COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing rules on the access of third country goods and services to the European Union's internal market in public procurement and procedures supporting negotiations on access of European Union goods and services to the public procurement markets of third countries
Date: 2012-03-21
Institutions: European Commission
Subjects: European undertaking, award of contract, foreign enterprise, freedom to provide services, international market, market access, originating product, provision of services, public service, restriction on competition, service concession, services contract, single market, supplies contract, third country

EUROPEAN COMMISSION 

Brussels, 21.3.2012  
SWD(2012) 58 final 

COMMISSION STAFF WORKING DOCUMENT 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE 
COUNCIL 

establishing rules on the access of third country goods and services to the European 
Union's internal market in public procurement and procedures supporting negotiations 
on access of European Union goods and services to the public procurement markets of 
third countries 

{COM(2012) 124 final} 
{SWD(2012) 57 final} 

 
 
 
 
  
 
Disclaimer: This executive summary commits only the Commission's services involved in its 
preparation  and  does  not  prejudge  the  final  form  of  any  decision  to  be  taken  by  the 
Commission. 

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Background 

Public  procurement  is  about  how  public  authorities  spend  taxpayers'  money  in  public 
purchase  and  investment  decisions.  Public  procurement  is  considered  to  be  a  key  driver  of 
public  policies.  In  economic  terms,  public  procurement  affects  a  substantial  share  of  world 
trade flows. Purchases of goods and services by public authorities account for roughly 17% of 
the EU’s GDP. Public procurement impacts at least 22 key markets of goods and services in 
which  the  customers  are  exclusively  or  mostly  public  purchasers,  or  for  which  public 
authorities  are  large  clients.  All  in  all,  the turnover  of  firms  operating  in  these  procurement 
markets may exceed 25% of the EU's GDP and represent some 31 million jobs. 

In  its  negotiations  with  third  countries,  the  EU  has  advocated  an  ambitious  opening  of 
international  public  procurement  markets.  However,  EU  companies  have  to  deal  with  an 
unlevel playing field in that respect as many trading partners are reluctant to further open their 
procurement markets to international competition – which considerably limits their business 
opportunities.  

Stakeholder's consultation 

This  impact  assessment  report  has  been  prepared  taking  into  consideration  the  views 
expressed by a wide range of stakeholders, including Member States, civil society, industry, 
and NGOs. In order to gather those views, the Commission organised an internet consultation, 
a public hearing, and other consultation mechanisms. Respondents to the internet consultation 
generally  welcomed  the  European  Commission's  initiative  and  agreed  on  the  description  of 
the problems faced, but held diverging views on the options to choose. A significant majority 
of  stakeholders  appear  to  support  a  legislative  initiative,  while  an  important  minority  prefer 
the  option  'nothing  happens'.  There  are  also  divergent  opinions  as  to  what  that  legislative 
option should be. Although there is large support for the legislative option with approach A1, 
there  are  a  significant  number  of  respondents  in  favour  of  an  alternative  approach  that  is 
neither  A  nor  B2.  It  is  worth  noting  that,  although  the  least  preferred  legislative  option, 
approach B also received support from a considerable number of respondents.  

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Approach  A:  EU  procuring  entities  would  be  required  in  principle  to  exclude  third  country  goods, 
services and companies not covered by international commitments of the EU. 
Approach B: Subject to notification to the Commission, EU procuring entities would have the option to 
decide  to  exclude  third  country  goods,  services  and  companies  not  covered  by  international 
commitments of the EU.In addition, the Commission would be entrusted with a specific tool to conduct 
enquiries  about  the  market  access  situation  for  EU  goods,  services  and  companies  and  to  impose 
restrictive measures on goods and services originating in third countries when EU goods, services and 
companies do not have sufficient access to the public procurement market of these countries. 

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1. 

PROBLEM DEFINITION 

1.1. 

The limited openess of public procurement markets worldwide  

Public procurement is excluded from GATT and GATS, which govern world trade in goods 
and services. Industrialised countries, among them the EU and 14 other countries (including 
USA,  Japan,  Canada  and  Korea),  have  become  parties  to  the  WTO  Agreement  on 
Government Procurement (GPA). Parties to the GPA commit themselves to mutual opening 
of their markets for certain types of purchases of certain public entities above specific values. 
The  EU  and  other  countries  such  as  Korea  or  Chile  have  also  committed  themselves  to 
opening their public procurement markets through free-trade agreements outside the WTO.  

The EU is directly concerned by the global opening of public procurement but in reality, only 
25% of contestable public procurement markets have been committed internationally in either 
the GPA or FTAs. Although, the GPA/FTAs only secure 5 billion EUR of EU exports (0,4% 
of all EU exports), the opening of public procurement affects some other 5 billion EUR taking 
place  in  non-committed  procurement  markets,  altogether  affecting  the  international  trade  of 
industrial  sectors  active  in  22  selected  markets,  whose  turnover  amounts  to  25%  of  the  EU 
GDP  and  some  31  million  jobs.  In  total,  more  than  50%  of  contestable  public  procurement 
markets  are  closed  through  protectionist  measures  such  as  price  preference  mechanisms  or 
local content requirements. In addition, some 25% are de facto open, but can be closed at any 
moment. This leaves the EU with some 12 billion EUR of untapped exports. Furthermore, the 
EU  has  so  far  no  agreements  on  public  procurement  with  countries  such  as  China  or  India, 
although it is currently negotiating market access commitments with both. 

The  opening  of  public  procurement  markets  has  been  prevented  by  strong  national  agendas 
driven,  in  industrialised  economies,  by  domestic  pressures  and,  in  emerging  economies,  by 
the need to climb the technological ladder..  

1.2. 

The EU lacks negotiations leverage to foster the globalisation of procurement 

The  EU  has  given  wide  commitments  on  its  public  procurement  market  when  compared  to 
other  GPA  parties.  As  a  result,  the  strategic  economic  interests  of  several  GPA  parties  are 
satisfied by the current state of affairs. Also, since the GPA is not part of  multilateral trade 
negotiations, market access in public procurement can only be traded in negotiations against 
market  access  in  public  procurement  (and  not  against  lower  tariffs,  for  example).  Also,  the 
fact  that  several  high-profile  contracts  have  been  awarded  in  types  of  procurement  not 
covered by commitments fuels the perception that the EU public procurement market is open 
even beyond the level of its international commitments.  

1.3. 

Some  Member  States take national measures to regulate access to their public 
procurement 

In this context, several Member States have taken measures to regulate access to their public 
procurement market. Others have informed the Commission – informally – that they intend to 
introduce measures. Since regulating the access to the EU procurement market for suppliers 
from  third  countries  clearly  falls  under  the  remit  of  the  EU's  exclusive  competence  for  the 
common commercial policy, Member States are not entitled to legislate in this area on their 
own. 

More  practically,  because  of  the  absence  of  EU  guidance  or  legislation  on  the  access  of 
foreign tenderers to the EU public procurement market, contracting authorities in the EU are 
at  a  loss  when  trying  to  understand  the  scope  of  the  EU's  international  commitments  in  the 

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area of public procurement. 28% of all contract award notices contain erroneous assessments 
of the coverage of the GPA – sending wrong signals to foreign bidders.  

1.4. 

Overarching problems 

Overall, most public procurement markets in third countries remain closed to EU businesses. 
EU companies are being denied access to some 12 billion EUR of potential exports. If third 
countries were able to accept withdrawing protectionist measures only in those sectors where 
they themselves have strategic offensive interests, they would open access to up to 4 billion 
EUR of exports for the EU. This impacts on the capacity of EU firms to create economies of 
scale.  In  addition,  EU  companies  supplying  goods  and  services  in  the  25%  of  procurement 
markets that are de facto open can be hit at any moment by protectionist measures.  

Current protectionist policies may distort business investment decisions, and could also lead 
to  jobs  being  shifted  artificially  outside  the  EU.  The  same  could  be  said  of  technology 
transfers  that  are  undertaken  for  reasons  of  industrial  policy  (e.g.  China's  "indigenous 
innovation"  policy)  rather  than  on  purely  commercial  grounds.  In  the  medium-term,  access 
problems  may  even  extend  to  those  sectors  where the EU has a  competitive edge to bypass 
existing barriers (e.g. pharmaceuticals).  

EU companies,  goods and  services do not enjoy from a level playing field. From  a  sectoral 
perspective,  Chinese  construction  companies  and  Japanese  railways  have  been  given  the 
opportunity  to  sell  to  EU  contracting  authorities,  while  sales  in  the  opposite  direction  are 
impossible.  In  several  instances,  state-supported  companies  (for  example,  from  Russia  and 
China) have been able to submit abnormally low tenders.  

1.5. 

Analysis of subsidiarity 

The  question  of  subsidiarity  does  not  arise  in  the  context  of  this  initiative,  as  the  rules  and 
negotiations  on  access  to  the  EU's  public  procurement  market  fall  within  the  scope  of  the 
common  commercial  policy,  an  exclusive  competence  of  the  EU  under  Article  207  of  the 
TFEU. Therefore, any action that sets a framework for the implementation of an international 
trade agreement must be taken at the EU level. . 

2. 

OBJECTIVES 

Fair competition and access to public procurement markets are key instruments for economic 
growth and job creation, in particular in the context of the recent economic crisis. Against this 
background,  the present legislative initiative  would serve as a trigger for  further opening of 
public procurement markets in third countries in order to improve business opportunities for 
EU firms.  

In  doing  so,  it  is  believed  that  the  initiative  will:  increase  the  competitiveness  of  EU 
businesses,  both  in  the  EU  and  internationally;  boost  the  internationalisation  of  SMEs  in  a 
globalised  economy;  and  increase  employment  and  promote  innovation  in  the  EU.  These 
general objectives have been translated into specific and operational objectives in the impact 
assessment. The specific objectives include: boosting the exports of EU goods and services in 
public  procurement  markets  outside  the  EU;  giving  the  EU  greater  leverage  in  international 
negotiations on procurement; increasing legal certainty in respect of third countries' access to 
the EU's public procurement market; and ensuring that commitments on public procurement 
given to the EU as part of its international agreements are respected. 

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3. 

POLICY OPTIONS 

3.1. 

Baseline scenario: "Nothing happens" (Option 1) 

The baseline scenario shows how the problems described in the problem definition will most 
likely  evolve  without  any  further  action  by  the  EU.  Under  this  scenario,  the  EU  would  not 
undertake  any  new  action;  the  present  EU  legal  framework  and  the corresponding  practices 
would  remain  in  place;  and  the  EU  would  continue  to  negotiate  additional  market  access 
(accession of China to the GPA, FTAs with India and Japan, bilateral procurement openings 
with  USA)  and  to  rely  very  largely  on  current  market  opening  commitments  secured  in  the 
GPA or in FTAs, together with those that might be secured in the future. In reality, however, 
there  is  considerable  uncertainty  about  the  likely  extent  and  rate  of  progress  in  the  current 
GPA market access negotiations, and about the outcome of ongoing bilateral negotiations. 

3.2. 

Non-legislative option (option 2):  

3.2.1. 

Soft-law and dispute settlement/ infringement mechanism (Option 2A) 

Under this option the Commission  would clarify in explanatory documents the scope of the 
EU's international commitments and would provide guidance on the enforcement of existing 
instruments  such  as  articles  58  and  59  of  Directive  2004/17  (procurement  by  energy,  water 
and  transport  entities).  The  Commission  would  also  consider  making  more  active  use  of 
existing  tools  such  as  its  own  infringement  procedures  and  existing  WTO/FTA  dispute 
settlement mechanisms where trading partners infringe their commitments. 

3.2.2.  Reinforcement of ongoing negotiations (Option 2B) 

Under this option, the EU would systematically encourage trading partners to join the GPA, 
require public procurement chapters in all FTAs (and re-open the Customs Union with Turkey 
so  as  to  include  a  procurement  chapter),  start  new  negotiations  and  further  extend  the 
procurement chapters of existing FTAs (Chile, Mexico). 

3.3. 

Legislative option with supervision by European Commission (option 3) 

This legislative option would define  and  regulate  access to public procurement  covered and 
not  covered  by  the  EU's  international  commitments  and  establish  "procurement  rules  of 
origin"  (PROs)  to  identify  the  origin  of  goods  and  services.  In  line  with  the  concerns 
expressed  by  NGOs,  it  would  also  grant  full  access  to  goods  and  services  from  least 
developed  countries.  Beyond  these  core  elements  of  a  legislative  policy  response,  it  is 
possible to distinguish three alternative approaches described in options 3A, 3B and 3C. 

3.3.1.  Approach based on an overall access restriction for not covered procurement at the 

EU level (Option 3A) 

Under the first approach, Member States' contracting entities would be required, in principle, 
to  exclude  third  country  goods,  services  and  companies  not  covered  by  the  international 
commitments  of  the  EU.  However,  in  order  to  avoid  obstacles  to  the  procurement  of  goods 
and services unavailable in the EU and/or needed in cases of emergency and/or of overriding 
reasons of general interest, the initiative would establish legal exceptions to the obligation to 
exclude,  and  provide  the  Commission  with  the  possibility  to  issue  additional  derogations 
through waivers when required by special circumstances. 

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3.3.2.  Approach  based  on  individual  decisions  by  the  EU  procuring  entities  and  a 

Commission driven mechanism in case of not covered procurement (Option 3B) 

3.3.2.1.  At the level of MS: individual procuring entities' decisions under the supervision of 

the European Commission (3B1) 

For not covered procurement, EU contracting entities would have the option either to admit or 
to  exclude  goods  or  service  providers  originating  from  third  countries  from  the  tendering 
process. The decision to exclude foreign bids would be subject to an ex ante notification to the 
Commission (through the contract notice). This would allow the Commission to monitor the 
situation and ensure consistency throughout the EU.  

3.3.2.2.  At the EU level: the Commission-driven mechanism (3B2) 

At  EU  level,  based  on  a  determination  of  market  access  difficulties  and/or  specific 
complaints,  the  Commission  would  decide  to  open  investigations  on  protectionist  measures 
and  other  trade  barriers  imposed  on  EU  suppliers  or  on  bids  in  third  countries.  The 
Commission could then (1) invite the trading partners concerned to enter into negotiations to 
dismantle the existing trade barriers, and/or to provide reciprocal market access commitments 
in  order  to  secure  access  to  the  other  party's  public  procurement  markets  and  (2)  adopt 
restrictive  measures  against  bids  originating  in  these  third  countries,  if  the  trading  partner 
concerned refuses to engage in negotiations.  

3.3.3.  Option 3C: Option for contracting entities to accept companies, goods and services 
not  covered  by  the  EU's  international  commitments,  subject  to  notification  of  the 
Commission  and  Commission  option  to  impose  access  to  the  EU's  public 
procurement market 

This  option  would  give  contracting  entities  the  possibility,  subject  to  clearance  of  the 
Commission, to accept companies, goods and services that do not benefit from international 
market access commitments. They would need, first, to have announced in the contract notice 
their  willingness  to  accept  these  companies,  goods  and  services.  If  they  were  actually  to 
receive offers of such goods and services they would then have to notify the Commission. The 
Commission would take a decision based on 'substantial reciprocity' within take 6-8 weeks. 

3.4. 

Legislative  approach  without  supervision  by  European  Commission  (extension 
of Article 58 to the whole scope of the directives) 

To  avoid  burdening  contracting  authorities  with  the  need  to  notify  the  Commission,  the 
provisions  of  Article  58  and  59  would  be  extended  to  services,  works,  bodies  governed  by 
public law, central and local authorities. Guidance on the application of these articles would 
be  provided  through  explanatory  documents  (as  per  option  2).  Finally,  this  initiative  would 
use the same core elements as option 3. 

3.5. 

Option 5: 'Buy Europe' 

To  level  the  playing  field  with  main  trading  partners  such  as  the  USA  and  China,  the  EU 
could create a system of price preferences with a 25% margin in order to mirror the existing 
"Buy American" and "Buy China" policies for non-covered procurement. However, by doing 
so,  the  EU  would  be  giving  implicit  approval  to  the  sorts  of  price  preference  mechanism 
across the world to which it is adamantly opposed. This option should therefore be discarded 
from the outset and will not be analysed.  

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3.6. 

Option 6: correcting unfair 'abnormally low tenders' (complementary option) 

The  options  mentioned  above  could  be  complemented  by  an  option  that  would  aim  at 
remedying the problems arising when suppliers from certain third countries offer (very) low 
prices since they receive subsidies or benefit from other unfair competition practices.  

4. 

ASSESSMENT OF IMPACTS 

The impact of each option is assessed taking into account a set of 9 criteria including impact 
on trading flows,  leverage effect of trading partners in international negotiations and impact 
on administrative burden.  

These impacts have to be measured against a potential increase of exports of 4 billion EUR 
(which  represents  about  60,000  jobs),  if  the  12  largest  non-EU  trading  partners  open  those 
procurement  markets  for  which  they  have  corresponding  offensive  interests  in  the  EU.  To 
determine  the  efficiency  of  each  option,  the  costs  of  each  of  them  will  be  compared  to  this 
benchmark.  The  possibility  of  retaliatory  measures  by  trading  partners  should  also  be  taken 
into account when measuring the costs and benefits of each of the envisaged options.  

Option  1  (baseline  scenario)  and  Option  2B  (further  negotiations)  are  expected  to  deliver  1 
billion EUR of additional exports (12.000-18.000 jobs).  

Under option 2A (legal clarification and enhanced use of existing mechanisms), increased use 
of  the  existing  restrictions  laid  down  in  Directive  2004/17/EC  (article  58.2)  is  likely  to 
produce most of the effects in terms of rules clarification and legal clarity. Guidance on the 
scope  of  committed  and  non-committed  procurement  indeed  improves  the  level  of  legal 
certainty  when  rejecting  offers  of  foreign  goods  and  services  during  tendering  procedures. 
Option 2A is not expected to have any significant impact on any other criteria.  

Option  3A  (overall  restriction  of  access  for  not  covered  procurement  at  EU  level)  should 
significantly  improve  legal  certainty  as  it  should  avoid  the  problems  caused  by  incorrect 
implementation  of  symmetric  reciprocity  clauses.  A  large  majority  of  the  procurement 
markets concerned would be able to apply restrictions, but waivers would probably be applied 
in the procurement of fuel, pharmaceuticals, medical equipment and computers. The potential 
impact  on  trade  flows  is  far-reaching  as  this  option  could  block  up  to  4  billion  EUR  of 
imports  of  goods  and  services.  This  option  might  have  large  retaliatory  effects  (1  billion 
EUR)  and  an  important  leverage  effect.  The  impact  on  public  finances  and  administrative 
burden would remain very limited. 

Under option 3B (individual entities, under the supervision of the European Commission, may 
exclude  bids  from  third  countries  (3B1),  and  a  Commission-driven  instrument  to  conduct 
enquiries  about  the  market  access  situation  for  EU  goods,  services  and  companies  in  third 
countries  (3B2)),  a  greater  degree  of  legal  certainty  would  be  obtained  as  the  Commission 
would have the final word on potential discriminatory measures. This option would cover all 
relevant  sectors  of  the  economy.  The  initiative  could  realistically  lead  to  market  openings 
worth 4 billion EUR of additional exports and create 60.000 jobs. The leverage potential of 
this option would be slightly better than option 3A thanks to the possibility to target offensive 
interests  of  third  countries  under  option  3B2.  The  retaliation  risk  of  this  option  would  be 
limited since closure of the EU procurement market would itself be limited and targeted. The 
impact  on  public  finances  would  be  limited,  but  the  administrative  burden  on  contracting 
authorities, businesses and even the European Commission would be relatively large because 
of the 6-8 week notification system. 

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Option 3C and 4 would present similar impacts as option 3A. Yet, option 3C would cause the 
largest  administrative  burden  of  all  options  (notifications  instead  of  waivers)  and  option  4 
would not improve the level of respect for international commitments as much as options 3A 
or 3B.  

Option 6 (correcting unfair abnormally low bids) would come as a complement to the other 
options  and  would  only  affect  foreign  bids.  Impact  on  the  administrative  burden  and  public 
finance  would  be  minor  but  would  depend  on  the  number  of  cases.  However,  the  risk  of 
retaliation exists, because companies excluded on the basis of abnormally low bids are most 
likely to be state-owned.  

5. 

COMPARISON OF OPTIONS 

The  proposed  policy  options  have  been  compared  on  the  basis  of  their  impact  on  the 
objectives to be achieved and on the basis of their efficiency. 

Option 1 does not meet the identified objectives and has therefore only be considered as the 
baseline scenario with which to compare the other policy options. Option 2 will have only a 
limited contribution to the fulfilment of the identified objectives (as regards improvement of 
legal  certainty  and  access  to  third  countries  markets)  and  also  has  the  least  advantages  in 
terms  of  efficiency,  effectiveness  and  coherence.  Options  3A,  3C  and  4  meet  the  identified 
objectives – but are not efficient because of the retaliation costs that they may entail, as well 
as  the  problems  for  supply  chains  of  EU  firms  in  USA  and  China.  Option  3C  generates  a 
substantial administrative burden. None of the options except option 6 can actually target the 
abnormally low tenders of state-supported firms, goods and services. Option 3B is the most 
likely to meet all the objectives and to meet them to the greatest extent. It has also received 
the best scores in terms of effectiveness, efficiency and coherence as compared with the other 
policy  options.  As  a  result,  it  is  recommended  to  follow  option  3B  and  to  complete  with 
option 6 and 2B.  

6. 

MONITORING AND EVALUATION 

The  Commission  will  monitor  the  compliance  of  Member  States  and  Member  States' 
contracting authorities with the obligations laid down in the external procurement initiative. 
The initiative proposes a set of indicators to track the achievement of each specific objective, 
notably by monitoring of: 

•  additional procurement-related exports 

•  number of sectors (among the 22 selected) that have been opened abroad compared to the  

•  current number 

•  expansion of trade flows in the area of procurement 

•  number of investigations launched by the European Commission 

• 

removal of procurement trade barriers against EU suppliers in specific third countries  

•  changes  in  national  law  to  reflect  international  commitments  in  the  area  of  public 

procurement. 

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