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Introduction to Public Procurement

Julie NazeraliPartner, Beachcroft LLP, Brussels and London

5 June 2009

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Today’s Menu

1. EU Procurement Regime

2. Public Private Partnerships and Competitive Dialogue

3. Key issues

4. Trends

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1. EU Procurement RegimeSo why procurement rules?

EC Treaty: Common Market between all Member States

Breach of public procurement rules acts as a barrier to trade

Total public procurement estimated at about 16% of EU GDP or £1000 billion

Increase of cross-border competition and improvement of prices

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1. EU Procurement RegimeThe General Regime

Directive 2004/18/EC (Works, Supply and Services)

Directive 2004/17/EC (Utilities)

Directive 2007/66/EC (Remedies)

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1. EU Procurement Regime What thresholds apply?

Type of contract Threshold

SuppliesCentral AuthoritiesOther Authorities

€133,000

€206,000

ServicesPart A Central AuthoritiesPart A Other AuthoritiesPart B All Authorities

€133,000

€206,000

€206,000

WorksWorks/Concessions €5,150,000

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1. EU Procurement Regime Procedures

Open = All bidders invited

Restricted = Only certain bidders invited

Negotiated = Allows discussion/negotiation

Competitive Dialogue = Allows discussion

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1. EU Procurement Regime

Transparency / Equal treatment

Advertise intention to procure Hold a competition between interested firms Exclude firms only for justified reasons Respect minimum time-limits for all participants Award contract based on results of the competition Provide information on decisions to interested parties 10 day standstill period between award decision

and conclusion of contract

Common principles

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1. EU Procurement RegimeRules applying to Part B services or below threshold contracts

Part B services: Health, education and cultural servicesFull procurement rules don’t applyWhen a contract is of “cross-border interest”:

EC principles apply: non-discrimination and equal treatment, transparency, proportionality

Sufficient degree of advertising, eg. Internet Fair competition must be respected

Relevant factors to be considered: value/subject matter of the contract, size/structure of the sector concerned

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1. EU Procurement Regime

Complaint to the Commission

Informal procedure – “a friendly settlement”?

Formal procedure: Letter of infringement to

Member State Reasoned opinion Proceedings before ECJ

Complainant does not receive damages

Proceedings before a national court

Now

Injunction proceedings

Damages

What happens if things go wrong?

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2. Public Private Partnerships (PPPs) PPPs deliver a project/service traditionally provided by the public

sector

How?: Through concessions, JVs and partial privatisations

Contract awarded to a PPP vehicle does not need to be tendered, if: The private partner was chosen in a fair and transparent tender

exercise The nature and scope of the contract was covered when tendering

for the private partner

PPPs often used for road and rail infrastructure projects

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2. Competitive Dialogue (CD)Used for “Particularly Complex Contracts”

Came into operation in 2006

Negotiated procedure can only be used in limited cases and not for CD

Used where open/restricted procedures not available; and Not possible to define technical specifications; or The legal and/or financial make up of the project

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2. Competitive Dialogue

OJEU Notice

Pre-qualification Questionnaire

Select/shortlist participants

Invitation to tender

Dialogue Phase – Successive stages possible

End Dialogue and invite final Tenders

Evaluation of tenders

Award contractObserve 10 day standstill

Contract Signature

Competitive Dialogue/Negotiated procedure

All procedures apart from open procedure

How does it work?

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2. Competitive Dialogue

Allows for discussions on all aspects of the contract during the dialogue stage

Authority can discuss each bidder’s individual solution

Allows for flexibility as to the setting/disclosure of evaluation criteria

Allows for limited post-tender discussions with preferred bidder

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3. Key issuesThe new Remedies Directive: four areas of reform

Introduction of “ineffectiveness”: contracts may be set aside for serious breaches of procurement rules (eg. contract notice not published in the OJEU)

Harmonisation of standstill provisions: 10/15 days before the conclusion of the contract Contracting authorities must send reasons with the award decision

New time limits for seeking ineffectiveness in Court: 30 days for published award decisions / 6 months if bidders were not notified of the award decision or where OJEU contract award notice not published

New rules bring in a defacto injunction procedure

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3. Key issuesThe new Remedies Directive: some further info

Court may not render a contract ineffective if it finds that there are good reasons for doing so, ie. reasons relating to a “general interest of non-economic nature”

Alternative remedies: contract shortening and fines applied as An alternative to using the ineffectiveness principle, and/or In addition to prospective ineffectiveness

Does not apply to Part B services or below threshold contracts

To be implemented by December 2009

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3. Key issues Disclosure of Award Criteria/Weightings - what must be

disclosed?

Award criteria and respective weightings: +

Sub-criteria and respective weightings: (+) if they could have had an impact on the preparation of bids

Other evaluation elements (scoring matrix etc.): (+) if they could have had an impact on the preparation of bids

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3. Key issues Exception to procurement rules: In-house contracts

A Contracting Authority (CA) can award a contract to another public body without holding a tender exercise, if:

The CA exercises control over the entity that is similar to the control it exercises over its own department, and

The entity carries out the essential part of its activities for the CA

Eg. the ECJ ruled that the transfer of the operation of a local authority’s cable TV network to a co-operative could be done without a tender exercise since the latter was controlled by a Board composed of representatives of the public authority (Coditel Brabant, Case C-342/07)

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4. Trends

Watch out for the Remedies Directive!

Bidders are becoming much more litigious

CAs must ensure robust procurement compliance

Still many grey areas in procurement law (eg. in-house awards, land transactions, change of award criteria in CD procedures, social award criteria, post-contract changes).

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Q&APlease don’t hesitate to ask questions!

Julie Nazerali,

Partner, Beachcroft LLP, Brussels

+32/ (0)2 541 85 82

jnazerali@beachcroft.com