5. 6. 89 Official Journal of the European Communities No C 139/31 
Opinion on the proposal for a Council Directive on the procurement procedures of entities 
operating in the telecommunications sector 
(89/C 139/09) 
On 24 October 1988 the Council decided to consult the Economic and Social Committee, 
under Article 100 A of the Treaty establishing the European Economic Community, on the 
abovementioned proposal. 
The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing 
the Committee's work on the subject, adopted its Opinion on 1 March 1989. The rapporteur 
was Mr Schmitz. 
At its 264th plenary session (meeting of 31 March 1989), the Economic and Social Committee 
adopted the Opinion set out below by 97 votes to 13, with 12 abstentions (vote recorded). 
The Committee welcomes the proposals submitted by 
the Commission to liberalize public procurement in the 
most significant but hitherto excluded sectors, subject 
to the following remarks. 
1. Introduction 
1.1. The Committee is relieved that the Commission, 
after a prolonged period of reflexion and consultation 
with the sectors concerned, has finally tabled its defini­
tive proposals to extend Community regulations to 
public purchases of all commodities outside the defence 
area. Public procurement contracts subject to Com­
munity procedures represent about 250 billion ECU. 
1.2. The potential savings effect of opening up public 
contracts are enormous but difficult to quantify. What 
is certain, however, is that the static direct trade effects 
resulting from increased import penetration (based on 
the assumption that public import penetration reaches 
the same level as in the private sector) are less significant 
than the competition effects (reorganization to elimin­
ate inefficiencies) and the restructuring effects (increas­
ing rates of utilization of production capacity, mergers, 
etc.). The goal of the Commission's proposals is to bring 
about increased competition in this area by creating 
transparency and laying down publishing and infor­
mation rules as an indispensable framework within 
which economic market forces are set free to act. 
1.3. The liberalization of public procurement in the 
telecommunication sector is an example of the general 
deregulation approach being followed by the Com­
mission in connection with the completion of the Com­
munity's internal market. Economic liberalization is 
acceptable only if there is a parallel adoption of the 
necessary supporting social and employment policy 
measures. 
1.4. The restructuring process should be comp­
lemented by macro-economic measures designed to increase the type of growth which promotes employ­
ment. In this context the Committee would refer to the 
Cecchini study which demonstrated that unless all the 
Member States adopted supporting macro-economic 
measures to promote investment, there was likely to be 
only a slight increase in levels of employment and even 
a decrease in the first years. 
1.5. A number of sectors (suppliers) have been pro­
tected by national public procurement procedures and 
have had to face barely any international competition. 
This has brought overcapacity and a lack of product 
and manufacturing innovation. There is thus a lack of 
homogenity in the Community in the structure of the 
manufacturing facilities in the telecommunication sec­
tor. The necessary restructuring must, however, be 
phased in gradually otherwise it may have unforesee­
able consequences for employment. Some of the old-
established industrial areas in the Community will be 
hard hit, as they are already facing a difficult situation. 
Small and medium-sized businesses, especially those 
operating in the field of electrical engineering, will be 
particularly affected. The Commission document refers 
to the comparatively small number of suppliers in the 
relevant sectors in the US, but this cannot be regarded 
as an example worthy of pursuing. 
1.6. The liberalization of public telecommunication 
procurement should therefore be accompanied by econ­
omic and structural measures. 
In those sectors which are particularly concerned by 
the proposals, structural adjustment plans should be 
worked out by European sectoral committees to serve 
as guidelines. As a further development of the social 
dialogue, the sectoral committees should comprise rep­
resentatives of employers, trade unions and the Com­
mission. As regards EC participation, it would appear 
to be self-evident that the Structural Funds may be 
used if serious problems arise with regard to structural 
adjustment. 
1.7. In view of the length of time required by the 
national parliaments to approve the legislation deriving 
from the Directives under consideration, the proposed 
date of entry into force (31 December 1989) would 
appear to be too early. 
No C 139/32 Official Journal of the European Communities 5. 6. 89 
The Committee consequently proposes that Article 14 
be redrafted to stipulate that the date of entry into force 
shall be 12 months after the adoption of the Directive 
by the Council. 
1.8. The positive impact expected to be brought 
about by the liberalization of public procurement will 
depend to a considerable degree on the existence of 
viable competition between telecommunication enter­
prises. An active competition policy (based on the 
implementation of Articles 85 and 86 of the EEC Treaty) 
must be pursued and no time must be lost in adopting an 
effective merger control regulation (*) so as to prevent a 
situation in which individual enterprises dominate parts 
of the market and are in a position to charge excessive 
prices. The enterprises concerned must, however, by no 
means be prevented from becoming large enough to 
ensure that they are fully competitive on the world 
market. 
1.9. The tendering procedure proposed by the Com­
mission does not take adequate account of the specific 
role of public-sector companies. 
1.9.1. The public-sector enterprises covered by the 
draft Directive have infrastructure policy roles set for 
them by the State. The construction, further develop­
ment and servicing of infrastructure projects is also 
a matter of considerable importance from a regional 
political standpoint. In the Committee's view the fulfil­
ment of these political functions must not be under­
mined by the liberalization of public procurement. 
1.9.2. Many public-sector companies are in compe­
tition (including substitution competition) with private 
enterprises, some of which fall outside the draft Direc­
tives. Steps must be taken to prevent the competitive 
position of public-sector enterprises being impaired by 
the introduction of bureaucratic call-for-tender pro­
cedures. In individual cases the Commission should 
also examine whether public procurement might not be 
more readily liberalized by bringing about real trans­
parency in respect of smaller contracts. 
2. General comments 
2.1. Contracting entities concerned 
2.1.1. The Committee, as in its Opinion on the public 
works Directive (2), approves the choice in the proposed 
Directive of a market-oriented approach. Whereas the 
legal status of purchasing entities may vary from coun­
try to country, the relevant criteria for a Community 
regulation must be whether the purchasing entity is 
public or is enjoying special or exclusive rights. The 
C1) OJ No C 208, 8. 8. 1988. 
(2) OJ No C 319, 30. 11. 1987. Committee does, however, recognize the risks—es­
pecially in the social field—which the suppliers con­
cerned may face as a result of the blanket opening-up 
of public contracts. The Committee stresses the need 
to ensure that suppliers have equality of opportunity. 
2.1.2. In view of the complexity of the definition of 
the entities subject to the Directives under consider­
ation, it would be advisable for the Commission to 
draw up a precise list of the entities involved and the; 
nature of the supplies and work covered. The Corri^ 
mission should review the list regularly (e.g. once a 
year). 
2.2. Contracts concerned 
2.2.1. The Committee invites the Commission in 
general to limit to a minimum the number of dero­
gations from the Directive. Exemptions should be the 
absolute exception to the rule for the simple reason 
that, once the Commission gives in to the pressure of 
one sector, others will (quite justifiably) follow suit. 
And this, as experience has shown with the former 
Directives, will mean that the Directive loses every hope 
of becoming efficient. The Commission's proposals are 
measures of transparency and information. 
2.2.2. The Committee considers it necessary to 
review the thresholds proposed by the Commission 
(200 000 ECU in the case of software/ 
telecommunications/other individual supply contracts 
and 5 million ECU in the case of building contracts). 
In order to avoid unnecessary red tape the decisive 
factor in determining the thresholds should be overall 
value of the contracts, not the number of contracts 
involved. 
2.3. Procedures for awarding contracts 
2.3.1. The Commission, as in the earlier supplies and 
public works Directives, requires purchasing agencies 
to base the award of contracts on the criteria of most 
economically advantageous tender or lowest price only. 
The Committee agrees with this principle. But equally, 
limiting the use of the negotiated (i.e. non competitive) 
tendering procedure has always been one of the Com­
mission's main goals in combatting the circumvention 
of the EC's procurement rules. The Committee wonders 
if this principle should not also be applied to the.hith­
erto excluded sectors and questions the Commission's 
justification for allowing a free choice of tendering 
procedures, namely that special 'flexibility' is required 
for the hitherto excluded sectors because of their 'par­
ticular character' in that they 'differ from the essentially 
administrative organizations typically covered by the 
existing Directives in having economic or industrial 
purposes'. This is a key argument behind the Com­
mission proposal because it serves as the justification 
for its 'flexible' approach. The main difference between 
the hitherto excluded sectors and the others and the 
5. 6. 89 Official Journal of the European Communities No C 139/33 
reason they were originally excluded from the public 
procurement Directives is a political one, namely that 
in the Member States' view they were of considerably 
bigger economic and industrial importance. The pretext 
for not having opened them up, as the Commission 
itself states was a legal one, i.e. 'that a particular activity 
may be allocated to a 'public' entity in some States, to 
a 'private' entity in others or indeed to both'. 
2.3.2. EC legislation on public procurement has had 
relatively little effect on trade because, in the words of 
the Cecchini report, 'there are too many ways to evade 
the rules or influence the choice of suppliers during bid 
evaluation'. So far suppliers have not bothered to enter 
into competitive bidding because they have believed it 
will be unproductive, i.e. too easy for the purchasing 
entity to avoid fair bidding. 
2.3.3. How the proposed Directive measures up to 
this challenge is of key importance since in the final 
run it is the credibility of the Directive which will decide 
the outcome of the Community's public procurement 
policies. 
2.3.4. The Committee raises the question of whether 
the tendering procedures of the proposed Directive are 
too 'flexible' to protect purchasing entities from politi­
cal interference in their purchasing decisions and there­
fore may not permit anything like the import pen­
etration of the public procurement sector hoped for and 
mentioned above. The reason is simple—contracting 
entities will according to the Directive have a free choice 
of tendering procedures, thereby enjoying substantially 
more flexibility than under the public supplies and 
public works Directives. 
2.3.5. In the interest of transparency, purchasing 
entities are required to issue prior calls for competition 
and give prior notice of criteria to be applied in the 
award of contracts. They are also required to keep 
records and furnish statistical reports. Altogether, these 
do not seem to be excessive obligations, especially as 
the rules for prior call for competition are so elastic 
as to render the requirements meaningless. A call for 
competition, for example, can correspond to the per­
iodic indicative notice which contracting entities are 
requested to draw up once a year as an indication of 
their future plans. However, one has to bear in mind 
that these periodic notices only have to cover 'envis­
aged' contracts, a very 'flexible' concept indeed. 2.3.6. Also, where additional projects are developed, 
it is not required that contracts included in a periodic 
notice actually have to be launched during the period 
covered by that notice, but it is possible to include them 
in the periodic notice of the following year! 
2.3.7. And, on top of this, the information to be 
given in the periodic notice is far less detailed than 
what is required for open, restricted or negotiated pro­
cedures, and does not, for example, cover the require­
ments for technical specifications or standards! 
2.3.8. Article 20 of the original supply Directive of 
1976 and Article 23 of the 1971 Directive on works 
contracts list a number of criteria for the exclusion of 
suppliers from participating in a contract, among which 
is the non-fulfilment of obligations relating to the pay­
ment of social security contributions or taxes. 
The Committee would invite the Commission to make 
it clear that similar provisions apply to the sectors 
covered by this Directive and suggests that the Directive 
be reworded in such a way as to ensure that social 
legislation and collective wage agreements are complied 
with at all levels of the undertaking involved and that 
tenders not in accordance with this basic requirement 
are disregarded. 
2.3.9. Transparency 
2.3.9.1. The Committee considers transparency to be 
a major objective. In 1986 it voiced its concern that all 
unsuccessful bidders should have the right to know 
which offer was successful and at what price. The 
Committee at that time suggested that the published 
notices of contract awards should include the name of 
a contact person to facilitate access to information of 
interest for potential subcontractors. 
2.3.9.2. The Committee demands that the Com­
mission redraft Article 15 of the water, energy and 
transport Directive, as referred to in Article 6.1 of the 
telecommunications proposal, in order to reflect the 
Committee's view of the transparency required for a 
Community Directive. 
2.3.9.3. Article 15.2 makes the protection of legit­
imate commercial interests of particular undertakings 
sufficient reason not to publish either the identity of a 
company that has been awarded a contract or the 
contract price. This is totally unacceptable to the Com­
mittee. It will render publication of award notices 
meaningless. The commercial interests of the successful 
bidders need no protection by secrecy. Transparency is 
a small price to pay for the privilege of a contract. The 
No C 139/34 Official Journal of the European Communities 5. 6. 89 
unsuccessful bidders on the other hand have a legitimate 
right to know what is the market price and where to 
address offers for subcontracts. 
2.3.9.4. There is no need for specific phrases in the 
Directive to make it possible to obscure the exact con­
tract price. The model notice in Annex 5 already con­
tains the option of publication of the range of prices 
(minimum/maximum) rather than the exact price paid. 
2.3.9.5. Article 15.3 which makes it possible to delay 
the dispatch of the award notice for 48 days makes a 
mockery of the publication requirement and is contrary 
to the interest of the subscribers of the Official Journal 
and the Tenders Electronic Daily (TED). In the Com­
mittee's opinion there is no reason why the award 
notice should not be dispatched the day after the award 
of the contract. 
2.4. Additional criteria 
2.4.1. The Committee welcomes the provision 
whereby, if tenders are received offering unusually 
favourable terms, it will be possible not just to require 
a written explanation with regard to individual items 
but also to seek information on whether the tendering 
company receives State subsidies. There are, however, 
grounds for doubt as to whether the Commission's 
information on subsidies is complete. In the telecom­
munications field, particular allowance must be made 
for State R&D grants. 
2.4.2. The definition of Community origin by means 
of the criterium of value-added is eminently political 
and transcends the scope of this Directive. 
Article 8 is, in the Committee's view, of especial import­
ance to the States of the European Free Trade Associ­
ation (EFTA). It therefore calls upon the Commission 
to enter into negotiations with these States without 
delay in order to prevent the measures concerned from 
having an undesirable impact on the process of bringing 
about a more comprehensive integration of European 
trade. 
The EC is, of course, obliged to respect present and 
future General Agreement on Tariffs and Trade 
(GATT) rules in dealing with non-EC suppliers. In areas 
not covered by GATT it is also extremely desirable that 
the EC negotiate reciprocal agreements (or, at least, 
agreements providing for balanced concessions) on a 
case-by-case basis. The Committee broadly endorses 
the proposed provisions for non-EC States. The rule 
specifying 50% local content should, however, be 
changed to 60%. Expenditure on R & D should, more­
over, be considered separately and should also be sub­
ject to the 60% rule. The provision whereby, in the event of the same price being quoted, preference is given 
to EC suppliers should not apply in the case of tenders 
submitted by suppliers of African, Caribbean and 
Pacific States (ACP). Bearing in mind the interlinked 
infrastructures of the EC and EFTA States, a mutually 
satisfactory arrangement should be negotiated with 
EFTA. 
2.4.3. In order to take account of regional problems 
in the Community, the Committee proposes that prefer­
ential treatment be given to tenders from regions which 
have structural problems. By analogy with the rule 
governing bids from non-EC countries, in the event of 
the same price being quoted, preference should be given 
to bidders from EC regions classified in group 1 (less-
developed regions) or group 2 (industrial regions experi­
encing problems of readjustment) under the Structural 
Fund regulations. 
2.5. Penalties 
2.5.1. The Committee welcomes the amended pro­
posal for an implementing Directive of 8 December 
1988 in which the Commission fully accepted the Com­
mittee's suggestion that the Commission be empowered 
to require authorities administering sanctions in the 
Member States to initiate the appropriate procedure in 
concrete cases. The Committee also requests that the 
Community Directive, currently before the Council, on 
the enforcement of Community regulations in respect 
of the awarding of public supply and public works 
contracts be applied to the present proposed Directive 
as soon as possible. The establishment of Community 
regulations will remain an irrelevant paper exercise if 
there are no ways to enforce their application. The 
Committee, as stated in its unanimously adopted 
Opinion on the abovementioned Directive, considers 
an enforcement Directive an indispensable adjunct for 
the achievement of a true internal market in public 
procurement and reiterates its demands that 
— the Commission, without waiting for adoption of 
the Directive, cooperate with the Member States 
on working out uniform provisions regarding time 
limits, penalty payments and administrative pro­
cedures, and 
— the Commission—as in the case of the competition 
rules [Treaty Article 87(2)]—must have the same 
powers to impose sanctions as those to be given 
to the national authorities under the enforcement 
Directive (1). 
2.5.2. The Committee considers at all events that if 
systematic recourse to the highly cumbersome pro­
cedure of the Court of Justice (and no doubt even that 
of its future Court of First Instance) is to be avoided, 
(!) OJ No C 347, 22. 12. 1987, p. 23. 
5. 6. 89 Official Journal of the European Communities No C 139/35 
disputes pertaining to the Directives should, subject to 
the right of appeal, be referred to a conciliation com­
mittee consisting of independent experts. 
2.5.3. In order to make public procurement pro­
cedures more transparent, statistics on international 
contracts should be published by the Commission and 
forwarded to the Committee. These statistics should be 
published annually. 
2.5.4. Measures should also be taken to prevent enti­
ties covered by the Directive from endeavouring to 
escape its provisions by entering, without valid reason, 
into very long term commitments with particular privi­
leged suppliers before the Directive is published. The 
Directive should make express provision for the poss­
ible review and curtailment of the period of application 
of such contracts. 3. Specific comments concerning the draft Directive 
on the procurement procedures of entities in the 
telecommunications sector 
3.1. The frequent references in the above draft Direc­
tive to the draft Directive on the procurement pro­
cedures of entities providing water, energy and trans­
port services make it an impractical instrument for 
telecommunication companies. The Committee there­
fore proposes that a draft Directive be formulated 
expressly for the telecommunications sector. 
3.2. In view of the complex nature of switching and 
transmission systems and the rapid pace of development 
in this field, there is a need for (a) ongoing cooperation 
between operators and the industry and (b) consider­
able R&D work which provides a return after a very 
short period. 
Different procedures should therefore be used for the 
different types of equipment concerned. 
Furthermore, the technical transparency requirements 
to be met by operators in the EC must not be pitched 
so high as to place these operators at a disadvantage 
vis-a-vis their US and Asian competitors. 
Done at Brussels, 31 March 1989. 
The Chairman 
of the Economic and Social Committee 
Alberto MASPRONE 
APPENDIX 
to the Opinion of the Economic and Social Committee 
The following members, present or represented, voted in favour of the Opinion: 
Mr/Mrs/Miss: Amato, Arena, Arets, Ataide Ferreira, Bagliano, Beltrami, Bento Goncalves, Beretta, Berger, 
Bernasconi, Bleser, Boddy, Boisseree, Bredima Savopoulou, Lobo Brandao R. Cal, Calvet Chambon, Campbell, 
Carroll, Cavazzuti, Ceballo Herrero, Christie, Coyle, van Dam, Delhomenie, Della-Croce, Dodd, Donck, 
Dos Santos, Drilleaud, van Eeckert, Forgas, Frandi, Freeman, Fresi, Giacomelli, Gomez Martinez, Green, 
Hancock, Houthuys, Horsken, Hovgaard Jakobsen, Jenkins, Kazazis, Kirchfeld, Laka Martin, Landaburu de 
Silva, Lappas, Larsen, Liverani, Luchetti, Maddocks, Mainetti, Margot, Marvier, Meyer-Horn, Moreland, 
Mourgues, Muhr, Murphy, Nielsen B., Nielsen P., Noordwal, Orsi, Pardon, Pelletier, Petersen, Petropoulos, 
Poeton, Proenca, Pronk, Proumens, Quevedo Rojo, Raftopoulos, Roseingrave, Rouzier, Saiu, Salmon, Santil-
lan Cabeza, Schmitz, Schnitker, Schoepges, Serra Caracciolo, Silva, Smith A. R., Smith L. J., Solari, Spijkers, 
Staedelin, Straufi, Telles, Tukker, Vallejo Calderon, Vanden Broucke, Vercellino, "Wick, "Whitworth, Zufiaur 
Narvaiza. 
The following members, present or represented, voted against the Opinion: 
Mr/Mrs/Miss: Ceyrac, Clavel, Collas, Decaillon, Gardner, Kaaris, Low, de Normann, Perrin-Pelletier, Schade-
Poulsen, Storie-Pugh, Tixier, Wagner. 
The following members, present or represented, abstained: 
Mr/Mrs/Miss: Aparicio-Bravo, Broicher, Doornbos, Gredal, Hagen, Kenna, Lustenhouwer, Pearson, Rangoni-
Machiavelli, Ribiere, Riera Marsa, Romoli.