Dods EUM: Conference on the new EU Rules for procurement and concessions

On March 19th, the European Commission organised a Conference on the new EU Rules for procurement and concessions.

By Dods EU monitoring

29 Mar 2014

Jacki Davis, Managing Director, Meade Davis Communications, opened the conference by saying that the procurement rules were part of the single market act. Public procurement may not be exciting, but it is important for growth and jobs

Ambassador Andreas Papastavrou, Deputy Permanent Representative of Greece to the European Union, opened the conference by saying that the very recent adoption by the Parliament and Council on the new directives represents a major achievement. The single market act I identified public procurement and concessions as one of the twelve levers to restore growth in the EU. In view of budgetary constraints, the efficiency of public tendering has become ever more important. The simplification of the rules should also help SME access to procurement. Given the substantial value of public procurement and the political evolution towards societal goals, there was also a belief that the rules should contribute to environmental and innovation targets. New investments for innovation and infrastructure projects were also required.

He noted that the negotiations took two years and the directives adopted meet the ambitious objectives. Procurement will be simpler and more flexible. He then laid out the main points of the new legislation: 
• The documentation required will be reduced and standardised
• Electronic information will be standardised
• The specific nature of local and regional authorities was recognised
• Health and cultural services have a special regime
• SME access was made easier with a term of a cap limitation and the encouragement to split contracts into lots
• The legal framework for cooperation between authorities was improved
• Social and environmentally responsible works and goods will be taken into account as the full life cycle cost including the CO2 footprint
• Innovation is fostered through measures on cross-border procurement.

As regards to concessions, he said that the directive will fill a gap as this was not previously covered. The new directive will impose a light legal framework creating more business opportunities for authorities. The specific nature of concessions means that they needed specific rules. The new rules clearly define concessions and set out the conditions for economic activity. The freedom for contracting authorities was also put in place. The new rules will encourage investment by creating new rules for public – private partnerships.

Intensive and complex work on implementation now lies ahead he said. He then welcomed the fact that the Commission services have promised to cooperate with and assist the member states in this task.

Panel I: Simplification and SMEs

Jacki Davis asked what has been achieved and what needs to be done to actually implement the rules. She asked what the most important aspects of the new rules are.

Jürgen Creutzmann, Member of the European Parliament, said that the main aim was to reduce bureaucracy and to further SME access to procurement tenders. When there is not a slot for SMEs, there will have to be an explanation of why not. Another very important element was the fact that double the value of the SME was introduced. He then raised the issue of e-procurement and explained that the Parliament pushed for this. This was rejected by Germany. This would have been very useful for SMEs.

Jacki Davis asked what difference these new rules will make. Will it be used as a lever? What are the most important changes in the legislation?

Jürgen Creutzmann said that the EU needs more jobs and this means more growth is required. State budgets are limited and as such, public procurement must be as efficient as possible. He noted that SMEs tend to offer cheaper and more innovative solutions.

Catarina Segersten-Larsson, Committee of the Regions, Rapporteur Public Procurement file, said that many of the suggestions of the Committee of the Regions are included. Some hurdles still need to be overcome including those on wage agreements. There thus remain things that could be improved in the text. There are also different areas that need special attention such as locally produced food.

Riccardo Viaggi, Secretary General, European Builders Confederation (EBC), said that the directive is significant. The SBA is an important piece of legislation in the EU as it concerned access to markets for SMEs. The simplification for SMEs with self-certification is very important. He noted that this could mean significant time and cost savings for SMEs participating in procurement tenders. The annual turnover measure is also very welcome. He then explained that the devil will be in the detail of implementation. Simplification for certain actors may actually be more difficult for SMEs, as for example, the minimum delay for tenders could be too short for SMEs.

Gian Luigi Albano, Head of Research, Consip S.p.A., (Italian central purchasing body) said that there is a general consensus on the concrete benefits of the new directive. He noted that perfect legislation does not exist. The new rules will be consistent and coherent with actual practice. It is difficult to accommodate different objectives in one piece of legislation and the question is whether there is now a tool box that will allow companies to exploit the new rules. He noted that there are already regions and countries that are splitting contracts into lots and have been doing so for over 10 years.

Catarina Segersten-Larsson said that the economically most advantageous tender is an important issue. At some point, there needs to be an assessment on who the contract should be awarded to. There will need to be a decision on what economically most advantageous means. It should be left to the authorities to decide if they want to split a contract into lots.

Jacki Davis then asked what the key challenges will be in the implementation. Are there any risks in the implementation and how can the Commission help the member states, he asked.

Jürgen Creutzmann noted that the different member states have different forms of administration and they will thus need the help of the Commission to implement the new rules. It is important to avoid over-loading local communities to ensure that they are able to fulfil the requirements of public procurement. There are different administrative cultures in the member states and this must be taken into account. As regards to the economically most advantageous tender, he said that the cheapest option in a tender is not necessarily the best one, especially in the long-term.

Jacki Davis then asked about the division of tenders into lots and whether this could actually make the situation more complicated.

Gian Luigi Albano noted the importance between giving an opportunity to smaller operators whilst ensuring that not doing so is justified. There needs to be certain knowledge to make a justification for not splitting contracts. In reality, the majority of procurement organisations will not be able to write a report on this. There is also a danger that authorities will manipulate the division of a lot.

Riccardo Viaggi said that the end game is not about kicking out large companies in favour of small companies. The aim is to help SMEs have access and to increase value for money. Companies need to be able to compete. He noted that the situation also needs to be simplified for the authorities actually making the tender. He then said that the directive does not improve the late payments environment. Late payments are a problem for SMEs.

Jacki Davis asked if this means that there will have to be a constant review of the rules.

Riccardo Viaggi said that the European Commission should strictly monitor the implementation of the late payments directive. He stressed the need for legal certainty for SMEs.

Jürgen Creutzmann said that the late payments directive has been badly implemented by many member states, including Germany and Greece. It is very important that the Commission maintains a close eye on the implementation of late payments.

Catarina Segersten-Larsson stressed the need for clarity and transparency. She explained that the determining factor will always be the price.

A representative of the European Construction Industry Federation noted that even the most efficient systems often rely on the cheapest tender. He then said that for public procurement, the main idea is not to just choose a local producer over another. He then argued that the late payments have now been delayed to 60 days.

Jürgen Creutzmann said that it is 60 days for B2B only.

A representative of a Greek company said that there are serious bureaucratic problems in Greece. The self-declaration system actually made things more complicated in Greece. How will the simplified system be enforced in the contracting agents?

Jacki Davis asked about the possibility of an anonymous feedback system. How can the EU enforce the simplified rules?

Gian Luigi Albano said that the new rules provide an architecture and the member states will have to transpose it. Once there needs to be secondary legislation, the situation will become even more complicated. As regards to the day to day practice, the Commission could help check on the actual practices. He then said that getting feedback from stakeholders is fundamental.

Riccardo Viaggi said that the EU will have to play a fundamental role in monitoring the transposition practice. Whenever a good idea is put up, there is already a bad idea that can accompany it. The EU must not turn a blind eye to day to day practices. The Commission could also encourage governments to use EU funds to train public authorities to become experts.

Jürgen Creutzmann agreed that the implementation is very important. There could be an exchange of best practices between the member states. He then reiterated his call for e-procurement.

Catarina Segersten-Larsson said that the Commission must take an active stance on the transposition of these rules.

A representative of the Italian Ministry of the Interior asked if there could be new tools to simplify transposition of EU legislation. Would a regulation not have been a better option?

A representative of BusinessEurope noted that the utilities directive seems to have been ignored. The new utilities directive may be damaging.

Jürgen Creutzmann said that the Parliament tried to reduce the complexity of the rules. He said that public authorities should use consultancies to make tenders easier.

Catarina Segersten-Larsson said that e-procurement should be the focus for the future.

Riccardo Viaggi said that purchasing authorities would have to change their daily work if they were to use e-procurement. Communicating online for construction projects could also be complicated. E-procurement is a challenge, but it is the future. As regards to whether the rules could have been introduced as a regulation, he said that different legal systems need to be able to adopt the text in a different way. The final goal is more important than the method.

Gian Luigi Albano said that trying to force e-procurement does not work. It is essential to work to convince people that e-procurement is the way forward.

Jacki Davis then asked what the key next step is.

Gian Luigi Albano said that the next step is to gather evidence on what is happening.

Riccardo Viaggi said that effective and monitored implementation is fundamental.

Catarina Segersten-Larsson called for more legislation based on actual know-how.

Jürgen Creutzmann said that the exchange of best practice between the authorities is essential.

Panel II: Social & Green

Jacki Davis, moderator, welcomed participants and said that in addition to what they heard during the previous session, the new rules are also designed to enable a more strategic use of PP. Because public procurement is so important, it can be a powerful lever to help meet key societal goals. To what extent will the new rules enable public authorities to do this? What are the key differences? How can those who want to take advantage of those new provisions can be supported to do so.  What does the panel see as the key implementation challenges?

Jacki Davis asked Marc Tarabella how much difference the new rules can make. How much impact the changes will have and what the most significant elements of the reform are.

Marc Tarabella (S&D, BE), Rapporteur on the Public Procurement file, explained that he has met a lot of the people in the room at the beginning of the procedure. Theory comes from practice and he thanked all people involved in this dossier. They listened to people working on the ground. This directive was not easy to construct. You have to try to beef up certain areas, he explained, remove some areas and get into more details. This is what they have tried to achieve. His initial proposal did not meet the support from all (2500 amendments). They had to find compromises before starting discussions with the council to get to the end result and make progress.

The 2004 directive did start an interesting process in using environmental criteria. With MEP Rühle they will share the work and he would talk about the social side of things.

Reinforcing social criteria was fundamental, he explained.  Commissioner Barnier wanted it and said it. Public procurement represents 20% of EU GDP. It can really help re-launch growth, also by using these social criteria and reaffirming the respect of a collective bargaining agreement. Articles give the possibility of excluding companies not respecting these criteria. Procurement based on quality criteria is a toolbox that can be used by the authorities. This should help fight against the lower price offer. When a tender is lower due to technical progress it is good, but when it comes from social dumping, like in services, that means it will have a major impact on people earnings and subcontracting.

Subcontracting is sometimes not economically profitable. Subcontracting is important as it offers opportunities to SMEs but this has to be done in a clear and transparent way. The work is however not completed.
• There are now two important stages: Implementation in all Member States. The Commission has a role to play here. On electronic procurement the Council is dragging its feet. The Member States are more reticent here and this is also true for transposing certain parts of the directive.
• Training of all authorities aimed at implementing the new rules. It is a tool box for the authorities to use. They have to train people so they know what to do.

Heide Rühle, Member of the European Parliament, said that the main problem in the past was legal unclarity. In Sweden or Germany there was the complaint of a lack of certainty. Open questions remained on products or process, or labels. They tried to have the most transparent process. They have improved the legal certainty and not obliged the procurer to do something but gave them the possibility to do something. They have gotten rid of the cheapest price and PP should look for quality. This is the main signal of this directive. It also offers the possibility to include labels, animal welfare issues. They have been very specific in the link of the subject matter. You have to give more space of manoeuvre but to guarantee legal certainty. The link to the subject matter is a clear guarantee that the procurer respects the rules.

J. Davis said that they have gotten rid of the cheapest price. You are enabling contracting authorities to do this, but how many will do it, she asked.

Kathleen Walker-Shaw, European Economic and Social Committee, Member (Group II) and GMB trade union official, said that the big difference with this current revision was that in the run up of the 2004 legislation they focused on the economic aspect. This time, the approach has been more a sort of enabling approach in transparency and cooperation with the Parliament and in the Commission. There was openness and willingness to discuss what quality procurement is. This was a big issue. The reality is still lurking there and the lowest price is still possible. Quality and lowest price rarely ever go together.

If the objective of public authorities is to have quality goods, quality work, quality services, then there is a price for that. She hoped there will also be cultural change in the decisions. There have been major steps and progress in the environmental and social clauses. The social clause is very important and sets the principle. Another big issue is in the scope where it is made clear what public procurement is all about. The restatement of these fundamental principles was needed. It is a success and political achievement. There is a lot of can do not shall do, she admitted and this is in the hand of Member States. So the proof of the pudding will be in the eating of where we are. The implementation phase will be decisive. She praised the high level of discussion and transparency. They have worked together and it is a driver for good and balanced procurement, she concluded.

J. Davis asked if they agree on the importance of the changes. What are the most important changes when it comes to the strategic objectives, he asked.

Arnhild Dordi Gjønnes, Attorney, Chair of the Public Procurement working group, Business Europe, said that social criteria and environmental criteria and how to implement those, are the most difficult tasks for a contracting authority. Business Europe wants clean and sound companies to bid for the contracts, to obey with social and environmental legislation in the countries. However, social and environmental objectives are important but not the target of the Public Procurement directive. The target has always been best value for money, efficient in public spending and non-discrimination between suppliers. Yes we should buy from the local ones if they are the best and not the worst.

Back to the question, she said that when talking about social and environmental objectives, the most important thing is to have better practical understanding of what it is. She agreed with MEP Rühle that the directive brings more legal certainty to the environmental question. The latter is not the most difficult point as they have expertise. But the social question, what is that? In the Nordic countries there are a lot of discussions on collective agreements and whether there will be a compulsory demand to ask for collective agreements. But this would mean 99% of the SMEs would be out of the market because they do not have these agreements, she concluded.

J. Davis asked about the impact the changes that have been made could have.

Veronica Nilsson, Confederal Secretary, European Trade Union Confederation (ETUC) stated that the changes are very important and they were not very fond of the previous directive. They have a stronger text now with a binding social clause in article 8.2. How difficult it is? It is a question of political will. The Council was not keen on this and it is because of the Parliament that they have this binding social clause. They now need to remain vigilant in the implementation process to make sure this article is not forgotten about or being seen as too complicated to implement. It is all about implementation at the national level in order to make sure this social clause becomes a reality and will play a major role.

On subcontracting and enhanced transparency, she thought it does not go far enough. At least there is recognition of its importance but they would have preferred a mandatory joint liability. There is now an obligation for public authorities to reject the tender if article 82 is not respected. Article 57 is on a voluntary basis and authorities may exclude the company if it has violated article 18.2.

Heide Rühle said a database is needed as well as more help for public procurers and figures. It is up to the Commission to develop this. If you have such a thing, it is transparent and you can respect green procurement and sustainability.

Marc Tarabella reacted to the Business Europe statement by saying he could not let her say that the respect of collective bargaining will be harmful for companies. Small companies are suffering in Europe because big companies are using and abusing the directive on the posting of workers. If you abuse the directive, it is the small companies that are losing out. Respecting collective agreement is respecting labour law. Big companies are organising unfair competition. This is what is causing problems today. Today, enactment will be a fundamental stage, because there has been a turn in the directive. He gave the example of direct and indirect payments of subcontractors. In some Member States it works and in others it does not. It is clear that they should work on good practices and traditions in the different countries.

J. Davis asked the question of the EU’s role. Should the EU’s role simply be to provide technical support to Member States who want to use these new tools or just to encourage it?

A Latvian procurement consultant said that one of the speakers said that it is good that we got rid of the lowest price. He pled for keeping both. Sometimes other criteria are necessary to be considered and sometimes it is ok to go with the price. He agreed with the legal certainty issue. About environmental criteria, there were already in force under the old directive and there is practice in Member States. But with social criteria, there are problems. He had no objections that companies should comply with minimum social rules. The new directive proposes the possibility to evaluate these criteria. What kind of criteria can be used? Would it not be putting barriers and obstacles for the participation of SMEs, he concluded.

A representative from a Law firm said that the main concern is that they all agree that introducing social and environmental criteria is positive, but he was afraid that it was not accompanied with proper transparency rules ex-post. Once the contract has been awarded, complaints by tenders or authorities about why not having been chosen will be more difficult to address. Now, with the new EU rules, the answer, will be more difficult.

Thomas Lividini from Food Service Europe made a comment. When you say the directive got rid of the lowest price, does it mean the contract authority who wants to ignore the quality criteria cannot anymore award the contract on the basis lowest price only? Is it still possible to have a contract based only on the price criteria?

A UK Member of Parliament asked about the social, economic and environmental impact. There are authorities embracing the new legislation because they found there is a business and a social case. The social objectives are not in opposition to the business objectives and can reinforce each other. She welcomed the EU concentration on this. Yes it might be more challenging but rewards are worthwhile.

J. Davis asked can you ignore quality if you want to?

Marc Tarabella replied yes.

J. Davis asked a question about the grey areas.

Veronica Nilsson about binding social criteria, said that authorities have to comply with the obligations concerning social, labour law and collective agreement. This is not revolutionary and complicated. There are other parts with broader social consideration which are more difficult she admitted. It is a lot about “may” and what authorities “may do”. This is giving the possibility to do things they could not do in the past. That is why the implementation will be so crucial. You cannot have a directive going in all social criteria one can imagine.

Arnhild Dordi Gjønnes said that it is difficult as there are different views. She is of the opinion that there is no such compulsory obligation with regard to collective agreements. It is up to the authority to decide, but they cannot refuse a bidder that has a decent salary at the same level as the collective agreement or even higher. This is a level playing field that everybody that fulfils the criteria set by the authorities should have the possibility to compete.  

Kathleen Walker-Shaw on grey area said that they need to start focus on the cost of not doing. Looking at the grey areas, how much is grey when somebody dies on a building site, and nobody wants to take the blame. That is grey. People think that having clear rules is a big problem.

Marc Tarabella agreed that the lowest price is still a possibility. The compromise also says that the price is always a criteria. Authorities can put the curser where they want on the price criteria. That is the point of the toolbox. There is work to do on training. How do you use it, where do you put it? On safety, things need to be clear from the start. At the beginning, the Commission talked a lot about the disadvantaged people and that authorities should be left the decision on how to apply the criteria. But this should be in a transparent manner. They need to define the criteria right from the beginning and make sure that everybody is on the same field.

Heide Rühle added that the possibilities created have to be linked to the subject matter. She added that one cannot imagine public procurement without looking at the price. The Parliament interest was to send a clear signal that price should not be the main criteria.

J. Davis was surprised why the question was not posed in a time of austerity: how can/should the Commission encourage Member States? What is the role of the EU?

A representative of the Central procurement directorate in Ireland, Belfast, asked a question about conflicting principles. Could an award criteria be used concentrating on the ability of companies to return quickly to carry out repairs for example. Would this clause be allowed or contradictory to non-discrimination?

A representative from the European federation of public service union said that there was complexity in the last panel. Complexity has to be linked with stability. There is a learning phase. Complexity is not necessarily an issue. They are looking at the process here. This is a process and they need to look at the outcomes in the end. What do we get for our money? Some countries have the clearest legal framework but the most disastrous outcome of public procurement and public private partnerships. She mentioned a report in the UK that concluded that a lot of public procurement has not been useful for citizens.

A representative from the Environmental law organisation Client Earth said that they have been interested in the stance taken on social and environmental issue. People see them as different and they have been treated differently. But they are on an equal footing in the new text and this is a good thing. Her question was will there be a continuation of the separation in the way they are treated by procurers. She asked the Commission, will the green guidance be separate from the social guidance?

J. Davis asked what the role of the Commission is.

Marc Tarabella replied to the question on why one part is prior to the other. Sustainable development is to have social, environmental and economic issues dealt with together. The main idea is to have services provided to the citizens and to better use public money. They have tried to reinforce social criteria. Now you have to strike a balance. Tarabella then came back on the local employment cause. Of course one cannot discriminate but one can also have reserved markets. As for cleaning public parks in a city, you can say that it goes to a company that recruits locally. You also have certain sectors, where labour is missing. Companies need to have access to labour as long as they follow the rules of the country they act in.

Arnhild Dordi Gjønnes said that one should bother with the grey areas. Local employment clauses, can we use this? Is this linked with the subject matter of the contract is the question. Why should we ask for local employment clauses? These are in the grey area and that needs answers. There are contracting authorities that do not want to struggle with this in court. The Commission should come with good guidance.

Heide Rühle repeated that a database is needed. We need figures and database and comparable figures. On locally produced products, the problem is that one loses the link to the subject matter and loses transparency and you run the risk of corruption. They did not go for these criteria but gave the possibility to take it into account.

V. Nilsson said that with such a complex directive it will be a difficult task and the Commission has to make sure it is implemented in the way the text was foreseen. Cooperation with social partners is very important. It is not only the Commission that has a role to play but governments and social partners.

K. Walker-Shaw said that guidance will be very important in terms of clarity and positive encouragement. On the sustainability guide, will the two elements be dealt with together or separately? They would like to see more active participation of social partners in developing national and EU guidance on this topic.

J. Davis asked about one priority to ensure these new tools can be used in the way foreseen. What has the highest priority?

V. Nilsson responded: transpose all the “shall do” provisions. Strong rules are needed and one has to get rid of lowest price as criteria.

Arnhild Dordi Gjønnes replied: workshop between contractors and authorities. Practice will be the key point.

K. Walker-Shaw replied to get all Member States to use the option to move away from the lowest price and to put quality as the key and core defining issue.

Heide Rühle explained that it is very important to open possibilities and not oblige. The implementation process is the main point. They need a database, she insisted.

Marc Tarabella said that two priorities are the implementation in all Member States, keeping the spirit, and the training of all authorities so that they know how to use the text and make best use of the opportunities offered to them in order to spend public money in a better way.

Panel III: Innovation

The Chair opened the discussion by asking panelists how important they felt that the use of public procurement was in driving innovation:

Malcolm Harbour (ECR, UK) said that his own parliamentary committee had been pushing for greater innovation in public procurement for the last 8 years, and that if these procurement reforms did not drive innovation they would have been a failure. He noted that the Commission’s Innovation Procurement Partnership is an important step. He felt that mechanism would allow suppliers to identify existing problems and test new solutions. However, to be a success the EU would need to leverage the expertise of the private sector, which has experience working in this way. He felt that the public sector had valuable lessons to learn from innovative private sector practices.

Miguel de Luna (EESC) said that as procurement accounts for about 20% of EU GDP it is an important area which merits attention. He went on to say that procurement could act as an important driver of innovation, especially where it is linked to sustainable development and the Horizon 2020 objectives. He went on to say that modernising procurement rules will allow the EU to be more effective with public funds and generate a better cost to benefit ratio in procurement. He said that green purchasing will also play a key role in public purchases and there needs to be a balance between price and quality. Member States will also need to ensure that their suppliers respect EU, National and International Rules. He said that if all of these elements are present, then the EU should be able to use procurement to innovate and grow the economy.

Richard Bergström (EFPIA) said that the new rules, tied to the Cross Border Directive, opens the door to some innovative thinking. He used the example of pandemic flu to illustrate his point. He made the point that flu crosses borders indiscriminately and that international pharmaceutical companies must work across borders to research products and deliver them to market. However the production process has remained unchanged for many years, relying on old technology. He said that the new rules would encourage greater innovation in new technologies. He also described a market failure in antibiotics. He said that in order to prevent antibiotic resistant strains of diseases appearing it was best not to expose them to antibiotics, essentially discouraging pharmaceutical companies from deploying new antibiotics. He suggested that the new procurement Directive offered opportunity to find innovative solutions to market failures, as it offered Public Authorities a greater range of procurement tools.

Jan Wierenga (FIEC) argued that compared to the 2004 procurement Directive not much has changed. He said that many of the measures in the Directives under discussion are already included in the 2004 Directive but are not being used. He noted that the European Parliament has highlighted this and that the debate had moved so that there was now a will to use innovative measures more readily. He emphasised the need for training for Public Authorities and bidders alike, so that those involved in procurement could benefit from the opportunities offered by the new rules.

Jean-Christophe Maisonobe (SYNCRO Project) gave an overview of the SYNCRO project, which would be a traffic management system shared between two towns in the Isère region. He said that before the project was implemented a number of pilot projects would be needed to evaluate the traffic management systems bidding for the tender. As such he said that public funding would be needed to operationally test the systems. This would allow the towns to work with the manufacturers to modify the systems so that they were adapted to local requirements. He pointed out that using public money for the pilot projects would allow the towns to use procurement to fund innovation and create jobs at the traffic management system providers, regardless of which company was eventually chosen as the winning bidder. He felt that the new rules would make these easier, allowing procurement officials to take job creation and innovation into account when awarding a contract.

He then went on to describe a situation where a French town had sought to partner with and Italian town in procuring a similar system. He explained that while the existing Directives did allow for this, it was legally complex which deters ad hoc public procurement efforts. According to him the new Directive clarifies the rules, which will make it easier for cross borders public procurement.

The Chair asked Malcolm Harbour to comment on the claims that the new Directives merely built on the 2004 Directives:

Malcolm Harbour (ECR, UK) acknowledged that the EU had built on the existing 2004 Directives, but that there were a number of important changes to facilitate cooperation and encourage innovations in procurement.

The Chair then asked the panel how to encourage innovation as a requirement for procurement bids:

Miguel de Luna (EESC) argued that the 2004 Directive was not especially effective, given that the Court of Justice had made a number of rulings against it, and that therefore a new Directive had been needed. He said that to implement the new Directive effectively the Commission should produce a manual which will make the complex Directive more accessible. He emphasised the need to train individuals in the Member States to understand the new Directive, so that they can in turn ensure that Member States’ procurement bodies understood the new opportunities on offer. He went on to call for mandatory training in Member States to facilitate change in procurement practices as a result of the new Directive.

The Chair asked the panel how to encourage people to make use of the Directive and how to avoid missing opportunities as had been the case in 2004:

Richard Bergström (EFPIA) said changes in behaviour would be needed. He said that the pharmaceutical industry would need to continue to be proactive in innovation, but industry would also need to disinvest in old technology. He made the point that in some areas of medicine generics are readily available; which can cheaply and effectively treat a patient. As such he felt that the Pharmaceutical industry should stop investing in these areas and instead focus research funds, including public money, on areas which require innovation.

Jan Wierenga (FIEC) stated that if the Directive is implemented fully it would help to develop and grow the construction industry. He felt that industry had a role to play in helping Member States understand the new Directive and to work together to train the people involved in procurement.

The Chair asked the panel for their views on how the new Directive might help a pan-EU procurement market emerge:

Jean-Christophe Maisonobe (SYNCRO Project) said the existing 2004 Directive did allow for innovation, but there were a number of legal obstacles which made cross border procurement difficult. The new Directives should lift this regulatory issue, which would facilitate cross border procurement. There is also the underlying issue of mentalities amongst procurement officials, which will need to be changed to embrace the new opportunities for Innovation and cross border trade. However, he felt that the new Directives were a step in the right direction for facilitating these changes.

The Chair then moved the discussion to a Q&A session, inviting questions and comments from the floor:

A representative from the Welsh Assembly Government commented that SMEs were less keen on the proposals contained in the new Directives.

Malcolm Harbour (ECR, UK) replied that the ethos behind Innovative Procurement Partnership was aimed at facilitating SME access to the procurement market. The structure follows the American model, where authorities have a quota of innovative solutions which they must buy from SMEs. He felt that together with the new procurement Directives these measures would be of benefit to SMEs seeking to access the procurement market.
A representative from the European Construction Federation queried whether or not there would be a size threshold for projects covered by the new rules, stating that a minimum project size requirement would place SMEs at a disadvantage.

Malcolm Harbour (ECR, UK) said that there would be no size tresholds, which would allow SMEs to continue to bring innovative aspects to larger projects.

Miguel de Luna (EESC) added that in this regard there could be some justification for criticising Articles 45 & 64 of the Directive, which he felt did not go far enough in facilitating SME access to the procurement market.

The Chair then asked how the pharmaceutical and construction industries representatives how they would help SMEs access procurement through future bids.

Jan Wierenga (FIEC) made the point that SMEs had strength in innovating in products, arguably more so than larger companies so they should be at an advantage in making innovative procurement bids. He called for an EU guide in ‘buying innovative’, which would highlight SME strengths and how the Directive could be applied to SMEs.

Richard Bergström (EFPIA) said that in life sciences there was an existing global market place which already drew upon expertise from SMEs. He felt that the Directive did not readily apply to the pharmaceutical industry - but could have applications around a specific product’s development.

Malcolm Harbour (ECR, UK) agreed that the Directive was not primarily aimed at pharmaceutical research. However, he noted that there were applications which are relevant to SMEs, in areas such as medical device innovation.

Jean-Christophe Maisonobe (SYNCRO Project) called for pioneers to pave the way with procuring innovative solutions from SMEs. Once a pilot project has been procured the public authority could act as a source of best practice for other authorities seeking to engage in similar procurement. The procurement would also have the added benefit of acting as a seal of approval for the validity of the innovative product being procured.

A representative from Eurocities asked what was being done in the field of pre-commercial procurement and what was being done to address the ‘valley of death’ between scientific research and final application?

Malcolm Harbour (ECR, UK) said that there were a number of measures in the new Directive which addressed this procuring at the edge of technology. Phased procurement would allow public authorities to support stages of development, with the option of withdrawing from the project if the technology is not able to deliver. This phased procurement allows an element of risk to be underwritten.

Richard Bergström (EFPIA) pointed out that this was an issue which frequently occurs in medicine. Procurement in medicines follows a ‘winner takes all’ approach, where once a product wins a procurement round it effectively takes a 100% market share. This discourages discounting behaviour which the market may take to gain access, locking a public authority into a set price which then does not respond to other market behaviours. He felt that more could be done to alleviate this, allowing a larger range of companies simultaneous access to a bid and exposing bid winners to market forces, both of which would ultimately benefit the public purse.

Moving on, the Chair asked the panel to identify the challenges facing the Directive as Member States moved into the implementation phase:

Miguel de Luna (EESC) reminded the panel that 70% of EU GDP is services based. He said that the Commission and Member States need to focus on innovation linked to services as well as goods, bemoaning the fact that currently the focus was too heavily on innovation in goods. He further added that procurement in services could be used as an opportunity to spur on innovation in the environmental and social spaces.

The Chair queried whether this meant that the Commission should have an active role in implementing the Directive.

Jan Wierenga (FIEC) felt that the Commission should be more passive, helping companies understand the new Directive - with active programmes to follow over time.

Malcolm Harbour (ECR, UK) disagreed, saying that the Commission is already acting in this sphere. He said that the Commission is already moving to procure in a more innovative way. Horizon 2020 and various DG Enterprise programmes were already providing financial incentives to local authorities (and others) to procure goods and services which reflect innovation. His view was that the Commission should continue to actively drive this change.

As the panel concluded its discussion the Chair invited the participants to identify their priorities for next steps.

Jean-Christophe Maisonobe (SYNCRO Project) said that the priority should be to support the first procurement bids and projects, enabling the new tools to be used.

Jan Wierenga (FIEC) reiterated identified teaching procurement officials and bidders how to best use the new procurement tools as his priority.

Richard Bergström (EFPIA) said that antibiotics and new vaccine research could benefit from these tools, the EU has a role to play in driving this.

Miguel de Luna (EESC) thought that services need to be at the heart of the changes and argued that the single market needs to be completed to include procurement. He thought that this would allow greater cross border procurement and a move away from protectionism.

Malcolm Harbour (ECR, UK) agreed that pioneers of procuring under the new rules should be helped and that the Commission can play a role in facilitating networking and sharing of best practice across the EU.

Jonathan Faull, Director General, Internal Market and Services, apologised on behalf of Commissioner Barnier for his absence, explaining that he had been called away to negotiate the Single Banking Resolution. He explained that he would deliver the intended speech in his place:

He said that the EU is still experiencing the repercussions of the financial crisis, but is starting to emerge from it into a period of anemic growth. The growth is slow and is not yet creating jobs in large enough numbers or of high enough quality to help everyone, especially the young. With the new growth we realise the need for sustained growth, which promotes innovation and green considerations. Over the last few years various programmes have been implemented which will help growth across the EU.

The EU has set out to create a more modern framework for procurement authorities, which will allow authorities to procure services which are of best value to tax payers. The EU wants to help SMEs especially, and are driving forwards more effective e-procurement across the EU. Social and Environmental concerns are also key to these efforts.

He said that he hoped the reform of public procurement rules provide an example of how the EU can help to make a complicated system more manageable. The idea of the reforms is to make procurement easier. The move has been for a modern digital Europe, with lower energy dependence. At the same time there was a move towards simplicity which will allow procurement officials to understand the new rules. He said that SMEs without legal departments also need to be able to easily interact with the new procurement rules. Thanks to the contributions of those involved in the legislative process the end result is a set of proposals which he felt the Commission can be proud of.

He said that procurement should be seen as a way in which other public policy aims can be met. Procurement should be freed to be able to support innovation and green initiatives. The lifecycle analysis and social clauses will facilitate this, allowing public authorities to consider the impact on the environment and assistance for the long term unemployed. He noted that this was a considered move from the lowest cost bid concept to a highest value concept, which takes a more holistic approach to procurement.

He claimed that the new Directives allow the Member States to make a number of choices in procurement contracts worth 420bn euros, whilst ensuring a level playing field across the EU. Furthermore, he said that the new rules would ensure non-discriminatory access to national and cross border procurement markets.

He recognised the need for capital to finance public services and infrastructure, as well as legal certainty to ensure that long term projects can be managed with greater certainty. Member States will have the freedom of choice to decide whether to keep a service or project within the public sphere, or seek a Public Private Partnership contract. He said that Member States will have a free choice, but that the legal framework will give those involved certainty.

In conclusion, the reform takes important steps to simplify the process, boost innovation and to set the right balance between EU rules and public procurement authorities. He noted that the EU needs the jobs that these changes can generate, which is why Member States should transpose the Directives quickly. The EU must also help Member States and SMEs to understand the rules, taking collective ownership of the new rules and ensuring that they are understood and implemented across Europe.

He ended the speech by saying that the Commission has a role to play from Brussels, but the Member States have to ensure that the Directives are implemented and contribute to growth across the European Economy. Please click here to read the entire speech.

Panel IV: Concessions

Having introduced the session and the panelists the Chair opened the discussion by asking Philippe Juvin to explain the need for new rules on Concessions:

Philippe Juvin (EPP, FR) explained that there were procurement rules for goods in existing Directives, but not for services. Continuing without them would lead to legal uncertainty which would ultimately lead to public authorities facing legal challenges. The Concessions Directive sought to clarify the legal situation.

Stuart Broom (EIB) said that it is currently unclear how many concessions exist around Europe. Defining them is currently based on case law, which relies on Commission action at the European Court of Justice (ECJ). The new Directive provides a definition for concessions, which levels the playing field in the EU. He went on to caution that not all concessions are Public Private Partnerships (PPP). He said that the Commission will need to be clear on that and ensure that it offers clarity on the levels of scrutiny which will apply to concessions across the EU.

Diogo Macedo Graça (UTAP) explained that Portugal has a public procurement code which went beyond existing Directive rules, and had chosen to create its own concessions rules at the national level. He said that he felt that offering clarity in this area was a vital step forward, as concessions tended to be long term and highly complex contracts which should exist within an area of legal certainty. The introduction of rules relating to amending contracts and negotiating procedures, as well as e-procurement rules are important additions to the current legal structures.

Valeria Ronzitti (CEEP) said that CEEP members were not initially supportive of the need for a Concessions Directive, instead believing that the status quo provided a light touch approach to regulation. However this view has shifted, there is now a clear recognition of public private cooperation and a number of other provisions in the Directive which should bring benefit. Together these offer greater clarity in the field of procurement, establishing a clear set of rules which should reduce the role of litigation in clarifying concession rules.

The Chair moved the discussion on by asking panel members for their views on whether the new rules on concessions will help mid-caps and SMEs successfully bid for concessions.

Philippe Juvin (EPP, FR) said that SMEs do not have access to the same legal expertise as large companies. The new rules provide a clearer text which SMEs can engage with, and they will no longer need to rely on lawyers to explain the evolution of concessions policy through ECJ case law. He said that this will require Member States not to further complicate the Directive during the transposition process. But overall he felt that the changes should level the playing field for SMEs as the new text would provide legal clarity.

The Chair then queried whether this meant that the regime was now too light to be useful in protecting SMEs.

Philippe Juvin (EPP, FR) stated that this was not the case. He used the example of risk to illustrate his point. He said the defining of risk in a concession as a percentage value of the project cost had been debated, however it was ultimately decided that agreeing a fixed percentage figure would unfairly compare risk across different concession sizes. This, he said, would fix the risk threshold at a similar point for a large project (such as a motorway) and a smaller project (such as an individual building.) Whilst the value of risk as a percentage of the project would be similar, the total sums involved in the procurement expenditure would be significantly different. He said that this would unfairly burden smaller projects. Instead the Directive chose to take a lighter touch, recognising the existence of risk but leaving it for Member States to decide an appropriate risk ratio on a case by case basis.

Stuart Broom (EIB) said that he thought the challenge will come from transposition and application in Member States. Projects should be looked at on a case by case basis. He said that whilst it is important to be able to split concession lots to encourage an SME bid, it should not come at the risk of making a project incoherent or additionally complex.

Diogo Macedo Graça (UTAP) said that in his opinion reforms which lighten the bureaucracy associated with procurement bids are a positive force. He went on to say that the use of electronic bids and clarifying rules on sub-contracting would facilitate SME access to the concessions market. He argued that the Directive could have gone further in its use of electronic procurement methods. His view was that the Directive uses conditional language where it could have used mandatory language to encourage electronic channels - which further lightens the burden on SMEs

Chair asked how one sees the challenges of the application of the Directives.

Valeria Ronzitti (CEEP) said that creating a lighter touch regime will make engaging with concessions bids easier for SMEs. The emphasis should now be on all those involved in the tender process, the bidders and public authorities, to work together to understand the changes and implement the Directive in a way which minimises legal uncertainty.

The Chair then asked the panel for their views on how they see the role of the Commission in helping implementation.

Valeria Ronzitti (CEEP) thought that the Commission should facilitate workshops which help national and local authorities understand the implementation challenges; as well as involving civil society so as to ensure implementation is mutually beneficial.

Diogo Macedo Graça (UTAP) said that the Commission should provide guidance on how to implement the Directive. One area of work the Commission could add value is on the nature of the tender process. The old Directive made a number of options for the tender process clear, the new one does not. He said the Commission should work with Member States to define this process. He welcomed the removal of a definition of the award process for a winning bid, but cautioned that the Commission should work with Member States to implement this change, so as to avoid litigation. He also called on the Commission to work with Member States to ensure that the three new Directives are implemented in a way which avoids conflicting or overlapping legislation.

Philippe Juvin (EPP, FR) was of the opinion that the Commission could start to work on revising the existing Directives, with the aim of eventually considering a Regulation. He said that the Commission should also be pro-active in its monitoring of implementation, offering guidance to Member States.

Stuart Broom (EIB) viewed the concessions Directive as being less proscriptive than the status quo. He said that the Public Procurement Directive already had a number of established best practices. He thought that the Commission had a role to play in ensuring that this best practice is preserved during the transposition process and is ultimately reflected in the new framework.

The Chair then opened the discussion to Q&A, inviting questions from the floor:

A representative of the European Institute of Public Administration asked how the Directive would offer legal certainty for Public Authorities offering payment, whilst exposing bidders to market forces.

Penny Clark of the European Federation of Public Service Unions asked if the Directive should instead focus on outcomes for investment rather than legislating the process for procurement, as it does now.

A representative of the Association of Austrian Cities highlighted the difficulties cities had in navigating the different contract options available through the proposed texts, and if the difference in contracts would be made clear.

Philippe Juvin (EPP, FR) responded by saying that before the Directive there was considerable legal uncertainty, clarity was obtained through litigation at the ECJ. In effect, the Directive was evolving through case law, which was difficult to understand for all those involved in the concessions process. The new Directive seeks to reduce legal uncertainty by clarifying the case law and codifying it in the Directive.

Stuart Broom (EIB) responded to the European Institute of Public Administration question by saying that he also had concerns about the definition of market risk, and that the Commission needed to be careful that it did not unintentionally capture PPP bids.

Diogo Macedo Graça (UTAP) said that the new Directive will define occasions where it is acceptable to amend a PPP contract, which will offer certainty for bidders whilst also ensuring long term value for the Public Authorities funding the project. He said that he was unclear as to the definition of the exposure of risk for bidders, and felt that it would be addressed on a case by case basis.

The Chair commented that the negotiations during the legislative phases showed some differences of opinion amongst member States on the need for Concessions legislation. The discussions surrounding water utilities was a case in point.

Philippe Juvin (EPP, FR) said that the idea of Concessions is that a Public Utility, such as water, is managed on behalf of a Public Authority by a private company. There was a fear amongst some that this would lead to the privatisation of the utility, but this is erroneous. After the concession was finished the utility would be handed back to the Public. The debate on water became controversial, so it was removed from the Directive so as to enable progress in other areas. In time this will be reviewed and water may well come under the scope of the Directive.

Valeria Ronzitti (CEEP) said the most important aspect of the Directive is the article which allows public authorities the discretion to manage public utilities as they see fit, but which does not allow for backdoor privatisation. This allows public authorities the flexibility to open concessions, whilst protecting against privatisation of key utilities such as water.

The Chair then asked if Member States have the expertise to apply the new rules, or if there was more that the Commission should be doing to facilitate the pooling of knowledge:

Diogo Macedo Graça (UTAP) said that he felt that the pooling of knowledge would be beneficial. Member States would in some instances be required to create a new framework, others would need to modify existing regimes and the EU would need to modify its own framework. Managing all of this would need careful stewardship. The Commission has a role to play in coordinating legislation across the EU.

Stuart Broom (EIB) said that the PPP Centre believed that sharing best practice amongst Member States, as well as specific bilateral support, would be advantageous to Member States as they apply the Directives. A position which Valeria Ronzitti (CEEP) also supported.

The Chair then concluded the panel by asking the panelists to express what they thought the most important next steps were to meet the implementation Challenge, and how to ensure that the new Concessions Directive achieved its goals.

Valeria Ronzitti (CEEP) said that it was to ensure that public authorities are included in the implementation process, to avoid case law at a later date.

Diogo Macedo Graça (UTAP) called for the Member States and the Commission to work on the rules governing the lifecycle of the contract. He said that this will need to include monitoring the project during its lifecycle, understanding the handing back of assets at the end of the contract and how to renegotiate a contract for active concessions.

Stuart Broom (EIB) was of the view that the Commission will need to work with the Member States to implement the Directive. He said that this will be especially important in drawing on existing best practice where it exists. The Directive does not preclude this.

Philippe Juvin (EPP, FR) said that the Commission will need to ensure that the Directive is implemented swiftly, and the future Commissioner for Internal Market and Services should be prepared to impose sanctions if this is not done.

Juaqim Munes De Almeida provided closing remarks for the Conference.

He said that his remarks would highlight the key points he had taken away from the day’s discussions. With that in mind he said that he recognised the need to develop training for Public Authorities involved in procurement and applying the new procurement rules. He felt that in the long term this will pay significant dividends.

He said that the new rules allow for a number of new measures to be used in deciding which bid to choose. This will allow innovation, social and environmental factors to be favoured over simple cost. This will allow for significant changes in public procurement practices, implementing other public policy through the procurement process. Whilst Member States will be freer to meet societal goals, the Commission must remain vigilant so as to ensure that this does not come to include protectionism and harm the Single Market.

He recognised that the ‘devil will be in the detail’ as the Directive is implemented. The Commission will have a role to play in guarding against creeping bureaucracy as the Directive is transposed by Member States. The spirit of the new regime’s light touch should be kept in mind when Member States prepare their own legislation. The previous practice of Concessions regulations evolving through litigation led to complications which Public Authorities and the market struggled to keep abreast of. The new legislative approach will hopefully alleviate aspects of this, but will not serve as a panacea.

He said that Public Private Partnerships (PPP) should be viewed as a tool available to public authorities, and not subject to a continual existential discussion. Greater training of public authorities will ultimately be what ensures that PPP contracts are effectively managed.

He closed by remarking that the Commission will assist the transition to the new rules with guidance, but the Member States should lead this effort. It should also be remembered that while guidance does have it uses and can reduce some ambiguity, there is also a need to address questions on a case by case basis. He felt that overall the new package presented new opportunities for the EU, Member States and bidders, but that those involved would need to seize the initiative to reap the potential benefits on offer.

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