Explanatory Memorandum to COM(2007)766 - Coordination of procedures for the award of certain public works contracts, public supply contracts and public service contracts in the fields of defence and security - Main contents
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| dossier | COM(2007)766 - Coordination of procedures for the award of certain public works contracts, public supply contracts and public service ... |
|---|---|
| source | COM(2007)766  |
| date | 05-12-2007 |
- Grounds for and objectives of the proposal
The creation of a European defence equipment market is a key factor in backing the European Security and Defence Policy (ESDP). In the field of public procurement, this requires a new European legislative framework which is tailored to the award of sensitive public contracts in the fields of defence and security. This Directive seeks to establish such a framework, by filling in the gaps in the existing legislation identified by the Commission after consulting all the parties concerned.
Public contracts awarded in the fields of defence and security currently fall within the scope of Directive 2004/18/EC i, apart from the exceptions arising in the situations provided for by Articles 30, 45, 46, 55 and 296 of the Treaty.
The Court of Justice has consistently ruled in its case law that recourse to derogations from Community law, including those covered by Article 296 of the Treaty, should be restricted to exceptional and clearly defined cases. As it is, in the fields of defence and security, Directive 2004/18/EC is rarely applied by the Member States, which invoke either the exemptions under Article 296 of the Treaty for public defence contracts, or those under Article 14 of the Directive for public security contracts. Thus, derogations which should be the exception according to the Treaty and Court of Justice case law are, in practice, the rule.
As a result, most defence and security equipment is purchased on the basis of uncoordinated national contract award procedures and rules. These provisions differ significantly in terms of publication, tendering procedures, selection and award criteria, etc. This lack of legal uniformity constitutes a major obstacle to the establishment of a European defence equipment market and opens the door to non-compliance with the principles of the Treaty, in particular the principles of transparency, non-discrimination and equal treatment, in wide sections of Europe's defence markets.
The extensive use of these derogations is largely due to the fact that Directive 2004/18/EC, despite the improvements it made to the coordination rules previously in force, does not take sufficient account of the specific requirements that have to be met by certain purchases of goods and services in the fields of defence and security.
It is therefore the Commission's objective to circumscribe the use of exemptions from the Treaty and Directive 2004/18/EC in the fields of defence and security to exceptional cases, in accordance with Court of Justice case law, whilst respecting the security interests of the Member States.
This proposal thus aims to introduce a new legal instrument tailored to the specific nature of 'sensitive' purchases for which specific requirements and precautions govern the award of contracts, in these fields. The Member States will then have at their disposal a common framework of procurement rules that not only ensure the application of the principles of the EC Treaty but also take into account the particular requirements of these purchases, such as security of information, security of supply and the necessary flexibility of the procedures.
- General background
In 1996 and 1997, the European Commission produced two Communications on defence-related industries to encourage restructuring and the setting up of an efficient European defence equipment market. Concrete proposals and measures followed with respect to some of these issues. However, some Member States considered any action at European level on the most essential reforms to be premature.
Following a period of transformation in this sector and in the institutional framework of the EU, including the beginnings of a real European Security and Defence Policy (ESDP), the European Parliament, in a Resolution of 10 April 2002, invited the Commission to tackle the issue of armaments in a new Communication.
In autumn 2002, the Convention on the Future of Europe set up a working party on defence chaired by the European Commissioner, Michel Barnier. The working party's report i stressed that the credibility of European defence policy depends on the existence and development of European defence capabilities and a strengthening of the European defence industrial and technological base. To this end, the European Defence Agency (EDA), which was initially provided for in the draft European Constitution, was set up in July 2004 and testifies to the Member States' determination to develop their defence capabilities.
Alongside the efforts made by the Member States, the Commission, through its 2003 Communication entitled ' Towards an EU Defence Equipment Policy ' i, launched seven initiatives to establish a more efficient European defence equipment market. In this communication, the Commission emphasised the need to initiate a reflection on how to optimise defence procurement and announced the adoption of an Interpretative Communication on the scope of Article 296 of the Treaty and the preparation of a Green Paper. The purpose of the latter was to serve as the basis for discussion with all parties concerned, on which rules to apply to the award of public defence equipment contracts, in accordance with the level of sensitivity of the equipment.
In 2004, the Commission published the Green Paper entitled ' Defence procurement ' i. By the end of the consultation, the Commission had received forty contributions from sixteen Member States, organisations and enterprises.
In 2005, after analysing these contributions and reflecting on its dialogue with the parties concerned, it published a Communication ' on the results of the consultation launched by the Green Paper on Defence Procurement and on the future Commission initiatives ' i. These contributions confirmed the value of an interpretative communication on the application of Article 296 of the Treaty – which was adopted in 2006 i - and demonstrated the need for Community rules for defence procurement which take the specific characteristics of certain purchases in this sector into account.
Further consultations with the parties concerned revealed the existence of similar requirements for non-military security purchases which call for a legislative response at European level as well. Indeed, as the European Council noted in the European security strategy ' A secure Europe in a better world ' in 2003, the emergence of asymmetrical transnational threats, such as terrorism and organised crime, is blurring the boundary between external and internal, military and non-military security, and calls for a comprehensive response. Furthermore, in order to combat these threats, non-military security forces often use equipment which, technologically speaking, is comparable to defence equipment. As a result, sensitivity is an increasingly important feature of such security procurement, particularly in terms of complexity and confidentiality, which renders it similar to defence procurement.
- Existing provisions in the area covered by the proposal
At present, the contracts covered by this proposal are governed by Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts.
- Consistency with other policies
The proposal forms part of the internal market policy and will enhance the ESDP and Europe's industrial policy.
It also falls within the framework of the seven policy areas identified by the Commission in 2003 in its Communication ' Towards an EU Defence Equipment Policy' and complements other Commission initiatives relating to the defence market and industry.
- Consultation of interested parties
From the outset of its initiative on defence procurement in 2003, the Commission has engaged in in-depth discussions with all parties concerned, resulting in this proposal. Consultations have been held within the Advisory Committee for Public Contracts (ACPC), through the EDA, and during bilateral meetings with the Member States and the European industry. There has also been regular contact with the members of the European Parliament's 'Internal Market and Consumer Protection' (IMCO) Committee.
The Green Paper on ' Defence procurement' was drawn up on the basis of expert advice from both the Member States and the European industry (see below). It, in turn, gave rise to a broad consultation exercise, with replies being received from forty parties (Member States, enterprises and other parties). The results of this consultation were used by the Commission to continue its work.
The Member States played an active part in compiling the interpretative communication adopted in December 2006 and were asked by the Commission to comment on an initial version of the text distributed to them at the ACPC. Likewise, all the interested parties were closely involved in drawing up this proposal, through a large number of multilateral and bilateral meetings and by sending written replies to four documents addressed to the members of the ACPC. In addition, governments and enterprises were consulted as part of the impact assessment conducted through five studies commissioned from external consultants which covered all aspects of defence procurement (demand, supply, regulatory framework and products).
- Collection and use of expertise
Between January and April 2004, the Commission organised six brainstorming sessions with groups of experts from the Member State governments and the European industry in order to collect information on current practices in the field of defence procurement. These sessions dealt with 'identifying the characteristics and economic dimensions of defence markets', 'defence procurement rules at national, inter-governmental and Community levels' and 'the course of action for a Community instrument on defence procurement'.
- Impact assessment
In the course of its impact assessment, the Commission looked at three options: taking no Community action, adopting a non-legislative measure and adopting a legislative measure.
The non-legislative measures envisaged included an interpretative communication to clarify the application of Article 14 of Directive 2004/18/EC in the field of security, a more rigorous policy on infringements and a training programme for the contracting authorities and Commission staff on how to act on the interpretative communication on the application of Article 296 of the Treaty.
The legislative measures envisaged included a regulation, a sectoral directive applying to all contracting authorities in the fields of defence and security, a separate directive applying to sensitive defence and security contracts and, finally, a directive amending directive 2004/18/EC in order to incorporate new rules relating specifically to these contracts.
The Commission very quickly dismissed the option of non-legislative measures. Although useful, these would not, by themselves, be able to cut down on the use of derogations based on Article 296 of the Treaty and Article 14 of Directive 2004/18/EC. This objective can only be achieved if the Community law on public procurement contains rules that are tailored to the specific nature of sensitive public defence and security contracts. Given that such rules do not currently exist, they need to be created, which requires the adoption of a legislative measure.
Similarly, if the Commission took no action at all, the extensive application of exemptions for public defence and security contracts from the rules of the internal market would doubtless continue. On the basis of the current legal framework, the majority of defence and security contracts would gain neither in transparency nor in openness.
The reasons behind the Commission's choice of legislative instrument are explained in the relevant section ("choice of instruments").
Aside from the issue of the instrument, the Commission considered various sub-options relating to:
° the scope of the new rules;
° their content, particularly as regards security of supply, security of information and award procedures.
The options relating to scope were assessed in the light of the objective to limit the use of derogations from Community rules to exceptional circumstances, whilst respecting the right of the Member States not to apply Community rules on the grounds of protecting their essential security interests.
The various options concerning the content of the new rules, particularly as regards security of supply, security of information and the award procedures, were assessed with respect to the objective of ensuring the greatest possible degree of transparency, equal treatment and non-discrimination in sensitive defence and security contracts. This objective should not, however, be detrimental to the legitimate security interests of the Member States.
This Directive will substantially improve the regulatory framework for public defence and security procurement. It will make it possible to coordinate national legislation in this field and ensure compliance with the principles of transparency, equal treatment and non-discrimination.
The impact analysis also revealed a very limited effect on administrative costs for the contracting authorities and businesses. Any increases in costs relating to the initial introduction of the new rules should be slight and lead in the medium or longer term to lower administrative costs for businesses and SMEs in particular.
Making defence and security markets more open should, from an economic viewpoint, improve the chances of businesses winning contracts in other Member States, thus allowing the more competitive enterprises to achieve economies of scale and develop their activities. Unit production costs will be reduced, making European products more competitive on the global market. Purchases made by the contracting authorities will be cheaper. Finally, more efficient use will be made of taxpayers' money and EU citizens will be better protected from threats to their security.
The provisions of this proposal will not alter international, and specifically trans-Atlantic, trade relations in the fields of defence and security. These relations are governed by the agreements reached within the World Trade Organization (WTO), and particularly by the Government Procurement Agreement (GPA). Sensitive public contracts awarded by contracting authorities operating in the field of defence, i.e. contracts for the supply of arms, munitions or war material, are excluded from the scope of this agreement. Public security contracts may, for their part, be exempted on a case-by-case basis from the application of this agreement on the basis of Article XXIII. The contracting authorities concerned by this proposal will thus retain the right to decide whether or not to ask for tenders from economic operators from third countries.
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Contents
- Summary of the proposed action
This proposal for a directive applies to sensitive public supply contracts, public service contracts and public works contracts in the fields of defence and security. The application thresholds proposed are the same as those currently applied at Community level under Directive 2004/18/EC.
This proposal is largely based on the design and rationale of Directive 2004/18/EC, but has a certain number of specific features which are tailored to the characteristics of sensitive public defence and security contracts. These features provide, on the one hand, for more flexibility for the contracting authorities and, on the other hand, for the safeguards required to guarantee the security of information and supply. The key provisions of this proposal cover:
° the procedures: the negotiated procedure with publication of a contract notice is authorised without the need for specific justification in order to allow the flexibility required to award sensitive defence and security contracts. The restricted procedure and the competitive dialogue may also be used. The open procedure, however, which involves distributing the specifications to any economic operator that wants to see them, was felt to be inappropriate in view of the confidentiality and security of information requirements attached to these contracts.
° security of supply: the specific needs of the Member States with respect to security of supply for sensitive public contracts in the fields of defence and security justify specific provisions, in terms of both contractual requirements and the criteria for selecting candidates.
° security of information: similarly, the often confidential nature of the information relating to sensitive public defence and security contracts calls for safeguards applying to the award procedure itself, the criteria for selecting candidates and the contractual requirements imposed by the contracting authorities.
- Legal basis
The legal basis is formed by Articles 47 i, 55 and 95 of the EC Treaty, which are intended to ensure that the procedures used for the public procurement of goods and services comply with the principles of the free movement of goods, the freedom of establishment and the freedom to provide services.
- Subsidiarity principle
In accordance with the results of the consultations conducted in recent years, the need for legislative action has arisen at Community level in order to introduce a directive to coordinate Community contract award procedures specifically for sensitive purchases in the fields of defence and security.
This objective could not be achieved either by failing to take action or through action by the Member States.
A legislative initiative is thus required to put an end to infringement situations originating from the lack of Community provisions to coordinate the public procurement procedures that currently apply.
- Proportionality principle
The instrument chosen is a directive, which gives Member States a high degree of flexibility in terms of implementation.
The provisions laid down mirror those of Directive 2004/18/EC as regards the fields covered by this proposal. Furthermore, the provisions which pay specific attention to features that are peculiar to the fields of defence and security give the Member States and contracting authorities considerable leeway as regards the choices to be made in awarding their contracts.
As long as the provisions of the Directive are fully applied, their transposition into national law will allow each Member State to take into account the specific features and characteristics of the sensitive purchases they make in the fields of defence and security.
- Choice of instruments
Given that the legal bases are Articles 47 i, 55 and 95 of the EC Treaty, the use of a Regulation for the provisions applying to both the public procurement of goods and the public procurement of services would not be permitted by the Treaty. The instrument proposed is therefore a Directive.
Since the objective is to improve the operation of the internal market for purchases that involve specific characteristics whilst retaining the recent acquis (Directive 2004/18/EC) and the case-law acquis for purchases that do not have the same constraints and requirements, the proposal for a separate directive seems to be the best approach. It also ensures that the provisions are clearer and easier to read and understand.
When transposing the Directive, the Member States may, if they so desire, provide for legislation that applies to all their public procurement, including sensitive contracts from the fields of defence and security.
This Directive will have a budgetary impact arising from several lines of action:
- the daily publication of notices in the Official Journal of the European Union,
- annual monitoring of the implementation of the Directive,
- medium-term assessment (not before five years) of the administrative impact of implementing the Directive by the contracting authorities and in businesses,
- long-term assessment (not before ten years) of the economic impact of the Directive.
The measures listed above in the field of monitoring and assessment may require the services, in part or in full, of external service providers, under a technical assistance contract, an existing framework contract in the field of evaluation or through an invitation to tender under the restricted or open procedure.
A financial statement attached to the proposal for a directive details the subject-matter and estimated cost of the measures with a budgetary impact.
- European Economic Area
The proposed act concerns an EEA matter and should therefore apply to the European Economic Area.