Opinion of the Committee of the Regions on the 'Green Paper on "Public procurement in the European Union: Exploring the way forward"` (97/C 244/06)

THE COMMITTEE OF THE REGIONS,

having regard to the Green Paper 'Public Procurement in the European Union: Exploring the way forward` (COM(96) 583 final);

having regard to the European Commission's decision of 16 December 1996 to consult the Committee of the Regions in this matter, in accordance with the first paragraph of Article 198c of the Treaty establishing the European Community;

having regard to its decision of 15 January 1997 to instruct Subcommission 1 - Local and Regional Finances - to prepare the opinion on this matter;

having regard to the draft opinion (CdR 81/97 rev.) adopted by Subcommission 1 on 14 May 1997 (rapporteurs: Mrs Birath Lindvall and Mr Humphrey),

unanimously adopted the following opinion at its 18th plenary session on 11 and 12 June 1997 (meeting of 12 June).

1. Introduction

1.1. The European Commission has issued a green paper on public procurement in the European Union, which is intended as background material for discussions and as a first contribution to a debate on public procurement in the EU. The paper's point of departure is the problems arising out of the Member States' implementation of the rules and their relatively insignificant economic impact so far.

2. General remarks

2.1. Introduction

2.1.1. The public procurement directives are of vital importance to the regional and local procurement services since their annual purchases represent very substantial sums. The COR hopes that the green paper will contribute to sound and constructive debate on future tendering rules.

2.1.2. Section 2 of the green paper provides various statistics concerning public procurement and the number of advertised tenders. The extent to which the ratio between tendering procedure costs and contract prices has been investigated and analysed is not clear. Such information would be valuable for contracting entities since it would give some indication of the savings to be expected.

2.1.3. The COR advocates that the Commission evaluate the public procurement directives' financial impact on the contracting entities. This evaluation should show whether the predicted lower contract prices offset the increased costs that can be expected for the extra administrative work resulting from the directives.

2.1.4. Since the total value of local and regional authority procurement is so high, the COR recommends that the advisory committees set up by the Commission in the public procurement sector should include members of local and regional entities.

2.2. Simplification of tendering rules

2.2.1. Public procurement rules should guarantee that all such procurement operates according to fair, objective criteria, with no arbitrary exemptions.

2.2.2. The COR does not agree with the Commission's view that no major changes should be made in the directives at this stage, partly because implementation in the Member States has been unsatisfactory. The COR finds it most important that the Commission should embark without delay on a review of these directives with the stated aim of simplifying the legislative framework in keeping with the basic principles of public procurement.

2.2.3. The procurement directives must be reviewed, however, with the aim of simplifying existing rules, thus making the provisions more intelligible and the directives themselves easier to follow. This could help avoid misinterpretations.

2.2.4. In the COR's view, the various directives should be consolidated in a single simplified directive, to be accompanied by written guidelines in order to achieve an effective system which would have the additional merit of guaranteeing objectivity and facilitating monitoring of the process. The COR is open to transitional solutions conducive to better guidance and greater clarity.

2.2.5. Simplification would also mean that all firms, including SMEs, would have a chance, without access to special legal expertise, to submit a tender that can be assessed in accordance with the procedure provided for in the directives.

2.2.6. In the COR's view, the remedies directives can be a disproportionate solution to a relatively minor problem. While the COR does not see the need for an EU-wide independent monitoring authority, one option could be to set up independent national monitoring authorities. However, it is important to encourage the Member States to make sure that both the public and private sectors are well informed about the content of all directives. The COR advocates consolidating the remedies directives in the same way as other directives.

2.2.7. The COR finds the threshold values far too low. Contracts for such a small amount are quite simply uninteresting for foreign tenderers. The Commission should consider raising them. Another option which should also be considered is to index-link them to the annual average rate of inflation in the Member States, bearing in mind the rules of the WTO. Combined with simpler rules, that should lead to an increased proportion of cross-border tenders.

2.2.8. The COR would point out that the proposed development of price specifications must be structured so that information from different Member States is comparable, hence guaranteeing fairness and objectivity.

2.2.9. Framework contracts should be specifically permitted in all directives since they offer advantages by reducing administrative burdens while reducing the contracting entity's procurement costs.

2.2.10. The transfer of certain services from category A to category B should also be considered. Certain financial services are typical cases of services which do not lend themselves to tendering under the very formal rules applicable to category A, for instance because the set timelimits make it difficult to conduct business efficiently.

2.2.11. Another problem that needs to be tackled, and by extension means that rules will be simpler to apply, is the introduction of a broader and better definition of the term 'work`. This would make matters easier for contracting entities. The current definition can, in certain cases, make it difficult to ascertain whether a particular contract relates to the purchase of supplies, services or works. It can also be hard to know e.g. whether repairs are to be considered as procurement of a service or work, which could result in legal uncertainty and unnecessary procedures.

2.2.12. The COR advocates greater flexibility when it comes to application of the rules on negotiated procedures while ensuring transparency. It cannot be considered necessary to suspend a procurement procedure because the price offered is higher than the contracting entity can afford, when negotiation could have produced a lower price acceptable to both purchaser and seller. Provisions on negotiated procedures similar to those of the utilities directive should be incorporated into other directives.

2.2.13. Clear rules on negotiated procedures are necessary to guarantee objectivity. This is particularly important when systems such as the UK 'Private Finance Initiative` are applied in other Member States where negotiated procedures play a major role in allocating large capital equipment contracts.

2.3. System of sanctions

2.3.1. In the green paper the Commission says that public procurement is one area in which a common system of sanctions can be considered, partly because the policy impact is undermined by differences in national systems.

2.3.2. Firstly, it is too early to assess whether the Member States' systems of sanctions do actually differ widely since so few states have implemented the directives fully.

2.3.3. The COR is doubtful about the introduction of a common system of sanctions spelt out in great detail. In its view, procurement proceedings should be heard by the national courts, which then examine the practical substance of the procurement directives concerned.

2.3.4. As regards monitoring, thought could be given, in the case of those countries which have not implemented the monitoring directives, to the introduction of a common framework regulation setting out sanctions which would then be examined on a case by case basis by national bodies. Careful attention must be given to whether such a regulation would be compatible with the subsidiarity principle enshrined in the Rome Treaty (Article 3b). However, the COR would point out that an effective procurement system hinges on precise, simple rules - not sanctions.

2.3.5. The COR considers it reasonable for a supplier to be able to obtain damages for tendering costs incurred if infringement of the rules is proved. On the other hand, it is not reasonable for damages to be based on the potential profit from the contract, and there can be no question of a litigant receiving compensation in excess of his actual loss.

2.3.6. In the COR's view, it is also unreasonable to introduce rules that would mean suspending a contract once concluded, on grounds of infringement of the rules. Procurement contracts are binding under civil law and hence can entitle the supplier with whom the contracting entity has concluded the contract to bring a claim for damages.

2.3.7. The COR is opposed to introducing a procurement procedure based on the one provided for in Regulation No 17/62 in the competition field (). Should more effective investigatory powers be required in procurement cases, national arrangements should be made for this purpose so as to ensure that the Member States fulfil their obligations as required by the directives. The COR would point out that the EU institutions have a responsibility for the overall monitoring of application of EU legislation by the Member States.

2.4. Inter-municipal undertakings

2.4.1. The Commission makes no mention in the green paper of municipal or inter-municipal undertakings. Both the Netherlands and the Danish MEP Karin Riis-Jorgensen have raised this matter with the Commission.

2.4.2. In the COR's view, public sector undertakings, including those owned by local and regional entities, should continue to be regarded as contracting entities in accordance with the rules and exemptions specified in the directives.

2.4.3. However, in the COR's view, it must be established that procurement by regional and local authorities from their own independent legal entities does not fall within the scope of the directives and must be regarded as production carried out under their own management. The choice of legal form of activity should not, in such cases, have any relevance for the applicability or otherwise of the procurement directives. Organizational cooperation between local and regional entities and legal persons deriving from these entities also falls outside the scope of these directives. The same applies for inter-municipal undertakings.

2.4.4. The COR would draw the Commission's attention to the problems that can arise in connection with privatization of public sector undertakings and in cases where employees are given an opportunity to set up their own undertaking which then takes over local and regional authority tasks on a contract basis. The COR takes the view that the rules on service procurement should not act as impediment.

3. Specific comments

3.1. Attestation procedure

3.1.1. The Commission refers to the rules of the remedies for utilities directive and suggests that greater use should be made of the voluntary attestation procedure. This procedure allows contracting entities demonstrating 'good procurement practice` to undergo independent attestation. The desirability of making this procedure mandatory and its possible extension to other sectors are discussed.

3.1.2. On the other hand, it is to be expected that contracting entities must be presumed to respect public procurement rules in those countries which have implemented the directives. Should they fail to do so, the national review bodies are responsible for dealing with infringements.

3.1.3. In addition, the introduction of an attestation procedure can involve practical difficulties, including administrative problems.

3.1.4. The COR does not agree with the proposed mandatory attestation but supports the continuation of attestation on a voluntary basis.

3.2. Training in EU tendering procedures

3.2.1. In the green paper the Commission claims that training and courses to inform people about tendering can smoothen the process of public procurement. The Commission recommends a programme for cross-border exchanges of experience but otherwise has no suggestions.

3.2.2. The COR feels that clear, precise guidance is needed in the interpretation of procurement rules, especially for SMEs, and requests the Commission to compile readable, easily handled material.

3.2.3. The COR welcomes the proposal to facilitate access to information concerning public procurement. The material currently provided could be made more user friendly.

3.2.4. The COR supports the idea of publishing information on tenders at regular intervals.

3.3. Information technology (IT)

3.3.1. The green paper indicates that the Commission wishes to place increased emphasis on the use of IT tendering. This drive can facilitate notification of tenders and exchange of documents, and give suppliers easier access to EU procurement contracts.

3.3.2. In its opinion evaluating the services directive, the COR drew the Commission's attention, among other things, to the need for guidelines ensuring full use of IT facilities to permit electronic calls for, and submission of, tenders and to approve electronic signatures. In this connection, the COR would also stress that the system's safeguards must operate effectively so that suppliers do not run the risk of commercially sensitive information falling into the hands of unauthorized persons.

3.3.3. The COR encourages the Commission to press ahead with work in this sector so as to facilitate use of modern IT facilities. However, use of IT should be voluntary since local and regional authorities do not all have the same opportunities. Here the EU funds could provide aid to speed up development in certain cases. The Commission and national bodies must introduce transitional measures to make it possible for electronic means of communication to be used alongside traditional means of communication in order to maintain optimum levels of competition.

3.3.4. The COR would also point out that the costs involved in using the TED data base and the EU Official Journal seriously impede access to public contracts, especially in the case of SMEs. Every possible effort should be made to make access to information published through these channels less expensive.

3.3.5. The Commission should also evaluate experiences from the SIMAP ('Système d'information pour les marchés publics`) project, which involves the electronic transfer of tender details directly to Luxembourg. The COR is strongly in favour of making it possible for contracting entities to transfer calls for tender electronically. It would also be an advantage for suppliers to have access to such information directly on the net. Use of CD-ROM technology presupposes finding a solution to a number of distribution problems whereas use of the Internet raises no such problems. On the other hand, tendering then assumes a worldwide rather than European dimension - which should be covered in Chapter 6 of the green paper.

3.4. CPV nomenclature

3.4.1. The Commission claims that inadequate use is made of the CPV (Common Procurement Vocabulary) and the introduction of a fee for authorities that do not use this system is therefore being considered.

3.4.2. However, contracting entities can find the CPV hard to use. The Commission should therefore develop an administrative system which makes it easier for authorities to locate the various categories in the nomenclature and at the same time is easily accessible to all public authorities.

3.4.3. The COR cannot agree to making use of the CPV system compulsory unless the Commission accompanies it by clear, unambiguous rules and guidelines. The CPV must also be constantly updated to ensure that it does not become administratively cumbersome to use and adjustments are also needed to adapt it for electronic trading purposes.

3.5. Authorization to act as adviser

3.5.1. One particular point which should be clarified is the participation of advisers at the pre-tendering stage. Advisers have claimed that they do not dare to take part in discussions and inquiries prior to the tendering stage for fear of breaching the level playing field principle.

3.5.2. The Commission has said earlier that a technical dialogue at the pre-tendering stage may be necessary in certain situations. Provided that the adviser does not receive information liable to limit competition, there is no infringement of the above principle.

3.5.3. The Commission should clarify and specify suitable procedures for such dialogue.

3.6. Environment-friendly tenders

3.6.1. Many contracting entities are eager to be able to take environmental considerations into account in procurement. Here the Commission should spell out what potential exists for so doing and dismantle any obstacles to making allowance for environmental aspects in this context, provided that a level playing field is ensured.

3.6.2. The COR feels that the Commission should study in greater depth possible ways of incorporating existing EU environmental policy principles (e.g. the 'polluter-pays` principle) into the procurement directives.

3.6.3. The Commission should also try to promote more extensive use of the Community eco-label system.

3.7. Employment and social policy aspects

3.7.1. The green paper also discusses public procurement from the angles of employment and social policy. Since the entry into force of the procurement directives, the question is now being asked as to whether, and to what extent, the employment and social policy objectives enshrined in the Rome Treaty can or should be pursued, bearing in mind the special constraints provided for in these directives to prevent any challenge to their original purpose.

3.7.2. The COR feels that an interpretative communication is needed to clarify the opportunities public procurement law offers to the various categories concerned for implementing Community and national employment and social policy objectives.

3.8. Relations with central and eastern Europe

3.8.1. The COR supports the proposal that existing EU aid to the central and eastern European countries should encompass training in EU public procurement rules and technical support in this connection. Such aid is essential in preparing these countries for accession to the Union.

4. Summary conclusions

4.1. The EU procurement directives are of great importance for local and regional contracting entities since the value of their annual purchases is so high.

4.2. The COR urges the Commission to embark as soon as possible on a review of the procurement directives with the stated aim of simplifying the legislative framework. At present the directives are far too impenetrable and over-detailed, which makes it difficult to demarcate their scope.

4.3. This review should consider consolidating the various procurement directives. In addition, threshold values should be increased in the long term, bearing in mind the rules of the WTO, and certain definitions clarified.

4.4. In cases where a contracting entity transfers tasks to its own undertakings, it must be established that any such contracts and the resulting cooperation shall not be regarded as services procurement within the meaning of the procurement directives. Such contracts must be regarded as internal conditions for production under its own management.

4.5. The COR supports the Commission in its drive to step up the use of IT tendering.

Brussels, 12 June 1997.

The Chairman of the Committee of the Regions

Pasqual MARAGALL i MIRA

() OJ C 13, 21. 2. 1962, p. 204.