COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Date: 2011-12-20
Institutions: European Commission
Subjects: administrative contract, award of contract, energy supply, postal service, transport market, water supply

EUROPEAN COMMISSION 

Brussels, 20.12.2011 
SEC(2011) 1586 final 

COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Directive of the European Parliament and of the Council 

on Public Procurement 
and  
the Proposal for a Directive of the European Parliament and of the Council  
on procurement by entities operating in the water, energy, transport and postal sectors

{COM(2011) 896 final} 
{SEC(2011) 1585 final} 

 
 
 
 
  
 
COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a Directive of the European Parliament and of the Council 

on Public Procurement 
and  
the Proposal for a Directive of the European Parliament and of the Council  
on procurement by entities operating in the water, energy, transport and postal sectors 

1. 

BACKGROUND 

Public  procurement  (PP)  is  the  process  used  by  government  institutions  and  public 
sector  organisations  (CAEs)  to  buy  supplies,  services  and  public  works.  Such 
expenditure  is  a  significant  and  influential  component  of  the  economy.  In  2009, 
contracts governed by EU PP rules accounted for 3.6 % of EU GDP (€

 420 billion). 

Several  recent  reports  and  policy  statements  highlight  a  need  to  review  these 
Directives. Reviewing the PP framework is a priority of the Single Market Act. 

This  Impact  Assessment  analyses  the  current  challenges  facing  EU  PP  policy  and 
explores the options to support and adapt Directives 2004/17/EC and 2004/18/EC. 

2. 

STAKEHOLDER CONSULTATION 

This report builds on the extensive external expertise, consultation and analysis that 
underpins the 2011 evaluation of PP and the 2010 evaluation of the 2004 Action Plan 
for e-procurement. It draws on the findings of 2 Green Paper consultations on: 

(a) 

the modernisation of EU PP policy (over 620 replies) 

(b) 

expanding the use of e-procurement in the EU (77 replies). 

Both Green Papers were supported by well-attended  conferences in Brussels where 
stakeholders had a further opportunity to express their views. 

Member State (MS) representatives were consulted via the Advisory Committee for 
Public Contracts (ACPC). 

3. 

PROBLEM DEFINITION 

3 key problems have been identified: 

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• 

Insufficient  cost-efficiency  —  current  EU  rules  generate  estimated  savings  of 
 420 billion p.a. but procedures may be unduly 
approximately €
burdensome as the associated cost is around €

 20 billion on €

 5.6 billion. 

•  Missed  opportunities  for  society  —  current  rules  may  not  always  allow 
stakeholders  to  optimise  the  use  of  their  resources  and/or  make  the  best 
purchasing choices. 

• 

National  rather  than  EU  PP  market  —  over  98 %  of  contracts  awarded 
according to EU rules are won by national bidders (approximately 96 % of total 
value). 

Further analysis has identified the following causes of these problems, classified into 
5 main areas. 

3.1. 

Scope 

Cause: complex rules 

Complex  and  unclear  EU  rules  defining  scope  and  coverage  generate  uncertainty, 
lead to  risk-averse circumvention  and ‘box-ticking’ behaviour  by public purchasers 
to the detriment of the quality of procurement outcomes. Costly regulatory apparatus 
is  applied  to  large  populations  of  purchasers  or  transactions  without  sufficient 
countervailing benefit. There are many ‘grey zones’ regarding the activities covered 
by the Directives (e.g. form of public-public cooperation) and the rules that apply to 
different types of contract. Such complexity creates litigation costs, falling mainly on 
CAEs, who require advice on how to achieve compliance. 

3.2. 

Procedures  

Causes: disproportionate and inflexible procedures 

Disproportionate  procedures  generate  excess  costs,  especially  for  smaller  contracts. 
A typical procedure costs nearly €
 5 500; 5.9 firms bid at 
 125 000)  such  costs 
 3 800).  At  the  lowest  EU  threshold  (€
a  cost  per  firm  of  €
represent 18-29 % of the contract value. Further evidence is given by the significant 
variations noted in MS' performance (e.g. the difference in time taken from dispatch 
of the contract notice to award spans a range of 180 days). 

 28 000 (average CAE cost €

Many stakeholders complain that the current procedures are inflexible and limit their 
ability  to  negotiate.  In  particular  CAEs  cannot  make  the  best  use  of  non-standard 
procurement solutions (e.g. innovative purchasing). 

3.3. 

Strategic procurement 

Causes: uncertainty and insufficient provisions on the integration of strategic goals  

Despite  several  communications  to  clarify  how  to  integrate  other  policy  objectives 
(e.g. green, social, innovative) when applying PP rules, many stakeholders find that 
problems  remain.  They  also feel that more can be done to help CAEs who wish to 
spend public money in a more strategically responsible manner. A fear of litigation 
(due to non-compliance) has led to low take-up of such options and a general lack of 

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monitoring  prevents  the  identification  of  successes  and  wider  promotion.  There  is 
also  a  lack  of  convergence  in  the  way  MS  use  the  available  measures  and  the 
resultant  different  standards  /  labels  actually  risk  fragmenting  the  market  further 
along national lines. 

3.4. 

Access 

Causes: regulatory and ‘natural’ market barriers 

Difficulties  affecting  market  access  across  Europe  lower  the  involvement  of  SMEs 
and  reduce  cross-border  bidding.  Many  bidders  have  never  attempted  to  bid  in 
another country, due to a mix of natural (e.g. language, geographic) and regulatory 
administrative  barriers.  Both  SME  and  cross-border  bidders  are  hampered  by 
administrative requirements (e.g. provision of evidentiary documents) and problems 
in obtaining information. The share of SMEs winning PP contracts has not changed 
significantly  since  2002,  nor  have  cross-border  participation  rates  improved.  The 
most significant factor affecting SME participation is contract value — SMEs have 
problems bidding for or fulfilling contracts over €

 300 000. 

3.5. 

Governance  

Causes: different models and administrative capacities across MS 

Significant differences in the administrative organisation put in place by MS have led 
to inconsistent application, control and monitoring across the EU. This has resulted 
in  errors,  an  increased  risk  of  fraud  and  sub-optimal  management  of  resources. 
Recent  audits  of  EU-funded  projects  found  significant  error  rates  due  to  incorrect 
application  of  PP  rules  and  in  some  instances,  incorrect  transposition  of  EU 
Directives.  Analysis  of  the  infringement  procedures  launched  by  the  Commission 
since  2005  identified  a  similar  range  of  errors  and  issues,  implying  that  such 
mistakes are not one-offs but occur repeatedly. 

3.6. 

Consequences 

Taken together, these 3 key problems lead to the conclusion that the Internal Market 
is  not  achieving  its  full  potential  in  PP.  Without  action,  this  situation  will  at  best 
continue and could even get worse as differences become more marked and the lost 
opportunity costs of a sub-optimal framework are taken into account. 

Given that many of the problems identified are the result of action and interpretations 
stemming from 2 EU Directives, it follows that EU level action is justified and could 
be required to address these issues. 

4. 

OBJECTIVES 

The  evaluation  recognised  that  the  general  objectives  of  existing  PP  policy  remain 
valid, particularly given the current financial strain in many MS. Hence the EU will 
continue  to  promote  fair,  non-discriminatory  and  EU-wide  competition  in  order  to 
deliver  the  best  value  for  money  whilst  achieving  the  best  possible  procurement 
outcomes for society. It will also remain active in the fight against corruption. 

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Specific objectives  have  been identified to respond to the main problems identified 
above. They are to: 

(1) 

(2) 

improve the cost-efficiency of EU PP rules and procedures; 

take full advantage of all opportunities to deliver the best possible outcomes 
for society; 

(3) 

create EU rather than national markets for PP. 

9  operational  objectives  have  also  been  identified  to  address  the  causes  of  the 
problems.  Achieving  these  operational  objectives  should  help  achieve  the  specific 
objectives and lead to improved performance against the overarching goals. 

5. 

OPTIONS 

A  wide  range  of  options  have  been  considered,  although  radical  action  (either 
complete  abolition  or  full  harmonisation  of  EU  legislation)  was  quickly  discarded. 
Using  the  operational  objectives  as  a  guide,  a  range  of  non-legislative  (SOFT)  and 
legislative  (LEGI)  options,  based  on  certain  critical  choices,  was  developed  to 
address each of the 5 main problem areas. A high-level approach has been adopted, 
since microscopic examination of all the possible legislative changes would produce 
a document of several hundred pages. 

After  further  screening,  12  options  were  selected  for  further  analysis  against  the 
baseline (no change) scenario. 2 LEGI options were retained for each problem area, 
differing in their degree of ambition, and soft law options for problems in access and 
governance. 

For  a  given  problem  area,  it  is  not  always  an  ‘either/or’  choice  in  favour  of  one 
option. For the solutions proposed relating to scope, procedures and governance, the 
best solution could be to combine both LEGI options or LEGI and SOFT. 

6. 

IMPACTS AND COMPARISON OF OPTIONS 

The  key  impacts  of  these  options  are  summarised  below.  In  general,  the  most 
immediate  impacts  are  economic  with  limited  social  and  environmental  effects, 
except  for  the  options  relating  to  strategic  use  which  are,  by  their  very  nature, 
intended to create (positive) social and environmental impacts. 

6.1. 

Scope 

Options 

SCO.LEGI.TARGET: targeted adjustments to scope of PP legislation 

SCO.LEGI.REDUCE: 
purchasers/purchases 

Impacts 

significant 

amendments 

to 

exclude 

certain 

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Both  these  options  should  improve  clarity  and  hence  improve  cost-efficiency. 
SCO.LEGI.TARGET  should  address  the  current  grey  areas  and  improve  legal 
certainty without triggering any expected international consequences. Creating a new 
lighter  regime  for  social  services  contracts  above  €
 500 000  and  applying  the  full 
regime to all other services should improve clarity and the application of EU rules. 

The  impacts,  and  hence  benefits,  of  SCO.LEGI.REDUCE  would  be  limited  to  the 
excluded  procurement  and  are  based  on  the  assumption  that  any  substitute  national 
regime  is  lighter  than  the  EU  one.  While  national  (below  EU  thresholds) 
procurement  rules  may  be  less  prescriptive,  a  substantial  regulatory  cost  would 
remain for such exempted purchases and the inherent and unavoidable costs of sound 
management  of  PP.  Exclusions  would  also  reduce  transparency  at  EU  level,  but 
probably  also  nationally,  with  the  associated  negative  impact  on  competition  and 
price  paid.  Depending  on  the  exact  exclusions,  additional  costs  may  be  incurred  if 
they  contravene  international  obligations,  triggering  the  foreclosure  of  partner 
country  markets  with  potentially  significant  negative  impacts  for  EU  firms  trading 
with these countries. 

Improving legal clarity (SCO.LEGI.TARGET) would not address issues affecting the 
capture  of  stakeholders  and  transactions.  The  decision  as  to  whether  the  right 
stakeholders  and  subject  matter  would  be  covered  is  more  complicated  (and  to  a 
certain extent political given the possible international consequences). 

6.2. 

Procedures 

Options 

PRO.LEGI.DESIGN: correct and enhance existing procedures. 

PRO.LEGI.FLEXIB:  expand  menu  of  procedural  options  available  to  CAEs  and 
alleviate procedures that result in disproportionate costs. 

Impacts 

PROC.LEGI.DESIGN  would  improve  the  design  of  certain  procedures,  and  give 
greater legal clarity on what was required. This should improve cost efficiency and 
the  overall  proportionality  of  the  PP  process.  Whilst  greater  use  of  repetitive 
purchasing techniques should have overall positive benefits for CAEs, there are some 
concerns about market closure and the longer-term access of firms to such tools. This 
would  have  to  be  addressed  to  ensure  transparency  and  non-discrimination  and 
prevent a restriction of competition. Enforcing tools and measures that can facilitate 
up-take of e-procurement should significantly improve cost-efficiency and strengthen 
the integration of EU PP markets, although there would be set-up costs and technical 
barriers to be overcome (to avoid market fragmentation). 

PROC.LEGI.FLEXIB  would  increase  the  choice  and  flexibility  available  to  CAEs 
which  could  also  improve  procurement  outcomes,  particularly  through  the  use  of 
greater  negotiation  (although  with  certain  caveats  relating  to  appropriate  use  and 
potential  costs  of  developing  negotiating  expertise).  A  lighter  regime  for  contracts 
tendered  by  sub-central  authorities  should  improve  cost  efficiency  and,  assuming 

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certain  minimum  transparency  requirements  (use  of  a  Prior  Information  Notice), 
there should be no marked drop in competition and no international consequences. 

6.3. 

Strategic procurement 

Options 

STR.LEGI.FACILIT:  enable  CAEs  to  frame  their  PP  needs  in  ways  that  integrate 
other policy goals. 

STR.LEGI.ENFORC: remove discretion from CAEs. They must award (all or part of) 
contracts on the basis of performance on other policy goals. 

Impacts 

Broadly  speaking,  the  measures  under  both  these  options  are  very  similar.  Their 
impacts  would  differ  mainly  according  to  whether  a  permissive  or  a  coercive 
approach was adopted at EU level. Both would aim to improve the ability of CAEs to 
achieve  wider  strategic  goals.  The  strategic  impacts  of  the  FACILIT  option  would 
generally  be  lower  than  for  ENFORC,  due  to  likely  variations  in  implementation 
across  MS  depending  on  choices  taken.  However,  national  authorities  and  CAEs 
would  retain  the  ability  to  make  choices  depending  on  actual  circumstances  and 
available resources, which is particularly important in the current financial climate. 
ENFORC would ensure greater consistency and uptake across the EU. Both options 
have costs to CAEs and firms due to the increased information requirements and the 
need  for  greater  knowledge  and  controls  across  a  range  of  policies.  Both  options 
could, in the short term at least, increase complexity and the administrative burden. 

6.4. 

Access 

Options 

ACC.SOFT: further EU guidance and training on access e.g. to facilitate cross-border 
buying and selling. 

ACC.LEGI.FACILIT: remove administrative barriers to SME participation and cross-
border access. 

ACC.LEGI.ENFORC: introduce prescriptive measures to reserve parts of PP markets 
for SMEs or require structuring of purchases in ways that favour SME participation. 

Impacts 

Again, the 2 LEGI options contain similar content and the main difference in impact 
relates  to  whether  a  permissive  or  coercive  approach  is  adopted.  Whilst  coercive 
measures should lead to more SME and possibly cross-border access  and generally 
improve  the  internal  market  for  PP,  it  is  not  necessarily  clear  that  this  would 
streamline  and  simplify  the  rules.  Increasing  information  requirements    could 
increase  complexity  and  the  administrative  burden  for  CAEs  and  firms.  Some  of 
these  costs  could  be  lower  under  a  permissive  approach,  which  could  be  more 
targeted to local needs. 

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Instruments  that  aim  to  facilitate  access  to  EU  PP  markets  e.g.  by  reducing  the 
evidentiary  requirements  for  bidding,  should  result  in  simpler  and  less  burdensome 
processes for SMEs and cross-border bidders. Adopting the winning bidder approach 
to providing documentary evidence would reduce administrative costs by 80 %. Use 
of lots for contracts with a total value above certain thresholds would also increase 
the number of contracts accessible to SMEs. 

The  ACC.SOFT  option  would  have  a  minor  positive  impact  on  access  rates  but  is 
low cost. 

6.5. 

Governance 

Options 

GOV.SOFT: identify and provide guidance on areas of recurrent difficulty affecting 
governance e.g. ‘best practice’ learning and benchmarking. 

GOV.LEGI.TARGET: leverage economies of scale and optimal outcomes for CAEs 
by  using  specialised  professional  bodies 
that  aggregate  purchasing,  where 
appropriate. 

GOV.LEGI.ENHANC: oblige MS to establish a national authority responsible for PP 
implementation, control and monitoring and that reports annually on performance. 

Impacts 

Increasing  the  availability  and  role  of  specialised  purchasing  bodies  should 
significantly help the many CAEs that rarely conduct high value procurement and are 
uncertain  of  how  to  comply  with  EU  rules.  Whilst  greater  aggregation  raises 
concerns  about  possible  market  closure  which  would  need  to  be  addressed, 
GOV.LEGI.TARGET  should  have  overall  benefits 
firms. 
GOV.LEGI.ENHANC should create similar conditions and architecture for control, 
monitoring  and  application  of  PP  rules  at  national  and  EU  level,  improving 
consistency  and  certainty  across  the  EU  and  strengthening  the  internal  market. 
Although MS and CAEs would probably incur some additional costs, many already 
have the necessary structures and should make savings due to improved coordination 
and monitoring. 

for  CAEs  and 

Similar,  but  lesser  impacts  could  be  expected  from  GOV.SOFT  which,  due  to  its 
voluntary  nature,  would  be  unlikely  to  achieve  the  same  degree  of  adoption  and 
consistency. 

7. 

PREFERRED OPTIONS 

Based on this analysis, the following package of solutions is proposed (shaded grey): 

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Options 

Problem groups 

No change 
options 
(NC) 

Soft law 
options 
(SOFT) 

Legislative — generally 
within current framework 
(LEGI._) 

Legislative — new or 
significant change 
(LEGI._) 

Scope (SCO) 

SCO. NC 

Procedures (PRO) 

PRO. NC 

Strategic (STR) 

STR. NC 

Access (ACC) 

ACC. NC 

Governance 
(GOV) 

GOV. NC 

SCO. 
SOFT 
PRO. 
SOFT 

STR. 
SOFT 

ACC. 
SOFT 
GOV. 
SOFT 

SCO.LEGI.TARGET  
(clarify boundaries) 
PRO.LEGI.DESIGN 
(improve definitions and 
design) 
STR.LEGI.FACILIT 
(facilitate strategic public 
procurement ) 
ACC.LEGI.FACILIT 
(facilitate access) 
GOV.LEGI.TARGET 
(optimise the use of 
resources) 

SCO.LEGI.REDUCE 
(significant re-scoping) 
PRO.LEGI.FLEXIB 
(Increase choice, increase e-
proc) 
STR.LEGI.ENFORC 
(enforce strategic public 
procurement) 
ACC.LEGI.ENFORC 
(enforce tools for access) 
GOV.LEGI.ENHANC 
(enhance control & 
responsibility) 

8. 

FUTURE MONITORING AND EVALUATION 

A  lack  of  consistent  and  comparable  data  hampers  current  efforts  to  monitor  PP 
achievements  and  identify  areas  for  further  action.  Certain  improvements  to 
monitoring  arrangements  are  implicit  under  several  measures  considered  e.g. 
improving  governance  and  e-procurement.  Better  statistics  and  monitoring 
methodologies should be considered to monitor: 

• 

• 

• 

Compliance costs; 

Use  and  savings/costs  of  switching  to  e-procurement  and  delivering  strategic 
goals; 

SME and cross-border access rates; 

•  Measures to address fraud, corruption and non-competitive behaviour. 

The draft text would include a commitment to evaluate any new legislation. 

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