrative burden and simplification
The new lighter regime proposed under PRO.LEGI.FLEXIB option would simplify procedural steps in procurement of goods, works and services by sub-central contracting authorities. It would reduce the level of detail and frequency of publication requirements, thereby making the procedures less time-consuming and involving less paperwork. Some positive impacts could be also expected with regards to limiting administrative burden for companies - as a result of the introduction of a new lighter regime the information obligations during the bidding phase should generally be less burdensome (less detailed, as a shorter PIN would replace a CN as a means to announce a call for competition).
Enhanced flexibility of procedures (for example by permitting unlimited recourse to the negotiated procedure with publication) could also be the source of some improvements in terms of lessening the administrative workload for companies if the negotiated procedure is used, tender documents could be more general (than for example in restricted and open procedures) and more information could be transmitted to CAEs via non-paper based means (i.e. through negotiations).
Table 11): Summary of impacts of all options in Procedures
Specific objectives Improve cost efficiency Realise opportunities to Create EU wide rather
achieve best outcomes than national markets
Option for society
PRO.NC
PRO.LEGI.DESIGN (++) (+) (+)
Aggregation/repetitive Aggregation can facilitate Joint cross-border
purchasing can improve strategic procurement; e-procurement facilitates/
proportionality of proc can reduce time taken strengthens EU public
procedures & makes the and allow greater procurement markets;
-
most of economies of scale; monitoring of strategic Greater use of paperless
e-procurement and other procurement procurement removes
modifications should some geographic barriers
streamline & simplify and strengthens EU public procurement
provisions on procedures
market
PRO.LEGI.FLEXIB (+ ) (+) (+ / )
Increases flexibility and Increases flexibility of Better / more flexible
provides more legal CAEs to address strategic procedures improve the
certainty issues (innovativeness, functioning of IM in
eco-innovativeness) general
5.3. Strategic public procurement
5.3.1. Impacts of STR. C option
The expected consequences of the "no change" scenario are presented in section 2.4).
5.3.2. Impacts of STR.LEGI.FACILIT option
integrate environmental or other considerations into performance related technical specifications, contract clauses and other indirect routes. Such action would permit them to use measurable performance in respect of these considerations as a possible criterion for distinguishing between offers. This would provide new possibilities and legal certainty to those CAEs which spontaneously or under the impetus of national or EU initiatives, wish to favour procurement outcomes which perform better on environmental or welfare grounds.
To make use of these possibilities, CAEs would need off-the-shelf methodologies for measuring and comparing costs generated by the different tenders. Life cycle costing (LCC) is an established methodology which allows the evaluation of the costs of an asset throughout its entire life-cycle. The calculation of life cycle costing is highly dependent on the training and experience of the staff involved in tender specification and evaluation and based on the current levels of experience and use, increased use, even drawing on standardised (EU provided) methodologies could reasonably be expected to trigger learning and application costs. Also, the results of a survey of contracting authorities in the Adelphi study indicate that few currently have the skills or systems in place to be able to verify whether the goods or services provided by a contractor actually meet the specifications required.
However, experience with some of these approaches has been growing quickly. Under Directive 2009/33/EC contracting authorities are required to take into account the energy and environmental impacts of vehicles over their life time and an appropriate methodology is provided to calculate the LCC for such vehicles. On a voluntary basis, examples of environmental criteria have been established for a set of 18 product and service groups (see the GPP training toolkit
73), which, to the extent
possible, take into account life cycle costing considerations There is already a considerable amount of information available, including estimates in monetary terms of the costs of emission of green house gasses and particulate matter and fact sheets on how to apply life cycle costing. However many issues such as applicable discount rates and transport costs would need to be considered further before a complete common methodology for the calculation of life cycle costs for procurement purposes would be ready for adoption.
outset, and engage in iterative rounds of negotiation with suppliers. Experience with comparable procedures (e.g. competitive dialogue) shows that these procedures entail longer periods and higher cost. However, their growing use testifies to the fact that they respond to a real need of CAEs and help purchasers and suppliers explore promising solutions prior to investment / commitment which may ultimately deliver significant financial savings and/or strategic benefits.
Whilst there would be some costs associated with adapting these measures, the voluntary approach proposed would allow CAEs to retain a greater choice on whether to adopt such measures or not and thereby better reflect their immediate needs and situation. This would allow them to balance the (generally financial) implementation costs against the achievement of wider policy goals, which may also translate into financial as well as more societal benefits.
Strategic procurements are perceived to cost more than traditional procurements, more often than vice versa. To the extent that CAEs are subject to a fixed budget constraint, this may imply lower volumes of purchasing. However there is some evidence from green procurement that strategic procurement can deliver lower costs as well as higher environmental benefits. For example, the draft revised Buying Green Handbook (to be published during 2011) reports that:
· The City of Vienna saved 44.4 million and over 100,000 tonnes of CO2 between
2004 and 2007, through its EcoBuy programme.
· £40.7 million (47.2 million) could be saved in the UK if the proposed
Government Buying Standards (GPP criteria) are applied by all central government departments and executive agencies, according to a cost-benefit analysis which monetised the potential impacts.
5.3.2.2. Impacts on businesses (including SMEs)
Under this option, suppliers would be faced with more sophisticated and demanding procurement specifications from public authorities expressed in new award criteria, or framed over the course of new procedures. This might prompt them to adopt one of two strategies:
There may be direct costs for suppliers which take the form of acquisition of labels, or certificates to demonstrate compliance with certain requirements. These costs and challenges could be more significant in situations where demands relate to aspects of the supply chain beyond the direct control or responsibility of the bidder (such as compliance of inputs from third countries with requirements). These costs could be onerous for SMEs. Also, longer and iterative procurement procedures are likely to discourage suppliers who do not have 'deep pockets'.
The operating environment for suppliers would become more challenging if they are faced with more varying demands and approaches from different contracting authorities (e.g. competing labels, or different certification methods).
78% of respondents to the Green Paper consultation were of the view that SMEs in particular would encounter difficulty in responding to these requirements. This view was particularly pronounced amongst CAEs whereas Member States and representative bodies were more sanguine about the prospects for SMEs.
Innovation partnerships would provide research oriented economic operators with a structured long-term partnership with CAEs enabling them to understand the specific needs of CAEs and to develop new personalised innovative solutions to be delivered to agreed performance levels and costs. The framework of the innovation partnership would guarantee a sufficient degree of competition during the innovation partner selection phases and should provide for the necessary IPR transfer and protection arrangements depending on the individual circumstances. The structure of the innovation partnership and the possible participation of multiple CAEs should provide the necessary "market pull" for innovative solutions enabling the economic operators to reach the thresholds of economic profitability without foreclosing the market.
5.3.2.3. Impacts on Member States
Strategic procurement can be expected to shift consumption and supply towards welfare-improving outcomes. There is anecdotal evidence from across the EU of how properly conceived and executed procurement procedures have led to the selection of promising offers and helped improve performance against strategic goals. In Italy, for example, fifteen major projects for central government websites and hardware procurement (worth 71 million) were assessed to evaluate their compliance with laws on accessibility in 2006. Construction contracts awarded by the National Road Administration contain a standard clause placing an obligation on the contractors to comply with certain (core ILO) conventions when performing contracts in Sweden
However, it is likely that 'voluntary' strategic procurement would change outcomes at the margins and only progressively.
As mentioned above, CAEs would need operational and reliable methodologies for implementing these approaches. They cannot be expected to invent these methodologies independently. Central guidance ideally from the EU, but possibly also from national procurement authorities would be needed if contracting authorities are to implement these possibilities. There would therefore be a cost to Member States of developing and disseminating these techniques.
It is crucial for Member States to support innovation in order to keep their infrastructure at the upper edge of technological efficiency. Apart from R&D funding by traditional means in form of grants and financial incentives, public procurement budgets present an important financial 'market pull' that can provide for a sensible effect when oriented to specific direction. Member States therefore need clear and efficient tools enabling them to seek for innovative solutions in their public procurement procedures.
5.3.2.4. Impacts on the Internal Market
To the extent that the pattern of consumption and production moves towards more sustainable patterns, the benefits (particularly environmental) may also spill-over to other Member States. The transition could also stimulate the search for competitive advantages and actually stimulate greater competition in particular clusters or markets. Survey responses from seven vanguard Member States suggests that 45% of the value of expenditure on 10 product groups frequently purchased by the public sector was oriented towards green contracts
76.
The possibility for contracting authorities to introduce additional considerations into their purchasing decisions would increase the complexity of the award decision. In the absence of operational and fairly implemented methodologies, there is a risk that award decisions would involve a greater degree of subjectivity. If methodologies are not common and widely understood, suppliers from partner Member States may be disadvantaged for example if jurisdiction specific labels or certificates were required, or methods for calculating externalities led to different valuations.
encouraged and facilitated, but remain voluntary, so that certain contracting authorities retain the choice to apply it or not.
Greater encouragement of innovation could lead to the development of new solutions which could change the market. Whilst this is unlikely to happen in all markets, even a small change could lead to significant benefits to the internal market.
5.3.2.5. Summary of stakeholders views on this option
Opinions were divided on whether EU procurement legislation should allow considerations other than strict price/quality to be taken into account. 41% of respondents supported this approach, while 59% opposed. 80% Of Member State and 50% of contracting authorities opposed this idea while representatives of civil society (NGOs) were strongly supportive.
There was a certain degree of support for concrete measures such as allowing directly linked externalities in production/performance of goods or services to be taken into account particularly in the award phase (including clearer acceptance of life cycle costing). Contracting authorities are not in favour of making the consideration of life-cycle costs mandatory and many respondents emphasise that such measures presuppose the establishment of a clear and agreed methodology and common criteria to ensure correct assessment of the life-cycle cost.
Stakeholders clearly advocate further promoting and stimulating innovation through public procurement. They recommend for instance a greater use of procedures particularly suited for innovative procurement such as competitive dialogue, design contests and in particular the negotiated procedure, as well as a wider allowance of variants and performance requirements in technical specifications. Another idea brought up by some stakeholders is that contracting authorities should be given the possibility (framed in the procurement rules) to react to unsolicited proposals. 69%
of stakeholders supported the idea of tailor-made procedures (as an alternative to competitive dialogue) to promote innovative responses to procurement needs. MS, CAEs and representative bodies were uniformly supportive of this approach.
As far as firms are concerned, once a CAE makes a decision that it wishes to pursue strategic goals using the enhanced toolbox that would be put at their disposal under option STR.LEGI.FACILIT, firms would anyway face additional administrative burden (information obligations). While submitting offers in response to invitations to tender that involve strategic requirements, firms would have to provide more detail on their costs and processes (e.g. to fulfil life-cycle costing methodologies). As a result, the costs of bidding would probably increase. However there may be some mitigating solutions, which could decrease these costs for example, provision of a limited set of methodologies, databases containing standardised cost information e.g. CO
2 offsets, transport costs (that this option envisages).
5.3.3. Impacts of STR.LEGI.E FORC option
Critical choice:
Remove discretion from CAEs: they must award (all or part) contracts on the basis of performance in respect of other policy goals.
Headline action(s):
- Introduce obligations on "what to buy" (quotas);
- Require CAEs to use certain defined award criteria.
5.3.3.1. Impacts on CAEs
The imposition of EU level quotas or the definition of certain award criteria could have a powerful effect in ensuring that certain considerations were given greater weight in individual purchasing decisions. It would however tie the hands of CAEs when it came to defining their purchasing needs or eligible solutions. The regulatory imposition of such requirements, without regard to the real needs, circumstances, and resources available to CAEs could lead to sub-optimal procurement, reduce allocation efficiency and complicate sourcing of inputs to support public service delivery Renewable energy sources, for example, can cost three or four times as much as their non renewable equivalents and not all are equally available across the EU. The estimates made by different models gave a range of 24 31 billion to the additional production cost in the year 2020 of achieving a 20% share of renewable energy
There would be a need for investment in monitoring and quota management capacity at the level of CAEs. In the case of award criteria, CAEs would need to demonstrate that the rating of different tenders against the additional criteria had been conducted fairly and properly, and that scoring rules (weighting) had not distorted the outcome of the procedure. Despite the simplicity of the legislative approach, the imposition of obligatory award criteria would present considerable implementation challenges for CAEs.
5.3.3.2. Impacts on businesses (including SMEs)
Under a system of quotas, certain parts of the market would be reserved to suppliers being able to propose solutions embodying particular characteristics. Other suppliers would be excluded from these markets. Depending on how lucrative these markets are, this could lead to extensive investment by suppliers in qualifying to participate in these markets, or in demonstrating the eligibility of their tenders.
A system where multiple considerations were introduced as award criteria could compromise the ability of suppliers to respond to public tenders. The framing of award criteria, and their accumulation, should have close regard to the feasibility of the supply side to respond to these demands. Absent this, the over-specification of mandatory award criteria could undermine competition for public contracts.
5.3.3.3. Impacts on Member States
The introduction of reserved budgets would give a strong impetus for CAEs and suppliers to adopt production/performance methods capable of meeting these demands. In addition, it is likely to lead to appreciable investment in demonstrating formal compliance with qualification requirements. It could lead to over-investment in certificates or labels demonstrating that suppliers meet certain requirements. However it could, over time, deliver significant strategic benefits and advances against wider policy objectives.
The fixing of operational and meaningful quotas would be a challenging process for policy-makers. They would at the same time need to be meaningful the market should be capable of supplying the aggregate needs of all public purchasers subject to the quotas. They should also be set high enough to encourage suppliers to shift resources in order to benefit from privileged access to reserved markets, and change consumption/production patterns. Setting such quotas in EU public procurement legislation would require quotas affecting a range of different policy areas to be grouped under this one umbrella policy. This could lead to problems in terms of updating and ensuring consistency with sector specific developments, or Member States' individual strategies.
other Member States. The means for demonstrating compliance with award criteria would need to be comparable and viable. They should not emerge as a technical trade barrier.
The way in which quotas and award criteria were employed should be monitored to avoid their manipulation to restrict competition from non-domestic suppliers. The need to meet quotas should not become a pretext for exempting procedures from compliance with open tendering requirements for example. In particular, the decision to take account of environmental impacts linked to transport costs could penalise suppliers from remote regions of the single market. There would be a need to ensure a proportionate and objective approach to valuing these costs and taking results into account for purposes of award decision.
5.3.3.5. Summary of stakeholders views on this option
68% of responses to the Green Paper opposed the imposition of obligations on what to buy through EU legislation. Around 80% of responses from Member States, contracting authorities, and all responses from EU level organisations and citizens took this view. Only representatives of civil organisations took the opposite view (65%). The most frequently raised arguments against such obligations are: the fear of too much interference from the EU in the decisions of public purchasers; increased complexity of the legal framework; the risk of affecting contracting authorities' ability to adapt their purchasing decisions to their specific needs; risks of price increases and of disproportionate administrative costs for public purchasers and businesses, particularly SMEs.
5.3.3.6. Impacts on administrative burden and simplification
To a large extent, the impact on the information requirements that would result from option STR.LEGI.ENFORC would depend on the degree to which strategic quotas are set or the detail involved in defining and applying certain award criteria and the associated necessary monitoring. Under this option, EU obligations would follow from mandatory targets or quotas and MS would have to provide information on their progress against these objectives. Quota monitoring obligations imposed on MS would also generate additional reporting obligations on each and every public purchaser who awarded a contract involving strategic goals.
As mentioned in section 5.3.2.6), there may be some mitigating solutions, which could decrease these costs for example, provision of a limited set of methodologies, databases containing standardised cost information e.g. CO
2 offsets, transport costs.
5.3.4. Summary of impacts of options in Strategic against specific objectives
The strategic impacts of the facilitative option would generally be lower than under a mandatory approach, as there would probably be some variation in the degree of implementation across MS. However, it would permit buyers to make choices depending on their individual circumstances and available resources, which could be considered particularly important in the present environment of financial strain.
The coercive approach could potentially have strong impacts in achieving strategic goals as CAEs across the EU would be compelled to purchase in accordance with these rules. The principal drawback is that the coercive option would remove discretion from the CAE to frame its procurement needs in the areas covered by the requirements. This could potentially lead to inferior procurement outcomes and, over time, possibly have the perverse effect of locking public procurement into outdated preferences. At the present time, the different countries, sectors and actors exhibit widely different levels of maturity. Forcing the pace of change through changes to the EU public procurement rules setting quotas or targets would not appear desirable. However, there is no reason to discontinue the current approach of using sector specific legislation, which can been targeted at specific markets, based on more detailed information and analysis.
Table 12): Summary of impacts of all options in Strategic public procurement
Specific objectives Improve cost efficiency Realise opportunities to Create EU wide rather
achieve best outcomes for than national markets
Option society
STR.NC
STR.LEGI.FACILIT (/-) (+ +) (+/ )
5.4. Access
5.4.1. Impacts of ACC. C option
The expected results of the "no change" option have been discussed in section 2.4.
5.4.2. Impacts of ACC.SOFT option
The impacts of soft-law instruments to improve access are difficult to estimate, since the uptake of such actions would be voluntary and vary from MS to MS. Broadly speaking, non-legislative instruments should result in increased cross-border participation and higher SMEs success rate in public procurement, but their ultimate impacts might vary (e.g. if trainings on doing business abroad are organised, participation will remain voluntary and effects in increased cross-border participation cannot be guaranteed) and are generally expected to be lower than similar actions which are introduced via legislation.
New guidance relating to selling abroad could go some way to addressing the current inertia identified as affecting many firms and help them design strategies to identify and enter new markets. This could benefit both SMEs and cross-border procurement.
5.4.3. Impacts of ACC.LEGI.FACILIT option
Critical choice:
Remove administrative barriers to SME participation & cross-border access.
Headline action(s):
- Mandatory acceptance of self-declarations as prima-facie evidence for selection;
- Introduction of a European procurement passport.
Introducing a new generation of IT tools for the publication of notices would further enhance transparency at EU level, leading to more competition that could lower the price paid. New IT tools could also be the source of important savings for CAEs, introducing further automation and hence, consuming less time and effort. In a new generation of standard forms
80, data would become re-usable and input would be
more frequently limited to tick-boxes (rather than text fields), reducing the costs to CAEs. Other tools, such as a more widespread use (accompanied by more consistent updating by MS) of e-Certis or the introduction of an EU public procurement passport would also help CAEs to carry out procurement involving the participation of non-national bidders. The EU public procurement passport would contain information, validated at Member State level, confirming that a business is compliant with certain, frequently requested criteria. Such measures would remove any uncertainty relating to the validity or appropriateness of a given piece of evidence, even when written in an unfamiliar language. They should also make the process more efficient for the CAE, especially as it would not have to approach different national entities to request or validate particular evidence.
5.4.3.2. Impacts on businesses (including SMEs)
Increasing the use of self-certifications could significantly reduce administrative burden for firms
81 and result in cost savings of around 169 million, since
approximately 4 firms per bid would not have to provide the detailed information requested. Similarly, using a European public procurement passport should be simpler for firms who would have a document whose validity would have to be recognised by all CAEs, including those in other Member States. Mutual recognition of such passports should also reduce the need for translation, thereby reducing cost. This could encourage greater participation in public procurement contracts, both in their domestic markets as well as in those of other countries.
Revised tools to enhance transparency (e.g. a new generation of standard forms) would equalise access to public procurement markets for all companies irrespective of their size. Encouraging more language provision through wider translation possibilities in OJ/TED (as a minimum through greater standardisation of structured data and less reliance on free text which requires translation) would also improve access to business opportunities for all firms (including SMEs), allowing firms to decide if the opportunities presented in a particular market are worth the costs of entry
5.4.3.3. Impacts on Member States
Increasing access to government markets should lead to higher competition and lower prices/improved quality. Whilst both the headline measures should increase the degree of competition national firms may face from businesses based in other Member States, these firms should also enjoy equal access to markets in other EU countries. The costs of setting up an EU procurement passport would vary depending on the format chosen (e.g. electronic vs. paper), the number of different evidences covered by the passport and the infrastructure in place to provide key information through national/central databases. Such choices would be made on a country by country basis, to reflect their own resources and policy. Whilst the set up costs of such systems could be quite large in some countries where little such infrastructure exists, the use of such passports would be beneficial both within a country as well as outside.
Improved tools for publication in OJ/TED would increase transparency and facilitate access to structured statistical information on public procurement markets that can be shared by Member States with the Commission. The widespread use of new, streamlined IT tools for publication which should be less time consuming for CAEs and firms, when aggregated, could generate important budgetary saving for Member States. Increased use of e-Certis would put some additional control and maintenance duties (in terms of updating the content of the database) on MS. This would require certain involvement from the national administrations in charge of public procurement. These costs however would be marginal from a budgetary perspective.
5.4.3.4. Impacts on the Internal Market
In general, measures which improve cross-border bidding such as self- certification/winning bidder provides and the EU procurement passport, should benefit the internal market and should improve competition. Improved tools for publication in OJ/TED would significantly increase transparency as they would facilitate access to structured statistical information on EU public procurement markets.
regard to documentation for qualification of candidates (evidence for selection criteria).
Hence, a vast majority of stakeholders think that business and in particular SMEs, would benefit greatly from an alleviation of the administrative burden related to the choice of bidders. In particular, stakeholders from all interest groups advocate the use of self-declarations and the introduction of a rule according to which original certificates may only be required from the winning bidder.
A majority of business and public authorities but not MS - think that additional measures are needed to strengthen the innovation capacity of SMEs, recommending for instance financial support schemes and compensation of bidding costs.
Finally, stakeholders identify a clear need for better recognition of certificates across borders and a better coordination of national systems in this context. Some respondents think that certificates should have a European-wide standardised content; others recommend a greater use of electronic databases for facilitating the use of certificates in a cross-border context, such as e-Certis. The idea of a European- wide prequalification system finds some support from business but meets opposition from contracting authorities.
5.4.3.6. Impacts on administrative burden and simplification
Option ACC.LEGI.FACILIT focuses on proposals and headline actions that can significantly reduce administrative burden for companies. New provisions aimed at reducing the information obligations placed on firms, by requiring only the winning bidder to provide information, would immediately reduce the administrative burden by just over 80% (on average there are 5.4 bidders per contract, so 4.4 no longer have to provide the information) i.e. far exceeding the EU's target of a 25% reduction. Coupling this with the creation of a European procurement passport, whereby processes would be put in place to allow a national agency to provide some of the requested information could significantly reduce the information requirements on a bidder.
Headline action(s):
- Impose mandatory use of lots for all above threshold contracts;
- Quotas for share of procurement contracts/budget awarded to SMEs.
5.4.4.1. Impacts on CAEs
If coercive tools that seek to force an increase in market access were introduced, CAEs would loose a certain element of flexibility and not always be able to adapt to their individual circumstances at a given point in time. The time required to carry out procurement procedures would probably increase which could have some cost implications. For example, if the mandatory use of lots or SMEs quotas were to be introduced, CAEs would have to spend time ensuring compliance and checking that these conditions were met. To verify compliance, more documentation would need to be requested, analysed and evaluated in the selection stage (e.g. additional information concerning bidders to verify their SME status) or award stage (checking bids for many individual lots rather than a single contract), increasing the duration and hence procedural costs.
The introduction of the mandatory use of lots would increase the complexity of the award procedure, as each new lot could require a separate definition of requirements and a separate evaluation of offers
-
83.Similar issues would arise in terms of verifying
that quotas for SMEs were being met. There could also be some increases in price, as firms try to recuperate their resultant additional administrative expenses. Finally any coercive measures would limit the flexibility and autonomy for CAEs to determine the most appropriate way of conducting public procurement and there could be tensions between choosing the best bid and meeting certain quotas.
Excessive uniformity, which might be inherent in some of the proposed actions (e.g.
a mandatory pan-European pre-qualification system) could have negative impacts on the quality of selection of bidders, as CAEs would no longer be able to ask for very specific (tailor-made to their needs) requirements, but would have to accept candidates fulfilling more general/standardised qualifications. In the case of obligatory subcontracting, CAEs would lose a certain degree of control over contract execution that could have negative impacts and reduce the cost-effectiveness of
procurement. Some of these actions (e.g. obligatory subcontracting) could interfere in civil law relationships again, this could be a potential source of complexity and legal uncertainty and might result in higher litigation.
Similar effects would be likely if obligatory requirements concerning the acceptance of bids in a 2
nd language were introduced (and which could be counter-productive as
bidders should be able to operate in the native language of a CAE if they wish to fully understand the business and legal environment).
5.4.4.2. Impacts on businesses (including SMEs)
Measures proposed under this option could increase transparency and access to information for firms, as certain requirements linked to public procurement procedures would be similar/the same across all MS. For example a mandatory pre- qualification system for bidders would provide the firms with clear, pan-European requirements that they would need to meet in order to be accepted in the system.
A mandatory division of contracts into lots would lower the typical value of a single contract (lot) which should make public procurement contracts (at least from the financial point of view) more accessible for SMEs
-
84.In the case of SME quotas,
SMEs shares in the public procurement market would most probably increase, but bidding would become more information intensive as firms would be obliged to provide additional documentation (e.g. concerning their turnover, headcount, etc.). This would lower the cost-effectiveness of procedures. Obligatory subcontracting of contracts would increase competition for SMEs while acting as subcontractors, but could disadvantage them significantly as prime contractors (i.e. this measure would probably favour big undertakings, as SME would not be qualified/have the capacity to act as prime contractors and supervisors of other firms).
As far as the GP replies are concerned, SMEs are favourable to subdivision of contracts into lots, however there is much more resistance among firms with regards to all other measures potentially considered under this option
markets (France awards 44%86 of contract value to SMEs, as compared to the EU
average of 34%). Unfortunately, little other comparative data is available in this area, but further analysis is planned.
5.4.4.4. Impacts on the Internal Market
Measures proposed under this option should increase transparency and access to public contracts at the EU level, but this gain would be realised at a certain cost. For example, the establishment and monitoring of compliance with such systems (e.g. SME quotas, mandatory use of lots) would have to be carried out by the Commission and involve some potentially significant budgetary cost, not just as a one-off expense, but also in regular maintenance costs (see also actions proposed under the legislative options relating to Governance). Overall the probable additional administrative burden and more time consuming and complex procedures would lead to a lower cost efficiency of public procurement markets at the EU level.
Finally, this option raises some doubts in relation to the subsidiarity principle, as it seems likely that several of the actions that are proposed to be coordinated at the EU level (e.g. mandatory subcontracting or SMEs quotas), could be performed more effectively at a more immediate or local level.
5.4.4.5. Summary of stakeholders views on this option
The GP replies show mixed support for the introduction of additional measures more specifically focused on improving SME access, such as mandatory splitting of contracts into lots or turnover caps. Public authorities are in general quite sceptical about such coercive measures; business' opinions are divided.
Many stakeholders are rather sceptical about the introduction of more specific EU level measures to encourage participation of bidders from other Member States. In particular, the idea of requiring contracting authorities to draw up tenders in a second language and/or to accept bids in a different language is rejected by a very large majority of all stakeholder groups.
complied with particular criteria. By splitting a contract into lots, CAEs would often have to repeat the same evaluation and award process several times with the corresponding increase to both time taken and burden generated. The new procedural requirements might be burdensome and time consuming for CAEs (e.g. additional verifications to check the size of economic operators).
For firms, the new provisions proposed under ACC.LEGI.ENFORC would be the source of additional information obligations as bidders would have to provide more detail on their status (e.g. data on workforce, turnover and ownership structure), which would need to be consistently and periodically updated. However, as firms are already required to have some similar information (turnover, balance sheet, number of employees) in the context of other EU legislation, e.g. the EU's accounting Directives, the additional costs of providing this information in the context of procurement procedures may not be significant. Overall, the costs of bidding may marginally increase.
Finally, some increase in administrative burden could be seen depending on the introduction of further requirements to verify sub-contracting arrangements. This burden would be higher depending on the degree of prescription enforced.
5.4.5. Summary of impacts of options in Access against specific objectives
Whilst the introduction of coercive measures should lead to more SME and possibly more cross-border access to EU public procurement markets, it is not clear that it would actually streamline and simplify the rules. The introduction of more information requirements could increase complexity and administrative burden. Non- coercive instruments which aim to facilitate access to EU public procurement markets could result in simpler and less burdensome processes for SMEs and cross- border bidders, which could encourage increased participation, although with some associated costs for CAEs and MS.
Table 13): Summary of impacts of all options in Access
Specific Improve cost efficiency Realise opportunities to Create EU wide rather than
objectives achieve best outcomes for national markets
society
Option
improving cost efficiency and adaptation to local and different policy choices
motivates more firms to specificities across MS could generate lack
participate. Costs of other of convergence in the EU,
measures depend on choices thereby negating some of the
made by individual MS/CAEs improvements to cross border
ACC. (-) (+) (+)
LEGI.ENF
ORC Proposed obligatory measures Some strategic goals (incl. Increased cross-border
expensive and increasing SMEs and cross-strengthens integration of EU
disproportionate at least in the border access) could be public procurement market
short term achieved more effectively via
coercive measures
5.5. Governance
5.5.1. Impacts of GOV. C option
The consequences of pursuing a "no change" policy are discussed in section 2.4).
5.5.2. Impacts of GOV.SOFT option
Under this option, the Commission could initiate an informal process of mapping national institutional arrangements for public procurement administration, and identify areas of recurrent difficulty in procurement policy and practice. This could evolve into a process of learning from 'best practice' and benchmarking and provide a focal point for convergence of administrative practice.
Current efforts to provide assistance to national administrative bodies (through structural fund assistance to some countries) with the correct implementation of procurement procedures could be continued or stepped up. The benefits of channelling public procurement through specialised or centralised procurement entities (such as central purchasing bodies using electronic procurement facilities) could be highlighted and promoted.
the provision or severity of appropriate administrative powers to monitor and penalise non-respect of procurement rules could lead to pronounced differences in the degree of regularity, transparency and openness of MS procurement markets.
5.5.3. Impacts of GOV.LEGI.TARGET option
Critical choice:
Leverage achievement of economies of scale and optimal outcomes for CAE through the use of specialised, professional bodies which aggregate purchasing where
appropriate.
Headline action(s):
- Establish clear rules for purchases made through CPBs (inc. safe haven concept).
5.5.3.1. Impacts on CAEs
Optimisation of resources through the aggregation of demand could generate considerable positive effects for CAEs, such as diminished costs of procedures. For example running a framework agreement is associated with lower cost for CAEs than running "standard" restricted or negotiated procedures
-
87.However, procurement
techniques that involve aggregation usually take longer to award than non- aggregated procurement processes
88.
Greater aggregation could also enhance the buyer power of CAEs and improve opportunities to pool skills and expertise (and thus share the procurement related costs and risks). Procedures run through CPBs should be visible to a wide range of market participants, traceable and less prone to conflicts of interest or subjectivity that may distort traditional procurement administration. They could also facilitate strategic procurement of new, innovative products and services. Since CAEs could decide on a case by case basis whether to use these possibilities or not, they would also see a certain increase in the range of choices available to them i.e. their flexibility would increase, which could be of particular benefit to smaller CAEs which rarely publish contracts with values above the EU thresholds.
5.5.3.2. Impacts for businesses (including SMEs)
Aggregation of demand could have some negative impacts on transparency and opportunities for competition: as contracts are aggregated (i.e. over time and in value terms), the publication of notices would become less frequent but their value would become higher. For firms this could make access to business opportunities more difficult. In particular, SMEs might be threatened as the typical contract value rises.
Aggregation also intensifies the risks of weakening competition (e.g. reissuing consecutive frameworks might favour larger incumbents
89). To remedy the above,
tools such as the Dynamic Purchasing Systems (hereafter: DPS) could be used, offering an alternative that combines the benefits of aggregation with open competition between suppliers.
Aggregation of demand (e.g. through framework contracts) is expected to lower procedural costs for firms
-
90.The use of CPBs and framework agreements could also
offer suppliers more scope for economies of scale which could potentially reduce the prices offered to CAEs. More clarity with regards to definitions would undoubtedly be welcomed by firms, potentially allowing litigation and legal assistance costs to be scaled down.
5.5.3.3. Impacts on Member States
Better harnessing of scale benefits through aggregation91 could deliver significant
advantages and budgetary savings92. However, national authorities should be
attentive to the potential for greater market aggregation to undermine competition between suppliers. These risks could be mitigated by clearer rules and safeguards, and by giving CAEs alternatives to framework agreements. Member States could consider a range of CPB models, adapted to their circumstances and needs this may mean the creation of more than one CPB, to allow vertical procurement (e.g. medical and health related purchases) as well as horizontal (national, regional or local). Aggregation of demand could offer more scope for economies of scale which could potentially be passed on as reduced prices to the administration. Finally, MS could gain more leverage in achieving strategic goals in public procurement
facilitate the achievement of strategic goals in public procurement - CPBs are better resourced to implement complex or sophisticated procurement policies.
5.5.3.5. Summary of stakeholders views on this option
The GP replies lead to a conclusion that stakeholders are in general in favour of a stronger and more generalised aggregation of demand. Many respondents consider that there are various obstacles to an effective aggregation of demand and that the current public procurement legal framework does not provide sufficient tools to overcome them. Nearly all stakeholders believe that the aggregation of demand implies a certain amount of risk for competition and may hinder SME access to public contracts. They also agree on the fact that some areas are more convenient for aggregation of demand than others.
5.5.3.6. Impacts on administrative burden and simplification
Option GOV.LEGI.TARGET seeks to optimise the use of resources, in particular by the aggregation of demand. This has important potential in simplifying procurement procedures as less professional public purchasers could delegate the buying functions to specialised bodies (CPBs). As far as firms are concerned, centralised demand might also mean less frequent bidding (for higher value contracts) that could ultimately mean that firms spend less time on meeting procedural requirements. Less paperwork would also mean less administrative burden.
Finally, central purchasers are often the front-runners in using e-Procurement tools as a result the simplification and savings expected from electronic methods of procuring would be relevant also for aggregated purchases but with (potentially) more significant positive impacts achieved through the economies of scale.
5.5.4. Impacts of GOV.LEGI.E HA C option
Critical choice:
Oblige MS to identify a national authority in charge of implementation, control & monitoring of public procurement which reports annually on performance.
Clearer and more authoritative guidance, plus greater provision of the appropriate professional support would increase legal certainty as CAEs would be able to obtain clarification on scope, procedures, etc. As a consequence the number of litigations would be reduced, the time taken to run a procedure could be shortened and ultimately this would lead to increased cost-efficiency. Moreover, the possibility of regular and systematic training of personnel and sharing of best practices would lead to improved administrative capacity building, more legal certainty and increased efficiency.
5.5.4.2. Impacts on businesses (including SMEs)
More professional procurement and stronger anticorruption measures would increase transparency, legal certainty and competition. Failure to publicise and administer public procurement procedures implies lost business opportunities and may result in costly litigation for suppliers. The (potentially) high level of corruption in some national markets/sectors could be distorting competition and denying opportunities to competitive suppliers. Efforts to enhance the quality and professionalism of public procurement administration would reduce friction, complexity and cost, increase legal certainty and confidence in the system. The supply side of the market would be the first beneficiary of these improvements in the operating environment.
5.5.4.3. Impacts on Member States
Having in place a national body with responsibility for monitoring and strategic oversight of public procurement would provide a source of feedback on the functioning of the policy at national level, allowing for rapid identification of systemic problems. This would increase the opportunity for timely remedial actions by means of guidance or even legislative changes. This system could, within a relatively short time-frame, be expected to generate improvements in terms of overall management of public procurement expenditure at least through the principal spending agencies and departments.
Some Member States would have to make the necessary legal and administrative arrangements to designate a single body in charge with public procurement implementation and control. This process could involve some start-up cost to create or adapt the mandate of existing entities and resource them. The monitoring and control powers could be assigned to an already existing body
labour) in setting up any such centres. However for those Member States which would have to create new knowledge centres this could generate additional costs
-
96.In
small Member States such as Ireland or the Netherlands agencies carrying out these tasks have around 25 staff of all grades.
Clear rules at national level on anti-corruption, anti-fraud, and conflict of interest or professional misconduct would increase confidence in the system and allow for better enforcement of the rules. This should result in a more attractive environment for investments in Member States and increased transparency and competition.
This option could be considered to stray into areas previously not covered due to subsidiarity concerns. However, the evaluation has shown that Member States do not consistently monitor and control public procurement policy. This is a significant impediment not only to the correct implementation of provisions stemming from the EU Directives which is a major source of cost and uncertainty in itself. The absence of effective national arrangements also undermines the capacity of national administrations to effectively account for and manage overall public procurement expenditure. Therefore, there is, in addition to the case for enhancing control of the implementation of EU rules, a strong self-interest for Member States to step up the quality of their public procurement administration.
5.5.4.4. Impacts on the Internal Market
The advantage of a single central counterpart in each Member States would be in having first hand and timely information particularly in relation to different problems affecting the implementation of public procurement law. This would allow immediate feedback on the functioning of the policy; identification of the potential weak points in national legislation as well in EU legislation; and a subsequent timely pro-active approach in solving such issues (through guidance, soft law, etc).
5.5.4.5. Summary of stakeholders views on this option
Whilst the GP consultation did not ask any explicit questions about national administrative capacity, there is a general view in support of further steps to increase the professionalisation of public procurement. In general, stakeholders are against the introduction of criminal sanctions to address certain violations of public procurement rules and feel that Member States should be left to determine any detailed measures or additional instruments to tackle organised crime in public procurement.
However, the new structure of public procurement administration could be the source of simplification, as various functions which are currently performed by many organisations in some Member States would be more clearly allocated and possibly brought together.
5.5.5. Summary of impacts of options in Governance against specific objectives
Whilst choices relating to greater aggregation have overall positive benefits, there are some concerns about market closure (GOV.LEGI.TARGET). The option GOV.LEGI.ENHANC considers possible actions to improve the control, monitoring and application of public procurement rules at both national and EU level. By considering actions to introduce similar conditions and architecture in all MS, it should improve the effectiveness of these functions at both national and EU level. Both the LEGI options should generate some improvements to legal certainty and effectiveness. In some instances, similar actions could be taken under the option GOV.SOFT but adoption would be voluntary and might not lead to a desired level of convergent and consistent procurement oversight and professionalisation. However, soft law action could be used to complement any legislative change, providing further detail/examples and guidance and if appropriate to support/provide training.
Table 14): Summary of impacts of all options in Governance
Specific Improve cost efficiency Realise opportunities to Create EU wide rather than
objectives achieve best outcomes for national markets
society
Option
GOV.NC
GOV. SOFT (+ / ) (+ / ) (+ / )
Improvements due to new Improvements due to new Improvements due to new
guidance, but take-up guidance, but take-up guidance, but take-up
legislation whilst reflecting any new jurisprudence or information/experience. Depending on what, if any, legislative proposals are presented, a transposition date would be set to ensure that MS have sufficient time to transpose and create new legislation. As such, when developing such proposals, consideration would be given
to two key issues:
-
-The need to maintain two separate Directives i.e. to keep the current Classic and Utilities Directive approach; and
-
-The use of implementing / comitology measures to permit a later adoption of more technical or detailed rules which it may not yet be possible to specify. For example, this could include, if appropriate, regulations relating to new standards for e-procurement; methodologies and data sources for measuring costs related to production and/or life-cycle; methodologies and indicators for future monitoring.
The suggestions on the exact legal form could only be taken once any initial proposals have been fully drafted and would only be confirmed at adoption, following detailed discussion and consultation with MS. The decision about whether to maintain two separate Directives would be informed by a detailed comparison of the final proposals, assessing how different/similar their content is. Due to the nature of the reforms being discussed and the problems identified, close consideration would be paid to issues affecting clarity and simplicity, coherence with other EU policy and monitoring and control arrangements.
The Directives provide a general framework for public procurement and to-date, other sector-specific legislation has been used to set out particular strategic goals. Careful consideration would need to be given as to whether this approach would be maintained or, particularly if mandatory strategic obligations were introduced, such sectoral objectives would be included in or cross-referenced by EU public procurement legislation. This approach of tackling specific market failures or opportunities for strategic procurement in a targeted way (e.g. energy efficient public purchasing or clean cars) may remain a valid approach subject to a coherent application of these sectoral solutions in as great accordance with the general principles and framework for public procurement as possible.
Table 15): Comparison of retrained options
Specific Effectiveness - extent to Efficiency - the extent to Coherence the extent to
objectives which options achieve the which objectives can be which options are coherent
specific objectives achieved for a given level of with the overarching
Policy resources / at least cost objectives of the EU policy
options (cost-effectiveness)
All NC options
SCO.LEGI.(+ / ) (+ / ) (+)
TARGET
Expected gains in cost Benefits are expected to Improves on but still
effectiveness, are outweigh the cost of consistent with current
counterbalanced by neutral implementing new measures Internal Market policy
effectiveness in achieving
best outcomes for society and
potential losses in creating EU
public procurement market
SCO.LEGI.(+ ) (+) (-)
REDUCE
May be cost efficient for Doesn't require new systems / Contradicts Internal Market
individual procedures, but resources to be put in place policy by reducing the size of
global cost-efficiency affected EU-wide market and could
by possible international cause problems with
consequences. international agreements
PRO.LEGI.(+) (+ +) (+/ )
DESIGN
Effectiveness from very Certain tools will increase the Improves on but still
positive (in terms of cost-economies of scale; benefits consistent with current
efficiency) to neutral in are expected to outweigh the Internal Market policy
creating EU wide market, cost of implementing new
hence overall slight positive measures
Specific Effectiveness - extent to Efficiency - the extent to Coherence the extent to
objectives which options achieve the which objectives can be which options are coherent
specific objectives achieved for a given level of with the overarching
Policy resources / at least cost objectives of the EU policy
options (cost-effectiveness)
STR.LEGI.(+) (-) (-)
ENFORC
Slightly positive effectiveness Mandatory solutions would be Depends on how trade-offs
(mainly driven by positive burdensome and costly at this between wide set of policy
impacts in achieving best outcomes for society, but point in time (lack of EU-objectives which may
wide data, methodologies and sometimes conflict are
counter-balanced by low cost-standards tested in practice) managed
effectiveness)
ACC. (+ / ) () (+ / )
SOFT
Guidance has been issued and Low costs, low impacts Consistent with current
has not brought the expected Internal Market policy,
results unlikely to improve the
situation
ACC.LEGI.(+/ ) (+) (+)
FACILIT
Effective in achieving best Respects subsidiarity and Improves on, but still
outcomes for society and cost-proportionality while allowing consistent with current
effectiveness, but marginal / CAE / MS to make choices Internal Market policy
slightly negative effectiveness that best suit their objectives
in terms of creating EU wide and resources
market, thus the overall score
is only slightly positive
ACC.LEGI.(+) (-) (+)
ENFORC
Slightly positive effectiveness Mandatory solutions would be Supports both Internal Market
(mainly driven by positive burdensome and costly at this policy and wider EU2020
impacts in achieving best outcomes for society, but point in time (e.g. goals
Specific Effectiveness - extent to Efficiency - the extent to Coherence the extent to
objectives which options achieve the which objectives can be which options are coherent
specific objectives achieved for a given level of with the overarching
Policy resources / at least cost objectives of the EU policy
options (cost-effectiveness)
GOV.LEGI.(+) (+) (+ / )
TARGET
Potential economies of scale Most MS already have CPBs. Aggregation/centralisation
and increased Mandatory use of e-may lead to economies of
professionalisation should procurement should generate scale and there is potential for
improve pp outcomes cost efficiency; Certain tools increased strategic
will increase the economies of procurement, but safeguards
scale necessary to prevent SMEs
being excluded
GOV.LEGI.(+ +) (+) (+)
ENHANC
Positive impacts in terms of Possible increased monitoring Greater coordination across
all strategic objectives costs but no major MS strengthens application of
establishment costs expected Internal Market policy
as functions currently
conducted (in most MS);
savings through coordination
and improved monitoring
The evidence gathered through the evaluation and the present Impact Assessment suggests that action is warranted.
Clearly there are certain tradeoffs between the different solutions, particularly across the different problem areas. The most obvious examples are in the options relating to procedures and governance or strategic procurement where cost-efficiencies and benefits realised through improvements to procedures can be used to meet the costs of certain actions. E-procurement and its inherent tracking and monitoring could off- set costs related to new monitoring requirements, particularly in governance but also in addressing issues affecting access and strategic procurement. As mentioned in the impacts section, the strategic costs of adapting to new methodologies etc will reduce over time and increasing the use of concepts such also life cycle costing allow more attention to be paid to the wider cost base and contribute to achieving other policy goals, particularly those identified in the EU2020 strategy.
to small-value contracts or to contracts operated by small and less procurement savvy local purchasing bodies. However, it would come at a heavy price in terms of reduced transparency and weaker disciplines on public procurement across the EU. The evaluation confirms the expectation that transparency translates into increased competition and delivers price and quality savings. Small firms are also relatively more active and successful in competing for contracts for values close to the Directive thresholds. Therefore radically reducing the scope of the Directives through significant increases to the thresholds (or the exclusion of important populations of purchasers such as sub-central authorities) would have significant unintended consequences. Increasing the thresholds would also have international consequences as it would trigger a breach of the GPA and lead to the closure of (parts of) certain 3
rd country markets.
Consequently, a targeted approach to any redefinition of the Directives' scope is preferred (SCO.LEGI.TARGET). This would entail for example, exclusion of all but the very largest value contracts for social services. The special regulatory arrangements operated by Member States in respect of social services or services to the person, mean that these markets are characterised by limited tradability. Conversely, the impact assessment concludes that targeted actions to improve the definition of scope would also permit the elimination of grey areas such as the treatment of many forms of cooperative purchasing arrangements (public-public). In sum, this impact assessment concludes in favour of the targeted approach to scope redefinition.
6.1.2. Procedures
It is necessary to correct certain shortcomings in the current legislation if the latent potential of certain procedures (DPS, competitive dialogue) is to be realised. Such changes would allow CAEs to tailor the organisation of the purchasing procedure to the characteristics of the purchase. More widespread use of e-procurement holds out the prospect of significant and enduring gains in administrative efficiency and an intensification of transparency and competition driven savings which far exceed the switchover costs for CAEs and suppliers. Therefore, it is deemed desirable to proceed with the changes envisaged under the option PRO.LEGI.DESIGN.
procurement can have a decisive impact in supporting the general dissemination of superior technologies or solutions.
It is therefore considered inappropriate and excessively risky at this point in time to require, through changes to EU legislation, contracting authorities to allocate some part of their budget to purchases meeting certain criteria. Member States have already established national action plans (NAP) in order to set (generally non- obligatory) targets for increased levels of green public procurement within certain groups of products. These NAPs have not yet been evaluated in most MS and it is not clear whether they are having a significant impact on contracting authorities' behaviour. Establishing mandatory quotas within the public procurement legislation would seem premature while the effectiveness of voluntary measures has not yet been assessed. However there would be no reason not to advance such strategic goals via sector specific legislation as different markets mature.
Instead, it is preferred to pursue the option of allowing contracting authorities to take account of the performance of proposals in respect of a number of considerations directly linked to the production process and to provide additional procedures to support innovative procurement (STR.LEGI.FACILIT). The conclusion of the impact assessment is that there are significant risks associated with this approach relating in particular to a more complex operating environment for CAEs and suppliers. There is also a risk of market fragmentation if implementation methods (measurement and weighting systems, labels and certificates) are developed in an inconsistent manner across the single market. However, the benefits on offer are worth striving for. Policy - both legislative and non-legislative (guidance, relating to the legislative changes introduced) - should invest heavily in measures to mitigate the risks for contracting authorities, suppliers and the single market that this approach entails.
6.1.4. Access
The impact assessment analysis strongly supports additional actions to remove administrative
barriers to participation in public procurement markets
The impact assessment concludes in favour of facilitating access and removing access barriers. Such actions could usefully be supported by appropriate soft law measures (ACC.SOFT). It rejects the option of imposing outcomes in terms of market share to be reserved to certain categories of actor.
6.1.5. Governance
The cost-benefit analysis supports the inclusion in the Directives of a clear set of provisions regulating aggregation, generally via the activities and organisation of CPBs. These structures are emerging as key hubs in the European public procurement landscape. Procedures run through these structures should be visible to a wide range of market participants, traceable and less prone to conflicts of interest or subjectivity that may distort traditional procurement administration. The most notable drawback of centralisation is the potential impact on the supplier base if contracts are too large for SMEs to bid for, or if they foreclose markets for excessive periods. These risks need to be mitigated but do not overturn the case in favour of this option (GOV.LEGI.TARGET).
The analysis also examined the need to identify a national level counterpart to assist the European Commission in ensuring the sound implementation of EU legislation, and to assist with the development of a coherent response to new procurement challenges (development of common approaches for strategic procurement, consistent design of e-procurement models). Such structures could also provide a focal point for national efforts to exercise strategic or central control over excessively fragmented public purchasing administration. Many Member States have recognised this and are moving in this direction themselves (e.g. UK Cabinet Office efforts to drive efficiency in UK public procurement). This should reduce political resistance
to this direction. However, when proposing this option
(GOV.LEGI.ENHANC), the impact assessment recognised that such action would require some element of institution building within some Member States, as well as investment in monitoring and reporting systems. In broad terms, the benefits of provided by such oversight bodies through improved compliance and more efficient procurement are expected to outweigh the costs of creating and running them.
alternative packages could be considered, they would be composed of options that have been shown to be less effective than the proposed selection. The package proposed should optimise the synergies between the different solutions allowing savings due to one type of action to neutralise related costs due to another (e.g. possible increased information requirements under the strategic procurement actions should be partly neutralised by the reductions relating to the improved design of procurement procedures).
Many of the measures are designed to simplify and streamline the current environment and increase its cost-effectiveness. Where the checks and balances required to ensure the proper functioning of the Internal Market could run counter to this simplification, effort has been taken to reduce their complexity.
Table 16): Summary table of preferred options (marked in grey)
Options No change Soft law Legislative generally Legislative new or
Problem groups options options within current framework significant change
(NC) (SOFT) (LEGI._) (LEGI._)
Scope (SCO) SCO. C SCO. SCO.LEGI.TARGET (clarify SCO.LEGI.REDUCE
SOFT boundaries) (significant re-scoping)
Procedures (PRO) PRO. C PRO. PRO.LEGI.DESIG (improve PRO.LEGI.FLEXIB
SOFT definitions and design) (Increase choice, increase e-
procurement)
Strategic (STR) STR. C STR. STR.LEGI.FACILIT STR.LEGI.E FORC
SOFT (facilitate strategic public (enforce strategic public
procurement) procurement)
Access (ACC) ACC. C ACC. ACC.LEGI.FACILIT ACC.LEGI.E FORC
SOFT (facilitate access) (enforce tools for access)
Governance GOV. C GOV. GOV.LEGI.TARGET GOV.LEGI.E HA C
(GOV) SOFT (optimise the use of (enhance control &
resources) . responsibility)
Finally, following the wider consultation of other DGs at the Commission, a proposal to set a target date for the adoption of the use of electronic means of communication for all CAEs has been put forward. This recognises the arguments presented in this impact assessment stating that the market is currently not ready for an immediate switchover, but suggests setting a deadline by which such action should be possible.
In so doing, it builds on the phased approach adopted (CPBs must be ready to use electronic communication exclusively at the date of adoption; the phases for electronic notification and access to documents are made mandatory at the same point) and signals clearly to the markets and stakeholders the future direction.
from data contained in the procurement notices published in OJ/TED97. However it is
often necessary to supplement this data.
In the recent evaluation of the Directives it was necessary to conduct a number of surveys, studies and interviews in order to provide sufficient data to allow detailed analysis of the extent to which the legislation was meeting its objectives
98.
Additional information about bidders was important to analyse the cross border activity and access of firms by size. In particular, it has proved useful to examine the how the Directives have been implemented by MS, not simply in terms of transposition, but to see how the different administrative structure and arrangements for procurement below and outside the scope of the Directives had affected the way in which goods and services were acquired in different MS.
Since the costs of collecting some of this information could involve an additional burden on CAEs, firms or Member States the detailed requirements may need to be investigated in more detail and combined with the data collection needs of Member States. If the preferred governance solutions were to be adopted, there would be clearer responsibility for conducting monitoring at Member States level and designated bodies which would interact with Commission Services to identify and define the content of annual performance reports. This should ensure greater consistency in reporting and enable a clear EU overview of progress, allowing a timely identification of potential problem areas. Such obligations could be further clarified and formalised through future implementing measures.
Areas for further consideration would include developing statistics and monitoring methodologies to appraise consistently and with the appropriate periodicity areas such as:
· The cost of conducting public procurement according to the EU rules, covering the costs for both CAEs and firms, including further measurement of administrative burdens;
· Integration and cross-border participation in procurement;
8. ANNEXES
8.1. ANNEX 1 Procedural issues
8.1.1. Inter-service steering group
List of Directorate Generals participating in the inter-service steering group:
· Directorate General Internal Market and Services,
· Secretariat General,
· Directorate General Regional Policy,
· Directorate General Economic and Financial Affairs,
· Directorate General Information Society and Media,
· Directorate General Environment,
· Directorate General for Employment, Social Affairs and Inclusion,
· European Commission European Anti-fraud Office (OLAF),
· Directorate General Competition,
· Directorate General Budget,
· Directorate General Energy,
· Legal Service,
· Directorate General Mobility and Transport,
· 26 July 2011
The minutes of meeting on 26.07.11 (where the draft Impact Assessment report circulated on 15.07.11 was discussed) are sent to the IAB in a separate document.
8.1.2. External expertise
· Adelphi, Belmont, PPRC (2011), "Strategic use of public procurement in
Europe", available at:
http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/str ategic-use-public-procurement-europe_en.pdf
· Eurobarometer (2011), The awareness, Perception and Impacts of the Internal
Market, 2011.
· Europe Economics (2006), Evaluation of Public Procurement Directives, London,
2006. Available at:
http://ec.europa.eu/internal_market/publicprocurement/docs/final_report_en.pdf
· Europe Economics (2011), Taking Stock of Utilities Procurement, 2011; available
at: http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/ta king-stock-utilities-procurement_en.pdf
· Europe Economics (2011), Estimating Benefits and Savings from the Procurement
Directives, 2011; available at:
http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/es timating-benefits-procurement-directives_en.pdf
· European Commission (2009b), Public procurement indicators, Brussels, 2009.
Available at:
http://ec.europa.eu/internal_market/publicprocurement/docs/indicators2009_en.pd f
effectiveness of procurement regulation, London 2011; available at: http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/co st-effectiveness_en.pdf
· PricewaterhouseCoopers, Significant and Ecorys (2009), Collection of statistical
information on Green Public Procurement in the EU Report on data collection results,
Available at:
http://ec.europa.eu/environment/gpp/pdf/statistical_information.pdf
· Rambøll (2007) DG Internal Market: Improving and automating the collection of
statistical data concerning public procurement in Belgium, Denmark, France, Ireland, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Spain and the UK,
2007; available at: http://www.portal-vz.cz/Uploads/Mezinarodni-
spoluprace/Improving-and-automatingthe-collection-of-statist
· Rambøll (2011), Cross-border procurement above EU thresholds, May 2011;
available at:
http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/cr oss-border-procurement_en.pdf
8.1.3. Public consultations
8.1.3.1. The GP on the modernisation of EU public procurement policy
On 27 January 2011, the European Commission launched a public consultation on modernisation. The Commission services received 621 contributions. The consultation document, associated papers, synthesis report of the responses and the non-confidential contributions can be consulted on the Commission's website under the heading "Consultation on the modernisation of EU public procurement policy" (http://ec.europa.eu/internal_market/publicprocurement/modernising_rules/consultati ons/index_en.htm).
8.2. ANNEX 2 Additional information related to Section 2.2. Background
8.2.1. Total expenditure on works, goods and services
Table 17): Total expenditure on works, goods and services in 2005-2009 in billion by EU MS -
2005 2006 2007 2008 2009
Belgium 49,75 46,94 48,67 51,95 55,91
Bulgaria n/a n/a 4,72 5,67 6,41
Czech Republic 20,39 30,21 32,14 37,54 36,50
Denmark 29,61 32,08 33,79 35,47 39,17
Germany 362,11 375,61 399,05 419,26 461,84
Estonia 2,10 2,27 2,67 2,92 2,60
Ireland 19,79 22,13 26,09 27,80 27,56
Greece 18,72 20,23 22,67 22,84 26,28
Spain 126,88 142,49 160,84 164,50 194,96
France 303,30 315,63 328,90 342,14 367,27
Italy 204,49 212,99 215,12 221,49 241,15
Cyprus 1,53 1,73 1,65 1,80 1,91
Latvia 2,11 2,68 3,38 3,62 3,15
-
2005 2006 2007 2008 2009
Slovenia 4,08 6,03 5,22 5,80 6,04
Slovakia 8,77 11,36 13,98 15,89 13,96
Finland 25,27 26,75 28,89 31,54 33,32
Sweden 51,32 55,43 59,08 60,74 59,28
United Kingdom 316,75 356,90 365,40 344,89 324,91
Total EU 27 1 802,23 1 945,80 2 091,63 2 164,47 2 288,44
Source: DG MARKT estimates
8.2.2. The estimated value of tenders published in TED
Table 18): The estimated value of tenders published in TED in 2005-2009 in billion by EU MS -
2005 2006 2007 2008 2009
Belgium 6,94 7,65 10,56 12,35 13,53
Bulgaria n/a n/a 2,45 2,96 4,14
Czech Republic 2,68 5,86 5,21 7,90 7,11
Denmark 4,60 6,49 7,31 6,92 8,83
Germany 36,10 38,39 27,07 29,65 34,14
Estonia 0,79 0,97 1,13 1,32 1,15
-
2005 2006 2007 2008 2009
Hungary 6,02 6,14 4,57 5,45 5,86
Malta 0,05 0,09 0,11 0,07 0,40
Netherlands 8,23 12,44 10,19 11,13 11,60
Austria 4,86 4,31 4,55 6,86 6,40
Poland 18,63 14,24 18,13 25,95 25,54
Portugal 3,19 2,97 2,90 4,33 5,75
Romania n/a n/a 9,12 10,29 7,56
Slovenia 0,91 1,56 2,26 1,90 2,12
Slovakia 2,43 1,36 1,97 2,41 4,31
Finland 5,17 5,10 6,39 7,30 8,36
Sweden 9,41 9,62 10,24 11,82 12,43
United Kingdom 64,21 89,52 81,19 80,55 96,89
Total EU 27 319,87 377,06 367,20 392,42 420,44
Source: DG MARKT estimates based on OJ/TED data
8.2.3. umber of contract notices and contract award notices published in OJ/TED
Table 19): Number of contract notices and contract award notices published in OJ/TED in 2005-2010 by EU MS
authorities in the context of public procurement99. However it was decided, that on
their own, these prohibitions were not sufficient to establish a single market in this area. Differences between national rules and the absence of requirements to open up contracts to EU-wide competition often resulted in national markets being closed to foreign competitors. Secondary legislation was therefore needed to ensure this openness, as well as to make procedures more transparent. Since 1971, several Directives have been adopted to supplement the general provisions of the Treaty, based on three main principles:
· Community-wide advertising to foster cross-border competition;
· The prohibition of technical specifications liable to discriminate against
potential foreign bidders; and
· Application of objective criteria for evaluation and award of public contracts.
Over the years new Directives were adopted both to expand the coverage of the Directives (eventually to works, supplies and services) and to exclude certain sectors (e.g. transport, energy, water and telecommunications). Other changes were necessary to integrate requirements related to GATT/WTO agreements and to address deficiencies of earlier legislation, such as national markets which were still not sufficiently open. The first Utilities Directive (90/531/EEC), in 1990 was based on the same principles as the previous Directives, and introduced a higher degree of flexibility for contracting entities. In April 2004 the Council adopted Directives 2004/18/EC and 2004/17/EC which replaced the previous Directives. They were intended to modernise and simplify public procurement procedures, and recognised for the first time in EU procurement law, the possibility of using electronic procedures. To ensure the rights given to firms by the EU-rules were observed everywhere in the EU, the first Remedies Directive (89/665/EEC) was introduced in 1989
-
100.The Defence Directive was introduced in 2009 to cover the procurement of
arms, munitions and war material for defence purposes101. The EU is also party to a
range of international agreements, most importantly, the GPA102. In view of the
international rights and commitments devolving on the EU as a result of the acceptance of the GPA, CAEs must apply the provisions of this Agreement
103.
Public procurement legislation is supplemented and complimented by rulings by the European Court of Justice (ECJ).
Table 20): Overview of the main developments of secondary legislation
Directive Who What, from which Comments
threshold
71/305/EEC Public sector Works contracts, Works concessions not
1 million covered, transport, water and energy sectors excluded
77/62/EEC Public sector Supplies contracts, transport, water, energy and telecommunications sectors excluded
200,000
80/767/EEC Public sector, Supplies contracts, Amending Directive
central state 140,000 77/62/EEC; mainly because
of
authorities the 1979 GATT
Agreement on Government procurement;
transport, water, energy and telecommunications sectors excluded
88/295/EEC Public sector Supplies contracts, Amending Directive
130,000 (for central state authorities), 77/62/EEC; i.a. because of the 1986 GATT Agreement
on
otherwise
200,000 Government
procurement;
transport, water, energy and telecommunications sectors excluded
89/440/EEC Public sector Works contracts, works concessions Amending Directive
contracts, 71/305/EEC;
Definition of contracting authorities
works contracts awarded
by
concessionaires, broadened
subsidised works contracts, 5,000,000 (bodies governed by public law), definition of works contracts
Directive Who What, from which Comments
threshold
92/50/EEC Public sector Service contracts, Two tier system, service concessions
subsidised contracts, design contests 200,000 excluded;
water, energy, transport and telecommunications sectors excluded.
93/36/EEC Public sector Supplies contracts, Codified Directive
130,000 - 200,000 77/62/EEC and its
(central state authorities, others) subsequent amendments
and introduced substantial changes;
Definition of
contracting authority
broadened (body governed by public law), water, energy,
transport and
telecommunications sectors excluded.
93/37/EEC Public sector Works contracts, works Purely a codification of Directive 71/305/EEC and its subsequent amendments;
See remarks to 89/440/EC. Water, energy, transport and
concessions contracts,
works contracts awarded by concessionaires, subsidised works
contracts,
5,000,000 telecommunications
sectors excluded.
93/38/EEC Utilities (water, Works contracts, supplies contracts services contracts¸ design contests, 5,000,000 for works, 400,000 600,000 for supplies and services Codification of Directive 90/531/EEC with the new provisions
energy, transport
and telecommunications sectors) concerning
service contracts; Two tier system for services, works and service concessions contracts not covered, very broad definition of special or exclusive rights
Directive Who What, from which Comments
threshold
2004/17/EC Utilities (Water, Works, supplies and Replaced Directive
energy, transport and postal sectors) services contracts, design contests, 93/38/EEC with its
currently: subsequent modifications;
Two
4,845,000 for works tier system for
contracts, 387,000 for services, works and service concessions contracts not covered,
supplies and services.
narrower but
refocused definition of
special and exclusive
rights. Postal sector added, telecommunications sector excluded. Provisions on e- procurement included.
2004/18/EC Public sector Works, supplies and Replaced Directives
services contracts, works concessions contracts, works contracts 92/50/EEC, 93/36/EEC and 93/37/EEC
with
awarded by subsequent modifications;
Two
concessionaires, subsidised works tier system for
and services services, service
contracts, design contests, currently 4,845,000 for works contracts and works concessions, 125,000 193,000 for supplies and services contracts concessions contracts not covered. Water, energy, transport, telecommunications
and
postal sectors excluded;
Provisions
on e-
8.3. ANNEX 3 - Detailed description of problem drivers
8.3.1. Problem drivers in Scope and coverage
PROBLEM DRIVER: Complexity of the rules on scope and coverage
Both contracting authorities and firms find that the current rules defining who and what is included and excluded from the scope and coverage of EU public procurement rules are too complex. At present, a detailed set of conditions need to be examined to decide whether a particular buyer or a particular transaction is covered. Depending on the individual procurement, basic treaty principles, part or all of the obligations stemming from the Directives may need to be applied. Often the jurisprudence of the ECJ also needs to be consulted as clarifications have been sought in relation to particular definitions e.g. "body governed by public law ", "public undertaking"
104 and what constitutes a "public contract"105. The actual rules
which apply depend on the type of purchaser, the actual purchase and its value. There are at least 10 possible "choices" based on the application of various threshold levels (see: Tables 13) and 14) below).
Table 21): Rules for the determination of the applicable thresholds basic thresholds types
Amount in [ .000] - - -
Applies to 1251933874 845
All works contracts, all subsidised works contracts, all works concessions, all works contracts awarded by concessionaires X
Supplies and service contracts awarded by Utilities; design contests organised by Utilities, supplies and services contracts falling within the scope of the Defence Directive X
Supplies and services contracts awarded by "sub-central"
contracting authorities, subsidised service contracts, design contests organised by sub-central contracting authorities; all contracts and design contests concerning the services listed in Annex II B of Directive 2004/18/EEC; service contracts (and design contests) concerning certain telecommunications services and R&D services awarded by central government contracting authorities; supplies not listed in Annex V of Directive 2004/18/EC and awarded by contracting authorities operating in the field of defence. X
Amount in [ .000] - - -
Applies to 1251933874 845
All service contracts and design contests organised by central government authorities concerning services listed in Annex II A (except certain telecommunications services and R&D services);
all supplies contracts awarded by central government authorities not operating in the field of defence; supplies contracts awarded by contracting authorities operating in the field of defence and concerning the products listed in Annex V of Directive 2004/18/EC X
Table 22): Rules for the determination of the applicable thresholds grouped by the Directives, actors and transactions
Directive 2004/17/EC All contracting entities, Works contracts 4,845,000
all
sectors All supplies and services 387,000
contracts, all design contests
Directive 2004/18/EC Central Government authorities Works contracts, works 4,845,000
concessions contracts, subsidised works contracts
All contracts concerning services listed in Annex II B, certain telecommunications services and R&D services; all design contests concerning these services and all subsidised services, 193,000
All contracts and design contests concerning services listed in
Annex II A except contracts and design contests concerning certain telecommunications services and R&D services 125,000
Since many public authorities do not launch such large contracts every year, they do not have the necessary knowledge or familiarity with these EU rules "at their finger tips".
8.3.1.1. Identification of buyers covered
With very few exceptions, the first step in deciding whether the Directives apply or not, is to decide whether the procurement is being carried out by a relevant body (or on its behalf). For example, under the Classic Directive, purchases are generally made by bodies belonging to the public sector ("contracting authorities"). Concepts such as "State" and "local and regional authorities" are generally understood, but the definition of public sector also includes "bodies governed by public law"- a concept which has proved the source of some confusion and has resulted in a whole series of judgments by the ECJ
-
106.The Utilities Directive applies to a wider group of
purchasers, known as "contracting entities". This group includes not just the "contracting authorities", but also public undertakings and private undertakings, provided these latter exercise one of the relevant activities
107 on the basis of an
exclusive or special right. In this context also there appear to be some confusions between the concept of "body governed by public law "and public undertaking", which was addressed by recent ECJ case law
-
108.In approximately 30% of the
contract notices published on OJ/TED, a CAE classifies itself as "other", reflecting either their confusion, or a potential desire to (knowingly) apply a more favourable (but incorrect) regime. This initial classification is critical to identifying which particular provisions of the Directives apply. Random checking conducted as part of the evaluation also identified a misclassification rate of around 5%.
A majority of respondents to the GP finds that the current approach to defining public procurers is appropriate; some legal experts, civil society organisations and public authorities would support some changes in this respect.
109 They also feel that
the EU rules should be limited to actual purchases by CAEs.
8.3.1.2. Identification of transactions covered
completed by a number of important ECJ judgements111
112 for example Commission vs.
Germany, Donau-Wald case or Helmut Müller case113 meaning that there is no
longer one clear source of information for CAEs.
Under the current legislation, the category of purchaser together with the type and value of the items being bought determine which procurement rules apply. Basically, the current Directives apply to the award of works, supplies and service contracts, whose estimated value, before V.A.T. equals or exceeds the relevant threshold
114.
Different thresholds apply according to the purchaser (i.e. central or sub-central contracting authorities or contracting entities) and the subject matter (goods, works or services). Many stakeholders call for the threshold values to be increased, thereby simplifying the process for CAE and enterprises by removing a number of transactions from the scope/application of the Directives. They also question why the thresholds for defence and utilities are higher (for supplies and services) than for purchases covered by the Classic Directive and/or why inflation has not been taken into account (the current thresholds date from the 1994 GPA). On the other hand, a limited number of stakeholders find the current "two-tier" system (where some procurement is subject to detailed EU rules and the remainder to EU treaty principles) as unnecessary complicated. For example, many developers of e- procurement platforms want to create one system which is used for all purchases above and below thresholds.
8.3.1.3. A/B-type services
Further complexity results from the different rules applicable to service contracts, (the so called A and B-type services)
-
115.Recent research, comparing the Common
Procurement Vocabulary (CPV) codes entered by a CAE against the A/B services classification which it also provides, identifies many errors and results in the wrong rules being applied. About 7% of transactions reported as A-type services had CPV codes that matched the B-type definition and 5% of notices reported as B-type had CPV codes matching A-type services (see: Figure 7). The latter example raises more concern, as it indicates contracts which should have followed the "full" procurement rules rather than the "simplified" regime. Given that on average 160 billion per annum are spent via service contracts (around 38% of the total EU public procurement market), these errors could be having a significant impact. Approximately 74% of services contracts value refers to A-type group.
Figure 7): Share of services by classification (left-hand side graph) and the share of "category 27" services by classification (right-hand side graph)
Actual CPV matchActual CPV match
IIAIIBIIAIIB
er s
NO
hasI
I A7%14%
r cPV
pu
C
i ce
dby
Ser v
or t e
I I B5%
Yes
20%
Rep
Source: PwC study
Category 27 within B-type services is even more prone to misclassification as much as 20% of notices in this category had CPV codes that refer to A-types services. There is also some evidence that the A/B lists may not be capturing the correct services. When this split was made, the A list included services where it was felt that a certain degree of cross-border trade could be expected; the B list were assumed to be less open to cross-border purchasing. However the evaluation found that some of the services on the B list exhibit a high degree of cross-border trade and vice versa. Replies to the GP consultation did not indicate a clear consensus about how the distinction between A/B services should be handled, although overall a slight majority felt it should be reviewed.
8.3.1.4. Legal uncertainty
This complexity is one source of the legal uncertainty identified by many stakeholders. It represents the perceived risk of complaints and litigation among public purchasers and firms
Figure 8): Perceived risk of complaints and litigation among public purchasers (compared above EU threshold public procurement versus below EU threshold public procurement)
29%
Open
10%
Much more and more than below threshold procurement
Restricted31%
13%Much less and less than below threshold procurement
31%
Negotiated
12%
0%10%20%30%40%
Source: PwC study
Figure 9): Perceived risk of complaints and litigation among firms (compared above EU threshold public procurement versus below EU threshold public procurement)
23%
Open
22%
Much more and more than below threshold procurement
Restricted15%
21%Much less and less than below threshold procurement
26%
Negotiated
18%
of government authorities of around 2.6 person-days per transaction or about 350.000 person-days annually across Europe for managing complaints and litigation
118.
As a result, CAEs may adopt a risk averse approach, preferring to follow the full (more costly) procedures rather than a potentially simpler regime which should apply, in order to avoid the risk of future problems e.g. an enterprise which challenges the use of the simplified regime even if the CAE is sure that it has followed the right procedure, it can still be costly and time consuming to reply to the challenge of the enterprise. The above estimate of cost of litigation (in terms of time spent) and the possible additional costs incurred by following the "safer" procedure leads to questions about how appropriate, proportional and cost-effective the current design and definition of the scope and coverage of the EU public procurement rules
is.
8.3.1.5. Conclusions
To summarise, the current rules are complex and not always available in one place, leading to legal uncertainty on the scope and coverage of the Directives, particularly for CAE. The correct identification of actors and transactions covered by the EU rules might be beyond the capacities of many purchasers, particularly if they do not need to apply these rules frequently e.g. smaller local authorities. The current lack of clarity with regards of the scope of the Directives has resulted in a number of legal cases and judgments in this area. As a result, high-level legal analysis can be necessary to define the scope of the Directives and the correct application of those rules (especially in border-line cases). Legal uncertainty generated by the current rules also leads to additional costs of legal assistance and might result in risk averse behaviours of CAEs to avoid litigation.
8.3.2. Problem drivers in Procedures
PROBLEM DRIVER: Disproportionate and inflexible procedures
Stakeholders frequently raise issues about the disproportionate nature of procedures / processes that need to be followed in order to procure works, goods or services by public authorities. They complain that public procurement costs too much, both in the time it takes and the resources it uses. In a recent survey, respondents were asked to compare public and private purchasing. 57% of firms concluding contracts following the most used procedure (the open procedure) found that it was cheaper or much cheaper to sell to the private sector, compared to 17%, who thought the opposite; 59% agreed that the private sector process is less or much less time consuming, compared with 18% who found private procurement to be more or much more expensive. Similar results were found for the other procedures negotiated and restricted
8.3.2.1. Disproportionate costs of procedures for low value contracts
The typical procurement procedure costs for all participants can be estimated at nearly 28,000
-
120.This cost is split between CAEs, who typically pay 5,500 per call
for tender launched) and firms, which pay 3,800 per offer submitted121. The total
cost for all procedures covered by the threshold is some 5.6 billion per annum or 1.3% of the total value of contracts published
122.
The cost of the procurement process can, particularly for contracts nearer the lower thresholds, account for quite a high percentage of the total value of a contract. Currently many transactions having values below thresholds are published in OJ/TED, meaning that most probably many CAEs follow EU rules and publish notices in OJ/TED although they are not obliged to do so. This implies that significant and potentially disproportionate costs of following above threshold procedures are being incurred by these CAEs either voluntarily or in order to avoid the possibility of falling foul of the rules if by any chance the contract turned out to exceed the relevant threshold.
As seen on Figure 10), 18 % of supplies and services contracts concluded by central government are below 125,000 euro threshold. The total value of the contracts below threshold is minimal, only accounting for half a percentage of the total values for all contracts in the threshold category. In the range above the threshold level, the number of contracts accumulates quickly while the values accumulate much more slowly. Two thirds of all central government services/supplies contracts under the scope of the threshold are below the 500,000 level. The total value is much less, in total only 10 % is found at that level.
Figure 10): Supply and service contracts published by central authorities
250
T80 %
h
r e
c t s
s
t r a200hN
o
In the sub-central threshold category nearly 30 % of contracts recorded have values below the threshold (se: Figure 10).
Figure 11): Supply and service contracts published by sub-central authorities
400T
h80 %
350r e
s
h
t soN
c300l dCumulative
o nt r a
25050 %
f
c
r
o200
b e
m150
N u
10020 %
50
Cumulative
100200300400500
Contract value ('000)
Source: Pwc study
The cumulative value of these is about 1.6% (2.2% for open procedure). The accumulation of contracts and values match very closely the central government patters.
Whereas the works threshold is concerned, as much as 70% of works contracts concluded are below 4.85 million (see: Figure 12).
Figure 12): Works contracts (by all types of authorities)
80%
120T
hN Cumulative
r e
s
h
c t s
90o
l d
There is some evidence that CAEs publish CNs with no cross-border interest, as they find OJ/TED to be a well-functioning, toll-free portal that is regularly accessed and monitored by their domestic firms (especially, if no similar platform exist at the national level). Finally, some CAEs presumably follow the EU rules because of a lack of knowledge and misunderstanding of what is and is not covered by the Directives.
For these smaller value contracts, the cost of following the rules set out in the Directives constitutes a significant proportion of the contract value itself. At the lowest threshold in the Directives, 125'000, total costs of purchase can amount to between 18 and 29 % of the contract value. At 390'000, the median contract value, costs reach between 6 and 9 %. Although the cost for each participant is lower than this total (about 1/6), these shares are significant.
Figure 13): Total procurement cost (CAE and firms) as share of contract values (HiLo estimates)
125390
th resholdmedian contract
30 %
c t
n t r a20 %
of
c o
a r e
S h10 %
0 %
100 200 400 800 1 600
Contract value ('000)
Source: PwC study
These findings are clearly influenced by the fact that many of the contracts published are well below EU threshold. This may occur for a variety of reasons, a positive example being the case where as a result of the competition from following the Directives, the final price is reduced to a point below the original estimate, which was above the EU thresholds. However, as mentioned above, it may also be the case that uncertainty about what rules to apply, linked also to a fear of litigation, causing a CAE to follow the stricter rules required under the Directives. Some contracts are also published individually, but which form part of one single project where the total costs is higher than the thresholds
In 2009124, the High Level Group investigating administrative burden concluded that
this burden accounted for 216 million of the 234 million identified as the total administrative costs resulting from EU public procurement rules (i.e. over 92%).
A broad majority of respondents to the GP consider that the procurement rules are too detailed, although most MS and business representatives disagreed with this opinion. This difference is not so surprising when one considers that it is essentially CAEs, rather than firms, which have to understand and follow the rules, while MS representatives will often be those who have drafted the appropriate legislation in the first place. The perceived complexity is usually driven the detailed character of rules defining the procedures (for example, the technical specifications, strict division between the selection and award stage of the evaluation, etc.).
Similarly to the legal uncertainty referred to in Scope, uncertainty with regards to procedures results in fear of litigation that might lead to sup-optimal (risk averse) choices being made by authorities in order to avoid litigation. This perception is widely shared among stakeholders although the available evidence in this respect is rather anecdotal. For example, in a recent survey run by the Local Government Association in the UK, the fear of litigation is identified an one of the most common themes, with respondents stating for example: "the biggest fear facing my own staff is always regarding the risk of legal challenge [...]. This fear leads to cautious, risk averse procurement procedures that stifle innovation and the chance to deliver cashable savings"
125
8.3.2.3. Insufficient flexibility
The current rules are also accused of lacking flexibility and preventing CAE from achieving the best possible outcomes; in particular many respondents to the GP call for more flexibility in the conduct of the procedure
-
126.Initiatives where more
flexibility could be permitted include: the opportunity to negotiate with bidders and the setting of time-limits; the organisation and sequence for examining selection and award criteria; allowing CAEs, in exceptional circumstances, to take account of criteria pertaining to the bidder himself; and more generally to take into account previous experience with one or several bidders. In particular, contracting authorities operating under the framework of the Classic Directive complain that their ability to negotiate with enterprises is too limited and ask for more flexibility
value involved is significantly higher up to 8.6% of total value of contracts awarded in 2010 (5.2% in 2009), with a mean contract value of 40 million.
Figure 14): The use of competitive dialogue over time (2006-2010)
10.0%
9.0%8.6%
8.0%
7.0%
6.0%5.2%
5.0%Competitive Dialogue - Value
3.9%
4.0%
3.0%
2.0%1.7%
1.0%0.7%
0.0%
20062007200820092010
Source: PwC study
The rapid take-up of the competitive dialogue procedure since its introduction, suggests that there was a need for a procedure that allowed for more negotiation or dialogue also in the Classic Directive. However, use of this procedure is limited to very complex projects and hence does not fully meet the needs of contracting authorities.
Finally, the perceived lack of flexibility of the current procedures is also a source of missed opportunities for society, preventing CAEs from responding effectively to strategic goals. The previously quoted survey of local authorities in the UK also points out that lack of flexibility of the procedures emerged as a challenge experienced in relation to EU procurement rules: "such a rigid regime stops local authorities from being able to take advantage of innovative commercial offers that do not fit with the agreed evaluation criteria"
mandated the use of e-procurement e.g. Portugal (all procurement) and Lithuania. Equally the systems which are being developed differ significantly from country to country and even region to region, creating a risk of market fragmentation and increasing costs for suppliers who have to invest time in understanding how to use the different systems as they move between different CAEs.
There is certain inertia on the part of CAE and, to a lesser extent, businesses to move towards using e-procurement. The evaluation highlighted a number of key challenges facing e-procurement which need to be addressed if greater take-up is to be achieved and risks to fragmenting the EU public procurement market are to be addressed.
Authentication and integrity measures also differ significantly between systems. Here there are particular issues relating to the very technical measures which were initially promoted at EU level. Some MS have adopted these solutions which at present are very often national solutions, creating barriers to non-domestic firms trying to bid in another country and creating a conflict/tension with the ability of e- procurement to actually open up markets by over-coming distance barriers to bidding. Others have adopted less technical approaches which could be less secure (although there is no hard evidence available to support this belief at present) but which are more open to a wider range of bidders.
Sometimes the problem stems from over specification for example, the DPS, a purely electronic tool introduced in 2004 to create an open repetitive purchasing system is specified in great detail but does not seem to work in its current form. 22 out of 27 MS have transposed the provisions for this option into their legislation, but many have also felt it necessary to add further clarification and despite these good intentions, only one MS has currently implemented a working system. Given the growing use of framework agreements, another form of repetitive purchasing albeit a closed system, and the interest shown by the transposition of the option, this points to problems in the system design which should be addressed.
Equally some problems are due to a lack of detail for example electronic catalogues, a powerful tool for standardising and simplifying bid responses are only mentioned in a recital. Standards which could have reduced the emergence of technical barriers and aided in the integration of certain features are only now beginning to emerge.
percent of total values to reaching about 22% in 2010. The values involved in framework agreements are also increasing and reached even higher levels - at about 25 % in 2010. About 85 billion of framework agreements were concluded in 2010.
Figure 15): Use and values of techniques over time as share of total
25 %Framework agreement
25 %Joint purchasing
20 %20 %
15 %15 %
10 %N
u
mV10 %
5 %ba
el u
re5 %
0 %0 %
20062007200820092010*20062007200820092010*
Source: PwC study
Both these techniques are frequently used together - joint purchasers tend to use frameworks more extensively than the general population (i.e. the share in number of notices rises from 11% in the overall use to 25% when joint purchasing is used, see: Figure 16).
Figure 16): Share of joint purchasing using frameworks
Share of joint purchasing using frameworks
More
60 %DK
SKSENO
NL
PT
40 %CZGB
IE
RO
EEA30
FIFR
20 %EELV
efficiently than without aggregation. At this moment, there is no indication that it is really happening and the society loses opportunities and gains that could have been generated through professional, strategic purchasing conducted by CPBs.
8.3.2.6. Conclusions
In summary, problems relating to a certain lack of flexibility and disproportionate nature of the current procedures hamper efficient responsiveness to structural changes in the markets and create cost inefficiencies. They also create missed opportunities for society and together result in the best value for money and society not being achieved.
8.3.3. Problem drivers in Strategic public procurement
PROBLEM DRIVER: Uncertainty and insufficient provisions with regards to integration of other policy goals in public procurement
The prime aim of the current rules is to ensure that when the public sector purchases goods, services or works in the market place, it does so in a transparent manner, treating all potential suppliers or service providers equally and seeking the offer that provides the best, or most appropriate, quality at the best price.
8.3.3.1. Insufficient provisions with regards to the integration of strategic goals
Given the significant and influential role of public procurement in the economy, it is clear that it has the potential to impact on other policies (EU2020 objectives). The most frequently mentioned main areas for future strengthening of the rules are: environmental sustainability; respect for certain social conditions; and supporting innovation. In response to demands to be able to use public procurement rules to support other strategic goals, changes were introduced in 2004 to help CAEs achieve
the aims of "sustainable and non-inflationary growth respecting the environment " and "a high level of employment and of social protection ". The Commission has published a handbook on environmental public procurement and most recently a Guide to taking account of social Considerations in Public Procurement.
Figure 17): Uptake of GPP policies by MS
Source: Adelphi, study
Stimulation of innovation through the wider use of variants does not appear to be a widespread choice at present. In fact, there is a universal trend over the last few years in all MS towards allowing variants in fewer cases
-
133.Some measures or incentives
may be needed if it were considered desirable to reverse this trend.
As the current rules are non-prescriptive and leave plenty of leeway to the CAE, the Commission has also published a number of communications
134 intended to clarify
the practicalities of how to integrate other policy objectives whilst still remaining compliant with the public procurement regime. As Figure 17) shows, the most common means of incorporating environmental considerations is in the technical specifications, although the use of award criteria and requiring specific technical or professional qualifications are also relatively frequent.
Figure 18): Where do you address environmental objectives in your tender documents?
Source: Adelphi study
These figures are based on the results from the European level that uses the stratified results from 30 EEA MS whereas the comparison of the front-runners (Denmark, the Netherlands, Norway, Sweden, and the UK), is based on the average percentages of 22 MS. The frontrunners use more sections and also use them more often than the other MS.
Figure 19): Frontrunners compared with other MS -
objectives have been identified, they are being implemented through different commitments / means and to different extent across MS.
8.3.3.2. Uncertainty with regards to extent of integration of strategic goals
Even with the existing guidance, CAE are unsure how far they can go in integrating these other strategic goals. Some of this uncertainty stems from a lack of specialist knowledge and competence sometimes in a given strategic area, sometimes in terms of adapting their public procurement practices to absorb these wider strategic issues, whilst remaining compliant with the Directives. The problems encountered by many CAE relating to the complexity of the current EU rules can only be magnified when they are also asked to integrate and often police other policy goals when procuring a particular item. Equally, for many of these policy areas, the evaluation found that there is a lack of appropriate national guidance setting strategic objectives and linking them to public procurement in particular, meaning that individual CAE need to identify targets and take responsibility for policy areas where they themselves may have little experience and expertise. In certain areas, particularly in relation to innovative purchases, the resultant uncertainty and risk/fear of non- compliance appears to be proving too great, deterring many CAEs from using public procurement to support and achieve these strategic goals.
Several stakeholders make the argument that the current system rewards compliance with the Directives. They find that no incentives are built into the existing public procurement regime to incentivise CAEs to use their procurement to support these wider strategic objectives. Rather, they feel "hamstrung" by the current rules, which restrict their freedom by insisting that any selection/award/performance criteria show a clear link with the subject of the contract. Hence they are not able to add the specifications they would like. A commonly used example is the inability of/difficulty incurred by CAEs wishing to support for example Fair Trade objectives, fair employment conditions, etc.
However, results from the survey shows that while CAEs use social responsibility considerations most frequently as requirements for promoting employment opportunities and decent working conditions, fair trade and accessibility objectives are also actively pursued by some CAEs.
Figure 20): What kind of specific requirements do you set with regard to socially responsibility objectives in your tender documents?
Source: Adelphi study
It is worth noting that 20% of those who do not include any specific social considerations in their requirements nonetheless say that they do take social considerations into account in procurement. These CAEs may be including social issues in their contract terms and conditions or by reference to national legislation or International Labour Organisation (ILO) standards.
The GP responses on the issue of using public procurement in support of other policies show a division in opinions between businesses and contracting authorities on the one side and civil society on the other. A majority of businesses and contracting authorities considers the current rules on technical specifications as sufficient. A large majority of civil society organisations have a less positive opinion.
organisations with social and environmental interests, emphasised that best value in public contracting is not simply the lowest price but must take account of social, ethical and environmental benefits
139.
Stakeholders from all groups want to see further promotion and stimulation of innovation through public procurement. A majority of business and public authorities shares the view that additional measures are needed in order to strengthen the innovation capacity of SMEs.
140
Most MS have put in place some measures to encourage the procurement of greener, more sustainable and socially responsible products and services as well as making public contracting more open and accessible to SME and innovative solutions. However the degree to which contracting entities actually put these policies into practise varies widely both across and within MS. As a result suppliers are potentially faced with a variety of technical specifications, citing different standards, certificates or labels in different MS.
Figure 21): Front-runners in encouraging innovation compared with the other MS -
Source: Adelphi study
The MS which are frontrunners in terms of encouraging innovation (Finland, the UK and the Netherlands) refer to the use of EMAT criteria more frequently than other MS as a way to encourage innovation, along with functional requirements, acceptance of variants and life-cycle costing.
traditional products offering lower levels of sustainability e.g. lower environmental protection, less social improvement.
8.3.4. Problem drivers in Access
PROBLEM DRIVER: Market access barriers
One of the key objectives of public procurement policy has always been the open and free access of all European undertakings to public contracts in Europe. Fragmented national procurement markets were considered to be economically inefficient. Discriminatory procurement, where it occurred, would constitute a barrier to trade and reduce trade flows.
8.3.4.1. Low cross-border procurement
Although cross-border access is facilitated by the high transparency created by the Directives, this has not translated into particularly high levels of actual cross-border trade. Direct cross-border procurement
141 accounts for 1.6% of awards or roughly
3.5% of the total value of contract awards published in TED during 2006-9. In addition to direct cross-border procurement, there is a considerable volume of indirect cross-border procurement
-
142.This channel accounted for 11.4% of awards
published in TED and 13.4% by value during 2006-9. As the above figures suggest, the dominant role in cross-border procurement is played by purchases from local affiliates of foreign companies and not by direct purchases (i.e. not by the channel that is directly influenced and governed by the Directives).
Figure 22): Direct cross-border procurement and indirect cross-border through affiliates 2006-2009
16,0%
indirect cross-boder through affiliates (value)
14,0%
13,7%13,9%
12,0%12,4%
11,7%
11,2%11,4%indirect cross-boder through affiliates (number of contracts)
38% of contracts above EU thresholds are awarded within the distance143 of 50 km
and 50% of contracts within the distance of 100 km144 (see: Figure 23).
Figure 23): Cumulative shares of awarded contracts in relation to distance (2007-2009)
Distribution of awards in relation to distance
25%
20%
s
15%
w ar d
f
a
o
r e
S ha
10%
5%
0%
5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 8 9 1 -
1-
3-
7-
9 1 2 3 4
1 - 2
2 3 -
4- 5
4 5 - 6
6 7 - 8
8 -
1-
1-
1-
2-
2-
2- 3
9 -
1 - 1
1 - 1
1 1
1 2
1 3 - 1
1 4 -
1 - 2
1 5
1 6 - 1
1 7 - 1
1 8
1 9
2 - 2
2 1 -
2 - 2
2 2
2 3 - 2
2 4 - 2
2 5
2 6
2 7 - 2
2 8 -
3 - 3-
3-
3 - 3-
3-
3 - 4-
4-
4 - 4-
4-
4 - 4-
4-
4 - 5
2 9
3 - 3
3 1
3 2
3 3
3 4
3 5
3 6 - 3
3 7
3 8
3 9
4 4 1
4 2
4 3 - 4
4 4
4 5
4 6
4 7
4 8
4 9
5 - 5
Distance between awarding authority and economic operator in kilometers
Source: Rambøll study
The above data shows that half of awarded contracts are concluded within geographic proximity. An average distance for each type of contract (i.e. goods, works and services) is different and confirms that supply contracts are the most tradable, as the average distance between the buyer and seller is 232 km (i.e. significantly more than 102 km for works and 123 km for services).
8.3.4.2. Import penetration lower than in the private sector
Table 23): Import penetration of public and private sectors in 1995, 2000 and 2005
Year Import penetration Import penetration of private sector Import penetration Gap between
of of public and
public sector total economy private (percentage points)
2005 7.5% 19.1% 17.4% 11.6
2000 6.5% 18.7% 17.1% 12.2
1995 5.1% 15.6% 14.1% 10.5
Source: Rambøll study
However this data also shows that import penetration in the public sector is significantly lower than in the private sector, suggesting that the public sector is less open and integrated in the general economy as than the private sector. There are both supply and demand side explanations. Looking at the demand side, this difference in import penetration can be partially explained by the differences in the kinds of purchase made by government authorities as compared to private companies. The differences in the structure of purchases by these two sectors was pointed out in an earlier evaluation study by Europe Economics
146 as a potential reason for differences
in public and private import shares.
In 2005 60% of public sector demand was due to three main product groups: public administration (25.3%); health and social services (21.2%) and education (14.3%). Their joint import penetration ratio is close to zero (0.1%), reflecting perhaps that in general they are locally provided services and by their very nature, less tradable services than supplies. This has a significant affect on the public sector's propensity to import - the three largest sectors are not fully exposed to competition due to either exclusions, exemptions or other regulatory arrangements, such as reimbursement through statutory health insurance, that place them outside of the full scope of application of EU public procurement rules (or even the rules governing the procurement of B-type services).
8.3.4.3. Reluctance to bid cross-border amongst firms
As mentioned previously, procurement contracts awarded directly across borders are still limited (3.5% in value terms and 1.6% in the number of transactions). This can be explained by both supply and demand factors. Previous section explained that low levels of import penetration may be due to the composition of public demand, which is dominated by services that are sourced locally. On the supply side, recent survey data shows that companies are also reluctant to tender cross-border. In a recent large scale survey around 73% of firms, otherwise active in public procurement, said that they have not made any cross-border tenders in the last three years (ref. Figure 24). The fact that the average success rate when bidding abroad is lower than when bidding at home may go some way to explain this behaviour.
Figure 24): Participation in cross-border tenders survey of firms
> than 2076.1
times6.4
10 to 2010.9
times5.3
5 to 10 times6participation overall
4.9participation abroad
1 to 5 times7
11.1
never
72.3
20406080
Source: Rambøll study
Asked about the reasons for this low level of participation in cross-border procurement, the major reason given appears to be simple inertia: 61% of respondents identified their general lack of experience in doing business abroad. It would appear that most firms do not bid for cross border procurement opportunities simply because thy have not done so before (see: Figure 25) below). The second major obstacle identified was language barriers. Further confirmation that language matters, comes from the analysis of contract awards by country. An econometric analysis of contracts awarded between 2007 - 2009 shows a relationship between the existence of common language borders and the chance of awarding a contract to a foreign firm i.e. confirming that the probability of direct cross-border procurement award in a country that shares a language with another MS is significantly higher than in MS with a different language (by 21.3%). Indeed, the analysis of contracts published in OJ/ TED confirms that common language helps, as 75% of the contracts awarded directly cross-border by Irish authorities are awarded to firms from the UK. 84% of direct cross-border awards made by Austrian authorities are concluded with businesses from Germany
were named as the fourth most important obstacle (only 28% of firms do not rank this problem high).
Figure 25): Business' view on several possible obstacles to cross-border bidding
Based on your experience, how do you assess the relevance of the f ollowing possible obstacles?
0%20%40%60%80%100%
Lack of experience with doing business abroad61.327.15.16.5
Language barriers50.324.413.112.3
High extent of competition with national bidders48.626.515.39.5
Legal requirements leading to market entry barriers
in the awarding country (e.g. special allowances 47.623.99.918.6
necessary f or of f ering services abroad)
Cost level in general higher at home than abroad
(e.g. because of labour costs etc.)36.629.916.916.6
Resources necessary f or participating in cross-border
tender procedures higher compared to procedures in 34.626.620.418.4
home country
Unf amiliar f ormal requirements demanded (e.g.
certif icates to provide, etc.)34.228.918.918.1
Risks imposed by possible currency exchange rate
f luctuations32.525.921.120.5
Additional costs due to geographic distance, i.e.
implementation of contract more costly compared to 24.940.417.916.8
delivery close to own location
Dif f erent kinds of technical specif ications that are
demanded compared to experiences in your own
Member State (e.g. dif f erent IT standards and the 24.535.214.925.5
like)
Tax or social insurance dif f erences leading to cost
disadvantages24.035.121.819.1
firms did not bid cross border and shows that administrative obstacles have a major negative impact on firms (43% of firms which had competed for cross border public contracts found that country-specific formal requirements were a major obstacle in cross-border procurement).
The results of the evaluation confirm that direct cross-border participation on public procurement markets remains low. As a result, the direct cross-border success rate is also low. This is driven by various entry barriers that still exist on the markets and deter firms from participating in invitations to tender in other MS. The identified entry barriers can be principally grouped into natural ones (such as languages or geographic distance, the very nature of public sector markets) and regulatory. Within the regulatory barriers mentioned by companies, some of them stem from the Directives, but many other are driven by legal provisions stemming from other legal acts (such as tax or social security insurance differences leading to cost disadvantages). A frequently repeated regulatory barrier is linked to the mutual recognition of standards or certificates (including certificates or documents that need to be provided while submitting offers).
8.3.4.4. Market access barriers (SMEs in particular)
Questions are frequently asked about the proportion of public procurement which is awarded to SMEs. A recent study estimated that between 2006 and 2008, SMEs won between 58% and 61% of above threshold public contracts, representing between 31% and 38% of the total value of all contracts
-
151.There is a significant variation
across MS, ranging from countries where SMEs won 79% of contracts (in value terms) to MS where this proportion is 17%
Figure 26): Share of SMEs in the total value of contracts awarded, by MS (total for 2006-2008)
20406080100 20406080100
7941
BG16333021DE7161959
6241
LV5114738SE7191559
6239
MT7252938BE1172161
5337
LU12132847FI6141763
5235
GR1543348IT6111865
4934
EE7162551AT5111766
4734
HU8211953CY4171366
4734
SK7172353EU-276111766
4531
LT463555RO3131569
4530
DK5211955PL3101670
4424
FR7181856GB651376
4322
SI7162157PT461278
4322
IE3142657ES361278
4317
NL5142357CZ161083
MicroSmallMediumLarge MicroSmallMediumLarge
is also seen as an often-occurring problem (34% of companies experienced it `always' or `often'), and many companies also complain about unclear requirements set out by public authorities (30%). The least frequently mentioned obstacles to procurement are too large contract values (7%) and that joint fulfilment of requirements by members of the consortium is not allowed by the procurer (5%)
153.
Table 24): Problems faced by bidders in accessing public procurement markets, by company size class (proportion of companies using the source 'always' or 'often', in percentage)
Potential problems Micro Small Medium Large Total
Over-emphasis on price 58 55 51 55 54
Long payment terms 52 42 38 36 40
Late payments 47 36 39 35 38
No debriefing 43 36 33 36 36
Administrative burden 45 34 35 30 34
Lack of clarity 38 28 29 28 30
Limited options for
interaction 30 23 19 22 23
Disproportionate financial criteria
34 21 18 17 20
Insufficient time to bid 27 23 14 20 20
Lack of information on opportunities
8.3.4.5. Conclusions
To summarise, the current data reveal that the full potential for opening-up public procurement to EU-wide competition is not being realised as the direct cross-border procurement remains at relatively low levels and SMEs participation remains lower than their importance in the economy. This means that public procurement markets remain serviced mainly by national or large-size suppliers and that important market entry barriers remain despite the existence of the Directives.
8.3.5. Problem drivers in Governance
PROBLEM DRIVER: Different administrative models across MS leading to different public procurement capacities in the EU and different capabilities of CAEs
In their current form, the public procurement directives do not contain any instructions to MS on how to organise their individual public procurement capacity and resources. This has, quite naturally, led to a range of very different set-ups and abilities being developed. Administration is often organised in several layers sometimes reflecting the national/regional/local divisions, other times devolving responsibilities across different (generally central) government departments. Most MS have a national central body dealing with procurement which is responsible for managing public procurement. As the evaluation notes: "The national legal basis for these bodies, the hierarchical lines of subordination and the functions that such bodies are empowered with vary considerably across MS."
8.3.5.1. Differences in national organisation of public procurement
According to a 2007 Sigma paper154 (no. 40) the main public procurement functions
can be grouped under the following headings: drafting legislation (implementing relevant EU Directives and in some instances, national legislation related to areas not covered by said EU legislation); monitoring; control; international relations; guidance and support; publication; information provision. Sometimes these functions may overlap, again depending on the set-up that has been put in place. Generally these functions are held by the national central body dealing with procurement but they could also be located in other institutions (e.g. the Ministry of Economy, Ministry of Finance, etc).
procurement structure157 have a dispersed concentration of procurement functions
allocated to several institutions at various levels in their administrations.
At least eight countries158 have also introduced additional supporting bodies which
provide guidance and support relating to national public procurement policy and processes. Many MS also have distinct internal or external structures tasked with supervising and/or controlling the public procurement system. Most of the time, control is exercised by a national audit body (i.e. Court of Auditors or State Audit Office). Some of the newer MS have created specialised bodies within government to oversee supervision and control. Only Italy has taken advantage of the provisions contained in Article 81 of the Classic Directive and Article 72 of the Utilities Directive and established an independent Authority for the Supervision of Public Contracts (covering central and sub-central procurement).
Differences in organisation of public procurement across MS are present in many areas. For example the CPB was included in the 2004 Directives as an option, which with few exceptions
159 most MS have implemented. As with e-procurement, the
implementation of a legal option does not always lead to availability and use160. On
the other hand, other different arrangements for buying on behalf of other CAE have also been put in place, which are not necessarily considered CPBs in the sense of the Directives
161.
Moreover, while most MS have established CPBs, it is only the central government authorities' administrations which are obliged to use it. Other bodies may also be encouraged to use it but they are also permitted to establish other purchasing agreements. There is also a problem of insufficient coordination of centralised purchasing at the MS level.
The risks of this situation are perhaps best summarised by the 2010 OECD policy roundtable on Collusion and Corruption in Public Procurement
162: "Public
procurement frequently involves large, high value, projects, which present attractive opportunities for collusion and corruption. Regulatory requirements dictating particular procurement procedures can render the process excessively predictable, creating opportunities for collusion. [....] Finally the sheer quantity of goods and services that are contracted by the State creates monitoring difficulties and increases the likelihood that the public procurement process may fall prey to collusion or corruption."
levels of buying experience. These range from very large, centralised buyers to procurers for small towns or fire stations who rarely, if ever need to make purchases which fall under the EU rules. Often procurers for these organisations are not professionals they have limited training and experience and procurement is but one of several tasks they fulfil. Procurement rules are generally set out in guidance documents, and often practitioners will not know where the rules originate. They will not necessarily know about the EU or national legislation but when they do, they are often driven to adopt risk averse procedures, which may lead to sub-optimal outcomes, out of fear of the consequences of non-compliance. As mentioned earlier, the costs associated with pre-empting or addressing litigation are important elements in the calculation of cost efficiency of procurement. A recent survey, estimates that around 25% of the purchasers responding incurred some litigation costs when concluding contracts with values above the EU thresholds.
Confronted with the complex challenges implied by public procurement policy, some (generally smaller and newer) MS (e.g. Slovenia, Lithuania, Portugal) have established well resourced central procurement organisations, able to provide training and advice to individual CAEs. Other Member States have dispersed responsibility for the organisation of public procurement procedures across myriad CAEs who are often poorly resourced. This context is ripe for administrative error, and inconstant application of the principles and provisions of EU law. The limited of professional procurement training and advice in many countries may have resulted in errors, an increased risk of fraud and a less than optimal management of resources, which would leave considerable scope for further cost efficiency savings. Recent audits of projects funded by community funds have found around 40% error rates due to the wrong application of public procurement rules and in some instances, the incorrect transposition of the Directives into national legislation. According to the European Court of Auditors' annual report for the financial year 2009
"The non-respect of public procurement rules alone accounts for 43% of all quantifiable errors and makes up for approximately three quarters of the estimated error rate [for the Structural Funds]".
In the context of structural funds, according to the applicable rules163 the MS
receiving the funds have to set up a dedicated administrative structure for management, monitoring and controls. Having a compliant administrative structure in place is a pre-condition for receiving actual payments from the EU budget. The structure is composed of a managing authority which is the body designated to manage the operational programme; a certifying authority , which has the responsibility to certify statements of expenditure and applications for payment before they are sent to the Commission; and an audit authority which is a body independent of the first two and is responsible for verifying the effective functioning of the management and control system. Given that operating under these strict conditions, the error rate due to the misapplication of public procurement rules was 40%, it could be argued that the error rate would be even higher in the absence of such structures, as is frequently the case for the majority of public procurement contracts
-
164.For example a quick analysis of the contract award notices published in
TED in 2009 showed that 21% of all notices did not include price information (an obligatory field) and hence were non compliant, while for EU funded projects only 5% of notices were non-compliant from this point of view. Similar figures are observed for 2010 (22% of all contract award notices were non compliant, while in case of EU funded projects the figure was 6%).
Three major groups of weaknesses were identified by the DG REGIO audits:
· Inadequate assessment of bids;
· Absence of tendering or award of contract based on inappropriate tendering
procedure and award of supplementary contracts without competition; and
· Non-compliance with publication requirements.
An analysis of the infringement procedures launched by the Commission from 2005 onwards
165 also identifies the same range of issues and errors regarding
implementation of procurement policy. Apart for the general provisions on infringements proceedings and the control of transpositions the Commission (DG MARKT) has no specific legal basis for other systematic controls of implementation (like DG REGIO has in relation to Structural Funds implementation or DG COMP has to undertake market investigations in relation to merger controls and antitrust policy).
and high error rates identified by the Commission's audits are limited only to the application of cohesion policy projects. The analysis of infringements, which covered this wider population, showed similar problems.
8.3.5.4. Difference in monitoring arrangements
Other aspects of the evaluation showed that it is often difficult to assess whether particular public procurement or wider strategic goals are being achieved, since there is no systematic or consistent monitoring of these actions at national level. Monitoring at both national and EU level is important as it allows policy makers to track progress against objectives and either identify areas for further action in a timely manner, before a problem becomes severe or to identify areas of good practice and success which could be shared with other interested parties. Although the current Directives require MS to provide certain information to the Commission annually, this information is limited in scope and does not cover all the relevant policy areas. The expected uptake of e-procurement, which could systematically improve monitoring and audibility capacities due to the automatic registration of key data for all transactions has not yet occurred. Monitoring arrangements differ widely from country to country.
8.3.5.5. Integrity of public procurement
All stakeholder groups replying to the GP recognise that procurement markets are exposed to risks of favouritism and corruption. However, most stakeholders (excluding academic/legal experts) believe that the integrity of procurement should be addressed through national rather than EU legislation.
At present the EU rules do not cover the issue of conflicts of interest166. However, as
pointed out by ECJ case law conflict of interests constitutes objectively and by itself serious irregularities regardless of the parties involved and whether they were acting
in good or bad faith
-
167.Again, CAE and MS considering that national legislation in
this area is sufficient. A majority of business, civil society and legal experts would support a common European definition of "conflict of interest" and the introduction of certain minimum safeguards.
In a recent impact assessment carried out by DG HOME for the EU anticorruption package estimated that although globally the cost of corruption is estimated at 5% of
GDP: "[...] it has been estimated that the costs of corruption in the EU amount to around 1% of EU GDP ".
It is clear that only a small percentage can be attributed to public procurement, however, the same impact assessment stated that in Bulgaria: "It is thus estimated that the cost of organised public procurement corruption in terms of fiscal and public welfare loss ranges between 25 30% of the public procurement market. This suggests 0.7 billion euro losses due to public procurement misappropriations in 2007 2008 ".
Addressing these errors and the risk of fraud is important the evaluation has shown that following the rules and principles set out by the EU Directives translates into savings for the procurer which will be foregone under the practices identified above. Not only does public procurement become more expensive and inefficient, resulting in an immediate cost to society, but there may be other missed opportunities as the possibility to address other strategic issues and progress towards wider societal goals is also negatively affected.
8.3.5.6. Conclusions
Significant differences in the administrative organisation put in place by MS have led to inconsistent application, control and monitoring across the EU. This has resulted in errors, an increased risk of fraud and a less than optimal management of resources.
8.4. ANNEX 4 Summary table linking objectives with problems
The table presented overleaf shows the mapping between the problems and objectives identified for this impact assessment. In particular, it shows that the problem of missed opportunities can be linked to the drivers for all five problem areas, whilst the insufficient cost efficiency is related to the problem drivers for governance, scope and procedures (cells in table bordered by a dotted line). The national markets are being caused by drivers linked to the areas of governance, strategic and access (cells shaded in grey).
General problem/result: The internal market is not achieving its full potential for public procurement
General objectives:
Promote EU-wide competition for contracts (i.e. fair, non-discriminatory and level playing field for all suppliers, ensuring EU markets accessible to all EU firms) Deliver best value for money whilst achieving the best possible procurement outcomes for society (and hence, ultimately, making best use of tax payers' money)
-
-Aid the fight against corruption
Problems : Specific objective Operational objectives Problem drivers
-
a)ensure rules capture the appropriate actors and subject-matter of procurement Scope:
Complex rules defining scope and coverage
Problem = Sub-optimal cost efficiency of b) provide clarity and legal certainty with respect to said scope and coverage
public procurement leading to best value
for money not being achieved a) streamline and simplify procurement procedures to (i) reduce operational costs (ii) ensure proportionality and (iii) provide for more legal certainty Procedures:
Disproportionate and inflexible procedures
Specific objective = Improve the cost-
efficiency of EU public procurement rules
and procedures b) improve the flexibility of procedures to better respond to purchasing needs of authorities
Problem = Missed opportunities for a) ensure consistent application, controls and monitoring of public procurement policy and outcomes across MS Governance:
Different administrative models and capacities across EU
society
Specific objective =Take full advantage b) reduce errors and problems in complying with EU public procurement rules
of all opportunities to deliver the best
possible outcomes for society a) help public procurers to use public procurement to support other policy objectives in a legally compliant
and fair manner Strategic:
Uncertainty
-
&insufficient
Problem = National rather than EU provisions w.r.t. integration of strategic goals
public procurement markets
Specific objective = Create European a) simplify the rules and introduce instruments to increase the transparency of EU public procurement, opening up markets to more cross-border competition Access:
rather than national markets for Market access barriers: natural
and regulatory
procurement
8.5. ANNEX 5 Long list of proposals considered before defining Options169
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Introduction of additional measures to foster SME participation in public procurement through increased use of lots unders certain circumstances
Market access barriers; Disproportionate procedures
3 Hi Opinions divided ACC.LEGI.FACILIT
Alleviation of administrative burdens through self- declarations with regard to evidence for exclusion and selection criteria; winning bidder then provides evidence
Disproportionate procedures; Inflexible procedures; Market access barriers
4 Hi Everybody in
favour ACC.LEGI.FACILIT
169 During the drafting of proposals and internal consultation processes, several of the actions originally identified in this table were discarded. Where these actions fall within the options which form the preferred solution presented under this IA, they are highlighted in italics.
170 1 = low market size and low transaction impact; 5 = high market size and high transaction impact.
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Revise standard forms to reduce information requirements on CAEs Disproportionate procedures; Market access barriers;
Inflexible procedures
5 Hi General support ACC.LEGI.FACILIT
Inflexible procedures; Uncertainty and insufficient provisions w.r.t. integration
of strategic goals; Legal
uncertainty
(Optional) instruments to encourage pro-competitive procurement strategies Mixed opinions,
2 Med business slightly ACC.LEGI.FACILIT
in favour, CAEs (discarded)
slightly against
Disproportionate procedures; Market access barriers; Lack of clarity; Legal uncertainty
Improve mutual recognition of certificates, e.g. through greater use of e-Certis
Ability to
improve the
Action Economic functioning of
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Some support,
but solutions
proposed often
Measures to foster the innovation capacity of SMEs outside public Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
2 Med procurement ACC.LEGI.FACILIT
legislation (e.g.
financial support
through
subsidies)
Vast majority
agrees that
excessively strict
Legislative rules limiting excessively strict turnover requirements for proving financial capacity (to facilitate SMEs access) turnover Disproportionate procedures;
Inflexible procedures;
Market access barriers
requirements are
2 Med a problem for ACC.LEGI.FACILIT
SMEs. Less
unanimous
reaction to EU
level turnover
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Introduction of a European public procurement passport
4 Hi Generally
positive Market access barriers ACC.LEGI.FACILIT
List of possible requirements for selection of candidates made exhaustive
3 Med Neutral Market access barriers ACC.LEGI.FACILIT
(Question of
Introduction of additional measures to foster SME participation in public procurement through use of quotas quotas not
explicitly asked Market access barriers; Disproportionate procedures
3 Hi in Green Paper ACC.LEGI.ENFORC
because of doubts
if legally possible)
Impose mandatory use of lots for all contracts
5 Med Generally against Market access barriers ACC.LEGI.ENFORC
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Obligation to subcontract a certain share of the main contract to third parties
3 Med Mixed opinions Inflexible procedures;
market access barriers;
ACC.LEGI.ENFORC
Obligation to draw up tender specifications for high-value contracts in a second language
2 Lo Strong opposition from stakeholders
Market access barriers ACC.LEGI.ENFORC
Instruments to prevent the development of dominant suppliers (e.g. obligation to annul the procedure if only one or two valid bids received)
(Green Paper
2 Med replies not Market access barriers ACC.LEGI.ENFORC
conclusive)
Complex rules defining scope and coverage; Different models across Member States
EU definition of conflict of interest in public procurement
2 Med Mixed opinions GOV.LEGI.TARGET
Ability to
improve the
Action Economic functioning of
magnitude170 - the public Stakeholder
Link to problem driver(s) Option action assigned to
procurement views
market (Hi,
Med, Lo)
Different models leading to different public procurement capabilities being developed across Member States; Disproportionate procedures
Neutral;
New organisation of CPBs 4 Hi tempered by concerns for
GOV.LEGI.TARGET
SMES
Support notably
from business
and Civil Society
Safeguards to prevent, identify and resolve conflict- of-interest situations for minimum
2 Med standards at EU Complex rules defining scope and coverage
GOV.LEGI.TARGET
level, contracting
authorities and
MS more
sceptical
Stakeholders Different models leading to different public procurement capabilities being developed across Member States; Disproportionate procedures
Require Member States to improve knowledge sharing tools, assistance to CAEs and business, notably in cross- border context (use of IMI) strongly in favour
of
3 Hi professionalizing GOV.LEGI.TARGET
public
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
No support for
very dense and
coercive rules
Additional instruments to tackle organised crime in public procurement w.r.t anti-Lack of consistent application, controls and monitoring of public procurement outcomes across Member States
2 Med corruption
safeguards, most GOV.LEGI.ENHANC
stakeholders
think this should
be left to MS
legislation
Designation of national bodies
to control, monitor and supervise public procurement practice in Member States (with the tasks of monitoring structural problems + liaise with the Commission on this point + deal with problems in individual procedures/ complaints where necessary + annual implementation report)
No specific
question asked in
the GP, but in Different models leading to different public procurement capabilities being developed across Member States;
general strong
5 Hi overall support GOV.LEGI.ENHANC
for
professionalizing
public
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Introduction of criminal sanctions for certain violations of public
procurement rules Different models leading to different public procurement capabilities being developed across Member States;
2 Med Stakeholders GOV.LEGI.E HA
against (discarded)
Modify procedures by shortening time-limits Broad support Disproportionate procedures; Inflexible procedures
4 Med from CAEs; PRO.LEGI.DESIGN
business sceptical
Modify procedures to alleviate publication requirements (DPS, PIN) Disproportionate procedures; Inflexible procedures
3 Hi Some support PRO.LEGI.DESIGN
More flexible approach to the organisation and sequence of the examination of selection and award criteria, including allowing experience of staff to be taken into account in the award phase
3 Med Quite broad
support Inflexible procedures PRO.LEGI.DESIGN
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Allowing negative previous experience with one or several bidders to be taken into account.
3 Med Broad support Inflexible procedures PRO.LEGI.DESIGN
New rules to improve functioning of repetitive purchasing and aggregation techniques and structures (framework agreements, DPS, CPBs)
Some support, Disproportionate procedures; Inflexible procedures; Market access barriers
3 Hi tempered by concerns for
PRO.LEGI.DESIGN
SMES
Regulating the issue of substantial modifications of a contract while it is still in force
Support for
3 Med codification of Lack of clarity PRO.LEGI.DESIGN
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Introduce a rule that contracting authorities must have the possibility to terminate a contract e.g. after
a ECJ judgement in an infringement case
2 Med Slight majority in Lack of clarity; Legal uncertainty
favour PRO.LEGI.DESIGN
Stronger safeguards against anti-competitive behaviours in tender procedures, e.g. obligation to exclude bidders because of attempt of bid- rigging in the procedure in question
Lack of clarity; Legal uncertainty; Market access barriers
2 Med Mixed opinions PRO.LEGI.DESIGN
Replies to GP not
entirely
conclusive, but
Rules concerning attribution of exclusive rights
2 Lo for majority the
attribution of Market access barriers PRO.LEGI.DESIG
(discarded)
exclusive rights
can jeopardize
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Rules concerning the attribution of contracts on the basis of exclusive rights
2 Lo Support from
stakeholders Market access barriers PRO.LEGI.DESIGN
Safeguards to tackle advantages of certain bidders because of their prior association with the design of the project Disproportionate procedures; Inflexible procedures; Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
2 Med Mixed opinions PRO.LEGI.DESIGN
Mandatory e-transmission of notices Already used at
3 Med 93% - general Disproportionate procedures
PRO.LEGI.DESIGN
acceptance
Full electronic availability of tender documents from the moment of publication of notice
3 Med General Disproportionate procedures
Ability to
improve the
Action Economic functioning of
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Allow Member States to go further in imposing e- communication (clarify Member States ability to impose mandatory use)
Disproportionate procedures;
Lack of certainty;
Lack of clarity
4 Hi General support PRO.LEGI.DESIGN
Clarify appropriate authentication and identification solutions ensuring minimum standards and accessibility - for e- procurement
Disproportionate procedures;
Lack of certainty;
Lack of convergence
3 Hi General support PRO.LEGI.DESIGN
Slight majority in
Fully electronic communication imposed for
all (above threshold) procurement favour, but with
caveats w.r.t.
5 Hi readiness and Disproportionate procedures
PRO.LEGI.FLEXIB
need to address
existing
challenge
Generalise negotiated procedure
3 Hi Broad support Inflexible procedures PRO.LEGI.FLEXIB
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Specific rules for procurement by sub-central authorities (publication facilities: PIN) Complex rules defining scope and coverage; Disproportionate procedures;
4 Hi Some support PRO.LEGI.FLEXIB
Support from Uncertainty and insufficient provisions w.r.t. integration
of strategic goals;
Market access barriers
Elimination of the lowest price only criterion
4 Lo GOs; CAs and PRO.LEGI.FLEXIB
MS strongly (discarded)
against
Some support
Uncertainty and insufficient provisions w.r.t. integration of strategic goals;
Market access barriers
Elimination of the lowest price only criterion for certain
services from GOs with
3 Lo regard to social PRO.LEGI.FLEXIB
services, other (discarded)
stakeholders
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Allow MS to eliminate the lowest price only criterion for social services Questions not Uncertainty and insufficient provisions w.r.t. integration of strategic goals;
Market access barriers
3 Lo explicitly asked
in the GP (see: PRO.LEGI.FLEXIB
above)
Fully electronic communication imposed on CPBs
3 Hi Not discussed Disproportionate procedures
PRO.LEGI.FLEXIB
Modifications to the distinction between A and B services. (Some in favour,
4 Med but diverging on Complex rules defining scope and coverage
what exactly they SCO.LEGI.TARGET
Ability to
improve the
Action Economic functioning of
magnitude170 - the public Stakeholder
Link to problem driver(s) Option action assigned to
procurement views
market (Hi,
Med, Lo)
Majority in
favour of keeping
Modifications to certain exclusions (update, clarify). main concepts;
3 Lo some support for Complex rules defining scope and coverage
SCO.LEGI.TARGET
clarification
according to
case-law
Majority in
favour of keeping
Clarifications to definitions of certain procurers main concepts;
4 Lo some support for Complex rules defining scope and coverage
SCO.LEGI.TARGET
clarification
according to
case-law
Legislative rules at EU level regarding the scope and criteria for exemption of public-public cooperation.
Support for Lack of clarity; Complex rules defining scope and coverage
2 Med codifying case-SCO.LEGI.TARGET
Ability to
improve the
Action Economic functioning of
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
o support from
Regulate other aspects of contract execution (e.g. issues of guarantees, liability, ..) stakeholders Lack of clarity; Complex rules defining scope and coverage;
Inflexible procedures
3 Med should be left to SCO.LEGI.TARGET
national contract (discarded)
law
Support from
CAEs, civil Society and Uncertainty and insufficient provisions w.r.t. integration of strategic goals
Disproportionate procedures;
Complex rules defining scope and coverage
Specific features of social services taken more fully into account in EU public procurement legislation social service
4 Hi providers in
favour of taking SCO.LEGI.TARGET
into account
specificities;
business rather
against171.
171 General line of those stakeholders in favour of special regime: they claim 1. more flexibility + 2. possibility for CAEs to give stronger focus on quality criteria (enabling approach)
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Uncertainty and insufficient provisions w.r.t. integration
of strategic goals Disproportionate procedures; Complex rules defining scope and coverage
Specific features of social services taken more fully into account in EU public procurement legislation
-
-higher threshold Question of new
threshold for
4 Hi social services SCO.LEGI.TARGET
not discussed in
the GP
Specific features of social services taken more fully into account in EU public procurement legislation - very flexible procedures, leaving MS to define the procedures they think are useful, in full respect of principles of transparency and non- discrimination Support from
those Uncertainty and insufficient provisions w.r.t. integration
of strategic goals Disproportionate procedures;
Complex rules defining scope and coverage
stakeholders that
are in favour of a
4 Hi specific regime
for social SCO.LEGI.TARGET
services, see
comment in
general social
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
Option action assigned to
procurement views - Link to problem driver(s)
market (Hi,
Med, Lo)
Complex rules defining
Clarification of the exemptions for intra-group and joint-venture procurement scope and coverage;
2 Med Opinions divided SCO.LEGI.TARGET
Lack of clarity
Clarification and simplification of the procedure for examining requests for exemption for contracts awarded in sufficiently competitive markets (the current "Art. 30 Decisions")
Complex rules defining
2 Med General support scope and coverage; SCO.LEGI.TARGET
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
Option action assigned to
procurement views - Link to problem driver(s)
market (Hi,
Med, Lo)
Targeted exclusion of procurement made for the purpose of exploring for oil and gas
3 Med Generally supported Complex rules defining scope and coverage
SCO.LEGI.TARGET
Support from
Specific features of social services taken more fully into account in EU public procurement legislation - ensure that CAEs can choose the service provider on the basis of quality criteria those Uncertainty and insufficient provisions w.r.t. integration
of strategic goals Disproportionate procedures;
Complex rules defining scope and coverage
stakeholders that
are in favour of a
4 Hi specific regime
for social SCO.LEGI.TARGET
services, see
comment in
general social
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Question not
asked in that
detail in the Uncertainty and insufficient provisions w.r.t. integration
of strategic goals;
Disproportionate procedures;
Complex rules defining scope and coverage
Specific features of social services taken more fully into account in EU public procurement legislation - impose on CA the taking into account of quality criteria Green Paper, but
in general, strong
4 Hi opposition from SCO.LEGI.TARGET
CAEs and MS as (discarded)
regards
mandatory EU
obligations with
regard to societal
issues
Obligation for MS to allow cross-border joint procurement and develop a conflict of laws rule to determine the applicable law and jurisdiction
Inflexible procedures;
Market access barriers;
Uncertainty & insufficient provisions w.r.t. integration
of strategic goals
2 Med Broad support SCO.LEGI.TARGET
Radically modify the structure
of the Directives by abandoning division into works /goods / services
5 Med Mostly against Complex rules defining scope and coverage
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Radically modify the material scope of the Directives by excluding sub-central authorities
4 Med Mostly against Complex rules defining scope and coverage
SCO.LEGI.REDUCE
Radically modify the material scope of the Directives by exclusion of B services.
4 Med (Mostly against) Complex rules defining scope and coverage
SCO.LEGI.REDUCE
Some strongly in
favour (notably
Raise the thresholds 5 Med CAEs), others Complex rules defining scope and coverage
against (majority of business). MS SCO.LEGI.REDUCE
divided.
Complex rules defining scope and coverage; Disproportionate procedures;
Include the utilities in the Classic Directive
4 Med No support SCO.LEGI.REDUCE
Ability to
improve the
functioning of
Action Economic Stakeholder
magnitude170 - the public Option action assigned to
procurement views - Link to problem driver(s)
market (Hi,
Med, Lo)
Complex rules defining scope and coverage;
Disproportionate procedures;
Exclude the utilities from procurement rules altogether
4 Lo No support SCO.LEGI.REDUCE
Complex rules defining scope and coverage; Disproportionate procedures;
Extending scope to below thresholds procurement
4 Med No support SCO.LEGI.REDUCE
Favourable
opinion on
concept of LCC
Clarify the concept of LCC and explicitly allow the use from a lot of Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
4 Hi stakeholders; STR.LEGI.FACILIT
opinions split as
to how far this
should be
mandatory
Allow obligations on "what to buy" to be imposed at national
level Opposition from Uncertainty and insufficient provisions w.r.t. integration of strategic goals
3 Med CAEs and STR.LEGI.FACILIT
Ability to
improve the
functioning of
Action Economic Stakeholder
magnitude170 - the public
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Incentives/measures to further promote and stimulate innovation through public procurement - Promote increased use of performance related technical specifications
Uncertainty and insufficient provisions w.r.t. integration of strategic goals; Inflexible procedures
3 Med Stakeholders
sceptical STR.LEGI.FACILIT
Incentives/measures to further promote and stimulate innovation through public procurement - Promote increased use of variants Question not
explicitly asked Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
2 Med in Green Paper - STR.LEGI.FACILIT
no statistics
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Probably quite
broad support (Question not
asked, but
stakeholders have
identified a need
New procedure to support/foster use of innovation (Innovation partnership) for improving Uncertainty and insufficient provisions w.r.t. integration
of strategic goals;
Inflexible procedures
4 Med innovation-
friendliness, STR.LEGI.FACILIT
support for the
elements
resembled in the
new procedure
can be deducted
from replies to
the GP
Improve functioning of competitive dialogue notably through better protection of creative solutions Uncertainty and insufficient provisions w.r.t. integration of strategic goals; Inflexible procedures
3 Med Strong support
from business STR.LEGI.FACILIT
Ability to
improve the
Action Economic functioning of
magnitude170 - the public Stakeholder
Link to problem driver(s) Option action assigned to
procurement views
market (Hi,
Med, Lo)
Possibility for contracting authorities to explicitly require certain labels (certification schemes), but safeguard that equivalent labels must also be accepted
Question not
explicitly asked Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
2 Med in Green Paper - STR.LEGI.FACILIT
no statistics
available
Violation of obligations from EU environmental or social law or from certain international labour law provisions = ground for exclusion of bidders Question not
explicitly asked Uncertainty and insufficient provisions w.r.t. integration of strategic goals
2 Med in Green Paper -
no statistics
available (some
support)
STR.LEGI.FACILIT
Tenders which are abnormally low because of non- compliance with obligations from EU environmental or social law, including throughout the supply chain, must be rejected
Question not
explicitly asked
2 Med in Green Paper - Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
no statistics STR.LEGI.FACILIT
available (some
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Allow inclusion of factors directly linked to production processes in award criteria and technical specifications
3 Med Stakeholders Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
opinions mixed STR.LEGI.FACILIT
Different Member States models; Uncertainty and insufficient provisions w.r.t. integration of strategic goals
Require CAEs to use certain defined award criteria and / or technical specifications Opposition
3 Med notably from
businesses and STR.LEGI.ENFORC
MS
Different Member States models; Uncertainty and insufficient provisions w.r.t. integration of strategic goals
Permitting restriction to local
or regional suppliers
-
-in specific cases Support from
3 Lo CAEs, opposition STR.LEGI.ENFORC
Ability to
improve the
Action Economic functioning of
magnitude170 - the public Stakeholder
Link to problem driver(s) Option action assigned to
procurement views
market (Hi,
Med, Lo)
Favourable
opinion on
Mandatory use of life-cycle costing when determining the economically most advantageous offer concept of LCC
from a lot of Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
4 Med stakeholders; STR.LEGI.ENFORC
opinions split as
to how far this
should be
mandatory
Dropping the condition that requirements imposed by the contracting authority must be linked to the subject matter of the contract
Strong opposition
Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
4 Lo notably from
businesses and STR.LEGI.ENFORC
MS
EU level quotas in public procurement legislation to impose consideration of green, social etc. factors Strong opposition
from all Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
4 Lo stakeholder STR.LEGI.ENFORC
groups except
Ability to
improve the
functioning of
Action Economic
magnitude170 - the public Stakeholder
procurement views - Link to problem driver(s) Option action assigned to
market (Hi,
Med, Lo)
Obligations on "what to buy"
at EU level enshrined in policy specific legislation (environmental, energy- related, social, accessibility,
etc)
Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
4 Lo Stakeholders
opinions mixed. STR.LEGI.ENFORC
Incentives/measures to further promote and stimulate innovation through public procurement
-
-Obligatory use of performance related technical specifications
Uncertainty and insufficient provisions w.r.t. integration of strategic goals; Inflexible procedures
3 Lo Stakeholders
sceptical STR.LEGI.ENFORC
Incentives/measures to further promote and stimulate innovation through public procurement - Obligatory use
of variants Question not
explicitly asked Uncertainty and insufficient provisions w.r.t. integration
of strategic goals
2 Lo in the GP - no STR.LEGI.ENFORC
statistics
8.6. ANNEX 6 Detailed description of Headline actions
Table 25): Detailed description of Headline Actions under each legislative option
Option Headline Action Description of the headline action
SCO.LEGI.TARGET Higher threshold for social services , with a special regime for social services above this threshold There would be no change in basic thresholds, but higher threshold for social services , with a special regime for
social services above this
threshold. Above this threshold,
special light regime, with an
obligation of ex-ante publication of a notice would be introduced as compensation
for the higher
thresholds. CAEs would be allowed to choose the service provider on the basis of considerations linked to the specificities of social services, in particular to the quality of the service.
SCO.LEGI.TARGET Inclusion of all former B- services (except for social services) in the regular regime All former B-services (except for social services for which the directive provides a special regime, see below under strategic) would be covered by the regular regime. In practice, this would mean the abolition of B-regime as such (and a replacement of a complicated two-tier structure by a simpler one i.e. based on a special regime for social services- see: above).
Option Headline Action Description of the headline action
Coherent rules for the use of e- catalogues would be provided. The commission would be empowered to issue
interoperability standards
through comitology.
PRO.LEGI.DESIGN Increase use of electronic communications tools (e- procurement) The use of e-procurement tools would be promoted, for example thought: mandatory transmission of notices in electronic form, mandatory electronic availability of tender documents, CPBs would be bound to use fully electronic communication tools. CAEs would have to have access to DPS. MS would be allowed to make mandatory electronic communication where it is not yet mandatory by virtue
of the Directive.
PRO.LEGI.FLEXIB Greater freedom for CAEs to use negotiated procedure The use of the negotiated procedure with prior publication would be available for all contracts with certain safeguards (notably: documentation obligations, etc.)
PRO.LEGI.FLEXIB New lighter publication Sub-central contracting authorities would enjoy new lighter publication regime, by taking the advantage of leeway allowed by the GPA. For example, they would enjoy the possibility to use the prior information notice as a means of calling for competition and the possibility to set certain
regime for sub-central
Option Headline Action Description of the headline action
use of common EU methodology would
be mandatory whenever
established.
STR.LEGI.FACILIT Allow inclusion of factors directly Factors directly linked relating to production
linked to processes would be
production processes in allowed in award criteria and technical specifications. This would include socially
award criteria and technical specifications
disadvantaged people
involved in the production process to support the Social Business Initiative. However,
such approach would
exclude requirements too far away from the production process, such as requirement for the economic operator to build schools for the children of workers in the country of origin of the supplies (Fair Trade Premium) or general
Corporate Social
Responsibility.
STR.LEGI.FACILIT Introduce the "Innovation partnership" (a new, special procedure for purchases not yet available on the market) Special procedure for purchases which are not yet available on the market: competitive procedure to choose the developer, who would develop the product in cooperation with the contracting authority. To have an incentive to invest the supplier would also be allowed to directly supply the product/service, if the contracting authority
Option Headline Action Description of the headline action
ACC.LEGI.FACILIT Mandatory acceptance of self-declarations as prima- facie evidence for selection CAEs would be obliged to accept self- declarations as preliminary evidence submitted by bidders. Only once a successful bidder is selected, the CAE would require the winner to submit original documentation and / or to clarify the certificates and documents which were presented in the offer.
ACC.LEGI.FACILIT Introduction of a European Procurement passport EU public procurement passport could become
a tool for further
simplification of the procedures. EU public procurement passport would take the form of a standard document validated at the MS level, confirming that a bidder is compliant with certain frequently requested criteria e.g. certification that the firm has not been the subject of a conviction by final judgment or is subject of insolvency or winding-up proceedings, that the firm pays social and fiscal tax, etc. The Passport would have a limited validity of for example several months.
ACC.LEGI.ENFORC Impose mandatory use of lots for all above threshold contracts All contacts above the EU thresholds would have to be split into lots in order to facilitate the access of SMEs to public procurement markets. The proposed model would not foresee any possibility to waive such obligation, even if such compulsory subdivision into lots was technically difficult, expensive or for other economic reasons.
Option Headline Action Description of the headline action
GOV.LEGI.ENHANC Obligatory designation of New provisions that would aim at stronger
central national oversight body by Member States, with clear obligations on monitoring, ownership of MS in
enforcement of EU public
procurement rules, notably through obligation to identify appropriate structures. Also a direct answer to the IAS Audit Report asking for more ownership by MS in the application of EU procurement law. This national oversight body would have obligations on monitoring, enforcement and reporting. The annual reports of the oversight body could for example include reporting on SME success in public tenders. The oversight body could also be responsible for ensuring better
enforcement
and reporting
assistance to CAEs and
businesses in order to improve professionalisation of procurement, better knowledge sharing / knowledge management (e.g. via "knowledge centres"), although this role could also be fulfilled by a different body. Administrative cooperation between MS could be improved through the use of IMI for information exchange.
8.7. ANNEX 7 Detailed analysis of impacts of selected Headline actions
8.7.1. SCO.LEGI.TARGET - ew regime for all services and a lighter treatment for social
split into A-type and B-type services (74% and 26% respectively in value terms and 70%/30% in terms of the number of CANs).
The abolition of the current A/B distinction in service (a two-tier structure) could basically mean that one of four approaches is chosen:
(i) the distinction into A- or B- type services is abolished and all services are subject to the "full" regime (i.e. all services would become A-type ),
(ii) the distinction into A- or B- type services is abolished and all services are
subject to the "light" regime enjoyed currently by B-type services,
(iii) service contracts would be entirely excluded from the Directives.
Ad.(i): The first proposal, where all services would be subject to the "full" regime (using the current terminology, all services would become A-type services), would expand the scope of the "full" regime by around 41 billion. This move could however pose significant difficulties, as part of the current B-type services have little or even no cross-frontier interest, therefore expanding full provisions of the Directives to those selected services could be perceived as too burdensome and not adapted to services that are not tradable (e.g. so-called "services to the person").
Ad. (ii): Bringing all services to B-type status would be detrimental to those A-type services that are successful in cross-border procurement. Recent research shows that many of A-type services are relatively successful in cross-border procurement (e.g. Category 11:Managemen consulting services and related services with 10.4% direct cross-border ratio in volume terms in 2007-2009).
Ad. (iii): The impact of the fourth approach aimed at abolishing the two tier structure by the exclusion of all service contracts from the scope of the Directives would mean downsizing EU public procurement market by roughly 160 billion each year. Although a theoretical possibility, this measure should be ruled out immediately, as it cannot be regarded as a serious alternative - it is not supported by the stakeholders, would trigger important losses in transparency and undermine EU's credibility on the international level (including potential penalties under the GPA). Finally, the third proposal is not sustainable given the findings of the evaluation (i.e. that the benefits of the Directives outweigh its costs). As a consequence, the above measure will not be considered further.
less important174 than Category 25, as the latter constituted around 1/3 of value of all
B-type contracts awarded in 2007-2009.
Table 26): Cross-border procurement A and B services on the basis of contract value (2007-2009)
Service Category Direct cross- border Indirect cross- border through
affiliates
A-type services 2.8% 16.2%
B-type services 1.2% 12.1%
within B-type: 0.1% 0.6%
25: Health and social services
Total 2.4% 14.6%
Source: Rambøll study
As mentioned before, currently, social services are listed in Annexes B of the Directives therefore, when outsourcing social services via a public service contract, public authorities already enjoy considerable latitude with regard to the procedures to be followed. Nevertheless, some stakeholders claim that adaptations of the current rules are needed in order to take better account of the specificities of social services. There are in particular calls for higher thresholds for such services or a global exclusion of these services from the scope of the Directives.
According to estimations based on notices published in OJ/TED social services accounted for roughly 18 billion in 2009
Service category CPV codes Value [ % of the
million] total
volume
services
Category 25: Health and social services 79611000-0, and from 85000000-16,422.95 3.9%
9 to 85323000-9 (except
85321000-5 and 85322000-2)
TOTAL 18,716.26 4.5%
Source: DG MARKT estimates based on OJ/TED data
While analysing the volume of transaction related to social services, it is equally important to notice that of the 6.11 % of GDP spent by governments on health social security and education
176, only a marginal amount has been published in the OJ/TED.
The comparison of public expenditure by functions of government with contracts advertised reveals that around 94% of expenditure in the health or social services sector is not spent through contracts advertised in OJ/TED. A similar issue arises in the education sector, where 83% of expenditure seems not to be advertised (see:
Table 8 below).
Table 28): Comparisons between expenditure on works, goods and services by functions of government (based on COFOG data) and the value of publications in OJ/TED grouped by activities, in 2008
COFOG OJ/TED OJ/TED
expenditure estimated publications as %
[ million] publication of expenditure
[ million]
Health 563,884.20 36,316.12 6%
Education 129,784.80 21,556.80 17%
education, health care and social protection services are delivered already seems to effectively place most expenditure on goods and services in these sectors outside the scope of the provisions of the Directives. As a result, the proposed changes could have only limited impact on the provision of these services, as the majority of public spending in these sectors is done without the use of public procurement rules defined
in the Directives.
Finally, it is expected that more clarity with regards to the correct identification of the relevant service category could generally improve publication rates for services, especially for B-type services. Improving clarity and hence "user-friendliness" of the system would facilitate correct identification of these service types could rise the publication rates for services.
It is also worth mentioning that a slight majority of stakeholders support the idea of reviewing the distinction between A and B services
-
178.Most frequently repeated
arguments refer to the fact that some of the B-services might not merit differentiated/lighter treatment (for example restaurants, legal services). Stakeholders argued that the market in a number of sectors of B-type services is now developed and these should now be made A's (whilst new or emerging services could be classified as B, until the markets mature).
8.7.2. SCO.LEGI.REDUCE- General increase of EU thresholds
In order to analyse the impacts of a general increase of EU thresholds we focus on the principal three threshold levels (the remaining thresholds have been ignored for the sake of clarity of this analysis):
· goods and services purchased by central government ( 125,000),
· goods and services purchased by sub-central government ( 193,000) and
· works contracts for all contracting authorities ( 4.85 million).
Figure 27): Values by procedure, median and mean 2006-2010
ProcedureMedianMean
Restricted693 8 287
Negotiated712 6 672
Total390 3 141
Accel. Restr.496 3 045
Negot. w.o publ.356 2 279
Accel. Negot.360 2 218
Open353 2 181
(thousand)
Source: PwC study
Figure 28): Distribution of procedures and contract value (thousand euro increments)
100 %
Competetive dialogue
75 %w.o publ
50 %Negotiated
25 %Restricted
Open
0 %
123
Contract value (millions)
Source: PwC study
As a consequence, if thresholds were to be raised, the use of available procurement procedures would change, affecting most significantly the use of open procedure which is more frequent in the low end of the value range
180.
The hypothesis that open contest would be mainly affected by this change is confirmed by a simulation, where potential raise in thresholds levels (thee variants i.e. an increase by 20%, 50% and 100%) were modelled against the distribution of procedures. The results show that the open procedure would be used less frequently and will be mainly replaced by the use of restricted procedure. The use of negotiated procedure would also increase albeit at smaller levels. The effect would be the largest for works
Figure 29): Growth rates of use of procedures by increases in threshold levels (scenarios identified - increasing threshold levels by 20%, 50% and 100%)
Central governmentSub-central governmentWorks
+20%
Open
r i o
e na
+50%Restricted
S c
Negotiated
+100%
-5 %0 %5 %10 % 15 %-5 %0 %5 %10 % 15 % -10 %0 %10 %20 %
Source: PwC study
Less frequent use of open procedure might have negative impact on transparency of public procurement regime in general.
8.7.2.2. Impacts on the number and volume of transactions no longer covered
The effects of raising the thresholds can also be calculated in terms of the number of transactions carried out under the Directives, and the market volume covered by these rules. The outputs based on the three scenarios (i.e. increase by 20%, 50% and 100%) as presented below
182.
Figure 30): Impact on number of transactions and market volume by raising threshold levels (2009 est.) rates in percent levels (scenarios identified - increasing threshold levels by 20%, 50% and 100%)
Procurements impactMarket volume impact ()
12,8 %
Works13 %
9 %7,3 %
4 %2,9 %
Sub-26 %3,8 %
central15 %2,0 %+100%
doubled and 15% less notices in case of a 50% rise. As far as central government supply and services contracts are concerned, raising this threshold by 50% and 100% would decrease the number of notices published by respectively 12% and 22%.
To summarise, the above analysis shows that raising thresholds would reduce the size of the market covered by EU public procurement rules (by up to approx. 20 billion, if all thresholds were to be doubled).
8.7.3. PRO.LEGI.DESIG - Increase in the use of e-procurement
As presented in the 2010 Evaluation of the e-procurement Action Plan, the Commission supports the transition from paper-based to on-line procurement because it sees the following advantages:
Benefits for individual procedures: compared to paper based systems, e- procurement can help contracting authorities and economic operators to reduce administrative costs and speed up individual procurement procedures. In the current financial climate, such efficiencies could be very welcome, maximising the potential which can be obtained from limited resources.
Benefits in terms of more efficient procurement administration: the development of CPBs, often making extensive use of electronic procedures, can help to centralise costly procurement back-office functions and reap scale economies in procurement administration.
Greater transparency and better monitoring of procurement: by automating and centralising the flow of information about individual tender opportunities, e- procurement can also enhance the transparency and overall efficiency of public procurement, opening up markets to more competition and deepening the pool of competing suppliers, whilst at the same time improving spend management and overall planning.
Potential for integration of EU procurement markets: e-procurement reduces distance barriers and information gaps which could have reduced or discouraged cross-border participation in paper-based procedures. It should be underlined that, while e-procurement can overcome distance-related costs to participation in the procurement procedure itself, it will not change the relevance of distance or physical proximity in the actual performance of the underlying business transaction. An increasing number of procurements, for example the provision of services such as software, design competitions and helpdesks, can be provided from another country and e-procurement should be well suited to publicise, exploit and ultimately realise such opportunities.
The potential to reduce costs was promoted as a key incentive to encourage the switch to electronic procedures. Certain MS have turned it into an objective of their national strategy, such as Ireland where five of the quantitative targets of their national action plan were focused on costs.
Due to the lack of appropriate data, it is not possible at this stage to evaluate the reduction of costs of single procedures in the MS. E-procurement is expected to have initially increased the costs due to the necessary spending for the creation of platforms, but a dramatic decrease of costs was expected, once the structural costs had been absorbed. There is however a small but growing body of proof that savings are being realised as a result of e-procurement use (see: Box 3) below). Wider anecdotal evidence suggests that many contracting authorities and economic operators have made the switch-over to e-procurement and would not contemplate a return to paper based procedures. The ePractice
183 website gathers case studies
showing examples of MS (such as Austria, Spain, France or Romania) where the savings made through e-procurement exceed the investment and running costs. (for more detail see Annex VIII of report, which gives a broad overview of the situation by MS in terms of savings.)
Examples of savings and improvements
-
-Italian Emilia Romagna's agency Intercent ER offers e-procurement services including e- Marketplace, e- Catalogues and e-Auctions and is now the reference point for 539 administrations (90% of local agencies). In 2008 it processed transactions amounting to some 419 million, delivering efficiency benefits of 67.5 million and time savings of 45 man-years.
-
-The Austrian Federal Procurement Agency centralises purchases for federal authorities through e-procurement functionalities. In 2008 it reported savings of 178 million against a procurement volume of 830 million. Benefits seem to significantly outweigh the annual maintenance costs of 5 million, which are less than 3% of the savings.
-
-As of 1 February 2005, all contracting authorities in Denmark may only accept electronic invoices. This reform affects approximately 15 million invoices a year, and applies to the entire public sector, from ministries to nursery schools. The use of e-Invoicing is expected to save the public 100 million every year, on top of savings in internal administrative processes.
8.7.4. PRO.LEGI.DESIG - Improve tools for repetitive purchasing
Repetitive purchasing is used by contracting authorities to make purchases, repeatedly, over a certain period of time. It aims at streamlining and improving the timeliness and the effectiveness of the process of acquiring the goods/services/works needed. There are two main repetitive purchasing procedures foreseen by the
Directives: framework agreements and the DPS.
A `framework agreement' is an agreement between one or more contracting authorities and one or more economic operators. Its purpose is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged.
A DPS is a completely electronic process for making repetitive purchases, limited in duration and open throughout its validity to any economic operator which satisfies the selection criteria and has submitted an indicative tender that complies with the specification.
In addition to these two procedures, e-catalogues (electronic catalogues), are also a useful tool in the context of repetitive purchasing. An e-catalogue is an electronic document established by a supplier describing goods and services and their prices. It can constitute a tender, under certain conditions. In the context of repetitive purchasing, e-catalogues can be very useful as they allow suppliers to rapidly prepare an offer, while allowing contracting authorities to evaluate offers in a standard format.
The Directives could improve/simplify the use of repetitive purchasing procedures/tools by increasing clarity when running these procedures, by making them more proportionate and suited to contracting authorities' needs and by addressing their current shortcomings (risk of market closure for framework agreements, complex rules for running the DPS etc.). Simplifying and improving the use of these procedures would in turn optimise the use of repetitive purchasing, generating additional benefits for both contracting authorities and suppliers.
However, repetitive purchasing can increase the risk of market closure and concentration, if repetitive purchasing procedures favour the participation of a limited number of participants or the use of long term contracts. Repetitive purchasing can also restrict SME participation in public tenders if the value of the contracts is too high for SMEs to be able to compete.
8.7.4.1. Impacts of using framework contracts
Framework agreements prove to have lower costs than other procurement procedures; thus, increasing their use could reduce the average cost of running procurement procedures. According to the Evaluation "framework contracts have lower costs per contract than any other form of procurement. There are savings in frameworks for both authorities and for firms. CAEs costs are about 75% of the average procedure; firms' costs are about 83% of the average". Lower transaction costs are one of the reasons why the use of framework agreements has increased rapidly. Between 2006 and 2009 the number of framework contracts has increased by almost a factor of four
-
184.According to the Evaluation, framework agreements also
perform better than other procurement procedures in terms of the number of bids that they attract.
The lower transaction costs and the higher level of competition when setting up a framework agreement should be balanced against the much lower level of competition that exists at the time of each contract under the framework.
Table below summarises compares the duration of the award stage of procurement procedures (i.e. the number of calendar days from the deadline for the receipt of tenders to award of a contract). As Figure 31) shows, aggregated procedures are usually more time consuming than those which do not use the below mentioned techniques.
Figure 31): Duration of procedures in calendar days (award stage) by aggregation techniques
The GP responses and the Evaluation show that many stakeholders and MS are concerned that framework agreements may close particular markets to competition for significant periods of time and that the size of the contracts may put them well beyond the ability of SMEs to bid for them. Indeed, the evaluation shows that framework contracts are twice the value of regular purchases, increasing the risk of low SME participation.
Thus, the use or the design of framework agreements should be amended to prevent more effectively the potential risk of market closure and to increase competition and SME participation.
8.7.4.2. Impacts of increasing the use of the DPS
As a fully electronic procedure for repetitive purchasing, the DPS can reduce transaction costs and increase transparency for contract award. Moreover, the DPS, contrary to the framework agreement, is open to new participants throughout its duration, which increases competition and favours SME participation. Thus, increasing the use of DPS can increase the openness of particular markets to competition, while providing the advantages of repetitive purchasing described above.
However, the costs of running a DPS are high. According to the Evaluation running a DPS is the most expensive procurement procedure
-
185.Moreover, almost 40% of the
respondents to the Green Paper on e-procurement perceive the current provisions on DPS as complex and not adapted to contracting authorities' and suppliers' needs. They call for clearer provisions on the DPS and simpler rules for running it.
The Evaluation shows that so far the actual use of the DPS has been marginal. This low use also seems to demonstrate a misunderstanding of the provisions. So far, 10 MS have added further provisions, clarifying the conceptual framework, the different stages and scope of a DPS, which may actually show that there was indeed some lack of clarity in the original provisions on DPS.
There are a number of providers of e-catalogue systems, but the underlying data or structures are not interoperable or easily interchangeable between these systems (cf. page 108 of the Evaluation). This can complicate the task of suppliers who have to use different e-catalogue formats. Moreover, if contracting authorities do not make available the format of e-catalogues for their suppliers or if the cost of establishing an e-catalogue is too high, SME participation in e-procurement can be restricted
186.
Thus, European legislation should clearly define e-catalogues, the conditions under which they may be used and possibly common formats to be applied to ensure interoperability and easy access by suppliers.
8.7.5. PRO.LEGI.FLEXIB - Permit more negotiations
One of the headline actions identified under PRO.LEGI.FLEXIB option would be to permit more negotiations, for example by putting the negotiated procedure with publication on equal footing with other procedures in the Classic Directive. Impacts of such proposal would be significant, as until now the use of negotiated procedure was an exceptional method of awarding a contract which could be used exclusively under specific circumstances (i.e. a list of these circumstances was enumerated in Art. 30 of the Classic Directive).
Greater freedom to use negotiations was basically supported by the majority of respondents to the GP, across all stakeholders groups
-
187.The main argument
presented in the GP consultation was that negotiation would permit the needs of CAEs to be addressed more efficiently
-
188.This possibility is also compatible with the
GPA.
8.7.5.1. Impact on the costs of procedures
The negotiated procedure is less expensive than open and restricted procedures, as it attracts less competition (so the global costs are lower due to lower costs for businesses). The total cost of a typical negotiated procedure is around
26'000
compared with around a thousand euro more in the open contests and almost 42'000
pay higher prices per purchase and the previously mentioned benefits of lower transaction costs may level off (to some extent).
Figure 32): Typical cost of a procedure [in '000]
Total5.522.4
Negotiated5.820.3
Costs for authorities
Costs for firms
Restricted9.032.9
Open5.122.4
5.010.015.020.025.030.035.040.045.0
Source: PwC study
8.7.5.2. Impacts on competition
If negotiated procedure becomes more frequently used due to the introduction of legislative changes foreseen under option PRO.LEGI.FLEXIB, this might have negative impact on competition as the typical negotiated procedure attracts fewer tenders than the corresponding open procedure.
Figure 33): Number of bids received by procedure and technique (mean)
highlighted other effects. The econometric analysis thus investigated which effects can be uniquely attributed to each explanatory variable and showed that negotiated procedures would, holding all else equal, receive less offers than the open procedure (by roughly 2.2%). The results of the regression are presented on Figure 34) below.
Figure 34): Estimated impact of type of procedure on number of offers
Impact on # of offers
Negotiated vs Open-2,2
Restricted vs Open-0,6
Framework vs non-...0,8
EMAT vs price0,7
EC funded-0,3
e-auction0,5
Joint purchasing0,4
Source: PwC study
8.7.5.3. Impacts on the duration of the award stage
While analysing economic impacts the introduction of unlimited right to use the negotiated procedure with publication, we should mention a draw-back concerning its lower time-efficiency when compared with the open procedure.
Figure 35): Time from the deadline for the receipt of tenders to award of a contract in days, by procedure
Competitive Dialogue245
business uncertainty (as they have invested resources in bidding and do not know if they were successful or not).
8.7.5.4. Impacts on the costs of procedures
In 2009, in the utilities sectors the negotiated procedure with publication (which under the Utilities Directive is a standard procedure) was used in 43% of awarded contracts (see: Figure 36).
Figure 36): The use of procedures in the utilities sector in 2009 (based on the number of CANs)
100%
6%
90%
80%
38%Restricted
70%
60%Open
50%
40%Negotiated with competition
30%43%
Negotiated without competition
20%
10%
12%
0%
100%
Source: DG MARKT based on OJ/TED data
In the same year, this procedure was used only in 4% of notices published in the classical sector. If we assume, that after the proposed legislative revision the use of negotiated procedure with publication in the classical sector would become similar to the utilities sector (i.e. it would rise from 4% to 43%), this would mean that for around 47,000 transactions yearly, costs of public procurement procedures would be lower by 1,200, hence the global costs would diminish by roughly 56 million per year.
Table 29): Value of direct cross-border procurement by procedure [in %] in 2007-2009
Procedure Direct cross-border Direct cross-border
[%] [%] -
Classic Directive Utilities Directive
Open 2% 5%
Restricted 4% 2%
Negotiated with publication 4% 10%
Negotiated without publication 6% 11%
Accelerated restricted 3% -
Accelerated negotiated 23% -
Competitive dialogue 1% -
Source: Rambøll study
The use of negotiated procedure was also identified as a significant factor having positive influence on direct cross-border procurement. In a model that was analysing factors from the buy and sell side, the effect coefficient of the use of the negotiated procedure as compared with the open procedure was estimated at 46.3% (i.e. the chance of direct cross-border award if the negotiated procedure is used are 46.3% higher than if the open contests was used), see: Figure 37) below.
Figure 37) Factors with influence on direct cross-border procurement
Utilities vs. Classical Directive168,6%
Specifics of
contractSupplies vs. works269,1%
If the above relationship is sustained after the introductions of legislative changes in the Directives, unlimited right to use the negotiated procedure with publication should positively influence cross-border penetration in public procurement markets.
8.7.6. PRO.LEGI.FLEXIB - ew lighter regime for sub-central authorities
In direct response to concerns that current procedural requirements impose disproportionate costs on CAEs and suppliers, efforts could be made to design a lighter procedure based on periodic announcements of planned procedures or a constantly updated poster-board of current procedures. Such approaches could also maintain some common element of transparency to sustain wide supplier involvement, competition and improved procurement outcomes. Designing a procedure that delivers meaningful procedural benefits while meeting existing international requirements would be challenging. One area where there is still some room to manoeuvre in terms of the "fit" between the current GPA requirements and the current EU rules, is the regime applied to sub-central authorities a market representing around 33% of CANs (approx. 45,000 p.a.) and worth some 116 billion p.a. (28% of total).
Table 30): Economic importance of sub-central authorities procurement -
Number of CANs removed (% of CANs ) Value of CANs Internat. conse quences Comments
removed (% of
total value)
Sub-central authorities 45,000 (33%) 116 billion (28% ) Yes Could be more "other"
or "bodies governed by public law" not counted
Source: DG MARKT estimates based on OJ/TED data
Due to limited room to manoeuvre in terms of the "fit" between the current GPA requirements and the current EU rules, the new lighter regime would be available to sub-central authorities only i.e. a market representing around 33% of CANs (approx. 45,000 p.a.) and worth some 116 billion p.a. (28% of total) based on 2009 data (see overleaf).
Figure 38): Shares in the number of CANs and value of procurement published in OJ/TED in 2009 by type of authority [in %]
35%33%
30%28%
25%
20%21%22%
20%19%18%
number
14%16%
15%value
10%9%
5%
0%
CentralSub-UtilitiesBodyOther
centralgoverned
by public
law
Source: DG MARKT estimates based on OJ/TED data
8.7.7. STR.LEGI.FACILIT - Directly linked externalities taken into account
If the need for selection and award criteria to have a strong, objective link to the object of contract purchase were to be weakened it would be necessary to ensure safeguards to avoid the imposition of discriminatory criteria and uphold treaty principles. For example one could use sustainable criteria that are not related to the physical characteristics of the product but only to the process by which it had been produced. Such criteria might however increase the costs and time taken for CAEs, particularly in the tasks of drafting specifications and evaluation of offers. Again, they might need to invest in additional training, or the use of experts, to achieve the required level of knowledge.
26 of the 30 EEA MS have targeted specific product groups (in general, some or all of the product groups for which the Commission has established criteria) in their action plans. Construction and transport are among the most common product groups. These, together with Office IT equipment, make up a considerable proportion of the total value of contracts awarded above the thresholds amounting to more than 100 billion. Construction and transport have been identified in the 2011 European Energy Efficiency Plan as having the greatest energy saving potentials. They are thus in a strong position to meet national targets.
· If all IT purchases in Europe followed the example of Copenhagen City Council
and the Swedish Administrative Development Agency, energy consumption would be cut by around 30 terawatthours roughly the equivalent of four nuclear reactors.
· £40.7 million (47.2 million) could be saved in the UK if the proposed
Government Buying Standards (GPP criteria) are applied by all central government departments and executive agencies, according to a cost-benefit analysis which monetised the potential impacts.
· CO2 emissions would be cut by 15 million tonnes per year if the whole EU
adopted the same environmental criteria for lighting and office equipment as the City of Turku, Finland reducing electricity consumption by 50%.
8.7.8. STR.LEGI.FACILIT - Innovation partnership
Pre-commercial procurement is considered as a well-suited instrument for promoting innovation by a large majority of respondents to the Green Paper consultation. Most stakeholders are also clearly in favour of further measures to promote and stimulate innovation through public procurement and have suggested that more widespread use of the competitive dialogue, design contest and in particular the negotiated procedure, as well as a wider allowance of variants and performance requirements in technical specifications could be helpful.
According to a recent survey of contracting authorities, 48% seek innovative products, solutions or services in their tender documents on at least some occasions;
7% indicate that they aim to do this as much as possible and 10% indicate that they
do so regularly
190.
Procurement officers have to be particularly experienced in order to encourage innovative solutions without restricting competition. The difficulty comes from the need to evaluate and compare different solutions or products at an early stage, while they are still far from entering volume production. Of the survey participants 55% believe the procurement procedure to be more complex if innovation-promoting requirements are included in calls for tenders.
8.7.9. STR.LEGI.E FORC - Quotas in strategic procurement
Most stakeholder groups, including businesses, public authorities and Member States, which responded to the GP consultation are against introducing obligations on "what to buy" in EU public procurement rules.
Most frequently raised arguments against such obligations are the fear of too much interference from the EU in the decisions of public purchasers, increased complexity of the legal framework, the risk of affecting contracting authorities' ability to adapt their purchasing decisions to their specific needs, risks of price increases and of disproportionate administrative costs for public purchasers and businesses, particularly SMEs.
MS have already established national action plans (NAP) in order to set a (generally non obligatory) targets for increased levels of green public procurement within certain groups of products. These NAPs have not yet been evaluated in most MS and it is not clear whether they are having a significant impact on contracting authorities' behaviour. Establishing mandatory quotas would seem premature while the effectiveness of voluntary measures has not yet been assessed.
Imposing the use of criteria for strategic goals such as environmentally sustainable or socially responsible procurement for a certain percentage of purchases would provide no incentive for contracting authorities to consider which of their purchases could make the greatest contribution to achieving a particular strategic goal at least cost to
society.
8.7.10. ACC.LEGI.FACILIT - European public procurement passport
The European public procurement passport may be defined as a "certificate of certificates" issued by a trusted agency in a MS which includes in one single document a statement for each piece of evidence commonly required of an economic operator wishing to participate in a call for tenders.
· a binary positive or negative mark (e.g. Y or N) for all those statements that certify the presence or absence of a given requirement (e.g. "statement of compliance with Social Security obligations");
· structured information to document specific data for all the certificates that describe more complex situations (e.g. the total annual turnover in a balance sheet).
A passport certificate has a validity limited in time. Any CAE in the EU has to accept in procurement a passport certificate issued by any EU PA as long as the certificate is not expired.
8.7.10.1. Implications
The Passport model is essentially a new administrative concept and business model rather than an e-procurement application. In fact, it can entirely be enforced using traditional paper and mail communication.
However, it simplifies to a very large extent the automation scenario because it lays the foundation for a business document (the Passport Certificate) that is structured in a consistent manner and that is issued by one specific body in each MS that everybody knows and has access to. This simplifies to a very large extent the networking concerns.
In addition, by decoupling the evidentiary procedure within procurement and the actual request of traditional certificates from the National issuers (which remains indispensible), the EU-level automation scenario is freed from the nightmare of a CAE having to collect electronic evidence from the National issuers, which has proved extremely unrealistic so far (and probably will be so for many years to come.)
As pre-requisite for the model to work effectively EU law needs to define unequivocally the evidence that CAEs may ask for. e-Certis would form the basis for this.
-
4.Cross-border recognition of certificates and attestation would no longer be an
-
issue because CAEs are bound to accept the Passport Certificate coming from EU recognised bodies (i.e. the PA);
-
5.The model would be implemented supporting any National infrastructure as is.
The EU regulatory / legislative jurisdiction is just limited to the relationship between a CAE and a PA, leaving with the MS the responsibility to define the model for requesting, documenting and obtaining a Passport, as well as to define rules to set up and run the national PA. Countries that have implemented e-Certificates and e- Attestation solutions (e.g. VCD-based) would take on board all their own established assets. (The task of collecting certificates and attestations issued within a country is shifted from the contracting authority to the PA that will use all the mechanisms and infrastructure already in place to do so). This would enable to seamlessly support in cross-border applications very different maturity models - MS that are more advanced in the "dematerialisation" of certificates will apply very efficiently the business model without being affected by the delay that may occur in other MS.
Downsides of the solution:
-
1.MS are requested to set up a new public service (the PA) either as an entirely
-
new body or as a specific division of an existing body;
-
2.The workload for the PA would be quite significant, receiving a great deal of
applications to be examined plus renewals each time the passport certificates expire.
8.7.11. GOV.LEGI.TARGET - ew organisation of CPBs
Through the aggregation of demand CPBs could significantly diminish costs of procedures. As mentioned before, one for of aggregated purchasing running a framework agreements is associated with lower cost than running "standard" restricted or negotiated procedures
-
191.However, procurement techniques that involve
aggregation usually take longer to award than non-aggregated procurement processes
8.7.12. GOV.LEGI.E HA C Oblige Member States to identify national authority in
charge of implementation, control and monitoring of public procurement which reports annually on performance
8.7.12.1. Current situation
All MS have an audit system on public procurement and contracting authorities. Audits are not necessarily focussed on the proper application of EU public procurement rules, but include in most cases a check list on the respect of public procurement national rules. In many MS this ex-post control is already flanked by ex-ante control or advice. However this is not always done in a structured and similar way in all MS.
Consultations with the Member States 193 show that Member States consider that
their own surveillance of their CAEs is currently too weak. Many Member States admit that there are still too many failures which could have been avoided if the structural weakness had been addressed in advance.
According to the most recent overview conducted in 2010 by the PPN and including institutional aspects, at least 17 MS already have a body in charge of legal oversight, legal advice or technical advice to CAEs. The establishment of this type of supporting body, endowed with greater or lesser powers depending on the local situation, has already been expanding across MS on their own initiative, demonstrating the strong demand for consistent advice, ex-ante control of respect of public procurement rules (at least at national level) and for independent and objective opinion on the functioning and performance of procurement policies.
Currently, as discussed in the problem statement, insufficient expertise in the preparation of public procurement contracts leads to the bad drafting of calls for tender and inefficient management of the various phases of the procurement procedure. Whilst the 2011 evaluation stated that litigation costs are overall a minor part of procurement costs, there is wide agreement that litigation, and the fear of incurring it is a major factor influencing the behaviour and choices made by CAEs and businesses.
8.7.12.3. Technical support
To-date technical support is provided by either the existing oversight bodies or by other public bodies with a specific sectoral mission. In this area there is a need to systematise and better structure legal advice and expertise.
An OECD study on centralised purchase confirms the added value of CPBs in providing additional and robust legal expertise, economic advice and detailed market knowledge. For instance, Consip has a research department which can consider the strategic importance of the evolution of markets for IT products and services in the procurement field. This study also notes that public procurement must become more professional; not only because of the changing legal environment, but because of the increasing number of policy objectives it is being used to serve in the current context.
In principle, such advice could equally be provided via the "knowledge centres" being proposed or by the national oversight body.
CAEs constantly face the need to respond to evolving markets and procurement can require specialised skills either from an economic or from a technical or legal point of view. Some forms of procurements which serve to satisfy modern society needs are very sophisticated (e.g. Competitive dialogue or PPPs). A 2008 UN study ("Guidebook on promoting good governance in PPPs") demonstrated the need for sound governance for PPPs and insisted that such contracts are challenging because of the skills needed all along across life (from preparation to negotiation to management of the project). The study found that the vast majority of the CAs have no such skills and need private consultants, which may generate considerable costs.
It is interesting to consider the example provided by Finland during a CCMP discussion (May 2011) where it mentioned a hot-line intended to provide assistance in the context of EU co-financed contracts. Finland indicated that a small help-desk unit costs to the state 200.000 (according to the minutes of the meeting), showing that structures delivering positive impacts can be put in place without incurring major cost.
put in place would need to be adapted to individual circumstances and existing provision. It would not be proportionate to dictate a "one size fits all" solution.
8.7.12.5. Possible impact of creating oversight bodies (back of the envelope calculations)
An initiative to establish oversight bodies in all MS would have the most significant impact on those MS that are currently without any centralised body carrying out such oversight. For Member States where such bodies already exist, the impact would be limited, consisting mainly of adjustment of an institutional nature due to the need to adapt and probably complete the range of activities and powers or to ensure independence, from a tutelary ministry.
Little information is publicly available on the costs incurred by MS with a body or department specifically in charge of public procurement. It would appear that the staff involved at present ranges from 25 to 200 people according to the exact tasks and size of the MS concerned (e.g. 20 people in small units like SE or BE or 200+ in bigger structures).
The number of staff involved in the largest CPBs (which also function as knowledge centres ranges from 100 to 900 people (with a rough average of 250 people). Assuming that MS will adopt a centralised structure to ensure technical assistance to CAs, financial and administrative burden would be probably equal to a medium-size CPB. Here we assume that implies an additional staff of around 150.
Based on an average monthly cost of labour of 2,266194 (Eurostat), and assuming
that all Member States will set up completely new structures for an oversight body, containing 150 staff, with an additional 50% to cover overhead costs, the estimated total cost would be around 165 million per year across EU. These figures are very rough, and could be easily criticised - the staff cost is low and does not assume any management structure, but the number of staff is perhaps high so there may be some "netting out".
However, such oversight bodies should generate savings and benefits195
assessment of bids (40%); absence of tendering or awards based on inappropriate tendering procedures and award of supplementary contracts without competition (34%); and non-compliance with publication requirements (22%). The same audit identified the causes of errors to be the weak management and control systems at the level of managing authorities/intermediate bodies and the lack of administrative capacity and knowledge of the public procurement rules, both at the level of the managing authorities and at the level of contracting authorities. Similar findings were confirmed by the European Court of Auditors, in its 2009 Report. 43% of errors were attributable to public procurement, which represented three quarters of the total estimated error rate of 5%. This would imply that the error rate corresponding to public procurement irregularities is of 3.75%.
Considering that the oversight body should reduce at least the errors due to the wrong choice of procedure and inadequate publication, a rough estimate of savings would be around 360 million
198 across EU. Compared to the costs of setting up and
running the structures, estimated at 165 million, this would result in a net saving of around 200 million. A reduction in errors and a potentially increased compliance rate could also lead to a reduction in the number of infringements, which would generate further savings.
8.8. ANNEX 8 Background data to support the analysis of impacts
8.8.1. Comparison between above and below EU-thresholds procurement
In a recent survey, CAE have been asked about perceptions concerning comparisons between above and below EU-threshold procurement. Most purchasers have seen time and costs as being higher in above-threshold procurement (see: Figure 39).
Figure 39): Comparison of above versus below EU threshold procurement (replies by CAEs)
OpenRestrictedNegotiated
Time process32% Time process27% 28 %Time process38 %28% 31%
Cost process23% Cost process14% 26 %Cost process27 %22% 18%
Overall, authorities consider that the above threshold procedures are more or much more costly than below thresholds (e.g. 37% in the open procedure versus 13% who responded that below threshold were more costly). A large majority of respondents consider that the above threshold procedures take longer to complete (e.g. between 59% in the open procedure and 66% in case of the restricted procedure).
Whereas firms are concerned, their perceptions of the differences between above and below threshold procedures are more attenuated, however still more respondents see the latter as less time consuming. Most firms find the cost of procedures similar (see: Figure 40).
Figure 40): Comparison of above versus below EU threshold procurement (replies by firms)
OpenRestrictedNegotiated
Time process23% 12% Time20% 18% Time21% 13%
Price weight20% 10% Price20% 8% Price20% 10%
Cost process19% 10% Cost19% 15% Cost21% 11%
No. of bidsNo. of bids21% 5% 17% No. of bids11% 13%
Quality weight10% 18% Quality6% 11% 14% Quality4% 11% 19% 8%
Transparency 13% Transparency 18% 6% 17% Transparency 17% 4% 12% 11%
Risk of complaints15% Risk of complaints16% 13% Risk of complaints10% 5% 15% 15% 11%
Fairness11% 18% FairnessFairness15% 3% 15% 7%
Efficiency7% 16% Efficiency16% 8% 20% Efficiency16% 3% 19% 14% 7%
Bids from abroad15% 15% Bids from abroad13% 16% 10% Bids from abroad8% 16% 14% 9%
0 %25 %50 %75 % 100 %0 %25 %50 %75 % 100 %0 %25 %50 %75 % 100 %
Much less than for below thresholdLessNo differenceMoreMuch more than for below threshold
Source: PwC study
Perceptions of higher level of competition in above EU thresholds can be observed across both types of respondents (CAE and businesses).
8.8.2. Comparison between above EU-thresholds procurement and private procurement
Figure 41): Perceived timing and cost of above EU threshold public procurement compared with private procurement survey among firms
OpenRestrictedNegotiated
Time process27% Time process32% 27% Time process31% 26% 24%
Cost process27% Cost process30% 26% Cost process32% 22% 25%
Transparency Transparency 26% 14% Transparency 24% 11% 19% 10%
Risk of complaintsRisk of complaints17% 21% Risk of complaints19% 11% 16% 14%
Price weight13% 23% Price weight13% 16% 26% Price weight12% 16% 26% 7%
Fairness8% 17% 24% Fairness9% 5% 19% 26% Fairness8% 4% 19% 24% 7%
No. of bids4% 16% 22% No. of bids10% 4% 17% 24% No. of bids11% 2% 13% 15% 7%
Quality weight9% 16% Quality weight18% 8% 5% 19% Quality weight16% 8% 5% 24% 11% 4%
Efficiency15% 23% Efficiency17% 6% 16% 29% 18% Efficiency7% 10% 30% 16% 9%
Bids from abroad12% 18% Bids from abroad11% 6% 16% 15% Bids from abroad16% 3% 6% 16% 9% 6%
0 %25 %50 %75 % 100 %0 %25 %50 %75 % 100 %0 %25 %50 %75 % 100 %
Much less than private sectorLessNo differenceMore Much more than private sector
Source: PwC study
8.8.3. Litigation costs
According to a recent study, about 350'000 person days is spent annually across Europe on managing complaints and litigation for government authorities
199.
Multiplying the above estimate by average daily labour costs200 provided by
Eurostat, we arrive at around 54 million of cost per year.
It is important to notice, that these costs refer to the CAE only. Much higher costs can be incurred by firms, which frequently seek legal assistance and finally make a decision not to lodge a claim against CAE (as they take into account reputational risks linked to such action). These costs are very difficult to track as they do not appear in statistics on number of legal cases opened / closed, etc. To estimate such cost we base our calculation on input data of an average number of bids submitted per invitation to tender (i.e. typically 5.4 bids). Apart from the winner, we assume that the remaining 4 plus unsuccessful bidders may seek legal advice to decide whether or not the award decision is worth contesting. If we assume the worst-case scenario i.e. that in all CANs
To summarise, if public procurement regime was simplified with regards to rules defining its scope, up to around 140 million of litigation and legal advice costs could be saved per year by both CAEs and firms (see: Figure 42).
Figure 42): Estimated annual costs of litigation and/or legal advice in million
54.05
CAEs
firms
85.25
Source: DG MARKT estimates
As far as public authorities are concerned, diminished costs of legal assistance associated with avoiding (perceived) legal uncertainty, reducing risk and dealing with legal challenges could in principle have certain positive budgetary consequences (i.e. generate budgetary savings).
8.8.4. Costs of procedures
The introduction of unlimited right to use the negotiated procedure with publication of a CN could generate some savings in terms of cost-efficiency of procedures, as the negotiated procedure is globally cheaper than the open procedure (respectively 26'000, compared to 27'200 per procedure, see: Figure 43 below). It is however necessary to underline that the global lower cost for the negotiated procedure is driven by the fact that it attracts less competition
Figure 43): Typical cost of competition
Authorithy ('000)+(Firm ('000)*Bids)=Total per competition ('000)
Works7,2 4,8 5,55,3 3,1 3,87,8 5,3 5,948,2 21,3 27,9
Supplies Services
Open5,1 9,0 5,83,5 6,1 3,96,4 5,4 5,227,2 41,7 26,0
Restricted
Negotiated
Frameworks5,43,25,523,0
Total5,53,85,927,9
Source: PwC, Ecorys, LE
If we look at the global calculation (knowing that the negotiated procedure typically attracts less bids), it seems that a general permission to use the negotiated procedure could generate savings in the total costs of procedures.
8.8.5. SMEs impacts
As has been discussed above, the role of SMEs in public procurement is very important. Throughout the course of this Impact Assessment and the various supporting studies, care has been paid to identify issues of particular importance to SMEs. In particular, a specific study was conducted in 2010 that focused on SMEs' access to public procurement markets
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205.The GP consultation asked a number of
questions addressing issues affecting SMEs and start-ups and responses were received from several SME organisations. Similarly the e-procurement GP asked
"What further steps might be taken to improve the access of all interested parties, particularly SMEs, to e-Procurement systems? ". Two SME organisations replied, as did seven chambers of commerce whose members would be likely to include SMEs.
The Commission has made a clear commitment to support and promote the interests of SMEs. The importance of this policy and the desire to make sure that these objectives are met is echoed in the general objectives of public procurement policy, which set out to ensure a fair and level playing field, where markets are opened to all in a non-discriminatory manner. In addition, one of the operational objectives set to resolve issues of access clearly states the intention to facilitate participation by SMEs in public procurement markets. The options proposed under ACC.LEGI.ENFORC and ACC.LEGI.FACILIT would promote different ways of increasing SME access, whilst ACC.SOFT could consider complimentary guidance and training programmes, ensuring SMEs are "tooled up" for any new changes.
Main findings in the Public Procurement Priority Area:
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1)On the basis of two Directives and one Regulation, a total of seven EU Information Obligations (IO) and Possibilities Stated in the EU Legal Acts were identified. Commission Regulation (EC) No 1564/2005 does not include Information Obligations.
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2)The seven EU IOs resulted in 194 national IOs (including 26 Possibilities stated in the EU Act and three Possibilities not stated in the EU Act) across the 27 MS.
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3)The total administrative cost of these seven IOs is estimated at a total of 234 million EU-wide.
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4)Of the 234 million of administrative cost, 92.35% (216 million) have been classified as administrative burden. The remaining costs are considered to cover activities which can be classified as "business as usual".
Source: Final report on public procurement baseline measurement
This report noted that the most burdensome IOs related to the submission of documents related to selection and exclusion criteria. Together these IOs accounted for 211.5 million (98%) of the administrative burden on firms.
8.9. ANNEX 9 Glossary
ACPC (Advisory Committee for Public Contracts)
Agreement, the: reference equivalent to the GPA (see below)
A-type services: Categories of services (1-16) mentioned in annex II A of the Classic Directive and annex XVII A of the Utilities Directive, for which the full set of rules stemming from the Directives apply; the remaining services are referred to as B-type services
B-type services: Categories of services (17-27) mentioned in annex II B of the Classic Directive and annex XVII B of the Utilities Directive, for which the Directives provide only a limited set of obligations (i.e. observance of the provisions on technical specifications and an obligation to inform the Commission of contract awards)
CAE (Contracting Authorities and Entities)
CAN (Contract Award Notice)
Classic Directive, the: Directive 2004/18/EC of the European Parliament and of the Council
of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, OJ L 134, 30.4.2004, p. 114
CN (Contract Notice)
CPB (Central Purchasing Body): CPBs are contracting authorities which either act as wholesalers (i.e. buy, stock and sell on to other contracting authorities) or as intermediaries (i.e. award contracts or conclude framework agreements that will be used by other contracting authorities)
CPV (Common Procurement Vocabulary): CPV establishes a single classification system for public procurement aimed at standardising the references used by contracting authorities and entities to describe the subject of procurement contracts
E-procurement GP (Green Paper): Green Paper on expanding the use of e-procurement in the EU, Brussels, 18.10.2010, COM(2010) 571 final, SEC(2010) 1214, documents available
at:
http://ec.europa.eu/internal_market/publicprocurement/e-
procurement/consultations/index_en.htm
e-procurement Report, the: Commission Staff Working Document, Evaluation of the 2004 Action Plan for e-procurement, Brussels, 18.10.2010 SEC(2010) 1214 final, available at: http://ec.europa.eu/internal_market/consultations/docs/2010/e-procurement/evaluation- report_en.pdf
e-Certis: the European Commission information system that helps identifying different certificates and attestations frequently requested in procurement procedures across the 27 MS, two Candidate Countries (Turkey and Croatia) and the three EEA countries (Iceland, Liechtenstein and Norway). e-Certis is a free, on-line information tool providing companies and contracting authorities with information on the different documents required when tendering for a public contract in another country. At present, e-Certis only covers the most frequently requested documents and the data provided is maintained on a voluntary basis by MS. For more information see: http://ec.europa.eu/internal_market/publicprocurement/e- procurement/e-certis/index_en.htm
EMAT (Economically Most Advantageous Tender): one of the contract award criteria on which the award of a (public) contract shall be based
EP Report: Report of the European Parliament Committee on the Internal Market and Consumer Protection on the new developments in public procurement (2009/2175(INI)), A7- 0151/2010,
available at: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-
//EP//NONSGML+REPORT+A7-2010-0151+0+DOC+PDF+V0//EN
Eurobarometer: large surveys based on in-depth thematic studies carried out for various services of the European Commission or other EU Institutions
Europe 2020: Communication from the Commission on smart sustainable and inclusive growth, COM(2010)2020 of 03.03.2010; report and related initiatives available at: http://ec.europa.eu/europe2020/index_en.htm
http://ec.europa.eu/internal_market/consultations/docs/2011/public_procurement/synthesis_do cument_en.pdf
GPA (Government Procurement Agreement): The GPA is the main international agreement relating to public procurement. The current version, which was negotiated in the in parallel with the Uruguay Round in 1994 and entered into force on 1 January 1996, The GPA establishes a set of rules which (a) govern the procurement activities of its Parties and (b) enable the Agreement to function as an international one
GPP (Green Public Procurement)
IM (Internal Market)
IO (Information Obligation): term used to estimate administrative burden
ITT (Invitation to tender): also known as a Contract Notice (CN)
LCC (life-cycle costing)
Mario Monti's report: A New Strategy for the Single Market - at the service of Europe's economy and society, Report to the President of the European Commission José Manuel Barroso
by Mario Monti, 9 May 2010, available at:
http://ec.europa.eu/bepa/pdf/monti_report_final_10_05_2010_en.pdf
MS (Member States): the 27 Member States of the European Union
OJ/TED (Tenders Electronic Daily): TED is the online version of the 'Supplement to the Official Journal of the European Union', dedicated to European public procurement
PIN (Prior Information Notice)
PP (Public procurement): A procedure initiated by a contracting authority or contracting entity with a view of acquiring goods, services or works for the fulfilment of its tasks
TFEU (The Treaty on the Functioning of the European Union)
| publication date | 22-12-2011 |
|---|---|
| reference | 18966/11 ADD 1 |
