[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 5.12.2007

COM(2007) 766 final

2007/0280 (COD)

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the coordination of procedures for the award of certain public works contracts, public supply contracts and public service contracts in the fields of defence and security

(presented by the Commission) {SEC(2007) 1598}{SEC(2007) 1599}

EXPLANATORY MEMORANDUM

1) BACKGROUND

- Grounds for and objectives of the proposal

The creation of a European defence equipment market is a key factor in backing the European Security and Defence Policy (ESDP). In the field of public procurement, this requires a new European legislative framework which is tailored to the award of sensitive public contracts in the fields of defence and security. This Directive seeks to establish such a framework, by filling in the gaps in the existing legislation identified by the Commission after consulting all the parties concerned.

Public contracts awarded in the fields of defence and security currently fall within the scope of Directive 2004/18/EC[1], apart from the exceptions arising in the situations provided for by Articles 30, 45, 46, 55 and 296 of the Treaty.

The Court of Justice has consistently ruled in its case law that recourse to derogations from Community law, including those covered by Article 296 of the Treaty, should be restricted to exceptional and clearly defined cases. As it is, in the fields of defence and security, Directive 2004/18/EC is rarely applied by the Member States, which invoke either the exemptions under Article 296 of the Treaty for public defence contracts, or those under Article 14 of the Directive for public security contracts. Thus, derogations which should be the exception according to the Treaty and Court of Justice case law are, in practice, the rule.

As a result, most defence and security equipment is purchased on the basis of uncoordinated national contract award procedures and rules. These provisions differ significantly in terms of publication, tendering procedures, selection and award criteria, etc. This lack of legal uniformity constitutes a major obstacle to the establishment of a European defence equipment market and opens the door to non-compliance with the principles of the Treaty, in particular the principles of transparency, non-discrimination and equal treatment, in wide sections of Europe's defence markets.

The extensive use of these derogations is largely due to the fact that Directive 2004/18/EC, despite the improvements it made to the coordination rules previously in force, does not take sufficient account of the specific requirements that have to be met by certain purchases of goods and services in the fields of defence and security.

It is therefore the Commission's objective to circumscribe the use of exemptions from the Treaty and Directive 2004/18/EC in the fields of defence and security to exceptional cases, in accordance with Court of Justice case law, whilst respecting the security interests of the Member States.

This proposal thus aims to introduce a new legal instrument tailored to the specific nature of "sensitive" purchases for which specific requirements and precautions govern the award of contracts, in these fields. The Member States will then have at their disposal a common framework of procurement rules that not only ensure the application of the principles of the EC Treaty but also take into account the particular requirements of these purchases, such as security of information, security of supply and the necessary flexibility of the procedures.

- General background

In 1996 and 1997, the European Commission produced two Communications on defence-related industries to encourage restructuring and the setting up of an efficient European defence equipment market. Concrete proposals and measures followed with respect to some of these issues. However, some Member States considered any action at European level on the most essential reforms to be premature.

Following a period of transformation in this sector and in the institutional framework of the EU, including the beginnings of a real European Security and Defence Policy (ESDP), the European Parliament, in a Resolution of 10 April 2002, invited the Commission to tackle the issue of armaments in a new Communication.

In autumn 2002, the Convention on the Future of Europe set up a working party on defence chaired by the European Commissioner, Michel Barnier. The working party's report[2] stressed that the credibility of European defence policy depends on the existence and development of European defence capabilities and a strengthening of the European defence industrial and technological base. To this end, the European Defence Agency (EDA), which was initially provided for in the draft European Constitution, was set up in July 2004 and testifies to the Member States' determination to develop their defence capabilities.

Alongside the efforts made by the Member States, the Commission, through its 2003 Communication entitled " Towards an EU Defence Equipment Policy "[3], launched seven initiatives to establish a more efficient European defence equipment market. In this communication, the Commission emphasised the need to initiate a reflection on how to optimise defence procurement and announced the adoption of an Interpretative Communication on the scope of Article 296 of the Treaty and the preparation of a Green Paper. The purpose of the latter was to serve as the basis for discussion with all parties concerned, on which rules to apply to the award of public defence equipment contracts, in accordance with the level of sensitivity of the equipment.

In 2004, the Commission published the Green Paper entitled " Defence procurement "[4]. By the end of the consultation, the Commission had received forty contributions from sixteen Member States, organisations and enterprises.

In 2005, after analysing these contributions and reflecting on its dialogue with the parties concerned, it published a Communication " on the results of the consultation launched by the Green Paper on Defence Procurement and on the future Commission initiatives "[5]. These contributions confirmed the value of an interpretative communication on the application of Article 296 of the Treaty – which was adopted in 2006[6] - and demonstrated the need for Community rules for defence procurement which take the specific characteristics of certain purchases in this sector into account.

Further consultations with the parties concerned revealed the existence of similar requirements for non-military security purchases which call for a legislative response at European level as well. Indeed, as the European Council noted in the European security strategy " A secure Europe in a better world " in 2003, the emergence of asymmetrical transnational threats, such as terrorism and organised crime, is blurring the boundary between external and internal, military and non-military security, and calls for a comprehensive response. Furthermore, in order to combat these threats, non-military security forces often use equipment which, technologically speaking, is comparable to defence equipment. As a result, sensitivity is an increasingly important feature of such security procurement, particularly in terms of complexity and confidentiality, which renders it similar to defence procurement.

- Existing provisions in the area covered by the proposal

At present, the contracts covered by this proposal are governed by 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.

- Consistency with other policies

The proposal forms part of the internal market policy and will enhance the ESDP and Europe's industrial policy.

It also falls within the framework of the seven policy areas identified by the Commission in 2003 in its Communication " Towards an EU Defence Equipment Policy" and complements other Commission initiatives relating to the defence market and industry.

2) CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT

- Consultation of interested parties

From the outset of its initiative on defence procurement in 2003, the Commission has engaged in in-depth discussions with all parties concerned, resulting in this proposal. Consultations have been held within the Advisory Committee for Public Contracts (ACPC), through the EDA, and during bilateral meetings with the Member States and the European industry. There has also been regular contact with the members of the European Parliament's "Internal Market and Consumer Protection" (IMCO) Committee.

The Green Paper on " Defence procurement" was drawn up on the basis of expert advice from both the Member States and the European industry (see below). It, in turn, gave rise to a broad consultation exercise, with replies being received from forty parties (Member States, enterprises and other parties). The results of this consultation were used by the Commission to continue its work.

The Member States played an active part in compiling the interpretative communication adopted in December 2006 and were asked by the Commission to comment on an initial version of the text distributed to them at the ACPC. Likewise, all the interested parties were closely involved in drawing up this proposal, through a large number of multilateral and bilateral meetings and by sending written replies to four documents addressed to the members of the ACPC. In addition, governments and enterprises were consulted as part of the impact assessment conducted through five studies commissioned from external consultants which covered all aspects of defence procurement (demand, supply, regulatory framework and products).

- Collection and use of expertise

Between January and April 2004, the Commission organised six brainstorming sessions with groups of experts from the Member State governments and the European industry in order to collect information on current practices in the field of defence procurement. These sessions dealt with "identifying the characteristics and economic dimensions of defence markets", "defence procurement rules at national, inter-governmental and Community levels" and "the course of action for a Community instrument on defence procurement".

- Impact assessment

In the course of its impact assessment, the Commission looked at three options: taking no Community action, adopting a non-legislative measure and adopting a legislative measure.

The non-legislative measures envisaged included an interpretative communication to clarify the application of Article 14 of Directive 2004/18/EC in the field of security, a more rigorous policy on infringements and a training programme for the contracting authorities and Commission staff on how to act on the interpretative communication on the application of Article 296 of the Treaty.

The legislative measures envisaged included a regulation, a sectoral directive applying to all contracting authorities in the fields of defence and security, a separate directive applying to sensitive defence and security contracts and, finally, a directive amending directive 2004/18/EC in order to incorporate new rules relating specifically to these contracts.

The Commission very quickly dismissed the option of non-legislative measures. Although useful, these would not, by themselves, be able to cut down on the use of derogations based on Article 296 of the Treaty and Article 14 of Directive 2004/18/EC. This objective can only be achieved if the Community law on public procurement contains rules that are tailored to the specific nature of sensitive public defence and security contracts. Given that such rules do not currently exist, they need to be created, which requires the adoption of a legislative measure.

Similarly, if the Commission took no action at all, the extensive application of exemptions for public defence and security contracts from the rules of the internal market would doubtless continue. On the basis of the current legal framework, the majority of defence and security contracts would gain neither in transparency nor in openness.

The reasons behind the Commission's choice of legislative instrument are explained in the relevant section ("choice of instruments").

Aside from the issue of the instrument, the Commission considered various sub-options relating to:

° the scope of the new rules;

° their content, particularly as regards security of supply, security of information and award procedures.

The options relating to scope were assessed in the light of the objective to limit the use of derogations from Community rules to exceptional circumstances, whilst respecting the right of the Member States not to apply Community rules on the grounds of protecting their essential security interests.

The various options concerning the content of the new rules, particularly as regards security of supply, security of information and the award procedures, were assessed with respect to the objective of ensuring the greatest possible degree of transparency, equal treatment and non-discrimination in sensitive defence and security contracts. This objective should not, however, be detrimental to the legitimate security interests of the Member States.

This Directive will substantially improve the regulatory framework for public defence and security procurement. It will make it possible to coordinate national legislation in this field and ensure compliance with the principles of transparency, equal treatment and non-discrimination.

The impact analysis also revealed a very limited effect on administrative costs for the contracting authorities and businesses. Any increases in costs relating to the initial introduction of the new rules should be slight and lead in the medium or longer term to lower administrative costs for businesses and SMEs in particular.

Making defence and security markets more open should, from an economic viewpoint, improve the chances of businesses winning contracts in other Member States, thus allowing the more competitive enterprises to achieve economies of scale and develop their activities. Unit production costs will be reduced, making European products more competitive on the global market. Purchases made by the contracting authorities will be cheaper. Finally, more efficient use will be made of taxpayers' money and EU citizens will be better protected from threats to their security.

The provisions of this proposal will not alter international, and specifically trans-Atlantic, trade relations in the fields of defence and security. These relations are governed by the agreements reached within the World Trade Organization (WTO), and particularly by the Government Procurement Agreement (GPA). Sensitive public contracts awarded by contracting authorities operating in the field of defence, i.e. contracts for the supply of arms, munitions or war material, are excluded from the scope of this agreement. Public security contracts may, for their part, be exempted on a case-by-case basis from the application of this agreement on the basis of Article XXIII. The contracting authorities concerned by this proposal will thus retain the right to decide whether or not to ask for tenders from economic operators from third countries.

3) LEGAL ELEMENTS OF THE PROPOSAL

- Summary of the proposed action

This proposal for a directive applies to sensitive public supply contracts, public service contracts and public works contracts in the fields of defence and security. The application thresholds proposed are the same as those currently applied at Community level under Directive 2004/18/EC.

This proposal is largely based on the design and rationale of Directive 2004/18/EC, but has a certain number of specific features which are tailored to the characteristics of sensitive public defence and security contracts. These features provide, on the one hand, for more flexibility for the contracting authorities and, on the other hand, for the safeguards required to guarantee the security of information and supply. The key provisions of this proposal cover:

° the procedures: the negotiated procedure with publication of a contract notice is authorised without the need for specific justification in order to allow the flexibility required to award sensitive defence and security contracts. The restricted procedure and the competitive dialogue may also be used. The open procedure, however, which involves distributing the specifications to any economic operator that wants to see them, was felt to be inappropriate in view of the confidentiality and security of information requirements attached to these contracts.

° security of supply: the specific needs of the Member States with respect to security of supply for sensitive public contracts in the fields of defence and security justify specific provisions, in terms of both contractual requirements and the criteria for selecting candidates.

° security of information: similarly, the often confidential nature of the information relating to sensitive public defence and security contracts calls for safeguards applying to the award procedure itself, the criteria for selecting candidates and the contractual requirements imposed by the contracting authorities.

- Legal basis

The legal basis is formed by Articles 47(2), 55 and 95 of the EC Treaty, which are intended to ensure that the procedures used for the public procurement of goods and services comply with the principles of the free movement of goods, the freedom of establishment and the freedom to provide services.

- Subsidiarity principle

In accordance with the results of the consultations conducted in recent years, the need for legislative action has arisen at Community level in order to introduce a directive to coordinate Community contract award procedures specifically for sensitive purchases in the fields of defence and security.

This objective could not be achieved either by failing to take action or through action by the Member States.

A legislative initiative is thus required to put an end to infringement situations originating from the lack of Community provisions to coordinate the public procurement procedures that currently apply.

- Proportionality principle

The instrument chosen is a directive, which gives Member States a high degree of flexibility in terms of implementation.

The provisions laid down mirror those of Directive 2004/18/EC as regards the fields covered by this proposal. Furthermore, the provisions which pay specific attention to features that are peculiar to the fields of defence and security give the Member States and contracting authorities considerable leeway as regards the choices to be made in awarding their contracts.

As long as the provisions of the Directive are fully applied, their transposition into national law will allow each Member State to take into account the specific features and characteristics of the sensitive purchases they make in the fields of defence and security.

- Choice of instruments

Given that the legal bases are Articles 47(2), 55 and 95 of the EC Treaty, the use of a Regulation for the provisions applying to both the public procurement of goods and the public procurement of services would not be permitted by the Treaty. The instrument proposed is therefore a Directive.

Since the objective is to improve the operation of the internal market for purchases that involve specific characteristics whilst retaining the recent acquis (Directive 2004/18/EC) and the case-law acquis for purchases that do not have the same constraints and requirements, the proposal for a separate directive seems to be the best approach. It also ensures that the provisions are clearer and easier to read and understand.

When transposing the Directive, the Member States may, if they so desire, provide for legislation that applies to all their public procurement, including sensitive contracts from the fields of defence and security.

4. BUDGETARY IMPLICATION

YES

This Directive will have a budgetary impact arising from several lines of action:

- the daily publication of notices in the Official Journal of the European Union,

- annual monitoring of the implementation of the Directive,

- medium-term assessment (not before five years) of the administrative impact of implementing the Directive by the contracting authorities and in businesses,

- long-term assessment (not before ten years) of the economic impact of the Directive.

The measures listed above in the field of monitoring and assessment may require the services, in part or in full, of external service providers, under a technical assistance contract, an existing framework contract in the field of evaluation or through an invitation to tender under the restricted or open procedure.

A financial statement attached to the proposal for a directive details the subject-matter and estimated cost of the measures with a budgetary impact.

5. ADDITIONAL INFORMATION

- European Economic Area

The proposed act concerns an EEA matter and should therefore apply to the European Economic Area.

2007/0280 (COD)

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the coordination of procedures for the award of certain public works contracts, public supply contracts and public service contracts in the fields of defence and security (Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 47(2) and Article 55 and Article 95 thereof,

Having regard to the proposal from the Commission[7],

Having regard to the opinion of the European Economic and Social Committee[8],

Having regard to the opinion of the Committee of the Regions[9],

Acting in accordance with the procedure laid down in Article 251 of the Treaty[10],

Whereas:

(1) The gradual establishment of a European defence equipment market is essential for strengthening the defence industrial and technological base in Europe and developing the military capabilities required to implement the European Security and Defence Policy (ESDP).

(2) One prerequisite for the creation of a European defence equipment market is the establishment of an appropriate legislative framework. In the field of public procurement, this involves the coordination of procedures for the award of public contracts to meet the security requirements of the Member States and the obligations arising from the Treaty.

(3) At the same time, these rules should reflect the European Union's overall approach to security, which responds to changes in the strategic environment. The emergence of asymmetrical transnational threats has increasingly blurred the boundary between external and internal, military and non-military security.

(4) Defence and security equipment is vital both for the security and sovereignty of the Member States and for the autonomy of the European Union. As a result, purchases of goods and services in the defence and security sectors are often of a sensitive nature.

(5) This results in specific requirements, particularly in the fields of security of supply and security of information. These requirements relate especially to purchases of arms, munitions and war material for the armed forces (as well as services and work directly relating to these), but also to certain particularly sensitive purchases in the field of non-military security.

(6) The award of contracts concluded in the Member States on behalf of the State, regional or local authorities and other public law entities, is subject to compliance with the principles of the Treaty and in particular the principles of the free movement of goods, the freedom of establishment and the freedom to provide services, and with the principles deriving therefrom, such as the principles of equal treatment, non-discrimination, mutual recognition, proportionality and transparency. For public contracts above a certain value, it is advisable to draw up provisions for the Community coordination of national procedures for the award of such contracts which are based on these principles so as to ensure the effects of these and to guarantee the effective opening-up of public procurement to competition. These coordinating provisions should therefore be interpreted in accordance with both the aforementioned rules and principles and with other rules of the Treaty.

(7) Articles 30, 45, 46, 55 and 296 of the Treaty make provision for specific exceptions to the application of the principles set out in the Treaty and, consequently, to the application of law derived from these principles. It therefore follows that none of the provisions in this directive should prevent the imposition or application of any measures considered necessary to safeguard interests recognised as legitimate by these provisions of the Treaty. Nevertheless, in accordance with ECJ case-law, the possibility of recourse to such exceptions should be interpreted in such a way that their effects do not extend beyond that which is strictly necessary for the protection of the legitimate interests that these Articles of the Treaty help safeguard. This means that non-application of the Directive should be proportionate to the aims pursued and cause as little disturbance as possible to the free movement of goods and/or the provision of services.

(8) Contracts relating to arms, munitions and war material awarded by contracting authorities operating in the field of defence are excluded from the scope of the Government Procurement Agreement (hereinafter "the Agreement") concluded at the World Trade Organization. With respect to the other contracts covered by this Directive, these may be exempted from the application of this agreement on the basis of Article XXIII thereof.

(9) A contract shall be deemed to be a public works contract only if its subject-matter specifically covers the execution of activities under Division 45 of the "Common Procurement Vocabulary" laid down by Regulation (EC) No 2195/2002 of the European Parliament and of the Council of 5 November 2002 on the Common Procurement Vocabulary (CPV)[11] (hereinafter the "CPV"), even if the contract covers the provision of other services necessary for the execution of such activities. Public service contracts may, in some cases, include works. However, insofar as such works are incidental to the principal subject-matter of the contract, and are only a possible consequence thereof or a complement thereto, the fact that such works are included in the contract does not justify the qualification of the contract as a public works contract.

(10) Public defence and security contracts often contain sensitive information which, for security reasons, needs to be protected from unauthorised access. In the military field, the Member States have systems for classifying this information. The picture is more varied, however, when it comes to non-military security matters. The recommendation is, therefore, to make use of a concept which takes into account the diversity of practices in the Member States and can encompass both the military and non-military fields. At any rate, public procurement in these fields should not, where appropriate, affect the obligations arising from Commission Decision 2001/844/EC of 29 November 2001 amending its internal Rules of Procedure[12] or Council Decision 2001/264/EC adopting the Council’s security regulations[13].

(11) The contracting authorities should be allowed to use framework agreements, which makes it necessary to provide a definition of the framework agreements and specific rules. Under these rules, when a contracting authority enters into a framework agreement in accordance with the provisions of this Directive relating, particularly, to advertising, time limits and conditions for the submission of tenders, it may enter into contracts based on this framework agreement during its term of validity either by applying the terms set forth in the framework agreement or, if not all terms have been fixed in advance, by reopening competition between the parties to the framework agreement. The reopening of competition should comply with certain rules, the aim of which is to guarantee the required flexibility and to guarantee compliance with the general principles, in particular the principle of equal treatment. For the same reasons, the term of the framework agreements should not exceed five years, except in cases duly justified by the contracting authorities.

(12) Contracting authorities may make use of electronic purchasing techniques, providing such use complies with the rules drawn up under this Directive and with the principles of equal treatment, non-discrimination and transparency.

(13) Multiplying the number of thresholds for applying the coordinating provisions complicates matters for the contracting authorities. The application thresholds for this Directive should therefore correspond to those that already have to be met by the contracting authorities in applying 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[14]. To this end, the thresholds should be aligned with those of Directive 2004/18/EC when the latter are revised.

(14) For the implementation of the rules of this Directive and for monitoring purposes, the best way of defining the field of services is to sub-divide it into categories corresponding to certain codes in the CPV.

(15) In addition, provision should be made for cases where the Directive does not apply because specific rules on the awarding of contracts which derive from international agreements or which are specific to international organisations are applicable.

(16) It can be the case that armed forces from the Member States conduct military operations beyond the borders of the European Union. In such circumstances, authorisation should be given to contracting authorities deployed in the field of operations not to apply the rules of this Directive when they award contracts to local economic operators.

(17) The technical specifications drawn up by public purchasers need to allow public procurement to be opened up to competition. To this end, it must be possible to submit tenders which reflect the diversity of technical solutions. To do so, technical specifications should, on the one hand, be established on the basis of performances and functional requirements. On the other hand, where reference is made to the European standard - or, in the absence thereof, to international or national standards, including those specific to the field of defence - tenders based on equivalent arrangements must be considered by contracting authorities. This equivalence can be assessed in particular with regard to interoperability and operational efficiency requirements. To demonstrate equivalence, tenderers should be permitted to use any form of evidence. Contracting authorities must be able to provide a reason for any decision that equivalence does not exist in a given case. There are also international agreements on standardisation which aim to ensure the interoperability of the armed forces and which can have force of law in the Member States. Should one of these agreements apply, the contracting authorities can demand that tenders comply with the standards described in these agreements. The technical specifications should be clearly indicated, so that all tenderers know what the requirements established by the contracting authority cover.

(18) The detailed technical specifications and additional information concerning contracts must, as is customary in Member States, be given in the contract documents for each contract or in an equivalent document.

(19) Defence and security equipment is often intended to be integrated into more complex structures (a system, or system of systems). In this case, certain technical specifications relating to this integration may not appear in the contract documents and may only be revealed to the successful tenderer on condition that the impact of these technical specifications on the tender is limited to explanations or clarifications which do not alter the subject-matter of the contract. In all cases, the contracting authorities provide the same information to all tenderers and ensure that they are all treated equally.

(20) Contract performance conditions are compatible with this Directive provided that they are not directly or indirectly discriminatory and are indicated in the contract notice or in the contract documents.

(21) In particular, the conditions of performance may contain requirements by the contracting authorities as regards security of information and security of supply. These requirements are particularly important given the sensitive nature of the equipment covered by this Directive and concern the whole of the supply chain.

(22) With respect to security of supply, the contracting authority's requirements as regards the organisation and location of the tenderer's supply chain include, for example, the business's internal rules between subsidiaries and the parent company on intellectual property rights.

(23) In any case, no performance conditions may pertain to requirements other than those relating to the performance of the contract itself.

(24) The laws, regulations and collective agreements, at both national and Community level, which are in force in the areas of employment conditions and safety at work, apply during performance of a public contract, providing that such rules, and their application, comply with Community law. In cross-border situations, where workers from one Member State provide services in another Member State for the purpose of performing a public contract, Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services[15] lays down the minimum conditions which must be observed by the host country in respect of such posted workers. If national law contains provisions to this effect, non-compliance with those obligations may be considered to be grave misconduct or an offence concerning the professional conduct of the economic operator concerned, liable to lead to the exclusion of that economic operator from the procedure for the award of a public contract.

(25) The public contracts covered by this Directive are characterised by specific requirements in terms of complexity, security of information or security of supply. Extensive negotiation is often required to satisfy these requirements when awarding the contract. As a result, the contracting authorities may use the negotiated procedure with the publication of a contract notice, as well as the restricted procedure, for the contracts covered by this Directive.

(26) Contracting authorities which carry out particularly complex projects may, without this being due to any fault on their part, find it objectively impossible to define the means of satisfying their needs or of assessing what the market can offer in the way of technical solutions and/or financial/legal solutions. This situation may arise in particular with projects requiring the integration or combination of several technological or operational capabilities or projects involving complex and structured financing, the financial and legal make-up of which cannot be defined in advance. In this case, use of the restricted procedure and the negotiated procedure with the publication of a contract notice would not be feasible, as it would not be possible to define the contract with enough precision to allow candidates to draw up their offers. It is therefore necessary to provide for a flexible procedure which guarantees competition between economic operators as well as the need for the contracting authorities to discuss all aspects of the contract with each candidate. However, this procedure must not be used in such a way as to restrict or distort competition, particularly by altering any fundamental aspects of tenders, or by imposing substantial new requirements on the successful tenderer, or by involving any tenderer other than the one selected as the most economically advantageous.

(27) Use of the negotiated procedure with the publication of a contract notice could be impossible or entirely inappropriate in certain exceptional circumstances. The contracting authorities should thus, in certain very specific cases and circumstances, be able to use the negotiated procedure without publication of a contract notice.

(28) Certain circumstances should be partly the same as those provided for by Directive 2004/18/EC. In this respect, consideration should be given in particular to the fact that defence and security equipment is often technically complex. Consequently, the incompatibility or disproportionate technical difficulties in operation and maintenance justifying the use of the negotiated procedure without publication of a contract notice in the case of supply contracts for additional deliveries should be judged in the light of this complexity and the associated requirements for interoperability and standardisation of the equipment. This is the case, for example, with the integration of new components into existing systems or the modernisation of these systems.

(29) The specific nature of the contracts subject to this Directive also demonstrates the need to provide for new circumstances which may arise in the fields covered by the Directive.

(30) The armed forces of the Member States may, for example, be called on to intervene in crisis situations or armed conflicts. At the launch, or during the course, of such an intervention, the security of the Member States and their armed forces may necessitate the award of certain contracts at a speed which is incompatible with the deadlines imposed by the award procedures normally laid down by this Directive. Such emergencies could also arise for the security forces, e.g. in the case of a terrorist attack on EU territory.

(31) Stimulating research and technological development is a key way of strengthening the EU defence technological and industrial base, and the opening-up of public procurement helps achieve this objective. The importance of research in this specific field does, however, justify maximum flexibility when awarding contracts, particularly to encourage the Member States to pool their investments in future capabilities.

(32) Sales of arms, munitions and war material between governments are also public contracts of a particular type that may be useful in improving interoperability.

(33) In view of new developments in information and communications technology, and the simplifications these can bring, electronic means should be put on a par with traditional means of communication and information exchange. As far as possible, the means and technology chosen should be compatible with the technologies used in other Member States .

(34) To ensure development of effective competition in the field of public procurement covered by this Directive, it is necessary that contract notices drawn up by the contracting authorities of Member States be advertised throughout the Community. The information contained in these notices must enable economic operators in the Community to determine whether the proposed contracts are of interest to them. For this purpose, they must be given adequate information on the subject-matter of the contract and the conditions attached thereto. Improved visibility should therefore be ensured for public notices by means of appropriate instruments, such as standard contract notice forms and the CPV, which is the reference nomenclature for public contracts.

(35) Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures[16] and Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market ("Directive on electronic commerce")[17] should, in the context of this Directive, apply to the transmission of information by electronic means. The public procurement procedures require a level of security and confidentiality higher than that required by these Directives. Accordingly, the devices for the electronic receipt of offers and requests to participate should comply with specific additional requirements. To this end, the use of electronic signatures, in particular advanced electronic signatures, should be encouraged as far as possible. Moreover, the existence of voluntary accreditation schemes could constitute a favourable framework for enhancing the level of certification service provision for these devices.

(36) The transmission of contract notices by electronic means leads to savings in time. As a result, it should be possible to reduce the minimum time limit for receipt of requests to participate, subject however to the condition that they are compatible with the specific mode of transmission envisaged at Community level.

(37) Verification of the suitability and the selection of candidates should be carried out in transparent conditions. For this purpose, non-discriminatory criteria should be indicated which the contracting authorities may use when selecting competitors and the means which economic operators may use to prove they have satisfied those criteria. In the same spirit of transparency, the contracting authority should be required, as soon as a contract is put out to competition, to indicate the selection criteria it will use and the level of specific competence it may or may not demand of the economic operators before admitting them to the procurement procedure.

(38) A contracting authority may limit the number of candidates in the restricted and negotiated procedures with publication of a contract notice, and in the competitive dialogue. Any reduction in the number of candidates should be performed on the basis of objective criteria indicated in the contract notice. For criteria relating to the personal situation of economic operators, a general reference in the contract notice to the situations set out in Article 30 may suffice.

(39) In the competitive dialogue and negotiated procedures with publication of a contract notice, in view of the flexibility which may be required and the high level of costs associated with such methods of procurement, contracting authorities should be entitled to make provision for the procedure to be conducted in successive stages in order gradually to reduce, on the basis of previously indicated contract award criteria, the number of tenders which they will go on to discuss or negotiate. This reduction should, insofar as the number of appropriate solutions or candidates allows, ensure that there is genuine competition.

(40) The relevant Community rules on mutual recognition of diplomas, certificates or other evidence of formal qualifications apply when evidence of a particular qualification is required for participation in a procurement procedure.

(41) The award of public contracts to economic operators who have participated in a criminal organisation or who have been found guilty of corruption or fraud to the detriment of the financial interests of the European Communities, of money laundering, the financing of terrorism or of terrorist and terrorism-related offences should be avoided. Where appropriate, the contracting authorities should ask candidates or tenderers to supply relevant documents and, where they have doubts concerning the personal situation of a candidate or tenderer, they may seek the cooperation of the competent authorities of the Member State concerned. Such economic operators should be excluded as soon as the contracting authority has knowledge of a judgment concerning such offences rendered in accordance with national law that has the force of res judicata . If national law contains provisions to this effect, non-compliance with public procurement legislation on unlawful agreements, which has been the subject of a final judgment or a decision having equivalent effect, may be considered an offence concerning the professional conduct of the economic operator concerned or grave misconduct.

(42) Non-compliance with national provisions implementing Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation[18] and Council Directive 76/207/EEC of 9 February 1976 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions[19], which has been the subject of a final judgment or a decision having equivalent effect, may be considered an offence concerning the professional conduct of the economic operator concerned or grave misconduct.

(43) Given the sensitive nature of the defence and security sectors, the reliability of the economic operators that win the contracts is vital. This reliability depends, in particular, on their ability to respond to the requirements imposed by the contracting authority with respect to security of supply and security of information.

(44) Contracts should be awarded on the basis of objective criteria which ensure compliance with the principles of transparency, non-discrimination and equal treatment and which guarantee that tenders are assessed in a transparent and objective manner under conditions of effective competition. As a result, it is appropriate to allow the application of two award criteria only: "the lowest price" and "the most economically advantageous tender".

(45) To ensure compliance with the principle of equal treatment in the award of contracts, it is appropriate to lay down an obligation - established by case-law - to ensure the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied to identify the most economically advantageous tender. It is therefore the responsibility of contracting authorities to indicate the criteria for the award of the contract and the relative weighting given to each of those criteria in sufficient time for tenderers to be aware of them when preparing their tenders. Contracting authorities may derogate from indicating the weighting of the criteria for the award in duly justified cases for which they must be able to give reasons, where the weighting cannot be established in advance, in particular on account of the complexity of the contract. In such cases, they must indicate the descending order of importance of the criteria.

(46) Where the contracting authorities choose to award a contract to the most economically advantageous tender, they shall assess the tenders in order to determine which one offers the best value for money. In order to do this, they shall determine the economic and quality criteria which, taken as a whole, must make it possible to determine the most economically advantageous tender for the contracting authority. The determination of these criteria depends on the object of the contract since they must allow the level of performance offered by each tender to be assessed in the light of the object of the contract, as defined in the technical specifications, and the value for money of each tender to be measured.

(47) Certain technical conditions, and in particular those concerning notices and statistical reports, as well as the nomenclature used and the conditions of reference to that nomenclature, need to be adopted and amended in the light of changing technical requirements. It is therefore appropriate to put in place a flexible and rapid adoption procedure for this purpose.

(48) The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission[20],

HAVE ADOPTED THIS DIRECTIVE:

CONTENTS

TITLE I

SCOPE, DEFINITIONS AND GENERAL PRINCIPLES

Article 1 - Scope

Article 2 - Definitions

Article 3 - Public procurement principles

TITLE II

RULES ON PUBLIC CONTRACTS

CHAPTER I

General provisions

Article 4 - Economic operators

Article 5 - Confidentiality

CHAPTER II

Scope: thresholds and exclusion provisions

Section 1 – Thresholds

Article 6 - Threshold amounts for public contracts

Article 7 - Methods for calculating the estimated value of public contracts and of framework agreements

Section 2 – Excluded contracts

Article 8 - Contracts awarded pursuant to international rules

Article 9 - Specific exclusions

CHAPTER III

Specific rules governing specifications and contract documents

Annex 10 - Technical specifications

Article 11 - Variants

Article 12 - Subcontracting

Article 13 - Conditions for performance of contracts

Article 14 - Security of information

Article 15 - Security of supply

Article 16 - Obligations relating to taxes, environmental protection, employment protection provisions and working conditions

CHAPTER IV

Procedures

Article 17 - Procedures to be applied

Article 18 - Negotiated procedure with publication of a contract notice

Article 19 – Competitive dialogue

Article 20 - Cases justifying use of the negotiated procedure without publication of a contract notice

Article 21 – Framework agreements

CHAPTER V

Rules on advertising and transparency

Section 1 – Publication of notices

Article 22 - Notices

Article 23 - Form and manner of publication of notices

Section 2 - Time limits

Article 24 - Time limits for receipt of requests to participate and for receipt of tenders

Section 3 - Information content and means of transmission

Article 25 - Invitation to tender, to negotiate or to participate in the dialogue

Article 26 - Information for candidates and tenderers

Section 4 - Communication

Article 27 - Rules applying to communication

Section 5 - Reports

Article 28 - Content of reports

CHAPTER VI

Conduct of the procedure

Section 1 - General provisions

Article 29 - Verification of suitability and choice of participants, award of contracts

Section 2 - Criteria for qualitative selection

Article 30 - Personal situation of the candidate

Article 31 - Suitability to pursue the professional activity

Article 32 - Economic and financial capacity

Article 33 - Technical and/or professional capacity

Article 34 - Quality assurance standards

Article 35 - Environmental management standards

Article 36 - Additional documentation and information

Section 3 - Award of the contract

Article 37 - Contract award criteria

Article 38 - Abnormally low tenders

TITLE III

Statistical obligations, executory powers, and final provisions

Article 39 - Statistical obligations

Article 40 - Content of the statistical report

Article 41 - Advisory Committee

Article 42 - Revision of the thresholds

Article 43 - Amendments

Article 44 - Amendment of Directive 2004/18/EC

Article 45 - Transposition

Article 46 - Entry into force

Article 47 - Addressees

***

Annexes

Annex I - Services referred to in Article 1

Annex II - Definition of certain technical specifications referred to in Article 10

Annex III - Information to be included in the notices referred to in Article 22 (notice of the publication of a prior information notice on a buyer profile, prior information notice, contract notice, contract award notice)

Annex IV - Features concerning publication

Annex V- Registers

Annex VI - Requirements relating to devices for the electronic receipt of requests to participate and tenders

TITLE I

SCOPE, DEFINITIONS AND GENERAL PRINCIPLES

Article 1 Scope

This Directive shall apply to public contracts awarded in the fields of defence and security for:

a) the supply of arms, munitions and/or war material, referred to in the Council Decision of 15 April 1958[21] and, where necessary, public works and services contracts strictly related to these supplies;

b) the supply of parts, components and/or subassemblies for incorporation in or fitting to the goods referred to under a), or for the repair, refurbishment or maintenance of such goods;

c) the supply of all products intended for training or testing of the goods referred to under a);

d) works, supplies and/or services involving, entailing and/or containing sensitive information, and which are necessary for the security of the EU and its Member States, in the fields of protection against terrorism or organised crime, border protection and crisis management operations.

This Directive shall apply without prejudice to Articles 30, 45, 46, 55 and 296 of the Treaty.

Article 2 Definitions

1. For the purposes of this Directive the following definitions shall apply:

1) "Common Procurement Vocabulary (CPV)": the reference nomenclature applicable to public contracts as adopted by Regulation (EC) No 2195/2002;

2) "Public contracts": contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services within the meaning of this Directive;

3) "Public works contracts": works contracts covering either the execution, or both the execution and design, of works related to one of the activities mentioned in Division 45 of the CPV or of a work or the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority;

4) "Work": the outcome of building or civil engineering works taken as a whole that is sufficient of itself to fulfil an economic or technical function;

5) "Public supply contracts": public contracts other than works contracts having as their object the purchase, lease, rental or hire-purchase, with or without the option to buy, of products;

6) "Public service contracts": public contracts having as their object the provision of services mentioned in Annex I;

7) "Sensitive information": any information (namely, knowledge that can be communicated in any form) or material determined to require protection against unauthorised disclosure for security reasons;

8) "Terrorism": intentional acts which, given their nature or their context, may seriously damage a country or an international organisation where committed with the aim of seriously intimidating a population, or unduly compelling a Government or international organisation to perform or abstain from performing any act, or seriously destabilising or destroying the fundamental political, constitutional, economic or social structures of a country or an international organisation:

a) attacks upon a person's life which may cause death;

b) attacks upon the physical integrity of a person;

c) kidnapping or hostage taking;

d) causing extensive destruction to a Government or public facility, a transport system, an infrastructure facility, including an information system, a fixed platform located on the continental shelf, a public place or private property likely to endanger human life or result in major economic loss;

e) seizure of aircraft, ships or other means of public or goods transport;

f) manufacture, possession, acquisition, transport, supply or use of weapons, explosives or of nuclear, biological or chemical weapons, as well as research into, and development of, biological and chemical weapons;

g) release of dangerous substances, or causing fires, floods or explosions, the effect of which is to endanger human life;

h) interfering with or disrupting the supply of water, power or any other fundamental natural resource, the effect of which is to endanger human life;

i) threatening to commit any of the acts listed in (a) to (h);

9) "Criminal organisation": a structured association, established over a period of time, of more than two persons, acting in concert with a view to committing offences which are punishable by deprivation of liberty or a detention order of a maximum of at least four years or a more serious penalty, whether such offences are an end in themselves or a means of obtaining material benefits and, where appropriate, of improperly influencing the operation of public authorities;

10) "Crisis": any man-made situation in a Member State or third country presenting a direct physical threat to persons or institutions in that country;

11) "Framework agreement": an agreement between one or more contracting authorities and one or more economic operators, the purpose of which 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;

12) "Contractor", "supplier" and "service provider": any natural or legal person or public entity or consortium of such persons and/or bodies which offers on the market to execute works, supply products and provide services respectively;

13) "Economic operator": a contractor, supplier or service provider. The term "economic operator" is used merely in the interests of simplification;

14) "Candidate": an economic operator that has sought an invitation to take part in a restricted or negotiated procedure or a competitive dialogue;

15) "Tenderer": an economic operator that has submitted a tender under a restricted or negotiated procedure or a competitive dialogue;

16) "Contracting authorities": State, regional or local authorities, bodies governed by public law, associations formed by one or several such authorities or one or several of such bodies governed by public law;

17) "Body governed by public law": any body:

a) established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character;

b) having legal personality; and

c) whose activities are mainly financed by the State, regional or local authorities or other bodies governed by public law, or are subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law;

18) "restricted procedures": those procedures in which any economic operator may ask to participate and whereby only those economic operators invited by the contracting authority may submit a tender;

19) "negotiated procedures": those procedures in which the contracting authority consults the economic operators of its choice and negotiates the terms of the contract with them;

20) "competitive dialogue": a procedure in which any economic operator may ask to participate and whereby the contracting authority conducts a dialogue with the candidates admitted to that procedure, with the aim of developing one or more suitable alternatives capable of meeting its requirements, and on the basis of which the candidates chosen are invited to tender;

21) "Particularly complex contract": for the purposes of recourse to the competitive dialogue procedure, a public contract where the contracting authority:

- is not objectively able to define the technical means in accordance with Article 10 (3)(b), (c) or (d), capable of satisfying their needs or objectives, and/or

- is not objectively able to specify the legal and/or financial make-up of a project;

22) "Written" or "in writing": any expression consisting of words or figures which can be read, reproduced and subsequently communicated. It may include information which is transmitted and stored by electronic means;

23) "Electronic means": any means using electronic equipment for the processing (including digital compression) and storage of data which is transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means.

2. A public contract having as its object the supply of products and which also covers, as an incidental matter, siting and installation operations shall be deemed a "public supply contract".

A public contract having as its object both products and services within the meaning of Annex I shall be deemed a "public service contract" if the value of the services in question exceeds that of the products included in the contract.

A public contract having as its object services within the meaning of Annex I and including activities mentioned in Division 45 of the CPV that are only incidental to the principal object of the contract shall be deemed a public service contract.

Article 3 Public procurement principles

Contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way.

TITLE II

Rules on public contracts

CHAPTER I

General provisions

Article 4 Economic operators

1. Candidates or tenderers who, under the law of the Member State in which they are established, are entitled to provide the relevant service, shall not be rejected solely on the ground that, under the law of the Member State in which the contract is awarded, they would be required to be either natural or legal persons.

However, in the case of public service and public works contracts as well as public supply contracts covering in addition services and/or siting and installation operations, legal persons may be required to indicate in the tender or the request to participate, the names and relevant professional qualifications of the staff to be responsible for the performance of the contract in question.

2. Consortia of economic operators shall be authorised to be candidates. Contracting authorities may not demand that consortia must have a given legal form in order to be allowed to submit a tender or request to take part, but the consortium selected may be required to adopt a given legal form after it has been awarded the contract if this change is necessary for proper performance of the contract.

Article 5 Confidentiality

Without prejudice to the provisions of this Directive, in particular those concerning the obligations relating to the information to candidates and tenderers set out in Articles 23(4) and 27, and in accordance with the national law to which the contracting authority is subject, the contracting authority shall not disclose information forwarded to it by economic operators which they have designated as confidential; such information includes, in particular, technical or trade secrets and the confidential aspects of tenders.

CHAPTER II

Scope: thresholds and exclusion provisions

SECTION 1

Thresholds

Article 6 Threshold amounts for public contracts

This Directive shall apply to public contracts which have a value excluding value-added tax (VAT) estimated to be no less than the following thresholds:

a) EUR 137 000 for public supply and service contracts awarded by central government authorities other than those operating in the field of defence;

b) EUR 211 000 for the following public contracts:

- for public supply and service contracts awarded by contracting authorities that are not central government authorities and by central government authorities operating in the field of defence,

- for public service contracts awarded by any contracting authority in respect of the services listed in Category 8 of Annex I or Category 5 telecommunications services in that same Annex, the headings of which in the CPV are equivalent to CPV reference nos 64228000-0, 64221000-1 and 642228000-0;

c) EUR 5 278 000 for public works contracts.

Article 7 Methods for calculating the estimated value of public contracts and of framework agreements

1. The calculation of the estimated value of a public contract shall be based on the total amount payable, net of VAT, as estimated by the contracting authority. This calculation shall take account of the estimated total amount, including any form of option and any renewals of the contract.

Where the contracting authority provides for prizes or payments to candidates or tenderers it shall take them into account when calculating the estimated value of the contract.

2. This estimate must be valid at the moment at which the contract notice is sent, as provided for in Article 23(2), or, in cases where such notice is not required, at the moment at which the contracting authority commences the contract award procedure.

3. No works project or proposed purchase of a certain quantity of supplies and/or services may be subdivided to prevent its coming within the scope of this Directive.

4. With regard to public works contracts, calculation of the estimated value shall take account of both the cost of the works and the total estimated value of the supplies necessary for executing the works and placed at the contractor's disposal by the contracting authorities.

5. a) Where a proposed work or purchase of services may result in contracts being awarded at the same time in the form of separate lots, account shall be taken of the total estimated value of all such lots.Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 6, this Directive shall apply to the awarding of each lot.However, the contracting authorities may waive such application in respect of lots, the estimated value of which, net of VAT, is less than EUR 80 000 for services or EUR 1 million for works, provided that the aggregate value of those lots does not exceed 20% of the aggregate value of the lots as a whole;

b) Where a proposal for the acquisition of similar supplies may result in contracts being awarded at the same time in the form of separate lots, account shall be taken of the total estimated value of all such lots when applying Article 6(a) and (b).

Where the aggregate value of the lots is equal to or exceeds the threshold laid down in Article 6, this Directive shall apply to the awarding of each lot.

However, the contracting authorities may waive such application in respect of lots, the estimated value of which, net of VAT, is less than EUR 80 000, provided that the aggregate cost of those lots does not exceed 20% of the aggregate value of the lots as a whole.

6. With regard to public supply contracts relating to the leasing, hire, rental or hire purchase of products, the value to be taken as a basis for calculating the estimated contract value shall be as follows:

a) in the case of fixed-term public contracts, if that term is less than or equal to 10 years, the total estimated value for the term of the contract or, if the term of the contract is greater than 10 years, the total value including the estimated residual value;

b) in the case of public contracts without a fixed term or the term of which cannot be defined, the monthly value multiplied by 120.

7. In the case of public supply or service contracts which are regular in nature or which are intended to be renewed within a given period, the calculation of the estimated contract value shall be based on the following:

a) either the actual aggregate value of successive similar contracts concluded over the previous 10 years adjusted, where possible, for anticipated changes in quantity or value over the 10 years following the initial contract;

b) or the estimated aggregate value of the successive contracts awarded during the 10 years following the first delivery or during the term if that term is longer than 10 years.

The choice of method used to calculate the estimated value of a public contract may not be made with the intention of excluding it from the scope of this Directive.

8. With regard to public service contracts, the value to be taken as a basis for calculating the estimated contract value shall, where appropriate, be the following:

a) for the following services:

i) insurance services: the premium payable and other forms of remuneration;

ii) banking and other financial services: the fees, commissions, interest and other forms of remuneration;

iii) design contracts: fees, commission payable and other forms of remuneration;

b) for service contracts which do not indicate a total price:

i) in the case of fixed-term contracts, if that term is less than or equal to 120 months: the total value for their full term;

ii) in the case of contracts without a fixed term or with a term greater than 120 months: the monthly value multiplied by 120.

9. With regard to framework agreements, the estimated value to be taken into consideration shall be the maximum estimated value net of VAT of all the contracts envisaged for the total term of the agreement.

SECTION 2

Excluded contracts

Article 8 Contracts awarded pursuant to international rules

This Directive shall not apply to public contracts governed by different procedural rules and awarded:

a) pursuant to an international agreement concluded in conformity with the Treaty between a Member State and one or more third countries and covering supplies or works intended for the joint implementation or exploitation of a work by the signatory States or services intended for the joint implementation or exploitation of a project by the signatory States. All agreements shall be communicated to the Commission which, with the agreement of the Member State(s) concerned, may consult the Advisory Committee for Public Contracts referred to in Article 41;

b) pursuant to the particular procedure of an international organisation.

Article 9 Specific exclusions

This Directive shall not apply to the following public contracts:

a) service contracts for the acquisition or rental, under whatever financial arrangements, of land, existing buildings, or other immovable property or concerning rights in respect thereof;

b) contracts awarded in a third country, with local economic operators, for the deployment of military forces, or to conduct or support a military operation outside the territory of the European Union.

CHAPTER III

Specific rules governing specifications and contract documents

Article 10 Technical specifications

1. The technical specifications as defined in point 1 of Annex II shall be set out in the contract documentation, such as contract notices, contract documents or additional documents.

When a public contract contains sensitive technical specifications that may only be communicated to the successful tenderer, these must not be set out in the contract notice, contract documents or additional documents provided that knowledge of such specifications is not required in order to prepare tenders.

In this case, these technical specifications are entered in the reports referred to in Article 28 before the contract documents are sent to the candidates.

Such technical specifications may only deal with explanations or clarifications of the tender and have no significant technical or financial impact on the subject-matter of the public contract.

After awarding the contract by applying the award criteria, the contracting authority shall send the successful tenderer the sensitive technical specifications that were not set out in the contract documents or additional documents so that the successful tenderer can adapt his bid accordingly.

2. Technical specifications shall afford equal access for tenderers and not have the effect of creating unjustified obstacles to the opening up of public procurement to competition.

3. The technical specifications shall be drawn up:

a) either by reference to technical specifications defined in Annex II and, in order of preference, to national standards transposing European standards, European technical approvals, common technical specifications, international standards, other technical reference systems established by the European standardisation bodies or - where these do not exist – by reference to national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the products, or by reference to the defence standards defined in point 3 of Annex II. Every reference shall be followed by the expression "or equivalent";

b) or in terms of performance or functional requirements; the latter may include environmental characteristics. However, such parameters must be sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting authorities to award the contract;

c) or in terms of performance or functional requirements as mentioned in subparagraph (b), with reference to the specifications mentioned in subparagraph (a) as a means of presuming conformity with such performance or functional requirements;

d) or by referring to the specifications mentioned in subparagraph (a) for certain characteristics, and by referring to the performance or functional requirements mentioned in subparagraph (b) for other characteristics.

If the technical specifications are compatible with Community law, the first subparagraph shall not prejudice the compulsory national technical rules and technical requirements to be met by the Member States, under international agreements, in order to guarantee the interoperability required by these agreements.

4. Where a contracting authority makes use of the option of referring to the specifications mentioned in paragraph 3(a), it cannot reject a tender on the grounds that the products and services tendered for do not comply with the specifications to which it has referred, once the tenderer proves in his tender to the satisfaction of the contracting authority, by whatever appropriate means, that the solutions which he proposes satisfy in an equivalent manner the requirements defined by the technical specifications.

An appropriate means might be constituted by a technical dossier from the manufacturer or a test report from a recognised body.

5. Where a contracting authority uses the option laid down in paragraph 3 to prescribe performance-related or functional requirements, it may not reject a tender for works, products or services which comply with a national standard transposing a European standard, with a European technical approval, a common technical specification, an international standard or a technical reference system established by a European standardisation body, if these specifications address the performance or functional requirements which it has laid down.

In his tender, the tenderer must prove to the satisfaction of the contracting authority and by any appropriate means that the work, product or service in compliance with the standard meets the performance or functional requirements of the contracting authority.

An appropriate means might be constituted by a technical dossier from the manufacturer or a test report from a recognised body.

6. Where contracting authorities lay down environmental characteristics in terms of performance or functional requirements as referred to in paragraph 3(b), they may use the detailed specifications, or, if necessary, parts thereof, as defined by European or (multi-)national eco-labels, or by any other eco-label, provided that:

- those specifications are appropriate as a means of defining the characteristics of the supplies or services that are the object of the contract,

- the requirements for the label are drawn up on the basis of scientific information,

- the eco-labels are adopted using a procedure in which all stakeholders, such as government bodies, consumers, manufacturers, distributors and environmental organisations, can participate, and

- they are accessible to all interested parties.

Contracting authorities may indicate that the products and services bearing the eco-label are presumed to comply with the technical specifications laid down in the contract documents; they must accept any other appropriate means of proof, such as a technical dossier from the manufacturer or a test report from a recognised body.

7. "Recognised bodies", within the meaning of this Article, are test and calibration laboratories, and certification and inspection bodies which comply with applicable European standards.

Contracting authorities shall accept certificates from recognised bodies established in other Member States.

8. Unless justified by the subject-matter of the contract, technical specifications shall not refer to a specific make or source, or a particular process, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products. Such reference shall be permitted on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract pursuant to paragraphs 3 and 4 is not possible; such reference shall be accompanied by the words "or equivalent".

Article 11 Variants

1. Where the criterion for award is that of the most economically advantageous tender, contracting authorities may authorise tenderers to submit variants.

2 Contracting authorities shall indicate in the contract notice whether or not they authorise variants: variants shall not be authorised without this indication.

3. Contracting authorities authorising variants shall state in the contract documents the minimum requirements to be met by the variants and any specific requirements for their presentation.

Only variants meeting the minimum requirements laid down by these contracting authorities shall be taken into consideration.

4. In procedures for awarding public supply or service contracts, contracting authorities which have authorised variants may not reject a variant on the sole ground that it would, if successful, lead either to a service contract rather than a public supply contract, or to a supply contract rather than a public service contract.

Article 12 Subcontracting

In the contract documents, the contracting authority may ask or may be required by a Member State to ask the tenderer to indicate in his tender any share of the contract he may intend to subcontract to third parties and any proposed subcontractors.

This indication shall be without prejudice to the question of the principal economic operator's liability.

Article 13 Conditions for performance of contracts

Contracting authorities may lay down special conditions relating to the performance of a contract, provided that these are compatible with Community law and are indicated in the contract notice or in the specifications. These conditions may, in particular, seek to ensure the security of sensitive information and the security of supply required by the contracting authority or take environmental or social considerations into account.

Article 14 Security of information

When the public contracts involve, entail and/or contain sensitive information, the contracting authority shall specify in the contract documents all measures and requirements needed to ensure the security of such information at the requisite level.

To this end, the contracting authority may require of the tenderer that the tender submitted contain the following particulars:

a) proof that the subcontractors already identified possess the capabilities required to protect the confidentiality of the sensitive information to which they have access or which they are required to produce when carrying out their subcontracting activities,

b) a commitment to provide the same proof for any new subcontractors that may be involved during performance of the contract,

c) a commitment to keep all sensitive information confidential for the entire duration of the contract and after termination or conclusion of the contract.

Article 15 Security of supply

Provided that they are in conformity with Community law, the contracting authority may specify requirements to guarantee security of supply.

To this end, the contracting authority may require of the tenderer that the tender submitted contain the following:

a) evidence that it will be able to honour its obligations regarding the export, transfer and transit of goods associated with the contract, including by means of a commitment from the Member State(s) concerned,

b) evidence that the organisation and location of its supply chain will allow it to comply with the contracting authority's requirements concerning the security of supply set out in the specifications,

c) a commitment to meet additional needs required by the contracting authority as a result of an emergency, crisis or armed conflict,

d) a commitment from its national authorities not to obstruct the fulfilment of any additional needs required by the contracting authority as the result of an emergency, crisis or armed conflict,

e) a commitment to carry out the maintenance, modernisation or adaptation of the supplies covered by this contract,

f) a commitment to inform the contracting authority in due time of any change in its organisation or its industrial strategy that may affect its obligations to that authority.

The requirements shall be explained in the specifications or contract documents.

Article 16 Obligations relating to taxes, environmental protection, employment protection provisions and working conditions

1. A contracting authority may state in the contract documents, or be obliged by a Member State so to state, the body or bodies from which a candidate or tenderer may obtain the appropriate information on the obligations relating to taxes, to environmental protection, to the employment protection provisions and to the working conditions which are in force in the Member State, region or locality in which the works are to be carried out or services are to be provided and which shall be applicable to the works carried out on site or to the services provided during the performance of the contract.

2. A contracting authority which supplies the information referred to in paragraph 1 shall request the tenderers to indicate that they have taken account, when drawing up their tender, of the obligations relating to employment protection provisions and the working conditions which are in force in the place where the works are to be carried out or the service is to be provided.

The first subparagraph shall be without prejudice to the application of the provisions of Article 38 concerning the examination of abnormally low tenders.

CHAPTER IV

Procedures

Article 17 Procedures to be applied

In awarding their public contracts, contracting authorities shall apply the national procedures adjusted for the purposes of this Directive.

They shall award public contracts by applying the restricted procedure, the negotiated procedure with publication of a contract notice or, under the circumstances referred to in Article 19, the competitive dialogue.

In the specific cases and circumstances referred to expressly in Article 20, the contracting authorities may apply a negotiated procedure without publication of the contract notice.

Article 18 Negotiated procedure with publication of a contract notice

1. In negotiated procedures with publication of a contract notice, contracting authorities shall negotiate with tenderers the tenders submitted by them in order to adapt them to the requirements they have set in the contract notice, the specifications and additional documents, if any, and to seek out the best tender in accordance with Article 37.

2. During the negotiations, contracting authorities shall ensure the equal treatment of all tenderers. In particular, they shall not provide information in a discriminatory manner which may give some tenderers an advantage over others.

3. Contracting authorities may provide for the negotiated procedure to take place in successive stages in order to reduce the number of tenders to be negotiated by applying the award criteria in the contract notice or the specifications. The contract notice or the specifications shall indicate whether this option has been used.

Article 19 Competitive dialogue

1. When a contract is particularly complex, the contracting authority, should it consider that recourse to the restricted procedure or the negotiated procedure with publication of a contract notice will not enable it to award the contract, may make use of the competitive dialogue in accordance with this Article.

A public contract shall be awarded on the sole basis of the award criterion for the most economically advantageous tender.

2. Contracting authorities shall publish a contract notice setting out their needs and requirements, which they shall define in that notice and/or in a descriptive document.

3. Contracting authorities shall open, with the candidates selected in accordance with the relevant provisions of Articles 29 to 36, a dialogue the aim of which shall be to identify and define the means best suited to satisfying their needs. They may discuss all aspects of the contract with the chosen candidates during this dialogue.

During the dialogue, contracting authorities shall ensure equality of treatment among all tenderers. In particular, they shall not provide information in a discriminatory manner which may give some tenderers an advantage over others.

Contracting authorities may not reveal to the other participants solutions proposed or other confidential information communicated by a candidate participating in the dialogue without his agreement.

4. Contracting authorities may provide for the procedure to take place in successive stages in order to reduce the number of solutions to be discussed during the dialogue stage by applying the award criteria in the contract notice or the descriptive document. The contract notice or the descriptive document shall indicate that recourse may be had to this option.

5. The contracting authority shall continue such dialogue until it can identify the solution or solutions, if necessary after comparing them, which are likely to meet its needs.

6. Having declared that the dialogue is concluded and having so informed the participants, contracting authorities shall ask them to submit their final tenders on the basis of the solution or solutions presented and specified during the dialogue. These tenders shall contain all the elements required and necessary for the performance of the project.

These tenders may be clarified, specified and fine-tuned at the request of the contracting authority. However, such clarification, specification, fine-tuning or additional information may not involve changes to the basic features of the tender or the call for tender, variations in which are likely to distort competition or have a discriminatory effect.

7. Contracting authorities shall assess the tenders received on the basis of the award criteria laid down in the contract notice or the descriptive document and shall choose the most economically advantageous tender in accordance with Article 37.

At the request of the contracting authority, the tenderer identified as having submitted the tender offering best value for money may be asked to clarify aspects of the tender or confirm commitments contained in the tender, provided this does not have the effect of modifying substantial aspects of the tender or of the call for tenders and does not risk distorting competition or causing discrimination.

8. The contracting authorities may specify prices or payments to the participants in the dialogue.

Article 20 Cases justifying use of the negotiated procedure without publication of a contract notice

1. Contracting authorities may award public contracts by a negotiated procedure without prior publication of a contract notice in the cases set out in paragraphs 2 to 6 below.

The provision of the first subparagraph shall also apply when these contracts are awarded as part of a cooperative programme between two or more Member States.

2. For public works contracts, public supply contracts and public service contracts, the negotiated procedure without prior publication of a contract notice may be applied in the following circumstances:

a) when the periods laid down for the restricted procedure and negotiated procedure with publication of a contract notice are incompatible with the urgency of a crisis or armed conflict;

b) when, for technical reasons, or for reasons connected with the protection of exclusive rights, the contract may be awarded only to a particular economic operator.

3. For public service contracts and public supply contracts, the negotiated procedure without prior publication of a contract notice may be applied for research and development services and for products manufactured purely for the purpose of research, experiment, study or development, with the exception of quantity production to establish commercial viability or to recover research and development costs.

4. For public supply contracts, the negotiated procedure without prior publication of a contract notice may be applied for the following deliveries and supplies:

a) for additional deliveries by the original supplier which are intended either as a partial replacement of normal supplies or installations or as the extension of existing supplies or installations where a change of supplier would oblige the contracting authority to acquire material having different technical characteristics which would result in incompatibility or disproportionate technical difficulties in operation and maintenance.The length of such contracts as well as that of recurrent contracts may not, as a general rule, exceed five years;

b) for the supply of arms, munitions and/or war material by the government of a Member State to the government of another Member State.

5. For public works contracts and public service contracts, the negotiated procedure without prior publication of a contract notice may be applied for additional works or services not included in the project initially considered or in the original contract but which have, through unforeseen circumstances, become necessary for the performance of the works or services described therein, on condition that the award is made to the economic operator performing such works or services:

i) when such additional works or services cannot be technically or economically separated from the original contract without major inconvenience to the contracting authorities,

or

ii) when such works or services, although separable from the performance of the original contract, are strictly necessary for its completion.

However, the aggregate value of contracts awarded for additional works or services may not exceed 50% of the amount of the original contract.

6. The negotiated procedure without prior publication of a contract notice may be applied for new works or services consisting in the repetition of similar works or services entrusted to the economic operator to whom the same contracting authorities awarded an original contract, provided that such works or services are in conformity with a basic project for which the original contract was awarded according to the restricted procedure, the negotiated procedure with publication of a contract notice or the competitive dialogue.As soon as the first project is put up for tender, the possible use of this procedure shall be disclosed and the total estimated cost of subsequent works or services shall be taken into consideration by the contracting authorities when they apply the provisions of Article 6.This procedure may be used only during the five years following the conclusion of the original contract.

Article 21 Framework agreements

1. Member States may provide that contracting authorities may conclude framework agreements.

2. For the purpose of concluding a framework agreement, contracting authorities shall follow the rules of procedure referred to in this Directive for all phases up to the award of contracts based on that framework agreement. The parties to the framework agreement shall be chosen by applying the award criteria set in accordance with Article 37.

Contracts based on a framework agreement shall be awarded in accordance with the procedures laid down in paragraphs 3 and 4. Those procedures may be applied only between the contracting authorities and the economic operators originally party to the framework agreement.

When awarding contracts based on a framework agreement, the parties may under no circumstances make substantial amendments to the terms laid down in that framework agreement, in particular in the case referred to in paragraph 3.

The term of a framework agreement may not exceed five years, save in exceptional cases duly justified, in particular, by the subject of the framework agreement.

Contracting authorities may not use framework agreements improperly or in such a way as to prevent, restrict or distort competition.

3. Where a framework agreement is concluded with a single economic operator, contracts based on that agreement shall be awarded within the limits of the terms laid down in the framework agreement.

For the award of those contracts, contracting authorities may consult the operator party to the framework agreement in writing, requesting it to supplement its tender as necessary.

4. Where a framework agreement is concluded with several economic operators, the latter must be at least three in number, insofar as there is a sufficient number of economic operators that satisfy the selection criteria and/or of admissible tenders that meet the award criteria.

Contracts based on framework agreements concluded with several economic operators may be awarded either by application of the terms laid down in the framework agreement without reopening competition, or, where not all the terms are laid down in the framework agreement, when the parties are again in competition on the basis of the same and, if necessary, more precisely formulated terms, and, where appropriate, other terms referred to in the specifications of the framework agreement.

In the latter case, the following procedure shall apply:

a) for every contract to be awarded, contracting authorities shall consult in writing the economic operators capable of performing the contract;

b) contracting authorities shall fix a time limit which is sufficiently long to allow tenders for each specific contract to be submitted, taking into account factors such as the complexity of the subject-matter of the contract and the time needed to submit tenders;

c) tenders shall be submitted in writing, and their content shall remain confidential until the stipulated time limit for reply has expired;

d) contracting authorities shall award each contract to the tenderer who has submitted the best tender on the basis of the award criteria set out in the specifications of the framework agreement.

CHAPTER V

Rules on advertising and transparency

SECTION 1

Publication of notices

Article 22 Notices

1. Contracting authorities shall make known, by means of a prior information notice published by the Commission or by themselves on their "buyer profile", as described in point 2 of Annex IV:

a) where supplies are concerned, the estimated total value of the contracts or the framework agreements by product area which they intend to award over the following 12 months, where the total estimated value, taking into account Articles 6 and 7, is equal to or greater than EUR 750 000.

The product area shall be established by the contracting authorities by reference to the CPV nomenclature;

b) where services are concerned, the estimated total value of the contracts or the framework agreements in each of the categories of services listed in Annex I which they intend to award over the following 12 months, where such estimated total value, taking into account the provisions of Articles 6 and 7, is equal to or greater than EUR 750 000;

c) where works are concerned, the essential characteristics of the contracts or the framework agreements which they intend to award, the estimated value of which is equal to or greater than the threshold specified in Article 6, taking into account Article 7.

The notices referred to in subparagraphs (a) and (b) shall be sent to the Commission or published on the buyer profile at the earliest opportunity after the beginning of the budgetary year.

The notice referred to in subparagraph (c) shall be sent to the Commission or published on the buyer profile at the earliest opportunity after the decision approving the planning of the works contracts or the framework agreements that the contracting authorities intend to award.

Contracting authorities that publish a prior information notice on their buyer profiles shall send the Commission, electronically, a notice of publication of the prior information notice on a buyer profile, in accordance with the format and detailed procedures for sending notices indicated in point 3 of Annex IV.

This paragraph shall not apply to negotiated procedures without the prior publication of a contract notice.

2. Contracting authorities which wish to award a public contract or a framework agreement by restricted procedure, negotiated procedure with the publication of a contract notice or a competitive dialogue, shall make known their intention by means of a contract notice.

3. Contracting authorities may, in accordance with Article 23, publish notices of public contracts that are not subject to the publication requirement laid down in this Directive.

4. Contracting authorities which have awarded a public contract or concluded a framework agreement shall send a notice of the results of the award procedure no later than 48 days after the award of the contract or the conclusion of the framework agreement.

In the case of framework agreements concluded in accordance with Article 21, the contracting authorities are not bound to send a notice of the results of the award procedure for each contract based on that agreement.

Certain information on the contract award or the conclusion of the framework agreement may be withheld from publication where release of such information would impede law enforcement or otherwise be contrary to the public interest, would harm the legitimate commercial interests of economic operators, public or private, or might prejudice fair competition between them.

Article 23 Form and manner of publication of notices

1. Notices shall include the information mentioned in Annex III and, where appropriate, any other information deemed useful by the contracting authority in the format of standard forms adopted by the Commission in accordance with the procedure referred to in Article 41(2).

2. Notices sent by contracting authorities to the Commission shall be sent either by electronic means in accordance with the format and procedures for transmission indicated in Annex IV, paragraph 3, or by other means. In the event of recourse to the accelerated procedure set out in Article 24(4), notices must be sent either by fax or by electronic means, in accordance with the format and procedures for transmission indicated in point 3 of Annex IV.

Notices shall be published in accordance with the technical characteristics for publication set out in point 1(a) and (b) of Annex IV.

3. Notices drawn up and transmitted by electronic means in accordance with the format and procedures for transmission indicated in point 3 of Annex IV, shall be published no later than five days after they are sent.

Notices which are not transmitted by electronic means in accordance with the format and procedures for transmission indicated in point 3 of Annex IV, shall be published not later than 12 days after they are sent, or in the case of the accelerated procedure referred to in Article 24(4), not later than five days after they are sent.

4. Contract notices shall be published in full in an official language of the Community as c