Opinion of the Committee of the Regions on the 'Communication from the Commission: Public Procurement in the European Union'
Date: 1998-09-17
Institutions: European Committee of the Regions
Subjects: aid to undertakings, competitiveness, environmental protection, invitation to tender, public contract, simplification of formalities

2.12.98

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Official Journal of the European Communities

C 373/13

Opinion of the Committee of the Regions on the ‘Communication from the Commission:
Public Procurement in the European Union’

THE COMMITTEE OF THE REGIONS,

(98/C 373/02)

having regard to the Communication from the Commission on public procurement in the
European Union (COM(98) 143 final);

having regard to its decision of 13 May 1998, under the fourth paragraph of Article 198c of
the Treaty establishing the European Community, to issue an opinion on the subject and to
entrust Commission 6 (Employment, Economic Policy, Single Market, Industry, SMEs) with
the task of preparing it;

having regard to the draft opinion (CdR 108/98 rev.) adopted by Commission 6 on 3 June
1998 (Rapporteurs: Mrs Lund and Mrs Birath-Lindvall),

adopted the following opinion at its 25th plenary session of 16 and 17 September 1998 (meeting
of 17 September).

1.

Introduction

2. General comments

As a follow-up to the wide-ranging debate on
1.1.
the future of the EU’s rules on procurement launched
by the Commission’s Green Paper on Public Procurement
in the European Union: Exploring the Way Forward (1),
the Commission published its communication on public
procurement on 11 March 1998.

1.2. On 16 June 1997 the COR submitted its own
contribution to the debate on the Green Paper (2). The
COR opinion pointed out that the public procurement
directives have important implications for local and
regional authorities as responsibility for a large pro-
portion of public procurement lies with them. The COR
was openly critical of the unnecessary amount of red
tape involved in the public procurement directives. The
thrust of its opinion was that the rules on procurement
should be simplified as speedily as possible so as to
reflect the demands of the current public-private sector
interplay. In addition, several Member States have more
restrictive public procurement arrangements which go
beyond what is laid down in the actual directives,
thereby creating a situation of unequal competition.

1.3.
A wide range of players — and the European
Parliament in particular — were similarly critical of the
public procurement directives. The clear message from
the players closely involved in the day-to-day application
of procurement rules was that there is a need for
simplification, greater flexibility and easy access to
information in the area of public procurement.

(1) COM(96) 583 final.
(2) CdR 81/97 fin — OJ C 244, 11.8.1997, p. 28.

2.1. The overall approach

2.1.1.
The COR therefore welcomes the fact that the
Commission communication focuses on simplification
and greater flexibility. In the COR’s view, the communi-
cation demonstrates the Commission’s desire to take on
board the proposals for simplification and greater
flexibility made by the COR in response to the Green
Paper.

2.1.2.
The Commission communication proposes
presenting a legislative package in 1998 which primarily
seeks to streamline existing rules. The COR is pleased
to see that, in line with its wishes, the Commission has
abandoned the basic view that stability in the area of
procurement should take precedence over the objective
of making the necessary adjustments to the relevant
directives.

2.1.3.
The COR is therefore in overall agreement
with the Commission’s main conclusion from the public
procurement debate: the need for simplification and
greater flexibility.

2.2. Simplification and greater flexibility

2.2.1.
It is clear from the communication that hence-
forth the Commission wishes to work on the principle
that greater flexibility should be accompanied by more
effective control and complaint procedures at national
level. The COR would endorse this linkage of simplifi-
cation and more stringent national controls provided
that it leads to greater flexibility in practice. The COR
is also working on the assumption that many countries
have already established effective control and complaint

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procedures. The COR would also urge the Commission
to apply an additional principle: namely that EU
procurement should always bring with it real benefits
for both purchasers and companies supplying the public
sector. EU-wide procurement should be an active instru-
ment for ensuring that the market for public services
produces high-quality supplies at the most favourable
prices. In practice, this overriding principle should
ensure that the cost of procurement to contracting
entities and tenderers does not undermine the economic
benefit arising from increased competition.

2.2.2. C o n s o l i d a t i o n
d i r e c t i v e s

o f

p r o c u r e m e n t

2.2.2.1.
As suggested by the COR and others, the
Commission communication proposes consolidating the
‘traditional’ procurement directives (on public supplies,
public works and public services) into a single procure-
ment directive. The purpose of this is to streamline
administrative procedures and achieve greater clarity in
the application of procurement rules for contracting
entities and suppliers.

2.2.2.2.
The COR is able to give its full support to
this proposal in that it will be easier for local and
regional authorities to follow a single set of rules, rather
than three, as is currently the case. The COR feels that
this consolidation should take place as soon as possible
and that the codified version should be followed up with
additional interpretative documents.

2.2.2.3.
The Committee of the Regions welcomes the
proposals aimed at improving the functioning of the
directives; it would at the same time urge the Member
States to step up the implementation of the directives.

2.2.3. P r o p o s a l s f o r t h e i n t r o d u c t i o n o f
a n e w p r o c u r e m e n t p r o c e d u r e —
c o m p e t i t i v e n e g o t i a t e d d i a l o g u e

2.2.3.1.
As a practical proposal to meet the need for
simplification, the Commission has suggested introdu-
cing a new standard procedure, the ‘competitive dia-
logue’. Here the Commission’s objective is to achieve
smoother and more flexible interaction between the
public and private sectors than is possible under the
usual open and restricted procedures. The Commission
proposes that this new procurement procedure should
replace the existing negotiated procedure with prior
publication of a notice. At present there is very limited
access to this method.

respect the COR feels it is necessary to highlight the
problems experienced by local and regional authorities
under the present procurement directives.

2.2.3.3.
The overriding problem for local and regional
authorities is that, in practice, it is very difficult to
conduct a satisfactory EU procurement procedure,
particularly in fields where the pace of product and
market development is very fast and services very
complex. This is the case with, for instance, procurement
in the health sector
technology,
operating and X-ray equipment etc.), as well as with IT
systems. There are essentially four types of problem:

(pharmaceutical

1) Before publishing an EU-wide invitation to tender,
the public authority is required to give a precise
description of its requirements in the tender specifi-
cations. In order to do this, the authority must be
able to enter into a flexible interchange with suppliers
in order to obtain up-to-date details of the market
solutions available.

2) During the tendering process itself, further clarifi-
cation is often required, either of the authority’s
specifications or of the bids submitted by suppliers.

3) While the contract is being prepared, it may prove
necessary in the course of cooperation between
contracting authority and supplier to modify certain
parts of the overall contract.

4) During implementation of the contract, minor techni-

cal adjustments may be needed.

2.2.3.4.
It is the experience of many local and regional
authorities that, in these four areas, the existing rules
on procurement constitute an entirely unnecessary
obstacle to the flexible interplay which ensures that
citizens get the best services for the least money.

2.2.3.5.
A report by the Swedish Nämnd för Offentlig
Upphandling (1) [National Board of Public Procurements
Complaints] shows amongst other things that the overall
economic impact of public procurement legislation in
terms of savings for public authorities is small. In the
COR’s view, the results of this study demonstrate that
detailed and inflexible procurement legislation may
result in less favourable economic results than would
have been the case with flexible procurement rules.

2.2.3.6.
The direct consequence for local and regional
authorities is often that they are obliged to buy in the

2.2.3.2.
The COR would support the Commission’s
proposal to introduce this new procedure provided that
it does actually lead to more flexibility and is in no way
inferior to the current negotiated procedure. In this

(1) ‘Effekter av lagen om offentlig uphandling’ (Impact of the
Law on Public Procurement), Nämnden för Offentlig
Upphandling, January 1998.

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services of expensive outside consultants to handle the
procurement procedure. This results in citizens paying
more overall for services.

2.2.3.7.
The indirect consequence is that the obstacles
impeding a forward-looking dialogue between con-
tracting authority and supplier are not conducive to
optimum product development and innovation among
suppliers. The COR feels that, in the longer term, this
could have implications for growth and employment.

2.2.3.8.
The COR therefore urges the Commission to
ensure that the proposed new procurement procedure
— competitive dialogue — allows for a high degree of
flexibility so as to facilitate a wide-ranging dialogue
with suppliers before, during and after commissioning.

2.2.3.9.
The COR would also urge the Commission
to reject the notion that matters of price and content
can be dealt with separately in the procurement process.
At the moment, it is not always possible to make
technical adjustments to a contract if this will affect the
price. An EU procurement procedure should be seen
as a single process in which price and content are
inextricably linked.

2.2.3.10.
In the COR’s view, it is crucial that competi-
tive dialogue be brought into line with the standard
open and restricted procedures.

2.2.4. C l a r i f i c a t i o n o f

‘ g r e y a r e a s ’ o f

t h e p r o c u r e m e n t d i r e c t i v e s

2.2.4.1.
The Commission proposes that a number of
areas covered by the procurement directives should be
clarified so as to rule out ambiguity in the day-to-day
application of the rules. The COR welcomes this
initiative, as directives which are unclear give rise to
continual problems of interpretation and hence high
administrative costs.

2.2.4.2. One example of an area where clarification
is needed is the provision for dialogue between public
authorities and suppliers before an invitation to tender
is issued (technical dialogue). In practice, the authority
needs to gather information and knowhow from firms
on current market solutions. At present this dialogue is
severely hampered by the way the directive is customarily
interpreted. Much greater flexibility is needed for both
authority and supplier.

2.2.4.3.
The COR feels that it is crucial when clarify-
ing the procurement directives that the Commission
tackles the job with an eye for simplification and greater
flexibility. It is the COR’s view that, in the interests of
simplification, these clarifications should be made as
far as possible by means of additional interpretative
documents, and where this is not possible, then by
amending the directives.

2.2.4.4.
The COR believes there is a need to clarify
the conditions under which private consultants may be
brought into EU procurement procedures. The COR
feels that steps should be taken to ensure a high
degree of independence between private consultants and
suppliers. This is especially true for sectors in which
there are close historical and cultural ties between
consultants and suppliers.

2.2.5. R e d u c i n g t h e a d m i n i s t r a t i v e b u r -
d e n — i n c r e a s i n g t h e a b i l i t y t o
t e n d e r

In the COR’s view, the current threshold
2.2.5.1.
values for the purchase of goods and services place
an entirely unnecessary administrative strain on both
purchasers and suppliers. The debate following the
Green Paper has shown that a large number of players
share this view.

2.2.5.2.
Experience shows that firms have only a
limited interest in bidding for small contracts abroad.
The Commission’s own studies indicate that only around
1 % of all contracts go to firms abroad. A study among
Danish local authorities shows that foreign firms apply
to have their tender considered in only 3 % of service
procurements. Against this background, small contracts
are even more likely to be mainly of regional, and in
some cases, national, interest.

The COR believes that the lack of interest
2.2.5.3.
shown by firms in bidding for small contracts abroad,
combined with the high administrative costs which are
well documented, clearly demonstrates the need to raise
the threshold values. It would therefore once again urge
the Commission to propose an increase in the threshold
values in the goods and services directive.

2.2.5.4.
The COR reiterates its requests for a global
appraisal of the administrative implications of the
procurement directives, and of the implications stem-
ming from the implementation of the directives by the
Member States.

3. Specific comments

3.1. Green procurement and tendering rules

3.1.1.
The Commission communication proposes
clarifying the options for imposing environmental
requirements in public procurement. The COR notes
with pleasure that the Commission wishes to work
harder for green procurement and would point out that

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many local and regional authorities are actively engaged
in fostering a green procurement policy. The COR
emphasizes, however, that environmental requirements
cannot be put on a par with the principle of cost
effectiveness.

The COR considers it crucial in public procure-
3.1.2.
ment to be able, in addition to laying down certain
conditions with regard to a product’s properties (e.g.
the PVC content of plastic), to impose objective require-
ments concerning the overall environmental impact of a
product and of a company, including the production
process.

to how they wish to organize themselves, including
agreements between public authorities but not with
private entities are not affected by the procurement
directives. The COR feels it is important to emphasize
that that the Council of Europe convention on local and
regional self-government unambiguously establishes the
right to enter into inter-municipal collaboration for the
purpose of carrying out tasks of common interest.

3.3. Electronic procurement

The COR is aware that the international GPA
3.1.3.
agreement (1) makes this possible (cf. GPA agreement
Article VI). The Commission is therefore urged to look
into how far the GPA agreement could serve as a basis
for imposing such objective environmental requirements
in the case of EU procurement. If this cannot be done,
the Commission is asked to propose amendments to the
procurement directives to allow public authorities to
take account of the environment in a responsible manner
when purchasing.

The COR welcomes the steps taken by the
3.3.1.
Commission to further the development of an effective
framework for electronic procurement. The Com-
mission’s electronic pilot project, SIMAP (Systeme
dans l’Information de Marché Public) (2), has already
produced good results, and the COR hopes that within
a short space of time this project can lead to real
administrative savings and greater transparency with
regard to public procurement.

3.1.4.
The COR feels it is important for the Com-
mission to integrate action in the field of procurement
with environmental initiatives, especially the European
Eco-label and the European eco-management and audit
scheme for businesses, EMAS.

3.2.

Inter-municipal undertakings

3.2.1.
In response to the Green Paper, the COR called
on the Commission to make clear that transferring tasks
e.g. from one local authority to an inter-municipal
undertaking (e.g. refuse company) is regarded as an
in-house contract and therefore falls outside the scope
of the procurement directives. The Commission com-
munication does not address this issue specifically. The
same goes for local authorities and inter-municipal
undertakings which enter into inter-municipal agree-
ments to have certain tasks of one local authority carried
out by other local or regional authorities.

3.2.2.
The COR therefore once again calls upon the
Commission to make clear that the political choices
made by local and regional authorities with regard

3.3.2.
The COR would urge the Commission to
ensure that, where appropriate, all parts of the procure-
ment process can be handled electronically: sending out
notices to tender, seeking new invitations to tender,
sending and receiving specifications and bids and ulti-
mately electronic exchange of agreements and payment
for services rendered. In this connection, the Committee
would point out that the system must include efficient
security mechanisms, so that contractors do not need to
worry about commercially sensitive information falling
into the wrong hands.

3.3.3.
The COR would, however, point out that there
are considerable disparities between Member States in
terms of information technology, and this is particularly
true of local and regional authorities. It is therefore vital
that those authorities and firms that do not have access
to such electronic facilities do not end up in a worse
position as a result of the Commission’s proposals in
this regard.

3.3.4.
It is also the COR’s view that the objectives in
this field can only be achieved if the introduction of
electronic procurement is followed up with targeted
training for public authorities and businesses. The COR
is happy to contribute to the Commission’s work by
drawing up practical proposals to boost training.

(1) The General Procurement Agreement is the international
procurement agreement under the WTO which, inter alia,
enables European companies to bid for public contracts in
e.g. the USA.

(2) The Commission has set up a pilot project which is intended
to form the basis of a global electronic procurement system.

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3.3.5.
Lastly, the COR takes the view that a prerequi-
site for more widespread use of electronic procurement
is an effective CPV nomenclature (1). The existing CPV
nomenclature gives rise to a number of problems as its
structure is not standardized and it is imprecise in many
areas. The COR would therefore urge the Commission
to improve the CPV nomenclature so that it becomes an
effective instrument in electronic procurement too.

3.4. Exclusion of certain supply sectors

3.4.1.
The Commission proposes that entities within
the supply sector that are operating under real competi-
tive conditions should not come within the scope of the
Utilities Directive (93/38/EEC) (2). This is particularly
relevant in the telecommunications sector, where the
liberalization process has led to former monopolies now
functioning under conditions of real competition.

3.4.2.
The COR agrees with this proposal and feels
that steps should be taken to ensure that when a Member
State decides that a sector is to be opened up to true
competition (i.e. liberalized), that sector will automati-
cally be excluded from the public procurement directives
except where the public interest, which justifies the
sector’s status as a public service, requires a degree of
monitoring involving compliance with Community rules
on public procurement.

3.5.

Increased use of framework contracts

The Commission proposes amending the rules
3.5.1.
on public procurement so as explicitly to permit the use
of (flexible) framework contracts. It is a recognized fact
that this is not expressed in so many words in the
supplies and services directives. The COR would point
out that a large proportion of the procurement currently
undertaken by local and regional authorities makes use
of EU procurement framework contracts. They are
widely recognized as offering a flexible form of purchas-
ing which facilitates on-going monitoring of product
developments and price changes.

3.5.2.
The COR endorses the Commission’s view
that as a matter of principle there should be greater
scope for making use of framework contracts.

3.6. Regulation of concessions (3)

3.6.1.
The Commission proposes increased regu-
lation of concessions in the service sector. In the COR’s
view, the Commission has not produced evidence to
support the claim that there is now a greater need for
regulation than when the services directive first came
into being. The COR is therefore unable to support the
Commission’s proposal.

The COR also feels that it would be appropriate
3.6.2.
to await the judgement of the Court of Justice in the
Arnhem case (C-360/96)(4) as the Advocate General’s
ruling in the case goes a good way towards providing
an interpretation of what is meant by concession in the
service sector.

3.7. Community-level checks and independent control

and complaint authorities

3.7.1.
In its response to the Green Paper, the COR
was sceptical (on grounds of the subsidiarity principle)
about the Commission having increased powers equiva-
lent to those applicable in the area of competition law
(fines, compensation, etc.). At the same time the COR
was in favour of applying the procedure for infringe-
ments of the Treaty, because of the greater pressure to
comply and the obvious deterrent effect in Member
States which do not respect the public procurement
directives or have not even transposed them into national
law.

3.7.2.
The COR feels that the way to greater trans-
parency and to securing legal guarantees for firms and
purchasers lies in setting up national control and
complaint authorities. Developing such authorities at
national
level will also guarantee fair treatment of
complaints while helping to raise awareness about public
procurement nationally. The COR would therefore
support the Commission in putting further pressure
on those Member States which,
in the process of
implementing the monitoring directives, have not yet
set up independent control and complaint authorities at
national level.

3.7.3.
The experience of countries with such auth-
orities is broadly positive. Both businesses and con-
tracting entities have greater peace of mind when specific
complaints are assessed by an independent body.

(1) The Common Procurement Vocabulary is a global system
for identifying individual groups of goods and services.
(2) The Utilities Directive covers procurement procedures
within the following sectors: gas, electricity, water and
heating supply, as well as public transport networks and
telecommunications.

(3) Concession is the term used to refer to the arrangement
whereby a public authority, against payment, gives a firm
the right to operate a public transport network, for
example.

(4) The Court of Justice is currently dealing with a case against
a Dutch inter-municipal refuse company in Arnhem which
is expected to raise the issue of concessions.

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3.7.4.
For purposes of simplifying public procurement
and guaranteeing equal terms of competition, care
should also be taken to ensure that national authorities
do not apply rules which are more restrictive than those
provided for in the Community directives.

3.7.5.
Lastly, the COR feels that, in order to fight
organized crime effectively, promote the continuation
and growth of an honest labour market and maintain
work of a high standard, it is important to emphasize
that the rules on procurement should not require that
contracts are awarded to the lowest bidder but also
allow them to be awarded according to a properly
defined ‘weighted average’; or similar criterion.

3.8. SME policy and tendering rules

3.8.1.
The COR welcomes the proposals of the
Commission for special measures in favour of SME,
which will increase their ability to tender.

3.8.2.
For the COR, it is particularly important that
future initiatives prioritize training and information.
Local and regional authorities throughout Europe can
attest to the fact that many businesses are not sufficiently
well equipped to bid for public contracts. This often
results in purchasing authorities being forced to reject
bids because,
the
conditions of tender. Many local and regional authorities
also find that it is always the same, usually big, national
firms that bid for contracts again and again.

for example, they do not meet

Local and regional authorities have a responsi-
3.8.3.
bility to foster a favourable business climate for compa-
nies, besides training and equipping them to face
increased competition in tendering. An example from
the municipality of Naestved in Denmark has shown
that targeted action to train companies has led to both
greater interest in public contracts and to a marked
improvement in the quality of bids which the local
authority receives when putting out an EU-wide invi-
tation to tender. The COR calls on the Commission
to give far greater assistance to local and regional
authorities through exchanges of experience and help
with setting up such training schemes.

would also point out that the existing highly bureaucratic
public procurement rules represent a considerable
obstacle for SMEs. The problem today is that the many
procedural requirements involved in an EU tender mean
that the administrative costs of drawing up bids for
public contracts are too high for SMEs. Small companies
do not have the same administrative capacity as large
ones to handle the complicated tendering process.
Effectively, the rules on public procurement give com-
panies with large-scale internal resources a relative
competitive advantage.

3.8.5.
Against this background the COR would also
urge the Commission to pursue the drive for simplifi-
cation presented in the communication.

3.8.6.
The COR asks the Commission to ensure
that everything possible is done to give the widest
dissemination of public procurement opportunities to
SMEs.

3.9. Representation of local and regional authorities

3.9.1.
Though local and regional authorities play a
key role in applying the rules of public procurement,
these same authorities have only limited representation
within the bodies that advise the Commission on an
ongoing basis.

3.9.2.
The COR finds it most unfortunate that the
Commission’s advisory committee, for example, does
not include a single representative with practical experi-
ence from the local and regional authorities, which in
many Member States, are responsible for over two-thirds
of
total procurement and therefore have practical
experience of conducting a great many procurement
operations.

3.9.3.
The COR therefore urges the Commission to
consider how the Commission’s ongoing work in this
area can draw directly on the experience of local and
regional authorities.

The COR supports the proposal that existing
3.9.4.
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. Conclusions

3.8.4.
The Commission notes that experience of
direct participation in cross-border contracts of SME
are disappointing. Replies to the green paper show that
SMEs are confronted with many obstacles, such as lack
of information about potential contracts. The COR

4.1.
Local and regional authorities are responsible
for a very large proportion of public procurement in
Europe. The public procurement directives have a major
impact on the interaction between local and regional

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authorities and private companies, and hence on the
services which those authorities provide for their citizens.

4.2.
The COR welcomes the fact that, as the COR
and others wished, the Commission has given priority
to the need for simplification and greater flexibility. The
COR hopes that what the proposed global legislative
package will mean in practice is lower administrative
costs for both public authorities and businesses. EU
procurement procedures should continue to be an
effective instrument to obtain the best supplies at the
lowest cost.

In the interests of simplification,

4.3.
the COR
supports the proposal to consolidate the traditional
procurement directives in a single directive and to
introduce a new procurement procedure — competitive
dialogue — which can ensure the necessary degree of
flexibility in the interplay between the public and private
sectors.

The COR endorses the Commission’s efforts to
4.4.
create a ‘green’ public procurement policy. The COR
therefore calls upon the Commission to pave the way to

making all environmental criteria an integral part of
public procurement, either by means of a special
interpretative document or by amending the public
procurement directives. The COR emphasizes, however,
that environmental requirements cannot be put on a par
with the principle of cost-effectiveness.

The COR wants the Commission to ensure that
4.5.
SMEs can take full advantage of public procurement
opportunities through encouraging improved training
and ensuring the widest dissemination of those oppor-
tunities. The COR would point out that the Commission
in particular, as well as the Member States and local
and regional authorities, have a responsibility to set
up targeted training initiatives in the field of public
procurement.

The COR takes the view that, if the Commission’s
4.6.
proposed initiatives are to be put into practice, it is
essential that the experience of local and regional
authorities is actively brought to bear in subsequent
work on the rules for public procurement. The COR
therefore urges the Commission to look into how the
continuing dialogue can be enhanced by drawing on this
experience.

Brussels, 17 September 1998.

The President

of the Committee of the Regions

Manfred DAMMEYER