Explanatory Memorandum to COM(2012)124 - Access of third countries to the Union’s public procurement market and negotiations on access of the Union to the public procurement markets of third countries - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2012)124 - Access of third countries to the Union’s public procurement market and negotiations on access of the Union to the public ... |
|---|---|
| source | COM(2012)124  |
| date | 21-03-2012 |
This is a new proposal in the area of the European Union’s international procurement policy. The key objective of this initiative is to improve the conditions under which EU businesses can compete for public contracts in third countries. Currently, EU suppliers face manifold restrictive procurement practices in many of the countries that are the EU’s main trading partners. Moreover, the initiative confirms the legal status of bidders, goods and services from countries that have an international agreement with the EU in the area of public procurement and clarifies the rules applicable to bidders, goods and services not covered by these agreements.
In the negotiations on a revised Government Procurement Agreement (GPA) in the context of the World Trade Organisation (WTO) and in bilateral negotiations with third countries, the EU has advocated an ambitious opening of international public procurement markets. Some €352 billion of EU public procurement is open to bidders from member countries of the WTO agreement on government procurement.
However, many third countries are reluctant to open their procurement markets to international competition or to open those markets further than what they have already done. The value of US procurement offered to foreign bidders is currently just €178 billion and €27 billion for Japan, whereas only a fraction of the Chinese public procurement market is open to foreign business. Many countries have also adopted protectionist measures, especially in the wake of the economic crisis. All in all, more than half of the world’s procurement market is currently closed due to protectionist measures and this share is only growing. As a result, only €10 billion of EU exports (0.08% of EU GDP) currently find their way in global procurement markets, whereas an estimated €12 billion of further EU exports remains unrealised due to restrictions.
In contrast, the EU has kept its public procurement market largely open to international competition, despite growing pressure on its domestic market, in particular from emerging economies on certain key sectors (railways, construction, IT services). With the exception of some provisions limited in scope to supply and service contracts in the utilities sector[1], the EU has not exercised its power to regulate the access of foreign goods, services and companies to the EU’s public procurement market.
Given the rising importance of emerging economies, the absence of a level playing field causes many problems. The EU’s principal problem is a lack of leverage in its international negotiations with trading partners to redress the imbalance and to gain substantial market access commitments for the benefit of EU business. Also, contracting authorities lack a clear framework to be able to apply the international commitments of the EU.
This initiative aims at solving these problems by firstly strengthening the position of the European Union when negotiating access for EU companies to the public procurement markets of third countries, in order to open up our trading partners’ markets. Secondly, for this purpose it seeks to clarify the rules governing access by third-country companies, goods and services to the EU’s public procurement market. Ultimately the objective is to improve, in line with the EU’s 2020 strategy, business opportunities for EU firms on a global scale, thereby creating new jobs and promoting innovation.
The two basic public procurement directives of the European Union[2] do not provide a general framework for dealing with bids containing foreign goods and services on the EU’s public procurement market. The only specific rules are set out in Articles 58 and 59 of Directive 2004/17/EC. However, these provisions are limited to procurement by utilities and are too narrow in their scope to make a substantial impact on negotiations on market access. Indeed the EU public procurement for Utilities only stands for around 20% of the total EU public procurement market.
In the Commission proposal on the modernization of the EU rules on public procurement, the Commission decided not to take over Article 58 and 59 of the Utilities-directive, in view of the present initiative[3].
This initiative implements the Europe 2020 strategy for smart, sustainable and inclusive growth [COM(2010) 2020] and the Europe 2020 Flagship Initiative on Integrated Industrial Policy for the Globalisation Era [COM(2010) 614]. It also implements the Single Market Act [COM(2011) 206] and the Communication on Trade, Growth and World Affairs [COM(2010) 612]. It is a CWP 2011 strategic initiative (COM(2010) 623 final).
This proposal is also consistent with the developmental policies and objectives of the Union, in particular by generally sheltering goods and services from least-developed countries from action under this instrument.
Contents
- RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS
- LEGAL ELEMENTS OF THE PROPOSAL
- BUDGETARY IMPLICATION
- Grounds for and objectives of the proposal
- General context
- Existing provisions in the area of the proposal
- Consistency with the other policies and objectives of the Union
- Consultation of interested parties
- Summary of responses and how they have been taken into account
- Collection and use of expertise
- Impact assessment
- Summary of the proposed action
- Legal basis
- Subsidiarity principle
- Proportionality principle
- Choice of instruments
- 5. OPTIONAL ELEMENTS
- European Economic Area
- Detailed explanation of the proposal
To gather the views of stakeholders, the Commission organised, in addition to individual meetings, a series of consultations and outreach activities.
An open internet consultation was carried out between 7 June and 2 August 2011. It consisted of three detailed questionnaires aimed at (i) contracting authorities and Member States (MS), (ii) businesses and/or their representatives, and (iii) other potentially interested parties (citizens, NGOs, trade unions). The Commission received a total of 215 contributions i. A summary report of the contributions is given in Annex I to the Impact Assessment report. As part of this process the Commission organised a public hearing on 8 July 2011 in Brussels. Social partners also had the opportunity to express their views in the Liaison Forum organised by DG Employment on 7 February 2011. Specific consultations were also conducted with EU Delegations in third countries and the MS in the Advisory Committee for Public Contracts. Specific topics (i.e. Article 58 of the Utilities-Directive and the treatment of abnormally low tenders) have also been addressed in the consultation on the Modernisation of Public Procurement Policy. The Commission’s minimum standards for consultations were fully met.
The Commission initiative was generally welcomed. A large majority of the respondents were in agreement with the Commission's description of the current level of access to the EU’s public procurement market for goods, services and companies from outside the EU and they also supported the identified objectives of the initiative.
As regards the outlined policy options it is important to note that the views expressed were divergent: overall, a significant majority of stakeholders appear to support a legislative initiative (around 65 %), while a sizeable minority of around 35 % prefer the ‘nothing happens’ option. However, views within the different groups of stakeholders also diverge as to the preferred option. Among contracting entities and government authorities (including from third countries), for example, two thirds are in favour of the ‘nothing happens’ or non-legislative option, while for businesses and other stakeholders some 75 % are in favour of a legislative initiative. There are also divergent opinions as to what that legislative option should be. Although almost half of respondents support legislative option ‘approach A’[5], a significant number of respondents also favour alternative approaches. It is worth noting that, despite being the least preferred legislative option, ‘approach B’[6] also received support from a considerable number of respondents.
The main reasons put forward by stakeholders in favour of or against one or the other policy option included the importance of best value for money, the competitiveness and productivity that could be undermined by some of the policy options, the risk of retaliation by our trading partners, the administrative burden that could be attached to such an initiative and the fact that the initiative would endanger the status of the EU as an advocate of open markets. Trade unions and non-governmental organisations (NGOs) have been fairly neutral on the choice of options and have tended to focus their contributions on the need for third countries to respect ILO Conventions when tendering in the EU or for the EU to open its borders to maintain fair trade vis-à-vis least-developed countries.
The use of external expertise was not considered necessary in addition to the consultations mentioned above. In the area of public procurement the Commission traditionally commands significant expertise.
Several options have been considered by the Commission in order to identify the most appropriate one.
The first option is not to take any additional action in this field at all, and continue with business as usual with the international market access negotiations (possibly in a reinforced manner) with the European Union’s trading partners. However, judging from past experience, it is unlikely that such an option would lead to substantial improvements in entitling EU goods, services and suppliers to participate in procurement processes in third countries. The inevitable result would be a continued loss of tendering opportunities on a significant scale.
A second type of option would consist in upgrading the implementation of existing tools under Directive 2004/17/EC (Articles 58 and 59), based on better guidance or an extension of the scope of these tools to cover the entire scope of Directives 2004/17/EC and 2004/18/EC. Based only on optional use by individual contracting authorities/entities, this scenario would clearly not improve significantly the leverage of the EU in international negotiations.
A third option could be to close generally or by sector the EU public procurement market to goods, services and suppliers from third countries, subject to the EU’s international obligations in this field. However, such an option gives rise to serious concerns as to its impact in terms of retaliation and the costs involved for individual contracting authorities/entities and the competitiveness of the EU.
Therefore, the Commission favours a fourth option, namely to create an autonomous instrument that would strike the right balance between, on the one hand, the need to enhance the Union position in negotiations on market access, and on the other hand, the preservation of a competitive procurement regime in the European Union.
To this effect, the proposal establishes a double mechanism. Individual contracting authorities/entities would be entitled to exclude tenders of which more than 50% of the value is made up of goods and/or services not benefiting from international market access commitments, under supervision by the Commission. In addition the Commission would be allowed to respond by limiting temporarily market access for those countries which demonstrably exclude or discriminate against Union suppliers, goods and services in their national procurement practices, and refuse to grant better market access in negotiations. Any restrictions on access to the EU public procurement market which the Commission may one day adopt under this Regulation would be measured and finely targeted.
This Commission's Impact Assessment Board (IAB) has issued two opinions on the Impact assessment report. In the light of the first opinion impact assessment-report has been revised as follows: the problem definition has been reshuffled in order to focus on the central issue identified across the impact assessment, the need for further opening of third countries' procurement markets and the problems of compliance of EU international commitments. The scale of options to be considered has been broadened. In addition to a more active negotiating policy the impact assessment takes into account the extension of the current regime of articles 58 and 59 of directive 2004/17/EC to all procurements covered by the EU directives and the possibility for selective acceptance of non-covered procurement. Finally, the analysis of impacts has been refined to upgrade the measurement of retaliation and the employment figures. Annex 10 of the Impact assessment report provides a more detailed review of how the IAB's first opinion has been incorporated in the revised report, resubmitted on 8 February 2012.
In its opinion on the resubmitted report, the IAB acknowledges the improvements made to the report and the incorporation of the recommendations it made in its first opinion, but stated it could not give a positive opinion. The IAB believes there are still a number of areas where the assessment could be strengthened and identifies a number of actions to further improve the report (i.e. refine presentation of the options, improve the presentation of the model used to estimate the impacts, better justify the proportionality of the preferred option, etc). The final impact assessment report has integrated to the extent possible these recommendations.
The main objectives of this proposal are to strengthen the position of the European Union when negotiating the terms of access of EU goods, services and suppliers to the public procurement markets of third countries and to clarify the legal situation for foreign bidders, goods and services participating in the EU public procurement market. Accordingly, this proposal establishes a comprehensive EU external public procurement policy that governs the access of foreign goods and services to the EU public procurement market and includes mechanisms to encourage the EU’s trading partners to start market access discussions.
In the first place, the proposal reflects in EU legislation the principle that, on the EU's internal market in procurement, goods and services benefiting from market access commitments are treated equally to EU goods and services and it extends this treatment to goods and services originating in least-developed countries.
As regards the treatment of goods and services not benefiting from market access commitments, a three-stage approach is envisaged.
The Commission may approve that Contracting authorities/entities exclude tenders where the value of non-covered goods and services exceeds 50% of the total value of goods and services included in the tender. After informing potential tenderers, in the contract notice, of its intention to exclude such tenders, a contracting authority/entity has to notify the Commission when it receives tenders that fall into this category. The Commission would give its approval to the exclusion if there is a lack of substantial reciprocity in market opening between the EU and the country from which the goods and/or services originate. The Commission will approve the exclusion where the goods and services concerned fall within the scope of a market reservation by the EU in an international agreement.
In addition, this proposal establishes an EU mechanism to further increase the leverage of the EU in international negotiations on market access, based on Commission investigations, consultation with third countries and, where appropriate, imposition of temporary restrictive measures by the Commission.
Upon request by interested stakeholders or on its own initiative, the Commission may conduct investigations to verify the existence of restrictive procurement practices. Where the existence of such practices is confirmed, the Commission would invite the country concerned to enter into consultation in order to address such restrictive practices and thereby create a better market access situation for EU companies.
If the country concerned is unwilling to engage into consultations or provide satisfactory solutions to the restrictive procurement measures, the European Union could take a decision to temporarily restrict the access of goods and/or services from that country to the EU public procurement market.
Finally, as a complement to the provisions on abnormally low tenders in the proposed reform of the public procurement directives, contracting authorities/entities will be required to inform the other tenderers when they intend to accept abnormally low tenders where the value of non-covered goods and services exceeds 50% of the total value of goods and services included in the tender. As the need for third countries to respect core ILO labour standards is addressed in the proposed reform of the public procurement directives, it is not necessary to treat it in the present text.
Designed as a policy tool to stimulate negotiations, it should be underlined that the thrust of this initiative is not to close the procurement market in the European Union, but to gain better access to the public procurement markets of the European Union’s trading partners. It is imperative to preserve competitive tendering conditions on the internal market which give tangible benefits to contracting authorities/entities and society at large.
Articles 207 of the Treaty on the Functioning of the European Union.
The proposal falls under the exclusive competence of the European Union. The subsidiarity principle therefore does not apply.
The proposal complies with the proportionality principle for the following reasons.
This proposal strikes a careful balance between the interests of all relevant stakeholders and the form and substance of the EU action does not exceed what is necessary to achieve the objectives of the Treaty.
First, the contracting authorities/entities will have the right to exclude tenders consisting, for more than 50 %, of non-covered goods and services, under the supervision by the Commission. This ensures that contracting authorities/entities are left the choice to accept goods and services irrespective of their origin or restrict the access of goods and services not covered by the EU's international agreements, to the extent such restrictions are consistent with the EU's common commercial policy, which is exclusively an area of EU competence. The supervision by the Commission is carefully designed to ensure uniformity and proportionality. Secondly, the Commission tool established by this regulation will ensure that the EU has a mechanism available to investigate restrictive procurement practices and consult with the third country concerned on these. Only where no other solution can be found will the Commission adopt temporary restrictive measures.
Administrative costs are kept as low as possible, but measures have to be taken to preserve the consistency of the common commercial policy. The setting up of supervision and investigation mechanisms are to be carried out by Commission services currently working on the external public procurement policy and on market access monitoring, thus limiting the impact on human resources within the Commission. The administrative burden for contracting authorities/entities will be reduced to situations where restrictive measures are taken by the Commission or when contracting authorities/entities choose to use the mechanism, and would be based on standard forms or self-declarations, limiting the investigations that individual entities would perform to verify the origin of goods or services.
The proposed instrument is a regulation.
Other means would not be adequate, since only a regulation can sufficiently ensure uniform action by the European Union in the field of common commercial policy. Moreover, this instrument gives powers to the European Commission, meaning that transposition would not be useful.
The proposal in itself does not have budgetary implications. The additional tasks for the Commission can be met with existing resources.
Review/revision/sunset clause
The proposal includes a review clause.
The proposed act concerns an EEA matter and should therefore extend to the European Economic Area.
Article 1 defines the subject matter and the scope of application of this Regulation, based on the EU public procurement Directives 2004/17/EC and 2004/18/EC and the Directive on the award of concessions contracts, as proposed by the Commission[7].
Article 2 contains relevant definitions, most of which are taken over from the EU public procurement Directives. The text also defines the 'covered goods and services' and non- covered goods and services, which are central to the application of this Regulation.
Article 3 sets out, for the purpose of this Regulation, the applicable rules of origin, for goods and services procured by contracting authorities/entities. In compliance with the EU international commitments, rules of origin for goods are in line with the non-preferential rules of origin as defined in the EU Customs Code (Regulation 2913/92). The origin of a service is defined on the basis of the relevant rules under the Treaty on the Functioning of the European Union on the right of establishment and on the definitions that the GATS provides (Article XXVIII).
Article 4 spells out the rules on access to the EU public procurement market applicable to foreign goods and services benefiting from the EU market access commitments (referred to as ‘covered goods and services’) and to goods and services originating in the least-developed countries. Both categories have to be treated equally to EU goods and services.
Article 5 outlines the rules of access for goods and services originating in third countries not benefiting from market access commitments of the EU (referred to as ‘non- covered goods and services’). The access of these goods and services may be subject to restrictive measures taken by contracting authorities/entities or the Commission under the mechanisms established by this Regulation.
Article 6 sets out the conditions under which the Commission may approve that individual contracting authorities/entities exclude tenders from tendering procedures, where the value of non-covered goods and services exceeds 50% of the total value of goods or services included in the tender for contracts with an estimated value equal or above EUR 5.000.000.
When a contracting authority/entity has indicated in the contract notice its intention to exclude non-covered goods and services and receives tenders that fall into this category, it must notify the Commission and indicate the characteristics of the tenders concerned. According to the publication of notices in the Official Journal (TED, Tenders European Daily) only 7% of all contracts published in the Official Journal have a value above EUR 5 million. However, those contracts represent 61% of the whole EU public procurement market. The Commission estimates that it would receive each year a maximum of 35-45 notices.
For contracts with an estimated value equal or above EUR 5.000.000 the Commission should take a decision on the exclusion. The Commission should, for all contracts, approve the intended exclusion when the goods and services concerned are subject to a market access reservation under the EU international agreements on public procurement. Where such an agreement does not exist, the Commission shall approve the exclusion where the third country maintains restrictive procurement measures leading to a lack of substantial reciprocity in market opening between the Union and the third country concerned. When assessing whether a lack of substantial reciprocity exists, the Commission shall examine, to what degree public procurement laws of the country concerned ensure transparency in line with international standards in the field of public procurement and preclude any discrimination against Union goods, services and economic operators. Moreover it shall examine to what degree public authorities and/or individual procuring entities maintain or adopt discriminatory practices Union goods, services and economic operators.
Article 7 imposes on contracting authorities/entities the specific obligation to inform the other tenderers in an award procedure of their decision to accept an abnormally low tender where the value of non-covered goods and services exceeds 50% of the total value of goods or services included in the tender.
Article 8 sets out the conditions under which the Commission, on its own initiative or at the request of Member States or interested parties, may launch an external procurement investigation into restrictive procurement measures by third countries, and how to conduct such an investigation.
Article 9 establishes a mechanism for consultation with third countries in cases where the Commission concludes, after conducting an external procurement investigation, that the country concerned has adopted or maintains a restrictive procurement practice. Under this mechanism, the Commission will invite the country concerned to enter into discussions with a view to removing the restrictive procurement practice and ensuring transparency and equal treatment for EU suppliers, goods and services. The consultation scheme takes into account the different situations to be considered, such as the existence of a dispute settlement mechanism for restrictive procurement practices affecting covered procurement, unilateral remedial measures or the conclusion of an international agreement providing for equal treatment for EU suppliers, goods and services previously affected by restrictive procurement practices. The Commission is empowered to adopt an implementing act prohibiting exclusion of tenders comprising non-covered goods and services originating in countries with which substantive market access negotiations take place and there is a reasonable prospect of removing restrictive procurement practices in the near future.
Article 10 empowers the Commission to adopt an implementing Act concerning ‘restrictive measures’, provided that its investigation has confirmed the existence of restrictive procurement measures in a third country, and that the Commission has attempted to conduct discussions on market access under the consultation mechanism. Such measures may in principle consist of (i) the disqualification of certain tenders made up for more than 50% of goods or services originating in the country concerned; and/or (ii) a mandatory price penalty on those goods or services tendered which originate in the country concerned.
Article 11 provides rules for withdrawal or suspension of restrictive measures adopted, as well as a Commission decision to prohibit the use of Article 6 by contracting authorities/entities.
Article 12 sets the rules for the provision of information of tenderers on the application of restrictive measures adopted by the Commission in the context of individual public procurement procedures.
Article 13 sets out the circumstances when contracting authorities/entities are authorised to set aside measures adopted pursuant to this Regulation. The objective of this provision is to give contracting authorities/entities a requisite degree of flexibility to satisfy their purchasing needs and, at the same time, to ensure proper monitoring by the Commission by means of the notification obligation.
Article 14 and 15 sets out the delegation of powers conferred on the Commission to adopt delegated acts in accordance with Article 14 concerning amendments to the Annex to reflect the conclusion of new international agreements by the Union in the field of public procurement.
Article 16 provides legal remedies in case of violation of the provisions of this Regulation.
Article 17 designates the relevant committee procedure for the adoption of implementing acts. Moreover, it empowers the Commission to adopt implementing measures for the adoption of standard forms.
Article 18 requires the Commission to report on implementation of this Regulation at least every three years after its entry into force.
Article 18 contains rules on confidentiality of information received pursuant to this Regulation.
Article 20 provides for the repeal of Articles 58 and 59 of Directive 2004/17/EC.
Article 21 determines the entry into force of this Regulation.