WRITTEN QUESTION E-0393/02

by Piia-Noora Kauppi (PPE-DE) to the Commission

(21 February 2002)

Subject: Equal competition opportunities in connection with public procurement contracts

In my home town of Oulu, a procurement decision was made in 2001 relating to the organisation of the temporary care of small animals and animal collection service. The town council put out to tender at local authority level a contract for the organisation of temporary care of small animals in accordance with the Finnish animal protection act.

In the course of the year, a considerable number of animal transport services have been provided in the town, amounting to some 400 instances (368 against payment and the rest free of charge). However, the town decided to award the contract for the organisation of the care of small animals to a public service animal protection association.

This public service association was able to make a significantly lower offer than the private firms working in the same field owing to its wide use of voluntary work and its resources in the form of donations. Donations may be compared to public support, and the effect of donations should be taken into account in the same way as large subsidies.

It is significant that the above-mentioned public service organisation charged the town council for all the services it rendered.

According to our information the public service organisation did not comply in its operations with the minimum requirements of Finnish legislation and the EU directive (Section 30 of the Finnish Animal Protection Act and Finnish law regulation 491/96 based on Council Directive 95/29/EC(1)). For example, the organisation does not have the use of a vehicle complying the standards of EU legislation which has received an animal transport licence. The above-mentioned organisation was thus able to make a cheaper offer because it had not invested resources in accordance with the law on the organisation of animal care.

1. What is the Commission's view of situations in which public service organisations can obtain competitive advantages in some areas thanks to a wide use of voluntary labour, donations and public funding over private sector firms, which are naturally forced in their operations to take account of the requirements of economic viability?

2. How does the Commission intend to prevent the status of a public service organisation being misused in connection with public procurement procedures to obtain a fundamental competitive advantage in respect of economic activity?

3. How does the Commission intend to ensure that compliance with EU legislation is one basic criterion in decisions on public procurement?

(1) OJ L 148, 30.6.1995, p. 52.

Answer given by Mr Bolkestein on behalf of the Commission

(8 April 2002)

1. In case the grant of public funds to public service organisations satisfies the criteria set out in Article 87 §1 of the EC Treaty, it should be notified to the Commission, in order to allow it to verify its compatibility with the common market.

It has to be reminded in that respect that the prohibition of State aids concerns only selective advantages given without an equivalent counterpart. This prohibition does not apply to cases where the State purchases goods or services at a market price or where a State compensates a company for the additional costs it bears in accomplishing public service obligations(1).

Furthermore, State aids in the sense of Article 87 §1 of the EC Treaty are measures directly or indirectly financed by the State. Thus, competitive advantages to public service organisations do not come under the EC Treaty State aid rules when they are financed by private donations.

Moreover, Article 87 §1 of the EC Treaty only prohibits State aids insofar as they affect competition and trade between Member States. It is questionable to what extent, if any, grants to public service organisations having a strictly local activity may affect trade between Member States. In addition, according to the Commission Regulation (EC) No 69/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid(2), aid measures are deemed not to meet all the criteria of Article 87 §1 of the EC Treaty, if they don't exceed 100 000 over a period of three years.

2. The European Court of Justice has on 7 December 2000 in the case C-94/99 (Arge Gewässerschutz vs. Bundesministerium fûr land und Forstwirtschaft) expressed its opinion on the participation of tenderers that receive public subsidies in a procedure for the award of public service contracts.

According to the Court it is not against the principle of equal treatment that contracting authorities allow bodies which receive subsidies enabling them to submit tenders at prices appreciably lower than those of the other, unsubsidised, tenderers, to take part in a procedure for the award of a public procurement contract. The Court concluded that if the Community legislature had intended to require contracting authorities to exclude tenderers that receive public subsidies, it would have stated this explicitly. The Court further concludes that only in certain specific circumstances, e.g. when the subsidy received has been incompatible with the EC Treaty and the obligation to repay would threaten the financial well-being of the tenderer, the contracting authorities may take into account the existence of subsidies, and in particular of aid incompatible with the EC Treaty, in order, where appropriate, to exclude tenderers in receipt of such aid.

3. As far as public procurement is concerned, the directives oblige the Member State only above a certain threshold which is dependent on the applicable directive. In every public procurement procedure though, including also those that remain below the thresholds, the fundamental rules of the EC Treaty will have to be complied with, in general, and the principle of non-discrimination on the ground of nationality in particular. Contracting authorities, as individuals within the Community, have also to obey any legislation deriving from the EC Treaty and subsequent implementing rules including Council Directive 95/29/EC of 29 June 1995 amending Directive 90/628/EEC concerning the protection of animals during transport.

Surveillance of proper application of Community law by Member States is the duty of the Commission under article 211 of the EC Treaty. This is carried on in different ways, e.g. by own-initiative investigations or based on complaints filed in by companies or individuals.

(1) Judgement of the Court of 22 November 2001, Ferring SA and ACOSS, Case C-53/00.

(2) OJ L 10, 13.1.2001.