Explanatory Memorandum to COM(2006)195 - Amendment of Council Directives 89/665/EEC and 92/13/EEC CEE with regard to improving the effectiveness of review procedures concerning the award of public contracts - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2006)195 - Amendment of Council Directives 89/665/EEC and 92/13/EEC CEE with regard to improving the effectiveness of review procedures ... |
|---|---|
| source | COM(2006)195  |
| date | 04-05-2006 |
Grounds for and objectives of the proposal Directives 89/665 and 92/13 coordinate national provisions relating to the application of review procedures in the event of infringement of the Public Procurement Directives. However, the lack of coordinated rules on the time limits applicable to pre-contractual reviews has resulted in most Member States retaining national arrangements which do not allow the signing of disputed contracts to be prevented in time. But the result of signing the contract in question is almost always to make irreversible the effects of the disputed award decision. This situation is all the more worrying when it involves preventing contracts which have been directly and illegally awarded, i.e. those which have been illegally concluded with no prior publication of a contract notice and no competitive tendering procedure. The proposal for a Directive amending Directives 89/665 and 92/13 (the “Remedies Directives”) seeks to give greater encouragement to Community enterprises to tender in any Member State of the Union by providing them with the certainty that they can, if need be, effectively seek effective review if their interests seem to have been adversely affected in procedures for awarding contracts. The increasingly effective nature of pre-contractual reviews will prompt awarding authorities to adopt better publication and competitive tendering procedures for the benefit of all involved.
General context The Remedies Directives make a distinction between pre-contractual reviews seeking primarily to correct in time infringements of Community law on public procurement and post-contractual reviews which are generally limited to awarding damages. Given that there are no specific time limits and provisions allowing the suspension in time of the signature of a contract the award of which is disputed, the relative effectiveness of pre-contractual reviews varies considerably from one Member State to another. Furthermore, in the case of an illegal direct award of contract the injured enterprises can in fact only seek review for damages, but such a review does not allow an illegally awarded contract to be opened again for competition. In addition, such reviews for damages have little deterrent effect on awarding authorities, especially because enterprises who feel that their interests have been harmed must prove that they had serious chances of being awarded the contract. Thus, even though the Court of Justice has called illegal direct awards of contracts “the most serious breach of Community law in the field of public procurement” (Stadt Halle, case C-26/03, paragraph 37), the current Remedies Directives do not make it possible to prevent or correct in an effective way the consequences of such illegal action. In the absence of legislative action at Community level, the very different situations among the Member States with regard to the effectiveness of review procedures available to enterprises would persist or even be aggravated. Situations of legal uncertainty and serious or repeated infringements of the public procurement Directives would continue.
Existing provisions in the area of the proposal This proposal for a Directive seeks to amend the two Remedies Directives in the area of public procurement: i) Directive 89/665/EEC which applies, in principle, to contracts for works, services and supplies awarded by contracting authorities, now coming under Directive 2004/18/EC; ii) Directive 92/13/EEC which applies to contracts awarded by contracting entities operating in the water, energy, transport and postal services sectors (remedies in the so-called “special” sectors). The proposed amendments introduce coordinated rules intended to clarify and improve the effectiveness of the current provisions on pre-contractual reviews brought in the framework of the formal procedures for awarding contracts or in the case of illegal direct awards of contracts. The other proposed amendments are intended, on the one hand, to refocus the corrective mechanism which may be applied by the Commission to cases of serious infringement and, on the other hand, to repeal two mechanisms (attestation of contracting entities and conciliation) which apply solely to the special sectors and which have not prompted the interest of the contracting entities or the enterprises concerned.
Consistency with the other policies and objectives of the Union The objective in amending the “Remedies” Directives is, in particular, to improve the effectiveness of appeals by economic operators in connection with public procurement procedures, which must comply not only with the specific provisions of Directives 2004/17 and 2004/18 but also with the principles of the EC Treaty, such as the principles of the free movement of goods, the freedom to provide services, the freedom of establishment and the principles derived therefrom, such as equality of treatment, mutual recognition, proportionality and transparency. In addition, this objective is fully in line with the objective of Article 47 of the Charter of Fundamental Rights of the European Union, which states the right of everyone whose rights and freedoms guaranteed by the law of the Union are violated to an effective remedy before an impartial tribunal. Lastly, improving the effectiveness of national review procedures, especially those dealing with illegal direct awards of contracts, is also in line with the European Union’s overall policy against corruption (see Commission Communication of 28.5.2003, COM(2003) 317 final).
Consultation of interested parties
Consultation methods used, main sectors targeted and general profile of respondents The Member States were consulted in the Advisory Committee on Public Procurement. A public consultation, open to economic operators and their representatives (professional associations and lawyers) was organised using on-line questionnaires (Interactive Policy Making), which provided 138 contributions. In addition, five European and national professional associations voluntarily offered written contributions. Economic operators were also consulted by means of a questionnaire specifically addressed to a representative panel of European enterprises (European Business Test Panel), which provided 543 contributions. Non-governmental experts, including representatives of economic operators as well, were consulted in the Advisory Committee on the Opening-up of Public Procurement. Awarding authorities were consulted by means of an on-line questionnaire, which resulted in 16 contributions.
Summary of responses and how they have been taken into account The consultations of the economic operators and their representatives indicate that the operation of national review procedures in connection with the existing Directives does not always make it possible to remedy effectively non-compliance with Community rules on public procurement. There is virtual consensus among the interested parties on the need to improve the effectiveness of pre-contractual reviews by providing for a standstill period between the notification of an award decision and the signing of the contract, as well as supplementary rules intended to ensure effectiveness. Although there is virtual consensus as well on the seriousness of the illegal practices of direct awards of contracts by certain awarding authorities, opinions differ among the Member States and economic operators on the solutions to be introduced. Only a minority of Member States and economic operators support proposals to impose pecuniary penalties or prior administrative checks on awarding authorities or a system of notification by independent bodies which would receive complaints from enterprises whose interests had been harmed. The requirement to observe a standstill period, together with the requirement of transparency prior to signing a contract directly awarded, is a proposal which is generally more acceptable to the interested parties.
A consultation was organised using the Internet from 19/03/2004 to 07/05/2004. The Commission received 543 replies. The results of the consultation are available on: europa.eu.int/comm/internal_market
Use of external expertise was not necessary.
Impact assessment Three major options are available in connection with the revision of the “Remedies” Directives, with two of these options subject to a variant depending on whether the Directives are amended or a communication is adopted: i Retaining the Directives as they are: this option would involve encouraging the Commission to pursue infringement proceedings in order to deal with all the problems of the incompatibility of national legislation or practice in this area with the “Remedies” Directives. The differences which have been noted in the way in which the Member States draw the operational conclusions from the principles deriving from the case law of the Court would persist, and the problems of the race to sign contracts would be solved only in part and the pace would vary greatly depending on the Member State, thus depriving economic operators of guarantees with regard to the effectiveness of the pre-contractual reviews applicable in the Member States ("no level playing field"). In the case of illegal direct awards, most Member States have no plans at present to introduce specific review mechanisms. In practice, potential tenderers would continue to be able to apply only for damages. Now, the difficulties inherent in this type of procedure, such as the burden of proof and the length and expense of proceedings, give tenderers no encouragement to make use of it, since only rarely is a positive result the outcome. In the absence of a coordinated approach allowing the introduction of effective remedies against this illegal practice, there would be no improvement to the transparency and competitive tendering of public procurement, and this would deprive European enterprises (including the most competitive among them) of the chance to bid for public contracts which are still directly and illegally awarded. i Introduction of a standstill period by means of an amendment to the Directives or a communication indicating the Member States’ obligations in this regard: although the case law of the Court of Justice has specified the requirement to provide for a reasonable standstill period, so that the tenderers who consider that their interests have been harmed can seek a remedy at a time when the infringements can still be corrected, there are still differences of approach from one Member State to another with regard to the scope and exact content of such a requirement. Drawing the operational conclusions from such a requirement in a Directive makes it possible to deal at the same time with the problem of the race to sign contracts in formal tendering procedures and the problem of illegal direct awards, by improving the legal certainty of the situations in question and providing guarantees for an effective application of the mechanism. i New powers granted to independent bodies by means of an amendment to the Directives or a communication encouraging the introduction of such bodies: the Member States would appoint independent bodies which would have the power to notify awarding authorities of more serious breaches of Community law on public procurement (more particularly, illegal direct awards) so that they would be prompted to correct the shortcomings themselves. This notification mechanism offers advantages for tenderers in terms of cost and anonymity. On the other hand, uncertainty about the administrative costs likely to be generated for these independent bodies to function, together with the negative position expressed by the majority of the Member State delegations in the Advisory Committee on Public Procurement, prompted the Commission to discard this solution in favour of introducing a standstill period.
The Commission conducted an impact assessment under the Commission’s Legislative and Work Programme. The report may be found at: europa.eu.int/comm/internal_market
Contents
Summary of the proposed measures When an awarding authority completes a formal procedure for awarding a contract in accordance with the Directives on public procurement, it must in principle suspend the conclusion of the contract until the end of a minimum period of ten calendar days from the date on which the economic operators involved in the award procedure are given a reasoned notification of the award decision. When an awarding authority considers that it has the right to directly award a contract with a value above the thresholds fixed by the Directives on public procurement it must – except in cases of extreme urgency – suspend the conclusion of the contract for a minimum period of ten calendar days, following sufficient publicity in the form of a simplified award notice. If a contract is concluded illegally by the awarding authority during the standstill period, such an action is considered invalid. The consequences of such an illegal action on the effects of the contract are drawn by the competent review body, although the matter must be referred to the body by an economic operator before the end of a limitation period of six months with effect from the effective date of conclusion. The corrective mechanism is focused on serious infringements and the unused attestation and conciliation mechanisms are repealed.
Legal basis Article 95 of the EC Treaty.
Subsidiarity principle The principle of subsidiarity applies insofar as the proposal does not concern an area in which the Community has exclusive competence.
The objectives of the proposal cannot be sufficiently achieved by the Member States for the following reasons.
In spite of the developments in case law since 1999 and the resulting actions by certain Member States, especially following infringement proceedings by the Commission, there are still significant disparities among the Member States in terms of the effectiveness of reviews in the area of public procurement. In addition, the lack of guarantee of effective remedy discourages Community enterprises from tendering outside their country of origin. The experience of recent years shows that this legal uncertainty will not be removed by isolated and separate action by some Member States.
The objectives of the proposal can be better achieved by Community action for the following reasons.
The shortcomings which it was possible to detect during the consultation process occur in the scope of the two Directives adopted in 1989 and 1992. Improvements to and clarifications of the existing provisions of these Directives would be fully effective only by means of an amending Directive. The Union is best capable of achieving the objective of improving review procedures in the area of public procurement covered by Directives 2004/17/EC and 2004/18/EC. In fact, the preliminary consultations have shown that the degree of mobilisation is still very different from one Member State to another with regard to the need to strengthen provisions which can ensure effective enforcement of the Directives on public procurement. If there is no Community initiative in this area, the disparities among the Member States in the proper application of Community legislation on public procurement will persist.
With regard to the problem of illegal direct awards of contracts, no effective solution to combat this illegal practice has yet been adopted by most Member States, even though the vast majority acknowledge the reality and the seriousness of the problem. As for the problem of the race to sign the contract in the case of formal award procedures, there is an emerging consensus among the representatives of the Member States on the need to include in an amending Directive a standstill period, which will be clearly defined with regard to its scope and arrangements. In addition, legislative action at Community level proves necessary with a view to establishing a clear system of effective, proportionate and deterrent sanctions against the most serious infringements of Community law on public procurement.
The Member States will retain their power to appoint the bodies responsible for the review procedures and to maintain the national procedural rules applicable to such reviews (respect for the Member States’ procedural autonomy). The proposal for a Directive focuses on the two most important problems which are common to all the Member States.
The proposal thus complies with the principle of subsidiarity.
Proportionality principle The proposal complies with the principle of proportionality for the following reasons.
The proposal for a Directive is limited to providing some improvements or clarifications to existing provisions dealing with pre-contractual reviews and with those contracts where the amounts are higher than the thresholds fixed by Directives 2004/18/EC and 2004/17/EC, and does not demand any changes to existing administrative or judicial systems. In addition, the fact that there is provision for subsequent drafting of interpretative documents to deal with other problems in connection with the poor operation of national review procedures as a result of incorrect interpretation of existing provisions by some Member States indicates the proportionate nature of the Commission’s initiative.
The burden on public authorities is limited mainly to the marginal costs in connection with deferring the signing of a contract for ten calendar days as a rule, and to an initial increase in the number of reviews by a few percent in relation to the number of public contracts published at Community level. For society in general, the main benefit of better application of Community law on public procurement as a result of the deterrent effect of effective reviews would be a reduction in public expenditure and an improvement in the quality of public service, with this overall benefit greatly exceeding the additional costs which have been mentioned. Since there is no requirement to create new administrative structures, the financial and administrative burden on the public authorities has also been kept to a minimum.
Proposed instrument(s): Directive.
Other instruments would not have been appropriate for the following reasons. The alternative to a Directive establishing the scope and the arrangement for applying a standstill period would have been the adoption of a document interpreting the case law of the Court. However, this alternative was discarded because it could not have guaranteed the application in every Member State of a standstill period which was clearly defined and satisfactory in terms of the various situations covered by the Directives on public procurement. In general terms, the differences of interpretation with and between the Member States on the scope of the case law on which the requirement to observe a standstill period is based, as well as arrangements for applying effective, proportionate and deterrent sanctions in the event of infringement of this key provision for the effectiveness of pre-contractual reviews, would not be removed by the Commission’s adoption of an interpretative document.
The proposal has no implications for the Community budget.
Simplification
The proposal simplifies the legislative framework.
The proposed simplification consists of repealing the attestation and conciliation mechanisms which are applicable in the special sectors (Directive 92/13/EEC) and which have not been used.
The proposal includes a review clause.
Correlation table The Member States are required to communicate to the Commission the text of national provisions transposing the Directive, as well as a correlation table between those provisions and this Directive.
European Economic Area The proposed act concerns an EEA matter and should therefore extend to the European Economic Area.